REDWOOD TRUST INC

We report on our business using four segments: Sequoia Mortgage Banking, CoreVest Mortgage Banking, Redwood Investments and Legacy Investments. For additional information on our segments, refer to Part I, Item 1, and Note 4 in Part II, Item 8 of this Annual Report on Form 10-K.

The following table presents the segment contribution from our four segments reconciled to our consolidated net (loss) income for the years ended December 31, 2025 and 2024.

Table 4 – Segment Results Summary

The sections that follow provide further detail on our business segments and their results of operations for the years ended December 31, 2025 and 2024.

Corporate/Other

Expenses from Corporate/Other remained flat year-over-year, primarily attributable to offsetting changes in expense components. Higher compensation and related costs associated with increased headcount supporting Mortgage Banking platform growth were largely offset by lower corporate interest expense resulting from lower average corporate debt balances.

Sequoia Mortgage Banking Segment

This segment consists of a mortgage loan conduit that acquires residential consumer loans from third-party originators for subsequent sale to whole loan buyers, securitization through our SEMT® (Sequoia) private-label securitization program, or transfer into our Redwood Investments portfolio. Subordinate securities that we retain from our Sequoia securitizations (many of which we consolidate for GAAP purposes) are transferred to and held in our Redwood Investments segment. We typically acquire residential consumer mortgages and the related mortgage servicing rights on a flow or bulk basis from our extensive network of loan sellers. We utilize a combination of capital and our residential consumer loan warehouse facilities to finance our inventory of residential consumer loans held-for-sale. This segment also includes various derivative financial instruments that we utilize to manage certain risks associated with our inventory of residential consumer loans held-for-sale within this segment.

In the first quarter of 2025, we launched an additional mortgage loan conduit under our Aspire brand that acquires mortgage loans under expanded underwriting criteria, which we also refer to as "Expanded". These loan programs, primarily bank statement and DSCR loans, are designed for prime quality borrowers seeking alternative underwriting solutions, a segment that continues to grow within the U.S housing finance market. While we may report this activity as a separate standalone segment in the future, we are including its results within our Sequoia Mortgage Banking segment until this additional conduit activity reaches sufficient scale.

This segment’s main source of income is Mortgage banking income, which is comprised of net interest income from its inventory of loans held-for-sale, securities utilized for interest rate hedging purposes, as well as income from mortgage banking activities, which includes changes in fair value of loans we acquire and subsequently sell, securitize, or transfer into our Redwood Investments portfolio, loan purchase commitments, interest rate lock commitments and the hedges used to manage risks associated with these activities. See Note 5 in Part II, Item 8 of this Annual Report on Form 10-K for further detail on the composition of mortgage banking activities, net. Direct operating expenses and tax expenses associated with these activities are also included in this segment.

The following tables present key earnings and operating metrics and loan inventory activity for our Sequoia Mortgage Banking segment for the years ended December 31, 2025 and 2024.

Table 5 – Sequoia Mortgage Banking Earnings Summary and Operating Metrics

Operating expenses presented in the table above include general and administrative expenses and loan acquisition costs for this segment.

Activity at this segment that is performed within our taxable REIT subsidiary is subject to federal and state income taxes. The provision for income taxes for the periods presented above resulted from GAAP income from these operations at our TRS during that period.

The following table provides the activity of residential consumer loans held in inventory for sale at our Sequoia Mortgage Banking business for the years ended December 31, 2025 and 2024.

Table 6 – Loan Inventory for Sequoia Mortgage Banking Operations

(1)Represents the fair value of the net transfers of loans from held-for-sale to held-for-investment within our Redwood Investments portfolio, associated with securitizations we sponsored that we consolidate under GAAP.

Sequoia Mortgage Banking segment contribution increased to $126 million from $61 million for 2025, as compared to the prior year, driven by higher mortgage banking income from increased loan lock and purchase volumes, strong distribution activity, tightening credit spreads, and sustained operating efficiency. The Sequoia Mortgage Banking segment represents one of the Company’s primary capital-efficient operating platforms and a key driver of earnings growth. During 2025, the segment transitioned into a phase of scaled execution, reflecting sustained engagement with loan sellers, consistent access to capital markets, and continued operating leverage. Results for the year reflect both higher production volumes and disciplined execution across acquisition, hedging, and distribution activities.

