Redwood Trust Inc: Form 10-Q for the period ended Mar 31, 2026

INTRODUCTION

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in five main sections:

• Overview
• Results of Operations
• Consolidated Results of Operations
• Results of Operations by Segment
• Income Taxes
• Liquidity and Capital Resources
• Critical Accounting Estimates
• Market and Other Risks

Our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and in Part II, Item 8, Financial Statements and Supplementary Data in our most recent Annual Report on Form 10-K, as well as the sections entitled “Risk Factors” in Part I, Item 1A of our most recent Annual Report on Form 10-K and Part II, Item 1A of this Quarterly Report on Form 10-Q, as well as other cautionary statements and risks described elsewhere in this report and our most recent Annual Report on Form 10-K. The discussion in this MD&A contains forward-looking statements that involve substantial risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, such as those discussed in the Cautionary Statement below.

References herein to “Redwood,” the “company,” “we,” “us,” and “our” include Redwood Trust, Inc. and its consolidated subsidiaries, unless the context otherwise requires. Financial information concerning our business is set forth in this MD&A and our consolidated financial statements and notes thereto, which are included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Our website can be found at www.redwoodtrust.com (http://www.redwoodtrust.com). We make available, free of charge through the investor relations section of our website, access to our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934, as well as proxy statements, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission (“SEC”). We also make available, free of charge, access to our charters for our Audit Committee, Compensation Committee, and Governance and Nominating Committee, our Corporate Governance Standards, and our Code of Ethics governing our directors, officers, and employees. Within the time period required by the SEC and the New York Stock Exchange, we will post on our website any amendment to the Code of Ethics and any waiver applicable to any executive officer or director of Redwood. In addition, our website includes information concerning purchases and sales of our equity securities by our executive officers and directors, and may include disclosure relating to certain non-GAAP financial measures (as defined in the SEC’s Regulation G) that we may make public orally, telephonically, by webcast, by broadcast, or by similar means from time to time. The information on our website is not part of this Quarterly Report on Form 10-Q.

Our Investor Relations Department can be contacted at One Belvedere Place, Suite 300, Mill Valley, CA 94941, Attn: Investor Relations, telephone (866) 269-4976.

Our Business

Redwood Trust, Inc., together with its subsidiaries, is a specialty finance company focused on several distinct areas of housing credit where we provide liquidity to growing segments of the U.S. housing market not well served by government programs. We deliver customized housing credit investments to a diverse mix of investors, through our best-in-class securitization platforms, whole-loan distribution activities, joint ventures and our publicly traded shares. Our goal is to provide attractive returns to shareholders through a stable and growing stream of earnings and dividends, capital appreciation, and a commitment to technological innovation that facilitates risk-minded scale. We operate through three core residential housing-focused operating platforms — Sequoia, Aspire, and CoreVest — alongside our complementary Redwood Investments portfolio which is primarily composed of assets we source through these platforms. Redwood Investments also includes RWT Horizons®, our unified technology platform spanning internal AI innovation and strategic investments across the ecosystem, which supports our efforts to develop an AI-first operating model that enables compounding operational leverage and scalable growth. These platforms reflect how we manage and organize our business and may differ from the manner in which our reportable segments are presented for financial reporting purposes.

We report our results through the following reportable segments: Sequoia Mortgage Banking, Aspire Mortgage Banking, CoreVest Mortgage Banking, Redwood Investments and Legacy Investments. In the first quarter of 2026, we identified and began reporting a new reportable segment, Aspire Mortgage Banking, which was previously included within the Sequoia Mortgage Banking segment and consists of our expanded-credit residential mortgage conduit focused on acquiring and distributing residential consumer loans under expanded underwriting criteria, commonly referred to as “Expanded” or non-QM loans. These loan programs, primarily bank statement and DSCR loans, are designed for prime quality borrowers seeking alternative underwriting solutions, a segment that continues to grow within the U.S housing finance market. Since its launch in the first quarter of 2025, Aspire has scaled rapidly, including completing $914 million of loan sales to institutional buyers during 2025 and executing its first non-QM securitization in the first quarter of 2026. These activities supported improved capital turnover and reflect Aspire’s increasing contribution and distinct operating characteristics relative to our Sequoia Mortgage Banking segment. Aspire Mortgage Banking segment is expected to continue to grow over time as we expand our presence in this market.

For a full description of our segments, see Part 1, Item 1—Business in our Annual Report on Form 10-K for the year ended December 31, 2025. For further information on our reportable segments, see Note 4 in Part 1, Item 1 - Financial Statements and Results of Operations by Segment in Part 1, Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report on Form 10-Q.

Cautionary Statement

This Quarterly Report on Form 10-Q and the documents incorporated by reference herein contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve numerous risks and uncertainties. Our actual results may differ from our beliefs, expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Forward-looking statements are not historical in nature and can be identified by words such as “anticipate,” “estimate,” “will,” “should,” “expect,” “believe,” “intend,” “seek,” “plan” and similar expressions or their negative forms, or by references to strategy, plans, opportunities, or intentions. These forward-looking statements are subject to risks and uncertainties, including, among other things, those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, under the caption “Risk Factors.” Other risks, uncertainties, and factors that could cause actual results to differ materially from those projected may be described from time to time in reports we file with the SEC, including reports on Forms 10-Q and 8-K. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Statements regarding the following subjects, among others, are forward-looking by their nature: (i) statements we make regarding Redwood's business strategy and strategic focus, including statements relating to our overall market position, strategy and long-term prospects (including trends driving the flow of capital in the housing finance market, our strategic initiatives designed to capitalize on those trends, our ability to attract capital to finance those initiatives, our approach to raising capital, and our ability to pay dividends in the future); (ii) statements related to our financial outlook and expectations for 2026 and future years, including our expectation to establish an additional joint venture in the second quarter of 2026 to support further growth at Aspire; (iii) statements related to opportunities we see for our residential consumer and residential investor platforms, and our positioning to capture market share; (iv) statements related to our investment portfolio including our intention to continue reducing our capital allocation to Legacy Investments, targeting reducing the capital allocated to the Legacy Investments segment down to $100 million by the end of 2026; (v) statements relating to acquiring residential mortgage loans in the future that we have identified for purchase or plan to purchase, including the amount of such loans that we locked in anticipation of purchase during the first quarter of 2026 and at March 31, 2026, expected fallout and the corresponding volume of residential mortgage loans expected to be available for purchase, total net jumbo loan exposure, and residential mortgage loans subject to forward sale commitments; (vi) statements we make regarding future dividends, including with respect to our regular quarterly dividends in 2026; and (vii) statements regarding our expectations and estimates relating to the characterization for income tax purposes of our dividend distributions, our expectations and estimates relating to tax accounting, tax liabilities and tax savings, and GAAP tax provisions, and our estimates of REIT taxable income and TRS taxable income.

Important factors, among others, that may affect our actual results include:

• adverse economic and market conditions—including in housing, real estate, mortgage finance, and broader financial markets;
• changing benchmark interest rates—and the Federal Reserve’s actions and statements;
• federal, state, and local legislative and regulatory developments, and actions by governmental authorities and entities;
• our ability to compete successfully;
• our ability to adapt our business model and strategies;
• strategic business and capital deployment decisions we make;
• our use of financial leverage;
• our exposure to a breach of our cybersecurity or data security;
• the impact of public health events such as pandemics;
• our exposure to credit risk and the timing of credit losses within our portfolio;
• the concentration of the credit risks we are exposed to, including due to the structure of assets we hold and the geographical concentration of real estate underlying assets we own, and our exposure to environmental and climate-related risks;
• the efficacy and expense of our efforts to manage or hedge credit risk, interest rate risk, and other financial and operational risks;
• changes in credit ratings on assets we own and changes in the rating agencies’ credit rating methodologies;
• changes in interest rates or mortgage prepayment rates;
• investment and reinvestment risk;
• asset performance, interest rate volatility, changes in credit spreads, and changes in liquidity in the market for real estate securities and loans;
• our ability to finance the acquisition of real estate-related assets with short-term debt;
• the ability of counterparties to satisfy their obligations to us;
• we may enter into new lines of business, acquire other companies, or engage in other new strategic initiatives;
• changes in the demand from investors for residential consumer and residential investor mortgages and investments, and our ability to distribute residential consumer and residential investor loans through our whole-loan distribution channels;
• our involvement in loan and HEI origination and securitization transactions, the profitability of those transactions, and the risks we are exposed to in engaging in loan origination or securitization transactions;
• foreclosure activity may expose us to risks associated with real estate ownership and operation;
• exposure to claims and litigation, including litigation arising from loan or HEI origination and securitization transactions;
• acquisitions or new business initiatives may fail to improve our business and could expose us to new or increased risks;
• whether we have sufficient liquid assets to meet short-term needs;
• changes in our investment, financing, and hedging strategies and new risks we may be exposed to if we expand or reorganize;
• our ability to successfully retain or attract key personnel;
• we are dependent on third-party information systems and third-party service providers;
• our exposure to a disruption of our or a third party’s technology infrastructure and systems;
• our failure to maintain appropriate internal controls over financial reporting and disclosure controls and procedures;
• our risk management efforts may not be effective;
• we could be harmed by misconduct or fraud;
• inadvertent errors, system failures or cybersecurity incidents could disrupt our business;
• the impact on our reputation that could result from our actions or omissions or from those of others;
• 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;
• regulatory risk related to HEI, including recharacterization or regulation as mortgage loans;
• our failure to comply with applicable laws and regulation, including our ability to obtain or maintain required governmental licenses;
• our ability to maintain our status as a REIT for tax purposes;
• our ability to raise, manage, and deploy capital;
• limitations imposed on our business due to our REIT status and our status as exempt from registration under the Investment Company Act of 1940;
• provisions in our charter and bylaws and provisions of Maryland law may limit a change in control or deter a takeover;
• the ability to take action against our directors and officers is limited by our charter and bylaws and provisions of Maryland law and we may indemnify them against certain losses;
• our stock may experience losses, volatility, and poor liquidity, and we may reduce our dividends;
• a limited number of institutional shareholders own a significant percentage of our common stock;
• future sales of our stock or other securities by us or our officers and directors may have adverse consequences for investors;
• the change-in-control-related conversion rights of our preferred stock may be detrimental to holders of our common stock;
• dividend distributions and the timing and character of such dividends may change;
• payment of dividends in common stock could place downward pressure on market price; 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.

