~~REDWOOD TRUST, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2022~~

~~(Unaudited)~~


	Three Months Ended March 31, 2022
(In Thousands)
Supplementary pro forma information:
Net interest income	$	54,815
Non-interest income	22,401
Net income	32,230

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, ~~2021~~2022 is a summary of our significant accounting policies.

Recent Accounting Pronouncements

Newly Adopted Accounting ~~Standards~~Standard Updates ("ASUs")

In August 2020, the FASB issued ASU 2020-06, "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)." This new guidance simplifies the accounting for convertible debt by reducing the number of accounting models to separately present certain conversion features in equity. This new guidance was effective for fiscal years beginning after December 31, 2021. We adopted this guidance in the first quarter of 2022, which did not have a material impact on our consolidated financial statements.

~~Other Recent Accounting Pronouncements~~

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” ASU 2022-03 was issued to (1) to clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce 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. Early adoption is permitted. We are evaluating the accounting and disclosure requirements of ASU 2022-03 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 March 2022, the FASB issued ASU 2022-02, "Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures." ASU 2022-02 addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the current expected credit loss ("CECL") model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to disclose current-period gross writeoffs for financing receivables and net investment in leases by year of origination in the vintage disclosures. This new guidance iswas effective for fiscal years beginning after December ~~15, 2022, including interim periods within those fiscal years. Early adoption is permitted.~~31, 2022. We ~~plan to adopt~~adopted this ~~new~~ guidance byin the ~~required date and do~~first quarter of 2023, which did not ~~anticipate that this update will~~ have a material impact on our consolidated financial statements.

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

Note 3. Summary of Significant Accounting Policies - (continued)

In March 2022, the FASB issued ASU 2022-01, "Derivatives and Hedging (Topic 815), Fair Value Hedging - Portfolio Layer Method," which will expand companies' abilities to hedge the benchmark interest rate risk of portfolios of financial assets (or beneficial interests) in a fair value hedge. The ASU expands the use of the portfolio layer method (previously referred to as the last-of-layer method) to allow multiple hedges of a single closed portfolio of assets using spot starting, forward starting, and amortizing-notional swaps. The ASU also permits both prepayable and non-prepayable financial assets to be included in the closed portfolio of assets hedged in a portfolio layer hedge. The ASU further requires that basis adjustments not be allocated to individual assets for active portfolio layer method hedges, but rather be maintained on the closed portfolio of assets as a whole. This new guidance iswas effective ~~for public business entities~~ for fiscal years beginning after December ~~15, 2022, including interim periods within those fiscal years. Early adoption is permitted.~~31, 2022. We ~~plan to adopt~~adopted this ~~new~~ guidance byin the ~~required date and do~~first quarter of 2023, which did not ~~anticipate that this update will~~ have a material impact on our consolidated financial statements.

~~REDWOOD TRUST, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30,~~In December 2022,

~~(Unaudited)~~

~~Note 3. Summary of Significant Accounting Policies - (continued)~~

~~In March 2020,~~ the FASB issued ASU ~~2020-04,~~2022-06, "Reference Rate Reform (Topic 848)~~: Facilitation~~ - Deferral of the ~~Effects~~Sunset Date of ~~Reference Rate Reform on Financial Reporting.~~Topic 848." This new guidance ~~provides optional expedients and exceptions for applying GAAP~~defers the sunset date of Topic 848 from December 31, 2022, to ~~contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In January 2021,~~December 31, 2024, after which entities will no longer be permitted to apply the ~~FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848): Scope." This new~~relief in Topic 848. The objective of the guidance ~~clarifies that certain optional expedients and exceptions~~ in Topic 848 ~~for contract modifications and hedge accounting apply~~is to ~~derivatives that are affected by~~provide temporary relief during the ~~discounting transition. This new guidance is effective for all entities as of~~transition period. Through March ~~12, 2020 through December~~ 31, ~~2022. We are currently evaluating the impact the adoption of this standard would have on our consolidated financial statements. Through September 30, 2022,~~2023, we have not elected to apply the optional expedients and exceptions to any of our existing contracts, hedging relationships, or other transactions.

Other Recent Accounting Pronouncements Pending Adoption

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” ASU 2022-03 was issued (1) to clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce 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. Early adoption is permitted. We are evaluating the accounting and disclosure requirements of ASU 2022-03 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.

We have an established cross-functional group that has evaluated our exposure to LIBOR, reviewed relevant contracts and has monitored regulatory updates to assess the potential impact to our business, processes and technology from the ultimate full cessation of LIBOR in 2023, and has established a LIBOR transition plan to facilitate an orderly transition to alternative reference rates. We continue to remain on track with our LIBOR transition plan, which requires different solutions depending on the underlying asset or liability with LIBOR exposure. At ~~September 30, 2022,~~March 31, 2023, our primary LIBOR exposure included the following: ~~$689 million of repo or warehouse debt, $37 million of interest rate swaps, $757~~$742 million of bridge loans and $140 million of trust preferred securities and subordinated ~~notes~~ debt. ~~Since December 31, 2021, c~~ertain of our contracts, such as interest rate swaps, have experienced an orderly market transition and we have transitioned a substantial portion of our derivative positions off of LIBOR-benchmarks. Other contracts, such as warehouse debt agreements, require bilateral amendments, many of which we have amended or are currently in the process of amending.

~~We anticipate most of these facilities will be amended in~~ ~~2022, with sufficient time remaining to resolve the remainder, which also have fallback provisions for benchmark replacement.~~ In ~~early~~ 2022, we began benchmarking all newly originated BPL bridge loans to ~~the Secured Overnight Financing Rate (“SOFR”), and our existing portfolio of~~SOFR. The LIBOR-indexed BPL bridge loans ~~are short-dated and~~ we ~~expect the vast majority to mature before the LIBOR cessation date in 2023.~~ have outstanding have fallback provisions for benchmark replacement. Additionally, as a result of legislation that was passed in the state of New York, our trust preferred securities and subordinated notes are expected to convert to SOFR upon the cessation of LIBOR.

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 consolidated balance sheets. However, we do not 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.

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

Note 3. Summary of Significant Accounting Policies - (continued)

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~

~~REDWOOD TRUST, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2022~~

~~(Unaudited)~~

~~Note 3. Summary of Significant Accounting Policies - (continued)~~

2022.

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


		Gross Amounts of Recognized Assets (Liabilities)		Gross Amounts Offset in Consolidated Balance Sheet			Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet		Gross Amounts Not Offset in Consolidated Balance Sheet (1)				Net Amount			Gross Amounts of Recognized Assets (Liabilities)			Gross Amounts Offset in Consolidated Balance Sheet			Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet				Gross Amounts Not Offset in Consolidated Balance Sheet (1)						Net Amount
September 30, 2022 (In Thousands)						Financial Instruments			Cash Collateral (Received) Pledged
March 31, 2023 (In Thousands)															March 31, 2023 (In Thousands)			Gross Amounts of Recognized Assets (Liabilities)				Gross Amounts Offset in Consolidated Balance Sheet				Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet			Financial Instruments			Cash Collateral (Received) Pledged			Net Amount
Assets (2)	Assets (2)																		Assets (2)
Interest rate agreements	Interest rate agreements	$	24,626	$	—		$	24,626	$	(23)	$	(7,638)	$	16,965	Interest rate agreements	$	8,032			$	—			$	8,032			$	—		$	(1,596)		$	6,436

TBAs	TBAs	13,568		—			13,568		(529)		(12,077)		962		TBAs	3,037			—				3,037				(1,397)			—			1,640
Futures	Futures	26,275		—			26,275		(2)		(10,675)		15,598		Futures	75			—			75				(75)			—			—
Total Assets	Total Assets	$	64,469	$	—		$	64,469	$	(554)	$	(30,390)	$	33,525	Total Assets	$	11,144		$	—		$	11,144			$	(1,472)		$	(1,596)		$	8,076

Liabilities (2)	Liabilities (2)														Liabilities (2)
Interest rate agreements		$	(23)	$	—		$	(23)	$	23	$	—	$	—

TBAs	TBAs	(6,545)		—			(6,545)		529		1,280		(4,736)		TBAs	$	(3,018)		$	—		$	(3,018)			$	1,397		$	1,277		$	(344)
Futures	Futures	(2)		—			(2)		2		—		—		Futures	(7,712)			—			(7,712)				75			7,637			—
Loan warehouse debt	Loan warehouse debt	(224,370)		—			(224,370)		224,370		—		—		Loan warehouse debt	(938)			—			(938)				631			—			(307)

Total Liabilities	Total Liabilities	$	(230,940)	$	—		$	(230,940)	$	224,924	$	1,280	$	(4,736)	Total Liabilities	$	(11,668)		$	—		$	(11,668)			$	2,103		$	8,914		$	(651)


		Gross Amounts of Recognized Assets (Liabilities)		Gross Amounts Offset in Consolidated Balance Sheet			Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet		Gross Amounts Not Offset in Consolidated Balance Sheet (1)				Net Amount			Gross Amounts of Recognized Assets (Liabilities)			Gross Amounts Offset in Consolidated Balance Sheet			Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet				Gross Amounts Not Offset in Consolidated Balance Sheet (1)						Net Amount
December 31, 2021 (In Thousands)						Financial Instruments			Cash Collateral (Received) Pledged
December 31, 2022 (In Thousands)															December 31, 2022 (In Thousands)			Gross Amounts of Recognized Assets (Liabilities)				Gross Amounts Offset in Consolidated Balance Sheet				Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet			Financial Instruments			Cash Collateral (Received) Pledged			Net Amount
Assets (2)	Assets (2)																		Assets (2)
Interest rate agreements	Interest rate agreements	$	18,929	$	—		$	18,929	$	(1,251)	$	(16,046)	$	1,632	Interest rate agreements	$	14,625			$	—			$	14,625			$	—		$	(5,944)		$	8,681

TBAs	TBAs	2,880		—			2,880		(633)		(704)		1,543		TBAs	1,893			—				1,893				(1,873)			—			20
Futures	Futures	25		—			25		(25)		—		—		Futures	3,976			—			3,976				(57)			—			3,919
Total Assets	Total Assets	$	21,834	$	—		$	21,834	$	(1,909)	$	(16,750)	$	3,175	Total Assets	$	20,494		$	—		$	20,494			$	(1,930)		$	(5,944)		$	12,620

Liabilities (2)	Liabilities (2)														Liabilities (2)
Interest rate agreements		$	(1,251)	$	—		$	(1,251)	$	1,251	$	—	$	—

TBAs	TBAs	$	(658)	$	—		$	(658)	$	633	$	15	$	(10)	TBAs	$	(16,784)		$	—		$	(16,784)			$	1,873		$	4,518		$	(10,393)
Futures	Futures	(905)		—			(905)		25		880		—		Futures	(57)			—			(57)				57			—			—
Loan warehouse debt	Loan warehouse debt	(572,720)		—			(572,720)		572,720		—		—		Loan warehouse debt	(224,695)			—			(224,695)				224,695			—			—

Total Liabilities	Total Liabilities	$	(575,534)	$	—		$	(575,534)	$	574,629	$	895	$	(10)	Total Liabilities	$	(241,536)		$	—		$	(241,536)			$	226,625		$	4,518		$	(10,393)

Income Taxes

Taxable Income, REIT Status and Dividend Characterization

As a REIT, under the Internal Revenue Code, Redwood is required to distribute to shareholders at least 90% of its annual REIT taxable income, excluding net capital gains, and meet certain other requirements that relate to, among other matters, the assets it holds, the income it generates, and the composition of its stockholders. To the extent Redwood retains REIT taxable income, including net capital gains, it is taxed at corporate tax rates. Redwood also earns taxable income at its taxable REIT subsidiaries (TRS), which it is not required to distribute under the Internal Revenue Code.

In ~~September 2022,~~March 2023, our Board of Directors declared a regular dividend of $0.23 per common share and $0.60147 per Series A preferred share for the ~~third~~first quarter of ~~2022~~2023, which ~~was~~were paid on ~~September 30, 2022 to shareholders of record on September 23, 2022.~~March 31, 2023 and April 17, 2023, respectively. As of ~~September 30, 2022,~~March 31, 2023, our year-to-date dividend distributions ~~of $0.69 per share~~ exceeded our minimum distribution requirements and we believe that we have met all requirements for qualification as a REIT for federal income tax purposes. 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.

While our minimum REIT dividend requirement is generally 90% of our annual REIT taxable income, we carried a $37 million federal net operating loss carry forward (NOL) into ~~2022~~2023 at our REIT that affords us the ability to retain REIT taxable income up to the NOL amount, tax free, rather than distributing it as dividends. Federal income tax rules require the dividends paid deduction to be applied to reduce REIT taxable income before the applicability of NOLs is considered; therefore, REIT taxable income must exceed our dividend distribution for us to utilize a portion of our NOL and any remaining NOL amount will carry forward into future years.

While the exact amount is uncertain at this time, we currently expect a significant portion of our ~~2022~~2023 common stock dividend distributions to be taxable as ordinary income for federal income tax purposes. Any remaining amount is currently expected to be characterized as a return of capital, which in general is nontaxable (provided it does not exceed a shareholder's tax basis in Redwood shares) and reduces a shareholder's basis in Redwood shares (but not below zero). To the extent such distributions exceed a shareholder's basis in Redwood shares, such excess amount would be taxable as capital gain. We currently expect all of our 2023 preferred stock dividend distributions to be taxable as ordinary income for federal income tax purposes. Under the federal income tax rules applicable to REITs, none of Redwood’s ~~2022~~2023 dividend distributions are currently expected to be characterized as long-term capital gain dividends. The income or loss generated at our TRS will not directly affect the tax characterization of our 2022 dividends; however, any dividends paid from our TRS to our REIT would allow a portion of our REIT’s dividends to be classified as qualified dividends.

