REDWOOD TRUST INC Q1 FY2026 earnings call

• Chris Abate discussed record operating quarter, mortgage banking volumes surpassing 8.5 billion, earnings available for distribution, AI adoption with over 2,500 agentic workflows, and partnerships like Castle Lake. - Dash Robinson talked about operating performance across segments, Sequoia's record volume, Aspire's growth, Corvest's progress, and legacy portfolio wind down. - Brooke Carrillo discussed financial results, EAD, margins, liquidity, and segment-specific financials including Sequoia, Aspire, Corvest, and legacy investments.

Sequoia had a record quarter with $6.5 billion of locks, up 22% from Q4, cost per loan improved 30% to below 20 basis points, gain on sale margins 96 basis points. Aspire lock volume increased to $1.6 billion, ~4% market share expected to at least double by H2 2026. Corvest first quarter volume totaled $432 million, with progress in smaller balance residential transition loan and DSCR products. Legacy Investments balances reduced as part of wind down.

• Joint venture with Castle Lake has potential for ~12 to 15 cents per share of incremental annual earnings. - Aspire JV expected to support 25% to 30% of Aspire's annualized production. - Goal to have legacy capital allocation below 10% by end of year and below 5% by year end.

• Pockets of weakness and liquidity constraints in private credit sector. - Mortgage market volatility, spread levels above pre-COVID, regulatory dynamics including Basel III endgame uncertainties. - Market risk and asset liability risk impacts on mortgage operations.

Q: About the new joint venture announcement and EPS accretion target?

A: Anticipating ~12 to 15 cents of incremental earnings.

Q: Size of Aspire JV?

A: Expected to support 25% to 30% of Aspire's annualized production.

Q: Momentum in April mortgage rates and outlook?

A: Rates volatile, but market processed initial shock, and Basel III endgame benefits.

Q: Drivers of Sequoia's cost per loan improvement?

A: AI adoption, eliminating vendors, efficiencies between Sequoia and Aspire.

Q: Bank source volume at Sequoia outlook?

A: Volume mix to evolve, expected to continue growing.

Q: Competition in non-QM market impact?

A: Net advantage for Redwood due to deep distribution channels.

Q: Legacy wind down timeline and financial impact?

A: Aim to be below 10% by end of year, freeing capital to improve EAD.

Q: Castle Lake JV ramp up and impact?

A: Definitively additive, expected to be incremental volume for Sequoia.

Q: G&A expense allocations and drivers?

A: G&A increased due to one-time costs and reallocation of corporate debt by segment.