Timbercreek Financial (TSX:TF) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Timbercreek Financial reported a net loss of 32.1 million for Q3 due to 40 million of expected credit losses (ECL) related to legacy staged loans, primarily in Vancouver.
Net investment income remained stable at 25 million, while net new mortgage originations increased to 453 million year-to-date, reflecting strong core lending performance.
Management is focused on resolving legacy staged loans and aims to recycle capital into performing mortgage investments to enhance earnings and distributable income.
The company expects a temporary increase in the distributable income payout ratio to approximately 135% in Q4 due to the Vancouver asset resolution, but anticipates improvement once resolved.
The portfolio remains diversified, with 82.6% in cash-flowing properties and 94.8% in first mortgages, supporting ongoing cash income and monthly dividend stability.
Full Transcript
OPERATOR
At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session for analysts. Analysts are asked to raise their hand to register for a question. As a reminder, today’s call is being recorded. I would now like to turn the meeting over to Blair Tamblyn. Please go ahead.
Blair Tamblyn (Chief Executive Officer)
Thank you. Good afternoon everyone and thank you for joining us. With me on the call today are Scott Rowland, our Chief Investment Officer; Tracy Johnson, our Chief Financial Officer; and Jeff McPait, who leads Canadian originations and global syndications. The third quarter was an active one for Timbercreek Financial, although our results also reflect the continuing impact of a few legacy staged loans. To start with, our core lending business continues to perform well. During Q3 we advanced approximately 229 million, and through the first nine months of the year, net new mortgage originations are up to 453 million compared with approximately 258 million in the prior-year period. Net investment income was similar year over year at 25 million, and distributable income was also stable at 14 million, or $0.17 per share. At the same time, Q3 results include 40 million of ECL related to the revised recovery assumptions on certain staged mortgage investments.
This resulted in a reported net loss of 32.1 million for the quarter. Scott and Tracy will discuss the drivers and financial impact in more detail shortly. We’re clearly not satisfied with where our share price is today. We recognize shareholders’ concerns around the level of staged loans, the pace of the resolution, and the impact these positions are having on the earnings capacity of the portfolio. These issues remain a clear priority for management and the Board. As part of our ongoing strategic planning process, management and the Board recently completed a focused review of the remaining staged positions and the appropriate path forward.
Our conclusion is that, given where these assets and the markets are today, we should increase the pace of resolution, recover the capital, and put it back to work in performing mortgage investments as fast as possible. This builds on several years of active management and demonstrated progress. Since the beginning of 2023, we have resolved more than 212 million of Stage 2 and Stage 3 exposures, and with several additional resolution processes underway, we expect further progress in the near term. Importantly, the substantial majority of the portfolio continues to perform and generate cash income, providing a strong foundation for the monthly dividend.
As we work through the remaining staged positions, our objective is to recycle capital currently generating suboptimal returns into new performing investments that can contribute more fully to earnings and distributable income. The Board and management are aligned on this path forward and we remain confident in the underlying strength of the business and the opportunities ahead. With that, I will turn the call over to Scott to review the portfolio and discuss our progress on the remaining staged exposures in more detail.
Scott Rowland (Chief Investment Officer)
Thanks Blair and good afternoon everyone. Before getting into the staged loans, I want to put them in the context of the overall portfolio. The core portfolio remains consistent with our long-standing strategy and is predominantly invested in income-producing commercial real estate. At quarter-end, 82.6% of the portfolio was invested in cash-flowing properties, 63% was invested in multi-residential assets, and 94.8% of investments were first mortgages.
The weighted average loan-to-value remained conservative at 69.8%, and the portfolio remains well diversified across property types in Canada’s major urban markets. As Blair mentioned, the challenges we have been managing are concentrated within a relatively small number of legacy investments. They do not reflect the performance or underwriting profile of the broader portfolio. Against that backdrop, I will turn to the remaining staged positions and the progress we are making there. In a portfolio of 100 to 120 loans, it’s normal for some loans to require active management at any point in time. Historically, Stage 2 and Stage 3 loans have represented approximately 6 to 8% of the portfolio, and returning toward that range is an important objective.
