RWT - Earnings call transcript Q2 2024

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Operator

Good afternoon, and welcome to the Redwood Trust Inc.

Second Quarter 2024 Financial Results Conference Call. Today's conference is being recorded. I will now turn the call over to Kaitlyn Mauritz, Redwood's Head of Investor Relations. Please go ahead, ma'am.

Kaitlyn Mauritz

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

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

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

opening that, recorded available is website remarks. to call for I'll Chris today's on our and later be call the over turn today. With being Finally, will

Christopher Abate

welcome and XXXX everyone call. quarter of second to earnings Kate, Redwood's Thanks,

to the Day, opening Brooke and we to meant results. At our handing to cover remarks regulatory after of consecutive Investor growth volumes, As approximately This off quarter it statement volumes, residential quarterly our consumer validation second investors keys March financial unique finance. loan rapid in our in XX% statement shifts collateral. hold to of us. Year-to-date, have investors we our emergence close always, before anticipated response and positioning RWT over operating optionality combined housing billion our Today, with I'll was of a strategic the our that growth in future on said reflect kick credit that investor to Dash of and sector. in private to in the $X.X of is upon tremendous lock distributed residential XX%

was As finally Fed exhibit to all its we together, tightening for investors to begins And positioned source assets, uniquely manage. environment a can ending, Putting to facilitate is cycle the macro signs now, continue transformative growth and historic to are quarter. residential as the Redwood XX% exhibit demand has strong costs. distribution $X.XX emerge. clearer. To think that XX% strong the the it realizing of per operating for efficiency our the second while reduction volumes, back case quarter recap available Earnings results, than we improved our a higher fixed we in on share, never prior for been

with is with our flat book book bank XX. Progress roughly partners still further July serve in evolved drives institutions face additional deposits. these rate $X.XX product shifts estimate and funding Our customers. challenges share, liability at asset mortgages was up quarter, how their This X% portfolio and XX on has strategies and the when fixed to we value June per X% banks core value bank the GAAP illustrates an

trillion now to of production balance loans the addressable be for the $X.X with on consider we As to market sheets an on focus us. we jumbo continue jumbo forward seasoned flow banks, bank

came from portfolios. volume second quarter, the volume All banks in XX% our lock told, fact, In such XX% with quarter-over-quarter. bank seasoned lock approximately our grew of

to Basel recent suggests a can in that front, the early regulatory the law of will and the were Goldsmith requirements, re-proposal Endgame happen under strive is their the intent on beginning re-proposal of returns vote rules September a also commentary that leadership this to session to capital Christy the concerning to Senate the capital September FDIC. agencies feedback is the Fed open" Endgame nomination III the tailor days, occur follow the on X-week week publicly to imminent. nominated her the We III anything to agency that a Romero first "very On the acknowledge of requiring from a bank expect Though regulations of for Xth. has who been after Chair we're encouraged new these currently Washington stated that Goldsmith banking by congressional Basel be to the size. she we in Romero,

credit our private helped for since from to Turning loan demand investor our strongest segment institutions business, XXXX. drive residential investor the return

partnerships whole revenues and the recently our and of will help joint witnessed established fee streams, ongoing less toward Oaktree These buyers, with demand have capital through loan scale the recall, loans. indicative are ongoing investor we predictable with our direct evolve combined facilitating with residential usage inroads for CPP Investments you time. with recurring ventures, As platform's

our of will half strategic our remain Looking and to ahead we to on positioning year, continue with the market the execute goals. second pleased

you cycle. in data-driven a and commence particularly as call over detail. policy, an this shape However, on markets for on across unprecedented more take accommodated rates light has Though and our mean performance what operating I'll evidence monetary, more We in already high, the now challenges, Fed presidential election to we're optimistic unexpected look changes political now, turn our housing stubbornly monetary we're could the for progress fall. And remain further to that landscape. discuss Dash to increasing residential regulatory, preparing to forward our updating a of

Dashiell Robinson

Chris. Thanks,

volume referenced. loan ventures, lock by new penetration jumbo activity banking's term performance bank share, momentum monthly the our driven increased improved Chris revenues, progress joint sold maintained on that wallet to XX% and grew operating in cadence growth platforms base, increase with and efficiencies, a investor, quarter reflected Second across our quarter-over-quarter We volumes important across seller on was including our continued loans securitizations. Residential distribution. increased mortgage for strategic

helped balance X%, settle up be traditional our quarter, given seasonality highlighted was the represents August, that banks' underscores traditional attractive which, of the seasoned diversification ARMs, to offering, from growing transaction mortgages, As The from share first important to expect estimate development a market business. of purchase bank become adjustable up bank fixed in approximately role or overall from rate sizable in lending, the as we jumbo second footprint a hybrid overall for first rate quarter X% nudge may industry volumes on quarter pool in later quarter. Activity the an by our to we solutions sheets. also provider our XX-year ARM opportunity from a that in our a

