Q1 2025 Redwood Trust Inc Earnings Call

Operator: Greetings and welcome to the Redwood Trust First Quarter 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation.

Greetings and welcome to the Redwood Trust first quarter 2025 financial results Conference call.

At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. How do you want to require operator assistance. Please press star zero on your telephone keypad.

Operator: If anyone should require operator assistance, please press star zero on your telephone key. As a reminder, this conference is being recorded.

As a reminder, this conference is being recorded.

Kait Mauritz: It is now my pleasure to introduce Kait Mauritz, Head of Investor Relations. Please go ahead. Thank you, Operator.

Kate: It is now my pleasure to introduce Kate <unk> head of Investor Relations. Please go ahead.

Kate: Thank you operator, Hello, everyone and thank you for joining us today for Redwoods first quarter 'twenty 25 earnings Conference call with me on today's call are Chris <unk>, Chief Executive Officer Dash, Robinson, <unk>, President and Bruce <unk> Chief Financial Officer.

Kait Mauritz: Hello, everyone, and thank you for joining us today for Redwood's first quarter 2025 earnings conference call.

Kait Mauritz: 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 include risks and uncertainties that could cause actual results to differ materially.

Kate: 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.

Kate: Forward looking statements are based on current expectations forecasts and assumptions and include 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 provide 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 <unk>.

Kait 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. On this call, 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. A reconciliation between GAAP and non-GAAP financial measures are provided in our first quarter Redwood review, which is available on our website, redwoodtrust.com.

Kate: We're looking statements.

Kate: On this call. 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 a reconciliation between GAAP and non-GAAP financial measures are provided in our first quarter Redwood review, which is available on our website.

Kate: <unk> Dot Com also note that the content of today's conference call contains time sensitive information that are only accurate 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 and will be available on our website later today.

Kait Mauritz: Also note that the content of today's conference call contain time-sensitive information that are only accurate as of today. We do not intend and undertake no obligation to update this information to reflect subsequent events or circumstances.

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

Christopher Abate: With that, I'll turn the call over to Chris for opening remarks. Thank you, Kate. Good afternoon, everyone, and thank you for joining Redwood's first quarter conference call.

Chris: With that I'll turn the call over to Chris for opening remarks.

Chris: Thank you Kate and good afternoon, everyone and thank you for joining redwoods first quarter conference call.

Christopher Abate: A month into the second quarter, it's safe to say that the latest new normal is now sweeping the markets, rendering most macro projections for 2025 either obsolete or at best under review. Many have analogized this April with March of 2020 in terms of the extreme price and spread volatility we've seen across most financial markets. Fortunately for the mortgage market, we have not seen any disproportionate effects this time around. Redwood continues to navigate this current bout of market volatility from a position of strength. As mentioned in the Q1 shareholder letter we published last week, our gap book value per share was estimated at April 21st to be up 1 to 1.5% from quarter end.

Chris: A month into the second quarter, it's safe to say that the latest new normal is now sweeping the markets rendering most macro projections for 2025, either obsolete alright best under review.

Chris: Many of Analogize. This April with March of 2020 in terms of the extreme price and spread volatility we've seen across most financial markets.

Chris: Fortunately for the mortgage market, we have not seen any disproportionate effects at this time around.

Chris: Redwood continues to navigate this current bout of market volatility from a position of strength.

Chris: As mentioned in the Q1 shareholder letter, we published last week, our GAAP book value per share was estimated at April 'twenty, one to be up one to one 5% from quarter end.

Christopher Abate: And we believe that estimate still holds today.

Chris: And we believe that estimate still holds today.

Christopher Abate: As we move forward, it's worth reiterating that the results of our strategic initiatives have begun to take hold. We believe the way mortgages are financed is undergoing a period of transformation. The risk-reward balance has shifted for many originators, with banks actively looking for balance sheet solutions for both new production and legacy collateral. To that end, we saw billions of dollars of seasoned jumbo loans change hands in the first quarter, and we positioned ourselves to be in the hunt for much of that production.

Chris: As we move forward, it's worth reiterating that the results of our strategic initiatives have begun to take hold.

Chris: We believe the way mortgages are financed is undergoing a period of transformation.

Chris: The risk reward balance has shifted for many originators.

Chris: <unk> actively looking for balance sheet solutions for both new production and legacy collateral.

Chris: To that end, we saw billions of dollars of season Jumbo loans change hands in the first quarter and we positioned ourselves to be in the hunt for much of that production.

Christopher Abate: We are also in the early stages of shifts in housing finance policy in Washington that have the potential to create a significant green field for our platform. We have witnessed a flurry of activity at the GSEs, including mass voluntary and involuntary workforce reductions, and an almost complete board-level turnover that we believe reflects ideological shifts aimed at reassessing the GSE housing footprint. This isn't a surprise to us. In recent years, taxpayers have found themselves backstopping GSC mortgages with balances over $1 million, mortgages on investment and vacation homes, second lien mortgages, and other products not squarely aligned with the federal government's housing mission.

Chris: We are also in the early stages of shifts and housing finance policy in Washington the.

Chris: The potential to create a significant greenfield for our platform.

Chris: We have witnessed a flurry of activity at the gse's, including mass voluntary and involuntary workforce reductions and an almost complete board level turnover that we believe reflects ideological shifts aimed at reassessing the GSE housing footprint.

Chris: This isn't a surprise to us in recent years taxpayers, who found themselves backstopping GSE mortgages with balances over $1 million mortgages on investment and vacation homes second lien mortgages and other products now squarely aligned with the federal government's housing mission.

Christopher Abate: All of these are examples of products that we believe can and should be financed by the private sector without government support. We remain optimistic that over time, the GSEs can be reoriented back to their core housing missions with much of this work able to precede any plan for a full release from conservatorship.

All of these are examples of products that we believe can and should be financed by the private sector without government support.

Chris: We remain optimistic that over time, the gse's can be re oriented back to their core housing missions with much of this work able to proceed any plan for a full release from conservatorship.

Christopher Abate: We've also recently been spending time in Washington to advocate to members of the new administration, as well as lawmakers on both sides of the aisle, for a leveling of the playing field between private capital and the GSEs, particularly through streamlining regulatory burdens that drive up costs. For example, there is room to rationalize outdated securitization rules that are holding back private capital formation and to sensibly update disclosure and execution burdens that would make the mortgage capital markets far more efficient, ultimately benefiting mortgage borrowers and supporting broader housing finance reform.

Chris: We've also recently been spending time in Washington to advocate to members of the New administration as well as lawmakers on both sides of the aisle for a leveling of the playing field between private capital and the Gse's, particularly through streamlining regulatory burdens that drive up costs. For example, there is.

Chris: Room to rationalize outdated securitization rules that are holding back private capital formation, and as sensibly update disclosure and execution burdens that would make the mortgage capital markets far more efficient.

Chris: Ultimately benefiting mortgage borrowers and supporting broader housing finance reform.

Christopher Abate: As we look ahead, there remains strong demand for the assets we create, which trillions of dollars raised by private credit institutions were actively looking to crowd their capital into the residential mortgage space. The fact that they have not already done so in greater scale is a direct byproduct of the government's outsized role in housing. As the landscape in Washington evolves, our role as an intermediary between these large capital sources and our extensive network of loan originators and sponsors has the potential to become transformative.

As we look ahead, there remains strong demand for the assets, we create which trillions of dollars raised by private credit institutions, we're actively looking to crowd their capital into the residential mortgage space.

Chris: In fact that they have not already done so and greater scale is a direct byproduct of the government's outsized role in housing.

Chris: As the landscape in Washington evolves, our role as an intermediary between these large capital sources and our extensive network of loan originators and sponsors has the potential to become transformative.

Christopher Abate: As we pursue our 2025 volume objectives, strategic partnerships with entities on both the supply and demand side of this market will remain a key part of our growth initiatives.

Chris: As we pursue our 2025 volume objectives strategic partnerships with entities on both the supply and demand side of this market will remain a key part of our growth initiatives.

Dashiell Robinson: And with that, I'll turn it over to Dash to cover our operating results for the first quarter. Thank you. Thank you, Chris.

Speaker Change: And with that I'll turn it over to dash to cover our operating results for the first quarter.

Dash: Thank you Chris I'll cover our operating results before handing the call over to <unk> to conclude with our financial highlights.

Dashiell Robinson: I'll cover our operating results before handing the call over to Brooke to conclude with our financial highlights. Sequoia's first quarter performance underscores the significant runway for the business, even amidst a continued period of relatively tepid housing activity. While money center banks reported steep mortgage volume declines of between 20 to 30 percent, Sequoia's $4 billion of first quarter locks represented 73 percent quarter-on-quarter growth. The source of the momentum is twofold, continued wallet share growth across our seller base for on-the-run production, and the long-awaited emergence of seasoned bulk portfolios, primarily from banks, as a viable expansion of our funnel.

Speaker Change: So coy, it's first quarter performance underscores the significant runway for the business, even amidst a continued period of relatively tepid housing activity.

Speaker Change: While money center banks reported steep mortgage volume declines of between 20% to 30%.

Speaker Change: Cause $4 billion of first quarter locks represented 73% quarter on quarter growth.