OVERVIEW

Business Update

Our first quarter 2026 results reflect continued execution against Redwood’s strategy to scale a capital-efficient mortgage banking platform supported by diversified distribution channels and institutional capital partnerships. During the quarter, we generated our third consecutive record level of mortgage banking production, with combined Sequoia, Aspire, and CoreVest volumes reaching approximately $8.5 billion, an increase from $7.3 billion in the fourth quarter of 2025.

The operating environment remained characterized by subdued housing activity and affordability challenges, with mortgage applications continuing to track below pre-pandemic levels. Despite this backdrop, Redwood continued to gain market share across its platforms, supported by its established origination network and ability to provide liquidity and execution solutions to both bank and non-bank counterparties.

Our financial results reflected continued strength in operating performance despite increased market volatility late in the quarter. On a consolidated basis, Redwood reported a GAAP net loss of $(0.07) per share, primarily driven by market-driven valuation changes and restructuring expenses, while our mortgage banking platforms continued to generate strong operating income. GAAP book value per share declined modestly to $7.12 at March 31, 2026, compared to $7.36 at December 31, 2025.

Our Sequoia platform delivered record quarterly lock volume of $6.5 billion, compared to $5.3 billion in the fourth quarter of 2025 and continued market share gains across both bank and independent mortgage bank counterparties. Distribution activity remained strong, with $5.5 billion of loans sold or securitized compared to $4.1 billion in the prior quarter, including a record level of securitization issuance. With respect to the types of loan products that our Sequoia platform acquires, in the first quarter of 2026 we added a program to acquire mortgage loans tailored to medical professionals and we expect to begin acquiring HELOCs in the second quarter of 2026, complementing our acquisitions of closed-end second lien mortgage loans. Operating efficiency continued to improve, with cost per loan (calculated as operating expenses divided by loan purchase commitments for the Sequoia platform) declining to 18 basis points from 26 basis points, reflecting the benefits of scale and operating leverage.

Aspire continued to scale as a standalone platform in 2026, generating $1.6 billion of lock volume and completing its inaugural securitization transaction during the quarter. Distribution remained diversified, with approximately $1.0 billion of loans sold through a combination of this inaugural securitization and whole loan sales, supported by strong demand from institutional investors. The platform’s expanding seller network and product breadth continue to support growth opportunities across the non-QM market.

CoreVest funded $432 million of loans during the quarter, reflecting a modest decline from the prior quarter as the platform took a more measured approach to originations late in the first quarter in response to increased market volatility. Despite lower overall volume, CoreVest continued to make progress in its strategic focus on smaller-balance products, including RTL and DSCR loans, while maintaining strong distribution activity of approximately $694 million across securitizations, whole loan sales, and joint venture transfers.

Across our platforms, distribution remained a key driver of capital efficiency and liquidity. Total mortgage banking distributions increased to approximately $7.2 billion during the quarter, supported by continued momentum in securitization issuance, whole loan sales, and joint venture activity. These distribution channels enabled efficient risk transfer and supported continued improvements in capital velocity and operating efficiency.

We continued to advance our capital-light strategy through the expansion of institutional partnerships. During the quarter, cumulative loan transfers to our joint venture with CPP Investments reached approximately $2 billion since inception. Subsequent to quarter-end, we announced an additional strategic joint venture designed to support continued growth across our Sequoia platform, providing dedicated capital and enhancing our ability to efficiently distribute loan production across varying market conditions. In addition, we expect to establish an additional joint venture in the second quarter of 2026 to support further growth within Aspire.

Our Legacy Investments portfolio continued to decline as a percentage of total capital, decreasing to approximately 15% at March 31, 2026, compared to 19% at year-end 2025, reflecting ongoing asset resolution activity and capital redeployment into higher-return operating platforms.

In addition, we continued to invest in technology and operational infrastructure to support scalable growth across our platforms. Through our RWT Horizons initiatives, we advanced the use of automation and data-driven processes across mortgage banking functions, contributing to improved execution speed and operational efficiency. These efforts are designed to enhance our ability to scale production while maintaining disciplined cost management.

Looking ahead, the broader housing finance market continues to be influenced by interest rate volatility, evolving monetary policy, and geopolitical uncertainty. While these factors may contribute to near-term variability in market activity, they also reinforce the importance of capital-efficient platforms capable of adapting to changing conditions.

RESULTS OF OPERATIONS

Within this Results of Operations section, in accordance with Item 303(c)(2)(ii) of Regulation S-K, we have elected to discuss any material changes in our results of operations by comparing our quarter ended March 31, 2026 to the immediate preceding quarter ended December 31, 2025. We believe that providing a sequential discussion of our results of operations offers highly relevant information for investors and stakeholders to understand and analyze our business activities. Additionally, we generally continue to address material changes in our results of operations for the most recent fiscal year-to-date period, compared to the corresponding year-to-date period of the preceding fiscal year, pursuant to Item 303(c)(2)(i) of Regulation S-K. Unless otherwise specified, references in this section to increases or decreases during the "three month periods" refer to the change in results for the first quarter of 2026, compared to the first or fourth quarter of 2025.

Consolidated Results of Operations

The following table presents the components of our net (loss) income for the three months ended March 31, 2026, the immediate preceding quarter ended December 31, 2025, and year-to-date period ended March 31, 2025.

Table 1 – Net (Loss) Income

(In Thousands, except per Share Data)

54

Net loss for the three months ended March 31, 2026 totaled $7 million, compared with net income of $18 million for the three months ended December 31, 2025. The decline was primarily driven by lower mortgage banking activities reflecting reduced gain on sale margins across the Sequoia and Aspire mortgage banking platforms, as the fourth quarter of 2025 benefited from more favorable market conditions, including tighter mortgage spreads and stronger execution on loan sales, that did not recur in the first quarter of 2026. Results were further impacted by market-driven negative fair value changes on our investment portfolio during a period of increased interest rate and spread volatility late in the first quarter of 2026. These impacts were partially offset by higher net interest income from our Mortgage Banking platforms, improved servicing income, and lower losses within our Legacy Investments segment.

Net interest income increased by $9 million during the quarter, driven by growth and capital deployment across our Mortgage Banking platforms. Sequoia contributed the majority of the increase, with net interest income increasing by approximately $7 million, primarily reflecting higher income earned on loans held-for-sale, increased average inventory balances, and modest benefits from lower benchmark rates. Aspire also contributed incremental growth, with net interest income increasing by approximately $1 million as the platform continued to scale, while CoreVest remained relatively consistent quarter over quarter. These increases were partially offset by a $2 million decline in net interest income from Redwood Investments due to portfolio repositioning and paydowns, partially offset by income generated from retained operating investments sourced through our mortgage banking platforms. Legacy Investments net interest loss improved by approximately $4 million, driven by continued portfolio runoff and lower secured financing costs on our legacy bridge loans which were optimized into an accretive secured financing structure during the quarter.

Mortgage banking activities remained strong, with total production increasing to $8.5 billion from $7.3 billion in the prior quarter, reflecting continued scale across Sequoia and Aspire and strong demand across securitizations, whole loan sales, and joint ventures. Despite this growth, mortgage banking activities, net declined to $32 million from $53 million in the prior quarter. The decrease was primarily due to lower gain-on-sale margins across platforms, reflecting less favorable market conditions and increased interest rate and spread volatility, particularly late in the first quarter. At Sequoia, margins declined to 96 basis points from 136 basis points in the prior quarter, while Aspire margins declined to 73 basis points from 92 basis points. These declines were partially offset by higher volumes, including a 22% increase in Sequoia lock volumes to $6.5 billion and continued growth in Aspire production, as well as strong distribution activity, including the platform's inaugural securitization. CoreVest mortgage banking activities, net also declined as lower margins and modestly lower funding volumes more than offset continued distribution activity, reflecting a more cautious origination approach late in the quarter in response to market volatility and evolving borrower demand.

Investment fair value changes were a significant driver of the quarter-over-quarter decline, reflecting a $23 million negative fair value changes in the first quarter of 2026. These changes were primarily driven by market-driven valuation changes and portfolio seasoning within Redwood Investments, while underlying asset performance remained generally stable across most of the portfolio. Valuation impacts within Legacy Investments were largely consistent with the prior quarter.

Operating expenses increased to $49 million for the first quarter of 2026, compared to $41 million for the fourth quarter of 2025. The increase was primarily driven by higher general and administrative expenses, including approximately $7 million of severance and organizational restructuring costs, as well as higher portfolio management costs associated with managing and resolving assets within Redwood Investments and Legacy Investments, including REO-related costs and other asset-level expenses tied to ongoing resolution activity.

Overall, first quarter results reflect continued strength in our core Mortgage Banking platforms, including record production volumes, improving operating efficiency, and strong capital velocity, offset by normalization of gain-on-sale margins and market-driven valuation changes. Results also reflect continued execution on our strategic repositioning, including scaling capital-light operating platforms such as Sequoia and Aspire, alongside ongoing reduction in exposure to non-core Legacy Investments.

See further discussion of these results in the Segment Results section in Part I, Item 2 of this Quarterly Report on Form 10-Q

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Net loss for the three months ended March 31, 2026 totaled $7 million, compared with net income of $14 million for the three months ended March 31, 2025. The decline was primarily driven by negative investment fair value changes reflecting market-driven valuation declines across our investment portfolio. During the first quarter of 2026, interest rates across the U.S. Treasury yield curve increased by approximately 15 to 35 basis points, which adversely impacted the more interest rate‑sensitive portions of the portfolio.

