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Redwood Trust, Inc. Declares a Fourth Quarter Regular Dividend and a Special Dividend

Monday, November 14, 2005

MILL VALLEY, Calif.--(BUSINESS WIRE)--Nov. 14, 2005--Redwood Trust, Inc. (NYSE:RWT), a financial institution that invests in, credit-enhances, and securitizes residential and commercial real estate loans and securities, today announced the declaration of a regular quarterly dividend and a special dividend.

Regular Dividend

Redwood's Board of Directors authorized the payment of a fourth quarter regular cash dividend of $0.70 per share, payable on January 23, 2006 to stockholders of record at the close of business on December 30, 2005.

"Our Board of Directors has indicated that it intends to maintain Redwood's regular dividend at a rate of $0.70 per share per quarter during 2006. Sustaining our regular dividend rate over time is one of our primary financial goals," said George Bull, Redwood's Chairman and CEO.

Special Dividend

Redwood's Board of Directors also authorized payment of a special cash dividend of $3.00 per share, payable on December 9, 2005 to stockholders of record at the close of business on November 25, 2005.

"As a result of another excellent year, management is again pleased to deliver a special dividend to stockholders," Bull added. "We want to stress that special dividends should not be relied upon going forward. Our regular dividend rate, however, is meant to give an indication to stockholders of the level of dividends that management and the Board believe it is reasonably likely that Redwood can support in the future."

Harold Zagunis, Redwood's CFO, said, "The November 2005 special dividend represents the distribution of a portion of the REIT taxable income we earned in 2005. As we did in prior years, we also intend to defer until 2006 the distribution of a portion of this year's REIT taxable income. We currently expect that the amount we will defer will equal two to three quarters of dividends at our 2006 regular dividend rate. Furthermore, we intend to retain approximately 10% of the ordinary REIT taxable income we earned during 2005, and we also intend to retain the income we earned at our taxable subsidiaries. Retaining earnings helps to build book value per share, which should help support long-term growth in earnings and dividends per share. We currently expect that our November 2005 special dividend will be the only special dividend we will need to declare in order to meet our REIT distribution requirements for 2005 income."

"We expect to designate a portion of each of the dividends declared during 2005 as a distribution of long-term capital gain income earned by Redwood during 2005," Zagunis continued. "Many of our tax-paying stockholders should benefit to the extent that they can take advantage of the lower tax rate on long-term capital gain distributions. We will distribute information on the composition of our 2005 dividends prior to January 31, 2006."

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This press release contains forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature, including the words "anticipated," "estimated," "should," "expect," "believe," "intend," and similar expressions, are intended to identify forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including, among other things, those described in our Annual Report on Form 10-K under the caption "Risk Factors." Other risks, uncertainties, and factors that could cause actual results to differ materially from those projected are detailed from time to time in reports filed by us with the Securities and Exchange Commission, or SEC, including Forms 10-Q and 8-K.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. In light of these risks, uncertainties, and assumptions, the forward-looking events mentioned, or discussed in, this press release might not occur. Accordingly, our actual results may differ from our current expectations, estimates, and projections.

Important factors that may impact our actual results include changes in interest rates and market values; changes in prepayment rates; general economic conditions, particularly as they affect the price of earning assets and the credit status of borrowers; the level of liquidity in the capital markets as it affects our ability to finance our real estate asset portfolio; and other factors not presently identified. For a discussion of risk factors, readers should review the section of our Annual Report on Form 10-K entitled "Risk Factors". This press release contains statistics and other data that in some cases have been obtained from, or compiled from information made available, by servicers and other third party service providers.

    CONTACT: Redwood Trust, Inc.
             Harold Zagunis, 415-389-7373
             Nicole Klock, 415-389-7373

    SOURCE: Redwood Trust, Inc.

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