Tax Provision under GAAP

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, we recorded a tax ~~provision~~benefits of $1 million and ~~a tax benefit of $10 million, respectively. For the three and nine months ended September 30, 2021, we recorded tax benefit of $4 million and a tax provision of $14~~$2 million, respectively. Our tax provision is primarily derived from the activities at our TRS as we do not book a material tax provision associated with income generated at our REIT. ~~For~~The decrease in the ~~nine-month periods, the switch to a~~ tax benefit ~~from a tax provision~~ year-over-year was primarily the result of a smaller GAAP ~~income being recorded at our TRS during this period~~loss in ~~2021 versus GAAP losses being recorded at our TRS during this period in~~2023 compared to 2022. For the three-month periods, while GAAP income was earned at the TRS during both periods, the switch to a tax provision from a tax benefit year-over-year was due to the release of valuation allowance on a portion of our deferred tax assets in 2021.

Realization of our deferred tax assets ("DTAs") is dependent on many factors, including generating sufficient taxable income prior to the expiration of NOL carryforwards (where applicable) and generating sufficient capital gains in future periods prior to the expiration of capital loss carryforwards. ToWe determine the extent ~~we determine it~~to which realization of our DTAs is ~~more likely than~~ not ~~that we will not be able to realize a deferred tax asset, we~~assured and establish a valuation allowance accordingly. At December 31, ~~2021,~~2022, we reported net federal ordinary and capital DTAs with no material valuation allowance recorded against them. As we experienced GAAP losses in 2022 and during the three months ended March 31, 2023 at our TRS, we closely analyzed the realizability of our net deferred tax assets in whole and in part. We evaluate our deferred tax assets each period to determine if a valuation allowance is required based on whether it is "more likely than not" that some portion of the deferred tax assets would not be realized. The ultimate realization of these deferred tax assets is dependent upon the generation of sufficient taxable income during future periods. We conduct our evaluation by considering, among other things, all available positive and negative evidence, historical operating results and cumulative earnings analysis, forecasts of future profitability, and the duration of statutory carryforward periods. Based on this analysis, we continue to believe it is more likely than not that we will realize ~~all of~~ our federal deferred tax ~~assets;~~assets in future periods as income is earned at our TRS; therefore, there continues to be no material valuation allowance recorded against our net federal DTAs. ~~As we have experienced year-to-date GAAP losses at our TRS, we are continuing to monitor our estimate of~~This evaluation requires significant judgment in assessing the ~~realizability of our net deferred tax assets and will reassess the~~possible need for a valuation allowance and changes to our assumptions could result in ~~whole~~a material change in the valuation allowance with a corresponding impact on the provision for income taxes in the period including such change.

If in a future period, based on available evidence, we conclude that it is not more likely than not that our DTAs will be realized, then a valuation allowance would be established with a corresponding charge to GAAP earnings, which would reduce our book value. Such charges could cause a material reduction, up to the full value of our net DTAs for which a valuation allowance has not previously been established, to our GAAP earnings and book value per share for the quarterly and annual periods in which they are established and could have a material and adverse effect on our business, financial results, or ~~in part, in future periods.~~liquidity.

Consistent with prior periods, we continued to maintain a valuation allowance against the majority of our net state DTAs as realization of our state DTAs is dependent on generating sufficient taxable income in the same jurisdictions in which the DTAs exist and we project most of our state DTAs will expire prior to their utilization.

LIQUIDITY AND CAPITAL RESOURCES

Summary

In addition to the proceeds from equity and debt capital-raising transactions, our principal sources of cash and liquidity consist of borrowings under mortgage loan warehouse facilities, secured term financing facilities, securities repurchase agreements, payments of principal and interest we receive from our investment portfolio assets, proceeds from the sale of investment portfolio assets, and cash generated from our operating activities. Our most significant uses of cash are to purchase and originate mortgage loans for our mortgage banking operations and manage hedges associated with those activities, to purchase investment securities and make other investments, to repay principal and interest on our debt, to meet margin calls associated with our debt and other obligations, to make dividend payments on our capital stock, and to fund our operations.

At ~~September 30, 2022,~~March 31, 2023, our total capital was ~~$2.02~~$1.97 billion and included ~~$1.15~~$1.14 billion of equity capital and ~~$863~~$832 million of convertible notes and long-term debt on our consolidated balance sheet, including ~~$199~~$144 million of convertible debt due in 2023, $150 million of convertible debt due in 2024, ~~$172~~$162 million of exchangeable debt due in 2025, $215 million of convertible debt due in 2027 and $140 million of trust-preferred securities due in 2037.

As of ~~September 30, 2022,~~March 31, 2023, our unrestricted cash was ~~$297 million, and we estimate we had approximately $160 million of available capital.~~$404 million. While we believe our available cash is sufficient to fund our operations, we may raise equity or debt capital from time to time to increase our unrestricted cash and liquidity, to repay existing debt, to make long-term portfolio investments, to fund strategic acquisitions and investments, or for other purposes. To the extent we seek to raise additional capital, our approach will continue to be based on what we believe to be in the best interests of the company.

In the discussion that follows and throughout this document, we distinguish between marginable and non-marginable debt. When we refer to non-marginable debt and marginable debt, we are referring to whether or not such debt is 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. If a mortgage loan is financed under a marginable warehouse facility, to the extent the market value of the loan declines (which market value is determined by the counterparty under the facility), we will be subject to a margin call, meaning we will be required to either immediately reacquire the loan or meet a margin requirement to pledge additional collateral, such as cash or additional mortgage loans, in an amount at least equal to the decline in value. Non-marginable debt may be subject to a margin call due to delinquency or another credit event related to the mortgage or security being financed, a decline in the value of the underlying asset securing the collateral, an extended dwell time (i.e., period of time financed using a particular financing facility) for certain types of loans, or a change in the interest rate of a specified reference security relative to a base interest rate amount. For example, we could be subject to a margin call on non-marginable debt if an appraisal or broker price opinion indicates a decline in the estimated value of the property securing the mortgage loan that is financed by us under a loan warehouse facility, or ~~based on~~following the occurrence of a triggering credit event impacting the financed ~~collateral which is followed by~~mortgage loan based on a decline in the market value of the financed ~~collateral~~mortgage loan (as determined by the lender).

We also distinguish between recourse and non-recourse debt. When we refer to non-recourse debt, we mean debt that is payable solely from the assets pledged to secure such debt, and under which debt no creditor or lender has direct or indirect recourse to us ~~or any other entity or person~~ (except for customary exceptions for fraud, acts of insolvency, or other "bad acts"), if such assets are inadequate or unavailable to pay off such debt.

At ~~September 30, 2022,~~March 31, 2023, in aggregate, we had ~~$2.86~~$2.43 billion of ~~secured~~ recourse debt outstanding, ~~financing our mortgage banking and investment portfolio,~~ of which ~~$480~~$380 million was marginable and ~~$2.38~~$2.05 billion was non-marginable.

We are subject to risks relating to our liquidity and capital resources, including risks relating to incurring debt under loan warehouse facilities, securities repurchase facilities, and other short- and long-term debt facilities and other risks relating to our use of derivatives. A further discussion of these risks is set forth below under the heading “Risks Relating to Debt Incurred under Short-and Long-Term Borrowing Facilities."

~~100~~

Repurchase Authorization

~~During the third quarter of~~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. ~~Under this~~This authorization shares or securities may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. This common stock repurchase authorization replaced the $100 million common stock repurchase authorization approved by the Board of Directors in 2018, has no ~~time limit, may be modified, suspended or discontinued at any time,~~expiration date and does not obligate us to acquire any specific number of shares or securities. The Board of Directors also continued its previous authorization for the repurchase of outstanding debt securities. Like other investments we may make, any repurchases of our common stock or debt securities under this authorization would reduce our available capital and unrestricted cash described above.

During the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, we ~~repurchased 3.4 million and 7.1 million~~did not repurchase any shares of our common stock ~~for $24~~under this program, and separately repurchased $33 million ~~and $56 million, respectively.~~of Redwood's convertible debt due in August 2023. At ~~September 30, 2022,~~March 31, 2023, $101 million of the current authorization remained available for the repurchase of shares of our common stock and we also continued to be authorized to repurchase outstanding debt securities. ~~Subsequent to September 30, 2022, and through November 4, 2022, we repurchased $3 million of our convertible notes due in August 2023.~~

Cash Flows and Liquidity for the ~~Nine~~Three Months Ended ~~September 30, 2022~~March 31, 2023

Cash flows from our mortgage banking activities and our investments can be volatile from quarter to quarter depending on many factors, including the profitability of mortgage banking activities, the timing and amount of securities acquisitions, sales and repayments, as well as changes in interest rates, prepayments, and credit losses. Therefore, cash flows generated in the current period are not necessarily reflective of the long-term cash flows we will receive from these investments or activities.

Cash Flows from Operating Activities

~~Cash flows from~~During the three months ended March 31, 2023, our net cash provided by operating activities ~~were negative $129 million during the nine months ended September 30, 2022.~~was $102 million. This amount includes the net cash utilized during the period from the purchase and sale of residential mortgage loans and the origination and sale of our business purpose loans associated with our mortgage banking activities. Purchases of loans are financed to a large extent with short-term and long-term debt, for which changes in cash are included as a component of financing activities. During the first ~~nine~~three months of ~~2022,~~2023, excluding cash flows from the purchase, origination, sale, principal payments of loans classified as held-for-sale and the settlement of associated derivatives (which cumulatively totaled ~~$218 million)~~$117 million of net cash outflows), cash flows from operating activities were positive ~~$88~~$14 million.

Cash Flows from Investing Activities

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, our net cash provided by investing activities was ~~$169~~$111 million and primarily resulted from proceeds from principal payments on loans held-for-investment ~~securities~~ and other investment in excess of cash deployed tointo these investments. Because many of our investment securities, loans and ~~loans~~HEI are financed through various borrowing agreements, a significant portion of the proceeds from any sales or principal payments of these assets are generally used to repay balances under these financing sources. Similarly, all or a significant portion of cash flows from principal payments of loans and HEI at consolidated securitization entities would generally be used to repay ABS issued by those entities.

Although we generally intend to hold our loans and investment securities as long-term investments, we may sell certain of these assets in order to manage our liquidity ne~~eds~~needs and interest rate risk,, to meet other operating objectives, and to adapt to market conditions.

As presented in the "Supplemental Noncash Information" subsection of our consolidated statements of cash flows, during the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we transferred loans between held-for-sale and held-for-investment classification, ~~and long-term debt to short-term debt,~~ which represent significant non-cash transactions that were not included in cash flows from investing activities.

~~101~~

Cash Flows from Financing Activities

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, our net cash ~~provided by~~used in financing activities was ~~$202~~$52 million. This primarily resulted from $414 million of net ~~long-term~~repayments of short-term debt borrowings, ~~of $787 million, which included the issuance of $215 million of convertible debt in June 2022, as well as $132~~partially offset by $327 million of net borrowings under ABS issued, ~~including~~in each case resulting from the issuance of ~~CAFL SFR, CAFL bridge and~~two Sequoia ~~ABS~~ securitizations, which included a combined $657 million of residential loans. Additionally, during the ~~nine~~three months ended September 30, 2022. These amounts were partially offset by $1.04 billion of net paydowns on short-term borrowings, resulting primarily from a reduction in financed loan inventory at our mortgage banking operations through September 30, 2022, as well as the payment of our threeMarch 31, 2023, we paid regular quarterly dividends ~~totaling $85 million. Cash raised through~~on our common stock ~~issuances under our ATM program~~ of ~~$68~~$28 million, ~~during~~and in the first quarter of ~~2022 were partially offset by stock repurchases~~2023, we raised $67 million of ~~$56 million during~~net proceeds from the ~~second and third quarters~~issuance of ~~2022.~~preferred stock.

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we declared and paid dividends on our common stock of ~~$0.69~~$0.23 per common share. On ~~September 13, 2022,~~March 14, 2023, the Board of Directors declared a regular dividend of $0.23 per share for the ~~third~~first quarter of ~~2022,~~2023, which was paid on ~~September 30, 2022~~March 31, 2023 to shareholders of record on ~~September 23, 2022.~~March 24, 2023. Additionally, on March 31, 2023, the Board of Directors declared a regular quarter dividend of $0.60417 per share of preferred stock, payable on April 17, 2023 to stockholders of record on March 31, 2023.

In accordance with the terms of our outstanding deferred stock units, cash-settled deferred stock units, and restricted stock units, which are generally long-term compensation awards, each time we declare and pay a dividend on our common stock, we are required to make a dividend equivalent cash payment in that same per share amount on each outstanding deferred stock unit, cash-settled deferred stock unit, and restricted stock unit.

Material Cash Requirements

In the normal course of business, we enter into transactions that may require future cash payments. As required by GAAP, some of these obligations are recorded on the balance sheet, while others are off-balance sheet or recorded on the balance sheet in amounts different from the full contract or notional amount of the transaction.

Our material cash requirements from known contractual and other obligations during the twelve months following ~~September 30, 2022~~March 31, 2023, include maturing short-term debt, interest payments on short-term and long-term debt, payments on operating leases, ~~and~~other current payables, funding commitments for BPL bridge loans and under HEI flow purchase ~~agreements.~~agreements and other current payables. Our material cash requirements from known contractual and other obligations beyond the twelve months following ~~September 30, 2022~~March 31, 2023, include maturing long-term debt, interest payments on long-term debt, payments on operating leases and funding commitments for BPL bridge loans and under HEI flow purchase ~~agreements.~~agreements, and payments under ABS issued (as described further below under Liquidity Needs for our Investment Portfolio).

At ~~September 30, 2022,~~March 31, 2023, we had commitments to fund up to ~~$990~~$811 million of additional advances on existing 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 (e.g. funding is dependent on actual progress on a project and we retain the option to conduct due diligence with respect to each draw request to confirm conditions have been met). Approximately ~~$650 million~~68% of the commitments are for longer-term build-for-rent loans (which generally have funding caps below their full commitment amount) and are expected to fund over the next eight quarters. Additionally, at ~~September 30, 2022,~~March 31, 2023, we had ~~$1.66~~$1.73 billion of available warehouse capacity for business purpose loans and ~~the majority~~we have an average of ~~our $1.96 billion balance~~$200 million of quarterly bridge ~~loans outstanding matures~~loan maturities over the next ~~12 to 24 months,~~10 quarters, which will provide an additional source of cash that can be used to fund our commitments.

