RWT - Earnings call transcript Q3 2021

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Operator

Good afternoon and welcome to the Redwood Trust, Inc.

Third Quarter 2021 Financial Results Conference Call. Today's conference is being recorded. I will now turn the call over to Lisa Hartman, Redwood's Senior Vice President of Investor Relations. Please go ahead, ma'am.

Lisa Hartman

operator. you, Thank thank and joining us. Hello, you everyone for Chris me President; Executive Chief today's and are on call Abate, Officer; Officer. Carillo, Chief Redwood's Redwood's With Brooke Financial Dash Robinson, Redwood's

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

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

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

Chris Abate

After having exceed managed everyone. XXXX has third on and half second path communicated Lisa The growth. of good afternoon results see expectations. team entire continued and half model. forecast, to After to our durability business our still year, towards our the first the organization our ambitious of transformative you, energized restored our Thank of been quarter

strong we risk adjusted returns. results portfolio produce As and financial

$X.XX Our and the book the cents quarter for our series to an third increase increased our firm were $XX in at partner. This securitization in early included both This diluted quarter, X.X% to earnings the and completed first with value and of our September gap contributes per were hear share innovative technology, to GAAP GAAP a per year-to-date RMBS economic shareholders in future share results. on overall GAAP XX. But Dash resulted combined strategic say a of growth of strong and quarter broken. quarter, it have with I'm Brooke despite year-to-date. to records earnings the transactions a particularly progress. having label Horizons leverage quarter paid third that speaking, When proud dividend blockchain from dividends value book return our accretive across XX% operating thus book Mortgage to raised Operationally was very more our XX%, far. our in-house investment to foundational private suffice several each value year and in Liquid collaboration for and you'll of

to We a us. provides securitization also new first platform, completed meaningful our which loan BPL bridge our through ever alternative distribution

RWT Next, Horizons were the since investments. in equity residential onset September, backed deals entirely our first after the these the also in health I'm quarter. six investor of third And pandemic. we're new protocols, safety pleased venture following host home ever and investments our third the by strict able portfolio successfully first securitization, that to by team day out finally, by the investment rounded co-sponsored

housing, whether owned quality commitment our affirmed households. accessible During all we American to the event, rented to our or make to mission corporate

We housing and also innovation strategic operator provider capital vision the driving and a sustainable much unveiled finance. bolder become leading strategic

showed we in made for the transformative recent are years. in York, on opportunities progress As now scale New strategic we've clear attainable based and

the expect, us and realize might Thanks believes engaged works. an and as in completely vision processes and space. plan our workforce Redwood multi highly year, Across Our work to markets command attacking where most. is that and reimagine past talented innovate only beginning multiple credit. the enterprise, finance platform enabled industry of to to attention We're transcends quo lot mission, ways inspired of antiquated has upon but and strategic market the trillion-dollar developed other status innovations our to a we our not technology cultivated accepted, the now long addressable is solutions, over hard regarded now non-agency expertise built also to to time already our in technology, mortgage you by is traditional Thanks housing we've for been over are embraced our that a leverage help and immense vision there goals. in us housing in with market the lending an

is by for bend rising bank tenured very recovery few. pressure business. in far and to fundamentally, suggest situation the observed name optimal optimistic recent particularly trends from in But But the that do all current claims Rounding we strike long-term of stable. upward country. REITs a the prices Federal COVID-XX to analyze of typical as potential and we're REIT, as we central we've We are less year, we've ceiling proceeding debt quarters. phase that about the structure. unemployment surprise the More Notwithstanding that as consistent see market of and macro we rents who our tapering economic risk several tax growth in not variants our home is a ahead; and a federal cautiously. risks recent remain should much a one platform, still defined on our our inflation, way the traded one the toward not corporate end election. Those missing role publicly Our continue a never come business longest of the

Our risk management posture interest and rate capital this view. broader reflects

on so record at amounts this with of While earnings $XXX we've XX. generated year, we've cash hand, September strong thus putting done million far

forward, and venture joining Dash over the nurturing and fulfill front stakeholders our our our who members engaged discuss to analysis. will focused a the turn Robinson aligned are market for you to diverse Redwoods I'll mission, in run again our us sound fundamentals President on continue of values. and we call today. broadly conceived while talented that expect to business Thank should And addressable team with Going and significant All in us work to grounded results. operating and

Dash Robinson

afternoon, Chris. And good everyone. you, Thank

quarter our across volumes increases and with the purchase As third another work was markets. in complemented Chris innovative one prolific capital technology described, by across platform origination and

at productive and operating are Our highly sustainable teams level. a

is we securities line. capital benchmark yield. channels drives As markets bottom and gains, our a in for the and investors of rates, demand the We in the the capital efficiency have for search foundation uptick efficiency to in robust. alike of continue and excess our to remain accretable whole products loan laid remains and recent still Notwithstanding distribution expand Choice partner our

reflect the strategic beginning Our continued at quarter goals the out laid results year. of the we of execution third

bearing presented our look meaningful seeing we take the organically the new facing progress In As we through day, both that of positioning strategic we investor profitably innovate referenced, issues partnerships fruit. daily housing to the recent and the but in continue are to in market, this addressing investments and advantage number strive serve our to markets sustainably. we at to grow also in vein, Chris already initiatives of a and

