Earnings call transcript Q4 2022

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Operator

Good afternoon, and welcome to the Redwood Trust Incorporated Fourth Quarter 2022 Financial Results Conference Call. Today's conference is being recorded.

I'll now turn the call over to Kaitlyn Mauritz of Investor Relations. Please go ahead, ma'am.

Kaitlyn Mauritz

Thank you, Operator. you earnings us conference thank fourth for and XXXX quarter call. everyone, for today joining Redwood's Hello, With me Chief on Executive Officer; today's call are Robinson, and Christopher President; Brooke Carillo, Financial Dash Officer. Abate, Chief

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

cause Forward-looking risks and involve and assumptions actual to statements results that are based on current differ materially. that expectations, could forecasts uncertainties

Form the could differ read and provides Company's impact to XX-K, you expressed and of that which results from description Report factors on encourage be may have in some of to We that cause actual performance a statements. Annual forward-looking material those the the Company's a

of and should The our financial which financial a On and www.redwoodtrust.com. accordance this measures call, GAAP be we in website our financial not are GAAP. substitute quarter between reconciliation might or GAAP financial at measures for non-GAAP fourth non-GAAP with also considered A performance provided in available both on refer prepared isolation provided utilized as Redwood measures measures. in to non-GAAP is review,

deferred XXXX, our due the of completion to the your year now relating assets ended Form statement and a the XXXX December for XX, results the XX, year the XX, and is XXXX, XXXX. valuation presented vary are today including As on ended Company's reminder, XX-K results December audit a audit audited financial unaudited in financial our Company's at of annual for report may to December reporting procedures the complete from tax

Form this on confident advance schedule circumstances. we date do statement to note audit financial in scheduled subsequent events And and call no XX-K accurate intend today. in our information time of today's contains information conference filing. undertake February late the or sensitive that's Also as XXXX conclude not to to that of obligation Company's annual only reflect The is

our recorded website available being and later today. will is on be call Today's Finally,

I'll to Chris call over opening the for now turn remarks.

Christopher Abate

excited to you our for and thanks everyone Kate, with opportunity Thanks, fourth the to in have this We're quarter results. to afternoon. speak tuning in today

update front of Now so on in for or underperformance XXXX. the of opportunity how the We'll year. touch us viewed we month the remainder also also the you first

cover As points a you Brooke probably suspect performance and greater business and detail. then handle Dash and high a our off in and will financial

Fourth brought over about efforts past and rounded sudden the to Federal year quarter most than markedly manner a was behavior led to housing cycles. affecting freezing consumer the seen profoundly and jump XXXX, previous curb we've a that markets to mortgage In the rates the that largely change downturns through Reserve's out mortgage pronounced in activity different in inflation in four refinance market. years, and housing

of half ongoing widening much second the the Significant bouts volatility of severe year. and increases of rates spread in characterize

Our the expectations. risk prudently focused on protecting results our forward. for during company path managing period certainly this value, positioning We our didn't and meet book our

behind us, only Such appreciated now helped resolved break in challenging all as we in build XXXX. and book towards activity worth a of few exactly XXXX welcome a GAAP what that uptick noting thus far momentum we've value done priorities. realizing our have accomplishments improve That's to our long-term we early focal January, are such As fully year points huddle in and these to the hindsight. a quickly sometimes and know,

source of a stock of seemed segment capital. Already it market year, an expanding alternative sheet our we've that year, activity last completed offering a balance to reopening the this preferred little while

this for creative business loans firms. turn sale potential of loan both a was for million forward completed at the volumes. impacted at new our from Sell that's year's we pool platform BPL build or our lending pricing business up, momentum created we top to positively of BPL us, institutional last partner of a bellwether $XXX and sorts record for purpose loans a reaffirmed terms of Next to a

over loan again, market a this is for January, sponsors over allowed for market and boost and GAAP the any helped participants. Investor gain all by team late label in a BPL significant good deal reset fact strongest our Sequoia Once deal with it securitization for bond influenced private increase sale, prices and our to other we've Generally on in expansion us now issuance sale. residential demand completed the year. first was of RMBs the a seen year our a in a calendar our securitization

grew debt Xth. other This our allow we a our been optimizations balance unrestricted through puts robust in boost across proceed forward Through XXX our in to as our million M&A, in Accompanying creative including has to our considering will other and these strong markets, position opportunistically capital over future a when expenses. us reduction go maturities liquidity position as investments. this us cash significant operating available sheet, just actions well February at in

touch to primary will here has as reduce on Brooke full regard opportunities arise. costs, of strategic been costs the managing preserving volumes. while to conditions in market optionality been loan with conflicts advantage this As that very focus We've take

prospect homeowners think we consumer mortgage to refinance rate. the new a home challenged, are much existing of or not the remain capital we going to as higher assuming As volumes majority about expect allocation their financially mortgage forward, a with to one move of incentivized

simply fourth to tell, that our the throughout In market, have to or rates. focus which remains ours about stability demand evolves. pent-up of residential modest early response, if of that slow simply trend reduced quarter. seller mortgage is attending brought much-needed partially as business meantime, acknowledge we working was January a the following have In in to ensuring and XXXX. by a due We needs the mortgage to some strategic XX% meet a banking we It's about too capital to a their market however, base our start this products decline allocated

the second to finance products property. that pressure expanded our will as rental near-term, cater consumers, single products, well demand in prime homes is as sector very who that looking of still there products in Despite consumer our refinement includes remains volumes mortgage in BPL heightened or growth mode. investor remain for a a belief much that This own under to

