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Newcastle Investment Corp. (NYSE:NCT)

Q4 2012 Earnings Call

February 28, 2013 8:30 a.m. ET

Executives

Sarah Waterson – Investor Relations

Wes Edens – Chairman

Ken Riis – CEO, President

Brian Sigman – CFO

Greg Finck – Managing Director

Analysts

Matthew Howlett - UBS

Jasper Burch - Macquarie

Bose George - KBW

Douglas Harter - Credit Suisse

Jackie Earle - Compass point

Operator

Good morning. My name is Stephanie and I will be your conference operator today. At this time, I would like to welcome everyone to the Newcastle Fourth Quarter 2012 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions) I would now like to turn the conference over to Ms. Sarah Waterson from Investor Relations.

Sarah Waterson

Thank you, Stephanie, and good morning. I'd like to welcome you all today, February 28, 2013, to Newcastle's fourth quarter and full year 2012 earnings call. Joining us today are Wes Edens, Chairman of the Board of Directors; Ken Riis, CEO and President; Brian Sigman, CFO; and Greg Finck, Managing Director.

Before I turn the call over to Wes, I'd like to point out certain statements made today may be forward-looking statements. Forward-looking statements are not statements of fact, instead these statements describe the company's current beliefs regarding events that by their nature are uncertain and outside of the company's control. The company's actual results may differ materially from the estimates or expectations expressed in any forward-looking statements, so you should not place undue reliance on any of the forward-looking statements. I encourage you to review the disclaimers in our earnings release regarding forward-looking statements and expected returns and to review the risk factors contained in our annual and quarterly reports filed with the SEC.

Thank you. And I'd now like to turn the call over to Wes Edens.

Wes Edens

Thanks, Sarah, and welcome everyone. Well, let's start with the financial results. The quarter which we have previewed with people, I think the numbers are very much in the market. Core earnings $0.19 per share in the fourth quarter. Net income $0.32, CAD $0.20 and paid dividend of $0.22. Obviously there is a bit of noise in the financials as we have been in the ramp up phase of both raising capital and trying to time that appropriately to then invest the capital. We have average invested cash in the quarter of $245 million.

The big news actually in terms of the company happened right after the end of the quarter. Actually you heard in early January we announced two things. One that we had been a successful winner of a large chunk of the servicing, we being a Nationstar servicer and an owner, and part of it and Newcastle as part of the excess MSR. We raised a bunch of capital at that time and announced that we are going to split the company. And so the split is very much on track. I think that our thoughts at that time were that we would get it done through the SEC by about the end of the quarter, plus or minus April 1. And it looks very much like that’s the case.

So I think the goal, I think I first mentioned this on earnings call last summers, is that once we got the residential business to its scale and a size that we thought that it would be viewed as a viable standalone candidate that we would split it off because we thought that the resultant evaluation for both the old company, Newcastle, as well as the new company, New Residential, could lead to a materially higher price than it kind of collectively traded. And in fact subsequent to the announcement that is in part is what has happened. So that’s all good news.

In addition, a second update for the quarter is we raised capital just a few week ago kind of mid-quarter. Really reflecting a flurry of activity in the first part of the year on virtually every front. On the MSR front and on the agency then in the core business in the senior housing stuff and a bunch of debt purchases that have gone on. So it's been a very very busy and very productive quarter. There are a handful of new asset classes which we are looking at that I will talk about in a little bit of detail when we get to it. But so far so good. So maybe what I will do is take a pause now in terms of talking about the new business and turn over to Ken to talk about the activities of Newcastle and its core business. Ken?

Ken Riis

Thanks, Wes. So today I will talk about the commercial real estate debt portfolio in our senior living investments that we have made to date. At quarter end, we owned $3 billion of real estate securities and loans financed with $2 billion of primarily non-recourse debt. So net of our financing, our direct holding equals $1 billion in our commercial real estate debt portfolio. In the fourth quarter, it generated $45 million of cash flow and the value of the portfolio increased by $21 million to an average price of 85% of par.

The $1 billion of difference between the face amount of our assets and liabilities represents the total principal recovery Newcastle would realize if held to maturity and all our assets and liabilities were paid off at par. At quarter end, we expected to recover $725 million to $750 million of the $1 billion principal amount, over an average life of five years. But this assumes we don’t buyback anymore of our liabilities at a discount or collapse any of our CDOs. I think this is conservative. We are actively looking to buyback our liabilities at discount and in addition shorten our recovery time by collapsing CDOs.