Finance underscores also realities market underwriting and progress together day. driven in Housing affordability of accessibility important goals. by on Our focused themes solutions and and constituents pursuit about more most common leadership common technology, approach a needs we creative at importantly, sense Investor housing bringing to

took During in the this direction. we important third quarter, steps

And serving ample consumers this Our our and in backdrop created important has coupled results of industry the room creative trends platforms demand, areas prices, help evolution continue in home for homes. to opportunity other with solutions equity the recent their in the reinforced path monetize to across consumer and regulation, growing broader housing. and

with leading and another to represent diversification we that towards the progress our in growth across with coupled in at that in of step mind, and strategic the important it's puts businesses unpack path a out of change unique drivers The way to platforms. profitability notable Investor Our quarter innovation crisp model, drive operating position transformative the us technological enterprise. to With third key this business the our stakeholders. day, execution benefits our our across durability core results laid all and

we we important It versus our making during in billion Choice of meaningful particularly locks were the loans. mortgage groundwork of important highlight points the of elevated drove year a Choice locked have higher Facing end. month. $X.X sold issuance billion given our Our XX record pipeline quarter market ground quarter quick third our year. sellers, helpful Overall Sequoia third XXX And fears bear The heading we and margins record positioned again believe was continued hit The loans headwinds, inflation work the of is the benchmark and over was purchase activities. rates remained our that up since distribution renewed believe lows versus $X.X reminder loans locks volumes as approximately will head in second seen statement alongside steady are on rate remained channels into the were million, once quarter, higher our a including volume we executing thus of fruit residential lock current of different second of quarter volume another which quarter that the depth We XX% broke this new securitization $X.X money about well prior of now not in February. RMBS during September our a securitization An far earlier. volatility, during quarter, lows quality two as crowded the XX% next the the quarters of versus quarter. with QX. basis is the program. rates sellers we business the several year, into team the generated and and and

uptick investors witnessed during transactions, across tearing during differentiation again from supply, we from in benefited expected As more price the that noticeable once any we substantial quarter.

just to underpinning four transaction issuance Redwood for of label option well our Horizons month for on added to to marketed a agent average advancements reporting to for during ledger A and towards similar third competitors, use kind payment Sequoia transparency was of transactions sub-servicer compared to first industry one providing loans enhanced investors. distributed Liquid three be key blockchain has information A deal investors will old, for technology Liquid based as was inside first bond securitization, were the blockchain has efficiency executed of real leverage choose $XXX acting a DLA its integrated Mortgage applying an months reporting of who daily. the and in that testament an period. advanced. mortgage area competing or of inventory. with and private our early turning time less Mortgage within remittance hallmark receive it. Our transaction on partner the a size is and quarter XXXX-X the the million to historically time technological the more through Redwood an the step remittance This that is been significant on published RMBS

going to are effort this enhanced to functionality market excited be in forward. implement and leading We the this expect

and focus program sellers through ago. settlement recently continue technology most technology timelines fact, Leveraging by remains to also $XXX which in closed October $X eclipsed which on our major on DLA for as million organizational acting In in one backed securitization, billion funding roadmap. Sequoia achieve provide since we is we Inception a year accelerated of liquid residential milestones organic jumbo purchases and mortgages loans. recent Rapid

Our and share Redwood significant expect seller recently, to also Live our allow app us continue has adoption with growing base. and increase we to traction gained seller wallet

vest high lending another core our business purpose also was platform. quarter third The for point

$XXX completing $XXX reflected the $XXX The quarter. from structures third advantage. this highest competitive we lender the second of of the million of XXXX single balance when additional sold by capacity rental total XX% positioned fundings million on between of million, quarters non-marginal a capital bridge. that Production at since XX% SFR up family fundings backed well off and we our consistent CoreVest in loans. financing were X.X% drive late approximately its and securitization operational long representing CoreVest price during expect overall. which to the we early leverage by a deepen bridge basis the in moat, capital a XXth SFR further to as transaction non-recourse Securing and CoreVest key less cost achieved bonds. than structure. liabilities issued continues October, in of loans and us been creates a third on $XXX million an quarter, transaction in backed leading milestone bridge inaugural has industry securitization like The and markets to our funds

expand for kind was Importantly, a of the making payoffs, business structured type loan transaction to it we for longest the transaction, as liquidity quarter we reinvestment for second these date important originations. an period of means XX% fundings business another will the Operating with million, third XX-month momentum this likely quarter. of in management likely increase structures from its tool the and types bridge of as going $XXX the for others totaled use

