Press Releases

REDWOOD TRUST, INC.

Consolidated Income Statements(1)

Fourth

Third

Second

First

Fourth

($ in millions, except share data)

Quarter

Quarter

Quarter

Quarter

Quarter

2011

2011

2011

2011

2010

Interest income

$

56

$

53

$

53

$

54

$

56

Interest expense

(29)

(24)

(24)

(22)

(22)

Net interest income

27

29

29

32

34

Provision for loan losses

(8)

(4)

(2)

(3)

(8)

Market valuation adjustments, net

(10)

(13)

(11)

(6)

-

Net interest income after provision and

10

12

17

24

26

market valuation adjustments

Operating expenses

(13)

(12)

(12)

(12)

(13)

Realized gains on sales and calls, net

0

1

6

4

2

Provision for income taxes

-

-

-

-

-

Net (loss) income

(3)

1

10

16

15

Less: Net income (loss) attributable to noncontrolling interest

-

-

1

(2)

-

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

$

(3)

$

1

$

9

$

18

$

15

Average diluted shares (thousands)

78,370

78,471

79,478

79,372

78,944

Diluted (loss) earnings per share

$

(0.03)

$

0.01

$

0.11

$

0.22

$

0.18

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)

Years Ended December 31,

2011

2010

Interest income

$

217

$

230

Interest expense

(99)

(85)

Net interest income

118

145

Provision for loan losses

(16)

(24)

Market valuation adjustments, net

(40)

(20)

Net interest income after provision and

62

102

market valuation adjustments

Operating expenses

(48)

(54)

Realized gains on sales and calls, net

11

63

Provision for income taxes

(0)

(0)

Net income

25

111

Less: Net (loss) income attributable to noncontrolling interest

(1)

1

Net Income Attributable to Redwood Trust, Inc.

$

26

$

110

Average diluted shares (thousands)

78,300

78,811

Diluted earnings per share

$

0.31

$

1.36

Regular dividends declared per common share

$

1.00

$

1.00

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

REDWOOD TRUST, INC.

Consolidated Balance Sheets(1)

31-Dec

30-Sep

30-Jun

31-Mar

31-Dec

($ in millions, except share data)

2011

2011

2011

2011

2010

Residential real estate loans

$

4,195

$

4,158

$

3,860

$

3,796

$

3,797

Commercial real estate loans

170

111

84

62

50

Real estate securities, at fair value:

Trading securities

253

278

297

322

330

Available-for-sale securities

729

755

741

782

825

Cash and cash equivalents

267

133

80

220

47

Other assets

130

119

103

101

95

Total Assets

$

5,743

$

5,554

$

5,165

$

5,283

$

5,144

Short-term debt

$

428

$

-

$

41

$

-

$

44

Other liabilities

144

163

119

104

123

Asset-backed securities issued

4,139

4,293

3,839

3,957

3,761

Long-term debt

140

140

140

140

140

Total liabilities  

4,851

4,595

4,138

4,201

4,068

Stockholders’ equity

893

959

1,025

1,075

1,065

Noncontrolling interest

-

-

2

7

11

Total equity

893

959

1,027

1,082

1,076

Total Liabilities and Equity

$

5,743

$

5,554

$

5,165

$

5,283

$

5,144

Shares outstanding at period end (thousands)

78,556

78,495

78,555

78,139

78,125

GAAP book value per share

$

11.36

$

12.22

$

13.04

$

13.76

$

13.63

(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), New Sequoia Entities, and our Other Consolidated Entities had on GAAP income for the three and twelve months ended December 31, 2011.

Consolidating Income Statement(1)

Three Months Ended December 31, 2011

New

Other

($ in millions)

Redwood

Sequoia

Consolidated

Intercompany

Redwood

    (Parent) (2)

Entities

Entities

Adjustments

Consolidated

Interest income

$

20

$

8

$

21

$

-

$

49

Net discount (premium) amortization

9

(0)

(1)

-

8

Total interest income

29

8

20

-

56

Interest expense

(5)

(7)

(18)

-

(29)

Net interest income

24

1

2

-

27

Provision for loan losses

(1)

-

(7)

-

(8)

Market valuation adjustments, net

(11)

-

1

-

(10)

Net interest income (loss) after provision

12

1

(4)

-

10

and market valuation adjustments

Operating expenses

(13)

-

(0)

-

(13)

Realized gains on sales and calls, net

-

-

0

-

0

Income from New Sequoia Entities

1

-

-

(1)

-

Loss from Other Consolidated Entities

(3)

-

-

3

-

Noncontrolling interest

-

-

-

-

-

Provision for income taxes

-

-

-

-

-

Net (Loss) Income

$

(3)

$

1

$

(3)

$

2

$

(3)

Consolidating Income Statement(1)

Year Ended December 31, 2011

New

Other

($ in millions)

Redwood

Sequoia

Consolidated

Intercompany

Redwood

    (Parent) (2)

Entities

Entities

Adjustments

Consolidated

Interest income

$

70

$

20

$

92

$

-

$

182

Net discount (premium) amortization

41

0

(6)

