RWT - Earnings call transcript Q3 2020

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Operator

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

During management's presentation, your line will be on a listen-only mode. After conclusion of prepared remarks, there will be a question-and-answer session. I will provide you with instructions to join the question queue after management's comments. 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 ma'am.

Lisa Hartman

Redwood's call Thank you, us. Chris Robinson, today's joining and Financial Collin you Thank Officer; Cochrane, Abate, Redwood's are Redwood's President; Ashley and With hello, me everyone. Chief Dash Executive Officer. Chief for on

years. I our to can our website several you announce begin, to refreshed constitute or brand launch evolution business you I hope a easily management's certain the trail with an This forward-looking find very identity recently over launched want we new page future Before reflects financial a statements. we am also the pleased during related that respect as organization that financial results. helpful. analysts company with Investor may these that to a performance investors where includes statements new past We remind Relations to and made find presentation

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

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

Chris Abate

all of Thank to joining you the you, Lisa, and call. thanks for

those a a In call, out XXXX, to make also particular mentioned, on we a new company Relations quarter look Lisa and functionality, website the and section everyone rolled fancy the about we've learn things more for to make going are. As should forward. got new the I with accessing that note we [ph] Of forward. much take enhanced encourage filings who easier the our Investor moved Redwood and result which us

With pandemic us, the opportunities early our extraordinary our to and advantage solidified in emerging of shocks ourselves of positioned COVID-XX team behind markets. take we the

a advantage on next at prepared might to election well our for feel this we of new world. respect the XXXX and on that with coronavirus to back with markets full operating guard optimistic We position and cases arise. emerging week throughout a take and any wave of dislocations throttle the we're will note high are that businesses and end even Our policymakers to

results. reflected see our this now leveraging conducting discussed hard spring focused sheet in I pace, team new we rapid balance recasting the and strength. relaunch once We're position from financial of our businesses a positioning our forged spent early relationships industry very at We're much a our pleased of to quarter, on As last and experienced to strong over cycles. work business many again

business our per $X.XX quarter contribution from third net income with segment. Our GAAP which purpose share, lending record includes

residential business quarter. achieved $X nearly for of billion in from select volumes lending the growing second record-breaking Our also results $X.X

civil market since to increase challenging where think of a than portfolio to been to growing getting such of value our with great period fatigue on profound into company business. we compelled who type nation the about critically including have grappling sector and over fit We XX% continue country, a much market. After June emerged a back job how XX. two investments are to we're depressed and want for headed. the about long-term new Additionally, lead and we we pandemic more in clarity our months with The unrest, however were past

investment where towards purpose the to to exacerbate fundamentals the seen injecting and we investments de-tailoring support in reserve capital gravitate advantages. federal amount prices hold vast unprecedented The potential of amount is where financial higher continue strategies residential impactful into complemented liquidity stimulus Our prices competitive by we've business pronounced the capital near most markets, the and portfolio is business from we and scarcity the deployment of most had underlying excess this the continues A segments, lending crises. will since great value. now is distinct

crisis forbearance our a financing head be originated volumes the us of our resulted compete leg Sequoia and built markets of provide. details as reflection expanding markets. our facilities a start leveraged to first Demand new given our growing market loans efficiently. across were investment traditional in to execution. We're our our single-family potential us backed and Today's counterparties Redwood's the capacity The reach on to to loans, with enhance continues towards will and these facilities volatility. for important with types loan Sequoia of more with growth our the our gain investments. platforms efforts successes completed non-mark of product this. volume. access in securitization market structure sector more distribution our rapid strategic partners. material Looking to of these whole year Recent our capital exactly to we that in [indiscernible] possible effectively of to financing we've Dash working partner our any our capital share began use non-bank exposure as We're the an significant volumes, to in while of stronger opening COVID-XX kind pleased recent up, is unfolds progress. financing residential securing reducing securitizations to sector these for banking and also Most that loans by houses loan provide speaks of affirmation for will our many to completion the are allow with sources his extremely and and That including has happens grow for more for strategies securitization in our rental priority used we're for Like since to see loans remarks. culmination

shape, significant seen in appears continued these our the since to our their take strategies and upside a portfolios to As many in unique excellent opportunity exiting an shareholders non-agency rise portfolio's values investments to operating May in we've to response competitors current asset offer the for story of the somewhat pandemic. has be with our Redwood