Speaker Change: The source of the momentum is twofold continued wallet share growth across our seller base for on the run production and a long awaited emergence of seasoned bulk portfolios primarily from banks as a viable expansion of our funnel.

Dashiell Robinson: Combined with an outlook for distribution that once again includes certain depositories seeking to bolster loan growth with third-party mortgage portfolios, this primes the business to grow market share even while prudently navigating the recent macro volatility. With a network of over 200 sellers, we are actively engaged with originators that represent close to 75% of overall jumbo originations. This includes several top 20 banks and a deep group of independent mortgage bankers, or IMBs, who are benefiting from many depositories deemphasizing mortgage lending. First quarter volume was split evenly between banks and IMBs and notably included a $1 billion portfolio of season 30-year and hybrid production acquired from a large depository, our second large portfolio acquisition from a bank in the past three quarters.

Speaker Change: Combined with an outlook for distribution that once again include certain depository is seeking to bolster loan growth with third party mortgage portfolios. This primes the business to grow market share, even while prudently navigating the recent macro volatility.

Speaker Change: With a network of over 200 sellers, we are actively engaged with originators that represent close to 75% overall jumbo originations. This includes several top 20 banks in a deep group of independent mortgage bankers or <unk>, who are benefiting from many depository is deemphasizing mortgage lending.

Speaker Change: First quarter volume was split evenly between banks and <unk> and notably included a $1 billion portfolio of seasoned 30 year in hybrid production acquired from a large depository our second large portfolio acquisition from a bank in the past three quarters.

Dashiell Robinson: Even net of this important transaction, we estimate our market share of on-the-run jumbo production to be between 6% and 7%, up from 4% to 5% in 2024 and from the platform's long-term average of approximately 2%. As our product offerings deepen and more banks prioritize distribution over balance sheet retention, we expect this footprint to continue growing. Efficient distribution drove another quarter of Sequoia gain on sale margins well above our historical targets. Sequoia distributed $2.5 billion of loans during the first quarter through three securitizations and several bulk whole loan sales. Notably, the majority of our whole loan distribution was the bank seeking to bolster overall loan growth, reflecting an emerging two-way flow between bank sellers and bank buyers that were well-positioned to continue facilitating.

Speaker Change: Even net of this important transaction, we estimate our market share of on the run jumbo production to be between 6% to 7% up from 45% in 2024 and from the platforms long term average of approximately 2%.

Speaker Change: As our product offerings, deepen and more banks prioritize distribution over balance sheet retention, we expect this footprint to continue growing.

Speaker Change: Sufficient distribution drove another quarter of Sequoia gain on sale margins well above our historical targets. So.

Speaker Change: So quite a distributed $2 5 billion of loans during the first quarter through three securitizations and several bulk whole loan sales.

Speaker Change: Notably the majority of our whole loan distribution was the banks seeking to bolster overall loan growth, reflecting an emerging two way flow between bank sellers and bank buyers that were well positioned to continue facilitating.

Dashiell Robinson: Amidst April's unprecedented market fluctuations, we continue to defend margins, executing our fourth securitization of the year earlier this week while carefully managing pipeline and hedging risk to position us favorably into the second half of Q2 and beyond.

Speaker Change: Amidst april's unprecedented market fluctuations, we continue to defend margins executing our fourth securitization of the year earlier this week, while carefully managing pipeline and hedging risks to position us favorably into the second half of Q2 and beyond.

Dashiell Robinson: A core complement to Sequoia's growth is the expansion of our Aspire platform, which now includes both directly-originated home equity investments, or HEI, and expanded loan products acquired from third parties, many of them existing sellers. While loan acquisition volume for the first quarter was just over $100 million, the platform has now locked loans with 25 discrete sellers and remains active in onboarding new origination partners. Inflows are being efficiently distributed, and we have sold Aspire pools to two different end investors, with several others actively engaged in acquiring loans from the platform. While Aspire Loans serve consumers requiring an alternative approach to underwriting income or other key attributes, the focus remains on high-quality borrowers with strong equity positions in their homes.

Speaker Change: A core complement to Sequoia is growth is the expansion of our aspire platform, which now includes both directly originated home equity investments or hei and expanded loan products acquired from third parties many of them existing sellers.

Speaker Change: While loan acquisition volume for the first quarter was just over $100 million. The platform has now locked loans with 25 discrete sellers and remains active in Onboarding new origination partners.

Speaker Change: Inflows are being efficiently distributed and we have sold aspire pools to two different end investors with several others actively engaged in acquiring loans from the platform.

Speaker Change: Well aspire alone serve consumers requiring an alternative approach to underwriting income or other key attributes the focus remains on high quality borrowers with strong equity positions in their homes life to date aspire loan production has averaged $7 55, FICO and 68% LTV.

Dashiell Robinson: Life-to-date Aspire Loan production has averaged 755 FICO and 68% LTV. Looking ahead, we expect to grow Aspire's volumes meaningfully in the second half of 2025 with a full-year share goal of 2% to 3% of an addressable market that continues to expand. Aspire is leveraging Sequoia's playbook of speed and reliability of execution to capture production from a growing base of sellers. This will be coupled with an important technology overlay to more effectively transform the experience for our loan sellers and the prospective homeowners they serve. By providing these innovations to both new origination partners and the sellers we have served for decades, our loan acquisition funnel could emerge over time as a distinct competitive advantage in the sector.

Speaker Change: Looking ahead, we expect to grow spires volumes meaningfully in the second half of 2025 with a full year share goal of 2% to 3% of an addressable market that continues to expand.

Speaker Change: Aspire is leveraging <unk> playbook of speed and reliability of execution to capture production from our growing base of sellers. This will be coupled with an important technology overlay to more effectively transformed the experience for our loan sellers and the prospective homeowners they serve by.

Speaker Change: By providing these innovations to both new origination partners and the salaries, we observed for decades, our loan acquisition funnel could emerge over time as a distinct competitive advantage in this sector.

Dashiell Robinson: Corvette maintained its recent momentum in the first quarter, funding $482 million of loans, a 4% decrease from the fourth quarter, but up 48% year-over-year. As the market landscape continues to evolve, our increased focus in recent quarters on smaller balanced loans backed by single-family homes, namely Residential Transition Loans, or RTL, and DSCR loans, continues to serve the platform well. These two products comprise about 30% of Corvette's first quarter volumes. A proportion we expect to grow throughout the remainder of the year. During the first quarter, 98% of our bridge volume was backed by single-family homes, and we continue to expand the sourcing funnels for these strategies and see ongoing runway to gain share in conjunction with existing bellwether products like term loans, for which volume dips slightly quarter over quarter given interest rate volatility, but where we maintain a strong pipeline for Q2.

Speaker Change: Corvette maintained its recent momentum in the first quarter funding $482 million of loans, a 4% decrease from the fourth quarter, but up 48% year over year.

Speaker Change: As the market landscape continues to evolve our increased focus in recent quarters on smaller balance loans backed by single family homes, namely residential transition loans or RTL and <unk> loans continues to serve as a platform well.

Speaker Change: These two products comprised about 30% of core best first quarter volumes, a proportion we expect to grow throughout the remainder of the year.

Speaker Change: During the first quarter, 98% of our bridge volume was backed by single family homes, and we continue to expand the sourcing funnels for these strategies and see ongoing runway to gain share in conjunction with existing bellwether products like term loans for which volume dip slightly quarter over quarter, given interest rate volatility, but where we maintain a strong pipeline for.

Speaker Change: Q2.

Dashiell Robinson: Corvette continues to execute on its capital light strategy, prioritizing products in which the market sees value. The platform distributed over $400 million of loans during the first quarter, largely to whole loan buyers and our joint ventures, and maintained an efficient working capital ratio while focusing on products prioritized by private credit investors. In the past year alone, Corvette has distributed over $1.8 billion of loans into dedicated sources of capital, specifically joint ventures, whole loan sales, and existing securitizations with revolving features. Overall credit strategy across our platforms reflects a more nuanced national housing landscape than we've seen in some time.

Speaker Change: Whereabouts continues to execute on its capital light strategy prioritizing products in which the market sees value the <unk>.

Speaker Change: Platform distributed over $400 million of loans during the first quarter largely to whole loan buyers in our joint ventures and maintained an efficient working capital ratio, while focusing on products prioritize by private credit investors.

Speaker Change: In the past year alone <unk> has distributed over $1 8 billion of loans into dedicated sources of capital specifically joint ventures whole loan sales and existing securitizations with revolving features.

Speaker Change: Overall credit strategy across our platforms reflects a more nuanced national housing landscape than we've seen in some time.

Dashiell Robinson: While the U.S. remains structurally undersupplied in turnkey homes, both new and secondary inventory has grown in several markets as buyers face higher borrowing and maintenance costs. The recent softness is modest relative to the appreciation of recent years. We're adjusting our production priorities in response to emerging local trends that we believe will allow us to meet our growth goals at attractive risk-adjusted returns. Within Redwood Investments, credit performance for organically retained and third-party assets, particularly ones with consumer-related strategies, remains strong. We've talked before about the ability to unlock the discount from these investments, which at quarter ends stood at $1.87 per share, through re-levering and other portfolio optimization, and see a path towards achieving that in the coming quarters.

