View all news

Redwood Trust Reports Fourth Quarter 2010 Results

Thursday, February 24, 2011

MILL VALLEY, Calif.,Feb. 24, 2011 /PRNewswire/ -- Redwood Trust, Inc. (NYSE: RWT) today reported net income for the fourth quarter of 2010 of $15 million, or $0.18 per fully diluted share. This compares to net income of $20 million, or $0.25 per fully diluted share, for the third quarter of 2010, and net income of $40 million, or $0.51 per fully diluted share, for the fourth quarter of 2009.

Redwood also reported an estimated taxable loss of $6 million, or $0.07 per share, during the fourth quarter of 2010.  This compares to an estimated taxable loss of $9 million, or $0.11 per share, for the third quarter of 2010, and a taxable loss of $35 million, or $0.44 per share, for the fourth quarter of 2009.  

At December 31, 2010, GAAP book value was $13.63 per share, an increase of $0.61 per share from September 30, 2010, and management's estimate of non-GAAP economic value was $14.31 per share, an increase of $0.58 per share from September 30, 2010.

During the fourth quarter of 2010, Redwood acquired $195 million of residential mortgage loans, originated $30 million of commercial loans, and acquired $26 million of residential securities.  At December 31, 2010, cash and cash equivalents totaled $47 million.

Please see the tables that follow for reconciliations between GAAP and non-GAAP metrics.   Additional information on Redwood's business, financial results, and on non-GAAP metrics is available in The Redwood Review, which is available on Redwood's website at www.redwoodtrust.com, and in Redwood's most recent Annual Report on Form 10-K, which is filed with the Securities and Exchange Commission, and which is also available on Redwood's website at www.redwoodtrust.com.

The accounting concepts and disclosures relating to Redwood's financial statements are complex. The Redwood Review is an additional publication that provides information about Redwood. Today, The Redwood Review was released covering the fourth quarter of 2010 and is available on our website.

Cautionary Statement: This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve numerous risks and uncertainties. Our actual results may differ from our beliefs, expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Forward-looking statements are not historical in nature and can be identified by words such as "anticipate," "estimate," "will," "should," "expect," "believe," "intend," "seek," "plan" and similar expressions or their negative forms, or by references to strategy, plans, or intentions. These forward-looking statements are subject to risks and uncertainties, including, among other things, those described in our most recent 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 may be described from time to time in reports we file with the Securities and Exchange Commission (SEC), including reports on Forms 10-Q and 8-K. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

REDWOOD TRUST, INC.
















































Consolidated Income Statements

Fourth



Third


Second


First


Fourth

($ in millions, except share data)

Quarter



Quarter


Quarter


Quarter


Quarter


2010



2010


2010


2010


2009

















Interest income

$

56



$

59


$

56


$

59


$

62

Interest expense


(22)




(24)



(21)



(18)



(21)

Net interest income


34




35



35



41



41

Provision for loan losses


(8)




(2)



(4)



(10)



(9)

Market valuation adjustments, net


-




(2)



(7)



(11)



(4)

Net interest income after provision and


26




31



24



20



28

market valuation adjustments
















Operating expenses


(13)




(12)



(11)



(18)



(11)

Realized gains on sales and calls, net


2




2



16



44



20

Benefit from income taxes


-




-



-



-



3

Net income


15




21



29



46



40

Less: Net income attributable to noncontrolling interest


-




1



-



-



-

GAAP Net Income

$

15



$

20


$

29


$

46


$

40

































Average diluted shares (thousands)


78,944




78,961



78,852



78,542



78,101

Diluted earnings per share

$

0.18



$

0.25


$

0.35


$

0.58


$

0.51

Regular dividends declared per common share

$

0.25



$

0.25


$

0.25


$

0.25


$

0.25



REDWOOD TRUST, INC.


