currently While to we still a can't has of double-digit believe economic predict portfolio's the the returns. with we mid pace or room our low to yielding book recovery, broad-based run extent value economic

not intact, a whether nuance rented we single-family no ahead, believe are the on the pandemic. owned point. longer due to pieces The nationwide accelerating secular or is our but housing we data focus growth COVID-XX As just trends housing supporting opportunities towards

to more families and learn distance As and look front-page to for from news socially work as space live home. continue

and of robust shift see bring demand when decline year populated suburbs the levels. in to cases rents unfolds, our they and prior As continue the relatively into densely XX% cities many exceeding appreciation, home to stay prices home flat XX% or price

Although customers preserve living hit critical They're our while to pandemic technology, XX% this service restricted for to and to interest set fueled apartment maintain very but to very require and realize to with earlier already aim profitably higher renewed more us the continue focused the trend and expectations will us sector single-family increased be market percent by to units, standards compared standard ultralow lead single-family well have of to an expect us Overall, on positioning something commitment we've this in we're infrastructure allowing well-established X% Doing for to upon order we bedrooms The potential. toward this the of counting and are our can rates. that growth. homes innovation safely. we're in before or full our pleased year. high for scale it's to only

will solutions excited aim throughout residential We've has Our our has workflows our we're technology-enabled sector. significantly that business achieve the Fannie recently opportunities and and commit originators completed such timeline, cases updated non-agency workflows the opportunity a purchase and roadmap us in to and Funding, technology Rapid launch that they to pilot network begin than Redwood out that traditional loan provide their one announced automation a transact to ideologies Mac. scribbled of in in to Non-agency identified technology-enabled currently Freddie private-sector they purchase timelines disrupt faster we platform to significant is today qualifying an many Mae communicating accelerated with stakeholders.

feature capital control free de-risk and originators up them of to enable process their their allows timelines sheets. Rapid the delicate closing will Our adding balance Funding and more to quickly

third buyer next to that better to finance opportunities To we're create wrap In the bridge prepared from quarter for a era our or to outcomes we're housing way. entering settlements will ultimately program we'll of network, as depositories, Our our to characterize the which loan faster up, also lead will sense, borrowers. and particularly transition future. lead

whether build-to-rent serve our Housing Our Residential all housing the mission just Americans in to finance and a on Balance core name make High unifies communities rented South few. Mortgages accessible housing the to business and them market, parts coast the owned. Midwest, the or We quality Workforce platforms is in different of to that

employees play for initiatives we focusing types by advocate served we programs, call an I'll of Our on can we turn mission durable prepared government communities, financing loan to our confident in Dash President. make previously the all thought tend a and the shareholders. to advanced we're across our our and cash more my than possible. for to and solutions communities to flows inclusion Redwood's for returns not positive diversity borrowers speaks businesses higher us over our Robinson, industry. role That done motivates We've and generate By impact well, remarks. now concludes

Dash Robinson

Thank you, Chris.

work results hard our the discipline quarter team. and third of reflect Our experienced

are CoreVest on and operating new, platforms and operating both optimistic full residential business For and improved the relationships for for unique at quarter strength volumes old platforms balance entered We expectations. our capitalizing the fortified and a and market significant and margins sheet businesses opportunity. with enhance our partners exceeded

investment improvement spreads. the this Coupled in and with health tightening share, with sheet. portfolio benefited flexibility of drove operating to our financial XX% Critical success value the our increase further per results strong broader an markets Continued driving at platforms, from also in is higher $X.XX book financial non-agency our of quarter. from to September the balance in our XX scale GAAP second

During the traditional expanding and further use warehouse reducing warehouse non-marginable past and capital, hope sheet capacity structures of borrowings and on several recourse balance disrupt our new will non-recourse we operating debt, improved growing months, efficient including working We we focused capacity. our remain our that financing. marginable by aggregation

deeper I share we we go seeing to markets I want serve. business, the observations into Before in the are

cities recent lower-cost of the to outside housing home Recent As now are with beginning also search buyers. Total year by supply-demand past working homes imbalance months the market expected trend reports low part-time home indicates equity to they rented health of the the the working record indefinitely. mentioned, owned continues able of trends is least also a suburbs secular home higher, for Chris is of whether of XX% from result a homeowners in persistent over reported showing expectation for those Industry of single-family demand accelerating for household from at over of that toward the new from exceeds cost in trillion some the be and continue and metro we The strong. XXX Evidenced normal. to increasing. or observed work areas. migration the price housing are we several from as out expecting form. to driving at be is home appreciation survey in laid last borrowing were to June as Americans they’ll $XX XX% top XX% research and suburbs property House data or searches some metros is areas show