Speaker Change: While the U S remains structurally under supplied and turnkey homes, both new and secondary inventory has grown in several markets as buyers faced higher borrowing and maintenance costs. The recent softness is modest relative to the appreciation of recent years, we're adjusting our production priorities in response to emerging local trends that we believe will allow us to.

Speaker Change: To meet our growth goals at attractive risk adjusted returns.

Speaker Change: Within Redwood investments credit performance were organically retained in third party assets, particularly ones with consumer related strategies remained strong.

Speaker Change: We've talked before about the ability to unlock the discount from these investments which at quarter end stood at $1 87 per share through re levering and other portfolio optimization and see a path towards achieving that in the coming quarters.

Dashiell Robinson: Underlying repayment velocity in the bridge loan portfolio remains solid, as we saw over 10% of the portfolio repaid in Q1. We continue to actively reduce exposure in the Legacy Bridge Portfolio, specifically from the 2021 and 2022 vintage, prioritizing resolutions that optimize net present value, including traditional property liquidations and restructurings that better position a sponsor to refinance, as well as, more recently, pursuing partnership-based solutions with other capital providers in the space at both an asset-specific and portfolio level. At times, this value-driven approach may result in short-term increases in delinquencies, as it did this quarter, largely tied to two sponsored relationships and still concentrated in the legacy multifamily bridge cohort we've previously discussed.

Speaker Change: Underlying repayment velocity in the bridge loan portfolio remains solid as we saw over 10% of the portfolio repaid in Q1.

Speaker Change: We continue to actively reduce exposure in the legacy bridge portfolio, specifically from the 2021 and 2022 vintage prioritizing resolutions that optimize net present value, including traditional property liquidations and restructurings that better position us sponsor to refinance as well as more recently pursuing partnership based solutions with other.

Speaker Change: Capital providers in the space at both an asset specific and portfolio level.

Speaker Change: At times this value driven approach May result in short term increases in delinquencies as it did this quarter largely tied to two sponsor relationships and still concentrated in the legacy multifamily bridge cohort. We've previously discussed.

Dashiell Robinson: Of note, during the first quarter, approximately 10% of loans that were 90-plus days delinquent at year end were resolved, progress that has continued into the second quarter. We remain confident that this strategy is the most effective path to achieving successful outcomes and preserving value. Roughly half of this legacy multifamily portfolio has already been repaid, and our net capital exposure to this cohort, net of recent resolution activity, now sits at approximately $1.60 per share. Our post-2023 vintages, largely centered on single-family strategies, continue to perform well and reflect the strength of our more recent investment focus.

Speaker Change: Note during the first quarter approximately 10% of loans that were 90 plus days delinquent at year end were resolved progress. It has continued into the second quarter.

Speaker Change: We remain confident that this strategy is the most effective path to achieving successful outcomes and preserving value roughly half of this legacy multifamily portfolio has already been repaid and our net capital exposure to this cohort net of recent resolution activity now sits at approximately $1 60 per share.

Speaker Change: Post 2023 vintages largely centered on single family strategies continue to perform well and reflect the strength of our more recent investment focus.

Brooke Carillo: And with that, I will hand the call over to Brooke. Thank you, Dash. We reported gap earnings of $14.4 million, or $0.10 per share, compared to a loss of $8.4 million, or negative $0.07 per share in the fourth quarter. The sequential improvement was driven by strong performance across our operating platforms, supported by improved fair value marks in the investment portfolio compared to the fourth quarter. Book value per share ended the quarter at $8.39, a modest decline from $8.46 in the fourth quarter, translating to a positive economic return of 1.3% for the first quarter. Our shareholder letter published early last week noted that our estimated book value per share for the second quarter is 1 to 1.5% higher than at March 31, supported by our dynamic hedging and strong mortgage banking activity to start the second quarter.

Brian: And with that I will hand, the call over to Brian.

Brian: Thank you Dash, we reported GAAP earnings of $14 4 million or 10 cents per share compared to a loss of $8 4 million or negative seven cents per share in the fourth quarter. This sequential improvement was driven by strong performance across our operating platform supported by improved fair value marks and the inverse.

Brian: Portfolio compared to the fourth quarter.

Brian: Book value per share ended the quarter at $8.39, a minus declined from $8.46 in the fourth quarter translate into a positive economic return of one 3% for the first quarter. Our shareholder letter published early last week.

Brian: Our estimated book value per share for the second quarter is one to one 5% higher than at March 31st.

Brian: Warranted by our dynamic hedging and strong mortgage banking activity to start the second quarter.

Brooke Carillo: Earnings available for distribution, or EAD, for the first quarter was $19.8 million, or $0.14 per share, up from $18.4 million, or $0.13 per share in the fourth quarter. These results reflect healthy contributions from mortgage banking and a continued focus on operational efficiency. Net income from Sequoia was $25.8 million, representing a 28% ROE for the quarter, up from 23% in the previous quarter. Lock volume increased 73% quarter over quarter, reaching $4 billion, the highest level since 2021, driven both by strong daily flow activity and bulk purchases from strategic partners. Capital efficiency drove ROE improvement as the segment utilized less capital, largely given heightened securitization activity on the quarter.

Brian: Earnings available for distribution or <unk> for the first quarter was $19 8 million or 14 cents per share up from $18 4 million or <unk> 10 per share in the fourth quarter.

Brian: These results reflect healthy contributions from mortgage banking and a continued focus on operational efficiency.

Brian: Net income from the plan with 20 858 million, representing a 28% army for the quarter up from 23% in the previous quarter lock volume increased 73% quarter over quarter, reaching 4 billion the highest level since 2021, driven both by strong daily flow activity and bulk purchases from strategic partnering.

Brian: Capital efficiency drove irony improvement as the segment utilized less capital largely given heightened securitization activity on the quarter.

Brooke Carillo: Gain on sale margins remained above our historic 75 to 100 basis point range, and Aspire's early lock volume, just over $100 million, tracked within the same gain on sale margin range. Aspire's results remain consolidated under Sequoia at this stage, but through time, we expect to break out metrics as the platform scales. Corvettes generated net income of $1.3 million, or $2.9 million, excluding amortization of acquisition-related intangibles, resulting in a 20% ROE for the quarter. While volumes were down slightly from the fourth quarter, we saw margin expansion in term loan production and continued strength in our smaller balanced bridge and DSER strategies.

Brian: Gain on sale margins remained above our historic 75 to 100 basis point range.

Fires early last volume just over 100 million tracks within the same gain on sale margin range.

Brian: <unk> results remain consolidated under the play at this stage that through time, we expect to breakout metrics as a platform scale.

Brian: <unk> generated net income of $1 3 million or $2 9 million, excluding amortization of acquisition related intangibles, resulting in a 20% Roe for the quarter.

Brian: While volumes were down slightly from the fourth quarter, we saw margin expansion in term loan production and continued strengthen our snipe Allan Briggs <unk> strategy. Despite recent investments in expanding our production capacity efficiency metrics remained strong and within our target range underscore the scalability of our operating infrastructure.

Brooke Carillo: Despite recent investments in expanding our production capacity, efficiency metrics remain strong and within our target range, underscoring the scalability of our operating infrastructure. Redwood Investments generated $22.9 million of net income in the first quarter, up from $2.8 million in Q4. This reflects solid returns from our retained operating investments and third-party portfolio, offset by the continued pressure in our legacy bridge book, which we have broken out separately. Dash reviewed delinquency rates in the book rose due to credit migration on select vintage multi-family bridge loan exposures, though we are actively pursuing resolutions for this group. From a capital and liquidity standpoint, we ended the quarter with unrestricted cash of $260 million, up from $245 million at year-end.

Brian: Greg with investments generated $22 9 million of net income in the first quarter.

$2 8 million in Q4. This reflects solid returns from our retained operating investments and third party portfolio offset by the continued pressure in our legacy branch that once we have broken out separately.

Brian: Reviewed delinquency rates and the Buck really due to credit migration and select vintage multifamily bridge loan exposure.

Brian: We're actively pursuing methylation and fitness grew.

Brian: From a capital and liquidity standpoint, we ended the quarter with unrestricted cash of $260 million from $245 million at yearend recourse leverage at two five times compared to two four times in the fourth quarter.

Brooke Carillo: Recourse leverage stood at 2.5 times compared to 2.4 times in the fourth quarter. Following quarter-end, we accessed $50 million of additional capacity under our CPP Investments Partnership, bolstering our near-term liquidity as we prepare for continued market volatility. As we noted in our shareholder letter, market conditions have shifted materially in recent weeks. The impact of escalating trade policy and rate volatility has led to a broad risk off-tone. With many economists now pricing in heightened recession risk, we've positioned our balance sheet to benefit modestly from declining rates and increased volatility. At quarter end, our debt profile remained predominantly linked to non-marginable loan warehouse lines or non-recourse securitization.

Brian: Quarter end, we accessed $50 million of additional capacity under our CVP investments partnership bolstering, our near term liquidity and to prepare for continued market volatility.

Brian: As we noted in our shareholder letter market conditions have shifted materially in recent week the impact of escalating trade policy and rate volatility has led to fraud risk off county.

Brian: Many economists now pricing and heightened recession risks, we've positioned our balance sheet to benefit modestly from declining rates and increased volatility.

Brian: At quarter end, our debt profile remained predominantly linked to non large jumbo loan warehouse line or non recourse securitization.

