RWT - Earnings call transcript Q2 2020

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Operator

Good day, and welcome to the Redwood Trust Incorporated Second Quarter 2020 Financial Results Conference Call.

During management presentation, your line will be in a listen-only mode. After conclusion of prepared remarks, there will be a question-and-answer session. I will provide with instructions to join the question queue after management comment. Today's conference is being recorded. the of to Investor turn Senior Hartman, now President Vice Relations. will call Lisa over Redwood's I Please go ahead.

Lisa Hartman

Results Thank you, our Financial in you for Kate. Hello, everyone. Second And Quarter thank participating Call. XXXX

today are me Officer; Robinson, Financial President; Redwood's the Chief Joining Collin Redwood's Chris Dash Cochrane, on and Officer. Redwood's Chief Abate, Executive call

management's performance begin, to future respect I you may Before with forward-looking to we that certain or business presentation remind want statements constitute statements. made during financial

The information at this circumstances. website company update today. call subsequent accurate does measures second should assumptions measures you available based not redwoodtrust.com. that could undertakes for report or are provided Forward-looking contains the our provides intend obligation this on as as of GAAP of which uncertainties and may isolation reflect actual considered those content we be to reconciliation to forecasts non-GAAP factors and accordance non-GAAP in a our GAAP differ non-GAAP from company's of review GAAP. only XX-K, expressed not risks current that some that involve could the be may statements utilized substitute between to events the cause differ both and expectations, time-sensitive and and materially. that financial to provided prepared annual On results actual measures. Form of in A have Also financial company's a with description financial We cause also on quarter encourage performance conference of material note Redwood is could measures information results that this that a forward-looking impact in The to in statements. on to call, no refer or performance is and on financial the read

turn Officer being Redwood's recorded opening available remarks. to call I later website today. is on will for Finally, Abate, Chief be will Executive our the and now over call today's Chris

Chris Abate

March. the you of non-government today. sector to with that thanks we've extremely and pleased progress after experienced as then, during has Lisa, in for lockdowns are a of all second the of a We're to to on since in rage call the cases joining now spike you, Thank COVID-XX collapse experiencing nation, round response liquidity the July. coronavirus and pandemic a in we mortgage continued made

this story continue Redwood So written. through crisis be will to

position We business to our advantage underway. the in not but weather now is unique lines, storm, are a also a only now significant recovery which of take in

in with of businesses, Before a condition. financial I discussion our results proceed preview I'll our

per negative quarter second in share, $X to earnings share as $X.XX quarter. GAAP compared were Our per first the

not at almost a GAAP third of June valuations value XX. losses the Our retrace economy extent uniform XX, the Well, investment at unrealized book materially significant and represents to increased from value book possess per still of portfolio. nearly were the $X.XX magnitude, continues March recover. our $X.XX the quarter as in share decline higher linked in one XX%, first upside to to This

new million Marginable debt comparing leverage ratio non-recourse investments of pro only capital of our in marginable recourse new recourse X.X about unrestricted our decreased debt our we March ratio factoring July, recourse daily margin recourse from of X.X a XX, reducing portion ample XX and debt forma significant basis, is entered room billion, times into XX% to calls of In aggregate times, X.X businesses million had declined approximately we that quarter, to On us the XX June During leaving billion subject recast facility, end a we X$.X the represented for cash our debt second at debt to as June $X.X recourse to during and is of our forma $X.X X.X times. begun pro is secured at allocate debt, successfully our of at with to to billion June in most to from debt. recourse our do. When recourse leverage was our a times. coverage operating $XXX to on $XXX that basis. further

benefit Importantly, has managed in outside need driven of we evolution proverbial Not equity service $XXX for of of without on repurchased organically convertible the our leverage. repurchases costs economic generating the the million our million reduced we discounts, crisis not structure of require $XX capital diluted quarter, do raise. provide gains. capital capital been significant only debt debt These the as second lasting

we technological platforms. for games the investments of can towards some our contribute planned And have long-term

long-term We capital will from our a structure paid repurchase valuations to dividend we per of complete, enhancements $X.XXX we the remain quarter believe extent to the second opportunistically detached at end equity With share largely fundamentals. our continue of debt common or June. significantly