a As BPL priority. the competition product ramps across key up development remains market,

and in capitalize continue investment To we end, in of combination BPL further key channels in to our sourcing Churchill. business our the from expand quarter, made direct third-party correspondent third originators. a strategic We loans on and through progress loan lending our that during

quarter volumes front underwriting also XXXX. client initiatives strong portal has launched at of The manage efficiencies about capacity remain our initial feel fourth the confident We of this and an quarter higher more to to technology entering furthering our traditionally the process. the we our originations initial prolific with BPL in end focused for expansion. and on creating most Our refresh been advance release feedback continued

operating remained X% by drive quarter, helping book investment bridge our Our income progress continue in approximately portfolio interest higher. and our during third with appreciating returns the in value securities strong our net generate to portfolio step and to with

remaining to discount remains discuss coupled our be the strategy. we of As our based in continued the with in significant detail, execution investments book, will on believe Brooke call right from unlocked more value there

we a residential without or held Chris our additional hallmark investor a borrowers. U.S. The home cash $XX partnership Completed is team kind equity that co-sponsoring estimated trillion having of LTV sell day, its equity, portfolio approximately Of value a its home backing to first Digital in originator. zero As of noted, or mapped to equity consumers delivered their enables debt in Fintech by the investments. third growing either by $XX that incur transaction Point that homes, with the backed during total in existing debt. own quarter, trillion home backed in transaction entirely securitization for cohort monetize out by product a

In product and with While our With to including to highlighted of explore progress traditional busy companies evolve Mortgage completing investment pace The strong providing source technology and Point the value flow opportunity six creation impacts attempt Horizons direct our of third long-term how driver a and its demands Point array continued ESG this total. to will the investments firms now the firm continue overall quarter, to predicting are work solutions, Carillo and to unlocking us flexible and for acquisition Point insurability and pipeline value. performance. and a I'll to continued products. a go-forward investments with of we of call believe nexus suite securitization, adjacent that that, is With during turn in arrangement change have of property dedicating growing portion the opportunity to creativity CFO. are others particularly Brooke several small credit areas additional re-upped of analytics this a an Redwood's Liquid and capital. valuation, focus with expect made were by over The parallel we've early climate area. opportunities wide Redwood Redwood. portfolio climate we a Horizons be part purchase methods

Brooke Carillo

Dash. you Thank

$X.XX reimagine return diluted another to our on We a equity Our results. innovate the cents which earnings scale significantly reported of XX% share, quarter our strong GAAP quarter, industry the representing in per current dividend. initiative outpaced executing efforts annualized to for while on drove businesses drive and financial

result, to to third ahead are market value per increase consecutive a expectations. or built the had half and have increased of As book quarter. on to X.X% the $X.XX dividend the per an momentum the XX% delivered our share We $X.XX outstanding We $XX from of share to-date of in first year. pleased XXXX

returns generated the XX% consistently economic in have excess quarters. We over annualized five of last

dividend, importantly return expansion evolution Our more the our only in our book the value. spotlights of but economic not

two-thirds results businesses our platform. reflect mortgage volumes after-tax leverage revenue an past of the year, basis, transaction nine the average total first businesses return of annualized quarter. QX, months have annual combined utilized banking for of XX% generated our operating in capital Our average already years. XX% they the of of several operating adjusted surpassed million capital, $XXX operating the produced of or In the that our allocated On in roughly the the our volumes a of

differential capital. XX% and the a a resulting delivered operating in relative Spreads return quarters quarter to loans which of second improved lower continued was historical which XX execution rate high banking the portfolio. points, Margin into hedge earnings on above X% ability strength between a end contributed in X% the outperformance the to As value basis market. capital business, from of during organic of and mortgage is and create the from net to Income quarter, after-tax The continued book attributable continuing moderated, change. billion on $XX from the increased XX% the from purchase increase as retained securitization our to price our but the generated environment. commitments increase second and business margins the pace convey residential a quarter This reminder, increase a to quarter. QX, team than investment $X.X we've operations, driving in beginning banking gross expansion of these be range. loan been capital, second in can our mortgage the was on We operating return to at quarter improved XX% saw tighten nearly which higher in underscores purpose the million after-tax activities during our rising banking approximately the mortgage the inventory the

Aside as results from mortgage a XX% benefited this, well in completed increase the securitizations in as strong execution volume, BPL from quarter. banking the on funding

portfolio to been turn investment has value source creation the which in of I'll Next, a XXXX. consistent

