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: September 30, 2023 OR ☐ 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 ...

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, 2023 OR ☐ 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 68-0329 ...

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: March 31, 2023 OR ☐ 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 68-032 ...

UNITED STATES OF AMERICA SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended: December 31, 2022 OR ☐ 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 (Exact Name of Registrant as Specified in Its Charter) (State or Other Jurisdiction of Incorpor ...

PART I — FINANCIAL INFORMATION [Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for the three and nine months ended September 30, 2022, providing a detailed overview of the company's financial position and performance through various statements and 24 explanatory notes Consolidated Financial Highlights (Unaudited) | Financial Metric | Q3 2022 (in thousands) | Q3 2021 (in thousands) | Nine Months 2022 (in thousands) | Nine Months 2021 (in thousands) | |---|---|---|---|---| | Net Interest Income | $34,935 | $41,968 | $128,525 | $98,351 | | Total Non-interest (Loss) Income, Net | $(37,135) | $98,331 | $(129,359) | $346,993 | | Net (Loss) Income | $(50,411) | $88,286 | $(119,462) | $275,568 | | Diluted (Loss) Earnings per Share | $(0.44) | $0.65 | $(1.04) | $2.03 | Consolidated Balance Sheet Summary (Unaudited) | (In Thousands) | September 30, 2022 | December 31, 2021 | |---|---|---| | Total Assets | $13,145,947 | $14,706,944 | | Total Liabilities | $11,991,705 | $13,320,857 | | Total Equity | $1,154,242 | $1,386,087 | Consolidated Cash Flow Summary (Unaudited) | (In Thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | |---|---|---| | Net cash used in operating activities | $(129,432) | $(3,780,271) | | Net cash provided by investing activities | $168,959 | $1,363,013 | | Net cash (used in) provided by financing activities | $(201,923) | $2,518,514 | | Net (decrease) increase in cash | $(162,396) | $101,256 | [Note 1. Organization](index=9&type=section&id=Note%201.%20Organization) Redwood Trust, Inc. operates as a specialty finance REIT, focusing on housing credit through Residential Mortgage Banking, Business Purpose Mortgage Banking, and Investment Portfolio segments, deriving income from net interest and mortgage banking activities - The company operates in **three segments**: Residential Mortgage Banking, Business Purpose Mortgage Banking, and Investment Portfolio[29](index=29&type=chunk) - Primary income is derived from **net interest income** on investments and **non-interest income** from mortgage banking activities, which involve originating, acquiring, and then selling or securitizing loans[30](index=30&type=chunk) [Note 2. Basis of Presentation](index=10&type=section&id=Note%202.%20Basis%20of%20Presentation) The unaudited interim financial statements adhere to SEC regulations and GAAP, incorporating significant estimates, particularly for fair value, and detail the consolidation principles for VIEs, including the acquisition of Riverbend Funding, LLC - On July 1, 2022, the company acquired Riverbend Funding LLC for an initial cash payment of approximately **$44 million**, plus potential earnout consideration[41](index=41&type=chunk) Riverbend Acquisition Purchase Price Allocation (July 1, 2022) | (In Thousands) | Amount | |---|---| | **Total consideration** | **$44,603** | | **Assets Acquired:** | | | Business purpose loans, at fair value | $59,748 | | Goodwill | $23,373 | | Intangible assets | $13,300 | | Other assets | $19,239 | | **Total assets acquired** | **$115,660** | | **Liabilities Assumed:** | | | Short-term debt, net | $67,423 | | Accrued expenses and other liabilities | $3,634 | | **Total liabilities assumed** | **$71,057** | | **Total net assets acquired** | **$44,603** | - The acquisition of Riverbend resulted in the recognition of **$23.4 million** in goodwill and **$13.3 million** in finite-lived intangible assets[43](index=43&type=chunk)[49](index=49&type=chunk) [Note 4. Principles of Consolidation](index=17&type=section&id=Note%204.%20Principles%20of%20Consolidation) This note details the company's GAAP application for consolidating Variable Interest Entities (VIEs), reporting $9.4 billion in total assets and $8.4 billion in liabilities for 64 consolidated VIEs as of September 30, 2022, while also discussing unconsolidated VIEs Assets and Liabilities of Consolidated VIEs (as of Sep 30, 2022) | (In Thousands) | Total Consolidated VIEs | |---|---| | **Total Assets** | **$9,449,163** | | Residential loans, held-for-investment | $4,918,295 | | Business purpose loans, held-for-investment | $3,531,229 | | Consolidated Agency multifamily loans | $427,458 | | **Total Liabilities** | **$8,448,479** | | Asset-backed securities issued | $8,139,293 | | Short-term debt | $233,104 | - The company's maximum loss exposure from its involvement with unconsolidated VIEs, primarily related to retained securities and MSRs, was estimated at **$118.5 million** as of September 30, 2022[99](index=99&type=chunk) [Note 5. Fair Value of Financial Instruments](index=25&type=section&id=Note%205.