The optimal path for resolution of these files is bespoke, with a variety of factors informing the decision process. As we have highlighted over the past year, commercial real estate experienced a significant reset following the sharp increase in interest rates and changes in financing and development economics. While our core portfolio remained resilient, a limited number of legacy loans were more significantly affected by those conditions. As Blair mentioned, we have demonstrated our ability to move these files to resolution through active management. During Q3 and subsequent to quarter-end, that progress continued; we completed the resolution of the Victoria mixed-use position and the Calgary office position. There are letters of intent in place to sell two GTA staged positions in the coming months with combined net carrying values of approximately 44 million, and additional smaller resolution initiatives are also advancing. These are tangible steps toward reducing the overall balance.
As part of the focused review Blair referenced, and in light of current market conditions, we assessed each of the remaining exposures in the context of current market conditions and the resolution strategies already underway. Based on that work, we believe there are situations where greater certainty and speed of capital recovery now offer a better outcome than extending the resolution timeframe. The largest exposure remaining is Vancouver, so let me focus on that. Specifically, the Vancouver retail and development portfolio has been in staging for several years and now represents 71% of our remaining Stage 2 and Stage 3 exposure across several projects. The primary component is a downtown city block of retail buildings intended for multi-residential redevelopment and currently being marketed for sale. We’ve actively managed these assets throughout the staging period, working with the borrower to pursue a range of property-level strategies intended to preserve and maximize value.
Our investment thesis reflected the site’s strong location and significant redevelopment potential, particularly for multi-residential use. What changed materially was the market around the asset. Large urban development sites in cities like Vancouver and Toronto have been particularly affected by higher financing and development costs, changes in government policies affecting demand, and changes in residential development economics. Those changes have had a significant impact on what buyers are prepared to pay for development land today.
As the sale process has advanced, the information available to us has provided greater visibility into current market values and the expected recovery. Based on that information, we updated our expected recovery value for the Vancouver portfolio and recorded approximately 33 million of ECL in Q3. The revised carrying value reflects our current assessment of expected recovery based on available market information. Our focus now is on execution. The primary asset is in a live sales process and our objective is to conclude this process and recover the capital.
Successful resolution and subsequent redeployment into new loans will be a significant step to improve the portfolio’s earning capacity. With that, I’ll turn things over to Jeff to discuss the origination environment and the opportunities we are seeing to put capital to work.
Jeff McPait (Head of Canadian Originations and Global Syndications)
Thanks Scott and good afternoon everyone. The lending environment remained active through the third quarter and we continue to see healthy demand across our target markets. During Q3 we advanced approximately 229 million, including 12 new mortgage investments along with additional advances on existing relationships. Through the first nine months of 2024, new net mortgage originations reached 453 million compared with 258 million in the prior-year period.
Portfolio repayments totaled approximately 151 million during the third quarter. The combination of strong advances and normal-course repayments resulted in meaningful net deployment during Q3 and increased the net mortgage portfolio to approximately 1.22 billion at quarter-end. We are seeing attractive opportunities to redeploy capital. Multi-residential continues to account for a significant portion of our activity. We remain disciplined on leverage, structure, and sponsor quality. Syndication activity also remains an important component of our capital strategy. Through the first nine months of the year, syndications increased to 885 million from approximately 628 million in the prior-year period, supporting balance sheet capacity and contributing to fee generation, in addition to providing some institutional third-party validation of the profile of originated volume.
The current level of borrower activity and strength of our pipeline gives us confidence that, as capital becomes available from resolutions, we have attractive opportunities to put it back to work in new performing investments at current market returns. I will now turn the call over to Tracy.
