Redwood Trust Reports First Quarter 2012 Results

REDWOOD TRUST, INC.

Consolidated Income Statements(1)

First

Fourth

Third

Second

First

($ in millions, except share data)

Quarter

Quarter

Quarter

Quarter

Quarter

2012

2011

2011

2011

2011

Interest income

$

59

$

56

$

53

$

53

$

54

Interest expense

(31)

(29)

(24)

(24)

(22)

Net interest income

28

27

29

29

32

Provision for loan losses

-

(8)

(4)

(2)

(3)

Other market valuation adjustments, net

(1)

(10)

(13)

(11)

(6)

Net interest income after provision and

27

10

12

17

24

other market valuation adjustments

Mortgage banking activities, net

4

-

-

-

-

Operating expenses 

(15)

(13)

(12)

(12)

(12)

Realized gains, net

14

0

1

6

4

Provision for income taxes

-

-

-

-

-

Net income (loss)

30

(3)

1

10

16

Less: Net income (loss) attributable to noncontrolling interest

-

-

-

1

(2)

Net Income (Loss) Attributable to Redwood Trust, Inc.

$

30

$

(3)

$

1

$

9

$

18

Average diluted shares (thousands)

79,892

78,370

78,471

79,478

79,372

Diluted earnings (loss) per share

$

0.37

$

(0.03)

$

0.01

$

0.11

$

0.22

Regular dividends declared per common share

$

0.25

$

0.25

$

0.25

$

0.25

$

0.25

(1) Certain totals may not foot due to rounding.

REDWOOD TRUST, INC.

Consolidated Balance Sheets(1)

31-Mar

31-Dec

30-Sep

30-Jun

31-Mar

($ in millions, except share data)

2012

2011

2011

2011

2011

Residential loans, held-for-sale

$

303

$

395

$

2

$

2

$

2

Residential loans, held-for-investment

3,348

3,800

4,156

3,858

3,794

Commercial loans

190

170

111

84

62

Real estate securities, at fair value

1,262

982

1,033

1,038

1,104

Cash and cash equivalents

150

267

133

80

220

Other assets

119

130

119

103

101

Total Assets

$

5,372

$

5,743

$

5,554

$

5,165

$

5,283

Short-term debt 

$

441

$

428

$

-

$

41

$

-

Other liabilities

126

144

163

119

104

Asset-backed securities issued

3,704

4,139

4,293

3,839

3,957

Long-term debt 

140

140

140

140

140

Total liabilities  

4,410

4,851

4,595

4,138

4,201

Stockholders' equity 

962

893

959

1,025

1,075

Noncontrolling interest

-

-

-

2

7

Total equity

962

893

959

1,027

1,082

Total Liabilities and Equity

$

5,372

$

5,743

$

5,554

$

5,165

$

5,283

Shares outstanding at period end (thousands)

78,756

78,556

78,495

78,555

78,139

GAAP book value per share

$

12.22

$

11.36

$

12.22

$

13.04

$

13.76

(1) Certain totals may not foot due to rounding. See notes to consolidating balance sheet on page 5.

REDWOOD TRUST, INC.

The following tables show the estimated effect that Redwood (Parent), New Sequoia Entities, and our Other Consolidated Entities had on GAAP income for the three months ended March 31, 2012.

Consolidating Income Statement(1)

Three Months Ended March 31, 2012

 New Sequoia Entities 

Other 

($ in millions)

 Redwood 

 Consolidated 

 Intercompany 

 Redwood 

(Parent) (2)

 Entities 

 Adjustments 

 Consolidated 

Interest income

$

24

$

7

$

21

$

-

$

52

Net discount (premium) amortization

8

(0)

(1)

-

7

Total interest income

32

7

20

-

59

Interest expense

(6)

(6)

(19)

-

(31)

Net interest income 

26

1

1

-

28

Provision for loan losses

-

-

-

-

-

Other market valuation adjustments, net

-

-

-

-

(1)

Net interest income after provision

26

1

1

-

27

and other market valuation adjustments

Mortgage banking activities, net

4

-

-

4

Operating expenses

(15)

-

-

-

(15)

Realized gains, net

6

-

7

-

14

Income from New Sequoia Entities

1

-

-

(1)

-

Income from Other Consolidated Entities

8

-

-

(8)

-

Noncontrolling interest

-

-

-

-

-

Provision for income taxes

-

-

-

-

-

Net Income

$

30

$

1

$

8

$

(9)

$

30

(1) Certain totals may not foot due to rounding.