%20Fair%20Value%20of%20Financial%20Instruments) This note describes the methodology for determining the fair value of financial instruments using a three-level hierarchy, with many assets and liabilities, particularly Level 3, requiring significant unobservable inputs and management judgment, and provides detailed tables of fair value measurements and market valuation changes Level 3 Assets and Liabilities Measured at Fair Value (Recurring Basis, Sep 30, 2022) | (In Thousands) | Carrying Value | |---|---| | **Assets** | | | Residential loans | $5,752,524 | | Business purpose loans | $5,257,218 | | Consolidated Agency multifamily loans | $427,458 | | Real estate securities | $259,212 | | HEIs | $340,437 | | **Liabilities** | | | ABS issued | $7,564,312 | Market Valuation Gains and Losses, Net | (In Thousands) | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2022 | |---|---|---| | Mortgage banking activities, net | $6,420 | $(38,877) | | Investment fair value changes, net | $(57,697) | $(151,789) | | Other income | $384 | $7,179 | | **Total Market Valuation Gains (Losses), Net** | **$(50,893)** | **$(183,487)** | [Note 14. Short-Term Debt](index=51&type=section&id=Note%2014.%20Short-Term%20Debt) The company utilizes **$2.11 billion** in short-term debt, including repurchase agreements and loan warehouse facilities, to finance operations, and was in compliance with all related covenants as of September 30, 2022 Short-Term Debt Summary (as of Sep 30, 2022) | Facility Type | Outstanding Balance (in thousands) | Limit (in thousands) | Weighted Avg. Interest Rate | |---|---|---|---| | Residential loan warehouse | $748,962 | $2,850,000 | 4.83% | | Business purpose loan warehouse | $775,491 | $1,750,000 | 5.67% | | Real estate securities repo | $124,435 | N/A | 3.50% | | Servicer advance financing | $233,104 | $290,000 | 4.94% | | Convertible notes, net | $197,585 | N/A | 4.75% | | **Total Short-Term Debt** | **$2,110,279** | | | [Note 16. Long-Term Debt](index=57&type=section&id=Note%2016.%20Long-Term%20Debt) This note details the company's **$1.53 billion** in long-term debt obligations as of September 30, 2022, comprising various recourse and non-recourse financing facilities, convertible senior notes, and trust preferred securities with maturities extending to 2037, including a **$215 million** issuance in June 2022 - In June 2022, the company issued **$215 million** principal amount of 7.75% convertible senior notes due 2027, receiving net proceeds of **$208 million**[295](index=295&type=chunk) Long-Term Debt Summary (as of Sep 30, 2022) | Debt Type | Net Carrying Value (in thousands) | Final Maturity | |---|---|---| | Long-Term Debt Facilities | $868,851 | 2024-2026 | | 5.625% convertible senior notes | $148,716 | 2024 | | 5.75% exchangeable senior notes | $169,323 | 2025 | | 7.75% convertible senior notes | $208,581 | 2027 | | Trust preferred securities and subordinated notes | $138,755 | 2037 | | **Total Long-Term Debt** | **$1,534,226** | | [Note 17. Commitments and Contingencies](index=60&type=section&id=Note%2017.%20Commitments%20and%20Contingencies) This note outlines the company's future financial commitments, including **$22 million** for operating leases, up to **$990 million** for bridge loans, and **$149 million** for HEI acquisitions, alongside contingencies such as a **$44 million** maximum potential payment under risk-sharing arrangements and reserves for litigation - As of September 30, 2022, the company had commitments to fund up to **$990 million** of additional advances on existing bridge loans[304](index=304&type=chunk) - The company has an aggregate commitment to purchase **$350 million** of HEIs, with **$149 million** remaining outstanding as of September 30, 2022[307](index=307&type=chunk) - A contingent consideration liability related to the Riverbend acquisition, with a maximum potential payout of **$25.3 million**, was valued at zero as of September 30, 2022[310](index=310&type=chunk) [Note 24. Segment Information](index=70&type=section&id=Note%2024.