• | GAAP net loss was $(1) million, or $(0.02) per diluted common share |
• | Non-GAAP core earnings(1) were $38 million, or $0.39 per diluted common share |
• | Book value per common share was $15.89 at December 31, 2018 |
• | Economic return on book value(2) of (1.4)% for the fourth quarter and 7.8% for the year ended December 31, 2018 |
• | Recourse debt-to-equity leverage ratio(3) of 3.5x at December 31, 2018 |
• | Deployed $235 million of capital into new investments in the fourth quarter of 2018, bringing year-to-date deployment to a record $810 million |
• | Recent investment activity has further diversified our exposure to housing credit, including investments in excess servicing off of seasoned non-Agency securitizations and in re-performing loan securities |
• | Purchased $1.6 billion of jumbo loans, bringing full-year purchases to $7.1 billion |
• | Closed our twelfth Sequoia securitization of 2018, bringing total securitization volume in 2018 to $5.0 billion |
• | In January 2019, raised $177 million of equity capital in a follow-on offering of common stock and announced our decision to exercise our option to acquire the remaining interest in 5 Arches |
(1) | A reconciliation of GAAP net income to non-GAAP core earnings and a reconciliation of GAAP earnings per diluted share to non-GAAP core earnings per diluted share, along with additional information about Redwood’s core earnings measure, is included in the tables that follow. |
(2) | Economic return on book value is based on the periodic change in GAAP book value per common share plus dividends declared per common share during the period. |
(3) | Recourse debt excludes $5.7 billion of consolidated securitization debt (ABS issued and servicer advance financing) that is non-recourse to Redwood. |
REDWOOD TRUST, INC. | |||||||||||||||||||||
Financial Performance | Three Months Ended | Years Ended | |||||||||||||||||||
($ in millions, except per share data) | 12/31/2018 | 9/30/2018 | 12/31/2017 | 12/31/2018 | 12/31/2017 | ||||||||||||||||
GAAP net income (loss) | $ | (1 | ) | $ | 41 | $ | 31 | $ | 120 | $ | 140 | ||||||||||
GAAP net income (loss) per diluted common share | $ | (0.02 | ) | $ | 0.42 | $ | 0.35 | $ | 1.34 | $ | 1.60 | ||||||||||
Non-GAAP core earnings | $ | 38 | $ | 37 | $ | 30 | $ | 168 | $ | 119 | |||||||||||
Non-GAAP core earnings per diluted common share | $ | 0.39 | $ | 0.39 | $ | 0.35 | $ | 1.78 | $ | 1.40 | |||||||||||
REIT taxable income (2018 estimated) | $ | 27 | $ | 23 | $ | 34 | $ | 110 | $ | 90 | |||||||||||
REIT taxable income per share (2018 estimated) | $ | 0.32 | $ | 0.27 | $ | 0.44 | $ | 1.38 | $ | 1.17 | |||||||||||
GAAP book value per share | $ | 15.89 | $ | 16.42 | $ | 15.83 | $ | 15.89 | $ | 15.83 | |||||||||||
Dividends per common share | $ | 0.30 | $ | 0.30 | $ | 0.28 | $ | 1.18 | $ | 1.12 | |||||||||||
Economic return on book value | (1.4 | )% | 3.0 | % | 2.8 | % | 7.8 | % | 13.3 | % | |||||||||||
Recourse debt-to-equity leverage ratio (1) | 3.5x | 3.1x | 3.7x | 3.5x | 3.7x | ||||||||||||||||
Capital deployment | $ | 235 | $ | 281 | $ | 118 | $ | 810 | $ | 511 | |||||||||||
Jumbo loans purchased | $ | 1,563 | $ | 1,804 | $ | 1,950 | $ | 7,134 | $ | 5,742 | |||||||||||
Jumbo loans securitized or sold | $ | 1,290 | $ | 1,929 | $ | 1,163 | $ | 7,204 | $ | 4,628 |
(1) | Recourse debt excludes $5.7 billion, $3.4 billion, and $1.2 billion of consolidated securitization debt (ABS issued and servicer advance financing) that is non-recourse to Redwood at December 31, 2018, September 30, 2018, and December 31, 2017, respectively. |
REDWOOD TRUST, INC. | ||||||||||||||||||||
