Redwood Trust Reports Second Quarter 2013 Results

REDWOOD TRUST, INC.

Consolidated Income Statements ⁽¹⁾

Second

First

Fourth

Third

Second

($ in millions, except share data)

Quarter

Quarter

Quarter

Quarter

Quarter

2013

2013

2012

2012

2012

Interest income

$

58

$

54

$

53

$

60

$

60

Interest expense

(21)

(18)

(33)

(28)

(29)

Net interest income

36

35

20

31

31

Reversal of (provision for) loan losses

3

(2)

(3)

(1)

1

Other market valuation adjustments, net

(6)

-

2

1

-

Net interest income after provision and other market valuation adjustments

33

33

19

31

32

Mortgage banking activities, net

59

46

21

12

(4)

Operating expenses 

(24)

(20)

(18)

(17)

(15)

Realized gains, net

1

12

20

14

7

Provision for income taxes

(3)

(11)

-

(1)

(1)

Net Income

$

66

$

61

$

42

$

40

$

20

Average diluted shares (thousands)

96,172

87,345

82,498

80,764

78,815

Diluted earnings per share

$

0.71

$

0.69

$

0.50

$

0.48

$

0.24

Regular dividends declared per common share

$

0.28

$

0.28

$

0.25

$

0.25

$

0.25

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

REDWOOD TRUST, INC.

Consolidated Income Statements ⁽¹⁾

($ in millions, except share data)

Six Months Ended June 30,

2013

2012

Interest income

$

111

$

118

Interest expense

(40)

(60)

Net interest income

71

59

Reversal of provision for loan losses

1

1

Other market valuation adjustments, net

(7)

(1)

Net interest income after provision and other market valuation adjustments

66

58

Mortgage banking activities, net

105

1

Operating expenses 

(43)

(30)

Realized gains, net

13

21

Provision for income taxes

(14)

(1)

Net income

$

126

$

50

Average diluted shares (thousands)

91,647

79,965

Diluted earnings per share

$

1.40

$

0.61

Regular dividends declared per common share

$

0.56

$

0.50

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

REDWOOD TRUST, INC.

Consolidated Balance Sheets ⁽¹⁾

30-Jun

31-Mar

31-Dec

30-Sep

30-Jun

($ in millions, except share data)

2013

2013

2012

2012

2012

Residential loans

$

3,219

$

2,965

$

2,836

$

3,495

$

3,472

Commercial loans

495

401

313

298

259

Real estate securities

1,314

1,231

1,109

1,313

1,311

Mortgage servicing rights

43

18

5

3

2

Cash and cash equivalents

208

79

81

39

70

Other assets

156

103

101

149

132

Total Assets

$

5,435

$

4,797

$

4,444

$

5,297

$

5,246

Short-term debt 

$

1,446

$

721

$

552

$

522

$

455

Other liabilities

122

80

83

156

136

Asset-backed securities issued

2,214

2,365

2,529

3,429

3,564

Long-term debt 

444

444

140

140

140

Total liabilities  

4,226

3,609

3,304

4,247

4,295

Stockholders' equity 

1,209

1,188

1,140

1,050

951

Total Liabilities and Equity

$

5,435

$

4,797

$

4,444

$

5,297

$

5,246

Shares outstanding at period end (thousands)

82,332

81,706

81,716

81,526

79,263

GAAP book value per share

$

14.69

$

14.54

$

13.95

$

12.88

$

12.00

(1) Certain totals may not foot due to rounding. See notes to consolidating balance sheet on page 6.

REDWOOD TRUST, INC.

The following tables show the estimated effect that Redwood (Parent) and our Consolidated Sequoia Entities had on GAAP income for the three and six months ended June 30, 2013.

