BrightSpire Capital (BRSP) Q1 2025 Earnings Call April 30, 2025 10:00 AM ET Speaker0 Good day, and welcome to the BrightSpire Capital Inc. First Quarter twenty twenty five Earnings Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to David Palame, General Counsel. Please go ahead. Speaker1 Good morning, and welcome to BrightSpire Capital's ...

Financial Data and Key Metrics Changes - FBRT reported GAAP earnings of $23.7 million or $0.20 per diluted common share for Q1 2025, while distributable earnings were negative $6.2 million or negative $0.12 per fully converted share [15] - Distributable earnings before realized losses were $31.9 million or $0.31 per fully converted common share [15] - The book value per fully converted common share at the end of the quarter stood at $14.95, reflecting a decrease primarily due to dividend payouts exceeding earnings [18] Business Line Data and Key Metrics Changes - The company originated $341 million in new loan commitments during Q1 2025, with multifamily loans accounting for 79% of total origination volume [18] - Loan repayments totaled $353 million, predominantly from loans originated in 2021 and 2022 [18] - The average cost of debt on the core portfolio was SOFR plus 2.18% [19] Market Data and Key Metrics Changes - The core portfolio totaled $4.8 billion at quarter end, comprised of 152 loans, with multifamily securing 71% of the portfolio [23] - The average risk rating at quarter end was 2.2, with 146 of 152 positions risk-weighted at two or three [12] Company Strategy and Development Direction - The pending acquisition of NewPoint is expected to provide meaningful synergies and aligns with the strategic focus on the multifamily sector, enhancing earnings quality and consistency [13] - The company aims to recycle the bulk of its legacy book into current vintage loans, positioning itself for sustained growth [13] Management's Comments on Operating Environment and Future Outlook - Management expressed excitement about the NewPoint acquisition, viewing it as a catalyst for long-term value creation [13] - The company anticipates challenges in dividend coverage in the near term due to REO and non-performing loan portfolios, but believes in its long-term earning power [17] Other Important Information - The company has a liquidity position of $913 million, including $215 million in unrestricted cash [12] - The REO portfolio stood at 12 positions at quarter end, with plans to liquidate assets for optimal recovery [28] Q&A Session Summary Question: Plans for loan portfolio and REO proceeds - Management indicated that any new capital from REO sales would be proactively reinvested into new originations as soon as possible [35] Question: Impact of NewPoint acquisition on expenses - Expenses in Q1 included transaction costs related to NewPoint and REO expenses, which elevated overall costs [36] Question: Dividend sustainability and REO impact - Management is monitoring how quickly REO assets can be turned over and the potential impact of market volatility on dividend coverage [46][47] Question: Originations and deal flow - Management noted that while originations were paused for cash gathering for NewPoint, they expect to resume soon with a consistent deal flow available [55][58] Question: Changes at Fannie, Freddie, and HUD - Management expressed uncertainty about government actions but highlighted the unique opportunity presented by the NewPoint acquisition to build a competitive multifamily lending platform [62] Question: Agency business revenue contribution - Management did not disclose specific percentages for agency business revenue at close but indicated more details would be provided in the future [79]

