Redwood Trust Reports Fourth Quarter 2009 Results
MILL VALLEY, Calif., Feb. 25 /PRNewswire-FirstCall/ -- Redwood Trust, Inc. (NYSE: RWT) today reported net income for the fourth quarter of 2009 of $40 million, or $0.51 per share. This compares to net income of $27 million, or $0.34 per share, for the third quarter of 2009, and a net loss of $116 million, or $3.46 per share, for the fourth quarter of 2008.
For 2009, Redwood reported net income of $39 million, or $0.55 per share. This compares to a net loss of $444 million, or $13.46 per share, in 2008.
Redwood also reported that it incurred an estimated taxable loss of $34 million, or $0.44 per share, during the fourth quarter of 2009. This compares to an estimated taxable loss of $23 million, or $0.30 per share, for the third quarter of 2009, and a taxable loss of $13 million, or $0.39 per share, for the fourth quarter of 2008.
For 2009, Redwood estimated that it incurred a taxable loss of $83 million, or $1.12 per share. This compares to taxable income of $19 million, or $0.58 per share, in 2008.
GAAP book value at year end was $12.50 per share, an increase of $0.82 per share, or 7%, from the end of the third quarter of 2009, and management's estimate of non-GAAP economic value increased to $13.03 per share, up $0.75 per share, or 6%, from the end of the third quarter of 2009.
During the fourth quarter of 2009, Redwood acquired $68 million of residential securities, sold $66 million of securities, and ended the quarter with a securities portfolio of $781 million, up from $751 million at the end of the third quarter of 2009. Redwood ended the fourth quarter with $243 million of cash.
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 Annual Report on Form 10-K for the year ended December 31, 2009 which was filed today with the Securities and Exchange Commission. Redwood's Form 10-K is available on its website at www.redwoodtrust.com.
The accounting concepts and disclosures relating to Redwood's financial statements are complex. Today, The Redwood Review was released covering the fourth quarter of 2009. The Redwood Review is an additional publication that provides information about Redwood. The Redwood Review is available at www.redwoodtrust.com.
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 Annual Report on Form 10-K for the year ended December 31, 2009, under the caption "Risk Factors." Other risks, uncertainties, and factors that could cause actual results to differ materially from those projected are described below and 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
------------------------------
($ in millions, except share data)
Fourth Third Second First Fourth
Quarter Quarter Quarter Quarter Quarter
2009 2009 2009 2009 2008
---- ---- ---- ---- ----
Interest income $62 $70 $74 $82 $123
Interest expense (21) (25) (39) (47) (99)
--- --- --- --- ---
Net interest income 41 45 35 35 24
Provision for loan losses (9) (10) (15) (15) (19)
Market valuation
adjustments, net (4) (11) (29) (44) (111)
--- --- --- --- ----
Net interest income (loss)
after provision and
market valuation adjustments 28 24 (9) (24) (106)
Operating expenses (11) (15) (10) (11) (14)
Realized gains, net 20 18 25 - 6
Benefit from (provision
for) income taxes 3 - 1 - (4)
--- --- --- --- ---
Net income (loss) 40 27 7 (35) (118)
Less: Net (loss) income
attributable to
noncontrolling interest - - - - (2)
--- --- --- --- ---
GAAP net income (loss) $40 $27 $7 $(35) $(116)
=== === === ==== =====
Average diluted shares
(thousands) 78,101 78,223 66,446 53,632 33,366
Diluted earnings (loss)
per share $0.51 $0.34 $0.10 $(0.65) $(3.46)
Regular dividends declared
per common share $0.25 $0.25 $0.25 $0.25 $0.75
REDWOOD TRUST, INC.
Consolidated Income Statements
------------------------------
($ in millions, except share data)
Twelve Months Ended
December 31,
2009 2008
---- ----
Interest income $288 $568
Interest expense (132) (417)
---- ----
Net interest income 156 151
Provision for loan losses (49) (55)
Market valuation adjustments, net (88) (493)
--- ----
Net interest income (loss) after provision and 19 (397)
market valuation adjustments
Operating expenses (47) (61)
Realized gains, net 63 9
Benefit from income taxes 4 3
--- ---
Net income (loss) 39 (446)
Less: Net (loss) income attributable to
noncontrolling interest - (2)
--- ---
GAAP net income (loss) $39 $(444)
=== =====
Average diluted shares (thousands) 68,991 33,023
Diluted earnings (loss) per share $0.55 $(13.46)
Regular dividends declared per common share $1.00 $3.00
REDWOOD TRUST, INC.
