• | GAAP net income was $31 million, or $0.30 per diluted common share |
• | Non-GAAP core earnings(1) were $43 million, or $0.39 per diluted common share |
• | Book value per common share was $16.01 at June 30, 2019 |
• | Economic return on book value(2) of 1.9% for the second quarter of 2019 |
• | Recourse debt-to-equity leverage ratio(3) of 3.1x at June 30, 2019 |
• | Paid a regular quarterly cash dividend of $0.30 per common share |
• | Purchased $1.6 billion of jumbo loans, up 59% from the first quarter of 2019 |
• | Closed one Sequoia securitization totaling $0.4 billion and sold $0.8 billion of whole loans |
• | 5 Arches business originated $175 million of business purpose mortgage loans, our first full quarter of integrated results |
• | Deployed $136 million of capital into new investments in Q2, and deployed over $100 million in July |
• | Generated $243 million of capital through portfolio optimization activities |
(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 $7.2 billion of consolidated securitization debt (ABS issued and servicer advance financing) that is non-recourse to Redwood. |
REDWOOD TRUST, INC. | ||||||||||||
Financial Performance | Three Months Ended | |||||||||||
($ in millions, except per share data) | 6/30/2019 | 3/31/2019 | 6/30/2018 | |||||||||
GAAP net income | $ | 31 | $ | 54 | $ | 33 | ||||||
GAAP net income per diluted common share | $ | 0.30 | $ | 0.49 | $ | 0.38 | ||||||
Non-GAAP core earnings | $ | 43 | $ | 38 | $ | 37 | ||||||
Non-GAAP core earnings per diluted common share | $ | 0.39 | $ | 0.36 | $ | 0.42 | ||||||
REIT taxable income (estimated) | $ | 25 | $ | 29 | $ | 27 | ||||||
REIT taxable income per share (estimated) | $ | 0.25 | $ | 0.30 | $ | 0.35 | ||||||
GAAP book value per share | $ | 16.01 | $ | 16.00 | $ | 16.23 | ||||||
Dividends per common share | $ | 0.30 | $ | 0.30 | $ | 0.30 | ||||||
Economic return on book value | 1.9 | % | 2.6 | % | 2.5 | % | ||||||
Recourse debt-to-equity leverage ratio (1) | 3.1x | 2.9x | 3.4x | |||||||||
Capital deployment | $ | 136 | $ | 163 | $ | 186 | ||||||
Jumbo loans purchased | $ | 1,562 | $ | 1,022 | $ | 1,952 | ||||||
Jumbo loans securitized or sold | $ | 1,252 | $ | 833 | $ | 1,408 |
(1) | Recourse debt excludes $7.2 billion, $5.9 billion, and $1.9 billion of consolidated securitization debt (ABS issued and servicer advance financing) that is non-recourse to Redwood at June 30, 2019, March 31, 2019, and June 30, 2018, respectively. |
REDWOOD TRUST, INC. | ||||||||||||||||||||
Consolidated Income Statements (1) | Three Months Ended | |||||||||||||||||||
($ in millions, except share and per share data) | 6/30/19 | 3/31/19 | 12/31/18 | 9/30/18 | 6/30/18 | |||||||||||||||
Interest income | $ | 149 | $ | 131 | $ | 120 | $ | 99 | $ | 83 | ||||||||||
Interest expense | (116 | ) | (99 | ) | (85 | ) | (64 | ) | (48 | ) | ||||||||||
Net interest income | 32 | 32 | 35 | 35 | 35 | |||||||||||||||
Non-interest income | ||||||||||||||||||||
Mortgage banking activities, net | 19 | 12 | 11 | 11 | 11 | |||||||||||||||
Investment fair value changes, net | 3 | 20 | (39 | ) | 10 | 1 | ||||||||||||||
Other income, net | 2 | 4 | 4 | 3 | 3 | |||||||||||||||
Realized gains, net | 3 | 11 | 6 | 7 | 5 | |||||||||||||||
Total non-interest income (loss), net | 28 | 47 | (18 | ) | 32 | 20 | ||||||||||||||
Operating expenses | (26 | ) | (23 | ) | (19 | ) | (21 | ) | (19 | ) | ||||||||||
(Provision for) benefit from income taxes | (2 | ) | (1 | ) | 1 | (5 | ) | (3 | ) | |||||||||||
Net income (loss) | $ | 31 | $ | 54 | $ | (1 | ) | $ | 41 | $ | 33 | |||||||||
Weighted average diluted shares (thousands) (2) | 130,697 | 126,278 | 83,217 | 114,683 | 100,432 | |||||||||||||||
Diluted earnings (loss) per common share | $ | 0.30 | $ | 0.49 | $ | (0.02 | ) | $ | 0.42 | $ | 0.38 | |||||||||
Regular dividends declared per common share | $ | 0.30 | $ | 0.30 | $ | 0.30 | $ | 0.30 | $ | 0.30 | ||||||||||
(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 June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018, and June 30, 2018 were 97,715, 96,866, 84,884, 82,930, and 75,743, respectively. |
REDWOOD TRUST, INC. | ||||||||
Consolidated Income Statements (1) | Six Months Ended June 30, | |||||||
($ in millions, except share and per share data) | 2019 | 2018 | ||||||
