MILL VALLEY, Calif.--(BUSINESS WIRE)--May 5, 2004--Redwood Trust,
Inc. (NYSE:RWT), a financial institution that invests in real estate
loans, today reported GAAP earnings of $51 million, or $2.49 per
share, for the first quarter of 2004.
Core earnings for the first quarter of 2004 were $1.71 per share,
a 94% increase over first quarter 2003 core earnings of $0.88 per
share. Core earnings exclude gains and losses from asset sales and
changes in market values that are included in reported GAAP earnings.
Redwood's estimated taxable income was $2.48 per share for the
first quarter of 2004.
"Earning $1.71 per share on a core basis in a single quarter sets
a new record, and is a great accomplishment for Redwood and its
staff," said Doug Hansen, Redwood's President. "We have been building
and structuring a portfolio of high-quality real estate loan
investments for many years. As it seasons, this portfolio has
generated attractive levels of earnings and cash flow for our
investors."
"We expect our current portfolio will continue to perform well.
Furthermore, we believe the new investments that we acquired and
structured during this quarter will serve the shareholders in an
attractive manner in the years to come. We continue to have great
confidence in Redwood's business plan, and in Redwood's ability to
grow and thrive in the future."
First Quarter Review
Redwood's acquisitions for the first quarter of 2004 included $2.3
billion high quality adjustable-rate residential real estate loans for
its "Sequoia" securitization program, $38 million residential loan
credit-enhancement securities, and $86 million other residential and
commercial real estate loan securities. The total balance of
residential loans that Redwood either owns or credit-enhances grew
through its ownership of credit-enhancement securities from $84
billion to $89 billion during the quarter.
For funding purposes in the first quarter, Sequoia securitization
trusts sold $2.3 billion of asset-backed securities collateralized by
newly acquired residential real estate loans. Asset-backed securities
issued by Sequoia appear as "long-term debt" on Redwood's consolidated
balance sheet.
"Competition to acquire real estate loans and securities continues
to be strong, and prices for most of the assets we acquire continue to
be higher than in previous years," Hansen noted. "On the other hand,
the strong market demand for income-producing assets means that sales
of asset-backed securities by Sequoia to finance new residential loan
acquisitions have gone very well, thus securing low cost funding at
tighter spreads to LIBOR for these loans. Better funding levels have
offset the effect of higher acquisition prices. The net result is that
we continue to structure new investments for our portfolio that we
believe are likely to produce attractive net interest income and cash
flows for our shareholders over time."
"Many investors are focused on the prospects for higher interest
rates," said Hansen. "Redwood shareholders should know that we
structure our balance sheet in a manner that eliminates many potential
interest rate risks. For instance, over 94% of our consolidated assets
and liabilities are adjustable-rate -- with interest rate
characteristics tied to the one, three, and six month LIBOR rates --
and thus have interest rate characteristics that are closely matched.
The interest rate characteristics of our other assets and liabilities
are also well matched. We do not 'lend long and borrow short' or
participate in the 'carry trade' (funding fixed rate assets with
floating rate debt)."
"Rising interest rates are usually a sign of a strong economy, and
a strong economy is likely to benefit the credit performance of our
loan portfolios," added Hansen.
Redwood continues to use recourse debt solely to fund the
acquisition and accumulation of loans and securities on a short-term
basis prior to transferring these assets to securitization trusts for
long-term funding via issuance of asset-backed securities. Redwood's
recourse debt totaled $278 million at March 31, 2004.
Of Redwood's $51 million of GAAP income for the first quarter, $12
million ($0.58 per share) was generated as a result of calls of
seasoned residential credit-enhancement securities. "Calls, when they
do occur, generate attractive long-term capital gain income for
Redwood and for our shareholders," said Hansen. "However, in most
cases it is our highest yielding assets that get called. As a result
of calls of high-yielding assets during 2003 and 2004, the average
asset yield (yield after anticipated credit losses, before overhead
and other costs, excluding call income) on our remaining residential
credit-enhancement portfolio declined to 21.6% for the first quarter
of 2004 from 28.1% in the third quarter of 2003. We expect that more
of our higher-yielding securities will be called, increasing capital
gain income in the short-term but further reducing our average
on-going asset yield from this portfolio. Over the long-term, we
expect this portfolio will generate an asset yield of 14% to 20% in
most years when residential credit performance is at least
acceptable."
