Redwood Trust, Inc.

Good afternoon, and welcome to the Redwood Trust, Inc. Second Quarter 2024 Financial Results Conference Call. Today's conference is being recorded. I will now turn the call over to Caitlin Martz, Redwood's Head of Investor Relations. Please go ahead, ma'am.

Thank you, operator. Hello, everyone, and thank you for joining us today for our Second Quarter 2024 Earnings Conference Call. With me on today's call are Chris Labate, Chief Executive Officer, Dash Robinson, President, and Brooke Rillo, 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. We encourage you to read the company's annual report in Form 10-K, which provides a description of some of the factors that could have a material impact on a 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 second quarter Redwood review, which is available on our website, redwoodtrust.com. Also note that the contents 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. Finally, today's call is being recorded and will be available on our website later today. With that, I'll turn the call over to Chris for opening remarks.

Thanks, Kate, and welcome everyone to Redwood's second quarter of 2024 earnings call. As always, I'll kick off our opening remarks before handing it over to Dash and Brooke to cover our operating and financial results. At our March investor day, We said that investors in RWT hold the keys to tremendous optionality on the future of housing finance. This statement was meant to reflect our unique strategic positioning in response to anticipated regulatory shifts and the rapid emergence of private credit investors in our sector. Today, after a second consecutive quarter of approximately 50% growth in residential consumer lock volumes, combined with 40% quarterly growth in residential investor loan volumes, Validation of that statement is upon us. Year to date, we have distributed close to $3.5 billion of our collateral. As investors continue to exhibit strong demand for the residential assets, we are uniquely positioned to source and manage. And now, as the Fed finally begins to exhibit signs that its historic tightening cycle is ending, a macro environment to facilitate transformative growth can emerge. Putting it all together, we think the case for Redwood has never been clearer. To recap our second quarter results, we improved our operating efficiency on the back of strong volumes while realizing a 20% reduction in fixed costs. Earnings available for distribution was $0.13 per share, 70% higher than the prior quarter. Our June 30th gap book value was $8.73 per share, roughly flat on the quarter, and we estimate book value is up an additional 1% to 2% at July 31st. Progress with our bank partners illustrates the core asset liability challenges these institutions still face when funding fixed-rate mortgages with deposits. This drives shifts in bank product and portfolio strategies, and has further evolved how banks serve their customers. As we continue to focus on forward-flow jumbo production with the banks, we now consider the $1.3 trillion of seasoned jumbo loans on bank balance sheets to be an addressable market for us. In fact, in the second quarter, Approximately 35% of our bank lock volume came from such seasoned portfolios. All told, our lock volume with banks grew 80% quarter over quarter. On the regulatory front, recent commentary from the Fed also suggests that a re-proposal of the Basel III endgame rules is imminent. Though we were the first to acknowledge that anything can happen in Washington these days, we're encouraged by the early feedback on Christy Goldsmith Romero, who has been nominated to be the new chair of the FDIC. Goldsmith Romero has stated publicly that she is, quote, very open to the reproposal of the Basel III endgame capital requirements and that the agency under her leadership will strive to follow congressional intent concerning a law requiring banking agencies to tailor their capital regulations to bank size. We currently expect a vote on this nomination to occur in September after the Senate returns for a three-week session beginning the week of September 9th. Turning to our investor loan business, demand from private credit institutions helped drive the strongest return for our residential investor segment since 2021. As you recall, our recently established partnerships with CPP Investments and Oak Tree are indicative of the ongoing demand we have witnessed for our residential investor loans. These joint ventures, combined with ongoing inroads with whole loan buyers, will help evolve the platform's revenues toward recurring and predictable fee streams facilitating scale with less direct capital usage through time. Looking ahead to the second half of the year, we remain pleased with our market positioning and will continue to execute on our strategic goals. However, we're preparing for unexpected challenges, particularly in light of an already unprecedented presidential election cycle. Though rates remain stubbornly high, a data-driven Fed now has increasing evidence to commence a more accommodative monetary policy, and we're optimistic on what that could mean for our markets across the residential housing landscape. We look forward to further updating you on our progress as regulatory, monetary, and political changes take shape this fall. And now I'll turn the call over to Dash to discuss our operating performance in more detail.