Interest income | $ | 280 | $ | 160 | ||||
Interest expense | (215 | ) | (90 | ) | ||||
Net interest income | 64 | 70 | ||||||
Non-interest income | ||||||||
Mortgage banking activities, net | 31 | 37 | ||||||
Investment fair value changes, net | 23 | 2 | ||||||
Other income, net | 6 | 5 | ||||||
Realized gains, net | 14 | 14 | ||||||
Total non-interest income | 74 | 59 | ||||||
Operating expenses | (49 | ) | (42 | ) | ||||
Provision for income taxes | (3 | ) | (7 | ) | ||||
Net income | $ | 86 | $ | 80 | ||||
Weighted average diluted shares (thousands) | 128,499 | 104,291 | ||||||
Diluted earnings per common share | $ | 0.78 | $ | 0.88 | ||||
Regular dividends declared per common share | $ | 0.60 | $ | 0.58 | ||||
(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 | ||||||||||
($ in millions, except per share data) | 6/30/19 | 3/31/19 | 6/30/18 | ||||||||
GAAP net income | $ | 31 | $ | 54 | $ | 33 | |||||
Adjustments: | |||||||||||
Eliminate mark-to-market changes on long-term investments and associated derivatives (3) | (2 | ) | (16 | ) | (3 | ) | |||||
Include cumulative gain on long-term investments sold, net (4) | 13 | 1 | 7 | ||||||||
Eliminate purchase accounting adjustments (5) | 2 | (2 | ) | — | |||||||
Income taxes associated with core earnings adjustments (6) | (2 | ) | (1 | ) | — | ||||||
Total adjustments | 12 | (16 | ) | 5 | |||||||
Non-GAAP core earnings | $ | 43 | $ | 38 | $ | 37 | |||||
GAAP net income per diluted common share | $ | 0.30 | $ | 0.49 | $ | 0.38 | |||||
Non-GAAP core earnings per diluted common share (7) | $ | 0.39 | $ | 0.36 | $ | 0.42 | |||||
(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, (iii) exclude certain items related to Redwood's acquisition of 5 Arches (as described in footnote 5 below) and (iv) 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. |
(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) | Beginning with the first quarter of 2019, core earnings excludes several items related to the acquisition of 5 Arches. These items include the exclusion of a one-time gain associated with the re-measurement of our initial minority investment and purchase option in 5 Arches, as well as ongoing adjustments to exclude amortization of intangible assets and, beginning in the second quarter of 2019, changes in fair value of the contingent consideration liability related to the remaining purchase consideration for the platform. Additional information regarding this adjustment is included in the Appendix to the second quarter 2019 Redwood Review. |
(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. |
(7) | 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) | 6/30/19 | 3/31/19 | 12/31/18 | 9/30/18 | 6/30/18 | ||||||||||||||||
Residential loans | $ | 7,283 | $ | 7,274 | $ | 7,255 | $ | 5,922 | $ | 5,491 | |||||||||||
Business purpose loans | 251 | 161 | 141 | 116 | — | ||||||||||||||||
Multifamily loans | 3,750 | 2,176 | 2,145 | 942 | — | ||||||||||||||||
Real estate securities | 1,477 | 1,543 | 1,452 | 1,470 | 1,454 | ||||||||||||||||
Other investments | 372 | 414 | 439 | 114 | 117 | ||||||||||||||||
Cash and cash equivalents | 218 | 201 | 176 | 174 | 185 | ||||||||||||||||
Other assets | 500 | 424 | 330 | 402 | 266 | ||||||||||||||||
Total assets | $ | 13,852 | $ | 12,193 | $ | 11,937 | $ | 9,140 | $ | 7,513 | |||||||||||
Short-term debt | $ | 2,463 | $ | 2,163 | $ | 2,400 | $ | 1,424 | $ | 1,426 | |||||||||||
Other liabilities | 338 | 270 | 206 | 176 | 157 | ||||||||||||||||
Asset-backed securities issued | 6,913 | 5,638 | 5,410 | 3,407 | 1,930 | ||||||||||||||||
Long-term debt, net | 2,573 | 2,573 | 2,572 | 2,771 | 2,770 | ||||||||||||||||
Total liabilities | 12,288 | 10,643 | 10,589 | 7,778 | 6,284 | ||||||||||||||||
Stockholders' equity | 1,564 | 1,550 | 1,349 | 1,361 | 1,229 | ||||||||||||||||
Total liabilities and equity | $ | 13,852 | $ | 12,193 | $ | 11,937 | $ | 9,140 | $ | 7,513 | |||||||||||
Shares outstanding at period end (thousands) | 97,715 | 96,866 | 84,884 | 82,930 | 75,743 | ||||||||||||||||
GAAP book value per share | $ | 16.01 | $ | 16.00 | $ | 15.89 | $ | 16.42 | $ | 16.23 | |||||||||||
(1) | Certain totals may not foot due to rounding. |
CONTACTS |
Lisa M. Hartman |
SVP, Head of Investor Relations |
Phone: 866-269-4976 |
Email: [email protected] |