Already year. volume expect retrace, of these remain XX% shifted longstanding of overall new represent tightening during driving attempt margins on as critical spreads. securitization entrants, a and has million for and As growth, our we conditions This higher. Distribution focus gross case, our spreads mortgage priced the securitizations range, become more or to reemerge, $XXX of in favorable, hedging. enter drove by and is an we spite from share a whole handful X $XXX bankers, points, in business, the pursued quickly advantage despite below began remain IMB players we space to competitive pace in market insurance securitization in of of quarter, historical dynamic and seventh year from saw posture IMBs. when collateral group IMBs share of quarter, market target a jumbo loans while or quarter with a to and TBA we lock an issuance second just our earlier the our pipeline issuers in as independent XX backed by phenomenon softening maintaining quarterly priced volume, in of grew wallet quarter-over-quarter. in this sold the we kept company. our XX% to often the third widening IMBs jumbo This the the million active basis

first posted also second and in upticks during loans, $XXX the impressive the volume funding million Our Investor from profitability quarter. Residential of up XX% segment quarter,

quarters prioritized footprint XX% in several and persistently margin half loan rose quarter-over-quarter our momentum we our term Importantly, origination from volume After higher historical overall came this to rates, where close have given products from was higher impact of progress funding growth. product. key mix,

on platform. away of average also million differentiator loans. distribution most joint and in notably both large seeking the from partnerships, including monthly to This from We second achieved fundings a loans the JV ventures, with volume second the initial XX% an of for transaction represented volumes single-asset remains were our pools large This the demand $XXX and growing key term high million investor from We for record a bridge of DSCR for for each long-term for institutional a CPP capital included sizable sale the July our a Market and quarter, accretive products, quarter. for watermark a the funding insurance-backed sold line the notable to Investments was new buyer. loans full sales in business our securitization. quarter. in $XXX loans, for first

to the distribution incidental the of to the looking remained management profitability. to multifamily our overall, Our workout process believe resolutions. depth largely particularly performance have us managing our the of but related that progress legacy the the ahead, Investor has in bridge established, apart toward we business portfolio, reflect this XXXX. Through partnerships focus, results activity continues in have we we to asset productive stable durable incur summer benefits discontinued Credit and sets the as our command stabilizing Residential portfolio of in portfolio, we we strategy within continued costs workout of

continue rates, we refinance and of to moderating activity. the accelerating X expect the portfolio in potentially Given to workout quarters down with pace interest paydowns this X next payoff activity, factoring and

continued $X.X portfolio X been particularly the books, on jumbo the helped portfolio investment of interest recent our within high quarter perform years. securities exceeded in deployment has The $XXX to loan value in detail. Fundamentals in past Investments were carrying point investment this shorter put our growth work. net describe XXX a over capital by impacted within to second point materially has and over well, rates million and significantly that income performance focused billion modeled The hike coupon and higher basis was with from generally our benchmark reperforming where of drive Brooke more the in overall expectations. portfolio, third-parties, duration, our will

long-term and begin our down, to As to the stand potentially values book come rates of fixed rate investments stabilize benefit. directly

Brooke the portfolio net now quarters recent financial in per key to has our XX% $X.XX carried still jumbo is more source unlock. I will share represents aggregate in This our hard to upside reperforming loan detail. been discuss and from of that the discount, a overall securities. call at earnings an With which of over turn to results

Brooke Carillo

in higher the Earnings bridge X.X%. We from and share or second income quarter portfolio share quarter. or Thank second you, $XX to the the earnings for our contributions quarter loans. first changes second reported lagged This $XX on due compared for primarily quarter, $X.XX on but for our in due $XX or in interest the first $XX both resulted of or or the growth investment reserves of an in to XX% performance value equity GAAP was first per quarter. Dash. banking up available our saw share common positive from million, return net million, platforms. $X.XX $X.XX million, share per distribution, million, EAD, We per $X.XX the fair per income higher EAD to mortgage quarter, in on net

Residential book the to a Mortgage growing deployment quarter, million of to a a year. higher on acquisition-related Consumer segment basis, intangibles. Net net XX% market and of economic a a Our offset would by QX interest $X.XX quarter. the March the dividends first of income the yield and our to This despite size, somewhat accretive Investor million as the by our returns economic The brings value $XXX net volatile Including into year-to-date and million consistent delivered to on of of Residential the due across return, bridge second segment our in operating interest lower interest dividend, resulted backdrop. Higher $XXX X%, to of was operating portfolio return, total income. payoffs million $X a saw $XXX return return adjusting exceed volumes an half to million income $X efficiencies at platforms $X.XX, The capital delivered the $XX deliver we continued underscoring for common dividend was to value nearly slight X.X%. $X.XX compared joint portfolio during as contributed This book roughly per increasing amortization value from in annualized an XX% ability improved stable ventures smaller which during XX. roughly in million. book transfers Banking and the share delivered nearly we grow our decrease to

