REDWOOD TRUST INC

Note 1. Organization

Redwood Trust, Inc., together with its subsidiaries, is a specialty finance company focused on several distinct areas of housing credit, with a mission to help make quality housing, whether rented or owned, accessible to all American households. Our operating platforms occupy a unique position in the housing finance value chain, providing 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 and our publicly-traded securities. Our aggregation, origination and investment activities have evolved to incorporate a diverse mix of residential consumer and residential investor housing credit assets. 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 our business inthree segments: Residential Consumer Mortgage Banking, Residential Investor Mortgage Banking, and Investment Portfolio.

Our primary sources of income are net interest income from our investments and non-interest income from our mortgage banking activities. Net interest income primarily consists of the interest income we earn on investments less the interest expense we incur on borrowed funds and other liabilities. Income from mortgage banking activities is generated through the origination and acquisition of loans, and their subsequent sale, securitization, or transfer to our investment portfolios.

Redwood Trust, Inc. has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), beginning with its taxable year ended December 31, 1994. We generally refer, collectively, to Redwood Trust, Inc. and those of its subsidiaries that are generally not subject to subsidiary-level corporate income tax as “the REIT” or “our REIT.” We generally refer to subsidiaries of Redwood Trust, Inc. that are subject to subsidiary-level corporate income tax as “our taxable REIT subsidiaries” or “TRS.”

Redwood Trust, Inc. was incorporated in the State of Maryland on April 11, 1994, and commenced operations on August 19, 1994. References herein to “Redwood,” the “company,” “we,” “us,” and “our” include Redwood Trust, Inc. and its consolidated subsidiaries, unless the context otherwise requires. For a full description of our business, see Part I, Item 1—Businessin our Annual Report on Form 10-K for the year ended December 31, 2023.

Note 2. Basis of Presentation

The consolidated financial statements presented herein are at March 31, 2024 and December 31, 2023, and for the three months ended March 31, 2024 and 2023. These interim unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and note disclosures normally included in our annual financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") — as prescribed by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) — have been condensed or omitted in these interim financial statements according to these SEC rules and regulations. Management believes that the disclosures included in these interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the company's Annual Report on Form 10-K for the year ended December 31, 2023. In the opinion of management, all normal and recurring adjustments have been made to present fairly the financial condition of the Company at March 31, 2024 and results of operations for all periods presented. The results of operations for the three months ended March 31, 2024 should not be construed as indicative of the results to be expected for the full year.

In the first quarter of 2024, we updated the names of our Residential loans to Residential consumer loans and our Business purpose loans to Residential investor loans. There were no changes to the classifications of account balances as a result of this update in names. All prior period references in this document were conformed to this presentation.

Principles of Consolidation

In accordance with GAAP, we determine whether we must consolidate transferred financial assets and variable interest entities (“VIEs”) for financial reporting purposes. We currently consolidate the assets and liabilities of certain Sequoia securitization entities issued prior to 2012 ("Legacy Sequoia"), certain entities formed during and after 2012 in connection with the securitization of Redwood Select prime loans and Redwood Choice expanded-prime loans ("Sequoia"), entities formed in connection with the securitization of CoreVest residential investor term and bridge loans ("CAFL") and entities formed in connection with the securitization of home equity investment contracts ("HEI"). We also consolidate the assets and liabilities of certain Freddie Mac K-Series and Freddie Mac Seasoned Loans Structured Transaction ("SLST") securitizations (and re-securitization of such SLST securities) in which we have invested. Each securitization entity is independent of Redwood and of each other and the assets and liabilities are not owned by and are not legal obligations of Redwood Trust, Inc. Our exposure to these entities is primarily through the financial interests we have purchased or retained, although for certain entities we are exposed to financial risks associated with our role as a sponsor or co-sponsor, servicing administrator, collateral administrator or depositor of these entities or as a result of our having sold assets directly or indirectly to these entities.

For financial reporting purposes, the underlying loans owned at the consolidated Legacy Sequoia, Sequoia and Freddie Mac SLST entities are shown under Residential consumer loans held-for-investment, at fair value, the underlying loans at the consolidated Freddie Mac K-Series entity are shown under Consolidated Agency multifamily loans, at fair value, the underlying residential investor term and bridge loans at the consolidated CAFL entities are shown under Residential investor loans held-for-investment, at fair value, and the underlying HEI at the consolidated HEI securitization entities are shown under Home equity investments, at fair value on our consolidated balance sheets. The asset-backed securities (“ABS”) issued to third parties by these entities are shown under ABS issued. In our consolidated statements of income, we record interest income on the loans owned at these entities and interest expense on the ABS issued by these entities as well as fair value changes, other income and expenses associated with these entities' activities. See Note 15 for further discussion on ABS issued.

We also consolidatetwo partnerships ("Servicing Investment" entities) through which we have invested in servicing-related assets. We maintain an 80% ownership interest in each entity and have determined that we are the primary beneficiary of these partnerships.

See Note 4 for further discussion on principles of consolidation.

Use of Estimates

The preparation of financial statements requires us to make a number of significant estimates. These include estimates of fair value of certain assets and liabilities, amounts and timing of credit losses, prepayment rates, valuation allowances, and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the consolidated financial statements and the reported amounts of certain revenues and expenses during the reported periods. It is likely that changes in these estimates (e.g., valuation changes due to supply and demand, credit performance, prepayments, interest rates, or other reasons) will occur in the near term. Our estimates are inherently subjective in nature and actual results could differ from our estimates and the differences could be material.

Acquisitions

On July 1, 2022, we acquired Riverbend Funding LLC ("Riverbend"), a private mortgage lender to residential transitional and commercial real estate investors. Refer to our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information regarding this acquisition, including purchase price allocations. Additionally, in 2019 we acquired 5 Arches and CoreVest, originators of residential investor loans. In connection with these acquisitions, we identified and recorded finite-lived intangible assets totaling $95 million. The table below presents the amortization period and carrying value of our intangible assets, net of accumulated amortization at March 31, 2024.

Table 2.1 – Intangible Assets – Activity

All of our intangible assets are amortized on a straight-line basis. For the three months ended March 31, 2024, we recorded intangible asset amortization expense of $3 million. For the three months ended March 31, 2023, we recorded intangible asset amortization expense of $3 million. Estimated future amortization expense is summarized in the table below.

Table 2.2 – Intangible Asset Amortization Expense by Year

On a quarterly basis, we evaluate our finite-lived intangible assets for impairment indicators and additionally evaluate the useful lives of our intangible assets to determine if revisions to the remaining periods of amortization are warranted. We reviewed our finite-lived intangible assets and determined that the estimated lives were appropriate and that there were no indicators of impairment at March 31, 2024.

We recorded total goodwill of $23 million as a result of the total consideration exceeding the fair value of the net assets acquired from Riverbend. For reporting purposes, we included the intangible assets and goodwill from the Riverbend acquisition within our Residential Investor Mortgage Banking segment. There were no changes to the balance of goodwill during the three months ended March 31, 2024.

The potential liability resulting from the contingent consideration arrangement with Riverbend was recorded at its acquisition-date fair value ofzero as part of the total consideration for the acquisition of Riverbend. At March 31, 2024, the estimated fair value of this contingent liability waszero on our consolidated balance sheets. Our contingent consideration liability is recorded at fair value and periodic changes in the estimated fair value are recorded through Other expenses on our consolidated statements of income. During the three months ended March 31, 2024, we did not record any contingent consideration income or expense related to our acquisition of Riverbend. See Note 17 for additional information on our contingent consideration liability.

Note 3. Summary of Significant Accounting Policies

Significant Accounting Policies

Included in Note 3 to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2023 is a summary of our significant accounting policies.

Recent Accounting Pronouncements

Newly Adopted Accounting Standard Updates ("ASUs")

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security should not be considered in measuring its fair value and introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The amendments in this update are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. We adopted this guidance in the first quarter of 2024, which did not have a material impact on our consolidated financial statements.

In December 2022, the FASB issued ASU 2022-06, "Reference Rate Reform (Topic 848) - Deferral of the Sunset Date of Topic 848." This new guidance defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. The objective of the guidance in Topic 848 is to provide temporary relief during the transition period. Through March 31, 2024, we had not elected to apply the optional expedients and exceptions to any of our existing contracts, hedging relationships, or other transactions. At March 31, 2024, we had no remaining LIBOR-indexed financial assets or liabilities.

Other Recent Accounting Pronouncements Pending Adoption

In August 2023, the FASB issued ASU 2023-05, "Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement." ASU 2023-05 requires a joint venture, upon formation, to initially measure its assets and liabilities at fair value. This generally aligns the treatment to be consistent with the guidance for business combinations. Joint venture entities that are private companies may elect to include customer-related intangible assets and non-competition agreements within goodwill and not as separate intangible assets. This new guidance is effective for all joint venture entities with a formation date on or after January 1, 2025, with early adoption permitted. Joint ventures formed prior to the adoption date may elect to apply the new guidance retrospectively back to their original formation date. We are evaluating the accounting and disclosure requirements of ASU 2023-05 and we plan to adopt this new guidance by the required date. We do not anticipate that this update will have a material impact on our financial statements.

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. "ASU 2023-07 expands the breadth and frequency of segment disclosures by requiring disclosures of significant segment expenses regularly provided to the Chief Operating Decision Maker ("CODM") and included within the reported measures of a segment's profit or loss. Other disclosure requirements involve the amount and composition of other segment items and how the CODM uses the reported measures of profit or loss to assess segment performance and to decide how to allocate resources. The ASU does not change how a public entity identifies its operating segments, aggregates those operating segments or applies the quantitative thresholds to determine its reportable segments. This new guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. We are evaluating the accounting and disclosure requirements of ASU 2023-07 and we plan to adopt this new guidance by the required date.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." ASU 2023-09 improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation disclosures. Additionally, income taxes paid are required to be disaggregated by jurisdiction, along with other amendments to enhance the effectiveness of income tax disclosures. This new guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted and upon adoption, the guidance can be adopted on a prospective or retrospective basis. We are evaluating the accounting and disclosure requirements of ASU 2023-07 and we plan to adopt this new guidance by the required date.

In March 2024, the FASB issued ASU 2024-01, "Compensation - Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards." ASU 2024-01 provides clarification for determining whether a profits interest award should be accounted for as a share-based payment arrangement or other compensation. This new guidance is effective for annual and interim periods beginning after December 15, 2024. Early adoption is permitted and upon adoption, the guidance can be adopted on a prospective or retrospective basis. We are evaluating the accounting and disclosure requirements of ASU 2024-01 and we plan to adopt this new guidance by the required date.

Balance Sheet Netting

Certain of our derivatives and short-term debt are subject to master netting arrangements or similar agreements. Under GAAP, in certain circumstances we may elect to present certain financial assets, liabilities and related collateral subject to master netting arrangements in a net position on our balance sheets. However, we do not elect to report any of these financial assets or liabilities on a net basis, and instead present them on a gross basis on our consolidated balance sheets.

The following table presents financial assets and liabilities that are subject to master netting arrangements or similar agreements categorized by financial instrument, together with corresponding financial instruments and corresponding collateral received or pledged at March 31, 2024 and December 31, 2023.

Table 3.1 – Offsetting of Financial Assets, Liabilities, and Collateral

(1)Amounts presented in these columns are limited in total to the net amount of assets or liabilities presented in the prior column by instrument. In certain cases, we have pledged excess cash collateral or financial assets to a counterparty (which, in certain circumstances, may be a clearinghouse) that exceed the financial liabilities subject to a master netting arrangement or similar agreement. Additionally, in certain cases, counterparties may have pledged excess cash collateral to us that exceeds our corresponding financial assets. In each case, these excess amounts are excluded from the table; they are separately reported in our consolidated balance sheets as assets or liabilities, respectively.

(2)Interest rate agreements, TBAs and futures are components of derivative instruments on our consolidated balance sheets. Loan warehouse debt, which is secured by certain Residential consumer and Residential investor loans, is a component of Short-term debt and Long-term debt on our consolidated balance sheets.

