WhiteHorse Finance, Inc. (WHF) Q3 2021 Earnings Report, Transcript and Summary

Good afternoon. My name is Britney, and I will be your conference operator today. At this time, I would like to welcome everyone to the WhiteHorse Finance Third Quarter 2021 Earnings Conference Call. At this time, our host for today's call are Stuart Aronson, Chief Executive Officer; and Joyson Thomas, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 5:00 p.m. Eastern Standard Time. The replay dial-in number is (402) 220-9185 [Operator Instructions]. It is now my pleasure to turn the floor over to Robert Brinberg of Rose & Company.

Thank you, operator, and thank you, everyone, for joining us today to discuss WhiteHorse Finance's Third Quarter 2021 Earnings Results. Before we begin, I would like to remind everyone that certain statements, which are not based on historical facts made during this call including any statements related to the financial guidance, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Because these forward-looking statements involve known and unknown risks and uncertainties, these are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. WhiteHorse Finance assumes no obligation or responsibility to update any forward-looking statements. Today's speakers may refer to material from the WhiteHorse Finance Third Quarter 2021 Earnings Presentation, which was posted on WhiteHorse Finance's Web site this morning. With that, allow me to introduce WhiteHorse Finance's CEO, Stuart Aronson. Stuart, you may begin.

Thank you, Rob. Good afternoon, and thank you all for joining us today. As you're aware, we issued our press release this morning prior to market open. I hope you've had a chance to review our results from the period ended September 30, 2021, which can also be found on our Web site. On today's call, I'll start by addressing our third quarter results and market conditions and Joyson Thomas, our Chief Financial Officer, will then discuss our performance in greater detail, after which we'll open the floor for questions. I'm pleased to report a strong third quarter performance. In the third quarter, core NII was $7.8 million or $0.372 per share, covering our dividend of $0.355 and up from Q2 core NII of $7 million or $0.328 per share. NII was higher than the previous quarter, primarily due to higher fee income and accelerated OID amortization driven by repayment activity. I note that this is the company's 36th consecutive quarterly distribution paid since our IPO in 2012 with all distributions consistent at the rate of $0.355 per share per quarter. I think this speaks to both the strength of the platform and the deal sourcing capabilities as well as our historically conservative approach to deal structuring. As we announced on October 14th, the increase in net investment income and realized gains caused us to declare a special distribution of $0.135 per share, which will be payable on December 10, 2021 to stockholders of record as of October 29, 2021. We achieved modest NAV accretion in the quarter with NAV per share increasing to 15.46 compared to 15.42 in Q2, driven by NII in excess of our $0.355 dividend and markups within our portfolio. When adjusting for special dividends paid in prior years, our pro forma Q3 NAV per share reached a record level for the second consecutive quarter. Q3 was another strong period for capital deployments totaling $122.5 million across seven new originations. This investment activity enabled us to grow the portfolio by 2.5% from Q2 net of repayments and after the favorable impact of unrealized gains on our investments. $123 million of gross deployments were partially offset by repayments of $73 million, which included $47 million of refinancings from Source Code, EducationDynamics and NNA Services, dispositions of $2 million and principal repayments of $25 million, excluding revolvers. The result was net deployment value of $49 million. Of our seven new originations, five were sponsor and two were nonsponsor with an average leverage level of only 4.2 times. I note that these deals were all first lien. And at the end of the third quarter, 95% of our debt portfolio was first lien and 100% of it was senior secured. Sponsor loans comprise 67% of our portfolio, which was in line with Q2. We continue to be pleased with our pace of capital deployment despite the active M&A market driving elevated repayments. Our weighted average effective yield on income producing debt investments was 9.3% in Q3, slightly below Q2 levels at 9.5%. Now stepping back to bring our entire investment portfolio into focus. Our investment portfolio achieved an increase in the fair value reaching $687 million at the end of Q3, up from $671 million at the end of Q2. Nonaccruals represented only 1.3% of our debt portfolio compared to 1.5% based on fair value in Q2. This decrease is driven primarily by the increase in fair value of our portfolio as the Grupo HIMA investment remains the only nonaccrual as of September 30th. Now after the quarter closed, we received updated information on Grupo HIMA. Based on this information and subject to further performance updates and market conditions, we expect the market position down by another $0.05 to $0.15 of par by the end of Q4. The investment is expected to be on nonaccrual until restructuring negotiations with the company conclude. Many of our portfolio companies have