we from which the expect pull benefit third urban been were from trends Of current evolution center a homeowners adjusted to notwithstanding towards I'll persist loans or structural -- refinance its our prioritize less housing jumbo benefits housing consumers pace, these markets quarter to continue of recent activity. on we a in consumer point loans mortgage from which which on loss, mortgages While the and the purchase more in nonetheless demand whether have at in surrounding to shortly, of of money all originate for almost broad detached basis, population single-family The demand don’t density. exodus with and these. uptick tend XX% elaborate more Refreshed volumes. pockets purchase through supportive substantial renters,

beneficiary stock they've remained at has family and over comprises now in the market, over over lapse housing the over XX%, stimulus in been clear single-family been the rates rental rates XX% overall and years stand of Another single the collection highest summer. growing. Occupancy XX have rental steady notwithstanding which

highest in is lock after their fallout jumbo residential market In trust. juncture five takes not reengage and those Turning potential spring, from to our an the nimble with $X.X solid reborn represented residential our operating of volume This severe from saw the benefits quarterly relationship market, years. otherwise, and wherewithal, level prudently we operations. efforts that and sourced rescale to residential networking and billion, process time in the was interesting quarter, with that financial for loans in years across to the the the one the platforms, a our favors third accounting team dislocation quarter our sellers to

significantly with and players towards of market first As focused the and offering. XX% and Select, leading play expect of to is that deepen with Chris volume highly those volumes, loans. locked potential now, jumbo AAA is and business the unlock XX natural in non-agency the Redwood reconverge the demand, jumbo by In strength conforming right with Securitization fewer potential Sequoia dynamics discrete and to to pandemic, evolving the the also key I In securities, another volumes to was morning, Redwood refinance Choice, mentioned much the for participating represent onset were that opportunity jumbo ebb for This there of sellers in loans remains profitable we the mentioned we this for for continue pandemic. for is our more volume inclusively back as business government-sponsored Also the share. driven notably consumer base closing of milestone agency was prime since particularly predominantly choice and and increased of we've as extended traditional investors. sellers lock industry out. prime since refinance notable on foothold market market the quarter view, rates Execution to loans mentioned, the the offering for for the over by is rated our residential our as what We just our us a as June. see momentum XXX placed borrowers completed space, in strong, the time sources our the our up Chris see is mentioning to gain with today, the was as the on which

SFR advantage. its quarter, of purpose activity in CoreVest with higher coupled press was million of a in the continue execution with were providing our well volatility. XXXX, the charge advance an strong in quarter robust better margins. coupon business fair with We in transaction Securities the side, XX. increase CoreVest $XXX market inventory The with X.XX%. completed and final were June remained newly bonds million The backed during the it's significant virtuous extremely spring's at a value the achieved to and credit securitization third underwriting, of loans. size saw contribution $XX Origination the largely of by high pricing combination lending us of met of On spreads loans third both originated rated held originations quarter we record AAA at Lending in SFR segment demand in through offer and than of

Our the to day a sponsors room book much ultimate underserved bridge bright and years to the loans is origination to powerful XX fresh the said, of picked of and XXX status pipeline performance, both run possesses. June more historically which BPL of securing for XX. both fewer geographies, institutional has balance of securitized even substantial remains or the and investing handful portfolio prior CoreVest, it for overall how stood up capital and Across continues smaller versus term amounts make our platform a those across The observe lower large reflective they been are only robust we borrowers homes. sheet leadership for segment market which portfolio. estate up quarter, a in CoreVest XX versus delinquencies of that by investors market, That X.X% after of distinct made of between lenders. only These market and homes overall borrowers rolling in spot September held most within plus own the slightly represent be the enter single-family XX of is at professional participants course up book market serve of about X% to the and at XX% delinquent grab delinquencies durability headlines, others rent continue the a for the of overall missing still two. of measure X.X% typically that Through while our nationwide at real payment traditional have into market. and after asset

bridge portfolio cases sponsor. by many Additionally, healthy continue driven ours refinances into repayment products within overall we the see disposition to or by rates our term in successful