For each category of financial instrument set forth in the table above, the assets and liabilities resulting from individual transactions within that category between us and a counterparty are subject to a master netting arrangement or similar agreement with that counterparty that provides for individual transactions to be aggregated and treated as a single transaction. For certain categories of these instruments, our transactions generally are cleared and settled through one or more clearinghouses that are substituted as our counterparty. References herein to master netting arrangements or similar agreements include the arrangements and agreements governing the clearing and settlement of these transactions through the clearinghouses. In the event of the termination and close-out of any of those transactions, the corresponding master netting agreement or similar agreement provides for settlement on a net basis. Any such settlement would include the proceeds of the liquidation of any corresponding collateral, subject to certain limitations on termination, settlement, and liquidation of collateral that may apply in the event of the bankruptcy or insolvency of a party. Such limitations should not inhibit the eventual practical realization of the principal benefits of those transactions or the corresponding master netting arrangement or similar agreement and any corresponding collateral.

Note 4. Principles of Consolidation

GAAP requires us to consider whether securitizations we sponsor and other transfers of financial assets should be treated as sales or financings, as well as whether any VIEs that we hold variable interests in – for example, certain legal entities often used in securitization and other structured finance transactions – should be included in our consolidated financial statements. The GAAP principles we apply require us to reassess our requirement to consolidate VIEs each quarter and therefore our determination may change based upon new facts and circumstances pertaining to each VIE. This could result in a material impact to our consolidated financial statements during subsequent reporting periods.

Analysis of Consolidated VIEs

At March 31, 2024, we consolidated Legacy Sequoia, Sequoia, CAFL, Freddie Mac SLST, Freddie Mac K-Series, and HEI securitization entities that we determined were VIEs and for which we determined we were the primary beneficiary. Each of these entities is independent of Redwood and of each other and the assets and liabilities of these entities are not owned by and are not legal obligations of ours. Our exposure to these entities is primarily through the financial interests we have retained, although for certain securitizations, we are exposed to financial risks associated with our role as a sponsor, servicing administrator, collateral administrator, or depositor of these entities or as a result of our having sold assets directly or indirectly to these entities.

We also consolidatetwo Servicing Investment entities formed to invest in servicing-related assets that we determined were VIEs and for which we determined we were the primary beneficiary. At March 31, 2024, we held an 80% ownership interest in, and were responsible for the management of, each entity. See Note 11 for a further description of these entities and the investments they hold and Note 13 for additional information on the minority partner’s non-controlling interest. Additionally, we consolidated an entity that was formed to finance servicer advances that we determined was a VIE and for which we, through our control of one of the aforementioned partnerships, were the primary beneficiary. The servicer advance financing consists of non-recourse short-term securitization debt, secured by servicer advances. We consolidate the securitization entity, but the securitization entity is independent of Redwood and the assets and liabilities are not owned by and are not legal obligations of Redwood. See Note 14 for additional information on the servicer advance financing.

During the fourth quarter of 2023 and the third quarter of 2021, we co-sponsoredtwo HEI securitization transactions, and we consolidate the respective HEI securitization entities that we determined were VIEs and for which we determined we were the primary beneficiary. At March 31, 2024 and December 31, 2023, we owned a portion of the subordinate certificates issued by these entities and had certain decision-making rights for the entities. See Note 10 for a further description of these entities and the investments it holds and Note 13 for additional information on non-controlling interests in these entities. We consolidate these HEI securitization entities, but the securitization entities are independent of Redwood and the assets and liabilities are not owned by and are not legal obligations of Redwood.

During the fourth quarter of 2023, we re-securitized subordinate securities we owned in our consolidated Freddie Mac SLST securitization trusts through the transfer of these financial assets to a re-securitization trust that we sponsored. We retain a subordinate investment in the re-securitization trust and maintain certain discretionary rights associated with the ownership of this investment that we determined reflected a controlling financial interest in the entity, as we have both the power to direct the activities that most significantly impact the performance of the VIE and the right to receive benefits of, and the obligation to absorb losses from, the VIE that could potentially be significant to the VIE.

For certain of our consolidated VIEs, we have elected to account for the assets and liabilities of these entities as collateralized financing entities ("CFE"). A CFE is a variable interest entity that holds financial assets and issues beneficial interests in those assets, and these beneficial interests have contractual recourse only to the related assets of the CFE. Accounting guidance for CFEs allows companies to elect to measure both the financial assets and financial liabilities of a CFE using the more observable of the fair value of the financial assets or fair value of the financial liabilities. The net equity in an entity accounted for under the CFE election effectively represents the fair value of the beneficial interests we own in the entity.

In addition to our consolidated VIEs for which we made the CFE election, we consolidate certain VIEs for which we did not make the CFE election, and elected to account for the ABS issued by these entities at amortized cost. These include two CAFL bridge loan securitizations and the Freddie Mac SLST re-securitization.

The following table presents a summary of the assets and liabilities of our consolidated VIEs.

Table 4.1 – Assets and Liabilities of Consolidated VIEs

(1)Value of our investments in VIEs, as presented in this table, generally represents the fair value of the economic interests we own in VIEs (i.e., the securities or other interests we legally own in the consolidated securitizations or other VIEs). While most of our VIEs are accounted for under the CFE election (whereby the net equity in the VIE generally represents the fair value of our retained interests and associated accrued interest receivable), certain entities, including two CAFL bridge loan securitizations (included within the CAFL column), our SLST re-securitization (included within the Freddie Mac SLST column), and our Servicing Investment VIEs are not accounted for under the CFE election and their associated ABS issued are accounted for at amortized historical cost. As of March 31, 2024 and December 31, 2023, the fair value of our interests in the CAFL term loan securitizations accounted for under the CFE election were $333 million and $323 million, respectively, and the fair value of our interest in the CAFL bridge loan securitizations accounted for under the CFE election was$21 million and $22 million, respectively, with the difference from the tables above generally representing ABS issued and carried at amortized historical cost and accrued interest on our economic interests. As of March 31, 2024 and December 31, 2023, the fair value of our interests in the Freddie Mac SLST securitizations accounted for under the CFE election were $271 million and $274 million, respectively, with the difference from the tables above representing ABS issued and carried at amortized historical cost.

The following tables present income (loss) from these VIEs for the three months ended March 31, 2024 and 2023.

Table 4.2 – Income (Loss) from Consolidated VIEs

We consolidate the assets and liabilities of certain Sequoia, CAFL and HEI securitization entities, as we did not meet either the GAAP sale criteria at the time we transferred financial assets to these entities or we determined we were the primary beneficiary of a VIE. Our involvement in consolidated Sequoia, CAFL and HEI entities continues in the following ways: (i) we continue to hold subordinate investments in each entity, and for certain entities, more senior investments; (ii) we maintain certain discretionary rights associated with our sponsorship of, or our subordinate investments in, each entity, including rights to direct loss mitigation activities; and (iii) we continue to hold a right to call the assets of certain entities (once they have been paid down below a specified threshold) at a price equal to, or in excess of, the current outstanding principal amount of the entity’s asset-backed securities issued. These factors have resulted in our continuing to consolidate the assets and liabilities of these Sequoia, CAFL and HEI entities in accordance with GAAP.

We consolidate the assets and liabilities of certain Freddie Mac K-Series and SLST securitization (and re-securitzation) trusts resulting from our investment in subordinate securities issued by these trusts, and in the case of certain CAFL securitizations, resulting from securities acquired through our acquisition of CoreVest. Additionally, we consolidate the assets and liabilities of Servicing Investment entities from our investment in servicer advance investments and excess MSRs. In each case, we maintain certain discretionary rights associated with the ownership of these investments that we determined reflected a controlling financial interest, as we have both the power to direct the activities that most significantly impact the economic performance of the VIEs and the right to receive benefits of and the obligation to absorb losses from the VIEs that could potentially be significant to the VIEs.

Analysis of Unconsolidated VIEs with Continuing Involvement

Since 2012, we have transferred residential consumer loans to 46 Sequoia securitization entities sponsored by us that are still outstanding as of March 31, 2024, and accounted for these transfers as sales for financial reporting purposes, in accordance with GAAP. We also determined we were not the primary beneficiary of these VIEs as we lacked the power to direct the activities that will have the most significant economic impact on the entities. For certain of these transfers to securitization entities, for the transferred loans where we held the servicing rights prior to the transfer and continued to hold the servicing rights following the transfer, we recorded mortgage servicing rights ("MSRs") on our consolidated balance sheets, and classified those MSRs as Level 3 assets. We also retained senior and subordinate securities in these securitizations that we classified as Level 3 assets. Our continuing involvement in these securitizations is limited to customary servicing obligations associated with retaining servicing rights (which we retain a third-party sub-servicers to perform) and the receipt of interest income associated with the securities we retained.

The following table summarizes the cash flows during the three months ended March 31, 2024 and 2023 between us and the unconsolidated VIEs sponsored by us and accounted for as sales since 2012.

Table 4.3 – Cash Flows Related to Unconsolidated VIEs Sponsored by Redwood

The following table presents additional information at March 31, 2024 and December 31, 2023, related to unconsolidated VIEs sponsored by Redwood and accounted for as sales since 2012.

Table 4.4 – Unconsolidated VIEs Sponsored by Redwood

(1)Maximum loss exposure from our involvement with unconsolidated VIEs pertains to the carrying value of our securities and MSRs retained from these VIEs and represents estimated losses that would be incurred under severe, hypothetical circumstances, such as if the value of our interests and any associated collateral declines to zero. This does not include, for example, any potential exposure to representation and warranty claims associated with our initial transfer of loans into a securitization.

The following table presents key economic assumptions for assets retained from unconsolidated VIEs and the sensitivity of their fair values to immediate adverse changes in those assumptions at March 31, 2024 and December 31, 2023.

Table 4.5 – Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated VIEs Sponsored by Redwood

(1)Senior securities are comprised entirely of interest-only securities at March 31, 2024 and at December 31, 2023.

(2)Expected life, prepayment speed assumption, discount rate assumption, and credit loss assumption presented in the tables above represent weighted averages.

Analysis of Unconsolidated Third-Party VIEs

Third-party VIEs are securitization entities in which we maintain an economic interest, but do not sponsor. Our economic interest may include several securities and other investments from the same third-party VIE, and in those cases, the analysis is performed in consideration of all of our interests. The following table presents a summary of our interests in third-party VIEs at March 31, 2024 and December 31, 2023, grouped by asset type.

Table 4.6 – Third-Party Sponsored VIE Summary

We determined that we are not the primary beneficiary of these third-party VIEs, as we do not have the required power to direct the activities that most significantly impact the economic performance of these entities. Specifically, we do not service or manage these entities or otherwise solely hold decision making powers that are significant. As a result of this assessment, we do not consolidate any of the underlying assets and liabilities of these third-party VIEs – we only account for our specific interests in them.

Our assessments of whether we are required to consolidate a VIE may change in subsequent reporting periods based upon changing facts and circumstances pertaining to each VIE. Any related accounting changes could result in a material impact to our financial statements.

Note 5. Fair Value of Financial Instruments

For financial reporting purposes, we follow a fair value hierarchy established under GAAP that is used to determine the fair value of financial instruments. This hierarchy prioritizes relevant market inputs in order to determine an “exit price” at the measurement date, or the price at which an asset could be sold or a liability could be transferred in an orderly process that is not a forced liquidation or distressed sale. Level 1 inputs are observable inputs that reflect quoted prices for identical assets or liabilities in active markets. Level 2 inputs are observable inputs other than quoted prices for an asset or liability that are obtained through corroboration with observable market data. Level 3 inputs are unobservable inputs (e.g., our own data or assumptions) that are used when there is little, if any, relevant market activity for the asset or liability required to be measured at fair value.

In certain cases, inputs used to measure fair value fall into different levels of the fair value hierarchy. In such cases, the level at which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. Our assessment of the significance of a particular input requires judgment and considers factors specific to the asset or liability being measured.

The following table presents the carrying values and estimated fair values of assets and liabilities that are required to be recorded or disclosed at fair value at March 31, 2024 and December 31, 2023.

