Q1 2024 Redwood Trust Inc Earnings Call
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Operator: ?? ?? ?? ?? ?? Thanks for watching!
Good afternoon, and welcome to the Redwood Trust, Inc. First quarter 2024 financial results Conference call. Today's conference is being recorded I would now I'll turn the call over to Kaitlyn Mauritz Redwood Senior Vice President of Investor Relations. Please go ahead ma'am.
Operator: Good afternoon, and welcome to the Redwood Trust Inc. first quarter 2024 financial results conference call. Today's conference is being recorded. I'll now turn the call over to Kaitlyn Mauritz, Redwood's senior vice president of investigations. Please go ahead.
Kaitlyn Mauritz: Thank you, Operator. Hello, everyone, and thank you for joining us today for our first quarter 2024 Earnings Conference call. With me on today's call are Chris Abate, Chief Executive Officer; Dash Robinson, President; and Brooke Carillo, Chief Financial Officer. Before we begin, I want to remind you that certain statements made during management's presentation today with respect to future financial and business performance may constitute forward-looking statements. Forward-looking statements are based on current expectations, forecasts, and assumptions and involve risks and uncertainties that could cause actual results to differ materially.
Kaitlyn Mauritz: Thank you operator, Hello, everyone and thank you for joining us today for our first quarter of 2024 earnings Conference call with me on today's call are Chris <unk>, Chief Executive Officer Dash Robinson, <unk>, President and Chief Financial Officer before we begin I want to remind you that certain statements made during management's presentation today with respect to future financial.
Kaitlyn Mauritz: We encourage you to read the company's annual report on Form 10-K, which provides a description of some of the factors that could have a material impact on the company's performance and cause actual results to differ from those that may be expressed in forward-looking statements. In this column, we may also refer to both GAAP and non-GAAP financial measures. The non-GAAP financial measures provided should not be utilized in isolation or considered as a substitute for measures of financial performance prepared in accordance with GAAP.
Kaitlyn Mauritz: And business performance May constitute forward looking statements forward looking statements are based on current expectations forecasts and assumptions and involve risks and uncertainties that could cause actual results to differ materially. We encourage you to read the company's annual report on Form 10-K, which provides a description of factors that could have a material impact on the company's performance and cause actual results.
Kaitlyn Mauritz: Differ from those that maybe expressed in forward looking statements on this call may also refer to both GAAP and non-GAAP financial measures.
Kaitlyn Mauritz: The non-GAAP financial measures provided shall be utilized in isolation or considered as a substitute for measures of financial performance prepared in accordance with GAAP a reconciliation between GAAP and non-GAAP financial measures are provided in our first quarter Redwood review, which is available on our website that would trust dot Com I also note that the content of today's conference call contains time sensitive information that are only act.
Kaitlyn Mauritz: As of today, we do not intend and undertake no obligation to update this information to reflect subsequent events or circumstances. Finally, today's call is being recorded wont be available on our website later today I'll now turn the call over to Chris for opening remarks.
Kaitlyn Mauritz: A reconciliation between GAAP and non-GAAP financial measures is provided in our first quarter Redwood review, which is available on our website, redwoodtrust.com. Also note that the content of today's conference call contains time-sensitive information that is only accurate as of today, and we do not intend and undertake no obligation to update this information to reflect subsequent events or circumstances. Finally, today's call is being recorded and will be available on our website later today. I'll now turn the call over to Chris for his opening remarks.
Christopher J. Abate: Thanks, Kate. In February, we delivered our fourth quarter commentary, where our focus was on actions we took in 2023 to lay the groundwork for a long-term position. These actions occurred in the midst of one of the worst housing finance markets in decades. More recently, at our March Investor Day, we updated the market on our progress at that point in the first quarter, including the announcement of a transformational new capital partnership. For the first quarter now behind us, we're pleased to be building on the foundation we established, generating significant increases in net interest income, GAP earnings, EAD earnings, and GAP book value.
Chris: Thanks, Keith in February we delivered our fourth quarter commentary, where our focus was on actions. We took in 2023 to lay the groundwork for our long term positioning.
Chris: Jackson has occurred in the midst of one of the worst housing finance markets in decades.
Chris: And recently at our March Investor Day, we updated the market on our progress at that point in the first quarter, including the announcement of a transformational new capital partnership.
Chris: For the first quarter now behind US we're pleased to be building on the foundation, we established generating significant increases in net interest income GAAP earnings <unk> earnings and GAAP book value.
Christopher J. Abate: As we'll discuss in today's call, the first quarter is emblematic of our long-term strategic vision, and demonstrates the potential of our platform to deliver value regardless of the interest rate environment. Our business has been fueled by the strong capital position we've amassed in recent quarters, allowing us to form generational partnerships with banks and other institutions who now lack portfolio capacity for residential mortgages. With April now behind us, we've continued to gain market share, making our trajectory worthy of a second look by macro traders who've been otherwise consumed by the gyrations of the 10-year Treasury. Our residential consumer lock volume was up 50% quarter over quarter, exceeding our highest level since the beginning of this Fed tightening cycle.
Chris: As we'll discuss in today's call first quarter is emblematic of our long term strategic vision demonstrates the potential of our platform to deliver value regardless of the interest rate environment.
Our business has been fueled by the strong capital position is unmatched in recent quarters, allowing us to form generational partnerships with banks and other institutions now lack portfolio of capacities residential mortgages.
Chris: With April now behind US, we continue to gain market share.
Chris: Our trajectory worthy the second months by macro traders have been otherwise consumed the gyrations of the 10 year Treasury.
Chris: Our residential consumer lock volume was up 50% quarter over quarter eclipsing our highest level since the beginning of this fed tightening cycle.
Christopher J. Abate: The residential investor business has also found momentum on the heels of the $750 million strategic partnership that we announced with the Canada Pension Plan Investment Board last month. As a reminder, this partnership includes a $500 million joint venture sized to purchase up to $4 billion of residential investor loans in the quarters ahead. But the partnership with the Canada Pension Plan Investment Board is much more than a traditional joint venture. It also provides us with significant corporate liquidity through a $250 million secured revolving facility.
Chris: Our residential Investor business has also gone momentum on the heels of the $750 million strategic partnership we announced with the Canada pension plan investment Board last month.
Chris: As a reminder, this partnership includes a $500 million joint venture decides to purchase up to $4 billion of residential investor loans in the quarters ahead.
Chris: But the partnership with the Canada pension plan investment Board there is much more than a traditional joint venture. It also provides us with significant corporate liquidity to a $250 million secured revolving facility through today, we've already drawn $100 million on this facility as it is well suited to address the anticipated growth trajectory for our residential.
Christopher J. Abate: Through today, we've already drawn $100 million on this facility as it's well suited to address the anticipated growth trajectory for our residential consumer business. Leveraging this partnership has reduced our need for additional equity capital thus far in 2024.
Chris: Consumer business leveraging this partnership has reduced our need for additional equity capital thus far in 2024.
Christopher J. Abate: An extended period of higher rates has also driven the expansion of our home equity product offerings. We closed our first directly originated home equity investment option through our Aspire platform in the first quarter, and began the process of rolling out traditional second lane mortgage products through our seller base. As we have for some of our other products, we expect to pursue dedicated capital partners for this asset class in the quarters ahead and scale these offerings over time.
Chris: And extended period of higher rates is also driving the expansion of our home equity product offerings.
Chris: What was their first directly originated home equity investment options through our aspire platform in the first quarter began the process of rolling out a traditional second lien mortgage products through our seller base.
Chris: As we have for some of our other products, we expect to pursue dedicated capital partners for this asset class in the quarters ahead and scale these offerings over time.
Christopher J. Abate: Turning to our investment portfolio, fundamentals remain strong. The vast majority of our investments are backed by single-family housing credit, where homeowners continue to build equity. In particular, we've made meaningful progress within our residential investor portfolio where we saw a sharp reduction in credit-related charges for multifamily bridge loans relative to recent quarters. This eventual flattening was intuitive to us as we made important shifts in our product focus as rates began to rise in late 2022. And we've steered clear of commercial asset classes now experiencing significant stress.
Chris: Turning to our investment portfolio fundamentals remain strong the vast majority of our investments backed by single family housing credit homeowners continue to build equity.
Chris: In particular, we've made meaningful progress within our residential investor portfolio, where we saw a sharp reduction in credit related charges for multifamily bridge loans relative to recent quarters.
Chris: This eventual flattening it was intuitive to us as we made important shifts in our product focus as rates began to rise in late 2022.
Chris: And we've steered clear of commercial asset classes now experiencing significant stress.
Christopher J. Abate: Collectively, our progress in the first quarter reflects the unique value that our franchise brings to homebuyers, housing investors, banks, independent mortgage companies, and private credit institutions who have come to rely upon Redwood. Our focus will now be on scaling our platforms and growing wallet share at a time when few are capable of doing so. While our business stands to significantly benefit from an eventual Fed easing, the first quarter was evidence that we are well positioned for growth in an extended, higher-for-longer environment as well.
Chris: Collectively our progress in the first quarter reflects the unique value that our franchise Springs homebuyers housing investors banks independent mortgage companies and private credit institutions, who have come to rely upon redwood.
Chris: Our focus will now be on scaling our platforms and growing wallet share at a time when fewer capable of doing so.
Chris: While our business stands to significantly benefit from an eventual fed easing. The first quarter was evidenced that we are well positioned for growth and an extended higher for longer environment as well.
Christopher J. Abate: As more banks begin to publicly announce their early compliance with the anticipated Basel Ingame rules, it serves as an important reminder of the growing need for Redwood's products and services. And with that, I will turn the call over to Dash.
Chris: As more banks begin to publicly message there early compliance with anticipated Basel I and game rules serves as an important reminder of the growing need for Edwards products and services.
Speaker Change: And with that I will turn the call over to dash.
Dashiell I. Robinson: Thank you, Chris. I'll cover the performance of our operating platforms and investment portfolio before handing it over to Brooke to discuss our overall financial performance. As Chris emphasized, the first quarter of 2024 validated the unique opportunity for our residential consumer business to drive volumes and profitability amidst continued pressure on broader industry volumes. We locked $1.8 billion of loans during the quarter, a 53% increase from the fourth quarter. Gross margins were 107 basis points, above our historical target range, on the strength of three accretive securitizations totaling $1.2 billion, a monthly cadence that drives efficient capital turnover at increased volume.