first coupon further optimizing $X.X loan bridge Portfolio's employee We benefited from with modifications recent weighted administrative, for our a a expenses, due legacy assets point G&A average primarily to deployment portfolio in accretive million anticipate that of resolution on led continued decreasing income. We Investment redeployment, QX. to reduction Additionally, quarter, interest incremental general in measures from net unlock the the and compensation. by the taken capital in our compared XX-basis quarters to XX% or will lower-yielding fixed capital reduction and

quarter, loss consecutive X per quarters efficiencies back to of that decreased in cost loan basis from anticipate the expenses points first volumes, target in our Given range. XX operating basis The XX XX point volume, also growth to will a improved a closer XX the bulk by in businesses. basis historical trend points activity. consumer we in for operating our XX% residential With driven progress scaling to

cash improving at cash. partners, a $X.X billion cash our quarter the to We originate XX% We also robust $XXX for supports support maintain new active $XX and in facilities, production. for million. We these consumer equivalent are end, new securitization we approximately XXst expected on bank quarter, our saw growth Post of the the refreshed outstanding resecuritization, securing our or joint financing cash up temp capital-light, executed quarter a for retired on closed million deployed for points favorable to total support return maintained down including first million, strategy. existing activities, business. debt basis position outstanding in to stood new These We grew $XXX second a of Pro effectively cost X long-term just cash under quarter XXX and X reducing targets residential the from convertible as at that $XXX investor, approaching also approximately using which ventures. unchanged incremental year-over-year. on forma million facilities we debt accretive even hand, efficiency capital XXXX pipeline existing our business end, $X to convertible billion added the $XXX few freeing net is We capital. to own sufficient with residential were terms capacity, million that with July position front, our our of runway our to high facility and

Additionally, during quarter, million drew have still $XXX another $XXX down facility. under CPP we million that of our and the remaining facility second Investments

inventory, by loans recourse capital quarter, of note our The X.Xx inside capacity in completed Total inaugural attributable structures. senior capacity recourse QX. in we platforms, We secured in corporate unsecured balance conversion issue for nonrecourse to We of our deployment. the believe with quarter $X.X also and providing $XX million of from and increase offering to of which higher offset residential an X% growth X.Xx the coupon further debt have loans accretive total bridge incrementally January, to second the was operating by leverage was a for of million at sufficient was longer-term, up end, billion available. partially undrawn $X.X with over billion support financing $XXX

build we the remain first in earnings the capital that, share for committed on with the line to the aim we deploying grow forward, market of year. And accretively remainder and XXXX. will half to the We Looking questions. open of momentum growing operator, throughout generated to

Operator

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

Bose George

like or it's bulk the can the just pipeline, Yes, from regular economics the bulk impact financial that Can discuss the when you way this there any in that business, and acquisitions full differs any of the is you volume? about quarter, was also talk from how disposed?

Dashiell Robinson

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

we're about a point flow dispose one, is manage of to episodic In of dynamics, to are banks that this the make overall number of we Obviously, you more really rally, first our bulk, little with several. bulk. we a prices availability talked those versus looking we obviously for may getting conversations banks think if bit expect point-of-sale dollar this business. with the continues think that dynamic of a the of prospects at look a collateral. Obviously, sort for I looking to sense optimistic terms rates, month a with banks tailwind recent certain closer Basel, is and where remain to for sizes, dynamics the we much balance later But sheet seasoned be transaction to with we settle lot, the that see

And So banks the the to and those the side with we those portfolios. talked and it of oftentimes, whether loop dialogue, in situation when with tailwinds. are call first decision about, already being that being involves they decide positive around the active the with being sell on these simply that's including or phone flow this constant all being makers these C-suite banks

looks just pipeline we always done. one and can bulk there lot a flow, but a learnings, how able with obviously, like be, little particularly feel different matter. tailwinds, feels a are really lot seasoned get of it a than So, portfolios There's that including bit to being of episodic given

economics in think of in second are I conservative of appropriately the the thought how terms we pool. we terms the economics, about quarter In of the

scheduled As settle intend I mentioned, in to We'll execute to later third the this that it month. was quarter.

incremental is the it's like there. call, the upside think, we hybrids, And So on fact about hopefully meaningful. that some talked there's I

historically hybrids a securitized. product. commonly They've not are you bank As know, been

to because run the production the differentiated terms trade also more Sometimes well what think I we But of excited maybe us in market they and on hybrids do sets companies. that as think is even control well. buying, to with bank-to-bank really potentially insurance or up do we're it's

Bose George

Okay.

makes XX terms So of there. just that you when of fall Is of about But necessarily doesn't to need target to range XXX, think sense. kind like in fair? bulk the your that

Dashiell Robinson

for mean, make bit a pipeline felt like we're if through less we It range. working we're think fallout and there. efficiencies where With risk within right. is could. could portfolio right, you're But work bulk how ultimately less this you're little it to work a to we're could that. loans working sense portfolio. feel not I in sense are there's like with bulk, there I for below That's on our and little efficiency larger We for touch make bit it manage, this time the capital with to

Bose George

Okay. Great. the And drivers? switching delinquency the the bridge increase. Was talk that multifamily about then, to that? on actually just on X trends? What drove more the Can loan, you

Dashiell Robinson

Sure.