Consolidated Income Statements

Twelve Months Ended

($ in millions, except share data)

December 31,


2010


2009







Interest income

$

230


$

288

Interest expense


(85)



(132)

Net interest income


145



156

Provision for loan losses


(24)



(49)

Market valuation adjustments, net


(20)



(88)

Net interest income after provision and


101



19

market valuation adjustments






Operating expenses


(54)



(47)

Realized gains on sales and calls, net


64



63

Benefit from income taxes


-



4

Net income


111



39

Less: Net income attributable to noncontrolling interest


1



-

GAAP Net Income

$

110


$

39













Average diluted shares (thousands)


78,811



68,991

Diluted earnings per share

$

1.36


$

0.55

Regular dividends declared per common share

$

1.00


$

1.00



REDWOOD TRUST, INC.













































Consolidated Balance Sheets

31-Dec


30-Sep


30-Jun


31-Mar


31-Dec

($ in millions, except share data)

2010


2010


2010


2010


2009
















Real estate loans

$

3,847


$

3,752


$

3,810


$

3,662


$

3,740

Real estate securities, at fair value:















Trading securities


330



310



276



289



278

Available-for-sale securities


825



798



741



847



810

Other investments


-



-



4



11



20

Cash and cash equivalents


47



189



288



242



243

Other assets


95



113



100



144



162

Total Assets

$

5,144


$

5,162


$

5,219


$

5,195


$

5,253
















Short-term debt

$

44


$

-


$

-


$

-


$

-

Other liabilities


123



163



142



207



181

Asset-backed securities issued - Sequoia entities


3,458



3,568



3,681



3,557



3,645

Asset-backed securities issued - Acacia entities


303



264



253



280



298

Long-term debt


140



140



140



140



140

Total liabilities  


4,068



4,135



4,216



4,184



4,264
















Stockholders’ equity


1,065



1,016



991



998



972

Noncontrolling interest


11



11



12



13



17

Total equity


1,076



1,027



1,003



1,011



989
















Total Liabilities and Equity

$

5,144


$

5,162


$

5,219


$

5,195


$

5,253































Shares outstanding at period end (thousands)


78,125



77,984



77,908



77,751



77,737

GAAP book value per share

$

13.63


$

13.02


$

12.71


$

12.84


$

12.50



REDWOOD TRUST, INC.













































Consolidating Income Statement















Three Months Ended December 31, 2010







Other







($ in millions)

Redwood


New Sequoia


Consolidated


Intercompany


Redwood


(Parent)



Entities


Adjustments


Consolidated
















Interest income

$

16


$

2

-

$

27


$

-


$

45

Net discount (premium) amortization


12



-

-


(1)



-



11

Total interest income


28



2



26



-



56

Interest expense


(3)



(1)

-


(18)



-



(22)

Net interest income


25



1



8



-



34

Provision for loan losses


-



-



(8)



-



(8)

Market valuation adjustments, net


2



-

-

-

(2)


-

-



-

Net interest income after provision


27



1



(2)



-



26

and market valuation adjustments















Operating expenses


(13)



-



-



-



(13)

Realized gains on sales and calls, net


1



-



1



-



2

Income from New Sequoia


1



-



-



(1)



-

Loss from Other Consolidated Entities


(1)



-



-



1



-

Net Income (Loss)

$

15


$

1


$

(1)


$

-


$

15



Consolidating Income Statement















Twelve Months Ended December 31, 2010







Other







($ in millions)

Redwood


New Sequoia


Consolidated


Intercompany


Redwood


(Parent)



Entities


Adjustments


Consolidated
















Interest income

$

66


$

5

-

$

120


$

-


$

191

Net discount (premium) amortization


41



1

-


(3)



-



39

Total interest income


107



6



117



-



230

Interest expense


(8)



(5)

-


(72)



-



(85)

Net interest income


99



1



45



-



145

Provision for loan losses


-



-

-

-

(24)


-

-



(24)

Market valuation adjustments, net


(4)



-

-

-

(16)


-

-



(20)

Net interest income after provision


95



1



5



-



101

and market valuation adjustments















Operating expenses


(53)



-

-

-

(1)


-

-



(54)

Realized gains on sales and calls, net


56



-

-

-

8


-

-



64

Income from New Sequoia


1



-

-

-

-


-

(1)



-

Income from Other Consolidated Entities


11



-

-

-

-


-

(11)



-

Noncontrolling interest


-



-

-

-

(1)


-

-



(1)

Net Income

$

110


$

1


$

11


$

(12)


$

110



REDWOOD TRUST, INC.
































