Redwood Trust, Inc.

Greetings and welcome to the Redwood Trust Third Quarter 2026 Financial Results Conference Call. Today's conference is being recorded. I'll now turn the call over to Anh Nguyen, Head of Investor Relations. Please go ahead, ma'am.

Thank you for joining us today for Redwood's Third Quarter 2026 Earnings Conference Call. With me on today's call are Chris Abate, Chief Executive Officer, Dash Robinson, President, and Brooke Carillo, Chief Financial Officer. Before we begin today, I want to remind you that certain statements made during management's presentation with respect to future financial and business performance may constitute forward-looking statements. Forward-looking statements are based on current expectations, forecasts and assumptions, which includes risks and uncertainties that can cause actual results to differ materially. We encourage you to read the company's annual report on Form 10-K and quarterly report on Form 10-Q, which provides the 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. are considered as a substitute for measures of financial performance prepared in accordance with GAAP. Reconciliation between GAAP and non-GAAP financial measures are provided in our third quarter Redwood review, which is available on our website, redwoodtrust.com. Also note that the contents of today's conference call may contain time-sensitive information that are accurate only 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. It will be available on our website later today. With that, I'll turn the call over to Chris for opening remarks.

Good afternoon, everyone. Today, we announced several important developments for Redwood. I'll cover the key points before Dash and Brooke share their prepared remarks, and then we'll take your questions. After 32 years as a real estate investment trust, Redwood plans to transition to a taxable C corporation beginning in 2027. We believe the structure better aligns with our operating business today and will strengthen our ability to build long-term shareholder value. We expect the transition to generate an initial gap book value benefit of approximately 73 cents to 77 cents per share in the fourth quarter of 2026. which translates to an increase of approximately 11% over our September 30 book value per share of $6.56. We realize that this transition has been anticipated for some time by many of our shareholders. Redwood has evolved considerably since its founding in 1994 with our transformation into an operating platform accelerating in recent years. We serve as an embedded partner to hundreds of loan originators and real estate investors, including 70 of the top 100 U.S. banks. We support these institutions with deep underwriting and asset management expertise and leading securitization and whole loan distribution programs. Our recent market share gains and mortgage banking indicate that we have only begun to monetize the full potential of these relationships. However, the earnings strength of our franchise has not translated into sustained book value growth. One reason is that we've distributed substantial capital through dividends, limiting our ability to allocate capital and compete effectively with our mortgage banking peers. By de-reading, beginning with the 2027 tax year, we want to share three near-term benefits. First, we expect to unlock significant tangible value from our existing tax assets their previously unusable federal and state NOL carry forwards. In this regard, we are unique, as all REITs that come to mind would stand to lose their tax shelters by not complying with the REIT rules. Our shareholders will immediately realize the opposite. Second, we will have greater flexibility to retain earnings and allocate capital. As we disclosed earlier, we expect the Board to reset the quarterly common dividend to 2 cents per share beginning in the fourth quarter. This would bring our payout ratio in line with banks, asset managers, and other C-corp mortgage businesses with comparable operating models. We recognize that the DREIT transition, while in the long-term interest of the company, entails a lower common dividend to fully leverage the compounding effect of earnings and associated benefits. For our shareholders who value Redwood's historically high dividend yield, particularly our retail investors. Today we announce plans for a preferred for common exchange offer that we expect to come at a significant premium. This new series of preferred stock will carry a high dividend yield aligned with income oriented objectives. I would strongly encourage interested shareholders to fully explore it ahead of the upcoming launch. For common shareholders, this exchange can be thought of akin to a share buyback. and will further enhance the contribution from our newly minted tax assets. Based on our projected size for this exchange, we would expect any remaining potential dilution associated with our September convertible debt issuance to be neutralized, especially when factoring in our third quarter common share buybacks. Third and finally, the C-Corp transition creates a path towards a structurally lower cost of capital. Our corporate debt costs reflect constraints associated with mortgage REITs, particularly the requirement to pay out substantially all earnings rather than allocate that capital for other uses. As a consequence, non-REIT mortgage peers enjoy broader access to the debt markets, including rated debt, with covenants better suited for operating businesses. With more than 80% of our unsecured debt callable by the end of 2028, The C-Corp transition will allow us to not only pursue more attractive debt, but also opportunistically replace higher cost obligations with lower cost financing. In step with that unlock, today we announced the upsize of our corporate secured financing facility with CPP Investments and extended its maturity to March of 2030, adding valuable funding flexibility. As we head towards year end, We are working very hard to resolve as much of the legacy book as possible in the fourth quarter. While Dash and Brooke will cover legacy, I want to be sure our shareholders understand that the legacy book remains very much a melting ice cube. Charges went up this quarter because liquidations went up and the outstanding balance went down. I'd also note that our legacy book is marked dramatically lower than many who utilize Cecil Reserving for similar assets. This distinction is a big reason why we can pursue liquidations at this time rather than traditional loan modifications. In closing, through all of today's announcements, our mission remains the same. To make quality housing, whether rented or owned, accessible to all American households. As we discuss in this quarter's shareholder letter, that mission is taking on new significance as we transition towards becoming an agentic enterprise. With our expectation that markets begin to normalize after the midterm elections, we're excited to challenge the boundaries between agency and non-agency mortgage lending in the quarters ahead. With that, I'll turn the call over to Dash.