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spk02: year-over-year about 74% so you know very nice growth on a quarterly basis and then for the first six months of the year over a billion dollars which is more than twice the amount that we had done the prior year so fantastic growth across the platform ended the quarter with 3.1 billion in e and As we've come out of COVID and started to see borrowers get back on their feet, we've seen the non-performing rate reduce dramatically as borrowers cure and NPLs get resolved. From a financing and capital perspective, we completed three securitizations during the quarter. I think that speaks to our strength out there in the track record and the history that we've had of bringing good deals to market. And so we're proud to be able to continue to execute in choppy times. One of those transactions was a refinance of a deal that we've done during the heart of COVID. And we had a tremendous amount of capital tied up in that transaction. So that freed up a lot of liquidity for us and probably, in my mind, one of the most important Highlights of the quarter is we're sitting on $134 million of liquidity at the end of the quarter, which really puts us in a good position to not only take advantage of interesting opportunities, but also just patiently watch and see how markets develop. Lastly here, we did increase warehouse capacity another $100 million during the quarter. And as a reminder, All but one of those facilities is non-mark-to-market, so we've eliminated that risk almost entirely across the portfolio with securitization and non-mark-to-market facilities. Turning to page four, you can see book value per share $11.26. I think this slide just highlights our unique portfolio approach of building book value and trying to, you know, maximize shareholder return with limited volatility. So a number of our peers are seeing big marks just based on market volatility and our sort of approach and accounting methods, I think, eliminate a lot of that. So I'm proud of how the business has performed. And with that, I'll turn it over to Mark to handle the rest.
spk05: Thanks, Chris. Good afternoon. Good evening, everyone. And Thank you, Chris, for the kind words. Of course, I had to pay him enough to say all those things, but that's a different story. On slide five for loan production, as Chris mentioned, we have very strong loan production for the first half of this year, a little over a billion dollars compared to about $489 million for six months to 21, which is 110% increase in production. We only had $1.3 billion for all 12 months of last year, so we're in the billion for six months. We're still seeing very strong demand for our product. We have $445 million funded in Q2, and as we'll see in a little bit, we've been raising our WACs on our loans and our new loan applications to kind of keep up with the interest rates that we're seeing on the finance side to maintain that spread. We'll see that in just a moment. So even after raising our WACs, and actually our Q2 production, new originations on Q2, Our weight average coupons were up 145 basis points from the new originations that we had in Q1. So we've been aggressively raising the rates and still seeing good, strong production coming in in Q2, and again, the first six months of the year. So very happy to see that. On slide six, when the production comes in strong, the loan portfolio is growing accordingly because we're putting most of that into our portfolio, our in-place portfolio with our lot spread. Our total loan portfolio at the end of June was $3.1 billion. That's up 7% from the $2.9 billion as of the end of Q1 and up 49% year over year compared to June of last year. Again, just showing the very, very strong demand for our product. And the weighted average coupon was $7.53, and that's up from $7.50 for the first quarter. So again, we're raising the rates, getting the coupon up to offset the rising interest rates on the financing side, and still getting in the volume and able to grow the portfolio significantly. Slide seven, the net interest margin, what we're seeing is more of a return to normalized levels on our NIM. If you go back to second quarter of last year, you can see on the page it was up at 483, and we had said in some previous calls that that margin was kind of inflated. We were getting higher margins because we were getting a lot of the default interest repayment penalties as we were bringing that MPL rate consistently down, so that yield coming through was not a sustainable yield over the long haul, and we normally run around a four-point And you see we're normalizing back to kind of our normal run rate margins. We feel really good about that. And as our non-performing loans are resolved, the default interest and prepayment fees have kind of started to normalize because our NPL rate has come significantly down. And we'll take a look at that. But while we're doing that, we're still maintaining that spread. So if you look at the right-hand side, the portfolio yield and cost of funds, you can kind of see, you go back to Q2 of last year when interest rates were higher. We were charging more on the loans, and of course our debt costs were a lot higher at 481. You can see as Q1 came into play, as rates came down the second half of 21 into the first quarter of 22, we lowered the WAC on the loans to still maintain that spread, and we've been very aggressive now going into Q2 and through Q2 as interest rates have gone back up on the financing side. Again, as I said, we've increased the WACs almost immediately to keep that yield on our loans and still maintaining that spread throughout. On page 8, the asset resolution activity, we continue to see strong resolutions on our NPLs. NPL resolutions for Q2, $50 million in UPB for a $5.7 million gain. That's an 11-point gain on our resolution. So historically, we've run about a 3.5, 4-point gain on our resolutions