~~At September 30, 2022,~~ Additionally, at March 31, 2023, we had $8 million of outstanding HEI purchase commitments under flow purchase agreements with ~~multiple~~ third parties, with an aggregate commitment to purchase $350 million of HEIs, $149 million of which commitments remained outstanding. These purchase agreements specify monthly minimum and maximum amounts of HEIs subject to such purchase commitments. We may terminate the purchase agreement and associated purchase commitment relating to $85 million of remaining commitments upon 90 days prior notice. Subsequent to September 30, 2022, we entered into a repurchase agreement providing financing for HEIs. The committed amount and maximum borrowing limit under the facility is $150 million and the facility has a one-year term. As of the date of this report, there were no borrowings outstanding under this facility.parties.

For additional information regarding our material cash requirements, see Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 under the caption Contractual Obligations. For additional information on commitments and contingencies as of ~~September 30, 2022~~March 31, 2023 that could impact our liquidity and capital resources, see Note 17 of our Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, which supplements the disclosures included in Note 16 to the Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

~~102~~

Several of our loan warehouse facilities were established with initial one-year terms and are regularly amended on an annual basis to extend the terms for an additional year ahead of their maturity. We renewed several of these facilities in the first ~~nine~~three months of ~~2022~~2023 and have other such facilities with scheduled maturities during the next twelve months. While there is no assurance of our ability to renew these facilities, given current market conditions we would expect to extend these in the normal course of business.

Two series of our convertible notes are maturing during the 16 months following March 31, 2023. Historically, we have issued new convertible debt in part to refinance convertible debt that was maturing. However, given current market rates for unsecured corporate capital, which we find to be economically unattractive, we currently expect to repay our convertible notes maturing in August of 2023 with cash on hand. To the extent we do not choose to or cannot issue new unsecured corporate capital due to adverse market conditions going forward, we will need to utilize cash on hand to repay our convertible debt that is maturing, which will reduce the amount cash that can be deployed into our business and could reduce the earnings potential of our business. Further, if market rates for unsecured corporate capital remain elevated and we choose to issue new unsecured corporate capital, it could negatively impact our profitability.

We expect to meet our obligations coming due in less than one year from ~~September 30, 2022~~,March 31, 2023, through a combination of cash on hand, payments of principal and interest we receive from our investment portfolio assets, proceeds from the sale of investment portfolio assets, cash generated from our operating activities, or incremental borrowings under existing, new or amended financing arrangements. As of ~~September 30, 2022,~~March 31, 2023, we had approximately ~~$500~~$227 million of ~~pledgeable and~~ unencumbered assets.

During the first ~~nine~~three months of ~~2022,~~2023, the highest balance of our short-term debt outstanding was ~~$2.39~~$2.03 billion. See Note 14 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on our short-term debt. See Note 1516 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on our long-term debt.

Liquidity Needs for our Mortgage Banking Activities

We generally use loan warehouse facilities to finance the residential loans we acquire and the business purpose loans we originate or acquire in our mortgage banking operations while we aggregate the loans for sale or securitization. These facilities may be designated as short-term or long-term for financial reporting purposes, depending on the remaining maturity of the facility or the amount of time individual borrowings may remain outstanding on a facility.

At ~~September 30, 2022,~~March 31, 2023, we had residential warehouse facilities outstanding with ~~nine~~six different counterparties, with ~~$2.85~~$1.75 billion of total capacity and ~~$2.10~~$1.72 billion of available capacity. These included non-marginable facilities with ~~$1.38~~$1.00 billion of total capacity and marginable facilities with ~~$1.48~~$0.75 billion of total capacity.

At ~~September 30, 2022,~~March 31, 2023, we had business purpose warehouse facilities outstanding with ~~six~~seven different counterparties, with $3$3.24 billion of total capacity and ~~$1.66~~$1.73 billion of available capacity. All of these BPL financing facilities are non-marginable. We note that several of these facilities used to finance our business purpose mortgage banking loan inventory are also used to finance bridge loans held in our investment portfolio.

Several of these facilities have variable interest rates based on LIBOR or SOFR benchmarks and recent policy statements from the Federal Reserve indicate the likelihood of further increases in the federal funds rate, which would result in higher benchmark rates and interest costs for us under certain of our debt facilities.

As discussed above, several of the facilities we use to finance our mortgage banking loan inventory are short-term in nature and will require renewals. Additionally, because several of our warehouse facilities are uncommitted, at any given time we may not be able to obtain additional financing under them when we need it, exposing us to, among other things, liquidity risks. Additional information regarding risks related to the debt we use to finance our mortgage banking operations can be found under the heading "Risks Relating to Debt Incurred under Short- and Long-Term Borrowing Facilities" that follows within this section.

Liquidity Needs for our Investment Portfolio

We use various forms of secured recourse and non-recourse debt to finance assets in our investment portfolio. We distinguish our debt between recourse and non-recourse, as our non-recourse debt ~~is mostly comprised of ABS issued, which~~ has unique characteristics that differentiate it in important ways from our recourse debt. When we refer to non-recourse debt, we mean debt that is payable solely from the assets pledged to secure such debt, and under which debt no creditor or lender has direct or indirect recourse to us, or any other entity or person (except for customary exceptions for fraud, acts of insolvency, or other "bad acts"), if such assets are inadequate or unavailable to pay off such debt.

Our ABS issued is non-recourse and represents debt of securitization entities that we consolidate for GAAP reporting purposes. Our exposure to these entities is primarily through the financial interests we have purchased or retained from these entities (typically subordinate securities and interest only securities). 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. As the debt issued by these entities is not a direct obligation of Redwood, and since the debt generally can remain outstanding for the full term of the loans it is financing within each securitization, this debt effectively provides permanent financing for these assets. See Notes 4 and 15, respectively, in Part I, Item 1 of this Quarterly Report on Form 10-Q, for additional information on our principles of consolidation and our asset-backed securities issued.

~~Separately,~~Additionally, we ~~use~~have non-recourse debt in the form of non-marginable ~~term~~warehouse facilities to finance a portion of our business purpose bridge loan portfolio. While this debt is non-recourse to Redwood, it does have fixed terms with prepayment options that allows us to refinance this debt or ultimately repay it upon maturity.

The remainder of the debt we use to finance our investments is recourse ~~debt.~~debt, including our long-term subordinate securities financing facilities, BPL financing facility and MSR financing facility, as well as our short-term securities repo borrowings and HEI warehouse facility. For securities we have financed, ~~the majority of~~ our long-term financing facilities are non-marginable and our repo debt MSR facility (which also finances certificated MSRs) is in the form of recourse non-marginable secured term debt, with the smaller remaining amount being marginable securities repurchase debt. Additionally, a portion of our business purpose bridge loan portfolio is financed with recourse non-marginable secured term debt.marginable. Our BPL financing facilities and HEI warehouse facility are non-marginable.

~~103~~

We use a balanced combination of fixed and floating rate debt to finance our fixed and floating rate investments. Recent policy statements from the Federal Reserve indicate the likelihood of further increases in the federal funds rate, which if enacted could result in lower net interest income to the extent our variable rate assets and liabilities are not aligned. Additionally, to the extent interest rates remain elevated or increase further, certain fixed-rate term borrowings that mature in the coming quarters could have to be refinanced at higher interest rates, which could cause a reduction in net interest income. Further, each of our three recourse subordinate securities financing facilities have interest rate step-up provisions, under which if we do not repay the facilities by certain specified dates, the interest rates on those facilities will increase (see Note 16 in in Part I, Item 1 of this Quarterly Report on Form 10-Q for further detail on these provisions).

Corporate ~~Capital~~Debt

In addition to secured recourse and non-recourse debt we use specifically in association with our mortgage banking operations and within our investment portfolio, we also use unsecured recourse debt to finance our overall operations. This is generally in the form of convertible debt securities we issue in the public markets and also includes trust preferred ~~securities.~~securities and promissory notes. See ~~SeeNote 15~~Notes 14 and 16 in Part I, Item 1 of this Quarterly Report on Form 10-Q and Part II, Item 8 of our Annual Report on Form 10-K, for additional information on our short-term and long-term debt.

Risks Relating to Debt Incurred Under Short- and Long-Term Borrowing Facilities

As described above under the heading “Results of Operations,” in the ordinary course of our business, we use debt financing obtained through several different types of borrowing facilities to, among other things, finance the acquisition and/or origination of residential and business purpose mortgage loans (including those we acquire or originate in anticipation of sale or securitization), and finance investments in securities and other investments. We may also use short- and long-term borrowings to fund other aspects of our business and operations, including the repurchase of shares of our common stock. Recourse debt incurred under these facilities is generally either the direct obligation of Redwood Trust, Inc., or the direct obligation of subsidiaries of Redwood Trust, Inc. and guaranteed by Redwood Trust, Inc. Risks relating to debt incurred under these facilities are described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, under the caption(s) “Risks Relating to Debt Incurred under Short- and Long-Term Borrowing Facilities,” and “Our use of financial leverage exposes us to increased risks, including liquidity risks from margin calls and potential breaches of the financial covenants under our borrowing facilities, which could result in our being required to immediately repay all outstanding amounts borrowed under these facilities and these facilities being unavailable to use for future financing needs, as well as triggering cross-defaults under other debt agreements.”

Our sources of debt financing include secured borrowings under residential and business purpose mortgage loan warehouse facilities (including recourse and non-recourse warehouse facilities), short-term securities repurchase facilities, ~~a $10 million committed line of short-term secured credit from a bank,~~ short-term servicer advance financing, a secured, revolving debt facility collateralized by mortgage servicing rights, and subordinate securities financing facilities.

Aggregate borrowing limits are stated under certain of these facilities, and certain other facilities have no stated borrowing limit, but many of the facilities are uncommitted, which means that any request we make to borrow funds under these uncommitted facilities may be declined by the lender for any reason, even if at the time of the borrowing request we have then-outstanding borrowings that are less than the borrowing limits under these facilities. In general, financing under these facilities is obtained by transferring or pledging mortgage loans or securities to the counterparty in exchange for cash proceeds (in an amount less than 100% of the principal amount of the transferred or pledged assets).

Under many of our mortgage loan warehouse facilities and our short-term securities repurchase facilities, while transferred or pledged assets are financed under the facility, to the extent the value of the assets, or the collateral underlying those assets, declines, we are generally required to either immediately reacquire the assets or meet a margin requirement to transfer or pledge additional assets or cash in an amount at least equal to the decline in value. We refer to borrowing facilities with margin call provisions based solely on the lender's determination, in its discretion, of changes in the market value of transferred or pledged assets, as marginable debt. Borrowing facilities that we refer to as non-marginable debt may be subject to a margin call due to delinquency or another credit event related to the mortgage or security being financed, a decline in the value of the underlying asset securing the collateral, or a change in the interest rate of a specified reference security relative to a base interest rate amount. For example, we could be subject to a margin call on non-marginable debt if an appraisal or broker price opinion indicates a decline in the estimated value of the property securing the mortgage loan that is financed by us under a loan warehouse facility, or based on the occurrence of a triggering credit event impacting the financed collateral which is followed by a decline in the market value of the financed collateral (as determined by the lender), in which case the creditor may demand that we transfer additional collateral to the creditor (in the form of cash, U.S. Treasury obligations (in certain cases), or additional mortgage loans) with a value equal to the amount of the decline. Of our active financing arrangements with outstanding balances at ~~September 30, 2022,~~March 31, 2023, only our short-term securities repurchase facilities (with ~~$124~~$326 million of borrowings outstanding at ~~September 30, 2022)~~March 31, 2023), and six of our residential mortgage loan warehouse facilities (with ~~$356~~$26 million of borrowings outstanding at ~~September 30, 2022)~~March 31, 2023) retain market-value based margin call provisions based solely on the lender's determination of market value and, as such, are considered marginable.

~~104~~

Margin call provisions under these facilities are further described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 under the caption “Risks Relating to Debt Incurred under Short- and Long-Term Borrowing Facilities - Margin Call Provisions Associated with Short-Term Debt and Other Debt Financing.” Financial covenants included in these facilities are further described Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 under the caption “Risks Relating to Debt Incurred under Short- and Long-Term Borrowing Facilities - Financial Covenants Associated with Short-Term Debt and Other Debt Financing.”

Because many of these borrowing facilities are uncommitted, at any given time we may not be able to obtain additional financing under them when we need it, exposing us to, among other things, liquidity risks of the types described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 under the heading “Risk Factors,” and in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 under the heading “Market Risks.” In addition, with respect to mortgage loans that at any given time are already being financed through these warehouse facilities, we are exposed to market, credit, liquidity, and other risks of the types described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2021~~ 2022

100

under the heading “Risk Factors,” and in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 under the heading “Market Risks,” if and when those loans or securities become ineligible to be financed, decline in value, or have been financed for the maximum term permitted under the applicable facility.

At ~~September 30, 2022,~~March 31, 2023, and through the date of this Quarterly Report on Form 10-Q, we were in compliance with the financial covenants associated with our short-term debt and other debt financing facilities. In particular, with respect to: (i) financial covenants that require us to maintain a minimum dollar amount of stockholders’ equity or tangible net worth at Redwood, at ~~September 30, 2022~~March 31, 2023 our level of stockholders’ equity and tangible net worth resulted in our being in compliance with these covenants by more than $200 million; and (ii) financial covenants that require us to maintain recourse indebtedness below a specified ratio at Redwood, at ~~September 30, 2022~~March 31, 2023 our level of recourse indebtedness resulted in our being in compliance with these covenants at a level such that we could incur more than $5 billion in additional recourse indebtedness.

