REDWOOD TRUST INC

Our Business

Redwood Trust, Inc., together with its subsidiaries, is a specialty finance company focused on several distinct areas of housing credit, with a mission to 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. We operate our business across four reportable segments: Sequoia Mortgage Banking, CoreVest Mortgage Banking, Redwood Investments, and Legacy Investments. Our two mortgage banking segments generate income from the origination or acquisition of loans and the subsequent sale or securitization of those loans. Our Redwood Investments portfolio is comprised of investments sourced through our mortgage banking operations as well as investments purchased from third-parties, and generates income primarily from net interest income and asset appreciation. Our Legacy Investments portfolio is comprised ofassets that were previously included within the Redwood Investments segment and generates income primarily from net interest income.

Redwood Trust, Inc. has elected to be taxed as a real estate investment trust (“REIT”). We generally refer, collectively, to Redwood Trust, Inc. and those of its subsidiaries that are 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.”

For a full description of our segments, see Part I, Item 1—Businessin this Annual Report on Form 10-K.

Business Update

Over the past year, our focus has been on advancing Redwood Trust’s strategic transition toward a more scalable, capital-efficient, and simplified operating model centered on our mortgage banking platforms. During 2025, we accelerated the repositioning of our balance sheet, reallocated capital away from legacy investment activities, and materially expanded the scale of our core operating businesses. These efforts resulted in record production volumes and improved capital efficiency, positioning us for a more durable and predictable earnings profile, which we saw begin to materialize in the fourth quarter of 2025.

The housing finance market in 2025 was characterized by continued affordability challenges, subdued overall transaction activity, and evolving dynamics across bank and non-bank mortgage lending. While mortgage rates remained elevated for much of the year, volatility in interest rates and capital markets persisted, alongside shifting regulatory and policy considerations affecting housing supply, bank balance sheet positions, and institutional participation in residential mortgage finance. Against this backdrop, retrenchment by banks from certain areas of mortgage lending continued to create opportunities for non-bank platforms capable of providing liquidity, distribution, and capital-efficient execution at scale.

In response to these market dynamics, we furthered our role as a leading provider of capital to the non-agency market, emphasizing growth across our Mortgage Banking platforms, which is comprised of Sequoia (inclusive of Aspire) and CoreVest, while actively reducing exposure to assets and strategies that no longer align with our long-term operating objectives. For the full year, our Mortgage Banking platforms generated a record level of production, comprised of $20.7 billion of Sequoia loan locks and $2.0 billion of CoreVest funded volume, more than double our 2024 production. During the second half of 2025, Sequoia loan lock and CoreVest loan funding volume was $14.1 billion, which on a standalone basis, would have represented our second-largest production year ever.

At December 31, 2025, 81% of our capital was allocated to our Mortgage Banking platforms and Redwood Investments, compared to approximately 62% at the end of 2024, reflecting our continued shift toward an originate-to-distribute business model. A central element of our strategy in 2025 was the accelerated wind-down of our Legacy Investments portfolio. These assets, which include legacy unsecuritized bridge loans, residential re-performing loan securities, and third-party originated investments, were largely accumulated during prior periods when market conditions and return opportunities differed materially from those prevailing today.

Throughout the year, we executed a series of asset dispositions, financings, and restructurings to reduce our exposure to Legacy Investments, improve balance sheet flexibility, and enhance our earnings profile. During 2025, we completed approximately $1.2 billion of legacy asset dispositions, including outright sales, structured financings, and partnership transactions. As a result, Legacy Investments declined from approximately 33% of total capital in mid-2025 to 19% by year-end, with continued progress expected as remaining assets are resolved.

Proceeds from these actions enabled the repayment of higher-cost secured debt, improved utilization of flexible funding sources, and redeployment of capital into higher-return operating activities. In parallel, we actively managed our corporate capital structure, including repayment of our convertible notes that matured in 2025, issuance of $190 million of senior unsecured debt, and repurchase of $53 million of common stock during the year, the latter of which contributed approximately $0.13 per share of book value accretion.

Our Sequoia platform, which includes Aspire, delivered record production in 2025, reflecting continued market share gains across both bank and independent mortgage bank (“IMB”) counterparties. Full-year Sequoia lock volume totaled approximately $20.7 billion, increasing substantially year over year, with record quarterly production achieved in both the third and fourth quarters. In the fourth quarter alone, Sequoia locked $6.8 billion of loans (inclusive of Aspire activity), representing a 193% increase compared to the fourth quarter of 2024. Overall 2025 volumes translated into 7.0% of jumbo market share, up from 4.3% in 2024 and compared to our 1-2% historical average.

