Core Viewpoint - Redwood Trust (RWT) shares have increased by 10.1% in the past four weeks, closing at $5.89, with a potential upside indicated by Wall Street analysts' price targets suggesting a mean estimate of $7.47, representing a 26.8% increase from the current price [1] Price Targets and Analyst Estimates - The mean estimate consists of nine short-term price targets with a standard deviation of $0.73, where the lowest estimate is $6 (1.9% increase) and the highest is $8.50 (44.3% increase) [2] - A low standard deviation indicates a high degree of agreement among analysts regarding the stock's price movement, which can serve as a starting point for further research [9] Earnings Estimates and Market Sentiment - Analysts have shown increasing optimism about RWT's earnings prospects, with a strong consensus in revising EPS estimates higher, which correlates with potential stock price increases [11] - Over the last 30 days, one estimate has increased while there were no negative revisions, leading to a 9.8% increase in the Zacks Consensus Estimate [12] Zacks Rank and Investment Potential - RWT holds a Zacks Rank 1 (Strong Buy), placing it in the top 5% of over 4,000 ranked stocks based on earnings estimate factors, indicating strong potential for upside in the near term [13]

Core Insights - Redwood Trust reported revenue of $27.9 million for Q1 2025, a 16.3% year-over-year increase, but fell short of the Zacks Consensus Estimate of $31.31 million by -10.89% [1] - The company’s EPS for the quarter was $0.14, compared to $0.08 a year ago, but also missed the consensus estimate of $0.17 by -17.65% [1] Financial Performance Metrics - Net interest income was reported at $27.90 million, below the average estimate of $30.09 million from four analysts [4] - Total non-interest income (loss), net, was $45.90 million, exceeding the average estimate of $43.75 million based on four analysts [4] - Non-interest income (loss) from other income, net, was $1.60 million, significantly lower than the average estimate of $7.25 million [4] - Non-interest income (loss) from investment fair value changes, net, was reported at -$5.20 million, compared to the average estimate of $4.13 million from two analysts [4] Stock Performance - Redwood Trust shares have returned +2.8% over the past month, outperforming the Zacks S&P 500 composite, which saw a -0.2% change [3] - The stock currently holds a Zacks Rank 1 (Strong Buy), indicating potential for outperformance in the near term [3]

Core Viewpoint - Redwood Trust reported quarterly earnings of $0.14 per share, missing the Zacks Consensus Estimate of $0.17 per share, but showing an improvement from $0.08 per share a year ago, indicating a -17.65% earnings surprise [1] - The company posted revenues of $27.9 million for the quarter, missing the consensus estimate by 10.89%, compared to $24 million in the same quarter last year [2] Earnings Performance - Over the last four quarters, Redwood Trust has surpassed consensus EPS estimates two times [2] - The company had an earnings surprise of -18.75% in the previous quarter, where it was expected to post earnings of $0.16 per share but delivered $0.13 [1] Stock Performance - Redwood Trust shares have declined approximately 4.8% since the beginning of the year, while the S&P 500 has seen a decline of 5.5% [3] Future Outlook - The company's earnings outlook is crucial for investors, with current consensus EPS estimates for the upcoming quarter at $0.20 on revenues of $30.55 million, and $0.82 on revenues of $126.96 million for the current fiscal year [7] - The estimate revisions trend for Redwood Trust is currently favorable, resulting in a Zacks Rank 1 (Strong Buy) for the stock, suggesting expected outperformance in the near future [6] Industry Context - The REIT and Equity Trust industry, to which Redwood Trust belongs, is currently ranked in the bottom 43% of over 250 Zacks industries, indicating potential challenges ahead [8]

Redwood Trust (RWT) Q1 2025 Earnings Call April 30, 2025 05:00 PM ET Company Participants Kaitlyn Mauritz - Head - IRChristopher Abate - Chief Executive Officer and DirectorDashiell Robinson - PresidentBrooke Carillo - Chief Financial OfficerCrispin Love - DirectorEric Hagen - Managing Director Conference Call Participants Douglas Harter - Equity Research AnalystRichard Shane - AnalystDonald Fandetti - AnalystSteven Delaney - Analyst Operator Greetings, and welcome to the Redwood Trust First Quarter twenty ...