~~105~~101

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. A discussion of critical accounting policies and the possible effects of changes in estimates on our consolidated financial statements is included in Note 2 — Basis of Presentation and Note 3 — Summary of Significant Accounting Policies included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We have elected the fair value option of accounting for a significant portion of the assets and some of the liabilities on our balance sheet, and the majority of these assets and liabilities utilize Level 3 valuation inputs, which require a significant level of estimation uncertainty. See Note 5 in Part I, Item 1 of this Quarterly Report on Form 10-Q, for additional information on our assets and liabilities accounted for at fair value at ~~September 30, 2022,~~March 31, 2023, including the significant inputs used to estimate their fair values and the impact the changes in their fair values had to our financial condition and results of operations. See Note 5 in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, incorporated herein by reference, for the same information on these assets and liabilities as of December 31, ~~2021.~~2022. Periodic fluctuations in the values of these assets and liabilities are inherently volatile and thus can lead to significant period-to-period GAAP earnings volatility.

Additional detail on our critical accounting estimates is included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, under the heading "Critical Accounting Estimates."

MARKET AND OTHER RISKS

We seek to manage risks inherent in our business — including but not limited to credit risk, interest rate risk, prepayment risk, liquidity risk, and fair value risk — in a prudent manner designed to enhance our earnings and dividends and preserve our capital. In general, we seek to assume risks that can be quantified from historical experience, to actively manage such risks, and to maintain capital levels consistent with these risks. Information concerning the risks we are managing, how these risks are changing over time, and potential GAAP earnings and taxable income volatility we may experience as a result of these risks is discussed in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022.

In addition to the market risks described above, our business and results of operations are subject to a variety of types of risks and uncertainties, including, among other things, those described under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022.

~~106~~102

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Information concerning market risk is incorporated herein by reference to Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021,~~2022, as supplemented by the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Market Risks” within Item 2 above. Other than the developments described thereunder, including changes in the fair values of our assets, there have been no other material changes in our quantitative or qualitative exposure to market risk since December 31, ~~2021.~~2022.

Item 4. Controls and Procedures

We have adopted and maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed on our reports under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms and that the information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) of the Exchange Act, we have carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level.

There have been no changes in our internal control over financial reporting during the ~~third~~first quarter of ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~107~~103

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information on our legal proceedings, see Note 17 to the Financial Statements within this Quarterly Report on Form 10-Q under the heading "Loss Contingencies - Litigation, Claims and Demands," which supplements the disclosures included in Note 1617 to the Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 under the heading “Loss Contingencies - Litigation, Claims and Demands.”

Item 1A. Risk Factors

Our risk factors are discussed under Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended ~~September 30, 2022,~~March 31, 2023, we did not sell any equity securities that were not registered under the Securities Act of 1933, as amended.

In July 2022, our Board of Directors ~~authorized~~approved an authorization for the repurchase of up to $125 million of ~~common stock. This~~our common stock, ~~repurchase authorization replaces the $100 million common stock repurchase authorization approved by the Board of Directors in 2018, has no time limit~~ and ~~may be modified, suspended or discontinued at any time. The Board of Directors~~ also ~~continued its previous authorization for~~authorized the repurchase of outstanding debt ~~securities.~~securities, including convertible and exchangeable debt. This ~~repurchase~~ authorization has no expiration date and does not obligate us to acquire any specific number of shares or securities. Under this authorization, shares or securities may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. During the three months ended ~~September 30, 2022,~~March 31, 2023, we ~~repurchased 3.4 million~~did not repurchase any shares of our common stock ~~for a total cost of $24 million.~~under this program. At ~~September 30, 2022,~~March 31, 2023, $101 million of ~~this~~the current authorization remained available for the repurchase of shares of our common stock and we also continued to be authorized to repurchase outstanding debt securities. During the nine months ended September 30, 2022, we repurchased 7.1 million shares of our common stock for a total cost of $56 million under our current and previously-approved Board of Director authorizations.

The following table contains information on the shares of our common stock that we purchased or otherwise acquired during the three months ended ~~September 30, 2022.~~March 31, 2023.

Total Number of Shares Purchased or Acquired Average
Price per
Share Paid Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or approximate dollar value) of Shares that May Yet be Purchased under the Plans or Programs
(In Thousands, except per Share Data)
July 1, 2022 - July 31, 2022 — $ — — $ —
August 1, 2022 - August 31, 2022 1,126 $ 8.07 1,126 $ 115,907
September 1, 2022 - September 30, 2022 2,322 $ 6.30 2,322 $ 101,265
Total 3,448 $ 6.88 3,448 $ 101,265


	Total Number of Shares Purchased or Acquired	Average Price per Share Paid		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or approximate dollar value) of Shares that May Yet be Purchased under the Plans or Programs
(In Thousands, except per Share Data)
January 1, 2023 - January 31, 2023	—	$	—	—	$	—
February 1, 2023 - February 28, 2023	—	$	—	—	$	—
March 1, 2023 - March 31, 2023	—	$	—	—	$	—
Total	—	$	—	—	$	101,265

Item 3. Defaults Upon Senior Securities

None.

Item 4. ~~Not Applicable~~Mine Safety Disclosures (Not Applicable)

~~108~~

Item 5. Other Information

Effective November 2, 2022, our Board of Directors adopted Amended and Restated Bylaws of the Company in order to incorporate changes to the provisions in Article II of the Bylaws relating to annual meetings of stockholders. These changes include, among other things, updated provisions related to stockholder meetings held by phone, video, and remote communications, updated requirements related to the form of proxy cards and proxy solicitation by stockholders, updated information required to be included in a stockholder's notice of nomination of individuals for election as a director, and accompanying certifications to be made by the stockholder submitting such nomination, and clarify provisions relating to compliance with federal proxy rules, including Exchange Act Rule 14a-9, by stockholders submitting nominations.

The preceding summary of the amendment and restatement of the Bylaws of the Company is qualified in its entirety by reference to, and should be read in connection with, the complete copy of the Amended and Restated Bylaws attached as Exhibit 3.2.1 ~~to this Quarterly Report on Form 10-Q~~ ~~and incorporated by reference herein.~~

On November 3, 2022, Redwood amended and restated its employment agreements with each of Christopher J. Abate (Redwood’s CEO), Dashiell I. Robinson (Redwood’s President), Brooke E. Carillo (Redwood’s CFO), Andrew P. Stone (Redwood’s Executive Vice President, Chief Legal Officer, and Secretary), and Sasha G. Macomber (Redwood’s Chief Human Resource Officer). These agreements were amended and restated to, among other things, update or clarify certain defined terms, update and clarify certain notice and cure terms, and update provisions related to arbitration and costs related to dispute resolution, as well as to reflect previously disclosed compensation terms applicable to these officers.

The preceding summary of the five amended and restated employment agreements is qualified in its entirety by reference to, and should be read in connection with, the complete copies of the amended and restated employment agreements attached as Exhibits 10.2, 10.3, 10.4, 10.5 and 10.6 to this Quarterly Report on Form 10-Q and incorporated by reference herein.None

~~109~~104

Item 6. Exhibits


Exhibit Number						Exhibit
3.1						Articles of Amendment and Restatement of the Registrant, effective July 6, 1994 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit 3.1, filed on August 6, 2008)
3.1.1						Articles Supplementary of the Registrant, effective August 10, 1994 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit 3.1.1, filed on August 6, 2008)
3.1.2						Articles Supplementary of the Registrant, effective August 11, 1995 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit 3.1.2, filed on August 6, 2008)
3.1.3						Articles Supplementary of the Registrant, effective August 9, 1996 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit 3.1.3, filed on August 6, 2008)
3.1.4						Certificate of Amendment of the Registrant, effective June 30, 1998 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit 3.1.4, filed on August 6, 2008)
3.1.5						Articles Supplementary of the Registrant, effective April 7, 2003 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit 3.1.5, filed on August 6, 2008)
3.1.6						Articles of Amendment of the Registrant, effective June 12, 2008 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit 3.1.6, filed on August 6, 2008)
3.1.7						Articles of Amendment of the Registrant, effective May 19, 2009 (incorporated by reference to the Registrant’s Current Report on Form 8-K, Exhibit 3.1, filed on May 21, 2009)
3.1.8						Articles of Amendment of the Registrant, effective May 24, 2011 (incorporated by reference to the Registrant’s Current Report on Form 8-K, Exhibit 3.1, filed on May 20, 2011)
3.1.9						Articles of Amendment of the Registrant, effective May 18, 2012 (incorporated by reference to the Registrant’s Current Report on Form 8-K, Exhibit 3.1, filed on May 21, 2012)
3.1.10						Articles of Amendment of the Registrant, effective May 16, 2013 (incorporated by reference to the Registrant’s Current Report on Form 8-K, Exhibit 3.1, filed on May 21, 2013)
3.1.11						Articles of Amendment of the Registrant, effective May 16, 2019 (incorporated by reference to the Registrant's Current Report on Form 8-K, Exhibit 3.1, filed on May 17, 2019)
3.1.12						Articles of Amendment of the Registrant, effective June 15, 2020 (incorporated by reference to the Registrant’s Current Report on Form 8-K, Exhibit 3.1, filed on June 15, 2020)
~~3.2.1~~3.1.13						Articles Supplementary of the Registrant, effective January 13, 2023 (incorporated by reference to the Registrant's Form 8-A, Exhibit 3.2, filed on January 13, 2023) (No. 001-13759)
3.2						Amended and Restated Bylaws of the Registrant, as adopted on November 2,~~, 202~~2 2022 (incorporated b y reference to the Registrant's Annual Report on Form 10-K, Exhibit 3.2, filed ~~herewith~~on March 1, 2023 )
10.1*						~~Third Amendment to Amended and Restated Executive Deferred Compensation Plan, effected as of August 25, 2022 (filed herewith)~~
10.2*						~~Seventh Amended and Restated Employment Agreement, dated as of November 3, 2022, by and between Christopher J. Abate and the Registrant (filed herewith)~~
10.3*						~~Fifth Amended and Restated Employment Agreement, dated as of November 3, 2022, by and between Dashiell I. Robinson and the Registrant (filed herewith)~~
10.4*						~~Second Amended and Restated Employment Agreement, dated as of November 3, 2022, by and between Brooke E. Carillo and the Registrant (filed herewith)~~
10.5*						~~Seventh Amended and Restated Employment Agreement, dated as of November 3, 2022, by and between Andrew P. Stone and the Registrant (filed herewith)~~
10.6*						~~Second Amended and Restated Employment Agreement, dated as of November 3, 2022, by and between Sasha G. Macomber and the Registrant (filed herewith)~~
31.1						Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2						Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1						Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2						Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~110~~


Exhibit Number						~~Exhibit~~
101						Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended ~~September 30, 2022,~~March 31, 2023, is filed in inline XBRL-formatted interactive data files: (i) Consolidated Balance Sheets at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021;~~2022; (ii) Consolidated Statements of Income ~~(Loss)~~ for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021;~~2022; (iii) Statements of Consolidated Comprehensive Income ~~(Loss)~~ for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021;~~2022; (iv) Consolidated Statements of Changes in Stockholders' Equity for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021;~~2022; (v) Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021;~~2022; and (vi) Notes to Consolidated Financial Statements.
104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

______________________

* ~~Indicates exhibits that include management contracts or compensatory plan arrangements.~~

~~111~~105

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		REDWOOD TRUST, INC.

Date:	~~November 4, 2022~~May 5, 2023	By:	/s/ Christopher J. Abate
			Christopher J. Abate
			Chief Executive Officer
			(Principal Executive Officer)

Date:	~~November 4, 2022~~May 5, 2023	By:	/s/ Brooke E. Carillo
			Brooke E. Carillo
			Chief Financial Officer
			(Principal Financial Officer)

Date:	~~November 4, 2022~~May 5, 2023	By:	/s/ Collin L. Cochrane
			Collin L. Cochrane
			Chief Accounting Officer
			(Principal Accounting Officer)

~~112~~106


Maryland						68-0329422
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)


One Belvedere Place,	Suite 300
Mill Valley,	California	94941
(Address of Principal Executive Offices)		(Zip Code)


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	RWT	New York Stock Exchange
10% Series A Fixed-Rate Reset Cumulative Redeemable Preferred Stock, par value $0.01 per share	RWT PRA	New York Stock Exchange


		Page
PART I —	FINANCIAL INFORMATION
Item 1.	Financial Statements	2
	Consolidated Balance Sheets at ~~September 30, 2022~~March 31, 2023 (Unaudited) and December 31, ~~2021~~2022	2
	Consolidated Statements of Income ~~(Loss)~~ for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (Unaudited)	3
	Consolidated Statements of Comprehensive ~~(Loss)~~ Income for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (Unaudited)	4
	Consolidated Statements of Changes in Stockholders' Equity for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (Unaudited)	5
	Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (Unaudited)	76
	Notes to Consolidated Financial Statements (Unaudited)	98
	Note 1. Organization	98
	Note 2. Basis of Presentation	108
	Note 3. Summary of Significant Accounting Policies	1411
	Note 4. Principles of Consolidation	1714
	Note 5. Fair Value of Financial Instruments	2520
	Note 6. Residential Loans	3328
	Note 7. Business Purpose Loans	3631
	Note 8. ~~Consolidated Agency~~ Multifamily Loans	4035
	Note 9. Real Estate Securities	4136
	Note 10. Home Equity Investments (HEI)	4641
	Note 1 1 . Other Investments	4642
	Note 1 2 . Derivative Financial Instruments	4843
	Note 1 3 . Other Assets and Liabilities	5045
	Note 1 4 . Short-Term Debt	5147
	Note 1 5 . Asset-Backed Securities Issued	5450
	Note 1 6 . Long-Term Debt	5753
	Note 1 7 . Commitments and Contingencies	6056
	Note 1 8 . Equity	6359
	Note 1 9 . Equity Compensation Plans	6661
	Note 20 . Mortgage Banking Activities, Net	6763
	Note 2 1 .21. Other Income, Net	6864
	Note 2 2 ~~. General and Administrative Expenses, Loan Acquisition Costs, and Other~~22. Operating Expenses	6965
	Note 2 3 . Taxes	7067
	Note 2 4 . Segment Information	7068