Total loan locks for the year ended December 31, 2025 were $20.7 billion, compared to $9.0 billion in the prior year, representing a 130% increase. Growth was broad-based across both flow and bulk acquisition channels and was supported by deeper engagement with bank sellers as well as increased activity from independent mortgage bankers or IMBs. Our network now includes 210 originators across banks and IMBs and we estimate our full-year 2025 jumbo market share at 7%, up materially from prior years. Lock volume benefited from continued demand for prime jumbo products and increased availability of seasoned collateral as financial institutions evaluated balance sheet repositioning opportunities. In addition, we increased our lock volume in other products such as closed-end second liens ("CES") and adjustable rate-mortgages ("ARMs").

Aspire, which is included within the Sequoia Mortgage Banking segment, contributed $3.2 billion of lock volume during 2025 following its launch in the first quarter of the year. Aspire’s activity was supported with strong contributions from both flow and bulk channels, with close to 69% sourced through flow channels and approximately 70% from sellers in the Sequoia network. Although Aspire remains early in its development, performance to date highlights strengthening investor demand for "Expanded" products in a growing market segment, supporting overall segment results.

Distribution activity remained robust during 2025, with approximately $4.0 billion of loans sold through whole-loan sales and sixteen securitizations completed, backed by $8.5 billion of loans. Of the $4.0 billion of whole loan sales, nearly $1 billion related to Aspire-originated loans, with the remainder attributable to Sequoia prime jumbo production. The combination of whole loan sales and securitizations supported efficient balance sheet turnover and capital recycling throughout the year.

Gain on sale margins (calculated as net revenue divided by loan purchase commitments) for the segment averaged 116 basis points, exceeding the company’s long-term target range of 75 to 100 basis points, compared to 137 basis points in 2024. The year-over-year decrease was primarily driven by a higher proportion of bulk executions and modest spread compression, partially offset by favorable hedge performance and disciplined execution. Margins remained above the company's long-term target range of 75 to 100 basis points.

Operating expenses increased by $18 million year over year, reflecting higher loan acquisition costs, increased variable compensation associated with increased production levels and operating expenses related to the build out of Aspire. Cost per loan (calculated as operating expenses divided by loan purchase commitments) improved to 23 basis points in 2025 from 29 basis points in 2024, reflecting continued operating leverage as volumes scaled. The platform continues to utilize a combination of interest-rate futures, TBAs, and other hedging instruments to mitigate pipeline volatility and protect execution margins.

Capital allocated to the Sequoia Mortgage Banking segment increased to $650 million at December 31, 2025, compared to $350 million at December 31, 2024, reflecting higher working capital requirements associated with increased loan inventory and securitization activity, including approximately $200 million allocated to Aspire, which commenced operations in the first quarter of 2025. Despite higher average capital allocation during the year, the segment maintained loan holding periods of approximately 36 days. This was supported by consistent whole-loan sales and securitization execution, which enabled active capital recycling and limited balance sheet duration risk.

CoreVest Mortgage Banking Segment

This segment consists of a platform that originates residential investor loans for subsequent securitization, sale, or transfer into our Redwood Investments portfolio or into joint ventures. Residential investor loans are loans to investors in single-family rental and multifamily properties, which we classify as either "term" loans (which include loans with maturities that generally range from 3 to 30 years) or "bridge" loans (fixed and floating-rate loans with maturities that generally range between 12 and 36 months, typically used to finance transitional properties or value-add strategies).

Residential investor term loans include both larger balance and smaller balance mortgage loans secured by stabilized residential real estate (primarily 1-4 units detached or multifamily) that the borrower owns as an investment property and rents to residential tenants. Our smaller balance term loans are referred to as DSCR loans, which are fixed or floating-rate loans underwritten primarily on the basis of the property's debt service coverage ratio, rather than the borrower's personal income, and designed for stabilized rental properties.

Residential investor bridge loans include both larger balance and smaller balance mortgage loans which are generally secured by unoccupied (or in the case of certain multifamily properties, partially occupied) single-family or multifamily real estate that the borrower owns as an investment and that is being renovated, rehabilitated or constructed. Our bridge loans are first-lien, interest-only loans. Our smaller balance bridge loans are referred to as RTL loans, which are short-term, typically fixed-rate loans secured by 1-4 units residential properties that are commonly used by investors to acquire, renovate, or reposition properties prior to stabilization or exit.

Our inventory of loans is managed with a combination of our capital and loan warehouse facilities. All of these facilities are 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).