Speaker Change: Thank you Chris I'll cover the performance of our operating platforms and investment portfolio and before handing it over to Brad to discuss our overall financial performance.
Speaker Change: As Chris emphasized the first quarter of 2024 validated the unique opportunity for a residential consumer business to drive volumes and profitability amidst continued pressure on broader industry volumes.
Speaker Change: We locked $1.8 billion of loans during the quarter of 53% increase from the fourth quarter gross margins were 107 basis points above our historical target range on the strength of three accretive securitizations totaling $1 $2 billion of monthly cadence that drives efficient capital turnover at increased volumes.
Dashiell I. Robinson: Credit spreads have remained constructive for issuance, and earlier this month, we priced our fourth securitization of 2024 at our tightest spreads of the year with robust investor demand. This strength of execution pairs well with our longstanding operational advantages, and our first-quarter volume mix reflected increased wallet share across our network of loan sellers. Our lock volume with banks rose, even as overall bank production fell. Meanwhile, our volumes doubled quarter-on-quarter with independent mortgage bankers, or IMBs.
Speaker Change: Spreads have remained constructive for issuance and earlier this month, we priced our fourth securitization of 'twenty 'twenty four at our tightest spreads of the year with robust investor demand.
Speaker Change: This strength of execution pairs, well with our longstanding operational advantages in our first quarter volume mix reflected increased wallet share across our network of loan sellers.
Speaker Change: Our lock volume with banks rose, even as overall bank production fell Meanwhile, our volumes doubled quarter on quarter with independent mortgage bankers for I M. B's. These.
Dashiell I. Robinson: These partners remain a key driver of non-agency volumes in the market and represent a longstanding strategic moat for the business, critical to us continuing to drive market share higher. We also saw increased momentum from bulk acquisitions, which more than doubled relative to the fourth quarter. This is a development we have been planning for, as our enhanced capital position allows us to continue to be more aggressive in this channel and pursue larger seasonal portfolios that complement on-the-run production.
Speaker Change: These partners remain a key driver of non agency volumes in the market and represent a longstanding strategic moat for the business critical to us continuing to drive market share higher.
Speaker Change: We also saw increased momentum from bulk acquisitions, which more than doubled relative to the fourth quarter. This is a development and we have been planning for is our enhanced capital position allows us to continue to be more aggressive in this channel and pursue larger seasoned portfolios that complement on the run production.
Dashiell I. Robinson: Importantly, momentum in the business continues to grow, notwithstanding the 45 basis point backup and the 10-year treasury yield we have seen in April alone. Lock volumes in April, once again balanced across our seller base and between bulk and flow transactions, outpaced our average Q1 monthly run rate by 25%. Turning to our residential investor platform, our priorities remain prudently growing top-line revenue, proactively managing credit risk, and returning the business to sustained operating profitability. For the first quarter, we funded $326 million in loans, effectively flat from fourth-quarter volume.
Speaker Change: Importantly momentum in the business continues to grow notwithstanding the 45 basis point back up in the 10 year Treasury yield we have seen in April alone lock volumes in April once again balanced across our seller base and between bulk and flow transactions outpaced our average Q1 monthly run rate by 25%.
Speaker Change: Turning to our residential investor platform, our priorities remain prudently growing topline revenue proactively managing credit risk and returning the business to sustained operating profitability.
Speaker Change: For the first quarter, we funded $326 million of loans effectively flat from fourth quarter volumes revenue margins and segment profitability improved quarter over quarter, driven by tightening securitization spreads volume trends picked up later in the first quarter and given recent volatility in benchmark interest rates, we built important momentum in lesser.
Dashiell I. Robinson: Revenue margins and segment profitability improved quarter over quarter, driven by tightening securitization spreads. Volume trends picked up later in the first quarter, and given recent volatility and benchmark interest rates, we built important momentum in less rate-sensitive products, including single-asset bridge or SAB loans. We enter the second quarter with a growing pipeline as more borrowers come to accept the current rate environment and lock-in coupons. Funding volume in April is trending 15% higher than Q1's average monthly run rate, driven in part by the largest month for SAB production since the acquisition of the Riverbend platform in mid-2022. Distribution channels for our residential investor loans remain open and are benefiting from a firmer overall market tone.
Speaker Change: Rate sensitive products, including single asset bridge or SAP be loans.
Speaker Change: We entered the second quarter with a growing pipeline as more borrowers come to accept the current rate environment and lock in coupons.
Speaker Change: Funding volume in April is trending 15% higher than Q1s average monthly run rate driven in part by the largest month for SAP production since the acquisition of the Riverbend platform in mid 2022.
Speaker Change: Distribution channels for our residential investor loans remain open and are benefiting from a firmer overall market tone.
Brooke E. Carillo: First quarter bridge production was largely distributed into our oak tree joint venture and our three revolving bridge securitization. With the CPP partnership in place, we are finalizing warehouse financing for the joint venture and expect to begin selling both bridge and term loan production to this new vehicle towards the end of the second quarter. The delinquencies are that our term and bridge portfolios remain stable quarter over quarter, and we have continued to emphasize disciplined underwriting and product selection.
Speaker Change: First quarter bridge production was largely distributed into our Oaktree joint venture and our three revolving bridge securitizations with.
Speaker Change: But the CPP partnership in place, we are finalizing warehouse financing for the joint venture and expect to begin selling both bridge and term loan production to this new vehicle towards the end of the second quarter.
Speaker Change: Delinquencies are that our term and bridge portfolios remains stable quarter over quarter, and we have continued to emphasize disciplined underwriting and product selection.
Brooke E. Carillo: At March 31st, virtually all of our 90 plus day delinquencies in the bridge portfolio were for loans originated in the third quarter of 2022 or earlier, one of the key junctures at which we evolved our origination approach. Since late 2022, our residential investor production mix has remained predominantly focused on single-family loans, where performance has remained resilient. This trend bears out what we are seeing in our broader investment portfolio, particularly in our reperforming loan or RPL book, where delinquencies have hit three-year lows, partly on the strength of steadily improving LTV.
Speaker Change: At March 31, virtually all of our 90 plus day delinquencies in the bridge portfolio were for loans originated in the third quarter of 2022 or earlier, one of the key juncture at which we evolved our origination approach since late 2022, our residential investor production mix has remained predominantly focused on single family loans, where performance has remained.
Speaker Change: <unk> resilient.
Speaker Change: This trend mirrors, what we're seeing in our broader investment portfolio, particularly our in our re performing loan or RPE L book for delinquencies have hit three year lows, partly on the strength of steadily improving Ltvs. In addition, delinquencies within our securitized Sequoia portfolio remained low at just 20 basis points.
Brooke E. Carillo: In addition, delinquencies within our Securitized Sequoia Portfolio remain low at just 20 basis points. As a reminder, our investment portfolio sits with $2.47 per share of discounted equity, much of which we continue to believe is recoverable with both continued performance of the underlying investments and further firming of risk sentiment, which could reverse unrealized losses from spread widening taken in 2023. During the first quarter, we found attractive pockets of relative value, deploying approximately $115 million of capital into new investments for an estimated mid-teens blended return.
Speaker Change: As a reminder, our investment portfolio sits with $2 47 per share of discount much of which we continue to believe is recoverable with both continued performance of the underlying investments and further firming of risk sentiment, which could reverse unrealized losses from spread widening taken in 2023.
Speaker Change: During the first quarter, we found attractive pockets of relative value deploying approximately $115 million of capital into new investments at an estimated mid teens blended return.
Brooke E. Carillo: This represented our most active investing quarter since the third quarter of 2022, and we anticipate continuing to deploy excess capital accretively in the coming quarters, both in support of our operating platforms and into opportunistic third-party investment. And with that, I will turn the call over to Brooke to discuss our financial results. Thank you.
Speaker Change: This represented our most active investing quarter since the third quarter of 2022, and we anticipate continuing to deploy excess capital accretively in the coming quarters, both in support of our operating platforms and into opportunistic third party investments.
Speaker Change: And with that I will turn the call over to <unk> to cover our financial results.
Brooke E. Carillo: Thank you, Dash. We reported GAAP earnings of $29 million for the first quarter, or $0.21 per share, compared to $19 million, or $0.15 per share, in the fourth quarter, resulting in a first quarter GAAP ROE of 10%. We reported book value per share of $8.78, a 1.6% increase from $8.64 on December 31st. Gap earnings exceeded our Q1 common dividend of $0.16 per share, and we delivered a quarterly total economic return of 3.5% for the quarter.
Speaker Change: Thank you at Ash, we reported GAAP earnings of 29 million for the first quarter or 21 cents per share compared to $19 million or 15, especially on the fourth quarter, resulting in a first quarter GAAP early at 10% you.
Speaker Change: Our reported book value per share of $8.78.
Speaker Change: 1.6% increase from $8 64 times at December 31st.
Speaker Change: GAAP earnings exceeded our Q1 common dividend of 16 cents per share and we delivered a quarterly total economic return of three 5% for the quarter improvement in GAAP earnings was driven by higher net income from both of our mortgage banking platform as well as positive mark to market changes in the investment portfolio.
Brooke E. Carillo: The improvement in Gap earnings was driven by higher net income from both of our mortgage banking platforms, as well as positive mark-to-market changes in the investment portfolio. Net interest income increased 20%, or $4 million, in Q1, driven by $200 million of accretive capital deployment over the last two quarters and improved interest income on bridge loans. This positively impacted earnings available for distribution, or EAD, which was $11 million or $0.08 per share in the first quarter, as compared to $7 million or $0.05 in the fourth quarter.
Speaker Change: Net interest income increased 20% or $4 million in Q1, driven by $200 million of accretive capital deployment over the last two quarters and improved interest income on page nine this positively impact earnings available for distribution or <unk> D, which is 11 million or eight cents per share in the first quarter as compared to $7 million or 5%.
Speaker Change: In the fourth quarter.
Brooke E. Carillo: As mentioned, we grew block volume and maintained healthy margins above our target gain-on-sale range in our residential consumer mortgage banking segment, ultimately delivering a 17% gap return, up from 10% in the prior quarter. We have demonstrated operating leverage as we rescale the platform, driving down our cost per loan to 37 basis points during the quarter, approaching our run rate target of 30 to 35 basis points and in line with historical ranges for the business. The contribution from our residential investor mortgage banking segment also improved quarter over quarter, even with slightly lower volumes due to improved securitization economics from spread tightening.