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	7572
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	~~107~~103
Item 4.	Controls and Procedures	~~107~~103

PART II —	OTHER INFORMATION
Item 1.	Legal Proceedings	~~108~~104
Item 1A.	Risk Factors	~~108~~104
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	~~108~~104
Item 3.	Defaults Upon Senior Securities	~~108~~104
Item 4.	Mine Safety Disclosures (Not Applicable)	~~108~~104
Item 5.	Other Information	~~109~~104
Item 6.	Exhibits	~~110~~105
Signatures		~~112~~106


(In Thousands, except Share Data) (Unaudited)	(In Thousands, except Share Data) (Unaudited)	September 30, 2022		December 31, 2021		(In Thousands, except Share Data) (Unaudited)	March 31, 2023		December 31, 2022
ASSETS (1)	ASSETS (1)					ASSETS (1)
Residential loans, held-for-sale, at fair value	Residential loans, held-for-sale, at fair value	$	834,262	$	1,845,282	Residential loans, held-for-sale, at fair value	$	26,975	$	780,781
Residential loans, held-for-investment, at fair value	Residential loans, held-for-investment, at fair value	4,918,294		5,747,150		Residential loans, held-for-investment, at fair value	5,465,883		4,832,407
Business purpose loans, held-for-sale, at fair value	Business purpose loans, held-for-sale, at fair value	337,238		358,309		Business purpose loans, held-for-sale, at fair value	371,385		364,073
Business purpose loans, held-for-investment, at fair value	Business purpose loans, held-for-investment, at fair value	4,919,980		4,432,680		Business purpose loans, held-for-investment, at fair value	4,993,264		4,968,513
Consolidated Agency multifamily loans, at fair value	Consolidated Agency multifamily loans, at fair value	427,458		473,514		Consolidated Agency multifamily loans, at fair value	426,599		424,551
Real estate securities, at fair value	Real estate securities, at fair value	259,212		377,411		Real estate securities, at fair value	243,346		240,475
Home equity investments		340,437		192,740
Home equity investments, at fair value						Home equity investments, at fair value	416,783		403,462
Other investments	Other investments	412,762		449,229		Other investments	381,690		390,938
Cash and cash equivalents	Cash and cash equivalents	297,092		450,485		Cash and cash equivalents	404,449		258,894
Restricted cash	Restricted cash	71,996		80,999		Restricted cash	86,037		70,470
Goodwill	Goodwill	23,373		—		Goodwill	23,373		23,373
Intangible assets	Intangible assets	44,130		41,561		Intangible assets	37,784		40,892
Derivative assets	Derivative assets	65,213		26,467		Derivative assets	11,497		20,830
Other assets	Other assets	194,500		231,117		Other assets	232,221		211,240
Total Assets	Total Assets	$	13,145,947	$	14,706,944	Total Assets	$	13,121,286	$	13,030,899

LIABILITIES AND EQUITY (1)	LIABILITIES AND EQUITY (1)					LIABILITIES AND EQUITY (1)
Liabilities	Liabilities					Liabilities
Short-term debt, net	Short-term debt, net	$	2,110,279	$	2,177,362	Short-term debt, net	$	1,616,452	$	2,029,679

Derivative liabilities	Derivative liabilities	6,782		3,317		Derivative liabilities	10,736		16,855
Accrued expenses and other liabilities	Accrued expenses and other liabilities	201,125		245,788		Accrued expenses and other liabilities	176,271		180,203

Asset-backed securities issued (includes $7,564,312 and $8,843,147 at fair value), net		8,139,293		9,253,557
Asset-backed securities issued (includes $7,968,135 and $7,424,132 at fair value), net						Asset-backed securities issued (includes $7,968,135 and $7,424,132 at fair value), net	8,447,119		7,986,752
Long-term debt, net	Long-term debt, net	1,534,226		1,640,833		Long-term debt, net	1,733,028		1,733,425
Total liabilities	Total liabilities	11,991,705		13,320,857		Total liabilities	11,983,606		11,946,914
Commitments and Contingencies (see Note 17)	Commitments and Contingencies (see Note 17)					Commitments and Contingencies (see Note 17)
Equity	Equity					Equity
Common stock, par value $0.01 per share, 395,000,000 shares authorized; 113,343,014 and 114,892,309 issued and outstanding		1,133		1,149
Preferred stock, par value $0.01 per share, 2,800,000 shares authorized; 2,800,000 and zero issued and outstanding						Preferred stock, par value $0.01 per share, 2,800,000 shares authorized; 2,800,000 and zero issued and outstanding	66,923		—
Common stock, par value $0.01 per share, 395,000,000 shares authorized; 113,864,456 and 113,484,675 issued and outstanding						Common stock, par value $0.01 per share, 395,000,000 shares authorized; 113,864,456 and 113,484,675 issued and outstanding	1,139		1,135
Additional paid-in capital	Additional paid-in capital	2,345,152		2,316,799		Additional paid-in capital	2,355,139		2,349,845
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(64,935)		(8,927)		Accumulated other comprehensive loss	(63,036)		(68,868)
Cumulative earnings	Cumulative earnings	1,197,428		1,316,890		Cumulative earnings	1,156,571		1,153,370
Cumulative distributions to stockholders	Cumulative distributions to stockholders	(2,324,536)		(2,239,824)		Cumulative distributions to stockholders	(2,379,056)		(2,351,497)
Total equity	Total equity	1,154,242		1,386,087		Total equity	1,137,680		1,083,985
Total Liabilities and Equity	Total Liabilities and Equity	$	13,145,947	$	14,706,944	Total Liabilities and Equity	$	13,121,286	$	13,030,899


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Common Stock, $0.01 par value per share						~~113,349,651~~114,028,712			shares outstanding as of ~~November~~May 2, ~~2022~~2023


(In Thousands, except Share Data)	(In Thousands, except Share Data)	Three Months Ended September 30,				Nine Months Ended September 30,				(In Thousands, except Share Data)	Three Months Ended March 31,
(Unaudited)	(Unaudited)	2022		2021		2022		2021		(Unaudited)	2023		2022
Interest Income	Interest Income									Interest Income
Residential loans	Residential loans	$	61,002	$	53,993	$	191,252	$	146,081	Residential loans	$	57,874	$	65,203
Business purpose loans	Business purpose loans	95,197		67,129		270,430		201,640		Business purpose loans	97,296		94,299
Consolidated Agency multifamily loans	Consolidated Agency multifamily loans	4,762		4,846		14,247		14,492		Consolidated Agency multifamily loans	4,618		4,753
Real estate securities	Real estate securities	6,989		14,242		30,772		33,184		Real estate securities	6,428		15,955
Other interest income	Other interest income	9,712		5,512		27,816		17,325		Other interest income	12,300		9,190
Total interest income	Total interest income	177,662		145,722		534,517		412,722		Total interest income	178,516		189,400
Interest Expense	Interest Expense									Interest Expense
Short-term debt	Short-term debt	(23,944)		(11,826)		(49,093)		(30,794)		Short-term debt	(31,828)		(11,488)
Asset-backed securities issued	Asset-backed securities issued	(90,910)		(73,732)		(285,464)		(222,712)		Asset-backed securities issued	(87,465)		(105,695)
Long-term debt	Long-term debt	(27,873)		(18,196)		(71,435)		(60,865)		Long-term debt	(32,786)		(19,115)
Total interest expense	Total interest expense	(142,727)		(103,754)		(405,992)		(314,371)		Total interest expense	(152,079)		(136,298)
Net Interest Income	Net Interest Income	34,935		41,968		128,525		98,351		Net Interest Income	26,437		53,102
Non-interest (Loss) Income
Non-interest Income										Non-interest Income
Mortgage banking activities, net	Mortgage banking activities, net	16,535		63,163		2,833		200,189		Mortgage banking activities, net	16,671		16,315
Investment fair value changes, net	Investment fair value changes, net	(57,697)		26,077		(151,789)		120,644		Investment fair value changes, net	(127)		(6,120)
Other income, net	Other income, net	4,027		2,388		17,016		8,357		Other income, net	4,556		5,983
Realized gains, net		—		6,703		2,581		17,803
Total non-interest (loss) income, net		(37,135)		98,331		(129,359)		346,993
Realized gains (losses), net										Realized gains (losses), net	(2)		2,581
Total non-interest income, net										Total non-interest income, net	21,098		18,759
General and administrative expenses	General and administrative expenses	(40,107)		(47,692)		(106,927)		(131,837)		General and administrative expenses	(35,555)		(33,276)
Portfolio management costs										Portfolio management costs	(3,510)		(1,578)
Loan acquisition costs	Loan acquisition costs	(2,426)		(4,621)		(10,371)		(11,928)		Loan acquisition costs	(1,289)		(4,465)
Other expenses	Other expenses	(4,261)		(4,023)		(11,814)		(12,104)		Other expenses	(3,684)		(4,085)
Net (Loss) Income before Benefit from (Provision for) Income Taxes		(48,994)		83,963		(129,946)		289,475
(Provision for) benefit from income taxes		(1,417)		4,323		10,484		(13,907)
Net (Loss) Income		$	(50,411)	$	88,286	$	(119,462)	$	275,568
Net Income before Benefit from Income Taxes										Net Income before Benefit from Income Taxes	3,497		28,457
Benefit from income taxes										Benefit from income taxes	1,123		2,458
Net Income										Net Income	$	4,620	$	30,915
Dividends on preferred stock										Dividends on preferred stock	(1,419)		—
Net income available to common stockholders										Net income available to common stockholders	$	3,201	$	30,915

Basic (loss) earnings per common share		$	(0.44)	$	0.75	$	(1.04)	$	2.36
Diluted (loss) earnings per common share		$	(0.44)	$	0.65	$	(1.04)	$	2.03
Basic weighted average shares outstanding		116,087,890		112,995,847		118,530,172		112,754,691
Diluted weighted average shares outstanding		116,087,890		141,855,471		118,530,172		141,575,385
Net income available to common stockholders - Basic										Net income available to common stockholders - Basic	$	0.02	$	0.25
Net income available to common stockholders - Diluted										Net income available to common stockholders - Diluted	$	0.02	$	0.24
Basic weighted average common shares outstanding										Basic weighted average common shares outstanding	113,678,911		119,884,172
Diluted weighted average common shares outstanding										Diluted weighted average common shares outstanding	114,134,556		140,506,157


(In Thousands, except Share Data)	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive (Loss)		Cumulative Earnings		Cumulative Distributions to Stockholders		Total
(Unaudited)	Shares	Amount
June 30, 2022	116,753,174	$	1,168	$	2,363,709	$	(57,788)	$	1,247,839	$	(2,296,837)	$	1,258,091
Net (loss)	—	—		—		—		(50,411)		—		(50,411)
Other comprehensive (loss)	—	—		—		(7,147)		—		—		(7,147)


Employee stock purchase and incentive plans	38,698	—		34		—		—		—		34
Non-cash equity award compensation	—	—		5,068		—		—		—		5,068
Share repurchases	(3,448,858)	(35)		(23,659)		—		—		—		(23,694)
Common dividends declared ($0.23 per share)	—	—		—		—		—		(27,699)		(27,699)
September 30, 2022	113,343,014	$	1,133	$	2,345,152	$	(64,935)	$	1,197,428	$	(2,324,536)	$	1,154,242


(In Thousands, except Share Data)	Preferred Stock		Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive (Loss)		Cumulative Earnings		Cumulative Distributions to Stockholders		Total
(Unaudited)			Shares	Par Value
December 31, 2022	$	—	113,484,675	$	1,135	$	2,349,845	$	(68,868)	$	1,153,370	$	(2,351,497)	$	1,083,985
Net income	—		—	—		—		—		4,620		—		4,620
Other comprehensive income	—		—	—		—		5,832		—		—		5,832


Employee stock purchase and incentive plans	—		379,781	4		(1,048)		—		—		—		(1,044)
Non-cash equity award compensation	—		—	—		6,342		—		—		—		6,342

Issuance of preferred stock	66,923		—	—		—		—		—		—		66,923
Preferred dividends declared ($0.60417 per share)	—		—	—		—		—		(1,419)		—		(1,419)
Common dividends declared ($0.23 per share)(1)	—		—	—		—		—		—		(27,559)		(27,559)
March 31, 2023	$	66,923	113,864,456	$	1,139	$	2,355,139	$	(63,036)	$	1,156,571	$	(2,379,056)	$	1,137,680


(In Thousands) (Unaudited)	(In Thousands) (Unaudited)	Nine Months Ended September 30,				(In Thousands) (Unaudited)	Three Months Ended March 31,
		2022		2021			2023		2022
Cash Flows From Operating Activities:	Cash Flows From Operating Activities:					Cash Flows From Operating Activities:
Net (loss) income		$	(119,462)	$	275,568
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Amortization of premiums, discounts, and securities issuance costs, net		2,041		300
Net income						Net income	$	4,620	$	30,915
Adjustments to reconcile net income to net cash provided by (used in) operating activities:						Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Amortization of premiums, discounts, and debt issuance costs, net						Amortization of premiums, discounts, and debt issuance costs, net	5,818		(5,451)
Depreciation and amortization of non-financial assets	Depreciation and amortization of non-financial assets	12,115		12,674		Depreciation and amortization of non-financial assets	3,668		3,969
Originations of held-for-sale loans	Originations of held-for-sale loans	(913,477)		(960,419)		Originations of held-for-sale loans	(201,081)		(443,289)
Purchases of held-for-sale loans	Purchases of held-for-sale loans	(3,734,972)		(9,902,028)		Purchases of held-for-sale loans	(55,824)		(2,197,570)
Proceeds from sales of held-for-sale loans	Proceeds from sales of held-for-sale loans	4,110,949		6,948,264		Proceeds from sales of held-for-sale loans	368,633		2,176,422
Principal payments on held-for-sale loans	Principal payments on held-for-sale loans	160,985		49,619		Principal payments on held-for-sale loans	18,705		46,511
Net settlements of derivatives	Net settlements of derivatives	158,868		27,412		Net settlements of derivatives	(13,933)		67,200