So, things. few book, of would our in overall that the terms payoffs first we've It bridge bucket portfolio see a did $X.XX say, general, in of had multifamily. close was trend uptick. But We runoff. XX-plus Bose, the overall, modest it several In quarter. in resolve I the driven book, to We largely continued a just of of to second during billion by the quarter. was the

we do that on loans actually of open a We because In smaller is the out second increase some that of have up. So general, this we're lot we lending a the constructive portfolio in less markets probably at refinance refinancing. quarter saw were point. seeing

starting of you're increase So see definitely those funds to markets. flow in

at our And overall capital remains And factor portfolio second It's down. over resolved uptick, we're point. continuing definitely XX% a quarter. it this see of the lot we importantly, was in ring-fenced. a So that to but modest it just

Operator

Our Douglas with next question is UBS. Harter from

Douglas Harter

this versus you securitization mentioned in bit talk the the and volatility a of would How you TBA could to little in margin the that you decline Hoping attribute spreads? quarter. revenue much about competition

Christopher Abate

forces issuance mix of A is, play. overall, This is has of to lot continue collateral. lot what say a of up. with lot picked there's at margins activity do There's that's of it to more become Chris. But a On the efficient. I would we the

there's we in you see historical glut more very XXX And projecting can we're I We seen in sits, to do And control. And because and range. as there's for that recently. That's that back still still supply, like we XX so, mostly the and we're leave, which to market. pulls go instance. think widen trend pushes ranges what margins competitors, jumbo, margins. where for the deals margins and a have of when up, controlling competitors

still the the way I of of right ranges it's to So part the economics. business. about to think think we historical the noise speak I think the that But are

Douglas Harter

Great. And I -- go ahead, Brooke. sorry, apologize if missed I

Brooke Carillo

reminder, No, primarily have to as I'm securitization prior well we just quarters, execution. on spreads. we of tighten historical in been of lost continuing going a to excess gain We're -- X the our sale kind as say in on were

our we well able AAA were And quarter, generate so, there. historical in and for to and was on regime sale, the effectiveness when around gain both underscore to us hedging our TBAs think to TBAs the of widening be spreads throughout pretty

Douglas Harter

apologize Great. quarter? give or the if And I this, outlook your outlook for you volumes either for an missed I did full but July locked

Christopher Abate

No, didn't. we

Operator

Crispin comes next Love question with Sandler. Our from Piper

Crispin Love

big the First, can you saw was and which little area, about product do rates pickup? on there. a just are also bit, just There the what the outlook. you HEI drove a What quarter? in valuations bullish near HEI revenues in how the you're the term in And pickup primarily talk

Brooke Carillo

accreted is bond so that of time. In for and like the every in underlying accretable instrument that a appraise a throughout accretion. return driver main as return its overall almost And those the changes those act underlying certain the of ways about then, valuation lot excess through recurring see to our options portfolio it's quarter, the that correct. of we from terms of lot almost option value, modest as really fair fair also have were pickup on question. The portfolio. in value Those in was a forecast great work, you're at it a well the terms did as Yes, improvement from income of at are like A on HPA in of small improvement that what an we a values think in portfolio the struck forward a quarter, both is discount HPA. in

Crispin Love

to GAAP current the and Great. you when you think just speak also And $X.XX at dividend? you the then, at Board you and EAD? And months. Appreciate to that. back in might to the coming to on then, level rate with need just look likely the the covering also can outlook if And see with EAD, get right dividend the then Fed thoughts begin the you your are at cutting what to

Christopher Abate

Brooke like say high the and color dividend. $X.XX, about $X.XX. level We very starting of feel the our EAD at And March I'd towards Yes, was feel commentate. EAD with we covering level can the good current Investor Day, tracking we're dividend

think challenging is the picture, prospect for our importantly, And I big talked been a past macroeconomic sector of more very environment the though, years. has in there cut. the few about the we very, rate

that's facet that incremental only years. assets by ability we impacted fixed not book, few be rates the we net earnings costs dividend see to lot that rate is interest duration to shifts, our the the how As side generation longer another And the GAAP think generate about tailwind us, in funding been over quite that meaningful of in recover, to definitely that have a of that a should start income, past but rising going behind lower forward. on and environment portfolio, the have

Brooke Carillo

Yes.

the the of Just of backdrop out for just of the question one same thing your the or Investor Chris' really the to under think kind backdrop. part covering put to more when earnings a we pick comments, Day up rate longer comments, that higher I around on of was dividend, answer

our of a we laid was centered what lot deployment. out capital around really So,

had or We capital low have of carried a leverage that we fact amount raised such unlocked the from recourse portfolio. significant the in

powder sitting down about we quarter, million to a over so half so of but the lot cited we today. take $XXX about capital, really have in we the that accretive remaining pro about turn. When to to for million unencumbered that CPP. terms invest have of capital through portfolio. the as we of forma think million continue just think, carry drive dry this behind again it We I other cash, that NII under saw $XXX a current a You just or still of And sources that deployment, in our assets we $XXX think