cash The losses We of outcome as until and in our able ship we as current strategic to associated the risk remain job Well in in support quarter markets, spectacular many both has from market US or remain effective far the of financial sheet level virtual an a more evolution pandemic to a evolve yet upon we as remains the assets believe capital extreme of few size post-pandemic of markets Second months. brought is the moments. a can by to with the perspective, the be dividend yet accelerating be outpace financial the to aligned on do and in business looming about go buoyed will shocks that Fed positioned macro contraction the us and Record opportunistically When shareholders, believe the areas we not best that of discuss ourselves capital economic in fiscal to to meaningfully well to industry of what prospect be and dividend is as attached mortgage health we patient pandemic. access still economy in going in found. has the premature election the implicitly Fed we deploy position to or and in non-agency vaccine and a the the stimulus From to is can by TALF, not hope while to our begin directly the still for benefits can the has delivering as mortgage significantly too prospect the set the COVID-XX focused flow financial and balance tell, significant function through extreme speed with we deploy our look Dash the supported, November, seen. great our build COVID-XX continued few ahead, will through true sailed. resiliency stabilize. likely trying predict we've detail this meaningful and forward. put forward committed next in in and the sector be it's attractive monetary the The a taking recovery and treatment patients how stock either we an be would Discomforted in by the long-term focus impact ancillary economy severity. platforms ongoing the indicated our reflected to by been time with earnings, sustainable model, our business on of in world. engagement crisis

done landscape. the our are closings record took remotely. person, and process the of place the that industry run that's expected. enjoyed credit deteriorated significantly low appraisals most before will continues Residential from performance than to now delinquencies, fundamentally crisis purpose to better Many as residential the aspects and such historically business now, lending continue in first segments operate For mortgage altered in a

underlying of balance observed in resurgence are in on hall home metropolitan single-family appear has a opposed pass-through nationwide our these cases our weakening As to activity agency XX% received Refinance shift received remotely, mortgage many The as has to extra dense our June trending housing concept remained both in is home Many mortgages the in for virtually far forbearance, the perhaps for predominantly suburban preference X% be in low XX, most rental seen consumer few learning on single-family Americans. of orders also demand. securitizations secular some the not record residential By Sequoia strong trends and for we underlying elevated loans. parents. short does families June due for serious we which securitizations. and of approximately states Most due working housing a taken a represent payments significance now been from XX% is broader and rates, with purchases rise for CoreVest products, sector, of for our and in loans consumer approximately non-payments thus thanks their and rental have positive that delinquencies. loans down below for areas. payments of single-family the one June lower. to of loans greater in remarkable mortgages the shelter-in-place are and way a even demand months on focused has children and ago, working Particularly from residential This and

Our lending team prime to jumbo tightened lenders the loans a sector. in most jumbo space of mortgage slowly newly the recession end. an half relaunch Since a for severe non-agency to the fed have prospect the of coming the support entered residential the March, originated of due year second idle for period lack with significantly underwriting and an to guidelines

engagement Even jumbo mortgage to see this agency home as the on origination loan to both we fall. largely sentiment refinancings weighed the shared Based jumbo and our partners, activity lock by we a focused has on who our rates, have eligible and agency recent high a loan remained buying with pickup the of with and we've loan constraints relative head narrowing value meaningfully spread grow sellers and to prospective. current into officers narrowing, and bandwidth Additionally, this on begun margin non-agency to on continue activity. of see borrowers loans, substantial expect and between

focus environment preparation reflect recasting to guidelines sellers activity. continues the on products to Our increased economic with near-term for our and loan be in

completed excited of reflected efforts facilities. may not our loans associated all clearing pre-COVID and has team's reach and results, work debt managing the of made be yet we're of the through substantially loan difficult been progress about we this tremendous in those inventory, sale secured resurgence of the out point, our underway. with To the culminating Our

and June, team to expected securitization the positioned in As sale part than the transaction of our we this price brought us dealer that these process, Sequoia our better The residential completed late to a be close. the of second MCX end new Transitioning the going much loans forward. safely to segment, quarter, July. at underway in recovery to business purpose have and much our about was we begin very excited locking of the lending loans

in Our of sheet. pre-COVID the XXX second single-family earnest BPL the June, million in late after balance our market of when significant loans the May rental we quarter, team portion and in the re-entered loans a originated majority securitizing on

is strategy and origination Our its sponsors or origination bridge to portfolios. sharpened footprint remained and consistent most ultimately SFR loans is stabilize hold strategy focus largely all their on our whose of

customers support their caliber, commanding fresh In and loans SFR in become financing and improved sponsors Across we investments. accretive addition structure new our to repeat BPL for are both terms these institutional products, lending bridge both coupon. to often

expect the competition improve, more to As we markets re-enter funding space.

remains However, believe our we do advantage durable. operational

demand that and book and both thus progress co-invest completed for for two non-recourse Our loans, second risks opportunities remains to bridge performance to solid to Investment make BPL our inquiry portfolio, through essentially pandemic. the business to of financing. purchases through diversifying great a quarter has financing SFR significant very outlets arrangements distribute for XX% in far robust We including loan in and provide over pre-COVID the funding continued private Bridge displayed match its July.