And as we recover this principle, our plan is to reinvest in senior housing properties. This is something that we are very excited about. Fortress is very experienced in managing senior housing assets and the opportunity is big because it's a big market, and a lot of the assets are held by mom and pops so there are a lot of individual asset owners or small portfolio owners. And we have to grind through to make the acquisition but we are pretty excited about the opportunity.

Currently our short-term [actual] pipeline is about $400 million and it's growing. We currently own $200 million of senior living properties financed with $120 million of mortgage debt resulting in a net investment of $80 million. In the fourth quarter, this investment generated a 13.4% IRR, $2.1 million in earnings, $400,000 more than we projected at the time of purchase. So we have done a good job with our initial investments we have made in this sector and we are really excited about our opportunity to grow it. And our strategy remains the same. Buy properties that are underperforming in the market, overlay institutional asset management to increase occupancy and rent to market levels and lower operating costs.

Wes Edens

Great. So at the time of the split we detailed -- there is actually a good supplement that is posted online that I hope that you guys have taken a look at. But on page four of that supplement we detailed the two companies and what their investments focus and activities will be. Newcastle, which Ken just went through, you've got the legacy CDO business, senior housing, other real estate debt and a handful of opportunistic restructuring, which hopefully have some good news on in the next quarter or so because there is a lot of activity on that side.

The new company, New Residential, NRZ will be the ticker symbol. Focused on, kind of core residential focused activities. So excess MSR which has been a very very productive form of investment for us and I will talk about kind of what's happened to our portfolio and how things are going there. The RMBS, the non-agency RMBS debt which Greg Finck, one of my colleagues will talk about our activities there. Since Nationstar has become a very large services of the non-residential securities business through all their acquisition, we really started focusing our activities on buying, making investments in securities that those guys (inaudible). In total that non-agency market is around $1 trillion, just under $1 trillion. And Nationstar as a servicer or a master servicer, with just over 20% of it. So it's a big addressable universe for us. We have done some good work there. Greg has had a very good year in it so far.

Two other areas of focus that are not currently on the books but things that we think are actionable and interesting. The non-performing loan market which we think there is actually robust pipeline that exists in the country. And it seems like this could be the year where a lot of that does break loose. You have the agencies that own many hundreds of billions of dollars in non-performing loans. There is a lot of NPLs, books of business out there. Actually the pipeline in the first quarter looks robust and we have got some very very specific thoughts about that. That could be interesting.

And then what I would call adjacent assets. As I mentioned to folks when we talked a couple of weeks ago and we are raising capital, there are similar assets in the consumer debt markets in particular, there is some transactions we have looked at that we think could be productive. And so hopefully we will have some good news for you there as well. So on the excess MSR portfolio, we have invested in just over $300 billion face value of servicing. So it's quite a large (inaudible) now. Many numbers of pools. We detail the performance of them on our public filings in great detail and transparency to you all. And the news across the board has been uniformly positive.

In general, prepayment speeds of these assets have been modestly lower than what our expectations were, number one. Number two, especially on this stuff that we have owned for some time, the recapture rates which is really our defense against prepayment speeds inching up here, have gotten better and better over the time. So the Nationstar folks are doing a good job there. The net result to us as we have invested over $600 million in capital, we have got an IRR that is just on an unleveraged basis which is just under 20%. So in a general interest rate environment that has been a spectacular return.

Just a few comments on the market and what we see. Well, last year I think was characterized with very large episodic transactions at a handful of banks or liquidations. We had the Lehman Brothers transaction where the estate that was sold in a bankruptcy of sale at about this time last year. Obviously the big news at the end of the year was dominated by the ResCap portfolio on the one and then Bank of America being a large portfolio on the other. We think that there are still a handful of these episodic transactions on the horizon. There is one in particular that we are very focused on with our Nationstar folks. But I think you are going to see a migration on to more the flow basis.

To put some numbers around that. The total amount of mortgage originations this year are something between $1 trillion and $1.5 trillion. Those are big ranges but they give it some sense. And the average value of the total servicing is around 3%, let's say on the origination. At $1.5 trillion that would be $4.5 billion of kind of addressable investment need. I figure as much as half of that could be sold on kind of a one-by-one basis. Right. You still have a couple of the big moneys in our banks that are adding to the portfolio but there is a lot of the servicing in bits and pieces that have been sold.

