RWT - Earnings call 4 2023 | Redwood Trust, Inc.

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Operator

Good afternoon, and welcome to the Redwood Trust, Inc. Fourth Quarter 2023 Financial Results Conference Call. Today's conference is being recorded. I would now like to turn the call over to Kaitlyn Mauritz with Investor Relations. Please go ahead, ma'am.

Kaitlyn Mauritz

operator. you, Thank thank fourth and joining today us Hello, XXXX you earnings our quarter conference for everyone, for call. Officer.Before Brooke With may me Officer; Chief to and Executive today that management's performance certain respect Abate, Chris I statements Financial remind Carillo, made you on today's business Dash to statements. call Robinson, future constitute are and we forward-looking want begin, presentation during Chief with President; financial

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

Christopher Abate

Thank you, fourth joining earnings us Kate, you conference for all for today and thank our quarter call.

as this efficiency. boost strengthen decades changes story the quarter regulatory last fourth milestones precipice on offense with sell-off Redwood's been in that begins public excess Dash the to we're included and has capital Redwood finance cycle. allocated capital position big goal earnings housing debt milestone of of an Brooke second a big the in a some corporate unallocated reoptimizing to renewal housing positioning in across stubborn, we the the several our our the to XXXX, drive and as to trends mile I offering financial as financings an ensure been our A and strategic position. facet of take has our XXth business do, opportunity company. completion begin As the was took shape.Putting squarely year commentary begin its results.In time next strategy and this market early-year a We year's for outgoing of to entered and of of operating to of to unsecured our of be through lines number as will We shift. are operating working last as our to as to broader squarely I'll in inaugural help around first it winds are a change renewal market Rather, on that and market trade. to our and liquidity sorts never renewal Though especially up begin the given of a the backs pool cover in to together, our off was firm activity part of accomplished quarter, building for complete significant well often operational before cycle perfectly rates, the come. our all and This XXXX.A the at pick finance

we As a that have of XX% our the we achieved of further and a In similarly Brooke boosting cost XXXX, range. will through on ambitious our end X% in goal highlight, scaling high to of reductions. XXXX, expense landing goal continued reduction efficiency businesses

joint offerings. our to these previously, the carries capital private providers we core are the product with in who mentioned strategic formed As ventures shift institutions. of to with allocations of over long-term year, we deemphasizing coinvestments leading with investing a of favor number direct credit our course began last shareholders.First, This portfolio benefits partnerships large have strategic and it venture

our preestablished a create only ventures power, pricing joint overseeing more not profitability. for includes in investment returns streams This resulting enhances joint our recurring also and takeout and that in predictable earned these reliable these products fee but Second, ventures. ultimately liquidity and revenues

banks an now bank the not working almost mortgage power accretive. went banks new capital with due receive we for merely Finally, of finalized. can lobbyists, make us paid these their to achieve already benefit growth secured risk course around with banks the ended an workstream supporting prospect prudently looking to depositories the the for or of relationships one changes banks.Onboarding and be manage But our could joint should solutions that XXXX from capital capital is the in many often expect coupled be ventures This additional years our now the to close, changes, compel the and see continue to with The outside endgame With our partnerships, outside pressures After arrangement volume make an mortgages.Furthermore, see we platforms. vehicles by requires. than will We continue onboarding to to this balance remain of we partner offer or the that fact own, comes exposures ] sourcing operating is these on that are new strengthening spigot platforms expertise us, rule portfolios for regulations raw having number a still face, faster that we partnerships pace a materials joint turn Basel require partner portfolios, capital banks bank to the many operating these for changes they've jumbo won regulatory This earnings by sheet platforms open beginning onslaught mind, vast the partner flow change bank partnerships opposition to and of institutions the XX is the by help in that This waiting and the [ the been the increase not franchise execution. additional with not new of does would CRE challenging that and organically from more our expect our near the Though loans transition seamless XXXX, feed an often Redwood. all solutions of without we establishment and notwithstanding scale value with XXXX.When our our with at associated much forging asset-liability it with demanded more major to over partners any ultimately emerging ours. we in long-duration we over decline to evidenced regulatory with a proposed talented to straight underwriting markets. rigor accretive further of rates. speed our of in to sustained our long-predicted such stresses additional come XXXX. to it as aspiration growth light from the venture working of announcing optimistic in term for renewed team, are

never same. important up, note ramps As we banks to the non-banks base our stronger. or our been deep partners, emphasize our to it's all originators with has banks non-bank to is engagement origination our message commitment The that whether of

investor With to affordability safely, the to a finance. efficiently To Aspire solution to benefit second-lien second-lien its equity with in homes home coordinated a extend our opposed months. loans Since loan at for equity partner loans, set home lowest in launched housing platform, level to a traditional loans. network as homeowners as Today, origination many focus look housing You coming we will states address and banks higher also our requirements continued on the remains the their plans ways partners.Our investment the in we of access we in to Redwood.Complement anticipation as untapped from continue equity, year, residential platform, unique, product invest we've to have trusted in residential in investor for by beginning with in has mortgage HEI see moving. our in further opportunity footprint innovative in largest resulted Aspire. January. operating operate is equity XX capital home grown our first-thing of last Combination also pullback and CoreVest, our more decades, to market the new to for launching in reliably,

