Release Date: March 03, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: With the dividend cut to $0.125 starting in the first quarter, do you expect cash earnings to cover that level? How do you view earnings power over the next several quarters on a cash and non-cash basis? A: The first quarter will be the lowest of the year due to the non-core bucket being booked on a cash basis. We expect to cover the dividend approximately 1.5 times over the year, with earnings ramping up as we progress. Key drivers include operational expense savings, growth in our SBA business, and the UDF merger, which should add incremental earnings.
Q: Can you discuss the rationale behind the UDF acquisition, especially considering past credit challenges with acquired portfolios? A: The merger includes aggressive discounts on current project bases, ensuring credit security even in downturns. Our historical experience with these projects gives us confidence in their performance. The acquisition is expected to be highly accretive on an EPS basis, with the added benefit of improving leverage ratios.
Q: How do you assess the risk of additional problems with remaining assets, and what comfort can you provide that further significant reserving actions won't be needed? A: The core portfolio, representing 83% of the total, is deemed long-term with healthy credit metrics. The non-core portfolio, at 17%, is targeted for expeditious liquidation due to lower yields and stabilization challenges. We are focused on resolving non-core assets over the next 7 to 10 quarters.
Q: Regarding the 2026 maturities, what is the plan to address them? A: We have begun addressing these with recent senior secured notes. We plan to use projected cash flow and liquidity to manage early 2026 maturities, while accessing markets for larger debt issues later. Our asset maturity ladder aligns closely with liabilities, providing multiple paths for resolution.
Q: Can you discuss the credit trends in the SBA business and any potential administrative changes that could impact it? A: Our SBA portfolio shows strong credit trends, with 60-plus delinquencies at moderate levels. We maintain a healthy mix of traditional and small loan programs. Conversations with the SBA indicate no significant changes that would impact congressional authorization for the 7(a) program.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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