The decline in net income over the three month periods was also attributable to higher operating expenses, including approximately $7 million of severance and organizational restructuring costs, as well as higher portfolio management and loan acquisition expenses. These impacts were partially offset by higher net interest income from our Mortgage Banking platforms, reflecting growth and continued capital deployment across Sequoia and Aspire mortgage banking. The underlying factors driving these variances are consistent with those discussed above in the comparison of the first quarter of 2026 to the fourth quarter of 2025.

See further discussion of these results in the Segment Results section in Part I, Item 2 of this Quarterly Report on Form 10-Q

Consolidated Net Interest Income

The following tables present the components of net interest income recorded in each line item of our consolidated statements of income for the three months ended March 31, 2026, the immediate preceding quarter ended December 31, 2025 and year-to-date period ended March 31, 2025.

Table 2 – Consolidated Net Interest Income

(Dollars in Thousands)

56

(Dollars in Thousands)

(1) Average balances for residential consumer loans, residential investor loans, and trading securities are calculated based upon carrying values, which represent fair values. Average balances for AFS securities, debt facilities, corporate debt and certain ABS issued are calculated based upon amortized historical cost. Average balances for ABS carried at fair value are calculated based upon fair value.

(2) Yield is calculated as interest income/expense divided by average balance. Interest income on loans is based on stated loan coupons, net of interest write offs on non-performing loans.

(3) Interest income and interest expense securitized loans reflect activity from consolidated VIEs. While we consolidate these entities for GAAP reporting purposes, economically, we earn interest income from the securities we own in these entities, which is represented by the net interest income (interest income less interest expense) from these consolidated entities presented in the table above.

(4) Real estate securities include trading securities consisting primarily of interest-only securities, which generate a higher cash interest yield. This interest income may be offset by a decline in fair value (recognized through investment fair value changes, net on our consolidated statements of (loss) income) related to the receipt of cash flows each period, resulting in a lower overall economic yield for these investments.

Consolidated Market Valuation Gains and Losses, Net

The following table presents the net market valuation gains and losses recorded in each line item of our consolidated statements of income for the three months ended March 31, 2026, the immediate preceding quarter ended December 31, 2025 and year-to-date period ended March 31, 2025.

Table 3 – Consolidated Market Valuation Gains and Losses, Net

(In Thousands)

(1) Represents fair value changes on trading securities that are being used along with risk management derivatives to manage the market risks associated with our Sequoia Mortgage Banking platform.

(2) Mortgage banking activities, net presented above does not include fee income from loan originations or acquisitions, provisions for repurchases, or other expenses that are components of Mortgage banking activities, net presented on our consolidated statements of (loss) income, as these amounts do not represent market valuation changes.

(3) Includes changes in fair value of the securitized loans held-for-investment, securitized HEI, REO and the ABS issued at the entities, which, netted together, represent the change in value of our investments at the consolidated VIEs accounted for under the CFE election.

(4) Other investments includes changes in fair value of REO assets.

(5) Servicing income, net excludes net MSR fee income or provision for repurchases, as these amounts do not represent market valuation adjustments.

Results of Operations by Segment

We operate our business across five reportable segments: Sequoia Mortgage Banking, Aspire Mortgage Banking, CoreVest Mortgage Banking, Redwood Investments and Legacy Investments. For additional information on our segments, refer to Note 4 of our Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

During the three months ended March 31, 2026, we began discussing our Mortgage Banking platforms ("Mortgage Banking") on a combined basis to reflect the manner in which management evaluates the performance of its mortgage origination and distribution activities. Our Mortgage Banking platforms consist of Sequoia Mortgage Banking, Aspire Mortgage Banking and CoreVest Mortgage Banking segments. These platforms are primarily driven by loan production volumes, gain-on-sale margins, and execution across distribution channels. While each segment is reported separately, a combined discussion provides useful context for understanding the key drivers of changes in results of operations, with additional segment-level detail provided below.

During the three months ended March 31, 2026, we also began allocating corporate financing costs, comprised of interest expense on our promissory notes, trust preferred securities, convertible debt, and senior notes, as well as our preferred stock dividend expense and corporate capital to our operating or reportable segments for informational purposes. Corporate and other activities that are not directly allocated to the Company’s operating segments are included in Corporate/Other. For comparability purposes, prior period segment information has been adjusted to reflect this allocation.

The following table presents the segment contribution from our operations, reconciled to our consolidated net income for the three months ended March 31, 2026, the immediate preceding quarter December 31, 2025, and year-to-date period March 31, 2025. For comparability purposes, prior period segment information has been adjusted to reflect the changes discussed above.

Table 4 – Segment Results Summary

(In Thousands)

The sections that follow provide further detail on our business segments and their results of operations for the three months ended March 31, 2026, the immediate preceding quarter ended December 31, 2025, and year-to-date period ended March 31, 2025.

Corporate/Other

Net expenses from Corporate/Other increased by $5 million to $23 million for the three months ended March 31, 2026 compared to the three months ended December 31, 2025 and March 31, 2025. The increase primarily reflects higher compensation and related costs associated with increased headcount supporting growth of the Mortgage Banking platforms and higher portfolio management expenses related to legacy loan resolutions incurred during the first quarter of 2026. The quarter also included certain restructuring

expenses, including performance-based compensation costs and restructuring-related severance and organizational realignment costs.

Mortgage Banking Platforms

Our Mortgage Banking platforms, consisting of the Sequoia Mortgage Banking, Aspire Mortgage Banking and CoreVest Mortgage Banking segments, generate income from the origination or acquisition of loans and the subsequent sale or securitization of those loans.

Sequoia Mortgage Banking consists of a mortgage loan conduit that acquires residential consumer loans from third-party originators for subsequent sale to whole loan buyers, securitization through our SEMT® (Sequoia) private-label securitization program, or transfer into our Redwood Investments portfolio. Subordinate securities that we retain from our Sequoia securitizations (many of which we consolidate for GAAP purposes) are transferred to and held in our Redwood Investments segment. We typically acquire residential consumer mortgages and the related mortgage servicing rights on a flow or bulk basis from our extensive network of loan sellers. Refer to the Sequoia Mortgage Banking Segment below for further discussion and additional details.

In the first quarter of 2025, we launched an additional mortgage loan conduit under our Aspire brand that acquires mortgage loans under expanded underwriting criteria, which we also refer to as “non-QM.” These loan programs, primarily bank statement and DSCR loans, are designed for prime-quality borrowers seeking alternative underwriting solutions, a segment that continues to grow within the U.S. housing market. In the first quarter of 2026, due to the continued scaling and distinct operating characteristics of this platform, we began reporting Aspire as a separate reportable segment, Aspire Mortgage Banking. Aspire offers a differentiated product set relative to our Sequoia prime jumbo platform and has meaningfully scaled operations since its launch. As a result, Aspire activity is no longer included within our Sequoia Mortgage Banking segment. This change had no impact on the consolidated financial statements and all prior period amounts were conformed to the current presentation. Refer to the Aspire Mortgage Banking Segment below for further discussion and additional details.

CoreVest Mortgage Banking consists of a platform that originates residential investor loans for subsequent securitization, sale, or transfer into our Redwood Investments portfolio or into joint ventures. Residential investor loans are loans to investors in single-family rental and multifamily properties, which we classify as either "term" loans (which include loans with maturities that generally range from 3 to 30 years) or "bridge" loans (fixed and floating-rate loans with maturities that generally range between 12 and 36 months, typically used to finance transitional properties or value-add strategies). Residential investor term loans include both larger balance and smaller balance mortgage loans secured by stabilized residential real estate (primarily 1-4 units detached or multifamily) that the borrower owns as an investment property and rents to residential tenants. Our smaller balance term loans are referred to as DSCR loans, which are fixed or floating-rate loans underwritten primarily on the basis of the property's debt service coverage ratio, rather than the borrower's personal income, and designed for stabilized rental properties.

CoreVest loans are typically distributed through our CAFL® private-label securitization program, through whole loan sales, transfers into our Redwood Investments portfolio or into sales into one of our joint ventures. We have established joint ventures with two separate institutional investment managers, one to invest in residential investor bridge loans originated by CoreVest and another to invest in residential investor bridge and term loans originated by CoreVest. We administer the joint ventures for ongoing fees and are entitled to earn additional performance fees upon realization of specified return hurdles.

Our inventory of loans originated by CoreVest is managed with a combination of our capital and loan warehouse facilities. All of these facilities are non-marginable (i.e., not subject to margin calls based solely on the lender's determination, in its discretion, of the market value of the underlying collateral that is non-delinquent).

The main sources of mortgage banking income across our segments are net interest income from our inventory of loans held-for-sale (including interest expense on secured financings and allocated corporate financing costs), securities utilized for interest rate hedging purposes, as well as mortgage banking activities, net which includes origination and other fees on loans, mark-to-market adjustments on loans from the time loans are originated or purchased to when they are sold, securitized or transferred into our Redwood Investments portfolio, as well as loan purchase commitments, interest rate lock commitments and the hedges used to manage risks associated with these activities. See Note 5 of our Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further detail on the composition of mortgage banking activities. Fee income associated with our administration of joint ventures and other loan-related administrative functions is also included in this segment. Direct operating expenses and tax expenses associated with these activities are also included in each mortgage banking segment.

The following table presents key earnings for our Mortgage Banking platforms during the three months ended March 31, 2026, the immediate preceding quarter December 31, 2025, and year-to-date period through March 31, 2025.

