Redwood Trust (NYSE:RWT) management said the company ended 2025 with record production across its operating platforms and a continued shift toward a more capital-efficient, originate-to-distribute model, as fourth-quarter results reflected improved earnings and progress in winding down legacy investments.
Record 2025 volume and increased capital allocation to operating platforms
Chief Executive Officer Chris Abate said the fourth quarter capped “a year of meaningful progress,” highlighted by record mortgage banking activity, improved capital efficiency, and a “more durable earnings profile.” For full-year 2025, Redwood’s Sequoia, CoreVest, and Aspire platforms generated $23 billion of volume, which management described as the highest in company history.
Sequoia posted record locks and margin expansion
President Dash Robinson said Redwood exited 2025 with “record production and strong margins,” led again by the Sequoia platform. Sequoia locked $5.3 billion of loans in the fourth quarter, up 5% from the third quarter and up 130% from the fourth quarter of 2024.
Robinson said bulk activity represented close to 60% of Sequoia’s volume and included a $500 million pool sourced from a regional bank through a new Sequoia loan program that management expects to contribute meaningfully to 2026 volume. Flow volume was just over 40% and included a “notable pickup” in closed-end second and adjustable-rate loan purchases.
Robinson said Sequoia’s originator network now spans more than 210 originators across banks and independent mortgage bankers (IMBs), and management estimated full-year 2025 jumbo market share at approximately 7%. While IMBs represented roughly two-thirds of fourth-quarter production, Redwood expects the mix to evolve in 2026 as additional large bank relationships come online.
Sequoia distributed approximately $3 billion through securitizations and over $1 billion through whole loan sales in the quarter. Robinson said the breadth of distribution options has become a “durable operating advantage,” and noted that fourth-quarter margins rose nearly 40% sequentially from the third quarter, driven in part by distribution.
In the Q&A, management said January 2026 volume totaled $3.6 billion, indicating continued acceleration in run-rate activity relative to the fourth quarter’s pace.
Aspire scaled non-QM production and prepared for securitization
Redwood’s Aspire non-QM platform, which began operations about a year ago, locked a record $1.5 billion of loans in the fourth quarter, up 20% sequentially, Robinson said. Full-year 2025 lock volume exceeded $3 billion, with close to 70% sourced through flow and 65% from sellers that also do business with Sequoia.
On the distribution side, Aspire sold $648 million of loans through bulk loan sales to several counterparties, including what management described as the platform’s first-ever sale to a bank. Robinson said full-year distribution was near $1 billion. Abate also reiterated plans to launch the first securitization under the Aspire shelf “in the coming weeks,” and said Aspire would become Redwood’s third branded securitization issuance platform.
Asked about margins, Robinson said Aspire is targeting gain-on-sale margins “pretty much in line” with Sequoia’s traditional 75 to 100 basis point target, and said the securitization platform could be accretive versus whole-loan execution. Robinson described the non-QM market as competitive but said demand from securitization and whole-loan investors has been strong, with spreads “very close to the tightest” seen in years.
CoreVest mix shift, legacy wind-down progress, and financial results
Robinson said CoreVest’s full-year volumes rose 13% versus 2024 as production was repositioned toward smaller-balance products, including residential transition loans (RTL) and DSCR loans. RTL accounted for nearly 40% of fourth-quarter production, the first time it led quarterly funding mix, while DSCR volumes increased 43% versus the third quarter, including momentum in cross-collateralized portfolio loans.
Management also discussed progress in winding down the legacy investment portfolio. Robinson said the company reduced the legacy bridge portfolio’s principal balance by nearly 40% in the fourth quarter through asset sales, resolutions, and modifications. He added that 90-day-plus delinquencies fell to $82 million at year-end, down more than 65% from earlier in the year. The remaining loan book was described as 31 loans with an unpaid principal balance of $309 million.
Chief Financial Officer Brooke Carillo reported fourth-quarter GAAP net income of $18.3 million, or $0.13 per share, compared with a GAAP loss of $9.5 million, or $0.08 per share, in the third quarter. Book value per common share was $7.36 at December 31, up slightly from $7.35 at September 30. Carillo said the quarter’s economic return on book value was 2.6%, inclusive of $0.04 per share of accretion from share repurchases and a $0.18 per share common dividend.
On a non-GAAP basis, consolidated earnings available for distribution (EAD) increased from $0.01 per share in the third quarter to $0.20 per share in the fourth quarter, exceeding the common dividend, Carillo said. She attributed the improvement to reduced drag from legacy assets (up $0.08 versus the third quarter) and initial redeployment of freed capital into higher-return mortgage banking platforms. Core segment EAD was $0.33 per share, up from $0.20 per share in the third quarter.
Carillo said the Sequoia mortgage banking segment, which includes Aspire activity, generated $43.8 million of segment net income and a 29% return on capital in the fourth quarter. Gain-on-sale margins expanded to 127 basis points, which she said exceeded the company’s historical target range. CoreVest mortgage banking generated $7.5 million of segment net income, with a 30% GAAP return on capital and a 36% non-GAAP EAD return on capital, helped by distribution activity, improved net interest income, and efficiency gains despite modestly lower funded volumes.
Carillo also highlighted operating leverage, saying that in 2025 mortgage banking volumes grew about six times faster than total operating expenses, reducing operating expense to roughly 0.9% of production volume from 1.6% the prior year. She said Redwood’s loans typically remain on the balance sheet for approximately 35 days. Management also said organizational streamlining actions are expected to reduce annualized back-office run-rate costs by about $10 million to $15 million in 2026.
Redwood Investments delivered segment net income of $21 million and a 17% annualized return on capital, Carillo said, citing spread tightening and higher net interest income from assets created from mortgage banking. She noted that nearly $1 billion of financing in that segment—roughly 50% of its financing—was callable within the next year, which management said could provide upside if refinanced at a lower cost of funds.
On the balance sheet, Carillo said recourse leverage increased sequentially, driven primarily by higher warehouse utilization supporting record mortgage banking activity. She said 62% of recourse debt resides in the mortgage banking platforms, and liquidity included $256 million of unrestricted cash at quarter end.
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.