experienced supply chain issues and inflationary pressures, including higher shipping costs. Thankfully, so far, most of these borrowers have been able to pass cost increases to their customers to offset these higher costs. We continue to successfully utilize our JV with STRS Ohio, which generated investment income to the BDC of approximately $1.8 million in the quarter as compared to $2.1 million in Q2. During the third quarter, we contributed an additional $46 million of investments into the JV portfolio. The fair market value of the JV's portfolio was $239 million as of September 30th. The JV's portfolio had an average unlevered yield of 8% at the end of Q3, a slight decline compared to its Q2 '21 average yield of 8.1% at a portfolio size of $210 million. The JV's portfolio is also comprised exclusively of first lien senior secured loans. We remain pleased with the income contribution from the JV. We believe it supports the higher returns for shareholders, and is particularly relevant given the current market backdrop. Once the existing JV capital commitment of $75 million for WHF is deployed, WHF is likely to allocate an additional $25 million or more of commitments into this program to continue to generate attractive returns for WhiteHorse Finance and our shareholders. As a result of repayments and transfer of certain investments into the JV, leverage at the end of Q3 was 1.19 times for WHF approaching our target range of 1.25 times. During the last quarter, we previewed that our leverage may approach or exceed the top of our targeted range in the near future due to evolving market backdrop and short term expectations around repayments. We expect to see repayments over the next two quarters due to an uptick in M&A activity and the refinancing of certain existing credits in Q4. Offsetting the expected increase in repayments, we continue to build a strong pipeline. The market is quite busy with the mix across sponsor and nonsponsor deals, and our weekly investment pipeline often includes more than 150 deals. The sourcing process is becoming more competitive, particularly for the On the Run sponsor deals where pricing, leverage and documentation terms have returned fully to pre-COVID levels. In addition, heavily adjusted EBITDA levels are often being offered by competitors, and we are frankly walking away from more deals than we have in the recent past. While we expect our origination activity levels to remain high, we generally have a cautious approach and continue to underwrite to conservative downside scenarios. Documentation terms and EBITDA adjustments in the Off the Run sponsor market, which are the smaller sponsors, are less aggressive. We continue to have a significant off-the-run sourcing advantage due to our presence in 12 regional markets. Consistent with prior quarters, there is less competition for nonsponsor deals as well where we continue to source attractively priced transactions at attractive leverage profiles. WhiteHorse continues to have differentiated sourcing capabilities through our 3-tier architecture. We continue to derive significant advantages from the shared resources and affiliation with H.I.G., who is a leader in the midmarket. The WhiteHorse platform includes 63 deal professionals dedicated to direct lending and H.I.G. gives us a 20-plus person business development team, leveraging H.I.G.'s proprietary prospect database and we also get additional sourcing at the H.I.G. level from over 400 investment professionals across the firm. Our sourcing drives a high quality pipeline in markets with less competition for mandates. Our strategy and competitive advantages continue to result in a momentum in our originations business. Thus far in Q4, we have closed five deals that are working on an additional 14 mandates with targeted closings in Q4 and Q1 of 2022. Three of the five closed deals are sponsor and eight of the mandated deals are sponsor split between new originations and add-ons. At this stage, we expect the fourth quarter will produce one of the highest origination volume quarters we've ever generated through our platform, which positions us well to deploy the proceeds from our recent issuance of primary shares. This exceptional pipeline growth in these mandated deals are enabling the BDC to drive portfolio growth and grow the JV, which will ultimately lead to higher income levels and greater coverage of our dividend. In closing, we're well positioned to continue executing our 3-tiered sourcing approach and rigorous underwriting standards through the last quarter of 2021 and into the new year. Our portfolio as a whole remains very high quality and healthy. Together with a strong pipeline of investment opportunities due to expected repayments, our fee income could ramp up in the final quarter, allowing for continued dividend coverage by core NII. We remain cautious about cyclical industries and the lingering effects of the pandemic and our underwriting deals with these risks in mind. The evolving credit environment also continues to create uncertainty and could impact both portfolio performance and the rate of new asset origination. Nonetheless, we believe our platform is well positioned to drive portfolio growth and compelling returns to our shareholders. With that, I'll turn the call to Joyson for additional performance details and a review of our portfolio composition. Joyson, go ahead.