Financial Data and Key Metrics Changes - The company reported GAAP earnings of $14.4 million or $0.10 per share, compared to a loss of $8.4 million or negative $0.07 per share in the fourth quarter, indicating a significant sequential improvement driven by strong performance across operating platforms [22] - Book value per share ended the quarter at $8.39, a modest decline from $8.46 in the fourth quarter, translating to a positive economic return of 1.3% for the first quarter [23] - Earnings available for distribution (EAD) for the first quarter was $19.8 million or $0.14 per share, up from $18.4 million or $0.13 per share in the fourth quarter [24] Business Line Data and Key Metrics Changes - Sequoia's first quarter performance showed $4 billion in locks, representing a 73% quarter-on-quarter growth, while the net income from Sequoia was $25.8 million, representing a 28% return on equity (ROE) for the quarter, up from 23% in the previous quarter [11][24] - CorVest generated net income of $2.9 million, resulting in a 20% ROE for the quarter, despite a slight decrease in volumes from the fourth quarter [25] - Aspire's early lock volumes were just over $100 million, tracking within the same gain on sale margin range as Sequoia [25] Market Data and Key Metrics Changes - The company noted that while money center banks reported steep mortgage volume declines of 20% to 30%, Sequoia's growth was driven by wallet share growth and the emergence of seasoned bulk portfolios from banks [11] - The company observed a strong demand for the assets created, with trillions of dollars raised by private credit institutions looking to invest in the residential mortgage space [10] Company Strategy and Development Direction - The company is focusing on strategic partnerships with entities on both the supply and demand side of the market as part of its growth initiatives [10] - The company is advocating for a leveling of the playing field between private capital and government-sponsored enterprises (GSEs) to streamline regulatory burdens and enhance market efficiency [9] - The company aims to reallocate nearly 20% of capital towards operating platforms and retained operating investments while reducing exposure to legacy bridge investments [31] Management's Comments on Operating Environment and Future Outlook - Management indicated that the current macro environment has rendered most projections for 2025 obsolete, but the company is navigating market volatility from a position of strength [5][6] - The management expressed optimism about the potential transformation in housing finance policy and the opportunity for private sector financing without government support [9] - The company expects to achieve its full-year target despite potential short-term volume fluctuations due to market conditions [31] Other Important Information - The company ended the quarter with unrestricted cash of $260 million, up from $245 million at year-end, and recourse leverage stood at 2.5 times compared to 2.4 times in the fourth quarter [26] - The company has a current share repurchase authorization of over $100 million and is actively evaluating the potential for share buybacks [63] Q&A Session Summary Question: How did the company hedge its portfolio during the volatility in April? - The company emphasized its ability to turn capital and move risk quickly, which contributed to managing the period effectively across the book [33][34] Question: How does the company manage liquidity and execution risk with significant volume locks? - The company highlighted its efficient risk turnover and the ability to pre-sell or know where partners are lined up to execute, which mitigates liquidity risk [39][40] Question: Can the company provide clarity on the bulk purchases of seasoned loans? - The company confirmed that the bulk purchases are closed loans and emphasized their focus on distribution and hedging parameters [44][46] Question: What is the outlook for the bridge loans and the associated risks? - The company noted that the uptick in delinquency was a result of strategic decisions to pursue alternative resolutions and that they expect to resolve these issues throughout the year [50][52] Question: Can the company elaborate on the expected EAD ROE for 2025? - The company expects a year-end 2025 run rate of 9% to 12% for EAD ROE, driven by reallocating capital towards operating businesses [58][60]

Cautionary Statement; Forward-Looking Statements This presentation contains forward-looking statements, including statements regarding our 2025 forward outlook and strategic priorities, key drivers to increase earnings, book value, and mortgage banking volumes, current target annualized non-GAAP EAD returns on equity, current target returns related to capital deployment opportunities and estimates of upside and potential earnings in our Redwood Investments segment from embedded discounts to par value on sec ...

Core Viewpoint - Redwood Trust (RWT) has been upgraded to a Zacks Rank 1 (Strong Buy) due to an upward trend in earnings estimates, which significantly influences stock prices [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in a company's earnings picture, which is a strong indicator of near-term stock price movements [2][4]. - The correlation between earnings estimate revisions and stock price movements is well-established, with institutional investors using these estimates to determine fair value [4][6]. Company Performance Indicators - For the fiscal year ending December 2025, Redwood Trust is expected to earn $0.82 per share, reflecting a 57.7% increase from the previous year [8]. - Over the past three months, the Zacks Consensus Estimate for Redwood Trust has increased by 5.6%, indicating positive sentiment among analysts [8]. Zacks Rating System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [7]. - Only the top 5% of Zacks-covered stocks receive a 'Strong Buy' rating, indicating superior earnings estimate revisions and potential for market-beating returns [9][10].

