Exhibit 99.1
(REDWOOD TRUST LOGO)
     
FOR IMMEDIATE RELEASE
    
Redwood Trust, Inc.
  CONTACT: Harold Zagunis
Thursday, May 4, 2006
   (415) 389-7373
REDWOOD TRUST REPORTS FIRST QUARTER 2006 RESULTS
MILL VALLEY, California – May 4, 2006 – Redwood Trust, Inc. (NYSE: RWT) today reported GAAP earnings of $28 million, or $1.09 per share, for the first quarter of 2006. In the first quarter of 2005, GAAP earnings were $61 million, or $2.42 per share.
Doug Hansen, Redwood’s President, said, “Our business continues to develop and grow as planned, with no major surprises. Results for this quarter, while not at last year’s extraordinary levels, were still at levels we consider to be attractive.”
The reduction in our net income of $33 million from the first quarter of 2005 to the first quarter of 2006 resulted from a decrease in net interest income of $17 million, a decrease in net gains on sales, calls, and market value adjustments of $17 million, an increase in operating expenses of $1 million, and a decrease in GAAP provisions for income taxes of $2 million. The reduction in net interest income reflects higher levels of uninvested cash as well as the impact of increased loan prepayment rates on earnings from our assets that we have retained from the Sequoia residential loan securitizations we have sponsored. We had little sales activity and significantly fewer calls of securities during the first quarter of 2006 than in the first quarter of 2005. Operating expenses increased due to continuing investments we are making in systems, infrastructure, and new employees to position our business for additional growth. Provisions for income taxes decreased because we had less income in the 2006 period.
At the beginning of the year, our GAAP book value per share was $37.20. After declaring a regular quarterly dividend of $0.70 per share, GAAP book value increased during this quarter by 2% to $38.11 per share.
Additional Information
Additional information on our GAAP results is available in our Quarterly Report on Form 10-Q for the three months ended March 31, 2006 which was filed today with the Securities and Exchange Commission. Today we also released our second “Redwood Review”, covering the first quarter of 2006. The Review (formerly the supplemental information package) contains a discussion of first quarter activity, taxable income and other non-GAAP performance measures, and a review of Redwood’s business and outlook. Our 10-Q and the Redwood Review are available on our web site (www.redwoodtrust.com).

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REDWOOD TRUST, INC.
(All dollars in millions, except per share data)
                                         
    First     Fourth     Third     Second     First  
    Quarter     Quarter     Quarter     Quarter     Quarter  
CONSOLIDATED INCOME STATEMENT   2006     2005     2005     2005     2005  
Interest Income
   $ 225.4     $ 230.9     $ 243.5     $ 248.4     $ 237.2  
Interest Expense
     (180.7 )     (189.7 )     (196.6 )     (195.2 )     (176.0 )
 
                              
Net Interest Income
     44.7       41.2       46.9       53.2       61.2  
 
                                        
Operating Expenses
     (11.8 )     (12.1 )     (10.9 )     (11.1 )     (10.7 )
Net Recognized (Losses) Gains and Valuation Adjustments
     (1.9 )     17.8       24.9       3.1       15.0  
Variable Stock Option Income
     0.0       0.0       0.0       0.0       0.1  
Excise Tax Expense
     (0.3 )     (0.3 )     (0.3 )     (0.3 )     (0.3 )
Provision For Income Taxes
     (2.7 )     (4.1 )     (4.7 )     (4.0 )     (4.7 )
 
                              
GAAP Earnings
   $ 28.0     $ 42.5     $ 55.9     $ 40.9     $ 60.6  
 
                                        
Average Diluted Shares (thousands)
     25,703       25,311       25,314       25,196       25,021  
GAAP Earnings per Share (diluted)
   $ 1.09     $ 1.68     $ 2.21     $ 1.62     $ 2.42  
 
                                        
Regular Dividends per Share
   $ 0.70     $ 0.70     $ 0.70     $ 0.70     $ 0.70  
Special Dividends per Share
     0.00       3.00       0.00       0.00       0.00  
 
                              
Total Dividends per Share
   $ 0.70     $ 3.70     $ 0.70     $ 0.70     $ 0.70  

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REDWOOD TRUST, INC.
(All dollars in millions, except per share data)
                                         
    31-Mar     31-Dec     30-Sep     30-Jun     31-Mar  
CONSOLIDATED BALANCE SHEET   2006     2005     2005     2005     2005  
Residential Real Estate Loans
   $ 11,990     $ 13,875     $ 16,556     $ 19,630     $ 21,772  
Residential Loan Credit-Enhancement Securities
     644       613       664       706       611  
Commercial Real Estate Loans
     55       60       56       42       57  
Commercial Loan Credit-Enhancement Securities
     67       58       44       29       29  
Securities Portfolio
     1,818       1,749       1,783       1,649       1,505  
Cash and Cash Equivalents
     85       176       163       72       65  
Other Assets
     320       246       239       218       246  
 
                              
Total Consolidated Assets
   $ 14,979     $ 16,777     $ 19,505     $ 22,346     $ 24,285  
 
                                        
Redwood Trust Debt
   $ 0     $ 170     $ 162     $ 453     $ 199  
Consolidated Asset-Back Securities Issued
     13,930       15,585       18,237       20,815       23,057  
Other Liabilities
     82       87       90       86       81  
Equity
     967       935       1,016       992       948  
 
                              
Total Liabilities and Equity
   $ 14,979     $ 16,777     $ 19,505     $ 22,346     $ 24,285  
 
                                        
Shares Outstanding at Period End (thousands)
     25,382       25,133       24,764       24,647       24,514  
GAAP Equity (GAAP Book Value) per Share
   $ 38.11     $ 37.20     $ 41.03     $ 40.24     $ 38.67  
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