Redwood Trust Q1 Earnings Call Highlights

Key Points

• Record mortgage banking quarter: Mortgage banking volume topped $8.5 billion with 11 in-house securitizations and earnings available for distribution (EAD) of $0.21 per share, which management said again covered the dividend.
• Castlelake joint venture and third‑party capital: A Castlelake JV adds roughly $8 billion of incremental purchasing power and management expects it could contribute about $0.12–$0.15 per share of annual incremental earnings as it scales, with an Aspire-focused JV also planned.
• GAAP loss but underlying strength and liquidity: Redwood reported a GAAP net loss of $7 million and a 3% sequential book‑value decline, yet core EAD was $0.28 per share (≈19% ROE), Sequoia cut cost per loan ~30%, and liquidity included $202 million cash plus about $3.9 billion of excess warehouse capacity.

Redwood Trust NYSE: RWT reported what management described as a “third consecutive record operating quarter” during its first-quarter 2026 earnings call, driven by record mortgage banking activity and continued efforts to improve capital turnover and operating efficiency. While the company posted a GAAP net loss for the quarter, executives emphasized stronger performance on an earnings available for distribution basis and highlighted new third-party capital partnerships intended to support additional growth.

Record mortgage banking volume and securitization activity

Chief Executive Officer Chris Abate said Redwood’s mortgage banking volume surpassed $8.5 billion for the first time, and that earnings available for distribution (EAD) came in “a bit above last quarter at $0.21 per share, once again covering our dividend.” He framed the quarter as a strong performance despite a mortgage market he characterized as sluggish, citing mortgage applications “close to 40% below pre-pandemic levels” and noting that jumbo mortgage rates rose from February lows “in large part due to the conflict in the Middle East.”

Abate also pointed to the pace of loan turnover and securitization. Redwood completed 11 securitizations in the quarter—an “in-house record,” he said—supported by what he described as a high capital turnover model in which warehouse-held loans “are moving quickly and getting replaced with fresh production.”

Sequoia growth, product expansion, and efficiency gains

President Dashiell Robinson said Sequoia led the quarter with another record, logging $6.5 billion of locks, up 22% from the fourth quarter. He said the results reflected market share gains within Redwood’s originator network, supported by the rollout of additional products beyond its core jumbo offering.

Robinson said Sequoia’s cost per loan improved 30% sequentially to below 20 basis points, which he attributed to automation initiatives. Abate said the company executed more than 2,500 “agentic workflows” in the quarter, including technology platform expansion to support Sequoia and Aspire in a unified system, automated quality control, and reductions in work performed by outside vendors.

Robinson reported Sequoia’s first-quarter gain-on-sale margins were 96 basis points, “at the high end of our historical target range,” despite TBA underperformance into quarter end. He said Redwood executed $5.5 billion of dispositions, including $4.6 billion across nine securitizations. Chief Financial Officer Brooke Carillo later said March TBA widening was “about an eighth or so wider,” and estimated that at least half of the prior quarter’s roughly 25-basis-point TBA-related margin benefit reversed direction in March.

Robinson also highlighted new product momentum. During the quarter, Redwood launched a Medical Professionals loan program and locked “nearly $300 million” of those loans on a flow basis, then later securitized a bulk pool of medical professional loans acquired from a bank, which he called a first-of-its-kind transaction. He said expanded offerings accounted for 14% of total lock volume, with more than 100 sellers actively selling Redwood at least one new product.

Aspire momentum and early-stage securitization progress

Robinson said Aspire lock volume increased to $1.6 billion in the first quarter, with April lock volume “ahead of that pace.” He noted that approximately 70% of Aspire’s quarterly volume came from sellers already active with Sequoia, which he called a competitive advantage.

Robinson estimated Aspire’s first-quarter market share at approximately 4% and said the company expects it “to at least double by the second half of this year.” He said Aspire’s gross margins were 73 basis points, affected by spread widening late in the quarter that “has since largely reversed.” Abate added during Q&A that empirical spreads in the Aspire securitization market were “probably 20 to 30 basis points tighter today” than at March 31, and said the pipeline mark-to-market improvement could be “worth about $0.02 to $0.03 of EAD.”