We typically distribute most of our loans through our CAFL® private-label securitization program, through whole loan sales, transfers into our Redwood Investments portfolio or into sales into one of our joint ventures. We have established joint ventures with two separate institutional investment managers, one to invest in residential investor bridge loans originated by CoreVest and another to invest in residential investor bridge and term loans originated by CoreVest. We administer the joint ventures for ongoing fees and are entitled to earn additional performance fees upon realization of specified return hurdles.

This segment also includes various derivative financial instruments that we utilize to manage certain risks associated with our inventory of loans held-for-sale. This segment’s main sources of mortgage banking income are net interest income from its inventory of loans held-for-sale, securities utilized for interest rate hedging purposes, as well as mortgage banking activities, net which includes origination and other fees on loans, mark-to-market adjustments on loans from the time loans are originated or purchased to when they are sold, securitized or transferred into our Redwood Investments portfolio, and gains/losses from associated hedges. See Note 5 in Part II, Item 8 of this Annual Report on Form 10-K for further detail on the composition of mortgage banking activities. Fee income associated with our administration of joint ventures and other loan-related administrative functions is also included in this segment. Direct operating expenses and tax expenses associated with these activities are also included in this segment.

The following table presents an earnings summary for our CoreVest Mortgage Banking segment for the years ended December 31, 2025 and 2024.

Table 7 – CoreVest Mortgage Banking Earnings Summary

CoreVest Mortgage Banking segment contribution presented in Table 7 above is comprised of net interest income from our loans held-for-sale in inventory, mortgage banking activities, net (see Note 5 in Part II, Item 8 of this Annual Report on Form 10-K for further detail on the composition of mortgage banking activities, net), fee income (loss) from administration services for our joint ventures and other income, net for this segment. Operating expenses presented in the table above include general and administrative expenses, loan acquisition costs and other expenses (including amortization of purchase intangibles) for this segment. Activity of this segment that is performed within our TRS is subject to federal and state income taxes. The benefit from income taxes was primarily due to GAAP losses generated by this segment’s operations at our TRS in those periods presented above.

The following table provides unsecuritized residential investor loan origination activity for the years ended December 31, 2025 and 2024.

Table 8 – Residential Investor Loans - Funding Activity

(1)We originate Residential investor bridge loans at our TRS and transfer many of them to our REIT. Origination fees and any fair value changeson these loans prior to transfer or sale are recognized within Mortgage banking activities, net on our consolidated statements of (loss) income. Loans transferred to our REIT are classified as held-for-investment, with fair value changes subsequent to their transfer generally recorded through Investment fair value changes, net on our consolidated statements of (loss) income.

(2)Fundings and sales for Residential investor bridge loans for the year ended December 31, 2025 includes $126 million of construction draws, of which $88 million were related to construction draws on loans sold to our joint ventures. Funding and sales for Residential investor bridge loans in 2024, includes $49 million related to construction draws on loans sold to a joint venture with an institutional investment manager.

(3)Fundings include small-balance loans, consisting of DSCR loans reported within Residential investor term loans and RTL loans reported within Residential investor bridge loans.

(4)For the years ended December 31, 2025 and 2024, acquisitions include loans acquired from a residential construction loan originator, with whom we have a strategic equity method investment, and loan repurchases. See Note 12 in Part II, Item 8 of this Annual Report on Form 10-K for further information.

(5)For Residential investor term loans, amounts primarily represent loans transferred into consolidated securitizations reflected within our Redwood Investments Segment. Residential investor bridge loan amounts represent the transfer of loans originated or acquired by our CoreVest Mortgage Banking segment at our TRS and transferred to our Redwood Investments segment at our REIT.

CoreVest segment contribution increased to $20 million from $2 million for 2025, as compared to the prior year, primarily driven by higher mortgage banking income resulting from increased funding volumes, improved distribution execution, a shift in product mix toward smaller-balance investor loans, and operating efficiencies across the platform.

CoreVest funded $2.0 billion of loans during 2025, representing a 13% increase compared to $1.7 billion in 2024, driven by continued borrower demand across bridge and term lending products and growth in small balance loans, RTL and DSCR loans, areas of strategic focus for the platform. Approximately 40% of 2025 funded volume consisted of small-balance loans: RTL production increased by 36% to $641 million from $471 million in 2024, while DSCR volumes grew 134% to $150 million from $64 million. The shift in mix reflects strong demand for transitional and cash-flow-based lending products and aligns production with institutional investor demand for these assets.

