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Redwood Trust's Earnings Rise in First Quarter 2003; GAAP Earnings of $0.88 Per Share, Up 10%; Core Earnings of $0.88 Per Share, Up 14%

Thursday, May 01, 2003

MILL VALLEY, Calif.--(BUSINESS WIRE)--May 1, 2003--Redwood Trust, Inc. (NYSE:RWT), an investor in real estate loans, today reported GAAP earnings of $0.88 per share for the first quarter of 2003, an increase of 10% from the first quarter 2002 GAAP earnings per share of $0.80.

Core earnings, which exclude realized and unrealized gains and losses in the market value of assets, were $0.88 per share in the first quarter of 2003, a 14% increase from first quarter 2002 core earnings of $0.77 per share and a 10% increase from fourth quarter core earnings of $0.80 per share.

Doug Hansen, Redwood's President, said: "We are pleased to start 2003 with a strong quarter. Our credit results were excellent during the first quarter of 2003. As a result, our real estate loan portfolios generated an increased level of cash flow and profit."

"We started 2003 with excess capital," Mr. Hansen continued. "In the first quarter, we invested in $1.4 billion of new real estate loan assets, and thus made progress towards better capital utilization. Opportunities to acquire new assets continue to be attractive."

First Quarter Review

During the first quarter of 2003, Redwood earned $14.9 million on a reported GAAP basis ($0.88 per share) and $15.0 million on a core basis ($0.88 per share).

We acquired $1.3 billion high-quality residential jumbo whole loans, $37 million residential loan credit-enhancement securities, $2 million commercial real estate loans, and $43 million other residential and commercial real estate loan securities.

The combined residential portfolios, including both the loans we own and the loans we credit-enhance through the acquisition of residential credit-enhancement securities, grew from $65 billion to $68 billion during the first quarter of 2003.

Serious delinquencies in our combined residential portfolios increased from 0.23% to 0.24% of current loan balances. Redwood's delinquency ratios remain well below national averages for conventional and jumbo residential real estate loans. The credit loss rate on loans included in our combined residential portfolios remained under one basis point (0.01%) per year.

Our operating profitability margin -- net interest income as a percentage of equity -- improved from 20.9% in the fourth quarter of 2002 to 23.3% in the first quarter of 2003. Continued excellent credit results drove most of this margin increase; favorable prepayment trends and improved capital utilization also contributed to favorable results.

Tax expense accruals rose to $2 million for the first quarter of 2003. If our taxable REIT income continues to exceed our regular common dividend distributions, our current plan is to defer distribution of a portion of our 2003 taxable REIT income into 2004 (thus incurring excise taxes) and to retain on a permanent basis up to 10% of our taxable REIT income (thus incurring income taxes). We would expect that retained income may increase our earnings and dividend-paying potential over time. In addition to retaining and deferring any excess income that we may earn in 2003, we may distribute a portion of such income as special dividends in 2003 and/or 2004.

Mr. Hansen concluded: "We continue to grow and evolve: enhancing our operating capabilities, building closer relationships with customers, improving our productivity, and strengthening our balance sheet. We have been able to accumulate a large base of attractive real estate assets that we believe should generate healthy cash flows in most economic environments. As a result, we believe that we are in a strong position to achieve our primary operating objective -- paying a steady regular dividend to our shareholders."

For more information about Redwood Trust, Inc., please visit www.redwoodtrust.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Certain matters discussed in this news release may constitute forward-looking statements within the meaning of the federal securities laws that inherently include certain risks and uncertainties. Actual results and the timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including, among other things, changes in interest rates on our mortgage assets and borrowings, changes in prepayment rates on our mortgage assets, general economic conditions, particularly as they affect the price of mortgage assets and the credit status of borrowers, and the level of liquidity in the capital markets, as it affects our ability to finance our mortgage asset portfolio, and other risk factors outlined in the Company's 2002 Annual Report on Form 10-K (available on the Company's Web site or by request to the Contacts listed above). Other factors not presently identified may also cause actual results to differ. No one should assume that results or trends projected in or contemplated by the forward-looking statements included above will prove to be accurate in the future. We will revise our outlook from time to time and frequently will not disclose such revisions publicly.