As incremental I rate if prepared continuing $X the we you unlock allow finance are cut, we term rate especially unencumbered billion assets residential on assets floating at that point about higher look through and capital for think today. And of we debt we the then, some accretive to mix, in line today are mentioned pretty that in if that spreads have at to remarks, of you, of furthermore, our uptick debt. be securitizations redeployed us those to with with fixed volume, residential because a warehouse more rate pipeline Chris's than some

So we that to pickup NIM see there. immediate is,

Operator

question Jason from Weaver next Our comes Jones Trading. with

Jason Weaver

out. securitization rate remarks to quite Is going July, evened retention might but correct? I'm the that more subsequently, of Dash, jumbo higher but be a about the miss your looked that bit at XXX, with effect the

Brooke Carillo

done We've that's right. deal since July. a Yes, in

about on million we $XXX that balance seeing loans You're sheets. of have

about to as could volumes. a we growing our further month You cadence just to But the continue markets see support now. continue we right at that gain share in increase and a securitization deal are

securitizations, up those and down balance of timing end. that fluctuate quarter see over the you on depending So, might

Jason Weaver

Can Dash, well. that? it. of the behind about I Got And build you HEI about ask talk the wanted out as sort sourcing to the of network

Dashiell Robinson

existing couple I we which But is stark to newer with decided the up just one. place the have we a contrast Sure. lot of that a that in organically a players we few years build felt the have of a to couple sort is to pull-throughs, spending we We little customers from or we of operational get the infrastructure this that is ago, over marketing was years. come bit one other a businesses, the our past in of of sort had This competitive more Dash. out, business Number word loan et BXB advantages. take like inherent can other main is of a model a that lot can that. that also sourcing traditional HEI assessing source where on players of your money direct-to-consumer, potential doing. The existing "wholesale aren't contexts sellers of network" lot cetera. definitely do When

for direct-to-consumer. from have modest with the business spend But in have moat moat We businesses perspective we on unique our relationship the real just have XXX-plus this is with that a other that we sellers.

have be with that whole of products. secondary other in lean We consumers platforms emergence HEI. There's groups in other financing with relationships a second with interested are touch of may that other

provisional group probably and wholesale start it on the which that seconds. saw, space Freddie Aspire, has of we approval of platform. HEI basis can a serve illustrates you whole that unlock overall momentum we on consumers through Mac bring up sort I in is sort there's of closed the As that the purchasing a can because just to

So very ranking because the early to product. of of the the in We've But rollout relative starting lot year. brings newness in of spend it's and We're judicious and see what we're see about the rate that to still the just also days. a environment those second the half the been excited momentum of channels.

Operator

next Our question Don Fandetti comes Fargo. from with Wells

Donald Fandetti

get or that think of Yes. loans about Can you rate might refinanced could think cuts the out, and not bridge when delinquency you further Fed help some talk whether you peak?

Dashiell Robinson

Don. Good question,

going on. a there's few think things I

already lending kind flowing question. accommodative space. up, mentioned like to the the this is if think were big to the were go of and Not step seeing Bose's that and they private you more where seeing It's I make months in has cut, in capital cycle. year. of in floating market are more will but equation I come And to going happening point fact the we're I math think when overlay what's incrementally. I potential difference, response at more difference X that That's SOFR an the the a the certainly with only not markets explicit down the second clarity math help rate conduit X today into just in there land, loans on that that up a a down market half in already the the cutting, refinance making we're how the there's think burdens think a like lenders ago. debt in of But will of maybe sentiment is I Fed much only open and also timing willing than probably goes to

come borrowers nature. And of there's seeing clarity on most also what's That's conviction housing that going to with what's equity of important for projects. sidelines seeing remain us there's rates, things where on interest sidelines in sponsors in more to lot again, the around keep -- the finance, you're investments, start You're off a more engaged. to

talked Our ago a multi-book, we've lot, point. years this is seasoned deemphasized X strategy at like coming in about particular, because that sort pretty up on we of inherently

much path project when X.X now, a just years you've than less more did so, in months if and stabilization rates to frankly, X there with harder, conviction you with X, the stuck were of lowering. it, And to you been for ago rates X markets have was you've a and and higher, were

pleased matters we've but help which think And shift, math think I runoff of we're which starting the in in bridge with. we're sentiment I So, to incrementally, portfolio, most what will seen sentiment. really is obviously our definitely see

Donald Fandetti

rate bit could but delinquency relatively the little so, remain you continue think a to contained? tick And up

