Press Releases

REDWOOD TRUST, INC.

Consolidated Income Statements(1)

Second

First

Fourth

Third

Second

($ in millions, except share data)

Quarter

Quarter

Quarter

Quarter

Quarter

2011

2011

2010

2010

2010

Interest income

$

53

$

54

$

56

$

59

$

56

Interest expense

(24)

(22)

(22)

(24)

(21)

Net interest income

29

32

34

35

35

Provision for loan losses

(2)

(3)

(8)

(2)

(4)

Market valuation adjustments, net

(11)

(6)

-

(2)

(7)

Net interest income after provision and

17

24

26

31

24

market valuation adjustments

Operating expenses

(12)

(12)

(13)

(12)

(11)

Realized gains on sales and calls, net

6

4

2

2

16

Provision for income taxes

-

-

-

-

-

Net income

10

16

15

21

29

Less: Net income (loss) attributable to noncontrolling interest

1

(2)

-

1

-

Net Income Attributable to Redwood Trust, Inc.

$

9

$

18

$

15

$

20

$

29

Average diluted shares (thousands)

79,478

79,372

78,944

78,961

78,852

Diluted earnings per share

$

0.11

$

0.22

$

0.18

$

0.25

$

0.35

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)

Six Months Ended

($ in millions, except share data)

June 30,

2011

2010

Interest income

$

107

$

115

Interest expense

(46)

(39)

Net interest income

62

76

Provision for loan losses

(4)

(14)

Market valuation adjustments, net

(17)

(18)

Net interest income after provision and

40

44

market valuation adjustments

Operating expenses

(24)

(29)

Realized gains on sales and calls, net

10

60

Provision for income taxes

-

-

Net income

27

76

Less: Net (loss) income attributable to noncontrolling interest

(1)

-

Net Income Attributable to Redwood Trust, Inc.

$

28

$

75

Average diluted shares (thousands)

79,425

78,662

Diluted earnings per share

$

0.34

$

0.94

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)

2011

2011

2010

2010

2010

Residential real estate loans

$

3,860

$

3,796

$

3,797

$

3,733

$

3,790

Commercial real estate loans

84

62

50

19

20

Real estate securities, at fair value:

Trading securities

297

322

330

310

276

Available-for-sale securities

741

782

825

798

741

Other investments

-

-

-

-

4

Cash and cash equivalents

80

220

47

189

288

Other assets

103

101

95

113

100

Total Assets

$

5,165

$

5,283

$

5,144

$

5,162

$

5,219

Short-term debt

$

41

$

-

$

44

$

-

$

-

Other liabilities

119

104

123

163

142

Asset-backed securities issued - Sequoia entities

3,566

3,646

3,458

3,568

3,681

Asset-backed securities issued - Acacia entities

273

311

303

264

253

Long-term debt

140

140

140

140

140

Total liabilities  

4,138

4,201

4,068

4,135

4,216

Stockholders’ equity

1,025

1,075

1,065

1,016

991

Noncontrolling interest

2

7

11

11

12

Total equity

1,027

1,082

1,076

1,027

1,003

Total Liabilities and Equity

$

5,165

$

5,283

$

5,144

$

5,162

$

5,219

Shares outstanding at period end (thousands)

78,555

78,139

78,125

77,984

77,908

GAAP book value per share

$

13.04

$

13.76

$

13.63

$

13.02

$

12.71

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

REDWOOD TRUST, INC.

The following tables show the estimated effect that Redwood, New Sequoia, and our Other Consolidated Entities had on GAAP income for the three and six months ended June 30, 2011.

Consolidating Income Statement(1)

Three Months Ended June 30, 2011

Other

($ in millions)

Redwood

New

Consolidated

Intercompany

Redwood

(Parent)

Sequoia

Entities

Adjustments

Consolidated

Interest income

$

16

$

5

$

25

$

-

$

45

Net discount (premium) amortization

10

-

(2)

-

8

Total interest income

26

5

23

-

53

Interest expense

(2)

(4)

(17)

-

(24)

Net interest income

23

1

5

-

29

Provision for loan losses

-

-

(2)

-

(2)

Market valuation adjustments, net

(7)

-

(4)

-

(11)

Net interest income (loss) after provision

16

1

-

-

17

and market valuation adjustments

Operating expenses

(12)

-

-

-

(12)

