Company: RWT-PA
Filing Date: 2025-11-07
Form Type: 10-Q
Source: 0000930236-25-000037
Chunk: 97

Company: REDWOOD TRUST INC
Filing Date: 2025-11-07
Form: 10-Q
Item: Part I, Item 1
Chunk 97
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 trading securities generally include both residential and multifamily mortgage-backed interest-only and subordinate securities. Refer to Note 6 for further information on the inputs into the fair valuation of our real estate trading securities. AFS SecuritiesOn September 30, 2025, as part of the sale of a $484 million in fair value of legacy unsecuritized bridge loans and REO assets to the Legacy Trust, we retained a $182 million subordinate beneficial interest in the Legacy Trust. The beneficial interest represents our right to residual cash flows from the Legacy Trust after payment of senior financing and preferred interests and is recorded as an AFS security, measured at fair value and classified as a Level 3 asset.The retained beneficial interest is valued using discounted expected cash flows that incorporate assumptions for principal repayments, credit losses, and market discount rates. We did not record a separate allowance for credit losses at initial recognition because the fair value measurement already reflected expected credit losses; however, we will re-evaluate expected credit losses at each reporting period and record an allowance if updated expectations indicate one is required. See Note 8 for further discussion on this transaction.

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REDWOOD TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2025(Unaudited) Note 9. Real Estate Securities - (continued)

The following tables present the detail of our AFS securities, by position and collateral type, at September 30, 2025 and December 31, 2024.Table 9.2 – Carrying Value and Fair Value of AFS Securities by Type September 30, 2025(In Thousands)SeniorMezzanineSubordinateTotalAmortized cost$— $— $259,915 $259,915 Gross unrealized gains— — 29,104 29,104 Gross unrealized losses— — (3,852)(3,852)Allowance for credit losses— — (795)(795)Total Carrying Value$— $— $284,372 $284,372 December 31, 2024(In Thousands)SeniorMezzanineSubordinateTotalAmortized cost$39,135 $31,250 $121,053 $191,438 Gross unrealized gains230 668 25,733 26,631 Gross unrealized losses— (51)(5,623)(5,674)Allowance for