Speaker Change: As has been mentioned grid lock volume and maintained healthy margins above our target gain on sale range and our residential consumer mortgage banking segment, ultimately delivering a 17% GAAP return from 10% in the prior quarter, we have demonstrated our operating leverage as we scale the platform driving down our cost per loan to 37 basis points.
Speaker Change: The quarter approaching a run rate target of 30 to 35 basis points and in line with historical range is for the business the.
Speaker Change: The contribution from our residential investor in mortgage banking segment also improved quarter over quarter, even with the slightly liver volumes go down in previous securitization economics from spread tightening.
Brooke E. Carillo: On our last quarter's earnings call, we guided the market to another 5-10% reduction in G&A from 2023's levels. We made substantial progress towards this goal in the first quarter following recent expense reduction initiatives completed in late March. Our first quarter G&A expenses include $3 million of costs related to these actions. In aggregate, we expect our go-forward G&A to decrease by approximately $2 million quarterly, or $8 million on an annualized basis.
Speaker Change: On our last quarter's earnings call, we guided the market to another 5% to 10% reduction in G&A from 2023, if my math, we made substantial progress towards that goal in the first quarter and following recent expense reduction initiatives completed in late March our first quarter G&A expenses included 3 million of costs related to these actions in aggregate we expect are gone.
Speaker Change: Former G&A decreased by approximately $2 million quarterly or 8 million on an annualized basis.
Brooke E. Carillo: Our strong liquidity position was further bolstered by two important new sources of corporate capital. The first was a $250 million secured facility, which was part of the CPP partnership, and the second was the $60 million inaugural senior unsecured debt offering in January. As previously described, the CPP financing facility is secured by unencumbered assets, as well as by equity in certain of our operating subsidiaries. The facility is structured with revolving capacity, which makes it well suited to address the anticipated growth trajectory of our residential consumer business.
Speaker Change: Our strong liquidity position was further bolstered by two important new sources of corporate capital.
Speaker Change: The first was the $250 million secured facility, which was part of the CPP partnership and the second was the $60 million inaugural senior unsecured debt offering in January.
Speaker Change: Please describe the CPP financing facility is secured by unencumbered assets as well as by equity and certain of our operating subsidiaries and facility restructuring with revolving capacity, which makes it well suited to address the anticipated growth trajectory of our residential consumer business subsequent to quarter end, we completed an initial draw of $100 million and have begun to deploy the.
Brooke E. Carillo: Subsequent to quarter end, we completed an initial draw of $100 million and have begun to deploy the capital in line with the mid-team return targets Dash mentioned. We reported total recourse leverage of 1.9 times for the first quarter, a decrease from 2.2 times for the fourth quarter as a result of lower recourse debt at our operating businesses, as we successfully completed three Sequoia securitizations during the quarter and reduced our convertible debt by approximately $31 million. Cash and cash equivalents at quarter end were $275 million compared to $293 million at year end, which is notable given the $146 million of capital deployed during the quarter inclusive of corporate debt repurchases.
Speaker Change: Capital in line with the mid teen return targets Dash mentioned Libra.
Speaker Change: We reported total recourse leverage of one nine times for the first quarter a decrease from $2 two from the fourth quarter as a result of lower recourse debt at our operating businesses as we successfully completed three sequoia securitization during the quarter and reduced our convertible debt by approximately $31 million cash.
Speaker Change: Cash and cash equivalents at quarter end were $275 million compared to 293 million at year end, which is notable given 146 million of capital deployed during the quarter inclusive of the corporate debt repurchases.
Operator: During our Investor Day in March, we took the opportunity to walk the market through our path to higher earnings. Our performance during the quarter serves as a testament to that goal, and we expect to continue to build on the net interest income we generated in the first quarter. We're committed to growing market share and deploying capital effectively to boost earnings in line with the current dividend level over the remainder of this year. And with that, operator, we will open the line to questions.
Speaker Change: During our Investor day in March we took the opportunity to work the market through our path to higher earnings our performance during the quarter serves as a testament towards that goal and we expect to continue to build on the non interest income we generated in the first quarter, we're committed to growing market share and deploying capital effectively to boost earnings in line with the current dividend level over the remainder of this year.
Speaker Change: And with that operator, we will open the line for questions.
Speaker Change: Thank you.
Operator: Thank you. We will now conduct our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. If you do, a confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please as we poll for questions. Our first question comes from the line of Richard Shane with JPMorgan. Please proceed with your question.
Speaker Change: We will now conduct a question and answer session.
Speaker Change: If you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Please as we poll for questions.
Speaker Change: Our first question comes from the line of Rick Shane with J P. Morgan. Please proceed with your question.
Richard Barry Shane: Hi guys, thanks for taking my question this afternoon. When we compare the bridge loan maturity schedule from the fourth quarter to the first quarter, it looks to me like about $165 or $170 million of the attending first quarter maturities have been rolled in or extended into the second and third quarters. Is that about right?
Richard Barry Shane: Hi, guys. Thanks for taking my question this afternoon.
Richard Barry Shane: When we compare the <unk>.
Richard Barry Shane: <unk> loan maturity.
Richard Barry Shane: Schedule from the fourth quarter to the first quarter.
Richard Barry Shane: It looks to me like about a $165 $170 million of the <unk>.
Richard Barry Shane: Pending first quarter maturities have been enrolled and are extended into the second and third quarter is that about right.
Unknown Executive: Yeah, that's right. We had about 155 million in extensions during the quarter that were, you know, anywhere between about six to 12 months. I think around eight, eight months on average.
Speaker Change: Yeah, that's right, we had about $155 million of extensions on the corner that were you know anywhere between about six to 12 months I think around eight eight months on average.
Unknown Executive: Got it. And last year you guys provided sort of a pie chart showing the outcomes of 23 maturities, and you broke out what percentage were extended, what percentage were extended with additional commitments. Of that $155 million, was a high percentage extended with additional equity commitments, or how should we think about that?
Speaker Change: Got it.
Speaker Change: Last year, you guys provided sort of a pie chart showing the.
Speaker Change: Outcomes by Mitch of 'twenty three maturities.
Speaker Change: And you broke out what percentage were extended what percentage were extended with additional commitments.
Speaker Change: Of that 155 million.
Speaker Change: Was the high percentage of extended with additional equity commitments or how should we think about that.
Unknown Executive: Somewhere, Rick, you know, a lot of those were shorter-term in nature, so we always, you know, we don't extend a loan without, number one, procuring economics, and number two, ensuring that, you know, our equity position, you know, remains sufficient. So in certain of those cases, yes, you know, we did ask the borrower to re-up, but in many cases where we feel like we have sufficient equity position and the borrower just needs, you know, a few more months, you know, the house is on the market and they're just looking to sell it, we don't always require it, but we always obviously pulled out a fresh appraisal, and ensure that our equity position is sound.
Speaker Change: Somewhere Iraq.
Speaker Change: You know a lot of those were shorter term in nature. So we always we don't extend alone without number one procuring economics and number two.
Brooke E. Carillo: And those three are in other languages, right? I'm sorry, Brooke? Sorry, I was just noting that the associated fees are in other sources of income that Dash mentioned.
Speaker Change: During that.
Speaker Change: Our equity position remains sufficient so in certain of those cases, yes, we did as though the bar to re up but in many cases, where we feel like we have sufficient equity position in the borrower just needs.
Speaker Change: A few more months.
Speaker Change: <unk> on the market and they're just looking to sell it.
Speaker Change: As required, but we always obviously pulled out a fresh appraisals.
Speaker Change: And ensure that our equity position is sound.
Speaker Change: No.
Speaker Change: Right.
Speaker Change: Okay, I'm sorry Brooke.
Speaker Change: Just noting the dancers seen in fees or in other income that Doug mentioned.
Unknown Executive: Got it. And as we move through 24, under current market conditions, is it reasonable to assume, you know, sort of a roughly 50-50 mix between payoffs and extensions at this point?
Speaker Change: Got it.
Speaker Change: As we move through 'twenty four under current market conditions reasonable to assume.
Speaker Change: You know, it's sort of a roughly 50 50 mix between payoffs and extensions at this point.
Unknown Executive: We would actually probably expect extension activity to drop a bit. Um, just for context, you know, since the beginning of the year through today, the end of April, we've had about 250 million in payoffs in the full bridge portfolio, about 80% of that was from 2022 vintage earlier. So you're starting to see, you know, a little bit better velocity, particularly as the single-family market remains strong, and people are starting to move inventory, you know, a little bit more efficiently, sort of, you know, to consumers as single-family markets remain strong. So we would, historically, we've generally seen a third or so, and going forward, we would expect this number to trend back closer.
Speaker Change: Hum.
Speaker Change: We would actually probably expect extension activity to drop a bit.
Speaker Change: Just for context, you know since the beginning of the year through <unk>.
Speaker Change: Today at the end of April we had about $250 million in pay offs and and the full bridge portfolio about 80% of that was from 2022 vintage earlier, so you're starting to see.
Speaker Change: Little bit better velocity, particularly as the single family.
Speaker Change: The market remains strong and people are starting to move inventory a little bit more efficiently sort of to consumers as single family markets remains strong. So we would historically, we've generally seen a third or so and going forward. We would expect this number to trend back closer to that.
Speaker Change: Hey, Rick.
Unknown Executive: [inaudible] You know, just to make sure we don't bury the lead, you know, we thought that the performance of the bridge book this past quarter, certainly from a credit perspective, was substantially improved. But when you dig into the numbers, and you look at the slope of delinquencies and credit, there was a significant flattening, I don't think we've observed across the sector.
Richard Barry Shane: No just just to make sure we don't bear the lead we thought that the performance of the bridge book This past quarter certainly from a credit perspective was substantially improved when you dig into the numbers and you look at the slope of.
Speaker Change: Delinquencies and credit there was a significant flattening.
Speaker Change: I think we have observed them across the sector. So we're actually really really pleased with.
Speaker Change: Our asset management team and and you know, how we've sort of evolved that book.
Unknown Executive: So we're actually really, really pleased with our asset management team and, you know, how we sort of evolved that book. But I'm sure all of that will be evident in the review. Yeah, no, and look
Speaker Change: I'm sure all of that will be evident in the review.
