MILL VALLEY, Calif.--(BUSINESS WIRE)--Feb. 26, 2004--Redwood
Trust, Inc. (NYSE:RWT), a financial institution that invests in real
estate loans, today reported GAAP earnings of $3.53 per share for the
fourth quarter of 2003.
Core earnings for the fourth quarter of 2003 were $1.54 per share,
a 93% increase over fourth quarter 2002 core earnings of $0.80 per
share. Core earnings excludes gains and losses from asset sales and
changes in market values that are included in GAAP.
Redwood's estimated taxable income was $3.88 per share for the
fourth quarter of 2003.
Doug Hansen, Redwood's President, noted: "Core earnings of $1.54
per share for the fourth quarter of 2003 was a record quarter for
Redwood. The primary driver of our favorable results has been the
outstanding credit performance of our real estate loan portfolios over
the last few years. Favorable prepayment patterns and improved capital
utilization have also contributed to our results."
Fourth Quarter Review
Acquisitions for the fourth quarter of 2003 included $2.9 billion
high-quality adjustable-rate residential real estate loans, $78
million residential credit-enhancement securities, and $257 million
other residential and commercial real estate loan securities.
Hansen remarked, "Prices of all types of financial assets have
continued to increase over the last year, and our real estate loan
markets are participating in this trend. As a result, we are paying
higher prices for new acquisitions than we have in the last few years.
We are, however, maintaining our value discipline when making new
acquisitions, and we fully expect that our new acquisitions will
generate attractive long-term cash flows for our shareholders. Given
our disciplined approach, our pace of acquisitions may slow. In
addition, in 2004 we have started selling certain assets that have
appreciated significantly."
Redwood's recourse debt exposure of $236 million at December 31,
2003 remained at modest levels relative to our equity base of $553
million. We continue to match the interest rate characteristics of our
debt to the interest rate characteristics of our assets.
Credit results were excellent for the fourth quarter. Credit
losses on Redwood's $16 billion residential loan portfolio were
$50,000 for the quarter. Credit losses on the $68 billion loans
underlying its residential credit-enhancement security portfolio were
$1.6 million for the quarter. For both of these portfolios, annualized
credit loss rate remained under one basis point (less than 0.01%) of
the outstanding loan balances on an annualized basis.
Residential loan delinquencies for these two portfolios declined
from $180 million to $138 million (from 0.31% to 0.16% of current loan
balances) on a combined basis during the quarter. Calls of seasoned
credit-enhancement securities that had some delinquencies reduced our
total delinquency levels. Net growth in current balances for both of
these portfolios contributed to the decline in the delinquency ratio
for the quarter.
Residential loan prepayment patterns remained favorable, as
Redwood's residential loan portfolio (consisting primarily of
adjustable-rate loans) continued to prepay at low to moderate rates,
while the loans underlying Redwood's credit-enhancement securities
(primarily fixed-rate and hybrid loans) continued to prepay at a rapid
rate.
Redwood realized GAAP income of $48 million in the fourth quarter
of 2003 due to calls of residential credit-enhancement securities.
These securities may be called by their original issuer when the
principal balance of the loans underlying the securitization has been
paid down to a fraction of the original balance. These securities are
more likely to be called if the credit performance of the underlying
loans has been strong and if interest rates have declined. When
Redwood's securities are called, Redwood receives a payment equal to
the full principal value of the security. As Redwood's basis for these
securities is less than the principal value, calls generate capital
gains income for Redwood and its shareholders.
Hansen said, "We try to structure our loan investments so we can
generate very attractive returns for shareholders if credit results
are favorable. The call income we earned in the fourth quarter
reflects an accelerated realization of upside return potential for
some of our seasoned assets that have had good credit performance over
time."
"We do expect to earn call income in the future, although it is
difficult to anticipate when or in what amounts we will realize call
gains," added Hansen. "We do not currently expect that 2004 call
income will reach 2003 levels."