(2) The interest income and interest expense related to the resecuritization we engaged in during the third quarter of 2011 are included in Redwood (Parent).

REDWOOD TRUST, INC.

We present this table to highlight the impact that Redwood (Parent), New Sequoia Entities, and our Other Consolidated Entities had on our GAAP balance sheet at March 31, 2012. 

Consolidating Balance Sheet(1)

March 31, 2012

New Sequoia
   Entities(3)

Other 

($ in millions)

 Redwood 

 Consolidated 

 Intercompany 

 Redwood 

(Parent) (2)

 Entities 

 Adjustments 

 Consolidated 

Residential loans, held-for-sale

$

303

$

-

$

-

$

-

$

303

Residential loans, held-for-investment

-

591

2,757

-

3,348

Commercial loans

178

-

12

-

190

Real estate securities, at fair value

1,009

-

254

-

1,262

Cash and cash equivalents

150

-

-

-

150

Total earning assets

1,640

591

3,023

-

5,253

Investment in New Sequoia Entities

47

-

-

(47)

-

Investment in Other Consolidated Entities

40

-

-

(40)

-

Other assets

81

5

32

-

119

Total Assets

$

1,808

$

596

$

3,055

$

(87)

$

5,372

Short-term debt

$

441

$

-

$

-

$

-

$

441

Other liabilities

58

2

66

-

126

Asset-backed securities issued

207

547

2,950

-

3,704

Long-term debt 

140

-

-

-

140

Total liabilities

846

549

3,015

-

4,410

Stockholders' equity

962

47

40

(87)

962

Noncontrolling interest

-

-

-

-

-

Total equity

962

47

40

(87)

962

Total Liabilities and Equity

$

1,808

$

596

$

3,055

$

(87)

$

5,372

(1) Certain totals may not foot due to rounding. Certain Sequoia and Acacia securitization entities and the resecuritization we engaged in during the third quarter of 2011 are treated as secured borrowing transactions for GAAP and we are required under GAAP to consolidate the assets and liabilities of these securitization entities. However, the securitized assets of these entities are not available to Redwood. Similarly, the liabilities of these entities are obligations payable only from the cash flow generated by their securitized assets and are not legal obligations of Redwood.

(2) The consolidating balance sheet presents the assets and liabilities of the resecuritization we engaged in during the third quarter of 2011 under Redwood (Parent), although these assets and liabilities are owned by the resecuritization entity and are legally not ours and we own only the securities and interests that we acquired from the resecuritization entity. At March 31, 2012, the resecuritization accounted for $332 million of available-for-sale securities and $207 million of asset-backed securities issued and our investment in this resecuritization is reflected in the difference between these assets and liabilities.

(3) The consolidating balance sheet presents the New Sequoia securitization entities separately from Other Consolidated Entities (Sequoia entities issued prior to 2010 and Acacia entities) to highlight our renewed focus on growing our core business of creating residential credit investments. As we complete additional securitizations, we expect New Sequoia Entities to represent a larger portion of our consolidated balance sheet as prior Sequoia securitization entities continue to pay down.

REDWOOD TRUST, INC.

Tax / GAAP Differences(1)

Three Months Ended March 31, 2012

($ in millions, except per share data)

Tax (Est.)

GAAP

Differences

Interest income

$

38

$

59

$

(21)

Interest expense

(6)

(31)

25

Net Interest Income

32

28

4

Provision for loan losses

-

-

-

Realized credit losses

(10)

-

(10)

Other market valuation adjustments, net

-

(1)

1

Mortgage banking activities, net

0

4

(4)

Operating expenses

(13)

(15)

2

Realized gains, net

-

14

(14)

Provision for income taxes

(0)

-

(0)

Net Income

$

8

$

30

$

(22)

Income per share

$

0.11

$

0.37

$

(0.26)

(1)   Certain totals may not foot due to rounding.

Taxable income for 2012 is an estimate until we file our 2012 tax return.
Taxable income per share is based on the number of shares outstanding at the end of each quarter.