Exhibit 99.1

Redwood Trust’s Earnings Increase in Second Quarter 2003
GAAP Earnings of $1.21 per share and Core Earnings of $1.13 per share

Mill Valley, CA July 24, 2003 Redwood Trust, Inc. (NYSE: RWT), an investor in real estate loans, today reported GAAP earnings of $1.21 per share for the second quarter of 2003, an increase of 38% from first quarter 2003 and second quarter 2002 GAAP earnings of $0.88 per share. GAAP earnings for the first six months of 2003 totaled $2.09 per share versus $1.68 per share earned in the first half of 2002.

Core earnings, which exclude realized and unrealized gains and losses on the market value of assets, were $1.13 per share for the second quarter of 2003, a 28% increase from first quarter 2003 core earnings of $0.88 per share and a 41% increase from second quarter 2002 core earnings of $0.80 per share. Core earnings for the first half of 2003 totaled $2.01 per share as compared to $1.57 per share earned during the first six months of 2002.

Doug Hansen, Redwood’s President, commented, “We are very pleased with the strong earnings and cash flow generated by our real estate loan portfolios. Our record results for the quarter reflect the sound underlying characteristics of our real estate loans as well as better utilization of our capital base. In addition, we benefited during the second quarter from several temporary factors, including favorable prepayment patterns and a decline in short-term interest rates.”

Second Quarter Review

During the second quarter of 2003, Redwood acquired $2.2 billion high-quality jumbo adjustable-rate residential real estate loans, $11 million residential loan credit-enhancement securities, $3 million commercial real estate loans, and $238 million other residential and commercial real estate loan securities.

Redwood’s combined residential portfolios, including loans Redwood owns and the principal value of loans Redwood credit-enhances, decreased from $68 billion to $61 billion during the second quarter. Residential real estate loans owned by Redwood increased from $7 billion to $9 billion due to strong acquisition volume and relatively slow prepayment rates on these adjustable-rate loans. Loans credit-enhanced by Redwood decreased from $61 billion to $52 billion due to reduced acquisitions of credit-enhancement securities and rapid prepayments of the fixed-rate and hybrid loans in the credit-enhanced portfolio.

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Serious delinquencies in Redwood’s combined residential portfolios increased during the second quarter from $163 million to $164 million. Delinquencies as a percentage of current loan balances increased during the quarter from 0.24% to 0.27% primarily as a result of rapid loan prepayment rates. The company’s delinquency ratios are well below national averages for these types of loans. Actual credit losses for the quarter remained under 0.01% (one basis point) of current loan balances on an annualized basis. In general, the company expects that its current delinquency and loss rates are unsustainably low and are likely to increase over time even if housing markets remain strong.

Redwood’s GAAP-basis operating profitability margin – net interest income as a percentage of GAAP equity – improved from 19.8% in the first quarter of 2003 to 23.4% in the second quarter of the year. Redwood’s core-basis operating profitability margin – net interest income as a percentage of core equity – improved during the quarter from 23.3% to 27.6%. Favorable prepayment and interest rate trends, improved capital utilization, and strong credit results drove most of this increase in profitability.

“Our second quarter results benefited from decreasing short-term interest rates,” said Hansen. “We have always maintained a reasonable match between the characteristics of our assets and liabilities. Our goal is to mitigate much of the potential earnings volatility that could result from interest rate changes. In the past, we were willing to carry a degree of one- to six-month mismatch between the characteristics of a portion of our assets and liabilities. Consequently, we benefited from declining short-term interest rates over the last two years. Recently, however, we have been lengthening the maturity of our liabilities and increasing our hedging activities with the goal of reducing our remaining short-term asset/liability mismatches. As a result, we expect our liability and hedging costs to increase. Furthermore, it is unlikely that we would benefit from any additional decreases in short-term interest rates should they occur.”

“We continued to generate relatively high levels of REIT taxable income per share in the second quarter,” said Hansen. “We currently plan to retain, on a permanent basis, up to 10% of our 2003 REIT taxable income to build core book value per share and thus further support the sustainability of our regular dividend rate. We also currently plan to defer distribution of a portion of our 2003 REIT taxable income in order to pre-fund a portion of the regular dividends we plan to distribute in 2004. We will incur income and excise taxes if we retain and defer the distribution of income.”

“Even if we retain and defer income as described, we may need to distribute substantial special dividends in excess of our regular dividend rate of $0.65 per share per quarter,” Hansen added. “Pursuant to the REIT rules, we may be required to make special distributions if we continue to generate high levels of REIT taxable income during the remainder of 2003. The declaration of any special dividends will depend on a variety of factors and future events. If we declare one or more special dividends representing the distribution of 2003 REIT taxable income, the declarations could occur during 2003 or as late as September 2004.”

Hansen observed, “We face a number of potential challenges in the years ahead, including the likelihood of increased competition and a reduced supply of real estate loan investment opportunities when the mortgage refinance boom ends. We believe our results over the next few years will most

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likely be driven by the solid characteristics of our current asset base, whereas our longer-term results will depend on our ability to continue to create attractive real estate loan investment opportunities as our current book of loans pays down.”

“We believe strongly that our regular dividend rate is sustainable even if we face increased challenges in the future,” concluded Hansen. “With our strong competitive cost position, multiple investment opportunities in our residential and commercial loan markets, and the discipline and execution ability of our investment and finance staff, we remain optimistic about the years ahead.”

For more information about Redwood Trust, Inc., please visit www.redwoodtrust.com.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Certain matters discussed in this news release may constitute forward-looking statements within the meaning of the federal securities laws that inherently include certain risks and uncertainties. Actual results and the timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including, among other things, changes in interest rates on our real estate loan assets and borrowings, changes in prepayment rates on our real estate loan assets, general economic conditions, particularly as they affect the price of real estate loan and the credit status of borrowers, and the level of liquidity in the capital markets, as it affects our ability to finance our real estate loan portfolio, and other risk factors outlined in the Company’s 2002 Annual Report on Form 10-K (available on the Company’s Web site or by request to the Contacts listed above). Other factors not presently identified may also cause actual results to differ. No one should assume that results or trends projected in or contemplated by the forward-looking statements included above will prove to be accurate in the future. We will revise our outlook from time to time and frequently will not disclose such revisions publicly.

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