CoreVest’s lending activity continues to primarily serve small- to mid-sized investors, with approximately 86% of funded volume for the last two years attributable to borrowers who own fewer than 100 housing units. Only a nominal share of originations is associated with larger institutional investors, and CoreVest’s largest borrowers are generally focused on purpose-built Build-for-Rent ("BFR") communities rather than the acquisition of existing scattered-site single-family rental ("SFR") properties.

Distribution activity increased to $2.1 billion during the year ended December 31, 2025, representing a 33% increase compared to $1.6 billion in 2024. During the year, loans were distributed across multiple channels, including whole loan sales, securitizations and sales to joint ventures. Of the 2025 total, $980 million of loans were transferred to one of our joint ventures, split evenly between bridge and term loans. The increase in distribution activity reflects broader execution across these channels and sustained investor demand for our products, supporting improved capital turnover during the year.

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 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 allocated to CoreVest, including capital allocated to joint ventures, increased to $145 million at December 31, 2025 from $75 million at December 31, 2024, reflecting higher funding volumes and increased loan inventory levels. The platform continues to utilize joint venture structures and non-recourse financing arrangements to support loan inventory and facilitate capital-efficient growth.

Redwood Investments Segment

This segment consists of retained operating investments sourced through our Sequoia securitizations and CoreVest term and bridge loan securitizations, some of which we consolidate for GAAP purposes, and other third-party securities. We directly finance our holdings of real estate securities with a combination of recourse, non-marginable term debt financing, non-recourse, non-marginable re-securitization debt, and recourse, marginable securities repurchase financing.

In the second quarter of 2025, as a part of the Company's accelerated shift towards a scalable and simplified operating model, legacy unsecuritized bridge and term loan portfolios, our consolidated re-performing loan securitization entities, and other non-core legacy assets historically held in this segment were formally reclassified to the newly established Legacy Investments segment. This reclassification did not impact our consolidated financial results but served to streamline reporting and better align Redwood’s disclosure with its strategic focus. All relevant prior period amounts and disclosures have been conformed to reflect the current segment structure.

We primarily target investments with sensitivity to housing credit risk, sourced through our operating platforms where we control the underwriting and collateral review. Going forward, the Redwood Investments portfolio will focus on retained interests from the Company’s own securitizations and other investment vehicles, rather than third-party securities, consistent with Redwood’s strategic shift toward internally originated investments.

This segment’s main sources of income are net interest income and other income from investments, changes in fair value of investments and associated hedges, and realized gains and losses upon the sale of securities. Direct operating expenses and tax provisions associated with these activities are also included in this segment.

The following table presents an earnings summary for our Redwood Investments segment for the years ended December 31, 2025 and 2024.

Table 9 – Redwood Investments Earnings Summary

Investment fair value changes, net is primarily comprised of the change in fair value (both realized and unrealized) of our portfolio investments accounted for under the fair value option and interest rate hedges associated with these investments. Gains and losses from the sale of AFS securities are recorded as Realized gains, net, in our consolidated statements of (loss) income. See Table 3 in the Consolidated Results of Operations section of this MD&A for further detail on the composition of investment fair value changes (the difference in amounts in the table above and in Table 4 relates to fair value changes for investments held at Corporate/Other).

We hold certain of our investments, primarily our MSRs, at our TRS. Activity at this segment that is performed within our TRS is subject to federal and state income taxes. The benefit from income taxes was primarily due to GAAP losses generated by this segment’s operations at our TRS and our provision for income taxes at this segment is primarily driven by the amount of income earned from portfolio assets at our TRS.

During the year ended December 31, 2025, segment contribution was $65 million lower than the prior year. Net interest income decreased $18 million in 2025 as compared to 2024, primarily due to lower net interest income from securitized term loans and higher average cost of debt on securitized bridge loans incurred in 2025. Investment fair value changes, net declined by $38 million year over year. In 2025, investment fair value changes, net was $1 million, reflecting the benefit from improved credit performance on Sequoia retained and servicing investments, partially offset by a decrease in the value of securitized bridge loans. This compares with investment fair value changes, net in 2024 of $38 million, which was largely attributable to improved credit performance and spread tightening on our CAFL term and Sequoia retained investments. Operating expenses at this segment increased by $11 million in 2025, primarily due to expenses associated with a higher average balance of bridge loans securitized in 2025 relative to 2024.