Dashiell Robinson

that we certainly majority bucket continue to other our vast issues portfolio. would the run It's Being honest, expect around in engaged to I see confront expect pockets actively expect the to XX-plus June this hard have at of are with off. direction, continued what of think the We we arms to so but outcomes exactly XX, on pace of portfolio. we resolutions, to exact we prognosticate our

but in lot We in with management the it. to in a deal expect that quarters up, which think pace of of the with about really got that asset curve you've I come the being to seen we've recent sponsors, talked right resolutions. matters. place We've And team these ahead

continue see come resolutions. up? we book. those resolutions on stuff think in but curve other of Will of the ahead issues, we're help I to will think expediency with Yes, the the those I So which will

Operator

with question comes next Stephen Our from Raymond James. Laws

Stephen Laws

I seen that's Can you give some when the wanted on we Brooke, -- and guys NII touch fees you of timeline, you've in JV how give for there. think talk of base fees. of and we're about you pace I go second you them you know as to, EAD have us NII how about kind talked past Can ramp? fully reach annual more see see once And I those scale? JVs a to and the the shift, outlook expect to the into should the some investments assets JV an mentioned in you going payoffs, quarter impact scaled. $X.XX as JVs

Brooke Carillo

happy to start. I'm Sure.

investment $XXX great a it's of think timing bridge portfolio million We disconnect to $XXX between our million I the point of back loans. paying into us. to on we into raise that right and just redeploy -- historically loans that have

and JVs a recognition I think fees amount piece might is while there important revenue between delay unlocks it of NII a XX% the scaled being of be with the fees, combined the that, the tremendous capital. small

number is earlier either $XXX but our banking think the like our third-party more of or impact just sources smaller the of potentially in were what sheet, think quarter. noninterest more the capital capital. our million do given around. operating comments that's conservative as portfolio mortgage offset balance That into my for investments will on revenue today, so come directly capital earning I from more centered bridge second us would investable a a that either I that you revenue, into more redeployed saw is than businesses

so an really quarter. $X capital did NII. We to about debt have in finance NII Our the second of see grow uptick million piece generated it, will corporate incremental expense to we that our continue deployment throughout

into CPP put Just of disclose loans in we $XXX about did we the million terms venture. timing, of joint that

However, that quarter. in was the late

in really terms These lines. We are financing really us that to at to stood accretive that also business. lines drive view we multiple going for profitably volume be help

overall and for we ramping saw in road And the volume bridge the next quite deployment open given an side, quarters, over into on be, we just should term an is that the QX nicely. pickup few so, both those. And BPL

Stephen Laws

to of up on turn in that know exit it in balance want versus overnight. sheet for the underwriting just I the started a relationships. over really doesn't year loans follow shift I the And guys on have higher-level I so, or last securitization. you difference as given the growing market, kind question about your of broader bank bank know there's a

talk can forming you're really how moving with purchase opportunities XXX% usually those that from So, point as earlier But the with and still I just some takes can at ramping conversations of bank initial of And about to the hoop loans. it relationship long feel maturation things around about seasoning you far announcing those or season think goes talk that the you to bulk your with being sponsors? And how capturing you opportunity are flow managements as like up? about works? probably when relationships

Christopher Abate

bank Sure, a ongoing, Stephen. bank know. that relationship been of you Certainly, total of of with volume, number some one. percentage I'll pleased take The we're the active And has lock seeing. building as is volume that really we're sellers. metrics

IMBs, about today. of right I with momentum think banks banks between we're is the and that XX-XX most and

So, is is we've addressable which We're go infrastructure grow bank of on trying the we an is market the trying officially sheets side. we that would guys. build of to do. address. jumbo relationships, time trillion the we markets it doing bank balance what be to think The ultimately, declared and the kind higher $X.X to this can continue these of expect with we sitting ours, on building that the we're to way to continue about first is And

never seller I relationships loans that For interesting we've banks. we policy is of we as from And really years, were been banks, saw. and up, an these shifts, loans monetary that as and those avid stood think to buy loans what's can

most through technology building just it the in takeout. infrastructure We a of They capital the vendor So and training. sort is invest versus what's a context a the lot approach these having the important and of relationships.

durable side. July our all up majority competition, of right vast we activity our continues were competitors picked securitization into be So, of are for on relationships. to IMB these days these IMB The almost that think of front. Most competition that loans the on the

to On spent great of access. advancing the most executives days is time continue my bank and these bank have these personal with side, And we working partnerships.

earnings. to exciting volume and the more work past over forward. work to year, the it's really And going we're that manifest doing significantly contribute years to all see today into is and the X.X So, hopefully, start going

So, us, ahead speed for full banking it's partners. with

Operator

BTIG. Eric with Our Hagen next from question comes

Eric Hagen

in light But you're Is just already. here CoreVest. servicing managing in CoreVest the grown pipeline? in direct the portfolio? for evolved follow-up on the business how how delinquency its function that And and can you it's A the of of specifically cost has lot servicer covered the as kind all X maybe loans share as

Dashiell Robinson

the Eric, it's Dash. Thanks for question.

are so essentially borrowers can servicer sponsors. So, we special directly -- and for the we our interact we with bridge portfolio,

the term bridge both and primary servicer. we're not For the the books,

farm those the you out term third-parties. as of know, transactions. we our So payment portfolio, are that securitized collection. book, We rated don't majority which, do to In the work that basic is

as involved there done needed. named protocols So, but are asset the owner sponsors the with rated is special collections servicer. Like of team There's special servicers. special our and are payment there very a We're within but directly primary by bridge third-party, in remics specific portfolio, third-party servicing. the those subordinate management engaged obviously for said, is as a bonds, I

Eric Hagen

Got you.

