Core Viewpoint - Redwood Trust, Inc. has successfully closed its inaugural Medical Professionals loan securitization, marking a significant milestone for its Sequoia jumbo mortgage platform [1] Group 1: Company Developments - The transaction, named SEMT 2026-MED1, amounts to $482 million and represents Sequoia's 165th securitization [1] - This securitization is notable as it is the first of its kind backed by medical professionals [1]

From a liquidity perspective, we have never been stronger, as we issued our first rated unsecured debt offering for $500,000,000 in January, which gives us greater flexibility and makes us less reliant on short-term warehouse lines. This new capital will help us execute our long-term plan of growing book value and maximizing shareholder returns. Looking forward, we have great momentum and are well positioned to continue our growth. That concludes my prepared remarks, and we will turn over to Page three in t ...

Financial Performance - Net income reached $25.4 million, a 60.6% increase from $15.8 million in 3Q24[8] - Core net income increased by 58.9% to $26.9 million, compared to $16.9 million in 3Q24[8] - Diluted EPS rose to $0.65, up from $0.44 per share in 3Q24[8] - Core diluted EPS increased to $0.69, up from $0.47 per share in 3Q24[8] Loan Production and Portfolio - Loan production hit a new record of $739.0 million, a 55.0% increase from 3Q24[6] - The total loan portfolio reached $6.3 billion in UPB as of September 30, 2025, a 32.0% increase from $4.8 billion in UPB as of September 30, 2024[6] - Portfolio net interest margin (NIM) for 3Q25 was 3.65%, an increase of 5 bps from 3.60% for 3Q24[8] - The UPB of fair value option (FVO) loans was $4.2 billion, or 66.3% of total loans, as of September 30, 2025, an increase from $2.2 billion in UPB, or 47.1% as of September 30, 2024[19] Asset Quality and Resolution - Nonperforming loans (NPL) as a % of HFI loans decreased to 9.8%, down from 10.6% as of September 30, 2024[6] - 3Q25 NPA resolutions realized gains of $2.8 million, or 102.6%, of UPB resolved[6] - NPA resolutions totaled $108.0 million in UPB, realizing 102.6% of UPB resolved, compared to $68.6 million in UPB and realization of 103.4% of UPB resolved for 3Q24[33] Financing and Capital - Completed the 1st single counterparty securitization totaling $190.9 million of securities issued with a large money manager in July, in addition to the VCC 2025-4 securitization totaling $457.5 million of securities issued[6,9] - Liquidity of $143.5 million, consisting of $99.0 million in unrestricted cash and $44.5 million in available borrowings from unpledged loans[9] - Total available warehouse line capacity of $600.3 million[9]

Financial Data and Key Metrics Changes - The company achieved record quarterly adjusted net income of $37 million or $2.17 per diluted share, reflecting strong performance across core businesses [21] - Earnings per share grew by 26% compared to the second quarter, driven by robust loan growth and net interest margin expansion [4][21] - Net interest income increased by $3 million or 18% annualized, supported by continued net interest margin expansion [21] Business Line Data and Key Metrics Changes - Loan growth accelerated significantly, increasing by $286 million or 17% annualized, with a 15% increase net of planned runoff from M2 Equipment Finance loans and leases [6][29] - Wealth management revenue grew by $5 million, an 8% increase over the prior quarter, and year-over-year revenue is up $1.5 million or 15% annualized [10][25] - Capital markets revenue rebounded to $24 million, up $14 million from the prior quarter, exceeding the upper end of guidance [21][25] Market Data and Key Metrics Changes - Core deposits increased by $410 million or 8% annualized year to date, reflecting the success of the relationship-driven strategy [29] - Total criticized loans decreased by 9% year to date, indicating improved asset quality [18][30] Company Strategy and Development Direction - The company operates through three primary lines of business: traditional banking, wealth management, and LITEC lending, all of which delivered improved performance [6][10] - The digital transformation initiative is on track, with key milestones achieved, including the successful conversion of the core operating system for one of the charters [7][9] - The company is focused on maintaining strong regulatory capital while exploring innovative ways to expand LITEC lending capacity [15][34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about sustaining loan growth momentum, guiding for gross annualized loan growth in a range of 10% to 15% for the fourth quarter [6] - The company anticipates continued core margin expansion and is guiding for an increase in fourth quarter NIM TEY ranging from three to seven basis points [24] - Management noted that asset quality remains excellent, with net charge-offs declining compared to the second quarter [18][30] Other Important Information - The company returned $10 million of capital to shareholders through share repurchases and announced a new share repurchase program for up to 1.7 million shares [18][19] - The effective tax rate for the quarter was 9.5%, up from 5% in the prior quarter, primarily due to higher pretax income [36] Q&A Session Summary Question: Margin guidance and rate cuts - Management confirmed that the margin guidance of three to seven basis points does not include any rate cuts [39][40] Question: Future buyback activity - Management indicated that they will remain active in buybacks due to higher earnings per share and reduced need to retain capital for organic growth [42][44] Question: Appetite for additional securitizations - Management anticipates a large permanent loan securitization in the first half of next year, targeting around $350 million [50] Question: NII impact from construction loan sales - Management stated that any NII give-up from construction loan sales is expected to be replaced by improved capital markets revenue [52][54] Question: Loan growth expectations for next year - Management expects loan growth to be in the double digits based on current pipelines [61] Question: One-time costs related to conversions - Management indicated that there will be some one-time costs associated with conversions, estimated to be in the range of $4 million to $5 million for 2025 [77] Question: Trends in reserves - Management noted that reserves may continue to trend down as a percentage of loans, but they do not expect significant further reductions [81]