-

35

Total interest income

111

20

86

-

217

Interest expense

(13)

(17)

(69)

-

(99)

Net interest income

98

3

18

-

118

Provision for loan losses

(1)

(0)

(15)

-

(16)

Market valuation adjustments, net

(29)

-

(11)

-

(40)

Net interest income (loss) after provision

67

3

(8)

-

62

and market valuation adjustments

Operating expenses

(47)

(0)

(0)

-

(48)

Realized gains (losses) on sales and calls, net

12

-

(1)

-

11

Income from New Sequoia Entities

3

-

-

(3)

-

Loss from Other Consolidated Entities

(8)

-

-

8

-

Noncontrolling interest

-

-

1

-

1

Provision for income taxes

(0)

-

-

-

(0)

Net Income (Loss)

$

26

$

3

$

(8)

$

5

$

26

(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), New Sequoia Entities, and our Other Consolidated Entities had on our GAAP balance sheet at December 31, 2011.

Consolidating Balance Sheet(1)

December 31, 2011

New

Other

($ in millions)

Redwood

Sequoia

Consolidated

Intercompany

Redwood

   (Parent) (2)

Entities (3)

Entities

Adjustments

Consolidated

Residential loans

$

395

$

676

$

3,124

$

-

$

4,195

Commercial loans

158

-

12

-

170

Real estate securities, at fair value:

Trading securities

22

-

231

-

253

Available-for-sale securities

729

-

-

-

729

Cash and cash equivalents

267

-

-

-

267

Investment in New Sequoia Entities

49

-

-

(49)

-

Investment in Other Consolidated Entities

42

-

-

(42)

-

Total earning assets

1,661

676

3,367

(90)

5,614

Other assets

91

6

33

-

130

Total Assets

$

1,752

$

682

$

3,400

$

(90)

$

5,743

Short-term debt

$

428

$

-

$

-

$

-

$

428

Other liabilities

72

2

69

-

144

Asset-backed securities issued

220

631

3,289

-

4,139

Long-term debt

140

-

-

-

140

Total liabilities

859

633

3,358

-

4,851

Stockholders’ equity

893

49

42

(90)

893

Noncontrolling interest

-

-

-

-

-

Total equity

893

49

42

(90)

893

Total Liabilities and Equity

$

1,752

$

682

$

3,400

$

(90)

$

5,743

(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 December 31, 2011, the resecuritization accounted for $325 million of available-for-sale securities and $220 million of asset-backed securities issued and our investment in this resecuritization is reflected in the difference between these assets and liabilities.

(3) The consolidating balance sheet presents the New Sequoia securitization entities separately from Other Consolidated Entities (Sequoia entities issued prior to 2010 and Acacia entities) to highlight our renewed focus on growing our core business of creating residential credit investments. As we complete additional securitizations, we expect New Sequoia Entities to represent a larger portion of our consolidated balance sheet as prior Sequoia securitization entities continue to pay down.

REDWOOD TRUST, INC.

Tax / GAAP Differences(1)

Three Months Ended December 31, 2011

($ in millions, except per share data)

Tax (Est.)

GAAP

Differences

Interest income

$

31

$

56

$

(25)

Interest expense

(7)

(29)

23

Net Interest Income

25

27

(3)

Provision for loan losses

-

(8)

8

Realized credit losses

(15)

-

(15)

Market valuation adjustments, net

-

(10)

10

Operating expenses

(11)

(13)

1

Realized gains on sales and calls, net

-

0

(0)

Provision for income taxes

(0)

-

(0)

Less: Net loss attributable to noncontrolling interest

-

-

-

Net Loss

$

(1)

$

(3)

$

1

Income per share

$

(0.02)

$

(0.03)

$

0.01

Tax / GAAP Differences(1)

Year Ended December 31, 2011

($ in millions, except per share data)

Tax (Est.)

GAAP

Differences

Interest income

$

128

$

217

$

(89)

Interest expense

(17)

(99)

82

Net Interest Income

112

118

(7)

Provision for loan losses

-

(16)

16

Realized credit losses

(58)

-

(58)

Market valuation adjustments, net

-

(40)

40

Operating expenses

(45)

(48)

2

Realized gains on sales and calls, net

-

11

(11)

Provision for income taxes

(0)

(0)

0

Less: Net loss attributable to noncontrolling interest

-

(1)

1

Net Income

$

9

$

26

$

(17)

Income per share

$

0.11

$

0.31

$

(0.20)

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

Taxable income for 2011 is an estimate until we file our 2011 tax return.

Taxable income per share is based on the number of shares outstanding at the end of each quarter.  The taxable income per share for the year ended December 31, 2011 is the sum of the four quarterly per share estimates.

Dividends in 2011 are expected to be characterized as 25% ordinary income, or $19 million, and 75% return of capital, or $59 million. The 2010 dividends were characterized as 62% ordinary income, or $48 million, and 38% return of capital, or $30 million. The portion of Redwood's dividends characterized as a return of capital are not taxable to a shareholder and reduces a shareholder's basis for shares held at each quarterly distribution date.