Consolidating Balance Sheet
















December 31, 2010








Other







($ in millions)


Redwood


New Sequoia


Consolidated


Intercompany


Redwood



(Parent)



Entities


Adjustments


Consolidated

















Real estate loans


$

285


$

145


$

3,417


$

-


$

3,847

Real estate securities, at fair value:
















Trading securities



21



-



309



-



330

Available-for-sale securities



802



-



23



-



825

Other investments



-



-



-



-



-

Cash and cash equivalents



47



-



-



-



47

Investment in New Sequoia



24



-



-



(24)



-

Investment in Other Consolidated Entities



81



-



-



(81)



-

Total earning assets



1,260



145



3,749



(105)



5,049

Other assets



35



2



58



-



95

Total Assets


$

1,295


$

147


$

3,807


$

(105)


$

5,144

















Short-term debt


$

44


$

-


$

-


$

-


$

44

Other liabilities



46



-



77



-



123

Asset-backed securities issued



-



123



3,638



-



3,761

Long-term debt



140



-



-



-



140

Total liabilities



230



123



3,715



-



4,068

















Stockholders’ equity



1,065



24



81



(105)



1,065

Noncontrolling interest



-



-



11



-



11

Total equity



1,065



24



92



(105)



1,076

















Total Liabilities and Equity


$

1,295


$

147


$

3,807


$

(105)


$

5,144



































REDWOOD TRUST, INC.


















Tax / GAAP Differences









Three Months Ended December 31, 2010









($ in millions, except per share data)



Tax


GAAP


Differences

Interest income

$

28


$

56


$

(28)

Interest expense


(2)



(22)



20

Net Interest Income


26



34



(8)

Provision for loan losses


-



(8)



8

Realized credit losses


(20)



-



(20)

Market valuation adjustments, net


-



-



-

Operating expenses


(12)



(13)



1

Realized gains on sales and calls, net


-



2



(2)

Provision for income taxes


-



-



-

Less: Net income attributable to noncontrolling interest


-



-



-

Net (Loss) Income

$

(6)


$

15


$

(21)










Estimated (loss) income per share

$

(0.07)


$

0.19


$

(0.26)



REDWOOD TRUST, INC.


















Tax / GAAP Differences









Twelve Months Ended December 31, 2010









($ in millions, except per share data)



Tax


GAAP


Differences

Interest income

$

137


$

230


$

(93)

Interest expense


(9)



(85)



76

Net Interest Income


128



145



(17)

Provision for loan losses


-



(24)



24

Realized credit losses


(100)



-



(100)

Market valuation adjustments, net


-



(20)



20

Operating expenses


(44)



(54)



10

Realized gains on sales and calls, net


-



64



(64)

Provision for income taxes


-



-



-

Less: Net income attributable to noncontrolling interest


-



1



(1)

Net (Loss) Income

$

(16)


$

110


$

(126)










Estimated (loss) income per share

$

(0.20)


$

1.36


$

(1.56)



REDWOOD TRUST, INC.


Book Value Per Share and Management's Estimate of Non-GAAP Economic Value Per Share*

($ in millions, except per share data)











December 31, 2010
















Management's


GAAP




Estimate of Non-GAAP


As Reported


Adjustments


Economic Value

Cash and cash equivalents

$

47


$



$

47










Real estate loans at Redwood









    Residential


255






255

    Commercial


30






30

Subtotal real estate loans


285






285

Real estate securities at Redwood









    Residential


814






814

    Commercial


8






8

    CDO


1






1

Subtotal real estate securities


823






823

Investments in the Fund


14






14

Investments in Sequoia entities


87



(9)

(a)


78

Investments in Acacia entities


4



(3)

(b)


1

Other assets (d)


35






35

Total assets


1,295






1,283










Short-term debt


(44)






(44)

Long-term debt


(140)



65

(c)


(75)

Other liabilities (d)


(46)






(46)

Stockholders' Equity

$

1,065





$

1,118










Book Value Per Share

$

13.63





$

14.31



















(a) Our investments in Sequoia entities consist of interest-only securities and senior and subordinate securities issued by Sequoia entities. We calculated the $78 million estimate of non-GAAP economic value for these securities using the same valuation process that we follow to fair value our other real estate securities. In contrast, the $87 million GAAP carrying value of these investments represents the difference between the assets and liabilities owned by the Sequoia entities.