Consolidated Income Statements (1) | Three Months Ended | |||||||||||||||||||
($ in millions, except share and per share data) | 12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | |||||||||||||||
Interest income | $ | 120 | $ | 99 | $ | 83 | $ | 77 | $ | 71 | ||||||||||
Interest expense | (85 | ) | (64 | ) | (48 | ) | (42 | ) | (36 | ) | ||||||||||
Net interest income | 35 | 35 | 35 | 35 | 35 | |||||||||||||||
Non-interest income | ||||||||||||||||||||
Mortgage banking activities, net | 11 | 11 | 11 | 27 | 3 | |||||||||||||||
Investment fair value changes, net | (39 | ) | 10 | 1 | 2 | — | ||||||||||||||
Other income, net | 4 | 3 | 3 | 2 | 3 | |||||||||||||||
Realized gains, net | 6 | 7 | 5 | 9 | 5 | |||||||||||||||
Total non-interest (loss) income, net | (18 | ) | 32 | 20 | 40 | 11 | ||||||||||||||
Operating expenses | (19 | ) | (21 | ) | (19 | ) | (23 | ) | (20 | ) | ||||||||||
Benefit from (provision for) income taxes | 1 | (5 | ) | (3 | ) | (5 | ) | 5 | ||||||||||||
Net (loss) income | $ | (1 | ) | $ | 41 | $ | 33 | $ | 47 | $ | 31 | |||||||||
Weighted average diluted shares (thousands) (2) | 83,217 | 114,683 | 100,432 | 108,195 | 109,621 | |||||||||||||||
Diluted (loss) earnings per common share | $ | (0.02 | ) | $ | 0.42 | $ | 0.38 | $ | 0.50 | $ | 0.35 | |||||||||
Regular dividends declared per common share | $ | 0.30 | $ | 0.30 | $ | 0.30 | $ | 0.28 | $ | 0.28 | ||||||||||
(1) | Certain totals may not foot due to rounding. |
(2) | In the periods presented above, excluding the fourth quarter of 2018, 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 December 31, 2018, September 30, 2018, June 30, 2018, March 31, 2018, and December 31, 2017 were 84,884, 82,930, 75,743, 75,703, and 76,600, respectively. |
REDWOOD TRUST, INC. | ||||||||
Consolidated Income Statements (1) | Years Ended December 31, | |||||||
($ in millions, except share and per share data) | 2018 | 2017 | ||||||
Interest income | $ | 379 | $ | 248 | ||||
Interest expense | (239 | ) | (109 | ) | ||||
Net interest income | 140 | 139 | ||||||
Non-interest income | ||||||||
Mortgage banking activities, net | 60 | 54 | ||||||
Investment fair value changes, net | (26 | ) | 10 | |||||
Other income, net | 13 | 12 | ||||||
Realized gains, net | 27 | 13 | ||||||
Total non-interest income | 74 | 90 | ||||||
Operating expenses | (83 | ) | (77 | ) | ||||
Provision for income taxes | (11 | ) | (12 | ) | ||||
Net income | $ | 120 | $ | 140 | ||||
Weighted average diluted shares (thousands) | 110,028 | 101,975 | ||||||
Diluted earnings per common share | $ | 1.34 | $ | 1.60 | ||||
Regular dividends declared per common share | $ | 1.18 | $ | 1.12 | ||||
(1) | Certain totals may not foot due to rounding. |
REDWOOD TRUST, INC. | ||||||||||||||||||||
Reconciliation of GAAP Net Income to Non-GAAP Core Earnings (1) (2) | Three Months Ended | Years Ended | ||||||||||||||||||
($ in millions, except per share data) | 12/31/18 | 9/30/18 | 12/31/17 | 12/31/18 | 12/31/17 | |||||||||||||||
GAAP net (loss) income | $ | (1 | ) | $ | 41 | $ | 31 | $ | 120 | 140 | ||||||||||
Adjustments: | ||||||||||||||||||||
Eliminate mark-to-market changes on long-term investments and associated derivatives (3) | 37 | (12 | ) | (7 | ) | 14 | (36 | ) | ||||||||||||
Include cumulative gain (loss) on long-term investments sold, net (4) | 4 | 8 | 5 | 37 | 10 | |||||||||||||||
Income taxes associated with core earnings adjustments (5) | (2 | ) | — | 2 | (2 | ) | 5 | |||||||||||||
Total adjustments | 39 | (4 | ) | — | 49 | (21 | ) | |||||||||||||
Non-GAAP core earnings | $ | 38 | $ | 37 | $ | 30 | $ | 168 | $ | 119 | ||||||||||