Table 5 – Mortgage Banking Platforms Earnings Summary

(In Thousands)

Three Months Ended March 31, 2026 Compared to Three Months Ended December 31, 2025

The $7 million decrease in Mortgage Banking contribution during the three months ended March 31, 2026, as compared to the three months ended December 31, 2025, is primarily driven by a $14 million decline in mortgage banking income resulting from normalization of gain-on-sale margins driven in part by market volatility later in the first quarter, and changes in execution mix, partially offset by continued growth in production volumes and distribution activity.

Mortgage Banking production volumes increased to approximately $8.5 billion during the first quarter of 2026, compared to approximately $7.3 billion in the fourth quarter of 2025, reflecting substantial growth across all three platforms and marking a record level of quarterly production. Production volumes also increased 17% compared to the fourth quarter of 2025, representing the third consecutive quarter of record production. The increase in production volumes was driven by expansion of the Company’s loan seller network, increased activity from both bank and independent mortgage bank counterparties, and the continued scaling of newer platforms, including Aspire, which was launched in January 2025, and CoreVest’s small-balance, including DSCR and RTL products.

This growth was achieved despite a more volatile and uncertain macroeconomic backdrop and a decline in overall industry origination volumes versus the fourth quarter of 2025, reflecting continued market share gains across the Company’s Mortgage Banking platforms. Distribution activity also increased meaningfully, supported by continued execution across securitization and whole loan sale channels, including record securitization activity during the quarter, which facilitated efficient risk transfer and consistent access to capital markets.

Despite the increase in production volumes, mortgage banking income was partially impacted by lower gain-on-sale margins compared to elevated levels in the prior quarter, which benefited from favorable market conditions, including interest rate volatility, hedge outperformance, and spread tightening. Margins in the current period reflect a more normalized market environment as well as less favorable capital markets conditions, including changes in interest rates and mortgage spreads. Notwithstanding these dynamics, gross margins remained at the higher end of the Company’s targeted ranges during the quarter, despite increased market volatility late in the quarter driven by changes in interest rates and mortgage spreads.

Operating expenses increased compared to the prior quarter, primarily reflecting higher production-related compensation, increased loan acquisition costs, and continued investment in platform capabilities, including personnel, infrastructure, and capital markets execution across all three platforms. However, expense growth remained more moderate relative to the increase in production volumes, resulting in improved operating leverage. In particular, production growth outpaced expense growth during the quarter, and total operating expenses as a percentage of volume declined by 7% compared to the prior quarter, reflecting continued efficiency gains as scale increased.

Overall, Mortgage Banking results for the current quarter reflect strong growth in production and distribution activity across all platforms, supported by continued market share gains, platform expansion, and capital markets execution, partially offset by normalization in margins relative to elevated prior-year levels. The Mortgage Banking platforms continue to benefit from an originate-to-distribute model, which supports capital efficiency through securitizations, whole loan sales, and joint venture activity, and enables production to scale while maintaining disciplined capital deployment.

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

The $14 million increase in Mortgage Banking contribution during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, is primarily driven by higher mortgage banking income attributable to increased production volumes and strong distribution activity in the first quarter of 2026.

Sequoia Mortgage Banking Segment

The following table presents key earnings and operating metrics for our Sequoia Mortgage Banking segment during the three months ended March 31, 2026, the immediate preceding quarter ended December 31, 2025, and year-to-date period through March 31, 2025.

Table 6 – Sequoia Mortgage Banking Earnings Summary

(In Thousands)

Operating expenses presented in the table above include general and administrative expenses and loan acquisition costs for this segment.

Activity at this segment performed within our taxable REIT subsidiary is subject to federal and state income taxes. The provision for income taxes or income tax benefit for the periods presented above reflects GAAP income or loss from these operations at our TRS during the respective periods.

The following table summarizes certain operating metrics related to our portfolio of loans included in the Sequoia Mortgage Banking segment during the three months ended March 31, 2026, the immediate preceding quarter ended December 31, 2025, and year-to-date period through March 31, 2025.

Table 7 – Sequoia Mortgage Banking Operating Metrics

(In Thousands)

(1) Number of loans presented in units

(2) Cost per loan for the Sequoia Mortgage Banking segment is calculated as operating expenses of this segment divided by loan purchase commitments of this segment

(3) Gain on Sale margins reflect net revenue divided by loan purchase commitments

Sequoia Mortgage Banking segment results remained stable compared to the prior quarter, with segment contribution of $38 million in the current quarter compared to $33 million in the prior quarter.

Production volumes increased during the quarter, with loan lock volume of $6.5 billion, up from $5.3 billion in the fourth quarter of 2025. These increases were driven by increased activity across both bank and non-bank sellers and continued expansion in sourcing channels and product offerings, including ARM, closed-end second lien (“CES”), and other specialized loan programs.

Higher production volumes were partially offset by lower gain-on-sale margins, which declined to 96 basis points from elevated levels in the prior quarter, reflecting changes in execution mix and market conditions. Margins remained within the Company’s historical target range of 75 to 100 basis points. Operating efficiency improved, with cost per loan declining to 18 basis points compared to 26 basis points in the prior quarter, primarily driven by lower operating expenses, including a decrease in variable compensation of approximately $4 million.

Distribution activity remained robust, with $5.5 billion of loans sold during the quarter, including $4.6 billion through securitizations and $915 million through whole loan sales. Sequoia also completed a record level of securitization activity during the quarter, including its inaugural securitization backed by medical professional loans, reflecting elevated capital markets activity and continued product innovation.

The change from a tax provision in the fourth quarter of 2025 to a tax benefit in the first quarter of 2026 was primarily the result of GAAP income earned at our TRS in the fourth quarter of 2025, compared to a GAAP loss at our TRS in the first quarter of 2026.

Capital allocated to this segment was $500 million at March 31, 2026, compared to $450 million at December 31, 2025, reflecting higher working capital requirements associated with increased loan inventory and securitization activity. The Sequoia platform remains focused on capital-efficient growth through active loan sales and securitizations, supporting our ability to turn capital over quickly. Loan inventory is financed through a combination of corporate capital and consumer loan warehouse facilities.

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Sequoia segment contribution increased by $15 million to $38 million during the three months ended March 31, 2026, compared to $22 million in the same period of 2025. The increase was driven by higher mortgage banking income resulting from increased loan lock and purchase volumes, strong distribution activity, and improved capital markets execution, partially offset by normalization in gain-on-sale margins. The change from a tax provision in the first quarter of 2025 to a tax benefit in the first quarter of 2026 for this segment was primarily the result of GAAP income earned at our TRS in the first quarter of 2025, compared to a GAAP loss at our TRS in the first quarter of 2026.

Total loan locks increased 67% year over year to $6.5 billion, reflecting broad-based growth across both flow and bulk channels, supported by deeper engagement with bank sellers and increased activity from independent mortgage banks. Loan acquisition volumes increased to $5.7 billion from $2.4 billion in the prior-year period, reflecting higher lock volumes and improved pull-through. Distribution activity remained robust, with approximately $5.5 billion of loans sold and securitized during the quarter, compared to approximately $2.0 billion in the prior-year period, including $4.6 billion of securitizations and $915 million of whole loan sales. Gain-on-sale margins were 96 basis points, within the Company’s long-term target range of 75 to 100 basis points, compared to elevated levels in the prior-year period driven by favorable market conditions.

Aspire Mortgage Banking Segment

The following table presents key earnings for our Aspire Mortgage Banking segment during the three months ended March 31, 2026, the immediate preceding quarter ended December 31, 2025, and year-to-date period through March 31, 2025.

Table 8 – Aspire Mortgage Banking Earnings Summary

(In Thousands)

Operating expenses presented in the table above include general and administrative expenses and loan acquisition costs for this segment.

Activity at this segment performed within our taxable REIT subsidiary is subject to federal and state income taxes. The provision for income taxes for the periods presented above resulted from GAAP income from these operations at our TRS during that period.

The following table summarizes certain operating metrics related to our portfolio of loans included in the Aspire Mortgage Banking segment during the three months ended March 31, 2026, the immediate preceding quarter ended December 31, 2025, and year-to-date period through March 31, 2025.

Table 9 – Aspire Mortgage Banking Operating Metrics

(In Thousands)

(1) Number of loans presented in units

(2) Cost per loan for the Aspire Mortgage Banking segment is calculated as operating expenses of this segment divided by loan purchase commitments of this segment

(3) Gain on Sale margins reflect net revenue divided by loan purchase commitments

Aspire Mortgage Banking is presented as a separate reportable segment beginning in the first quarter of 2026, reflecting the continued growth and distinct operating characteristics of our expanded-credit residential platform. This change had no impact on the consolidated financial statements and all prior period amounts were conformed to the current presentation.

During the three months ended March 31, 2026, Aspire generated segment contribution of $2 million and continued to scale its origination platform, with lock volume of $1.6 billion. Growth was supported by increasing demand for non-QM loan products and expansion of the platform’s loan seller network, which included approximately 140 active sellers. Existing sellers accounted for approximately 70% of production during the period, reflecting a strong base of counterparties, including those actively selling loans to our Sequoia platform.

Mortgage banking income was impacted by lower gain-on-sale margins, which declined to 73 basis points from 92 basis points in the prior quarter, reflecting changes in execution mix and market conditions partially driven by volatility at the end of the first quarter. Operating expenses increased modestly during the period, reflecting continued investment in the platform’s growth. Despite this increase, operating efficiency improved, with cost per loan declining compared to the prior quarter as a result of higher production volumes and operating leverage.

Distribution activity increased during the quarter, with $1.0 billion of loans sold through a combination of securitizations and whole loan sales, representing a 44% increase compared to the prior quarter. Aspire completed its inaugural $391 million non-QM securitization during the quarter, representing an important milestone in establishing its capital markets execution and funding diversification capabilities. The transaction was supported by strong investor demand and included a co-sponsorship structure through which we syndicated the risk retention and subordinate securities issued out of the transaction.