BPL continue solutions are tasked see more borrowers business workforce With still to require and locked growth. products rents therefore not are unlike offer. alternatives for of actively demand XX sideline. rates plans seeking housing. on range households, been rentals the low we in for year and from to multi-family, market on we Rental content loan has built including elevated, are investors providing our consumers executing and the sit to fuel into They transaction-oriented, liquidity

with primary for remains by and with the remain secured particularly of focus loans our originating in as our business, strong face potential respect we the the That's on it BPL why Our BPL Perhaps on remains book the investment fundamentals recession assets of quality start year value. overall market positive to sentiment XXXX. even portfolio, prospect sponsors. bullish to our most with matters driver the

firm rates, credit with we activity fourth of to display overall portfolio far widening, and prices like to declines I'd lower XXXX from securitization has flow positive the mirrored begun fundamentals book incurred in XXXX Market increased the securities strong spread and mark-to-market credit XXXX, with on remain much thus further for delinquencies. majority housing in the While cash reflecting have in emphasizing quarter story market mortgage detached been continuing up, continue the vast the deal the to of low flows, markets. largely that, underlying different.

net XX%, investment With potential a forward and realize at we discount a our loss weighted yield $X.XX adjusted of of projected to the average portfolio principal overtime. $X.XX of $XXX carrying or approximately to to value year-end earnings million that face have share year-end value per had

impact for credit with range the for While many resilient XXXX, a we question our economy. path scenarios portfolio it significant realized critical the seasoned to-date on home believe and to of prices wide construction and of the assets downturn makes remains HPA mortgage its

With unrestricted our we this our We of cash in million resources we and the our liquidity we continue and of opportunistic remain strong to so in elsewhere be use our We to securities of in that environment bond debt repurchasing sources assets active upcoming position corporate XXXX undervalued, and in convertible address other available $XX in including and intend convertible believe debt repurchased capital remain our be towards intentional about cash own steering perform position, to equity. across believe maturity, better Redwood's and to XXXX remainder doing markets XXXX. and stack.

in late further to balance our likely this of linger well strong people. is navigate ability into our uncertainty our importantly, confident remain of While cycle, we to in the we're and fed diversification, sheet, most pillars believe for challenges XXXX, innings the

dynamic invest housing compelling and a Our access opportunity a platform a in very market. point offers to unique

turn Robinson, And call the Dash I'll President. over Redwood's to with that,

Dash Robinson

Chris. you, Thank

our commentary ready I turning and XXXX enter a market and we Brooke performance. performance our investment businesses operating drive of portfolio. and and call recent overview current on results the financial XXXX, creative the segments of take turbulent a positioning my focus over current before outlook Following our these current across of to to dynamics advantage will

impacted quarter, and and ability which Chris an book, book input value. carrying the fundamental notwithstanding portfolio, of a unrealized now investment strong our Our of fourth to dividends further key our in represents XX% performance remains capital allocated driver continue durability realize discount important that changes value that the value flow our fair the net robust Cash across into to referenced. remained deliver

end rates SLST day core down as includes portfolio for loans our positions, lower X.X% improving plus quarter-over-quarter. created to delinquency stood from securities BPL at X.X% bonds X% of at loan our and stable improved, delinquency were with that reperforming Elsewhere, and on day from quarter rates refer Sequoia QX. the XX our what plus organically Delinquency retained book to rates across we XX and delinquencies shell, also of assets the

and In loans HPA, consistent we underlying equity loans portfolio to estimate Even in of XX%. is with our their securities far LTV modest slowing aggregate, these build of as declines recent payments. price markets, in continues the underlying that the certain approximately home as in in remain

approximately either strong. AGI to the this part holder to realized favorable by been been of the XX% Brooke also in on financed or an of which returns to in withstand incurring warehouse average value downward discount portfolio speeds have the on. and ATI, our been have or on that option home of allows majority loss portfolio pressure home before line equity meaningful approximately investment. securitized have prices of through Live Protected date touch home securitize XX%, initial is Results our the will investment

in were again the impacted Notwithstanding spread during investment fair values Fundamental our performance, quarter once widening the and portfolio fourth across sympathy trends with by market.

As largely that describe more have meaningfully to unrealized begun these detail, adjustments in to year-to-date. will reverse be continue Brooke

now view with clearer which into quarter. portfolios per the share, discount comes referenced, Chris of at each stands $X.XX face As our to passing net realization

work to We organic the across near-term investments fourth million capital our during putting maturities remained deployment discounts. active approximately in in optimizing debt of repurchases convertible at our and quarter, attractive third-party $XXX and