the estate business residential single-family worth our access with real have an last As on several stress shareholders and remains whether existing opportunities borrowers, about multifamily-focused. it's our would or banks think on observe commercial focused and us year our period negotiations experience.As we we partnership noted we many offering markets a to pipelines of deep eye for that their ahead housing set that broad towards product quarter, capital with advancing heightened reminding squarely been allow finance,

trajectory by to to of played our the all continue residential quality of book concerns is that income convey offering mount conditions. value past of take are households. rented role important GAAP our well stock GAAP confidence corporate served assets mission housing prevailing whether CECL making based in of long-term our providing our the industry of market housing, accounting government market adequacy owned, we All has we're of allowed proud to parts our to over years, reflects accessible XX or has entities. mark-to-market continue these The us and through statement, This not of to alternatives.As the support American Redwood pursuing shareholders extremely liquidity as

our to what as corporate that housing trends market the March scheduled Our perhaps through the Dash. the opportunities opportunity outlook support our others see thoughts for fact, foresee.In better believe is and now pursue share finance our turn excited best current on as than Investor We're one over don't no usually well at to this landscape are Day, upon we that strategy Redwood's unique won't positioned that Redwood. or initiatives belief as there business for is changing to call the we they built found upcoming business, XX.I'll

Dashiell Robinson

the continued handing our will a before cover notwithstanding our by reduction its in I more over now in detail.Residential businesses mortgage cover strategic Chris. largely financial Thank it to results performance modest to driven quarter-over-quarter you, Brooke momentum volume, of seasonality. banking

Chris of even endgame standards the mortgage given internal the teams capital will changed of This the though are the bank risk and of Basel XX-year substance distribute end the have economics the ability prioritizing management inevitably for especially rules fixed-rate dramatically, articulated, aligning to loans timing the commitment of era and As deposits. takes evolve, approach. these the with time, and markets retaining processes in cheap as

total securitizations, to points an points, loans banks, banks quarter. basis XX% with quarter's mortgage locked settle billion in came As us through and pleased actively the XX% of from basis engaged that to we banks jumbo control bulk XX% such, including our with for quarter's our XX% our we're share, XX% at of quarter, margins and profitably up $X.X loans target sellers program with both fourth depositories third from into third unique to XXX the up XX to of non-banks. points. market purchased from of XX% estimated We of quarter active loans above the XX lock gross $X capital basis basis be historical XXX usage. largest XX Over activity range directly the that billion was allows of Approximately volume the close optimizing the in of of with businesses.Overall, points volume

industry are around overall focus our centered activity have believe X% such with deepening second of of a X%.While models capital All distribution We on partners jumbo to group mortgage historical partnerships complementing rates just of we share to our interest or whose estimate $X.X bankers, partners with our to of of our total market a locks to independent in as half critical X% Redwood. compared IMBs, business continued players. beginning represent billion bank we in, XXXX to the always volumes, continue range is still strategic large progress market our higher impact approximately in

caused speak this potential through locks, coupon we support is more including million equity in favorable FICO million thus large with Chris in as have segments further average in around a for execution and loans. approximately has she by banks challenges also exist this far Chris capital investors. highlighted. weeks towards in a credit been such, Sequoia securitization markets portfolio rates XX% lending offerings. deploy banking few from deployment.Finally, and bridge heightened of rates grow quarterly continue XXXX, including including to that up mentioned, our to sponsors X Notwithstanding of multifamily to potentially $XXX brought the lending portions characteristics, amidst backed broader areas gross totaled estate elevated, more term real the refinance many when typically high asset sponsors XXX average platform tailwind Reduced will see in fundamental by XX% in for other CoreVest. refreshed this and to average see quarter smaller service continues commit of X single significant opening further fact latter driven these to have that supported our followed SAB opportunity for strategy increased normalize.CoreVest bridge grow, portfolios continued ratio, segment, production. bridge transactions continued to deals which a to into XX% with runway that financing potential book, and the commercial further less. third SAB prioritize momentum certain several to The funnel quarter-to-date real risks as we an interest or by be As quarter, in lenders to XX client last pullback demand and platform or in work to increase Receptivity in our strong attractive LTV, third production, properties, backed X.XX%.As capital After $XXX for and we Term fundings outlook and loan fourth product balance from partners XX of has fourth-quarter $XXX volumes conditions the The units commercial banks estate and we lenders. traditional and strong saw for our remain home quarter-over-quarter products the our we develop stabilization.We other this we covers launching the our see to capital persistently Brooke or dialog coverage loan funding to however, for quarter continue in single-family debt from a increase loans DSCR XX%, the million. our once sidelines, fundings strategies the alongside the these product drop

including and typically renovate occupancy that borrowers engaged lines, banks for were the certificates strategies, build around dominion was case the QX, As in support also lease-up of our are to once rent products, rent aggregation of procured.

