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Equity
 3 Months Ended
Mar. 31, 2024
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, 2024 and 2023.
Table 18.1 – Changes in Accumulated Other Comprehensive Income (Loss) by Component
Three Months Ended March 31, 2024Three Months Ended March 31, 2023
(In Thousands)Available-for-Sale SecuritiesInterest Rate Agreements Accounted for as Cash Flow HedgesAvailable-for-Sale SecuritiesInterest Rate Agreements Accounted for as Cash Flow Hedges
Balance at beginning of period$10,219 $(68,176)$3,435 $(72,303)
Other comprehensive income
before reclassifications
8,656 — 5,007 — 
Amounts reclassified from other
accumulated comprehensive income (loss)		(629)1,029 (193)1,018 
Net current-period other comprehensive income (loss)8,027 1,029 4,814 1,018 
Balance at End of Period$18,246 $(67,147)$8,249 $(71,285)
The following table provides a summary of reclassifications out of Accumulated other comprehensive income (loss) for the three months ended March 31, 2024 and 2023.
Table 18.2 – Reclassifications Out of Accumulated Other Comprehensive Income (Loss)
Amount Reclassified From
Accumulated Other Comprehensive (Loss)
Affected Line Item in theThree Months Ended March 31,
(In Thousands)Income Statement20242023
Net Realized Loss on AFS Securities
(Decrease) increase in allowance for credit losses on AFS securitiesInvestment fair value changes, net$(629)$28 
Gain on sale and calls of AFS securitiesRealized gains, net— (221)
$(629)$(193)
Net Realized Loss on Interest Rate
  Agreements Designated as Cash Flow Hedges
Amortization of deferred lossInterest expense$1,029 $1,018 
$1,029 $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, 2024, we did not issue any shares of common stock under this program. At March 31, 2024, the remaining share issuance capacity under this program was approximately $50 million.
Issuance of Preferred Stock
In January 2023, 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 three months ended March 31, 2024, the company declared preferred stock dividends of $0.625 per share. At March 31, 2024, preferred dividends payable totaling $1 million for the first quarter 2024 dividend were included in Accrued expenses and other liabilities and were payable on April 15, 2024 to preferred stockholders of record on April 1, 2024.
Direct Stock Purchase and Dividend Reinvestment Plan
During the three months ended March 31, 2024, we did not issue any shares of common stock through our Direct Stock Purchase and Dividend Reinvestment Plan. At March 31, 2024, approximately six 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, 2024 and 2023.
Table 18.3 – Basic and Diluted Earnings per Common Share
Three Months Ended March 31,
(In Thousands, except Share Data)20242023
Basic Earnings per Common Share:
Net income related to common stockholders$28,512 $3,201 
Less: Dividends and undistributed earnings allocated to participating securities(1,356)(1,404)
Net income related to common stockholders$27,156 $1,797 
Basic weighted average common shares outstanding131,570,347 113,678,911 
Basic Earnings per Common Share$0.21 $0.02 
Diluted Earnings per Common Share:
Net income related to common stockholders$28,512 $3,201 
Less: Dividends and undistributed earnings allocated to participating securities(1,356)(1,404)
Net income related to common stockholders$27,156 $1,797 
Weighted average common shares outstanding131,570,347 113,678,911 
Net effect of dilutive equity awards— 455,645 
Net effect of assumed convertible notes conversion to common shares— — 
Diluted weighted average common shares outstanding131,570,347 114,134,556 
Diluted Earnings per Common Share$0.21 $0.02 
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, 2024 and 2023, none of our convertible notes were determined to be dilutive and were not included in the calculation of diluted EPS under the "if-converted" method. Under this method, for convertible and exchangeable notes due in 2024 and 2025, 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 convertible notes due in 2027, if the potential conversion of the debt is dilutive, then the number of shares needed to settle the conversion premium are added to the shares outstanding used to calculate dilutive EPS.
For the three months ended March 31, 2024, 35,673,554 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, 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, 2024 and 2023, the number of outstanding equity awards that were antidilutive totaled 22,161 and 28,474 common shares, respectively.
Common Stock Warrants
In conjunction with establishing the joint venture with CPP Investments in March 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 our joint venture with CPP Investments 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 ASC 815, Derivatives and Hedging, 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.
For the three months ended March 31, 2024, these Warrants were not dilutive to our calculation of dilutive earnings per common share. The Warrants would have a dilutive effect on earnings per common share to the extent that the Warrants are vested and exercisable, and the market value per share of our common stock exceeds the strike price of the Warrants.
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. In May 2023, our Board of Directors approved an additional authorization for the repurchase of up to $70 million of our preferred stock. These authorizations have no expiration dates and does not obligate us to acquire any specific number of shares or securities. During the three months ended March 31, 2024, we did not repurchase any shares of our common or preferred stock under this program. At March 31, 2024, $101 million and $70 million of the current authorization remained available for the repurchase of shares of our common and preferred stock, respectively, and we also continued to be authorized to repurchase outstanding debt securities.