Results for the quarter reflect continued growth in production volumes and platform scale, partially offset by normalization in margins and ongoing investment in personnel, infrastructure, and distribution capabilities.

Capital allocated to this segment was $200 million at March 31, 2026, consistent with December 31, 2025. The Aspire platform remains focused on scaling its origination capabilities while maintaining a disciplined approach to capital deployment and expenses. Loan inventory is financed through consumer loan warehouse facilities and corporate capital.

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Aspire was launched in January 2025, and as a result, activity during the three months ended March 31, 2025 reflects an initial ramp-up period, including limited production, early onboarding of loan sellers, and is not directly comparable to the current quarter. During the three months ended March 31, 2026 Aspire locked $1.6 billion of loans compared to $111 million in the prior-year period. The increase in volume in the three month periods primarily reflect the continued scaling of the platform, driven by expansion of its loan seller network and increasing investor demand for non-QM products.

CoreVest Mortgage Banking Segment

The following table presents an earnings summary for our CoreVest Mortgage Banking segment for the three months ended March 31, 2026, the immediate preceding quarter December 31, 2025, and year-to-date period March 31, 2025.

Table 10 – CoreVest Mortgage Banking Earnings Summary

(In Thousands)

Operating expenses presented in the table above include general and administrative expenses, loan acquisition costs and other expenses (including amortization of purchase intangibles) for this segment.

Activity at this segment 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 in those periods presented above.

The following table summarizes certain operating metrics related to our portfolio of loans included in the CoreVest Mortgage Banking segment during the three months ended March 31, 2026, to the immediate preceding quarter December 31, 2025, and year-to-date period through March 31, 2025.

Table 11 – CoreVest Mortgage Banking Operating Metrics

(In Thousands)

(1) Net Cost to Originate is calculated as operating expenses, adjusted for organizational restructuring charges associated with employee severance and related transition expenses, less origination fees and other fees attributable to this segment, divided by this segment’s funding volume.

CoreVest Mortgage Banking segment contribution decreased by $10 million during the three months ended March 31, 2026 compared to the three months ended December 31, 2025, with segment loss of $3 million in the current quarter compared with segment net income of $7 million in the prior quarter. The decrease in segment contribution was primarily attributable to lower gain-on-sale margins, reduced funding volumes and approximately $5 million of severance and organizational restructuring costs.

CoreVest funded $432 million of loans during the first quarter of 2026, compared to $460 million in the fourth quarter of 2025. The decline in funding volume reflects a more cautious approach to loan origination late in the quarter in response to market volatility and evolving demand from real estate investors. Funding activity remained diversified, composed of approximately 61% bridge loans and 39% term loans, and continued contribution from small-balance lending products, including RTL loans and DSCR loans.

Mortgage banking income was impacted by lower gain-on-sale margins compared to the prior quarter, reflecting normalization in market conditions and changes in execution mix. Operating efficiency improved during the quarter, with net cost to originate improving to 0.79% in the first quarter compared to 0.95% in the prior quarter. This improvement reflects continued operating leverage and expense discipline.

Distribution activity increased during the first quarter of 2026, with $694 million of loans distributed through a combination of whole loan sales, securitizations and sales to joint ventures, compared to $582 million in the fourth quarter of 2025, representing a 19% increase. CoreVest also completed a CAFL securitization during the quarter backed by a mix of seasoned performing and non-performing loans and real estate owned, supporting continued capital recycling and distribution execution.

Capital allocated to this segment was $142 million at March 31, 2026, compared to $145 million at December 31, 2025. The platform continues to utilize joint venture structures and non-recourse financing arrangements to support loan inventory and facilitate capital-efficient growth.

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

CoreVest Mortgage Banking segment contribution decreased by $5 million during the three months ended March 31, 2026 compared to the three months ended March 31, 2025, with a segment loss of $3 million in the current quarter compared to segment net income of $1 million in the prior year period. The decrease in segment contribution was primarily attributable a $3 million decline in mortgage banking income, reflecting lower funding volumes in the first quarter of 2026. CoreVest funded $432 million of loans during the first quarter of 2026, compared to $482 million in the first quarter of 2025. The decline in funding volume reflects lower origination activity relative to the first quarter of 2025. The lower funding volume was attributable to reduced origination activity, driven by a more cautious approach to loan production late in the quarter in response to market volatility and evolving demand from real estate investors, whereas the prior‑year period benefited from stronger borrower demand for term and bridge loans.

Redwood Investments Segment

This segment consists of investments comprising retained operating investments sourced through our Mortgage Banking securitizations and third-party securities, some of which we consolidate for GAAP purposes. We directly finance our holdings of real estate securities with a combination of recourse, non-marginable term debt financing, non-recourse, non-marginable re-securitization debt, and recourse, marginable securities repurchase financing.

In the second quarter of 2025, as a part of the Company's accelerated shift towards a scalable and simplified operating model, the non-core legacy assets historically held in this segment were formally reclassified to the newly established Legacy Investments segment. This reclassification did not impact our consolidated financial results but served to better align Redwood’s disclosure with its strategic focus. All relevant prior period amounts and disclosures have been conformed to reflect the current segment structure.

We primarily target investments with sensitivity to housing credit risk, sourced through our operating platforms where we control the underwriting and collateral review. The Redwood Investments portfolio is increasingly focused on retained interests from the Company’s own securitizations and other internally sourced investment vehicles, as we continue to scale our mortgage banking platforms and allocate capital to investments generated through those activities. This shift has resulted in a portfolio increasingly concentrated in investments sourced through our Mortgage Banking platforms and is consistent with our strategy to enhance capital efficiency and align our investment portfolio with our core operating businesses.

This segment’s main sources of income are net interest income (including interest expense on secured financings and allocated corporate financing costs) and other income from investments, changes in fair value of investments and associated hedges, and realized gains and losses upon the sale of securities. Direct operating expenses and tax provisions associated with these activities are also included in this segment.

The following table presents an earnings summary for our Redwood Investments segment for the three months ended March 31, 2026, the immediate preceding quarter ended December 31, 2025, and the year-to-date period ended March 31, 2025.

Table 12 – Redwood Investments Earnings Summary

(In Thousands)

Investment fair value changes, net is primarily comprised of the change in fair value (both realized and unrealized) of our portfolio investments accounted for under the fair value option and interest rate hedges associated with these investments. See Table 3 in the Consolidated Results of Operations in Part I, Item 2 of this Quarterly Report on Form 10-Q for further detail on the composition of investment fair value changes (the difference in amounts in the table above and in Table 3 relates to fair value changes for investments held at corporate/other).

We hold certain of our investments, primarily our MSRs, at our TRS. Activity at this segment 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.

The $23 million decrease in segment contribution for the three months ended March 31, 2026, compared to the three months ended December 31, 2025, was primarily driven by $15 million of negative investment fair value changes in the current quarter, compared to $8 million of positive fair value changes in the prior quarter. The current‑quarter valuation changes primarily reflected unrealized market‑driven changes (including widening of credit spreads) on portfolio investments and related hedges, driven by interest rate volatility and spread movements.

Overall, results for the quarter were primarily impacted by market-driven valuation changes and portfolio seasoning, while underlying asset performance remained generally stable across most of the portfolio. Delinquencies in CAFL Bridge Securities increased, with 90 day+ delinquency rates rising to 8.1% in the first quarter of 2026 from 4.3% in the fourth quarter of 2025. The increase in 90+ day delinquencies for CAFL Bridge Securities was primarily driven by seasoned loans originated in 2021 and 2022, which accounted for 58% of the rise. The higher delinquency rate was further amplified by a lower total outstanding balance in the first quarter of 2026. In contrast, 90 day + delinquency balances for Sequoia Securities and CAFL Term Securities improved modestly to 0.2% and 9.8% of total unpaid principal balances, respectively, compared to 0.3% and 10.1% in the prior quarter.

Net interest income decreased modestly by $2 million, primarily reflecting lower balances of third-party securities due to portfolio repositioning and paydowns, partially offset by income generated from retained operating investments sourced through our mortgage banking platforms.

Servicing income increased by $4 million compared to the prior quarter, reflecting valuation benefits from higher interest rates observed in the first quarter of 2026, while other income streams remained relatively stable.

As we continue to expand our focus on our operating platforms, we intend to allocate capital accordingly. In line with this strategy, during the first quarter we deployed approximately $50 million of capital into retained investments created from our Mortgage Banking securitization activity. We also continue to optimize financing through non-recourse structures, consistent with our strategy to enhance capital efficiency and align the investment portfolio with our mortgage banking platforms.

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

The $27 million decrease in segment contribution for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025 is primarily due to the decline in Investment fair value changes, net of $19 million driven by market-related valuation changes on portfolio investments and associated hedges resulting from interest rate volatility and spread movements during the three month periods.

Redwood Investments Detail

The following table presents a balance sheet summary for our Redwood Investments segment as of March 31, 2026 and December 31, 2025.

Table 13 – Redwood Investments Balance Sheet Summary

(In Thousands)

(1) Represents our retained economic investment in securities issued by consolidated Sequoia securitization VIEs. For GAAP purposes, we consolidated $18.24 billion of loans and $17.24 billion of ABS issued associated with these investments at March 31, 2026. We consolidated $14.84 billion of loans and $14.12 billion of ABS issued associated with these investments at December 31, 2025. At March 31, 2026 and December 31, 2025, excludes $343 million and $134 million, respectively, of retained Sequoia securities that were used as hedges for our Sequoia Mortgage Banking segment.

(2) Represents our retained economic investments in securities issued by consolidated CAFL Term securitization VIEs. For GAAP purposes, we consolidated $1.82 billion of loans and $1.53 billion of ABS issued associated with these investments at March 31, 2026. We consolidated $1.99 billion of loans and $1.68 billion of ABS issued associated with these investments at December 31, 2025.

(3) At March 31, 2026 and December 31, 2025 represents HEI originated and owned by Redwood.