Tracy Johnson (Chief Financial Officer)
Thanks, Jeff, and good afternoon, everyone. Net investment income for Q3 was 25 million compared with 25.4 million in the prior-year period. Distributable income was 14 million, or 17 cents per share, compared with 14.1 million, or 17 cents per share, in Q3 of last year. The distributable income payout ratio was 101.9% for the quarter and 99.3% for the first nine months of the year. Reported earnings were significantly impacted by ECLs on our remaining staged exposures, reflecting revised recovery assumptions as the underlying asset sale process has progressed. As Scott discussed, the largest component related to this was the Vancouver portfolio. Reported results were also impacted by a $4.8 million loss on mortgage investments classified at fair value through profit and loss, again reflecting revised recovery expectations for the underlying collateral assets.
As a result, we reported a net loss and comprehensive loss of 32.1 million, or a loss of $0.39 per share. Net income before ECLs was 8.2 million, or $0.10 per share. This slide shows the historical relationship between reported IFRS earnings and earnings before ECL and distributable income. Reported earnings have been more variable because of expected credit losses and fair value adjustments, while distributable income has been much more stable over time. Dividend sustainability is understandably an important focus for our shareholders. The substantial majority of the portfolio continues to perform and generate cash income, providing a strong foundation for the monthly dividend.
At the same time, Stage two and Stage three loans constrain the portfolio’s earning capacity and put upward pressure on our distributable income payout ratio. As a result, we currently expect the payout ratio to increase temporarily to approximately 135% in Q4 and remain elevated through the Vancouver sale process, which is currently expected to be completed by the end of Q1 2027, subject to market conditions and execution. As the Vancouver assets are resolved and the recovered capital begins contributing to earnings, we expect dividend coverage to improve and the payout ratio to trend back toward its historical average.
Looking quickly to the balance sheet, net mortgage investments totaled approximately 1.22 billion at September 30, up approximately 15% year over year, reflecting strong deployment activity through the first nine months of the year. At quarter end, approximately 513 million was drawn on our credit facilities, representing approximately 98% utilization. We continue to manage balance sheet capacity actively through portfolio repayments and syndication activity.
Syndication remains particularly important in that mix, both in supporting capacity and contributing to fee income. With that, I’ll turn things back to Scott.
Scott Rowland (Chief Investment Officer)
Thanks, Tracy. We have a clear set of priorities as we move through the coming quarters. First, execution on the remaining stage loans. We have several resolution processes underway and expect further progress in the near term. Vancouver assets is obviously an important part of that work, and our focus is on advancing the sale process and recovering the capital. Second is redeployment. Jeff discussed the level of activity we are seeing in the market today—more than 450 million of originations for the first nine months of the year. We believe there’s a strong opportunity to put recovered capital back to work in performing loans underwritten at current valuations.
And third is earnings. Increasing the proportion of the portfolio that is contributing fully to earnings and distributable income should, over time, improve the earnings capacity of the portfolio and dividend coverage. This is where our attention is focused. We appreciate the patience and continued support of our shareholders as we work hard toward putting these issues behind us.
OPERATOR
We will now take any analyst questions. If you have a question, please click the raise hand button on the bottom right screen below. Our first question comes from Gabriel. Gabriel, your line is open. Please go ahead.
Gabriel (Analyst)
Yes, good afternoon. I wanted to start. Hey, can you hear—
OPERATOR
—me? Yeah, yeah, go ahead. Thanks.
Gabriel (Analyst)
Perfect. I wanted to start with the elevated DI payout ratio. You said the timing of a return to normal, that’s dependent on the Vancouver resolution, which is targeted for Q1. So if the process stretches beyond that, what would have to happen for you to lower the dividend?