Table 5.1 – Carrying Values and Fair Values of Assets and Liabilities

(1)Includes HEI held at Redwood and HEI held at consolidated HEI securitization entities. See further discussion in Note 10.

(2)These investments are included in Other investments on our consolidated balance sheets.

(3)These assets are included in Other assets on our consolidated balance sheets.

(4)Short-term debt excludes short-term convertible notes, which are included under "Convertible notes, net."

(5)These liabilities are included in Accrued expenses and other liabilities on our consolidated balance sheets.

(6)These liabilities are primarily included in Long-term debt, net on our consolidated balance sheets. Convertible notes, net also includes convertible notes classified as Short-term debt. See Note 14 for more information on Short-term debt.

During the three months ended March 31, 2024 and 2023, we elected the fair value option for $48 million and $2 million of securities, respectively, $1.00 billion and $53 million (principal balance) of residential consumer loans, respectively, and $327 million and $442 million (principal balance) of residential investor loans, respectively. Additionally, during the three months ended March 31, 2024 and 2023, we elected the fair value option for $0.3 million and $17 million of HEI, respectively. For the three months ended March 31, 2024 and 2023, we elected the fair value option for $0.2 million andzero, respectively, of Other investments.

The following table presents the assets and liabilities that are reported at fair value on our consolidated balance sheets on a recurring basis at March 31, 2024 and December 31, 2023, as well as the fair value hierarchy of the valuation inputs used to measure fair value.

Table 5.2 – Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents additional information about Level 3 assets and liabilities measured at fair value on a recurring basis for the three months ended March 31, 2024.

Table 5.3 – Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis

(1) Other settlements, net: for residential consumer and residential investor loans, represents the transfer of loans to REO; for derivatives, represents the transfer of the fair value of loan purchase and interest rate lock commitments at the time loans are acquired to the basis of residential consumer and residential investor loans; and for MSRs and other investments, primarily represents an investment that was exchanged into a new instrument that is no longer measured at fair value on a recurring basis.

(2) For the purpose of this presentation, derivative assets and liabilities, which consist of loan purchase commitments, are presented on a net basis.

The following table presents the portion of fair value gains or losses included in our consolidated statements of income that were attributable to Level 3 assets and liabilities recorded at fair value on a recurring basis and held at March 31, 2024 and 2023. Gains or losses incurred on assets or liabilities sold, matured, called, or fully written down during the three months ended March 31, 2024 and 2023 are not included in this presentation.

Table 5.4 – Portion of Net Fair Value Gains (Losses) Attributable to Level 3 Assets and Liabilities Still Held at March 31, 2024 and March 31, 2023 Included in Net Income

(1) Represents the portion of net fair value gains or losses included in our consolidated statements of income related to securitized loans, securitized HEI, and the associated ABS issued at our consolidated securitization entities held at March 31, 2024 and March 31, 2023, which, netted together, represent the change in value of our investments at the consolidated VIEs under the CFE election, excluding REO.

The following table presents information on assets recorded at fair value on a non-recurring basis at March 31, 2024. This table does not include the carrying value and gains or losses associated with the asset types below that were not recorded at fair value on our consolidated balance sheets at March 31, 2024.

Table 5.5 – Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis at March 31, 2024

(1) Strategic investments represent investments we made in companies either through our RWT Horizons venture investment platform or separately at a corporate level. See Note 11 for further detail regarding Strategic Investments

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, 2024 and 2023.

Table 5.6 – Market Valuation Gains and Losses, Net

Footnotes to Table 5.6

(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 residential consumer mortgage banking operations.

(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 income, as these amounts do not represent market valuation changes.

(3)Includes changes in fair value of the residential consumer 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 income presented above does not include net MSR fee income or provisions for repurchases of MSRs, as these amounts do not represent market valuation adjustments.

At March 31, 2024, our valuation policy and processes had not changed from those described in our Annual Report on Form 10-K for the year ended December 31, 2023.

The following table provides quantitative information about the significant unobservable inputs used in the valuation of our Level 3 assets and liabilities measured at fair value.

Table 5.7 – Fair Value Methodology for Level 3 Financial Instruments

Table 5.7 – Fair Value Methodology for Level 3 Financial Instruments (continued)

Footnotes to Table 5.7

(1)The weighted average input values for all loan types are based on unpaid principal balance. The weighted average input values for all other assets and liabilities are based on relative fair value.

(2)Values represent pricing inputs used in securitization pricing model. Credit spreads represent spreads to applicable swap rates unless specified otherwise.

(3)The fair value of the loans and HEI held by consolidated entities is based on the fair value of the ABS issued by these entities and the securities and other investments we own in those entities, which we determined were more readily observable in accordance with accounting guidance for collateralized financing entities. At March 31, 2024, the fair value of securities we owned at the consolidated Sequoia, CAFL Term, CAFL Bridge (under CFE), Freddie Mac SLST, Freddie Mac K-Series, and HEI securitization entities was $218 million, $333 million, $21 million, $271 million, $34 million, and $37 million, respectively. CAFL Bridge only includes the one securitization entity for which we made the CFE election.

(4)Represents the estimated average duration of outstanding servicer advances at a given point in time (not taking into account new advances made with respect to the pool).

(5)Fair value presented in this line item for ABS issued at consolidated HEI entities does not include non-controlling interests in our HEI entities, which we account for separately as liabilities in our Consolidated Balance Sheets and carry at fair value. However, given the HEI non-controlling interests are priced using the same model and inputs, the unobservable inputs and input values provided in this section include those for the HEI non-controlling interests.

Determination of Fair Value

We generally use both market comparable information and discounted cash flow modeling techniques to determine the fair value of our Level 3 assets and liabilities. Use of these techniques requires determination of relevant inputs and assumptions, some of which represent significant unobservable inputs as indicated in the preceding table. Accordingly, a significant increase or decrease in any of these inputs in isolation — such as anticipated credit losses, prepayment rates, interest rates, or other valuation assumptions — would likely result in a significantly lower or higher fair value measurement.

Included in Note 5 to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2023 is a more detailed description of our financial instruments measured at fair value and their significant inputs, as well as the general classification of such instruments pursuant to the Level 1, Level 2, and Level 3 valuation hierarchy.

Certain of our Other investments (inclusive of strategic investments in early-stage companies) are Level 3 financial instruments that we account for under the fair value option. These investments generally take the form of equity or debt with conversion features and do not have readily determinable fair values. We initially record these investments at cost and adjust their fair value based on observable price changes, such as follow-on capital raises by these companies or secondary sales of these, or similar, equity or debt instruments, and will also evaluate impacts to valuation from changing market conditions and underlying business performance. As of March 31, 2024, the carrying value of these investments was $3 million.

Note 6. Residential Consumer Loans

We acquire residential consumer loans from third-party originators and may sell or securitize these loans or hold them for investment. The following table summarizes the classifications and carrying values of the residential consumer loans owned at Redwood and at consolidated Sequoia and Freddie Mac SLST entities at March 31, 2024 and December 31, 2023.

Table 6.1 – Classifications and Carrying Values of Residential Consumer Loans

At March 31, 2024, we owned mortgage servicing rights associated with $504 million (principal balance) of residential consumer loans owned at Redwood that were purchased from third-party originators. The value of these MSRs is included in the carrying value of the associated loans on our consolidated balance sheets. We contract with licensed sub-servicers that perform servicing functions for these loans.

Residential Consumer Loans Held-for-Sale

The following table summarizes the characteristics of residential consumer loans held-for-sale at March 31, 2024 and December 31, 2023.

Table 6.2 – Characteristics of Residential Consumer Loans Held-for-Sale

At both March 31, 2024 and December 31, 2023, there wereno residential consumer loans held-for-sale that were 90 days or more delinquent or in foreclosure.

The following table provides the activity of residential consumer loans held-for-sale during the three months ended March 31, 2024 and 2023.

Table 6.3 – Activity of Residential Consumer Loans Held-for-Sale

(1)Net market valuation gains on residential consumer loans held-for-sale are recorded primarily through Mortgage banking activities, net on our consolidated statements of income.

Residential Consumer Loans Held-for-Investment at Fair Value

We invest in residential subordinate securities issued by Legacy Sequoia, Sequoia and Freddie Mac SLST securitization trusts and consolidate the underlying residential consumer loans owned by these entities for financial reporting purposes in accordance with GAAP. The following tables summarize the characteristics of the residential consumer loans owned at consolidated Sequoia and Freddie Mac SLST entities at March 31, 2024 and December 31, 2023.

Table 6.4 – Characteristics of Residential Consumer Loans Held-for-Investment

(1)The fair value of the loans held by consolidated entities was based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable, in accordance with accounting guidance for collateralized financing entities. The net impact to our income statement associated with our economic investment in these securitization entities is presented in Table 4.2.

(2)For loans held at consolidated entities, the number and unpaid principal balance of loans 90+ days delinquent includes loans in foreclosure.

For loans held at our consolidated Legacy Sequoia, Sequoia, and Freddie Mac SLST entities, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines, and are recorded in Investment fair value changes, net on our consolidated statements of income. The following table provides the activity of residential consumer loans held-for-investment at consolidated entities during the three months ended March 31, 2024 and 2023.

Table 6.5 – Activity of Residential Consumer Loans Held-for-Investment at Consolidated Entities

(1)Represents the transfer of loans from held-for-sale to held-for-investment associated with Sequoia securitizations.

Note 7. Residential Investor Loans

We originate and invest in residential investor loans, including term loans and bridge loans. The following table summarizes the classifications and carrying values of the residential investor loans owned at Redwood and at consolidated CAFL entities at March 31, 2024 and December 31, 2023.

Table 7.1 – Classifications and Carrying Values of Residential Investor Loans

Nearly all of the outstanding residential investor term loans at March 31, 2024 were first-lien, fixed-rate loans with original maturities of three, five, seven, or ten years.

The outstanding residential investor bridge loans held-for-investment at March 31, 2024 were first-lien, interest-only loans with original maturities of 6 to 36 months and were comprised of 73% one-month SOFR-indexed adjustable-rate loans, and 27% fixed-rate loans.

At March 31, 2024, we had $513 million in commitments to fund residential investor bridge loans. See Note 17 for additional information on these commitments.

The following table provides the activity of residential investor loans at Redwood during the three months ended March 31, 2024 and 2023.

Table 7.2 – Activity of Residential Investor Loans at Redwood

(1)The principal balance of loans sold to third parties is net of $15 million related to construction draws on residential investor bridge loans sold to the Oaktree joint venture.

(2)For residential investor term at Redwood, represents the transfer of loans from held-for-sale to held-for-investment associated with CAFL term securitizations. For residential investor bridge at Redwood, represents the transfer of residential investor bridge loans from "Bridge at Redwood" to "Bridge at CAFL" resulting from their inclusion in one of our bridge loan securitizations, which generally have replenishment features.

(3)Represents loan origination fee income and net market valuation changes from the time a loan is originated to when it is sold, securitized or transferred to our investment portfolio. See Table 20.1 for additional detail on Mortgage banking activities income (loss).

Residential Investor Loans Held-for-Investment at CAFL

We invest in securities issued by CAFL securitizations sponsored by CoreVest and consolidate the underlying residential investor term loans and bridge loans owned by these entities. For loans held at our consolidated CAFL Term entities and one CAFL Bridge entity, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines, and are recorded through Investment fair value changes, net on our consolidated statements of income. The net impact to our income statement associated with our economic investments in the CAFL Term entities is presented in Table 4.2. We did not elect to account for two of our CAFL Bridge securitizations under the collateralized financing entity guidelines but have elected to account for the loans in these securitizations at fair value, and changes in fair value for these loans are recorded through Investment fair value changes, net on our consolidated statements of income.

The following table provides the activity of residential investor loans held-for-investment at CAFL during the three months ended March 31, 2024 and 2023.