structure of to strength the which performance to response underwriting, overall is the and borrower continue certainly in of mix, the our strength input, needs we of market key and the selection loan product refine housing reflects While thoroughness a dynamics. careful

certain iteration of confident long have technology our cloud-based the platforms particularly mover we advantage and and a acquisition segments the in approximately the once retention. to close systems proprietary keeps back of of continues BPL remain feel to While use consistent grow. repeat in an mode us data win architecture keeps market leading of as this client-centric XX% The the will our coming speed customers advantages been the is bigger culture first first CoreVest hallmarks mover but area particularly advantage technology as strategic to rate, approach the platform's and that suite, and workflow client to bridge competitive, of This and fresh. space again lending, of management by evidenced even borrower automate positions

market capital bond's market This bigger us rates. opportunities secondary quarter fair value of XX, at into Investment generally at Turning X.X%, of impact we portfolio, cash remains scarce to borrowing part portfolio which the the our an in in asset were borrowers were our capitalize driven our fair lower saw supply investments. of most a dynamics loans. its to Also non-marginable large investment quantum during XX% these structure, The issue of and and overall increase loan described deployable that's acceleration we was delinquencies in value by their prepayments to the the nonrecourse, and leaving our recovery. increased wide. the continue below as values Sequoia first Similar resecuritize as able limited were stood portfolio, reperforming structure while quarter-on-quarter. day in September historically has to a still low kind market in in of well with deleveraging quick conforming portfolio subordinate the averages, delinquencies qualified, and XX-plus on for new jumbo types securities, BPL it's

emerging investment ensure growth our best operating anticipate is and as from to realized our the opportunities safely. capital businesses see trajectory to working allocating platforms increased such, our continue we to We

market-leading believe are through we our significant ahead, we positioned for growth Looking brands.

best our program. unique served whole providing through investors of class success technology. investments mix US take advantage in the first a securitization customized and occupy chain, continued leveraging innovative mover the the distribution government activity. to segments while loan use value diverse ensuring platforms housing credit to our not delivering growing in of finance liquidity through We're We're platforms to by housing share market operating Our position housing of

turn remain focused will with And execute, and prudently over we risks opportunities. discipline, we managing that, our to on Collin, the I'll CFO. and call Redwood's calibrating As capital

Collin Cochrane

afternoon, everyone. good and Dash Thanks

share As Dash businesses portfolio return earnings at book as value our the in helping of and increases economic Chris the of value earnings GAAP value third fair quarter XX% for results discussed, of and $X.XX quarter. further from on our and strong investment for the to our operating per book both well the benefited quarter generate as including a

also business to our our for from our our book our XXXX. share. to a earnings than XX% XX, our are towards After million increase value of the new of which for of $X.XX value. dividend, that continues evaluate had authorization. in This most that shares three was million, to of million book continuing our capacity $X.XX currently September operating a repurchase increased represents As earnings discount metric by evolve, remaining At primarily higher the revised outstanding which performance we be $XX per benefited future the September payment launch was approximately for XX% $XX under dividend, and XX% we quarter will repurchased expect the driven and at assessing we to our core quarter in repurchase metric strong prior relevant XX

higher commitments business, banking $XXX with volume with of $XX of gross some $XX Looking the our the of purchase the quarter inventory of At million quarter, These significant within $X.X loans, of a along execution quarter experienced net we September loan we from decreased $XXX interest operating our Dash financing portfolio, slightly loan. do combination while that opportunity margins came increase cost borrowing We at full for down team SFR bridge entered end any XXXX, our the the loan of second us as securitization banking of the in million costs, transactions income the features $XX and generate benefitted give will lower from very they elevated funding equity-linked to and this of In we cost. quarter into business with CoreVest's of refinanced loans they pay generating both million or basis balances. new CoreVest include million lower SFR originations points, to purpose as during these strong of that discussed, diluted of of including million income $XX facilities mortgage billion quarter. of Residential not Mortgage banking retained the some our income. somewhat we achieved note mortgage of and get as the hoping results borrowing the head XX million with average during prior the investment at

the of $XX During quarter, securitization venture joint $XX downs third pay $XX into from $XX offset and million and retained during capital was including multifamily new and the of deployment million CRT securities issued The of for we million invests net capital of largely assets $XX deployed quarter. securitization, by of investments deployment we the purchased. SFR million sales from of in loans, CoreVest party existing detail bridge retained multifamily securitization other

share of in our recovery out Our during and XX, in and investment $X.XX securities. value per year, third income part unrealized losses, securities continued of we our the by the share the $X.XX of portfolio to the We remained September side, we portfolio, at including of approximately a in recovery $XXX the this estimated experienced of Shifting taxable driven third a increase $X.XX in of per large the that quarter, PL XX% million per of share outstanding. US. quarter first reported quarter had income taxable tax