Consolidating Income Statement ⁽¹⁾

Three Months Ended June 30, 2013

($ in millions)

 Redwood 

 Consolidated 

 Redwood 

(Parent) ⁽²⁾

 Sequoia Entities 

Consolidated

Interest income

$

40

$

11

$

51

Net discount (premium) amortization

9

(2)

7

Total interest income

49

9

58

Interest expense

(15)

(7)

(21)

Net interest income

34

2

36

(Provision for) reversal of provision for loan losses

(1)

4

3

Other market valuation adjustments, net

(6)

(1)

(6)

Net interest income after provision and other market valuation adjustments

28

6

33

Mortgage banking activities, net

59

-

59

Operating expenses

(24)

-

(24)

Realized gains, net

1

-

1

Provision for income taxes

(3)

-

(3)

Net Income

$

60

$

6

$

66

Consolidating Income Statement ⁽¹⁾

Six Months Ended June 30, 2013

($ in millions)

 Redwood 

 Consolidated 

 Redwood 

(Parent) ⁽²⁾

 Sequoia Entities 

Consolidated

Interest income

$

74

$

23

$

96

Net discount (premium) amortization

18

(4)

15

Total interest income

92

19

111

Interest expense

(26)

(14)

(40)

Net interest income

67

5

71

(Provision for) reversal of provision for loan losses

(2)

3

1

Other market valuation adjustments, net

(6)

-

(7)

Net interest income after provision and other market valuation adjustments

59

7

66

Mortgage banking activities, net

105

-

105

Operating expenses

(43)

-

(43)

Realized gains, net

13

-

13

Provision for income taxes

(14)

-

(14)

Net Income

$

119

$

7

$

126

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

(2) The interest income and interest expense related to the residential resecuritization we engaged in during the third quarter of 2011 and the commercial securitization we engaged in during the fourth quarter of 2012 are included in Redwood (Parent).

REDWOOD TRUST, INC.

We present this table to highlight the estimated effect that Redwood (Parent) and our Consolidated Sequoia Entities had on our GAAP balance sheet at June 30, 2013. 

Consolidating Balance Sheet ⁽¹⁾

June 30, 2013

($ in millions)

 Redwood 

 Consolidated 

 Redwood 

    (Parent) ⁽²⁾

 Sequoia Entities 

 Consolidated 

Residential loans

$

1,221

$

1,998

$

3,219

Commercial loans

495

-

495

Real estate securities

1,314

-

1,314

Mortgage servicing rights

43

-

43

Cash and cash equivalents

208

-

208

3,281

1,998

5,279

Other assets

147

10

156

Total Assets

$

3,428

$

2,008

$

5,435

Short-term debt

$

1,446

$

-

$

1,446

Other liabilities

121

2

122

Asset-backed securities issued

294

1,921

2,214

Long-term debt 

444

-

444

Total liabilities

2,304

1,922

4,226

Stockholders' equity

1,124

86

1,209

Total Liabilities and Equity

$

3,428

$

2,008

$

5,435

(1) Certain totals may not foot due to rounding. Certain Sequoia securitization entities, the residential resecuritization we engaged in during the third quarter of 2011, and the commercial securitization we engaged in during the fourth quarter of 2012 are treated as secured borrowing transactions for GAAP and we are required under GAAP to consolidate the assets and liabilities of these securitization entities. The securitized assets and liabilities are legally not ours, and we own only the securities and interests that we acquired from these entities. The liabilities of these entities are obligations payable only from the cash flow generated by their securitized assets.

(2) The consolidating balance sheet presents the assets and liabilities of the residential resecuritization we engaged in during the third quarter of 2011 under Redwood (Parent), although these assets and liabilities are owned by the residential resecuritization entity and are legally not ours and we own only the securities and interests that we acquired from the residential resecuritization entity. At June 30, 2013, the residential resecuritization accounted for $296 million of real estate securities and other assets and $134 million of asset-backed securities issued and other liabilities.

The consolidating balance sheet presents the assets and liabilities of the commercial securitization we engaged in during the fourth quarter of 2012 under Redwood (Parent), although these assets and liabilities are owned by the commercial securitization entity and are legally not ours and we own only the securities and interests that we acquired from the commercial securitization entity. At June 30, 2013, the commercial securitization accounted for $276 million of commercial loans and other assets and $160 million of asset-backed securities issued and other liabilities.