Company: RWT-PA
Filing Date: 2025-08-08
Form Type: 10-Q
Source: 0000930236-25-000029
Chunk: 5

Company: REDWOOD TRUST INC
Filing Date: 2025-08-08
Form: 10-Q
Item: Part I, Item 2
Chunk 5
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 or fraud;

•inadvertent errors, system failures or cybersecurity incidents could disrupt our business;

•accounting rules related to certain of our transactions and asset valuations are highly complex and involve significant judgment and assumptions;

•the future realization of our deferred tax assets is uncertain, and the amount of valuation allowance we may apply against our deferred tax assets may change materially in future periods;

•the impact of changes to U.S. federal income tax laws on the U.S. housing market, mortgage finance markets, and our business;

•our failure to comply with applicable laws and regulation, including our ability to obtain or maintain governmental licenses;

•our ability to maintain our status as a REIT for tax purposes;

•limitations imposed on our business due to our REIT status and our status as exempt from registration under the Investment Company Act of 1940;

•our stock may experience price declines, volatility, and poor liquidity, and we may reduce our dividends;

•decisions about raising, managing, and distributing capital;

•dividend distributions and the timing and character of such dividends may change; 

•limited number of institutional shareholders own a significant percentage of our common stock; and

•other factors not yet identified, including broad market fluctuations.

This Quarterly Report on Form 10-Q may contain statistics and other data that in some cases have been obtained from or compiled from information made available by servicers and other third-party service providers.

61

OVERVIEW

Business Update

Our second quarter results reflect our decision to accelerate Redwood’s strategic transition toward a more scalable and simplified operating model. This decision comes as we see avenues for growth across our operating platforms that can be transformative —particularly amid evolving market dynamics in single-family housing finance, shifts in bank lending practices and potential outcomes related to changes in housing policy within the Federal government, including potential outcomes related to the future structure and role of Fannie Mae and Freddie Mac. In light of this, we took decisive steps to begin to meaningfully reduce exposure to portfolio holdings that now reside outside of our core operating footprint. These include our legacy unsecuritized bridge loans, third-party securities portfolio, and other non-core legacy assets, such as third-party originated HEI, the vast majority of which we have held for years. While these investments were initially aligned with our strategy and return thresholds, some are valued at a level that is attractive for sale to lock in gains, while others have underperformed as interest rates have risen and have become a significant drag on our forward earnings. In assessing the shifts now occurring in