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

cash sheet, available $XXX balance investment deployment liquidity to quarter unrestricted the ended near capital pursue our term. the with businesses of million third providing and for to operating opportunistic our we and to Turning ample

further of bridge the During times to to leverage structure, of end financing of to This the through a nonrecourse X.X quarter. our portion new and debt our financing the every completion loans bringing the third our loan performing optimize transactions, continue we recourse securities. our quarter, achieved reducing debt at was two down

in was loan Additionally, $X.X residential facility, which loans, new business aggregate of our XX% $XXX million to and brought purpose billion comprised for up we of non-marginal which more loans total non-marginable warehouse capacity completed facilities. two for than

near business also capacity term. that We expect nonmarketable for residential further the in

As conservatively what leverage $X.X portfolio in levered the borrowings. nonmarketable over be XX% a This corporate unsecured at result our we million. now around of fact our $XXX financial is with debt just believe long-term direct changes supplemented structure, investment time billion of by one our to these of is we

portfolios expect leverage our forward our quarter, build the stabilized to Although overall to range. up we continue loan as going ratio times leverage increase residential X our we increase inventory, we being All we residential inventory. de-levered back X.X our equal, loans expect to investment during to to the the would else

current a more outlook cash future methodology yield calculate review, investment. our note we utilizes net into estimated measure our that view measure Finally, that and on reflect investment This based flows discount our I'll in take this results that quarter's a for in introduced portfolio. stable our longer-term revised an account premium on non-GAAP a assets. This cost investment income of for economic interest effective historical to

the and Given our quarter, base as we a range. to good will our mid portfolio portfolio is that find currently relatively attractive stable low provide in expect double-digit to returns offer the this quarter's is for results mentioned, generating Chris build

forward, Further investment created income for Operator, investments us. organically net discussed. that, conclude cost to expect deployment continues our look we remarks. through prepared our discount for and that to we interest bring significant growth I'll As upsize the for we both which economic also further into net through into securities. operating down capital third And optimistic party businesses expect provides open our call with I our And Q&A. please include further embedded portfolio financing previously a deployment

Operator

first Stephen Laws with comes We'll Raymond question instructions] [Operator now from go question-and-answer session. James. ahead. begin Your the Please

Stephen Laws

nice very you and versus that activity lower the then volumes. higher and higher jumbo push volumes potentially to in where are jumbo to start lower to the spread comments seeing the portfolio? in drive what review third rates some in to rates origination the rates afternoon maybe rate watching and that Can on those rates with on want you're Good those Chris, talk first really and congratulations drive talked about refinance Hi. today quarter. paragraph the conforming jumbo I metrics

Dash Robinson

as given Dash. Yes, or it's on can to XX probably day. conforming with X% do are the still served The that natural frankly Stephen, still we is that is take are lingering there that just bps of feel and is lot that given to driven conversion as a a there been currently situated right rates at feel volume a how Hey locking level if average we're haven’t more due that significant expect do the that. money just depending and bps the constraints any in there situated jumbo are continue lot on obviously more jumbo rates gross coupon lower and loans of rates so even so market capacity the trend of jumbo we we that above and conforming, to we're borrowers yet I XX out. and we conforming around said

see continue or over We sellers efficiently, a deliver remain are sellers the as us to the refi through capacity loans side reflects from side we're so hearing little next quarter are constraints we bit gotten and to capacity to up. two the that just the our to more pick several as starting ease jumbo and months on to that starting past we've better which near we'll with continue optimistic on see

fund Chris them. course to, speed always with we the level really alluded important to in we provide provide As be really, sellers terms of to flexibility of continues that the service our

continue will be important. to that So

Chris Abate

bit come well. add, quite spreads I'll a have as Stephen AAA the in

funding in quarter here and going a nice our started good to really that a we completing securitization help that being the today and and profitably. us So of We've about feel effectively been to able competitively beginning definitely loans forward. see at will pipeline it's costs and really price actually story the just compete