%20Segment%20Information) This note provides a financial breakdown of the company's three operating segments—Residential Mortgage Banking, Business Purpose Mortgage Banking, and Investment Portfolio—all of which reported negative contributions for the nine months ended September 30, 2022, primarily due to significant unrealized mark-to-market losses, with the Investment Portfolio holding the vast majority of assets at **$11.3 billion** Segment Contribution (Nine Months Ended Sep 30, 2022) | (In Thousands) | Segment Contribution | |---|---| | Residential Mortgage Banking | $(7,371) | | Business Purpose Mortgage Banking | $(27,054) | | Investment Portfolio | $(24,049) | | Corporate/Other | $(60,988) | | **Net (Loss)** | **$(119,462)** | Total Assets by Segment (as of Sep 30, 2022) | (In Thousands) | Total Assets | |---|---| | Residential Mortgage Banking | $738,301 | | Business Purpose Mortgage Banking | $473,748 | | Investment Portfolio | $11,301,836 | | Corporate/Other | $632,062 | | **Total Assets** | **$13,145,947** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=75&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's Q3 2022 GAAP loss driven by mark-to-market adjustments in a volatile interest rate environment, detailing strategic actions, segment performance challenges, liquidity, capital resources, and debt management [Overview](index=79&type=section&id=OVERVIEW) In Q3 2022, Redwood Trust reported a GAAP loss of **$(0.44)** per share, with book value declining **5.6%** to **$10.18** per share, primarily due to unrealized fair value changes, while maintaining strong liquidity and deploying capital through acquisitions and stock repurchases amidst market challenges - GAAP book value per share declined **5.6%** quarter-over-quarter to **$10.18** at September 30, 2022, driving a GAAP loss of **$(0.44)** per share for Q3 2022[387](index=387&type=chunk) - The company maintained a strong liquidity position with **$297 million** of unrestricted cash, **$491 million** of unencumbered assets, and added **$900 million** of new financing capacity in Q3[388](index=388&type=chunk)[402](index=402&type=chunk) - Key capital deployment in Q3 included the acquisition of Riverbend Funding, LLC and the repurchase of **3.4 million** common shares for **$24 million**[388](index=388&type=chunk)[402](index=402&type=chunk) - Management expects continued challenges in the consumer residential sector due to rapidly increasing mortgage rates and low housing affordability[392](index=392&type=chunk) [Consolidated Results of Operations](index=83&type=section&id=Consolidated%20Results%20of%20Operations) For Q3 2022, Redwood reported a net loss of **$50.4 million**, a sharp reversal from Q3 2021's net income, primarily driven by a **$83.8 million** negative swing in investment fair value changes and decreased mortgage banking activities, partially offset by reduced general and administrative expenses Consolidated Net (Loss) Income Summary | (In Thousands) | Q3 2022 | Q3 2021 | Change | |---|---|---|---| | Net Interest Income | $34,935 | $41,968 | $(7,033) | | Non-interest (loss) income, net | $(37,135) | $98,331 | $(135,466) | | General and administrative expenses | $(40,107) | $(47,692) | $7,585 | | **Net (Loss) Income** | **$(50,411)** | **$88,286** | **$(138,697)** | - The decrease in income from mortgage banking activities was driven by lower volumes and margins in Residential Mortgage Banking and market volatility impacting the Business Purpose Mortgage Banking operations[411](index=411&type=chunk)[412](index=412&type=chunk)[413](index=413&type=chunk) - Negative investment fair value changes in Q3 2022 reflected extreme credit spread widening on longer-duration, fixed-rate investments, partially offset by gains in IO securities and interest rate hedges[415](index=415&type=chunk) [Results of Operations by Segment](index=88&type=section&id=Results%20of%20Operations%20by%20Segment) All three operating segments experienced significant year-over-year declines in contribution for Q3 2022, with Residential Mortgage Banking, Business Purpose Mortgage Banking, and the Investment Portfolio reporting losses primarily due to lower volumes, market volatility, and large unrealized mark-to-market losses Segment Contribution Summary (Q3 2022 vs Q3 2021) | (In Thousands) | Q3 2022 | Q3 2021 | Change | |---|---|---|---| | Residential Mortgage Banking | $(640) | $19,406 | $(20,046) | | Business Purpose Mortgage Banking | $(3,856) | $10,837 | $(14,693) | | Investment Portfolio | $(22,404) | $71,085 | $(93,489) | | Corporate/Other | $(23,511) | $(13,042) | $(10,469) | - Residential Mortgage Banking intentionally reduced volume, with jumbo loan locks at **$461 million** in Q3 2022, down from **$3.3 billion** in Q3 2021, focusing on risk management in a challenging market[441](index=441&type=chunk)[445](index=445&type=chunk) - Business Purpose Mortgage Banking funded **$570 million** in loans in Q3 2022, with a notable shift towards bridge loans (**83%** of volume) over SFR loans (**17%**) as borrowers preferred shorter-duration products[402](index=402&type=chunk)[451](index=451&type=chunk) - The Investment