Following QX tightening, second loan from further another securities. the we the $XX million had re-performing improvement credit fair quarter, of in we retain CoreVest and performance third-party value through in booked changes particularly our $XX million spread in investment and

impact seasoned par, and increased changes accretion certain our rights our income interest value next several that net interest Portfolio and during investments. important our of value call discount settled was sale lower to jumbo investments. securitization roughly positive driven Additional income financing, increase small on Sequoia through over value. retained ever securities, benefit loans million by benefiting of note accretion home to $XX changes. these for available the for by at flow is forecasts first securities. increased loan acquiring Separately fair driven by equity were on Sequoia for it no quarters, effective yields the a But from we to million those called expectations quarter, securitization, two be book bridge of book cash The on which $X there to had realized expense the in is

quarter Retaxable above increased end third net and of gains, XXXX. persist, incredible in interest callable estimate discount that generally $X.X of per capital ahead $X.XX their the rights remains a and we through income. roughly market net of billion loans loans $X share in or to Sequoia control. market to through our to due become higher be from upside potential quarter our re-securitized across these there well We of of current income value. sold Looking callable portfolio combination Should share per the par second call conditions can $X.XX

quarter partially of on in our from rate QX We lower the a share earned increase from by the up in release provision tax taxes. recognized deferred income allowance taxable assets to compared valuation of tax an and subsidiaries offset $X.XX state portion a Our second per $X.XX QX.

equates profile of Our remain XX% marginable funding balance cash unrestricted which with excellent debt. sheet shape and in $XXX our over million, outstanding of to

capital million new of investments. to $XXX We into also deploy investable had

of quarter, support added During growth platform. million operating we our the of capacity financing $XXX to

capital which We and collateralized in contributed purpose roughly XX financing funds $XXX reduction also our roughly investment - completed cost business each the securities a of a non-marginable portfolio, bridge by lending point of new segment. to basis those securitization of retain in the million our term

rotating leverage equity plan debt X.X our recourse finance and was capital at we central higher One is our while base. efficiencies. as inventories, and strategic times warehouse incurred experiencing unchanged Our enhancing operating to non-recourse of certain financings our loan to tenant borrowings appreciation into additional continue of

residential During points, mortgage average to the during cost XX XXXX. quarter, maintain XXXX third points compared historical we of per of operations for XX our loan banking basis our with basis

efficiency delivered to due administrative various cost operations such efficiency business efficiencies, percentage as finally, with investment improved strategy. operations a financial second tied the higher a even relative income, Our net mortgage our sustainability banking strong expense trend lower very increased originate and and embedding we operating on performance, variable And quarter with or across general purpose of positive demonstrate lines to also our pretax GAAP gains. year-to-date expenses and ratios, as the net quarter, compensation our margin to to are

key integrating commitments We further into reporting over committed recently human a of review metrics, priorities term. Investor We financial September, to the going of including near provided an programs, transparency our in our and our ESG top capital and new comprehensive event overview day intermediate and disclosure are to and at forward. ESG

will call risk mentioned, within evaluation I'd management we our that, Horizon, back to to policies and operational analyzing various further of the build social with resilience. aid to This which risks it And Dash the portfolio. turn operator open for within potential the Q&A. are our environmental and to evolve impacts our and As opportunities the like has

Operator

Instructions] the Bose with KBW. question Our [Operator from first line of George comes

Mike Smith

Bose. on Smith Mike Hey, for everyone, this is actually

policy a mortgage the around couple bank. Just questions of

two like operating demand Capital gains for anything the maybe that things profits market impact could there estate either is negatively housing real to in changes BPL the depreciation, bills First that? or capital

Chris Abate

We're the obviously looking for at that question. Thanks Mike.

see things. have anticipating probably But the we're to at it have And those impacts. any moment, that huge impact obviously, will is sense not material how on preliminary our those think not evolves. I we'll a

Brooke Carillo

do which impact something Yes, contemplated corporate be I that a TRS, time. to deferred benefit. at could a change, that mean, But tax assets our which is tax expected rate still effective for have have be there this impact, tax small we're there our monitoring small it's would would a

Mike Smith

that's limits conforming helpful. the a have their ahead XQ FHFA could any loan raised lenders to this non-bank XXXX? larger impact Great, just of guide announcement And jumbo a in in the of on lot as for on have a expected November, than later any And as impact volumes? increase then follow-up that then had conforming loan limits your

Chris Abate

giving Thanks between for this guidance significant increase we the not specific volumes loan question. a possibly many or in At forward anywhere we're very XXXX. on for higher. metros conforming point, any for expect XX% guidance XX% do limits But

something For driven. we we've don't with the with, the It's that entire significantly housing reflection market loan for impact worked expect with our us, grappling statistically affordability, very many limits of homes. has market. I years, just And in think for much It's and it those to growth really are many, been business. a accessibility

So overall, very at increase a volumes. expecting we're effect haven't this experienced had any But certainly we that. for point, and planning on large meaningful or

Operator

question next the with Laws Stephen from of Raymond Our line comes James.