Year 2003 Review
GAAP earnings for 2003 were $7.09 per share. Core earnings for
2003 were $4.88 per share, a 54% increase over the $3.16 per share
Redwood earned in 2002.
Dividends to shareholders during 2003 totaled $137 million, or
$7.35 per share. A portion of 2003 dividends consist of a distribution
of capital gains income to shareholders; taxable shareholders may be
taxed at a lower rate on this portion of their dividends.
Redwood's estimated 2003 taxable income was $171 million, or $9.36
per share. Redwood is retaining a portion of its 2003 tax income in
order to build book value per share, with the goal of increasing
future earnings and dividends per share potential. Redwood also
deferred the distribution of 2003 taxable income in an amount that
should be sufficient to fund its regular quarterly dividend for the
first three quarters of 2004.
"Our outstanding results for 2003 were the result of disciplined
investment decisions we have made over the last five years, an
increasingly efficient balance sheet, and a favorable operating
environment," said Hansen.
Outlook
"In our opinion, the long-term outlook for Redwood's business
remains excellent," said Hansen. "Residential real estate loans
outstanding in the U. S. are expected to double by 2011. We expect
that housing prices will continue to increase over the long-term, and
that rising prices should help our credit results. We believe our
competitive position is strong, and we continue to find ways to
conduct our business more effectively."
"Our net income for tax purposes significantly exceeded our
regular divided rate in 2003," said Hansen. "The degree to which this
income exceeds our dividend rate will likely diminish over time,
especially if we enter an on-going environment that is less favorable
due to higher credit losses, increased asset acquisition prices,
and/or less favorable prepayment patterns."
"Our Board has indicated that they intend to increase our regular
dividend rate from $0.65 to $0.67 per share per quarter for 2004. Our
regular dividend rate represents our best estimate of the dividend
rate we can sustain in a less favorable environment. The fact that we
are raising our regular dividend rate reflects our belief that we have
succeeded over the last year in raising Redwood's core sustainable
rate of profitability and that we continue to be optimistic for
Redwood's future."
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 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 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 millions, except per share data)
Fourth Third Second First Fourth
Quarter Quarter Quarter Quarter Quarter
INCOME STATEMENT 2003 2003 2003 2003 2002
------- ------- ------- ------- -------
Interest Income $108.3 $90.2 $71.4 $61.1 $54.1
Interest Expense (68.6) (55.6) (41.8) (36.9) (33.3)
------- ------- ------- ------- -------
Net Interest Income $39.7 34.6 29.6 24.2 20.8
Operating Expenses (8.0) (8.5) (7.3) (7.4) (6.9)
Mark-to-Market Adjustments 39.4 0.1 1.5 0.0 1.4
Provision For Income Taxes (1.2) (1.5) (1.6) (1.2) 0.0
Preferred Dividends 0.0 0.0 0.0 (0.7) (0.7)
------- ------- ------- ------- -------
GAAP Earnings $69.9 $24.7 $22.2 $14.9 $14.6
Less: Mark-to-Market
Adjustments (39.4) (0.1) (1.5) 0.0 (1.4)
------- ------- ------- ------- -------
Core Earnings (1) $30.5 $24.6 $20.7 $14.9 $13.2
Average Diluted Shares
(thousands) 19,801 19,018 18,433 16,984 16,529
GAAP Earnings per Share
(Diluted) $3.53 $1.30 $1.21 $0.88 $0.88
Core Earnings per Share (1) $1.54 $1.29 $1.13 $0.88 $0.80