Speaker Change: Yeah I know.
Unknown Executive: Yeah, No. We certainly see that on the bridge book, a 20 basis point increase quarter over quarter versus 160 the quarter before, so that second derivative is very favorable, there's no question. I'm just trying to understand sort of how the dispositions work.
Speaker Change: We certainly we certainly see that on the bridge book 20 basis point increase.
Speaker Change: Quarter over quarter versus 260, the quarter for 116 the quarter before.
Speaker Change: So that second derivative has very favorable theres no question.
Speaker Change: I'm, just trying to understand sort of how the dispositions work.
Speaker Change: Yes.
Speaker Change: Thank you.
Bose Thomas George: Thank you. Our next question comes from the line of Bose George with KBW. Please proceed with your question.
Speaker Change: Our next question comes from the line of Bose, George with U K B W.
Bose Thomas George: With your question.
Unknown Executive: Hey everyone, good afternoon. I wanted to ask you guys about accretion from the JV at the investor day. I think it was 25 to 27 cents over, I think it was a three-year period. And the 15 cents that were mentioned in the review today, is that over sort of a shorter time frame, and then we sort of grow into that, you know, the higher numbers over the next three years or just yet trying to figure out the cadence?
Bose Thomas George: Hey, everyone. Good afternoon.
George: I wanted to ask them at the Investor Day, you guys mentioned the accretion from the JV.
Bose Thomas George: I think it was 25 to 27 cents over I think it was a three year period and the.
Bose Thomas George: <unk> was mentioned in the review today is that over sort of a shorter timeframe and then we sort of throw into that.
Bose Thomas George: The higher numbers over the next three years or just trying to figure out the cadence.
Unknown Executive: Yeah, we were really just reiterating what we had said on Investor Day, so it remains the same. You know, it's a 15 cent annual number for the joint venture in terms of accretion over where we are kind of with our standalone business as it's financed today. As you saw with us in Oak Tree, it will take a quarter or so.
Speaker Change: Yeah, we were.
Speaker Change: Just reiterating what we had said at Investor day. So it remains the same as you know at the 15th annual number for that joint venture in terms of.
Speaker Change: Accretion over over where we are with our Standalone business as it stands today and as you saw with us and O Dream. It will take a quarter or so where we're actively working on financing facilities for the joint venture we're seeing a lot of.
Unknown Executive: We're actively working on financing facilities for the joint venture. We're seeing a lot of very robust appetite from lenders to finance this facility, as you might expect, which is really going to help us further with our deployment. So we're excited about it, but this will be a later deployment in Q2 as we get those lines established.
Unknown Executive: Okay, great. Thanks.
Speaker Change: Very robust appetite from lenders to finance this facility as you might expect which is really going to help US you know further.
Bose Thomas George: Further with our deployment. So we're excited about it but this will be a later in Q2 and you know to find out as we get those lines established.
Unknown Executive: And then in terms of deployable capital, you know, how should we think about that now? You have, I guess it was $274 million in cash, but, you know, you've got more, obviously, more flexibility with the JV. You, in the review, it mentions unencumbered assets that you could lever up. So just, you know, trying to think and put the pieces together and think about, you know, how much sort of flexibility you have.
Speaker Change: Okay, great. Thanks, and then in terms of deployable capital how should we think about that now you have I guess it was $274 million of cash but it's.
Bose Thomas George: <unk> got more flexibility with.
Bose Thomas George: J B E.
Bose Thomas George: The review had mentioned unencumbered assets that you could lever up so just trying to think of put the pieces together and think about how much sort of flexibility you have.
Unknown Executive: We think our flexibility is really good, Bose. It's a great question.
Bose Thomas George: We think our flexibility is really good because it's a great question at.
Unknown Executive: At the moment, you know, in terms of liquidity on hand, we think we have about 175 million of deployable capital that does not include, you know, further optimization of unencumbered assets, obviously inclusive of the ability to draw, you know, on the CPP line further. That, by the way, is net of the July 2024 convert maturity. So we're backing that out.
Bose Thomas George: At the moment.
Bose Thomas George: Of liquidity on hand, we think we have about $175 million of deployable capital that does not include further optimization of unencumbered assets, obviously inclusive of.
Bose Thomas George: The ability to draw on the CPP line further that by the way is net of the July 2024 convert maturity silver backing that out. We just have we have just over $100 million of remaining outstandings under that issuance. So net of that today, we have about 175 and you know that can go up by another 125.
Unknown Executive: We just have We have just over 100 million outstanding under that issuance. So net of that, today, we have about 175. And, you know, that can go up by another 125 plus or more, you know, between further draws on CPP, which, as a reminder, includes unencumbered assets, as well as equity in certain of our operating subsidiaries. So definitely, you know, net asset value there that's not otherwise easy to monetize, we can borrow against, and then we have other securities which we could encumber if we wanted to, you know, and more sort of run of the mill repo.
Bose Thomas George: Or more.
Bose Thomas George: Between further draws on CPG.
Bose Thomas George: Which as a reminder includes unencumbered assets as well as equity in certain of our operating subsidiaries so definitely.
Bose Thomas George: Net asset value, there, that's not otherwise easier to monetize.
Bose Thomas George: We can borrow against and then we have other securities, which we could encumber if we wanted to.
Bose Thomas George: One more.
Bose Thomas George: Sort of run of the mill repo. So we feel really good about our deployment, it's a big part of the NII walk.
Unknown Executive: So we feel really good about our deployment, you know, it's a big part of the NII walk. We which was up 20% quarter on quarter and where we where we see future growth, we have some information in the review. This quarter about that, a lot of that is linked to this deployable capital and just our ability to go on offense and continue to point that like we did in the first quarter. Okay, great. Thanks.
Bose Thomas George: Which was up 20% quarter on quarter, and where we see future growth we have some information in the review.
Bose Thomas George: This quarter about that a lot of that is linked to this deployable capital and just our ability to go on offense and continue deploying that like we did in the first quarter.
Speaker Change: Okay, great. Thanks.
Douglas Michael Harter: Thank you. Our next question comes from the line of Doug Harter with UBS. Please proceed with your question.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Doug Harter with UBS. Please proceed with your question.
Speaker Change: Okay.
Operator: Doug, you might be on mute.
Douglas Michael Harter: Doug you might be on mute.
Operator: How about now, Kait? Can you hear me? We can hear you now. Perfect.
Douglas Michael Harter: How about now Okay can you hear me.
Speaker Change: Here you know Doug.
Unknown Executive: Another question on the bridge delinquencies. Last quarter, you gave us a breakdown of how much of it was multi versus single asset. Just wondering if you could update us on that mix of those delinquencies. And then on resolutions, how are the resolutions trending and kind of where any liquidations that are happening and kind of what the recoveries are there relative to your loans?
Douglas Michael Harter: Perfect. Another question on the <unk>.
Douglas Michael Harter: Bridge delinquencies last quarter, you gave us a little bit of Oh, you gave us a breakdown kind of where weather how much of it was multi versus.
Douglas Michael Harter: Single asset.
Douglas Michael Harter: Just wondering if you could update us on kind of that mix of those delinquencies.
Douglas Michael Harter: And then on.
Douglas Michael Harter: Resolutions have you.
Douglas Michael Harter: Kind of how are the resolutions trending and kind of where any.
Douglas Michael Harter: Liquidations that are happening and kind of what the recut.
Douglas Michael Harter: Recoveries are there relative to your loans.
Unknown Executive: Sure, we do still have that information. It's in our Excel tables this quarter. It's out of the body of the review, so it's Table 16 in our Excel tables. I would say the trends are similar. One thing I would note is, as Rick pointed out, we have about 4.7% of our 90-plus population at 331. Chris talked about the flattening of that curve.
Speaker Change: Sure. We do we do you still have that information it isn't our excel tables. This quarter, it's out of the body of the review. So it's table 16 in our XL tables I would say the trends are similar one thing I would note as you know we.
Speaker Change: As Rick pointed out you have about four 7% and 90, plus you know at $3 31, Chris talked about the flattening of that curve.
Unknown Executive: Since the end of the quarter in April, we have resolved about 1.3% of the portfolio, so that 90-plus number is now in the threes. That's not reflected in the review, but those are all at 331, but we were able to continue momentum with resolutions during the month of April and year-to-date. In terms of outcomes, we've been pleased. On the bridge portfolio, most of the severities have been zero.
Speaker Change: Since the end of the quarter in April we have resolved about one 3% of the portfolio. So that that 90 plus number is now in the threes. That's not that's not reflected in the review those are all as of $3 31 beds.
Speaker Change: We were able to continue momentum.
Speaker Change: With resolutions.
Speaker Change: During the month of April and year to date in terms of outcomes. We've been pleased you know on the on the bridge portfolio.
Speaker Change: Most of the severities have been zero, they've averaged high single digits in terms of what we've got resolved.
Unknown Executive: They've averaged high single digits in terms of what we've resolved. In terms of where we have the position marked, we feel very, very good about those outcomes and resolutions. You didn't ask about terms, but I'll mention it anyway.
Speaker Change: Which you know in terms of where we have the position Mark we feel very very good about those outcomes and resolutions.
Speaker Change: He didn't ask about term, but I'll mention it.
Unknown Executive: We've continued to see good momentum there, and realized severities have been very low in that book, sub 1% in terms of the loans we resolved in the first quarter. Like we've talked about before, we're not altogether surprised at some of the delinquencies, but we're pleased that they're headed back in the right direction. Obviously, ultimately, it's about the loss of content as we resolve it. Chris talked about how the asset management team is doing. We've been pleased with the ultimate outcomes there so far.
Speaker Change: Continue to see good momentum there realize severities have been very low in that book sub 1% in terms of the loans, we resolved in the first quarter so like.
Speaker Change: Like we've talked about before.
Speaker Change: We're not altogether surprised at some of the delinquencies, but we were pleased that theyre headed back in the right direction and obviously ultimately it's about the loss content as we resolve Chris talked about you know how the asset management team is doing so we've been pleased with the ultimate outcomes there so far.