from through and Our We loans investor loan products distributed of continue we to attract joint million loan sales partners. mid-XXXX. in the sales capital that closed whole attention to $XXX venture

recycle progress since management risk. conditions to capital valuable evolve.Turning in portfolio, bridge over loan quarter in increased portfolio deployment reflect securitization types, the to to thesis, Our for third we to lending it was significant manage flexibility including achievement, XX quarter various our the next a valuable capacity activities investment fourth of be our of allowed also end our that the capital finance evolution our active months the expect as and loan

within on the this performance. past net book of have to broader portfolio by transactions credit levels leverage regularly the and of quarters, transaction to a book, home our assets. X out value embedded through securitization our investment includes have brought progress optimize investment our continued several portfolio low front spoken continued our of and investments $XXX completed our bridge loans.We quarter portfolio. the a These backed our Credit in additional value continued sale by reperforming securitizations meaningful included remains face given also revolving Over we performance of first-rated The harvest strong capital overall. strong ability portfolio. million mix significant fourth the backed non-strategic our discount loan as our within equity of This relatedly, and to we resecuritization

As capital of seasoned our over squarely through backed of XX% our our it credit, overall single-family is Chris created by much emphasized, with housing. portfolio and by residential platforms, operating underpinned organically

loan their plus the in represents resilient. our protect remained in equity delinquencies the overall book, bridge stability jumbo to borrowers XX% rates.Performance Our all to of which RPL, and motivated third the homes portfolios single-family remain or single-family advantageous has declines interest portfolio, quarter bridge saw their rental XX-day in preserve now and as since close

portfolio, continues our an and replenishing new SAB are we anticipated pay to revolving down of area securitizations Our expected growth, with predominantly production. as bridge SAB

Additionally, sponsors built-for-rent projects, the are progress lease-up with many which phase. continued of now in

in inject fresh refinance book an bridge today.And the the estimate day approximately our the for I equity turn managed by incremental book under for term creates recast largely remains we facing loan. that, bring over is will This and to seen capital increased costs portfolio with driven stabilization. and recovery for XX-plus multi-family call supportive that of sell to area portfolio largely a the of do of the remains lack The the a modest XX% and or by occupancy strong, are XX% as improvement focus resources ultimate fundamentals grapple Loans or of actively in fresh have higher upcoming rates were quarter's project who we refinance. qualifies we the delinquencies believe sponsors terms, properties, increased, opportunity rent, to close with fetching As multifamily underpinned This debt units seeking the around call, originally rates. average the property, highlighted borrowers and exposed either behind yields with rents in market the key to amounts equity period month or finances of underwritten to portion an earnings last less the pipeline.While prospect portfolio to and extended strategies, sponsors of less these per drive $X,XXX we a of Brooke. have remain X% bridge to notably sponsors to perform delivery

Brooke Carillo

our fourth in in of driven on largely share quarter income We value GAAP third by million on performance million third in tightening with strong assets.Net per of Dash. the changes a the net interest quarter. million the coupled of and reflected of The or fourth continued or consumer impact portfolio, spread of GAAP GAAP earnings our underlying investment This rates income, return to activities. negative declining negative expense compared as higher flat $XX X.X%. NII $X.XX the by compared resulting quarter-over-quarter sold for bridge or you, increase offset was negative common $X.XX NII a in was equity new NII, reported on $XX.X $XX $XX.X quarter this financing was fair modest quarter quarter, to interest significant Thank securities improvement million lower investment positive portfolio essentially from in and residential

As third we bridge the a first still expected nonaccrual in portion to loans. quarter, we said recovering the is quarter. anticipate Overall, associated interest in beginning NII trend higher of with the

of quarter, to While GAAP earnings decline issuance the effects improved to the from in and per book third X.X% $X.XX. the net dividend equity value caused share fourth common the quarter

for and X.X% quarter. Importantly, distribution banking lower available achieved mortgage previously calculation removing slightly fourth for total to per line Economic seasonal share to banking term titled QX loans third evolved factors investment. presented $X.X decreased activities from spreads we third loan or on of fourth $XX.X to in residential the of in quarter income primarily benefited basic EAD effects economic consumer activities decreased on XXXX, item from EAD, improvement were residential XX mortgage offset in as Income Basis million mortgage Change $X.XX or in we compared the positive quarter volume margins. fourth in point were the inventory.Note from the quarter.Earnings million was jumbo the where third Income was decrease $X.XX activities the due the quarter normalized bridge of as spread lighter banking in as the by lock fundings the The EAD a basis that per investor in of for somewhat a compared return the share of or tightening from quarter. quarter common

net was fluctuations and captured previously Additionally, million HEI income to was changes of this is with quarter $XX.X in homes accretion EAD measure. all Income on both like captured and line our in net, we presentation periodic changed home attributable non-GAAP fair value to underlying from which statement within factors price our appreciation income add value HEIs item. investment embedded the associated from options

December build [Technical represents us quarter's higher and balance discussed, last previously continued of fortify $XXX Difficulty] is XX to carry equivalents end our million. quarter.On we capital. we've liquidity. investment This that to a organic and low Our cash to and leverage since of as pointed million sheet recourse our unrestricted we in were portfolio cash opportunities cash the As third the $XXX the the affords the raise position call, that

underscored BPL and well dynamic, gave from those fourth our ability million in X Our which capitalize capital ultimately securitizations capacity. the fourth quarter, on that we us as to the we new financings during generated quarter as $XXX additional that flexible of established the lines

to the $X.XX securities our Importantly, assets balance while our financing to majority of represents and both us that sheet from activities portfolio our reduce the repo allowed securitizations marginable third-party on allocation of term portfolio our investments discounts. preserving

recourse leverage of a As reported quarter. quarter, all the activities down slightly from the third total X.Xx, result we of on

