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Exantas Capital Corp. (XAN) Q4 2019 Earnings Call Transcript

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XAN earnings call for the period ending December 31, 2019.

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Exantas Capital Corp. (ACR 5.62%)
Q4 2019 Earnings Call
Mar 4, 2020, 8:30 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good day, ladies and gentlemen, and welcome to the Q4 and Full-Year 2019 Exantas Capital Corp. Earnings Conference Call. [Operator Instructions]

I would now like to introduce your host for today's conference, Steve Landgraber, Senior Vice President of Corporate Finance. Sir, you may begin.

Steve Landgraber -- Senior Vice President of Corporate Finance

Good morning, and thank you for joining the call. Before we begin, I would like to remind everyone that certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements.

When used in this conference call, the words believes, anticipates, expects and similar expressions are intended to identify forward-looking statements. While the Company believes that these forward-looking statements are based on reasonable assumptions, such statements are based on management's current expectations and beliefs and are subject to a number of trends, risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements.

These risks and uncertainties are discussed in the Company's reports filed with the SEC, including its reports on Forms 8-K, 10-Q and 10-K, and in particular, the Risk Factors section of our Form 10-K. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update any of these forward-looking statements.

Furthermore, certain non-GAAP financial measures will be discussed on this conference call. Our presentation of this information is not intended to be considered in isolation or as a substitute to the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with Generally Accepted Accounting Principles are contained in our earnings release for the past quarter.

I will now turn it over to CEO of Exantas Capital Corp., Bob Lieber for opening remarks.

Robert C. Lieber -- Chief Executive Officer

Thanks, Steve, and good morning, everybody. Thanks for joining our call today. With me today are Matt Stern, our President; Dave Bryant, our Chief Financial Officer; Paul Hughson, who is the Head of all the Commercial Real Estate Lending; and Steve Landgraber from whom you've already heard. We also may be joined by Andrew Farkas, who's getting off an airplane imminently and may be joining into this call, but we didn't want to go any longer, so if Andrew joins, we'll welcome him in the part when he gets here.

I'd like to start by reviewing the progress Exantas made in 2019. Our full-year dividend for 2019 was $0.95 versus $0.475 in 2018, an increase of 100%. We generated core earnings of $1.07, which was well in excess of our dividend. We originated or acquired nearly $1.1 billion of commercial real estate related debt investments. Economic book value began the year at $13.54 and ended at $13.61.

Exantas continues to successfully execute the business plan articulated by our team. Needless to say, the commercial real estate finance markets are dynamic. As articulated on our calls through 2019, our traditional markets have seen a number of new entrants and risk-adjusted returns across products to consistently evolve.

To further differentiate Exantas from our competition and deliver value to our borrowers and our investors, we have announced last week that Exantas will now offer a fixed-rate loan product, which expands our platform to provide a full suite of loan products to middle market borrowers. We believe this differentiates Exantas from many of our competitors and is expected to increase capital deployment, as well as drive earnings.

Full-year 2019 core earnings were $1.07 versus $0.71 adjusted core earnings in 2018. The growth in core earnings is attributable to $5.9 million or $0.19 improvement in net interest income and an improvement of $2.4 million or $0.08 per share in operating expenses. Deployment for the year was nearly $1.1 billion with $730 million of loans originated and over $210 million of loans purchased from CM, including the 2,000, -- excuse me, the 211 [Phonetic] loans purchased from C-III Commercial Mortgage, as well as $147 million of CMBS that was acquired. Excluding the portfolio purchase from C-III, we deployed $878 million of capital, which falls within our original guidance of $850 million to $1 billion, albeit at the lower end of the range. This compared to $862 million of loans originated and $252 million of CMBS purchased in 2018, totaling a little over $1.1 billion.

Payoffs and paydowns were $740 million in 2019 versus $596 million for 2018, so outsized payoffs did materially impact some of the things we did to increase our portfolio.

Within this context that Exantas announced that its expanding its commercial real estate debt platform to include fixed-rate commercial real estate loans through the integration of C-III Commercial Mortgage platform. Matt will discuss later the benefits to our borrowers and our shareholders, but we feel this additional product will allow us to deploy more capital at attractive yields and specifically capture some of the demand for permanent financing coming directly from our borrowers.

Exantas is now a one-stop solution for borrowers, who borrow short-term on transitional assets and then can utilize the same lender to provide fixed-rate long-term loans once the business plan is completed. We feel this differentiates us from our competition at the loan size we most commonly originate.