Fundamental performance of our residential consumer assets within our Redwood Investments portfolio continues to be driven by strong employment data, embedded equity protection associated with loan seasoning and home price appreciation, and borrowers motivated to stay current on their low-coupon mortgages. Notably, our 90 day+ delinquencies within our Sequoia securities portfolio remained steady at 0.3% at December 31, 2025 compared to 0.2% at December 31, 2024. The 90 day+ delinquencies on our CAFL Term securities portfolio increased to 10.1% at December 31, 2025, compared to 7.4% at December 31, 2024. This increase was largely attributable to a modest increase in newly delinquent loans (net of resolutions) and portfolio runoff due to the resulting decline in the number of loans outstanding, which increased the delinquency rate on a percentage basis in 2025.

We hold certain of our investments, including our MSRs, at our taxable REIT subsidiary. Our provision for (or benefit from) income taxes at this segment is primarily driven by the amount of GAAP income earned (or loss recognized) from investment portfolio activities at our taxable REIT subsidiary.

Redwood Investments Detail

The following table presents a balance sheet summary for our Redwood Investments segment as of December 31, 2025 and 2024.

Table 10 – Redwood Investments Balance Sheet Summary

(1)Represents our retained economic investment in securities issued by consolidated Sequoia securitization VIEs. For GAAP purposes, we consolidated $14.84 billion of loans and $14.12 billion of ABS issued associated with these investments at December 31, 2025. We consolidated $8.82 billion of loans and $8.40 billion of ABS issued associated with these investments at December 31, 2024. At December 31, 2025 and 2024, excludes $134 million and $51 million, respectively, of retained Sequoia securities that were used as hedges for our Sequoia Mortgage Banking segment.

(2)Represents our retained economic investment in securities issued by consolidated CAFL Term securitization VIEs. For GAAP purposes, we consolidated $1.99 billion of loans and $1.68 billion of ABS issued associated with these investments at December 31, 2025. We consolidated $2.49 billion of loans and $2.17 billion of ABS issued associated with these investments at December 31, 2024.

(3)At December 31, 2025 and 2024 represents HEI originated and owned by Redwood.

(4)Other investments at both December 31, 2025 and 2024 includes net risk share investments of $18 million, representing $19 million of restricted cash and other assets, net of other liabilities of $1 million. Also includes mortgage servicing rights of $33 million and $32 million at December 31, 2025 and 2024, respectively.

(5)Represents our economic investment in securities issued by a consolidated Freddie Mac K-Series securitization entity which were paid off in full during the year ended December 31, 2025. For GAAP purposes, we consolidated $425 million of loans and $389 million of ABS issued associated with these investments at December 31, 2024.

(6)Represents our economic investment in consolidated Servicing Investment VIEs. At December 31, 2025, for GAAP purposes, we consolidated $266 million of servicing investments and $152 million of non-recourse securitization debt, as well as other assets and liabilities for these entities. At December 31, 2024, for GAAP purposes, we consolidated $262 million of servicing investments and $159 million of non-recourse securitization debt, as well as other assets and liabilities for these entities.

During 2025, the size of our Redwood Investments portfolio increased as we deployed capital into new residential Sequoia securities and residential investor bridge loan securitizations, including those sponsored by one of our joint ventures. This was offset by sales and calls of third-party residential and multi-family securities in the portfolio. At December 31, 2025 and December 31, 2024, 95% and 87% of our Redwood Investments were retained from our mortgage banking operations, and 5% and 13% were purchased from third parties for interest rate hedging purposes. This trajectory aligns with Redwood’s strategic shift toward internally-originated investments rather than securities issued by third parties.

The following table summarizes the credit characteristics of Sequoia securities and CAFL term securities at December 31, 2025. This table includes both our securities held on balance sheet and our economic interest in securities we own in securitizations we consolidate in accordance with GAAP.

Table 11 – Credit Statistics (1)

(1)Underlying loan performance information provided in this table is generally reported on a one-month lag. As such, the data reported in this table is from December 2025 reports, which reflect a loan performance date of November 2025. The methodology for calculating weighted average values for securities investments presented in the tables above, including delinquency rates, is based on notional balances of loans collateralizing each of our securities investments.

(2)Sequoia Securities presented in this table include subordinate and interest only or certificated servicing securities.