Financial Data and Key Metrics Changes - The company originated $640 million in new loans, a 69% increase year-over-year, driving a 27% increase in net revenue and a 17% increase in core pretax earnings [4][12] - Core earnings per share increased to $0.55 from $0.51 a year ago, marking the second-best quarterly earnings in company history [7] - The total loan portfolio reached just under $5.5 billion, a 7.8% increase from year-end 2024 and a 27.3% increase year-over-year [13][14] Business Line Data and Key Metrics Changes - The weighted average coupon on new held-for-investment originations was strong at 10.5%, with a five-quarter average trend of 10.8% [12] - The weighted average loan-to-value ratio for the quarter was just under 63%, indicating tight credit levels [13] - Non-performing loans remained stable at 10.8%, consistent with previous quarters [15][16] Market Data and Key Metrics Changes - The company reported strong demand across all property types, with a recent shift towards commercial loans [4] - The real estate markets are functioning well, with healthy investor demand and participation in offerings despite market volatility [5][21] Company Strategy and Development Direction - The company aims to grow its portfolio to $10 billion over the next five years, focusing on technology to scale the business without significantly increasing headcount [47][49] - The company has been active in capital markets, completing four successful debt transactions and issuing three new securitizations [5][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the future, citing strong production and healthy demand in real estate markets [21] - The company does not anticipate material impacts from external factors such as tariff discussions [21] Other Important Information - The company has a total liquidity of $75.6 million, comprised of cash and available liquidity on unfinanced collateral [19] - The CECL loan loss reserve at the end of the quarter was $5 million, slightly above the expected normal range due to macroeconomic forecasts [17][18] Q&A Session Summary Question: Will the NIM remain stable in Q2? - Management indicated that the NIM is expected to be around 3.35% to 3.5%, which is considered normal [23] Question: What is the outlook for new origination yields? - Management expects yields to remain stable, with potential for a decrease later in the year if the Federal Reserve continues to cut rates [25][26] Question: Is the increase in commercial demand due to borrowers being shut out of other channels? - Management clarified that the increase is primarily due to the establishment of a small commercial division rather than a demand issue [30] Question: What will the raised capital be used for? - The raised capital will be used to continue making more loans, with a focus on growing the portfolio [34] Question: What is the current total headcount and office locations? - The company has a total headcount of 323 and operates from five office locations [43][45] Question: What is the long-term vision for the company? - The company aims to grow its portfolio to $10 billion in five years while leveraging technology to enhance productivity [47][49]