Thanks, Stuart, and thank you, everyone, for joining today's call. During the quarter, we recorded GAAP net investment income of $7.6 million or $0.366 per share. This compares to $6.1 million or $0.296 per share in the second quarter. Core NII was $0.372 per share after adjusting for $0.1 million capital gains incentive fee accrual. Q3 fee income was $1.2 million compared with $0.3 million in the prior quarter. The increase was largely due to more meaningful prepayment and amendment activities during the current quarter. We reported an increase in net assets resulting from operations of $8.3 million. Our risk ratings during the quarter showed that 89% of our portfolio positions carried either a 1 or 2 rating compared to 90% in Q2. Regarding the JV, specifically, we continue to grow our investment. We transferred two new deals, three add-on transactions and the remaining portions of four previously transferred deals, which aggregated to approximately $45.7 million in exchange for a net investment in the JV of $9.4 million as well as cash proceeds of approximately $36.3 million. As of December 30, 2021, the JV's portfolio held positions in 27 portfolio companies with an aggregate fair value of $239 million compared to 25 portfolio companies at a fair value of $209.5 million in Q2. The investment in the JV continues to be accretive to the BDC's earnings. We expect the yield on our investment in the JV may fluctuate period-over-period as a result of the timing of additional capital invested, the changes in asset yields in the underlying portfolio as well as the overall performance of the JV's investment portfolio. Turning to our balance sheet. We had cash resources of approximately $16.6 million as of December 30, 2021, including $7 million in restricted cash. As reported during our last call, at the beginning of Q3, we completed an amendment on our existing JPMorgan revolving credit facility. The impact extended a non-call period to November 2022, pushed out the reinvestment period to November 2024 and reduced interest margin from 250 to 235 basis points. We anticipate this to result in annual cost savings approximately $0.4 million, assuming the line continues to be utilized at historical levels. At quarter end, we had approximately $25.4 million undrawn under our revolving credit facility. Subsequent to quarter end, on October 4th, the terms of our credit facility were again amended to, among other things, allow us to temporarily upsize the credit facility by $50 million, allowing the BDC to borrow up to $335 million for a three month period beginning on October 4, 2021. This provides us with significant flexibility to better account for timing differences between anticipated prepayments and originations. As of December 30, 2021, the company's asset coverage ratio for borrowed amounts, as defined by the 1940 Act, was 184.2%, which is above the minimum asset coverage ratio of 150%. Our Q3 net effective debt-to-equity ratio after adjusting for cash on hand was 1.14 times. Subsequent to the end of the quarter, we completed a primary follow-on offering of approximately 2.2 million shares of our common stock at an offering price of $15.81 per share. This offering generated net proceeds before offering expenses of approximately $34 million and provides WhiteHorse Finance further capital to deploy into new investments. Before I conclude and open up the call to questions, I would like to highlight our distributions. On August 9, 2021, we declared a distribution for the quarter ended September 30, 2021 of $0.355 per share for a total distribution of $7.4 million to stockholders of record as of September 20th. The dividend was paid on October 4, 2021. In addition to our quarterly distribution, we elected to declare a special distribution of $0.135 per share to be payable on December 10th to stockholders of record as of October 29, 2021. The distribution was related to taxable income that was earned last year, which would have otherwise been taxable. Finally, this morning, we announced that our Board declared a fourth quarter distribution of $0.355 per share to be payable on January 4, 2022 to stockholders of record as of December 20, 2021. This will mark the company's 37th consecutive quarterly distribution paid since our IPO in December 2012 with all distributions consist at the rate of $0.355 per share per quarter. Inclusive of this distribution and this year's special distribution, total distributions declared in 2021 will aggregate to $1.555 per share. As we said previously, we will continue to evaluate our quarterly distribution, both in the near and medium term based on the core earnings power of our portfolio in addition to other relevant factors that may warrant consideration. With that, I'll now turn the call back over to the operator for your questions. Operator?

[Operator Instructions] And we will take our first question from Bryce Rowe with Hovde Group.

I appreciate you taking the questions here. Stuart and maybe even Joyson as well, I just wanted to touch on the right side of the balance sheet. Appreciate taking advantage of being able to raise equity here in October and certainly appreciate the temporary upsizing of the credit facility. I was curious how you're thinking about maybe layering in some more unsecured notes here as we get into the end of the year and early next year to help lift that level of unsecured within the liability mix.

Bryce, we are actively aware of the opportunity to issue unsecured debt. Our baby bonds are now callable. And we will take under advisement based on market conditions, the best solution for the capitalization of the BDC. We do generally agree with you that we'd like to have more unsecured debt. So I would say it is likely, not certain, but likely that we will proceed with an unsecured offering between now and year-end.