Turning to fourth quarter results. 2019 core earnings were $0.23 per share compared to $0.31 per share last quarter and $0.21 per share during the fourth quarter of 2018. This quarterly decline in core earnings from last quarter was driven primarily by the negative net production during the third quarter, which is consistent with our commentary provided on our third quarter earnings call.

New commercial real estate originations of $203 million increased as expected in Q4 relative to the $105 million originated in Q3. We continue to experience higher than usual paydown activity as our borrowers achieved their business plans and took advantage of the lower interest rate environment.

Fourth quarter loan payoffs and paydowns were $204.8 million after $205 -- $256.9 million in Q3. We do believe that the introduction of the fixed-rate business will allow us to capture some of this refinancing volume.

Net deployment for the fourth quarter was $45.6 million with gross real estate debt investments of $276 million net of the $2. -- of the $227.7 million of payoffs. As of December 31, 2019, our commercial real estate debt portfolio was $2.3 billion, which consists of $1.8 billion of commercial real estate loans and $556 million of CMBS at par.

Net interest income during the fourth quarter was $14.4 million or $0.45 per share compared to $16.6 million or $0.52 per share during the third quarter of 2019. GAAP book value per common share was $14, a $0.12 decrease from the third quarter and economic book value decreased to $13.61 compared to $13.71 last quarter.

GAAP net income was $3.8 million or $0.12 per share compared to $10 million or $0.31 per share for the third quarter. GAAP net income was negatively impacted by $0.07 of non-core activity, which Dave will highlight in his comments. GAAP net income for the year was $0.81 versus $0.22 in 2018 prior to any one-time adjustments.

In light with the integration of C-III Commercial Mortgage, we'd like to update our 2020 origination guidance. And I would characterize this under normalized market conditions, we now expect Exantas to originate or acquire at least $1.1 billion of commercial real estate debt in 2020. Of this amount, we would expect about $200 million to come from fixed-rate originations. I want to emphasise though that this recent market activity has not been normal and we may need to revisit this guidance later this year.

Our current pipeline looks strong with over $350 million of term sheets returned and $87 million of loans closed this quarter to-date. Some of the term sheets we returned will close in the second quarter. We still have ample liquidity of $140-ish million to fund our pipeline and grow net interest income. This translates to roughly $300 million to $350 million of incremental deployment capacity.

Given most of our deployment will be at the end of the first quarter and then into the second quarter, we expect our net interest income in the first quarter to be relatively muted. However, the current pipeline and our confidence in our deployment guidance gives us the comfort with our current dividend of $0.275 per share.

With that, I'd like to turn it over to Matt.

Matthew J. Stern -- President

Thank you, Bob, and good morning, everyone. I'll first provide some additional information on the integration of C-III Commercial Mortgage as loan platform, after which I'll review the fourth quarter performance of our CRE and CMBS portfolios.

We are encouraged by the opportunities created for Exantas through the integration of C-III Commercial Mortgage's fixed-rate lending business. Since its inception in 2010, C-III Commercial Mortgage has originated $3.2 billion of fixed-rate loans and $2.1 billion of floating-rate loans. This business has a track record of profitably deploying capital with an excellent credit history.

As you'll recall, in May 2019, C-III Commercial Mortgage sold a $211 million portfolio of floating-rate CRE mortgage loans to Exantas, which was immediately accretive to Exantas's earnings.

We believe the addition of the fixed-rate business will be a valuable differentiator for Exantas as the competition for transactions has increased. We tend to target borrowers with light transitional assets, who are often looking for more permanent financing as their business plan gains traction. Exantas's borrowers will now be able to benefit from a full suite of real estate capital market offerings from short-term floating-rate loans to longer term fixed-rate loans, as well as preferred equity and mezzanine debt in appropriate situations.

We will also be able to capture a share of the maturities in our floating-rate book by offering flexible longer term fixed-rate capital products to our existing floating-rate customer base, as well as reaching a new universe of borrowers, who primarily seek fixed-rate loans. Additionally, Exantas will become one of the few public REITs operating a fixed-rate securitization business, which will enhance shareholder returns.