Robinson called Aspire’s inaugural securitization in March a key milestone, citing broader distribution and improved capital efficiency, including through third-party distribution of risk retention and subordinate tranches. He also said Redwood was in the market with Aspire’s second securitization during the call.

Capital partnerships: Castlelake JV and additional plans

Management repeatedly emphasized third-party capital as a way to expand volume without raising additional equity capital. Abate said Redwood announced “a major Sequoia capital partnership with Castlelake” that adds approximately $8 billion of incremental purchasing power to Sequoia. He described it as part of a broader strategy to pair Redwood’s origination capabilities with third-party capital “at scale,” and said the company is also working on an Aspire-focused joint venture.

Carillo said the Castlelake joint venture “has the potential to contribute approximately $0.12–$0.15 per share of incremental annual earnings as it scales,” with “additional upside through structured economics.” In response to questions about timing, Carillo said investors can think about the earnings contribution “somewhat linearly over the next four quarters as we ramp fully.” She also told analysts the JV is “definitively additive,” and said operational setup—including warehouse lines—would occur in the second quarter.

Asked about an Aspire JV, Robinson said Redwood is expecting a structure that could support “25%–30% of Aspire’s annualized production,” alongside securitizations and whole loan sales. Abate added that Redwood’s experience with prior joint ventures has streamlined its ability to add similar structures.

GAAP loss, book value decline, and liquidity

Carillo reported a GAAP net loss of $7 million, or $0.07 per share, compared with GAAP net income of $18 million, or $0.13 per share, in the fourth quarter. Book value per share was $7.12 at March 31, down 3% sequentially. Carillo said the decline was driven by “non-cash market-related valuation changes and certain non-recurring expense items rather than underlying operating performance,” and noted book value also reflected the $0.18 common dividend.

On a non-GAAP basis, consolidated EAD was $27 million, or $0.21 per share, up from $0.20 per share in the fourth quarter. Core segments EAD was $37 million, or $0.28 per share, which Carillo said represented a 19% return on equity. She said the difference primarily reflected the legacy portfolio, which reduced consolidated EAD by approximately $0.08 per share in the first quarter.

By segment, Carillo said Sequoia generated $38 million of GAAP net income; Aspire generated $2 million of GAAP net income; CoreVest posted a GAAP net loss of $3 million, including about $5 million of one-time restructuring charges; Redwood Investments recorded a GAAP net loss of $8 million; and legacy investments recorded a GAAP net loss of $13 million, improving from a $23 million loss in the fourth quarter.

Carillo said total G&A was $49 million, up from $41 million in Q4, reflecting $8 million of reorganization costs and seasonal expense patterns. Excluding those items, she said run-rate G&A was about $40 million. She also highlighted operating leverage, saying first-quarter volume growth exceeded expense growth by nearly 2x, driving the expense-to-volume ratio down to 66 basis points.

Liquidity, she said, included $202 million of unrestricted cash and approximately $3.9 billion of excess warehouse capacity as of March 31. Recourse debt rose modestly to $4.7 billion due to higher warehouse utilization. Carillo said Redwood’s cost of funds declined about 50 basis points over the past 12 months, warehouse capacity increased 30% to $7.1 billion, and the company renewed $5.7 billion of facilities. She also said there are no corporate unsecured debt maturities over the next five quarters.

During Q&A, Abate said Redwood had seen some reversal of investment portfolio marks after quarter end and estimated book value was “probably up 1.5%” based on portfolio movement, while cautioning it was still early in the quarter. Management also pointed to potential industry tailwinds from the reproposed Basel III Endgame capital rules, with Abate and Robinson suggesting lower bank capital charges on high-quality mortgages could increase both flow and bulk opportunities for Redwood’s platforms.

About Redwood Trust NYSE: RWT

Redwood Trust, Inc NYSE: RWT is a publicly traded real estate investment trust specializing in the U.S. residential mortgage market. Headquartered in Mill Valley, California, the company focuses on investing in a diversified portfolio of residential mortgage assets, including whole loans, agency and non-agency mortgage-backed securities, and structured credit products.

The company's core activities encompass the acquisition, financing, and management of prime residential mortgage whole loans and mortgage-backed securities.

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