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Redwood Trust Reports Second Quarter 2012 Results

Thursday, August 02, 2012

MILL VALLEY, Calif., Aug. 2, 2012 /PRNewswire/ -- Redwood Trust, Inc. (NYSE: RWT) today reported net income for the second quarter of 2012 of $20 million, or $0.24 per fully diluted share. This compares to net income of $30 million, or $0.37 per fully diluted share, for the first quarter of 2012, and net income of $9 million, or $0.11 per fully diluted share, for the second quarter of 2011.

Redwood also reported estimated taxable income of $17 million, or $0.22 per share, for the second quarter of 2012.  This compares to estimated taxable income of $8 million, or $0.11 per share, for the first quarter of 2012, and an estimated taxable loss of less than $1 million, or less than $0.01 per share, for the second quarter of 2011. 

Additional information on Redwood's business, financial results, and non-GAAP metrics can be found in The Redwood Review, a quarterly publication available on Redwood's website at www.redwoodtrust.com. In order to complete the formatting of its Quarterly Report on Form 10-Q with eXtensible Business Reporting Language (XBRL) tags, Redwood plans to file the Quarterly Report with the Securities and Exchange Commission by Tuesday, August 7, 2012, and also make it available on the 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(1)


Second


First


Fourth


Third


Second

($ in millions, except share data)


Quarter


Quarter


Quarter


Quarter


Quarter



2012


2012


2011


2011


2011

















Interest income


$

60


$

59


$

56


$

53


$

53

Interest expense



(29)



(31)



(29)



(24)



(24)

Net interest income



31



28



27



29



29

Reversal of (provision for) loan losses



1



-



(8)



(4)



(2)

Other market valuation adjustments, net



(5)



(1)



(10)



(13)



(11)

Net interest income after provision and



27



27



10



12



17

other market valuation adjustments
















Mortgage banking activities, net



2



4



-



-



-

Operating expenses 



(15)



(15)



(13)



(12)



(12)

Realized gains, net



7



14



0



1



6

Provision for income taxes



(1)



-



-



-



-

Net income (loss)



20



30



(3)



1



10

Less: Net income attributable to noncontrolling interest



-



-



-



-



1

Net Income (Loss) Attributable to Redwood Trust, Inc.


$

20


$

30


$

(3)


$

1


$

9

































Average diluted shares (thousands)


78,815


79,892


78,370


78,471


79,478

Diluted earnings (loss) per share


$

0.24


$

0.37


$

(0.03)


$

0.01


$

0.11

Regular dividends declared per common share


$

0.25


$

0.25


$

0.25


$

0.25


$

0.25

















(1) Certain totals may not foot due to rounding.
















 

REDWOOD TRUST, INC.


















Consolidated Income Statements(1)


($ in millions, except share data)

Six Months Ended June 30,


2012


2011







Interest income

$

118


$

107

Interest expense


(60)



(46)

Net interest income


59



62

Reversal of (provision for) loan losses


1



(4)

Other market valuation adjustments, net


(6)



(17)

Net interest income after provision and


54



40

other market valuation adjustments






Mortgage banking activities, net


6



-

Operating expenses 


(30)



(24)

Realized gains, net


21



10

Provision for income taxes


(1)



-

Net income


50



27

Less: Net loss attributable to noncontrolling interest


-



(1)

Net Income Attributable to Redwood Trust, Inc.

$

50


$

28












Average diluted shares (thousands)

79,965


79,425

Diluted earnings per share

$

0.61


$

0.34

Regular dividends declared per common share

$

0.50


$

0.50







(1) Certain totals may not foot due to rounding.






 

REDWOOD TRUST, INC.

































Consolidated Balance Sheets(1)

30-Jun

31-Mar

31-Dec

30-Sep

30-Jun

($ in millions, except share data)

2012

2012

2011

2011

2011












Residential loans, held-for-sale

$

256

$

303

$

395

$

2

$

2

Residential loans, held-for-investment


3,216


3,348


3,800


4,156


3,858

Commercial loans


259


190


170


111


84

Real estate securities, at fair value


1,311


1,262


982


1,033


1,038

Cash and cash equivalents


70


150


267


133


80

Other assets


134


119


130


119


103

Total Assets

$

5,246

$

5,372

$

5,743

$

5,554

$

5,165












Short-term debt 

$

455

$

441

$

428

$

-

$

41

Other liabilities


136


126


144


163


119

Asset-backed securities issued


3,564


3,704


4,139


4,293


3,839

Long-term debt 


140


140


140


140


140

Total liabilities  


4,295


4,410


4,851


4,595


4,138












Stockholders' equity 


951


962


893


959


1,025

Noncontrolling interest


-


-


-


-


2

Total equity


951


962


893


959


1,027












Total Liabilities and Equity

$

5,246

$

5,372

$

5,743

$

5,554

$

5,165























Shares outstanding at period end (thousands)


78,756


78,756


78,556


78,495


78,555

GAAP book value per share

$

12.00

$

12.22

$

11.36

$

12.22

$

13.04












(1) Certain totals may not foot due to rounding. See notes to consolidating balance sheet on page 6.

 

REDWOOD TRUST, INC.














The following tables show the estimated effect that Redwood (Parent) and our Consolidated Entities had on GAAP income for the three and six months ended June 30, 2012.