And obviously, a lot of moving parts in terms of originations and repayments. How do you think we should think about net over the next, maybe not necessarily the next quarter. But do you expect to see some level of net portfolio growth with the heavy level of expected repayments? It sounds like that's a yes, but I just wanted to be sure that the originations are likely to outweigh the repayments.

I'll pass that to Joyson in a second. But I am just going to caution, we have found that during due diligence, especially on nonsponsor deals, a lot of credits don't work out. And so even though we have 14 mandated deals, there can be no certainty as to how many of those mandated deals would close. But Joyson, if you know, looking at the mandated deals and looking at the likely repayments in Q4, does it project that we would grow the portfolio in Q4 or be stable?

Stuart, I think right now, it does look like we'd have a net increase or net deployment for the quarter. I think to that point, though, it does depend on whether or not some of these mandated deals do get pushed out into Q1. And then to the extent that there may be some repayments that we had not forecasted that are accelerated that also is a wildcard to consider. But currently, right now, we are forecasting net deployments.

And maybe just one more for me. It looks like you've added a little more equity or some added some equity positions here in the third quarter, you typically haven't had as many as some of maybe your lower middle market peers. Is that a change in strategy or just relative interest in those particular companies from an equity perspective?

Bryce, feedback we've gotten from both analysts and shareholders is that they would like us to create a modest but diversified pool of equity positions in the BDC to help provide gains that can offset potential future losses. Our equity investing history is very strong. And with the knowledge and wherewithal of H.I.G. to make smart equity co-investments, we expect that we should be able to continue to invest and hopefully generate a strong track record of performance looking forward. As you'll notice in our remarks, some of our equity positions that we've already taken have been marked up based on strong performance including, I believe, a nice markup on the Ascalon equity this past quarter.

We will take our next question from Mike Schleien with Ladenburg.

Actually, Joyson, just a couple of questions from me. Perhaps the first one for Stuart. We look at this year, apart from repayments, which is a theme across the sector, I'd say BDCs have had a lot of positive trends, including strong economic growth and a very low default rate environment. Next year may be more challenging start with the Fed potentially tightening and lower economic activity and certainly the election volatility. So I'm curious how you're thinking about these risks in terms of your balance sheet leverage and the style or what particular originations you're focused on?

Mickey, we've seen the market seem to make the assumption that the economy is going to be strong for the next two to three years, and that will be based on what we're seeing in terms of leverage multiples being put on cyclical companies. We continue to underwrite with the belief that there is a risk of recession one year out. We don't think that's going to happen, but it's always a downside. And we underwrite every one of our deals with a mind's eye to a potential repeat of the Great Recession. And if a deal would not survive a repeat of the Great Recession, then we don't do the deal. So we underwrite to cyclical downside and we also underwrite to pandemic waves, and we are trying to be very careful about what we do, focused on noncyclicals, light cyclicals and, to a lesser extent, moderate cyclicals as well. In terms of the balance sheet, just because we don't know what's going to happen in the future. We want to have a constructive mix of secured debt and unsecured debt. Obviously, the secured debt is much less expensive. So it does make sense to use that. But as I mentioned to Bryce, we are actively considering issuing more unsecured debt to make sure that our relative ratio of secured to unsecured is optimized in the potential for market volatility.

And your target leverage, if I'm not mistaken, is from 1 to 1.25. Is that still the case or have you adjusted that at all?

I would say, given current market conditions and what we're doing, with so much of the portfolio being first lien, we would expect to operate the BDC at right around 1.25 leverage.

And my last question relates to the JV, the size of the JV grew and none of its investments were put on nonaccrual. I appreciate there's differences between GAAP and cash and tax, et cetera, but its dividend to you was reduced. Could you just comment on that and what is the outlook for the dividend from the JV?

I asked Joyson the same question, so I'll pass it back to him to answer for you as well.

Yes. Mickey, as I mentioned in my prepared remarks, quarter-over-quarter, period-over-period, the yield on the JV may fluctuate a little bit. So the way to think about the JV entity and you kind of alluded to it, is that from a cash basis and when we record the dividend, that's upon the declaration of the JV’s dividend upstreamed up to its owners. The underlying portfolio and the earned income, there may be a timing difference for a number of reasons. And so the way to think about this is though Q3 income was slightly lower than Q2, we actually expect the income to be back up in Q4 right to the BDC. It was largely due to some repayments that happened towards the tail end of Q1 into Q2 at the JV level and really deploying that capital back to work, which, again, since it's kind of on a quarter lag for the dividend to be received back up to the BDC. That's kind of why you've seen kind of like the slight decrease this quarter.