Portfolio's economic investments grew to **$3.6 billion**, but its contribution was negative due to unrealized losses from credit spread widening, despite stable underlying credit performance[389](index=389&type=chunk)[468](index=468&type=chunk)[470](index=470&type=chunk) [Liquidity and Capital Resources](index=100&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) As of September 30, 2022, Redwood maintained a solid liquidity position with **$297 million** in unrestricted cash and **$160 million** of available capital, actively managing its **$2.86 billion** secured recourse debt, and repurchasing **$24 million** of common stock, with sufficient cash to meet operational and funding commitments - At September 30, 2022, the company had **$297 million** in unrestricted cash and an estimated **$160 million** of available capital[512](index=512&type=chunk) - The company had **$2.86 billion** of secured recourse debt, with only **$480 million** being marginable, reducing exposure to margin calls based on market value fluctuations[515](index=515&type=chunk) - In Q3 2022, the Board approved a new **$125 million** repurchase authorization for common stock and debt, and the company repurchased **3.4 million** shares for **$24 million** during the quarter[517](index=517&type=chunk)[518](index=518&type=chunk) - Material cash requirements include funding commitments of up to **$990 million** for bridge loans and **$149 million** for HEI purchases[529](index=529&type=chunk)[530](index=530&type=chunk)[531](index=531&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=107&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section incorporates by reference the market risk disclosures from the company's 2021 Annual Report on Form 10-K, indicating no material changes in market risk exposure since December 31, 2021, beyond what is discussed in the MD&A - There have been no material changes in the company's market risk exposure since December 31, 2021, beyond what is discussed in the MD&A section of this report[557](index=557&type=chunk) [Controls and Procedures](index=107&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of Q3 2022, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2022[559](index=559&type=chunk) - No material changes to internal control over financial reporting occurred during the third quarter of 2022[560](index=560&type=chunk) PART II — OTHER INFORMATION [Legal Proceedings](index=108&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 17 of the financial statements for information on legal proceedings, indicating no significant updates to litigation matters and an aggregate loss contingency reserve of **$2 million** as of September 30, 2022 - The aggregate loss contingency reserve for outstanding litigation matters was **$2 million** as of September 30, 2022[317](index=317&type=chunk) [Risk Factors](index=108&type=section&id=Item%201A.%20Risk%20Factors) This section states that the company's risk factors are discussed in Part I, Item 1A of its Annual Report on Form 10-K for the year ended December 31, 2021, indicating no new or materially changed risk factors are being reported in this 10-Q [Unregistered Sales of Equity Securities and Use of Proceeds](index=108&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not sell any unregistered equity securities during Q3 2022, but repurchased **3.4 million** common shares for **$24 million** under a new **$125 million** authorization approved in July 2022, with **$101 million** remaining available Common Stock Repurchases (Q3 2022) | Period | Total Shares Purchased (in thousands) | Average Price Paid per Share | Total Cost (in thousands) | |---|---|---|---| | July 2022 | — | $— | $— | | August 2022 | 1,126 | $8.07 | $9,087 | | September 2022 | 2,322 | $6.30 | $14,629 | | **Total Q3** | **3,448** | **$6.88** | **$23,716** | - A new **$125 million** repurchase authorization for common stock and debt was approved in July 2022, replacing a previous program[565](index=565&type=chunk) [Other Information](index=109&type=section&id=Item%205.%20Other%20Information) Effective November 2, 2022, the Board of Directors adopted Amended and Restated Bylaws to update provisions related to annual stockholder meetings and director nominations, and on November 3, 2022, the company amended and restated employment agreements with five executive officers - The company adopted Amended and Restated Bylaws on November 2, 2022, updating rules for stockholder meetings and director nominations[570](index=570&type=chunk) - Amended and restated employment agreements were executed with five key executive officers on November 3, 2022[572](index=572&type=chunk)

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, 2022 OR ☐ 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) (State or Other ...