Blair Tamblyn (Chief Executive Officer)
Hey, Gabriel, it’s Blair. So, yeah, I mean, as Scott mentioned, you know, that process is well underway. You know, the primary assets have been marketed broadly across the country and we expect to be able to evaluate interest in, you know, the weeks, the weeks ahead, effectively in December. So, you know, our view is there’s a strong probability that there’s—there’s a logical execution there. And if that’s the case, you know, based upon what Jeff said a minute ago, the health of the business in general, the transaction volume that we’ve demonstrated is there, we’ll be able to redeploy the proceeds from the sale quickly.
So with any real estate transaction, you go firm and then it’ll close 30 or 60 days later. During that period of time, Jeff and his team will be out actively looking to redeploy that capital. So in that execution, the capital is back to work quickly. And, you know, the 2027 plan that we looked at with the board yesterday shows an annual DI pay ratio, you know, back in the neighborhood of 100% in spite of an over-distribution in the early part of the year, as we’ve telegraphed is probably the case. So that’s what we think will happen, that’s what we hope will happen. But it’s, you know, the market’s the market. So if that doesn’t happen, then clearly we’ll have to look at alternatives, you know, starting at the board level, and pay out, you know, pay out what we’re earning.
So if that was the case, you know, we would adjust our distribution until such time as this Granville asset is sold, if it will be sold. It’s just, it’s a matter of when. If you look at the staged loans to date, I think we’re at—what are we at? 16% net of that Granville block? We’re in the neighborhood of 6% to 8%. Right. So this is the key. We’ve got to get this transaction done and we will get it done. So I can’t really give you a lot more information other than that, other than to say we’re not going to pay out more than we’re earning for very long.
But keep in mind the majority of the portfolio is earning very predictable income. If there’s an adjustment that needs to be made over the short term, it’s going to reflect that. It’s not going to reflect some of the changes to dividend policies that we’ve seen in the marketplace, you know, in the REIT sector, for argument’s sake. So I think I’ll probably leave it at that. We don’t expect that will need to happen, but we’re, you know, we have to be pragmatic about this.
Gabriel (Analyst)
Okay. And then, like, just going to that Vancouver exposure specifically, could you perhaps walk us through the decision criteria at the time of investment and then maybe if there’s any changes to your underwriting approach since.
Blair Tamblyn (Chief Executive Officer)
Yeah, you know, it’s a good question and I think it’s a question that’s on the minds of a lot of investors. So, you know, I actually like to take a moment and I think it makes sense to walk through this transaction a little more fully. I mean, it’s a long story, right, and it began as a series of very well located retail assets and they were acquired over time by an experienced borrower of ours, an experienced borrower within the community. And overall, the strategy was to sort of form a city block and assembly.
These assets held considerable value as retail properties, individual retail properties, even substantially more when redeveloped, right, so that’s that. So we call that a covered land play. The original concept and the zoning was to develop an office project here. And this was actually acquired—assets were acquired pre-Covid and as Covid happened, right, we wake up in a post-Covid world and you find out that that was no longer viable. So in that 2022, 2023 post-Covid period, there was tremendous demand for multi-residential projects.
So the borrower, working with the city, decided to pivot and rezone these assets and execute on that strategy. Given the very weak transaction market at the time, Timbercreek, we supported that rezoning effort. And then I’ll say for us, right subsequent to that decision, unfortunately there’s really been nothing but headwinds. And just to give people some of the idea around that, it’s like you have the interest rate spike, and that did nothing but add cost to the project. At the same time, cash income was being reduced as the retail tenants were being vacated, which was the right strategy to create a shovel-ready project, but obviously worked against income in the portfolio. Construction costs were also being elevated. Between raw material costs and government-driven development fees, the cost of development has dramatically increased.
Then we had the timing for the zoning approval. This continued to stretch out significantly with the city, unfortunately, causing more time to pass. We also saw changes in immigration policies and that’s affected demand. So as the zoning was achieved in early 2026, you have many other groups that experienced all of these combined issues. And so what’s happened there in Vancouver, as an example, you have a lot of sites that are available with now reduced demand to purchase.