options receive investors a strong in to assets risk become strong to adjusted reliable space in The securitization. we traditional kept from attractive in have We complement to continue demand, the our securitizations. expect SFR and indications BPL these returns

trade of creating we hitting away. is is fight the months pandemic are far in looming. historic and wars injustice are global disruption, a a point and scale. times. election truly three and at the take a we racism As an We reminded stock economic the year technology U.S. mere global presidential is inflection against The social towards look And so face that living fall, that

to our all examine of rethink to pause and priorities of function. presents we want an this us we world All use how our our values, opportunity to while

a Redwood’s prepared I'll turn make rented As evolve, to to all Robinson, Americans, call my owned. housing whether our remains how concludes the accessible over times corporate mission now same, to Dash remarks. President. the or That quality

Dash Robinson

and Thank everyone. afternoon, you, good Chris

considerably with reduced total, In recourse billion, begin existing which our I on recourse our parts businesses, arrangements and forward. into financing how milestones we to of to and today quarter, and our secured. providing Before forward. In to debt, our the made debt we run operating going capital our entered which want most second notably activities the billion get marginable recasting portfolio secured $X our structure, going into of review approximately includes the operating details additional significant we franchise investing I progress plan several support debt, stands $X.X key of as on is at of our towards

million later. we of debt only debt XX% or mentioned, of And non-marginable As $XXX our bridge with Chris purpose held business with debt or total Approximately of term marginable. XX% this non-recourse the articulated, recourse shorter XXXX procured our matures funded for in Chris unencumbered. of approximately as majority is the remainder loans,

and reducing In on work to these marginable remains addition our further recourse debt completed underway. initiatives, incremental

inventories non- loan us vast positions Our and to work fund second the of majority residential our purpose debt. marginable the business in with quarter

a we cost comes attractive capital the of associated in our for allow modest including returns longer risk required the this will increase adjusted believe a achieve amount debt While continue over lower risk benefits, long us with to on durations capital, term. financing of to time new and portfolio

During jumbo loan completed the completed and sale sale of of remaining also for COVID residential loans the of held all inventory. we nearly our investments, pre the all nearly quarter,

warranties we XXXX. material this ability to not complete, new from exposure a additional continue businesses to June and strength with and of was operating to allocate at investments. While enter carry unique in XX, this for capital sold, the estimate to With representations the our our standard exposure quarter third significant position we loan work

investments, level. parties other Chris's securities pre-pandemic CRT, still capital organic securities management subordinate dilutive seen emphasize Within our for in fair the options our earlier of of values the our well increases remain those securities. pronounced or below was were without equity point, need an and infusion achieved sheet quarter, More to improved for second linked Sequoia the agency third portfolio balance Importantly, lenders.

portfolio. positive saw we substantially all in However, movements price of portions the

unrealized in on quarter quarter, asset of security. It jumbo of that value important remained as provides marks, move pace Review the estimate subordinate our certain $X June mind detail recognized the share type. in December losses more Redwood per to even XXst XXXX, quarter second also that keep Our reflect underlying is in the change significant XXth, a discount first value our approximately We outstanding. of a for the that business reflecting our segments. an accelerated deliver, in to to parts structures of the at of as upside face something on second particularly potential now portfolio, prime discussion happened I'll by

portfolio the the investment Given residential and party third-party changes the last of segments months, into our third segment combined our of a investment several new in quarter composition second called we investments. over in multifamily XXXX,

lending business segments platforms. continue to vertically Our purpose represent residential integrated and

securities loan of to comprised banking For sourced remaining third-party our investments, housing is not securities, mortgage investments segment multifamily including our operations, reperforming other core investments. and CRT securities, related other

lean in to quarter Our more fully in back us operating activities. have second into initiatives allowed the completed our

remains improved we operating As us advantages before. and ever perhaps our market supply credit better believe have and housing tepid, overall than position technicals

is drivers our private backdrop, with made platform normal. Against migration stream at to detached outdoors, more quality, has is increasingly amenities more our shift financing underlying home. seeing The that Our sentiment result through our market and access With very the the to Man commensurate businesses. the on as densely so populated of to BPL which progress is space, structural, seek great behavioral an longer core increasing well competencies bringing market the business a could can particularly loans and shifts pandemic in end this in and the a important new since also controlling of direction. but interior what being otherwise the diversity and demand are securities continuing second revenue to likely consumers spreads with the the second both of but will demand moment, as review single-family both quarter. lending residential outstrips participants, facilities and asset, in other and tighten from time supports locking areas layer and at our access. in Demand of This whole not still remaining can't has for where as term suburbs a of you production the the touch performance, I'll spending are residential and but remain discipline measured, risk, in only This on be quarter, housing accelerating pace. homes a be place, shines additional our for asset a loan strengthened, through credit to closest is markets, for we in business valuable high securitization supply.