Redwood recently sold some seasoned residential credit-enhancement
securities that had appreciated significantly but had little remaining
appreciation potential. These sales generated an additional $6 million
($0.31 per share) of GAAP income in the first quarter of 2004.
Hansen noted, "We sold appreciated assets as part of our on-going
capital recycling and capital efficiency program. Over time, we have
significantly improved our utilization of equity capital while also
strengthening our balance sheet and reducing recourse debt. This has
been a major contributing factor to our increases in core return on
equity, core earnings per share, and dividends per share. The capital
efficiencies we have gained should continue to benefit our
shareholders in the future. Most of our improvements in capital
utilization have stemmed from innovations in the use of
securitizations (issuance of asset-backed securities). These
innovations have allowed us to fund a greater portion of our balance
sheet through securitization, and also to complete re-securitizations
that recycle capital from appreciated assets to support our continued
growth. As an alternative to re-securitization, occasional sales of
appreciated assets may also help to improve the efficiency and
competitiveness of our balance sheet."
Market value gains and losses, such as the $12 million of gains
from calls and $6 million of gains from sales discussed above, were
not included in Redwood's $1.71 per share core earnings results for
the first quarter.
Prepayment trends for Redwood's loans continue to be favorable.
Redwood's results have benefited both from slow prepayment rates on
our adjustable-rate residential loan portfolio and also from rapid
prepayment rates on the fixed-rate and hybrid loans underlying our
residential credit-enhancement securities.
Credit results for the first quarter of 2004 were excellent. There
were no credit losses on Redwood's $18 billion residential loan
portfolio during the first quarter. Credit losses on the $71 billion
loans underlying Redwood's residential credit-enhancement securities
portfolio were $103,000 for the quarter. The annualized credit loss
rate remained under one basis point (less than 0.01%) of the combined
balances of the residential loans we either own or credit-enhance.
Serious delinquencies for the $89 billion of residential loans
Redwood either owns or credit-enhances increased from $138 million to
$146 million, but did not change as a percentage (0.16%) of combined
current loan balances during the quarter.
"We continue to maintain disciplined underwriting standards
designed to make sure that the loans we acquire or credit-enhance have
been made to high-quality borrowers," explained Hansen. "In addition,
we have benefited from recent increases in housing prices: higher
housing values reduce credit risk for our existing portfolios."
Outlook
Hansen concluded, "The primary long-term factor driving our
earnings and dividends is our credit performance. Recent economic
reports show a stronger economy. A stronger economy, if it persists,
is likely to be beneficial for the credit results of the loans we own
or credit-enhance."
"The gradual run-off of our highest yielding assets through calls
and prepayments, plus a potential return to more normal market
conditions, will likely put some downward pressure on our core
earnings per share results over time, relative to the extraordinary
results we have earned in the last few quarters. We have benefited
from very favorable economic, market, prepayment, and competitive
conditions over the last few years. With the help of these favorable
conditions, we are currently earning a 34.8% GAAP return on equity and
a 27.5% core return on equity (annualized core earnings divided by
core equity; for core ROE, mark-to-market adjustments are eliminated
from both earnings and equity). We do not believe that these levels of
return on equity are likely to be sustainable in our business over
time."
"We do, however, believe we will continue to generate an
attractive return on equity -- and attractive earnings and dividends
per share -- for our shareholders as a result of our focus, scale,
efficiencies, strong balance sheet, relationships, expertise, market
presence, and innovative culture. In general, based on our experience
and our belief in the competitiveness of Redwood's balance sheet and
business plan, we expect our core ROE is likely to be in the 11% to
18% range in most years when our residential credit performance is at
least acceptable. If we make good management and investment decisions,
and our high-quality borrowers continue to perform well, we may be
able exceed these ROE levels in some years."