Unknown Executive: I'd also just note you saw that in NII as well, Doug, you know, our non-accrual loan bucket declined by about $70 million on the quarter, which contributed about $2 million positive to net interest income for the portfolio, so I think we try to be pretty conservative about placing loans on non-accrual status, even in advance of them rolling 90 days delinquent and don't really take them off until kind of we're all caught up by the borrower, so just wanted to note that too, that it may expand to NII.
Speaker Change: I'd also just note is that all right.
Speaker Change: In NII and Sontag Ironically.
Speaker Change: Our non accrual loan bucket declined by about $70 million on the corner, which contributed about $2 million plus names to N and interest income from the portfolio. So we tried to be pretty conservative about placing loans on non accrual status even in advance of them Rolling 90 days delinquent in and don't really take them off until kindergarten.
Speaker Change: All caught up by the borrowers. So just wanted to know that too that it made its way into NII.
Speaker Change: I appreciate that and.
Unknown Executive: I appreciate that. Can you give us an update on how book value is trending so far?
Speaker Change: Can you give us an update on how book value is trending so far in April.
Speaker Change: Okay.
Unknown Executive: A book we estimate, as of effectively today, is flat to down 1%.
Speaker Change: Book, we estimate passive effectively today is flat to down 1%.
Speaker Change: Thank you.
Crispin Love: Thank you. Our next question comes from the line of Crispin Love with Piper Sandler. Please proceed with your question.
Speaker Change: Thank you. Our next question comes from the line of Crispin Love with Piper Sandler. Please proceed with your question.
Unknown Executive: Thanks. I appreciate you taking my question.
Crispin Love: Thanks Appreciate you taking my questions just firstly with banks pulling back on Jumbo can you just speak to some of the.
Crispin Love: The competition that you're seeing in that space are you seeing any new entrants coming on whether they are mortgage player as asset managers.
Crispin Love: Curious on the competitive landscape here.
Crispin Love: Coming back on who could be competing with you for sure now and who my space going forward.
Unknown Executive: So just first, with banks pulling back on Jumbo, can you just speak to some of the competition that you're seeing in this space? Or are you seeing any new entrants coming in, whether they are mortgage players, asset managers? You're just curious about the competitive landscape here. Banks are pulling back, and who could be competing with you for share now and who might enter the space going forward?
Speaker Change: Sure you know the competitors that we've seen you know more or less over the past year or so have largely been.
Crispin Love: You know the wall Street banks and broker dealers I think our bank strategy is pretty differentiated because you know most banks, they're first choices and to sell loans to banks. So if you're looking for a capital partner.
Crispin Love: We're kind of like Switzerland in that regard and you know.
Unknown Executive: Sure, you know, the competitors that we've seen, more or less over the past year or so, have largely been, you know, the Wall Street banks, the broker dealers. I think our bank strategy is pretty differentiated because, you know, most banks, their first choice isn't to sell loans to banks. So if you're looking for a capital partner, you know, we're kind of like Switzerland in that regard. And, you know, our business operates a lot like the GSEs, where we don't service mortgages; we don't originate mortgages. We truly are.
Crispin Love: Our business operates a lot like the GSE is where we don't service mortgages, we don't originate mortgages.
Crispin Love: We truly are.
Unknown Executive: So from that standpoint, the competitive landscape hasn't changed that much, and we've used this period of time where transaction activity in the housing market has been very low just to deepen these relationships. We keep adding banks to our seller base. We've actually gained a significant amount of share with the independents as well. So I think just being capital efficient and being a great partner has enabled us to really build our business. And I think we're pretty excited about the growth trajectory of consumer residential.
Crispin Love: So from that standpoint, the competitive landscape hasn't changed that much in and we've used this period of time, where transaction activity in the housing market has been a very low just to deepen these relationships, we keep adding banks to our seller base.
Crispin Love: We've actually gained a significant significant amount of share with the independents as well.
Crispin Love: So I think just being capital efficient and being a great partner and has enabled us to really build our business and I think we're pretty excited about the growth trajectory of consumer residential your printing Ah results. There with CAGR is that that reflect that so ironically.
Unknown Executive: We're printing results there with CAGRs that reflect that. So ironically, obviously, I think the market views an easing of rates as extremely positive for our business, and that's true. But as rates sort of hang out at these levels, every day, it's compelling another bank to think about a capital partner. So from that standpoint, ironically, it's been very positive for the relationships that we're building. And hopefully, we can continue to do that through the course of 2024.
Crispin Love: Obviously, you know I think the market views.
Crispin Love: You know an easing of rates is extremely positive for our business and that's true, but as rates sort of paying out.
Crispin Love: At these levels you know every day, it's compelling you know another bank to think about a capital partner so from that standpoint, Ironically, it's it's been very positive for the relationships that we're building.
Crispin Love: And hopefully we can continue to do that through the course of 'twenty four.
Unknown Executive: Great, thank you. I appreciate all the color there.
Speaker Change: Great. Thank you I appreciate all the color there and then just on the bridge book.
Speaker Change: The quarterly funded volume side.
Crispin Love: But not as much as some other players in this space.
Crispin Love: Funded volume to turn to cross the bridge term portfolios. You think you could be reaching a bottom here are you seeing opportunities are the additions pretty much all in SF arb.
Crispin Love: Is there any multifamily just very little.
Unknown Executive: And then just on the bridge book, on the quarterly funded volume side, it's decreased, but not as much as some other players in the space. So how would you expect funded volume to trend across the bridge and term portfolios? Do you think you could be reaching a bottom here? Are you seeing opportunities? And are the additions pretty much all in FFR? And is there any multifamily, or just very little?
Speaker Change: Yeah. That's a great question a few things so as we said in the prepared remarks, you know april's run rate well will.
Unknown Executive: Yeah, that's a great question. A few things. So, as we said in the prepared remarks, you know, April's run rate will be about 15% higher than the average monthly run rate for Q1. There are a few reasons for that.
Crispin Love: It will be about 15% higher than the average monthly run rate for Q1 there.
Unknown Executive: I think the one we're most excited about, frankly, is the growth in the single asset bridge funding. You know, that's a business that, you know, we are very committed to. Last quarter, as you saw, was about 16% of our funding. In April, that'll probably double or probably 30-35% of our funding in April.
Crispin Love: There are a few reasons for that I think the one we're.
Crispin Love: Most excited about frankly is the growth in the single asset bridge funding. That's a business that we are very committed to.
Crispin Love: Last quarter as you saw was about 16% of our fundings in April that will probably double or probably be 30% to 35% of our fundings in April.
Unknown Executive: You know, that's a single family strategy, largely an area where we feel like we can compete. You know, really strongly with the market, with our sales team and our fulfillment, but also, frankly, our distribution. You know, our distribution across our businesses, but certainly in the residential investor, at this point, is probably in as good a spot as it's been in quite some time. When you marry securitization demand, obviously, the joint ventures, you know, with CPP coming online next to Oak Tree, and also demand for whole loans remains really robust, particularly for those smaller balanced single asset bridge loans, and we've used that to our advantage to really grow volume there, taking advantage of the funnel.
Crispin Love: Yeah, that's a single family strategy, largely an area, where we feel like we can compete.
Crispin Love: Strongly with a market with our with our sales team on our fulfillment, but also frankly our distribution.
Crispin Love: Distribution.
Crispin Love: Across our businesses, but certainly in residential investor at this point is probably in as good a spot as it's been in quite some time when you marry securitization demand obviously, the joint ventures with CPP coming online next to Oaktree.
Crispin Love: But also demand for whole loans remains really robust, particularly for those smaller balanced single asset bridge loans and we've used that to our advantage to really grow volume there take advantage of the funnel. So that's one piece and term volumes are trending in the right direction as well, even with benchmark rates higher securitization spreads have tightened we have been able to use that to our advantage to build a pipe.
Unknown Executive: So that's one piece, and term volumes, you know, are trending in the right direction as well. You see, even with benchmark rates higher, securitization spreads have tightened. We've been able to use that to our advantage to build a pipeline there, and also, frankly, we're in a situation where I think a lot of borrowers are wanting to get out of bridge loans that are... you know, very high single- and low double-digit rates and are willing to accept the somewhat higher term loan rates, you know, as it relates to where benchmark rates are at this point.
Crispin Love: Brian There and also frankly.
Crispin Love: In a situation where there's a lot of borrowers you know are wanting to get out of bridge loans that are.
Crispin Love: Very high single low double digit rates.
Crispin Love: Are willing to accept to somewhat higher.
Crispin Love: Term loan rates as a relative or a benchmark rates are at this point. So all of those are tailwind for the business.
Unknown Executive: So all of those are tailwinds for the business, you know, but it really starts with the right funnel and, obviously, distribution. You know, to address your question on multifamily, I think we're, you know, remaining very selective there. As we said last quarter, there were a lot of multifamily deals over the past four or five quarters we could have done, and, you know, we're glad we didn't.
Crispin Love: But it really starts with the right funnel and obviously distribution now to address your question on multi.
Speaker Change: I think we are remaining very selective there you know as we said last quarter. There were a lot of multifamily deals over the past four or five quarters. We could have done and are glad we didn't so I think we're going to be more opportunistic there.
Unknown Executive: So I think we're going to be more opportunistic there. There's a bit of an analog to the bank story in Jumbo, which you asked about as well, which is an area we are definitely focusing on, you know, where a lot of really, really good sponsors that have gotten low loan-to-cost loans from banks over the years are not going to be able to be served by those depositories anymore. You know, multifamily sponsors, that's definitely an opportunity for us where, again, we have this distribution on the other side.
Speaker Change: Bit of an analog to the bank's Dorian jumbo, which you asked about as well, which is an area. We are definitely focusing on you know where.
Speaker Change: A lot of really really good sponsors that have gotten the low loan to cost loans from banks over the years are not going to be able to be served by those depository is anymore.
Speaker Change: Families sponsors that's definitely an opportunity for us where again, we have this distribution on the other side.
Unknown Executive: You know, stronger than we've had in quite some time. So those pieces need to come together in terms of, you know, NOIs and just, you know, the thoughts on multifamily broadly. But, you know, at a macro level, the pieces are there for that to potentially grow.
Speaker Change: Stronger than we've had in quite some time, so those pieces need to come together in terms of you know NOI isn't just the thoughts on multifamily broadly, but you know at a macro level. The pieces are there for that to potentially grow as well.
Donald James Fandetti: Great. Thank you. I appreciate all your answers to my question. Thank you. Our next question comes from the line of Don Fandetti with Wells Fargo. Please proceed with your question.