Our fixed-rate loans will be originated at a taxable REIT subsidiary or a TRS, as these loans will be targeted for CMBS securitization. Gains on securitization are deemed to be non-qualified income for a REIT, which is why we will be doing this business at a TRS. One item of note is that Exantas has $60 million of gross net operating losses or NOLs at our TRS from legacy business activities, which were disposed of as part of the strategic plan. Exantas has a full valuation allowance against these NOLs, so there is no book value currently associated with them. This new business endeavor will allow us to utilize this valuable asset.

In conclusion, the integration meaningfully expands Exantas's precedence in the commercial real estate space and helps to accelerate the deployment of our capital base accretively, despite a competitive marketplace.

I'll now address fourth quarter activity in both our commercial real estate and CMBS portfolios. At December 31, 2019, our commercial real estate loan portfolio balance was $1.8 billion and consisted of 98% floating-rate assets. The composition of the portfolio remained consistent by both property type and region, relative to last quarter.

During the fourth quarter, we originated 12 commercial real estate floating-rate loans, totaling $203 million with an average commitment of $16.9 million and a weighted average spread of 289 basis points over a 30-day LIBOR. The weighted average unlevered yield on new loan originations decreased by 68 basis points to 5.04% during the fourth quarter compared to 5.72% during the fourth quarter of 2018.

Total CRE loan asset financing was $1.3 billion at quarter-end with a weighted average spread of 1.59% compared to a spread of 1.68% during the fourth quarter of 2018.

Our CRE loan portfolio remained flat during the fourth quarter as payoffs and paydowns of $204.8 million offset new loan originations of $203 million. We had 15 loan payoffs in the fourth quarter, 11 of which totaling $163 million were paid off within 25 months of origination. Of the 11, five were paid off with fixed-rate financing and four assets were sold, demonstrating that these properties had sufficiently achieved their business plan to exit the transitional loan market. It is exactly these key types of situations, where we feel we can capture some of the refinancings with our own fixed-rate loan products.

Turning now to our CMBS portfolio. During the third quarter, we acquired $73 million in face amount of CMBS bonds, including $59 million of floating-rate bonds at a spread of LIBOR plus 2.46%. This was partially offset by $22.9 million of paydowns, resulting in net acquisitions of $50.1 million at a weighted average coupon rate of 3.99%.

At December 31, 2019, our $556 million CMBS portfolio at par, which had a carrying value of $520.7 million was comprised of $382.7 million of floating-rate bonds and $138 million of fixed-rate bonds. We recognized a net increase from last quarter of $0.02 per common share of book value from our CMBS portfolio, including the impact of mark-to-market on our interest rate swaps.

With that, I'd like to turn it over to Dave Bryant to discuss our financials.

David J. Bryant -- Chief Financial Officer

Thank you, Matt. Good morning. Our GAAP net income allocable to common shares for the three months and year-ended December 31, 2019 was $3.8 million or $0.12 per share and $25.6 million or $0.81 per share respectively.

Core earnings were $7.3 million or $0.23 per share for the fourth quarter 2019, and that was relatively flat over the adjusted amount for the same period in 2018. For the calendar year 2019, core earnings were $34 million or $1.07 per share or an increase of $11.6 million or $0.36 per share over adjusted core earnings in calendar 2018.

The growth in our core earnings is being driven primarily by our positive net investment production over the last year. Accordingly, we saw net interest income increase by $5.9 million or 11% for 2019 compared to 2018.

In terms of significant items impacting the fourth quarter GAAP earnings, we incurred $3.3 million or $0.10 per share of charges on a non-core legacy asset held for sale, comprised of $2.2 million or $0.07 per share that Bob mentioned from a valuation adjustment based on an updated property appraisal, and the balance of $0.03 per share is from protective operating advances, both reflected in other income.

As we stated during last quarter's call, we expected a decline in net interest income during the fourth quarter as a result of outsized loan payoffs in the second half of 2019. We had substantial loan payoffs at the end of the third quarter and beginning of the fourth quarter, which was only partially offset by our net positive fourth quarter production. This combined to cause a $0.06 decline to earnings per share.

We accelerated deferred costs related to our 2018 securitization of approximately $700,000 or $0.02 per share, reflected in interest expense that resulted from loan payoffs of $125 million within our 2018 CLO. These items were offset by a non-recurring adjustment from a former investment that was exited as part of the strategic plan, in which we recovered $600,000 or $0.02 per share, resulting from a revaluation of an indemnification obligation recorded from the 2017 disposal of a JV investment. The net negative impact from these items combined in 2019 was approximately $5.3 million or $0.16 per share.