REDWOOD TRUST, INC.
(All dollars in thousands, except per share data)

                   First     Fourth      Third     Second     First
INCOME            Quarter    Quarter    Quarter    Quarter   Quarter
 STATEMENT         2003       2002       2002       2002       2002
--------------   --------- ---------- ---------- ---------- ----------

Interest
 Income           $61,125$54,155$42,093$36,252$30,716
Interest
 Expense          (36,933)   (33,323)   (24,291)   (18,489)   (15,602)
--------------   --------- ---------- ---------- ---------- ----------
Net Interest
 Income            24,192     20,832     17,802     17,763     15,114

Operating
 Expenses          (6,472)    (6,009)    (4,290)    (4,536)    (3,546)
Taxes              (2,077)      (959)         0          0          0
Preferred
 Dividends           (681)      (681)      (681)      (681)      (681)
Mark-to-Market
 Adjustments          (30)     1,383      1,475      1,256        332
--------------   --------- ---------- ---------- ---------- ----------
GAAP Earnings     $14,932$14,566$14,306$13,802$11,219

Less: Mark-to-
 Market
 Adjustments           30     (1,383)    (1,475)    (1,256)      (332)
--------------   --------- ---------- ---------- ---------- ----------
Core Earnings
 (1)              $14,962$13,183$12,831$12,546$10,887

Average
 Diluted
 Shares        16,983,513 16,529,075 16,240,194 15,747,048 14,077,405
GAAP Earnings
 per Share
 (Diluted)          $0.88$0.88$0.88$0.88$0.80
Core Earnings
 per Share (1)      $0.88$0.80$0.79$0.80$0.77

Common
 Dividends per
 Share
 (Regular)         $0.650     $0.630     $0.630     $0.630     $0.620
Common
 Dividends per
 Share
 (Special)         $0.000     $0.125     $0.125     $0.125     $0.000
--------------   --------- ---------- ---------- ---------- ----------
Total Common
 Dividends per
 Share             $0.650     $0.755     $0.755     $0.755     $0.620

Yield on
 Earning
 Assets              3.31%      3.59%      4.07%      4.71%      4.92%
Cost of Funds        2.10%      2.35%      2.57%      2.69%      2.82%
--------------   --------- ---------- ---------- ---------- ----------
Interest Rate
 Spread              1.21%      1.24%      1.50%      2.02%      2.10%

Net Interest
 Margin              1.28%      1.35%      1.68%      2.25%      2.36%
Net Interest
 Income / Core
 Equity (2)          23.3%      20.9%      18.5%      19.1%      18.1%

Return on
 Equity:  GAAP
 Earnings/
Reported
 Equity              12.9%      13.7%      14.1%      15.4%      14.2%
Core Return on
 Equity:  Core
 Earnings /
 Core Equity         15.4%      14.2%      14.3%      14.5%      14.2%

(1) Core earnings is not a measure of earnings in accordance with
generally accepted accounting principles (GAAP). It is calculated as
GAAP earnings from ongoing operations less mark-to-market adjustments
(which include realized and unrealized gains and losses on certain
assets, hedges, and variable stock options). Management believes that
core earnings provides relevant and useful information regarding our
results of operations in addition to GAAP measures of performance.
This is, in part, because market valuation adjustments on only a
portion of our assets and stock options and none of our liabilities
are recognized through our income statement under GAAP and thus GAAP
valuation adjustments may not be fully indicative of changes in market
values on our balance sheet as a whole or a reliable guide to our
current operating performance. Furthermore, gains or losses realized
upon sales of assets vary based on portfolio management decisions; a
sale of an asset for a gain or a loss may or may not affect our
on-going earnings from operations. Because all companies and analysts
do not calculate non-GAAP measures such as core earnings in the same
fashion, core earnings as calculated by us may not be comparable to
similarly titled measures reported by other companies.

(2) Core equity is calculated as GAAP equity less unrealized gains and
losses on certain assets and hedges. Management believes measurements
based on core equity provide relevant useful information regarding our
results of operations in addition to GAAP measures of performance.
This is, in part, because market valuation adjustments reflected in
our GAAP equity represent unrealized gains and losses on a portion of
our balance sheet only and may not be reflective of the equity we are
have available to invest in our operations. Because all companies and
analysts do not calculate non-GAAP measures in the same fashion, core
equity and ratios using core equity as calculated by us may not be
comparable to similarly titled measures reported by other companies.