I understand, Joyson. Historically, that JVs generated a blended return on investment for you. Blended, meaning both the interest on the notes and the dividend on the equity of around 12%. Is that where you expect it to be over the long term?

Yes, that's correct. So currently, right now, in terms of long-term forecast, kind of where we underwrote it to, it's still consistent at 12% plus.

Okay. That's it for me…

And the actual numbers are higher than 12%. Aren't they, Joyson?

They are, right. And so like again, at any point in time, it may be low. So if you think of -- in the prior quarters, it's probably approaching more like 14%. And that's why kind of I’ve just guided to a more tempered 12% plus, but it is performing above 12%, yes.

And we will take our next question from Sarkis Sherbetchyan with B. Riley Securities.

I just wanted to touch on the fee income. It sounded like you mentioned it's going to ramp-up here in the final quarter because of repayments. I guess, just stepping back, I want to get a general sense, if you think given the current environment for repayments and if it continues to remain elevated, do you think your repayments are going to be relatively elevated even kind of positioning into next year?

It's really hard to predict the future. We do know that there are a lot of companies that are in an active sale process. Most of those are intending to complete the process in Q4. But undoubtedly, some of those will roll over into Q1. Generally, historically, Q1 is not as busy an M&A quarter as the end of the year. So I would expect refinancings to slow down into the beginning part of next year, but then probably accelerate into the second half again. But again, that's just a guess.

And I guess as I look back and think about your dividend level or distribution level relative to kind of coverage, it sounds like when you're getting the fee income, you're more than covering the distribution, but assume if you don't get these levels of fee income. Do you maybe think you have to revisit the distribution level or kind of grow the portfolio more aggressively? Like what are your thoughts there?

At 1.25 leverage and a good mix of assets, we should be in a position absent other impacts to generally be earning the dividend. And then when we get higher than normal repayments, the fee sweeps and prepayment penalties will cause the income to rise above the dividend level. And as you've seen for each of the last three years, when we've had supplemental income, we've distributed that as an incremental dividend. And I expect that that's what we continue to do in the future. I don't see any indication right now of our dividend having to be changed. And again, if we continue with historical behavior, then capital gains and earnings on the BDC should allow us to not only make the dividend but potentially do supplemental dividends in future years. But again, that's all subject to future performance, which is still unknown.

And we will take our next question from Melissa Wedel with JPMorgan.

Actually, most of them have already been asked, but I thought it would be worth circling back to one of the charts that you have in the slide deck, and it shows just sort of this long term shift towards an increased allocation towards sponsored deals in the portfolio. Given your comments earlier today about sort of the increased competition in the on-the-run sponsor deals at least. How are you thinking about the opportunity set and the potential yield pickup in sort of the nonsponsored space, and to countervailing maybe a little bit higher risk associated with that space?

Melissa, thank you for the question. In our experience, including during the COVID period, we have not seen higher risk in the nonsponsored portfolio. In fact, the nonsponsored portfolio has, on average, performed better than the sponsor portfolio. We believe that is because we are carefully selecting our nonsponsor deals. The nonsponsor deals have lower leverage, tighter documents, tighter covenants and all of those things combined to create very strong performance. We are always looking to optimize our nonsponsor originations because we do believe that, that is the most attractive sector of the market but it's also the sector of the market where it's hardest to find qualified deals. As I mentioned earlier when we get mandates on deals many of the deals don't make it through due diligence. And that's especially true in the nonsponsor sector, where we do organic due diligence that requires anywhere from three to nine months to complete a very significant percent of the nonsponsor deals that we get mandated on do not survive the due diligence process, and we do not close on those transactions. So we will continue to try to optimize a mix of sponsor and nonsponsor. And in the sponsor market, as I shared in my prepared remarks, we have found the other on sponsor market to still be more attractive than the on-the-sponsor market, although, there are plenty of good deals in the on-the-run sponsor market as well. But the off-the-run sponsor market is still demanding higher price at slightly lower leverage levels. So we have very broad origination in the on the run, off the run and nonsponsor. We really cover the full spectrum of the lower mid-market and mid-markets. And we believe we are one of the only players that do cover that full spectrum of on-the-run sponsor, off-the-run sponsor and nonsponsor, creating a very differentiated portfolio that you've seen through the numbers we've shared has modest leverage multiples and above market pricing.

