rwt-20220331

UNITED STATES OF AMERICA

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended: March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _______________ to _______________.

Commission File Number 1-13759

REDWOOD TRUST, INC.

(Exact Name of Registrant as Specified in Its Charter)


Maryland						68-0329422
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)


One Belvedere Place,	Suite 300
Mill Valley,	California	94941
(Address of Principal Executive Offices)		(Zip Code)

(415) 389-7373

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	RWT	New York Stock Exchange

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.


Common Stock, $0.01 par value per share						120,295,309			shares outstanding as of May 3, 2022

REDWOOD TRUST, INC.

2022 FORM 10-Q REPORT

TABLE OF CONTENTS


		Page
PART I —	FINANCIAL INFORMATION
Item 1.	Financial Statements	2
	Consolidated Balance Sheets at March 31 , 202 2 (Unaudited) and December 31, 2021	2
	Consolidated Statements of Income for the Three Months Ended March 31 , 202 2 and 202 1 (Unaudited)	3
	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31 , 202 2 and 202 1 (Unaudited)	4
	Consolidated Statements of Changes in Stockholders' Equity for the Three Months Ended March 31 , 202 2 and 202 1 (Unaudited)	5
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 202 1 (Unaudited)	6
	Notes to Consolidated Financial Statements (Unaudited)	8
	Note 1. Organization	8
	Note 2. Basis of Presentation	8
	Note 3. Summary of Significant Accounting Policies	10
	Note 4. Principles of Consolidation	14
	Note 5. Fair Value of Financial Instruments	22
	Note 6. Residential Loans	32
	Note 7. Business Purpose Loans	35
	Note 8. Multifamily Loans	38
	Note 9. Real Estate Securities	39
	Note 10. Other Investments	44
	Note 11. Derivative Financial Instruments	46
	Note 12. Other Assets and Liabilities	47
	Note 13. Short-Term Debt	49
	Note 14. Asset-Backed Securities Issued	51
	Note 15. Long-Term Debt	54
	Note 16. Commitments and Contingencies	57
	Note 17. Equity	59
	Note 18. Equity Compensation Plans	62
	Note 19. Mortgage Banking Activities, Net	63
	Note 20. Other Income	64
	Note 21. General and Administrative Expenses, Loan Acquisition Costs, and Other Expenses	65
	Note 22. Taxes	66
	Note 23. Segment Information	66
	Note 24. Subsequent Events	70
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	71
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	99
Item 4.	Controls and Procedures	99

PART II —	OTHER INFORMATION
Item 1.	Legal Proceedings	100
Item 1A.	Risk Factors	100
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	100
Item 3.	Defaults Upon Senior Securities	100
Item 4.	Mine Safety Disclosures (Not Applicable)	100
Item 5.	Other Information	100
Item 6.	Exhibits	101
Signatures		102

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

REDWOOD TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


(In Thousands, except Share Data) (Unaudited)	March 31, 2022		December 31, 2021
ASSETS (1)
Residential loans, held-for-sale, at fair value	$	1,347,069	$	1,845,282
Residential loans, held-for-investment, at fair value	5,870,068		5,747,150
Business purpose loans, held-for-sale, at fair value	505,889		358,309
Business purpose loans, held-for-investment, at fair value	4,248,889		4,432,680
Multifamily loans, held-for-investment, at fair value	451,804		473,514
Real estate securities, at fair value	358,882		377,411
Other investments	635,581		641,969
Cash and cash equivalents	409,272		450,485
Restricted cash	73,549		80,999
Intangible assets	38,027		41,561
Derivative assets	112,060		26,467
Other assets	202,202		231,117
Total Assets	$	14,253,292	$	14,706,944

LIABILITIES AND EQUITY (1)
Liabilities
Short-term debt, net	$	1,647,246	$	2,177,362

Derivative liabilities	80,260		3,317
Accrued expenses and other liabilities	244,450		245,788