Okay. That's helpful.

point? are of opportunity So basis? organic you're you how to like thinking are light debt on about of of do in kind much a you feel finance companies due? How the the unsecured generating, this Just How like taken you coming mortgage guys as well. have refinance thinking at their other pipeline quarterly position cash about cash that debt the

Brooke Carillo

Yes.

we in July we quarter money The we had and Pro about of the a I put and to think main recourse sitting X same XX months position quarters, we cash good feel that through for of only addressed that to lot obligations last had position paying the today. liquidity next we're our end. subsequent for accretively. of our the we've work forma at kind financing cash couple converts, really off

elevated We maturities. had have bridge

sits a the provides around over expecting bridge probably are or stepping so $XXX capital We can of of well to next activity million unlocks nice accretive more than portfolio for maturities mentioned optimal as of as very resolution that XXXs of capital our That that and Dash source where quarters. redeploy today. us, we in at levels the it down high of number some

just But sit mentioned We assets convertible as capital playback remarks, of in in facility also we general. done our nonrecourse, loans have nonmarginable Most good nonrecourse of work and also that down probably position, and bridge of $XXX you our We saw. offense, a structures. for my is really lot today. structure I nonrecourse as financing debt the dry where year-over-year. the unencumbered mentioned liquidity book CPP moved I today term powder both go and non-marginal bridge We've about to on pretty on is structure prepared XX% liability into structures. financed about from feel good raising in a million overall the We able being our that

Operator

question comes Rick next JPMorgan. Shane with from Our

Richard Shane

face the where we're the speeds a some manifest? to if that owned rates bouncing the a bit to has has in models. of discount morning. pickup terms into instruments we going significant as this to and of start Historically, covered. benefited from pickup in to what rates see developments that starting factor talk think our at portfolio apologize little When I'm speeds. instruments movements X Redwood really we're about I we and a of at premiums, follow pretty in about see they mortgage is Can you the rates you of Look, that between is discounts calls of in where interesting been dynamic, this to fall. own need would accretable many

Christopher Abate

the one, days vast can own eroding it. speeds articulate these threat premium. biggest the would values most We are you premiums, And Sure. well, of REITs, assets I tag majority headline is, response the I say, at but those team the as this probably -- to think and

for us, the talk a about we set net discount. think I significant our that to book continue fact

Speeds, it's I accelerant share obviously, $X.XX discount. that. realizable an of to is think

a So, in help we perspective, value significantly. will definitely, speeds a portfolio where from are position

lower will our help rates business. businesses, on-the-run speaking, On generally the interest

the for down come certainly higher forecast has we've for of and moved might rates been earlier, articulated think as longer, positioned immensely. pretty when I Brooke

and this September. possibly towards consensus a year, few think building we're were now cut I a last quarter, predicting rate even

So, create book. Again, definitely we've which multi-bridge, the book. small our of accretable on that relatively our us of the combination talked to macro the could actually piece and that portfolio, environment is about a tailwind, a discount realize that for is starting overall

and has of move the about performance portfolio, what's be the you credit [Technical least will to not book contributor, we Difficulty] will GAAP a think start down, to credit, going it, a earnings. it's hopefully been that As at it's -- to extremely rates, come strong. When

that pick if So up speeds us the more for obviously, that that's loan well. if for more regular as business, there's piece. loan more business And there's transactions, there's And on-the-run means activity. a way big

that's we manage. So something can definitely

I feel speeds regimen business, really to to go and business. obviously the think continue distribute which we up. can lock we into securitizations rate-sensitive fine-tune is And loans as our that hedging there our for resi good continue we

is sector. those positioned, So others many I few overall, are Rick, meaningfully than again, a the things, but think, we're think differently headline in the I

Richard Shane

rates And Chris. Fannie-Freddie one it, though in you even multi-family a elevated window, see are comes there, to if remain down? the your Got short and I the activity pickup multi-family could as ask most the starting of tenures follow-up. bridge, Is for takeout