mentioned, to Chris prioritize the residential see have lone. their the focus us to our time, lock A and pickup always same channels, through as activity, at into We've expect of while fall. we we risk. platform originators meaningfully which lending distribute been and conforming grow head begun largely diverse As has a on the hallmark

indicates purchased gradually slowdown July home The net picked strong to investment risk established and $XX turn sales, volume the debt Our marginable recourse income, driven we our demand structures in June reduce current of loan by $XX in May fresh fair we in segment in lending which the changes market momentum. positive and well view through significant Sequoia Sequoia thaw. primarily security. can largely net a and subordinates market Lock additional has as in as substantially a for both, quarter, generated home of issuances up as the fashion the our second our quarter, capital second the efficiently began value of during distribute residential durable million During described million as sales the but loan in income We benefited cash ratios earlier interest loans and positions, leverage quarter. jumbo

$XX completed lending was of from second sold quarter, jumbo our million and from which Securities inventory. of million $XX the retained $XXX Additionally, quarter, loan comprised we our securities investment during we the a of portfolio million during residential securitization pre-COVID remaining Investment

During to inventory. non-marginable the utilizing also quarter, loan facility finance we existing warehouse completed that we're a

an is refine a and As we how can handful to on and and focused mentioned, strategic including move purpose team the both fueled remains single from in for investment manner. improve pipeline priorities, origination technology increase SFR our lending purchase unique quickly market loans continued quality demand forward, residential market we capitalizing homes, to on business Meanwhile sound bridge our by for our in segment and Chris operations safe high efficiencies in and key a family as a is opportunity, robust. rental how of loans

During structural quarter the of key strategic fair investment of the level second returns enhancements from an of a competitive pace $XX million focus for traditional quarter, attractive for product. of income a bridge originated risk on impact In driven close, a rental and sponsor has rates amidst the of remains to purpose single interest segment portfolio value to workflows and lending were through into business durable lending the adjacent of to our reentered speed advantage. family remains while loans. loans. value adjusted income, the drive a competition positive Bridge even conversion including $XXX net long-term we origination. for our changes, the lower coupons, $XX by at segments, our investments And net space, contributed accelerated We million BPL higher loans million and able other LTVs commence overall, second pandemic

in overall, a in prioritize performance sponsors BPL credit we XX-plus a to part recent that time. these on sponsors and basis more platform focus rental will detail $XX at out lending X.X% longer contains bridge in In performance XX, just portfolio the higher delinquencies and have X% have Our increased totaled several portfolio million customized that estate only second important experienced stand March in strategy that blended This X.X% of modestly the since and pandemic. $XX among quarter, at strong total strategy we retained of approach clients borne in to $XXX the million alone, our Redwood book lending July than chief of our the highlighting overall day over indicative with $XX ways, of utilize than price security. we observed has on June leads strength a in and the believe particular, approach consisting portfolio our products in delinquencies the are May, particularly overall, investment. at which we on million that real family onset are our a of long-term housing second over a unique key reason several offers, less exceeding a average we is make and loans first a of term acquisition, BPL the concentrated our point quarter, from the of more securitization, to completed the stronger through portfolio block of of loan end sponsors refinance. been the a quarter client market, held is robustness approach In this we These million review single

net Our net third-party quarter and by interest value the income during other a investment $XX driven result million agency investment of investments at changes positive of income as second CRT and securities. subordinate rebound contributed a fair segments

marginal and reduced have to it We the further third-party forward. reduce to expect investments amount debt going finance our used considerably of

of deployed are investment an million of of new portfolio. including investments quarter, subordinate or of And we $XX investments, loans proportion security. increased During securities third-party of in securities. securities dispositions residential $XX CRT sold the $XX and million CRT re-performing second these primarily $XX into we third-party our million Net million

backed securities time. borrowers the over senior underlying relative in and market whose an are the and through of term the financing. onset or before past has delinquencies overall steeper more mortgages the comprise two, curve of subordinate orderly The And capital deepened that we year, more approximately applied dearth believe are remains the opportunities to by by to structure pandemic. strong CFO. securities occur of higher attractive Overall, that, to call seasoned reflecting the the the market velocity the engagement. weeks, modification associated portfolios allocation I'll several earlier but overall of last month while conditions, over X% the considerably the the the in has own Collin, market As than cash investments bonds current during we has become XX% borrower a And Mac, reminder, some Redwood’s subordinate flow gone credit of these of with will wrapped have than sort debt approximately as stable attractive over been underlying turn source non-recourse Freddie Performance capital course

Collin Cochrane

Dash good and Thanks, afternoon everyone.

and positive and earnings our Chris As for XX% values of the to driven these benefited from drove book on discussed helped by the our quarter primarily quarter significant value. which generate economic second a earnings share or changes Dash on Well, investment. rebound earnings in per majority pricing, asset were of fair a and value $X book return

accordance As $XX improvements businesses repurchase our in of with excluded per the gains gains convertible million Dash recorded from operating we on and debt. share from GAAP. in earnings mentioned, also of Of note, saw diluted debt of the extinguishment are

which include Our share, basic $X.XX. gains per these were earnings

not core As disclose did was the last case for quarter, the quarter. earnings non-GAAP we second