While platforms, spreads still across capital today, own creatively deploy operating here and securities, opportunity have see party third stabilized ample our we meaningfully structure. to capital our

are the and for that financing new Riverbend Our have paying induced volatility borrowing loan through enhanced year, flexibility. the meaningfully winds of of P&L on the end turned operating banking platforms that page some market bridge persisted capabilities, overall whole advancing mortgage reversing our adding the business distribution the including progress XXXX in growing with in the strategic line key In dividends well quickly integration, the headwinds purpose XXXX, year, quarter. team early weeks of loans and our from knocks a fourth the non-recourse the broad already

of XX% our estimated million for but fourth loans line market $XXX the with in originated overall. trend in We QX volume down BPL quarter, from the

driven opted significant other of production step. term lock long-term term in fixed rates to production multifamily compared loans mix term to quarter floating in bridge as bridge Our rate term in a BPL where XX% in was quarter-over-quarter, increase up BPL possible sponsors lieu for quarters more XXXX, between volume funding. and rebalance the shorter by

prison strong, position term diversifying year The We a of for over million and distribution fourth out ourselves capital loan full during January, our $XX base to for loans. XXXX. forward complement go particularly more a platform a been of recycling for we quality deeper increased volumes quarter the importance platform billion, rounded fourth Distribution BPL $XXX to loans structure securitization attracted as the fundings channels $X.X in of production and profitability our lead with to across whole appropriately best-in-class and sold on million the year pipeline quarter's our production BPL buyer record that growing a new products. term has

traditional fresh Importantly, January acquisition a either between in channels our sentiment capital the sale constructive over to opportunities carried the overall work, for emerging markets. through taking to and again advantage of to partnerships for in put improvement rent We're on sponsors. conditions as in leaning or of refinance more or dynamics result once newer

timed both distribution significant our uncertainty of improving proven and sponsor capacity competitors. certain and and well loan progress around and has Our demand it's funding

on of financing to production our Additionally, we be we loan million also of XX% completed capacity continue basis, to a on December, at our the portfolio, in end optimize XXX% to non-recourse. financing substantial $XXX financing inclusive excess bridge the existing obligations on bridge funding financed support year maintain of new portfolio non-marginal continued future We loans. line and with

which favorable refinance with more modestly overall from XXXX, in expect loan up within or managing and team environment, backing to seeking equity continue loans, conditions the Europe. market management Notwithstanding increased and stage earlier the the in we turbo our including engagement sponsors delinquencies given are to BPL bridge asset

origination with XXXX overall real stabilization of and our sort estate highlighted, footprint on previously have some largely we sponsors focus strategy. As

of in already rate leasing single XX% properties sponsors where off well. the on originations loans loans and bridge and were multifamily improving stabilized Approximately fixed

focused progress profiles repeat and in with Riverbend our with emphasis bridge past single track an six months, increased production liquidity loans, customers asset on on riverbed Given that the expect records. of round integrating out strong mix the platform in to we

is Importantly, leveraging are financing balance whole relatively more to distribution these loan partnerships begin capital to existing keep creative positioned loans for and and markets and our of types broaden mature on buyer well sheet. we

mortgage mid our which This banking was mortgage quarter, level remains since million down locking substantially inventory design in enough quarter in an XXXX. moved its residential of but highs and the loans plus the early of the money to maintain as managing X% rates refinance Our by to jumbo fourth purchase muted. not their improvement volumes $XX higher during drive posturing defensive off an business XX, to demand environment lowest in

first at of quarters which reverse million currently Improved widening that market and conditions to of end January us residential whole our fourth much small year sits allowed in $XXX loan half inventory, amount, through several after around at the stood roughly year. our and at year market of the was in pipeline over sentiment, issuance pricing with carried Execution of final where completion successful are was securitization the indicative sales January Sequoia on the improved end. a meaningfully

In we further be monitoring favorable believe, remaining levels. distribute to pipeline we market sentiment, at will able

business recent to volumes. been Chris mentioned, As capital residential with and reduced have allocated costs our transaction commensurate

continue back seller rollouts as the our enhanced However, our base, in product including offerings. optionality have we preserved prime to of through lean to expanded conditions warrant serving

after The highlights of recent value costs, exit players put largest much of in of one durability and continue the partnerships and reduced the of consistent speed in market, even efficiency the prioritize rightsizing our as capital many they activity, reliability. continued our of to ever sellers the period a as as correspondent our

to turn the now over cover to will results. our Brook I call financial

Brooke Carillo

share, to discuss Dash. to results reported provide XXXX and the basic XXXX. $X.XX return you, $X.XX reflecting December select first quarter of of Thank the today, ended book loss of my fourth year end quarter $X.XX quarter for will per per earnings and of an equity XX, non-GAAP were In and We've of negative our primary metrics date our of value economic GAAP value I for share. comments dividend on drivers The an a per X.X% overview relating book quarter. GAAP share the in

in $X.XX and inventories. from loss as per spread due of share, per the to substantially credit third distribution which in unrealized for quarter, share negative both of $X.XX GAAP changes. negative investment reflect Earnings per on by available share $X.XX mark-to-market to the continue mortgage changes earnings value quarter, $X.XX fourth driven BPL by the compared impacted residential per fair were to share widening was banking, a

available the end, More in reflected quarter. lower that our marks far balances a at fourth for channels has activity Chris interest from on inventories trend partially due by lack and of specifically, distribution noted cost the our decreased average the year a declined GAAP offset net our increased, Overall, income as first thus our banking reversed lower debt by in higher mortgage and quarter average volumes as loan. third bridge inventory quarter, of coupons while to

the investment, increase facility mentioned, fourth to Dash we million contributed in which expense. As during the closed new borrowing HEI for a $XXX interest quarter,

nearly Importantly, higher year of balance of end economic million average interest as $X due than solid building. capital from was GAAP, to net income higher was economic deployment. been primarily and has investments Liquidity