Brooke Carillo: Only roughly a third of our $2.9 billion of recourse debt is marginable, mainly tied to our Prime Jumbo Pipeline, where active hedging and fast capital turnover help mitigate exposure. In fact, we've reduced securities repo by 40% since March 31st, following accretive sales and non-recourse financing transactions.

Brian: Only roughly a third of our $2 $9 billion of recourse debt is 19, Nevada, mainly tied to our prime jumbo pipeline.

Brian: Hygiene in fact capital turnover helped mitigate exposure in fact, we've reduced securities repo by 40% since March 31.

Brian: Boeing accretive sales and nonrecourse financing transaction.

Brooke Carillo: As it relates to our overall capital structure, we are evaluating alternatives including the potential for share repurchases, particularly in light of the current discount to book value, which we believe meaningfully exceeds downside credit risk under stress scenarios. As mentioned, we've made enhancements to our disclosures this quarter to clearly delineate the contributions from our strategies where we're actively directing new capital deployment, namely our operating businesses, Goya, Corvette, and Aspire, and the retained investments we create there, versus opportunistic third-party investments and legacy portfolios. These disclosures provide increased transparency around the strategic capital allocation decisions we've made and the resulting earnings contributions, which we believe will help investors better track our progress.

Brian: As it relates to our overall capital structure, we are evaluating alternatives, including the potential for share repurchases, particularly in light of the current discount to book value we.

Brian: We believe meaningfully exceeds downside credit risks under stress scenarios.

Brian: As mentioned, we have made enhancements to our disclosures this quarter to clearly delineate the contributions from our strategy where we.

Brian: We're actively directing new capital deployment, namely our operating businesses Quant corvette and a fire and then retain investments we create there versus opportunistic third party investments in legacy portfolio. These disclosures provide increased transparency around our strategic capital allocation decisions, we've made and the resulting earnings call.

Brian: Elevation, which we believe will help investors better track our progress with Q4 earnings we provided volume and return targets for each of our platform and have expanded that with additional information in this quarter's Redwood review.

Brooke Carillo: With Q4 earnings, we provided volume and return targets for each of our platforms and have expanded that with additional information in this quarter's Redwood review. While the second quarter may see short-term volume fluctuations due to market conditions, we continue to expect to achieve our full-year targets. For our year-end 2025 run rate, we are targeting annualized EAD returns on equity in the 9% to 12% range, up from 7% in Q1. We aim to accomplish this by reallocating nearly 20% of capital towards our operating platforms and retained operating investments as we reduce exposure to our legacy bridge investments and other non-strategic third-party securities.

Brian: Second quarter, Macys short term volume fluctuations due to market conditions, we continue to expect to achieve our full year targets for our year end 2025 run rate, we are targeting an annualized returns on equity in the 9% to 12% range up from 10% in Q1, we aim to accomplish this by reallocating nearly 20% of capital.

Towards our operating platforms and retained operating investment as we reduce exposure to our legacy print investments and other non strategic third party securities.

Brooke Carillo: To date in Q2, we have sold approximately $50 million of such investments and anticipate continued activity throughout 2025.

Brian: In Q2, we had filled approximately $50 million of such investment and anticipate continued activity throughout 2025.

Operator: And with that, Operator, we will now open the line for questions. Thank you.

Brian: With that operator, we will now open the line for questions.

Operator: Well, now we conduct a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key.

Brian: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

Brian: Confirmation tone will indicate your line is in the question queue you.

Brian: You May you May press star two to remove your question from the queue for.

Brian: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: One moment, please, while we poll for questions.

Brian: One moment, please while we poll for questions.

Brian: Okay.

Dashiell Robinson: Our first question is from Doug Harter with UBS. Thanks. Hoping you could walk through, you know, kind of the real-life case study of April, how you guys hedge your portfolio and, you know, kind of how you made it through that period, you know, kind of with book value up. Uh, sure, Doug. Um, you know, we, we, we aren't going to get into the, the, um... The specifics of how we hedged, other than to say, you know, we consider the pipeline a moving business and we're constantly trying to turn capital and move risk. And we've been in the markets.

Brian: Our first question is from Doug Harter with UBS.

Speaker Change: Hoping you could walk through.

Speaker Change: Kind of the real life case study of <unk> of April how have you guys had your portfolio and kind of how you made it through that period.

Speaker Change: You know kind of with with book value up.

Speaker Change: Yes.

Doug Harter: Sure Doug.

Doug Harter: We are going to get into the <unk>.

Speaker Change: Specifics of how we hedged other.

Speaker Change: Other than to say you know, we consider the pipeline of moving business and we're constantly trying to turn capital to move risk as quickly as we can we've been in the markets.

Dashiell Robinson: Numerous Sequoia transactions at this point, and we're always looking to sell loans in bulk. So I think it was kind of all of the above. You know, obviously TBA is underperformed. Volatility was very high, but I think we've learned a lot over the past few years, particularly through the COVID experience and our positioning with respect to our pipeline, our non-marginal facilities, things of that sort, all of it kind of contributed to being able to manage that period effectively across the book.

Speaker Change: Numerous sequoia transactions at this point.

Speaker Change: We're always looking to sell loans in bulk so I think it was it was kind of all of the above.

Speaker Change: You know, obviously TBA has underperformed and volatility was very high but I think we've learned a lot over the past few years, particularly through the COVID-19 experience and our positioning with respect to our pipeline our non marketable facilities things of that sort all of that kind of contributed to being able to.

Speaker Change: Manage that period effectively across the book.

Dashiell Robinson: Great. And is there any way you could, you know, give us any sense as to kind of how Sequoia spreads have kind of fared and, you know, whether you think that has any impact on the ability to continue to generate kind of the target revenue margin on those loans? Yeah, the market was obviously extremely volatile in April. You know, we've. I'd say we had somewhat of a risk-off mindset in the first half of the month, which was extremely appropriate. Things have calmed down and spreads have come back in. The last deal that we were in the market with, spreads, a point back of TBAs, just kind of right back to more normalized levels.

Speaker Change: Great and is there any way you could give.

Speaker Change: Give us any sense as to kind of how.

Speaker Change: Decoy spreads have kind of fared and whether you think that has any impact on the ability to continue to generate kind of the target revenue margin on those loans.

Speaker Change: Yes.

Speaker Change: The market was obviously extremely volatile in April.

Speaker Change: I would say, we had somewhat of a risk off mindset in the first half of the month, which was extremely appropriate.

Speaker Change: Things have calmed down and spreads have come back in.

Speaker Change: The last deal that we were in the market with <unk>.

Speaker Change: Spreads are point back of TBA is just kind of right back to.

Speaker Change: More normalized levels.

Dashiell Robinson: And so I think where Brooke was going in her prepared remarks, we still feel that it's early in the year, and just given the growth in the business and the trajectory, we obviously had a fantastic first quarter. We still feel confident we can generate margins that are at or in excess of our long-term range of 75 to 100 basis points.

Speaker Change: And so I think where brokers going in our prepared remarks, we still.

Speaker Change: Feel that it's early in the year and just given the growth in the business and the trajectory. We obviously had a fantastic first quarter.

Speaker Change: We still feel confident we can generate margins that are at or in excess of our you know our long term range of 75 to 100 basis points.

Dashiell Robinson: Great. Appreciate those answers.

Speaker Change: Great I appreciate those answers thank you.

Dashiell Robinson: Thank you.

Speaker Change: With.

Richard Shane: Our next question is from Rick Shane with J.P. Morgan. Hey, guys, thanks for taking my question. It's actually kind of the other side of the coin of Doug's question. I'm looking at the tremendous growth that you guys are experiencing and the volatility of the markets that we're also all experiencing. And, Dash, I think you alluded to this a little bit, but I'm curious, as you do things like lock $4 billion worth of volume in a quarter, how you manage the liquidity and execution risk associated with that. It's kind of interesting, actually. The average capital allocation, it looks to me like ticked down for the quarter.

Rick Shane: Our next question is from Rick Shane with J P. Morgan.

Speaker Change: Hey, guys. Thanks for taking my question, it's actually kind of the other side of the coin of Doug's question.

Speaker Change: I'm looking at the tremendous growth.

Speaker Change: You guys are experiencing.

Speaker Change: And.

Speaker Change: The volatility of the markets.

Speaker Change: We're also all experiencing.

Speaker Change: Yes, I think you alluded to this a little bit but.

Speaker Change: I'm curious.

Speaker Change: As you do things like locked $4 billion worth of volume in a quarter.

Speaker Change: You manage the liquidity and execution risk associated with that it is kind of interesting actually the average.

Speaker Change: Capital allocation it looks to me like tick down for the quarter.

Dashiell Robinson: You alluded to the fact that there was a lot of velocity in terms of Sequoia execution, and it sounds like post-quarter there's been additional. But I would love to understand, in the context of things, what is the risk that you guys take on when you, for example, lock $4 billion in an environment where maybe the markets go away the next day?

Speaker Change: You've alluded to the fact that there was a lot of velocity in terms of Sequoia execution.

Speaker Change: It sounds like post quarter Theres been additional.

Speaker Change: But I would love to understand in the context of things what is the risk.

Speaker Change: That you guys take on when you for example put up locked $4 billion in an environment, where maybe the markets go.