"Our primary goal continues to be to maintain core and taxable
earnings at a level sufficient to fund our regular dividend rate of
$0.67 per share per quarter on a sustainable basis. We are confident
that we will continue to meet this goal."
In addition to this press release, Redwood released today its
first quarter 10-Q and also a supplemental financial information
package. For these documents and 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 real estate loan
assets and borrowings, changes in prepayment rates on our real estate
loan assets, general economic conditions, particularly as they affect
the price of real estate loan and the credit status of borrowers, and
the level of liquidity in the capital markets, as it affects our
ability to finance our real estate loan portfolio, and other risk
factors outlined in the Company's 2003 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 millions, except per share data)
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
INCOME STATEMENT 2004 2003 2003 2003 2003
------------------------------ ------- ------- ------- ------- -------
Interest Income $124.8 $108.3 $90.2 $71.4 $61.1
Interest Expense (79.5) (68.6) (55.6) (41.8) (36.9)
------------------------------ ------- ------- ------- ------- -------
Net Interest Income $45.3 $39.7 34.6 29.6 24.2
Operating Expenses (8.6) (8.0) (8.5) (7.3) (7.4)
Net Recognized Gains (Losses)
and Valuation Adjustments 17.4 42.1 0.6 3.0 0.9
Variable Stock Option Expense (1.4) (2.7) (0.5) (1.5) (0.9)
Provision For Income Taxes (1.9) (1.2) (1.5) (1.6) (1.2)
Preferred Dividends 0.0 0.0 0.0 0.0 (0.7)
------------------------------ ------- ------- ------- ------- -------
GAAP Earnings $50.8 $69.9 $24.7 $22.2 $14.9
Less: Net Recognized Gains
(Losses) and Valuation
Adjustments (17.4) (42.1) (0.6) (3.0) (0.9)
Less: Variable Stock Option
Expense 1.4 2.7 0.5 1.5 0.9
------- ------- ------- ------- -------
Core Earnings (1) $34.8 $30.5 $24.6 $20.7 $14.9
Average Diluted Shares
(thousands) 20,399 19,801 19,018 18,433 16,984
GAAP Earnings per Share
(Diluted) $2.49 $3.53 $1.30 $1.21 $0.88
Core Earnings per Share (1) $1.71 $1.54 $1.29 $1.13 $0.88
Estimated Taxable Income Per
Share $2.48 $3.88 $1.97 $1.93 $1.58
Dividends per Common Share
(Regular) $0.670 $0.650 $0.650 $0.650 $0.650
Dividends per Common Share
(Special) $0.500 $4.750 $0.000 $0.000 $0.000
------------------------------ ------- ------- ------- ------- -------
Total Dividends per Common
Share $1.170 $5.400 $0.650 $0.650 $0.650
Yield on Earning Assets 2.75% 2.79% 3.03% 3.35% 3.31%
Cost of Funds 1.79% 1.81% 1.92% 2.05% 2.10%
Net Interest Income / Average
GAAP Equity 31.0% 28.4% 25.1% 23.4% 19.8%
Net Interest Income / Average
Core Equity (2) 35.7% 33.8% 30.2% 27.6% 23.3%
GAAP ROE: GAAP Earnings/ Avg
GAAP Common Equity 34.8% 50.0% 17.8% 17.6% 12.9%
Core ROE: Core Earnings / Avg
Common Core Equity 27.5% 26.0% 21.4% 19.4% 15.4%
(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 net recognized gains
(losses) and valuation adjustments (which include gains from sales
and valuation adjustments on certain assets, hedges, and variable
stock options). Management believes that core earnings provides
relevant and useful information regarding its results from
operations in addition to GAAP measures of performance. This is,
in part, because market valuation adjustments on only a portion of
the company's assets and stock options and none of its liabilities
are recognized through the income statement under GAAP and thus
GAAP valuation adjustments may not be fully indicative of changes
in market values on the balance sheet as a whole or a reliable
guide to 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 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
the company 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 its results of operations in addition to
GAAP measures of performance. This is, in part, because market
valuation adjustments reflected in GAAP equity represent
unrealized gains and losses on a portion of the balance sheet only
and may not be reflective of the equity available to invest in
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 the company may not be
comparable to similarly titled measures reported by other
companies.