$XX various and Unrestricted cash Xth. million to the activities such optimization and as December XXst stock million equivalents increased as $XXX preferred efforts. million -- a sales, function by securitization covered $XXX of offering February from as financing well is This to already

$XXX our opportunities As financing million incremental we assets. beyond of unencumbered position, to over of in plus see a our by we review, million generate portion $XXX also noted cash of the existing liquidity

recourse drove in balance total of billion X.Xx our leverage in debt tangible the equity $X.X was decline a unchanged modest from quarter-over-quarter, increase While X.Xx. to

capital and markets $XX third is total ratio of contributing to X.Xx since shareholders. to our nearly attributable realized leverage end in quarter, far in our This at the leverage thus fell million XXXX, gains financing also and repurchase expense the debt February decline Given our activities Xth. to for recourse convertible both interest conducted estimated reduce we the of of

we term $X.X the in of to leverage of have XXXX. respect our recourse maturing billion With liabilities, structure

XXXX total representing X facilities foresee As we or issues we these eight rolling remain renewed further floors. markets no capacity. financing To in billion team orderly, illustrate financing establish financing normal of during facilities

for EAD our quarter. of to for be the business factors several and In are X% the that first XXXX. currently we GAAP level our Xth, both levels value more support the February return book earnings see re-approach normalized and dividend We terms of outlook, through estimating return throughout to to

yield have and Across platforms portfolio mortgage credit XX% experienced, we've carrying sale banking we are changes overhang which spreads year, improves last outlets. clear the largely and further the both mark-to-market of volume on at approximately the forward our inventory investment we from a With gain affirming.

lending building from volumes origination we Furthermore, in improved XXXX our distribution alternatives. and on business fueled by are the purpose are profitable execution seen

nimble our in based on where Our underscored optimize ability revenue capital the risk dynamically our and market. of diversity adjusted has to streams the business the the are best allocation returns

We capital that operating XX%. flagship to banking has of the XX%. platform model mortgage expenses by optionality in historically business of year-over-year, variable us is generated at the which XX% driven the excess reduce reduced preserve have cost segment allowed allocated Debt is to by residential a a ROE

we've maintaining our smaller are Given even historical the and generate opportunities made, share for normalized returns market to with business. that the margins sufficient changes this

And challenging finally, our the we year, primarily due severance, administrative third we slightly transition overall related operating or market the in conditions this employee been response and face footprint. focused on General increased to to G&A expenses expenses. have and quarter, from rationalizing

the were down year for relative the to G&A year. XXXX expenses However, XX% full prior

rate run forma Pro since expect September on our XXth. be X% currently call. initiatives in reduction for XXXX and full earnings XX% to units year comparable XXXX quarter's guidance expense lower We than with levels, completed last line

our improved expect changes to in structure to cost to these profitability We XXXX. lead

the I And over turn line the for operator to open call with to will that, Q&A.

Operator

Thank question-and-answer you. will comes Our and [Operator from Laws time, state this question. question a conducting Please Instructions] And James. session. ladies Stephen with at Raymond we gentlemen, your first be

Stephen Laws

a the on year. I volatile through touch kind it business to of want move we've seen remember like first did year guess as it where the I and conduit

to obviously market kind and although do on we there see for we've margins the other volumes is need in stabilized of 'XX? first more corner As turned outlook you lower in volatility your forward, of feel profitability, much the kind see you've Do there deal transactions and seen Sequoia the margin and and what's year-to-date. solid what some look to you margins

Christopher Abate

Good Hi, Stephen, Chris. it's question.

mortgage and year particular, obviously, was it think volumes tough really that. in resi I pretty for a there's banking for and well-known reasons for

returns, the As rate. issuance. to that much done deal We aggregators first think far certainly in leaning Sequoia as a demand the PLS greater turning was we'd the and got the year as a think in for That ourselves greater a begin that corner will create And first saw was done acquiring that like the we goes, I I thing demand this over for that markets, on in year. confidence, deal.

where of where said, still rate would as interested people X%. we're be far north cases rates homes, stand versus, a X%, and that Now, off I in current in as some most think refined ways

in business. Brooke So, stabilizing, we've declaring fully the we're as a quarter said, of the things optionality, I far think cautious as as in built first out capital here some but lot we've victory taken of

one highest And shift got know, Redwood about business, to is, and XX-year to we're and things best great capital old use. resources we've the and of their ability you the

it's a And usually so a a time be good tremendously I to be not think, it's investing. to when great time issuing,

of And in think resi. a created we've an to so, lot I optionality be there investor

going I and business you across that comments lot year. on. in reasons, earlier cautiously, to the a And months. proceed so, I coming in to point that, We'd growth think gear on the areas I the issuing. issue the of quarters think focusing think, we hopefully, had the on to on focus the at other in securitization we're like XXXX, is businesses something couple can But we're And in know, meantime, of and business continue of going some we're the Dash first lot next a in of for BPL

Stephen Laws

how of And attractive facility far you being about do new the side the in your we're you that talk equity Can the investments, Is view one seeing for fourth as financing there? quarter. as the follow-up the on options opportunities capital the the force home you going in of or deployed? as on to options place now, an kind resi rank area put DAC, investment side, new