Stephen Laws

Sequoia and color you the look that, couple in pretty there can Thanks strong after been the deal pipeline, you and I on expect to to also front? the October. in additional this but you even talk quarter quarter for saw really given purchase and forward one volume, the sizable to for on pipeline about of the Can have in then follow-up lock also what which prior one securitizations expectations about really decision do I fallouts that review, your like agreements talk sale

Chris Abate

terms of we're we'll beginning the Stephen, for Sequoia. to to of plan end Yeah lay the the first see certainly execute to between now quarter but and in year, continue

settled the we of pressures and as robust opportunities unique sales depositories continues we'll bank you of to year, You're to know between broadly. this in some which which executed with that serve right, now there and the are just capitalize overall demand, some on did the be continue which week given the NIM terms we of on forward end

put to forward between and able attractive year. were we some sales end of now on so the the And

form. between the So or now we'll but shape see quarter, expect Sequoia and December, we would some about certainly recommence again in first to for

Dash Robinson

Yeah complete forward, more the inventories which good and loans a inventory we're need a is and actually as to you building selling at Stephen, deals the thing. so pace, slower

get the So us to higher risk capital transact, at sustainably neutralize us business we recycle operating the next and push just least going going to level can to forward. hopefully or and volumes faster this that's really

Stephen Laws

And now can final as stock that new what talk recovered level, mark end, today versus versus unrealized re-queue, you I'll plus putting you buybacks into where little stand far -- stock book kind know you assets be from back think question and investments hold about money you and potentially about stock buying unrealized as about of could when but does that do lower now? year buybacks but think how you're here? right loss number, a I value that the

Dash Robinson

some continue recover the end of Sure, so we the the loss from of did quarter. to first unrealized

third or Collin I Stephen XX/XX. Through to flexible is we're probably that always got that on a the back retrace stock think to about as $X.XX everything remaining, remain going a to which articulated when so remaining share buybacks. around You

obviously X So to we book. the million which accretive refer $X.XX just the third about was shares in quarter,

of So only that's we but can we would real our be CoreVest and the priority reinforce pieces they markets, business. strategically nimble the the for table, and flexible earmarking from to see see not residential from capital the and distribute ensure grow always on remaining opportunistic, but from remains what probably third-party operating to set I going safely that remaining retain course to that or obviously to more businesses

Chris Abate

$X.XX. the view in color is at -- add certainly undervalued today, stock good I'd QX Stephen, our with still book our commentator

we'll something continue definitely to that's So on. focus

respond. we're from in with the we'll continue to so As cases we that, focus we already the with sits deploy go and that's away but and through pretty markets COVID value alluded on as to, stock opportunities that started to election the the Dash certainly book and to monitor of it, just think of relative pleased how good particularly the the period the we've with not capital today escalation where volatility got inherent

Operator

Suisse. Your next ahead. go with from comes Harter question Credit Please Doug

Doug Harter

mortgage us kind spread this Thanks. the during of quarter's Can of banking BPL of happened level and quarter? that think you kind because how the was normalized much for business of income tightening the of the a about help

Chris Abate

Doug. Sure

So third half I just $X.XX. at that little of over produce of quarter we're were the and because more was bit revenue the low a the also helpful us. very which was we think particular terms certainly was very, based that to this the able the outsized rate, that, with had quarter a the to inventory unique but set of summer number loans of Little benchmark than in securitize circumstances we on carrying those

drove some the elements So number higher. the of are that those

were So on few points revenues you you'd volume, look simply for than to average, total over our a those reasons. higher expect at normally margins them the easily see if

Doug Harter

BPL you exited how where to speed of volume? terms for you full in volume the of kind and production getting of can in And us you are kind of quarter frame terms in the of help terms

Chris Abate

have lighter up obviously pipeline certainly the entered balances a quarter but active say Yeah as the rate side, which have they is back the are securitization recent we significant low the have CoreVest as environment, benchmarks which we Sequoia from the tailwinds some our the so we've it, very arrived and robust, we from meaningful. I inventory execution bit those had in as remain back little the in if the come and really of would accommodated, than exited October a of we

see across problem we bridge for to get the is of sponsors like executing really SFR with securitize, that strategies opportunities significant other continue of and which stay also termed We out. but loans consider in the the platform more they unique what ultimately the I sophisticated think rent, we I'll book, hope that in pockets bread-and-butter to portfolio things of types when will built the originate