REDWOOD TRUST, INC.
(All dollars in thousands, except per share data)

                 31-Mar     31-Dec     30-Sep     30-Jun     31-Mar
BALANCE SHEET     2003       2002       2002       2002       2002
-------------- ---------- ---------- ---------- ---------- -----------
Residential
 Real Estate
 Loans         $7,321,039$6,215,179$4,761,893$2,803,556$1,794,260
Residential
 Loan Credit-
 Enhancement
 Securities       373,162    352,479    324,130    284,759    249,832
Commercial
 Real Estate
 Loans             31,214     29,270     50,664     49,798     49,380
Securities
 Portfolio        366,307    335,697    491,756    512,489    609,432
Cash and Cash
 Equivalents       42,882     39,169     20,606     13,155      9,960
Working
 Capital and
 Other Assets      37,459     35,978     25,253     26,025     26,974
-------------- ---------- ---------- ---------- ---------- -----------
Total Assets   $8,172,063$7,007,772$5,674,302$3,689,782$2,739,838

Short-Term
 Debt            $475,717$99,714$834,081$1,005,003$1,122,513
Long-Term Debt  7,170,691  6,397,020  4,365,281  2,241,600  1,234,459
Working
 Capital and
 Other
 Liabilities       40,253     38,005     29,212     25,249     18,422
Preferred
 Equity            26,517     26,517     26,517     26,517     26,517
Common Equity     458,885    446,516    419,211    391,413    337,927
-------------- ---------- ---------- ---------- ---------- -----------
Total
 Liabilities
 and Equity    $8,172,063$7,007,772$5,674,302$3,689,782$2,739,838

Total Reported
 Equity          $485,402$473,033$445,728$417,930$364,444
Less: Mark-to-
 Market
 Adjustments      (68,077)   (69,146)   (54,148)   (35,826)   (11,015)
               ---------- ---------- ---------- ---------- -----------
Core Equity      $417,325$403,887$391,580$382,104$353,429

Common Shares
 Outstanding
 at Period End 16,604,910 16,277,285 15,886,421 15,624,012 14,624,647
Reported
 Equity (Book
 Value) per
 Common Share      $27.64$27.43$26.39$25.05$23.11
Core Equity
 per Common
 Share             $23.54$23.18$22.98$22.76$22.35

Net Premium /
 (Discount)
 Balance         $(33,319)   $(9,662)     $(446)   $(9,147)   $(9,095)

Average Total
 Assets        $7,553,726$6,158,898$4,234,477$3,158,751$2,564,847
Average
 Earning
 Assets        $7,393,566$6,042,042$4,131,870$3,080,165$2,498,565
Average
 Interest
 Bearing
 Liabilities   $7,036,183$5,680,238$3,781,717$2,752,215$2,211,927
Average Total
 Reported
 Equity
 (Common and
 Preferred)      $489,086$450,464$432,310$385,887$341,766REDWOOD TRUST, INC.
(All dollars in thousands)

LEVERAGE         31-Mar     31-Dec     30-Sep     30-Jun     31-Mar
 RATIOS (1)       2003       2002       2002       2002       2002
-------------- ---------- ---------- ---------- ---------- ----------

Total Report
 Assets        $8,172,063$7,007,772$5,674,302$3,689,782$2,739,838
Less: Non-
 Recourse
 Assets        (7,210,944)(6,435,025)(4,394,493)(2,266,849)(1,252,881)
               ---------- ---------- ---------- ---------- ----------
Recourse
 Assets          $961,119$572,747$1,279,809$1,422,933$1,486,957

Total Reported
 Debt          $7,646,408$6,496,734$5,199,362$3,246,603$2,356,972
Less: Non-
 Recourse Debt (7,170,691)(6,397,020)(4,365,281)(2,241,600)(1,234,459)
               ---------- ---------- ---------- ---------- ----------
Recourse Debt    $475,717$99,714$834,081$1,005,003$1,122,513

