Equity

3 Months Ended

Mar. 31, 2023

Equity [Abstract]

Equity

Equity

The following table provides a summary of changes to Accumulated other comprehensive income (loss) by component for the three months ended March 31, 2023 and 2022.

Table 18.1 – Changes in Accumulated Other Comprehensive Income (Loss) by Component

	Three Months Ended March 31, 2023				Three Months Ended March 31, 2022
(In Thousands)	Available-for-Sale Securities		Interest Rate Agreements Accounted for as Cash Flow Hedges		Available-for-Sale Securities		Interest Rate Agreements Accounted for as Cash Flow Hedges
Balance at beginning of period	$	3,435	$	(72,303)	$	67,503	$	(76,430)
Other comprehensive income (loss) before reclassifications	5,007		—		(17,873)		—
Amounts reclassified from other accumulated comprehensive income (loss)	(193)		1,018		(692)		1,018
Net current-period other comprehensive income (loss)	4,814		1,018		(18,565)		1,018
Balance at End of Period	$	8,249	$	(71,285)	$	48,938	$	(75,412)

The following table provides a summary of reclassifications out of Accumulated other comprehensive income (loss) for the three months ended March 31, 2023 and 2022.

Table 18.2 – Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

		Amount Reclassified From Accumulated Other Comprehensive (Loss)
	Affected Line Item in the	Three Months Ended March 31,
(In Thousands)	Income Statement	2023		2022
Net Realized (Gain) Loss on AFS Securities
Increase (decrease) in allowance for credit losses on AFS securities	Investment fair value changes, net	$	28	$	705
Gain on sale of AFS securities	Realized gains, net	(221)		(1,397)
		$	(193)	$	(692)
Net Realized Loss on Interest Rate   Agreements Designated as Cash Flow Hedges
Amortization of deferred loss	Interest expense	$	1,018	$	1,018
		$	1,018	$	1,018

Issuance of Common Stock

We have an established program to sell common stock from time to time in at-the-market ("ATM") offerings. During the three months ended March 31, 2023, we did not issue any common shares under this program. At March 31, 2023, the share issuance capacity under this program was $175 million.

Issuance of Preferred Stock

In January 2023, Redwood issued 2,800,000 shares of 10.00% Series A Fixed-Rate Reset Cumulative Redeemable Preferred Stock ("Series A Preferred Stock") for gross proceeds of $70 million and net proceeds of approximately $67 million after deducting the underwriting discount and other estimated expenses. The Series A Preferred Stock will pay quarterly cumulative cash dividends beginning April 15, 2023 to January 15, 2028 at a fixed annual rate of 10%, based on the stated liquidation preference of $25.00 per share, in arrears, when authorized by Redwood's Board of Directors and declared by the Company. Starting April 15, 2028, the annual dividend rate will reset to the five-year U.S. Treasury Rate plus a spread of 6.278%. The Series A Preferred Stock ranks senior to Redwood's common stock with respect to rights to the payment of dividends and the distribution of assets upon any liquidation, dissolution or winding up of the Company. During the three months ended March 31, 2023, the Company declared a preferred stock dividend of $0.60417 per share, payable on April 17, 2023 to stockholders of record on March 31, 2023, which is included in Accrued expenses and other liabilities at March 31, 2023.

Direct Stock Purchase and Dividend Reinvestment Plan

During the three months ended March 31, 2023, we did not issue any shares of common stock through our Direct Stock Purchase and Dividend Reinvestment Plan. At March 31, 2023, approximately 6 million shares remained outstanding for future offerings under this plan.

Earnings per Common Share

The following table provides the basic and diluted earnings per common share computations for the three months ended March 31, 2023 and 2022.

Table 18.3 – Basic and Diluted Earnings per Common Share

	Three Months Ended March 31,
(In Thousands, except Share Data)	2023		2022
Basic Earnings per Common Share:
Net income available to common stockholders	$	3,201	$	30,915
Less: Dividends and undistributed earnings allocated to participating securities	(1,404)		(1,209)
Net income allocated to common stockholders	$	1,797	$	29,706
Basic weighted average common shares outstanding	113,678,911		119,884,172
Basic Earnings per Common Share	$	0.02	$	0.25
Diluted Earnings per Common Share:
Net income available to common stockholders	$	3,201	$	30,915
Less: Dividends and undistributed earnings allocated to participating securities	(1,404)		(1,348)
Add back: Interest expense on convertible notes for the period, net of tax	—		4,582
Net income allocated to common stockholders	$	1,797	$	34,149
Weighted average common shares outstanding	113,678,911		119,884,172
Net effect of dilutive equity awards	455,645		290,831
Net effect of assumed convertible notes conversion to common shares	—		20,331,154
Diluted weighted average common shares outstanding	114,134,556		140,506,157
Diluted Earnings per Common Share	$	0.02	$	0.24

We included participating securities, which are certain equity awards that have non-forfeitable dividend participation rights, in the calculations of basic and diluted earnings per common share as we determined that the two-class method was more dilutive than the alternative treasury stock method for these shares. Dividends and undistributed earnings allocated to participating securities under the basic and diluted earnings per share calculations require specific shares to be included that may differ in certain circumstances.

During the three months ended March 31, 2022, certain of our convertible notes were determined to be dilutive and were included in the calculation of diluted EPS under the "if-converted" method. Under this method, the periodic interest expense (net of applicable taxes) for dilutive notes is added back to the numerator and the weighted average number of shares that the notes are entitled to (if converted, regardless of whether they are in or out of the money) are included in the denominator.

For the three months ended March 31, 2023, 46,316,074 of common shares related to the assumed conversion of our convertible notes were antidilutive and were excluded in the calculation of diluted earnings per share. For the three months ended March 31, 2023, the number of outstanding equity awards that were antidilutive totaled 28,474. For the three months ended March 31, 2022, the number of outstanding equity awards that were antidilutive totaled 17,154.

Stock Repurchases

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. This authorization has no expiration date and does not obligate us to acquire any specific number of shares or securities. During the three months ended March 31, 2023, we did not repurchase any shares of our common stock under this program. At 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.