Realized gains on sales and calls, net

4

-

2

-

6

Income from New Sequoia

1

-

-

(1)

-

Income from Other Consolidated Entities

-

-

-

-

-

Noncontrolling interest

-

-

(1)

-

(1)

Provision for income taxes

-

-

-

-

-

Net Income

$

9

$

1

$

-

$

(1)

$

9

Consolidating Income Statement(1)

Six Months Ended June 30, 2011

Other

($ in millions)

Redwood

New

Consolidated

Intercompany

Redwood

(Parent)

Sequoia

Entities

Adjustments

Consolidated

Interest income

$

32

$

7

$

49

$

-

$

88

Net discount (premium) amortization

22

-

(3)

-

19

Total interest income

54

7

46

-

107

Interest expense

(5)

(6)

(34)

-

(46)

Net interest income

49

1

12

-

62

Provision for loan losses

-

-

(4)

-

(4)

Market valuation adjustments, net

(6)

-

(11)

-

(17)

Net interest income (loss) after provision

43

1

(3)

-

40

and market valuation adjustments

Operating expenses

(23)

-

-

-

(24)

Realized gains (losses) on sales and calls, net

11

-

(1)

-

10

Income from New Sequoia

1

-

-

(1)

-

Loss from Other Consolidated Entities

(4)

-

-

4

-

Noncontrolling interest

-

-

1

-

1

Provision for income taxes

-

-

-

-

-

Net Income (Loss)

$

28

$

1

$

(4)

$

3

$

28

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

REDWOOD TRUST, INC.

We present this table to highlight the impact that consolidation has on our GAAP balance sheet.

Consolidating Balance Sheet(1)

June 30, 2011

Other

($ in millions)

Redwood

New

Consolidated

Intercompany

Redwood

(Parent)

Sequoia (2)

Entities

Adjustments

Consolidated

Residential real estate loans

$

205

$

392

$

3,263

$

-

$

3,860

Commercial real estate loans

71

-

13

-

84

Real estate securities, at fair value:

Trading securities

20

-

277

-

297

Available-for-sale securities

741

-

-

-

741

Cash and cash equivalents

80

-

-

-

80

Investment in New Sequoia

37

-

-

(37)

-

Investment in Other Consolidated Entities

57

-

-

(57)

-

Total earning assets

1,211

392

3,552

(93)

5,062

Other assets

39

4

60

-

103

Total Assets

$

1,250

$

396

$

3,613

$

(93)

$

5,165

Short-term debt

$

41

$

-

$

-

$

-

$

41

Other liabilities

44

1

72

-

119

Asset-backed securities issued

-

358

3,481

-

3,839

Long-term debt

140

-

-

-

140

Total liabilities

225

359

3,554

-

4,138

Stockholders’ equity

1,025

37

57

(93)

1,025

Noncontrolling interest

-

-

2

-

2

Total equity

1,025

37

59

(93)

1,027

Total Liabilities and Equity

$

1,250

$

396

$

3,613

$

(93)

$

5,165

(1) Certain totals may not foot due to rounding. We are required under GAAP to consolidate all of the assets and liabilities of the Opportunity Fund we managed at June 30, 2011 (due to our significant general and limited partnership interests in the Fund and asset management responsibilities).  In addition, certain Sequoia and Acacia securitization entities 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 obligations of Redwood.

(2) The consolidating balance sheet presents the New Sequoia securitization entities separately from Other Consolidated Entities (Sequoia entities issued prior to 2010, Acacia entities, and the Opportunity Fund) to highlight our renewed focus on growing our core business of creating residential credit investments. As we complete additional securitizations, we expect New Sequoia securitization 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 June 30, 2011

($ in millions, except per share data)

Tax est.

GAAP

Differences

Interest income

$

30

$

53

$

(23)

Interest expense

(3)

(24)

21

Net Interest Income

27

29

(2)

Provision for loan losses

-

(2)

2

Realized credit losses

(16)

-

(16)

Market valuation adjustments, net

-

(11)

11

Operating expenses

(11)

(12)

1

Realized gains on sales and calls, net

-

6

(6)

Provision for income taxes

-

-

-

Less: Net income attributable to noncontrolling interest

-

1

(1)

Net (Loss) Income

$

-

$

9

$

(10)

(Loss) income per share

$

-

$

0.11

$

(0.11)

Tax / GAAP Differences(1)

Six Months Ended June 30, 2011

($ in millions, except per share data)

Tax est.