Reported Debt
 to Reported
 Equity              15.8       13.7       11.7        7.8        6.5
Reported
 Equity/Total
 Reported
 Assets                 6%         7%         8%        11%        13%

Recourse Debt
 to Reported
 Equity               1.0        0.2        1.9        2.4        3.1
Reported
 Equity/Recourse
 Assets                51%        83%        35%        29%        25%

(1) The majority of our debt is non-recourse debt. Holders of
non-recourse debt can look only to the pledged assets -- and not to
Redwood -- for repayment. Therefore, management believes that another
useful measure of the leverage we employ is to compute leverage ratios
comparing our equity base to our recourse debt (reported debt less
non-recourse debt) and to our recourse assets (our assets for which we
are "at-risk", i.e., excluding those assets pledged to non-recourse
debt).


REDWOOD TRUST, INC.
(All dollars in thousands, except per share data)

                  First     Fourth      Third     Second      First
Residential      Quarter    Quarter    Quarter    Quarter    Quarter
 Real Estate       2003       2002       2002       2002       2002
 Loans         ----------- ---------- ---------- ---------- ----------
--------------
Start of
 Period
 Balances      $6,215,179$4,761,893$2,803,556$1,794,260$1,474,862
Acquisitions    1,338,920  1,616,400  2,075,296  1,146,621    417,276
Sales Proceeds    (73,137)         0     (2,960)   (46,683)         0
Principal
 Paydowns        (152,768)  (155,915)  (109,896)   (89,582)   (95,924)
Net
 Amortization
 Expense           (6,156)    (5,754)    (3,502)    (1,060)    (1,672)
Net Charge
 Offs
 (Recoveries)          31          0        236          0          0
Credit
 Provisions        (1,756)    (1,660)      (894)      (472)      (282)
Mark-to-Market
  - Balance Sheet       0          0          0          0          0
Mark-to-Market
  - Income Statement  726        215         57        472          0
-------------- ----------- ---------- ---------- ---------- ----------
End of Period
 Balances      $7,321,039$6,215,179$4,761,893$2,803,556$1,794,260

Average
 Amortized
 Cost During
 Period        $6,625,540$5,318,910$3,262,462$2,201,384$1,544,924
Yield                2.55%      2.80%      3.00%      3.56%      3.66%

Principal
 Value of
 Loans         $7,297,515$6,190,674$4,736,646$2,795,628$1,790,239
Credit Reserve     (9,996)    (8,271)    (6,611)    (5,953)    (5,481)
Net Premium
 (Discount) to
 be Amortized      33,520     32,776     31,858     13,881      9,502
Market
 Valuation
 Adjustments            0          0          0          0          0
-------------- ----------- ---------- ---------- ---------- ----------
Residential
 Real Estate
 Loans         $7,321,039$6,215,179$4,761,893$2,803,556$1,794,260

Credit
 Reserve,
 Start of
 Period            $8,271$6,611$5,953$5,481$5,199
Net Charge-
 Offs (NCO)           (31)         0       (236)         0          0
Credit
 Provisions         1,756      1,660        894        472        282
-------------- ----------- ---------- ---------- ---------- ----------
Credit
 Reserve, End
 of Period         $9,996$8,271$6,611$5,953$5,481

Delinquencies
 (90 days + FC
 + BK + REO)       $1,159$4,127$1,387$3,257$4,926

Delinquencies
 as % of
 Residential
 Loans               0.02%      0.07%      0.03%      0.12%      0.27%
NCO as % of
 Residential
 Loans
 (annualized)        0.01%      0.00%      0.01%      0.00%      0.00%
Reserve as %
 of Residential
 Loans               0.14%      0.13%      0.14%      0.21%      0.31%
Reserve as %
 of Delinquencies     862%       200%       477%       183%       111%


REDWOOD TRUST, INC.
(All dollars in thousands, except per share data)


                                      First       Fourth      Third
                                     Quarter     Quarter     Quarter
                                       2003        2002        2002
                                  ------------- ----------- ----------
Residential Loan Credit-
 Enhancement Securities
----------------------------
Start of Period Balances             $352,479$324,130$284,759
Acquisitions                           37,077      13,442      28,983
Sales Proceeds                              0           0           0
Principal Paydowns                    (23,212)    (13,573)     (9,437)
Net Amortization Income                 5,545       3,275       2,722
Mark-to-Market  - Balance
 Sheet                                    998      25,205      17,351
Mark-to-Market  - Income
 Statement                                275           0        (248)
----------------------------      ------------- ----------- ----------
End of Period Balances               $373,162$352,479$324,130