Table 7.3 – Activity of Residential Investor Loans Held-for-Investment at CAFL

Footnote to Table 7.3

(1)Net market valuation gains (losses) on residential investor loans held-for-investment at CAFL are recorded through Investment fair value changes, net on our consolidated statements of income. For loans held at our consolidated CAFL Term entities and one CAFL Bridge entity, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines. The net impact to our income statement associated with our economic investment in these securitization entities is presented in Table 4.2.

Residential Investor Loan Characteristics

The following tables summarize the characteristics of the residential investor loans owned at Redwood and at consolidated CAFL entities at March 31, 2024 and December 31, 2023.

Table 7.4 – Characteristics of Residential Investor Loans

Footnotes to Table 7.4

(1)The fair value of the loans held by consolidated CAFL Term entities and one CAFL Bridge entity were based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable in accordance with accounting guidance for collateralized financing entities.

(2)The number of loans 90+ days delinquent includes loans in foreclosure.

(3)May include loans that are less than 90 days delinquent.

At March 31, 2024 and December 31, 2023, in addition to residential investor bridge and term loans that were 90 or more days delinquent, residential investor bridge loans with an aggregate unpaid principal balance of $142 million and $207 million, respectively, and an aggregate fair value of $137 million and $201 million, respectively, were on non-accrual status.

The following table presents the unpaid principal balance of business purpose loans recorded on our consolidated balance sheets at March 31, 2024 by collateral/strategy type.

Table 7.5 – Residential Investor Loans Collateral/Strategy Type

(1)The fair value of the loans held by consolidated CAFL Term entities and one CAFL Bridge entity were based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable in accordance with GAAP for collateralized financing entities.

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

rent.

(3) Includes loans for light to moderate renovation of residential and small multifamily properties (generally less than 20 units).

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

Note 8. Consolidated Agency Multifamily Loans

We invest in multifamily subordinate securities issued by a Freddie Mac K-Series securitization trust and consolidate the underlying multifamily loans owned by this entity for financial reporting purposes in accordance with GAAP. The following table summarizes the characteristics of the multifamily loans consolidated at Redwood at March 31, 2024 and December 31, 2023.

Table 8.1 – Characteristics of Consolidated Agency Multifamily Loans

There wereno consolidated agency multifamily loans with 90+ day delinquencies andno multifamily loans in foreclosure at March 31, 2024 and December 31, 2023.

The outstanding Consolidated Agency multifamily loans held-for-investment at the consolidated Freddie Mac K-Series entity at March 31, 2024 were first-lien, fixed-rate loans that were originated in 2015. The following table provides the activity of multifamily loans held-for-investment during the three months ended March 31, 2024 and 2023.

Table 8.2 – Activity of Consolidated Agency Multifamily Loans Held-for-Investment

(1)Net market valuation gains (losses) on multifamily loans held-for-investment are recorded through Investment fair value changes, net on our consolidated statements of income. For loans held at our consolidated Freddie Mac K-Series entity, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines. The net impact to our income statement associated with our economic investment in these securitization entities is presented in Table 4.2.

Note 9. Real Estate Securities

We invest in real estate securities that we create and retain from our Sequoia securitizations or acquire from third parties. The following table presents the fair values of our real estate securities by type at March 31, 2024 and December 31, 2023.

Table 9.1 – Fair Value of Real Estate Securities by Type

Our real estate securities include mortgage-backed securities, which are presented in accordance with their general position within a securitization structure based on their rights to cash flows. Senior securities are those interests in a securitization that generally have the first right to cash flows and are last in line to absorb losses. Mezzanine securities are interests that are generally subordinate to senior securities in their rights to receive cash flows, and have subordinate securities below them that are first to absorb losses. Subordinate securities are all interests below mezzanine. Nearly all of our residential securities are supported by collateral that was designated as prime at the time of issuance.

Trading Securities

We elected the fair value option for certain securities and classify them as trading securities. Our trading securities include both residential and multifamily mortgage-backed securities. The following table presents the fair value of trading securities by position and collateral type at March 31, 2024 and December 31, 2023.

Table 9.2 – Fair Value of Trading Securities by Position

(1)Includes $32 million and $28 million of Sequoia certificated mortgage servicing rights at March 31, 2024 and December 31, 2023, respectively.

The following table presents the unpaid principal balance of trading securities by position and collateral type at March 31, 2024 and December 31, 2023.

Table 9.3 – Unpaid Principal Balance of Trading Securities by Position

(1)Our senior trading securities are comprised of interest-only securities, for which there is no principal balance.

The following table provides the activity of trading securities during the three months ended March 31, 2024 and 2023.

Table 9.4 – Trading Securities Activity

(1)Net market valuation gains (losses) on trading securities are recorded through Investment fair value changes, net and Mortgage banking activities, net on our consolidated statements of income.

AFS Securities

The following table presents the fair value of our available-for-sale ("AFS") securities by position and collateral type at March 31, 2024 and December 31, 2023.

Table 9.5 – Fair Value of Available-for-Sale Securities by Position

The following table provides the activity of available-for-sale securities during the three months ended March 31, 2024 and 2023.

Table 9.6 – Available-for-Sale Securities Activity

(1)Net unrealized gains (losses) on AFS securities are recorded on our consolidated balance sheets through Accumulated other comprehensive loss.

At March 31, 2024, we had $4 million of AFS securities with contractual maturities less than five years, $7 million with contractual maturities greater than five years but less than ten years, and the remainder of our AFS securities had contractual maturities greater than ten years.

We often purchase AFS securities at a discount to their outstanding principal balances. To the extent we purchase an AFS security that has a likelihood of incurring a loss, we do not amortize into income the portion of the purchase discount that we do not expect to collect due to the inherent credit risk of the security. We may also expense a portion of our investment in the security to the extent we believe that principal losses will exceed the purchase discount. We designate any amount of unpaid principal balance that we do not expect to receive and thus do not expect to earn or recover as a credit reserve on the security. Any remaining net unamortized discounts or premiums on the security are amortized into income over time using the effective yield method.

The following table presents the components of carrying value (which equals fair value) of AFS securities at March 31, 2024 and December 31, 2023.

Table 9.7 – Carrying Value of AFS Securities

The following table presents the changes for the three months ended March 31, 2024, in unamortized discount and designated credit reserves on residential AFS securities.

Table 9.8 – Changes in Unamortized Discount and Designated Credit Reserves on AFS Securities

AFS Securities with Unrealized Losses

The following table presents the total carrying value (fair value) and unrealized losses of residential AFS securities that were in a gross unrealized loss position at March 31, 2024 and December 31, 2023.

Table 9.9 – AFS Securities in Gross Unrealized Loss Position by Holding Periods

At March 31, 2024, after giving effect to purchases, sales, and extinguishment due to credit losses, our consolidated balance sheets included 69 AFS securities, of which 13 were in an unrealized loss position and 12 were in a continuous unrealized loss position for 12 consecutive months or longer. At December 31, 2023, our consolidated balance sheets included 66 AFS securities, of which 21 were in an unrealized loss position and 19 were in a continuous unrealized loss position for 12 consecutive months or longer.

Evaluating AFS Securities for Credit Losses

Gross unrealized losses on our AFS securities were $5 million at March 31, 2024. We evaluate all securities in an unrealized loss position to determine if the impairment is credit-related (resulting in an allowance for credit losses recorded in earnings) or non-credit-related (resulting in an unrealized loss through other comprehensive income). At March 31, 2024, we did not intend to sell any of our AFS securities that were in an unrealized loss position, and it is more likely than not that we will not be required to sell these securities before recovery of their amortized cost basis, which may be at their maturity. We review our AFS securities that are in an unrealized loss position to identify those securities with losses based on an assessment of changes in expected cash flows for such securities, which considers recent security performance and expected future performance of the underlying collateral.

At March 31, 2024, our current expected credit loss ("CECL") allowance related to our AFS securities was $2 million. AFS securities for which an allowance is recognized have experienced, or are expected to experience, adverse cash flow changes. In determining our estimate of cash flows for AFS securities we may consider factors such as structural credit enhancement, past and expected future performance of underlying mortgage loans, including timing of expected future cash flows, which are informed by prepayment rates, default rates, loss severities, delinquency rates, percentage of non-performing loans, FICO scores at loan origination, year of origination, loan-to-value ratios, and geographic concentrations, as well as general market assessments. Changes in our evaluation of these factors impacted the cash flows expected to be collected at the assessment date and were used to determine if there were credit-related adverse cash flows and if so, the amount of credit-related losses. Significant judgment is used in both our analysis of the expected cash flows for our AFS securities and any determination of security credit losses.

The table below summarizes the weighted average of the significant credit quality indicators we used for the credit loss allowance on our AFS securities at March 31, 2024.

Table 9.10 – Significant Credit Quality Indicators

The following table details the activity related to the allowance for credit losses for AFS securities for the three months ended March 31, 2024.

Table 9.11 – Rollforward of Allowance for Credit Losses

Gains and losses from the sale of AFS securities are recorded as Realized gains, net, in our consolidated statements of income. During the three months ended March 31, 2024, we didnot sell any AFS securities. During the three months ended March 31, 2023, we realized gains of $1 million on sales of AFS securities.

Note 10. Home Equity Investments (HEI)

From time to time, we may purchase home equity investment contracts from third party originators under flow purchase agreements. Additionally, in the third quarter of 2023, we began to originate HEI directly. Each HEI provides the owner of such HEI the right to purchase a percentage ownership interest in an associated residential property, and the homeowner's obligations under the HEI are secured by a lien (primarily second liens) on the property created by recording a security instrument (e.g., deed of trust) with respect to the property. Our investments in HEI expose us to both home price appreciation and depreciation of the associated property.

As discussed in Note 3, we co-sponsoredtwo HEI securitization transactions. We consolidate these HEI securitization entities in accordance with GAAP and have elected to account for them under the CFE election. As such, market valuation changes for the securitized HEI are based on the estimated fair value of the associated ABS issued by the entity, including the interest we own, and are reported in HEI income, net on our Consolidated statements of income.

The following table presents our HEI at March 31, 2024 and December 31, 2023.

Table 10.1 – Home Equity Investments

The following table details our HEI activity during the three months ended March 31, 2024 and 2023.

Table 10.2 – Activity of HEI

Note 10. Home Equity Investments (HEI) - (continued)

The following table provides the components of HEI income, net for the three months ended March 31, 2024 and 2023 and reflect net market valuation gains (losses) recorded on HEI at Redwood and on securitized HEI, net of the third party and non-controlling interests in the HEI securitizations that are not owned by Redwood.

Table 10.3 – Components of HEI Income, net

(1)Amount includes interest expense associated with ABS issued, which totaled $3 million and $1 million for the three months ended March 31, 2024 and 2023, respectively.

The following tables summarizes the characteristics of our HEI at March 31, 2024 and December 31, 2023.

Table 10.4 – HEI Characteristics

Note 11. Other Investments

Other investments at March 31, 2024 and December 31, 2023 are summarized in the following table.

Table 11.1 – Components of Other Investments

Servicer advance investments

We and a third-party co-investor, throughtwo partnerships (“SA Buyers”) consolidated by us, purchased the outstanding servicer advances and excess MSRs related to portfolios of legacy residential mortgage-backed securitizations serviced by the co-investor. Refer to Note 11 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information regarding the transactions.

Note 11. Other Investments - (continued)

At March 31, 2024, our servicer advance investments had a carrying value of $216 million and were associated with specified pools of residential mortgage loans with an unpaid principal balance of $9.92 billion. The outstanding servicer advance receivables associated with these investments were $176 million at March 31, 2024, which were financed with short-term non-recourse securitization debt. See Note 14 for additional detail on this debt. The servicer advance receivables were comprised of the following types of advances at March 31, 2024 and December 31, 2023.

Table 11.2 – Components of Servicer Advance Receivables

We account for our servicer advance investments at fair value and during the three months ended March 31, 2024, we received $9 million in repayments, recorded $5 million of interest income, through Other interest income, and recorded a net market valuation loss of $1 million through Investment fair value changes, net in our consolidated statements of income.