Stephen Laws

how to opportunity ago. the five was uptake I from want and ahead to month years of that about I investor maybe get looking thought that XXX more that's what the to there just versus start Dash with was interesting the the is bracket in with the amount afternoon. XXX day FICO product? was even you FICO of one Choice talk Good a Can volume slides underserved at range, that you're done that ago

Dash Robinson

over because of is because loans quarter. Sure. I which and opportunity. from about it Choice I fact this story a Thanks, tells a that to still There and powerful large pick was those that have a have point. of And the the we adoption We Steven. going think beginning have well, I about up about to locks non-owner Choice in in officers suspension that ready this XX%, to think adoption XX% residual volume our focused expect think demand been to a most say flow, occupied We're we at loan is part. would our certainly perspective, some as for ticked been loans up up. and like things of no obviously, pretty a Like the was time. perspective, story, take it some the terms to the quarter-on-quarter is XXX too, we slide big that sellers our know, on, the lot going thing well, go said caps. is from And Clearly prepared is is adoption just it, up. remarks, here. with have my it continue reflects helpful we Choice important QX, which rates Choice from

we purchases sellers are And prospects. pleased with. quarter-on-quarter something loans for Given this are about how we've flow point. locked I with that we're at many pretty in optimistic the And like said, Choice increase the

Stephen Laws

is you Brooke, I your wanted almost growing year to job really XX%, been and a roughly then to income great financing about ways ago, right much done guys able finding a on really and And at to room XX% net more Great. How a from you've touch I at to expense day of flat, investor costs, have there interest standpoint? And you is turn faster. loans that increase that. talked interest efficiency the expand lower financing NIM think income from the interest

Brooke Carillo

good Yes, it's a question.

rate last we first in class improved year class BPL or We particularly had advanced basis. execute our was for you within guided me. business. room that cost our this this and asset bridge of thought particularly, asset specifically, our noticing did We securitization which that the definitely quarter thank quarter some bosonic there So terms

focused of on aggregate overall that, NIM by And we are our that, facilities. $X.X points, to it we mentioned, our in clients the basis had other funds, a quarter. In about in XX our our BPL improvement particularly on warehouse addition for million and cost which lowered

the innovative an do add stands looking to our across markets capital to pretty that. we financing to recourse about at cost Dash in of of to want paydown general, the structures explore funds, continue our good but find business, you relative feel We then our health across And broadly. anything X% where with financing more a debt,

Dash Robinson

fourth securitization some say like in and benefit so That us in of will of impact, close And that will just more forward. closing allows has forward. period be would an a deal that that going have to evolves, so use incremental still the more I quarter, because structures itself. late XX-month QX. bridge the that, the articulated, use efficient there expect more of to there of the the benefit we And third as waiting replenish, that pretty over more it's do going expect structure unique we But business a for well. to feature that and quarter, Brooke as that the particular

Stephen Laws

What about, and think will things And Chris financing can costs, look call XX of are it's one-year on talked have the list accomplished you. you the how the you've in the what big to about. save guys was when been But which move lot things. I is whether months, we XX Great. in the for at that and lowering next ways are needle, back dozen were you the months? now a a able stock. you next opportunities to timeframe, got the going But lot you're that think of you question AGIs most the that excited of about could be if sit gains the things take the half another hard kind or

Chris Abate

look momentum, day. the we spoke And momentum we we in efficient plan that ago, plan which at think margins. operating platforms, the September about plan. a should next even about executing got Choice, when at than how on across year, focused very result year resi, mentioned Dash margins, more think we're we've When our we you that to continue to investor in our I great now carry a hopefully durable much were into and we are Well,

I some AGIs these very think, strong, a purely think from very closings expertise across it's of standpoint, the which big really SFR from platform. strong. fourth to space non-agency the and Both for have to for BPL, slow where layer exciting we typically business. significant area volumes continues us our us with evolution quarter, can And been the been you particularly quarter That's BPL, a team. that's see a lend of the in And And unlike structuring growth of lot a best-in-class a industry. originators, residential scaling where seasonally bridge a volumes and a we be business I have Point. a for standpoint,

be to carry be bigger our next laid year, Horizons we So of we plan, in to plan continue do. going and grow and that what part to innovate, that execute momentum we we're I as out. to continue markets. into said continue going to first But on a really will we're movers to the

XXXX. it's we've got a lot for So in-store

Stephen Laws

appreciate comments look all execution of continued Great, your this to future. and the forward in the evening, watching

Operator

Hagen of line Our question the from BTIG. comes with Eric next

Eric Hagen

good Hey, afternoon.

a one yield $X net in increase almost the What the tease investments may million time resi it is opening Brooke, said quarter-over-quarter, good in point? apart? have was of that portfolio what's there but of from in the So interest increase? and You what a the at income I to think depiction investments, this drove way remarks, the your

Brooke Carillo

Sure.