(b)  The GAAP carrying value of our investments in Acacia entities was $4 million and management's estimate of the non-GAAP economic value of those investments was $1 million, which primarily reflects the present value of the management fees we expect to earn from these entities. The equity interests and securities we own in the Acacia entities have minimal value.

(c) At December 31, 2010, we had $140 million of long-term debt outstanding with a stated interest rate of LIBOR plus 225 basis points due in 2037. During the first half of 2010, through interest rate hedging arrangements, we effectively fixed the interest rate on this long-term debt at 6.75% (excluding issuance costs). We calculated the $75 million estimate of non-GAAP economic  value of this long-term debt based on its stated interest rate using the same valuation process used to fair value our other financial assets and liabilities.

(d) Other assets are comprised of $5 million of accrued interest receivable and $30 million of other assets. Other liabilities are comprised of dividends payable of $20 million and accrued interest and other liabilities of $26 million.

* This table presents supplemental components of book value at December 31, 2010, as reported under GAAP and as estimated by us using fair values for our investments and long-term debt. We show our investments in the Fund, and the Sequoia and Acacia entities as separate line items to highlight our specific ownership interests, as the underlying assets and liabilities of these entities are legally not ours. Our non-GAAP estimated economic value is calculated using bid-side asset marks (or estimated bid-side values) and offer-side marks for our financial liabilities (or estimated offered-side values), as required to determine fair value under GAAP.   For additional information to consider when reviewing this table, please see “Factors Affecting Management’s Estimate of Economic Value” in our most recent Annual Report on Form 10-K.  



REDWOOD TRUST, INC.












Sources and Uses of Cash (a)







($ in millions)









Three Months Ended



December 31, 2010


September 30, 2010

Beginning cash balance


$

189


$

288

Sources of cash







Loans at Redwood



6



-

Securities at Redwood - principal and interest







Residential senior



42



36

Residential Re-REMIC



2



2

Residential subordinate



8



9

Commercial and CDO



1



2

Securities at Redwood - sales



-



-

Investments in Consolidated Entities



11



11

Short-term debt financing



44



-

Derivative margin returned, net



26



-

Changes in working capital



3



-

Total sources of cash



143



60








Uses of cash







Acquisitions of residential loans



(195)



(62)

Origination of commercial loans



(30)



-

Acquisitions of securities (b)



(29)



(48)

Cash operating expenses



(9)



(9)

Interest expense on long-term debt



(2)



(2)

Derivative margin posted, net



-



(17)

Dividends



(20)



(20)

Changes in working capital



-



(1)

Total uses of cash



(285)



(159)








Net uses of cash



(142)



(99)

Ending Cash Balance


$

47


$

189















(a) The sources and uses of cash in the table above are derived from our GAAP Consolidated Statements of Cash Flows by aggregating and netting cash flow in a manner consistent with the way management analyzes it. This table excludes the gross cash flow generated by our Sequoia and Acacia securitization entities and the Fund (cash flow that is not available to Redwood), but does include the cash flow distributed to Redwood as a result of our investments in these entities. The beginning and ending cash balances presented in the table above are GAAP amounts.

(b) Total acquisitions of securities in the fourth quarter of 2010 were $26 million. Securities acquisitions of $3 million made in the third quarter that did not settle until early October are also reflected in this table.



SOURCE Redwood Trust, Inc.

Contact: Diane Merdian, +1-415-380-2331, or Mike McMahon, +1-415-384-3805, both of Redwood Trust, Inc.

Multimedia Files:

View all news