of NPL loans, and we're at 11-point gain for Q2. And as Chris mentioned, some of the things in there, in Q2, we did sell a couple of large REOs that probably brought in about a million-dollar gain. And then if you look at the resolution activity at the long-term loan side up in the top, you see paid in full. For Q2, it was about $17 million UPV paid in full for a $3.3 million gain, where Q2 of last year was $21 million, but even a smaller gain. And the reason that's happening is some of those, as Chris mentioned, some of those loans that were in foreclosure in the judicial states where it takes about a year and a half or two years to settle those loans, some of those are now finally coming through. And remember, we've got that four-point default interest tacked on, and that's accruing the whole time it's in that foreclosure process. So as these borrowers are now paying off those loans because we're getting to the point where we can foreclose on the properties and they don't want to lose the property, so as they're paying off these loans, they have to pay it off. They have to come up with all that default interest, too. And that's why you're seeing a lot of those big canes coming through. One thing to point out, it's not on this slide, but with that growth in production, the growth in the in-place portfolio, and maintaining that spread, we're seeing great core diluted earnings per share. You saw it was $0.31 for Q2. Year-to-date, which wasn't on one of these slides, year-to-date, our core diluted EPS is $0.67 a share versus On the next slide, the loan investment portfolio performance. And as I mentioned, with all that strong resolutions that we're doing, the NPL rate continues to come down. We ended Q2 at an 8.2% non-performing rate. Year-over-year comparison, that compares to 15.3 where we're at Q2 of 21. And remember, at the end of 2020, we were as high as 17.1. So we feel very, very good about the way we've been able to get these loans performing again or to resolve the loans by having them pay down or pay current. all at the same time still making a four-point, or even you saw 11 points in Q2, gain on those resolutions. That's mainly because of our own in-house special servicing department. It allows us to take charge of those non-performing assets, really work with the borrowers on getting very, very successful resolutions. That kind of in-house strategy really pays off, and you can kind of see the results here. In terms of our loan loss reserve, our cease to reserve, It remains very consistent in terms of basis points of reserve on UPV. That's in kind of the bottom left-hand chart. You can see we were at 19 BIPs back in Q2 of 21. We kind of had additional reserves on there, not knowing the uncertainties of COVID, and now we're kind of evening out right around the 16, 17 basis points. In terms of total dollars, we ended the quarter at $4.9 million, which is a 5.2% increase from Q1 and a 24% increase from Q2. June of last year, and that's really as a result of just the growth of the portfolio. As our in-place portfolio grows and you're maintaining a 16, 17 basis point spread, the dollars of the reserve are going to grow accordingly. The key point is on the right-hand side of the bottom, you see our charge-offs. Our charge-offs have been running consistently low, and that's historical, too. If you just look at the last four quarters, the average charge-offs, loan charge-offs, have been about $168,000 a quarter. With this most recent quarter, it's coming in at under $38,000. Again, strong resolutions, NPL rate coming down, very low charge-offs, very good gain, and maintaining our margin in a very widely moving interest rate environment. We feel very good about our results and where we're headed so far this year. On page 11, durable funding liquidity strategy. Chris, I think, hit most of the high points there. We did four securitizations already in 2022. Think about we did four all of last year, and we've already done four during six months. Three of those securitizations were in Q2. So we actually did securitizations April, May, and June, which again just goes to show the investor demand for the product that's out there. We're having no problem getting these securitizations done in a pretty kind of widely moving market. So we feel really good about that. We did $896 million worth of securitizations issued. this year, which $623 million almost was in Q2. And we achieved a couple things with these securitizations. One, we were able to collapse a couple older deals. One deal as far back as 2015, which was the old sequential structure. I'm sorry, yeah, the sequential structure. And that sequential structure, as it pays down, gets more expensive. So that was a higher yield deal. We were able to collapse that and re-securitize it in our pro rata structure at actually a lower cost. And then the old MC1, the old mixed collateral deal that we did back in July of 2020, kind of in the heat of COVID, to get the securitization and liquidity, was only at a 65% advance rate. So we had a lot of equity and collateral tied up in that deal. And as it paid down, our equity just went up because all the payments as a turbo went right to the bondholders, paid them down, and our equity just kind of kept growing. We were able to re-leverage that at almost like a 75% advance rate and generate quite a bit of liquidity, as Chris mentioned. So we were able to, doing those deals, ending up the second quarter with about $134 million in available liquidity, $46 million of that being the cash that you see on the balance sheet, and then another $88 million in loans that are unfinanced that we can put on lines at any time and draw the liquidity off of. So we feel really good about our liquidity position ending the quarter. And as Chris mentioned, we raised the maximum capacity of our warehouse lending from $650 million to $750 million.
spk00: to over the economic value of equity.