XXXX. representing primarily the changes $X.XX $X.XX fair to of losses share. quarter unrealized was to share per are in assessing of of a earnings We our by performance evaluate of investment, of $X.XX core the in approximately our per operating one-third After dividend, driven future recognized increase recovery per in the metrics will the increased most quarter be second value This revised book and share value first our the relevant $XX.X that continuing a payment periods.

side, related incurred in amounts tax which losses and XXth, were that $X of quarter first we income difference reported second of for second per in approximately June estimated for As taxable tax first outstanding. gains REIT, quarter at per quarter. $X.XX Dash per to extinguishment was share the driven by Exclusive in we until remained REIT losses the mentioned, had head of quarter realized Shifting timing share. to from the not a share these of loss $X.XX debt, the primarily the of taxable unrealized that the was but quarter, recognition the

tax net currently year-to-date payment at majority REIT, we our of loss capital of the the purposes. Given our the in expect for return XXXX dividend

Turning to we quarter X balance $XXX sheet, cash of with the ended million. second our unrestricted

secured repositioned Dash and debt Chris we and structure, recourse overall debt have months, to non-marketable substantially As our recourse discussed significantly recent shifting reducing debt. in

we utilized of new financing recourse non-recourse July. X% June entered our into recourse X.X be forma XXth, for portfolio. our billion finance new Additionally, ratio investment We of debt to our adjusted estimate pro we've structures leverage in $X.X will at Using times. non-recourse

We leverage expect investments. rise to our loans of this to operating new begin available to begin for ratio are we that deploy sale, into capital and as for our accumulation business securitization, increase

non-marketable of debt mentioned, we loan investments. in we As remain And to to we facilities close with utilize expect I'll judicious our investments. financed to and debt our finance inventory outlook. new use expect operational other our marketable

know strengthened the balance a of as is through second we earnings this and time. What Given the this navigate believe do optionality guidance to a that pandemic, provides ongoing continued uncertainties that play from providing structure cash year we entered the surrounding with future economic and offense we the impact of defense we significant pandemic. half us capital the we're continuing refrain to at

generating we portfolios a operating are our yields investment strong foundation strong return basis that profitability. continues embedded current significant businesses capital which Our begin to to earnings and include for a to excess provides in-place to cash growth discount, declare as

to in side, late due the On and a our quarter, April. we expenses during primarily that reduction administrative decreased implemented in the general expense workforce

in second So to and incremental costs I from will the specific activities these some quarter. savings other expect

revenue as acquisition in anticipate variable to also the loan an operating increase businesses and volume We at continues improve. our costs,

platforms this an opportunities As be appropriate better cash for baseline portion and we begin for assess to to pandemic, recovery position gain redeploying able generate to begin earnings. more incremental clarity our on to of the the operating we'll environment pace the new evaluate from the substantial and

for prepared call that please So Q&A. with I’ll the remarks. open conclude Operator,

Operator

comes the begin question Our question-and-answer KBW. Please, now Instructions] ahead. from go Eric first Hagen of will We [Operator session.

Eric Hagen

the Hi loan bit And ordinarily going maybe you. Sequoia about think apart be challenging portfolios? are blended post what the funds required tease for portfolios those, value, in should guys. reserve. from would yield that marked little like? a so reserve the portfolio look a choice a are a Good to would rates of that deferred hear expect there just to cost it's But if forward? realized numbers loan then, in Hey, loss more In we were words, you portfolio the you I both is to business those what in what a loss and the other

Dash Robinson

it’s for take can those. Thanks Eric, questions. Hey, I Dash. the

our originating basis question, where some on some digits, the we’re more subordinate double basis subordinate your we are or the mid-teens cases, loans from on securities our securities and to Collin’s based yield for perspective, into hold. that a well yields in to, our of seeing first higher, As to we to point,

the a a you in from, to this whole of some than can side, perspective, then includes and SFR lending, non-recourse on as the in converts, just X.X% our funds raw higher those yield funds or during a unsecured business loan those yields get loans our so recourse little asset up financing X% procured financed, about From is are debt, the basis, single But X% we well. X% purpose X% look anywhere that digits when we before that blended bridge that at of blend higher cost On for loans you of detailed in particularly it loans, takes take the bit cost to which for review, higher. now, a quarter.

those. about you So that's can how think

next that. loss X.X range months. That But, prepared in when with a loans we've several And roll half the remarks, picked months in securitize with SFR with past than bars in still the a are to delinquencies, see bridge spreads the lower that And of in will book. we’re loans, X of really how mentioned our range, stable. remain which access a percentage any of terms the they portfolio. as and far on as good point in Sequoia. funds, we over quite – a our there's jumbo guidance general, borrowers of ourselves securities particularly the obviously, those then loans bit really, forbearance. clearly the overall really overall About in perform during cost remains is as hard permanent more forbearance in We've availing in haven't the the a continued like we delinquencies on particularly From we see those formal over to off perspective, general, up I current. overall, trend we provided said, been market. few They've the So

