Greetings, welcome to the Ready Capital first quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Andrew Ahlborn. Thank you, and you may proceed.
Thank you, operator, and good morning to those of you on the call. Some of our comments today will be forward-looking statements within the meaning of the Federal Securities laws. Such statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on them. We refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. During the call, we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.
A reconciliation of these measures to the most directly comparable GAAP measure is available in our first quarter 2023 earnings release and our supplemental information, which can be found in the Investors section of the Ready Capital website. In addition to Tom and myself on today's call, we are also joined by Adam Zausmer, Ready Capital's Chief Credit Officer. I will now turn it over to Chief Executive Officer, Tom Capasse.
Thanks, Andrew. Good morning, everyone, thank you for joining the call today. Given the seemingly full-on recession in CRE, Ready Capital was not immune to pressures we and others in the industry are navigating. That said, our core capital light, Freddie Mac, SBL, and SBA 7(a) originations and multifamily-centric credit metrics outperformed. While results did not quite achieve our 10% ROE target for the first time in 12 quarters, the business demonstrated its resiliency. Distributable earnings of $0.31 per share were pressured largely by non-recurring items, resulting in a $0.06 per share deviation compared to our 10% return on equity target. Approximately 50% of the shortfall was due to mark-to-market losses on our opportunistic investment allocations, such as CRE equity, and an additional 25% was due to higher operating costs from the build-out of our small business fintech platform.
Of note, the mark-to-market losses did not result from credit impairment, but increases in valuation metrics such as cap rate assumptions. In our lower middle market CRE lending business, originations declined to $411 million. Our volume was 94% multifamily, including 67% in our capital light Freddie Mac SBL channel. The year-over-year decline in our bridge lending was due to two main factors. First, the unfolding CRE recession stoked by reduced demand stemming from an approximate 100 basis point increase in multifamily cap rates and a doubling in debt cost to 7% reflected in the first quarter over 50% decline in overall CRE transaction volume compared to the same period last year.
Of note, the change in demand for multifamily is less than other CRE sectors due to an estimated 4 million unit housing shortage in the US, particularly in Ready Capital's affordable multifamily segment. Second, at this stage of the credit cycle, more defensive loan pricing in terms of spread, credit, and projects has emerged. For the quarter, our average loan spread was SOFR plus 600 basis points, translating to a mid to high teens retained yield at current CRE CLO execution versus low teens retained yield in the first quarter of 2022. We continue to tighten credit with stabilized LTVs averaging 61% and debt yields increasing to 10%. Our ongoing focus is funding lower risk, affordable multifamily projects in the strongest markets with experienced and well-capitalized sponsors.
Another significant differentiator for Ready Capital is our lower risk credit profile versus the CRE peer group, where current historic share price discounts to book value reflect fears of future book value erosion and dividend cuts from CECL reserves. Our first quarter credit metrics continue to outperform the industry. This is exemplified by 60-day-plus delinquencies and four to five high-risk assets in our originated portfolio, holding at only 2.7% and 5% respectively. This four to five higher risk asset exposure is currently only one-fifth of the current industry average. Our stronger credit metrics relative to the peer group reflect the following. First, our mid-market multifamily focus now accounts for 81% of the current portfolio. Multifamily continues to perform well, supported by continued rent versus buy dynamics and the ongoing housing shortages.
While we believe potential credit losses in the books to be low, we remain vigilant on mitigating maturity defaults should the broader landscape further weaken. Second, we have limited exposure to the most stressed CRE sectors, particularly the COVID poster child office, which is weighing on CRE sector valuations. The national office market will continue to experience heavy lease rollover, with tenants vacating or downsizing space, specifically in older vintage Class B properties located in central business districts. The 10-year term of leases will result in a protracted period of defaults and foreclosures for the sector. Our office exposure is the second lowest in the peer group at under 5%, with an average balance of only $2.6 million. Of the 5% exposure, only 19% or $92 million of our non-performing office assets are located in CBDs, one in downtown Manhattan and two in Chicago.
Expected losses on these assets equal $11 million and have already been included in our CECL reserves. The balance of our office holdings, given their small balance, avoid CBDs, which face the greatest challenges for the industry. Third is credit. In the fourth quarter of 2021, we preemptively tightened credit guidelines. Specifically, we cut projected rent increases to 0%-3%, lowered stabilized LTVs to 63%, and increased debt yields to over 9%. Our portfolio credit metrics provide a significant risk mitigant against maturity defaults, resulting from negative leverage in multifamily bridge loans, where debt costs exceed cap rates and rent increases are under budget. This is an industry-wide credit issue for aggressive lenders in the 2021, 2022 vintage. Fourth, the granularity of the portfolio is unique relative to the sector.