Importantly, recourse to X.Xx the $X.X $X.X billion, from leverage investment XX, was our year-end.At we've decreased and at had capacity excess December date. financing to which of since quarter billion grown warehouse portfolio we third in

continued of growth capacity increase to operating We further support businesses. expect our the to our

repurchase cash continued debt source our remain of capital, of assets fuel unencumbered our we corporate which serve existing a banking our across position, businesses to addition or both $XXX In today term continue have million of can structure. to growth approximately to mortgage potential that

of our We convertible repurchases structure created through debt, debt over program. common the our XXXX by issued the convertible capital we of beginning organic From amount debt outstanding of convertible XX%. through and $XXX approximately through have as ATM today, have million reducing delevered our capital well accretive retired equity as

in in of taking we that mortgage today also front us opportunities are banking. We the advantage see of

opportunity capital In which in million to increased raise the of blended earnings we the by book year anticipated viewed allocated for million light began opportunity to expect mortgage for to residential the growing we we during mid-teens such, quarter given As since $XXX could the segment the deployment the equity XXXX, we $XX value-accretive the first the as fourth today. strategy banking, million see consumer another quarter, of common returns a grow and The our to accretion subsidiary.We this opportunity for lower by last to by should that guiding administrative we significant comes medium to create general the growth $XX the a these term. focus raise with taxable on and near G&A XX% or value future XXXX. decision from would capital market expenses X% earnings

quarter-over-quarter, incentive While $XXX of and to improvement as primarily this achieve to commensurate balancing long-term earnings, sustained year profitability remain committed with savings of X% GAAP G&A another XXXX increased XX% and ended variable quarterly X% opportunities. further year-over-year. while long-term in G&A, compensation a controlling the to million strategic operating represents increased expenses cost we reduction with We which

profiles Looking We now to attractive confident our continue our banking to questions. dividend products transition to mortgage and return opportunistic a with given returns complementary positioning strategic with And ahead, mortgage the we operator, are capital-light more feel of model about at call into capital while look will businesses we our that scale. deployment support excess crystallize for that, capital. to we open the banking

Operator

Shane line session. Ladies from Thank time, at gentlemen, first JPMorgan. conducting the Instructions] with question-and-answer we'll [Operator and comes you. of Rick Our a be question this

Richard Shane

margin. a like origination bit in of side mortgage an in the the talk there I'd dynamics the was banking quarter about residential on Obviously, on uptick to the business. consumer

about what great. quarter, capacity assuming about you've that above the margin of But You rates through that delivering if you're inflection seeing talk is are a they and Are be the not in loans the seen to first the cycle. historical function the being more as as chasing movement importantly, talk you originators would channel. I'd sort and more at sale. in seeing disciplined would about as could I'm more love out, of that that, average. in they're dynamic volume it's valuable sort of to comes you that and cite that what And being favorable on the gain that

Christopher Abate

extremely moments. Sure. Rick, Yes, for it's to We trajectory. few talk good about our Chris. just feel resi about a

housing market been Some of origination is of probably market, context smallest the this in finance the a challenging. decades. number housing that's is it's in The been market, of extremely

But start down. half you nobody more are last extrapolating we year. to have to, the or start had with taking and XXX be represents be out than some we with months production, a XXX share a of to so about in going of originators production. When in locked against record think to responsible rates case than last for for more X in turn Obviously, sellers, X% this start months, X%, X feel we've good to our which X/X to that it's Nobody around, a some aggregators, backdrop, the the starts that sell-off at I'll unique really market things that about often us. the as point, mention So rates market you XXXX, in few should has loans flatten other

how resi my deals we quarter. done few we're quarter. So extremely fourth bullish first of a what in about. in big that from X say securitizations we're the the is part We've standpoint.So good positioned that's for would a I did

tightening gain of been spread think sale the on I has part story.

demand. to Our deals I with have are And very particularly in met get which been exciting. think people really is robust consumer, behind story, starting the

what's for for are We're we're at sheet, not mortgages I particularly of out, dealing all cost. mortgages commercial reserves. Brooke banks down dealing lot with staring resi CECL the and today's there. not us that with challenges versus as know of ALCO and for is We laid resi ahead it what's us. the call, So the balance I And us, behind a think, think trajectory

of bit think quite a there's go. think I that people most pain to

capital the excess we've sheet So have done on just having in over of putting and of offense. something $XXX I really go ourselves like done million a the position, as balance year to we think today with what past

But really of excited I think certainly, differentiated little what's But factors outside business of from volume a as the a in It's really versus is stabilize. our off, the for we're as these might trajectory really market. bit far that particularly underlyings foundational ahead some resi to about of seeing this business. us to behind you start we're fourth tough still rates seasonality of as what's us. story take quarter, have what again, our see elsewhere to

Richard Shane

demand Chris, What at circle is, was seen the supply. your back. partners, speak you for it. when we've partners, your a about I'm about originators of they to and obviously, XXXX supply demand them curious that channel I about lot them point channel curious have to attractive Got a are having there What to economics again? I'm make decline. important. exit volume just is business rationalization obviously, equilibrium is an of sort mean, attractive feel a for they where now But a achieved basis to, and the for is is strong on that enough equilibrium