Speaker Change: Great. Thank you I appreciate all of you answering my questions.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Don Vendetti with Wells Fargo. Please proceed with your question.
Unknown Executive: Brooke, just to clarify, the $100 million drawdown on the CPP facility is that...
Donald James Fandetti: Just to clarify the $100 million drawdown on the C. P. P facility is that am I thinking about it correctly, you're going to use that to essentially fund residuals of residential credit.
Speaker Change: Doctrine is that.
Speaker Change: I should think about that.
Unknown Executive: Yes, we can use it to fund residuals of securitizations as we go forward. We also have, you know, a number of residuals that are unfinanced today that represent that $370 million in our unencumbered basket. So I think Dash mentioned the revolving nature of it, and we did in our prepared comments as well. I think that's probably the most interesting. This is a great feature of the facility just because our working capital needs in the residential mortgage business flex even intra-months as we're securitizing at this cadence once a month, and so it really allows us to align with those working capital needs.
Speaker Change: Yes, we can use it to fund residuals.
Speaker Change: Securitization does it go forward. We also have a number of residuals that are on finance today that represent that.
Speaker Change: Our unencumbered basket, though.
Speaker Change: And I think Jos mentioned, the revolving nature of it and we said in our prepared comments as well I think that's probably the most interesting and.
Speaker Change: Sure on the facility just because our working capital needs of the residential mortgage business Flex you know even in China as for Securitizing and at this cadence once a month and so it really allows us to Latin.
Speaker Change: Accordion with the working capital needs, but.
Unknown Executive: It allows us to finance a number of different types of assets using our residuals from all the securitizations that we do as well as some of our other assets within the investment portfolio. And then in terms of EAD covering the dividend, I guess you mentioned that's going to happen this year, probably driven by NII continuing to march higher. And then you've got some cost saves. Is that sort of the best way to think about it?
Jos: Yeah. It allows us to finance a number of different types of assets between our residuals from all the securitization that we deal with some of our other assets fit them in.
Jos: And then portfolio.
Speaker Change: Got it and then in terms of E D covering the dividend I guess, you mentioned that it's going to happen this year.
Speaker Change: Probably driven by NII continues to March higher and then you've got some cost saves is that sort of the best way to think about it.
Unknown Executive: Yeah, that is, if you think about our earnings available for distribution increasing from five to eight cents this quarter, eight cents really would have been 10 cents, if you know on the pro forma, 0 If you would like to view a transcript of this webinar, email the following links to the webinar. Thank you so much. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Speaker Change: Yeah that is if you think about our and.
Speaker Change: Our earnings available for distribution, increasing from five to eight cents. This corner eight since really would've been 10 cents. If you know on the kind of format and.
Stephen Albert Laws: Thank you. Our next question comes from the line of Stephen Laws with Raymond James. Please proceed with your question.
Speaker Change: Cost structure that will have in Q2 and marching forward.
Speaker Change: Incremental <unk> towards a different and Israeli and yeah.
Speaker Change: Driven by the capital deployment that Josh mentioned, but also.
Speaker Change: The April trends that we're seeing in the business.
Speaker Change: Mentioned, a 25% increase in inlet volumes for the residential business at 15% to 20% increase in that investor a pipeline as well and so a couple of pennies of that work was from <unk>.
Speaker Change: Increased but and you know reasonable growth assumptions in the near term from mortgage banking.
Speaker Change: Our next question by what we're seeing in the pipeline today.
Speaker Change: Got it thanks.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Stephen Laws with Raymond James. Please proceed with your question.
Unknown Executive: Hi, good afternoon. Brooke, you kind of hit on it, and from Dash's prepared remarks, the 25% kind of run rate April volume versus the monthly average in Q1 on Jumbo. And I think, Dash, you mentioned some of that financing said, even as bank production was down, you're, I think, getting a higher share of that. Can you talk about, you know, how you view the market share opportunity to continue gaining that?
Stephen Albert Laws: Hi, good afternoon.
Stephen Albert Laws: Brookdale you kind of hit on it and for Dash. His prepared remarks, the 25% kind of a run rate April volume versus the monthly average in Q1 on jumbo.
Stephen Albert Laws: And I think that you mentioned from a fine interesting said, even as bank production was down youre going to think getting a higher share of that.
Speaker Change: Can you talk about.
Stephen Albert Laws: How you view the market share opportunity to continue gaining that and as you look out.
Speaker Change: 12, or 18 months in the future what type of quarterly volumes do you think.
Unknown Executive: And as you look out, you know, 12 or 18 months in the future, what type of quarterly volumes do you think these relationships in the market can support if you get a little cooperation from rates moving lower, say, in 25?
Speaker Change: These relationships in the market.
Speaker Change: On your platform can support if you get a little cooperation from from rates moving lower say in 'twenty five.
Unknown Executive: Yeah, it's a great question, Steven. And we wanted to, we really wanted to focus on our strong April, you know, given the backup. And, you know, the point is that even if the market, you know, remains constrained, there's a lot of room to the ceiling from a wallet share perspective. We feel like we're currently in that four to five percent market share range for Jumbo.
Speaker Change: Yes, it's a great. It's a great question, Stephen and we wanted to we really wanted to focus on our strong April given the backup in the.
Speaker Change: The point is that even if the market.
Speaker Change: Remains constrained.
Speaker Change: There's a lot of room to the ceiling from a wallet share perspective, we feel like we're currently in that 4% to 5% market share range for jumbo, we talked about the doubling of INV volumes quarter on quarter, which is a really big deal because as you know that's been a huge historical mode.
Unknown Executive: You know, we talked about the doubling of IMB volumes quarter on quarter, which, you know, it's a really big deal because, as you know, that's been a huge historical moat for the business. You know, that crowd is always going to be, you know, originate to sell model, with potentially a couple of exceptions.
Speaker Change: For the business those that crowd is always going to be a originate.
Speaker Change: Our originate to sell model.
Speaker Change: Potentially a couple of exceptions, and so just being being on the screws with that cohort is important but you know the bank opportunity is really the big one it's the big Ocean. So to speak in terms of where volume could go and we're really just getting started there bank volume was up quarter on quarter like you said, even though.
Unknown Executive: And so, just being on the screws with that cohort is important, but, you know, the bank opportunity is really the big one. It's the big ocean, so to speak, in terms of where volume could go, and we're really just getting started there. You know, bank volume was up quarter on quarter, like you said, even though, you know, depository volume was down. The big thing with banks, and we've talked about this before, is, you know, from a wallet share perspective, once you're in, you're in.
Speaker Change: <unk> volume.
Speaker Change: Volume was down the big thing with banks and we've talked about this before is from a wallet share perspective.
Speaker Change: Once you're in you're in you know the vendor management in these set of processes of banks, they do take time.
Unknown Executive: You know, the vendor management and these set-up processes of banks do take time. You know, because a lot of these banks are coming back into the market for the first time in a while, it has been a process, you know, to get each other switched back on. And that's a really deep moat, right? You know, to the extent we're in there locking loans with them now, it's unlikely they're going to run out and go through another several-month vendor management process again, right?
Speaker Change: Because a lot of these banks are coming back to the market for the first time in a while it.
Speaker Change: It has been a process.
Speaker Change: To get each other's switched back on them and that's a really deep moat right because.
Speaker Change: To the extent, we're in there locking loans with them now it fits it's unlikely theyre going to run out and then go through another several months vendor management process again, Ryan and so that's a big piece that I think is really really hard to replicate and something that we really want the market to understand is if these relationships.
Unknown Executive: And so that's a big piece that I think is really, really hard to replicate and something that we really want the market to understand is that these relationships take time to stand up, certainly personally, but also operationally. And we really think we're in the early innings of bank volume, and that could be a huge driver going forward.
Speaker Change: Take time to stand up certainly personally, but also operationally and we really think we're in.
Speaker Change: The early innings of the bank volume and that could be a huge driver going forward.
Unknown Executive: I definitely agree with you there. I appreciate the comments.
Speaker Change: Definitely agree there I appreciate the comments.
Speaker Change: Can you touch on the.
Speaker Change: Gain on sale margin was quite strong for Q1 can you talk about the margin on the April securitization I may have missed the comment there, but curious if those strong margins continued into April.
Unknown Executive: Can you touch on the, you know, gain on sale margin was quite strong for Q1. Can you talk about the margin on the April securitization? I may have missed the comment there, but curious if those strong margins continued into April.
Speaker Change: Yeah.
Speaker Change: Rising on our April securitization was actually and even even stronger.
Speaker Change: Stronger than our.
Unknown Executive: Yeah, our pricing on our April securitization was actually even stronger than our March deal. So we continue to see really strong margins. I think part of, you know, the commentary that we wanted to make sure came across today is just the durability of what we've, you know, done in terms of some of the changes to how we're efficiently financing the business that's come through and net interest income and also to margin on the business this quarter and also some shifts in our hedges as well. So I think that's definitely helping from a margin perspective.
Speaker Change: My remarks today also and we continue to see.
Speaker Change: <unk> released final license I think part of the commentary that we wanted to make sure I came across <unk>.
Speaker Change: Durability of what we've done in terms of some of the changes to how were efficiently financing the business that's come through and net interest income and and also some margin on that.
Speaker Change: Since this quarter and also some shifts in our our hedges as well. So I think that then that's definitely helping from a margin perspective.
Unknown Executive: Great. And then lastly, you know, I forget if it was the release or the deck, but you talked about the first directly originated HEI investment and launched a closed-end, closed-end second product through your, you know, Resi Consumer Seller Network. Can you talk about kind of uptake and outlook for these products and maybe the competitive landscape around those types of new products you're launching here?
Interviewer: Great and then lastly on.
Interviewer: Noticed the release or the deck, but talked about.
Interviewer: Yes.
Interviewer: First directly originated hei investment and launch the closed then.
Interviewer: And second product to your consumer.
Interviewer: Consumer seller network can you talk about kind of uptake and outlook for these products and maybe the competitive landscape around those type.
Interviewer: The new products, you're launching here.
Unknown Executive: Sure, Steven, I'll weigh in. Clearly, there's a lot of excitement brewing around the second generation of lean products in the market. I think private capital is really crowding in there. I think it's so lucrative that even the GSEs want to be involved, which is interesting. But I think our business is well suited to source that product. We're kind of in the midst of rolling all this out to our seller base. It does take time, you know, with the training and with the guides and the process, as Dash mentioned.