A real focus of our activity is to try and capture some substantial portion of that. So maybe not as exciting or the same kind of announcements that you see from some of the large transactions but robust activity nonetheless and something that we are very focused on and think that we can generate some meaningful investments and thus investment returns in it. So with that let me take a pause and turn over to Greg to talk about the non-agency market.

Greg Finck

Thanks, Wes. We purchased $134 million current base of non-agency RMBS in the fourth quarter at an average price of 65% of the par, investing approximately $87 million. We received roughly $9 million principle and interest cash within the quarter and the portfolio increased in value by $11 million. In total in 2012, we purchase $456 million in base RMBS at an average price of 53% of par for a total investment of $288 million. We applied $151 million debt against the portfolio for a net investment of $138 million.

As of year-end, the RMBS portfolio had a market value of $290 million and had received $22 million in cash while distributions. In 2013, to date we have invested an additional $191 million to purchase $322 million base of non-agency RMBS at an average purchase price of 59% of par. RMBS price has increased significantly in the fourth quarter and we believe these securities still offer attractive investment opportunities, given the recovery in the housing market and fundamental performance improvements in the mortgage market.

Home prices rose 7% in 2012 and market conditions remained ripe for further price appreciation given low mortgage rates and positive supply demand dynamics. Mortgage delinquencies have been declining for several years now and we believe the recent improvement in the housing market will lead to further decline in default rates, lower loss severities on defaulting loans and potentially increases in prepayment rates. Many non-agency borrowers have been unable to refinance their mortgages at today's low mortgage rates due to home price depreciation and resulting negative equity. Rising home prices should slowly more of these underwater borrowers the opportunity to refinance. Our RMBS portfolio would benefit from increases in prepayments due to the discount price of the securities.

We expect our RMBS investment to generate 5% to 7% annualized returns on an unlevered basis which translates in the 10% to 15% returns on levered basis. We have primarily invested in current pay subprime and Alt-A RMBS service by Nationstar. As Wes mentioned, we believe Nationstar has been very effective at modifying and carrying delinquent loans and thus reducing default in losses. We also continue to believe that our potential arbitrage opportunities by collapse in RMBS securitizations back into the underlying loans to add incremental value to the portfolio.

In many cases we believe the loans can trade at 10% to 15% higher prices than the securities. We are working to aggregate concentrated positions in select deals in order to most effectively take advantage of this pricing differential. Over two-thirds of our RMBS portfolio is concentrated in ten specific deals. We hope to complete our first deal collapse in the first half of 2013. With that I would turn it back over to Brian.

Brian Sigman

Thanks, Greg. In the quarter we had GAAP income of $0.32 per share. This included core earnings of $0.19 while the remainder is primarily due to a onetime breakup fee related to the ResCap transaction and mark-to-market net gains on our loans held for sale and our excess MSRs. We generated $35 million of cash available for distribution or CAD in the quarter and $112 million for 2012. Our common dividend for the quarter was $0.22 per share which we paid back in January.

Our fourth quarter financial results were affected by having approximately $245 million of average uninvested capital in the quarter, including $160 million of average uninvested cash and $85 million of potential financing from our unlevered non-agency RMBS. If this capital was fully invested in the quarter, our earnings would have increased by $0.05 to $0.06 per share. As we continue to fund our commitments and make new investments in the quarter, our earnings will continue to grow.

Additionally, you will notice, our G&A expenses were higher relative to previous quarters as a result of the expenses associated with the ResCap transaction and the planned spin-off of New Residential. This morning we posted our Q4 supplement and as you can see from our disclosures, we have been breaking out our results by our two business lines to give transparency into what the companies will look like after the spin. We saw a full quarter from our MSRs that we purchased in July and with that the residential business generated close to 50% of our total cash flow.

We currently have $285 million of unrestricted cash to invest and have $400 million face or $235 million value of non-agency RMBS that are currently unlevered in addition to our MSR book which is completely unlevered. As Wes and Ken mentioned, we are seeing a lot of opportunities to invest the capital and expect to be fully invested in the near-term. That ends our prepared remarks. We will now take your questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Matthew Howlett with UBS.