GAAP

Differences

Interest income

$

64

$

107

$

(44)

Interest expense

(6)

(46)

40

Net Interest Income

58

62

(4)

Provision for loan losses

-

(4)

4

Realized credit losses

(31)

-

(31)

Market valuation adjustments, net

-

(17)

17

Operating expenses

(23)

(24)

1

Realized gains on sales and calls, net

-

10

(10)

Provision for income taxes

-

-

-

Less: Net loss attributable to noncontrolling interest

-

(1)

1

Net Income

$

4

$

28

$

(23)

Income per share

$

0.06

$

0.34

$

(0.28)

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

Taxable (loss) income for 2011 is an estimate until we file the 2011 tax return.

Taxable (loss) income per share is based on the number of shares outstanding at the end of each quarter.  The six month taxable income per share is the sum of the two quarterly per share estimates.

The characteristics of our 2011 dividend between ordinary income and a return of capital will be determined at the end of 2011.  To the extent the REIT has taxable income or net capital gains in 2011, these amounts will be characterized as ordinary income.  The portion of Redwood's dividends characterized as a return of capital is not taxable to a shareholder and reduces a shareholder's basis for shares held at each quarterly distribution date.

REDWOOD TRUST, INC.

Book Value Per Share (1)

($ in millions, except per share data)

June 30, 2011

March 31, 2011

Cash and cash equivalents

$

80

$

220

Real estate loans at Redwood

    Residential

205

55

    Commercial

71

42

Subtotal real estate loans

276

97

Real estate securities at Redwood

    Residential

754

780

    Commercial

6

7

    CDO

1

1

Subtotal real estate securities

761

788

Investments in Sequoia entities

90

97

Investments in Acacia entities

1

2

Investments in the Fund

3

11

Other assets (2)

39

34

Total assets

1,250

1,249

Short-term debt

(41)

-

Long-term debt

(140)

(140)

Other liabilities (3)

(44)

(34)

Stockholders' Equity

$

1,025

$

1,075

Book Value Per Share

$

13.04

$

13.76

(1) This table presents our assets and liabilities as calculated and reported under GAAP and as adjusted to reflect our investments in the Redwood Opportunity Fund, L.P. (the Fund) and in Sequoia and Acacia securitization entities in separate line items, similar to the equity method of accounting, reflecting the reality that the underlying assets and liabilities owned by these entities are legally not ours. We own only the securities and interests that we have acquired from these entities. Certain totals may not foot due to rounding.

(2) At June 30, 2011, other assets are comprised of $5 million of accrued interest receivable and $34 million of other assets. At March 31, 2011, other assets are comprised of $4 million of accrued interest receivable and $30 million of other assets.

(3) At June 30, 2011, other liabilities are comprised of dividends payable of $20 million and accrued interest and other liabilities of $24 million. At March 31, 2011, other liabilities are comprised of dividends payable of $20 million and accrued interest and other liabilities of $14 million.

REDWOOD TRUST, INC.

Sources and Uses of Cash (1)

($ in millions)

Three Months Ended

June 30, 2011

March 31, 2011

Beginning cash balance

$

220

$

47

Sources of cash(2)

Loans at Redwood

5

6

Proceeds from securitization

-

296

Securities at Redwood - principal and interest

Residential senior

30

33

Residential Re-REMIC

1

2

Residential subordinate

8

9

Commercial and CDO

1

-

Sales of securities(3)

14

30

Investments in Consolidated Entities(1)

16

15

Short-term debt financing

41

-

Derivative margin returned, net

-

3

Changes in working capital

-

3

Total sources of cash

116

397

Uses of cash

Acquisitions of residential loans

(152)

(101)

Origination of commercial loans

(29)

(12)

Acquisitions of securities(4)

(29)

(13)

Investment in New Sequoia

-

(15)

Short-term debt repayment

-

(44)

Cash operating expenses

(12)

(17)

Derivative margin posted, net

(11)

-

Interest expense on long-term debt

(2)

(2)

Dividends

(20)

(20)

Changes in working capital

(1)

-

Total uses of cash

(256)

(224)

Net (uses) sources of cash

(140)

173

Ending Cash Balance

$