Financial Performance - Q1 2022 GAAP earnings were $0.24 per diluted share, with a GAAP book value of $12.01 per share, down 0.4% from year-end 2021[375]. - Net income for the first quarter of 2022 was $30.9 million, a decrease of 68% compared to $97.3 million in the same period of 2021[394]. - Net interest income increased by $27.3 million to $53.1 million, primarily due to higher average asset balances and increased investments in bridge loans and bonds[394][395]. - Total non-interest income decreased by $115.5 million to $18.8 million, driven by a significant drop in mortgage banking activities, which fell by $66.3 million[394]. - The economic return on book value for the first quarter was 1.5%[389]. - Total interest income for the three months ended March 31, 2022, was $189,400,000, an increase of 47.8% compared to $128,305,000 in the same period of 2021[410]. - The total interest expense for the three months ended March 31, 2022, was $136,298,000, an increase of 32.9% from $102,552,000 in the same period of 2021[410]. Business Operations - Business purpose lending fundings grew 25% in Q1 2022 compared to Q4 2021, driven by record bridge originations[377]. - The company announced an agreement to acquire Riverbend Funding, expected to enhance its business purpose lending platform and operational integration within CoreVest[378]. - The company launched a new short-term rental product and closed its inaugural short-term rental portfolio loan[391]. - The company funded $920 million in business purpose loans, representing a 25% increase from the fourth quarter of 2021, with SFR loans up 38%[391]. - The company locked $2.63 billion of loans during the first quarter, with 65% being purchase-money loans and 35% refinancings[423]. - The Business Purpose Mortgage Banking segment funded $505 million in single-family rental loans and $414 million in bridge loans during the three months ended March 31, 2022, totaling $920 million in fundings[435]. Market Conditions - Mortgage rates rose approximately 1.50% in Q1 2022 due to the Fed's tightening monetary policy, impacting origination capacity across the industry[379]. - The ongoing impact of the pandemic continues to create uncertainty in the housing market and broader financial markets[372]. - The company experienced increased rate volatility and spread widening, negatively impacting margins and profitability in the Business Purpose Mortgage Banking segment[439]. Investments and Assets - The Investment Portfolio segment's total investments increased to $3.04 billion as of March 31, 2022, up from $2.69 billion at December 31, 2021[443]. - The fair value of bridge loans held-for-investment increased to $1,209,950,000 from $944,606,000, representing a growth of approximately 28.2%[471]. - The fair value of residential loans at the end of the period was $246,064,000, up from $172,048,000, indicating an increase of approximately 43%[476]. - The total fair value of other investments at the end of the period was $595,056,000, down from $606,267,000, reflecting a decrease of about 1.9%[479]. - The company had $1.10 billion of loans in inventory at the end of the period, with an additional $1.09 billion identified for purchase[424]. Cash Flow and Capital Management - The company ended Q1 2022 with over $400 million of unrestricted cash and $140 million of available capital[375]. - Cash flows from operating activities were negative $292 million for the three months ended March 31, 2022, but excluding certain cash flows, it was positive $126 million[496]. - The company declared a regular dividend of $0.23 per share for the first quarter of 2022, which was paid on March 31, 2022[501]. - The company had $37 million in federal net operating loss carryforward (NOL) into 2022, allowing it to retain REIT taxable income up to the NOL amount tax-free[484]. - The Board of Directors authorized the repurchase of up to $100 million of common stock, with $78 million remaining available for repurchase as of March 31, 2022[494]. Debt and Financial Risk - The company had $1.85 billion in total capacity for business purpose warehouse facilities, with $760 million available as of March 31, 2022[436]. - Total secured recourse debt outstanding was $2.94 billion, with $619 million being marginable and $2.32 billion non-marginable[515]. - Risks related to debt include liquidity risks from uncommitted facilities, which may not provide additional financing when needed[511]. - Several debt facilities are subject to variable interest rates based on LIBOR or SOFR, indicating potential increases in interest costs[510]. - The company actively manages various market risks, including credit risk, interest rate risk, and liquidity risk[525].