Speaker Change: Sure Steven.
Speaker Change: When clearly theres a lot of.
Steven: A excitement brewing around certainly the second lien products into the market.
Speaker Change: I think private capital is really crowding in there I think it's so lucrative that he then.
Speaker Change: The Gse's Wanna be involved.
Steven: Which is interesting.
Steven: But I think the you know our business is well suited to source their products.
Steven: We're kind of in the midst of.
Steven: Rolling all of this out to our seller base. It does take time, you know with the training and with the guides in the process as Dash mentioned, but we're quite excited about it we think we've got great institutional capital partners that.
Unknown Executive: But we're quite excited about it. We think we've got great institutional capital partners that are interested in working with us, you know, from a distribution standpoint. I think that, you know, HEI's time is coming. You saw a great Case Shiller print today. And as you like head out into the horizon and think about, you know, the trajectory of HPA from here, I think HEI is going to continue to grow. And to the extent we can help institutionalize the product, make it safe, make it transparent, that's a huge TAM for this business. So I think we're very focused on both. You know, I think the home equity product front is going to be a storyline for us over the next few quarters.
Steven: Are interested in working with US you know from a distribution standpoint.
Steven: I think that you know a G is time is coming.
Steven: You saw a great case shiller print today.
Steven: And as you like cut out in the horizon and think about the trajectory of HPA from here I think she is going to continue to grow and to the extent, we can help institutionalize the product.
Steven: Make it safe make it transparent.
Steven: That's a huge Tam for this business. So I think we're very focused on both you know I think I think the home equity product front is gonna be.
Steven: <unk> line for US you know over the next few quarters.
Unknown Executive: Great. I appreciate the comments this evening, and perhaps a nice start to the year.
Speaker Change: Great I appreciate the comments this evening and perhaps on a nice start to the year.
Speaker Change: Thank you.
Eric J. Hagen: Thank you. Our next question comes from the line of Eric Hagen with BTIG. Please proceed with your question.
Speaker Change: Thank you. Our next question comes from the line of Eric Hagen with <unk>. Please proceed with your question.
Unknown Executive: Hey, how are we doing? Hey, so looking at the capital utilized in the quarter in the jumbo segment, it looks like it was 160 million. Looks like you took it up, you know, ended the quarter around 200 million. Would you say that's a pretty steady level of capital at these mortgage rates? Do you see that maybe moving around much in the near term? Then can you also share what the return on capital is for the retained tranches from the jumbo securitization right now? Maybe how that compares to levels in the past.
Eric J. Hagen: Hey, How're you doing.
Eric J. Hagen: So looking at the capital utilized in the quarter and the Jumbo segment. It looks like it was 160 million. It looks like you took it up it.
Eric J. Hagen: We ended the quarter around $200 million would you say, that's a pretty steady level of capital that these mortgage rates did you see that maybe moving around much in the near term and then can you also share with a return on capital is for the retained tranches from like the Jumbo securitization right now and.
Eric J. Hagen: Maybe how that compares to levels in the past.
Unknown Executive: Sure, I think you could certainly see capital allocated to that business going higher. We have talked about, you know, again, utilizing the CPP facility, you know, to support that. But, you know, certainly as volumes, hopefully, continue to trend up, I think you could see it, you know, hang out in the 200 to 250 range or something like that, that that level of capital would support a run rate at or in excess of our April run rate that we talked about.
Speaker Change: Sure Eric.
Eric J. Hagen: Thank you could you could certainly see capital allocated to that business going higher you know we have talked about.
Eric J. Hagen: Again, utilizing the CPP facility to support that but certainly as volumes as volumes hopefully continue to trend up I think you could see it hang out in the $202 50 range or something like that that that level of capital would support.
Eric J. Hagen: I think a run rate at or in excess of our April run rate.
Unknown Executive: So that's the thinking there in terms of return on the retained pieces; it's, you know, low to mid double digits at this point, largely on the subs and depending on some of the, you know, the seniors. The AOS piece that we typically keep, that's the return profile rate.
Eric J. Hagen: We talked about so that's the thing.
Eric J. Hagen: Thinking there in terms of return on the retained pieces. It's a you know low to mid double digits at this point.
Eric J. Hagen: Largely on the subs and depending on some of the senior.
Eric J. Hagen: Yeah, the Aosp's that we typically keep that's the return profile right now.
Eric J. Hagen: Okay.
Unknown Executive: Got it. Okay, that's helpful. Can you share how big the unfunded commitment is in the bridge book at this point? Can CPP funding be used to support unfunded commitments? Or is it only for really new loans? And you know, you guys don't have a CECL reserve for the portfolio because you're marking everything to market. But if there was a loss assumption that you could share for the portfolio, just for benchmarking purposes, that could be kind of...
Speaker Change: Got it okay. That's helpful.
Speaker Change:
Speaker Change: Can you share a how big the unfunded commitment is in the bridge book at this point and the C. P. P funding be used to support unfunded commitments or is it only for really new loans.
Eric J. Hagen: And you know you guys don't have a seasonal reserve for the portfolio because your marketing everything to market, but if there was a loss assumption that you could show for the portfolio just for benchmarking purposes that.
Eric J. Hagen: That'd be kind of helpful.
Unknown Executive: We had about 513 million in unfunded commitments at the end of March. Just for context, we only had 80 million in draws for the quarter. This number has come down as you're tracking over time. And so our payoffs have significantly exceeded our draws.
Speaker Change: Sure we had about 513 million of unfunded commitments at the end of March.
Speaker Change: Just for context, we only had 80 million roughly as a drive on the quarter and this number has come down and as you're tracking over time and so are our payoffs have significantly exceeded our drawn and so that will probably be more of a source of self financing.
Unknown Executive: And so that will probably be more of a source of self-financing. BridgeNet used no capital during the quarter between the capacity we had in our RTL facilities as well as our joint ventures and our payoffs. And so all capital is fungible, but that's not the intention of utilizing this APP facility. Just in terms of your commentary on our marks, we have about 150 basis points across the Bridge portfolio of essentially reserves, given where it's marked at 331, that varies, you know, between certain cohorts. We have about 300 base points across the entire multifamily portfolio, and, you know, our non-performing loan cohort was, you know, about 10 points of reserve.
Speaker Change: <unk> net is no capital in the quarter between the capacity, we had in our RTL and facilities as well as you.
Speaker Change: Our joint ventures, and our payoffs and so and you know.
Speaker Change: You'll likely not all capital is fungible, but that's not the intention of utilizing the CPP facility.
Speaker Change: Just in terms of your commentary on <unk>.
Speaker Change: Sure.
Speaker Change: Our marks we have about 150 basis points across the branch portfolio and.
Speaker Change: Essentially reserves, given where it is mark at 331 and that varies between certain cohorts and about 300 basis points.
Speaker Change: Across the entire multifamily portfolio and you know our nonperforming loan cohort.
Speaker Change: Cohort with.
Speaker Change: 10 point something over there.
Unknown Executive: Okay, that's helpful. Thank you, guys.
Speaker Change: Okay. That's helpful. Thank you guys.
Steven Cole DeLaney: Thank you. Our next question comes from the line of Steve Delaney with Citizens JMP. Please proceed with your question.
Speaker Change: Thank you. Our next question comes from the line of Steve Delaney with citizens JMP. Please proceed with your question.
Unknown Executive: Hey, good afternoon, everyone, and congratulations on the nice start to 2024. I'd like to go back and talk a little bit about the IMBs, the mortgage bankers.
Steven Cole DeLaney: Hi, good afternoon, everyone and congratulations on the nice start to 2024.
Steven Cole DeLaney: I'd like to go back and talk a little bit about the mortgage bankers.
Unknown Executive: I'm curious if you could just give us some general information, approximately how many, how has that grown over the past year? Are you focusing on the very – the largest players in the space, you know, just from a standpoint of, you know, efficiency and risk return? Just curious about how that has emerged here, not something that I recall talking a lot about in the past, and your thoughts about, you know, how big this might become. Thank you.
Steven Cole DeLaney: Curious if you could just give us some general information approximately how many <unk>.
Steven Cole DeLaney: That grown over the past year are you focusing at the very the largest players in the space.
Steven Cole DeLaney: From a standpoint of.
Steven Cole DeLaney: Nancy and risk return just curious about how that has emerged here not something that I would call talking a lot about in the past.
Steven Cole DeLaney: And your thoughts about.
Speaker Change: How big this might become thank you.
Unknown Executive: Sure, I can start there, Steve. So our total seller base, banks and non-banks, about 190 discrete institutions of that, 115 are non-banks. And as you obviously know, we've grown the bank piece of that to about 75, you know, particularly over the past few quarters, but like we talked about, IMBs have always been a core foundation of our volumes, you know, we, we lock loans, as you can tell with a wide variety, there's a lot of the biggest, you know, household names, you know, in that list.
Speaker Change: Sure I can I can start there Steve so our total seller base.
Speaker Change: <unk> is about 190 discrete institutions of that about 115 115 are nonbanks and as you obviously know.
Speaker Change: We've grown the bank piece it out to about 75, particularly over the past few quarters, but like we talked about MBS have always been.
Speaker Change: Our core foundation of our volumes, we locked loans.
Speaker Change: Because you can tell with a wide variety of there's a lot of the biggest household names in that last we talked a little bit about this last quarter, but it's worth underscoring, which is just the diversity of our of our overall volumes across the seller base.
Unknown Executive: We talked a little bit about this last quarter, but it's worth underscoring just the diversity of our overall volumes across the seller base. You know, we had a 1.8 billion lot quarter. You know, we had a big April, generally, no one seller is more than 5% or so of production. And you can sort of see that when our Sequoia deals are in the market, just the distribution there.
Speaker Change: We had a $1 8 billion last quarter, you know we had a big April.
Speaker Change: Generally no no one seller has more than 5% or so of production and you can sort of see that when our sequoia deals are in the market just the.
Speaker Change: The distribution there and that's really important because we have really broad reach.