All this taken together, all this together has resulted in multifamily land values in Vancouver falling from peak values of 300 to $400 a foot to lows of 100 to 150 a foot today. Like clearly a very, very challenging and difficult environment. And so where does that put us, right, where does that put us as investors? Holding onto the asset and waiting for a better market is really no longer going to be measured in months, it could be years. The project does not generate meaningful cash flow. And as a stage loan, you know, we can’t generate an accretive equity yield. So therefore, when you consider, like, should we hold longer, the math, the opportunity cost rate of doing so simply does not make sense.
We would just be really running to stand still at best. So what this did, when the board and the management team, as we came together, you know, we discussed this and this resulted in the decision really to get repaid via sale. This will allow us to recycle the recovered capital at normalized equity yields. While this has taken a material writedown to achieve, we believe that redeploying into diversified investments with current pay will support the dividend and clean the book.
So we believe this is the necessary next step to stabilize results, move the stock price back towards book value. So when it comes to underwriting, I sit there and say as a strategy and at the time, putting capital into a premier block in a Vancouver or Toronto downtown was a strong strategy. And I think you couldn’t replicate this series of events. This is a once-in-a-generation, a 20-year type of thing that happens. So it’s—unfortunately, I would say the one thing as we sit around and say—it’s a lot of capital in one location ultimately, and that I think we would clearly not replicate again.
So unfortunately we’ve had to take a significant ECL here. We’re focused to resolve it and we’ll certainly take steps not to repeat it. Sorry for the long-winded answer.
Gabriel (Analyst)
That was all good. Appreciate it. I’ll leave it there then.
Blair Tamblyn (Chief Executive Officer)
Great, thanks.
OPERATOR
Our next question comes from James. James, your line is open. Please go ahead.
James (Analyst)
Yep, gonna have to stick with the Vancouver asset. Do you have—have you received any expressions of interest at this time?
Blair Tamblyn (Chief Executive Officer)
We’re not at the bid date yet, James. So that is, you know, that’s coming in the weeks ahead. So there’s a lot of people who are looking at the file. We’ve got two brokers working, two different brokerage groups working on the transaction, and they’re managing the process. But we’re hopeful to get LOIs before the end of the year. And that’s where the timing for us we think is sort of a late Q1 closing would be the normal timeline.
James (Analyst)
Okay. And it’s just the Granville block, the 50% of the loan that is currently being marketed, or is the entire property and portfolio being marketed? And then, you know, with that, is it being marketed as individual properties or as an entire portfolio?
Blair Tamblyn (Chief Executive Officer)
So James, as I mentioned before, this is the key, the Granville block. Right. So that gets us back down sub-10 stage loans, which is, you know, the target. The rest obviously we want to resolve as well, and they’re being dealt with, you know, sort of individually. You know, the number of, literally the number of files in stage two and stage three is, you know, well below 10 now. Of course we’re working on resolving all of them, but this is the focus.
James (Analyst)
Yeah. And is it just the Vancouver loan, the 160 million, we’ll say, that is not generating any interest income at this point? Like, I mean, the others, the rest of the stage loans are still being accounted as previously, correct?
Blair Tamblyn (Chief Executive Officer)
Yeah, they’re, you know, they’re all a bit different, right? I mean it depends on what they are. But Tracy, do you want to—go ahead, Tracy.
Tracy Johnson (Chief Financial Officer)
Yeah, like the bulk of the other stage loans that are not this Vancouver portfolio, there is no income on them. We haven’t been recognizing income on those for at least three quarters or so.
James (Analyst)
Okay. Okay. And then shifting to the credit facility, there was some covenant relief negotiated in this quarter. Could you give us some color as to what covenants required relief and, you know, any other changes related to the credit facility?
Tracy Johnson (Chief Financial Officer)
Yeah, I mean as disclosed, there were no waivers for this quarter. I’ll be clear: there were no covenant breaches. It was done on a forward-looking basis as we continue to work through this Vancouver portfolio, so just negotiated enough headroom for us to get through this on an interim basis.