Our CRE portfolio is comprised of over 2,200 loans with an average balance of $4.3 million. The top 10 loans in the portfolio total only 10% of the loan book, and excluding the loans from the 2022 Mosaic merger, only 7%. The calls of the Mosaic loans are covered by a contingent reserve equal to 15% of the remaining outstanding balances. This granularity reduces the statistical skewness faced by large balance lenders, where a few large defaults can materially impact book value. Finally, portfolio concentration in strong CRE markets, the result of our proprietary geo-tier model, which scores MSAs 1- 5, 1 having the best CRE fundamentals and five the worst. Currently, 89% of the portfolio is in one and two-rated markets, specifically avoiding certain MSAs with overbuilding in multifamily. Now turning to our small business lending segment.
To review, the SBA 7(a) program features two basic segments, large loans, $350,000 to $5 million, and small loans under $350,000, which are underwritten using a credit scoring model. In the third quarter of 2022, we launched a unique dual large loan BDO and fintech small loan model capitalizing on the SBA's mission to promote the small 7(a) program benefiting women and minority-owned businesses. Our iBusiness Funding division focuses on small loans and continues to invest heavily in their end-to-end lending software, LenderAI, which is in addition to providing an origination edge for ReadyCap, may also generate fee income as a lending as a service product. We invested an incremental $10 million over the last 12 months versus the prior 12 and expect a lag in revenue recognition from the resulting ramp in small loan originations.
We firmly believe that this approach will advance our three-year SBA 7(a) origination target of $750 million or a 2.5% market share. In the quarter, we originated $92 million in SBA 7(a) loans comprising 65% large and 35% small loans. While total volume declined 8% year-over-year, small loan volume grew 3x, reflecting payoff of our tech investments in iBusiness. Average premiums on guaranteed loans increased 175 basis points, 9.5% in the quarter. We are ranked the number one non-bank and number five overall SBA 7(a) lender. In terms of the broader SBA lending scape, the bank crisis will curtail conventional financing in favor of SBA 7(a) loan financing.
Industry expectations are that as rate hikes stabilize, overall SBA 7(a) lending volume will increase 10% year-over-year. As we look forward, the company is well-positioned to maintain a dividend consistent with our stated 10% target or ROE while protecting book value. This is due to having strong credit metrics on the legacy multifamily book, but also the benefit of net interest margin accretion from reinvestment of $750 million in incremental liquidity. We're able to accomplish this due to two initiatives. First, a reinvestment of liquidity from the pending Broadmark merger, which is expected to close May 31st into core lending products and acquisition of distressed bank commercial real estate portfolios.
The Broadmark merger will provide operating leverage on an increased equity base, reduce leverage ratios by over a full turn, and most importantly, provide $500 million of incremental liquidity support, supporting $1.5 billion of buying power. While our core direct lending products currently provide ROEs at 15%, another peer group differentiator is Ready Capital's counter-cyclical acquisitions business. Post the GFC, Ready Capital and predecessor funds were a top three buyer of small balance commercial loans from banks, purchasing over $5 billion. In the strong CRE markets of recent years, bank asset sales were sparse. However, with the unfolding bank crisis, regional banks facing deposit outflows are targeting sales of small balance CRE portfolios.
One of the many benefits provided by our external manager, Waterfall, is that it sources acquisitions for Ready Capital with an acquisition pipeline of $750 million at 18%-20% projected ROEs. The current bank state of play is price discovery, with asset sales targeted for the second half of this year, providing reinvestment opportunity for our second half pending liquidity. Second, we plan to move out of lower yielding non-core assets whose earning drag was compounded by the 22 rate rise and product lines over the next few quarters. These efforts are expected to generate $250 million of incremental liquidity and losses on dispositions of these non-core assets will be recaptured through the significant higher returns on new investments. Our expectation is that second quarter lending volume in capital intensive products, and thus earnings, will remain lower on a year-over-year comparative basis.
The efforts described previously, along with the strength of our portfolio, position the company beyond the second quarter to deliver with consistency on our 10% target return. With that, I'll now hand it over to Andrew to discuss our financials.