Unknown Executive: And that's really important because we have a really broad reach, you know, which we're really proud of. As you know, Steve, it took years of building this network, you know, particularly on the IMB side. So, you know, it's interesting in terms of volumes. A minute ago, we talked about the banks, and obviously, there's a huge runway there for us to do more. But, you know, over the past couple quarters, well, really the last several years, I suppose, as you well know, you've seen IMBs become a more, you know, meaningful part of overall production.
Speaker Change: Which we're really proud of is you know Steve that's a years of building this network.
Speaker Change: Particularly on the <unk> side, So you know.
Speaker Change: It's interesting in terms of volumes here a minute ago, we talked about the banks and obviously, that's you know there's a huge runway there for us to do more but you know over the past couple of quarters really the last several years I suppose you've as you well know you've seen <unk> has become a more meaning.
Speaker Change: A meaningful part of overall production they were there when a lot of the banks step back last year with some of the volatility in the banking sector. So so things will move around a bit but we remain very bullish on the <unk> opportunity and we're thrilled we have that we have those relationships because we've been at a point in the past year, where frankly, they have continued to take share.
Unknown Executive: You know, they were there when a lot of the banks stepped back last year with some of the volatility in the banking sector. So things will move around a bit, but, you know, we remain very bullish on the IMB opportunity. And we're thrilled we have that.
Speaker Change: Sure and we've been there now.
Speaker Change: To provide liquidity to them.
Unknown Executive: I think they've invested in the technology, they're way ahead of the banks, and banks have the consumer relationships, but they just don't have the infrastructure, if you will, that the INDs have, for sure. Just one quick one to follow up on both.
Speaker Change: I think they've invested in the technology, they're way ahead of the bank the bank that the consumer relationships, but they just don't have the.
Speaker Change: The infrastructure, if you will with the IB.
Speaker Change: For sure.
Speaker Change: One quick one to follow up on bulk you know, there's an old saying you know who's got all the money well, it's the bank. So he's got all the mortgages would be the bank too.
Unknown Executive: You know, there's an old saying, you know, who's got all the money? Well, it's the bank. So, who's got all the mortgages would be the bank, too? When we hear about banks, about bulk, is it working directly with banks or possibly with Wall Street brokers who might be representing smaller banks that you don't have a relationship with? Just curious where the flow is coming from on the bulk packages. Thank you. That's my last question.
Speaker Change: When we hear about bank about bulk.
Speaker Change: Is it working directly with banks or possibly with Wall Street repo brokers, who might be representing smaller banks that you don't have a relationship just curious where the flow is coming from on the bulk packages.
Speaker Change: Last question.
Unknown Executive: It's definitely all of the above. There are some IMBs that operate in bulk fashion, and that was a part of the story. In Q1, certainly partnering with larger Wall Street banks that have platforms akin to ours is something we've done a lot of over the years and have continued to do. I think we are really just scratching the surface, probably in the batting practice zone, in terms of getting bulk packages off of bank balance sheets.
Speaker Change: It's definitely all of the above.
Speaker Change: There are some <unk> that that executed in both fashion and that was a part of the story in Q1, certainly partnering with larger wall Street banks that have platforms that Kinder ours is something we've done a lot of over the years and have continued to do.
Speaker Change: I think we are really just scratching the service probably in the batting practice zone in terms of.
Speaker Change: Getting bulk packages out off of bank balance sheets.
Unknown Executive: I think Chris said it well, as rates hang out here. Even if some of those sale prices are a little bit out of the money, it is going to compel banks to come to the table, I think, more quickly. And so that remains just a huge opportunity that we're, you know, excited to hopefully partner with Flow Relationships going forward.
Speaker Change: Chris said, it well as rates hang out here.
Speaker Change: Even if some of those sale prices are a little bit out of the money. It is going to compel banks to come to the table I think more quickly and so that that remains just a huge opportunity that we're excited to hopefully partner with flow relationships going forward with them.
Unknown Executive: Yeah, I'd say, Steve, a few things. We are, you know, as we partner up with some of these very large institutions like CPP Investments, Oak Tree, others, you know, I think we continue to become more formidable as far as, you know, our ability to be aggressive and both in terms of terms and size. So I think over time, you know, we should continue to see more bulk transactions. I do think it's worth noting that things like CRT and even bulk, you know, one of the challenges with portfolio lenders who haven't been attuned to distributing to the capital markets is you still have the same challenges. You have the loan files.
Speaker Change: I'd say a few things we are you know as.
Speaker Change: As we.
Speaker Change: As we partner up with some of these very large.
Speaker Change: Institutions like CPP investments Oaktree, others are you know I think we've continued to become more formidable.
Speaker Change: As far as you know our ability to to.
Speaker Change: Be aggressive in and both in terms and size. So I think over time.
Speaker Change: We should continue to see more bulk.
Speaker Change: Bulk transactions I do think it's worth noting that.
Speaker Change: Like CRT and even bulk you know one of the challenges with <unk>.
Speaker Change: Portfolio lenders, who havent been attuned to distributing to the capital markets. As you still have the same challenges you got the loan files, they've gotta be in order.
Unknown Executive: They've got to be in order a lot of these for CRT. They need ratings, so for bulk, whether it's whole loans or securities, there's still a lot of work that goes into those transactions. I think the efforts that we put in to work with these banks on the flow side will pay dividends over time on the bulk side. And we're now just starting to see that bulk bulk was a pretty meaningful part of our Q1 volume. And, and, you know, so we're very open to business to do more on that front.
Speaker Change: A lot of these for CRT.
Speaker Change: <unk> ratings so.
Speaker Change: So for bulk Ah, whether it's you know whole loans or securities. There's still a lot of work that goes into those transactions I think the efforts that we put in to.
Speaker Change: To work with these banks are on the flow side, I think will pay dividends over time on the bulk side and we're now just starting to see that you know bulk bulk was a pretty meaningful part of our Q1 volume and you know what.
Speaker Change: So we're very open for business to do more on that front.
Unknown Executive: I appreciate all the comments. Thank you. Thank you.
Speaker Change: Great I appreciate all the comments thank you. Thank.
Kyle Joseph: Thank you. Our next question comes from the line of Kyle Joseph with Jeffries. Please proceed with your question.
Speaker Change: Thank you Steve.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Kyle Joseph with Jefferies. Please proceed with your question.
Unknown Executive: Hey, good afternoon. Thanks for taking my questions to follow up on Steve's.
Kyle Joseph: Hey, good afternoon. Thanks for taking my questions kind of to follow up on Steve. Yeah. Obviously, we don't know what that will end game is going to look like in Indiana, but nevertheless, it sounds like banks.
Unknown Executive: Obviously, we don't know what the Battle Endgame is going to look like in the end, but nevertheless, it sounds like banks are already preparing in terms of reducing mortgage exposure. Obviously, that's a huge opportunity, but on the other side, have you seen any sort of incremental capital formation to take advantage of banks exiting? Have you seen basically any changes in the competitive environment on the other side besides banks leaving?
Kyle Joseph: Already preparing.
Kyle Joseph: In terms of where do you see mortgage exposure and obviously, that's a huge opportunity but on the other side have you have you seen any sort of incremental capital formulation.
Kyle Joseph: Take advantage of the banks exiting or have you seen basically any changes in the competitive environment on the other side. Besides thanks Levi.
Unknown Executive: Um, nothing overly formidable to this point. You know, one thing I will say that I think is meaningful is that, starting with this earnings call cycle, you did start to hear, certainly the large banks, voice that they expect to be compliant with the endgame rules. So, you know, as they do that, other banks will follow. And then, over time, banks who aren't messaging early compliance will sort of be in a different category with concerns that they can't comply currently. So I do think that was a really positive sign and validation that, you know, large banks expect the rules to change. So we've been obviously way out in front of that.
Speaker Change: Nothing overly formidable at this 0.1 thing I will say that I think is meaningful as you did starting with this.
Speaker Change: This earnings call cycle, you did start to here certainly the large banks.
Speaker Change: You know voice that they they expect to be compliant with.
Speaker Change: The end game rules are so you know as they do that other banks will follow and then over time.
Speaker Change: Banks, who arent messaging early compliance will will sort of be.
Speaker Change: In a different category with concerns that they can't comply.
Speaker Change: Currently so I do think that was a really positive sign and a validation that.
Speaker Change: Large banks expect the rules to change. So we then obviously way out in front of that we've talked about how you know regulatory changes really drive.
Unknown Executive: We've talked about how, you know, regulatory changes really drive the cycles in our business. And, you know, I think we're just going to keep on building these partnerships. Certainly, over time, you know, I think there's great interest in things like CRT. There are a lot of private credit funds out there that would love to be involved. There are challenges to getting CRT up to ground, certainly regulatory challenges, but also just operational challenges, as I laid out a few minutes ago.
Speaker Change: The cycles in our business and.
Speaker Change: We're just going to keep on you know building. These partnerships certainly over time I think there is great interest in things like CRT.
Speaker Change: Okay.
Speaker Change: Theres a lot of private credit funds.
Speaker Change: Funds out there that would love to be.
Speaker Change: There are challenges to getting CRT off the ground certainly regulatory challenges, but also just operational challenges as I laid out a few minutes ago. We are we are quite differentiated there because we do have the capacity to help walk through that process and so hopefully.
Unknown Executive: You know, we are quite differentiated there because we do have the capacity to help walk banks through that process. So hopefully, there's certainly going to be capital that is demanding these types of transactions outside of the walls of Redwood. But I do think, you know, we're arguably better positioned than anyone at this point to take advantage of it.
Speaker Change: You know, there's there's certainly going to be you know capital that that is demanding these types of transactions outside of the walls of redwood, but.
Speaker Change: I do think you know we're.
Speaker Change: We're arguably better positioned than anyone at this point to take advantage of it.
Unknown Executive: Very helpful. Great. Thanks for answering my question. Thanks. Thank you. And we have reached the end of the question and answer session, and this also concludes today's conference, and you may disconnect your line at this time. Thank you for your participation. Thank you for watching!
Speaker Change: Very helpful. Great. Thanks for answering my question.
Speaker Change: Thanks.
Operator: Thank you. And we have reached the end of the question and answer session, and this also concludes today's conference, and you may disconnect from the line at this time. Thank you for your participation.
Speaker Change: Thank you.
Speaker Change: And we have reached the end of the question and answer session and this also concludes today's conference and you may disconnect Your line.
Speaker Change: At this time.
Speaker Change: You for your participation.
Operator: Thanks for watching!
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: [music].