Strategic Investments

Strategic investments represent investments we made in companies either through our RWT Horizons venture investment platform or separately at a corporate level. At March 31, 2024, we had made a total of 36 investments in companies through RWT Horizons with a total carrying value of $22 million, as well asseven corporate-level investments. For the three months ended March 31, 2024, we recognized a net market valuation gain of $1 million on our strategic investments through Investment fair value changes, net in our consolidated statements of income, largely driven by one of the portfolio companies completing a Series A capital raising transaction during the first quarter of 2024.

In the second quarter of 2023, we established a joint venture with Oaktree Capital Management, L.P. ("Oaktree"), a global investment manager, to invest in residential investor bridge loans originated by our CoreVest subsidiary. During the three months ended March 31, 2024, we sold $52 million of residential investor bridge loans, net of $15 million of construction draws, to the joint venture and at March 31, 2024, the carrying value of our investment in the joint venture was $5 million. We account for our investment in the joint venture under the equity method of accounting as we have a 20% non-controlling interest, but are deemed to be able to exert significant influence over the affairs of the joint venture. We adjust the carrying value of our equity method investment for our share of earnings or losses, dividends or return of capital on a quarterly basis.

Excess MSRs

In association with our servicer advance investments described above, we (through our consolidated SA Buyers) invested in excess MSRs associated with the same portfolio of legacy residential mortgage-backed securitizations. Additionally, we own excess MSRs associated with specified pools of multifamily loans. We account for our excess MSRs at fair value and during the three months ended March 31, 2024, we recognized $3 million of interest income through Other interest income and we recorded net market valuation losses of $1 million through Investment fair value changes, net on our consolidated statements of income.

Mortgage Servicing Rights

We invest in mortgage servicing rights associated with residential mortgage loans and contract with licensed sub-servicers to perform all servicing functions for these loans. The majority of our investments in MSRs were made through the retention of servicing rights associated with the residential jumbo mortgage loans that we acquired and subsequently sold to third parties. During the three months ended March 31, 2024, we retained MSRs with an aggregate unpaid principal balance of $9 million from sales of residential loans to third parties. We hold our MSR investments at our taxable REIT subsidiaries.

Note 11. Other Investments - (continued)

At March 31, 2024 and December 31, 2023, our MSRs had a fair value of $27 million and $25 million, respectively, and were associated with loans with an aggregate principal balance of $2.00 billion and $2.19 billion, respectively. During the three months ended March 31, 2024, including net market valuation gains and losses on our MSRs, we recorded net income related to our MSRs of $4 million through Other income on our consolidated statements of income.

Note 12. Derivative Financial Instruments

The following table presents the fair value and notional amount of our derivative financial instruments at March 31, 2024 and December 31, 2023.

Table 12.1 – Fair Value and Notional Amount of Derivative Financial Instruments

Risk Management Derivatives

To manage, to varying degrees, risks associated with certain assets and liabilities on our consolidated balance sheets, we may enter into derivative contracts. At March 31, 2024, we were party to interest rate futures contracts with an aggregate notional amount of $1.23 billion. At December 31, 2023, we were party to swaps and swaptions with an aggregate notional amount of $50 million, futures with an aggregate notional amount of $142 million and TBA agreements with an aggregate notional amount of $1.79 billion.

For the three months ended March 31, 2024 and 2023, risk management derivatives had net market valuation gains of $10 million and losses of $17 million, respectively. These market valuation gains and losses are recorded in Mortgage banking activities, net and Investment fair value changes, net on our consolidated statements of income.

Loan Purchase and Interest Rate Lock Commitments

Loan purchase commitments ("LPCs") and interest rate lock commitments ("IRLCs") that qualify as derivatives are recorded at their estimated fair values. For the three months ended March 31, 2024, LPCs had net market valuation losses of $6 million, which were recorded in Mortgage banking activities, net on our consolidated statements of income. For the three months ended March 31, 2023, LPCs had net market valuation losses of $0.2 million, which were recorded in Mortgage banking activities, net on our consolidated statements of income.

Note 12. Derivative Financial Instruments - (continued)

Derivatives Designated as Cash Flow Hedges

For interest rate agreements previously designated as cash flow hedges, our total unrealized loss reported in Accumulated other comprehensive loss was $67 million and $68 million at March 31, 2024 and December 31, 2023, respectively. We are amortizing this loss into interest expense over the remaining term of our trust preferred securities and subordinated notes. For both of the three months ended March 31, 2024 and 2023, we reclassified $1 million of realized net losses from Accumulated other comprehensive loss into Interest expense. As of March 31, 2024, we expect to amortize $4 million of realized losses related to terminated cash flow hedges into interest expense over the next twelve months.

Derivative Counterparty Credit Risk

As discussed in our Annual Report on Form 10-K for the year ended December 31, 2023, we consider counterparty risk as part of our fair value assessments of all derivative financial instruments at each quarter-end. At March 31, 2024, we assessed this risk as remote and did not record an associated specific valuation adjustment. At March 31, 2024, we were in compliance with our derivative counterparty ISDA agreements.

Note 13. Other Assets and Liabilities

Other assets at March 31, 2024 and December 31, 2023 are summarized in the following table.

Table 13.1 – Components of Other Assets

(1)Fixed assets and leasehold improvements had a basis of $18 million and accumulated depreciation of $10 million at March 31, 2024.

Note 13. Other Assets and Liabilities - (continued)

Accrued expenses and other liabilities at March 31, 2024 and December 31, 2023 are summarized in the following table.

Table 13.2 – Components of Accrued Expenses and Other Liabilities

Investment Receivable

Investment receivable primarily consists of amounts receivable from third-party servicers related to principal and interest receivable from residential investor loans and fees receivable from servicer advance investments.

Margin Receivable and Payable

Margin receivable and payable resulted from margin calls between us and our counterparties under derivatives, master repurchase agreements, and warehouse facilities, whereby we or the counterparty posted collateral. We met all margin calls due through March 31, 2024.

Operating Lease Right-of-Use Assets and Operating Lease Liabilities

See Note 17 for additional information on leases.

Note 13. Other Assets and Liabilities - (continued)

REO

The following table summarizes the activity and carrying values of REO assets held at Redwood and at consolidated Legacy Sequoia, Freddie Mac SLST, and CAFL entities during the three months ended March 31, 2024.

Table 13.3 – REO Activity

(1)Includes REO held at Redwood and within consolidated CAFL Bridge securitization entities.

(2)For the three months ended March 31, 2024, REO market valuation adjustments and liquidations resulted in net valuation losses of $3 million, which were recorded in Investment fair value changes, net on our consolidated statements of income.

The following table provides detail on the numbers of REO assets at Redwood and at consolidated Legacy Sequoia, Freddie Mac SLST, and CAFL entities at March 31, 2024 and December 31, 2023.

Table 13.4 – REO Assets

Legal and Repurchase Reserves

See Note 17 for additional information on legal and repurchase reserves.

Payable to Non-Controlling Interests

In 2018, Redwood and a third-party co-investor, throughtwo partnership entities consolidated by Redwood, purchased servicer advances and excess MSRs related to a portfolio of residential mortgage loans serviced by the co-investor (see Note 4 and Note 11 for additional information on the partnership entities and associated investments). We account for the co-investor’s interests in the entities as liabilities, and at March 31, 2024, the carrying value of their interests was $22 million, representing their current economic interest in the entities. Earnings from the partnership entities are allocated to the co-investors on a proportional basis and during the three months ended March 31, 2024, we allocated $1 million of income to the co-investors, recorded in Other expenses on our consolidated statements of income.

In 2021 and in 2023, Redwood and a third-party investor co-sponsored the transfer and securitization of HEI throughtwo HEI securitization entities. Other third-party investors contributed HEI into these securitizations through Redwood and retained subordinate beneficial interests issued by the securitization entities alongside Redwood. See Note 10 for a further discussion of the HEI securitization. We account for the co-investors' interests in the HEI securitization entities as liabilities, and at March 31, 2024, the carrying value of their interests was $65 million, representing the fair value of their economic interests in the beneficial interests issued by the HEI entities. During the three months ended March 31, 2024, the investors' share of earnings, net from their retained interests was $5 million, recorded through HEI income, net on our consolidated statements of income.

Note 14. Short-Term Debt

We enter into repurchase agreements ("repo"), loan warehouse agreements, and other forms of collateralized (and generally uncommitted) short-term borrowings with several banks and major investment banking firms. At March 31, 2024, we had outstanding agreements with several counterparties and we were in compliance with all of the related covenants.

The table below summarizes our short-term debt, including the facilities that are available to us, the outstanding balances, the weighted average interest rate, and the maturity information at March 31, 2024 and December 31, 2023.

Table 14.1 – Short-Term Debt

Note 14. Short-Term Debt - (continued)

Footnotes to table 14.1

(1)Borrowings under our facilities generally are uncommitted and charged interest based on a specified margin over SOFR.

(2)Promissory notes payable on demand to lender with 90-day notice.

(3)At March 31, 2024, includesone non-recourse facility with a borrowing limit of $300 million and a maturity of March 2025.

The following table below presents the value of loans, securities, and other assets pledged as collateral under our short-term debt at March 31, 2024 and December 31, 2023.

Table 14.2 – Collateral for Short-Term Debt

(1)Includes certificated mortgage servicing rights classified as securities on our consolidated balance sheets.

(2)Represents securities we retained from consolidated securitization entities. For GAAP purposes, we consolidate the loans and non-recourse ABS issued from these securitizations.

For the three months ended March 31, 2024, the average balance of our short-term debt facilities was $951 million. At March 31, 2024 and December 31, 2023, accrued interest payable on our short-term debt facilities was $4 million and $6 million, respectively.

Servicer advance financing consists of non-recourse short-term securitization debt used to finance servicer advance investments. We consolidate the securitization entity that issued the debt, but the entity is independent of Redwood and the assets and liabilities are not owned by and are not legal obligations of Redwood.

In 2019, a subsidiary of Redwood entered into a repurchase agreement providing 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) recourse debt financing of certain Sequoia securities as well as securities retained from our consolidated Sequoia securitizations ("Subordinate securities financing" in Table 14.1 above). The financing is fully and unconditionally guaranteed by Redwood, and had an interest rate of approximately 4.21% through September 2022,5.71% from October 2022 through September 2023, and 7.21% from October 2023 through final maturity in September 2024.

In connection with our acquisition of Riverbend, we assumed promissory notes that are payable on demand with a 90-day notice from the lender or which may be repaid by us with a 90-day notice. These unsecured, non-marginable, recourse notes were issued in three separate series with fixed interest rates between 6% and 8%.

Note 14. Short-Term Debt - (continued)

During the three months ended March 31, 2024, we repurchased $27 million of our convertible notes due in 2024. At March 31, 2024 the outstanding principal balance of our convertible notes due in July 2024 was $116 million.

Remaining Maturities of Short-Term Debt

The following table presents the remaining maturities of our secured short-term debt by the type of collateral securing the debt at March 31, 2024.

Table 14.3 – Short-Term Debt by Collateral Type and Remaining Maturities

Note 15. Asset-Backed Securities Issued

ABS issued represents securities issued by non-recourse securitization entities we consolidate under GAAP. The majority of our ABS issued is carried at fair value under the CFE election (see Note 4 for additional detail) with the remainder carried at amortized cost. The carrying values of ABS issued by our consolidated securitization entities at March 31, 2024 and December 31, 2023, along with other selected information, are summarized in the following table.

Table 15.1 – Asset-Backed Securities Issued

(1)Includes $478 million and$485 million (principal balance) of ABS issued bytwo CAFL bridge securitization trusts sponsored by Redwood and accounted for at amortized cost at March 31, 2024 and December 31, 2023, respectively.

(2)Includes $175 million and $182 million (principal balance) of ABS issued by a re-securitization trust sponsored by Redwood and accounted for at amortized cost at both March 31, 2024 and December 31, 2023, respectively.

(3)Certain ABS issued by CAFL and HEI securitization entities are subject to early redemption and interest rate step-ups as described below.

