Redwood Trust Reports Fourth Quarter 2006 Results
MILL VALLEY, Calif.--(BUSINESS WIRE)--
Redwood Trust, Inc. (NYSE:RWT) today reported GAAP earnings of $36 million ($1.32 per share) for the fourth quarter of 2006 and $128 million ($4.85 per share) for 2006.
"This was a pretty good quarter and a pretty good year, with return on equity in the middle of our 11% to 18% target range," said Doug Hansen, Redwood's President. "We believe we are well positioned as we move forward into the new year."
Redwood's GAAP earnings of $1.32 per share for the fourth quarter increased from $1.22 per share earned in the prior quarter but decreased from earnings of $1.68 per share for the fourth quarter of 2005. Earnings for 2006 of $4.85 per share were lower than the $7.96 per share we earned in 2005.
GAAP book value per share decreased from $40.02 to $37.51 during the fourth quarter of 2006 as a result of fourth quarter regular and special dividend payments of $3.70 per share. During 2006, book value increased by 1% from $37.20 per share to $37.51 per share.
Net interest income for the fourth quarter of 2006 was $45 million, a decrease from net interest income of $49 million for the prior quarter and an increase from net interest income of $41 million for the fourth quarter of 2005. Net interest income decreased from $205 million in 2005 to $184 million in 2006.
Income gains from asset sales, calls, and valuation adjustments were $5 million for the fourth quarter of 2006, an increase from $1 million in the prior quarter and a decrease from $18 million in the fourth quarter of 2005. Income gains from asset sales, calls, and valuation adjustments decreased from $61 million in 2005 to $10 million in 2006.
Operating expenses were $13 million for the fourth quarter of 2006, a decrease from $14 million for the prior quarter and equal to the $13 million for the fourth quarter of 2005. Operating expenses increased from $48 million in 2005 to $56 million in 2006.
Additional Information
Additional information on our GAAP results is available in our Annual Report on Form 10-K for the year ended December 31, 2006 which was filed today with the Securities and Exchange Commission. Today we also released our Redwood Review covering the fourth quarter of 2006. The Redwood Review contains a discussion of 2006 and fourth quarter activity, taxable income and other non-GAAP performance measures, and a review of Redwood's business and outlook. Our Form 10-K and the Redwood Review are available on our web site (www.redwoodtrust.com).
CAUTIONARY STATEMENT: This press release contains forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature, including the words "anticipated," "estimated," "should," "expect," "believe," "intend," and similar expressions, are intended to identify forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including, among other things, those described in our 2006 Annual Report on Form 10-K under Item 1A "Risk Factors." Other risks, uncertainties, and factors that could cause actual results to differ materially from those projected are detailed from time to time in reports filed by us with the Securities and Exchange Commission, including Forms 10-K, 10-Q, and 8-K. Important factors that may impact our actual results include changes in interest rates and market values; changes in prepayment rates; general economic conditions, particularly as they affect the price of earning assets and the credit status of borrowers; the level of liquidity in the capital markets as it affects our ability to finance our real estate asset portfolio; and other factors not presently identified. In light of these risks, uncertainties, and assumptions, the forward-looking events mentioned in, discussed in, or incorporated by reference into this press release might not occur. Accordingly, our actual results may differ from our current expectations, estimates, and projections. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
REDWOOD TRUST, INC.
(All dollars in millions, except share data)
Fourth Third Second First Fourth
Quarter Quarter Quarter Quarter Quarter
CONSOLIDATED INCOME STATEMENT 2006 2006 2006 2006 2005
----------------------------- ----------------------------------------
Interest income $ 218 $ 224 $ 218 $ 226 $ 231
Interest expense (173) (175) (173) (181) (190)
-----------------------------
Net interest income 45 49 45 45 41
Operating expenses (13) (14) (16) (13) (13)
Gains on sales and calls, net 7 6 9 1 19
Valuation adjustments (2) (5) (3) (3) (1)
Provision for income taxes (1) (4) (3) (2) (4)
-----------------------------
GAAP earnings $ 36 $ 32 $ 32 $ 28 $ 42
Average diluted shares
(thousands) 27,122 26,625 26,109 25,703 25,311
GAAP earnings per share
(diluted) $ 1.32 $ 1.22 $ 1.20 $ 1.09 $ 1.68
Regular dividends per share $ 0.70 $ 0.70 $ 0.70 $ 0.70 $ 0.70
Special dividends per share 3.00 0.00 0.00 0.00 3.00
-----------------------------
Total dividends per share $ 3.70 $ 0.70 $ 0.70 $ 0.70 $ 3.70
REDWOOD TRUST, INC. (All dollars in millions, except share data) CONSOLIDATED INCOME STATEMENT 2006 2005 2004 ------------------------------------------ --------------------------- Interest income $ 886 $ 962 $ 652 Interest expense (702) (757) (432) ------------------------------------------ Net interest income 184 205 220 Operating expenses (56) (48) (38) Gains on sales and calls, net 23 66 66 Valuation adjustments (13) (5) (7) Provision for income taxes (10) (18) (8) ------------------------------------------ GAAP earnings $ 128 $ 200 $ 233 Average diluted shares (thousands) 26,314 25,121 22,229 GAAP earnings per share (diluted) $ 4.85 $ 7.96 $ 10.47 Regular dividends per share $ 2.80 $ 2.80 $ 2.68 Special dividends per share 3.00 3.00 6.00 ------------------------------------------ Total dividends per share $ 5.80 $ 5.80 $ 8.68
REDWOOD TRUST, INC. (All dollars in millions, except share data) CONSOLIDATED BALANCE 31-Dec 30-Sep 30-Jun 31-Mar 31-Dec SHEET 2006 2006 2006 2006 2005 ------------------------- -------- -------- -------- -------- -------- Real estate loans $ 9,352 $ 9,875 $10,491 $12,045 $13,934 Real estate securities 3,233 2,912 2,661 2,529 2,419 Cash and cash equivalents 168 113 106 85 176 Other assets 277 300 272 320 248 ------------------------- Total consolidated assets $13,030 $13,200 $13,530 $14,979 $16,777 Redwood debt $ 1,856 $ 510 $ 529 $ 0 $ 170 Consolidated asset-back securities issued 9,979 11,554 11,898 13,930 15,585 Other liabilities 92 93 99 82 87 Junior subordinated notes 100 - - - - Equity 1,003 1,043 1,004 967 935 ------------------------- Total consolidated liabilities and equity $13,030 $13,200 $13,530 $14,979 $16,777 Shares outstanding at period end (thousands) 26,733 26,053 25,668 25,382 25,133 GAAP equity (GAAP book value) per share $ 37.51 $ 40.02 $ 39.13 $ 38.11 $ 37.20
Source: Redwood Trust, Inc.
Released February 20, 2007