Matthew Howlett - UBS

Just on the servicing deals, they are outperforming above your initial expectations. Have you adjusted the recapture rate on those deals? I mean clearly Nationstar, it's running at a much much higher pace than the 30%-35% you have been modeled at?

Wes Edens

We haven’t really changed the initial assumption. They are what they are. And we think that’s fair. I think their (inaudible) ambition to be north of 50% on the loans they service. The ideal profile of the MSR from our standpoint are loans that are largely performing but have some degree of credit impairment in the form of like higher LTV or what not, that make it a little harder for them to refinance. So that’s the nature of a lot of the servicing that has been sold coincidently and it's also the stuff that we think offers the most value. But they have put a tremendous effort into it and I won't speak on their behalf but the results of that have been excellent and I feel great about it. So that’s with the exiting book.

And of course the loans that are refinanced in this environment, you know 3.25%, 3.5%, 3.75% across mortgage rates, I think are going to prove to be very sticky loans indeed. So from an MSR standpoint, that’s also an attractive file.

Matthew Howlett - UBS

Right. So I guess you are saying as time goes on, we will see on your fresh pool your fresh acquisition of MSRs and second when the recapture rate moves up significantly. Is that because Nationstar goes out and really mods the high LT stuff, does it in-house with modifications and that sort of just [kicks] some of those loans to board and then they really go after. Is that sort of how you envision the portfolio shaping up?

Wes Edens

Yeah, what happens I think is a practical matter, is that when the loans are boarded, it's a new relationship. Right. So the borrower-servicer relationship begins new when we first move it to other recapture rates are obviously very low on day one because they don’t really know their servicer. Nationstar makes a great effort both with technology and with people to be -- having a very cordial relationship, a good relationship with the borrowers and thus identify people that are in the process of looking to refinance and can refinance and then capture a high percentage of that. So it's by design and I think empirically it would show that it's working loan. So I think overtime we would expect the recapture rate to get better on exiting pools. And I think for the most parts that they have. But obviously there is a lot to assimilate now with some of these larger transactions that they are in the process of closing. But so far so good.

Matthew Howlett - UBS

Great. On that note, you said there was at least one large transaction that you are looking at after that it would be more MSR acquisitions on a flow basis, based on their originations, quarterly originations?

Wes Edens

Yeah, I think obviously the big episodic trades you can't predict, right. You need someone to decide to do something. I think that the same market conditions that were present to encourage the banks to be sellers of this in terms of regulatory capital issues and just their cost of dealing with their regulatory pressures etcetera. Those still exist. So I think it's entirely possible and in fact likely that you will see other large transactions in the future. But given the pipeline that we see now, it's a very robust pipeline but it's a much more diverse one. There is a handful of significant ones, one in particular that I mentioned. But then there is just a lot of kind of singles as it were.

Operator

Your next question comes from Jasper Burch with Macquarie.

Jasper Burch - Macquarie

I was just wondering if you could give us a little more color on for forecasting the NRZ versus NCT going forward. So if you have earmarked the $280 million, so which side of the business are we going to expect did it go to?

Wes Edens

There is a little bit of flexibility about where that’s going to end up. I think the lion's share of it is going to end up in NRZ. Obviously the final numbers won't be done until the split is completed but I think the bulk of that is going to end up on that side. Having said that, one of the reasons we have raised capital here recently is that the investment activity both in Greg's side of the non-agency and Kenny with some of the senior housing stuff that’s been actually very robust. So it's not one side but I would say it's more tilted towards the NRZ side of the table.

Jasper Burch - Macquarie

Okay. And then on the sort of IRR compression or the expectation of IRRs on the new MSR acquisitions. So this is meaningful that you have lower than what's already on your book. What's driving that, I guess one, is it competitive landscape?

Wes Edens

Well, I think our expectations -- return expectations when we got into the MSR and investing in business we are to generate kind of mid-teens unleveraged return. I think as it turns out they have outperformed that a bit because some of our expectations ended up being a little bit conservative. But I would say the core assumption about what we expected to generate is actually quite consistent with that. And the more recent transactions are recent and so it's little hard to judge in the first month or two along the way, what the returns will actually be. But I think the portfolio in the aggregate has been just under 20% unleveraged and I think mid-teens is kind of the base line. It's a good place to start and let's see where it goes. Any meaningful change in interest rates higher would change those numbers dramatically obviously.