During the fourth quarter of 2023, we consolidated the assets and liabilities of a securitization entity formed in connection with the securitization of CoreVest residential investor bridge loans (presented within CAFL in Table 15.1 above), which we determined was a VIE and for which we determined we are the primary beneficiary. At issuance, we sold $231 million (principal balance) of ABS issued to third parties and retained the remaining beneficial ownership interests in the trust. We elected to account for the entity under the CFE election and account for the ABS issued at fair value, with the entire change in fair value of the ABS issued recorded through Investment fair value changes, net on our consolidated statements of income. At March 31, 2024, the principal balance of the ABS issued was $231 million, and the net carrying value was $232 million. The weighted average stated coupon of the ABS issued was 7.89% at issuance. The ABS issued by the CAFL bridge entity are subject to an optional redemption in December 2025, and beginning in July 2026, the interest rate on the ABS issued increases by 1.5% through final maturity in December 2030. The ABS issued by this securitization were collateralized by $230 million of residential investor bridge loans, $1 million of restricted cash and $25 million of other assets at March 31, 2024. The securitization is structured with $250 million of total funding capacity and a feature to allow reinvestment of loan payoffs for the first 24 months of the transaction (through December 2025), unless an amortization event occurs prior to the expiration of the 24-month reinvestment period. Amortization trigger events include, among other events, delinquency rates or default rates exceeding specified thresholds for three consecutive periods, or the effective advance rate exceeding a specified threshold.

During the second quarter of 2022, we consolidated the assets and liabilities of a securitization entity formed in connection with the securitization of CoreVest residential investor bridge loans (presented within CAFL in Table 15.1 above), which we determined was a VIE and for which we determined we are the primary beneficiary. At issuance, we sold $215 million (principal balance) of ABS issued to third parties and retained the remaining beneficial ownership interest in the trust. The ABS were issued at a discount and we have elected to account for the ABS issued at amortized cost. At March 31, 2024, the principal balance of the ABS issued was $215 million, and the unamortized debt discount and deferred issuance costs were $1 million in total, for a net carrying value of $214 million. The weighted average stated coupon of the ABS issued was 4.32% at issuance. The ABS issued by the CAFL bridge entity are subject to an optional redemption in May 2024, and beginning in June 2025, the interest rate on the ABS issued increases by 2% through final maturity in May 2029. The ABS issued by this securitization were collateralized by $228 million of residential investor bridge loans, $18 million of restricted cash and $7 million other assets at March 31, 2024. The securitization is structured with $250 million of total funding capacity and a feature to allow reinvestment of loan payoffs for the first 24 months of the transaction (through May 2024), unless an amortization event occurs prior to the expiration of the 24-month reinvestment period. Amortization trigger events include, among other events, delinquency rates or default rates exceeding specified thresholds for three consecutive periods, or the effective advance rate exceeding a specified threshold.

During the third quarter of 2021, we consolidated the assets and liabilities of a securitization entity formed in connection with the securitization of CoreVest residential investor bridge loans (presented within CAFL in table 15.1 above), which we determined was a VIE and for which we determined we are the primary beneficiary. At issuance, we sold $270 million (principal balance) of ABS issued to third parties and retained the remaining beneficial ownership interest in the trust. The ABS were issued at a discount and we have elected to account for the ABS issued at amortized cost. At March 31, 2024, the principal balance of the ABS issued was $263 million, and the unamortized debt discount and deferred issuance costs were zero, for a net carrying value of $263 million. During the three months ended March 31, 2024, we repurchased of $7 million of this CAFL bridge ABS issuance for a net gain on extinguishment of debt of $0.3 million which was recorded in Realized gains, net on our consolidated statements of income. The weighted average stated coupon of the ABS issued was 2.34% at issuance. The ABS issued by the CAFL bridge entity are subject to an optional redemption in March 2024, and beginning in March 2025 the interest rate on the ABS issued increases by 2% through final maturity in March 2029. The ABS issued by this securitization were backed by assets including $304 million of residential investor bridge loans and $8 million of restricted cash and other assets at March 31, 2024. The securitization is structured with $300 million of total funding capacity and a feature to allow reinvestment of loan payoffs for the first 30 months of the transaction (through March 2024), unless an amortization event occurs prior to the expiration of the 30-month reinvestment period. Amortization trigger events include, among other events, delinquency rates or default rates exceeding specified thresholds for three consecutive periods, or the effective advance rate exceeding a specified threshold.

During the fourth quarter of 2023, we consolidated the assets and liabilities of a HEI securitization entity formed in connection with the securitization of HEI, which we determined was a VIE and for which we determined we are the primary beneficiary. At issuance, we sold $139 million (principal balance) of ABS issued to third parties and retained a portion of the remaining beneficial ownership interest in the trust. We elected to account for the entity under the CFE election and account for the ABS issued at fair value, with the entire change in fair value of the ABS issued (including accrued interest) recorded through HEI income, net on our consolidated statements of income. The ABS issued by the HEI securitization entity are subject to an optional redemption in October 2025, and beginning in October 2026, the interest rate on the ABS issued increases by 3% through final maturity in 2053.

During the third quarter of 2021, we consolidated the assets and liabilities of an HEI entity formed in connection with the securitization of HEI, which we determined was a VIE and for which we determined we are the primary beneficiary. At issuance, we sold $146 million (principal balance) of ABS issued to third parties and retained a portion of the remaining beneficial ownership interest in the trust. We elected to account for the entity under the CFE election and account for the ABS issued at fair value, with the entire change in fair value of the ABS issued (including accrued interest) recorded through Investment fair value changes, net on our consolidated statements of income. The ABS issued by the HEI securitization entity were subject to an optional redemption in September 2023, and beginning in September 2024 the interest rate on the ABS issued increases by 2% through final maturity in 2052.

During the third quarter of 2020, we transferred all of the subordinate securities we owned from two consolidated re-performing loan securitization VIEs sponsored by Freddie Mac SLST to a re-securitization trust, which we determined was a VIE and for which we determined we are the primary beneficiary. During the first quarter of 2023, we called the Freddie Mac SLST re-securitization and paid off the associated outstanding ABS.

The actual maturity of each class of ABS issued is primarily determined by the rate of principal prepayments on the assets of the issuing entity. Each series is also subject to redemption prior to the stated maturity according to the terms of the respective governing documents of each ABS issuing entity. As a result, the actual maturity of ABS issued may occur earlier than the stated maturity. At March 31, 2024, the majority of the ABS issued and outstanding had contractual maturities beyond five years. See Note 4 for detail on the carrying value components of the collateral for ABS issued and outstanding. The following table summarizes the accrued interest payable on ABS issued at March 31, 2024 and December 31, 2023. Interest due on consolidated ABS issued is payable monthly.

Table 15.2 – Accrued Interest Payable on Asset-Backed Securities Issued

(1)Includes accrued interest payable on ABS issued by a re-securitization trust sponsored by Redwood.

Note 16. Long-Term Debt

The tables below summarize our long-term debt, including the facilities that are available to us, the outstanding balances, the weighted average interest rates, and the maturity information at March 31, 2024 and December 31, 2023.

Table 16.1 – Long-Term Debt

(1)Variable rate borrowings are based on 1- or 3-month AMERIBOR or SOFR, plus an applicable spread.

Refer to Note 16 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, for a full description of our long-term debt.

During the three months ended March 31, 2024, we repurchased $4 million par value of our 7.75% convertible senior notes at a discount and recorded a gain on extinguishment of $0.1 million in Realized gains, net on our consolidated statements of income.

The following table below presents the value of loans, securities, and other assets pledged as collateral under our long-term debt at March 31, 2024 and December 31, 2023.

Table 16.2 – Collateral for Long-Term Debt

(1)Represents securities we have retained from consolidated securitization entities. For GAAP purposes, we consolidate the loans and non-recourse ABS debt issued from these securitizations.

The following table summarizes the accrued interest payable on long-term debt at March 31, 2024 and December 31, 2023.

Table 16.3 – Accrued Interest Payable on Long-Term Debt

Recourse Subordinate Securities Financing Facilities

In 2020, a subsidiary of Redwood entered into a repurchase agreement providing non-marginable recourse debt financing of certain securities retained from our consolidated CAFL securitizations. The financing is fully and unconditionally guaranteed by Redwood, with an interest rate of approximately 4.21% through February 2023, increasing to 5.71% from March 2023 through February 2024, and to 7.21% from March 2024 through February 2025. The financing facility may be terminated at our option, beginning in February 2023, and has a final maturity in February 2025. During the three months ended March 31, 2024, we reclassified this facility from long-term to short-term debt (Facility B in Table 16.1 above at December 31, 2023) when the maturity of this facility became less than a year.

In 2021, a subsidiary of Redwood entered into a repurchase agreement providing non-marginable recourse debt financing of certain securities retained from our consolidated CAFL securitizations (Facility C in Table 16.1 above). The financing is guaranteed by Redwood, with an interest rate of approximately 4.75% through June 2024, increasing to 6.25% from July 2024 through June 2025, and to 7.75% from July 2025 to June 2026. The financing facility may be terminated at our option, beginning in June 2023, and has a final maturity in June 2026.

Other Recourse Financing

During the three months ended March 31, 2024 we entered into a corporate secured revolving financing facility with CPP Investments to provide recourse debt financing secured by previously unencumbered assets, such as retained Residential Consumer and Residential Investor subordinate securities and other investments, as well as equity in certain operating subsidiaries (Facility K in Table 16.1 above). At March 31, 2024, this facility had a borrowing limit of $200 million and atwo-year term, with aone-year extension option. Subsequent to March 31, 2024, we exercised our right under the terms of the facility with CPP Investments to increase the borrowing limit of this facility to $250 million.

Senior Notes

In January 2024, Redwood issued $60 million of 9.125% Senior Notes due in 2029. The Senior Notes are senior unsecured obligations of Redwood and bear interest at a rate equal to 9.125% per year, payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year, beginning on June 1, 2024. The Senior Notes mature on March 1, 2029. We may redeem the Senior Notes, in whole or in part, at any time on or after March 1, 2026 at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest.

Note 17. Commitments and Contingencies

Lease Commitments

At March 31, 2024, we were obligated under nine non-cancelable operating leases with expiration dates through 2031 for $15 million of cumulative lease payments. For both the three-month periods ended March 31, 2024 and 2023 our operating lease expense was $1 million.

The following table presents our future lease commitments at March 31, 2024.

Table 17.1 – Future Lease Commitments by Year

During the three months ended March 31, 2024, we didnot enter into any new office leases with a lease term of greater thanone year. At March 31, 2024, our operating lease liabilities were $14 million, which were a component of Accrued expenses and other liabilities, and our operating lease right-of-use assets were $12 million, which were a component of Other assets.

We determined that none of our leases contained an implicit interest rate and used a discount rate equal to our incremental borrowing rate on a collateralized basis to determine the present value of our total lease payments. As such, we determined the applicable discount rate for each of our leases using a swap rate plus an applicable spread for borrowing arrangements secured by our real estate loans and securities for a length of time equal to the remaining lease term on the lease commencement date. At March 31, 2024, the weighted-average remaining lease term and weighted-average discount rate for our leases was 4 years and 5.3%, respectively.

Commitment to Fund Residential Investor Bridge Loans

As of March 31, 2024, we had commitments to fund up to $513 million of additional advances on existing residential investor bridge loans. 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. At March 31, 2024, we carried a $1 million contingent liability related to these commitments to fund construction advances. During the three months ended March 31, 2024, we recorded a net market valuation loss of $1 million, related to this liability through Mortgage banking activities and Investment of fair value changes, net on our consolidated statements of income.

Commitment to Fund Partnerships

In 2018, we invested intwo partnerships created to acquire and manage certain mortgage servicing related assets. See Note 11 for additional detail on these investments. In connection with these investments, we are required to fund future net servicer advances related to the underlying mortgage loans. The actual amount of net servicer advances we may fund in the future is subject to significant uncertainty and will be based on the credit and prepayment performance of the underlying loans.

Note 17. Commitments and Contingencies - (continued)

Commitments to Fund Strategic Investments

In the first quarter of 2022, we entered into a $25 million commitment to an investment fund with the mission of providing quality workforce housing opportunities in several California urban communities, including the San Francisco Bay Area. At March 31, 2024, we had funded $16 millionof this commitment. This investment is included in Other investments on our consolidated balance sheets.