(3)Delinquency percentages at underlying securitizations are calculated using unpaid principal balance ("UPB"). Aggregate delinquency amounts by security type are weighted using the notional value of the loans collateralizing each of our securities investments.

(4)Includes loans over 90 days delinquent and all loans in foreclosure (regardless of delinquency status).

Legacy Investments Segment

In the second quarter of 2025, we established Legacy Investments as a new reportable segment. This new segment primarily consists of assets no longer aligned with our core strategic objectives, including legacy unsecuritized bridge and term loans, residential re-performing loan securities and other non-core Legacy assets, that are in the active process of sale, runoff, or other disposition as part of an accelerated strategic repositioning of our business model. These assets were previously included within the Redwood Investments segment. We finance our assets in this segment with a combination of recourse and non-recourse, non-marginable warehouse facilities, and a portion of a secured, revolving financing facility. All relevant prior period amounts and disclosures have been conformed to reflect the current segment structure. At year-end 66% of capital in this portfolio was related to Legacy Bridge Loans (inclusive of certain unsecuritized term loans) and 34% was related to Legacy HEI.

During 2025, we executed on our plan to accelerate the wind down of the Legacy Investments portfolio through approximately $1.2 billion of dispositions and structured transactions. This included the sale of $484 million in fair value of legacy unsecuritized bridge loans and REO assets to a newly formed partnership structure specific for the accelerated wind-down of the Legacy Investments portfolio ("Legacy Trust"). In connection with this transaction, we retained a $182 million subordinate beneficial interest in the Legacy Trust. The beneficial interest represents our right to residual cash flows from the Legacy Trust after payment of senior financing and preferred interests and is recorded as an AFS security in the Legacy Investments segment. See further information on this beneficial interest in Note 9 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. As a result of these efforts, Legacy Investments declined from approximately 33% of total capital in mid-2025 to 19% by year-end 2025, with continued progress expected through 2026 as remaining assets are resolved or refinanced.

The continued wind-down of our Legacy Investments portfolio is simplifying our balance sheet and will continue to free up investment capital as we progress with further disposition activity. Asset sales and other accretive financings have enabled the repayment of higher cost secured debt and more efficient utilization of flexible funding sources, including our secured revolving financing facility with one of our joint venture partners. We remain focused on further reducing the legacy portfolio in 2026 while prioritizing maximum recovery through both outright sales and partnership structures that recycle capital while preserving upside where we believe it makes economic sense.

This segment’s earnings are primarily driven by net interest income and other income from investments, changes in the fair value of investments and associated hedges, and realized gains and losses upon the sale or disposition of assets. Direct operating expenses and tax provisions associated with these activities are also included in this segment.

The following table presents an earnings summary for our Legacy Investments segment for the years ended December 31, 2025 and 2024.

Table 12 – Legacy Investments Earnings Summary

Investment fair value changes, net is primarily comprised of the change in fair value (both realized and unrealized) of our portfolio investments accounted for under the fair value option and interest rate hedges associated with these investments. See Table 3 in the Consolidated Results of Operations section of this MD&A for further detail on the composition of investment fair value changes (the difference in amounts in the table above and in Table 3 relates to fair value changes for investments held at Redwood Investments and corporate/other).

We hold certain of our investments at our TRS. Activity of this segment that is performed within our TRS is subject to federal and state income taxes. The benefit from income taxes was primarily due to GAAP losses generated by this segment’s operations at our TRS.

Legacy Investments reported a $147 million segment loss during the year ended December 31, 2025, with $104 million of the loss recognized in the second quarter of 2025 upon the establishment of the Legacy Investments segment. Net interest loss totaled $25 million in 2025, driven by an increase in legacy unsecuritized bridge and term loan portfolios placed on non-accrual in 2025, which in certain cases resulted in reversals of previously accrued interest income. Investment fair value losses, net totaled $99 million in 2025, driven by valuation losses recognized on our legacy unsecuritized bridge and term loan portfolios, consolidated re-performing loan securitization entities, and other non-core legacy assets. These losses were driven by realized and anticipated near-term resolutions on these assets and changes in the underlying performance of certain legacy bridge loans, particularly in 2021 and 2022 vintage loans. These loans were underwritten during a period of significantly lower interest rates, more favorable financing conditions and different market fundamentals.