REDWOOD TRUST, INC.
(All dollars in millions, except per share data)
31-Mar 31-Dec 30-Sep 30-Jun 31-Mar
BALANCE SHEET 2004 2003 2003 2003 2003
-------------------------- -------- -------- -------- -------- -------
Residential Real Estate
Loans $18,086 $16,239 $13,813 $9,247 $7,321
Residential Loan Credit-
Enhancement Securities 375 379 373 393 373
Commercial Real Estate
Loans 22 22 24 35 31
Securities Portfolio 937 845 605 596 366
Cash and Cash Equivalents 58 59 32 36 43
Working Capital and Other
Assets 66 83 54 49 38
-------------------------- -------- -------- -------- -------- -------
Total Assets $19,544 $17,627 $14,901 $10,356 $8,172
Short-Term Debt $278 $236 $500 $218 $476
Long-Term Debt 18,583 16,783 13,782 9,543 7,170
Working Capital and Other
Liabilities 75 55 53 48 40
Preferred Equity 0 0 0 0 27
Common Equity 608 553 566 547 459
-------------------------- -------- -------- -------- -------- -------
Total Liabilities and
Equity $19,544 $17,627 $14,901 $10,356 $8,172
Total GAAP Equity $608 $553 $566 $547 $486
Less: Mark-to-Market
Adjustments (79) (82) (91) (108) (69)
-------------------------- -------- -------- -------- -------- -------
Core Equity $529 $471 $475 $439 $417
Common Shares Outstanding
at Period End (thousands) 19,796 19,063 18,468 17,821 16,605
GAAP Equity (GAAP Book
Value) per Common Share $30.72 $29.03 $30.65 $30.70 $27.64
Core Equity (Core Book
Value) per Common Share $26.75 $24.72 $25.75 $24.62 $23.54
Average Total Assets $18,386 $15,758 $12,132 $8,687 $7,554
Average Earning Assets $18,158 $15,504 $11,911 $8,524 $7,394
Average Interest Bearing
Liabilities $17,747 $15,120 $11,542 $8,160 $7,036
Average Total GAAP Equity
(Common and Preferred) $584 $559 $553 $505 $489
REDWOOD TRUST, INC.
(All dollars in millions)
31-Mar 31-Dec 30-Sep 30-Jun 31-Mar
LEVERAGE RATIOS (1) 2004 2003 2003 2003 2003
-------------------------- -------- -------- -------- -------- -------
Total Reported Assets $19,544 $17,627 $14,901 $10,356 $8,172
Less: Non-Recourse Assets (18,658) (16,838) (13,835) (9,591) (7,210)
-------------------------- -------- -------- -------- -------- -------
Recourse Assets $886 $789 $1,066 $765 $962
Total Reported Debt $18,861 $17,019 $14,282 $9,761 $7,646
Less: Non-Recourse Debt (18,583) (16,783) (13,782) (9,543) (7,170)
-------------------------- -------- -------- -------- -------- -------
Recourse Debt $278 $236 $500 $218 $476
Reported Debt to GAAP
Equity 31x 31x 25x 18x 16x
GAAP Equity / Total
Reported Assets 3% 3% 4% 5% 6%
Recourse Debt to GAAP
Equity 0.5x 0.4x 0.9x 0.4x 1.0x
GAAP Equity / Recourse
Assets 69% 70% 53% 72% 51%
(1) The "long-term debt" reported on our GAAP balance sheet consists
of asset-backed securities issued by bankruptcy-remote
securitization trusts. The owners of these securities have no
recourse to Redwood and must look only to the assets of the
securitization trust for repayment. Both the assets and
liabilities of these trusts, however, are consolidated on
Redwood's balance sheet for GAAP reporting purposes. Management
believes that, in addition to using GAAP measures, an analyst
could achieve insight into Redwood's business and balance sheet by
distinguishing between recourse debt that must be repaid by
Redwood and non-recourse debt that is consolidated onto Redwood's
balance sheet from other entities. This table shows leverage
ratios calculated for Redwood using both GAAP measures and also
measures that incorporate recourse debt only.