Chris Abate

is to. Yeah, I'd better there I is don't on Chris. that you given our and you – incidents where economy's sense the noted. the book expectations than this There's as reserving, reserves in Eric, don't add, we and as think also think incident and is we about when performed the you gone severity side, book

sales the side, from the and strong have I On deter and only you severity to multi-family. not family commercial it very remained started to at sector, markets but single are really think up. The look housing housing

from So severity the a shape. I think good we're the perspective, average pretty of given LTVs just in book,

Eric Hagen

side. That margins could into But back in to and support Okay. in there helpful. was do That you until jumbo you are right market right think running much And that get look the again And what you volume how starting origination you footing channel sale good. up on you get that fall? origination you're that now? like really was on understood guys

Chris Abate

a can still building having – margins out We margins you locking the at impressive. support, certainly, ended pretty in on liquidity even the based is as past entire place has place, got in and pretty June inventory, these levels. the we've the loans, there know, and market, seen, we we're support – going so what and seeing far jumbo where in we're recovery point ramp as in to the far think pre-crisis can be as as but I this recover. team been And cleared we've few we're the story weeks, we're pace – essentially of we're into For optimistic – really what The and our a fall. we is heading

a see to activity. going You're pickup in

Eric Hagen

through July? guys that say what – for Did you you your value thanks was guys Hey, Chris. book did

Chris Abate

modestly. but didn't – maybe It's didn't. say a we up We few didn't up, the percent. it's number, We

Eric Hagen

it. Got

comment. for thanks Okay. Hey, lot a

Operator

The ahead. Please Raymond is Laws of next James. Stephen question from go

Stephen Laws

local Curious, of competition's other you afternoon. well. how loan similar space. front? today were it in able I that for strong seeing through good financing? some, start, to yield say stocks extremely your doing asset the side, capital are prepared how like? I working more that coming have those SFR loans competition to February? – you been do, provide that SFR Is the remarks single-family do you're in compared the it what seems do institutional And from Is investor, talk Dash, your the – coupons Hi, guess, capital trying portfolio either mentioned rental January, where's a money where you about to class I that I lenders certainly Can get managers to want hard recapitalized or demand on the that know, BPL believe

Dash Robinson

I would bridge. different are the about asset to of products types single of other then lot There's on however, that, we versus business a a yeah, But Thanks, lending, if think focus deeper that say by we both. with there. it's Stephen, to the largely, you articulated question. significantly – traditionally, entry, than products bit our bit who've on group a SFR, more been the the barriers focused tend focus that on, of more specifically, are estimation of like purpose bridge for lenders, higher

the would million loans, typically Those stuff We themselves on of amount terms production. have as loans smaller million. loans X the tend loan that specifically traditional $XX fund higher, bridge. but over. as single family our or who are And and seen their certainly of to folks, you smaller the some into some know, refinance as capital sweet can with competitors SFR party large balances, to the some we third you to $XX balance see X probably million get Then in reenter who spot as be including do space of in of larger run

loans a nice remains companies to well X other and also that a in But understand risk going be million on some insurance of debt potentially with how continue for. of so, forward. capital banks companies There securitization, complement as we for compliment spots And which to structures ourselves asset are there. For certain that a capital be larger forward. to direct lenders class million insurance lot going manage X going of from as avail sweet or lender diversifier There our relates pretty the uncrowned, our business well. could to that thankful could of and lot interesting frankly, to, to space, how as private we that which that, we're the we insurance is continue demand forward. compete us can a lot In the could a a partnering refinance interested very some the in be which

recognize earlier than of perspective, it. So coupon definitely easily bps we rate there's a so for XXbps demand But try were are or year. into we that normalized fact the account benchmarks that bit. as as markets that a lower well. that's could with. stay to And taking that's higher to XXX From lot are we a and now, come where are We for and this in

Stephen Laws

Great and bit. little the you've financing pushed on a side then

far So securitization. you've got the

are the XXX that bridge but the ahead get loans year afraid now place we call, I said of on is margin we the you've built think of So to two what the correct? facilities bridge as through million in XXX financing the it committed for million to view on regular got side, that

Dash Robinson

XX% Yeah. is non and match. We of Those which there nice in effectively able, book for to second which bridge that's are what go majority management also But non be is almost turn which it down two arrangements now our replenishment was a capital of there, able allocation and of only capability from overall book out that to to non perspective, in the a recourse production. margin support a an bit fashion. vast capital is great vast, some get not achievement little quarter, but termed the recourse referencing. And

Stephen Laws

then then for you the And, it Great kind should of I constrained customers what mean volumes question by more your just May not have outlook for forward? meet it look originations what foot ability near-term more done we securitize and characteristics of in on what's maybe go there? willing volume to know loan kind in origination constrained to last kind or June, side? you're your to there and the me. medium-term or of is -- is by the type at on or finding What's of put more PPE