Financial Performance - Net income reached $189 million, a 95% increase compared to $173 million in 1Q24[7] - Core net income increased by 110% to $203 million from $182 million in 1Q24[7] - Diluted EPS increased to $055, up from $051 per share in 1Q24[7] - GAAP book value per share increased by 32% to $1619 from $1570 as of December 31, 2024[14] Loan Production and Portfolio - Loan production reached a record of $6404 million in UPB, a 137% increase from 4Q24 and a 691% increase from 1Q24[7] - The total loan portfolio was $54 billion in UPB, a 273% increase from $43 billion in UPB as of March 31, 2024[7] - The UPB of fair value option (FVO) loans was $31 billion, or 577% of total loans[21] Asset Quality and Resolution - Nonperforming loans (NPL) as a % of HFI loans were 108%, relatively consistent with 107% as of December 31, 2024, and 101% as of March 31, 2024[7] - 1Q25 NPA resolutions realized gains of $19 million, or 1024%, of UPB resolved[7] - NPA resolutions totaled $764 million in UPB, realizing 1024% of UPB resolved, compared to $545 million in UPB and realization of 1023% of UPB resolved for 1Q24[32] Financing and Capital - The company completed one securitization during 1Q25, totaling $3428 million of securities issued with a weighted average rate of 67%[7] - Collapsed VCC 2023-1R which released $526 million of marketable retained securities after paying off the associated debt[7] - Issued 16 million common shares, realizing net proceeds of $288 million through Velocity's ATM offering program at an accretive to book value WAP of $1835[7]

Financial Data and Key Metrics Changes - The first quarter net income was $12.4 million, essentially flat compared to the fourth quarter of 2024, resulting in a return on assets (ROA) of 1.17% and a return on equity (ROE) of 12.4% [11] - Net interest income grew by 12.4% year-over-year but declined slightly from the previous quarter due to a decrease in Fed funds sold and other interest-earning assets [12] - Non-interest expenses increased by 3.2% or $878,000 in the first quarter, and were up 8.5% or $2.2 million compared to the same quarter last year [12] - The net interest margin improved by nine basis points to 3.8% [9][12] Business Line Data and Key Metrics Changes - The bank successfully executed a significant commercial real estate loan securitization, enhancing balance sheet management and generating fee income that will positively impact the net interest margin in the second quarter [7][8] - Loan growth in April was reported at over $50 million, with a quarterly average growth of $42.5 million [13] - Nonperforming loans declined by $9.3 million, improving the nonperforming loans to total loans ratio by 23 basis points from the prior quarter [15] Market Data and Key Metrics Changes - Deposits declined by $62 million for the quarter, resulting in a loan to deposit ratio of 93.9% [12] - The bank's investment securities increased by $13.4 million to $397 million, with an accumulated other comprehensive income (AOCI) gain of $10.3 million [12] Company Strategy and Development Direction - The company is focused on disciplined loan growth, robust credit management, and improving operational efficiencies while increasing shareholder value [6][9] - The management emphasized the importance of maintaining a healthy balance sheet and promoting long-term sustainable growth through proactive asset management strategies [8][20] - The bank is evaluating additional securitizations as a tool for managing concentrations and supporting sustainable profitable growth [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's credit risk strategies and the overall economic outlook, noting that borrowers remain cautious but optimistic [27][29] - The company anticipates achieving $325 million in loan growth for the year, translating to an 8% annual run rate compared to the prior year [19][49] - Management acknowledged the potential for rate cuts and their impact on loan growth and customer behavior [48][49] Other Important Information - The bank's book value and tangible book value grew by 4.4% and 4.7% respectively over the prior quarter, and by 14.3% and 15.2% compared to the same period last year [9] - The company is considering a share buyback program due to capital accretion and stock price levels [13][51] Q&A Session Summary Question: Impact of securitization on net interest margin - Management confirmed that the securitization will primarily impact the margin, providing a five basis point benefit for the next quarter [23] Question: Loan growth confidence amid macro uncertainty - Management indicated that the loan growth in April was primarily due to fundings on revolving lines rather than new deals, and expressed optimism about the pipeline [25][26] Question: Fee income increase drivers - The increase in fee income was attributed to the treasury management division, which has seen significant growth in recent years [32][33] Question: Expectations for non-interest expenses - Management expects non-interest expenses to remain flat in the second quarter, around $28 million [36] Question: Outlook on loan production yields and margin - Management anticipates a stable margin around 3.75% to 3.8%, with the potential for improvement depending on interest rate movements [40][42] Question: Consideration of share buybacks - Management is seriously considering a buyback program due to attractive stock levels and capital accretion [51][52]