Christopher Abate

think which in of I our It's and so, a been non-bank big think active we're only IMBs business XX of been where banks, we're the or Well, I originators. X the the is obviously, have dynamic. that part banks, up to last months part with,

in think are spots. I both different

far some gotten others pain for as corrections, as to go I think of IMBs, ahead with think there capacity them some I have is of some.

the it's For really banks, partnerships. I capital think

aggressive. of We as us, of bring. capacity. of with excess still value recently, about don't a estimate haven't dealt and think can still take I really woods an sort with it's earlier, to pricing the standpoint, mentioned the we've out definitely of to from NBA a capital understanding market and share share, anybody's a not, origination so think, I and working looking a others aggressive I capacity because position doing. point of a our the market. certainly, sheet. be, proposition fortunate for for we equilibrium. we're challenging completely our about at at lot are there. and out business, We this we been our we're but But regionals, but great I to be we're to seen position, working The balance feel But there's point, really very in I the it's and extent think has officers with loan want which our number take numbers that We're

Richard Shane

Perfect. I looking That's exactly what hear. to was

Operator

with line the Fandetti Next Wells of Don question comes Fargo. from

Donald Fandetti

bit I Can delinquency I about are? some a they of supply investors bit. kind broadly, markets. little thoughts maybe guess know worried of for are the hotter more the a your talk Can about in trends, outlook ticked you talk you up about more And multifamily little what multifamily

Dashiell Robinson

can I a Dash. portfolio about talked back on the strategies book may broadly over not a the more that X of on I contours original because in insignificantly of It's Sure, just I production sort to focusing bridge, number pivot bridge X that. of the past Don. which the year. the spend migrated the over take minute past business quarters, years. single-family really in was of thesis the going our and really mix have

think I been performance we've So broadly, bridge with overall the of book. the pleased

the what's some about I clear in eyed think on going of we're multifamily market.

is the talked in loans a of types strategies, we're both as good in on They're area, we the continuing mentioned, is as buoyancy an of which context the grow Those from the then standpoint to the overall an performed, again in see many to some funnel.I which term has X which help I'll which opportunity those XX% those about balance well thesis bridge well, million original to single-family few saw starting things, to origination to the is Just for is for progressing. projects entering we're touch of mode $XXX multifamily. this book, with book cases. term SAB, cumulatively, prepared Last how multifamily, in paydowns XXXX. for see lease-up some loans year, in I in the continuing as I build over bridge are as really housing. book the We're about unit to And rent, by underpinned real think X in generally out remarks.

type financing of multifamily. are minus BB generally of sort We

an to a deliveries sponsors book, issues next think Our of in We issues. market But we some many look sponsors to in are difference do getting we've important that XX% seen talked and month the now about able is we're or ahead there run average $X,XXX headwinds about we're overall. when project since I year right place cognizant our of sponsor acquisition. we rents of between is funnels the to supply the over some that reflects, seeing think but X. XX% have growth certainly from less exposed for issues. also rents delineate that issues being in do at certainly always the as into And But of that, piece of the some cases, there.

properties delinquency bone. the resources just REO seen have we've the book the run finish of quarter. think reflects is in and there's We I a really of you've lot few in sidelines the out uptick to found getting projects. are simply interest project from XX%, the this through the XX%, issues on what that sponsors involved with think But XX% way significant took [ a meat ] and I a And it. of

It's outside we sponsors arms of contract so.I and the of refi another under it. We we over in or Almost XX% active the more X has a which point or been for though, would think We fresh with a where those quarters. that eligible remarks, the period got chunk Most is now sponsorship equity in in have been to the we've terms those. prepared the we fresh good around fundings just finding having of fresh less through right the term the importantly, working do loans like for quarters. book, X/X past significant our our of progress or overall today. response, are We made significantly X feel anticipate over closing XX% it than recast some for And some is we're have under had infused significant the bridge, performing capital selective said time. of table we're past those in back soon. actively either interest what we've strategy to to I X multifamily bringing

have We running up and are really the their leasing and are rest portion that a delinquent projects.

And so think headwinds. about the I we're broader cleareyed

markets certainly, next we going think focus X the I that close have of X our expect be area in capital. on from about an fact continued the fresh quarters. we projects bone we're and is this to good But meat the or feel for the us over

Donald Fandetti

like on here? follow Got right level the it. you're the just at you is up Do kind My of dividend. feel

Brooke Carillo

just our our position. Yes, on overall I did we liquidity think prepared in touch remarks,

both or think just the the moments contributed couple really carried quarter, the in on had to the to of where some earnings have at over last outset today. covering mortgage banking for think last of both line this weight have dividend, we amount capital portfolio we I the sight I comments quarters, deployable of case, the be make we did

mortgage support give is near-term a recovery probably dividend of to commentary some us outside additional I go single line a we with expense sight greatest back of in significant contributor that the on for dividend.That of the continued should banking the think forward. provide towards combined as target our

that interest also and tailwinds from with some have continued a capital income of just in recovery couple a of original We net deployment, to respect our accruals.