Dividends per Common Share
(Regular) $0.650 $0.650 $0.650 $0.650 $0.630
Dividends per Common Share
(Special) $4.750 $0.000 $0.000 $0.000 $0.125
------- ------- ------- ------- -------
Total Dividends per Common
Share $5.400 $0.650 $0.650 $0.650 $0.755
Yield on Earning Assets 2.79% 3.03% 3.35% 3.31% 3.59%
Cost of Funds 1.81% 1.92% 2.05% 2.10% 2.35%
Net Interest Income / Average
GAAP Equity 28.4% 25.1% 23.4% 19.8% 18.5%
Net Interest Income / Average
Core Equity (2) 33.8% 30.2% 27.6% 23.3% 20.9%
GAAP ROE: GAAP Earnings/ Avg
GAAP Common Equity 50.0% 17.8% 17.6% 12.9% 13.7%
Core ROE: Core Earnings / Avg
Common Core Equity 26.0% 21.4% 19.4% 15.4% 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 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)
Year Year
End End
INCOME STATEMENT 2003 2002
--------- ---------
Interest Income $331.0 $163.2
Interest Expense (202.9) (91.7)
--------- ---------
Net Interest Income $128.1 71.5
Operating Expenses (31.2) (19.3)
Mark-to-Market Adjustments 41.0 4.4
Provision For Income Taxes (5.5) 0.0
Preferred Dividends (0.7) (2.7)
--------- ---------
GAAP Earnings $131.7 $53.9
Less: Mark-to-Market Adjustments (41.0) (4.4)
--------- ---------
Core Earnings (1) $90.7 $49.5
Average Diluted Shares (thousands) 18,587 15,659
GAAP Earnings per Share (Diluted) $7.09 $3.44
Core Earnings per Share (1) $4.88 $3.16
Dividends per Common Share (Regular) $2.600 $2.510
Dividends per Common Share (Special) $4.750 $0.375
--------- ---------
Total Dividends per Common Share $7.350 $2.885
Yield on Earning Assets 3.05% 4.13%
Cost of Funds 1.93% 2.54%
Net Interest Income / Average GAAP Equity 24.3% 17.7%
Net Interest Income / Average Core Equity (2) 28.9% 19.2%
GAAP ROE: GAAP Earnings/ Avg GAAP Common Equity 25.3% 14.3%
Core ROE: Core Earnings / Avg Common Core Equity 20.8% 14.3%
(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 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-Dec 30-Sep 30-Jun 31-Mar 31-Dec
BALANCE SHEET 2003 2003 2003 2003 2002
-------- -------- -------- ------- -------
Residential Real Estate
Loans $16,239 $13,813 $9,247 $7,321 $6,215
Residential Loan Credit-
Enhancement Securities 379 373 393 373 352
Commercial Real Estate
Loans 22 24 35 31 29
Securities Portfolio 845 605 596 366 336
Cash and Cash Equivalents 59 32 36 43 39
Working Capital and Other
Assets 83 54 49 38 37
-------- -------- -------- ------- -------
Total Assets $17,627 $14,901 $10,356 $8,172 $7,008
Short-Term Debt $236 $500 $218 $476 $100
Long-Term Debt 16,783 13,782 9,543 7,170 6,397
Working Capital and Other
Liabilities 55 53 48 40 38
Preferred Equity 0 0 0 27 27
Common Equity 553 566 547 459 446
-------- -------- -------- ------- -------
Total Liabilities and
Equity $17,627 $14,901 $10,356 $8,172 $7,008
Total GAAP Equity $553 $566 $547 $486 $473
Less: Mark-to-Market
Adjustments (82) (91) (108) (69) (69)
-------- -------- -------- ------- -------
Core Equity $471 $475 $439 $417 $404
Common Shares Outstanding
at Period End (thousands) 19,063 18,468 17,821 16,605 16,277
GAAP Equity (GAAP Book
Value) per Common Share $29.03 $30.65 $30.70 $27.64 $27.43
Core Equity (Core Book
Value) per Common Share $24.72 $25.75 $24.62 $23.54 $23.18
Net Premium / (Discount)
Balance $(101) $(62) $(44) $(33) $(10)
Average Total Assets $15,758 $12,132 $8,687 $7,554 $6,159
Average Earning Assets $15,504 $11,911 $8,524 $7,394 $6,042
Average Interest Bearing
Liabilities $15,120 $11,542 $8,160 $7,036 $5,680
Average Total GAAP Equity
(Common and Preferred) $559 $553 $505 $489 $450
REDWOOD TRUST, INC.