In 2021, we entered into a commitment to funda $5 million RWT Horizons strategic investment. At March 31, 2024, we had funded$2 million of this commitment. This investment is included in Other investments on our consolidated balance sheets.

Commitment to Fund Joint Ventures

In the first quarter of 2024, we established a joint venture with Canadian Pension Plan Investment Board ("CPP Investments"), a global investment manager, to invest in residential investor bridge and term loans originated by our CoreVest subsidiary. In accordance with the terms of the joint venture, we will offer to sell certain residential investor bridge and term loans we originate into joint venture entities that meet specified criteria at contractually pre-established prices. Redwood and its subsidiaries will administer the assets on behalf of this joint venture. Redwood will earn ongoing fees to oversee the administration of the joint venture and is entitled to earn additional performance fees upon realization of specified return hurdles. CPP Investments and Redwood have committed to allocate up to $500 million of equity to the joint venture, with approximately $400 million of equity capital expected to be contributed to joint venture entities by CPP Investments and approximately $100 million of equity capital expected to be allocated by Redwood across both Redwood's direct equity capital contribution to joint venture entities and joint venture co-investments to be held in Redwood's investment portfolio. At March 31, 2024, no investments had been funded through this joint venture.

In the second quarter of 2023, we established a joint venture with Oaktree to invest in residential investor bridge loans originated by our CoreVest subsidiary. In accordance with the terms of the joint venture, we will offer to sell certain residential investor bridge loans we originate into the joint venture that meet specified criteria at contractually pre-established prices. Redwood and its subsidiaries will administer the assets on behalf of this joint venture. Redwood will earn ongoing fees to oversee the administration of the joint venture and is entitled to earn additional performance fees upon realization of specified return hurdles. Additionally, we have a commitment to contribute up to approximately $19 million to the joint venture to fund the joint venture's purchase of residential investor bridge loans, under the updated terms of the joint venture. At March 31, 2024, we had contributed $4 million of capital to the joint venture.

Riverbend Contingent Consideration

As part of the consideration for our acquisition of Riverbend, we may make earnout payments payable in cash, based on generating specified revenues over a threshold amount during thetwo-year period ending July 1, 2024, up to a maximum potential amount payable of $25 million. These contingent earnout payments are classified as a contingent consideration liability on our consolidated balance sheets and carried at fair value. At March 31, 2024, our estimated fair value of this contingent liabi lity waszero.

Loss Contingencies — Risk-Sharing

During 2015 and 2016, we sold conforming loans to the Agencies with an original unpaid principal balance of $3.19 billion, subject to our risk-sharing arrangements with the Agencies. At March 31, 2024, the maximum potential amount of future payments we could be required to make under these arrangements was $44 million and this amount was partially collateralized by assets we transferred to pledged accounts and is presented as pledged collateral in Other assets on our consolidated balance sheets. We have no recourse to any third parties that would allow us to recover any amounts related to our obligations under the arrangements. At March 31, 2024, we had incurred less than $100 thousand of cumulative losses under these arrangements. For the three months ended March 31, 2024, other income related to these arrangements was $0.2 million.

All of the loans in the reference pools subject to these risk-sharing arrangements were originated in 2014 and 2015, and at March 31, 2024, the loans had an unpaid principal balance of $388 million, a weighted average FICO score of 761 (at origination), and LTV ratio of 74% (at origination). At March 31, 2024, $8 million of the loans were 90 or more days delinquent, of which five loans with an aggregate unpaid principal balance of $1 million were in foreclosure. At March 31, 2024, the carrying value of our guarantee obligation was $6 million and included $5 million designated as a non-amortizing credit reserve, which we believe is sufficient to cover current expected losses under these obligations.

Note 17. Commitments and Contingencies - (continued)

Our consolidated balance sheets include assets of special purpose entities ("SPEs") associated with these risk-sharing arrangements (i.e., the "pledged collateral" referred to above) that can only be used to settle obligations of these SPEs for which the creditors of these SPEs (the Agencies) do not have recourse to us. At both March 31, 2024 and December 31, 2023, assets of such SPEs totaled $28 million, and liabilities totaled $6 million.

Loss Contingencies — Repurchase Reserves

We maintain a repurchase reserve for potential obligations arising from representation and warranty violations related to residential consumer and residential investor loans we have sold to securitization trusts or third parties and for conforming residential consumer loans associated with MSRs that we have purchased from third parties. We do not originate residential consumer loans and we believe the initial risk of loss due to loan repurchases (i.e., due to a breach of representations and warranties) would generally be a contingency to the companies from whom we acquired the loans. However, in some cases, for example, where loans were acquired from companies that have since become insolvent, repurchase claims may result in our being liable for a repurchase obligation.

At both March 31, 2024 and December 31, 2023, our repurchase reserve associated with our residential consumer loans and MSRs was $5 million, and was recorded in Accrued expenses and other liabilities on our consolidated balance sheets. During both the three months ended March 31, 2024 and 2023, we receivedone repurchase request. During the three months ended March 31, 2024 and 2023 we repurchasedone andfive loan(s), respectively. During the three months ended March 31, 2024 and 2023, we recorded reversals of repurchase provision expenses of $0.2 million andzero, respectively, in Mortgage banking activities, net, on our consolidated statements of income.

At March 31, 2024 and December 31, 2023, our repurchase reserve associated with residential investor loans sold to third-parties was $0.01 million andzero, respectively, and was recorded in Accrued expenses and other liabilities on our consolidated balance sheets. During the three months ended March 31, 2024 and 2023, we received nine andfour repurchase requests, respectively, for residential investor loans sold to third parties, and repurchased zero andeleven residential investor loans, respectively, that had been sold to third parties. One repurchase provision was recorded during the first three months of 2024 and, at March 31, 2024, two open repurchase requests were outstanding for residential investor loans sold to third parties.

Loss Contingencies — Litigation, Claims and Demands

There is no significant update regarding the litigation matters described in Note 17 within the financial statements included in Redwood’s Annual Report on Form 10-K for the year ended December 31, 2023 under the heading “Loss Contingencies - Litigation, Claims and Demands.”

Note 18. Equity

The following table provides a summary of changes to Accumulated other comprehensive income (loss) by component for the three months ended March 31, 2024 and 2023.

Table 18.1 – Changes in Accumulated Other Comprehensive Income (Loss) by Component

The following table provides a summary of reclassifications out of Accumulated other comprehensive income (loss) for the three months ended March 31, 2024 and 2023.

Table 18.2 – Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

Issuance of Common Stock

We have an established program to sell common stock from time to time in at-the-market ("ATM") offerings. During the three months ended March 31, 2024, we didnot issue any shares of common stock under this program. At March 31, 2024, the remaining share issuance capacity under this program was approximately $50 million.

Note 18. Equity - (continued)

Issuance of Preferred Stock

In January 2023, Redwood issued 2.8 million shares of 10.00% Series A Fixed-Rate Reset Cumulative Redeemable Preferred Stock ("Series A Preferred Stock") for gross proceeds of $70 million and net proceeds of approximately $67 million, after deducting the underwriting discount and other estimated expenses. The Series A Preferred Stock pays quarterly cumulative cash dividends through January 15, 2028 at a fixed annual rate of 10%, based on the stated liquidation preference of $25.00 per share, in arrears, when authorized by Redwood's Board of Directors and declared by the company. Starting April 15, 2028, the annual dividend rate will reset to the five-year U.S. Treasury Rate plus a spread of 6.278%. The Series A Preferred Stock ranks senior to Redwood's common stock with respect to rights to the payment of dividends and the distribution of assets upon any liquidation, dissolution or winding up of the company. During the three months ended March 31, 2024, the company declared preferred stock dividends of $0.625 per share. At March 31, 2024, preferred dividends payable totaling $1 million for the first quarter 2024 dividend were included in Accrued expenses and other liabilities and were payable on April 15, 2024 to preferred stockholders of record on April 1, 2024.

Direct Stock Purchase and Dividend Reinvestment Plan

During the three months ended March 31, 2024, we didnot issue any shares of common stock through our Direct Stock Purchase and Dividend Reinvestment Plan. At March 31, 2024, approximatelysix million shares remained outstanding for future offerings under this plan.

Earnings per Common Share

The following table provides the basic and diluted earnings per common share computations for the three months ended March 31, 2024 and 2023.

Table 18.3 – Basic and Diluted Earnings per Common Share

We included participating securities, which are certain equity awards that have non-forfeitable dividend participation rights, in the calculations of basic and diluted earnings per common share as we determined that the two-class method was more dilutive than the alternative treasury stock method for these shares. Dividends and undistributed earnings allocated to participating securities under the basic and diluted earnings per share calculations require specific shares to be included that may differ in certain circumstances.

Note 18. Equity - (continued)

During the three months ended March 31, 2024 and 2023, none of our convertible notes were determined to be dilutive and were not included in the calculation of diluted EPS under the "if-converted" method. Under this method, for convertible and exchangeable notes due in 2024 and 2025, the periodic interest expense (net of applicable taxes) for dilutive notes is added back to the numerator and the weighted average number of shares that the notes are entitled to (if converted, regardless of whether they are in or out of the money) are included in the denominator. For convertible notes due in 2027, if the potential conversion of the debt is dilutive, then the number of shares needed to settle the conversion premium are added to the shares outstanding used to calculate dilutive EPS.

For the three months ended March 31, 2024,35,673,554 of common shares, related to the assumed conversion of our convertible notes, were antidilutive and were excluded in the calculation of diluted earnings per share. For the three months ended March 31, 2023,46,316,074 of common shares, related to the assumed conversion of our convertible notes, were antidilutive and were excluded in the calculation of diluted earnings per share. For the three months ended March 31, 2024 and 2023, the number of outstanding equity awards that were antidilutive totaled 22,161 and 28,474 common shares, respectively.

Common Stock Warrants

In conjunction with establishing the joint venture with CPP Investments in March 2024, we issued warrants exercisable for 1,974,905 shares of our common stock (the “First Tranche Warrants”); and (ii) warrants exercisable for 4,608,112 shares of our common stock (the “Second Tranche Warrants” and together with the First Tranche Warrants, the “Warrants”). The First Tranche Warrants are exercisable from March 18, 2025 to March 18, 2029. The Second Tranche Warrants will vest upon achievement of specified deployment thresholds related to our joint venture with CPP Investments and, if vested, will be exercisable from the date the Second Tranche Warrants vest to March 18, 2029. The initial strike price of the Warrants is $7.76. The Warrants also contain a mandatory exercise provision, exercisable at Redwood’s option upon satisfaction of specified conditions, including the trading price of Redwood’s common stock exceeding a specified premium to the exercise price. Exercises of any Warrants will be settled on a net basis.

The Warrants met the criteria for equity classification under ASC 815, Derivatives and Hedging, and are recorded as a component of Additional paid-in-capital in Equity on our Consolidated Balance Sheets. The Warrants were valued at $0.8 million on the issuance date and are not subject to subsequent remeasurement.

For the three months ended March 31, 2024, these Warrants were not dilutive to our calculation of dilutive earnings per common share. The Warrants would have a dilutive effect on earnings per common share to the extent that the Warrants are vested and exercisable, and the market value per share of our common stock exceeds the strike price of the Warrants.

Stock Repurchases

In July 2022, our Board of Directors approved an authorization for the repurchase of up to $125 million of our common stock, and also authorized the repurchase of outstanding debt securities, including convertible and exchangeable debt. In May 2023, our Board of Directors approved an additional authorization for the repurchase of up to $70 million of our preferred stock. These authorizations have no expiration dates and does not obligate us to acquire any specific number of shares or securities. During the three months ended March 31, 2024, we did not repurchase any shares of our common or preferred stock under this program. At March 31, 2024, $101 million and $70 million of the current authorization remained available for the repurchase of shares of our common and preferred stock, respectively, and we also continued to be authorized to repurchase outstanding debt securities.