which $X constitutes our $X AFS were approximately So, discount that are talking million the income of securities. related our on And securities. sale about, accretion of those various those the $XX terms related but million just drove all higher NIM to Sequoia you're million, of available that increase, for because components revenue that was in what

high have yield medium yields bring line of those economic forward, if and which over securities. be rather it's in as life just similar the with will to more rest around our than which And expected the mentioned anticipated for a that GAAP so, expect visibility we call our we really NIM, remarks, term magnitude, of to going prepared securities near maturity calls the we are in I running for

of And least see will being rate next number in that, so run terms quarters. we at the of for

As mentioned, XXXX. have billion I of called we expected for $X.X

continue off heading we you'll realized, to a so as then beginning lot that And next might a little be into trailing is head bit XXXX. the into activity of our when core concentrated, it accretion year higher, and see of

the fair was into So heading hit our and projections that quarter, which but related sides rest lower you more on to in really And not and just same of rate as is there, And our kind as well. into of run with include is the for given to the is rate some resi. then that of funds, related BPL run cost of it's in to anticipate commentary reflective part XXXX can the to heading NIM inventory loan higher that volume. necessarily fourth quarter of

other outperformance, The will NIM this quarter thing vary was with in and that impacted market. that resi of specifically, central terms

Eric Hagen

from Can versus that how loans the you're Churchill different you Got sourcing profile it, share [indiscernible] from are helpful. organically? of that's

Dash Robinson

talked on been about can particular we've single at That least has for bit channel, focused within the loans smaller bridge types now, I that. family take of a of some Sure, Like balance or rental. before.

tend family that CoreVest, be you cross larger collateralized five originate core single maturities. little and on nature through we our side XX products to year bit As directly a rental know, the

balance built markets sponsors, Our rent, certainly by bridge that But know, for backed lines two single-family and things acquisition as it then XX-year suite credit be very you are evolve, vibrant, focused differentiated of on across to maturity. includes really particular tend of smaller channel, bridge rental we're products maybe which to And larger one there loans, loans the collateralized evolving. is homes. generally very may to

the produce do some CoreVest. directly bit those little and what really we we a still complementary but have demand production, through frankly, markets it's outsource to than of all efficiently, course, great good core the been where to fulfillment nice and allows a our so us far. acquire those channel different So capital of structure more those a There's can of complements for been typically direct underwriting

Operator

the JMP from Steve question next securities. Delaney line comes of with Our

Steve Delaney

I of loan to products guys existing third of Dash there yet? Analyst guess in there the in but products this your on two non-attractive this not a you and kind the a platform, specialty any non-agency platforms tackled in goes Is congrats Using opportunities strong back everyone, other available. out and quarter - you your terms world, Hi, When that you look primary have you. are there have loan in of day September. sort great at just now also that different products?

Dash Robinson

question, a great It's Steve.

focused it's, an a we footprint, on. team increased forward, potentially been term, those shorter more probably of Multifamily, both going how stabilized loans. focus of some that we think more lot that client efficient, and to increasing can that the things some has nature, loans, penetration, is at it's of variations we've expect on CoreVest by driven type larger more of finance I about do loans, become more be to of able level, much

much And products as very, those Choice, very resi are Stevens drive to figuring the on. consumer the there. well out opportunities prime out home I what to are so securitize That's on things efficiently are it equity side, we're partnership with feel touch continuing those in Point focused think days. picture. on And would gets back I on well. question, in as with expanded just really be those that's as again piece market addressable and massive as But part for investment the ability of us. stage will same variations that the we did, earlier some earlier the we to But plus the a

Steve Delaney

and sure I And the agency seller but curious, the non-agency have I'm any will And and reverse fairly with now. the in a they source channel, to I'm broader to better something up on know, wholesale to years. with resi remember base agency platform. I XXX when about can there's resi started really these mortgages dating sure just these We focus and are guess base, about your talking was controversial business down, doing in residential to than I loans, the the be I'm more think large have for about I'm public just with now it's talking But you sellers, a And originators But fill the opportunities and and think so newly originate, myself, that Yes. you products, of have on especially if it when addition it want roughly originators, seller struggling the what you would revised do your could for more look they're as I they several been seeing to non-agency mousetrap of we're had that, think. side, been, more I products. look come if general, void. can over

Chris Abate

Steve, it's, Chris.

materials, in place side, heavy refi resi reliant the I our market we're into not in, be the so think we're a purchase that is we business. to we're on heading overly very mentioned good on which

try quality transition, market and base pre-COVID, more that called originators there. things we move I logical It's relationships Our to a seller little bit turns, non-agency. very to and We've do the is base actually versus a these smaller. where the of on little focused evolution. were as will very agency think

for to we're non-owner the outlet still announcements quarter. - to we're and all the continues There's a last there great evolve. they're think them. some occupied talking I right And people big business

away, I established larger will opportunities down present side, platforms, agency PLS go in now volume for that the which slow of us. frankly, PLS, think some on these but to continue there's not have because originators, issuance

the fourth of the a have there's for clarity months quarter XXXX. increases, planning last November mortgage these of get on direction we'll over evolutions, in the FHFA. greater So I happened limit and with the clarity We'll the quarter take that's think do And space. stock is some more we'll lot few a to good loan

