Equitable Group Inc Bennington Financial Acquisition - M&A Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Geoffrey Kwan - RBC Capital Markets, LLC, Research Division - Analyst : We've seen a number of these [such] sales of commercial and vendor finance assets in recent years, typically smaller players, and they've been bought by deposit-taking institutions. Any concerns about when you've been doing the due diligence and credit quality, given where we are in the cycle? And what's your point, Tim, you mentioned the average through the cycle losses? What were the actual peak losses? And when was that? I'm assuming with the global financial crisis.

Question: Geoffrey Kwan - RBC Capital Markets, LLC, Research Division - Analyst : Okay. So -- but if we were to try and adjust for it, like when was that kind of peak that you would've seen at least through your due diligence, like what year would that have been?

Question: Geoffrey Kwan - RBC Capital Markets, LLC, Research Division - Analyst : Okay. Just the second question I had is, as you've kind of branched out into different loan classes outside your traditional on the mortgage side and now little bit more into the C&V, are there other asset classes that you're looking to get into, if you assume, for example, that the mortgage market is going to slow and you want to be able to still drive their earnings [indiscernable]

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : First one is around the breakdown of the funding today. Are you able to provide how much is securitized versus other sources?

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : Okay. And maybe early day -- early right now, but what kind of goodwill and intangibles are you expecting to bring on with this transaction?

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : Okay. And then in terms of the OpEx, and the -- I guess at 60% efficiency ratio, is this a scalable platform? I mean, in terms of growth like you need to bring on more people to continue to grow it? Or is this sort of geared up for some scalability?

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : Okay. So may be a little bit of operating leverage here X, any cost of fund savings?

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : Okay. And then in terms of the allowance for credit losses, what kind of PD and LGD assumptions are you using to arrive? Or at least to sort of get to that $9 million estimate today?

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : Right, okay. And last one for me just around the book of business. Transportation, long haul, I'm assuming these are the 18 wheelers, but I guess who is the underlying counterparty in these leases in that book?

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : Yes, and are these -- I mean, are these like large companies? Are they -- who are we looking at in terms of the size and quantity, things like that?

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : Okay. And they're -- are they -- the reason why I'm asking is we -- another company that's out there went against a firm that was doing sort of walkaway leases, is there any type of walkaway lease type truck involved in this portfolio? Or are these all permanent leases? They're not related to owner-operator leases. These are all the corporates as the counterparty?

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : Like -- maybe I'll just rephrase it, are there any owner-operated trucks involved in this lease portfolio?

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : And do they have any walkaway provisions?

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : Okay, all right. And in terms of that truck portfolio, are you -- have you done a deep scrub of the underlying valuations of that truck portfolio? And are you -- I guess, what I'd want to know is, is there any potential risk that we could have declining values in those truck portfolios related to engine or manufacturer risk and wear and tear things like that around that transportation portfolio?

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : Okay. So there's -- we shouldn't expect to see any sort of like MaxxForce engine exposure in that portfolio? Or let's say 2012, 2013, 2014 vintage trucks. These are all newer trucks and non-MaxxForce. Is that fair?

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : Maybe just -- I just want to key in on that one, just in terms of the age of the trucks, are you -- do you have any details around the age of the trucks?

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : But you're not able to share that at this point?