Thanks, Tom. Quarterly GAAP and distributable earnings per common share were $0.30 and $0.31, respectively. Distributable earnings of $38.1 million equates to an 8.5% return on average stockholders' equity. The quarter's shortfall on our distributable earnings target and dividend coverage were primarily due to mark-to-market losses on opportunistic investments and higher operating costs related to year-end expenses and the continued build-out of our small business lending platform. Interest income grew $10.5 million to $217.6 million as the portfolio WAC rose to 8.3% due to both the quarter's rise in rate and a slight increase in average spread to 378 basis points. This growth was offset by higher interest expense due to higher quarter-over-quarter debt balances and slightly higher funding costs.
Specifically, we moved $430 million of warehouse debt to securitized debt, resulting in a 32 basis point increase in average spread. Important to note, the change in net interest income was not the result of negative migration in the performance of the portfolio and non-accrual assets remained flat at 2.5%. Realized gains grew to $11.6 million in the quarter. In the SBA 7(a) business, average premiums in the quarter increased 175 basis points to 9.5% with $74.3 million of sales, producing $6.8 million of income. Originations in our Freddie Mac Affordable business were seasonally high at $277 million. 82% growth when compared to the same period last year. This production contributed $3.3 million of gains in the quarter.
Unrealized losses totaled $11.7 million, of which $7 million is included in distributable earnings. Additionally, lower income from unconsolidated joint ventures of $656,000 was driven by $2.5 million in mark-to-market losses inside of the JVs. The losses were not reflective of a deterioration of credit in the underlying collateral. The commercial real estate equity positions that sit inside of our unconsolidated joint ventures are expected to generate a 20% IRR over the next 5 years. Operating costs rose $7 million quarter-over-quarter, primarily due to increased investments in our iBusiness Funding build-out and increased costs associated with year-end audit valuation work. Net contribution from residential mortgage banking grew slightly to $3.7 million. On the balance sheet, our focus remains on maintaining higher liquidity, limiting mark-to-market debt exposure, and operating to conservative leverage levels.
In the quarter, we completed our 11th CRE CLO, a $586 million deal with an expected retained yield of 13%. In the deal, we sold through 83% of the structure at a weighted average cost of +290 basis points. At quarter end, mark-to-market debt exposure was limited to 21% of total debt. Our recourse leverage ratio remained low at 1.4 times. With that, we will open the line for questions.
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and then two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. One moment please while we pull for questions. The first question comes from Stephen Laws from Raymond James. Please proceed with your question, Stephen.
Hi, good morning. Andrew, I wanted to start with the CECL reserve release. You know, it looks like $8.1 million in the SBC segment was recorded as a recovery. Can you talk about what drove that and the assumptions underlying that change, please?
Yeah, good morning. Yeah, the way we approach CECL is the combination of applying Trepp's model in addition to, you know, an overlay on an asset-by-asset basis by the asset management staff here. The majority of the recovery was driven by changes in some of the macro assumptions used by Trepp's, mainly their projections on the unemployment rate. What you bought is, as Trepp's moved these assumptions around given the short duration nature of our bridge portfolio does create some volatility. The movement in the quarter was purely related to Trepp's movement in their assumptions. You know, when you look at our CECL reserve today, approximately 50% of our total allowance is coming from Trepp's, with the other 50%, you know, determined by an asset-by-asset review of the asset management staff here.
That was really the main driver of the recovery.
Okay. Appreciate the color there. I wanna try and get to the, you know, think about portfolio earnings level and what we're gonna go through the next quarter or two with Broadmark closing. I know that's a lot of unlevered assets, which will take some time to optimize the returns there as you look for ways to efficiently cap finance that. You know, I think you mentioned, Tom, $0.06 of one-time items in Q1, and we've got Broadmark closing. You know, can you talk about another 10% return, you know, on book that puts us somewhere around $1.50.
Can you talk about, you know, how we should think about distributable earnings ramping over the year, given the near-term pressure, you know, or current net interest income and the impacts of Broadmark and how we should think about distributable income versus the $0.40 dividend level?
Yeah. I'll kind of give you the high frame, then Andrew can kind of drill down into some of the bridge to how we get to our high level of confidence in the 10. The first point I want to make is this, besides those two non-recurring items, you know, the investment in the small business fintech, $10 million there, is the net interest margin. The net interest margin this quarter-over-quarter was down about $6.5 million. If you boil it down to two factors, one was the fact that we refinanced $1.1 billion of warehouse debt into securitizations. Very few were able to achieve that in the capital markets.