Consolidated Balance Sheets
---------------------------
($ in millions, except share data)
31-Dec 30-Sep 30-Jun 31-Mar 31-Dec
2009 2009 2009 2009 2008
---- ---- ---- ---- ----
Real estate loans $3,740 $3,831 $3,966 $4,541 $4,659
Real estate securities, at
fair value:
Trading securities 278 275 253 264 340
Available-for-sale securities 810 787 551 255 233
Other investments 20 29 47 62 78
Cash and cash equivalents 243 217 337 333 126
Other assets 162 146 131 126 146
--- --- --- --- ---
Total Assets $5,253 $5,285 $5,285 $5,581 $5,582
====== ====== ====== ====== ======
Short-term debt $- $- $- $- $-
Other liabilities 181 203 185 198 252
Asset-backed securities issued -
Sequoia entities 3,645 3,728 3,843 4,418 4,508
Asset-backed securities issued -
Acacia entities 298 288 287 291 347
Long-term debt 140 140 150 150 150
--- --- --- --- ---
Total liabilities 4,264 4,359 4,465 5,057 5,257
Stockholders’ equity 972 907 802 506 302
Noncontrolling interest 17 19 18 18 23
--- --- --- --- ---
Total equity 989 926 820 524 325
------ ------ ------ ------ ------
Total Liabilities and Equity $5,253 $5,285 $5,285 $5,581 $5,582
====== ====== ====== ====== ======
Shares outstanding at period end
(thousands) 77,737 77,669 77,503 60,228 33,471
GAAP book value per share $12.50 $11.68 $10.35 $8.40 $9.02
REDWOOD TRUST, INC.
Consolidating Income Statement
------------------------------
Three Months Ended December 31, 2009
($ in millions)
The Securitization Intercompany Redwood
Redwood Fund Entities Adjustments Consolidated
------- ---- -------- ----------- --------------
Interest
income $19 $1 $38 $- $58
Net
discount
(premium)
amortization 6 1 (3) - 4
--- --- --- --- ---
Total
interest
income 25 2 35 - 62
Management
fees 1 - - (1) -
Interest
expense (1) - (20) - (21)
--- --- --- --- ---
Net
interest
income 25 2 15 (1) 41
Provision
for loan
losses - - (9) - (9)
Market
valuation
adjustments,
net (2) (1) (1) - (4)
--- --- --- --- ---
Net interest
income
after provision
and market
valuation
adjustments 23 1 5 (1) 28
Operating
expenses (11) (1) - 1 (11)
Realized
gains, net 20 - - - 20
Income from
the Fund and
Securitization
Entities 5 - - (5) -
Noncontrolling
interest - - - - -
Benefit from
income taxes 3 - - - 3
--- --- --- --- ---
Net income $40 $- $5 $(5) $40
=== === === === ===
Consolidating Income Statement
------------------------------
Year Ended December 31, 2009
($ in millions)
The Securitization Intercompany Redwood
Redwood Fund Entities Adjustments Consolidated
------- ---- -------- ----------- ------------
Interest
income $85 $- $194 $(1) $278
Net
discount
(premium)
amortization 13 8 (11) - 10
--- --- --- --- ---
Total
interest
income 98 8 183 (1) 288
Management
fees 3 - - (3) -
Interest
expense (5) - (130) 3 (132)
--- --- ---- --- ----
Net
interest
income 96 8 53 (1) 156
Provision
for loan
losses - - (49) - (49)
Market
valuation
adjustments,
net (69) (7) (12) - (88)
--- --- --- --- ---
Net interest
(loss) income
after
provision
and market
valuation
adjustments 27 1 (8) (1) 19
Operating
expenses (46) (1) (1) 1 (47)
Realized
gains, net 44 - 19 - 63
Income from
the Fund and
Securitization
Entities 10 - - (10) -
Noncontrolling
interest - - - - -
Benefit from
income taxes 4 - - - 4
--- --- --- --- ---
Net income $39 $- $10 $(10) $39
=== === === ==== ===
REDWOOD TRUST, INC.