Non-cash equity award compensation expense	Non-cash equity award compensation expense	18,505		14,758		Non-cash equity award compensation expense	6,342		8,170

Market valuation adjustments	Market valuation adjustments	183,487		(292,056)		Market valuation adjustments	(11,270)		1,859
Realized gains, net		(2,581)		(17,803)
Realized (gains) losses, net						Realized (gains) losses, net	2		(2,581)
Net change in:	Net change in:					Net change in:
Accrued interest receivable and other assets	Accrued interest receivable and other assets	56,156		(9,680)		Accrued interest receivable and other assets	(13,750)		31,070
Accrued interest payable and accrued expenses and other liabilities	Accrued interest payable and accrued expenses and other liabilities	(62,046)		73,120		Accrued interest payable and accrued expenses and other liabilities	(9,921)		(8,901)
Net cash used in operating activities		(129,432)		(3,780,271)
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	102,009		(291,676)
Cash Flows From Investing Activities:	Cash Flows From Investing Activities:					Cash Flows From Investing Activities:
Originations of loan investments	Originations of loan investments	(1,377,714)		(557,327)		Originations of loan investments	(237,309)		(411,938)
Purchases of loan investments	Purchases of loan investments	(22,006)		(35,713)		Purchases of loan investments	—		(2,983)
Proceeds from sales of loan investments		—		9,484

Principal payments on loan investments	Principal payments on loan investments	1,666,514		1,950,151		Principal payments on loan investments	343,430		660,990
Purchases of real estate securities	Purchases of real estate securities	(15,006)		(29,342)		Purchases of real estate securities	—		(15,006)

Sales of securities held in consolidated securitization trusts		—		8,197

Proceeds from sales of real estate securities	Proceeds from sales of real estate securities	27,471		37,500		Proceeds from sales of real estate securities	6,186		—
Principal payments on real estate securities	Principal payments on real estate securities	26,584		46,904		Principal payments on real estate securities	255		23,050

Principal repayments from servicer advance investments, net		65,772		58,248
Repayments from servicer advance investments, net						Repayments from servicer advance investments, net	7,529		45,005

Acquisition of Riverbend, net of cash acquired		(40,636)		—
Purchases of HEIs	Purchases of HEIs	(176,439)		(109,174)		Purchases of HEIs	(16,559)		(40,141)
Principal payments on HEIs		35,187		—
Repayments on HEIs						Repayments on HEIs	7,754		12,671
Other investing activities, net	Other investing activities, net	(20,768)		(15,915)		Other investing activities, net	(557)		(1,151)
Net cash provided by investing activities	Net cash provided by investing activities	168,959		1,363,013		Net cash provided by investing activities	110,729		270,497
Cash Flows From Financing Activities:	Cash Flows From Financing Activities:					Cash Flows From Financing Activities:
Proceeds from borrowings on short-term debt	Proceeds from borrowings on short-term debt	4,149,726		9,847,178		Proceeds from borrowings on short-term debt	643,085		2,153,516
Repayments on short-term debt	Repayments on short-term debt	(5,192,165)		(8,443,664)		Repayments on short-term debt	(1,057,380)		(2,684,078)
Proceeds from issuance of asset-backed securities	Proceeds from issuance of asset-backed securities	1,420,289		2,822,785		Proceeds from issuance of asset-backed securities	594,327		680,749
Repayments on asset-backed securities issued	Repayments on asset-backed securities issued	(1,288,294)		(1,549,766)		Repayments on asset-backed securities issued	(267,449)		(535,568)

Proceeds from borrowings on long-term debt	Proceeds from borrowings on long-term debt	1,678,805		948,674		Proceeds from borrowings on long-term debt	126,760		630,865
Deferred long-term debt issuance costs paid	Deferred long-term debt issuance costs paid	(17,925)		—		Deferred long-term debt issuance costs paid	(308)		(532)
Repayments on long-term debt	Repayments on long-term debt	(873,820)		(1,055,475)		Repayments on long-term debt	(128,970)		(308,578)

Payments on repurchase of common stock		(56,496)		—

Taxes paid on equity award distributions	Taxes paid on equity award distributions	(1,571)		(957)		Taxes paid on equity award distributions	(1,207)		(1,202)
Net proceeds from issuance of common stock	Net proceeds from issuance of common stock	67,899		20,248		Net proceeds from issuance of common stock	162		67,632
Dividends paid		(84,712)		(64,212)
Net proceeds from issuance of preferred stock						Net proceeds from issuance of preferred stock	66,923		—
Dividends paid on common stock						Dividends paid on common stock	(27,559)		(28,788)

Other financing activities, net	Other financing activities, net	(3,659)		(6,297)		Other financing activities, net	—		(1,500)
Net cash (used in) provided by financing activities		(201,923)		2,518,514
Net (decrease) increase in cash, cash equivalents and restricted cash		(162,396)		101,256
Net cash used in financing activities						Net cash used in financing activities	(51,616)		(27,484)
Net increase (decrease) in cash, cash equivalents and restricted cash						Net increase (decrease) in cash, cash equivalents and restricted cash	161,122		(48,663)
Cash, cash equivalents and restricted cash at beginning of period (1)	Cash, cash equivalents and restricted cash at beginning of period (1)	531,484		544,450		Cash, cash equivalents and restricted cash at beginning of period (1)	329,364		531,484
Cash, cash equivalents and restricted cash at end of period (1)	Cash, cash equivalents and restricted cash at end of period (1)	$	369,088	$	645,706	Cash, cash equivalents and restricted cash at end of period (1)	$	490,486	$	482,821


~~(In Thousands)~~	~~Riverbend~~
~~Acquisition Date~~	~~July 1, 2022~~
~~Purchase price:~~
~~Cash~~	$	~~44,126~~
~~Provisional consideration payable~~	~~477~~
~~Contingent consideration, at fair value~~	—


~~Total consideration~~	$	~~44,603~~

~~Allocated to:~~
~~Business purpose loans, at fair value~~	$	~~59,748~~
~~Other investments~~	~~2,443~~
~~Cash and cash equivalents~~	~~3,490~~
~~Other assets~~	~~13,306~~
~~Goodwill~~	~~23,373~~
~~Intangible assets~~	~~13,300~~
~~Total assets acquired~~	~~115,660~~
~~Short-term debt, net~~	~~67,423~~
~~Accrued expenses and other liabilities~~	~~3,634~~
~~Total liabilities assumed~~	~~71,057~~
~~Total net assets acquired~~	$	~~44,603~~


		Intangible Assets at Acquisition				Accumulated Amortization at September 30, 2022			Carrying Value at September 30, 2022				Weighted Average Amortization Period (in years)				Intangible Assets at Acquisition			Accumulated Amortization at March 31, 2023		Carrying Value at March 31, 2023		Weighted Average Amortization Period (in years)
(Dollars in Thousands)	(Dollars in Thousands)							(Dollars in Thousands)
Borrower network	Borrower network			$	56,300						$	(19,537)			$	36,763			7		Borrower network	$	56,300	$	(23,559)	$	32,741	7
Broker network	Broker network	18,100				(12,972)			5,128				5	Broker network			18,100			(14,782)		3,318		5
Non-compete agreements	Non-compete agreements	11,400				(9,567)			1,833				3	Non-compete agreements			11,400			(9,975)		1,425		3
Tradenames	Tradenames	4,400				(3,994)			406				3	Tradenames			4,400			(4,100)		300		3
Developed technology	Developed technology	1,800				(1,800)			—				2	Developed technology			1,800			(1,800)		—		2
Loan administration fees on existing loan assets	Loan administration fees on existing loan assets	2,600				(2,600)			—				1	Loan administration fees on existing loan assets			2,600			(2,600)		—		1
Total	Total	$	94,600			$	(50,470)		$	44,130			6	Total			$	94,600		$	(56,816)	$	37,784	6



~~(In Thousands)~~	~~Riverbend~~
~~Beginning Balance~~	$	—
~~Goodwill recognized from acquisition~~	~~23,373~~
~~Impairment~~	—
~~Ending Balance~~	$	~~23,373~~


(In Thousands)	(In Thousands)	September 30, 2022		(In Thousands)	March 31, 2023
2022 (3 months)		$	3,238
2023		12,430
2023 (9 months)				2023 (9 months)	$	9,323
2024	2024	9,413		2024	9,412
2025	2025	8,426		2025	8,426
2026	2026	6,695		2026	6,694
2027 and thereafter		3,928
2027				2027	1,571
2028 and thereafter				2028 and thereafter	2,358
Total Future Intangible Asset Amortization	Total Future Intangible Asset Amortization	$	44,130	Total Future Intangible Asset Amortization	$	37,784


September 30, 2022		Legacy Sequoia			Sequoia			CAFL(1)			Freddie Mac SLST(1)			Freddie Mac K-Series					Servicing Investment			HEI				Total Consolidated VIEs
March 31, 2023													March 31, 2023				Legacy Sequoia								Sequoia						CAFL(1)				Freddie Mac SLST(1)					Freddie Mac K-Series					Servicing Investment				HEI				Total Consolidated VIEs
(Dollars in Thousands)	(Dollars in Thousands)			Legacy Sequoia						Sequoia						CAFL(1)					Freddie Mac SLST(1)					Freddie Mac K-Series							Servicing Investment										HEI								Total Consolidated VIEs					(Dollars in Thousands)
Residential loans, held-for-investment	Residential loans, held-for-investment												Residential loans, held-for-investment					$	170,000			$	3,831,538						$	—					$	1,464,345				$	—						$	—					$	—				$	5,465,883
Business purpose loans, held-for-investment	Business purpose loans, held-for-investment	—					—				3,531,229			—					—					—				—				3,531,229		Business purpose loans, held-for-investment					—					—				3,376,654				—					—					—			—	3,376,654
Consolidated Agency multifamily loans	Consolidated Agency multifamily loans	—			—			—			—			427,458					—			—				427,458			Consolidated Agency multifamily loans			—					—					—				—				426,599					—					—			426,599

Home equity investments	Home equity investments																					139,728				139,728			Home equity investments			—					—					—				—				—					—					129,317			129,317
Other investments	Other investments	—			—			—			—			—					307,723			—				307,723			Other investments			—					—					��				—				—					292,636					—			292,636
Cash and cash equivalents	Cash and cash equivalents	—			—			—			—			—					15,923			—				15,923			Cash and cash equivalents			—					—					—				—				—					20,087					—			20,087
Restricted cash	Restricted cash	92			78			15,889			—			—					18,569			3,540				38,168			Restricted cash			61					70					51,428				—				—					—					4,716			56,275
Accrued interest receivable	Accrued interest receivable	226			11,295			17,497			5,247			1,299					720			—				36,284			Accrued interest receivable			324					15,096					18,009				5,069				1,288					160					—			39,946
Other assets	Other assets	407			—			24,084			2,544			—					7,270			50				34,355			Other assets			18					—					19,199				2,642				—					7,650					50			29,559
Total Assets	Total Assets	$	198,886		$	3,248,543		$	3,588,699		$	1,490,755		$	428,757				$	350,205		$	143,318			$	9,449,163		Total Assets			$	170,403				$	3,846,704				$	3,465,290			$	1,472,056			$	427,887				$	320,533				$	134,083		$	9,836,956
Short-term debt	Short-term debt	$	—		$	—		$	—		$	—		$	—				$	233,104		$	—			$	233,104		Short-term debt			$	—				$	—				$	—			$	—			$	—				$	197,883				$	—		$	197,883
Accrued interest payable	Accrued interest payable	224			9,003			11,202			3,630			1,173					348			—				25,580			Accrued interest payable			316					11,259					10,816				3,510				1,162					492					—			27,555
Accrued expenses and other liabilities	Accrued expenses and other liabilities	(58)			80			1,903			—			—					24,223			24,354				50,502			Accrued expenses and other liabilities			(106)					78					4,222				—				—					29,737					23,097			57,028
Asset-backed securities issued	Asset-backed securities issued	197,354			3,013,249			3,179,487			1,249,041			395,411					—			104,751				8,139,293			Asset-backed securities issued			168,832					3,570,597					3,072,176				1,143,522				394,469					—					97,523			8,447,119
Total Liabilities	Total Liabilities	$	197,520		$	3,022,332		$	3,192,592		$	1,252,671		$	396,584				$	257,675		$	129,105			$	8,448,479		Total Liabilities			$	169,042				$	3,581,934				$	3,087,214			$	1,147,032			$	395,631				$	228,112				$	120,620		$	8,729,585

Value of our investments in VIEs(1)	Value of our investments in VIEs(1)	$	1,214		$	223,920		$	393,015		$	236,467		$	32,047				$	92,530		$	14,213			$	993,406		Value of our investments in VIEs(1)			$	1,186				$	260,933				$	376,042			$	323,465			$	32,130				$	92,421				$	13,463		$	1,099,640
Number of VIEs	Number of VIEs	20			17			19			3			1					3			1				64			Number of VIEs			20					19					19				2				1					3					1			65


		Three Months Ended September 30, 2022																												Three Months Ended March 31, 2023
		Legacy Sequoia				Sequoia		CAFL				Freddie Mac SLST			Freddie Mac K-Series				Servicing Investment		HEI				Total Consolidated VIEs					Legacy Sequoia				Sequoia				CAFL				Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)	(Dollars in Thousands)													(Dollars in Thousands)
Interest income	Interest income			$	1,475					$	31,587						$	61,439					$	16,098				$	4,762			$	7,800			$	—			$	123,161		Interest income	$	2,543	$	34,644	$	54,437	$	15,493	$	4,618	$	7,814	$	—	$	119,549
Interest expense	Interest expense	(1,486)				(27,541)		(44,804)				(12,829)			(4,377)				(2,606)		—				(93,643)		Interest expense			(2,504)				(30,055)				(39,542)				(11,218)		(4,241)		(3,848)		—		(91,408)
Net interest income	Net interest income	(11)				4,046		16,635				3,269			385				5,194		—				29,518		Net interest income			39				4,589				14,895				4,275		377		3,966		—		28,141
Non-interest income	Non-interest income																										Non-interest income

