rwt-20220630

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: June 30, 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						116,765,789			shares outstanding as of August 2, 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 June 30 , 2022 (Unaudited) and December 31, 2021	2
	Consolidated Statements of Income (Loss) for the Three and S ix Months Ended June 30 , 2022 and 2021 (Unaudited)	3
	Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended June 30 , 2022 and 2021 (Unaudited)	4
	Consolidated Statements of Changes in Stockholders' Equity for the Three and Six Months Ended June 30 , 2022 and 2021 (Unaudited)	5
	Consolidated Statements of Cash Flows for the Six Months Ended June 30 , 2022 and 2021 (Unaudited)	7
	Notes to Consolidated Financial Statements (Unaudited)	9
	Note 1. Organization	9
	Note 2. Basis of Presentation	9
	Note 3. Summary of Significant Accounting Policies	11
	Note 4. Principles of Consolidation	15
	Note 5. Fair Value of Financial Instruments	24
	Note 6. Residential Loans	32
	Note 7. Business Purpose Loans	35
	Note 8. Consolidated Agency Multifamily Loans	39
	Note 9. Real Estate Securities	40
	Note 10. Other Investments	45
	Note 11. Derivative Financial Instruments	47
	Note 12. Other Assets and Liabilities	48
	Note 13. Short-Term Debt	50
	Note 14. Asset-Backed Securities Issued	52
	Note 15. Long-Term Debt	55
	Note 16. Commitments and Contingencies	58
	Note 17. Equity	60
	Note 18. Equity Compensation Plans	63
	Note 19. Mortgage Banking Activities, Net	64
	Note 20. Other Income, Net	65
	Note 21. General and Administrative Expenses, Loan Acquisition Costs, and Other Expenses	66
	Note 22. Taxes	67
	Note 23. Segment Information	67
	Note 24. Subsequent Events	71
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	72
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	103
Item 4.	Controls and Procedures	103

PART II —	OTHER INFORMATION
Item 1.	Legal Proceedings	104
Item 1A.	Risk Factors	104
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	104
Item 3.	Defaults Upon Senior Securities	104
Item 4.	Mine Safety Disclosures (Not Applicable)	104
Item 5.	Other Information	104
Item 6.	Exhibits	105
Signatures		106

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

REDWOOD TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


(In Thousands, except Share Data) (Unaudited)	June 30, 2022		December 31, 2021
ASSETS (1)
Residential loans, held-for-sale, at fair value	$	1,213,067	$	1,845,282
Residential loans, held-for-investment, at fair value	5,365,532		5,747,150
Business purpose loans, held-for-sale, at fair value	505,171		358,309
Business purpose loans, held-for-investment, at fair value	4,697,766		4,432,680
Consolidated Agency multifamily loans, at fair value	443,114		473,514
Real estate securities, at fair value	284,278		377,411
Other investments	679,667		641,969
Cash and cash equivalents	371,296		450,485
Restricted cash	72,558		80,999
Intangible assets	34,720		41,561
Derivative assets	36,587		26,467
Other assets	171,780		231,117
Total Assets	$	13,875,536	$	14,706,944

LIABILITIES AND EQUITY (1)
Liabilities
Short-term debt, net	$	1,869,822	$	2,177,362

Derivative liabilities	6,591		3,317
Accrued expenses and other liabilities	190,825		245,788

Asset-backed securities issued (includes $7,993,953 and $8,843,147 at fair value), net	8,584,146		9,253,557
Long-term debt, net	1,966,061		1,640,833
Total liabilities	12,617,445		13,320,857
Commitments and Contingencies (see Note 16)
Equity
Common stock, par value $0.01 per share, 395,000,000 shares authorized; 116,753,174 and 114,892,309 issued and outstanding	1,168		1,149
Additional paid-in capital	2,363,709		2,316,799
Accumulated other comprehensive loss	(57,788)		(8,927)
Cumulative earnings	1,247,839		1,316,890
Cumulative distributions to stockholders	(2,296,837)		(2,239,824)
Total equity	1,258,091		1,386,087
Total Liabilities and Equity	$	13,875,536	$	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 June 30, 2022 and December 31, 2021, assets of consolidated VIEs totaled $9,951,520 and $10,661,081, respectively. At June 30, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $8,899,020 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 (LOSS)


(In Thousands, except Share Data)	Three Months Ended June 30,				Six Months Ended June 30,
(Unaudited)	2022		2021		2022		2021
Interest Income
Residential loans	$	65,047	$	48,433	$	130,250	$	92,088
Business purpose loans	80,934		70,323		175,233		134,511
Multifamily loans	4,732		4,860		9,485		9,646
Real estate securities	7,828		9,279		23,783		18,942
Other interest income	8,914		5,800		18,104		11,813
Total interest income	167,455		138,695		356,855		267,000
Interest Expense
Short-term debt	(13,661)		(11,195)		(25,149)		(18,968)
Asset-backed securities issued	(88,859)		(76,419)		(194,554)		(148,980)
Long-term debt	(24,447)		(20,451)		(43,562)		(42,669)
Total interest expense	(126,967)		(108,065)		(263,265)		(210,617)