Speaker Change: <unk> the next day.

Dashiell Robinson: Sure, Rick, I can take that. Thank you for the question. You know, as Chris referenced, you know, speed is... You know, in this industry, the hardest thing to teach and our ability to turn over the risk efficiently and have risk pre-sold or know where partners are lined up to execute I think is a really big deal. Just to put some math around that, the pipeline we are, you know, carrying, you know, into the end of the quarter, half of that has already been sold or securitized since March 31st. That's both hold-on sales, largely to banks, as I talked about, as well as securitization.

Speaker Change: Sure I can.

Speaker Change: I can take that thank you for the question.

Chris: As Chris referenced.

Chris: Speed is.

Speaker Change: You know in this industry that the hardest thing to teach and our ability to turn over the risk efficiently.

Speaker Change: And have risk pre sold or know where our partners are lined up to execute I think is a really big deal.

Speaker Change: Just to put some math around that pipeline, we are carrying into the end of the quarter half of that has already been sold or securitize since March 31.

Speaker Change: That's both whole loan sales largely to bags as I talked about as well as securitization. So just understanding.

Dashiell Robinson: So, just understanding... you know the shock absorbers in the market and where risk can be cleared you know day in day out in April it was intraday as you know at 10 a.m. that was a different answer than 3 p.m. on a number of days and just always knowing where that risk can clear is you know is the best is the best mitigant and I think Q1 was a good A good example of that, we've probably never felt better about our depth and distribution, you know, as Chris articulated, private label securitization, and this has not always been the case amidst macro volatility, has really hung in there.

Speaker Change: The shock absorbers in the market and where our risk can be cleared.

Speaker Change: And day out in April it was intra day as you know at 10, a M that was a different answer than three P. M. On a number of days and just always knowing where that risk can clear is is the best.

Speaker Change: As the best Michigan, and I think I think Q1 was good.

Speaker Change: A good example of that we probably never felt better about our depth and distribution as Chris articulated private label securitization and this has not always been the case amidst macro volatility is really hung in there it's been really orderly even amidst huge swings in rates and obviously equities.

Dashiell Robinson: It's been really orderly, even amidst huge swings in rates and obviously equity. know that as Chris articulated, we haven't seen in five years. And so I think that's a testament to a number of things, you know, including our platform and being able to get Sequoia deals up and down and, you know, being the only phone call that a lot of, you know, loan buyers will take, you know, amidst bouts of volatility. They're taking our call. They're not taking others. And so I think that's a big part of it. You know, as Brooke said in her remarks, you know, we've been positioned for a while to benefit from lower rates and increase in volatility.

Speaker Change: As Chris articulated we haven't seen in five years.

Speaker Change: And so I think Thats, a testament to a number of things, including our platform and being able to get as liquidity goes up and down and being the only phone call that a lot of loan buyers will take that.

Speaker Change: That's the volatility that they are taking our call that are not taken others and so I think thats thats a big part of it is <unk>.

Speaker Change: Said in her remarks, we've been positioned for a while to benefit from lower rates and increase in volatility. We obviously saw a fair amount of that.

Dashiell Robinson: We obviously saw a fair amount of that certainly on the ball side in April. So I think that continues to serve us well. But a lot of it, Rick, is the same as we've always done, which is just speed and knowing where the market is, you know, at all times. Got it.

Speaker Change: Certainly on the ball side in April So I think that continues to service well, but a lot of it Rick is the same as we've always done which is just speed and knowing where the market is at all times.

Dashiell Robinson: And if I could ask one follow up in this kind of reflects the limits of an equity analyst's understanding of your business, or at least my understanding of your business in the nomenclature. So you guys had $1.9 billion of bulk purchases. I think you said that those were season loans from a depository. That is, you know, it's categorized as part of the forward purchases, but I'm assuming that those are closed loans. Is that something where when you take on that $1.9 billion, you are basically within 24 hours, that's going, that's being funded in a permanent structure as opposed to flow loans on a lock basis?

Speaker Change: Got it and if I could ask one follow up.

Speaker Change: And this.

Speaker Change: Kind of reflects the limits of an equity analyst understanding of your business or at least my understanding your business and the nomenclature.

Speaker Change: You guys had $1 9 billion of bulk purchases.

Speaker Change: I think you said that those were seasoned loans from.

Speaker Change: A depository.

Speaker Change: That is.

Speaker Change: It's categorized as <unk>.

Speaker Change: Part of the forward purchases, but I'm assuming there.

Speaker Change: Those are those are closed loans is that something where when you take on that $1 9 billion.

Speaker Change: You are basically within 24 hours thats going.

Speaker Change: That's being funded in a permanent structure as opposed to flow loans on a on a lot basis.

Dashiell Robinson: I'll take that, Rick. And you've been around the hoop for decades, so I know you know more than you're letting on, but the... The closed pools, season pools, things that we're seeing from banks, we include that because that's really become a bona fide addressable market for us at this point. We're seeing pools regularly now, obviously there was a big TD pool that traded and got a lot of headlines in January. We were very focused on that, and certainly following that we've seen some additional pools and have been in touch with our regional bank partners. So what we're seeing causes us to position, to view that as an addressable market and make sure that we've got the resources and the hedging parameters in place, and the distribution.

Rick Shane: Well I'll take that Rick.

Rick Shane: And you've been around the hoop for for decades, So I know forever.

Rick Shane: You know more than youre, letting on but but the.

Rick Shane: The closed end.

Rick Shane: Pulls are the clothes pools sees.

Rick Shane: Susan pools things that we're seeing from banks.

Speaker Change: We include that because thats really become a bonafide addressable market for us at this point.

Rick Shane: We're seeing pools regularly.

Rick Shane: Now obviously, there was a big TD pool that trade it and got a lot of headlines in January.

Rick Shane:

Rick Shane: We were very focused on that and certainly following that.

Rick Shane: We've seen some additional pools than it had been in touch with our regional Bank partners.

Rick Shane: So what we're seeing causes us to position.

Rick Shane: Two two.

Rick Shane: View that as an addressable market and make sure that we've got the resources and the hedging parameters in place.

Dashiell Robinson: So we're selling to banks again. We've been very focused on buying from banks, but there's certain regional banks that still need collateral, and that's been the two-way. You know, exchanges with banks has been very good for us. So I think it's really something, you know, we've built some competencies around and if we know that there's a pool that we intend on purchasing, you know, the same day, the same moment, we're focused on how we're going to distribute it. So that's been working pretty well for us this year.

Rick Shane: And the distribution. So we are we're.

Rick Shane: We're selling to banks again.

Rick Shane: So we've been very focused on buying from banks, but there's there are certain regional banks that.

Rick Shane: Still need collateral.

Rick Shane: And that's been the two way.

Rick Shane: You know exchanges with banks has been.

Rick Shane: Good for us So I think it's really.

Rick Shane: We've built some competencies around and if we know that there's a pool that we intend on purchasing.

Rick Shane: The same day the same moment, we're focused on how we're going to distribute it. So that's been that's been working pretty well for us this year.

Dashiell Robinson: Thank you very much.

Rick Shane: Okay.

Rick Shane: Thank you very much.

Rick Shane: Sure.

Rick Shane: Yeah.

Donald Fandetti: Our next question is from Don Fandetti with Wells Fargo. Hi, good evening.

Speaker Change: Our next question is from Don <unk> with Wells Fargo.

Don: Hi, good evening can you.

Dashiell Robinson: Can you talk a little bit, I just want to clarify the, on the bridge loans, I guess the net capital, net of resolutions of $1.60, is that all of your bridge loans, both securitized and unsecuritized? No, thanks, Don. It's Dash. I can take that. That $1.60 share is specific to the 2022 and earlier vintage multifamily bridge, which, you know, as we've said, has been the area where we've seen the most density of issues. And so just trying to convey as we've, you know, continue to optimize financing against that part of the book, continue resolutions, continue to see paydowns, we thought it was useful to frame on a per share basis, the unsecuritized portion that's sort of older vintage Got it.

Speaker Change: Talk a little bit I, just want to clarify the on the bridge loans I guess, putting that capital now.

Speaker Change: Net of resolutions of $1 60 is that all of your bridge loans.

Speaker Change: Both securitized debt unsecured.

Josh: No. Thanks, Don It is Josh I can take that.

Josh: That dollar 60 share is specific to the 22 and 2022 and earlier vintage multifamily bridge.

Josh: <unk> is <unk>.

Josh: We've said, it's been the area, where we've seen the most density of issues and so just trying to convey is we've.

Josh: We will continue to optimize financing against that part of the book continue resolutions continue to see Paydowns. We just thought it was useful to frame.

Josh: On a per share basis.

Josh: The unsecured portion thats sort of older vintage multifamily.

Dashiell Robinson: And I mean, how should we think about the, you know, kind of a manifestation of that risk? Obviously, delinquencies, as you highlighted, you know, we're up a good bit this quarter, but you're resolving them and, you know, your resolutions are probably coming in pretty close to Carrying Value, I think. Like, how are you thinking about that rest of the book? Is there enough liquidity in multifamily where you can resolve these?

Speaker Change: Got it.

Speaker Change: I mean, how should we think about kind.

Speaker Change: Kind of a manifestation of that risk obviously delinquencies as you highlighted were up this.