That impacted the our margin by about 60 basis points. That's about $1.5 million. Then there's another short duration Mosaic asset which under the contractual terms there was a step down in the loan amount loan interest rate from roughly 12- 8. That was another $3.7 million. Those two factors were really the lion's share of the NIM. That's the noise in this quarter. Then we do expect some noise in the second quarter, just given all the moving parts, integration costs, et cetera.
in terms of the go-forward NIM accretion, I think one of the big differentiating factors besides credit for ReadyCap is the fact that with Mosaic and the initiative we've undertaken with sales of low yielding assets, which aren't credit impaired, they're just lower yielding, and that those equal about 10% of our NAV. Those two activity together will generate three-quarters of a billion of liquidity, which equates to well over $2 billion of buying power. The deployment of that capital into the current distressed environment where we're definitely seeing with this regional banking crisis, a lot of these pending banks looking at asset sales because they can't sell their bonds because it's underwater.
those are, you know, yeah, we're showing a reinvestment of 15%-20% versus pre-2022 when we were, you know, in 12, that kind of 12%-13% area. those are the factors driving the decline this quarter, noise in the second quarter. In terms of the core ability to generate a 10% ROE, the NIM accretion from reinvestment of that liquidity is a very unique, you know, it positions us uniquely versus the peer group.
You know, again, the other thing I wanted to score obviously is the relative outperformance of our multifamily small balance credit profile which as you could see in this quarter, also reduces the potential impact of significant CECL reserves due to declines in, you know, certain sectors, most notably office. Anyways, that's a maybe a long-winded answer to your question. I want Andrew if you add to that, but that's how we think about the current earnings balance sheet profile and NIM accretion going forward.
Yeah. I mean, the only other thing I would add to that is, you know, our SBA business does experience some seasonality in it. You know, lending volumes tend to ramp up from the beginning of the year to the end of the year. Production in 7(a) was, you know, off around $40 million from the end of last year. You will see a ramp in 7(a) production in the upcoming quarters, which obviously, you know, goes right to the bottom line. That'd be the only other thing that I would add to what Tom said.
Great. Thanks for highlighting that, Andrew. Appreciate the time this morning.
Thank you.
Thank you. The next question comes from Jade Rahmani from KBW. Please proceed with your question, Jade.
Thank you very much. The first question would be on the ROE target of 10%. Considering the company's leverage, the high returns generated by the licenses you have, the SBA, Freddie Mac, historic, you know, CLO securitization, these very high margin businesses, plus the opportunity to acquire these discounted portfolios. I mean, is the 10% ROE target, I just wanna understand, a long-term multi-year framework? Is it reasonable in your expectation to assume higher returns, you know, say, over the next 2 years? How are you thinking about that?
I would say 10 is our base case based on a conservative redeployment of the liquidity that we're getting at this stage and, you know, the peak credit losses that we're projecting in the portfolio. Over the next 2 years, we're highly confident of the ability to sustain the 10. Is there an upside scenario if we, you know, get a few large bank portfolios and as we did back post GFC? There could be, but I think 10 is our base case, and it's sustainable in terms of being fully covered over the next 2 years.
If you were to, say, double the size of the company, do you have a number in mind of what that would do to ROE, given in place, you know, expenses, infrastructure, and the operating leverage that that would ensue? I mean, there's a number of mortgage REITs trading at discounted valuations, and perhaps there's the potential to further scale the business.
Yeah. I mean, that's a good point, Ted. There's a denominator effect clearly at this stage for ReadyCap, you know, with Broadmark will be a little shy of $3 billion. Yeah, let's say through M&A, if we were able to achieve $5 billion, we would more likely than not, that would result in about a 100 basis point reduction in OpEx due to the denominator effect. That would bring that 10 up to 11. There's definitely potential accretion from M&A, just given the scale of the business and the fact that we don't need more bodies to make more loans, as we grow the balance sheet.
Thanks very much. In terms of the scale of distress you're seeing and the opportunity, loan portfolio sales, could you put any ranges in terms of volumes that you believe, you know, portfolio sizes that may come to market and perhaps how much capital Ready Capital would look to deploy in that? A follow-on would be on the Signature portfolio, if that's something that Ready Capital is gonna be looking at?
