Redwood Trust Reports Third Quarter 2025 Financial Results
Redwood Trust, Inc. a leading participant in the U.S. housing finance ecosystem, announced its financial results for the quarter ended September 30, 2025. The quarter marked a defining phase in Redwood’s ongoing strategic transition toward a more transaction-driven, mortgage banking–focused operating model. This continued restructuring of its business mix reflects both the Company’s ambition to expand access to housing for homebuyers and renters and its commitment to improving shareholder returns through clearer earnings drivers, more efficient capital deployment, and reduced exposure to legacy investment portfolios.
Mortgage Banking Platforms Demonstrate Strong Momentum
Redwood’s mortgage banking businesses delivered another strong quarter of volume and revenue performance, demonstrating scalable growth across multiple origination and distribution channels. During the period, the Company achieved record cumulative loan production of $6.8 billion across its platforms. This level of production represented a significant milestone, particularly as the mortgage sector continues to navigate a high-rate environment that has pressured origination activity across much of the industry.
Capital allocation to mortgage banking continues to increase as Redwood reorients its balance sheet to support scalable and recurring revenue streams. Since the second quarter of 2024, the Company has increased capital dedicated to mortgage banking by 84%, reflecting both its confidence in the platform and the efficiency gains derived from greater operating leverage. The quarter also marked Redwood’s highest mortgage banking revenue performance since the third quarter of 2021, underscoring the strength of both its Sequoia and CoreVest platforms.
Capital Management and Portfolio Repositioning
In parallel with its growth in origination and revenue, Redwood continued to execute on strategic capital management priorities. The Company undertook a substantial reduction in its Legacy Investments segment, transferring or resolving approximately $1 billion of holdings as of October 29, 2025. This repositioning unlocked $150 million in capital that can now be reallocated to support ongoing expansion within its core mortgage banking activities.
Redwood also took advantage of market conditions to continue buybacks of its common equity. During the third quarter, the Company repurchased five million shares for approximately $29 million, signaling management’s confidence in long-term franchise value and earnings potential.
Following quarter end, Redwood also broadened its strategic partnership with CPP Investments to further accelerate lending scale. The agreement included an extension of a secured financing facility and joint venture commitment period to September 2028, along with an upsized secured financing facility of $400 million. This extended capital support is expected to strengthen transaction flow and balance sheet flexibility.
Key Financial Metrics
Redwood reported a GAAP book value per common share of $7.35 as of September 30, 2025, a modest decrease from $7.49 at June 30, 2025. The Company recorded an economic return on book value of 0.5% for the quarter, reflecting the benefits of strong mortgage banking performance offset by one-time restructuring costs tied to Legacy Investments repositioning.
The Company reported a GAAP net loss of $(9.5) million, or $(0.08) per basic and diluted share. Management emphasized that the loss was largely attributable to non-recurring expenses associated with the transfer and resolution of certain Legacy Investment positions.
On a non-GAAP basis, Redwood reported Core Segments Earnings Available for Distribution (EAD) of $27.1 million, or $0.20 per basic common share, demonstrating the earnings power of the Company’s core operating model when excluding impacts from legacy asset runoff and corporate-level adjustments.
CEO Christopher Abate commented,
The third quarter was extremely productive at Redwood. We achieved record mortgage banking production of nearly $7 billion, underscoring the strength of our operating model and ability to significantly grow market share. We meaningfully reduced legacy portfolio holdings as we reposition our balance sheet for increased transaction activity as rates begin to fall. Together, these accomplishments demonstrate strong momentum and our continued focus on delivering returns for shareholders.
Segment-Level Performance
Sequoia Mortgage Banking
The Sequoia platform, which focuses on delivering prime residential mortgage solutions, reported segment GAAP net income of $34.3 million, representing strong profitability and operating leverage. The segment generated a 29% annualized Return on Equity and EAD-based ROE within expected target ranges.
Key production drivers included:
- $6.3 billion in lock volume, up 75% quarter-over-quarter and 183% year-over-year.
- Sequoia channel locks represented $5.1 billion of this volume, reflecting sustained flow from bulk and correspondent relationships.
- The Aspire platform, serving non-agency originations, contributed $1.2 billion, marking a 277% increase from the second quarter.
The segment distributed $2.7 billion of loans through a combination of $1.9 billion in securitizations and $0.9 billion in whole loan sales, supporting rapid capital turnover.
CoreVest Mortgage Banking
CoreVest, Redwood’s platform supporting residential investor and small balance real estate lending, reported segment GAAP net income of $3.5 million, with annualized ROEs ranging from 21% to 30% on a GAAP and EAD basis, respectively.
CoreVest funded $521 million in loans, reflecting a diversified mix of bridge (56%) and term products (44%), marking a 14% year-over-year increase and the platform’s strongest funding volume since mid-2022.
Loan distributions totaled $386 million, executed across whole loan sales, securitizations, and joint venture channels.
Redwood Investments
This segment, which manages corporate liquidity and strategic investment allocations, recorded GAAP net income of $10.3 million with recourse leverage stable at 1.1x, reflecting conservative balance sheet positioning.
Legacy Investments
As Redwood continues to de-emphasize legacy holdings, the segment recorded a GAAP net loss of $(22.2) million, primarily reflecting one-time resolution expenses and lower net interest income. Capital allocated to Legacy Investments declined from 33% in June to 25% by late October, with recourse leverage reduced from 1.2x to 0.6x.
Capital and Liquidity
As of quarter end, Redwood reported:
- $226 million in unrestricted cash and equivalents
- $3.8 billion in recourse debt (up due to increased warehouse utilization supporting mortgage banking)
- A 30% reduction in portfolio recourse debt tied to legacy asset runoff
- A completed $50 million reopening of its 7.75% convertible notes due 2027
- Retirement of convertible debt maturing October 2025, leaving the next unsecured maturity in June 2027
Source Link:https://www.businesswire.com/
