FOR IMMEDIATE RELEASE | CONTACT: | Kristin Brown | |
Redwood Trust, Inc. | Investor Relations | ||
Monday, November 7, 2016 | (415) 384-3805 | ||
REDWOOD TRUST, INC. | ||||||||||||||||||||
Consolidated Income Statements (1) | Third | Second | First | Fourth | Third | |||||||||||||||
($ in millions, except share and per share data) | Quarter | Quarter | Quarter | Quarter | Quarter | |||||||||||||||
2016 | 2016 | 2016 | 2015 | 2015 | ||||||||||||||||
Interest income | $ | 61 | $ | 67 | $ | 62 | $ | 69 | $ | 63 | ||||||||||
Interest expense | (22 | ) | (22 | ) | (24 | ) | (25 | ) | (24 | ) | ||||||||||
Net interest income | 39 | 44 | 38 | 44 | 40 | |||||||||||||||
Reversal of provision for loan losses | 1 | 7 | — | — | — | |||||||||||||||
Net interest income after provision | 40 | 51 | 38 | 44 | 40 | |||||||||||||||
Non-interest income (loss) | ||||||||||||||||||||
Mortgage banking activities, net | 10 | 8 | 7 | — | 1 | |||||||||||||||
MSR income, net | 4 | 3 | 6 | 3 | 4 | |||||||||||||||
Investment fair value changes, net | 12 | (11 | ) | (20 | ) | (4 | ) | (14 | ) | |||||||||||
Other income | 2 | 2 | 1 | 1 | — | |||||||||||||||
Realized gains, net | 7 | 10 | 10 | 20 | 6 | |||||||||||||||
Total non-interest income (loss), net | 34 | 11 | 4 | 20 | (3 | ) | ||||||||||||||
Operating expenses | (20 | ) | (20 | ) | (30 | ) | (23 | ) | (24 | ) | ||||||||||
(Provision for) benefit from income taxes | (1 | ) | — | — | — | 7 | ||||||||||||||
Net income | $ | 53 | $ | 41 | $ | 12 | $ | 41 | $ | 19 | ||||||||||
Weighted average diluted shares (thousands) (2) | 97,832 | 97,762 | 77,138 | 103,377 | 85,075 | |||||||||||||||
Diluted earnings per share | $ | 0.58 | $ | 0.48 | $ | 0.15 | $ | 0.46 | $ | 0.22 | ||||||||||
Regular dividends declared per common share | $ | 0.28 | $ | 0.28 | $ | 0.28 | $ | 0.28 | $ | 0.28 | ||||||||||
(1) | Certain totals may not foot due to rounding. |
(2) | In the third and second quarters of 2016 and the fourth quarter of 2015, weighted average diluted shares included shares from the assumed conversion of our convertible and/or exchangeable debt in accordance with GAAP diluted EPS provisions. Actual shares outstanding at September 30, 2016, June 30, 2016, and December 31, 2015 were 76,682, 76,935, and 78,163, respectively. |
REDWOOD TRUST, INC. | ||||||||
Consolidated Income Statements (1) | Nine Months Ended September 30, | |||||||
($ in millions, except share and per share data) | 2016 | 2015 | ||||||
Interest income | $ | 190 | $ | 191 | ||||
Interest expense | (68 | ) | (71 | ) | ||||
Net interest income | 122 | 120 | ||||||
Reversal of provision for loan losses | 7 | — | ||||||
Net interest income after provision | 129 | 120 | ||||||
Non-interest income | ||||||||
Mortgage banking activities, net | 25 | 11 | ||||||
MSR income (loss), net | 13 | (7 | ) | |||||
Investment fair value changes, net | (19 | ) | (17 | ) | ||||
Other income | 4 | 2 | ||||||
Realized gains, net | 26 | 16 | ||||||
Total non-interest income | 49 | 6 | ||||||
Operating expenses | (71 | ) | (75 | ) | ||||
(Provision for) benefit from income taxes | (1 | ) | 10 | |||||
Net income | $ | 106 | $ | 61 | ||||
Weighted average diluted shares (thousands) | 97,992 | 85,339 | ||||||
Diluted earnings per share | $ | 1.23 | $ | 0.69 | ||||
Regular dividends declared per common share | $ | 0.84 | $ | 0.84 | ||||
(1) | Certain totals may not foot due to rounding. |
REDWOOD TRUST, INC. | ||||||||
Reconciliation of GAAP Net Income to Core Earnings (1) (2) | Three Months Ended | |||||||
($ in millions, except per share data) | September 30, 2016 | June 30, 2016 | ||||||
GAAP net income | $ | 53 | $ | 41 | ||||
Adjustments: | ||||||||
Eliminate mark-to-market changes on long-term investments and associated derivatives(3) | (20 | ) | 4 | |||||
Eliminate restructuring and related charges(4) | — | — | ||||||
Eliminate reversal of commercial loan loss reserve(5) | — | (5 | ) | |||||
Income taxes associated with core earnings adjustments(6) | — | — | ||||||
Total adjustments | (20 | ) | (2 | ) | ||||
Core earnings | $ | 33 | $ | 40 | ||||
GAAP net income per diluted common share | $ | 0.58 | $ | 0.48 | ||||
Core earnings per diluted common share(7) | $ | 0.39 | $ | 0.47 | ||||
(1) | Certain totals may not foot due to rounding. |