Investment fair value changes, net	Investment fair value changes, net	(328)				(10,936)		(4,527)				(41,892)			316				(3,286)		(584)				(61,237)		Investment fair value changes, net			(94)				2,442				(9,682)				8,934		363		(1,047)		425		1,341
Other income	Other income	—				—		286				—			—				—		—				286		Other income			—				—				172				—		—		—		—		172

Total non-interest income, net	Total non-interest income, net	(328)				(10,936)		(4,241)				(41,892)			316				(3,286)		(584)				(60,951)		Total non-interest income, net			(94)				2,442				(9,510)				8,934		363		(1,047)		425		1,513
General and administrative expenses	General and administrative expenses	—				—		—				—			—				(55)		—				(55)		General and administrative expenses			—				—				—				—		—		10		—		10
Other expenses	Other expenses	—				—		—				—			—				(372)		—				(372)		Other expenses			—				—				—				—		—		(577)		—		(577)

Income (loss) from Consolidated VIEs	Income (loss) from Consolidated VIEs	$	(339)			$	(6,890)	$	12,394			$	(38,623)		$	701			$	1,481	$	(584)			$	(31,860)	Income (loss) from Consolidated VIEs			$	(55)			$	7,031			$	5,385			$	13,209	$	740	$	2,352	$	425	$	29,087


	Nine Months Ended September 30, 2022
	Legacy Sequoia		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income	$	3,595	$	95,608	$	195,381	$	49,851	$	14,247	$	23,287	$	—	$	381,969
Interest expense	(3,154)		(84,041)		(145,207)		(40,286)		(13,099)		(6,110)		—		(291,897)
Net interest income	441		11,567		50,174		9,565		1,148		17,177		—		90,072
Non-interest income

Investment fair value changes, net	(1,378)		(20,644)		(23,972)		(74,796)		390		(11,259)		4,028		(127,631)
Other income	—		—		631		—		—		—		—		631

Total non-interest income, net	(1,378)		(20,644)		(23,341)		(74,796)		390		(11,259)		4,028		(127,000)
General and administrative expenses	—		—		—		—		—		(130)		—		(130)
Other expenses	—		—		—		—		—		(1,158)		—		(1,158)

Income (loss) from Consolidated VIEs	$	(937)	$	(9,077)	$	26,833	$	(65,231)	$	1,538	$	4,630	$	4,028	$	(38,216)


	Three Months Ended September 30, 2021
	Legacy Sequoia		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income	$	1,042	$	18,867	$	48,937	$	18,707	$	4,846	$	3,905	$	—	$	96,304
Interest expense	(641)		(15,368)		(37,489)		(15,774)		(4,460)		(1,018)		—		(74,750)
Net interest income	401		3,499		11,448		2,933		386		2,887		—		21,554
Non-interest income

Investment fair value changes, net	(247)		3,314		2,943		13,849		554		(2,080)		47		18,380


Other income	—		—		10		—		—		—		—		10
Total non-interest income, net	(247)		3,314		2,953		13,849		554		(2,080)		47		18,390
General and administrative expenses	—		—		—		—		—		(60)		—		(60)
Other expenses	—		—		—		—		—		(149)		—		(149)

Income (loss) from Consolidated VIEs	$	154	$	6,813	$	14,401	$	16,782	$	940	$	598	$	47	$	39,735


		Nine Months Ended September 30, 2021																												Three Months Ended March 31, 2022
		Legacy Sequoia				Sequoia		CAFL				Freddie Mac SLST			Freddie Mac K-Series				Servicing Investment		HEI				Total Consolidated VIEs					Legacy Sequoia				Sequoia				CAFL				Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)	(Dollars in Thousands)													(Dollars in Thousands)
Interest income	Interest income			$	3,559					$	48,842						$	152,659					$	58,372				$	14,492			$	12,168			$	—			$	290,092		Interest income	$	1,012	$	32,098	$	77,334	$	17,200	$	4,753	$	7,919	$	—	$	140,316
Interest expense	Interest expense	(2,271)				(38,848)		(118,543)				(49,756)			(13,294)				(3,414)		—				(226,126)		Interest expense			(701)				(28,171)				(58,480)				(14,085)		(4,371)		(1,662)		—		(107,470)
Net interest income	Net interest income	1,288				9,994		34,116				8,616			1,198				8,754		—				63,966		Net interest income			311				3,927				18,854				3,115		382		6,257		—		32,846
Non-interest income	Non-interest income																										Non-interest income

Investment fair value changes, net	Investment fair value changes, net	(1,162)				13,118		6,354				54,282			11,330				(5,646)		47				78,323		Investment fair value changes, net			(714)				(3,822)				2,664				3,036		264		(3,468)		3,411		1,371

Other income	Other income	—				—		10				—			—				—		—				10		Other income			—				—				90				—		—		—		—		90
Total non-interest income, net	Total non-interest income, net	(1,162)				13,118		6,364				54,282			11,330				(5,646)		47				78,333		Total non-interest income, net			(714)				(3,822)				2,754				3,036		264		(3,468)		3,411		1,461
General and administrative expenses	General and administrative expenses	—				—		—				—			—				(150)		—				(150)		General and administrative expenses			—				—				—				—		—		(31)		—		(31)
Other expenses	Other expenses	—				—		—				—			—				(591)		—				(591)		Other expenses			—				—				—				—		—		(551)		—		(551)

Income (loss) from Consolidated VIEs	Income (loss) from Consolidated VIEs	$	126			$	23,112	$	40,480			$	62,898		$	12,528			$	2,367	$	47			$	141,558	Income (loss) from Consolidated VIEs			$	(403)			$	105			$	21,608			$	6,151	$	646	$	2,207	$	3,411	$	33,725


September 30, 2022		MSRs				Senior Securities (1)				Subordinate Securities
March 31, 2023									March 31, 2023				MSRs					Senior Securities (1)					Subordinate Securities
(Dollars in Thousands)	(Dollars in Thousands)				MSRs				Senior Securities (1)						Subordinate Securities					(Dollars in Thousands)
Fair value at September 30, 2022
Fair value at March 31, 2023														Fair value at March 31, 2023						$	11,160				$	31,208				$	77,714
Expected life (in years) (2)	Expected life (in years) (2)	7								7						16			Expected life (in years) (2)				7					7				15
Prepayment speed assumption (annual CPR) (2)	Prepayment speed assumption (annual CPR) (2)	8		%		11		%		8		%	Prepayment speed assumption (annual CPR) (2)				8		%			8		%			8		%
Decrease in fair value from:	Decrease in fair value from:												Decrease in fair value from:
10% adverse change	10% adverse change	$	334			$	942			$	570		10% adverse change				$	350				$	1,190				$	425
25% adverse change	25% adverse change	810				2,291				1,132			25% adverse change				801					2,908					999
Discount rate assumption (2)	Discount rate assumption (2)	11		%		12		%		8		%	Discount rate assumption (2)				11		%			12		%			8		%
Decrease in fair value from:	Decrease in fair value from:												Decrease in fair value from:
100 basis point increase	100 basis point increase	$	441			$	1,001			$	7,714		100 basis point increase				$	412				$	1,120				$	7,553
200 basis point increase	200 basis point increase	852				1,889				14,345			200 basis point increase				798					2,162					14,065
Credit loss assumption (2)	Credit loss assumption (2)	N/A				0.04		%		0.04		%	Credit loss assumption (2)				N/A					0.03		%			0.03		%
Decrease in fair value from:	Decrease in fair value from:												Decrease in fair value from:
10% higher losses	10% higher losses	N/A				N/A				$	190		10% higher losses				N/A					N/A					$	34
25% higher losses	25% higher losses	N/A				N/A				254			25% higher losses				N/A					N/A					83


September 30, 2022		Carrying Value			Fair Value Measurements Using
March 31, 2023											March 31, 2023			Carrying Value			Fair Value Measurements Using
(In Thousands)	(In Thousands)			Carrying Value			Level 1			Level 2			Level 3		(In Thousands)					Level 1			Level 2			Level 3
Assets	Assets												Assets
Residential loans	Residential loans	$	5,752,524		$	—		$	—		$	5,752,524	Residential loans		$	5,492,828		$	—		$	—		$	5,492,828
Business purpose loans	Business purpose loans	5,257,218			—			—			5,257,218		Business purpose loans		5,364,649			—			—			5,364,649
Consolidated Agency multifamily loans	Consolidated Agency multifamily loans	427,458			—			—			427,458		Consolidated Agency multifamily loans		426,599			—			—			426,599
Real estate securities	Real estate securities	259,212			—			—			259,212		Real estate securities		243,346			—			—			243,346
HEIs													HEIs		416,783			—			—			416,783
Servicer advance investments	Servicer advance investments	274,934			—			—			274,934		Servicer advance investments		260,378			—			—			260,378
MSRs	MSRs	24,796			—			—			24,796		MSRs		24,831			—			—			24,831
Excess MSRs	Excess MSRs	40,452			—			—			40,452		Excess MSRs		38,807			—			—			38,807
HEIs		340,437			—			—			340,437
Other investments	Other investments	11,174			—			—			11,174		Other investments		5,727			—			—			5,727
Derivative assets	Derivative assets	65,213			39,843			24,626			744		Derivative assets		11,497			3,112			8,032			353

Liabilities	Liabilities												Liabilities
HEI securitization non-controlling interest	HEI securitization non-controlling interest	$	24,355		$	—		$	—		$	24,355	HEI securitization non-controlling interest		$	23,097		$	—		$	—		$	23,097
Derivative liabilities	Derivative liabilities	6,782			6,547			23			212		Derivative liabilities		10,736			10,730			—			6
ABS issued	ABS issued	7,564,312			—			—			7,564,312		ABS issued		7,968,135			—			—			7,968,135


		Liabilities					Liabilities
								Derivatives (2)				HEI Securitization Non-Controlling Interest			ABS Issued								Derivatives (2)		HEI Securitization Non-Controlling Interest		ABS Issued
(In Thousands)	(In Thousands)		Derivatives (2)	HEI Securitization Non-Controlling Interest	ABS Issued	(In Thousands)												Derivatives (2)	HEI Securitization Non-Controlling Interest	ABS Issued
Beginning balance - December 31, 2021										$	4,130			$			17,035				$	8,843,147

Beginning balance - December 31, 2022																	Beginning balance - December 31, 2022						$	322	$	22,329	$	7,424,132
Acquisitions	Acquisitions							—				—			1,205,289		Acquisitions						—		—		594,327

Principal paydowns	Principal paydowns							—				—			(1,242,859)		Principal paydowns						—		—		(181,696)

Gains (losses) in net income (loss), net								(53,962)				7,320			(1,241,265)

Gains (losses) in net income, net																	Gains (losses) in net income, net						88		768		131,372
Other settlements, net (1)	Other settlements, net (1)							50,364				—			—		Other settlements, net (1)						(57)		—		—
Ending balance - September 30, 2022								$	532			$	24,355		$	7,564,312
Ending balance - March 31. 2023																	Ending balance - March 31. 2023						$	353	$	23,097	$	7,968,135


		Included in Net Income (Loss)									Included in Net Income
		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(In Thousands)	(In Thousands)	2022		2021		2022		2021		(In Thousands)	2023		2022
Assets	Assets									Assets
Residential loans at Redwood	Residential loans at Redwood	$	(28,762)	$	6,553	$	(42,952)	$	9,371	Residential loans at Redwood	$	156	$	(35,397)
Business purpose loans	Business purpose loans	(10,967)		18,810		(39,019)		19,829		Business purpose loans	12,239		(14,647)
Net investments in consolidated Sequoia entities (1)	Net investments in consolidated Sequoia entities (1)	(11,264)		2,885		(22,467)		11,779		Net investments in consolidated Sequoia entities (1)	2,349		(4,981)
Net investments in consolidated Freddie Mac SLST entities (1)	Net investments in consolidated Freddie Mac SLST entities (1)	(41,969)		13,781		(75,043)		54,006		Net investments in consolidated Freddie Mac SLST entities (1)	8,759		2,940
Net investments in consolidated Freddie Mac K-Series entities (1)	Net investments in consolidated Freddie Mac K-Series entities (1)	316		555		390		11,330		Net investments in consolidated Freddie Mac K-Series entities (1)	363		264
Net investments in consolidated CAFL SFR entities (1)		(6,585)		2,943		(24,365)		5,500
Net investments in consolidated CAFL Term entities (1)										Net investments in consolidated CAFL Term entities (1)	(8,810)		4,048
Net investment in consolidated HEI securitization entity (1)	Net investment in consolidated HEI securitization entity (1)	(1,652)		47		11,348		129		Net investment in consolidated HEI securitization entity (1)	1,194		9,628
Trading securities	Trading securities	(12,668)		1,547		(34,104)		3,824		Trading securities	1,793		(1,401)

Available-for-sale securities										Available-for-sale securities	(28)		—
HEIs at Redwood										HEIs at Redwood	3,433		1,185
Servicer advance investments	Servicer advance investments	(3,905)		(2,079)		(10,218)		(3,179)		Servicer advance investments	(1,352)		(3,081)
MSRs	MSRs	1,653		(235)		9,118		(49)		MSRs	(424)		3,526
Excess MSRs	Excess MSRs	(351)		(803)		(3,779)		(5,233)		Excess MSRs	(229)		(1,208)
HEIs at Redwood		(4,903)		(41)		(2,272)		21
Loan purchase and interest rate lock commitments	Loan purchase and interest rate lock commitments	723		9,021		744		9,261		Loan purchase and interest rate lock commitments	353		2,050

