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Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Taxes Taxes
Components of our net deferred tax assets at December 31, 2025 and 2024 are presented in the following table.
Table 24.1 – Deferred Tax Assets and (Liabilities)
(In Thousands)December 31, 2025December 31, 2024
Deferred Tax Assets
Net operating loss carryforward – state$98,290 $98,290 
Net capital loss carryforward – state2,306 19,459 
Net operating loss carryforward – federal190 13,753 
Net capital loss carryforward – federal323 116 
Allowances and accruals2,523 1,679 
Goodwill and intangible assets24,112 25,298 
Other2,090 1,685 
Total Deferred Tax Assets129,834 160,280 
Deferred Tax Liabilities
Real estate assets(6,308)(4,263)
Mortgage servicing rights(9,717)(9,304)
Interest rate agreements(1,442)(1,693)
Tax effect of unrealized (gains) – OCI— (13)
Total Deferred Tax Liabilities(17,467)(15,273)
Valuation Allowance(100,015)(117,862)
Total Net Deferred Tax Asset, net of Valuation Allowance$12,352 $27,145 
The deferred tax assets and liabilities reported above, with the exception of the state net operating loss ("NOL") and capital loss carryforwards, relate solely to our TRS. For state purposes, the REIT files a unitary combined return with its TRS. Because the REIT may have state taxable income apportioned to it from the activity of its TRS, we report the entire combined unitary state NOL and capital loss carryforwards as deferred tax assets, including the carryforwards allocated to the REIT.
Realization of our deferred tax assets ("DTAs") at December 31, 2025, is dependent on many factors, including generating sufficient taxable income prior to the expiration of NOL carryforwards (where applicable) and generating sufficient capital gains in future periods prior to the expiration of capital loss carryforwards. We determine the extent to which realization of the deferred assets is not assured and establish a valuation allowance accordingly. We closely analyzed our estimate of the realizability of our net deferred tax assets in whole and in part at December 31, 2025 and 2024. The Company evaluates its deferred tax assets each period to determine if a valuation allowance is required based on whether it is "more likely than not" that some portion of the deferred tax assets would not be realized. This evaluation requires significant judgment and changes to our assumptions could result in a material change in the valuation allowance. The ultimate realization of these deferred tax assets is dependent upon the generation of sufficient taxable income during future periods. The Company conducts its evaluation by considering, among other things, all available positive and negative evidence, historical operating results and cumulative earnings analysis, forecasts of future profitability, and the duration of statutory carryforward periods. Based on this analysis, we continue to believe it is more likely than not that we will realize our federal deferred tax assets in future periods as income is earned at our TRS; therefore, there continues to be no material valuation allowance recorded against our net federal DTAs. Consistent with prior periods, we continued to maintain a valuation allowance against the majority of our net state DTAs as we remained uncertain about our ability to generate sufficient income in future periods needed to utilize net state DTAs beyond the reversal of our state DTLs. The net decrease in the total valuation allowance was $18 million in 2025.
Our estimate of net deferred tax assets could change in future periods to the extent that actual or revised estimates of future taxable income during the carryforward periods change from current expectations. We assessed our tax positions for all open tax years (i.e., Federal, 2022 to 2025, and State, 2021 to 2025) and, at December 31, 2025 and 2024, concluded that we had no uncertain tax positions that resulted in material unrecognized tax benefits.
At December 31, 2025, our federal NOL carryforward at the REIT was $68 million, of which $29 million will expire in 2029 and $39 million will carry forward indefinitely. In order to utilize NOLs at the REIT, taxable income must exceed dividend distributions. At December 31, 2025, our taxable REIT subsidiaries had no federal NOLs. Redwood and its taxable REIT subsidiaries accumulated estimated state NOLs of $1.1 billion at December 31, 2025. These NOLs expire beginning in 2031. If certain substantial changes in the Company’s ownership occur, there could be an annual limitation on the amount of the carryforwards that can be utilized.
The following table summarizes the provision for income taxes for the years ended December 31, 2025, 2024, and 2023.
Table 24.2 – Provision for Income Taxes
 Years Ended December 31,
(In Thousands)202520242023
Current Provision for Income Taxes
US Federal$6,434 $1,946 $20 
US state and local3,968 3,911 92 
Total Current Provision for Income Taxes10,402 5,857 112 
Deferred Provision for Income Taxes
US Federal14,793 11,635 1,977 
US state and local(10)1,345 (454)
Total Deferred Provision for Income Taxes14,783 12,980 1,523 
Total Provision for Income Taxes
US Federal21,227 13,581 1,997 
US state and local3,958 5,256 (362)
Total Provision for Income Taxes$25,185 $18,837 $1,635 
The following is a reconciliation of the statutory federal and state tax rates to our effective tax rate at December 31, 2025, 2024, and 2023.
Table 24.3 – Reconciliation of Statutory Tax Rate to Effective Tax Rate
December 31, 2025December 31, 2024December 31, 2023
(In Thousands)AmountRateAmountRateAmountRate
US Federal Statutory Income Tax Rate$(9,417)21.0 %$15,296 21.0 %$(134)21.0 %
Domestic Federal
Nontaxable and nondeductible items(1,824)4.1 %(335)(0.3)%17 (2.7)%
Change in valuation allowance(7)— %108 0.1 %— — %
REIT GAAP income or loss not subject to federal income tax33,090 (73.8)%(1,138)(1.6)%2,082 (325.9)%
Domestic state and local income taxes, net of federal tax effect, as applicable (1)
3,343 (7.5)%4,906 6.7 %(330)51.7 %
Effective Tax Rate$25,185 (56.2)%$18,837 25.9 %$1,635 (255.9)%
(1)State taxes in California made up the majority (greater than 50%) of the tax effect in this category.
The December 31, 2023 effective tax rate is negative and appears outsized due to a relatively small consolidated GAAP loss and a provision for income taxes recorded against TRS GAAP income well in excess of the consolidated loss.
During the year ended December 31, 2025, the Company adopted ASU 2023-09, Income Taxes (Topic 740): "Improvements to Income Tax Disclosures". This guidance requires enhanced disclosures related to income taxes paid by jurisdiction. Accordingly, the Company has included the following table to comply with the new disclosure requirements. The adoption of this ASU did not have a material effect on the Company’s consolidated financial statements.
The following table presents the income taxes paid for the years ended December 31, 2025, 2024, and 2023.
Table 24.4 – Income Taxes Paid by Federal, State and Local Jurisdictions
 Years Ended December 31,
(In Thousands)202520242023
US Federal$4,125 $1,500 $— 
US State and Local
California3,500 3,235 (1,397)
Connecticut**(65)
Florida**73 
Georgia**75 
New York*(336)(63)
Tennessee**150 
Utah**(90)
Other1,173 171 112 
Total US State and Local4,673 3,070 (1,205)
Total Income Taxes Paid, Net of Refunds$8,798 $4,570 $(1,205)
* The amount of income taxes paid during the year does not meet the 5% disaggregation threshold.
We believe that we have met all requirements for qualification as a REIT for federal income tax purposes. Many requirements for qualification as a REIT are complex and require analysis of particular facts and circumstances. Often there is only limited judicial or administrative interpretive guidance and as such there can be no assurance that the Internal Revenue Service or courts would agree with our various tax positions. If we were to fail to meet all the requirements for qualification as a REIT and the requirements for statutory relief, we would be subject to federal corporate income tax on our taxable income and we would not be able to elect to be taxed as a REIT for four years thereafter. Such an outcome could have a material adverse impact on our consolidated financial statements.