Christopher Abate

by and we've putting that two platform. if that's not into Yes, That's example the or and move refinanced equity people Certainly, it's homes, I extract they'd in the three their to the large. incentivized their exciting. are think some a bought like of home last great built years is optionality homes, of very a within anybody trapped of quite bit equity, or on to a

really securitization equity say modernize And process. of to past We've to so, lot very home more or sort think completed a a in in but And the the strong meant is a see completed we we'll HEI product about I months, certainly, have Brooke's recently. that the financing team and coming warehouse initiative financing of it, demand. our

that So, be of focus excited in about starting there, big we're a institutionalize to area ours expect things we XXXX. to and

Operator

Our comes Shane next Please your question from Rick state JPMorgan. with question.

Rick Shane

with Thanks everybody taking of my I from and pipeline third the I'm just that little from about mark-to-market wondering talk Sequoia quarter, that want understand the quarter, been the for how fundings purchases trying think the the in locks residential I'm I'm execution, loss income bit everything. mortgage reversed, some to line first the timing and to in the and was fourth the of if of and quarter. questions. sale and the a banking to of that sort because of the assuming the of some that

Dash Robinson

It's Sure, I Rick. that. Dash. can take

a You the the on we held outcomes were result QX of mark-to-market X/XX. largely are was banking largely the It for mortgage book resi at right.

over locked the of the we a of loans not X/XX meaningfully position move end $XX the As and million noted, year. we between so little did QX, in

outcomes were result just spread revenue market. the in mortgages So, for banking a really the widening of residential

right. are You

executed. of book the and And of of the Brooks' the in includes in value that we which year, through improvement Sequoia deal in part early also realized been here of value half January has on some carrying commentary an the the pipeline

in Chris been are that and QX. because barely of you to just the has January to fairly prospects said we right, much X/XX since And with of position has in added reversed as another the trace execution Sequoia doing it one. easy thus the So far

Rick Shane

$XXX was the it the looking quarter, Got in sales it. again, And loan million. fourth only at

on the the see but the whatever is So few there Sequoia on realized remainder million, will we a transaction, was the outcome a loss presumably $XXX in months.

Christopher Abate

bit value was adjustments of quite wanted at up firmed we mean, -- it. that right or December and gate. have Yes. We right the transaction we I we And Since things way resi. anticipated reflected pipe a is think whether that the I to realized XXst. of that losses, about out to then, it in mark-to-market issue prepared that the think

some that of into shoots rate to it around those volumes, the really in sheets. space deal. with it's inventories ultimately, the the And demand, just a a So our was pieces of investor AAAs did confident to again green and Because successful especially together matter for see lean volatility. all back coming are we feel control we

Rick Shane

it. Got

Look, the there are end Thank determined the moving by at day, of parts a the are Redwood but credit lot Okay. you. performance. here, of at really economics

in of alluded deterioration, Can at securities have You residential some from perspective? provide credit the little to weakness a portfolio, a in related pockets model. variance bit talk you additional you versus strength, and point, no credit seeing, no of of to insight terms this what are pockets mortgage

Christopher Abate

are, as said, to end mean, all day of can businesses I quickly you on touch Yes. of I'll somehow tethered resi consumer and because at the our resi then Dash touch credit. on the BPL

in have have participated most is expanded HPA resi which the loan many essentially well. RPLs, our Our significant These traditional performing are our line consumer few our book, over season remarkably jumbo, been just and of which continues to Delinquencies book, largely years. and loans, perform declining. past cases in our flat

average numbers, is our some adjusted at Looking under HPA estimate XX in and our around RPL book the is XX. select LTV book is Choice the XX, over for mid-XXs. just

losses. is sitting on equity, think select any which of you when XX positions incur XX before again XXX. significant meaningful home embedded for RPLs million there, discounts significant, They're these choices about So our and

to continue is good the recession. the I certainly is is scenarios with with But the positioned, monitoring we book puzzle. the piece very, about, job which very other our maintaining, BPL, don't where keep why and to feel So a And downside some including of book to we're, continue credit. managing just I look think at

Dash Robinson

performance slight I uptick remains rental which level. Sure. would the say with family delinquencies. We're to a direction, the they empirical in BPL really, where from in consumer year-to-date, book, engaging in bridge within right of down are asset just always that very as very good, The the over in and has earlier securitized, Thanks, just borrowers. with were strong the prepared Chris. book year-end my saw single is I really they as similar X%, ago, our part in already book, early trending been the we largely team, stage directly delinquencies mentioned, that management just remarks, year

a bridge of as what or stabilization portfolio, finance the are just rental XX% shape reminder, vast the or in strategy. majority a we on some form So around

with the of and good. flows look we to remain the typically to are are corner, very is try to close sponsors durability going try X% and be. really stress multifamily try really, do about while with we that so liquidity. a rents best our the underwriting, the debt higher, overlaid how focusing And for of careful we sophisticated guard to the around we're front up on the yield or areas with underwritten where cash that's all What our And to anticipate most loans and

reality, XX space, think from now I The need bridge below basis the the years the that likely there QX. sits peak is probably have its plans. will to even across here, rates come sponsors points And reality points our be an come that on down Rick, as right XX loan, by to into cetera. that, executing of agency have sure refinance capital focus business do a et and is making pocket the they're we're their out with to few sponsors LTV

properties. of and and are reserves at our have lot We revaluing that think the apple, we're of bites drawers, in ensuring I as a rebalanced terms

as in. points those more more come of and so And data

which but a But strength we Here, have to direct area how hourly think those tapered perform. sponsors as both the you obviously that's how imagine, are still expect by executing. increased earnings, and can average more growth tenants we that heartened has underlying are focus bit input we're is into Rental seeing the going and a here. we're more

been So, all again, the good. But empirical of I is performance that has really that the really next really, stuff mentioned for us top quarters. for mind few just