Asset-backed securities issued (includes $8,475,868 and $8,843,147 at fair value), net	8,872,366		9,253,557
Long-term debt, net	1,963,704		1,640,833
Total liabilities	12,808,026		13,320,857
Commitments and Contingencies (see Note 16)
Equity
Common stock, par value $0.01 per share, 395,000,000 shares authorized; 120,289,243 and 114,892,309 issued and outstanding	1,203		1,149
Additional paid-in capital	2,391,344		2,316,799
Accumulated other comprehensive loss	(26,474)		(8,927)
Cumulative earnings	1,347,805		1,316,890
Cumulative distributions to stockholders	(2,268,612)		(2,239,824)
Total equity	1,445,266		1,386,087
Total Liabilities and Equity	$	14,253,292	$	14,706,944

——————

(1)Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At March 31, 2022 and December 31, 2021, assets of consolidated VIEs totaled $10,250,802 and $10,661,081, respectively. At March 31, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $9,202,156 and $9,619,347, respectively. See Note 4 for further discussion.

The accompanying notes are an integral part of these consolidated financial statements.

REDWOOD TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME


(In Thousands, except Share Data)	Three Months Ended March 31,
(Unaudited)	2022		2021
Interest Income
Residential loans	$	65,203	$	43,655
Business purpose loans	94,299		64,188
Multifamily loans	4,753		4,786
Real estate securities	15,955		9,663
Other interest income	9,190		6,013
Total interest income	189,400		128,305
Interest Expense
Short-term debt	(11,488)		(7,773)
Asset-backed securities issued	(105,695)		(72,561)
Long-term debt	(19,115)		(22,218)
Total interest expense	(136,298)		(102,552)
Net Interest Income	53,102		25,753
Non-interest Income
Mortgage banking activities, net	16,315		82,607
Investment fair value changes, net	(6,120)		45,087
Other income, net	5,983		3,843
Realized gains, net	2,581		2,716
Total non-interest income, net	18,759		134,253
General and administrative expenses	(34,854)		(43,551)
Loan acquisition costs	(4,465)		(3,559)
Other expenses	(4,085)		(4,096)
Net Income before Benefit from (Provision for) Income Taxes	28,457		108,800
Benefit from (provision for) income taxes	2,458		(11,543)
Net Income	$	30,915	$	97,257

Basic earnings per common share	$	0.25	$	0.84
Diluted earnings per common share	$	0.24	$	0.72
Basic weighted average shares outstanding	119,884,172		112,276,842
Diluted weighted average shares outstanding	140,506,157		141,039,285

The accompanying notes are an integral part of these consolidated financial statements.

REDWOOD TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


(In Thousands)	Three Months Ended March 31,
(Unaudited)	2022		2021
Net Income	$	30,915	$	97,257
Other comprehensive (loss) income:
Net unrealized (loss) gain on available-for-sale securities	(17,873)		10,986
Reclassification of unrealized (gain) on available-for-sale securities to net income	(692)		(2,795)

Reclassification of unrealized loss on interest rate agreements to net income	1,018		1,018
Total other comprehensive (loss) income	(17,547)		9,209
Total Comprehensive Income	$	13,368	$	106,466

The accompanying notes are an integral part of these consolidated financial statements.

REDWOOD TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the Three Months Ended March 31, 2022


(In Thousands, except Share Data)	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Cumulative Earnings		Cumulative Distributions to Stockholders		Total
(Unaudited)	Shares	Amount
December 31, 2021	114,892,309	$	1,149	$	2,316,799	$	(8,927)	$	1,316,890	$	(2,239,824)	$	1,386,087
Net income	—	—		—		—		30,915		—		30,915
Other comprehensive (loss)	—	—		—		(17,547)		—		—		(17,547)
Issuance of common stock	5,232,869	52		67,423		—		—		—		67,475

Employee stock purchase and incentive plans	164,065	2		(1,048)		—		—		—		(1,046)
Non-cash equity award compensation	—	—		8,170		—		—		—		8,170

Common dividends declared ($0.23 per share)	—	—		—		—		—		(28,788)		(28,788)
March 31, 2022	120,289,243	$	1,203	$	2,391,344	$	(26,474)	$	1,347,805	$	(2,268,612)	$	1,445,266

For the Three Months Ended March 31, 2021

(In Thousands, except Share Data)

Common Stock

Additional
Paid-In
Capital

Accumulated
Other
Comprehensive
Income (Loss)

Cumulative
Earnings

Cumulative
Distributions
to Stockholders

Total

(Unaudited)

Amount

December 31, 2020

112,090,006