Business Segments - The company operates in three segments: Residential Mortgage Banking, Business Purpose Mortgage Banking, and Investment Portfolio[26] - In Q4 2021, the company reorganized its segments to better reflect management's evaluation of operations, moving retained investments to a newly-created Investment Portfolio Segment[27] - The Residential Mortgage Banking segment primarily generates income from net interest income and gains on loans acquired and sold, with a focus on prime jumbo mortgages[28] - The Business Purpose Mortgage Banking segment originates single-family rental and bridge loans, with income derived from net interest, origination fees, and mark-to-market adjustments[29] - The Investment Portfolio segment includes investments from mortgage banking operations and third-party sources, generating income from net interest and changes in fair value[30] Employee Engagement and Retention - The company employs 298 full-time employees, with 53% directly engaged in operations at its subsidiary, CoreVest[34] - In 2021, the company hired 107 employees, maintaining a low voluntary turnover rate, indicating strong employee retention efforts[36] - 80% of employees reported high engagement levels, and 82% expressed satisfaction with their overall employment experience[37] Diversity and Community Engagement - The company is committed to diversity, equity, inclusion, and belonging, with initiatives aimed at increasing representation and fostering an inclusive work environment[38] - The company actively participates in community giving, supporting causes related to housing, racial equality, and education through corporate grants and employee-led initiatives[39] Risk Management - The Chief Executive Officer and Chief Financial Officer executed certifications as required by the Sarbanes-Oxley Act of 2002 on February 25, 2022[46] - The company actively manages various market risks including credit risk, interest rate risk, and liquidity risk to enhance earnings and preserve capital[545] - The company aims to maintain capital levels consistent with the quantified risks based on historical experience[545] - The company is subject to various types of risks and uncertainties as detailed in the "Risk Factors" section of the Annual Report[546]

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: September 30, 2021 OR ☐ 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) (State or O ...

Financial Performance - The company reported strong GAAP earnings of $90 million, equating to $0.66 per diluted share, and a 6.5% increase in book value to $11.46 as of June 30, 2021[348]. - The annualized GAAP return on equity for the first half of 2021 was 31%, with a total economic return to shareholders of 19%[348]. - Net income for Q2 2021 was $90.025 million, a decrease of $75.419 million compared to Q2 2020[365]. - The annualized GAAP return on equity for Q2 2021 was 28.7%, with an economic return on book value of 8.2%[361]. - The book value per share increased by $0.70 to $11.46 during Q2 2021, reflecting strong earnings and comprehensive income[362]. - The company announced a 13% increase in its quarterly dividend to $0.18 per share for Q2 2021[362]. - REIT taxable income for the three months ended June 30, 2021, was $12,497 thousand, compared to a loss of $57,905 thousand in the same period of 2020, representing a significant recovery[439]. - Total taxable income for the six months ended June 30, 2021, was $106,511 thousand, compared to a loss of $28,463 thousand in 2020, indicating a strong performance[439]. - Distributions to shareholders for the three months ended June 30, 2021, were $20,346 thousand, up from $14,366 thousand in 2020, reflecting a 42% increase[439]. Loan and Investment Activities - The company locked close to $4 billion in jumbo residential loans during the second quarter, achieving margins towards the high end of historical targets[350]. - The business purpose lending platform, CoreVest, surpassed $500 million in fundings during the second quarter, focusing on single-family rental and bridge loan originations[351]. - The company originated $527 million in business purpose mortgage loans in Q2 2021, including $312 million in single-family rental loans[362]. - The company securitized $1.81 billion of loans in Q2 2021 and had a pipeline of $2.47 billion in residential jumbo loans identified for purchase[362]. - The company completed three securitizations totaling $1.53 billion during Q2 2021[391]. - The company funded $215 million in business purpose bridge loans during Q2 2021, with principal payments