Operator

your question Hagen BTIG. next Our Eric comes Please with question. state from

Eric Hagen

that. Wells viable a And loans? levels? that you minimum then given achieve say is. think opportunity. And capital the you In on of I see those I would jumbo how the do is volume agency Fargo you at you the Like, funding takeout, just source channel the those both an heard return is. have think Thanks does. their just some can if exit in does that there questions, you the the versus And the three it how apply with often I jumbo less, capital? more me then in BPL being mean, of where there typically have that the that the mentioned GE the agency loans? risen correspondent BPL, have there ago on is capital that were scale tightest some improves? or compares, loan, takeout where what bear an Is the I've kind a with the would when any so spreads capital fees is connectivity envision, originations market for you to exit, say here. and securitizing just it's I a is year that now And cases, lot. fact any their But origination say which for from cases you in and segment not you of

Christopher Abate

conquer divide to and try We'll here.

obviously, of quite points closer few it's now front, in the mid back is to in happened but think AAA the agencies, Jumbo, bit eighths December, December, early two a the And we're months. to ago, were spreads, tighter, past or as five and one so. year prime, resi what's On trading story bigger I a three

significantly been economics there's improved big of securitization. which So, a snapback, is, the

business running Again, rate involves volatility. a the different one inverted for incurring moving rate mortgages all spread good is you're with carry a got to leaning but of an you've in fixed which parts, curve, yield and that a very that's us, of of lot sign

a and securitization in up additional requires getting frankly. risk, down So

think more to of what over get continue trying with do we're the we capital the the lowered business XX%, course and So mentioned is I efficient year. to by that that we

XX of As we're and doesn't can million. lean down to in, down does closer that creates to what really, our nice go distribute we inventory, when go, could back look we to probably that to case to sort year disappear. is base ready think And last a capital go something number that remaining further, money

unrestricted the last here, amassed be all pencils that of of sort we've and this in few of out plus can cash XXX and million They weeks the redeployed, months. into

back be it invested, to all can of used be buy it that be deployed, can stock. back So debt, can buy

quarter offense, restructuring sense a of position go back goal think we've in kind was, what modest some in I the of on us fourth exactly done to So, the a get here. to which is start

Dash Robinson

of you large by tremendous a that's say for aggregator On crisis. long-term wouldn't opportunity and the been particularly Wells bellwether corresponding you the since of know, to, a great in our agency, sorts, us manage the I shareholders, Wells I long-term jumbo has think largest refer somewhat front, not think that's for and I which financial

others. space So is and opportunity us, found exiting that potentially for really

So shift. an overnight it's it's not not

its expect company I into evolve a and forest very significantly the XXth the stepping notable think, the is our big us. competitiveness the the is But particularly things we're focused our that's and that and we heading resi space, real And back, that a economy emphasis business most housing, as rates, fed year, Wells, very business. like its for in major so, on. support and that's I But potentially with do think major for a in in long-term stability here, again, to near-term, tailwind and

Christopher Abate

capital BPL, sponsor sort your multifamily first rent take three single questions you side, majority on multifamily, in bridge then to and property to the on has family the the to into wants cases would Eric, areas, I tenor divide and hold for of say, around the to the portfolio that. strategy, built if that do of stabilization

a Plan the A HUD an takeout. will agency be likely or time most of

of we HUD underlying you depend affordability things is and Agency stay know in very the as to to extent are nature. upon sponsor commonly of takeouts the nature tenants, wants angle, going that of see to the Some that that, investment. the the

many around things I'd But nature. multifamily of GSEs lean HUD say to in and are affordability on of most continuing where tenants of actually spot a housing the that in and our sponsors focus do

GSE more footprint execution your mission point outcomes the where led favorable have would the Notwithstanding is around we that just GV, historically with those to So expect is. given that to continue.

often know. the caps, have GSEs product, their as own refinanced they when That term which which securitized. annually multi to you We our occur hit into tends have we

number do efficient as a more the it opposed a when to sponsor by is as that label, can stabilized of view GSEs waiting also private levels. seasoning for We of at months to and refinance certain stabilization

like we So, opportunities do see that.

for then a strategies, the for our rent for with of bridge single-family it's us build sponsors And those securitize, be bridge eligible a upon as fixed into for That's to partial. us the refinance a how stabilization of which huge business, win-win rate. side, On is agency depends are takeout. typically term our the for property that some source we longer-term book

Operator

Our next Jefferies. Please question. Sommers comes with from question Derek your state