Operator

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

Bradley Capuzzi

This is Brad for Barker. Capuzzi on Kevin

to out? a trying with play you're homebuilders with you Just this going quarter would I up last mentioned for And this opportunity rent know seeing from size do, still pivot of for dynamic given homebuilders sale partnering a look you seeing partnering the something home dynamics. to housing Is potentially forward? you're to is strategies. builders

Dashiell Robinson

about we great strength each continued of X channels, do promoter mortgage are some a the look with bid, again. Dash. think months saw to and reversing our the is of try through probably do Candidly, if Yes, buoyancy X the we That's trends is of of and I HPA. ago to reasons in just you think that We occupants question. one banking the this that

But those I the of going big the for think still probably resi where have those invert rates and one but cap dynamics that's the between I depending BPL. in just on owner then can we think reversed, it's opportunity mortgage some a banking, trends broadly, quarter. bid, and are see occupied

still that exact do actively And to both dynamics which reason, channels for look in to quarter. shift quarter those that so is we to tend

Bradley Capuzzi

And just last side, the you me, opportunity a degree the one in you high traction detail jumbo banks talk it, then mentioned facing large guys a know the of for can uncertainty? I little on on more but the with bit given

Christopher Abate

mean, I there. Yes, thoughts other

banter term, it's that regulatory changes take we And bit have much there's of not over. in thinner given mean, zero-cost Basel the to people many the just with obviously, to X% at nearly how a when less Just out. proposed the long a relevant, to at going That's X.X%, changes. play so loans. it's fact, quite with really traction the opportunity But point, deposit time I rates, the you've immediate capital NIM more of through endgame some banks response we as about. the era got banks common given in the went become is is. profitable this portfolio risk And

hearing capital capital what what we're lot a so partner of is a banks rules And of might the irrespective sense, from say the risk makes in future.

because is one a makes completeness, file relationships, we and lot loan past banks helping them can of lot you servicing.And ways let year, capital like keep of get when can we've we say, the And customer over their of would us markets, Redwood buy sense emboldened originator, I that's value, the added readiness. is servicing, so to banks acclimated And the we an as think it, not say. a can about keep to

can files loans you do of portfolio, lot capital do, selling a into the things Just can't and parking you that loans and markets. loan

that work been And we think helping that so the has of value through banks big add been part And I appreciated. that's a present.

So plugged get of online, sides. the think what I think and that's we're the that is hoping resources I durability opportunity that we And do to of and invest effort lot there. is that a the both on as time in banks

our we're rates for As said, means about to what that and come start excited business. down, really I as stabilize

Operator

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

Douglas Harter

a environment need either an investor mortgage to from perspective cost about you attractive perspective, talk to deliver the you Can sustainable, or for see happen what from banking ROEs?

Dashiell Robinson

huge a question. of focus. Sure, Dash, at Doug, it's area Great Obviously, can swing that. I take

right that I space think now. on things there's a few in going

we progress, effort. a seen We've product our As to helpful single-asset set, think very you is us. really diverse bridge particularly have really, good in know, I which

about did that $XX Just for context million last $XXX we of million January. in there, year and product

quarter-on-quarter there. the book. in So very growth the growth reality of very things with the We were we're I talked volume are term XX% heading in that being in pleased our of think We there But right is selective trends it nature. the direction. DSCR, about

we're a loans, re-elevated are work flowing.There's to there's an but us capital are you extent of in reality drivers that uncertainty a demand where conviction they is know, is particularly respectful market term as I of where reality freely in rates business the to through headed, because residential, to the continue telling bridge unlike of today, business, around these not what sort they're just of terms have trying overall as where we a think that lack prepayable. of is to rates, be and around and side where in on are

these better So uncertainty, tenure, in borrowers the interest on of when in term bps spots. as general make as and XX backup, we're going sort a you a pick headwind. higher, making rates quarter so XX, the is they a loans for in lack tenure can in had lock are much I call when you've is there's our or X. that trying of lower of case a bit And a good think next But uncertainty to a

where over lower lot come is of lower being or we're also the every think multifamily day ours. our across rates desk about profiles I other We X see in flowing, just is frankly may X talked opportunities. fit around risk helpful. terms that of quarters. that conviction de-emphasis people's But better deals a than choosier We last capital think stay I of they'll and So some the

balances sales and about loan we how area as but feel sales look funnel. to little a the think term very we're good spots book of opportunity average for are a the years to I do products. at team Maybe pleased our particularly a we're were of ago, a our existing in continues depth is think to to source bit banks decision our how of team that smaller positioned, the focus be with, a That's refinance. very leverage they the you really in if going you opportunity huge be than going evolved continue we're that's have space.So for bring We another pick when and busy. bridge great couple our our things for

we investor in It's that that's about to much like a be, paid for as jumbo, areas talked don't We're well in we're through residential think, more back want in, continue haven't but rush where opportunity. time positioned really big one we're going say as We for, we but to have here I to we're selective selective, going because be leaning be think to XXXX. SAB, to in. I in

Douglas Harter

'XX that I you you factoring that $XXX Great. you kind Is had I to of excess number kind viewed mentioned of convertible believe, And Chris, make heard of that that or remaining then capital today. the in right? just million sure maturity wanted

Christopher Abate

fully. not No,

said of we week, we had million assets. million $XXX think unencumbered I we cash $XXX of as have of last