(All dollars in millions)
31-Dec 30-Sep 30-Jun 31-Mar 31-Dec
LEVERAGE RATIOS (1) 2003 2003 2003 2003 2002
-------- -------- -------- ------- -------
Total Reported Assets $17,627 $14,901 $10,356 $8,172 $7,008
Less: Non-Recourse Assets (16,838) (13,835) (9,591) (7,210) (6,435)
-------- -------- -------- ------- -------
Recourse Assets $789 $1,066 $765 $962 $573
Total Reported Debt $17,019 $14,282 $9,761 $7,646 $6,497
Less: Non-Recourse Debt (16,783) (13,782) (9,543) (7,170) (6,397)
-------- -------- -------- ------- -------
Recourse Debt $236 $500 $218 $476 $100
Reported Debt to GAAP Equity 31x 25x 18x 16x 14x
GAAP Equity / Total Reported
Assets 3% 4% 5% 6% 7%
Recourse Debt to GAAP Equity 0.4x 0.9x 0.4x 1.0x 0.2x
GAAP Equity / Recourse
Assets 70% 53% 72% 51% 83%
(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)
Fourth Third Second First Fourth
Quarter Quarter Quarter Quarter Quarter
2003 2003 2003 2003 2002
-------- -------- ------- ------- -------
Residential Real Estate
Loans
Start of Period Balances $13,813 $9,247 $7,321 $6,215 $4,762
Acquisitions 2,897 4,997 2,168 1,339 1,616
Sales Proceeds (1) 0 0 (73) 0
Principal Paydowns (458) (420) (235) (153) (156)
Net Amortization Expense (10) (9) (5) (6) (6)
Net Charge Offs (Recoveries) 0 0 0 0 0
Credit Provisions (2) (2) (2) (2) (1)
Mark-to-Market - Income
Statement 0 0 0 1 0
-------- -------- ------- ------- -------
End of Period Balances $16,239 $13,813 $9,247 $7,321 $6,215
Average Amortized Cost
During Period $14,381 $10,958 $7,670 $6,626 $5,319
Interest Income $83 $64 $47 $42 $37
Yield 2.30% 2.32% 2.47% 2.55% 2.80%
Principal Value of Loans $16,111 $13,704 $9,206 $7,297 $6,190
Credit Reserve (16) (14) (12) (10) (8)
Net Premium to be Amortized 144 123 53 34 33
-------- -------- ------- ------- -------
Residential Real Estate
Loans $16,239 $13,813 $9,247 $7,321 $6,215
Credit Reserve, Start of
Period $14 $12 $10 $8 $7
Net Charge-Offs (NCO) 0 0 0 0 0
Credit Provisions 2 2 2 2 1
-------- -------- ------- ------- -------
Credit Reserve, End of
Period $16 $14 $12 $10 $8
Delinquencies (90 days + FC
+ BK + REO) $5 $2 $4 $1 $4
Delinquencies as % of
Residential Loans 0.03% 0.01% 0.04% 0.02% 0.07%
NCO as % of Residential
Loans (Annualized) 0.01% 0.00% 0.00% 0.01% 0.00%
Reserve as % of Residential
Loans 0.10% 0.10% 0.13% 0.14% 0.13%
Reserve as % of
Delinquencies 301% 852% 312% 862% 200%
REDWOOD TRUST, INC.