James (Analyst)
Okay. And then, you know, any restrictions regarding future growth around the borrowing base or anything like that, or is that all consistent?
Tracy Johnson (Chief Financial Officer)
No, I mean it all kind of, you know, it’s all driven off of covenants, and that lets us know what it’s—borrowing base driven. Right, so it’s—yeah, it’s math.
James (Analyst)
Yeah. No, just making sure there’s no other changes other than some forward-looking covenant relief and then increased costs, that’s all. Okay, that’s good for me. Thank you.
OPERATOR
The next question comes from Stephen. Stephen, your line is open. Please go ahead.
Stephen (Analyst)
Hi, just one question, Blair. Pending the successful resolution of that one file, where would you like to see the portfolio one year from now? Because there is a lot of activity, but I guess this 2 billion number has been kind of sticking around a little bit. Where would you like to see the portfolio at the end of ’27?
Blair Tamblyn (Chief Executive Officer)
Yeah, well, it’s a good question. So, you know, our—there are a couple different ways to answer that. Of course we want to get the stage loans back down to their kind of historical levels, as we talked about. That provides, in our mind and in the board’s mind, the ability to generate attractive income given the market fundamentals. And our strategy will be to communicate that to the marketplace with a view to getting the share price back to a level where we can grow the business again.
I appreciate why everyone wants to talk about the staged loans. We all do. It’s a huge frustration and, as Scott said, it was kind of a perfect storm here as it relates to Granville. But when we look at the market fundamentals—again, not to diminish the stage loans, but putting that aside for a sec, because we will resolve that—when we look at the market fundamentals, they’re strong. So we’re confident we can generate an attractive equity yield on the capital that we have to deploy.
So we’ll renew the credit facility, we’ll size that appropriately based upon, you know, our debt-equity ratios. And then, as we’ve done in the past, when there’s opportunity to grow, then you raise another dollar of equity and another, you know, another dollar of debt—obviously, generally speaking. So, you know, generally speaking, that’s what we’re driving towards looking at 12 months.
Scott Rowland (Chief Investment Officer)
I’ll just echo a comment there that post the interest rate reset, valuations are attractive, right? Some of the stuffing was taken out of the market. So you sit there and, for us as a lender, we have to lend in LTVs today—fresh capital that’s gone in, fresh transactions at lower values than were trading before. It’s an attractive time for us to put that money out. And borrowers are showing up and coming to us now with bridge ideas, with new capital they want to invest and take advantage of this market.
So what we’ve been putting out the door the last few years we really like, and that environment is sort of staying the same and, you know, we see continued, you know, sort of green shoots in most of the areas where we participate. We like the core part of our book, and we clearly need to accelerate the rest of these stage loans and get that capital onto the good side of the ledger.
Blair Tamblyn (Chief Executive Officer)
I guess maybe just to finish, historically, stock’s traded around book—maybe a little above, maybe a little below. And so when we’re finished this exercise—I mean, I’m not going to speculate where book value is going to end up. I mean, it’s 7.33 or 7.35 as of quarter end—where it’s not going to end up is something that starts with a 4 or a 5. So, you know, we need to work with you and the marketplace and explain why, you know, something in the neighborhood of book value makes sense, and that allows us to grow the business again.
Stephen (Analyst)
Okay, that’s it for me. Thanks, guys.
Blair Tamblyn (Chief Executive Officer)
Thank you.
OPERATOR
Our next question comes from Graham. Graham, your line is open. Please go ahead.
Graham (Analyst)
Hi, good afternoon. Can you hear me okay?
Blair Tamblyn (Chief Executive Officer)
Yeah. Hey, Graham.