Consolidating Balance Sheet
---------------------------
December 31, 2009
($ in millions)
The Securitization Intercompany Redwood
Redwood Fund Entities Adjustments Consolidated
------- ---- -------- ----------- ------------
Real
estate loans $3 $- $3,737 $- $3,740
Real estate
securities, at
fair value:
Trading
securities 8 - 270 - 278
Available-
for-sale
securities 773 37 - - 810
Other
investments - - 20 - 20
Cash and cash
equivalents 243 - - - 243
Investment
in the Fund 22 - - (22) -
Investment in
Securitization
Entities 75 - - (75) -
--- --- --- --- ---
Total
earning
assets 1,124 37 4,027 (97) 5,091
Other assets 21 5 136 - 162
--- --- --- --- ---
Total Assets $1,145 $42 $4,163 $(97) $5,253
====== === ====== ==== ======
Short-term debt $- $- $- $- $-
Other
liabilities 33 3 145 - 181
Asset-backed
securities
issued - - 3,943 - 3,943
Long-term debt 140 - - - 140
--- --- --- --- ---
Total
liabilities 173 3 4,088 - 4,264
Stockholders’
equity 972 22 75 (97) 972
Noncontrolling
interest - 17 - - 17
--- --- --- --- ---
Total equity 972 39 75 (97) 989
------ --- ------ ---- ------
Total
Liabilities
and Equity $1,145 $42 $4,163 $(97) $5,253
====== === ====== ==== ======
REDWOOD TRUST, INC.
GAAP / Tax Differences
----------------------
Three Months Ended December 31, 2009
(In Millions, Except per Share Data)
Tax GAAP Differences
--- ---- -----------
Interest income $39 $62 $(23)
Interest expense (1) (21) 20
-- --- --
Net Interest Income 38 41 (3)
Provision for loan losses - (9) 9
Realized credit losses (54) - (54)
Market valuation adjustments, net - (4) 4
Operating expenses (18) (11) (7)
Realized gains, net - 20 (20)
Benefit from income taxes - 3 (3)
Less: Net loss attributable to
noncontrolling interest - - -
--- --- ---
Net (Loss) Income $(34) $40 $(74)
==== === ====
Estimated income (loss) per share $(0.44) $0.51 $(0.95)
GAAP / Tax Differences
----------------------
Three Months Ended September 30, 2009
(In Millions, Except per Share Data)
Tax GAAP Differences
--- ---- -----------
Interest income $54 $70 $(16)
Interest expense (1) (25) 24
-- --- --
Net Interest Income 53 45 8
Provision for loan losses - (10) 10
Realized credit losses (67) - (67)
Market valuation adjustments, net - (11) 11
Operating expenses (16) (15) (1)
Realized gains, net 7 18 (11)
Benefit from income taxes - - -
Less: Net loss attributable to
noncontrolling interest - - -
--- --- ---
Net (Loss) Income $(23) $27 $(50)
==== === ====
Estimated income (loss) per share $(0.30) $0.34 $(0.64)
GAAP / Tax Differences
----------------------
Three Months Ended December 31, 2008
(In Millions, Except per Share Data)
Tax GAAP Differences
--- ---- -----------
Interest income $44 $123 $(79)
Interest expense (4) (99) 95
-- --- --
Net Interest Income 40 24 16
Provision for loan losses - (19) 19
Realized credit losses (40) - (40)
Market valuation adjustments, net - (111) 111
Operating expenses (13) (14) 1
Realized gains, net - 6 (6)
Provision for income taxes - (4) 4
Less: Net loss attributable to
noncontrolling interest - (2) 2
--- --- ---
Net Loss $(13) $(116) $103
==== ===== ====
Estimated loss per share $(0.39) $(3.46) $3.07
REDWOOD TRUST, INC.
