Asset Quality and Resolution
The company ended the year with $570,000,000 in delinquencies and $500,000,000 of OREO assets, totaling $1,100,000,000 in nonperforming assets, an 11% reduction from the last quarter. Management expects to resolve $100,000,000 to $150,000,000 of delinquencies by March end and another $100,000,000 to $150,000,000 in the next 90 days. Resolving these loans is estimated to add back $100,000,000 of income to the annual run rate, or about $0.48 per share, as noted by Ivan Kaufman, "We estimate that resolving these loans will add back $100,000,000 of income to our annual run rate, or about $0.48 a share."
Business Segment Performance
The agency platform had a strong fourth quarter with $1,600,000,000 origination volume, totaling $5,000,000,000 for the year. The servicing portfolio generates a predictable and growing annuity of over $128,000,000 a year of income. In the balance sheet lending business, the company originated $340,000,000 of volume in the fourth quarter. The single-family rental business originated approximately $580,000,000 in new business in the fourth quarter and is expected to produce $1,500,000,000 to $2,000,000,000 in volume in 2026.
Valuation and Dividend Yield
The stock is trading at a significant discount to book value, with a Price-to-Book Ratio of 0.53, indicating it may be substantially undervalued. The Dividend Yield is 16.77%, suggesting an attractive return for income investors. Given the company's efforts to resolve nonperforming assets and its strong business segment performance, the current valuation may not fully reflect the potential for future earnings growth.
Outlook and Conclusion
Management is optimistic about resolving the vast majority of delinquencies over the next few quarters, which will significantly reduce the drag on earnings. With a clear plan in place to address nonperforming assets and a strong performance from its business segments, the company is poised for improvement in its financial performance. The maintained dividend for 2025, despite earnings being below the dividend, reflects the company's long-term perspective and confidence in its ability to earn it back in a reasonable period.