Note 19. Equity Compensation Plans

At March 31, 2024 and December 31, 2023,9,170,507 and 10,211,459 shares of common stock, respectively, were available for grant under our Incentive Plan. The unamortized compensation cost of awards issued under the Incentive Plan, which are settled by delivery of shares of common stock, and purchases under the Employee Stock Purchase Plan, totaled $41 million at March 31, 2024, as shown in the following table.

Note 19. Equity Compensation Plans - (continued)

Table 19.1 – Activities of Equity Compensation Costs by Award Type

(1)Equity grant forfeitures for the three months ended March 31, 2024 represent the reduction in future equity compensation expense related to employee terminations, for which the underlying equity awards will be forfeited upon the actual employee termination date subsequent to March 31, 2024.

At March 31, 2024, the weighted average amortization period remaining for all of our equity awards was less thantwo years.

Restricted Stock Units ("RSUs")

We generally grant RSUs annually, as part of our compensation process. In addition, RSUs are granted from time to time in connection with hiring and promotions. RSUs generally vest over the course of afour-year vesting period, and are distributed annually, at the end of each vesting period.

At March 31, 2024 and December 31, 2023, we had 865,279 and 593,570 RSUs outstanding, respectively. During the three months ended March 31, 2024, we granted 542,719 RSUs and distributed 271,010 RSUs. Unvested RSUs at March 31, 2024 vest through 2028.

Deferred Stock Units (“DSUs”)

We generally grant DSUs annually, as part of our compensation process. In addition, DSUs are granted from time to time in connection with hiring and promotions and in lieu of the payment in cash of a portion of annual bonus earned. DSUs generally vest over the course of afour-year vesting period, and are distributed after the end of the final vesting period or after an employee is terminated.

At March 31, 2024 and December 31, 2023, we had 5,598,779 and 4,821,172 DSUs outstanding, respectively, of which 2,309,485 and 2,284,480, respectively, had vested. During the three months ended March 31, 2024, we granted 1,089,871 DSUs and distributed 312,264 DSUs. Unvested DSUs at March 31, 2024 vest through 2028.

Performance Stock Units (“PSUs”)

We generally grant PSUs annually, as part of our compensation process. PSUs generally have performance-based vesting over the course of athree-year vesting/performance period, and, subject to meeting certain performance criteria, will vest and be distributed after the end of the vesting period.

At March 31, 2024 and December 31, 2023, the target number of PSUs that were unvested was 2,598,194 and 3,072,039, respectively. Vesting for PSUs generally occurs approximately three years from their respective grant dates based on various total shareholder return performance calculations, as discussed in Note 19 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

For 473,845 target PSU awards that were granted in December 2020, the performance vesting period ended on January 1, 2024. Based upon the performance-based vesting criteria of these awards,564,975 shares of our common stock underlying these PSUs

Note 19. Equity Compensation Plans - (continued)

qualified for vesting, which was approved by our Board of Directors during the three months ended March 31, 2024. These PSUs were distributed as shares of our common stock in April 2024.

Employee Stock Purchase Plan ("ESPP")

The ESPP allows a maximum of 850,000 shares of common stock to be purchased in aggregate for all employees. As of March 31, 2024 and December 31, 2023,785,530 and 763,369 shares had been purchased, respectively, and there remained a negligible amount of uninvested employee contributions in the ESPP at March 31, 2024.

Note 20. Mortgage Banking Activities, Net

The following table presents the components of Mortgage banking activities, net, recorded in our consolidated statements of income for the three months ended March 31, 2024 and 2023.

Table 20.1 – Mortgage Banking Activities

(1)For residential consumer loans, includes changes in fair value for associated loan purchase commitments.

(2)For the three months ended March 31, 2024, this represents the fair value changes on trading securities being used as hedges to manage the mark-to-market risks associated with our residential consumer mortgage banking operations. For the three months ended March 31, 2023, we did not utilize trading securities as hedging instruments.

(3)Represents market valuation changes of derivatives that were used to manage risks associated with our mortgage banking operations.

(4)Amounts in this line item include other fee income from loan acquisitions, and provisions for repurchases, presented net.

(5)Amounts in this line item include other fee income from loan originations.

Note 21. Other Income, Net

The following table presents the components of Other income recorded in our consolidated statements of income for the three months ended March 31, 2024 and 2023.

Table 21.1 – Other Income, Net

(1)Includes servicing fees and fair value changes for MSRs, net.

(2)Includes asset management fees, extension fees, default interest and other fees.

Note 22. Components of Operating Expenses

Components of our general and administrative expenses, portfolio management costs, loan acquisition costs, and other expenses for the three months ended March 31, 2024 and 2023 are presented in the following table.

Table 22.1 – Components of Operating Expenses

(1)Includes $2 million and $1 million of severance and transition-related expenses for the three months ended March 31, 2024 and 2023, respectively.

(2)Includes $1 million and $0.1 million of equity amortization expense related to employee terminations during the three months ended March 31, 2024 and March 31, 2023, respectively. For the three months ended March 31, 2024 and 2023, long-term incentive award expense included $6 million and $6 million of expense, respectively, for awards settleable in shares of our common stock, and $1 million and $2 million of expense, respectively, for awards settleable in cash.

Note 22. Components of Operating Expenses - (continued)

Cash Settled Deferred Stock Units ("csDSUs")

Cash-settled deferred stock units that were granted 2020, 2021, and 2022, each vest over four-year periods and are subject to continued employment through the vesting periods through 2026. These awards will be fully vested and payable in cash with a vested award value based on the closing market price of our common stock on their respective final vesting dates. These awards are classified as liabilities in Accrued expenses and other liabilities on our consolidated balance sheets, and are being amortized over their respective vesting periods on a straight-line basis, adjusted for changes in the value of our common stock at the end of each reporting period. At March 31, 2024,980,407 csDSUs were outstanding, the liability associated with these awards was $3 million, and the unamortized compensation cost was $3 million. The expense associated with these awards is included in "Long-term incentive award expense," as presented in Table 22.1 above.

Refer to Note 22 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, for additional information regarding long-term cash-based awards and cash-settled deferred stock units.

Cash-Settled Restricted Stock Units ("csRSUs")

During the year ended December 31, 2023, $4 million of csRSUs were granted to certain executive officers that will vest over the next four years through 2027. On each vesting date over thefour-year vesting period, cash in an amount equal to the value of the common stock underlying the csRSUs that vest on such vesting date will be distributed to the recipients. These awards are classified as liabilities in Accrued expenses and other liabilities on our consolidated balance sheets, and are being amortized over their respective vesting periods on a straight-line basis, adjusted for changes in the value of our common stock at the end of each reporting period. At March 31, 2024,535,620 csRSUs were outstanding, the liability associated with these awards was $0.3 million, and unamortized compensation cost of the csRSUs was $3 million. The expense associated with these awards is included in "Long-term incentive award expense," as presented in Table 22.1 above.

Refer to Note 22 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, for additional information regarding long-term cash-based awards and cash-settled deferred stock units.

Cash Settled Performance Stock Units

During the three months ended March 31, 2023, $6 million of cash-settled performance stock units ("csPSUs") were granted to certain executive and non-executive employees which vest over approximately three years through January 1, 2026. The target number of csPSUs that were granted totaled 663,499 units based on a per unit grant-date fair value of $9.75. The equivalent number of underlying shares of common stock that vest and that the recipient becomes entitled to receive at the time of vesting will generally range from 0% to 250% of the target number of csPSUs granted, with the target number of csPSUs granted being adjusted to reflect the value of any dividends declared on our common stock during the vesting period. Upon vesting, the recipient will receive the settlement of the vested shares in cash based on the closing market price of our common stock on the final vesting date. These awards are classified as liabilities in Accrued expenses and other liabilities on our consolidated balance sheets, and are being amortized over their respective vesting periods on a straight-line basis, adjusted for changes in the value of the csPSUs at the end of each reporting period. At March 31, 2024, the liability associated with these awards was $2 million, and unamortized compensation cost of the csPSUs was $3 million. The expense associated with these awards is included in "Long-term incentive award expense," as presented in Table 22.1 above.

Refer to Note 22 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, for additional information regarding long-term cash-based awards and cash-settled deferred stock units.

Long-Term Cash-Based Awards

Cash-based retention awards were granted to certain executive and non-executive employees between 2020 and 2023 that vest overone- tothree-year periods, and are subject to continued employment through the vesting periods through 2025. At March 31, 2024, the liability associated with these awards was $1 million and the unamortized compensation cost of long-term cash-based awards was $1 million. The expense associated with these awards is included in "Long-term incentive award expense," as presented in Table 22.1 above.

Note 23. Taxes

We believe that we have met all requirements for qualification as a REIT for federal income tax purposes. To qualify as a REIT, the company must distribute at least 90% of its annual REIT taxable income and meet certain other requirements that relate to, among other things, the assets it holds, the income it generates, and the composition of its stockholders. Many requirements for qualification as a REIT are complex and require analysis of particular facts and circumstances. Often there is only limited judicial or administrative interpretive guidance and as such there can be no assurance that the Internal Revenue Service or courts would agree with our various tax positions. If we were to fail to meet all the requirements for qualification as a REIT and the requirements for statutory relief, we would be subject to federal corporate income tax on our taxable income and we would not be able to elect to be taxed as a REIT for four years thereafter. Such an outcome could have a material adverse impact on our consolidated financial statements.

For the three months ended March 31, 2024 and 2023, we recognized a provision for income taxes of $1 million and benefit from income taxes of $1 million, respectively. The following is a reconciliation of the statutory federal and state tax rates to our effective tax rate at March 31, 2024 and 2023.

Table 23.1 – Reconciliation of Statutory Tax Rate to Effective Tax Rate

We assessed our tax positions for all open tax years (i.e., Federal, 2020 to 2024, and State, 2019 to 2024) at March 31, 2024 and December 31, 2023, and concluded that we had no uncertain tax positions that resulted in material unrecognized tax benefits.

Note 24. Segment Information

Redwood operates inthree segments: Residential Consumer Mortgage Banking, Residential Investor Mortgage Banking and Investment Portfolio. The accounting policies of the reportable segments are the same as those described in Note 3 — Summary of Significant Accounting Policies. For a full description of our segments, see Part I, Item 1—Businessin our Annual Report on Form 10-K for the year ended December 31, 2023.

Segment contribution represents the measure of profit that management uses to assess the performance of our business segments and make resource allocation and operating decisions. Certain corporate expenses not directly assigned or allocated to one of ourthree segments, as well as activity at certain consolidated Legacy Sequoia Securitization entities, are included in the Corporate/Other column as reconciling items to our consolidated financial statements. These unallocated corporate expenses primarily include interest expense for our convertible notes and trust preferred securities (and in 2024 and 2023, realized gains from the repurchase of convertible notes), indirect general and administrative expenses and other expense. In the normal course of business, loans are originated and acquired at our mortgage banking segments and may subsequently be transferred to our investment portfolio segment either as whole loans or through the retention of securities from securitizations we sponsor and consolidate under GAAP. All of our loans are accounted for under the fair value option and amounts transferred between segments are accounted for at fair value at the time of transfer.

The following tables present financial information by segment for the three months ended March 31, 2024 and 2023.

Table 24.1 – Business Segment Financial Information

The following table presents the components of Corporate/Other for the three months ended March 31, 2024 and 2023.

Table 24.2 – Components of Corporate/Other

(1) Legacy consolidated VIEs represent Legacy Sequoia entities that are consolidated for GAAP financial reporting purposes. See Note 4 for further discussion on VIEs.

The following table presents supplemental information by segment at March 31, 2024 and December 31, 2023.

Table 24.3 – Supplemental Segment Information

Note 25. Subsequent Events

In April 2024, we exercised our right under the terms of the facility with CPP Investments to increase the borrowing limit of this facility from $200 million to $250 million and completed an initial $100 million borrowing under this facility.

Also in April 2024, we closed on a residential investor bridge loan warehouse financing facility with a new financing counterparty, with up to $180 million of non-recourse, non-marginable borrowing capacity, atwo-year borrowing period andthree-year term to maturity.