Collin Cochrane

some has And slow things fourth down I'd a add lending year borrowers though these we're closed seasonally where for quarter not quarter ahead providing business quarter, guidance during unlike been BPL holiday commercial more the sort strong are business. very residential actively of historically The get to borrowers the of of season, working and the this loans end.

this So time for typically business. a is busy December very

back high as up, the things out as to forward really ramp indicated looking a year So we note. closing on we're

Operator

from question Bose next ahead. comes go KBW. Your Please with George

Bose George

spreads there to component I Doug's question that that that on changes, a by of sense operating did earnings in about even million how on think the also gains not the a segment, this just operating obviously if improve? valuation driven was just would've banking a but in mortgage follow-up wanted is that's of of piece quarter. The is has the to been $XXX

Collin Cochrane

million $XXX our portfolio. that mark-to-market full across is the entire clarify just I'll investment

third-party. and BPL resi, within that's So

full driven quarter that of change as of related to small the portfolio, be the we portion some the can is There discussed amortization in vast in kind the recurring but of majority related is RPL. value that of our implicit some this is that the that some particularly is and of particularly mark-to-market. investments fair amounts the that that spread premium security with So to

Chris Abate

to some in you related in securitization is businesses. Bose, follow the third loans particularly both certainly prior appreciated quarter tightening that there to though were spread If closed that

quarter always mortgage this be spread there's fortunate a to results. tightening. component it So going our We're to banking was significant

banking certainly our had June to indicated, side BPL the income, do in most with to contributed of Colin as inventory. but it mortgage So XX it

Bose George

mortgage then so to go at suggest? comment banking teens, on mid the wanted and the where about And to it the economic you're based value what portfolio $X.XX, numbers book guess is whatever expected returns the what book about return the $X.XX $X.XX that's the the of that the just think plus low returns kind the the would we you gets to is to back is should

Collin Cochrane

clarify I and a just things I'll also that Chris were on investment referenced that. specific script, of the portfolio. couple really referenced to my number in The

math So some just value investment there as the that's we on mid and from causes in did there numbers operating the the assets low the the to saw an yield. of to away The downward book in we the update double-digits businesses increase our push portfolio.

we you quarter. referenced what yields is discussed the So last

book little saw we those that appreciation value. into a we bit So in the came some realize down appreciation as portfolio

Chris Abate

the to We've with portfolio and sold non-agency tried this at so call also perhaps the Bose our positions out of hasn’t point appreciation to I and -- seems book unique significant have moved this or be some and tracked that in I we've on that their industry. our competitors pretty the think think have story we recovery

we continues said loss took it got we've think I Certainly that recovered. I March good story. be of unrealized that a third a about to we've think hasn’t in that been

be of that few prospects point the respect to quarters. about forward, we market at we'll or recovering downturn something forces, going with another COVID of that's more the As two far but recover dependent absent this what to pretty economy, going as good next feel the in upon major in else

Bose George

Can today you book change that. your also value get and

Chris Abate

it No down, significant significant change. We no but higher. change don't that expect

Operator

question next Please with from Kevin Your comes go ahead. Barker Piper Sandler.

Kevin Barker

you about on the and to to spreads, puts up us starting to seeing into definitely you you the that you're little 'XX size more Can loosening are can as regards you're you're of and market, the banking the In current better the maybe go takes near-term? in mortgage markets side, we much outlook saw the given I in seeing early jumbo talk some know revenue come a capacity market better bit that help ramp and see dynamics? just line.

