Redwood Trust Q3 loss widens

Overview

• U.S. housing finance firm's Q3 book value per share fell 4.9% to $6.56

• Company posted Q3 GAAP net loss of $0.39 per share, with non-GAAP EAD turning negative

• Redwood plans transition to C-corp in 2027, expects initial book value boost

Outlook

• Redwood expects a $0.73–$0.77 per share GAAP book value increase in Q4 2026 from C-corp transition

• Company plans to materially reduce Legacy Investments earnings and financing burden beginning Q1 2027

• Redwood aims for more stable book value growth from Q1 2027 via earnings retention and expense management

Result Drivers

• LEGACY INVESTMENT LOSSES - Larger net loss in Legacy Investments segment driven by over $200 mln of completed or expected loan resolutions, net interest expense, portfolio management costs, and unrealized fair value declines

• MORTGAGE BANKING RETURNS - Mortgage banking platforms generated $27 mln in GAAP net income and a 26% annualized return on capital, but net income fell from prior qtr due to lower production and margins, particularly at Aspire

• INVESTMENT FAIR VALUE DECLINES - Fair value declines across retained investment portfolio, driven by sharp increase in benchmark interest rates and spread-widening, offset positive contributions from RWT Horizons

Company press release:

Key Details

Analyst Coverage

• The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 7 "strong buy" or "buy", 2 "hold" and no "sell" or "strong sell"

• The average consensus recommendation for the specialized reits peer group is "hold."

• Wall Street's median 12-month price target for Redwood Trust, Inc. is $5.61, about 73.1% above its November 2 closing price of $3.24

• The stock recently traded at 3 times the next 12-month earnings vs. a P/E of 5 three months ago

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(This story was created using Reuters automation and AI based on LSEG and company data. It was checked and edited by a Reuters journalist prior to publication.)