Speaker Change: This quarter, but you're resolving them in.

Speaker Change: Your resolutions are probably coming in pretty close to.

Speaker Change: Youre carrying value I think like how are you thinking about that risk to the book.

Speaker Change: Is there enough liquidity in multifamily where you can resolve these.

Dashiell Robinson: It's pretty clean. Yeah, good question. Um, I, you know, we, as I, you know, as I mentioned, we are always focused on, you know, the highest net present value of resolution. And to be candid that, you know, that evolves quarter by quarter, loan by loan, you know, depending on the market, depending on, you know, how the sponsor is progressing with the project. You know, we've talked in recent quarters about You know, our willingness for an engaged sponsor who's working on their project, you know, to maybe offer some short-term rate relief, you know, we've done that in certain cases.

Speaker Change: Clean.

Speaker Change: Yes, good question.

Speaker Change: We as I as I mentioned, we are always focused on the highest net present value of resolution.

Speaker Change: To be Canada.

Speaker Change: Evolves quarter by quarter loan by loan depending on the market depending on how the sponsor is progressing with the project we've talked in recent quarters about.

Speaker Change: Our willingness for an engaged sponsor who is working on their project.

Speaker Change: Could you maybe offer some short term rate relief, we've done that in certain cases.

Dashiell Robinson: You know, I think the uptick in delinquency we saw this quarter was a function, frankly, of decisions we made where we felt it was best to pursue alternative resolutions, potentially selling the note or getting into the real estate to, you know, to get out of the risk more efficiently. And that's what's important. This is a short-duration book. You know, there's a lot of maturities that have already occurred or coming up, you know, in the next six to 12 months. And we have the ability to, you know, control our outcomes if we want to continue to work with a sponsor or not.

Speaker Change: I think the uptick in delinquency, we saw this quarter.

Speaker Change: It was a function frankly of decisions, we made where we felt it was it was best to pursue alternative resolutions essentially selling the node or get into the real estate too.

Speaker Change: To get out of the risk more efficiently.

Speaker Change: And that's what's important this is a short duration book, there's a lot of maturities that have already occurred or coming up.

Speaker Change: In the next six to 12 months and we have the ability to control our outcomes. If we want to continue to work with the sponsor or not.

Dashiell Robinson: You know, we do expect these to continue to resolve throughout the year. Some are certainly taking, you know, from a timeline perspective longer than we expect. It will be a combination of working with a borrower through time to get them to some sort of refinance away from us, or potentially getting out of the risk ourselves without the borrower. I would say in general, liquidity in multifamily has been fine. It's certainly market-specific as you go across the country. In general, obviously, multifamily starts are down a lot. We expect that supply-demand ultimately to sort of... Reassess or realign here in the coming quarters as starts are down and demands are high.

Speaker Change: We do expect these to continue to resolve throughout the year. Some are certainly taking.

Speaker Change: From a timeline perspective longer than we expect but.

Speaker Change: We are it will be a combination of working with our borrowers through time to get them to some sort of refinanced away from us or potentially.

Speaker Change: Getting out of the risk ourselves without the borrower involved.

Speaker Change: I would say in general liquidity in multifamily has been fine. It's certainly market specific as you go across the country.

Speaker Change: In general obviously multifamily starts are down a lot, we expect that supply demand ultimately to sort of.

Speaker Change: Reassess or realign here in the coming quarters as starts are down in demand.

Dashiell Robinson: You know, uh... Stays where it is or improves. So again, it's loan-specific. You know, the important thing is that we're determining our outcome as it relates to continuing to work with these borrowers or not, and you know, the move in delinquency up this quarter reflected situations where we felt moving on and dealing with the real estate ourselves or in partnership with another capital partner was the best answer. John, thanks.

Speaker Change: Yes.

Speaker Change: Stays where it is or improves so again its loan specific.

Speaker Change: The important thing is that we are determining our outcome as it relates to continuing to work with these borrowers are not in.

Speaker Change: The move in delinquency up this quarter reflected situations, where we felt moving on in dealing with the real estate ourselves or in partnership with another capital partner was the best answer.

Speaker Change: Thanks.

Operator: Operator, we can take our next question.

Speaker Change: Operator, we can take our next question.

Crispin Love: Our next question is from Crispin Love with Piper Sandler. Thanks. Good afternoon. Appreciate you taking my question. First, can you talk a little bit about your EAD ROE guide for 2025? Brooke, I believe you called out 9% to 12% for the full year. It's still early, but that assumes a decent ramp from the first quarter. Can you just speak a little bit to the cadence you might expect throughout the year and what that might mean for dividend coverage throughout 2025 from EAD? Sure, I'm happy to.

Speaker Change: Our next question is from Crispin Love with Piper Sandler.

Crispin Love: Hi, Good afternoon I appreciate taking my question first can you talk a little bit about your EAA.

Crispin Love: ROE guide for 2025 broker I believe you called out 9% to 12% for the full year, it's still early but that assumes that a decent ramp from the first quarter can you just speak a little bit to the cadence you might expect throughout the year and what that might mean for dividend coverage through throughout 2025 from AAD.

Crispin Love: Sure I'm happy to.

Brooke Carillo: Yeah, so as I laid out in some of the prepared remarks, and we did include a slide on this in the Redwood review page. Reporter, and Transcription by CastingWords But we have, this has been an ongoing trend. You've seen us continue to de-emphasize some of our non-strategic investments in the investment portfolio in favor of, you know, redeploying capital into our operating businesses where we've seen, you know, this quarter we had a. 20% and 28% ROE for our operating businesses. I think we, from several of the already made comments, we see really strong opportunities for both increasing our flow activity with new banking partners through our Sequoia business and large bulk opportunities.

Crispin Love: Yes, so as I laid out.

Crispin Love: Paired remarks can we did include a slide on this in the Redwood review page 13 this corner.

Crispin Love: So we have this has been an ongoing trend you've seen us continue to deemphasize some of our non strategic investments.

Crispin Love: Investment portfolio in favor of.

Crispin Love: Redeploying it all into our operating businesses, where we have seen this quarter, we had 20.

Crispin Love: <unk>, 'twenty and 28% ROE for our operating businesses.

Crispin Love: I think we.

Crispin Love: From several of the Rd main comments, we see really strong.

Crispin Love: <unk> 4 billion, increasing our flow activity with new banking partners.

Crispin Love: Terrific way of business.

Crispin Love: And in large bulk opportunities those will obviously be more episodic.

Brooke Carillo: Those will obviously be more episodic, but then incorporate some of the smaller balance products that, where we are under penetrated in the market, those all serve as key areas for growth and will require incremental working capital to fund growth of our pipelines there. So I think we had guided at the beginning of the year that we locked about $9 billion of loans last year and we thought we could You know, 30% increase in... Some of our consumer volumes just if you draw a line through the first quarter, which obviously was very heavily weighted towards a couple of bulk transactions We think that we could exceed our initial projections there.

Crispin Love: But the new format.

Crispin Love: Smaller balance products that.

Crispin Love: Where we are under penetrated in the market with those alternatives kind of key areas for growth and will require incremental working capital.

Crispin Love: John.

Crispin Love: To fund the growth of our pipeline there. So I think we had guided at the beginning of the year then.

Crispin Love: We lost about $9 billion of loans last year, and we thought we could see.

Crispin Love: Yes, 30% increase and.

Crispin Love: Some of our consumer volume just if you draw lines in the first quarter, which obviously was very heavily weighted towards a couple of a bulk transaction.

I think that we could exceed our initial projections there and so this is really a 220 $200 million to $225 million rotation.

Brooke Carillo: And so, you know, this is really a 200 to 225 million dollar rotation out of some of the third-party investments that are really under levered today You know We carry a very low leverage in our investment portfolio, which serves as a nice area to funnel that redeployment. We obviously made commentary on just book value accretion possible through share buybacks today, which is not reflected in That guidance that we gave in the nice 12% book could hit the accelerator button there So I think a lot of this will just depend on when we see those opportunities You know, manifest in the operating businesses and comparing that to opportunities within our capital structure today, but you'll see it really throughout the year as Thank you for joining this reallocation, driven by payoffs, resolution activities, and...

Crispin Love: Edison of that third party investments that are really under levered today.

Crispin Love: No we carry very low leverage and our investment portfolio, which serves as a nice area to the funnel that redeployment, we obviously made commentary.

Crispin Love: Book value accretion possible through share buybacks today, which is now reflected in.

Crispin Love: That guidance that we gave in the 9% to 12%.

Crispin Love: Accelerator button there so I think a lot of it will just depend on when we see those opportunities.

Crispin Love: Manifest in the operating businesses and comparing that to opportunities in their own capital structure today, but you'll see it really throughout the year and as we continue this reallocation.

Crispin Love: Driven by payoffs resolution activities and sourcing optimization.

Brooke Carillo: Great, and I'm looking at that slide now, and I see target year-end 25 run rate of 9 to 12. So, does that mean for the full year you're expecting 9 to 12, or once you get to the 4th quarter? That's usually like a second, we'll call that a second half of the year run rate. Okay, sounds good.

Speaker Change: Great I'm looking at that slide now and I think target year end 25 run rate of 9% to 12. So does that mean for the full year, you're expecting nine to 12 or once you get to the fourth quarter.