Yeah. On the first point, you know, I think if we look at 2024, 'cause most of these sales are not gonna probably happen until last half of this year going into 2024 as these regionals, from what we're hearing, manage their balance sheet. We're seeing right now is price discovery, believe it or not, on office loans, which, you know, we're I think we and other opportunistic private credit is in the kind of in the 60s to upper 70s, and they're kinda offering more in them based on their CECL reserves, kind of in the near 90. There's about a 20-point bid ask.
I think what will happen is like, just like GFC, you'll see sales of clean to scratch-and-dent portfolios because there's not as much embedded leverage in the community banks. I think they account for, I think it's like 60% or some number like that of all CRE debt, the CRE personally in mortgages. What we're expecting is probably something like in the $20 billion-$50 billion of sales with the large majority of that being more in the scratch-and-dent area where, you know, some of the decline in CRE prices will create LTVs or, you know, that are above the regulatory minimum, but we're comfortable with it from a distressed debt standpoint.
You know, that's how to answer your first question. That's what we're expecting in terms of that quantum. As far as Signature Bank, I don't want to comment on that specifically, but we always do look. The Waterfall desk is very well connected with the FDIC, and we would look to involve ourselves in any process with respect to relatively small balance loans that fit our asset management capabilities. Just on that topic, we are hearing that the FDIC, these bank sales will likely revert to structured transactions which provide embedded leverage. Actually the banks themselves, that's an interesting point. The banks themselves are looking at these credit risk transfer structures to also provide more efficient deleveraging of their balance sheets.
It's really a question of do they need liquidity for deposit outflows, that's a cash sale, or are they doing it for a capital RBC improvement, in which case they'd revert to something like a credit risk transfer.
Interesting comments. Thanks for taking the questions.
Thanks, Jade.
Thank you. The next question comes from Steve DeLaney from JMP. Please proceed with your question, Steve.
Thanks. Good morning, Tom and Andrew. You know, CECL's a beautiful thing, in a lot of ways, but, you know, it creates a lot of noise. You know, the nice thing about distributable EPS is we get rid of that noise, and we just try to focus on earnings, including realized losses. Looking at page 19, can you give us a sense of your $0.31, whether it's 30, 31, but for distributable, what are the amount of actual realized losses that you've taken on the portfolio against distributable EPS in this first quarter? Thanks.
Good morning. Yeah. In the quarter, the realized amount of losses was really limited to the sale of one particular REO property. It was roughly $500,000. Pretty immaterial. You know.
Yeah.
Losses on the, on the loan side were really offset by, the contingent equity right, from Mosaic.
Yes.
it was really just that $500,000 sort of realized REO impairment.
Okay. That $61 million, definitely was gonna ask about that, given the 30%, I think 68+. That's money. You bought that portfolio, or you bought the equity in the portfolio, from the prior manager. Was that $61 million of the consideration that was set aside in escrow and would be used to absorb principal losses? Is it that simple, that if you have a loss on recovering one of those assets, you're able to tap into that $61 million and reduce the reserve?
Correct. When we structured the Mosaic transaction, part of the consideration was a contingent equity right that had a total value of roughly $90 million. It basically serves as a first loss piece against losses from the Mosaic portfolio.
Mm-hmm.
What is remaining in terms of the cushion on that portfolio is roughly $61 million.
Okay. You used roughly $30 million of it to this point for to absorb real losses. Okay.
Right.
Tom, I know, you know, It's, it's kind of hand-to-hand combat out there, obviously, you know, on the credit side right now. I liked your long-term comments about strategic versus tactical or day-to-day. Tough question I know, but is, in your view of the company two, three years down the road, is residential mortgage banking a core business for Ready Capital? Thanks. That's my last question.
Yeah. I mean, we look wherever we can to continue to simplify the story in the company. You know, part of it was the initiative what we call the One Team initiative to combine all of the commercial real estate lending businesses under one umbrella, where we offer, you know, one loan officer offers all the products to their sponsor to improve the brand. You know, residential mortgage banking has been a incremental contributor. It's obviously shrinking in relation to the overall balance sheet. I think we would look at options to, you know, potentially simplify the story as it relates to residential mortgage banking.
We currently have no intention to further invest in the sector from the standpoint of, again, the simplification of the ReadyCap, you know, product mix and brand.
Got it. That clarity is helpful. Thank you both for your comments.
Thanks, Steve.
Thanks, Steve.