Financial Data and Key Metrics Changes - FBRT reported GAAP earnings of $23.7 million or $0.20 per diluted common share for Q1 2025, while distributable earnings were negative $6.2 million or negative $0.12 per fully converted share [16] - Distributable earnings before realized losses were $31.9 million or $0.31 per fully converted common share [16] - The book value per fully converted common share at the end of the quarter stood at $14.95, reflecting a decrease primarily due to dividend payouts exceeding earnings [20] Business Line Data and Key Metrics Changes - The company originated $341 million in new loan commitments during Q1 2025, with multifamily loans accounting for 79% of total origination volume [20] - Loan repayments totaled $353 million, predominantly from loans originated in 2021 and 2022, with multifamily loans making up the majority of pay downs [20] - The average cost of debt on the core portfolio was SOFR plus 2.18%, with 81% of financing through CLOs [21] Market Data and Key Metrics Changes - The company’s liquidity stood at $913 million at quarter end, including $215 million in unrestricted cash [13] - The average risk rating at quarter end was 2.2, with 146 of 152 positions risk-weighted at two or three [13] - Watch list loans represented 4% of the total portfolio, comprising six names at the end of the quarter [13] Company Strategy and Development Direction - The pending acquisition of NewPoint is expected to provide meaningful synergies and aligns with the strategic focus on the multifamily sector, enhancing earnings quality and consistency [14] - The company aims to recycle the bulk of its legacy book into current vintage loans, positioning itself for sustained growth and potential premium trading to book value [14] Management Comments on Operating Environment and Future Outlook - Management acknowledged that the REO portfolio has created a near-term drag on earnings but emphasized a proactive approach to recover invested capital [10] - The company anticipates potential shortfalls in dividend coverage in the near term due to REO and non-performing loan portfolios [12] - Management expressed confidence in the long-term earning power of the company to cover dividends, contingent on the pace of REO sales and market conditions [19] Other Important Information - The company has moved four loans to watch list status, bringing the total to six, with ongoing discussions regarding loan modifications [26] - The foreclosure REO portfolio stood at 12 positions at quarter end, with plans to liquidate assets for the best possible outcome [29] - The integration of NewPoint is expected to create book value growth and enhanced earning powers over time [31] Q&A Session Summary Question: Plans for loan portfolio and REO proceeds - Management indicated that any new capital from REO sales would be proactively reinvested into new originations, although cash is being held for the NewPoint acquisition [35] Question: Impact of NewPoint acquisition on expenses - Expenses in Q1 were elevated due to transaction costs related to NewPoint and ongoing REO expenses, which are expected to normalize post-acquisition [38] Question: Balancing REO asset sales versus holding for potential gains - Management stated that each asset is evaluated on a case-by-case basis, prioritizing the liquidation of REO to redeploy capital into earning loans [43] Question: Dividend sustainability and potential adjustments - Management noted that the ability to cover dividends will be monitored closely, particularly in relation to the pace of REO turnover and market volatility [48] Question: Changes in originations and market conditions - Management confirmed that originations have been consistent, with a temporary pause for cash gathering for the NewPoint acquisition, but expect to resume soon [57] Question: Insights on agency lending and regulatory changes - Management expressed uncertainty regarding future government actions but highlighted the unique opportunity presented by the NewPoint acquisition to enhance their multifamily lending platform [64]

Core Viewpoint - The article emphasizes the importance of focusing on dividend income rather than stock price volatility, especially in the current uncertain economic environment. It highlights three specific stocks that offer reliable dividends. Group 1: TD Bank - TD Bank's shares are nearly 30% below their 2022 highs, placing it in a bear market, which has resulted in a historically high yield of around 5% [2][3] - Despite regulatory challenges due to money laundering issues in its U.S. business, TD Bank's core Canadian operations remain strong, allowing it to sustain and grow its dividend, which was recently raised by 3% [3] - The bank's ability to provide a reliable and growing dividend makes it a low-risk investment opportunity for conservative investors [3] Group 2: Vici Properties - Vici Properties is a net lease REIT primarily investing in casinos, which is perceived as risky; however, it does not operate the casinos and will continue to receive rent payments regardless of the economic conditions [4][5] - The REIT has consistently increased its dividend since its IPO, with a current yield of 5.3%, supported by long-term leases that include inflation-based rent hikes [5] - Vici's business model is designed to maintain dividends even during economic downturns, making it a stable investment option [5] Group 3: Enbridge - Enbridge is a North American midstream company with reliable cash flows from transporting oil and natural gas, allowing it to increase its dividend annually for 30 consecutive years [6][7] - The company is diversifying its operations, with 25% of its business focused on regulated natural gas utilities and clean energy, positioning it for long-term sustainability [7] - Enbridge offers a dividend yield of 5.7%, appealing to investors looking for both current income and long-term growth potential [6][7]