And follow-up question from me on your comments about the incremental information and the expected mark on Grupo HIMA in 4Q. I just wanted to confirm, I heard you say that, that could be another 5 to 15 mark during the fourth quarter? Did I hear you right?

So instead of the current market 50, we expect that the mark on that asset will come out somewhere between $0.35 to $0.40 on the principal dollar.

$0.35 to $0.45…

I'm sorry, if I didn't say that, I apologize. $0.35 to $0.45, yes.

[Operator Instructions] We will take our next question from Robert Dodd with Raymond James.

On kind of sort of following on to Melissa's but one narrow focus. I mean the leverage multiple of new deals in the quarter. So I mean 4.2 with a lot of those being sponsored and obviously, you talked about the offer and on the run. I mean you also mentioned in, I think, response to Mike people are now offering leverage even on cyclical businesses. So it really does make that 4.2 is probably a point or more below where the broad market seems to be right now. Is there any more color and you can give us on -- I mean, obviously, there's off the run. But is it industry that's doing that as well? I mean, are they lower multiple industries and it might be 4.2 but it's still 50% LTV, or any color you can give us for the context on that 4.2 which looks quite low?

Robert, most of the companies that we're involved with have enterprise values of between 9 times to 15 times. So we're lending at pretty low LTVs. We're often below 50% LTV. And again, our ability to find these lower leverage deals and lower LTVs is linked to our full spectrum coverage. There are some low LTV deals that happen in the on-the-run sponsor market because purchase multiples have risen so significantly. But the on-the-run sponsor market is typically a market where you see leverage levels between 5.5 times and 8 times. The off-the-run sponsor market is a market where leverage levels are typically more between 4 times to 6 times, even 4 times to 5.5 times. And that's one of the reasons why we invest the time and resources to cover that off-the-run sponsor market, even though it's a much less fertile market. It takes a lot more resources and a lot more time to find and underwrite and close an off-the-run sponsor deal than it does on-the-run sponsor deal. But that is the value add of the H.I.G. management company where we have a very broad sourcing architecture. And we have consistently for years now originated loans at less than the market averages in terms of leverage and a premium to market price compared to the data reported by the rating agencies?

I have one more going to a slide in the presentation as Slide 12. The line of interest to the net investment spread, I mean, if we look over the last three years, it's typically been in the, call it, mid to high prices. I mean, yes, your pricing has come down as the market has but so your cost of debt. Do you think that that in the last three quarters, it's been essentially flat at 5.7 on that metric. I mean, do you think that kind of level of net investment spreads separate from pure pricing, is that level sustainable in the competitive market that's out there right now?

I would tell you that the performance that we generated last quarter is indicative of what we're doing this quarter. We are still closing nonsponsored deals with pricing of 650 to 800, LIBOR plus 650 to 800, and we're doing that with companies that are levered between 3 times and 4.5 times. In the off-the-run sponsor market, we're getting pricing that ranges from 550 to 650 and in the on-the-run sponsor market, we're getting pricing that ranges from LIBOR 550 to LIBOR 600. But again, what we did last quarter would reflect current market conditions. And I would tell you that I think this quarter, Q4, our yields -- depending on what closes, our yields will probably be very similar to last quarter.

And we do have a follow-up question from Bryce Rowe with Hovde Group.

Stuart, I appreciate you're talking about adding possibly to the JV in terms of a capital commitment, and we've seen nice growth in the capital committed to the JV here in '21 already after maybe a slower pull down going into '21. How do you think about the pace of that $25 million? Could it get deployed all in 2022 depending on what market conditions give you? But just trying to think about kind of the pace of that JV deployment.

It would be very possible that we could deploy an additional $25 million beyond the current JV, $75 million in 2022 if our volumes hold up. Again, we are experiencing volumes that are as strong or stronger than we've ever seen. It's the strength of our 3-tiered origination that finds us thousands of deals that allows us to be very selective about what we do but we are closing a lot of transactions. And the fact that we have five transactions already closed in Q4 and 14 more mandates that we're working on with potentially more to come, it's still not too late to land mandates to close in Q4. It could be a very strong quarter and a good number of the deals that we're originating would be targeted for the JV.

And we have no further questions on the line at this time. I will turn the program back over to Stuart Aronson for any additional or closing remarks.

That's it for me. I appreciate everybody's time. If there are follow-up questions, we're happy to take them. And I'll remind both shareholders and analysts, anything you want us to address in prepared remarks each quarter, if you give us a notice of what you'd like to see, we do our very best to include that in the disclosures that we make to you. So thank you for your time, and have a great day.

This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful day.