Average Amortized Cost
 During Period                       $278,339$271,016$257,844
Yield                                   19.68%      16.65%      16.20%

Principal Value of Redwood's
 Securities                          $614,111$559,186$542,669
Redwood's Credit Reserve             (234,060)   (224,891)   (220,735)
Net Premium (Discount) to be
 Amortized                            (84,648)    (58,578)    (49,360)
----------------------------      ------------- ----------- ----------
Net Investment in Credit-
 Enhancement Securities              $295,403$275,717$272,574
Market Valuation Adjustments           77,759      76,762      51,556
----------------------------      ------------- ----------- ----------
Residential Loan Credit-
 Enhancement Securities              $373,162$352,479$324,130

Securities Senior to
 Redwood's Interests              $60,072,291$58,036,745$67,876,543
Principal Value of Redwood's
 Credit-Enhancement
 Securities                           614,111     559,186     542,669
Securities Junior to
 Redwood's Interests                   61,814      63,179      64,147
----------------------------      ------------- ----------- ----------
Underlying Mortgage Loan
 Balances                         $60,748,216$58,659,110$68,483,359

Redwood's Credit Reserve             $234,060$224,891$220,735
Securities Junior to
 Redwood's Interests                   61,814      63,179      64,147
----------------------------      ------------- ----------- ----------
Redwood's Total Credit
 Protection                          $295,874$288,070$284,882

Delinquencies (90 days + FC
 + BK + REO)                         $161,498$146,226$151,507

Redwood's Net Charge-Offs               $(684)      $(214)       $(47)
Losses to Securities Junior
 to Redwood's Interests                  (456)       (163)       (103)
----------------------------      ------------- ----------- ----------
Total Underlying Loan Credit
 Losses                               $(1,140)      $(377)      $(150)

Delinquencies as % of
 Underlying Loans                        0.27%       0.25%       0.22%
Total Pool Credit
 Losses/Underlying Loans
 (Annualized)                            0.01%       0.01%       0.01%
Total Credit Protection as %
 of Underlying Loans                     0.49%       0.49%       0.42%
Total Credit Protection as %
 of Delinquencies                         183%        197%        188%


                                               Second       First
                                              Quarter      Quarter
                                                2002         2002
                                            ------------ ------------
Residential Loan Credit-Enhancement
 Securities
-------------------------------------------
Start of Period Balances                       $249,832$190,813
Acquisitions                                     25,849       59,157
Sales Proceeds                                     (898)      (5,037)
Principal Paydowns                              (15,801)      (4,270)
Net Amortization Income                           1,767          366
Mark-to-Market  - Balance Sheet                  21,795        8,758
Mark-to-Market  - Income Statement                2,215           45
------------------------------------------- ------------ ------------
End of Period Balances                         $284,759$249,832

Average Amortized Cost During Period           $238,282$201,540
Yield                                             15.12%       13.29%

Principal Value of Redwood's Securities        $492,642$460,035
Redwood's Credit Reserve                       (206,343)    (194,556)
Net Premium (Discount) to be Amortized          (35,745)     (28,058)
------------------------------------------- ------------ ------------
Net Investment in Credit-Enhancement
 Securities                                    $250,554$237,421
Market Valuation Adjustments                     34,205       12,411
------------------------------------------- ------------ ------------
Residential Loan Credit-Enhancement
 Securities                                    $284,759$249,832

Securities Senior to Redwood's Interests    $65,503,415$64,286,646
Principal Value of Redwood's
 Credit-Enhancement Securities                  492,642      460,035
Securities Junior to Redwood's Interests         65,102       79,924
------------------------------------------- ------------ ------------
Underlying Mortgage Loan Balances           $66,061,159$64,826,605

Redwood's Credit Reserve                       $206,343$194,556
Securities Junior to Redwood's Interests         65,102       79,924
------------------------------------------- ------------ ------------
Redwood's Total Credit Protection              $271,445$274,480

