Redwood Trust Posts GAAP Loss of $0.39 per Share in Third Quarter

Key Facts

Redwood Trust reported a consolidated net loss under generally accepted accounting principles of $0.39 per basic and diluted common share in the third quarter of 2026. The announcement came after the New York Stock Exchange closed on November 3, the date the company had previously set for releasing its results. On its non-GAAP measure, the company reported a loss of $0.02 per share in distributable earnings, while its core segments generated distributable earnings of $0.18 per share. The gap between the two results reflects the different scope of the measures: Redwood said the difference between consolidated results and distributable earnings was primarily due to fair-value changes in investments related to exits within its legacy investments segment. The results did not establish that the company missed analysts’ estimates, and no trading data dated after the announcement is available to establish that it moved the stock.

Book value under generally accepted accounting principles fell to $6.56 per share on September 30, down 4.9% from $6.90 on June 30. At the same time, the legacy investments segment’s loss widened to $45.0 million in the third quarter, compared with a loss of $23.3 million in the second quarter. The company attributed the segment’s losses to the impact of completed or near-term expected loan resolutions totaling more than $200 million since June 30, as well as net interest expense, portfolio management costs and unrealized fair-value changes in its home equity investments portfolio. The accounting decline puts the impact of legacy assets on consolidated results in context, even as the core segments recorded a profit under the company’s adjusted measure. Redwood recorded a net loss of $3 million in the second quarter, an improvement from a loss of $7 million in the first quarter.

In its mortgage banking business, production totaled $6.6 billion in the third quarter, compared with $8.0 billion in the second quarter. The company had recorded production of $8.0 billion in the second quarter, following $8.5 billion in the first quarter, its second-highest quarterly level on record, according to its previous disclosure. Despite the sequential decline in production, Redwood distributed $8.8 billion in loans through its mortgage banking platforms via securitizations, whole-loan sales and joint ventures. The mortgage banking platforms generated a non-GAAP annualized return on capital of 26% in the third quarter. The company said this was the ninth consecutive quarter in which the return exceeded 20%, presenting a stronger operating picture than the production figure alone.

Redwood ended September with $201 million in cash and cash equivalents, while utilization of its warehouse financing facilities stood at 37% of total capacity. These figures provide an indication of liquidity and financing use at quarter-end, alongside the decline in book value and the increase in legacy investments losses. The board also kept the regular cash dividend at $0.18 per share in the third quarter, unchanged from the second quarter. The company said the dividend was its 109th consecutive regular quarterly distribution. The quarter’s results therefore combine a companywide accounting loss, continuation of the cash dividend and a high return at its core mortgage banking platforms.

Redwood announced plans to convert from a real estate investment trust to a C-corporation in 2027, saying the new structure aligns with its strategy and gives it greater flexibility to retain and reinvest earnings. The company expected the conversion to initially increase book value under generally accepted accounting principles by between $0.73 and $0.77 per share in the fourth quarter of 2026. It said higher retained earnings, lower cash income taxes, continued resolution of legacy assets and expense discipline are expected to support more stable growth starting in the first quarter of 2027. These expectations are tied to a future plan announced by the company and are not results already achieved. Redwood also said it plans to file its quarterly Form 10-Q with the U.S. Securities and Exchange Commission by November 9, 2026.