MILL VALLEY, Calif.--(BUSINESS WIRE)--Feb. 27, 2006--Redwood
Trust, Inc. (NYSE:RWT) today reported GAAP earnings of $42 million
($1.68 per share) for the fourth quarter of 2005 and $200 million
($7.96 per share) for the year ended December 31, 2005. In 2004, GAAP
earnings were $54 million ($2.22 per share) for the fourth quarter and
$233 million ($10.47 per share) for the year ended December 31, 2004.
The reduction in our net income of $33 million from 2004 to 2005
resulted from a decrease in net interest income of $14 million, an
increase in operating expenses of $11 million, and an increase in GAAP
provisions for income taxes of $10 million. Net gains on sales and
calls increased by $2 million. The reduction in net interest income
reflects the impact of increased prepayment rates and reduced balances
for residential adjustable rate mortgages consolidated on our balance
sheet from Sequoia securitization entities we have sponsored, lower
yields on our portfolio of residential credit-enhancement securities
as seasoned higher-yielding securities have been prepaid, called, or
sold, and higher levels of uninvested cash. Operating expenses
increased in part due to the rapid growth we experienced in 2003 and
2004 and also due to continuing investments we are making in systems,
infrastructure, and new employees to position our business for
additional growth. Provisions for income taxes increased in 2005
because we benefited from net operating loss carryforwards in 2004.
At the end of 2004, GAAP book value per share was $35.78. After
declaring dividends of $5.80 per share, GAAP book value increased
during 2005 by 4% to $37.20 per share.
Fourth Quarter Summary
From the fourth quarter of 2004 to the fourth quarter of 2005, net
income decreased by $12 million. Net interest income decreased by $17
million and operating expenses increased by $4 million. These
decreases in income, driven by the factors discussed above, were
partially offset by an increase in realized gains on sales and calls
of assets and net recognized market valuation adjustments of $9
million as a result of increased sales activity.
Additional Information
Additional information on our GAAP results is available in our
Annual Report on Form 10-K for the year ended December 31, 2005 which
was filed today with the Securities and Exchange Commission. Today we
also released our first "Redwood Review", covering the fourth quarter
of 2005. The Review (formerly the supplemental information package)
contains a discussion of 2005 and fourth quarter activity, taxable
income and other non-GAAP performance measures, and a review of
Redwood's business and outlook. Our 10-K and the Redwood Review are
available on our web site (www.redwoodtrust.com).
REDWOOD TRUST, INC.
(All dollars in millions, except per share data)
Fourth Third Second First Fourth
CONSOLIDATED INCOME Quarter Quarter Quarter Quarter Quarter
STATEMENT 2005 2005 2005 2005 2004
------------------------- ------- ------- ------- ------- -------
Interest Income $ 230.9 $ 243.5 $ 248.4 $ 237.2 $ 205.2
Interest Expense (189.7) (196.6) (195.2) (176.0) (147.2)
------------------------- -------- -------- -------- -------- --------
Net Interest Income 41.2 46.9 53.2 61.2 58.0
Operating Expenses (12.1) (10.9) (11.1) (10.7) (7.9)
Net Recognized Gains and
Valuation Adjustments 17.8 24.9 3.1 15.0 8.9
Variable Stock Option
(Expense) Income 0.0 0.0 (0.0) 0.1 (0.0)
Excise Tax (Expense)
Credit (0.3) (0.3) (0.3) (0.3) 0.2
Provision For Income
Taxes (4.1) (4.7) (4.0) (4.7) (4.8)
Reversal of Deferred Tax
Valuation Allowance 0.0 0.0 0.0 0.0 0.0
------------------------- -------- -------- -------- -------- --------
GAAP Earnings $ 42.5 $ 55.9 $ 40.9 $ 60.6 $ 54.4
Average Diluted Shares
(thousands) 25,311 25,314 25,196 25,021 24,491
GAAP Earnings per Share
(Diluted) $ 1.68 $ 2.21 $ 1.62 $ 2.42 $ 2.22
Regular Dividends per
Share $ 0.70 $ 0.70 $ 0.70 $ 0.70 $ 0.67
Special Dividends per
Share 3.00 0.00 0.00 0.00 5.50
------------------------- -------- -------- -------- -------- --------
Total Dividends per Share $ 3.70 $ 0.70 $ 0.70 $ 0.70 $ 6.17
REDWOOD TRUST, INC.
(All dollars in millions, except per share data)
CONSOLIDATED INCOME STATEMENT 2005 2004 2003
------------------------------------------- -------- -------- --------
Interest Income $ 960.0 $ 648.1 $ 331.0
Interest Expense (757.5) (431.9) (202.9)
------------------------------------------- -------- -------- --------
Net Interest Income 202.5 216.2 128.1
Operating Expenses (44.8) (33.1) (30.0)
Net Recognized Gains and Valuation
Adjustments 60.8 59.1 46.7
Variable Stock Option (Expense) Income 0.1 (1.0) (5.7)
Excise Tax (Expense) Credit (1.2) (0.6) (1.2)
Provision For Income Taxes (17.5) (13.2) (5.5)
Reversal of Deferred Tax Valuation
Allowance 0.0 5.2 0.0
Dividends and Income Allocated to Preferred
Stock -- -- (0.7)
------------------------------------------- -------- -------- --------
GAAP Earnings $ 199.9 $ 232.6 $ 131.7
Average Diluted Shares (thousands) 25,121 22,229 18,812
GAAP Earnings per Share (Diluted) $ 7.96 $ 10.47 $ 7.04
Regular Dividends per Share $ 2.80 $ 2.68 $ 2.60
Special Dividends per Share 3.00 6.00 4.75
------------------------------------------- -------- -------- --------
Total Dividends per Share $ 5.80 $ 8.68 $ 7.35
REDWOOD TRUST, INC.
(All dollars in millions, except per share data)
CONSOLIDATED BALANCE 31-Dec 30-Sep 30-Jun 31-Mar 31-Dec
SHEET 2005 2005 2005 2005 2004
------------------------- -------- -------- -------- -------- --------
Residential Real Estate
Loans $13,875 $16,556 $19,630 $21,772 $22,504
Residential Loan Credit-
Enhancement Securities 613 664 706 611 562
Commercial Real Estate
Loans 60 56 42 57 54
Commercial Loan Credit-
Enhancement Securities 58 44 29 29 14
Securities Portfolio 1,749 1,783 1,649 1,505 1,381
Cash and Cash Equivalents 176 163 72 65 57
Other Assets 246 239 218 246 206
------------------------- -------- -------- -------- -------- --------
Total Consolidated Assets $16,777$19,505$22,346$24,285$24,778
Redwood Trust Debt $ 170 $ 162 $ 453 $ 199 $ 203
Consolidated Asset-Back
Securities Issued 15,585 18,237 20,815 23,057 23,630
Other Liabilities 87 90 86 81 81
Equity 935 1,016 992 948 864
------------------------- -------- -------- -------- -------- --------
Total Liabilities and
Equity $16,777 $19,505 $22,346 $24,285 $24,778
Shares Outstanding at
Period End (thousands) 25,133 24,764 24,647 24,514 24,154
GAAP Equity (GAAP Book
Value) per Share $ 37.20 $ 41.03 $ 40.24 $ 38.67 $ 35.78
CONTACT: Redwood Trust, Inc.
Harold Zagunis, 415-389-7373
SOURCE: Redwood Trust, Inc.