Jasper Burch - Macquarie

That was actually my next question, was if you guys have -- have you guys provided any interest rate sensitivity for having a let's say 100 bps or 200 bps move in the long and would increase those IRRs?

Wes Edens

Yeah, I think the most constructive way to think about it, and it's easy for us to put disclosure in around this. So just look at the different static prepayment rates, to give you some measure of it, and then you can determine or other people can determine what they think will be prepayment rates if rates moved slightly higher. In material several 100 basis points, let's say increase in interest rates over the next year or so, would obviously dramatically slow both the existing book and then the new stuff that we have originated I think we have prepaid a very very slow rate. And those are very very good financial results. I don’t spend a lot of time thinking about what happens to the portfolio if everything goes right, kind of the opposite. But I am confident when you look at the numbers you will see the magnitude of orders shipped, if rates were to move much higher, it has a dramatic impact in a positive way on the portfolio.

Jasper Burch - Macquarie

Okay. And then, I guess, just lastly, you gave a little new commentary on trying to acquire MSRs through a flow business. What sort of customers would you be buying from? I mean that it probably wouldn’t be people who are selling into correspondent networks. Would it be, just be originators who are signed to the GSEs but don’t want to maintain the servicing. Sort of what types of banks would you be targeting or able to acquire those from?

Wes Edens

Yeah, I think the target would be people that are doing a meaningful that for whatever reasons don’t want to be at service. So there is a bar to be at service from a capital standpoint, from a regulatory standpoint, has gone up dramatically over the last couple of years. And I think that very very kind of productive mortgage bankers in the past might have held on to their servicing or are kind of moving that out as they go along. So the focus obviously is to get out to the people who have had the most production that we think of the highest quality folks, which is above the level of correspondents which also maybe higher quality but there are just more players. So the priority would be first that tier of the top 20 or 30 or 40 folks that are originating.

Jasper Burch - Macquarie

And then do you have any agreement in place with Nationstar for just of help co-invest and purchase those loans?

Wes Edens

We had lots of dialogues with them. There is, we bought some MSR that has been on a flow basis I expect that we will [define] a lot more in. My expectations, their expectations, we will sort out how to do this on a flow basis that works for both for us.

Operator

Your next question comes from the line of Bose George with KBW.

Bose George - KBW

Just following up on the flow servicing. The returns on investing in more prime MSRs which I assume those are going to be similar to what you are getting on the stuff that you are investing in?

Wes Edens

They are, they are. Model returns are similar. The profile of the MSR I think is meaningfully different though in that just by the virtue of the fact that somebody has refinanced -- they demonstrated the ability to refinance. So I expect that there is more prepayment sensitivity on them, the good news is that you are actually starting from a very low level of interest rate. When you look at the behavior of prime borrowers versus some of the less prime, I mean the sub-price which is less prime borrowers, is that they definitely are harder to recapture and they are more likely to prepay because they have got more option. That’s why we like the ones that the MSRs would have some credit impairment. But that said, when you are starting with the base mortgage rates with a three handle, you are in such a good point of entry that there is much much more upside in terms of rates going higher than there is on rates going lower.

Bose George - KBW

That makes sense. And actually in terms of this opportunity, is it something that is exclusively with Nationstar or just given the big portfolios at the banks etcetera, could this be something you work with others as well?

Wes Edens

Yeah, we have said before that we would be happy to and we have in fact talked, had conversations with a number of folks about having a similar relationship we have in Nationstar. It's just that the bar to sort out that relationships is higher one, right. We want someone who is a very high quality servicer. We want someone who is a very high quality originator that also has a significant amount of co-investment capital. So those are the hallmarks of what we think makes a great relationship. And I think there are a handful of situations that could be prospectively interesting and maybe one of (inaudible) those will come to pass in a way that is meaningful, but there hasn’t been any to date and I think it's because it's legitimately hard.

Bose George - KBW

And then actually just switching to the issue of leverage on the MSR. Is there much asset specific financing you can get on the MSR? Is leverage something we could see kind of at the corporate level or how we are kind of thinking about that?