(4) Other investments at both March 31, 2026 and December 31, 2025 includes net risk share investments of $15 million, representing $16 million of restricted cash and other assets, net of other liabilities of $1 million. Also includes mortgage servicing rights of $40 million and $33 million at March 31, 2026 and December 31, 2025, respectively.

(5) Represents our economic investment in consolidated Servicing Investment variable interest entities. At March 31, 2026, for GAAP purposes, we consolidated $257 million of servicing investments and $135 million of non-recourse short-term securitization debt, as well as other assets and liabilities for these entities. At December 31, 2025, for GAAP purposes, we consolidated $266 million of servicing investments and $152 million of non-recourse securitization debt, as well as other assets and liabilities for these entities.

The size of our Redwood Investments portfolio on an economic basis declined slightly for the three months ended March 31, 2026. The retention of residential consumer securities from our eight Sequoia securitizations during the three months ended March 31, 2026, was offset by a decline in our securitized and unsecuritized residential investor bridge loans due to sales and principal payments exceeding new bridge loan originations.

The following table summarizes the credit characteristics of Sequoia securities and CAFL term securities at March 31, 2026 and December 31, 2025. This table includes both our securities held on balance sheet and our economic interest in securities we own in securitizations we consolidate in accordance with GAAP.

Table 14 – Credit Statistics (1)

(Dollars in Thousands)

(Dollars in Thousands)

(1) Underlying loan performance information provided in this table is generally reported on a one-month lag. Accordingly, data as of March 31, 2026 reflects March 2026 reports with a loan performance date of February 2026, and data as of December 31, 2025 reflects December 2025 reports with a loan performance date of November 2025. The methodology for calculating weighted average values for securities investments presented in the tables above, including delinquency rates, is based on notional balances of loans collateralizing each of our securities investments.

(2) Sequoia Securities presented in this table include subordinate and interest only or certificated servicing securities.

(3) Delinquency percentages at underlying securitizations are calculated using unpaid principal balance ("UPB"). Aggregate delinquency amounts by security type are weighted using the notional value of the loans collateralizing each of our securities investments.

(4) Includes loans over 90 days delinquent and all loans in foreclosure (regardless of delinquency status).

Legacy Investments Segment

The Legacy Investments segment primarily consists of assets no longer aligned with our core strategic objectives, including legacy unsecuritized bridge and term loans, residential re-performing loan securities and other non-core Legacy assets, that are in the active process of sale, runoff, or other disposition as part of an accelerated strategic repositioning of our business model. These assets were previously included within the Redwood Investments segment. We finance our assets in this segment with a combination of recourse and non-recourse, non-marginable warehouse facilities, and a portion of a secured, revolving financing facility. All relevant prior period amounts and disclosures have been conformed to reflect the current segment structure. At March 31, 2026, 55% of capital in this portfolio was related to Legacy Bridge Loans (inclusive of certain unsecuritized term loans) and 45% was related to Legacy HEI. During the first quarter of 2026, we continued to execute on our plan to accelerate the wind down of the Legacy Investments portfolio to support capital redeployment and a reduction in portfolio exposure. Segment capital allocation decreased to 15% of total invested capital, compared to 19% at December 31, 2025.

The continued wind-down of our Legacy Investments portfolio is expected to continue to free up investment capital as we progress with further disposition activity. Asset sales and other accretive financings have enabled the repayment of higher cost secured debt and more efficient utilization of flexible funding sources, including our secured revolving financing facility with one of our joint venture partners. We remain focused on further reducing the legacy portfolio in 2026 while prioritizing maximum recovery through both outright sales and partnership structures that recycle capital while preserving upside where we believe it makes economic sense.

This segment’s earnings are primarily driven by net interest income (including interest expense on secured financings and allocated corporate financing costs) and other income from investments, changes in the fair value of investments and associated hedges, and realized gains and losses upon the sale or disposition of assets. Direct operating expenses and tax provisions associated with these activities are also included in this segment.

The following table presents an earnings summary for our Legacy Investments segment for the three months ended March 31, 2026, the immediate preceding quarter ended December 31, 2025, and the year-to-date period ended March 31, 2025.

Table 15 – Legacy Investments Earnings Summary

(In Thousands)

Investment fair value changes, net is primarily comprised of the change in fair value (both realized and unrealized) of our loans and portfolio investments accounted for under the fair value option and related interest rate hedges. See Table 3 in the Consolidated Results of Operations in Part I, Item 2 of this Quarterly Report on Form 10-Q for further detail on the composition of investment fair value changes (the difference in amounts in the table above and in Table 3 relates to fair value changes for investments held at corporate/other).

We hold certain of our investments at our TRS. 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.

Legacy Investments reported a segment loss of $13 million for the first quarter of 2026, compared to a loss of $23 million in the fourth quarter of 2025, representing an improvement of $10 million. The improvement in segment loss was primarily driven by higher HEI income, net and lower net interest expense.

Net interest (loss) income improved by $4 million, primarily reflecting the continued runoff of legacy assets which reduced our allocation of corporate financing costs, and lower secured financing costs on our legacy bridge loans, a portion of which were included in an accretive secured financing structure during the quarter. These benefits were partially offset by a higher balance of loans on non‑accrual status in the first quarter of 2026 compared to the fourth quarter of 2025.

Investment fair value changes, net improved modestly compared to the prior quarter, as valuation impacts stabilized. HEI income, net increased by $4 million, driven by improved liquidity in the asset class, including through securitization.

Operating expenses associated with ongoing asset management, resolution activities, and disposition efforts increased $3 million during the first quarter of 2026. The increase is primarily related to asset specific costs on REO that were largely offset by associated rental income included in other income in this segment.

Results for the quarter continue to reflect the active wind-down of the Legacy Investments portfolio, including asset sales, structured transactions, and financing optimization. Capital allocated to Legacy Investments declined by $64 million or 21%, reflecting continued execution on our strategy to reduce legacy exposure and redeploy capital to Mortgage Banking platforms to simplify the balance sheet and enhance returns. While subject to market conditions and execution timing, we are targeting reducing the capital allocated to Legacy Investments segment down to below $100 million by the end of 2026. As we execute on this reallocation strategy, we believe there is an opportunity for consolidated returns to improve.

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Legacy Investments reported a segment loss of $13 million for the first quarter of 2026, compared to a loss of $9 million in the first quarter of 2025, primarily due to a $4 million decline in net interest income. The decrease in net interest income was driven by a reduced investment balance resulting from asset sales and dispositions over the past 12 months, combined with higher financing costs stemming from increased secured debt and a greater proportion of loans on non-accrual status.

Legacy Investments Detail and Activity

The following table presents a balance sheet summary for our Legacy Investments segment as of March 31, 2026 and December 31, 2025.

Table 16 – Legacy Investments Balance Sheet Summary

(In Thousands)

(1) At March 31, 2026 and December 31, 2025, represents third-party originated HEI, as well as our net investment in a HEI securitization entity.

(2) During the year ended December 31, 2025 we sold a portfolio totaling $484 million in fair value of legacy unsecuritized bridge loans and REO assets to the Legacy Trust and 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. During three months ended March 31, 2026, we funded an additional $10 million of our total $35 million capital support commitment related to maintaining specified loan-to-value ratio thresholds of the Legacy Trust.

During the first quarter of 2026, we completed a $225 million CAFL securitization backed by a mix of performing, re-performing and non-performing bridge loans and REO. The collateral included $223 million of loans and $38 million of REO, primarily sourced from our called CAFL securitizations issued between 2021 and 2023. The securitization also included $66 million of loans and $19 million of REO from our Legacy Investments portfolio. This transaction contributed to the financing efficiency of legacy assets, facilitated the redeployment of capital into our core operating platforms and, through its securitization structure, provides the flexibility to sell loans and further reduce legacy exposures over time. See further discussion of this securitization in Note 17 in Part 1, Item 1 - Financial Statements.

We also continued to make progress in resolving legacy bridge exposures, including the resolution of approximately $4 million of 90+ day delinquent loans and the sale of approximately $34 million of REO during the quarter.

Loan Composition

The following table provides the composition of legacy term and bridge loans by product type at March 31, 2026.

Table 17 – Legacy Loans By Product Type at Legacy Investments at Fair Value

(In Thousands)

(1) Includes loans for predominantly light to moderate rehabilitation projects on multifamily properties.

(2) Includes loans to finance acquisition and/or stabilization of existing housing stock for light to moderate renovation or to finance new construction of residential properties for rent.

At March 31, 2026, the fair value of our legacy bridge and term loans and associated REO represented 91.5% of the combined unpaid principal balance of these loans and the unpaid principal balance of the loans at the time the REO were foreclosed. As part of our plans to accelerate the wind-down of the Legacy Investments portfolio, we have revised our underwriting practices to discontinue the active origination of large multifamily loans. Consequently, we expect our exposure to multifamily loans and REO to decline over time as we proactively reduce long-term exposure to the legacy bridge loan portfolio.

Income Taxes

REIT Status and Dividend Characterization

While the exact amount is uncertain at this time, a portion of our 2026 common and preferred stock dividend distributions may be taxable as ordinary income for federal income tax purposes. Any remaining amount is expected to be characterized as a return of capital, which in general is nontaxable (provided it does not exceed a shareholder's tax basis in Redwood shares) and reduces a shareholder's basis in Redwood shares (but not below zero). To the extent such distributions exceed a shareholder's basis in Redwood shares, such excess amount would be taxable as capital gains. Under the federal income tax rules applicable to REITs, none of Redwood’s 2026 dividend distributions are currently expected to be characterized as long-term capital gain dividends. The income or loss generated at our TRS will not directly affect the tax characterization of our 2026 dividends; however, any dividends paid from our TRS to our REIT would allow a portion of our REIT’s dividends to be classified as qualified dividends.