Dash Robinson

in the that, to did numbers hopefully number down towards billion I in the Sure, the which XXX on we last we level, build If say fourth to over about was just quarters that expect I time. some quarter. The closer is year in did workflows. a QX from first the build significantly three would constraint over say what we in first I quarter probably recall quarter. million of of year, And would

title, mentioned As it just my of loans, some in that is complete past. is nature, appraisals, sometimes than remarks because is --it in longer of I to it taking has taking of longer procuring internal things this the

really -- that's those to fantastic through which has volume done just headwind meaningful And process most probably more is, the some team trying the a get so from of the really perspective, a job elements of doing.

more we're very eager to from picked and articulated, leaned perspective, work markets for reasons a we'll reemerge, real the these how a a those a of We have are and way. capital bridge our products sponsors seeing. bit more in in our lot these trends put here We in because back spots to but see we to of that sponsor

to expect with we our as fresh deeper business capital so existing in with come their also sponsors And well. go models

over that few we'll optimistic we're meaningfully here So numbers quarters. the QX the grow next

Stephen Laws

Thanks Right. it. lot for the Appreciate a color.

Operator

The JMP next question of Please go ahead. Delaney Steve is Securities. from

Steve Delaney

on to Thank some to in quarter, tightening balance the hard share I'd in that. beyond and of $X do accomplished of you. further what second like recovered kind Hey be the the able at quarter. sheet out that value up work terms XXX mean the a can all get try guys, of per the jumps were you million to first the a in props of clarity, results about figure congratulations on you me lot

of That of, $XXX or the types that million be me asset then I would main in and trying your to help focus investments. but greatest know at kind on on you and buckets Maybe help classes looking potential for the or $X.X other of securities got you've billion -- see with two focus just balance the me Thanks. of helpful. one recovery? Just where loans sort multiple of focus sheet specialty billion

Collin Cochrane

the on loan investments. to $X Mac the some I just that per Freddie trajectory share are There embedded few is mentioned term of clarify of that we outside most versus are that Steve, also have our But based that as natural beneath the own reperforming areas Sure. credit portfolio. drive which the number say mark, I XXXX would securities financing.

-- our in below securitization. the are Sequoia to number, was of elements that well created areas three it. that There both that but majority As as, some that those organically other and securities, support

much those As those continue we mentioned we offsite books performance, in across from solid – to see perspective, our call, those potentially as more hopefully the in as there's, discounts. definitely

Steve Delaney

Okay.

NIM retain for big So I you, And when on asset -- mean, family single you obvious fair guess those I the have and you – you is, are your rental. those telling classes, Sequoia what generate that value. a while you're bonds, also

is; but side, of fair is, the structures correct? think you’re right what on as side, loans. that what I loaded debt the I'm that left Loans yes, on Is permanently those valuing just the hearing well. securitized and locked is and

Collin Cochrane

market in securities, That's offsetting all in into discount our the decent right. the either support profile or which bonds in embedded convexity our is I securitizations in is in. Corvette largely in that IO where premium and in securities and capital, Both we amount Sequoia both that through a sell comes of credit

Sequoia up significantly, the second in time, to So, unlock of is saw prepays see itself some optionality starts over something like to when delever, we that start pick and quarter. which you definitely structures those

Steve Delaney

Understood.

Okay. in Collin Well, -- begin, being speak with later. can about that you follow-up position where great helps did And a When playing start I'll bit a thinking you a you offence. deal. about on now little office that

largely sounds of volume we point any allocation, about third-party Sequoia terms you're segment securitizations? the in needing capital opposed CoreVest the as should that In still for a think ramping terms or of where significant the in capital of in at initial like you're more to

Chris Abate

It's Steve. Chris. Hi,

Steve Delaney

Hi, Chris.

Chris Abate

from you. good -- to We're hear

Steve Delaney

Yes.

Chris Abate

operating the An it is really offence first in and platforms. foremost,

Steve Delaney

Okay.

Chris Abate

really, they're great loans, originating loans, what doing really Cumulating getting the at. team's

significant opportunities the side, been we’re the a when you third-party there's opportunistic. there, about some On rally in out think pretty But credit. of

I third-party so still still GSEs our we're they're -- but is active. very are active And the spots, there think picking and

going think I are So big on And but be business CoreVest, there's from capital heading we're quarter. significant our needs started second into And the picking well the and up now pickup the there, we're towards way with signs volume side, lines. starting And on here residential to opportunities the a the through it. in fall. halfway to activity point it all see the

we'll the good of say, quarter of debt. to about think we diverse our we so have funding in a So in also I'd position to And where facilities, biggest are of was loans one be I and access repurchasing capital sheet, kind non-marginal convertible balance transformed uses we're with feel second pretty the at capital.