Crispin Love: We'll call that a second half of the year run rate.

Speaker Change: Okay.

Brooke Carillo: And then can you expand on your comments on sharing purchases? Do you have an authorization in place today? And what would you need to see to become more active there? Yeah, so we do have a current authorization. It's over just over $100 million. We have bought back stock before and we are actively evaluating it. As I said in my commentary, I think some of it is just, you know, freeing up the capital that we've laid out on this through this, you know, this plan today to make sure that we feel like given the volatile markets that we face today, that we feel like we have sufficient capital to manage our business and and excess capital to deploy it back into our own stock.

Speaker Change: Sounds good and then can you expand on your comments on share repurchases do you have an author's authorization in place today, and what would you need to see to become more active there.

Speaker Change: Yeah. So we do have a current authorization is over just over $100 million, we have bought back stock before and we are actively evaluating as I said in my commentary I think some of it is just.

Speaker Change: Freeing up the capital that we've laid out on this.

Speaker Change: Through this.

Speaker Change: As planned today to make sure that we feel like given the volatile market that we face today that we feel like we have sufficient capital to manage our business and and excess capital and deploy it back into our own stock, but we feel like the levels today are certainly attractive.

Brooke Carillo: But we feel like the levels today are certainly attractive. Yeah, I'd also add, when we look at our debt maturity ladder, You know, we have a convert maturing later this year, I think it's around $109 million or so, which if you look in the past three, four, five years, that's about the lowest amount of maturities we've had to manage in quite some time by a wide margin. So when we look at organically internally sourced capital and our uses, the stock is definitely something that we're going to pay close attention to in the coming weeks and months, particularly because we have the authorization.

Speaker Change: I'd also add when we look at our debt maturity ladder.

Speaker Change: You know we have we have a convert maturing later this year I think it's around $109 million or so which if you look in the past three or four or five years. That's that's about the lowest amount of maturities we've had to manage in quite some time by a wide margin.

Speaker Change: So when we look at.

Speaker Change: Organically internally source capital.

Speaker Change: And.

Our uses.

Speaker Change: The stock is definitely something that we're going to pay close attention to.

Speaker Change: You know in the coming weeks and months, particularly because we have the authorization in place.

Brooke Carillo: Fantastic. I appreciate you taking my questions.

Speaker Change: Fantastic I appreciate you taking my questions. Thank you.

Brooke Carillo: Thank you.

Eric Hagen: Our next question is from Eric Hagen with BTIG. Hey, thanks. Good afternoon. Okay, so a bone of contention to some degree in the securitization market, as you guys know, has been the high level of credit enhancement. And I hope to hear from you. You know, Eric, it's hard to say other than, you know, when we when we engage with the rating agencies, you know, their models and the timing of when they change their models is kind of all over the map. They use a lot of empirical and historical data. So it's not just, you know, what have we seen over the past year, but what have we seen over the past cycle or a few cycles?

Speaker Change: Our next question is from Eric Hagen with <unk>.

Speaker Change: Okay.

Eric Hagen: Hey, Thanks, good afternoon.

Eric Hagen: Okay. So a bone of contention to some degree in the securitization market. As you guys know has been the high level of credit enhancement.

Eric Hagen: Especially on the prime jumbo and non QM securitization deals relative to that risk that's embedded in those loans do you guys see any catalysts, which could maybe alleviate that constraint.

Eric Hagen: We're like the rating agencies to get more constructive.

Eric Hagen: How do you think that conversation potentially evolves as the GSE is potentially exit conservatorship and there's more demand for funding and that sort of needs to go into the private label securitization market.

Speaker Change: No Eric it's hard to say other than you know when we when we engage with the rating agencies are their models.

Speaker Change: <unk> of when they changed their models is.

Speaker Change: It's kind of all over the map they use a lot of empirical and historical data.

Speaker Change: So it's not just what we've seen over the past year, but what are we seeing in over the past cycle or a few cycles.

Dashiell Robinson: You know, as far as like what, what really opens up securitization, you know, as you know, we were just in Washington and You know, we've been re-advocating for some of the basic changes, such as changes to Reg AB2, you know, and some other things that would make public securitization in particular viable. There's one thing I can tell you is there's a lot of capital out there. You know, one of the boogeyman arguments within the Beltway is there's not enough private capital. I mean, go look at how many trillions of dollars have been raised in private credit over the past few years.

Speaker Change: You know as far as like what what really opens up securitization as you know we were just in Washington and.

Speaker Change: <unk> been re advocating for some of the basic changes such as changes to rugby too and some other things that would make public securitization in particular viable.

Speaker Change: There is one thing I can tell you is there's a lot of capital out there you know one of the bogeyman arguments within the beltway as Theres not enough private capital I didn't go look at how many trillions of dollars have been raised in private credit over the past few years theres tons of capital, but it's not a level playing field.

Dashiell Robinson: There's tons of capital, but it's not a level playing field. There was a great article, op-ed, that just dropped today in the journal about the GSEs. I would encourage everyone to read it. There's definitely a growing need for private sector capital, private sector securitizations, public securitizations. All of these things, you know, will continue to. pursue, and hopefully with change in Washington, we can get a few of the low-hanging fruit changes implemented that we think could have a big impact.

Speaker Change: There was a great article op, Ed that just dropped today in the journal about the Gse's I would encourage.

Speaker Change: Everyone to read it.

Speaker Change: Definitely a growing need for.

Speaker Change: Private sector capital.

Speaker Change: Private sector Securitizations public Securitizations all of these things we will continue to.

Speaker Change: Pursue and hopefully with change in Washington, and we can get a few of these.

Speaker Change: A few of the low hanging fruit changes implemented that we think could have a big impact.

Speaker Change: Yeah. That's helpful. Thanks, Chris.

Speaker Change: Okay. So for the Corvus loans that were originated in the quarter or maybe a couple of questions. There any color on how the expected returns have maybe changed from the perspective of the investors themselves.

Speaker Change: And in this environment, where the macro is maybe a little bit more challenging their sensitive do you think it's more effective to like.

Speaker Change: <unk> tightened the credit box or your underwriting standards or is it more effective to just raise the cost of credit like the loan coupon.

Dashiell Robinson: Hey, Eric. It's Dash. Those are great questions. I'll take them. In terms of return expectations, you know, I don't know that those have changed a ton. I think the ways in which these loans are financed continues to evolve. As you're well aware, there's now a fairly robust market for rated securitizations for residential transition loans. We're exploring doing one of those this quarter, which I think has helped bring efficiency to the market, particularly for some of those smaller balance, you know, single family bridge products. I would say, however, that a competitive tailwind for us, for sure, is the market, in terms of lenders leaning in or stepping back, feels about as fragmented as it has in a while.

Speaker Change: Hey, Eric it's Dave So those are great questions I'll take them.

Speaker Change: In terms of return expectations I don't know that those have changed a ton I think the ways in which these loans are financed continues to evolve as youre well aware there is now a fairly robust.

Speaker Change: <unk> for rated Securitizations for residential transition loans.

Speaker Change: We're exploring doing one of those this quarter.

Speaker Change: Which I think has helped bring efficiency to the market, particularly for some of those smaller balance singles.

Speaker Change: Single family Bridge products.

Speaker Change: I would say, however that a competitive tailwind for us for sure is the market.

Speaker Change: In terms of lenders leaning in or stepping back feels about as fragmented as it has in a while.

Dashiell Robinson: Maybe some of that is a function of your point around geography, which I'll get to in a second, but also I think a lot of it is just overall corporate posture for some of these shops. where that's a huge advantage for us, frankly, where good borrowers we haven't served before are coming to us because of a failure to execute by certain of our competitors. So I say that because not so much that that in and of itself is going to cause us to move spreads higher, but it certainly is a competitive tailwind and something that we are hoping to take advantage of, particularly in some of these smaller balanced products, whereas as Brooke articulated, we're still not as penetrated as we could be, you know, given the depth of our platform and, frankly, most importantly, the strength of our distribution.

Speaker Change: Maybe some of that is a function of your point around geography, which I'll get to in a second but also I think a lot of it is just overall corporate posture for.

Speaker Change: For some of these shops.

Speaker Change: That's a huge advantage for us frankly were good borrowers we haven't served before coming to us because of a failure to execute by certain of our competitors.

Speaker Change: So I say that because not so much that you know that.

Speaker Change: In and of itself is going to is going to cause us to.

Speaker Change: Move spreads higher but it certainly is a competitive tailwind and some of that we are hoping to take advantage of particularly in some of these smaller balanced products, whereas as brook articulated where we're still not as penetrated as we could be given the depth of our platform and frankly, most importantly, the strength of our distribution. So I think there's a long runway there, but we are pleased.

Dashiell Robinson: So I think there's a long runway there, but we are pleased, as we talked about earlier in the call about, you know, how these markets have hung in there, you know, from a securitization perspective and the emergence of these rated brick sales is. you know, certainly one we're following and hope to be a participant in more directly soon. You know, as it relates to geography, I think what we found over the years is that there's not many instances where extra spread can compensate for where lower leverage should have been employed. And so I think when you look at areas, you know, parts of Texas, Florida, obviously parts of the Southwest, you know, we have probably erred more on the side of reducing leverage.