Tax Provision under GAAP

For the three months ended March 31, 2026 and 2025, we recorded a tax benefit of $3 million and a tax provision of $6 million, respectively. Our tax provision is primarily derived from the activities at our TRS, as we do not book a material tax provision associated with income generated at our REIT. The change from a tax provision to a tax benefit year-over-year was primarily the result of GAAP income earned at our TRS in the first quarter of 2025 compared to a GAAP loss at our TRS in the first quarter of 2026. Refer to Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025 under the caption Income Taxes for additional information regarding our tax provision and deferred tax assets.

LIQUIDITY AND CAPITAL RESOURCES

Summary

In addition to the proceeds from equity and debt capital-raising transactions, our principal sources of cash and liquidity consist of borrowings under mortgage loan, MSR and HEI warehouse facilities, secured term financing facilities, securities repurchase agreements, a corporate secured revolving financing facility, payments of principal and interest we receive from our investment portfolio assets, proceeds from the sale of investment portfolio assets, and cash generated from our mortgage banking operating activities, such as the sale and securitization of mortgage loans.

Our most significant uses of cash are to purchase and originate mortgage loans for our mortgage banking platforms, including financing loans held for sale and managing hedges associated with those activities; to purchase investment securities and make other investments; to repay principal and interest on our debt, including warehouse and other recourse borrowings as loans are sold or securitized; to meet margin calls associated with our debt, interest rate hedges and other obligations; to make dividend payments on our capital stock; to fund draws on our bridge loan portfolio and other commitments when requested; to fund our operations; and from time to time, to repurchase shares of our common stock, outstanding debt securities, and convertible debt.

At March 31, 2026, our total capital was $1.73 billion, consisting of (i) $957 million of equity capital, (ii) $769 million of convertible notes and other corporate debt on our consolidated balance sheets ($297 million of convertible debt due in June 2027, $143 million of senior unsecured notes due in 2029, $189 million of senior unsecured notes due in 2030, $140 million of trust-preferred securities due in 2037), and (iii) $8 million of promissory notes.

Our capital structure continues to reflect the strategic shift toward mortgage banking, which is characterized by faster capital turnover and an originate-to-distribute model. Approximately 63% of our recourse debt is concentrated within our mortgage banking platforms, where loans typically remain on balance sheet for a short duration and related borrowings are repaid as loans are sold or securitized, supporting rapid recycling of our capital for subsequent reinvestment.

At March 31, 2026, our unrestricted cash and cash equivalents were $202 million. While we believe our available cash is sufficient to fund our operations, we may raise equity or debt capital from time to time to increase our unrestricted cash and liquidity, to repay existing debt, to make long-term portfolio investments, to fund strategic acquisitions and investments, or for other purposes. In particular, we continue to focus on additional joint ventures with strategic investors who seek to acquire the assets our operations originate and source and/or seek to provide capital to support the growth potential of our operating platforms. To the extent we seek to raise additional capital, our approach will continue to be based on what we believe to be in the best interests of the Company.

In the discussion that follows and throughout this document, we distinguish between marginable and non-marginable debt and recourse and non-recourse debt. Refer to the section set forth below under the heading "Risks Relating to Debt Incurred under Borrowing Facilities" for additional information regarding these terms on our debt.

At March 31, 2026, in aggregate, we had $3.90 billion of secured recourse debt outstanding, financing our mortgage banking platforms and investment portfolio, of which $3.02 billion was marginable and $874 million was non-marginable. The majority of this debt relates to short-term warehouse financing supporting our Sequoia and Aspire mortgage banking platforms, where capital turns rapidly, with loans remaining on balance sheet for an average of approximately 26 days before being sold or securitized

We are subject to risks relating to our liquidity and capital resources, including risks relating to incurring debt under loan warehouse facilities, securities repurchase facilities, other short- and long-term debt facilities and other risks relating to our corporate debt and use of derivatives, predominately those that hedge our mortgage banking activities. A further discussion of these risks is set forth below under the heading “Risks Relating to Debt Incurred under Borrowing Facilities."

Cash Flows and Liquidity for the Three Months Ended March 31, 2026

Cash flows from our mortgage banking activities and our investments can be volatile from quarter to quarter depending on many factors, including the timing and amount of loan originations, acquisitions, sales and profitability within our mortgage banking platforms, the timing and amount of securities acquisitions, sales and repayments, as well as changes in interest rates, prepayments, and credit losses. Therefore, cash flows generated in the current period are not necessarily reflective of the long-term cash flows we will receive from these operating or investment activities.

Cash Flows from Operating Activities

Cash flows used in operating activities increased by $2.56 billion from negative $1.95 billion in the three months ended March 31, 2026 to negative $4.51 billion in the three months ended March 31, 2026, primarily due to the increase in residential consumer loan purchases associated with our mortgage banking activities. Excluding cash flows from the purchase, origination, sale and principal payments of loans classified as held-for-sale, and the settlement of associated derivatives (which cumulatively totaled $4.44 billion of net cash outflows for the three month 2026 period, compared to $2.08 billion of net cash outflows for the three month 2025 period), cash flows from operating activities were negative $70 million during the first three months of 2026 and positive $127 million for the first three months of 2025.

Cash Flows from Investing Activities

During the three months ended March 31, 2026, our net cash provided by investing activities was $1.23 billion and primarily resulted from proceeds from principal payments on loans held-for-investment and other investments, in excess of cash deployed into these investments. Because many of our investment securities, loans and HEI are financed through various borrowing agreements, a significant portion of the proceeds from any sales or principal payments of these assets are generally used to repay balances under these financing sources. Similarly, all or a significant portion of cash flows from principal payments of loans and HEI at consolidated securitization entities would generally be used to repay ABS issued by those entities.

Cash Flows from Financing Activities

During the three months ended March 31, 2026, our net cash provided by financing activities was $3.12 billion. This primarily resulted from $3.09 billion of net borrowings under ABS issued (resulting from the issuance of eight Sequoia securitizations as well as the issuance of ABS through one Sequoia re-securitization of certain consolidated and unconsolidated Sequoia securities during the three months ended March 31, 2026, net of related issuance costs), and $65 million of net borrowings on debt obligations.

Material Cash Requirements

In the normal course of business, we enter into transactions that may require future cash payments. As required by GAAP, some of these obligations are recorded on the balance sheet, while others are off-balance sheet or recorded on our balance sheet in amounts different from the full contractual or notional amount of the transaction.

Our material cash requirements from known contractual and other obligations during the twelve months following March 31, 2026, include maturing debt obligations, interest payments on debt obligations and ABS issued, funding commitments for residential investor and consumer loans, strategic investments, potential repurchases of previously sold or securitized loans, meeting margin calls associated with our debt, interest rate hedges and other obligations, and other current payables. Our material cash requirements from known contractual and other obligations beyond the twelve months following March 31, 2026, include maturing long-term debt, interest payments on long-term debt, payments on operating leases and funding commitments for residential investor bridge loans and strategic investments (including our joint ventures), meeting margin calls associated with our debt, interest rate hedges and other obligations, and principal and interest payments under ABS issued (as described further below under Liquidity Needs for our Redwood Investment Portfolio).

At March 31, 2026, we had commitments to fund up to $203 million of additional advances on existing residential investor bridge loans, of which $92 million related to loans currently in securitizations co-sponsored by one of our joint ventures. These commitments are generally subject to loan agreements with covenants regarding the financial performance of the borrower and other terms regarding advances that must be met before we fund the commitment (for example, funding is dependent on actual progress on a project and we retain the right to conduct due diligence with respect to each draw request to confirm conditions have been met). A majority of the commitments are for longer-term renovate/build-for-rent loans (which generally have funding caps below their full commitment amount) and are expected to fund over the next several quarters. Additionally at March 31, 2026, we had $1.84 billion of available warehouse capacity for residential investor loans and scheduled bridge loan maturities are expected to provide an additional source of cash that can be used to fund our commitments.

During 2025, in connection with the sale of legacy unsecuritized bridge loans to the Legacy Trust, we entered into an agreement to provide up to $35 million of capital support if the Legacy Trust’s portfolio loan-to-value ratios exceed specified thresholds. As of March 31, 2026, we had funded $20 million of this commitment, with $15 million in remaining funding commitments if certain triggers are met.

For additional information regarding our material cash requirements, see Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025 under the caption Contractual Obligations. For additional information on commitments and contingencies as of March 31, 2026 that could impact our liquidity and capital resources, see Note 19 of our Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, which supplements the disclosures included in Note 18 to the Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2025.

Most of our loan warehouse facilities and our servicer advance financing were established with initial one-year terms and are regularly amended on an annual basis to extend the terms for an additional year ahead of their maturity. We renewed several of these facilities during the three months ended March 31, 2026. While there is no assurance of our ability to renew our other facilities maturing in the next year, given current market conditions we expect to extend these in the normal course of business.

We expect to meet our obligations coming due in less than one year from March 31, 2026 most likely from borrowings under existing, new or amended financing arrangements, or through other previously mentioned sources of capital including cash on hand.

See Note 18 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on our debt obligations.

Liquidity Needs for our Mortgage Banking Activities

We generally use loan warehouse facilities to finance the loans we acquire and originate in our mortgage banking platforms while we aggregate the loans for sale or securitization.

At March 31, 2026, we had residential consumer warehouse facilities outstanding with $4.70 billion of total capacity and $1.85 billion of available capacity. These included non-marginable facilities with $400 million of total capacity and marginable facilities with $4.30 billion of total capacity. At March 31, 2026, we had non-marginable, residential investor warehouse facilities outstanding available to finance our unsecuritized residential investor loans in our Redwood Investments, CoreVest Mortgage Banking and Legacy Investments segments with $2.03 billion of total capacity and $1.84 billion of available capacity. Borrowing under these facilities used to finance our CoreVest Mortgage Banking loan inventory at March 31, 2026 totaled $55 million. We note that several of these facilities used to finance our CoreVest Mortgage Banking loan inventory are also used to finance bridge loans held in our Legacy Investments portfolio at March 31, 2026.

