View all news

Redwood Trust Reports Fourth Quarter 2006 Results

Tuesday, February 20, 2007

MILL VALLEY, Calif.--(BUSINESS WIRE)--

Redwood Trust, Inc. (NYSE:RWT) today reported GAAP earnings of $36 million ($1.32 per share) for the fourth quarter of 2006 and $128 million ($4.85 per share) for 2006.

"This was a pretty good quarter and a pretty good year, with return on equity in the middle of our 11% to 18% target range," said Doug Hansen, Redwood's President. "We believe we are well positioned as we move forward into the new year."

Redwood's GAAP earnings of $1.32 per share for the fourth quarter increased from $1.22 per share earned in the prior quarter but decreased from earnings of $1.68 per share for the fourth quarter of 2005. Earnings for 2006 of $4.85 per share were lower than the $7.96 per share we earned in 2005.

GAAP book value per share decreased from $40.02 to $37.51 during the fourth quarter of 2006 as a result of fourth quarter regular and special dividend payments of $3.70 per share. During 2006, book value increased by 1% from $37.20 per share to $37.51 per share.

Net interest income for the fourth quarter of 2006 was $45 million, a decrease from net interest income of $49 million for the prior quarter and an increase from net interest income of $41 million for the fourth quarter of 2005. Net interest income decreased from $205 million in 2005 to $184 million in 2006.

Income gains from asset sales, calls, and valuation adjustments were $5 million for the fourth quarter of 2006, an increase from $1 million in the prior quarter and a decrease from $18 million in the fourth quarter of 2005. Income gains from asset sales, calls, and valuation adjustments decreased from $61 million in 2005 to $10 million in 2006.

Operating expenses were $13 million for the fourth quarter of 2006, a decrease from $14 million for the prior quarter and equal to the $13 million for the fourth quarter of 2005. Operating expenses increased from $48 million in 2005 to $56 million in 2006.

Additional Information

Additional information on our GAAP results is available in our Annual Report on Form 10-K for the year ended December 31, 2006 which was filed today with the Securities and Exchange Commission. Today we also released our Redwood Review covering the fourth quarter of 2006. The Redwood Review contains a discussion of 2006 and fourth quarter activity, taxable income and other non-GAAP performance measures, and a review of Redwood's business and outlook. Our Form 10-K and the Redwood Review are available on our web site (www.redwoodtrust.com).

CAUTIONARY STATEMENT: 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 2006 Annual Report on Form 10-K under Item 1A "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, including Forms 10-K, 10-Q, and 8-K. 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. In light of these risks, uncertainties, and assumptions, the forward-looking events mentioned in, discussed in, or incorporated by reference into this press release might not occur. Accordingly, our actual results may differ from our current expectations, estimates, and projections. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

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

                                Fourth   Third  Second   First  Fourth
                               Quarter Quarter Quarter Quarter Quarter
CONSOLIDATED INCOME STATEMENT    2006    2006    2006    2006    2005
----------------------------- ----------------------------------------

Interest income               $   218 $   224 $   218 $   226 $   231
Interest expense                 (173)   (175)   (173)   (181)   (190)
-----------------------------
Net interest income                45      49      45      45      41

Operating expenses                (13)    (14)    (16)    (13)    (13)
Gains on sales and calls, net       7       6       9       1      19
Valuation adjustments              (2)     (5)     (3)     (3)     (1)
Provision for income taxes         (1)     (4)     (3)     (2)     (4)
-----------------------------
GAAP earnings                 $    36 $    32 $    32 $    28 $    42

Average diluted shares
 (thousands)                   27,122  26,625  26,109  25,703  25,311
GAAP earnings per share
 (diluted)                    $  1.32 $  1.22 $  1.20 $  1.09 $  1.68

Regular dividends per share   $  0.70 $  0.70 $  0.70 $  0.70 $  0.70
Special dividends per share      3.00    0.00    0.00    0.00    3.00
-----------------------------
Total dividends per share     $  3.70 $  0.70 $  0.70 $  0.70 $  3.70
REDWOOD TRUST, INC.
(All dollars in millions, except share
 data)

CONSOLIDATED INCOME STATEMENT                  2006     2005     2004
------------------------------------------ ---------------------------

Interest income                            $    886 $    962 $    652
Interest expense                               (702)    (757)    (432)
------------------------------------------
Net interest income                             184      205      220

Operating expenses                              (56)     (48)     (38)
Gains on sales and calls, net                    23       66       66
Valuation adjustments                           (13)      (5)      (7)
Provision for income taxes                      (10)     (18)      (8)
------------------------------------------
GAAP earnings                              $    128 $    200 $    233

Average diluted shares (thousands)           26,314   25,121   22,229
GAAP earnings per share (diluted)          $   4.85 $   7.96 $  10.47

Regular dividends per share                $   2.80 $   2.80 $   2.68
Special dividends per share                    3.00     3.00     6.00
------------------------------------------
Total dividends per share                  $   5.80 $   5.80 $   8.68
REDWOOD TRUST, INC.
(All dollars in millions, except share data)


CONSOLIDATED BALANCE        31-Dec   30-Sep   30-Jun   31-Mar   31-Dec
 SHEET                        2006     2006     2006     2006     2005
------------------------- -------- -------- -------- -------- --------

Real estate loans         $ 9,352  $ 9,875  $10,491  $12,045  $13,934
Real estate securities      3,233    2,912    2,661    2,529    2,419
Cash and cash equivalents     168      113      106       85      176
Other assets                  277      300      272      320      248
-------------------------
Total consolidated assets $13,030$13,200$13,530$14,979$16,777

Redwood debt              $ 1,856  $   510  $   529  $     0  $   170
Consolidated asset-back
 securities issued          9,979   11,554   11,898   13,930   15,585
Other liabilities              92       93       99       82       87
Junior subordinated notes     100        -        -        -        -
Equity                      1,003    1,043    1,004      967      935
-------------------------
Total consolidated
 liabilities and equity   $13,030  $13,200  $13,530  $14,979  $16,777

Shares outstanding at
 period end (thousands)    26,733   26,053   25,668   25,382   25,133
GAAP equity (GAAP book
 value) per share         $ 37.51  $ 40.02  $ 39.13  $ 38.11  $ 37.20

Source: Redwood Trust, Inc.

Contact: Redwood Trust, Inc. Martin S. Hughes, 415-380-3455

Multimedia Files:

View all news