Derek Sommers

want up? a flip capital the lending. you. quarter-to-quarter you on With the some of the into it bumps, allocation opportunity non-QM you XX% the in reduced you correspondent basis Thank tap exiting do a And lenders you how guys. guys on as and of capital or allocation see to afternoon, hitting but Good when smaller that to combination a margin Wells speed to or side volume term a other just mortgage know more both? it by back said near is flexible opportunity then dial I that

Christopher Abate

Wells the long in money As as retail mortgage. other side fair I exit on it's I most side, the center very in noted, opportunity remain Wells to branch competitive a the characterize banks frankly think term on

things us changed. of be But I piece stabilize, puzzle So, in it quite the particular. a for meaningfully game think that hasn't could do changer as

flexibility the the as it's far very, very capital, think of I flexible. As

have issuance we workforce have attuned allocating where that's capacity. a put an and nimble operating a ourselves think as I very well as with in pretty we be position capacity, capital. to And we got can investment

the the is of one So moving the capital platform. around and hallmarks of optimizing it

preserve residential is is as on platform, we in think the as our I banking technology, of costs. what to We base, to focused full continue of technology. the variable integrity investments in And seller optionality. relationship But the the mortgage goal far make

something of a on is All basis. we day-to-day that focus

again, far as So the rate we control sheet. as in leaning

we'd into So, little which from first quarter we now ours. get that Well, bit and that, we've as lot big mentioned, risk potentially the like. need But And why I the them here is for getting of to growing more a really see quarter, aggressive? standpoint, think to comfortable we focus points second feel do of the more I uses big, that's the like capital. also rapidly a a will in turning a as got we right at

Operator

question. state Credit Harter Please Doug And our with next from Suisse. question comes your

Doug Harter

kind whether aggregation do now kind Can you long of to are periods that period able you even talk about, to we just through? kind went securitization given might just of that's how that to whole or loan the further, of shorten And volatile the what sale? think, you be time

Christopher Abate

we again, speak can to businesses. Yes, both

the we've we On forced fortunate the will, year resi moment to amount for XXXX of clearing a able our on When market were we top be substantial side, the some others what right, inventory. between a the few a ago, not to were if focused I think weeks securitizations. issuer, as essentially, we spoke it. you took that way, hit off, is were the And on pretty very of we inventory. did was quickly. a most And And of out stay

coming do I hoping the we've shape is curve. of here because mentioned, or going the And turnover know, to think, weeks the to capital another we're of forward, be in But you going yield months. as deal important

So, important to pricing rate as hedging in going far as sheet factor goes, margin, a healthy and extra costs. the it's to in the just be

focusing mini of be selling to bulk So unquote, emphasis on an as to pools ours. bulk going quote, loans, is in and smaller investors

the get past to ultimately, of proceeding there's that but few just think is we've we'd cautiously. really So we're the seen to aggregation, to years, ways it, like kind manage back I regular there's, way, do

Doug Harter

issued Obviously, And capital of capital the converts mix structure? how then can you the prefer envision optimal year you about see what the of have your structure? kind you talk kind just through this the coming of

Brooke Carillo

the probably It's fourth We XXs. Doug. from thought through and a first back equity materials good quarter debt our We I the we've XX that of well. capital about offering Thanks inside tightening our question. our million quarter. which in was by converts, our actually convertible seen XXs Since preferred stack bought that think also aided our price our as quite back buying we nicely, structure started

think other and a and of perpetual we structure on place the forms future actually preferred a of issuance, We issuance intentionally, the that. nice tighter of unsecured be that our expensive, capital in but relative debt. has to inaugural is I we of to they're small convertible did our and on the cost it follow capital think expect

job total probably continuing also with set noted in a and through we from raise you million, million XXXX. our to we XXX and that prepared we matures have that as cash unsecured we XXX done nice So have hand, are materials remarks on

we or continue to either discount a likely see to cease So, it. us at repurchase will

in XXXX the you level think of If about costs even that we our have maturities.

is can amazing. that You months cover quite which interest with today, expense teasels six

think nicely So, to will the it with of maturities capital other I we term accreted balancing capital while continue in forms our address structure.

Operator

our And Wells Fargo. Fandetti with your question. next comes Don question from state Please

Don Fandetti

income maybe in little a the about And you're pluses how through of then the as bit talk interest could Brooke, work about you some you year? thinking minuses net QX? and

Brooke Carillo

Yes, question. a is good it

to high stability. levels of the items maintenance as throughout our net we what rate. net over In we income to be good fourth those quarters of you've a quarter. seen we year in the come last one as reached have season saw different is yield been the income such year. in to what flat in represent X lot interest in had course quarter, but fourth of upside We've the that quarter, the run a essentially line out fourth from view more was think, as And the the million income million that I X really interest time, item have

NIM a positive X GAAP in to a are return the good into represents capital quarter we for fourth million we bridge it income a which as capital to for be actually in deploy quarter mentioned, the interest XX% quarter. so, income net an I continuing a run to the on contributed And not nice think on tailwind continues interest right, generated

We with terms actually sitting but cost weighted of today, saw was on bridge that only points amount coupons of of brands than that focus. not that of be basis average opportunities, to quarter, by in on XX which area funds higher on the increases. especially were the were done So continues about volume, deployment cash an actually was driven

we I GAAP million remarks head interest rates X I on changes, as economic accretion that income assets in but captured interest prepared for for through mentioned and aren't interest net our income, certain run that you and value income would effective us. some was that interest those discount higher forward, my run net really point by to that's as in driven also GAAP are investment but rather rate net is income

than will realized So, grow economic a interest job continue but for we both continue economic highlighting think through see to effective to will better I yields do assets it. whose income, those deployment tailwinds we be certain NII from and of

but know points quarter, they've stabilized. last they about basis up costs, just really XXX were also would I our financing

on with front been and we So of be the throughout renewals, widen kind bit seen second we've half need and year stable. spreads of spreads really lines curve, had a very the projected also the seen those to on financing we the stabilized of ends mid

exposure side on floating the rate more on the asset side So portfolio our debt have we of the to than continue of portfolio.