Wes Edens

Yeah, I mean the asset based financing markets have improved dramatically over the last 12 months and this is going to be getting better every day. There is no doubt that you could get asset level finance on the MSR book that would be attractive from a financial standpoint. I think one of the challenges of that is that even though it would show economically to be a good result because the IRR would go up and be leveraged higher obviously. It pushes out the receipt of cash flows fairly significantly and it just increases the risk of the investment I think a fair bit. We have not leveraged and we don’t intend to be leveraging. That’s something we could always readdress, as Brian mentioned. One of the things I am very focused on is to keep lots of balance sheet flexibility so that if there was a period of high volatility which might be a hard market to raise a lot of equity capital, it would be great to have the ownership flexibility to be able to borrow and be able to take advantage of those things, right. The markets that we are in right now are very good in terms of getting leverage, and very good in terms of equity valuations. They are a little harder from the acquisition standpoint. The inverse is also true, right. Periods of high volatility can be great acquisition opportunities, we have to have access to capital. And I think having a very very low leverage company gives you a lot of flexibility around that.

Bose George - KBW

And then just one last thing. In the presentation you guys note run rate earnings with $0.26 of the capital is deployed. I mean should we, is that number potentially higher just given that there expense is related to the spend or is that a reasonable run rate number?

Ken Riis

There were some other expenses as well and we only put in the $0.01. But that was really the fourth quarter so that kind of took our $0.19 for Q4 added in the average uninvested capital. Since then we have obviously done the two raises which have been accretive as well. So I don’t think that’s a perfect example of the go forward but it's a approximation.

Wes Edens

Yeah. You are going to get the benefit of the bulk of the settlement, the economics of the settlement as of the end of the second quarter on the MSR side. It will be between the first quarter and second quarter, so you will see I think the third quarter will be very clean quarter right now. There is a handful of other significant investments that we think we will close during this quarter. So I think that the second quarter will be a good proxy for one of those. And you will finally get to see the benefit of these fully invested which we think is material obviously.

Operator

(Operator Instructions) Your next question comes from the line of Douglas Harter with Credit Suisse.

Douglas Harter - Credit Suisse

Can you talk about the two bank loan investments that you made? Those on the fourth quarter and the first quarter, obviously at pretty low prices of par. Just give a little more color on that.

Ken Riis

Yeah, those are opportunistic investments that we are looking at. And they are potential restructure opportunities. And we like the -- obviously we are buying the assets at big discounts and we think there is a good return if nothing happens but a much better return if we can use our debt investments to restructure and turn it into a higher yielding investment over the long term. So it's sort of specific take it into all the details but it's something that I am excited about.

Douglas Harter - Credit Suisse

I mean are those real estate backed? I mean is that kind of falls into the commercial real estate bucket or not?

Ken Riis

No, it's not real estate backed.

Douglas Harter - Credit Suisse

Okay. And is that something that -- obviously, they are opportunistic but something that you would continue to pursue?

Wes Edens

Yeah, I think that Ken is trying to be very careful about this because it's a public situation. It is something that we think has great merits. It's a very interesting situation and we have added to a position here in the quarter. And I think that there is, certainly in the next quarter or two there will be some meaningful discussion about but right now it's a public situation I would rather not comment on.

Operator

Your next question comes from the line of Jackie Earle with Compass point.

Jackie Earle - Compass point

I noticed from your February 13 presentation you guys, under the opportunities for growth, you guys mentioned Spring Leaf Financial and CW Financial Services. I am not sure if you have spoken about this publicly but was wondering if you could provide any color on how you guys expect to work with these companies.

Wes Edens

Well, if you step back, in the Fortress family of investments and companies that we have relationships with. We have made it a focus for the firm to have big vendor relationships in the asset classes we think are interesting. So Nationstar is that counterparty in the residential servicing space. Spring Leaf which will deal with [American] General Finance that we made the investment in about 2.5 years ago. It's a very large and very capable consumer finance company. CW is the largest special services or the commercial servicing space. So very very large vendor relationships. Really really qualified companies. All of which we think have got somewhat of different opportunities for us to work with them. Obviously what we would be focused on, we need to business with either of those companies is something that is in there line of business. So in the case of CW it would be in the commercial side, something which Spring Leaf would be in the consumer side just as we have gone into the residential business with Nationstar. And you know the circumstances would dictate the specifics of any given transaction and obviously if and when we did something, we would give you great detail on it.

Operator

Thank you. I would like to turn it back over to Wes Edens for closing remarks.

Wes Edens

Great. Well, thanks everyone for calling in and for your questions and exciting times for us here. We look forward to having a good quarter and we will be back talking with you soon. Thanks much.

Operator

Thank you. This concludes today's conference call. You may now disconnect.

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