During the year ended December 31, 2025, we executed on our plan to accelerate the wind down of the Legacy Investments portfolio through $1.2 billion of dispositions and structured transactions. We completed approximately $662 million of dispositions of legacy unsecuritized bridge loans and REO assets, including the sale of $484 million in fair value of such assets to the Legacy Trust, $262 million in fair value of HEI, and $254 million of securities we had retained from our consolidated re-performing loan securitization entities. Since the second quarter of 2025 we reduced associated recourse debt by more than $200 million and unlocked approximately $200 million of capital redeployment.

Capital allocated to Legacy Investments declined by $230 million or 43% at December 31, 2025 from 2024, largely due to dispositions and paydowns on our legacy unsecuritized bridge and term loan portfolios, HEI portfolio, and SLST securitized re-performing loans. At December 31, 2025 our capital allocation to Legacy Investments was 19%. The pace of further reductions to capital allocated to Legacy Investments will depend on among other things, broader market conditions and market conditions more specific to the types of assets held in this segment. As we execute on this reallocation strategy, we believe there is an opportunity for consolidated returns to improve.

Investments Detail and Activity

The following table presents a balance sheet summary for our Legacy Investments segment as of December 31, 2025 and 2024.

Table 13 – Legacy Investments Balance Sheet Summary

(1)At December 31, 2025 and 2024, represents third-party originated HEI, as well as our net investment in HEI securitization entities.

(2)During the year ended December 31, 2025 we sold a portfolio totaling $484 million in fair value of legacy unsecuritized bridge loans and REO assets to the Legacy Trust and retained a $182 million subordinate beneficial interest in the Legacy Trust. The beneficial interest represents our right to residual cash flows from the Legacy Trust after payment of senior financing and preferred interests and is recorded as an AFS security, measured at fair value and classified as a Level 3 asset. See further information in Note 8, 9 and 19 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

(3)Residential re-performing loan securities (SLST) reflects the fair value of the securities we retained from our consolidated re-performing loan securitization entities. We sold these securities in 2025. See further information on our VIEs in Note 16 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

Legacy Unsecuritized Bridge and Term Loan Portfolios

The following table provides the activity of the legacy unsecuritized bridge and term loans for the years ended December 31, 2025.

Table 14 – Legacy Unsecuritized Bridge and Term Loan Portfolios - Activity

(1)The acquisitions reflected in this table were recorded at the lower of cost or market, and the resulting carrying value approximated fair value at December 31, 2025.

For the year ended December 31, 2025, gross interest income recognized on legacy bridge and term loans totaled $42 million. This amount included a write-off of deferred interest of $13 million.

At December 31, 2025, legacy unsecuritized bridge and term loans in this portfolio with an aggregate fair value of $102 million and an unpaid principal balance of $134 million, were greater than 90+ days delinquent. Of this amount, $82 million of unpaid principal balance related to legacy bridge loans, compared to $243 million at March 31, 2025, reflecting significant resolutions, payoffs and transfers to REO during the year. Included in the 90+ days delinquent balance are legacy bridge loans in foreclosure with an aggregate fair value of $17 million and an aggregate unpaid principal balance of $23 million. Additionally, the fair value of REO associated with legacy unsecuritized bridge loans increased to $91 million at December 31, 2025, from $76 million at December 31, 2024, resulting from transfers to REO of $91 million, partially offset from the sale of one REO property to the Legacy Trust for $33 million, a decrease in fair value totaling $0.2 million and payoffs of $42 million. Legacy REO properties are actively being marketed and are expected to be resolved over the next few quarters.

During 2025, as part of the transaction involving the sale of $484 million in fair value of legacy unsecuritized bridge loans and REO assets to the Legacy Trust, we retained a $182 million subordinate beneficial interest in the Legacy Trust, which is recorded as an AFS real estate security on our Consolidated balance sheet. See Notes 8, 9 and 19 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further information.

Loan Composition

The following table provides the composition of legacy unsecuritized term and bridge loans by product type at December 31, 2025.

Table 15 – Legacy Loans - By Product Type at Legacy Investments

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

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

At December 31, 2025, the fair value of our legacy bridge and term loans and associated REO represented 85.6% of the combined unpaid principal balance of these loans and the unpaid principal balance of the loans associated with the REO at time of foreclosure. As part of our plans to accelerate the wind-down of the Legacy Investments portfolio, we have revised our underwriting practices to discontinue the active origination of large multifamily loans. Consequently, we expect our exposure to multifamily loans and REO to decline over time as we proactively reduce long-term exposure to the legacy bridge loan portfolio.