But most importantly in terms of the book, in general, a lot of sponsors are sticking with it. They’re driving rents. In the vast majority of cases, they’re replenishing reserves. They’re doing all the things required to you know to get these projects over the goal line and as such, we talked about 50% of the book and what we feel is really good shape in terms of performing or eligible for our term refund. So, we’ll see how things go. Like I mentioned, we’re clear-eyed about some of the headwinds that remain in that space. But given how the book is situated, we’re optimistic for overall good outcomes.
Stephen Laws: Appreciate the comments there. And then a follow-up on the liquidity question that’s been touched on a couple of times. Can you talk about whether you’ve used the ATM any year-to-date? How you think about evaluation of issuing off that issuing stock at various levels versus book for given what investment returns are as you deploy capital? Maybe update us on what’s remaining under that authorization and whether you expect to re-up that?
Brooke Carillo: Yes. Great questions. So, a couple of things. As you we have not utilized ATM year-to-date. We and we did and I explained some of our rationale there. A lot of the proceeds that we raised in the fourth quarter really net earmarked for the growing opportunity in residential. I think we used about net $50 million of capital for resi, which has really grown every quarter throughout the year, throughout 2023. We effectively issued around close to 90% of tangible book. You know based on that math we were looking at kind of like a mid-teens blended returns. That’s a pretty rational payback. Here we think based on the earnings accretion that really drives of our future book value growth through our taxable rate subsidiaries over time.
And so it was — those can that math that we were looking at that drove the ATM utilization. We also look at it really comprehensively with some of the other actions taken on the financing front it was a kind of broader deleveraging that we’ve done and that we’ve done of our capital structure to really term out some of our convertible debt, reduce our marginable securities repo and just kind of net reduced our overall convertible debt maturity stack and all of which we think is very accretive to our shareholders over the long term. We continue to look at — the residential mortgage banking opportunity really on an kind of an earnings accretion basis to continue to fund that opportunity. I would also just note that it’s — given the we’re very cognizant of how we deploy those proceeds and over then — over what time period to make sure that we are crystallizing our assumptions on the earnings accretion for the ATM does afford us a nice way to somewhat match funds proceeds.
So that been said our stock is off of levels that we are — in the fourth quarter.
Stephen Laws: Great. Appreciate the comments. So look forward to seeing all of you next month. Thank you.
Chris Abate: Thank you.
Operator: Our next question comes from the line of Eric Hagen with BTIG. Please proceed with your question.
Eric Hagen: Hi. Thanks. How are you doing? Hey, going back to your comments around the NIM. and looking at the cost of funds on slide 32 how much of that balance would reprice and over — what kind of timeframe if the Fed were to cut interest rates?
Brooke Carillo: We have a pretty — we have a I would say a pretty pro rata maturity schedule for our recourse leverage that really rolls throughout 2024 — somewhat and on a somewhat balanced basis. And so a lot of our repo lines are a year in nature but one of the most important things that we did in the fourth quarter was with the amount debt that we raised and into the first quarter with the unsecured debt is a lot of it has pretty attractive prepayment flexibility and optionality and with largely it being callable within the next two years. So we really do think it’s a good option on where we are in on the rate – in the rate landscape because we’re either going to crystallize those our turn through mortgage banking in the near-term and at attractive gain on sale margins or put on longer-term investments at a pretty attractive return profile.
Eric Hagen: Right. Hey, essentially all of the securitized debt is fixed rate, is that right?
Brooke Carillo: Yes, that’s correct.
Eric Hagen: Okay. And then the investment portfolio and the capital allocation on Slide 29, do you feel like you can draw any more leverage against that portfolio and which assets are held unencumbered at this point? And what kind of advance rate do you think you can draw against those? Thanks guys.
Brooke Carillo : Good question. Sorry, I didn’t mean to cut you off. Chris mentioned we have another as of today we have about 318 million of unencumbered assets. That centers largely around some of our organically created subordinate securities through capital in RTL that we’ve created through our mortgage banking initiatives, same with on the Sequoia side. We have some of our reperforming loan securities. Other multifamily we have a lot of what we did last year was selling some of our less strategic or fixed rate third-party assets out of gain into this environment, just given that they were fixed rate bonds that were largely non-strategic and didn’t carry as well as the rest of the investment portfolio. So I think that we’ve I think there’s a couple of hundred million to raise there.
And just given the advance rate, some of these are securities or assets that are already financed elsewhere, and so we have on pretty tangible data points around lenders’ appetite for those assets. And then some of them we just have chosen not to finance and to mitigate some overhang of interest.
Eric Hagen : Got it. Thank you guys so much.
Chris Abate: Thanks, Eric.
Operator: Our next question comes from the line of Steve Delaney with Citizens JMP Securities. Please proceed with your questions.
Steve Delaney: Thanks. Appreciate it. So Chris you mentioned the upcoming 30-year anniversary. So how many of those 30 years have you have you been sitting at Redwood?
Chris Abate : Well, if you count the dog years, it’s a lot more than 30 years, I think it’s a 18 or so.
Steve Delaney: Okay. Gosh, I was going to be in the 20s, but I was data you, sorry about that. No, seriously, congrats for both the company, obviously, for that great record overall that time and for your longevity and leadership there as well. Well done. Just looking at the jumbo volume in the last two quarters of the year 1.6, 1.2 would you think next year if we were to for now until we see some potential rate relief, which we may or may not get. Would you guys think $5 billion to $6 billion is a reasonable starting point for jumbo production next year? Or am I being too conservative?
Chris Abate : No, I think that $6 billion range is definitely something we think is achievable. Obviously, rates are the big question mark and so, we can’t predict the path of rates. But I do think that what we’re seeing below the surface, really gives us confidence that as rates start to flatten and come down, the business is in a great position to scale. We are — there’s so much to do still with banks. I feel like we’re just kind of scratching the surface with this getting banks online various stages. And as I mentioned in my remarks, when you when you look at how the business changed after the great financial crisis, the vast majority of the jumbo business sort of moved on to bank balance sheets. And we think that’s going to change.
We think the regulations are going to change but we also think that the incentives that banks had to do that are no longer present. You don’t know longer have zero cost capital. You’ve got a lot more scrutiny from an asset liability management perspective. You’ve had some banks go down. So for us, you’ve got this massive jumbo portfolio opportunity that we haven’t seen in 15 years. So, irrespective of kind of rates, we’re just very excited to be looked at as a capital partner again for that piece of the business that just hasn’t been up for grabs if you will on the POS side. People ask why it’s securitization volumes. It stayed low after the great financial crisis. It wasn’t because there were no jumbo loans just to being originated is because they were all in ending up on bank balance sheets.
So to the extent that changes, that’s going to mean really great things for us and the POS market. So that’s really why we’re excited. We think that there’s structural changes happening with how capital is going to flow through the sector. And we noted that also applies for the investor loan business as well for CoreVest. We’re seeing great inbound from banks who are now dealing with seasonal challenges. So, there’s just a lot of headwinds out there. And to be sort of hopefully on the other side a lot of that is why we’re probably optimistic on today’s call.
Steve Delaney: Yes. I’ll tell you that duration, that 30-year fixed rate duration whatever it works out to belongs a lot better in the bond portfolios in Boston and LA than it does on bank balance sheet. That’s as far as just for the stability the financial system as a whole, so no question. Thanks for the comments.
Chris Abate: Thanks Steve.
Dash Robinson: Thanks Steve.
Operator: Ladies and gentlemen, this does conclude our question-and-answer session. It also does conclude our conference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.