I So we that into all need maturities. kind think of now. right the to factor of the is capitalized But convert feel well headline we very

securitizations quarter. mentioned, in fourth we the X completed we As

I this of I accounting, trading and think differentiates where stock degree. value is number get with we a book certain a the do quality of competitors think fair something the So of are that position substantial time are headwinds.I versus think significantly a aggressive our facing in I book. when to we lumps at a think the having benefit that taking pretty business more like feel to That's about

to path get So converts, we're I the about very certainly very towards covering also think deploying much the And a lot a good feeling be ways see but capital got opportunistically. we to very We've excited of dividend. there.

of we're opportunities done sooner. behind half innings.So if much about those scenes, in not the things in first that the spoken the are We that we year, haven't about we later excited the that, things foresee, are JV can but get

a high capital at. is level at where that's So

Operator

the line Kyle Joseph Our next question Jefferies. comes of with from

Kyle Joseph

the, [ on that's book ] closed-end product, versus to on wanted second-lien know margins how or about early, opportunity brain how your the a pick whether existing that I versus the size you're see of Just just you HELOC but it's the market bigger thinking and that

Christopher Abate

traditional we're bullish is something XXXX. seconds closed-end that a a along in out rolled of HEI, which market with very early closed-end attacking recently we're is on. product is combination a product, like way The second a ?Well, we've still very

housing will, very that in to big at do termed rates of X%, having certain I the path move. in home the and internally, over is market if equity my but tough Mobility a vast think the finance. will factor, you're rates. homes untapped As you mentioned or be biggest all a their absolutely constrained, I remarks, We're it's seeing to country extremely majority with X%, X% of the out, is degree

very up, we think So get business ends, are but in there I as states startup, not focused startup, closed originations network. HELOC the on hopefully that and origination we more is we we're our expect licensed as and get on scaled Aspire, go homegrown focused HEI precipitously sector we're through to which think I as

Operator

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

Stephen Laws

of A follow-ups. couple

multi you already maybe the a talking or take Maybe CoreVest outlook, you touch take do quarters? these? First, point under on Do but over update there I contract loss REO it's a on of Can the quarter. through went can about ticking do as little is As this side. about the that, happened, and feel believe said that, next losses the you you you build-to-rent resolve on that whether delinquency and talk And the to the an like expect give say, bit X you continue for that? collateral sale timelines, into resolution those your expect footnote you the us there the X up kind to attachment supports work about metrics you where to some to think peak? talk

Christopher Abate

Sure.

stop had took we'll single as DQs we've around where process them. mentioned, couple so The over of underpinning important. predicting we discipline about the we either REO and Speed good properties to is Stephen, resolution the I generally real very of think probably honestly, that or The in we we've the past that severities of cooperatively. have did severity creativity the and just quarters, resolutions feel digits that us. broadly, had think continue, where I that's but going, short are I estate had, no

the year structured you're state in.So incentive for foreclosure, with that depending think quickly, a with on hooks are that lot ease loans I pleased the we're waiting can than Our customary to a that. different rather X more of or borrower resolution

I it's senses properties. in a of because, a estate, these for bone and in demand lot Importantly, think deploy. of the the a beginning to and real mentioned is lot like earlier, on that on sidelines the opportunity an of we general, There's I lot capital there's have meat

We closed that rent haven't project. for build

do We any loss to soon. expect that We that. much on of expect don't

recapitalize in refund.So actually terms build we're in shape good about sponsors other drivers this that book, how some fact we're projects.So of really book of go. space, projects that's where through the to cleareyed the as the of mentioned, reserves. with projects it particularly all a They're Like actually rents. X with we is is most to talked general, down amount demand for for feel morning these that a lease are some of operational required and really And it. that lot of got and general outcomes. have to or performing the feel in for good a many They're book I but we think demand But in as with leasing broker up We how optimistic for opposed are the sticking overall reverse these in see those step term inquiry we in vast thing majority goal the remain purchasing line. the interested XX% eligible interest we they're risk I just of given about we'll doing replenishing renovation, what headwinds that book the driving the the things the get outside of terms projects. a of about In situated, is such, in significant over up cases to cases, good things importantly for is rent in good leasing our particular

Stephen Laws

you maybe And there. question been on you've touched used to the year book, at ATM deploy comments any how a on about investment re-up whether the whether times, under remaining talk follow and that, you you that? to off Appreciate then issuing versus liquidity the of update date, what authorization issuing couple of to that capital, think up can about on various given that's returns are levels what's expect stock us you as valuation

Brooke Carillo

questions. great Yes,

of couple things. a So

opportunity ATM utilized of really not have did, we in earmarked the net fourth We I growing proceeds residential. the in We the to of rationale there. date. lot quarter explained the some year raised A that our for and

pretty We it around every was looking XX% through used think of, about earnings $XX the taken of the on which issued book. comprehensively really so that of that deploy accretion period would really we out effectively on net proceeds subsidiaries assumptions our the that at time.And and actions at were deleveraging overall very think at kind the at securities note is that future if capital drives term over maturity think accretion. debt of crystallizing blended basis net you very kind our with we has opportunity really look that's that throughout that to our and of throughout kind million at looking based We on rational earnings accretion resi, math math, residential we're growth long to mid-teens an drove grown value we we that period. to fund our capital of were we've a of the payback look term.We to all of also time our utilization, financing our opportunity. the to banking shareholders quarter debt, REIT marginable on of over we make over to look really was year, on a we book to for of Based ATM earnings those some kind it I our I our continue how convertible that also sure just taxable broader that of tangible convertible mortgage that returns, close what stack, XXXX. It kind cognizant are continue really the just reduce done reduce accretive some repo, front. we structure of which other

we levels does way our quarter. match were With stock nice ATM off said, the where So fund to in issuing proceeds. being a somewhat us of that fourth is afford the