received totaling $115 million[413]. - The company had $727 million in bridge loans held-for-investment at June 30, 2021, with a weighted average coupon of 7.63%[435]. - The company consolidated $3.26 billion of loans and $3.01 billion of ABS issued associated with investments in CAFL entities as of June 30, 2021[412]. Revenue and Income Sources - The revenue mix is expected to continue migrating towards mortgage banking, significantly exceeding net interest income from the investment portfolio in the first half of 2021[353]. - The BPL business saw over a 50% increase in mortgage banking income in Q2 2021, benefiting from diverse product offerings and strong borrower relationships[356]. - Net interest income for the three months ended June 30, 2021, was $30,630,000, up from $27,280,000 in the same period of 2020, reflecting a growth of approximately 8.7%[378]. - Total interest income for the six months ended June 30, 2021, was $267,000,000, compared to $328,027,000 in 2020, indicating a decrease of about 18.6%[379]. - The net interest income for the six months ended June 30, 2021, was $56,383,000, compared to $78,690,000 in the same period of 2020, reflecting a decline of about 28.3%[379]. - Business purpose loans generated interest income of $15,474,000 for the three months ended June 30, 2021, with a yield of 6.7%[378]. Market Conditions and Risks - The ongoing impact of the COVID-19 pandemic remains a significant risk factor affecting the company's operations and market conditions[346]. - The company anticipates that regulatory changes for loans on second homes and investor properties could significantly increase market volumes in 2021 and beyond[345]. - The company faced increased competition in the business purpose lending market, particularly for lower-balance bridge and rental loan products[351]. - The non-Agency mortgage market is expected to increase volumes to $435 billion in 2021, driven by a regulatory pullback from GSEs on second homes and investor properties[354]. - The company expects quarter-to-quarter GAAP earnings volatility due to various factors, including changes in asset values and mortgage banking activities[482]. - The ongoing pandemic has introduced additional volatility, impacting estimates and financial performance[483]. - The company actively manages risks such as credit risk, interest rate risk, and liquidity risk to enhance earnings and preserve capital[484]. Capital and Cash Flow - The company estimates its available capital at approximately $175 million as of June 30, 2021[345]. - Unrestricted cash at June 30, 2021, was $421 million, with estimated available capital of $175 million[362]. - As of June 30, 2021, total capital was $1.95 billion, consisting of $1.30 billion in equity capital and $651 million in convertible notes and long-term debt[449]. - Cash flows from operating activities were negative $2.65 billion for the six months ended June 30, 2021, primarily due to mortgage banking activities[454]. - Net cash provided by investing activities was $1.07 billion during the six months ended June 30, 2021, mainly from principal payments on loans held-for-investment[455]. - Net cash provided by financing activities was $1.51 billion for the same period, driven by $1.18 billion from net short-term debt borrowings[458]. - The company maintains loan warehouse facilities with a total capacity of $2.35 billion and available capacity of $1.30 billion as of June 30, 2021[462]. - As of June 30, 2021, the company had $1.48 billion of short-term debt outstanding, with a peak balance of $2.66 billion during the first half of 2021[463]. Segment Performance - The company operates through three segments: Residential Lending, Business Purpose Lending, and Third-Party Investments, contributing to its overall financial performance[381]. - Residential Lending segment generated $31 million of net income in Q2 2021, down from $53 million in Q1 2021, with mortgage banking income of $27 million[384]. - Business Purpose Lending segment net income increased to $33 million in Q2 2021, driven by a 37% increase in origination volume compared to Q1 2021[402]. - Total segment investments in Residential Lending rose to $496.3 million as of June 30, 2021, compared to $382.3 million at the end of 2020[396]. - Total segment investments in Third-Party Investments increased to $799,421 as of June 30, 2021, compared to $775,369 on December 31, 2020[420]. - The net investment fair value changes for Third-Party Investments segment were $42,018 for the three months and $81,734 for the six months ended June 30, 2021[425].