REDWOOD TRUST INC [RWT] Filings

10-Q 1 rwt-20240630.htm 10-Q rwt-20240630

UNITED STATES OF AMERICA

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended: June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _______________ to _______________.

Commission File Number 1-13759

REDWOOD TRUST, INC.

(Exact Name of Registrant as Specified in Its Charter)


Maryland						68-0329422
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)


One Belvedere Place,	Suite 300
Mill Valley,	California	94941
(Address of Principal Executive Offices)		(Zip Code)

(415) 389-7373

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	RWT	New York Stock Exchange
10% Series A Fixed-Rate Reset Cumulative Redeemable Preferred Stock, par value $0.01 per share	RWT PRA	New York Stock Exchange
9.125% Senior Notes Due 2029	RWTN	New York Stock Exchange
9.0% Senior Notes Due 2029	RWTO	New York Stock Exchange

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.


Common Stock, $0.01 par value per share						132,215,757			shares outstanding as of August 7, 2024

REDWOOD TRUST, INC.

2024 FORM 10-Q REPORT

TABLE OF CONTENTS


		Page
PART I —	FINANCIAL INFORMATION
Item 1.	Financial Statements	2
	Consolidated Balance Sheets at June 3 0 , 2024 (Unaudited) and December 31, 2023	2
	Consolidated Statements of Income for the Three and Six Months Ended June 3 0 , 2024 and 2023 (Unaudited)	3
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 3 0 , 2024 and 2023 (Unaudited)	4
	Consolidated Statements of Changes in Stockholders' Equity for the Three and Six Months Ended June 3 0 , 2024 and 2023 (Unaudited)	5
	Consolidated Statements of Cash Flows for the Six Months Ended June 3 0 , 2024 and 2023 (Unaudited)	7
	Notes to Consolidated Financial Statements (Unaudited)	9
	Note 1. Organization	9
	Note 2. Basis of Presentation	9
	Note 3. Summary of Significant Accounting Policies	10
	Note 4 . Segment Information	12
	Note 5 . Mortgage Banking Activities, Net	17
	Note 6 . Fair Value of Financial Instruments	18
	Note 7 . Residential Consumer Loans	27
	Note 8 . Residential Investor Loans	31
	Note 9 . Consolidated Agency Multifamily Loans	37
	Note 10 . Real Estate Securities	38
	Note 1 1 . Home Equity Investments (HEI )	44
	Note 1 2 . Other Investments	46
	Note 1 3 . Derivative Financial Instruments	48
	Note 1 4 . Other Assets and Liabilities	52
	Note 1 5 . Principles of Consolidation	63
	Note 1 6 . Asset-Backed Securities Issued	63
	Note 17. Debt Obligations	65
	Note 18. Commitments and Contingencies	68
	Note 19. Equity	70
	Note 20. Earnings Per Share	73
	Note 21. Equity Compensation Plans	74
	Note 22. Operating Expenses	76
	Note 23. Taxes	77

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	78
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	110
Item 4.	Controls and Procedures	110

PART II —	OTHER INFORMATION
Item 1.	Legal Proceedings	111
Item 1A.	Risk Factors	111
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	111
Item 3.	Defaults Upon Senior Securities	111
Item 4.	Mine Safety Disclosures (Not Applicable)	111
Item 5.	Other Information	111
Item 6.	Exhibits	113
Signatures		115

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

REDWOOD TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


(In Thousands, except Share Data) (Unaudited)	June 30, 2024		December 31, 2023
ASSETS (1)
Residential consumer loans, held-for-sale, at fair value	$	962,548	$	911,192
Residential consumer loans, held-for-investment, at fair value	8,247,608		6,139,445
Residential investor loans, held-for-sale, at fair value	259,483		180,250
Residential investor loans, held-for-investment, at fair value	4,620,167		5,040,048
Consolidated Agency multifamily loans, at fair value	421,794		425,285
Real estate securities, at fair value	264,401		127,797
Home equity investments, at fair value	574,119		550,436
Other investments	349,906		343,930
Cash and cash equivalents	275,581		293,104
Restricted cash	63,799		75,684


Derivative assets	48,517		14,212
Other assets	403,181		402,944
Total Assets	$	16,491,104	$	14,504,327

LIABILITIES AND EQUITY (1)
Liabilities


Asset-backed securities issued (includes $10,975,688 and $9,151,263 at fair value), net	$	11,555,550	$	9,811,880
Debt obligations, net	3,414,626		3,239,123
Derivative liabilities	5,954		33,828
Accrued expenses and other liabilities	294,236		216,803
Total liabilities	15,270,366		13,301,634
Commitments and Contingencies (see Note 18)
Equity
Preferred stock, par value $0.01 per share, 2,990,000 shares authorized; 2,800,000 issued and outstanding	66,948		66,948
Common stock, par value $0.01 per share, 392,010,000 shares authorized; 132,215,757 and 131,485,661 issued and outstanding	1,322		1,315
Additional paid-in capital	2,497,218		2,487,848
Accumulated other comprehensive loss	(47,332)		(57,957)
Cumulative earnings	1,186,701		1,144,412
Cumulative distributions to stockholders	(2,484,119)		(2,439,873)
Total equity	1,220,738		1,202,693
Total Liabilities and Equity	$	16,491,104	$	14,504,327

——————

(1)Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At June 30, 2024 and December 31, 2023, assets of consolidated VIEs totaled $12,844,193 and $10,988,885, respectively. At June 30, 2024 and December 31, 2023, liabilities of consolidated VIEs totaled $11,866,962 and $10,096,308, respectively. See Note 15 for further discussion.