Speaker Change: As we talked about earlier in the call about how these markets have hung in there.

Speaker Change: From a securitization perspective, and the emergence of these rated for CLS is.

Speaker Change: Certainly one we're following and hope to be a participant and more directly soon.

Speaker Change: As it relates to geography.

Speaker Change: I think what we found over the years is that there is not many instances where extra spread can compensate for where lower leverage should have been employed.

Speaker Change: So I think when you look at areas.

Speaker Change: Parts of Texas, Florida, obviously parts of the southwest we have probably add more on the side of reducing leverage.

Dashiell Robinson: We haven't really gotten a lot of pushback, frankly, when we've tried to do that. And so I think, you know, in markets where you're worried about supply-demand challenges, et cetera, I think our general view is that it's better to, you know, to adjust for that, you know, through credit policy rather than an expectation of risk.

Speaker Change: We haven't really gotten a lot of pushback frankly, when we've tried to do that and so.

Speaker Change: I think when markets, where you're worried about supply demand challenges et cetera, I think our general view is that it's better to.

Speaker Change: To adjust for that through credit policy, rather than an expectation of return.

Dashiell Robinson: Yep, really helpful. I appreciate you guys.

Speaker Change: Really helpful. I appreciate it guys. Thank you.

Steve DeLaney: Thank you. Our next question is from Steve Delaney with Citizens JMP. Thanks, and I'd like to thank Crispin for getting to the details on the existing buyback with all this volatility. It's essential you guys have that tool in your pocket just to take advantage of for the benefit of the shareholders. I'm talking about volatility, you know. We had a 10-year at 480, in January it's under 420 now.

Speaker Change: Okay.

Steve DeLaney: Our next question is from Steve Delaney with citizens JMP.

Steve DeLaney: Thanks, and I'd like to thank Chris for getting to the details on the existing buyback with all this volatility.

Steve DeLaney: Seems like it's essentially you guys have that tool in the pocket.

Steve DeLaney: Just to take advantage of for the benefit of the shareholders.

Steve DeLaney: Talking about volatility.

Steve DeLaney: And we had a 10 year at <unk> in.

Steve DeLaney: January it's under $4 20 now.

Dashiell Robinson: Just curious, Dash, as far as how that primary bond market indicator has impacted, you know, your prime jumbo 30-year, kind of your vanilla jumbo loan product, fixed rate of course, you know, what the range has been this year that you find yourself quoting and kind of where is it today versus what was likely, I guess, a high back in January or February. Just any color you can give on that would be helpful. Sure, and Brooke can supplement here too, we've probably moved within a 100-bit range on rate for 30-year prime jumbo since January 1st, but as you articulated, Steve, the real story there is the relationship of that rate to where benchmark rates are, and as Chris pointed out.

Steve DeLaney: Just curious dash.

Steve DeLaney: I'll bet.

Steve DeLaney: Primary bond market indicator.

Steve DeLaney: Impacted your prime Jumbo 30 year kind of Youre vanilla jumbo loan product fixed rate of course.

Steve DeLaney: The range has been this year that you find yourself quoting and kind of where is it today versus what was likely I guess the high back in January and February just any color you can give on that would be helpful.

Steve DeLaney: Sure.

Steve DeLaney: And broken supplement here too we've probably we've probably moved within 100 bip range on rate for 30 year Prime Jumbo since January one, but as you articulated Steve the real story there is the.

Steve DeLaney: As the relationship of that rate.

Steve DeLaney: We're a benchmark rates are and as Chris pointed out.

Dashiell Robinson: You know, earlier in the Q&A, I think, you know, mortgage spreads are wide right now. You know, we're probably very high sixes, seven-handle, 30-year fixed. To your point, that's versus a sub-420, 10-year. That's as wide as we've seen in some time. You know, in these markets, that can... You know, that can be a headwind, obviously, because rates are higher and, you know, that, you know, rates at this level continue at a macro level to, you know, continue to... you know, put a lid on overall housing supply, but the other side of that coin is that spreads are wide, you know, mortgages versus benchmarks.

Steve DeLaney: Earlier in the Q&A I think.

Steve DeLaney: Mortgage spreads are wide.

Steve DeLaney: Right now, we're probably very high 6% to seven handle 30 year effects to your point that's versus the sub four years 2010 years, that's as wide as we've seen in some time.

Steve DeLaney: In these markets that Ken.

Steve DeLaney: That can be a headwind obviously because rates are higher.

Steve DeLaney: Rates at this level continue it at a macro level to continue to.

Steve DeLaney: Put a lid on overall housing supply.

Steve DeLaney: The other side of that coin is that spreads are wide mortgages versus benchmark.

Dashiell Robinson: And so I think that's been a part of some of the execution efficiency. You often see this when mortgage spreads, you know, are wide notwithstanding the volatility that allows us to price, you know, at a tighter spread back of TBAs, which as Chris said we've consistently done here, even through April where we saw a ton of volatility. So mortgages, you know, locally here continue to be very, very wide, but that is translated on a sort of a total return basis or, you know, versus TBAs and versus benchmarks, I think of continuously attractive levels where we've continued to be able to lock loans.

Steve DeLaney: So.

Steve DeLaney: I think thats been a part of some of the execution efficiency you often see this when mortgage spreads.

Speaker Change: Or why notwithstanding the volatility that allows us to price at a tighter spread back of TBA, which as Chris said, we've consistently done here, even even through April where we saw.

Speaker Change: Non of volatility so mortgages locally here continue to be very very wide, but that is translated on a sort of a total return basis or versus TBA is and versus benchmarks I think of continuously attractive levels, where we've continue to be able to lock loans in.

Dashiell Robinson: and Duso Prof. And I've had some portfolio managers, you know, in CNBS and RMBS mentioned that, you know, they're finding just really attractive opportunities. And has this resulted kind of from dislocation post the big tariff blow up several weeks ago, and that, you know, obviously, the tenure is going to get the safety bid. Credit Bonds, obviously, sounds like they're wide. And that's sort of what you're seeing in the last several You know, Steve, we've seen some widening in sympathy to the to the broader markets. Certainly, you know, it's been it's been tough across the board, but mortgage.

Speaker Change: And do so profitably.

Speaker Change: I've had some portfolio managers at CBS and RBS mentioned.

Speaker Change: Simon just really attractive opportunity and is this resulted counted from dislocation the big tariff blow up or several weeks ago.

Speaker Change: Obviously.

Speaker Change: It's going to get the safety bid.

Speaker Change: But credit bonds, obviously, it sounds like Youre widening out.

Speaker Change: Sort of what Youre seeing in the last several weeks.

Steve DeLaney: Steve we've seen.

Steve DeLaney: Some widening in sympathy to the broader markets certainly.

Steve DeLaney: It's been it's been tough across the board, but mortgage.

Dashiell Robinson: was disproportionately impacted in the early days of COVID a few years back, and we didn't observe that this time around. It was more in tune with the broader markets. One thing that has consistently... have shown up. For our sector, more recently, is private credit. You know, there's so much money that's been raised, and that gets to my earlier comment about private capital and being able to do more in housing, finance. You know, as spreads widen, it just seems like that bid shows back up consistently, and so I think that really kept things from gapping too far, you know, in the midst of some of the April volatility.

Steve DeLaney: It was disproportionately impacted in the early days of Covid a.

Steve DeLaney: A few years back and we didn't observe that this time around it was it was more in tune with where the broader markets.

Steve DeLaney: One thing that has consistently.

Steve DeLaney: Shown up.

Steve DeLaney: For our sector more recently as private credit.

Steve DeLaney: Theres so much money that's been raised.

Steve DeLaney: That gets to my earlier comment about private capital.

Steve DeLaney: And being able to do more and housing finance.

Steve DeLaney: As spreads widen.

Steve DeLaney: Just seems like that bid shows back up consistently and so I think that really.

Steve DeLaney: Cap things from gapping too far.

Steve DeLaney: The midst of.

Steve DeLaney: Some of the April volatility and.

Dashiell Robinson: And, you know, we've been in the market with a deal as recently as this week, and things have felt quite orderly relative to all the chaos, you know, in the broader markets.

Steve DeLaney: We've been in the market with a deal as recently as this week and things to felt quite orderly relative to all the chaos.

Steve DeLaney: The broader markets.

Dashiell Robinson: I appreciate everyone's comments. Thank you.

Steve DeLaney: I appreciate everyone's comments thank you.

Steve DeLaney: Thanks, Steve.

Operator: There are no further questions at this time.

Steve DeLaney: Thank you there are no further questions at this time I'd like to hand, the floor back over to Kate Morris for any closing comments.

Kait Mauritz: I'd like to hand the floor back over to Kait Mauritz for any closing comments. Thank you, Operator, and thank you everyone for joining today. We appreciate the questions and engagement. If you haven't already done so, we also encourage you to check out our shareholder letter and Redwood review on our website for additional commentary.

Kate Morris: Thank you operator, and thank you everyone for joining today, we appreciate the questions and engagement and if you haven't already done. So we also encourage you to check out our shareholder letter and met with review on our website for additional commentary thanks and have a good afternoon.

Kait Mauritz: Thanks and have a good afternoon.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: This concludes today's conference.

Speaker Change: You may disconnect your lines at this time, thank you for your participation.