Thank you. The next question comes from Eric Hagen from BTIG. Please proceed with your question, Eric.
Good morning. You got Ethan on for Eric. Just a couple from me. Are you seeing opportunities to pick up bulk packages of MSRs?
Yes, definitely. To underscore Stephen's prior point, we are not bidding them into Ready Capital. Ready Capital is a to be, you know, very clear, it's a small balance direct lender that will look at opportunistic acquisitions in the space. Yeah. We are seeing MSRs, that would not be a factor for our Ready Capital's investment strategy. The external manager is a bidder and has infrastructure to do that. We're seeing a lot of opportunities because of the nuclear winter in mortgage banking. A lot of them are now selling MSRs to generate liquidity along with the scratch and dent loans, that's not a factor for Ready Capital's investment strategy.
Got it. That's helpful. Second, how should we think about modeling net interest income following the CRE CLO you issued?
Yeah. The recent CRE CLO, the debt cost increased, you know, roughly 30 basis points from warehouse. Slightly higher advance into the low 80, but, the debt cost increased, you know, roughly 30 basis points from warehouse.
Got it. That's helpful. Thank you.
Sure.
Thank you. The final question comes from Matt Howlett from B. Riley. Please proceed with your question, Matthew.
Oh, hey, thanks for taking my question. Just on, you know, with Mosaic set to close, I mean, any update on you still expect double-digit accretion? How's the portfolio, you know, in terms of the turnover of the portfolio, how quickly?
Adam, you wanna comment on this?
Yes.
sorry, Andrew, you go. I'm sorry.
Yeah. you know, we are looking to close the transaction on the 31st. The book value of the company is in line with where we projected it to be headed into close. We have seen the portfolio turnover a little quicker, which is increasing the cash balances expected to be on balance sheet at close. I think when we look going forward past the close, as Tom mentioned in his remarks. We are gonna pull incremental capital out of the business via, you know, leverage that is expected to come on balance sheet upon close and then reinvest that, you know, that $500 million over the next, you know, quarter or two.
That along with the operating synergies that are expected just by, you know, combining two public companies, you know, should drive those double-digit returns we've been talking about.
Got you. That was my follow-up on the question on how your what you're gonna do with the balance sheet. How will Ready look when that, when that capital's turned over? Will you pay down more of the secured borrowings? I think you have one maturity, a small one later this year. Just walk me through. Do you wanna continue to move to you know, securitized financing, going into the back half of the year? Just walk me through how Ready's balance sheet, you know, the right side will look, you know, when this is, when this capital is turned over.
Yeah. Certainly we have the convert coming due in August. We are positioning ourselves to take that out in cash if that is what is needed. We are expecting to do our 12th CRE CLO in the third quarter. We have an SBA securitization that is on the calendar. We do think there are other parts of the portfolio today, mainly some legacy acquired assets and some fixed rate product that will go into either our acquisition shop or our fixed rate shop. I do think we'll be active in the securitization, you know, market. In terms of, you know, growth capital, I think the majority of that liquidity is gonna, you know, come from the asset level financing we plan to put on the existing Broadmark portfolio.
That capital will be redeployed into some mix of, you know, our core, mainly bridge product, as well as some allocation into, you know, what I would call a revamped Broadmark product. That's really the go-forward plan over the next, well, two to three quarters.
That's interesting. I guess the follow-up, you guys have had pretty good track record buying back stock. I mean, I'm assuming the window will, when this closes, you'll have the ability to repurchase stock. Given the discount to, you know, pro forma NAV, I mean, it seems like a compelling opportunity. Can you just go over how willing you are to restart the buyback?
Yeah. Certainly coming out of the merger, you know, as we've demonstrated in the past, we, you know, we believe that share repurchases to be a powerful tool in providing shareholder value. Given, you know, the amount of liquidity we plan to have coming out of the merger, we certainly think, you know, share repurchases will be a way to drive, you know, book value per share. I do expect that to be a tool we use in the back half of the year, you know, if the price of our shares stays sort of at this level.
Great. Thanks, Andrew. Thanks, everyone.
Thank you. That does conclude the question and answer session. I'd now like to turn the call over to Tom Capasse for closing remarks. Thank you, sir.
Yeah, again, we appreciate everybody's participation and look forward to the second quarter earnings call. Thank you, everybody.
Thank you. Ladies and gentlemen, that does conclude today's call. Thank you very much for joining us. You may now disconnect your lines.