Company: RWT-PA
Filing Date: 2025-11-07
Form Type: 10-Q
Source: 0000930236-25-000037
Chunk: 176

Company: REDWOOD TRUST INC
Filing Date: 2025-11-07
Form: 10-Q
Item: Part I, Item 1
Chunk 176
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S. Activity of this segment that is performed within our TRS is subject to federal and state income taxes. The benefit from income taxes was primarily due to GAAP losses generated by this segment’s operations at our TRS and our provision for income taxes at this segment is primarily driven by the amount of income earned from portfolio assets at our TRS. 

Three Months Ended September 30, 2025 Compared to Three Months Ended June 30, 2025 

Legacy Investments reported a $22 million segment loss during the three months ended September 30, 2025, driven by Net interest loss of $9 million from continued net interest margin pressure and Investment fair value losses, net of $7 million. During the third quarter of 2025, we transferred a portfolio of unsecuritized bridge loans and REO totaling $484 million in fair value to newly formed partnership structure (the “Legacy Trust”). In connection with this transfer, we recognized a negative $6 million investment fair value change, reflecting adjustments associated with completing the transaction.

 Capital allocated to Legacy Investments declined by $63 million or 12% at September 30, 2025 from June 30, 2025, largely due to dispositions and paydowns on our Legacy unsecuritized bridge and term loan portfolios and HEI portfolio. Through October 2025, we further reduced our capital allocated to our Legacy investments through the sale of our SLST re-performing loan securities. Looking ahead, we intend to continue reducing our capital allocation to Legacy Investments, targeting a decrease to approximately 20% by year-end 2025 from 28% at the end of the third quarter. While subject to market conditions and execution timing, we are targeting reducing the percentage of our capital allocated to Legacy Investments down to a range of 0% to 5%. As we execute on this reallocation strategy, we believe there is an opportunity for consolidated returns to improve.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

Legacy Investments reported a $128 million segment loss in the nine months ended September 30, 2025, driven by Investment fair value losses, net of $91 million. The second quarter of 2025 included significant fair value adjustments on Legacy unsecuritized bridge and term loans, reflecting both realized and anticipated resolutions as well as credit deterioration in certain vintages. In the third quarter of 2025, we recognized an additional negative $6