Graham (Analyst)
Great. So you gave some good color in the MD&A. Just about, you know, beyond the Vancouver, or the Granville assets, it looks like there’s maybe another $50 million of stage loans that you have some visibility towards resolution by the end of Q1 ’27. Am I thinking about 180 million potentially here of resolutions over the next couple of quarters? Is that the right way to think of what we should be looking for?
Blair Tamblyn (Chief Executive Officer)
Yeah, ideally, yes. Right. We’re trying hard not to overpromise, obviously. There’s certainly some great progress being made. The portfolio can sustain that 6% to 8% of loans that we’re working through that don’t necessarily result in ECLs. That has happened for, frankly, 20 years since we launched this business, so it’s not going to go to zero. As you know, you’ve been following us effectively from the start. Right. So we’re trying to accelerate all of them, not just Granville.
So, you know, the expectation is that we progress on the others as well, I guess. Right. I think some of the others, you know, it may take a couple extra quarters, Graham, as we practically work through it, but taken holistically—’27, the next two, three quarters—we plan to make material progress.
Graham (Analyst)
Okay, understood, that’s fair. And then you’ve got an ACL right now, 47 million—safe to sort of assume that this is your sort of best estimate of what you think fair value of these mortgages are in light of the fact that you’re trying to accelerate this resolution process? Like, should we think of that as being, to your best estimate, baked into your ACL right now?
Blair Tamblyn (Chief Executive Officer)
Yeah. So the biggest part of that obviously is Granville. Right. And then the other components—I mean, Tracy can give you some detail on it—but it’s us trying to clear out a few things that, you know, we’re trying to make this simpler for everybody: understand what’s important, what isn’t important. And no one likes write-offs, but, you know, there are a couple little things we could have thought, you know, maybe save a few million dollars a year out, and we’re just saying, you know what, let’s move on.
Graham (Analyst)
Yep, okay, that’s fair. And then. Okay, sorry. But just my last question is, let’s hope and assume that you do get through to a more normalized level of stage loans. Where does the weighted average rate settle back towards? What’s a reasonable expectation either, you know, late ’27 or 2028 for the weighted average mortgage rate or interest rate?
Blair Tamblyn (Chief Executive Officer)
Yeah—seven, six—seven. Yeah. Like, I would think it should be pretty similar, Graham. And the only thing that’s interesting in that math, right, is that we had a quarter point, obviously, increase in prime. We’re probably, you know—not that we want to speculate on interest rates—but we’re probably looking at another quarter point in the next three months. I mean, obviously there’s lots of factors into that decision, but probably at least another quarter point.
So those would be tailwinds to that number. But other than that, I believe—like, I’m thinking to my own forecast—it’s in that similar neighborhood. Seven, six. Sorry.
Graham (Analyst)
Sorry, I didn’t hear the number, though, or the range.
Blair Tamblyn (Chief Executive Officer)
Right. Seven, seven—about seven, six. But with potential upside to that number with interest rate increases.
Tracy Johnson (Chief Financial Officer)
Okay, yeah, it’s 7.6 today, or at quarter end it was 7.6, Graham.
Graham (Analyst)
I know, but does that 7.6 not have the overhang of—you’ve got some stage loans that aren’t, you know, you’ve got outside stage loans that are not earning interest income.
Blair Tamblyn (Chief Executive Officer)
Right. So those will get picked up, and then you’re losing some loans that were on their floors as you sort of roll through, which is a bit of an offset, but we’ll see where it ends up. But I would say at this point—like, the end of 2027 is hard to predict—but I’d say high sevens.
Graham (Analyst)
Understood. Okay, that’s good for me. Thank you.
OPERATOR
At this time, there are no other analyst calls, so I’ll turn the call back to Blair Tamblyn for closing remark.
Blair Tamblyn (Chief Executive Officer)
Thank you. Thanks, everyone, for joining. As usual, obviously not, you know, a quarter that we’d like to repeat, and, you know, we’ll look forward to talking about the progress we make—or have made—the next time we get together. Hope everyone has a good afternoon.
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