Financial Data and Key Metrics Changes - For Q1 2025, the company reported a net loss to common shareholders of $1 million, translating to a diluted earnings per share of negative $0.01, primarily due to fair value declines from interest rate volatility and credit spread widening [2][10] - The book value per share as of March 31 was $15.43, a modest decrease from December 31 [2] - The run rate return potential for PMT is currently averaging $0.35 per share, down from $0.37 in the prior quarter [14] Business Line Data and Key Metrics Changes - The Credit Sensitive Strategies contributed $1 million to pretax income, while losses from organically created CRT investments were $5 million [10] - The interest rate sensitive strategies incurred a pretax loss of $5 million, with fair value declines on MSR investments amounting to $56 million [10] - PMT's Correspondent Production segment generated $10 million in income, down from the prior quarter [13] Market Data and Key Metrics Changes - Total correspondent loan acquisition volume was $23 billion in Q1, down 18% from the previous quarter [12] - PMT retained 21% of total conventional correspondent production in Q1, an increase from 19% in the fourth quarter [12] - Current third-party estimates for industry originations in 2025 average $2 trillion, indicating growth in overall volumes [2] Company Strategy and Development Direction - PMT aims to leverage its relationship with PFSI to capitalize on unique investment opportunities, focusing on credit-sensitive strategies while maintaining a consistent securitization cadence [4][7] - The company plans to continue closing approximately one securitization of non-owner occupied loans per month and one jumbo loan securitization per quarter starting in Q2 [7] - PMT's strategy includes a focus on maintaining a stable dividend while navigating the current volatile market environment [36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in PMT's ability to navigate the challenging mortgage market, citing strong risk management practices and a diversified investment portfolio [3][9] - The company anticipates continued low delinquency rates due to the overall credit strength of consumers and substantial home equity accumulation [7][8] - Management noted that the current economic environment has led to credit spread widening, but they expect the yield curve to normalize over time, which could improve returns on interest rate-sensitive strategies [36][38] Other Important Information - PMT completed three securitizations of investor loans totaling $1 billion in unpaid principal balance during the first quarter [6] - The fair value of PMT's MSR asset at the end of the quarter was $3.8 billion, slightly down from December 31 [11] Q&A Session Summary Question: Changes in book value and expected ROE since quarter end - Management indicated that book value has decreased by about 2% to 3% due to interest rate volatility and credit spread widening, but remains contained [17][18] Question: Expectation of acquiring a larger percentage of loans from PFSI - Management stated that PMT's acquisition strategy focuses on where capital can be most advantageously deployed, with no expectation of increasing the proportion of loans retained in the second half of the year [22] Question: Outlook on capital allocation and investment strategies - Management expressed satisfaction with current capital allocation, emphasizing the importance of growing credit-sensitive strategies while maintaining correspondent activity [28][30] Question: Visibility on volumes from correspondent loans - Management expects increased correspondent activity starting at the end of April, with the market centered on a $2 trillion origination market [31][32] Question: Outlook for the dividend amidst lower run rate earnings - Management expects the dividend to remain stable despite fluctuations in run rate, emphasizing the importance of dividend stability [36] Question: Return expectations on new loan securitizations - Management noted that return targets on subordinate bonds have increased due to credit spread widening, with expected returns in the mid-teens [41][42]