REDWOOD TRUST, INC.
(All dollars in millions, except per share data)
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
2004 2003 2003 2003 2003
--------- --------- --------- ------- -------
Residential Real Estate
Loans
------------------------
Start of Period Balances $16,239 $13,813 $9,247 $7,321 $6,215
Acquisitions 2,322 2,897 4,997 2,168 1,339
Sales Proceeds 0 (1) 0 0 (73)
Principal Paydowns (460) (458) (420) (235) (153)
Net Amortization Expense (12) (10) (9) (5) (6)
Net Charge Offs
(Recoveries) 0 0 0 0 0
Credit Provisions (3) (2) (2) (2) (2)
Net Recognized Gains
(Losses) and Valuation
Adjustments 0 0 0 0 1
------------------------ --------- --------- --------- ------- -------
End of Period Balances $18,086 $16,239 $13,813 $9,247 $7,321
Average Amortized Cost
During Period, Net of
Credit Reserves $16,916 $14,381 $10,958 $7,670 $6,626
Interest Income $99 $83 $64 $47 $42
Yield 2.34% 2.30% 2.32% 2.47% 2.55%
Principal Value of Loans $17,951 $16,111 $13,704 $9,206 $7,297
Credit Reserve (19) (16) (14) (12) (10)
Net Premium to be
Amortized 154 144 123 53 34
------------------------ --------- --------- --------- ------- -------
Residential Real Estate
Loans $18,086 $16,239 $13,813 $9,247 $7,321
Credit Reserve, Start of
Period $16 $14 $12 $10 $8
Net Charge-Offs 0 0 0 0 0
Credit Provisions 3 2 2 2 2
------------------------ --------- --------- --------- ------- -------
Credit Reserve, End of
Period $19 $16 $14 $12 $10
Delinquencies (90 days +
FC + BK + REO) $3 $5 $2 $4 $1
Delinquencies as % of
Residential Loans 0.02% 0.03% 0.01% 0.04% 0.02%
Net charge-offs as % of
Residential Loans
(Annualized) 0.00% 0.01% 0.00% 0.00% 0.01%
Reserve as % of
Residential Loans 0.10% 0.10% 0.10% 0.13% 0.14%
Reserve as % of
Delinquencies 548% 301% 852% 312% 862%
REDWOOD TRUST, INC.
(All dollars in millions, except per share data)
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
2004 2003 2003 2003 2003
-------- -------- -------- -------- --------
Residential Loan Credit-
Enhancement Securities
-------------------------
Start of Period Balances $379 $373 $393 $373 $352
Acquisitions 38 78 23 11 37
Sales Proceeds (22) 0 0 (1) 0
Principal Paydowns (35) (117) (37) (39) (23)
Net Amortization Income 9 10 11 10 6
Net Unrealized Gains
(Losses) (12) (12) (21) 36 1
Net Recognized Gains
(Losses) and Valuation
Adjustments 18 47 4 3 0
------------------------- -------- -------- -------- -------- --------
End of Period Balances $375 $379 $373 $393 $373
Average Amortized Cost
During Period, Net of
Credit Reserves $287 $273 $271 $279 $278
Interest Income $16 $17 $19 $18 $14
Yield 21.64% 25.49% 28.08% 25.77% 19.68%
Principal Value of
Redwood's Credit-
Enhancement Securities $634 $624 $604 $598 $614
Internally Designated
Credit Reserve on Loans
Credit-Enhanced (217) (201) (178) (205) (234)
Net Discount to be
Amortized (111) (123) (145) (113) (85)
------------------------- -------- -------- -------- -------- --------
Net Investment in Credit-
Enhancement Securities $306 $300 $281 $280 $295
Net Unrealized Gains
(Losses) 69 79 92 113 78
------------------------- -------- -------- -------- -------- --------
Residential Loan Credit-
Enhancement Securities $375 $379 $373 $393 $373
Securities Senior to
Redwood's Interests $70,684 $67,463 $43,024 $51,168 $60,072
Principal Value of
Redwood's Credit-
Enhancement Securities 634 624 604 598 614
Securities Junior to
Redwood's Interests 44 46 52 58 62
------------------------- -------- -------- -------- -------- --------
Underlying Residential
Real Estate Loan
Balances $71,362 $68,133 $43,680 $51,824 $60,748
Internally Designated
Credit Reserve on Loans
Credit-Enhanced $217 $201 $178 $205 $234
External Credit
Enhancement on Loans
Credit-Enhanced 44 46 52 58 62
