REDWOOD TRUST INC

Business Update

Our second quarter results reflect our decision to accelerate Redwood’s strategic transition toward a more scalable and simplified operating model. This decision comes as we see avenues for growth across our operating platforms that can be transformative —particularly amid evolving market dynamics in single-family housing finance, shifts in bank lending practices and potential outcomes related to changes in housing policy within the Federal government, including potential outcomes related to the future structure and role of Fannie Mae and Freddie Mac. In light of this, we took decisive steps to begin to meaningfully reduce exposure to portfolio holdings that now reside outside of our core operating footprint. These include our legacy unsecuritized bridge loans, third-party securities portfolio, and other non-core legacy assets, such as third-party originated HEI, the vast majority of which we have held for years. While these investments were initially aligned with our strategy and return thresholds, some are valued at a level that is attractive for sale to lock in gains, while others have underperformed as interest rates have risen and have become a significant drag on our forward earnings. In assessing the shifts now occurring in housing finance, and the growth potential of our mortgage banking platforms – where capital allocation has grown by over $200 million in the past year and where we have generated combined GAAP returns in excess of 20% in each of the past four quarters – the opportunity cost of allowing legacy investments to naturally run off has prompted us to more proactively reposition our capital.

This strategic transition and capital repositioning is supported by the fact that our operating platforms have been swiftly increasing in scale. The retrenchment by banks in mortgage lending has enabled Redwood to meaningfully expand loan acquisition volumes and market share, even as overall housing activity remains subdued. As part of this trend, through our network we have seen increased demand from bank counterparties for capital-efficient solutions that address a broader segment of their loan production.

The decision to accelerate the wind-down of our legacy portfolio resulted in approximately $(0.79) per share of fair value and repositioning charges in the second quarter, as we moved forward with liquidations, term financings, or other resolutions for these assets. This was the primary contributing factor to a reduction in our GAAP book value per share to $7.49 at June 30, 2025, as compared to $8.39 at March 31, 2025. We expect to free up $200 to $250 million in capital from these legacy investments by year-end 2025, which we plan to redeploy into our operating platforms and into other uses to support a more stable earnings profile and streamlined revenue mix.

In support of this transition, we recently began repurchasing our common shares, buying back 1.6 million common shares in June 2025 and an additional 2.5 million common shares during the third quarter through August 7, 2025. In July 2025, our Board increased our common stock repurchase authorization to $150 million.

With respect to our second quarter operating performance, Redwood’s mortgage banking platforms continue to profitably grow amidst a complex environment. The impact of “Liberation Day” tariff announcements at the outset of the second quarter caused financial markets to enter a tariff-driven decline from which there seems to have been a temporary recovery. Our posture early in the second quarter was appropriately cautious, but our operating activity quickly rebounded, and we finished with sequential growth in overall mortgage banking revenues, closing with particularly strong activity in June that has sustained into the third quarter. Our mortgage banking platforms continued to deliver combined GAAP returns above 20%, reflecting a broadening operating footprint despite a sustained slowdown in overall housing market activity.

Sequoia’s jumbo loan lock volume for newly originated or "current coupon" loans in the second quarter of 2025 was its highest since 2021. Amidst sluggish home purchase activity and in a market bereft of meaningful mortgage loan refinance activity, this growth highlights the significant progress we have made in expanding our "wallet share" across both bank and non-bank loan sellers. We are encouraged by the continued depth and diversification of our sourcing network, which exceeds 200 loan sellers with no significant volume concentrated with any one of these sellers.

Second, our Aspire platform, which commenced acquiring expanded residential loan products (also referred to as "non-QM loans") in January, gained meaningful traction in the second quarter, driven by growing lock volume sourced from an increasing number of originators. Aspire’s lock volume tripled compared to the first quarter of 2025. We are in the early stages of leveraging our existing Sequoia seller network to grow Aspire, as many long-time jumbo-loan sellers begin insourcing direct origination of these types of products. These established relationships are now complemented by an expanding group of new non-QM loan sellers who recognize Redwood’s ability to deliver innovative solutions across a variety of home lending products. Given Aspire’s current growth trajectory and relative scale, we remain confident in the platform’s significant potential.

Our business purpose lending platform, CoreVest, funded over $500 million in loans during the second quarter, marking its highest volume since mid-2022. Borrower loyalty remains strong, as evidenced by our high repeat-customer rate during the quarter—an important indicator of stability amid signs of housing stress in select regions. Our diligent approach to credit risk, including targeted credit overlays, tightened leverage in more vulnerable markets, and enhanced structural protections, continues to support strong loan performance and deepening distribution channels. Moreover, strategic hires within our small-balance product segment have significantly contributed to CoreVest’s volumes and positioned the platform for continued prudent growth.