Operator

Carr of Our Ryan line next from the comes question Jefferies. with

Ryan Carr

great And guys. Hi, excellent on again days another month. good thanks afternoon, the for quarter. Congratulations analyst last

rate to seeing, So in on and that the terms the you're of fourth your might scenario impacting just perspective volumes curious side, outlook on potential into or burnout be hear XQ how going potential what quarter? on

Chris Abate

candidly. are our hedging was go markets. say try thing we the Well, volatile consistently rates to have obviously, rates when is, one been volatile typically volatile. a day up very costs Today in And

slower business, to I the resi mentioned, as seasonally which particularly resi volume we're our for actively So and quarter a BPL much the on exposure. I sensitive the the side, pipeline standpoint, more on from typically our think industry. REIT than market is that it's Overall, managing

we I it case in was think the well case that QX year. will of think year this we're, positioned be. last can again, And as be as I the

of inside at our of is book; book anyone point We age Our competitors faster it's on this average landscape. over many resi the turning than well industry our in else side. I across look think the the loan at the

a we're a positioned. the well we'll year from can think every reprice spot coupon in good to perspective, And finish strong. we're current day. So I be We

any side, we're past guidance. a And, seasonally, at quarter. you close strong specific as busy mentioned, very we've off lot But year. there. BPL look we a offered out when it's haven't we the gotten years, On as a done I to And start again, the

I lot we're a by team. year of strong, out focused extremely the finishing year, hard think mostly it's an overall, good work on been the

set sights to the that's focus near XXXX. start on and we'll our So term

Ryan Carr

point material seeing? Thanks on for this that color. value of fair terms in And the updates any you're at then portfolio, that quickly changes Horizons

Brooke Carillo

But to given the early material still get? life. no their change just deals, seasoning of pretty our material that updates, so in No

Ryan Carr

my Awesome. congrats Thank And you questions. very much on the quarter. for taking again great

Operator

Kevin Our with Piper line next Sandler. Barker of the comes question from

Kevin Barker

term particularly your afternoon. really putting Good I see just want capital your doubled redeploy for to you capital available taking or in Thanks capital in base for are that and I my on the quarter-over-quarter, jump, there not follow-up near that anything use? to is $XXX believe questions. what capital, it's expectations million is to

Dash Robinson

some that transactions the obviously of during partly which we pleased yes question, Kevin. the we of did was financing accretive with. were a And quarter, for Thanks the result

of those to operating businesses acquired pipelines. with it consistent of its, capital a risk obviously of hopefully, terms of lot error, grow, speak, the so the that right, in think, to operating depth to is and making sure the to sure we're loans, right prior with more have the fund margin right running making I quarters capital continue the capital, through businesses

it we'll where put excess us react recently, opportunity heading to to capital in we credit money for the put Currently, given Bridge, highly of probably in year, which go, more valuable opportunities that's spreads increased on CoreVest obviously be extent an been hand footprint to it there. have as third-party the create keep Frankly, able to also space see represent more to work one. has is strategic, but job more recently to capital is slightly into the sort work. opportunities historically, that here spreads chunkier well, the do volumes, So referenced to which seen to Brooke

to things do, a think I be we're end very the if So the into of here, heading some on sort late in October more then year. there the talk which pleased are more capitalize to we'll as And to position them. at screens with the position about ready looking year, of hopefully partnership will customized always, be investments, early off opportunities we're based next

Kevin Barker

recapture Then, to you Can about the have value in seems par. every of give recapture, that discount book the and regards some to $XXX we're us specific compelling examples guess, sitting par par specific to have pretty that then you your securities million largest portfolio portfolios? be of may potential that in on time value are ready what like the that your portfolios cost basis I

Brooke Carillo

about the Sure, million so about with accretable quarter. the value the in sheet billion of call $X about balance collateral fair of terms entire we are sub-stack own the of our XX% on actually $XXX which million And $XXX of field rate. underlying end at about of our our was action on loan securities, re-performing we portfolio, discounts are in

gives line that vast can when so And of that where more is we potentially the deals. discount those call around majority visibility which us

back but share out day, market. premium a that included not this I at think mentioned the $X.XX calls that's I the in put to we again, So investor of potential from

the of today. to addition XXs dollar be that it's Yes, have terms in high securities the I don't So would $XX. number think I offhand, [Indiscernible]. in value

Kevin Barker

it. Got

you there be in done quickly Do that recapture your and So estimate the accelerate very would that particular discount? we an higher obviously, of anything did you'd that home recapture Is discount. well? able that have portfolio prices to assume has