GAAP / Tax Differences
----------------------
Year Ended December 31, 2009
(In Millions, Except per Share Data)
Tax GAAP Differences
--- ---- -----------
Interest income $193 $288 $(95)
Interest expense (5) (132) 127
-- ---- ---
Net Interest Income 188 156 32
Provision for loan losses - (49) 49
Realized credit losses (224) - (224)
Market valuation adjustments, net - (88) 88
Operating expenses (54) (47) (7)
Realized gains, net 7 63 (56)
Benefit from income taxes - 4 (4)
Less: Net loss attributable to
noncontrolling interest - - -
--- --- ---
Net (Loss) Income $(83) $39 $(122)
==== === =====
Estimated income (loss) per share $(1.12) $0.55 $(1.67)
GAAP / Tax Differences
----------------------
Year Ended December 31, 2008
(In Millions, Except per Share Data)
Tax GAAP Differences
--- ---- -----------
Interest income $202 $568 $(366)
Interest expense (8) (417) 409
--- ---- ---
Net Interest Income 194 151 43
Provision for loan losses - (55) 55
Realized credit losses (117) - (117)
Market valuation adjustments, net - (493) 493
Operating expenses (58) (61) 3
Realized gains, net - 9 (9)
Benefit from income taxes - 3 (3)
Less: Net loss attributable to
noncontrolling interest - (2) 2
--- --- ---
Net Income (Loss) $19 $(444) $463
=== ===== ====
Estimated income (loss) per share $0.58 $(13.46) $14.04
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, 2009
-----------------
Management's
Estimate
GAAP of Non-GAAP
As Economic
Reported Adjustments Value
----------- ------------- ----------
Cash and cash
equivalents $243 $ $243
Real estate
securities at
Redwood
Residential 771 771
Commercial 9 9
CDO 1 1
--- ---
Subtotal real
estate securities 781 781
Investments
in the Fund 22 22
Investments in
Sequoia entities 72 (29) (a) 43
Investments in
Acacia entities (b) 3 3
--- ---
Total cash,
securities and
investments 1,121 1,092
Long-term debt (140) 71 (c) (69)
Other assets/
liabilities,
net (d) (9) (9)
--- ---
Stockholders' Equity $972 $1,014
==== ======
Book Value Per Share $12.50 $13.03
====== ======
(a) Our investments in Sequoia entities consist predominately of
AAA-rated interest-only securities, and to a smaller extent, senior
and subordinate securities issued by Sequoia entities. We calculated
the $43 million estimate of economic value for these securities using
the same valuation process that we follow to fair value our other
real estate securities. In contrast, the $72 million of GAAP carrying
value of these investments represents the difference between the
assets and liabilities owned by the Sequoia entities.
(b) The fair value of our investments in Acacia entities was $3 million
and the GAAP carrying value was $3 million. These investments consist
of equity and securities in the Acacia entities we sponsor, which
have minimal value, as well as management fees we receive from Acacia
entities. We valued the management fees at $3 million.
(c) At December 31, 2009, we had $140 million of long-term debt
outstanding at an interest rate of LIBOR plus 225 basis points due in
2037. We calculated the $69 million estimate of economic value of this
debt using the same valuation process used to fair value our other
financial assets and liabilities.
(d) Other assets/liabilities, net are comprised of $3 million of real
estate loans, $6 million of accrued interest receivable, and $15
million of other assets, less dividends payable of $19 million and
accrued interest and other liabilities of $14 million.
REDWOOD TRUST, INC.
Sources and Uses of Cash*
-------------------------
(In Millions)
Three Months Ended
December 31, 2009
------------------
Beginning cash balance $217
Business cash flow:
Cash flow from investments 68
Asset management fees 1
Operating expenses (11)
Interest expense on long-term debt (1)
---
Total business cash flow 57
Other sources and uses:
Proceeds from asset sales 66
Changes in working capital (9)
Acquisitions (68)
Dividends (20)
---
Net other uses (31)
---
Net sources of cash 26
---
Ending cash balance $243
====
*The sources and uses of cash in the table above are derived from our
GAAP Consolidated Statements of Cash Flow 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.
SOURCE Redwood Trust, Inc.
Released February 25, 2010