Financial Data and Key Metrics Changes - For Q1 2025, the company reported a net loss to common shareholders of $1 million, translating to a diluted earnings per share of negative $0.01 [4][17] - The book value per share as of March 31 was $15.43, a modest decline from December 31 [5] - The run rate return potential decreased to an average of $0.35 per share from $0.37 in the prior quarter [24] Business Line Data and Key Metrics Changes - The credit-sensitive strategies contributed $1 million to pre-tax income, while losses from organically created CRT investments were $5 million [17] - The interest rate-sensitive strategies reported a pre-tax loss of $5 million, with fair value declines on MSR investments amounting to $56 million [18] - Total correspondent loan acquisition volume was $23 billion, down 18% from the prior quarter, with PMT acquiring $3 billion, a 20% decrease [20][21] Market Data and Key Metrics Changes - Current third-party estimates for industry originations are projected to average $2 trillion in 2025, indicating growth in overall volumes [5] - Delinquency rates for borrowers in PMT's MSR portfolio remain low, attributed to strong consumer credit and accumulated home equity [13] Company Strategy and Development Direction - PMT's relationship with PFSI provides competitive advantages, leveraging PFSI's operating platform and access to the origination market [7][8] - The company aims to continue closing approximately one securitization of non-owner-occupied loans per month and one jumbo loan securitization per quarter starting in Q2 [11] - PMT is focused on increasing investments in credit-sensitive strategies while maintaining a stable dividend of $0.40 per share [57] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating a volatile market, emphasizing strong risk management practices [6][15] - The company expects to see increased correspondent activity and maintains a positive outlook on the $2 trillion origination market despite current volatility [50] Other Important Information - PMT completed three securitizations of investor loans totaling $1 billion in unpaid principal balance during Q1 [10] - The fair value of PMT's MSR asset at the end of the quarter was $3.8 billion, slightly down from December 31 [19] Q&A Session Summary Question: Changes in book value and expected ROE since quarter end - Management noted a decrease in book value by about 2% to 3% due to interest rate volatility and credit spread widening, but expressed satisfaction with the hedging program [31] Question: Expectation of acquiring a larger percentage of loans from PFSI - Management indicated that the focus is on capital deployment where most advantageous, and does not expect an increase in the proportion of loans retained in the back half of the year [37] Question: Outlook for dividend given lowered run rate earnings - Management expects the dividend to remain stable despite fluctuations in run rate, attributing the decline primarily to the yield curve shape [56] Question: Return expectations on new loan securitizations amid spread widening - Management stated that return targets on subordinate bonds have increased to mid-teens due to credit spread widening, which supports ongoing securitization activities [64]

Company Overview - Sunrise Realty Trust, Inc. (NASDAQ:SUNS) is an institutional commercial real estate lender providing flexible financing solutions to sponsors of commercial real estate projects in the Southern United States [3] - The company focuses on transitional commercial real estate business plans with potential for near-term value creation, collateralized by top-tier assets in established and rapidly expanding Southern markets [3] Financial Results Announcement - The company will release its financial results for the first quarter ended March 31, 2025, on May 7, 2025, before market open [1] - Management will review the financial results via a webcast at 10:00 am ET, accessible on the Investor Relations website [1] TCG Real Estate Platform - TCG Real Estate consists of affiliated commercial real estate-focused debt funds, including Sunrise Realty Trust, Inc. and Southern Realty Trust, Inc. [4] - The funds provide flexible financing on transitional commercial real estate properties that present opportunities for near-term value creation, focusing on top-tier assets in Southern U.S. markets benefiting from economic growth [4]

Core Insights - High-quality dividend stocks have historically outperformed non-payers, with an annualized return of 9.17% compared to 4.27% over the past 50 years [3] - The current market conditions, including a correction in major indices, make dividend stocks an attractive investment option [4] Group 1: Annaly Capital Management - Annaly Capital Management offers a yield of 13.79%, averaging around 10% over the last two decades, and has declared approximately $27 billion in dividends since its IPO in 1997 [5] - The company is sensitive to interest rate changes, with recent increases in the federal funds rate impacting its net interest margin and book value [6] - The Federal Reserve's current rate-easing cycle may benefit Annaly, allowing it to adjust its asset portfolio for better profitability [7] - Annaly's portfolio primarily consists of agency securities, which provide a safety net and allow for leverage to enhance profitability [8] - With improving yield-curve conditions and historical performance during declining interest rates, Annaly's financial metrics are expected to improve [9] Group 2: Realty Income - Realty Income has a yield of 5.56% and has increased its dividend for 110 consecutive quarters, positioning it well for long-term growth despite recession concerns [11] - The company's portfolio includes 15,621 commercial real estate properties, with 91% being resilient to economic downturns [12] - Realty Income's lessees are primarily brand-name businesses, ensuring consistent traffic and rental income even during economic challenges [12] - The company has a low percentage of lessees failing to pay rent, and its funds from operations are predictable [13] - Realty Income's shares are currently trading at a 22% discount to their five-year average cash flow multiple, indicating potential value [14] Group 3: Alliance Resource Partners - Alliance Resource Partners offers a yield of 10.26%, which has been sustainable despite the industry's challenges [15] - The company has successfully locked in volume and price commitments, ensuring consistent cash flow [17] - Alliance Resource has maintained a conservative approach to production expansion, resulting in a low net debt of $221.4 million [18] - The diversification into oil and natural gas royalties allows the company to benefit from price increases in these commodities [19] - The stock is valued at approximately 8.5 times forward-year earnings, presenting a solid investment opportunity [19]