(All dollars in millions, except per share data)
Fourth Third Second First Fourth
Quarter Quarter Quarter Quarter Quarter
2003 2003 2003 2003 2002
-------- -------- -------- -------- --------
Residential Loan Credit-
Enhancement Securities
Start of Period Balances $373 $393 $373 $352 $324
Acquisitions 78 23 11 37 13
Sales Proceeds 0 0 (1) 0 0
Principal Paydowns (117) (37) (39) (23) (13)
Net Amortization Income 10 11 10 6 3
Mark-to-Market - Balance
Sheet (12) (21) 36 1 25
Mark-to-Market - Income
Statement 47 4 3 0 0
-------- -------- -------- -------- --------
End of Period Balances $379 $373 $393 $373 $352
Average Amortized Cost
During Period $273 $271 $279 $278 $271
Interest Income $17 $19 $18 $14 $11
Yield 25.49% 28.08% 25.77% 19.68% 16.65%
Principal Value of
Redwood's Credit-
Enhancement Securities $624 $604 $598 $614 $559
Internally Designated
Credit Reserve on Loans
Credit-Enhanced (201) (178) (205) (234) (225)
Net Discount to be
Amortized (123) (145) (113) (85) (58)
-------- -------- -------- -------- --------
Net Investment in Credit-
Enhancement Securities $300 $281 $280 $295 $276
Market Valuation
Adjustments 79 92 113 78 76
-------- -------- -------- -------- --------
Residential Loan Credit-
Enhancement Securities $379 $373 $393 $373 $352
Securities Senior to
Redwood's Interests $67,463 $43,024 $51,168 $60,072 $58,037
Principal Value of
Redwood's Credit-
Enhancement Securities 624 604 598 614 559
Securities Junior to
Redwood's Interests 46 52 58 62 63
-------- -------- -------- -------- --------
Underlying Residential
Real Estate Loan
Balances $68,133 $43,680 $51,824 $60,748 $58,659
Internally Designated
Credit Reserve on Loans
Credit-Enhanced $201 $178 $205 $234 $225
External Credit
Enhancement on Loans
Credit-Enhanced 46 52 58 62 63
-------- -------- -------- -------- --------
Total Credit Protection
(1) $247 $230 $263 $296 $288
Delinquencies (90 days +
FC + BK + REO) $133 $178 $160 $162 $146
Redwood's Net Charge-Offs $(1) $(1) $0 $(1) $0
Losses to Securities
Junior to Redwood's
Interests (1) 0 0 0 0
-------- -------- -------- -------- --------
Total Underlying Loan
Credit Losses $(2) $(1) $0 $(1) $0
Delinquencies as % of
Underlying Loans 0.19% 0.41% 0.31% 0.27% 0.25%
Total Pool Credit
Losses/Underlying Loans
(Annualized) 0.01% 0.01% 0.01% 0.01% 0.01%
Total Credit Protection
as % of Underlying Loans 0.36% 0.53% 0.51% 0.49% 0.49%
Total Credit Protection
as % of Delinquencies 187% 129% 164% 183% 197%
(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)
Fourth Third Second First Fourth
COMBINED RESIDENTIAL LOAN Quarter Quarter Quarter Quarter Quarter
PORTFOLIOS 2003 2003 2003 2003 2002
-------- -------- -------- -------- --------
Residential Real Estate
Loans Owned $16,239 $13,813 $9,247 $7,321 $6,215
Residential Loans Credit-
Enhanced 68,133 43,680 51,824 60,748 58,659
-------- -------- -------- -------- --------
Total Residential Loans $84,372 $57,493 $61,071 $68,069 $64,874
Credit Reserve on
Residential Real Estate
Loans Owned $16 $14 $12 $10 $8
Internally Designated
Credit Reserve on Loans
Credit-Enhanced 201 178 205 234 225
-------- -------- -------- -------- --------
Redwood's Total
Residential Credit
Protection $217 $192 $217 $244 $233
