Company: RWT-PA
Filing Date: 2025-08-08
Form Type: 10-Q
Source: 0000930236-25-000029
Chunk: 6

Company: REDWOOD TRUST INC
Filing Date: 2025-08-08
Form: 10-Q
Item: Part I, Item 2
Chunk 6
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 housing finance, and the growth potential of our mortgage banking platforms – where capital allocation has grown by over $200 million in the past year and where we have generated combined GAAP returns in excess of 20% in each of the past four quarters – the opportunity cost of allowing legacy investments to naturally run off has prompted us to more proactively reposition our capital.

This strategic transition and capital repositioning is supported by the fact that our operating platforms have been swiftly increasing in scale. The retrenchment by banks in mortgage lending has enabled Redwood to meaningfully expand loan acquisition volumes and market share, even as overall housing activity remains subdued. As part of this trend, through our network we have seen increased demand from bank counterparties for capital-efficient solutions that address a broader segment of their loan production.

The decision to accelerate the wind-down of our legacy portfolio resulted in approximately $(0.79) per share of fair value and repositioning charges in the second quarter, as we moved forward with liquidations, term financings, or other resolutions for these assets. This was the primary contributing factor to a reduction in our GAAP book value per share to $7.49 at June 30, 2025, as compared to $8.39 at March 31, 2025. We expect to free up $200 to $250 million in capital from these legacy investments by year-end 2025, which we plan to redeploy into our operating platforms and into other uses to support a more stable earnings profile and streamlined revenue mix.

In support of this transition, we recently began repurchasing our common shares, buying back 1.6 million common shares in June 2025 and an additional 2.5 million common shares during the third quarter through August 7, 2025. In July 2025, our Board increased our common stock repurchase authorization to $150 million.

 With respect to our second quarter operating performance, Redwood’s mortgage banking platforms continue to profitably grow amidst a complex environment. The impact of “Liberation Day” tariff announcements at the outset of the second quarter caused financial markets to enter a tariff-driven decline from which there seems to have been a temporary recovery. Our posture early in the second quarter was appropriately cautious, but our operating activity quickly rebounded, and we finished with sequential growth in overall mortgage banking revenues, closing with particularly strong activity in June that has sustained into the third quarter. Our mortgage banking platforms continued to deliver combined GAAP returns above 20%, reflecting a broadening