With the net positive investment production in the fourth quarter and a strong start to production toward the first quarter of 2020, we expect our run rate earnings profile to increase as we see the full impact of our production from the current pipeline to begin in the second quarter.

For 2019, our GAAP net income is $0.81 compared to $1.07 of core earnings per share.

Net income includes a net $0.10 of charges, which I outlined related to the asset in our strategic plan. The other significant difference of $0.16 in core adjustments for the year are predominantly from the combination of non-cash amortization on our equity compensation expense and the non-cash amortization of the value of the convertible option on our 4.5% notes.

GAAP book value declined to $14 per common share at December 31 from $14.12 at September 30, and represents a $0.02 decrease from our December 31, 2018 book value of $14.02 per common share. Economic book value, a non-GAAP metric was $13.61 per share at December 31, a decline from $13.71 at September 30. However, the economic book value per share of $13.61 at year-end represents an increase of $0.07 from $13.54 at December 31, 2018.

GAAP book value per common share of $14, less the adjustments for unamortized discounts on our convertible notes and redemption value of our preferred stock, which totaled $0.39 per share, reconciles the calculation of economic book value per share.

As a further point of comparison, our economic book value at December 31, 2017 was $13.63 per common share and reflects our relative book value stability. Impacting our financials, starting January 1, 2020, will begin the implementation of CECL, which is new accounting guidance on loan loss reserves that require us to estimate expected credit losses over the life of our loans. In determining our credit losses -- expected credit losses, we evaluated by property type and loan type, available relevant historical and current loan loss data, as well as future macro-economic information.

We have evaluated the impact of CECL on our going-forward reserve policy with our advisors and it results in a 25 basis point reserve or $4.5 million on our $1.8 billion loan portfolio. Since we had reserved $1.5 million at year-end 2019, the charge to retained earnings will be $3 million or $0.10 per share upon adoption in the first quarter of 2020.

Our GAAP debt-to-equity ratio remained flat from last quarter at 3.4 times at December 31. We saw our securitizations experience debt paydowns of $138 million, which was offset by a net increase in our recourse borrowings of $120 million as we ramped up our loan book for our new CLO and acquired additional CMBS during the period.

Stockholders' equity decreased by $3.6 million as GAAP earnings were below our dividend this quarter, partially offset by a net increase in our mark-to-markets, which Matt had discussed. As an experienced issuer in CRE CLO markets, we find the CLO market an attractive source of non mark-to-market cost-efficient financing. During 2019, we issued the largest CLO in our history of Exantas Capital, 2019-RSO7 deal at $687.2 million.

In addition, we were able to liquidate and recycle capital in our 2017 CLO with only $63 million of the original loan collateral of $377 million that remains on our balance sheet as of today.

After the quarter, we announced the pricing of our newest real estate CLO, Exantas Capital 2020-RSO8. The transaction finances $522.6 million of CRE loans with $435.7 million of investment-grade non-recourse floating-rate notes. We priced the deal at a weighted average spread of 1.43% on the investment-grade notes and we'll close with a leverage factor of 83.4%.

However, at closing, we plan to purchase $42.4 million of the BBB notes and after financing those notes, we expect our leverage to be 81.9% at a weighted average spread of 1.28%. This is our 10th real estate CLO and we have sponsored $4.3 billion of CLO transactions over our 15-year history.

At December 31, our $1.8 billion floating-rate CRE loan portfolio at par has a weighted average LIBOR floor of 1.89% and weighted average spread over LIBOR of 3.49%. To mitigate the impact of the decline in LIBOR, we have historically included LIBOR floors on our loans along with minimum interest period protections typically ranging from 12 months to 18 months at the time of origination.

At the end of December, we had $1.3 billion or 71% of our loan book with LIBOR floors that are in the money, that is with 30-day LIBOR at 1.76% at the end of 2019. We expect to continue to see a benefit to net interest income during 2020 as we have seen LIBOR decline over the past week and the forward LIBOR curves projects a further decrease in rates.

Lastly, we redeemed the remaining $21 million of our 8% convertible notes in January 2020 and have sufficient liquidity at the end of February to fund a robust real estate floating and fixed-rate debt investment pipeline.

With that, I'll turn the call back to Bob for some final comments.

