Exhibit 99.1
FOR IMMEDIATE RELEASE
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Redwood Trust, Inc.
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CONTACT: | Harold Zagunis | ||
Monday, February 27, 2006
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(415) 389-7373 |
REDWOOD TRUST REPORTS FOURTH QUARTER 2005 RESULTS
MILL
VALLEY, California — February 27, 2006 — Redwood Trust, Inc. (NYSE: RWT) today reported GAAP
earnings of $42 million ($1.68 per share) for the fourth quarter of 2005 and $200 million ($7.96
per share) for the year ended December 31, 2005. In 2004, GAAP earnings were $54 million ($2.22
per share) for the fourth quarter and $233 million ($10.47 per share) for the year ended December
31, 2004.
The reduction in our net income of $33 million from 2004 to 2005 resulted from a decrease in net
interest income of $14 million, an increase in operating expenses of $11 million, and an increase
in GAAP provisions for income taxes of $10 million. Net gains on sales and calls increased by $2
million. The reduction in net interest income reflects the impact of increased prepayment rates
and reduced balances for residential adjustable rate mortgages consolidated on our balance sheet
from Sequoia securitization entities we have sponsored, lower yields on our portfolio of
residential credit-enhancement securities as seasoned higher-yielding securities have been prepaid,
called, or sold, and higher levels of uninvested cash. Operating expenses increased in part due to
the rapid growth we experienced in 2003 and 2004 and also due to continuing investments we are
making in systems, infrastructure, and new employees to position our business for additional
growth. Provisions for income taxes increased in 2005 because we benefited from net operating loss
carryforwards in 2004.
At the end of 2004, GAAP book value per share was $35.78. After declaring dividends of $5.80 per
share, GAAP book value increased during 2005 by 4% to $37.20 per share.
Fourth Quarter Summary
From the fourth quarter of 2004 to the fourth quarter of 2005, net income decreased by $12 million.
Net interest income decreased by $17 million and operating expenses increased by $4 million.
These decreases in income, driven by the factors discussed above, were partially offset by an
increase in realized gains on sales and calls of assets and net recognized market valuation
adjustments of $9 million as a result of increased sales activity.
Additional Information
Additional information on our GAAP results is available in our Annual Report on Form 10-K for the
year ended December 31, 2005 which was filed today with the Securities and Exchange Commission.
Today we also released our first “Redwood Review”, covering the fourth quarter of 2005. The Review
(formerly the supplemental information package) contains a discussion of 2005 and fourth quarter
activity, taxable income and other non-GAAP performance measures, and a review of Redwood’s
business and outlook. Our 10-K and the Redwood Review are available on our web site
(www.redwoodtrust.com).
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