Delinquencies (90 days + FC + BK + REO)        $149,960$129,849

Redwood's Net Charge-Offs                           $74$166
Losses to Securities Junior to Redwood's
 Interests                                         (189)        (618)
------------------------------------------- ------------ ------------
Total Underlying Loan Credit Losses               $(115)       $(452)

Delinquencies as % of Underlying Loans             0.23%        0.20%
Total Pool Credit Losses/Underlying Loans
 (Annualized)                                      0.01%        0.01%
Total Credit Protection as % of Underlying
 Loans                                             0.41%        0.42%
Total Credit Protection as % of
 Delinquencies                                      181%         211%


REDWOOD TRUST, INC.
(All dollars in thousands, except per share data)

                                    First       Fourth       Third
COMBINED RESIDENTIAL LOAN          Quarter     Quarter      Quarter
 PORTFOLIOS                          2003        2002         2002
---------------------------- ---------------- ----------- ------------

Residential Real Estate
 Loans Owned                       $7,321,039$6,215,179$4,761,893
Residential Loans Credit-
 Enhanced                          60,748,216  58,659,110  68,483,359
---------------------------- ---------------- ----------- ------------
Total Residential Loans           $68,069,255$64,874,289$73,245,252


Credit Reserve on
 Residential Real Estate
 Loans Owned                           $9,996$8,271$6,611
Internal Credit Reserve on
 Loans Credit-Enhanced                234,060     224,891     220,735
---------------------------- ---------------- ----------- ------------
Redwood's Total Residential
 Credit Reserve                      $244,056$233,162$227,346
External Credit Enhancement
 on Loans Credit-Enhanced              61,814      63,179      64,147
---------------------------- ---------------- ----------- ------------
Redwood's Total Credit
 Protection                          $305,870$296,341$291,493
Total Credit Protection as %
 of Total Residential Loans              0.45%       0.46%       0.40%


Residential Real Estate
 Loans Owned Delinquencies             $1,159$4,127$1,387
Residential Loans Credit-
 Enhanced Delinquencies               161,498     146,226     151,507
---------------------------- ---------------- ----------- ------------
Total Residential Loan
 Delinquencies                       $162,657$150,353$152,894

Delinquencies as % of Total
 Residential Loans                       0.24%       0.23%       0.21%
Total Credit Protection as %
 of Delinquencies                         188%        197%        191%

Net Charge-Offs on
 Residential Real Estate
 Loans Owned                             $(31)         $0       $(236)
Net Charge-Offs on
 Residential Loan Credit-
 Enhanced                                (684)       (214)        (47)
---------------------------- ---------------- ----------- ------------
Redwood's Shares of Net
 Credit (Losses) Recoveries             $(715)      $(214)      $(283)
Credit Losses to External
 Credit Enhancement                      (456)       (163)       (103)
---------------------------- ---------------- ----------- ------------
Total Credit Losses                   $(1,171)      $(377)      $(386)
Total Credit Losses as % of
 Total Residential Loans                 0.01%       0.01%       0.01%


                                                Second       First
                                                Quarter     Quarter
COMBINED RESIDENTIAL LOAN PORTFOLIOS             2002        2002
--------------------------------------------- ----------- ------------

Residential Real Estate Loans Owned            $2,803,556$1,794,260
Residential Loans Credit-Enhanced              66,061,159  64,826,605
--------------------------------------------- ----------- ------------
Total Residential Loans                       $68,864,715$66,620,865


Credit Reserve on Residential Real Estate
 Loans Owned                                       $5,953$5,481
Internal Credit Reserve on Loans Credit-
 Enhanced                                         206,343     194,556
--------------------------------------------- ----------- ------------
Redwood's Total Residential Credit Reserve       $212,296$200,037
External Credit Enhancement on Loans Credit-
 Enhanced                                          65,102      79,924
--------------------------------------------- ----------- ------------
Redwood's Total Credit Protection                $277,398$279,961
Total Credit Protection as % of Total
 Residential Loans                                   0.40%       0.42%

Residential Real Estate Loans Owned
 Delinquencies                                     $3,257$4,926
Residential Loans Credit-Enhanced
 Delinquencies                                    149,960     129,849
--------------------------------------------- ----------- ------------
Total Residential Loan Delinquencies             $153,217$134,775

