Company: RWT-PA
Filing Date: 2025-08-08
Form Type: 10-Q
Source: 0000930236-25-000029
Chunk: 317

Company: REDWOOD TRUST INC
Filing Date: 2025-08-08
Form: 10-Q
Item: Part I, Item 8
Chunk 317
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, we began reporting this HEI portfolio as part of our Legacy Investments segment. Furthermore, HEI income, net declined due to negative fair value adjustments due to a slowdown in home price appreciation and prepayment speeds during the quarter.

Additional detail on our HEI income is presented in Table 10.3 of our Notes to Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

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Operating Expenses 

Operating expenses increased by $4 million during the second quarter of 2025, primarily due to higher portfolio management costs related to specially-serviced residential investor bridge loans.

Additional detail on our General and administrative expenses is presented in Table 22.1 of our Notes to Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Provision for Income Taxes

Our provision for income taxes is almost entirely related to activity at our Taxable REIT Subsidiaries ("TRS"), which primarily includes our mortgage banking activities and MSR investments, as well as certain other investment and hedging activities. The tax provision for the second quarter of 2025 declined by $2 million, primarily due to losses related to legacy residential investor loans and a reduction in our estimated effective tax rate, reflecting a favorable change for us based on California’s tax apportionment methodology for financial institutions.

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 

Net Interest Income 

Net interest income decreased by $8 million for the six months ended June 30, 2025 compared to the same period in 2024. The decline was largely due to an increase in the balance of our legacy unsecuritized bridge and term loan portfolios on non-accrual during the second quarter of 2025, which in certain cases caused a reversal of prior period's net interest income. In addition, corporate interest expense rose by $6 million due to higher unsecured debt balances and fully utilizing the maximum capacity under the secured revolving financing facility established in 2024.

These decreases were partially offset by net interest income from Sequoia and CoreVest mortgage banking, including a $17 million increase from Sequoia, driven by higher loan purchase volumes, capital deployment into certain interest rate hedging instruments, and lower base floating rates on our financing facilities as SOFR declined over 90 basis points between June 30, 2024 and June 30, 2025. CoreV