Other investments										Other investments	(94)		—

Liabilities	Liabilities									Liabilities
HEI securitization non-controlling interest		$	1,068	$	(83)	$	(7,320)	$	(83)
Non-controlling interest in consolidated HEI entity										Non-controlling interest in consolidated HEI entity	$	—	$	(6,218)
Loan purchase commitments	Loan purchase commitments	(212)		(2,570)		(212)		(2,550)		Loan purchase commitments	(6)		(14,442)


September 30, 2022		Fair Value					Input Values
March 31, 2023															March 31, 2023		Fair Value					Input Values
(Dollars in Thousands, except Input Values)	(Dollars in Thousands, except Input Values)			Fair Value		Unobservable Input			Range						Weighted Average(1)			(Dollars in Thousands, except Input Values)			Unobservable Input				Range							Weighted Average(1)
Assets	Assets															Assets
Residential loans, at fair value:	Residential loans, at fair value:															Residential loans, at fair value:

Jumbo fixed-rate loans	Jumbo fixed-rate loans	$	718,347		Whole loan spread to swap rate		201		-	400		bps	202		bps	Jumbo fixed-rate loans		$	26,975	Whole loan spread to swap rate			112			-	112		bps	112			bps
																				Seasoned whole loan dollar price			$	91			$	91		$	91
					Called loan dollar price		$	92	-	$	92		$	92

Jumbo loans committed to sell		115,883			Whole loan committed sales price		$	96	-	$	102		$	98

Loans held by Legacy Sequoia (2)	Loans held by Legacy Sequoia (2)	198,160			Liability price					N/A			N/A			Loans held by Legacy Sequoia (2)		170,000		Liability price							N/A			N/A

Loans held by Sequoia (2)	Loans held by Sequoia (2)	3,237,170			Liability price					N/A			N/A			Loans held by Sequoia (2)		3,831,538		Liability price							N/A			N/A

Loans held by Freddie Mac SLST (2)	Loans held by Freddie Mac SLST (2)	1,482,964			Liability price					N/A			N/A			Loans held by Freddie Mac SLST (2)		1,464,345		Liability price							N/A			N/A

Business purpose loans:	Business purpose loans:															Business purpose loans:
Single-family rental loans		281,105			Senior credit spread		210		-	210		bps	210		bps
BPL term loans																BPL term loans		354,166		Senior credit spread(3)			180			-	180		bps	180			bps
					Subordinate credit spread		275		-	1,025		bps	458		bps					Subordinate credit spread(3)			240			-	600		bps	337			bps
					Senior credit support		36		-	36		%	36		%					Senior credit support(3)			36			-	36		%	36			%
					IO discount rate		8		-	9		%	8		%					IO discount rate(3)			7			-	13		%	10			%
					Prepayment rate (annual CPR)		3		-	3		%	3		%					Prepayment rate (annual CPR)(3)			3			-	3		%	3			%
					Whole loan dollar price		$	84	-	$	99		$	86						Whole loan spread to treasury rate			325			-	550		bps	441			bps

Single-family rental loans held by CAFL (2)		3,018,994			Liability price					N/A			N/A
BPL term loans held by CAFL (2)																BPL term loans held by CAFL (2)		2,891,043		Liability price							N/A			N/A

Bridge loans		1,957,119			Whole loan discount rate		5		-	15		%	9		%
BPL bridge loans																BPL bridge loans		2,119,440		Whole loan discount rate			5			-	15		%	10			%
					Senior credit spread		285		-	285		bps	285		bps					Senior credit spread(3)			280			-	280		bps	280			bps
					Subordinate credit spread		345		-	1,200		%	680		%					Subordinate credit spread(3)			335			-	1,150		bps	654			bps
					Senior credit support		43		-	43		%	43		%					Senior credit support(3)			43			-	43		%	43			%
					Prepayment rate (annual CPR)		—		-	—		%	—		%

Multifamily loans held by Freddie Mac K-Series (2)	Multifamily loans held by Freddie Mac K-Series (2)	427,458			Liability price					N/A			N/A			Multifamily loans held by Freddie Mac K-Series (2)		426,599		Liability price							N/A			N/A

Trading and AFS securities	Trading and AFS securities	259,212			Discount rate		5		-	18		%	10		%	Trading and AFS securities		243,346		Discount rate			5			-	18		%	10			%
					Prepayment rate (annual CPR)		6		-	65		%	12		%					Prepayment rate (annual CPR)			5			-	65		%	9			%
					Default rate		—		-	12		%	0.4		%					Default rate			—			-	12		%	0.5			%
					Loss severity		—		-	50		%	25		%					Loss severity			—			-	50		%	25			%
					CRT dollar price		$	73	-	$	93		$	85						CRT dollar price			$	64		-	$	96		$	87

Servicer advance investments		274,934			Discount rate		2		-	5		%	4		%
HEIs																HEIs		287,466		Discount rate			10			-	10		%	10			%
					Prepayment rate (annual CPR)		14		-	30		%	14		%					Prepayment rate (annual CPR)			1			-	23		%	16			%
					Expected remaining life (3)		5		-	5		yrs	5		yrs					Home price appreciation (depreciation)			(7)			-	4		%	3			%
					Mortgage servicing income		—		-	18		bps	7		bps
HEIs held by HEI securitization entity																HEIs held by HEI securitization entity		129,317		Discount Rate							N/A			N/A

MSRs		24,796			Discount rate		11		-	69		%	11		%

Servicer advance investments																Servicer advance investments		260,378		Discount rate			2			-	4		%	3			%
					Prepayment rate (annual CPR)		4		-	28		%	8		%					Prepayment rate (annual CPR)			14			-	30		%	14			%
					Per loan annual cost to service		$	93	-	$	93		$	93						Expected remaining life (4)			5			-	6		yrs	5			yrs
																				Mortgage servicing income			—			-	18		bps	3			bps


September 30, 2022				Legacy				Freddie Mac
March 31, 2023												March 31, 2023			Legacy				Freddie Mac
(In Thousands)	(In Thousands)	Redwood		Sequoia		Sequoia		SLST		Total		(In Thousands)	Redwood		Sequoia		Sequoia		SLST		Total
Held-for-sale at fair value	Held-for-sale at fair value	$	834,262	$	—	$	—	$	—	$	834,262	Held-for-sale at fair value	$	26,975	$	—	$	—	$	—	$	26,975
Held-for-investment at fair value	Held-for-investment at fair value	—		198,160		3,237,170		1,482,964		4,918,294		Held-for-investment at fair value	—		170,000		3,831,538		1,464,345		5,465,883
Total Residential Loans	Total Residential Loans	$	834,262	$	198,160	$	3,237,170	$	1,482,964	$	5,752,556	Total Residential Loans	$	26,975	$	170,000	$	3,831,538	$	1,464,345	$	5,492,858


September 30, 2022		Single-Family Rental				Bridge
March 31, 2023												March 31, 2023	BPL Term				BPL Bridge
(In Thousands)	(In Thousands)	Redwood		CAFL		Redwood		CAFL		Total		(In Thousands)	Redwood		CAFL		Redwood		CAFL		Total
Held-for-sale at fair value	Held-for-sale at fair value	$	281,105	—		$	56,133	$	—	$	337,238	Held-for-sale at fair value	$	354,166	—		$	17,219	$	—	$	371,385
Held-for-investment at fair value	Held-for-investment at fair value	—		3,018,994		1,388,750		512,236		4,919,980		Held-for-investment at fair value	—		2,891,043		1,616,610		485,611		4,993,264
Total Business Purpose Loans	Total Business Purpose Loans	$	281,105	$	3,018,994	$	1,444,883	$	512,236	$	5,257,218	Total Business Purpose Loans	$	354,166	$	2,891,043	$	1,633,829	$	485,611	$	5,364,649


	Three Months Ended September 30, 2022				Three Months Ended September 30, 2021
(In Thousands)	SFR at Redwood		Bridge at Redwood		SFR at Redwood		Bridge at Redwood
Principal balance of loans originated	$	99,281	$	470,425	$	392,620	$	208,938
Principal balance of loans acquired (1)	—		59,977		2,463		35,713
Principal balance of loans sold to third parties	37,202		48,279		—		253
Fair value of loans transferred (2)	266,181		77,362		332,670		276,354

Mortgage banking activities income (loss) recorded (4)	(19,325)		(110)		19,205		3,691
Investment fair value changes recorded (5)	—		(679)		—		900


		Nine Months Ended September 30, 2022				Nine Months Ended September 30, 2021					Three Months Ended March 31, 2023				Three Months Ended March 31, 2022
(In Thousands)	(In Thousands)	SFR at Redwood		Bridge at Redwood		SFR at Redwood		Bridge at Redwood		(In Thousands)	BPL Term at Redwood		BPL Bridge at Redwood		BPL Term at Redwood		BPL Bridge at Redwood
Principal balance of loans originated	Principal balance of loans originated	$	865,253	$	1,424,604	$	957,935	$	557,327	Principal balance of loans originated	$	174,078	$	255,152	$	442,727	$	411,938
Principal balance of loans acquired ~~(1)~~	Principal balance of loans acquired ~~(1)~~	100,349		81,983		2,463		35,713		Principal balance of loans acquired ~~(1)~~	3,815		9,085		61,892		2,983
Principal balance of loans sold to third parties	Principal balance of loans sold to third parties	368,704		48,279		—		9,484		Principal balance of loans sold to third parties	217,702		12,547		331,502		—
Fair value of loans transferred ~~(2)~~(1)	Fair value of loans transferred ~~(2)~~(1)	561,218		465,966		799,375		276,354		Fair value of loans transferred ~~(2)~~(1)	—		80,792		—		82,291
Fair value of loans transferred from HFI to HFS (3)		—		—		44,922		N/A

Mortgage banking activities income (loss) recorded ~~(4)~~(2)	Mortgage banking activities income (loss) recorded ~~(4)~~(2)	(83,827)		1,129		54,675		5,212		Mortgage banking activities income (loss) recorded ~~(4)~~(2)	12,666		1,162		(24,468)		2,375
Investment fair value changes recorded ~~(5)~~(3)	Investment fair value changes recorded ~~(5)~~(3)	—		(6,747)		—		4,142		Investment fair value changes recorded ~~(5)~~(3)	—		1,609		—		(759)


	Nine Months Ended September 30, 2022				Nine Months Ended September 30, 2021
(In Thousands)	SFR at CAFL		Bridge at CAFL		SFR at CAFL		Bridge at CAFL
Net market valuation gains (losses) recorded	$	(419,182)	$	50	$	(96,934)	$	—


September 30, 2022	SFR at Redwood			SFR at CAFL(1)			Bridge at Redwood			Bridge at CAFL
(Dollars in Thousands)
Number of loans	202			1,142			1,585			1,994
Unpaid principal balance	$	317,556		$	3,316,706		$	1,452,180		$	510,839
Fair value of loans	$	281,105		$	3,018,994		$	1,444,883		$	512,236
Weighted average coupon	5.14		%	5.22		%	8.06		%	8.04		%
Weighted average remaining loan term (years)	15			6			2			1
Market value of loans pledged as collateral under short-term debt facilities	$	279,846		N/A			$	702,899		N/A
Market value of loans pledged as collateral under long-term debt facilities	$	—		N/A			$	699,704		N/A
Delinquency information
Number of loans with 90+ day delinquencies (2)	1			15			51			47
Unpaid principal balance of loans with 90+ day delinquencies	$	536		$	31,296		$	33,822		$	7,063
Fair value of loans with 90+ day delinquencies (2)	$	528		N/A			$	31,140		$	7,144
Number of loans in foreclosure (3)	1			7			49			—
Unpaid principal balance of loans in foreclosure	$	536		$	10,335		$	33,471		$	—
Fair value of loans in foreclosure (3)	$	528		N/A			$	30,789		$	—


March 31, 2023	BPL Term at Redwood			BPL Term at CAFL(1)			BPL Bridge at Redwood			BPL Bridge at CAFL
(Dollars in Thousands)
Number of loans	94			1,094			1,473			1,796
Unpaid principal balance	$	349,190		$	3,172,026		$	1,636,460		$	484,124
Fair value of loans	$	354,166		$	2,891,043		$	1,633,829		$	485,611
Weighted average coupon	6.98		%	5.21		%	10.20		%	10.41		%
Weighted average remaining loan term (years)	9			5			1			1
Market value of loans pledged as collateral under short-term debt facilities	$	345,080		N/A			$	675,971		N/A
Market value of loans pledged as collateral under long-term debt facilities	$	—		N/A			$	922,296		N/A
Delinquency information
Number of loans with 90+ day delinquencies (2)	2			19			53			51
Unpaid principal balance of loans with 90+ day delinquencies	$	1,566		$	60,740		$	32,526		$	11,416
Fair value of loans with 90+ day delinquencies (3)	$	1,157		N/A			$	28,387		$	11,416
Number of loans in foreclosure	1			8			52			49
Unpaid principal balance of loans in foreclosure	$	536		$	9,378		$	31,446		$	7,628
Fair value of loans in foreclosure (3)	$	536		N/A			$	27,308		$	7,628


	Less Than 12 Consecutive Months				12 Consecutive Months or Longer
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
(In Thousands)
September 30, 2022	$	65,585	$	(10,685)		$	1,409	$	(191)
December 31, 2021	6,827		(251)			1,554		(46)


	Three Months Ended March 31, 2023
(In Thousands)
Beginning balance allowance for credit losses	$	2,540

Additions to allowance for credit losses on securities for which credit losses were not previously recorded	99
Additional increases (or decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period	(71)
Allowance on purchased financial assets with credit deterioration	—
Reduction to allowance for securities sold during the period	—
Reduction to allowance for securities we intend to sell or more likely than not will be required to sell	—
Write-offs charged against allowance	—
Recoveries of amounts previously written off	—
Ending balance of allowance for credit losses	$	2,568


Number of REO assets	Redwood Bridge	Legacy Sequoia	Freddie Mac SLST	BPL Term at CAFL	Total
At March 31, 2023	4	1	25	—	30
At December 31, 2022	2	2	24	—	28