So should rate any challenged. further increases actually to get

Operator

your with question. state question next from George. our Please And George KBW. comes Bose Bose

open. is line Your Please go ahead.

Bose George

mute. Sorry. It guys. Hey, was on

existing that opportunities that force are on or opportunities to the about yield XX% ask and returns the your seeing you to wanted investment Just portfolio? returns on best in compare how investment

Dash Robinson

is is context well articulated securitizing both SFR are loans I pieces better mid that. we that residual that teens that the much context in in as can The largely BPL as can for or Hey, very through just Bose, bridge organic creation this organic, too. Dash. create through take the

certainly rate have in Obviously, the market the dynamics so, are have this by our market of fact sympathy with over weeks. that, the few up, lending or widened the given also total although the aided past the they we benchmarks and of year past some is with tightened in a environment higher return spreads

as earlier well. the Away interesting as side definitely are Chris on more we opportunities seeing articulated on dynamics, from third-party that, call, given the market

certainly been CRT but securities. interesting. have investor remain those tightened We this in in have Those a agency year, regular potentially

well. flows other We well, dated more won't as with as return servicing obviously opportunities other well shorter potential banks There that we rights. in might are on be of types interesting some some others focused the there opportunities non-rated senior are those, certain that be to there is investing as divesting But be cash as mortgage profiles. of issuing for

the higher on So right in these with the based bar, or chin still now. that, see mid general, we market will where teens

Bose George

of back in returns, you way? Okay, mortgage in get capacity sort pulled normalized you see returns terms banking great. need back to to industry to or sort can then activity resi gets to And of that going normalized overtime, as some getting just of business, out do actually the refi pickup

Dash Robinson

Yes, of above. it's the all kind of

I the first stability in think rates. most and is thing important

I sidelines But rate volatility kept the think that environments. can a rate high function to refinancing with business has consumers on lot obviously buying respect of homes, homes. and the in

housing in the up into and housing demand will heading think January I we be season the -- selling in has picked here. market spring

is the announcement, mortgage it issue think think If going to It's a there issue is for players. issue. capacity I us. anything for with fewer originators So Wells bigger I than be real the a is

that So a piece positive. is

the penciling in coming continue much the a not only really good And months I could business here, the had if we our stability, also the coming But think I rate see but the I bonds. better consumer behavior, we in the think can And have for certainly out real demand quarters. answer momentum because frankly. once drives and certainly it for economics is, January,

Operator

next question Securities. from Steve JMP Please with DeLaney comes question. Our state your

Steve DeLaney

Hi. was already you jumbo your if prime ask getting little the haven't wanted I to Folks. late deal I deal. a you but Thanks, covered Sequoia it January on,

did talked on X% WACC did you you the what sold the coupon If loan that, the pool? mention see we was the on notes mention about what you

Christopher Abate

above five Steve. little it was a that, about bit about and was Yes, a quarter gross

Steve Laws

Okay.

loan or there tight was do there pretty margin that think Do those get today XX% get that at you, you you permanently unique Was both pricing. that the your those there are mentioned needed product? we this and doable of kind jumbo and sort something But loans, that, out, with that originating the this is on financed. about that deal So target to in execution was you you purchase that current loans hurdle. hurdle you did that mid-team money clear you're that of of

Dash Robinson

Yes.

the someone was securitized ever among we else the more season the that asked question. So, portfolio securitized, we've probably

typically I securitized a think we month two. jumbos or within

the a probably can were bit coupon these by market just more early glean we you As a seasoned than January. saw

deals And that from securitize you them to the those Sequoia tend and lot we thinner. Steve, a as pieces keep be recall,

would And low- contacts. at of was And on that of coupon, to X% or sort Chris our it if the structure. hit think But we I less capital in piece the so current have was look of yes, sort mid-teens, cap as you it.

of stability, rates, term if and the mid to get demand, note there, all look the So you getting at that, consumer from to perspective. be that. Should to high model, able challenge sixes, able do actually you with and the the be just rates, just is a

Steve DeLaney

get makes it. volatility wait into and decide, we okay, Chris' sense. I need the spring people but houses. Yes, that appreciate it this let's just about, And out. And comments people

but the will in you've waters we'll I some the SMT up little side it's hope see think the knows more pick purchase rest year sure. I purchase brand, a for we'll and the and market nice that here. brings, the get what Everybody the of momentum tested

the comments. for Thanks

Dash Robinson

Steve. Thanks

Operator

evening. that questions a may and great today. now All gentlemen, final our parties concludes call. That conference ladies And you. Thank also for today's was disconnect. Have

Redwood Trust (RWT) 9 Feb 232022 Q4 Earnings call transcript