Robert C. Lieber -- Chief Executive Officer

Thanks, Dave. These are certainly interesting times particularly in the capital markets. The current market dislocations create uncertainty, but for us, we believe this creates new opportunities and we think 2020 will be a great year for Exantas, particularly with the addition of the fixed-rate business and remain optimistic about our long-term operating strategy and its ability to produce results.

With that, I would like to ask the operator to open it up for any potential questions.

Questions and Answers:


Thank you. [Operator Instructions] Our first question comes from the line of Steve DeLaney of JMP Securities.

Steve DeLaney -- JMP Securities -- Analyst

Good morning, everyone. Thank you for taking the questions. Appreciate the color on the C-III Commercial Mortgage. We saw the initial announcement and because we, obviously, other -- couple other commercial mortgage REITs have this activity and it's been very positive to return on common equity. But just to clarify a couple of things, it strikes me that, what I'm hearing now and it wasn't clear initially from the press release is that, any gain on sale of revenue net and we certainly hope that will be positive, but that is -- that stays in the TRS, and the Manager is not receiving any share in that. I'm -- can you just kind of clarify? What I'm trying to get at is, if you record the sale of the loans in the TRS, somehow another is there any expenses paid or fees paid to the Manager other than the existing management agreement with the REIT? Thanks.

Matthew J. Stern -- President

Yeah, so there is -- I guess, there are two parts to that, one was an income question as it pertains to the REIT, Steve, I'll touch on that first and then I'll hit your second. So, the answer is, the income would occur at the TRS level.

Steve DeLaney -- JMP Securities -- Analyst

Got it.

Matthew J. Stern -- President

And then if the income or the money and income are -- is distributed off to the QRS, that would produce income at the REIT level. So, that's the first piece. It's really the upstreaming of the...

Steve DeLaney -- JMP Securities -- Analyst

I got that. Yup.

Matthew J. Stern -- President

Right from the securitization gain. As part of the broader arrangements, there is a significant cost profile to bringing over the team in order to execute this business at Exantas and as you might have seen in our press release, 1% of loans that are made -- fixed-rate loans only that are made on behalf of Exantas, there will be an expense reimbursement associated with that to the Manager.

Steve DeLaney -- JMP Securities -- Analyst

Got it. I did miss that, Matt. Thank you for that.

Matthew J. Stern -- President

Sure. And if you look at our 8-K and our press release, it is -- it's explained there. And that really is just an effort to partially mitigate the cost profile of bringing over the entirety of the fixed and floating-rate team from commercial mortgage.

Steve DeLaney -- JMP Securities -- Analyst

Got it. And I guess the other benefit, as you said is, to the extent you don't need that cash in the REIT to cover dividends etc., you want to utilize your NOL, you could hold that there and just grow GAAP book value for the consolidated Company, I assume. If you don't need to upstream it?

Matthew J. Stern -- President

I think that, that is right, but I would clarify one thing. It would still be a taxable event at the TRS level and so you could utilize the NOL. But, you're right about the decision, which is we could choose to upstream that money to the QRS, or the capital could be left in the TRS, which would obviously be a positive from a book value perspective.

Steve DeLaney -- JMP Securities -- Analyst

Correct, correct. Okay, thanks. That's very helpful. Okay, especially, the 1%, which as I said I missed. You had a good fourth quarter in credit in terms of CMBS spreads and a positive fair value mark, I know it's still early in this latest disruption, as recently as two weeks ago we were seeing new issue A4 10-year bonds being sold at near all-time tights, but I suspect things have widened out a little bit. Can you just comment generally on how much spread widening you're generally seeing in the CMBS market in the last couple of weeks?

Robert C. Lieber -- Chief Executive Officer

So, Paul, you want to take that?

Paul Hughson -- Head of Commercial Real Estate Lending

Sure. So, I would say the BNK yield price yesterday, AAA 10 years priced at 95 [Phonetic] over.

Steve DeLaney -- JMP Securities -- Analyst

Okay, OK.

Paul Hughson -- Head of Commercial Real Estate Lending

Say, two weeks ago, -- three weeks ago, that's probably like versus like 76 [Phonetic].

Steve DeLaney -- JMP Securities -- Analyst


Paul Hughson -- Head of Commercial Real Estate Lending

So, I think at the top end, we priced our CLO on Monday, and I'd say at the top of the stack, things are kind of 15, 20 [Phonetic] wider. And at the bottom of the stack, things are probably 35 to 50 [Phonetic] wider.