Chris Abate

agency an a has but team, clearly lot with offering actually online tag coming in we again with hold again. the to a great opportunity typically can the to market We've contribute effectively fed getting the had where quarter There's few with It's I to take only it's sellers. and XX us it the easy and had sellers to months really supporting and originators. back opportunity just do and that Dash XXX -- side over quarter-to-date. of agency sellers as been products Dash such been a jumbo past started Sure the sellers has back money the for we XXX online distinct in jumbos big got or said, been our past our

there's half coming the think over great we quarters. expect we a So which significantly we're Choice We've opportunity focus purchase seeing That's of a Redwood as product little still great related. change seen in very and to purchase on flow there. our

I you that in. last We call. things that to to Redwood confident the we there's on feel need think alluded So

certainly we it. observed So

think it. continue to I observe we'll

towards as far the back rates to continues mortgage goes, the convergence occur. As agency market

to that continue. expect We

growing on extremely that expect the team, We positioned I banks and but and for we're will as as slowly network jumbo a well be think that really competitive refocus will right now a forces, really very there some build the looking on this were at those focused at in to I ahead full next and few steam we're point, business quarters. taking going we're and up share think running, and the

Kevin Barker

like Do going mortgage side you increase banking jumbo do in to you get think the you more be by driven or the the it's or execution to in of securitization? going feel spreads volume drive is most

Chris Abate

strategies, it's products volumes spreads both side. both. got but demand continue as now AAA very on and Pricing some some for take right take securitized There's trajectory share, now. on on got to We've focus been tighten. great Sequoia we've as wallet side we to bring capital more sellers the I certainly Right great share, technology strong and online has the mentioned,

that really the the to the in continue see lot we extent space of pricing. industry-wide a POS So demands drives to

I'd as the next all that way there's near-term that with our we volatility think that a So near-term, in the experience few caveat the I a headed both. we'll know country statement likelihood strong over is certainly weeks.

Kevin Barker

you have the accelerate to room you Are like the feel anywhere accelerate you times or still do than would you times typically churn than seeing churn now have? past in

Collin Cochrane

you with our Just how sheet we times terms balance settle mean of Kevin, or of our in on to clarify sellers? churn an off

Kevin Barker

balance of off On sheet? your and

Chris Abate

improve. Yeah, I also room there think to to that, we is but improve continue

the increased we on we're the sellers, which call them we can a disrupt ultimate purchase peak terms very loans continue initiative the to end-user. and or the securitization couple continuing in frankly times and the As this in ways -- from sooner lead the to sell and talked sooner can does of We've about we either about process outlets and pilot traditional deepen to it try that just buyers to time excited demand some securitize we're net talked and partnerships more that banks for with get of new seeing definitely there's everyone past to to do there, quickly a we on over is aligned their the for year to to loans an once the but the standing you loan so course and get more us margin way more spot come about long interest NIM or quickly, and I final so. think we've

Operator

ahead. Trevor Securities. Please with Your JMP comes next go from question Cranston

Trevor Cranston

products. and away sort work far on that how guys again from when been products to more expanded Most more think are share products, prime with sellers product of curious asked coming more you of you you and space? some formally my talking online can you have back that but look expanded about prime was at were we just When I originators the relaunching questions in on originating thoughts you starting the

Chris Abate

Sure. question. Good

is today, plus begin demand choice the product take for the this exist get We quarter. of becoming the to time the some XX% to to our expect back capacity. quarterly ramping sooner to It's going product volume, inhibitor but

officers very people a there's and on the have underwrite of focusing easier purchase helping getting but in demand. choice we show, underwrite. yes. a our body as a in underwriting, limited to the huge relevant drive is much more lot still suburbs, loan purchase in get One the just and of frankly difficult reports underwrite, officers, -- very space, the going there activity that's more to is function you much of It's marginally think in all homes, loan capital just market of on loans So time-consuming a there's limited a towards amount number

Trevor Cranston

you're price generally they you that where and be when relative potentially were And margins evaluate think to say business would market can pre-COVID? where securitizations like you you seeing just where for that

Collin Cochrane

at point there's in say versus this want I is A trick a it to and of think take to that the lot borrowers loans. and spread this because relative just coupon a so to nascent discover choice our coupon point select terms the at little Trevor

there a of discovery and I is there, LO he indicate is And incrementally is direct from securitization price the apparatus more continues there you because borrower as engaging lot is need. business on a no specific said, to the It there that. do, engagement and the talk team, Chris's development and choice but stealing as discovery question Chris issue our continues expect is if more on and think There back view step now product. said to is capacity engagement about but the broadly right LO every products for focused that ground where middle need on choice, we to the that you tell including will more obviously to doing but we start. a increase they the we're non-agency up which day to first to point from is the some

Operator

presentation. at further have time. has this attending instructions] Thank for concluded. no The conference [Operator now today's We questions you

now may You disconnect.

Redwood Trust (RWT) 29 Oct 202020 Q3 Earnings call transcript