------------------------- -------- -------- -------- -------- --------
Total Credit Protection(1) $261 $247 $230 $263 $296
Delinquencies (90 days +
FC + BK + REO) $143 $133 $178 $160 $162
Redwood's Net Charge-Offs $0 $(1) $(1) $0 $(1)
Losses to Securities
Junior to Redwood's
Interests 0 (1) 0 0 0
------------------------- -------- -------- -------- -------- --------
Total Underlying Loan
Credit Losses $0 $(2) $(1) $0 $(1)
Delinquencies as % of
Underlying Loans 0.20% 0.19% 0.41% 0.31% 0.27%
Total Pool Credit
Losses/Underlying Loans
(Annualized) 0.01% 0.01% 0.01% 0.01% 0.01%
Total Credit Protection
as % of Underlying Loans 0.37% 0.36% 0.53% 0.51% 0.49%
Total Credit Protection
as % of Delinquencies 183% 187% 129% 164% 183%
(1) Total credit protection represents the aggregate of the internally
designated credit reserve and the amount of any junior securities
with respect to each credit-enhanced security. The credit
protection amount for any credit-enhanced security is only
available to absorb losses on the pool of loans related to that
security. To the extent such losses exceed the credit protection
amount for that security, a charge-off of the net investment in
that security would result.
REDWOOD TRUST, INC.
(All dollars in millions, except per share data)
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
COMBINED RESIDENTIAL LOAN
PORTFOLIOS 2004 2003 2003 2003 2003
------------------------- -------- -------- -------- -------- --------
(Owned and Credit-Enhanced)
Residential Real Estate
Loans Owned $18,086 $16,239 $13,813 $9,247 $7,321
Residential Loans Credit-
Enhanced 71,362 68,133 43,680 51,824 60,748
------------------------- -------- -------- -------- -------- --------
Total Residential Loans
Owned and Credit
Enhanced $89,448 $84,372 $57,493 $61,071 $68,069
Credit Reserve on
Residential Real Estate
Loans Owned $19 $16 $14 $12 $10
Internally Designated
Credit Reserve on Loans
Credit-Enhanced 217 201 178 205 234
------------------------- -------- -------- -------- -------- --------
Redwood's Total
Residential Credit
Protection $236 $217 $192 $217 $244
External Credit
Enhancement on Loans
Credit-Enhanced 44 46 52 58 62
------------------------- -------- -------- -------- -------- --------
Total Credit Protection(1) $280 $263 $244 $275 $306
Total Credit Protection
as % of Total
Residential Loans 0.31% 0.31% 0.42% 0.45% 0.45%
Residential Real Estate
Loans Owned
Delinquencies $3 $5 $2 $4 $1
Residential Loans Credit-
Enhanced Delinquencies 143 133 178 160 162
------------------------- -------- -------- -------- -------- --------
Total Residential Loan
Delinquencies $146 $138 $180 $164 $163
Delinquencies as % of
Total Residential Loans 0.16% 0.16% 0.31% 0.27% 0.24%
Total Credit Protection
as % of Delinquencies 191% 191% 136% 168% 188%
Net Charge-Offs on
Residential Real Estate
Loans Owned $0 $0 $0 $0 $0
Net Charge-Offs on
Residential Loan Credit-
Enhanced 0 (1) (1) 0 (1)
------------------------- -------- -------- -------- -------- --------
Redwood's Shares of Net
Credit (Losses)
Recoveries $0 $(1) $(1) $0 $(1)
Credit Losses to External
Credit Enhancement 0 (1) (0) 0 0
------------------------- -------- -------- -------- -------- --------
Total Credit Losses $0 $(2) $(1) $0 $(1)
Total Credit Losses as %
of Total Residential
Loans (Annualized) 0.01% 0.01% 0.01% 0.01% 0.01%
(1) The credit reserve on residential real estate loans owned is only
available to absorb losses on the residential real estate loan
portfolio. The internally designated credit reserve on loans
credit-enhanced and the external credit enhancement on loans
credit-enhanced are only available to absorb losses on the pool of
loans related to each individual credit-enhancement security.
