Equity

12 Months Ended

Dec. 31, 2024

Equity [Abstract]

Equity

Equity

The following table provides a summary of changes to accumulated other comprehensive income by component for the years ended December 31, 2024 and 2023.

Table 19.1 – Changes in Accumulated Other Comprehensive Income (Loss) by Component

	Years Ended December 31,
	2024						2023
(In Thousands)	Available-for-Sale Securities		Interest Rate Agreements Accounted for as Cash Flow Hedges		Total		Available-for-Sale Securities		Interest Rate Agreements Accounted for as Cash Flow Hedges		Total
Balance at beginning of year	$	10,219	$	(68,176)	$	(57,957)	$	3,435	$	(72,303)	$	(68,868)
Other comprehensive income before reclassifications	12,345		—		12,345		6,230		—		6,230
Amounts reclassified from other accumulated comprehensive income (loss)	(1,597)		4,138		2,541		554		4,127		4,681
Net current-period other comprehensive income	10,748		4,138		14,886		6,784		4,127		10,911
Balance at End of Year	$	20,967	$	(64,038)	$	(43,071)	$	10,219	$	(68,176)	$	(57,957)

The following table provides a summary of reclassifications out of accumulated other comprehensive income (loss) for the years ended December 31, 2024 and 2023.

Table 19.2 – Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

		Amount Reclassified From Accumulated Other Comprehensive Loss
	Affected Line Item in the	Year Ended December 31,
(In Thousands)	Income Statement	2024		2023
Net Realized (Gain) Loss on AFS Securities
Decrease in allowance for credit losses on AFS securities	Investment fair value changes, net	$	(1,561)	$	(58)
(Gain) loss on sales of AFS securities	Realized gains, net	(36)		612
		$	(1,597)	$	554
Net Realized Loss on Interest Rate   Agreements Designated as Cash Flow Hedges
Amortization of deferred loss	Interest expense	$	4,138	$	4,127
		$	4,138	$	4,127

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 year ended December 31, 2024, we did not issue any common shares through ATM offerings. The capacity of this program is $175 million, of which approximately $50 million remained outstanding for future offerings at December 31, 2024. During the years ended December 31, 2023 and 2022, we issued 17 million and 5 million of common shares under this program for net proceeds of $124 million and $67 million, respectively.

Issuance of Preferred Stock

Redwood issued 2.8 million 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 pays quarterly cumulative cash dividends through 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 year ended December 31, 2024, the Company declared preferred stock dividends of $2.50 per share. At December 31, 2024, preferred dividends payable totaling $1 million for the fourth quarter 2024 were included in Accrued expenses and other liabilities. These dividends are payable on January 15, 2025 to preferred stockholders of record on January 1, 2025.

Direct Stock Purchase and Dividend Reinvestment Plan

During the years ended December 31, 2024 and 2023, we did not issue shares of common stock through our Direct Stock Purchase and Dividend Reinvestment Plan. At December 31, 2024, approximately 6 million shares remained outstanding for future offerings under this plan.

Common Stock Warrants

In conjunction with establishing the joint venture with an institutional investment manager in the first quarter of 2024, we issued warrants exercisable for 1,974,905 shares of our common stock (the “First Tranche Warrants”); and (ii) warrants exercisable for 4,608,112 shares of our common stock (the “Second Tranche Warrants” and together with the First Tranche Warrants, the “Warrants”). The First Tranche Warrants are exercisable from March 18, 2025 to March 18, 2029. The Second Tranche Warrants will vest upon achievement of specified deployment thresholds related to the joint venture and, if vested, will be exercisable from the date the Second Tranche Warrants vest to March 18, 2029. The initial strike price of the Warrants is $7.76. The Warrants also contain a

mandatory exercise provision, exercisable at Redwood’s option upon satisfaction of specified conditions, including the trading price of Redwood’s common stock exceeding a specified premium to the exercise price. Exercises of any Warrants will be settled on a net basis.

The Warrants met the criteria for equity classification under GAAP and are recorded as a component of Additional paid-in-capital in Equity on our Consolidated Balance Sheets. The Warrants were valued at $0.8 million on the issuance date and are not subject to subsequent remeasurement. See Note 20 for discussion on the impact of the Warrants on earnings per common share.