The accompanying notes are an integral part of these consolidated financial statements.

REDWOOD TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME


(In Thousands, except Share Data)	Three Months Ended June 30,				Six Months Ended June 30,
(Unaudited)	2024		2023		2024		2023
Interest Income
Residential consumer loans	$	106,710	$	56,751	$	193,645	$	114,625
Residential investor loans	93,106		98,264		188,141		195,560
Consolidated Agency multifamily loans	4,559		4,697		9,140		9,315
Real estate securities	10,749		6,223		17,029		12,651
Other interest income	10,293		13,046		22,202		25,346
Total interest income	225,417		178,981		430,157		357,497
Interest Expense

Asset-backed securities issued	(133,429)		(90,093)		(253,688)		(177,558)
Debt obligations	(66,695)		(62,792)		(126,966)		(127,406)
Total interest expense	(200,124)		(152,885)		(380,654)		(304,964)
Net Interest Income	25,293		26,096		49,503		52,533
Non-Interest Income
Mortgage banking activities, net	18,924		16,552		33,480		33,223
Investment fair value changes, net	1,098		(13,517)		22,935		(17,909)
HEI income, net	15,839		8,921		24,870		13,186
Other income, net	6,293		4,158		10,799		8,714
Realized gains, net	—		1,056		409		1,054
Total non-interest income, net	42,154		17,170		92,493		38,268
General and administrative expenses	(33,284)		(30,805)		(67,853)		(66,360)
Portfolio management costs	(4,864)		(3,100)		(8,461)		(6,610)
Loan acquisition costs	(3,664)		(1,444)		(5,901)		(2,733)
Other expenses	(5,177)		(4,975)		(8,538)		(8,659)
Net Income Before (Provision for) Benefit From Income Taxes	20,458		2,942		51,243		6,439
(Provision for) benefit from income taxes	(4,924)		(69)		(5,447)		1,054
Net Income	$	15,534	$	2,873	$	45,796	$	7,493
Dividends on preferred stock	(1,757)		(1,758)		(3,507)		(3,177)
Net Income Available To Common Stockholders	$	13,777	$	1,115	$	42,289	$	4,316

Basic earnings per common share	$	0.10	$	—	$	0.31	$	0.02
Diluted earnings per common share	$	0.10	$	—	$	0.31	$	0.02
Basic weighted average common shares outstanding	132,115,854		114,051,017		131,843,100		113,830,347
Diluted weighted average common shares outstanding	132,123,702		114,445,262		131,847,024		114,255,292

The accompanying notes are an integral part of these consolidated financial statements.

REDWOOD TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


(In Thousands)	Three Months Ended June 30,				Six Months Ended June 30,
(Unaudited)	2024		2023		2024		2023
Net Income	$	15,534	$	2,873	$	45,796	$	7,493
Other comprehensive income:
Net unrealized gain (loss) on available-for-sale securities	1,054		(688)		9,710		4,319
Reclassification of unrealized (gain) loss on available-for-sale securities to net income	(514)		604		(1,143)		411

Reclassification of unrealized loss on interest rate agreements to net income	1,029		1,029		2,058		2,047
Total other comprehensive income	$	1,569	$	945	$	10,625	$	6,777
Comprehensive Income	$	17,103	$	3,818	$	56,421	$	14,270
Dividends on preferred stock	(1,757)		$	(1,758)	$	(3,507)	$	(3,177)
Comprehensive income available to Common Stockholders	$	15,346	$	2,060	$	52,914	$	11,093

The accompanying notes are an integral part of these consolidated financial statements.

REDWOOD TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the Three Months Ended June 30, 2024


(In Thousands, except Share Data)	Preferred Stock		Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive (Loss)		Cumulative Earnings		Cumulative Distributions to Stockholders		Total
(Unaudited)			Shares	Par Value
March 31, 2024	$	66,948	131,870,835	$	1,319	$	2,493,856	$	(48,901)	$	1,172,924	$	(2,461,983)	$	1,224,163
Net income	—		—	—		—		—		15,534		—		15,534
Other comprehensive income	—		—	—		—		1,569		—		—		1,569


Employee stock purchase and incentive plans	—

REDWOOD TRUST INC [RWT] Filings
REDWOOD TRUST INC [RWT-PA] Filings
REDWOOD TRUST INC [RWTN] Filings
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REDWOOD TRUST INC [RWT] Filings

REDWOOD TRUST INC [RWT-PA] Filings

REDWOOD TRUST INC [RWTN] Filings

REDWOOD TRUST INC [RWTO] Filings