Redwood Trust (RWT) Q2 2024 earnings summary

Executive summary

• Achieved two consecutive quarters of ~50% growth in residential consumer lock volumes and 40%+ growth in residential investor loan volumes, with bank lock volume up 80% sequentially and estimated 6% market share in Q2 2024.

• Distributed nearly $3.5 billion of collateral year-to-date and funded $459 million in residential investor loans in Q2, with term loan fundings up 91%.

• Improved operating efficiency with a 20% reduction in fixed costs and cost per loan in Residential Consumer down to 22bps from 36bps in Q1.

• Earnings available for distribution (EAD) rose 70% sequentially to $0.13 per share, with GAAP EPS at $0.10 and book value per share stable at $8.73.

• Large institutional and private credit investors showed strong demand for residential assets, supporting growth and robust capital deployment.

Financial highlights

• Q2 2024 GAAP net income available to common stockholders was $13.8 million ($0.10 per share), down from $28.5 million ($0.21 per share) in Q1.

• Non-GAAP EAD per share was $0.13, up from $0.08 sequentially; book value per share was $8.73–$8.78 at June 30, 2024.

• Total economic return for Q2 2024 was 1.3%, with a $0.16 per share dividend declared.

• Net interest income for Q2 2024 was $25.3 million, with unrestricted cash at $276 million at quarter end.

• Non-interest income surged to $42.2 million in Q2 2024, driven by higher HEI income, investment fair value gains, and mortgage banking activities.

Outlook and guidance

• Management expects further earnings growth by increasing market share, deploying excess capital, and maintaining cost efficiencies.

• Investment portfolio is positioned for upside as credit fundamentals remain strong and embedded discounts to par may be recovered if rates decline.

• Preparing for potential macroeconomic and regulatory changes, including Basel III and the U.S. election cycle.