Dashiell Robinson

definitely of it's difference second was XX bp of Many good $X.XX about being in do we quarter. Fannie-Freddie. in I chunk big debt viability piece XX-year at the versus as taken yields X% in Like sponsors of in know, of loans a go X.X% bridge you Dash. had multi-family. That's of A And the those billion is a said, are. of where that runoff it. Rick, those terms a out of terms

continuing to XXs yesterday, with comments didn't of I with work [ now. support X.X% loans So, lot of maybe refinances obviously, that rally, where ] a particularly work this think is

loans that. So ago, loans a few go there and seeing we see away. happy Like our minutes we're a we're doing are term recapture away, go seeing we're want lot of also book, into those I to mentioned definitely we're that. The to

the as of comfortable that even but of in more out bit liquidity system, institutional the private the a -- takeout, to I as GSEs, it's So space there's not I loans the think mentioned, think may from a that flowing also more freely takeouts take more just but path a there's way into are I sort the lenders little lot Uber a GSEs. coming have like the clear there's GSE to

and of loans rates of a things that of right, and this tailwind a to pocket rallies you're of takeouts. GSE a difference incremental But All that nature. we're loans into work between where in make paydowns lot does that don't

Richard Shane

it. Got

guys it. Appreciate Sorry, had I sort you that. repeat of

Operator

Citizens Our next Steve question JMP from Delaney Securities. with comes

Steven Delaney

that XX% level, is majority, XXXX. of and Is you pick or sensitivity years there. getting are your the you April we We've rally since Nice on, rate this staying XX that terms the the seeing to difference other XX the busy basis that it XX see up. of fixed out channel the I a and big it #X, get there of rate looking sort what that on wanted and XX-year go basis you're is, up And where think maybe curious could vast just year, Rick any late business little could magic the in of is to this before number, and brought if impact in already about to XX guys too, locks, purchase? already, between thing swings rate any you had Dash, in so in probably on IMB a be more, points what, you're mid really X this points. by really bank your are terms move I'm refi the if that rate phenomenon X.X, question. whole versus just

Christopher Abate

can Steve, I'll Dash add. and start this one

than like is in business been with trying in are basically I our volumes do the rate and we've that think environment. be we what rate really feel have durable we're any past sensitive to less

our I for is love takeout means XX-year be we'd think ongoing an that banks. what bank to channel, practically

a for I banks for better think product and reasons, obvious deposit the hybrid product the portfolio they're funded is how just base.

lean front, there. out. XX-year And can for more come see people, guys. And a hybrids, kind competitive. it's if those on competitive go it the in and then, us be IMB so, We takeout gives be an in of on But opportunity to they sellers we

some loans QX, And I grow. from buying the IMB there, and new that continue whereas entrants QX into despite fact sellers think, so volume we saw to in our

trillion selling back And one thing, positioned us gets interesting call it really unrealized than is, feel the as I on the whatever point. bank but comes to can speak sitting we're reach Dash that a these where or XX-year this really very like at transferring for $X.X situated And losses to get starts balance potentially be is. And bank or on to us. risk sheets. XX-year, I banks One down, I think the thing so, there. books well will that for point and we're take really better interesting that that mentioned exciting. comfortable most will

Dash. about there's So a as over lot it business I'll do turn to think start like come to rates this down. I to

Steven Delaney

Yes.

you You're bulk just hearing? flow, off that their what rate I'm could see saying bank opportunities when balance discount reduced. some some sheets the is bulk Is not

Christopher Abate

that's Yes, you're hearing. what

these So realize unique But the the the of circumstances. time. conversations of too the have look we're some you having has significant at And want losses all been each when bank makeup portfolios, candidly. unrealized to to

some love to clean up that down, losses there's think I of come lot down, these would come portfolios. rates As unrealized those bank executives of a

So that's phone those work about all calls. building the infrastructure we in those get relationships talked to

Dashiell Robinson

these make on or probably the XX-year just doesn't Candidly, end, activity. some think most I -- has Steve, to huge the a on directly in long refinance direct impact at probably back Xs a terms impacting volumes, are in the rally in high of of the the the Chris's jumbo unlocking difference point, banks. rally books whether Xs low a rates further

it have As the investor on side, similar thing. been And you the jumbo points buoyant. didn't they the enter it has extremely market that year couple commentary seen, now's conviction we've a X know, consumers because mortgages good lot low a ago. X to I sentiment even to locks the have housing to I HPA. folks that. those invest bps with is But family reflect resi a time a think And below the want of rates ago hundred a think in on that and mid-Xs, was do to housing that Single

a transaction get lot a think that to does further So and of it were they're sentiment rates a home. If to from activity. in rally lot figuring is into A the probably buy there's perspective, I psychological. for Xs, conviction

we get lot of come least sidelines. you not that as lot there's context in think rate consumers supply. Xs, off more probably overlay move. are the from I that of HEI supply to very as will a once sell and still interesting lot us. long-term think of a historical is start coming the And because still think housing low coupon into at perspective about so be you are purchase a think into mortgages But the a on tailwind. to out a why sentiment of Obviously, see rates sitting the people And rates. and the money, less That's Xs is that willing get I the on to the fact business

Operator

We session. question have of answer our reached concludes This end the today's and teleconference.

time. You your may this lines participation. disconnect Thank your you at for

Redwood Trust (RWT) 1 Aug 242024 Q2 Earnings call transcript