Redwood Trust Inc. Files Q2 2024 10-Q

TL;DR

RWT Q2 10-Q filed. Assets/liabilities detailed, including debt and loans. Check it out.

AI Summary

Redwood Trust Inc. filed its 10-Q for the period ending June 30, 2024, reporting on its financial performance. The company's total assets and liabilities are detailed, with specific mentions of common stock, redeemable preferred stock, and various senior notes due in 2029. The filing also includes information on residential consumer loans held for sale.

Why It Matters

This filing provides investors with a detailed look at Redwood Trust's financial position and performance for the second quarter of 2024, impacting investment decisions.

Risk Assessment

Risk Level: medium — The filing contains detailed financial information, including various debt instruments and loan portfolios, which carry inherent financial risks.

Key Numbers

• 20240630 — Period End Date (Indicates the end of the reporting period for the 10-Q filing.)
• 20240807 — Filing Date (The date the 10-Q was officially submitted to the SEC.)

Key Players & Entities

• REDWOOD TRUST INC (company) — Filer
• 20240630 (date) — Period of Report
• 20240807 (date) — Filing Date
• ONE BELVEDERE PLACE, SUITE 300, MILL VALLEY, CA 94941 (address) — Business and Mail Address
• rwt:A9125SeniorNotesDue2029Member (financial_instrument) — Debt Instrument
• rwt:A9.000SeniorNotesDue2029Member (financial_instrument) — Debt Instrument
• rwt:ResidentialConsumerLoansHeldForSaleMember (asset) — Loan Portfolio

FAQ

Key Financial Figures

• $0.01 — ich registered Common stock, par value $0.01 per share RWT New York Stock Exchange

Filing Documents

• rwt-20240630.htm (10-Q) — 5158KB
• rwtex1012q24.htm (EX-10.1) — 236KB
• rwtex1022q24.htm (EX-10.2) — 236KB
• rwtex1032q24.htm (EX-10.3) — 228KB
• rwtex1042q24.htm (EX-10.4) — 254KB
• rwtex1052q24.htm (EX-10.5) — 236KB
• rwtex1062q24.htm (EX-10.6) — 237KB
• rwtex3112q24.htm (EX-31.1) — 11KB
• rwtex3122q24.htm (EX-31.2) — 10KB
• rwtex3212q24.htm (EX-32.1) — 4KB
• rwtex3222q24.htm (EX-32.2) — 4KB
• 0000930236-24-000031.txt ( ) — 29667KB
• rwt-20240630.xsd (EX-101.SCH) — 152KB
• rwt-20240630_cal.xml (EX-101.CAL) — 150KB
• rwt-20240630_def.xml (EX-101.DEF) — 869KB
• rwt-20240630_lab.xml (EX-101.LAB) — 1357KB
• rwt-20240630_pre.xml (EX-101.PRE) — 1138KB
• rwt-20240630_htm.xml (XML) — 6840KB

Financial Statements

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)

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

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 78

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 110

Controls and Procedures

Item 4. Controls and Procedures 110 PART II — OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 111

Risk Factors

Item 1A. Risk Factors 111

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 111

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 111

Mine Safety Disclosures (Not Applicable)

Item 4. Mine Safety Disclosures (Not Applicable) 111

Other Information

Item 5. Other Information 111

Exhibits

Item 6. Exhibits 113

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

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 use

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited) Note 1. Organization Redwood Trust, Inc., together with its subsidiaries, is a specialty finance company focused on several distinct areas of housing credit, with a mission to help make quality housing, whether rented or owned, accessible to all American households. Our operating platforms occupy a unique position in the housing finance value chain, providing liquidity to growing segments of the U.S. housing market not well served by government programs. We deliver customized housing credit investments to a diverse mix of investors through our best-in-class securitization platforms, whole-loan distribution activities and our publicly-traded securities. Our aggregation, origination and investment activities have evolved to incorporate a diverse mix of residential consumer and residential investor housing credit assets. Our goal is to provide attractive returns to shareholders through a stable and growing stream of earnings and dividends, capital appreciation, and a commitment to technological innovation that facilitates risk-minded scale. We operate our business in three segments: Residential Consumer Mortgage Banking, Residential Investor Mortgage Banking and Investment Portfolio. Our primary sources of income are net interest income from our investments and non-interest income from our mortgage banking activities. Net interest income primarily consists of the interest income we earn on investments less the interest expense we incur on borrowed funds and other liabilities. Income from mortgage banking activities is generated through the origination and acquisition of loans, and their subsequent sale, securitization, or transfer to our investment portfolios. Redwood Trust, Inc. has elected to be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), beginning with its taxable year ended December 31, 1994. We generall

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited) Note 2. Basis of Presentation - (continued) Principles of Consolidation The consolidated financial statements include the accounts of the entities where the Company has a controlling financial interest. The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity ("VOE") or a variable interest entity ("VIE"). A VOE is an entity that has sufficient equity and in which equity investors have a controlling financial interest. The usual condition for a controlling financial interest in a VOE is ownership of a majority voting interest. if the Company has a controlling majority voting interest in a VOE, the entity is consolidated. A VIE is an entity that lacks one or more of the characteristics of a VOE. The Company has a controlling financial interest in and consolidates a VIE when the firm has a variable interest or interests that provide it with (i) the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits for the VIE that could potentially be significant to the VIE. See Note 15 for further information about VIEs. For financial reporting purposes, we consolidate the assets and liabilities of certain entities formed in connection with the securitization of our loans and home equity investments ("HEI"), which we have determined to be VIEs and in which we have a controlling financial interest. The underlying loans owned at the consolidated securitization entities are shown under Residential consumer loans and Residential investor loans, at fair value on our consolidated balance sheets. The underlying HEI at the consolidated HEI securitization entities are shown under Home equity investments, at fair value on our consolidated balance sheets. See Note 11 for further discussion

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited) Note 3. Summary of Significant Accounting Policies - (continued) Other Recent Accounting Pronouncements Pending Adoption In August 2023, the FASB issued ASU 2023-05, "Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement." ASU 2023-05 requires a joint venture, upon formation, to initially measure its assets and liabilities at fair value. This generally aligns the treatment to be consistent with the guidance for business combinations. This new guidance is effective for all joint venture entities with a formation date on or after January 1, 2025, with early adoption permitted. Joint ventures formed prior to the adoption date may elect to apply the new guidance retrospectively back to their original formation date. We expect that this new guidance will not have a material impact on our consolidated financial statements and plan to adopt this new guidance by the required date. In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. "ASU 2023-07 expands the breadth and frequency of segment disclosures by requiring disclosures of significant segment expenses regularly provided to the Chief Operating Decision Maker ("CODM") and included within the reported measures of a

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View this 10-Q filing on SEC EDGAR