External Credit
Enhancement on Loans
Credit-Enhanced 46 52 58 62 63
-------- -------- -------- -------- --------
Total Credit Protection
(1) $263 $244 $275 $306 $296
Total Credit Protection as
% of Total Residential
Loans 0.31% 0.42% 0.45% 0.45% 0.46%
Residential Real Estate
Loans Owned Delinquencies $5 $2 $4 $1 $4
Residential Loans Credit-
Enhanced Delinquencies 133 178 160 162 146
-------- -------- -------- -------- --------
Total Residential Loan
Delinquencies $138 $180 $164 $163 $150
Delinquencies as % of
Total Residential Loans 0.16% 0.31% 0.27% 0.24% 0.23%
Total Credit Protection as
% of Delinquencies 191% 136% 168% 188% 197%
Net Charge-Offs on
Residential Real Estate
Loans Owned $0 $0 $0 $0 $0
Net Charge-Offs on
Residential Loan Credit-
Enhanced (1) (1) 0 (1) 0
-------- -------- -------- -------- --------
Redwood's Shares of Net
Credit (Losses)
Recoveries $(1) $(1) $0 $(1) $0
Credit Losses to External
Credit Enhancement (1) (0) 0 0 0
-------- -------- -------- -------- --------
Total Credit Losses $(2) $(1) $0 $(1) $0
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)
Fourth Third Second First Fourth
Quarter Quarter Quarter Quarter Quarter
Commercial Real Estate Loans 2003 2003 2003 2003 2002
------- ------- ------- ------- -------
Start of Period Balances $24 $35 $31 $29 $51
Acquisitions 0 1 4 2 0
Sales Proceeds 0 (1) 0 0 0
Principal Paydowns 0 (11) 0 0 (22)
Net Amortization Income 0 0 0 0 0
Credit Provisions (1) 0 0 0 0
Mark-to-Market - Balance Sheet 0 0 0 0 0
Mark-to-Market - Income
Statement (1) 0 0 0 0
------- ------- ------- ------- -------
End of Period Balances $22 $24 $35 $31 $29
Average Amortized Cost During
Period $23 $30 $33 $31 $48
Interest Income $0.2 $0.9 $1.0 $0.8 $1.2
Yield 4.16% 12.33% 11.59% 10.57% 10.12%
Principal Value of Loans $31 $31 $42 $32 $30
Credit Reserve (1) 0 0 0 0
Net Discount to be Amortized (8) (7) (7) (1) (1)
------- ------- ------- ------- -------
Commercial Mortgage Loans $22 $24 $35 $31 $29
Commercial Real Estate Loan
Delinquencies $0 $0 $1 $1 $1
Commercial Real Estate Loan
Net Charge-Offs $0 $0 $0 $0 $0
Commercial Real Estate Loan
Credit Provisions $1 $0 $0 $0 $0
Commercial Real Estate Loan
Credit Reserves $1 $0 $0 $0 $0
Fourth Third Second First Fourth
Quarter Quarter Quarter Quarter Quarter
Securities Portfolio 2003 2003 2003 2003 2002
------- ------- ------- ------- -------
Start of Period Balances $605 $596 $366 $336 $492
Acquisitions 257 28 238 43 196
Sales Proceeds 0 0 (4) 0 (315)
Principal Paydowns (17) (13) (12) (12) (31)
Net Amortization Income
(Expense) (1) 0 0 0 0
Mark-to-Market - Balance Sheet 4 (3) 8 (1) (7)
Mark-to-Market - Income
Statement (3) (3) 0 0 1
------- ------- ------- ------- -------
End of Period Balances $845 $605 $596 $366 $336
Average Amortized Cost During
Period $710 $603 $454 $360 $320
Interest Income $8 $6 $5 $4 $4
Yield 4.40% 4.30% 4.46% 4.66% 4.93%
Principal Value of Securities $833 $599 $587 $370 $336
Net Premium to be Amortized 8 7 6 2 5
Market Valuation Adjustments 4 (1) 3 (6) (5)
------- ------- ------- ------- -------
Securities Portfolio $845 $605 $596 $366 $336
CONTACT: Redwood Trust, Inc.
Harold Zagunis, 415-389-7373
SOURCE: Redwood Trust, Inc.