REDWOOD TRUST, INC.
(All dollars in millions, except per share data)
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
Commercial Real Estate Loans 2004 2003 2003 2003 2003
------------------------------ ------- ------- ------- ------- -------
Start of Period Balances $22 $24 $35 $31 $29
Acquisitions 0 0 1 4 2
Sales Proceeds 0 0 (1) 0 0
Principal Paydowns 0 0 (11) 0 0
Net Amortization Income 0 0 0 0 0
Credit Provisions 0 (1) 0 0 0
Net Recognized Gains (Losses)
and Valuation Adjustments 0 (1) 0 0 0
------------------------------ ------- ------- ------- ------- -------
End of Period Balances $22 $22 $24 $35 $31
Average Amortized Cost During
Period, Net of Credit
Reserves $22 $23 $30 $33 $31
Interest Income $0.7 $0.2 $0.9 $1.0 $0.8
Yield 12.56% 4.16% 12.33% 11.59% 10.57%
Principal Value of Loans $31 $31 $31 $42 $32
Credit Reserve (1) (1) 0 0 0
Net Discount to be Amortized (8) (8) (7) (7) (1)
------------------------------ ------- ------- ------- ------- -------
Commercial Mortgage Loans $22 $22 $24 $35 $31
Commercial Real Estate Loan
Delinquencies $0 $0 $0 $1 $1
Commercial Real Estate Loan
Net Charge-Offs $0 $0 $0 $0 $0
Commercial Real Estate Loan
Credit Provisions $0 $1 $0 $0 $0
Commercial Real Estate Loan
Credit Reserves $1 $1 $0 $0 $0
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
Securities Portfolio 2004 2003 2003 2003 2003
------------------------------ ------- ------- ------- ------- -------
Start of Period Balances $845 $605 $596 $366 $336
Acquisitions 86 257 28 238 43
Sales Proceeds 0 0 0 (4) 0
Principal Paydowns (10) (17) (13) (12) (12)
Net Amortization Income
(Expense) 0 (1) 0 0 0
Net Unrealized Gains (Losses) 16 4 (3) 8 (1)
Net Recognized Gains (Losses)
and Valuation Adjustments 0 (3) (3) 0 0
------------------------------ ------- ------- ------- ------- -------
End of Period Balances $937 $845 $605 $596 $366
Average Amortized Cost During
Period $862 $710 $603 $454 $360
Interest Income $10 $8 $6 $5 $4
Yield 4.46% 4.40% 4.30% 4.46% 4.66%
Principal Value of Securities $921 $833 $599 $587 $370
Net (Discount) Premium to be
Amortized (4) 8 7 6 2
Net Unrealized Gains (Losses) 20 4 (1) 3 (6)
------------------------------ ------- ------- ------- ------- -------
Securities Portfolio $937 $845 $605 $596 $366
CONTACT: Redwood Trust, Inc.
Harold Zagunis, 415-389-7373
SOURCE: Redwood Trust, Inc.