Consolidating Income Statement(1)







Three Months Ended June 30, 2012






($ in millions)

 Redwood 

 Consolidated 

 Redwood 


     (Parent) (2)

 Entities 

 Consolidated 








Interest income

$

27

$

27

$

53

Net discount (premium) amortization


8


(2)


7

Total interest income


35


25


60

Interest expense


(6)


(23)


(29)

Net interest income 


29


2


31

Reversal of (provision for) loan losses


-


2


1

Other market valuation adjustments, net


(6)


1


(5)

Net interest income after provision


22


4


27

and other market valuation adjustments







Mortgage banking activities, net


2


-


2

Operating expenses


(15)


-


(15)

Realized gains, net


7


-


7

Provision for income taxes


(1)


-


(1)

Net Income

$

16

$

4

$

20






















Consolidating Income Statement(1)







Six Months Ended June 30, 2012






($ in millions)

 Redwood 

 Consolidated 

 Redwood 


     (Parent) (2)

 Entities 

 Consolidated 








Interest income

$

51

$

55

$

105

Net discount (premium) amortization


16


(3)


14

Total interest income


67


52


118

Interest expense


(11)


(48)


(60)

Net interest income 


55


4


59

(Provision for) reversal of loan losses


(1)


2


1

Market valuation adjustments, net


(7)


1


(6)

Net interest income after provision


48


6


54

and other market valuation adjustments







Mortgage banking activities, net


6


-


6

Operating expenses


(30)


-


(30)

Realized gains, net


13


7


21

Provision for income taxes


(1)


-


(1)

Net Income

$

37

$

13

$

50








(1) Certain totals may not foot due to rounding.














(2) The interest income and interest expense related to the resecuritization we engaged in during the third quarter of 2011 are included in Redwood (Parent).

 

REDWOOD TRUST, INC.




















We present this table to highlight the impact that Redwood (Parent) and our Consolidated Entities had on our GAAP balance sheet at June 30, 2012. 











Consolidating Balance Sheet(1)










June 30, 2012









($ in millions)


 Redwood 


 Consolidated 


 Redwood 



    (Parent) (2)


 Entities 


 Consolidated 











Residential loans, held-for-sale


$

256


$

-


$

256

Residential loans, held-for-investment



-



3,216



3,216

Commercial loans



247



12



259

Real estate securities, at fair value



1,057



255



1,311

Cash and cash equivalents



70



-



70

Total earning assets



1,629



3,483



5,112

Other assets



97



37



134

Total Assets


$

1,726


$

3,520


$

5,246











Short-term debt


$

455


$

-


$

455

Other liabilities



74



62



136

Asset-backed securities issued



193



3,371



3,564

Long-term debt 



140



-



140

Total liabilities



862



3,433



4,295











Stockholders' equity



864



87



951

Noncontrolling interest



-



-



-

Total equity



864



87



951











Total Liabilities and Equity


$

1,726


$

3,520


$

5,246











(1) Certain totals may not foot due to rounding. Certain Sequoia and Acacia securitization entities and the resecuritization we engaged in during the third quarter of 2011 are treated as secured borrowing transactions for GAAP and we are required under GAAP to consolidate the assets and liabilities of these securitization entities. However, the securitized assets of these entities are not available to Redwood. Similarly, the liabilities of these entities are obligations payable only from the cash flow generated by their securitized assets and are not legal obligations of Redwood.











(2) The consolidating balance sheet presents the assets and liabilities of the resecuritization we engaged in during the third quarter of 2011 under Redwood (Parent), although these assets and liabilities are owned by the resecuritization entity and are legally not ours and we own only the securities and interests that we acquired from the resecuritization entity. At June 30, 2012, the resecuritization accounted for $323 million of available-for-sale securities and $193 million of asset-backed securities issued and our investment in this resecuritization is reflected in the difference between these assets and liabilities.

REDWOOD TRUST, INC.






























Tax / GAAP Differences(1)










Three Months Ended June 30, 2012










($ in millions, except per share data)





Tax (Est.)


GAAP


Differences

Interest income


$

42


$

60


$

(18)

Interest expense



(6)



(29)



23

Net Interest Income



36



31



5

Reversal of (provision for) loan losses



-



1



(1)

Realized credit losses



(5)



-



(5)

Other market valuation adjustments, net



-



(5)



5

Mortgage banking activities, net



(1)



4



(5)

Operating expenses



(13)



(15)



2

Realized gains, net



-



7



(7)

Provision for income taxes



-



(1)



1

Net Income


$

17


$

20


$

(3)











Income per share


$

0.22


$

0.24


$

(0.02)































Tax / GAAP Differences(1)










Six Months Ended June 30, 2012










($ in millions, except per share data)





Tax (Est.)


GAAP


Differences

Interest income


$

80


$

118


$

(38)

Interest expense



(12)



(60)



48

Net Interest Income



68



59



10

Reversal of (provision for) loan losses



-



1



(1)

Realized credit losses



(16)



-



(16)

Other market valuation adjustments, net



-



(6)



6

Mortgage banking activities, net



(1)



6




Operating expenses



(26)



(30)



4

Realized gains, net



-



21



(21)

Provision for income taxes



-



(1)



1

Net Income 


$

26


$

50


$

(23)











Income per share


$

0.33


$

0.61


$

(0.28)





















(1)  Certain totals may not foot due to rounding. Taxable income for 2012 is an estimate until we file our 2012 tax return. Taxable income per share is based on the number of shares outstanding at the end of each quarter. 

SOURCE Redwood Trust, Inc.

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