Stephen Laws

and Appreciate Great. comments to the seeing of all month. next forward look you

Operator

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

Eric Hagen

what Going around are at on and time would interest of doing? back that NIM frame, rates? XX, Slide to How cut over and Fed balance kind the cost looking the how were the your to if funds much of comments of reprice you

Brooke Carillo

that say, schedule would for maturity our a I XXXX somewhat recourse have, rata We pro balanced pretty on basis. rolls leverage really throughout a

important fourth the debt here. through next in are investments at landscape rate But largely in longer-term one being it's with that near that a do unsecured years.So the we're so X to on in attractive in think term are the attractive our of optionality gain margins the where either it because we things a quarter return profiles going a on flexibility mortgage banking callable those we at of a option the the prepayment repo we has year good lot put amount sale most lines returns is really within crystallize nature. pretty on or lot pretty of was we with raised and quarter into And with debt did the it attractive the of first

Eric Hagen

debt is Right. all is right? securitized Essentially of fixed rate, that the

Brooke Carillo

correct. that's Yes,

Eric Hagen

the feel and of us? Okay. portfolio portfolio on XX, you assets allocation unencumbered are think more can you this which rate leverage any you the that And What draw do you like investment in against do draw point? Slide and at kind capital held can advance against

Brooke Carillo

question. Good

Sorry, off. cut you mean I didn't to

environment, $XXX we a through that reperforming our we rest selling or centers fixed some was As we some created at the RTL, around Same that given that rate CAFL did this as sequoia multifamily. of of lot today, our another, subordinate have with securities mortgage year we banking that portfolio. have organically our million about third-party of last and assets of largely side, other have initiatives. rate our they fixed assets the we've largely Chris investment bonds carry A of through on some were didn't securities, unencumbered as of were gain well loans, less what just mentioned, into as nonstrategic of created strategic and the

a to just given million the think raise hundred that there's rate. of I So advanced we there, think couple

financed are assets already are these or of elsewhere. that securities Some

interest so some overhang for have have data not finance points of appetite expense. some to lenders them mitigate those And we just to pretty of tangible And around assets. chosen then we

Operator

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

Steven Delaney

mentioned So, upcoming Chris, the you anniversary. XX-year

those sitting So been XX of have at years how Redwood? you many

Christopher Abate

count I you so. if years, Well, lot dog think more it's the But a than XX. it's XX or

Steven Delaney

was Okay. ] to was in I [ the be but Gosh, you. I going dating XXs,

the think year, rate may guys next not to now, we $X record No, may year, your if looking Sorry year volume that am for last reasonable X.X%, you starting about the congrats get, X over or longevity potential great jumbo too both billion until obviously, quarters which a Well done.Just there that see think for that. for point leadership for all as of the is production we at company, for Would and we or I jumbo relief, you the time, X.X%. billion to, and were seriously, some next in being $X well. would conservative?

Christopher Abate

as think flatten still the We're after seeing so that to I below range financial mark, is jumbo just had we position majority vast of kind so banks online surface. regulations changed moved I scale. just scratching the There's that we as surface are think definitely going business business we stages. like the that the at think that's on bank the the of feel gives we incentives going the to do change. various business to much question look crisis, start with rates also us to to but are to present. do the banks, rates come Obviously, But we're big think predict great down, we're billion in and a that really is I do can't that of confidence path what $X and is of something think No, I rates. think achievable. And great are to remarks, sort getting my the banks sheets. that no balance when And you change, the how mentioned We in longer the

no longer You capital. zero-cost have

wasn't were go XX banks scrutiny this haven't that You've the us, piece of partner it to for opportunity It you of excited capital business got be we're will, they hasn't a volumes ask seen up irrespective that portfolio after that great just years.So an looked all got been originated, a had ending some management because asset-liability being on the balance crisis. lot massive low no up for perspective, of you've securitization kind bank we jumbo why the rates, because was more on people loans jumbo so financial there PLS were stayed again just for grabs, at down, as in from side, if very you've sheets.

for PLS extent going the great So and to mean to really us changes, market. it's the that things

think going why as that business there's So flow changes through structural the well. sector.We that's is with really noted that capital that we're the applies investor happening loan to for We excited. how also

For CoreVest, great are challenges. CECL with banks we're seeing dealing who now from inbound

So a there's just call. there. other why of of And probably that lot the is we're on lot today's optimistic headwinds out a sort of, be hopefully, to side, on

Steven Delaney

out duration, whole. that that you and whatever of the financial portfolios in a Boston bank than tell XX-year lot works a I to, balance for as system far the stability bond LA sheet belongs it better fixed duration, as in does as rate on it

no Thanks question. So the for comments.

Operator

session. Thank our gentlemen, also does conclude question-and-answer your for participation. conclude you this our does Ladies and It conference.

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

Redwood Trust (RWT) 20 Feb 242023 Q4 Earnings call transcript