Aspire, our expanded-credit and non-QM platform included within the Sequoia platform, completed its first full year of operations in 2025 and scaled rapidly throughout the year. Aspire locked $3.2 billion of loans in 2025, including record quarterly production of approximately $1.5 billion in the fourth quarter. Aspire’s seller network expanded to 123 originators, with 69% of volume sourced from originators that also transact with Sequoia, demonstrating the benefits of our integrated platform approach.

Bulk transactions represented a significant portion of Sequoia’s activity during the year, particularly with bank counterparties seeking capital-efficient alternatives to holding residential mortgage loans on balance sheet. Production was supported by continued strength in both flow and bulk executions, including the purchase of a large seasoned loan pools in each of the first and third quarters of 2025 and additional seasoned bank collateral acquired during 2025 as institutions repositioned balance sheets amid increased merger and acquisition activity. Product breadth also contributed to record lock volumes, including growth in Adjustable-Rate Mortgages (“ARMs”) and Closed-End Seconds (“CES”), reflecting borrower demand for alternative affordability structures in a higher-rate environment and broadening Sequoia’s sourcing capabilities. Refinancing volumes for our Sequoia prime jumbo products increased during the second half of 2025, representing approximately 35% of second-half lock volume, compared to approximately 26% in the first half of the year.

Distribution remained a core differentiator across the Sequoia platform, inclusive of Aspire. During the fourth quarter, Sequoia distributed approximately $3.0 billion of loans through securitizations and an additional $1.2 billion through whole loan sales, supporting rapid capital turnover and attractive returns. Loans were typically held on balance sheet for approximately 36 days prior to sale or securitization, limiting balance sheet risk and enhancing capital efficiency. As production volumes increased, cost per loan (calculated as operating expenses divided by loan purchase commitments) declined to 0.23% in 2025 from 0.29% in 2024, a 21% year-over-year improvement driven by operating leverage and disciplined cost management.

Distribution capabilities expanded alongside production within Aspire. During 2025, Aspire completed $914 million of loan sales to various institutional buyers, including its first whole loan sale to a bank in the fourth quarter, and prepared for the launch of its inaugural securitization platform in early 2026. These activities supported improved capital turnover and positioned Aspire for continued growth and enhanced returns as volumes scale.

CoreVest continued to expand its footprint in business purpose lending, delivering 13% year-over-year growth in funded volume during 2025. Production increasingly shifted toward smaller-balance products, including RTL and DSCR loans. In the fourth quarter, RTL represented 37% of funded volume, while DSCR production increased 43% from the prior quarter. Importantly, these two products represented 40% of CoreVest's full year 2025 volume, representing clear progress on our strategic focus for the platform.

Distribution activity supported improved liquidity and capital efficiency, while credit performance remained an area of focus. The second and fourth quarters of 2025 each represented record quarters for CoreVest distribution activity, reflecting continued momentum across securitizations, whole loan sales, and transfers to joint ventures. Since launching our joint venture strategy, cumulative loan transfers to these vehicles were $2.1 billion in early 2026, underscoring the scale and capital efficiency achieved through this distribution channel. We continued to apply targeted credit overlays, tightened leverage in vulnerable markets, and actively managed legacy exposures. As a result of these efforts, 90-day-plus delinquencies in the legacy unsecuritized bridge loans portfolio declined significantly during the year, and remaining exposure became increasingly concentrated in a smaller number of assets.

Net cost to originate, calculated as operating expenses less upfront origination fees divided by total origination volume, improved 22% year-over-year from 1.18% in 2024 to 0.92% in 2025. The improvement reflects higher production volumes, disciplined expense management and improved revenue margins achieved through joint venture and other distribution channels. These efficiency gains follow improvements realized in 2024 and demonstrate operating leverage as production volumes increase.

Capital efficiency was a defining feature of our operating model in 2025. Across our mortgage banking platforms, working capital usage averaged approximately 2.5% of total production volume, reflecting high levels of capital turnover driven by sales, securitizations, and joint venture activity.

As volumes scaled, revenue growth significantly outpaced operating expense growth. Combined mortgage banking fixed cost per loan declined by approximately 44% year over year, while revenue-to-expense efficiency improved by 35%. Total operating expenses declined to approximately 0.9% of production volume, compared to 1.6% in the prior year, reflecting disciplined cost management and operating leverage embedded in our model.

By the end of 2025, Redwood Trust operated with a simplified balance sheet, a greater concentration of capital in core operating activities, and an expanded network of institutional capital partners. Our operating platforms entered 2026 with strong production momentum, diversified funding and distribution channels, and infrastructure designed to support continued growth as housing market conditions evolve.

While housing affordability, interest rate trends, and policy developments remain key variables influencing market activity, we believe the structural changes implemented during 2025 have strengthened our ability to generate durable returns across a range of market environments. Our focus remains on scaling our operating platforms, efficiently deploying capital, and creating long-term value through disciplined execution and risk management.