Company Overview - Redwood Trust, Inc. issued its Shareholder Letter for Q1 2025 on April 21, 2025[6] - The company is listed on the New York Stock Exchange under the symbol RWT[4] - Redwood Trust is classified as an emerging growth company under the Securities Act[4] - Redwood Trust has multiple classes of securities registered, including common stock and various senior notes[4] Financial Performance - Redwood Trust reported significant financial results in the attached shareholder letter, which includes detailed performance metrics[6] - The financial statements and exhibits related to the Q1 2025 results are included in the report[8] - Redwood Trust's financial condition and operational results are subject to further detailed analysis in the shareholder letter[6] Compliance and Governance - The report was signed by Brooke E. Carillo, the Chief Financial Officer of Redwood Trust[12] - The company is committed to transparency and compliance with SEC regulations[7] Operational Insights - The shareholder letter provides insights into operational performance and future strategies[6]

Group 1 - Redwood Trust (RWT) shares increased by 9.5% to close at $5.42, supported by higher trading volume compared to normal sessions, following a 21.2% loss over the past four weeks [1][2] - The stock price surge is attributed to a broader market rally due to optimism from Trump's announcement of a 90-day pause on reciprocal tariffs for most trading partners, which is expected to ease cost pressures and improve profitability for mREIT stocks [2] - Redwood Trust is projected to report quarterly earnings of $0.16 per share, reflecting a year-over-year increase of 100%, with expected revenues of $26.76 million, up 11.5% from the previous year [3] Group 2 - The consensus EPS estimate for Redwood Trust has been revised 2.7% lower in the last 30 days, indicating a negative trend in earnings estimate revisions, which typically does not lead to price appreciation [4] - Redwood Trust holds a Zacks Rank of 3 (Hold), while another stock in the same industry, Franklin BSP (FBRT), saw a 4.1% increase to $11.56 but has returned -16.2% over the past month [4] - Franklin BSP's consensus EPS estimate remains unchanged at $0.33, representing a year-over-year decrease of 19.5%, and it currently has a Zacks Rank of 5 (Strong Sell) [5]

Business Segments - The company operates in three segments: Sequoia Mortgage Banking, CoreVest Mortgage Banking, and Redwood Investments, with no changes to the composition of the segments[23]. - Sequoia Mortgage Banking primarily generates income from net interest income on loans held-for-sale and mortgage banking activities, including valuation changes and gains/losses from hedges[25]. - CoreVest Mortgage Banking focuses on originating residential investor loans, with term loans typically ranging from 3 to 30 years and bridge loans from 12 to 36 months, generating income from net interest and origination fees[26]. - Redwood Investments includes organic investments from mortgage banking operations and third-party investments, with income sources being net interest income, changes in fair value, and realized gains/losses[27]. Employee Management - As of December 31, 2024, the company employed 283 full-time employees, with 147 (52%) directly engaged in CoreVest operations[32]. - The company reported a voluntary employee turnover rate of 7.5% for 2024, indicating effective employee retention strategies[34]. - The company offers a competitive compensation structure, including financial incentives and health benefits, to attract and retain talent[36]. Corporate Responsibility and Governance - The company prioritizes corporate responsibility initiatives aligned with its mission to make quality housing accessible to all American households[37]. - The Chief Executive Officer and Chief Financial Officer have executed certifications as required by the Sarbanes-Oxley Act, ensuring compliance with corporate governance standards[43]. - The company will post any amendments to its Code of Ethics and waivers for executive officers on its website, ensuring transparency in governance practices[41]. Market Competition and Risks - The company faces intense competition from various financial institutions, including commercial banks and mortgage REITs, which may impact its ability to compete successfully[38]. - Regulatory developments in housing and real estate markets can adversely affect the company's business and the value of its assets[39]. - The company is committed to managing various market risks, including credit risk, interest rate risk, and liquidity risk, to enhance earnings and dividends while preserving capital[547]. - The company actively manages risks based on historical experience to maintain capital levels consistent with identified risks[547]. - The company is subject to various types of risks and uncertainties that may impact its operations and financial results, as detailed in the "Risk Factors" section of the Annual Report[548].