Redwood Trust, Inc.

Good afternoon, and welcome to the Redwood Trust Inc. Third Quarter 2021 Financial Results Conference Call. Today's conference is being recorded. I will now turn the call over to Lisa Hartman, Redwood's Senior Vice President of Investor Relations. Please go ahead, ma'am.

Thank you, Operator. Hello, everyone, and thank you for joining us. With me on today's call are Chris Abate, Redwood's Chief Executive Officer, Dash Robinson, Redwood's President, and Brooke Carrillo, Redwood's Chief Financial Officer. Before we begin, I want to remind you that certain statements made during management's presentation with respect to future financial or business performance may constitute forward-looking statements. Forward-looking statements are based on current expectations, forecasts, and assumptions that involve risks and uncertainties that could cause actual results to differ materially. We encourage you to read the company's annual report on Form 10-K, which provides a description of some of the factors that could have a material impact on the company's performance and could 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. The reconciliation between GAAP and non-GAAP financial measures are provided in our third quarter Redwood review available on our website at redwoodtrust.com. Also note that the content of this conference call contains time sensitive information that is accurate only as of today. The company does not intend and undertakes no obligation to update this information to reflect subsequent events or circumstances. Finally, today's call is being recorded and will be available on the company's website later today. I will now turn the call over to Chris Vatte, Redwood's Chief Executive Officer, for opening remarks.

Thank you, Lisa, and good afternoon, everyone. After a historic first half of the year, our team continued on our path towards transformative growth. After having communicated an ambitious second half of 2021 forecast, our third quarter results still managed to exceed our expectations. The entire organization has been energized to see the durability of our business model as we produce strong financial results and risk-adjusted portfolio returns. Our gap earnings were $0.65 per diluted share for the third quarter, and our gap book value increased 4.7% in the quarter to $12 per share at September 30th. This contributes to an overall year-to-date increase in our gap book value of 21%, despite having raised our dividend each quarter of the year thus far. When combined, our gap book value growth and dividends paid have resulted in a 27% economic return to shareholders year to date. Operationally speaking, you'll hear more from Dash and Brook on our third quarter results, but suffice to say it was a very strong quarter with several in-house records broken. I'm particularly proud of a series of strategic and innovative transactions across our firm that were both accretive to earnings and foundational for future operating progress. This included the first private label RMBS securitization to leverage blockchain technology, completed in collaboration with Liquid Mortgage, an Early Horizons investment partner. We also completed our first ever bridge loan securitization through our BPL platform, which provides a meaningful new distribution alternative to us. Next, our investment portfolio team co-sponsored the first ever securitization backed entirely by residential home equity investments. And finally, These deals were rounded out by six new venture investments by RWT Horizons in the third quarter. I'm also pleased that after following strict health and safety protocols, we're able to successfully host our third investor day in September, the first since the onset of the pandemic. During the event, we affirmed our commitment to our corporate mission to make quality housing, whether rented or owned, accessible to all American households. We also unveiled a much bolder strategic vision become the leading operator and strategic capital provider driving sustainable innovation and housing finance. As we showed in New York, our opportunities for transformative scale are clear and now attainable based on the strategic progress we've made in recent years. Our vision is built upon an immense multi-trillion dollar addressable market that transcends the traditional mortgage lending space. Thanks to innovations in technology, there are now multiple ways for us to leverage our long-developed and highly regarded expertise in housing credit. We're already attacking antiquated processes in our markets with technology-enabled solutions, and over time we plan to completely reimagine how the non-agency housing finance market works. Across the Redwood enterprise, we've cultivated a talented and engaged workforce that, as you might expect, believes in our mission and is inspired to innovate and help us realize our strategic vision and goals. Thanks to a lot of hard work over the past year, our platform is now beginning to command the attention of an industry where the status quo has not only been accepted, but also embraced by most. Our role is not a typical one for a REIT, much less one of the longest tenured publicly traded REITs in the country. But that should not come as a surprise, as we've never defined our business by way of our federal tax election. Those who do risk missing the growth potential of our platform particularly as we continue to analyze our optimal long-term corporate structure. Rounding the bend toward the end of the year, we remain very optimistic about our business, but we are proceeding cautiously. We see several macro and market risks ahead, COVID-19 variants, rising inflation, central bank tapering, and federal debt ceiling strike, to name a few. More fundamentally, recent trends in unemployment claims suggest that we're still in a recovery phase, and the current economic situation is far from stable, notwithstanding the consistent upward pressure on home prices and rents that we've all observed in recent quarters. Our interest rate, capital, and broader risk management posture reflects this view. While we've generated strong earnings thus far this year, we've done so with record amounts of cash on hand, including $557 million at September 30th. Going forward, our stakeholders should expect that we will continue to work to fulfill our broadly conceived mission, focus on the significant addressable market in front of us, and run a business grounded in fundamentals and sound analysis, all while nurturing a diverse and talented bench of team members who are engaged and aligned with our values. Thank you again for joining us today. I'll now turn the call over to Dash Robinson, Redwood's president, to discuss our operating results.