GAAP net income per diluted common share | $ | (0.02 | ) | $ | 0.42 | $ | 0.35 | $ | 1.34 | $ | 1.60 | |||||||||
Non-GAAP core earnings per diluted common share (6) | $ | 0.39 | $ | 0.39 | $ | 0.35 | $ | 1.78 | $ | 1.40 | ||||||||||
(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 has defined core earnings as: GAAP net income adjusted to (i) eliminate the impact of quarterly mark-to-market changes on the fair value of long-term investments (and associated derivatives) related to changes in benchmark interest rates and credit spreads, (ii) include the cumulative net gains or losses on long-term investments accounted for as trading securities under GAAP that were sold during the period presented, net of any gains or losses from derivatives associated with the investments sold, and (iii) include the hypothetical income taxes associated with core earnings adjustments. |
(3) | Adjustments eliminate 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. Details on the components of investment fair value changes, net, are included in the Appendix of the Redwood Reviews for the respective quarters presented. |
(4) | Adjustment includes the cumulative net gains or losses on long-term investments accounted for as trading securities under GAAP that were sold during the period presented, net of any realized gains or losses from derivatives associated with the investments sold. Cumulative gains and losses are calculated by multiplying the difference between the sales price and original purchase price by the face value of the securities sold. |
(5) | 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. |
(6) | Additional information on the calculation of non-GAAP core diluted EPS can be found in Table 2 in the Financial Tables section of the Redwood Reviews for the respective quarters presented. |
REDWOOD TRUST, INC. | |||||||||||||||||||||
Consolidated Balance Sheets (1) | |||||||||||||||||||||
($ in millions, except share and per share data) | 12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | ||||||||||||||||
Residential loans | $ | 7,255 | $ | 5,922 | $ | 5,491 | $ | 5,146 | $ | 5,115 | |||||||||||
Business purpose loans | 141 | 116 | — | — | — | ||||||||||||||||
Multifamily loans | 2,145 | 942 | — | — | — | ||||||||||||||||
Real estate securities | 1,452 | 1,470 | 1,454 | 1,358 | 1,477 | ||||||||||||||||
Other investments | 439 | 114 | 117 | 66 | 64 | ||||||||||||||||
Cash and cash equivalents | 176 | 174 | 185 | 179 | 145 | ||||||||||||||||
Other assets | 330 | 402 | 266 | 251 | 240 | ||||||||||||||||
Total assets | $ | 11,937 | $ | 9,140 | $ | 7,513 | $ | 7,000 | $ | 7,040 | |||||||||||
Short-term debt | $ | 2,400 | $ | 1,424 | $ | 1,426 | $ | 1,504 | $ | 1,939 | |||||||||||
Other liabilities | 206 | 176 | 157 | 157 | 149 | ||||||||||||||||
Asset-backed securities issued | 5,410 | 3,407 | 1,930 | 1,542 | 1,165 | ||||||||||||||||
Long-term debt, net | 2,572 | 2,771 | 2,770 | 2,576 | 2,575 | ||||||||||||||||
Total liabilities | 10,589 | 7,778 | 6,284 | 5,780 | 5,828 | ||||||||||||||||
Stockholders' equity | 1,349 | 1,361 | 1,229 | 1,220 | 1,212 | ||||||||||||||||
Total liabilities and equity | $ | 11,937 | $ | 9,140 | $ | 7,513 | $ | 7,000 | $ | 7,040 | |||||||||||
Shares outstanding at period end (thousands) | 84,884 | 82,930 | 75,743 | 75,703 | 76,600 | ||||||||||||||||
GAAP book value per share | $ | 15.89 | $ | 16.42 | $ | 16.23 | $ | 16.12 | $ | 15.83 | |||||||||||
(1) | Certain totals may not foot due to rounding. |
CONTACTS |
Lisa M. Hartman |
SVP, Head of Investor Relations |
Phone: 415-384-3555 |
Email: [email protected] |