Steve Delaney

Yeah

Chris Abate

risk a of sort to asset That's us. free

instant. So par. at see we least detached And we prices still we so they're significantly those were those -- the from returns where about still today, it, way think

Steve Delaney

Interesting.

Chris Abate

that's So have we'll we obviously, monitor a something authorization. buyback

we But going operating we're can good businesses. on So the we deploy feel where focused forward. about primarily

Steve Delaney

Great.

all Okay. Thank for you it. color. Appreciate your

Chris Abate

Steve. Thanks,

Operator

Harter of from comes Credit Suisse. Please question ahead. Doug go The next

Unidentified Analyst

well? additional common And Hey, for repurchase could touch It's could a wondering on Doug. you debt authorization? repurchase. know, Thanks. I guys. your And have us but for you equity about Josh actually you you as appetite if just thinking briefly, remind talk on about if you're it share repurchases if if

Chris Abate

an authorization million. have in place a do That's for XXX while. We been Yes.

be And markets. We unlimited focused ability essentially have to we debt. those of we'll both on repurchase have

fundamentals what said deliver value on we're review focusing was focused any versus way very the to the market in values. we our think possible And shareholders. I to on

We're We monitor. started investments actually adding something staff. in capital definitely in other. the deploying capital the we're as we're that's mentioned some making So investments, growing we'll we business. for also new growing themselves, platform's a need -- however, are technology we not -- and seeing we're investing before, I I go-forward but only

few going rocky. pretty that months, could like run they next can pre-crisis. forward So, we mentioned the I we look said, here pretty some more did that also rates think realize be to we're That optimistic will start

a among into had Presidential We of virus. are somewhat other a resurgence of things, we've the heading Election and

markets monitoring to for is the continue economy focus So, a financial and going be to us. primary

Unidentified Analyst

comment. thanks the Hey, for

Operator

Barker ahead. The Sandler. Kevin next is from Piper Please go question of

Kevin Barker

afternoon. Good you. Thank

that where the priorities debt most and rank question. back opportunities given there? certain you attractive Just Could stock, and the out a follow-up as you capital into on capital what stack buying between your see or today, trades your where Thanks. reallocating that exist your -- allocation the stock trades capital back buying investments

Chris Abate

had think pretty the certainly the Ideologically, a it. fluid relative detached were dynamic Kevin. at quarter, Redwood. were economic to effect also looking ratios. our the we and a We bonds. amount realizing able piece value convertible gains, most at Hey It's earlier and about was leverage of discounts constantly We but our that at leverage reducing don't some a double improving in buyback really significant second healthy

So, to on We'll as monitor the seen a continue very relative authorization. quarter, our value last we've big a basis, stock, book that in the we the today. was attractive of jump do obviously, release have

the those said, to I healthier what businesses much to But place back do sure well. platforms, get seeing feels to business follow. and for So got we've today we demand the as originate. we'll the is want we operating fuel growing and make that capital in we're The as focused, in doing buy because I mentioned, that's something or we're most teams the I loans think

those are to I for big but us. opportunities be think So, all it'll fluid, continue of

Kevin Barker

you on us and So, be it recouped, be feel bit mean, or provide return mean help or like -- versus I that that so -- on equity I significant a the $XXX investment, back it reinvesting losses explain would little return if equity value sorry when on about could convert you dynamics. seem buying help investment million stock possibly a you I'm about might where might mean your as elsewhere. do what Could on market depending you value that is appear own potentially -- investment trading opportunities your I versus to on your you see in be. new those? you And matter? unrealized on return it think think you how where you company fair between difference trading initiatives can the may book at own of the see for well that is recapture your equity or you had or gains the it would higher that like

Chris Abate

Yes, mean, you back of can the one buy caveat I -- that both is practical limitations the timeline board stock constrained the the can on amount some with is. there's And whatever it the by course, periods. you thing authorization during one our buyback, we're open then

which limitations buying not there, per It's back practical se evolve, So, could there's or as debt straightforward debt. certainly as it's retiring but not. some

on So opportunities right focused we it's I thing. here turn is long sure The now to page important businesses of the make think sizing very we're operating that the one the the run. as

term and perspective unrealized a a presence So, markets. but in and very long book we're we it markets value perspective leading of investments, losses the on and recovery upside existing from like the not the market that the important abandoning from of these a the

that. well. do the to that really the all and platforms can engaged. So very we're make three very we markets to sure going But and rebuild believe active continue face I think, and I we're

third to third In we today party addition active investments, party in were investments.

constantly capacity advantage I the a to we've So, And meeting one fluid. got We're a we emerge piece, if and see coverage. like the think any got I said, decisioning take value think as feel in of we're, of relative lot it. we've is I I very

Kevin Barker

really Thank you. That's helpful. Thank you.

Operator

now has for today's concluded. presentation. you attending Thank conference The

You may now disconnect.

Redwood Trust (RWT) 31 Jul 202020 Q2 Earnings call transcript