Redwood Trust, Inc. (NYSE:RWT) Q3 2023 Earnings Call Transcript

Kyle Joseph: Hey, good afternoon. Thanks for taking my questions. On the — you mentioned, and I would recover in the fourth quarter, what’s the specific driver of that?

Brooke Carillo: Yes, the main item that drove the decline in interest income on the quarter was really a one-time reversal of prior quarter interest. And that was on our nonaccrual loans. I would note that, our — what we call our nonaccrual loans is a broader list of just our 90-day bucket and really doesn’t have anything to do with our view on recoverability. It’s been fairly formulaic to date. And so we — a lot of that $6 million decline that was from a prior quarter reversal really and our view remains recoverable today. And so, as we look out to Q4, we really expect it and I would more roughly approximately what we saw in Q2.

Kyle Joseph: Go ahead.

Brooke Carillo: Sorry, one other thing. I just note that, a lot of what we talked about our prepared remarks is really strategically rotating capital from the third-party investment portfolio and operating businesses and so you’ll continue to see a shift from us in terms of income generated from NII relative to noninterest income. And that was apparent on the quarter, our mortgage banking businesses saw noninterest income up, almost 3.5 million. So that will be a shift that will continue to play out as well.

Kyle Joseph: Got it. And then just one follow-up for me on the Aspire product is that purely equity? Are there any secondly in there, and how do you foresee that flowing through the P&L and impacting margins?

Brooke Carillo: Yes, to date that is only the true equity products that we’ve been talking about. We are focused on closing seconds as well in other home equity products that just generally speak to what we view as a massive opportunity in the home equity space today. But that, those all flow through investment fair value changes. Like our other options that we have on balance sheet today from some of the other third-party originators.

Kyle Joseph: Got it. Thanks for taking my questions.

Operator: Thank you. As there are no further questions, that concludes the conference of Redwood Trust, Inc. Thank you for your participation. You may now disconnect your lines.