Ellington Credit Company (NYSE:EARN) Q4 2024 Earnings Conference Call March 13, 2025 11:00 AM ET Company Participants Alaael-Deen Shilleh - Associate General Counsel and Secretary Laurence E. Penn - Chief Executive Officer and President Mark Tecotzky - Co-Chief Investment Officer Christopher Smernoff - Chief Financial Officer Gregory Borenstein - Head of Corporate Credit at Ellington Management Group Conference Call Participants Douglas Harter - UBS Matthew Erdner - JonesTrading Operator Good morning, ladie ...

Financial Data and Key Metrics Changes - In Q4 2024, the company reported net income of $0.25 per share and adjusted distributable earnings (ADE) of $0.45 per share, which comfortably covered the quarterly dividend of $0.39 per share [7][19] - The ADE increased from $0.28 per share in Q1 2024 to $0.45 per share in Q4 2024, reflecting a 25% year-over-year growth in the credit portfolio [44] Business Line Data and Key Metrics Changes - The Longbridge reverse mortgage segment performed excellently, contributing $0.30 per share to net income, while the credit portfolio generated $0.32 per share [19] - The credit portfolio increased by 5% to $3.42 billion, driven by net purchases of closed-end seconds, HELOCs, commercial mortgage bridge loans, and non-agency RMBS [24] - The Longbridge portfolio decreased by 15% sequentially to $420 million due to the impact of proprietary reverse mortgage securitization [25] Market Data and Key Metrics Changes - The agency strategy generated a modest loss due to rising interest rates and volatility around the presidential election, impacting Agency RMBS performance [22] - The overall debt-to-equity ratio increased to 8.8:1 from 8.3:1, while the recourse debt-to-equity ratio remained unchanged at 1.8:1 [26] Company Strategy and Development Direction - The company aims to continue leveraging its vertical integration to grow its loan origination business and maintain a focus on credit investments rather than agency securities [30][79] - The strategic use of securitizations is viewed as a core competitive advantage, expected to drive strong earnings and support dividend coverage [14][58] Management's Comments on Operating Environment and Future Outlook - Management noted an uptick in residential loan delinquencies, particularly in the non-QM portfolio, but does not expect material losses due to strong underlying real estate security [39] - The company remains optimistic about the demand for proprietary reverse mortgage products and anticipates continued ADE growth to cover dividends moving forward [45] Other Important Information - The company completed four securitization transactions in Q4, capitalizing on favorable market conditions, which included two non-QM deals and a proprietary reverse mortgage securitization [10][12] - The total weighted average borrowing rate on recourse borrowings decreased by 56 basis points to 6.21% due to lower short-term interest rates and tighter financing spreads [25] Q&A Session Summary Question: Can you talk about some of the originator investments and the appetite for non-QM given the commentary around delinquencies? - Management indicated that they have been making small investments in platforms where they have established relationships and can help lower warehousing costs and improve underwriting processes [63][64] Question: Can you contextualize the earnings expectations for Longbridge? - Management suggested a long-term run rate target of approximately $0.09 per share per quarter for Longbridge, with Q4 exceeding this expectation [68][70] Question: Why isn't the agency portfolio more attractive at current valuations? - Management explained that while the agency sector has been good, they believe their capital can be better utilized in credit-focused investments that leverage their vertical integration [76][79] Question: Is there an expectation from investors to buy loans out of the securitization trust? - Management clarified that they expect to work out and resolve loans while they remain in the securitization, rather than buying them out [84] Question: What is the current run rate for net interest income? - Management indicated that the net interest income seen in Q4 is a good run rate moving forward, supported by ongoing improvements in liability management [91][92] Question: What is the impact of staffing cuts at HUD on Longbridge? - Management acknowledged the uncertainty but emphasized that their proprietary business has been driving earnings, and they will have to wait and see how regulatory changes unfold [121][123]