(2) | Core earnings is a non-GAAP measure of Redwood’s earnings and results of operations. Specifically, management defines core earnings as: GAAP net income adjusted to (i) eliminate the impact of quarterly mark-to-market changes on the fair value of our long-term investments (and associated derivatives) related to changes in benchmark interest rates and credit spreads and (ii) include the hypothetical income taxes associated with core earnings adjustments. In addition, Redwood’s core earnings also exclude the impact of the restructuring and related charges associated with the recent restructuring of Redwood's conforming residential and commercial mortgage banking operations in the first quarter of 2016, as well as the release of commercial loan loss reserves in the second quarter of 2016 associated with the anticipated sale of our commercial mezzanine loans. |
(3) | Adjustment eliminates the mark-to-market changes on the fair value of loans held-for-investment, trading securities, other investments, and associated derivatives that are primarily related to changes in benchmark interest rates and credit spreads. More details on the components of investment fair value changes, net, are included in the Financial Insights section of the third quarter Redwood Review. |
(4) | Adjustment eliminates operating expense charges from the restructuring of Redwood's conforming residential and commercial mortgage banking operations, which were announced during the first quarter of 2016, and related charges associated with the subsequent announcement of the departure of Redwood's President. |
(5) | Adjustment eliminates the benefit to GAAP earnings from the release of $5 million of commercial loan loss reserves, which was associated with the anticipated sale of our commercial mezzanine loans. |
(6) | We apply estimated effective tax rates to core earnings adjustments occurring within Redwood's taxable REIT subsidiaries to estimate the hypothetical income tax expense or benefit associated with those adjustments. For the three months ended September 30, 2016 and June 30, 2016, the core earnings adjustments we made to our reported results did not result in any associated hypothetical income tax adjustments. |
(7) | Consistent with the calculation of net income per diluted common share for GAAP purposes, core earnings per diluted common share is calculated following the "two-class" method. Additional information on the calculation of core earnings using the "two-class" method can be found in Table 2 in the Financial Tables section of the Appendix to the third quarter Redwood Review. |
REDWOOD TRUST, INC. | |||||||||||||||||||||
Consolidated Balance Sheets (1) | 30-Sep | 30-Jun | 31-Mar | 31-Dec | 30-Sep | ||||||||||||||||
($ in millions, except share and per share data) | 2016 | 2016 | 2016 | 2015 | 2015 | ||||||||||||||||
Residential loans | $ | 4,311 | $ | 4,040 | $ | 3,715 | $ | 3,929 | $ | 4,037 | |||||||||||
Real estate securities | 937 | 884 | 920 | 1,233 | 1,085 | ||||||||||||||||
Commercial loans | 30 | 325 | 364 | 403 | 468 | ||||||||||||||||
Mortgage servicing rights | 106 | 110 | 127 | 192 | 163 | ||||||||||||||||
Cash and cash equivalents | 221 | 217 | 305 | 220 | 235 | ||||||||||||||||
Other assets | 267 | 322 | 296 | 243 | 269 | ||||||||||||||||
Total assets | $ | 5,873 | $ | 5,898 | $ | 5,727 | $ | 6,220 | $ | 6,257 | |||||||||||
Short-term debt | $ | 1,117 | $ | 1,059 | $ | 804 | $ | 1,855 | $ | 1,873 | |||||||||||
Other liabilities | 185 | 202 | 195 | 142 | 189 | ||||||||||||||||
Asset-backed securities issued, net | 820 | 860 | 958 | 1,049 | 1,178 | ||||||||||||||||
Long-term debt, net | 2,620 | 2,684 | 2,683 | 2,028 | 1,811 | ||||||||||||||||
Total liabilities | 4,742 | 4,805 | 4,641 | 5,074 | 5,050 | ||||||||||||||||
Stockholders' equity | 1,130 | 1,093 | 1,086 | 1,146 | 1,207 | ||||||||||||||||
Total liabilities and equity | $ | 5,873 | $ | 5,898 | $ | 5,727 | $ | 6,220 | $ | 6,257 | |||||||||||
Shares outstanding at period end (thousands) | 76,682 | 76,935 | 76,627 | 78,163 | 82,125 | ||||||||||||||||
GAAP book value per share | $ | 14.74 | $ | 14.20 | $ | 14.17 | $ | 14.67 | $ | 14.69 | |||||||||||
(1) | Certain totals may not foot due to rounding. |