Delinquencies as % of Total Residential Loans        0.22%       0.20%
Total Credit Protection as % of Delinquencies         181%        208%


Net Charge-Offs on Residential Real Estate
 Loans Owned                                           $0$0
Net Charge-Offs on Residential Loan Credit-
 Enhanced                                              74         166
--------------------------------------------- ----------- ------------
Redwood's Shares of Net Credit (Losses)
 Recoveries                                           $74$166
Credit Losses to External Credit Enhancement         (189)       (618)
--------------------------------------------- ----------- ------------
Total Credit Losses                                 $(115)      $(452)
Total Credit Losses as % of Total Residential
 Loans                                               0.01%       0.01%


REDWOOD TRUST, INC.
(All dollars in thousands, except per share data)

                           First   Fourth    Third   Second    First
Commercial Real Estate    Quarter  Quarter  Quarter  Quarter  Quarter
 Loans                     2003     2002     2002     2002     2002
------------------------ -------- -------- -------- -------- ---------
Start of Period Balances  $29,270$50,664$49,798$49,380$51,084
Acquisitions                2,011        0      919      470      140
Sales Proceeds                  0        0        0        0        0
Principal Paydowns            (68) (21,068)     (54)     (53)  (1,873)
Net Amortization Income         0       24        0        0       28
Mark-to-Market
 - Balance Sheet                0        0        0        0        0
Mark-to-Market
 - Income Statement             1     (350)       1        1        1
------------------------ -------- -------- -------- -------- ---------
End of Period Balances    $31,214$29,270$50,664$49,798$49,380

Average Amortized Cost
 During Period            $30,889$47,935$50,102$49,369$50,170
Yield                       10.57%   10.15%    9.99%   10.22%   10.12%

Principal Value of Loans  $32,223$30,250$51,318$50,436$50,057
Net Premium (Discount)
 to be Amortized           (1,009)    (980)    (654)    (638)    (677)
Market Valuation
 Adjustments                    0        0        0        0        0
------------------------ -------- -------- -------- -------- ---------
Commercial Mortgage
 Loans                    $31,214$29,270$50,664$49,798$49,380

Commercial Mortgage
 Delinquencies               $650$650$0$0$0
Commercial Mortgage Net
 Charge-Offs                   $0$0$0$0$0
Commercial Mortgage
 Credit Provisions             $0$0$0$0$0
Commercial Mortgage
 Credit Reserves               $0$0$0$0$0

                             First   Fourth    Third   Second    First
                           Quarter  Quarter  Quarter  Quarter  Quarter
Securities Portfolio         2003     2002     2002     2002     2002
------------------------ -------- -------- -------- -------- ---------
Start of Period Balances $335,697$491,756$512,489$609,432$683,482
Acquisitions               42,955  196,279    6,811   23,026   76,701
Sales Proceeds                  0 (315,308)       0  (56,802) (89,395)
Principal Paydowns        (11,329) (31,009) (31,830) (65,618) (60,040)
Net Amortization Income
 (Expense)                      3      (24)  (1,051)  (1,249)  (1,701)
Mark-to-Market  -
 Balance Sheet               (944)  (7,128)     970    3,017     (444)
Mark-to-Market  - Income
 Statement                    (75)   1,131    4,367      683      829
------------------------ -------- -------- -------- -------- ---------
End of Period Balances   $366,307$335,697$491,756$512,489$609,432

Average Amortized Cost
 During Period           $360,084$320,154$493,997$529,843$676,692
Yield                        4.66%    4.93%    4.63%    4.70%    5.03%

Principal Value of
 Securities              $370,187$335,402$477,950$502,684$601,926
Net Premium (Discount)
 to be Amortized            1,597    4,828   11,214    8,183    8,901
Market Valuation
 Adjustments               (5,477)  (4,533)   2,592    1,622   (1,395)
------------------------ -------- -------- -------- -------- ---------
Securities Portfolio     $366,307$335,697$491,756$512,489$609,432
    CONTACT: Redwood Trust, Inc.
             Doug Hansen/George Bull, 415/389-7373

    SOURCE: Redwood Trust, Inc.

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