spk02: Thanks, Mark. Appreciate it. On slide 12, we've shown this slide a few quarters in a row now, so won't spend a tremendous amount of time on it, but want to make the point that most of our peers mark their balance sheet to fair value. And we believe if we were to do something like that, we'd see a much higher mark than you see just looking at the face of the financial statements. And that's largely driven by the locked in spread embedded gain in the portfolio so we think from a value perspective um we're undervalued you know based on where our stock's trading today and want to try to highlight that that we think there's a lot of future value that's yet to be realized 13 just kind of talking about the outlook we mentioned that you know we're seeing seeing good demand um from a credit perspective, we feel very safe there. And, you know, there's a lot in the press about what's going to happen and what may happen. But so far, we think things are good and we expect it to continue that way. We do plan to do two more securitizations this year. And I think from an earnings perspective, we just want to continue to focus on managing the portfolio, providing that stable spread, looking for opportunities to grow both organically and strategically. So with that, we'll turn it back over to Andrew. We can see if there are any questions.
spk04: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you'd like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Aaron Suganovich with Citi. Please go ahead.
spk03: Thank you. On the production side, obviously a solid quarter, a little bit lower, and it sounds like you were able to pass through some of the increase in price, which slowed down the production. What level of production are you expecting in the second half of the year relative to, I guess maybe you could talk about how the cadence happened throughout the quarter?
spk02: Yeah. Hi, Aaron. Good question. I mean, I think the right guidance is kind of at the second quarter level. We feel good that we're going to be able to deliver that for the next few quarters. So I think that's a good run rate.
spk03: Okay. That's good. And then on the securitizations that you did recently, how have those been pricing relative to some of your earlier securitizations?
spk02: Yeah, so they're definitely pricing a lot wider than certainly 21. 21 was a banner year for us, and we were getting some incredible pricing there. And I would say they're pricing a little wider than even before 21. So margins aren't as strong on the most recent deals as probably they have been historically. But I think on a go-forward basis, we feel like we've caught the pipeline up now and think we'll be there. It obviously depends a lot on where the market goes from here, but we're feeling like we're back in line from a spread perspective now.
spk03: And that would be kind of around that 4% type of NIMH? That's the expectation?
spk02: Yes, that's right.
spk03: Okay. All right. Thanks a lot. You're welcome.
spk04: Again, if you have a question, please press star, then 1. The next question comes from Steve Delaney with J&P Securities. Please go ahead.
spk01: Thanks. Hey, guys, congrats on a really strong quarter and obviously a very challenging market. And, Mark, congrats to you from another former public company CFO. It's tough work, man, so great job. Thank you. Chris, you talked about the stress situations, seeing some things out there. Boy, we have seen some shops shut down. And just this morning, I saw a mortgage rate right off over $20 million of a pref equity investment and an originator who had ceased operations. So we know those kind of things are out there. I'm just curious, as you look at those opportunities, is it a matter of just looking at loan collateral that may be sitting on warehouse somewhere, or is there any interest in infrastructure and in any product expansion opportunities? Thanks.
spk02: Sure. Thanks, Steve. Appreciate it. Yeah, so we've seen both asset opportunities and strategic opportunities. Nothing huge yet, but I feel like it's the beginning of probably a larger opportunity set. On the asset side, yeah, I think you're largely seeing assets that are probably hung either on a warehouse line or maybe have some scratch and dent characteristic or something like that where we would obviously look to pick those up at a discount. And then I think strategically we've seen a couple of platforms that we've looked at, nothing compelling yet. And we haven't seen anything in terms of new products, but we're open to that. And so my gut tells me over the next six months we may see something like that.
spk01: Okay. Yeah. Okay. Well, that's the last year or so it's been just a matter of, you know, your own keeping things straight in your own kitchen, right? But you guys have really gotten yourself squared away. Thank you. You've got a strong position to take advantage. Just curious where you're pricing today. I mean, I assume we're probably up to something near an eight handle. And how the demand is looking at that type of a coupon.
spk02: Yeah. So we're – the more recent production is kind of – eight and a half to nine-ish coupon. And yeah, and just in the last few weeks, submissions have been very strong. So I think there's what I call kind of the sensitivity period where, you know, customers and clients, borrowers are kind of adjusting to things and there's like a hold back or a lull, if you will, and then people start to realize This is the new reality, and they transact. So there was a little bit of an adjustment period there for sure, but very pleased to see how strong submissions have been. Great.
spk01: Thank you both for the comments. Appreciate it. Thank you, Steve.
spk04: This concludes our question and answer session. I would like to turn the conference back over to Christopher Farrar for any closing remarks.
spk02: I just want to say thanks again for everybody for participating and all of your support. And we're grateful for the support that we've seen from everyone. So that'll conclude our call. Thank you.
spk04: Thank you, everybody. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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