Steve DeLaney -- JMP Securities -- Analyst

That's very helpful. Thank you, Paul. So, a bit -- it's hard to expect that as low as absolute rates are going, in some ways that may be an economic requirement, but if you're -- if I'm a life company and I see the 10-year go down 50 basis points, I got to get some carry somewhere, it's almost -- spreads almost widened just because base rates are so much lower, but we'll have to wait and see on the credit. That color is very helpful.

And one final thing for me. You guys have done a good job of cleaning up the right side of your balance sheet with some high-cost debt etc., that you paid off. You still have your Series C $116 million at 8.625 [Phonetic]. Can you remind us when that would be callable?

Matthew J. Stern -- President

Yeah, so it's, that's the last piece of it. I think it's carried on our balance sheet at $116 million and it is callable in I believe it is July of 2024.

Steve DeLaney -- JMP Securities -- Analyst

Well, so you've got a little bit of that for a while?

Matthew J. Stern -- President

Yeah, I think from a -- based on existing terms, we -- that's something that we'll need to have for a while.

Steve DeLaney -- JMP Securities -- Analyst

Okay. Thank you very much for the time and the questions.

Matthew J. Stern -- President

Yeah, thank you, Steve.


[Operator Instructions] Your next question comes from the line of Stephen Laws of Raymond James.

Stephen Laws -- Raymond James -- Analyst

Hi, good morning.

Matthew J. Stern -- President

Good morning.

Robert C. Lieber -- Chief Executive Officer

Good morning.

Stephen Laws -- Raymond James -- Analyst

Bob, appreciate some of the details you went through with projections on originations especially the $200 million of fixed-rate, but can you give us a little more details on that product, what the typical yield is? How it differs, if any, in structure from in terms of the floating outside of just the rate and financing strategy around those loans to mitigate interest rate risk?

Robert C. Lieber -- Chief Executive Officer

Sure. Thanks, Steve. I'm going to turn that over to Paul to talk about what he sees in that part of the business.

Paul Hughson -- Head of Commercial Real Estate Lending

So the majority of those loans are 10-year fixed-rate loans that are fully call-protected with the intention that they'd be contributed to securitized transactions, C-III contributed 35 or 40 different pooled securitized transactions. The loans are hedged. So, and there is a component of our lines that will allow us to finance them. So, given the -- we have roughly $900 million of warehouse line capacity. So, we'll have the ability to finance post the fixed and the floating-rate loans on our...

Stephen Laws -- Raymond James -- Analyst

Great. To follow-up on the last set of remaining legacy assets, I think it's $30 million or $40 million left. Can you give us an update there, timing to resolution or are those assets largely just need to run off to maturity? But any update there would be appreciated?

Robert C. Lieber -- Chief Executive Officer

Paul, you want to?

Paul Hughson -- Head of Commercial Real Estate Lending

I would say, it's a good question. And the, I mean, I think we've -- I would like to think that the substantial majority of those assets will be gone over the course of the next two quarters, but some of that is subject to the sales market and how the current environment affects the overall real estate capital markets. But all things equal, I would hope that the vast majority of that would be resolved over the course of the next couple of quarters.

Stephen Laws -- Raymond James -- Analyst

Great. Finally, Dave, can you -- appreciate the numbers on CECL. Any expected material changes to that reserve either way in anticipation of any shift in asset mix or anything else that we need to think about as we build in a CECL reserve line going forward?

David J. Bryant -- Chief Financial Officer

Not at this present time, Stephen. It obviously just took -- went into effect on January 1, and we've looked at our history of losses and we look forward using a service, and we just don't see any change to that in the near-term future.

Stephen Laws -- Raymond James -- Analyst

Okay, great. Thanks very much.


At this time, there are no further questions. I'll now turn the call to management for any additional or closing remarks.

Robert C. Lieber -- Chief Executive Officer

Well, I want to thank everybody for joining us this morning. We look forward to updating you on our progress on our next Board -- our next earnings call. Thank you very much.


[Operator Closing Remarks]

Duration: 35 minutes

Call participants:

Steve Landgraber -- Senior Vice President of Corporate Finance

Robert C. Lieber -- Chief Executive Officer

Matthew J. Stern -- President

David J. Bryant -- Chief Financial Officer

Paul Hughson -- Head of Commercial Real Estate Lending

Steve DeLaney -- JMP Securities -- Analyst

Stephen Laws -- Raymond James -- Analyst

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