Most of our loan warehouse facilities were established with initial one-year terms and are regularly amended on an annual basis to extend the terms for an additional year ahead of their maturity. We renewed several of these facilities during the three months ended March 31, 2026, and have other such facilities with scheduled maturities during the next twelve months. See Note 18 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on the loan warehouse facilities used for our Mortgage Banking platforms.

As described above, our material cash requirements include meeting margin calls associated with loan warehouse facilities and interest rate hedges. During periods when there is higher volatility in benchmark interest rate levels, we may experience increased margin calls related to interest rate hedges, which may be material and present increased liquidity risk. In particular, interest rate hedges associated with our mortgage banking activities are typically intended to fully or partially offset interest rate-driven changes in the fair value of mortgage loans we own or have identified for purchase. When benchmark interest rates rise or decline, there may be liquidity risk due to the fact that any corresponding change in value to such mortgage loans or other financial instruments we own may not be an immediate source of liquidity to offset margin call amounts related to our interest rate hedges.

Additional information regarding risks related to the debt we use to finance our mortgage banking platforms can be found under the heading "Risks Relating to Debt Incurred under Borrowing Facilities" that follows within this section.

Liquidity Needs for our Redwood Investments

At March 31, 2026, in addition to our ABS issued, our investment portfolio was financed with $566 million of secured recourse debt, of which $219 million was marginable and $347 million was non-marginable, and $300 million of secured non-recourse debt that was non-marginable. At March 31, 2026, we have also allocated $81 million of outstanding borrowings from our secured revolving financing facility to finance our Redwood Investments segment. Our secured revolving financing facility may be used to finance both our Redwood Investments, Sequoia and CoreVest mortgage banking platforms, as well as Legacy Investments.

We use various forms of secured recourse and non-recourse debt to finance assets in our investment portfolio. Refer to Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025 under the caption Liquidity and Capital Resources for additional information regarding our forms of financing assets in our investment portfolio, as well as for our descriptions of what constitutes non-recourse and non-marginable debt.

See Note 17 and Note 18 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on our asset-backed securities issued and debt obligations, respectively.

Liquidity Needs for our Legacy Investments

At March 31, 2026, we financed our Legacy Investments with a combination of recourse and non-recourse, non-marginable residential investor loan warehouse facilities, a recourse non-marginable HEI facility, and non-recourse securitization debt (ABS issued). Certain residential investor warehouse facilities may impose advance rate step-downs or repurchase requirements if underlying loan performance or property valuations deteriorate, which could require the use of additional liquidity. At March 31, 2026, we have also allocated $244 million of outstanding borrowings from our secured revolving financing facility to finance our Legacy Investments segment.

Refer to Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025 under the caption Liquidity and Capital Resources for additional information regarding our forms of financing for our investments, as well as for our descriptions of what constitutes non-recourse and non-marginable debt.

See Note 17 and Note 18 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on our asset-backed securities issued and debt obligations, respectively.

Corporate Capital

We also use unsecured recourse debt to finance our operations, including convertible and non-convertible senior debt securities issued in the public markets, as well as trust preferred securities and promissory notes. These financing arrangements support the capital needs of our operating segments. Accordingly, the associated financing costs, including interest expense, are allocated to our operating segments based on their respective use of capital, consistent with how management evaluates segment performance. See Note 18 Part I, Item 1 of this Quarterly Report on Form 10-Q and Note 18 in Part II, Item 8 of our Annual Report on Form 10-K, for additional information on our unsecured debt obligations, net.

Risks Relating to Debt Incurred under Borrowing Facilities

As described above under the heading “Results of Operations,” in the ordinary course of our business, we use debt financing obtained through several different types of borrowing facilities to, among other things, finance the acquisition and/or origination of residential consumer mortgage loans, residential investor mortgage loans, and HEI (including those we acquire or originate in anticipation of sale or securitization), and finance investments in securities and other investments. We may also use borrowings to fund other aspects of our business and operations, including the repurchase of shares of our capital stock. Recourse debt incurred under these facilities is generally either the direct obligation of Redwood Trust, Inc., or the direct obligation of subsidiaries of Redwood Trust, Inc. and guaranteed by Redwood Trust, Inc. Risks relating to debt incurred under these facilities are described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025, under the caption(s) “Risks Relating to Debt Incurred under Borrowing Facilities,” and “Our use of financial leverage exposes us to heightened liquidity risks, including margin calls and acceleration of repayment from defaults and cross-defaults.”

Aggregate borrowing limits are stated under certain of these facilities, and certain other facilities have no stated borrowing limit, but many of the facilities are uncommitted, which means that any request we make to borrow funds under these uncommitted facilities may be declined by the lender for any reason, even if at the time of the borrowing request we have then-outstanding borrowings that are less than the borrowing limits under these facilities. In general, financing under these facilities is obtained by transferring or pledging mortgage loans, securities or other assets to the counterparty in exchange for cash proceeds (in an amount less than 100% of the principal amount of the transferred or pledged assets). Given that we may not be able to obtain additional financing under uncommitted lines when we need it, we are exposed to, among other things, liquidity risks of the types described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 under the heading “Risk Factors,” and in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2025 under the heading “Market Risks.” In addition, with respect to mortgage loans, securities or other assets that at any given time are already being financed through these warehouse facilities, we are exposed to market, credit, liquidity, and other risks of the types described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 under the heading “Risk Factors,” and in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2025 under the heading “Market Risks,” if and when those loans, securities or other assets become ineligible to be financed, decline in value, or have been financed for the maximum term permitted under the applicable facility.

Under many of our mortgage loan and HEI warehouse facilities, our securities repurchase facilities, and our secured revolving financing facility, while transferred or pledged mortgage loans, HEI, or securities are financed under the facility, to the extent the value of the loans, HEI, or securities, or the collateral underlying those loans, HEI, or securities, declines, we are generally required to either immediately reacquire the loans or securities or meet a margin requirement to transfer or pledge additional loans, securities or cash in an amount at least equal to the decline in value. Of our active financing arrangements with outstanding balances at March 31, 2026, only our securities repurchase facilities (with $104 million of borrowings outstanding at March 31, 2026), eight of our residential consumer mortgage loan warehouse facilities (with a combined $2.8 billion of borrowings outstanding at March 31, 2026), and a certificated MSR facility (with $114 million of borrowings outstanding at March 31, 2026) retain market-value based margin call provisions based solely on the lender's determination of market value and, as such, are considered marginable.

Margin call provisions under these facilities are further described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 under the caption “Risks Relating to Debt Incurred under Borrowing Facilities - Margin Call Provisions Associated With Debt Facilities and Other Debt Financing.” Financial covenants included in these facilities are further described Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 under the caption “Risks Relating to Debt Incurred under Borrowing Facilities - Financial Covenants Associated With Debt Facilities and Other Debt Financing.”

At March 31, 2026, and through the date of this Quarterly Report on Form 10-Q, we were in compliance with the financial covenants associated with our debt financing facilities. Our financial covenants require us to maintain a minimum dollar amount of stockholders’ equity or tangible net worth and minimum liquidity, as well as financial covenants that require us to maintain recourse indebtedness below a specified ratio. In particular, with respect to: (i) financial covenants that require us to maintain a minimum dollar amount of stockholders’ equity or tangible net worth at Redwood, at March 31, 2026, our level of stockholders’ equity and tangible net worth resulted in our being in compliance with these covenants by more than $200 million; and (ii) financial covenants that require us to maintain recourse indebtedness below a specified ratio at Redwood, at March 31, 2026, our level of recourse indebtedness resulted in our being in compliance with these covenants at a level such that we could incur at least $1.8 billion in additional recourse indebtedness.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. A discussion of critical accounting policies and the possible effects of changes in estimates on our consolidated financial statements is included in Note 2 — Basis of Presentation and Note 3 — Summary of Significant Accounting Policies included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We have elected the fair value option of accounting for a significant portion of the assets and some of the liabilities on our balance sheet, and the majority of these assets and liabilities utilize Level 3 valuation inputs, which require a significant level of estimation uncertainty. See Note 6 in Part I, Item 1 of this Quarterly Report on Form 10-Q, for additional information on our assets and liabilities accounted for at fair value at March 31, 2026, including the significant inputs used to estimate their fair values and the impact the changes in their fair values had to our financial condition and results of operations. See Note 6 in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2025, incorporated herein by reference, for the same information on these assets and liabilities as of December 31, 2025. Periodic fluctuations in the values of these assets and liabilities are inherently volatile and thus can lead to significant period-to-period GAAP earnings volatility.

Additional detail on our critical accounting estimates is included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025, under the heading "Critical Accounting Estimates."

MARKET AND OTHER RISKS

We seek to manage risks inherent in our business — including but not limited to credit risk, interest rate risk, prepayment risk, liquidity risk, and fair value risk — in a prudent manner designed to enhance our earnings and dividends and preserve our capital. In general, we seek to assume risks that can be quantified from historical experience, to actively manage such risks, and to maintain capital levels consistent with these risks. Information concerning the risks we are managing, how these risks are changing over time, and potential GAAP earnings and taxable income volatility we may experience as a result of these risks is discussed in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

In addition to the market and other risks described above, our business and results of operations are subject to a variety of types of risks and uncertainties, including, among other things, those described under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

Information concerning market risk is incorporated herein by reference to Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as supplemented by the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Market Risks” within Item 2 above. Other than the developments described thereunder, including changes in the fair values of our assets, there have been no other material changes in our quantitative or qualitative exposure to market risk since December 31, 2025.

We have adopted and maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed on our reports under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms and that the information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) of the Exchange Act, we have carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level.

There have been no changes in our internal control over financial reporting during the first quarter of 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our risk factors are discussed under Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025.