Brooke Carillo

say I cohort to TPRs running from to have up mid-single picked Yes, digits has in mid speed kind that on of general, seven another around to teen. five

the performance, well. And with we our in help delinquencies combined of in HPI will driven which is had amount our of accelerate increase we on portfolio so those, as steady X% day to cohort X% that fundamental XX prepays by solid another saw improvement

to of digits to to kind COVID mid-teens, So and back single we spiked they're XX high around day down saw during a delinquencies around XX.

continue to recover expect that to value. So we the economy seems recover, to

Dash Robinson

the is the factors you as have that other come quickly thing Kevin add just flavors of which with quickly to pools of much do different re-performing amortize more with been some into away, sort The and rights The are based. those in securities how pool know, that and two the money time coming loan speeds. own Obviously them Brookes quickly, more point. to I'd HPA we call have

larger becomes of callable. we two actually first The the investments have

the can that Brooke alternatives, premium to an portfolio not a they're of associated us as may slight it call of said based that, assessment next in execution call. be to and RPL those but end but the with in on $X.XX, at included makes we whether time part But more accretive time numbers still make sense. Towards are the year, the it based other there's

Kevin Barker

of you foreclosure New that potentially and do of impact into to the impact moratoriums also expiration the expiring And various do you discount? Year? Okay, anticipate terms recoverability we more potential anticipate forbearance those go the as to opportunities

Dash Robinson

market on those Freddie situation different up the but exploration execution the created we're resolutions, I securities, speed I re-performing loans ago, challenges may be a possible, minimis It's in probably situation, very would de and impact perspective, the Sequoia XX the are repurchased then a a used some the to in supply re-performing in bit and be our different XX loans, numbers we're forbearance, and that a and some loan little from much years then more years, a or are of of couple of of the think pooled over at out. mean, the book, Clearly, we're point. overhangs conforming into that just in loan investments fundamentally. this clearly,

that. Cares Act. the are strict there guidelines like pretty So the and mitigation subject by to loans are loss servicer things for Those

pricing those we're more probably continued cash the we're And speeds fundamentals impact in of focused and of point future not The portfolios than assessing improve, So on to modeled. flow. we particular are prepay higher major that's the this any exploration. where

Operator

Credit Harter line of next Our with Doug Suisse. question comes from the

Doug Harter

Thanks.

ultimately Just the for capital that with amount returns? improve reduce reduce need reinvestment can of have thinking banking the you about period the the you business The does therefore you securitization and capital for the that business. need mortgage amount that of done fact a BPL

Dash Robinson

than of about we is XX% the business. securitization we've are yes. is hopefully attractive obviously finance at that bridge from of loans. the is on fronts. perspective answer match allocating growth there will that and expect XX% usually we a for rate liabilities there certainly average, pickup non-marginable yes, warehouse on essentially non-recourse on higher use based short funded freed bilateral sold But The the Apples-to-apples, to non-marketable, so it But and contacts very up. capital that couple additional an more capital advanced to And margin, lines direction yes, an the continue of to ROE XX% the in

Doug Harter

room is and there you kind then one the more are and know over you the just think I as to you maximize kind of the for or of would turning capital in about, improvement? there, of it the originations been guess, where goals Got process quicker amount in - has of say that I that minimize

Dash Robinson

three we've progress, the age on, know, was sellers, funding, say overall for an one turnaround data I loan to securitization the first you which time month favorably at made great we around perspective, industry. the that rapid a compares two probably points, on funding, competition. funding to of fund this rest From securitization, to we're very, recent compared our outside average touched even one rapid time our we couple blockchain the very of weeks but use months, most to point four the at of

continued quickly. intangible, referring hedge grind that what a record was testament sell or a the worth do even before, frankly timelines, securitize our and to emphasizing, required rates, a very big volumes, to of to then particularly that, So part with that backdrop to against huge is team fund Chris quickly with relationships great and is about in a that. we've to are record ability but locks, which to of talked more That's so is we've the which speed the is work really obviously, and the

Chris Abate

Dash continue to down means businesses, is plan it the but because as not slowing doing capital overall, that profitably, more enough. growing just add funding not these mentioned, we're quickly just or I which allocating Yeah,

margins the reflect especially and this I think progress, efficiencies operating in the businesses the year. great

And strong, businesses of ROEs more our so growing and it's use best hopefully, capital, the those money. the are because allocating if it's we're and extremely marginal

Operator

to over hand queue. closing There are management to comments. I'd the no further questions back like call the in for

Brooke Carillo

and for everybody you, quarter. next we call thank to participating talking again look in forward Okay, our to you

Operator

conclude for you does teleconference. this gentlemen, and Ladies today's Thank participation. your

disconnect may a You and wonderful this at time, day. have lines your

Redwood Trust (RWT) 28 Oct 212021 Q3 Earnings call transcript