EX-99.1 2 v301464_ex99-1.htm EXHIBIT 99.1

 

 

 

 

FOR IMMEDIATE RELEASE CONTACTS:  Diane Merdian
Redwood Trust, Inc. (415) 380-2331
Monday, February 27, 2012  
  Mike McMahon
  (415) 384-3805

 

 

 

REDWOOD TRUST REPORTS FOURTH QUARTER 2011 RESULTS

 

MILL VALLEY, CAFebruary 27, 2012 – Redwood Trust, Inc. (NYSE:RWT) today reported a net loss for the fourth quarter of 2011 of $3 million, or $0.03 per fully diluted share. This compares to net income of $1 million, or $0.01 per fully diluted share, for the third quarter of 2011, and net income of $15 million, or $0.18 per fully diluted share, for the fourth quarter of 2010.

Redwood also reported an estimated taxable loss of $1 million, or $0.02 per share, during the fourth quarter of 2011. This compares to an estimated taxable income of $6 million, or $0.07 per share, for the third quarter of 2011, and a taxable loss of $6 million, or $0.07 per share, for the fourth quarter of 2010.

Additional information on Redwood’s business, financial results, and non-GAAP metrics is available in The Redwood Review, which is available on Redwood’s website at www.redwoodtrust.com, and in Redwood’s most recent Annual Report on Form 10-K, which is filed with the Securities and Exchange Commission, and which is also available on Redwood’s website.

 

Cautionary Statement: This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve numerous risks and uncertainties. Our actual results may differ from our beliefs, expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Forward-looking statements are not historical in nature and can be identified by words such as “anticipate,” “estimate,” “will,” “should,” “expect,” “believe,” “intend,” “seek,” “plan” and similar expressions or their negative forms, or by references to strategy, plans, or intentions. These forward-looking statements are subject to risks and uncertainties, including, among other things, those described in our most recent Annual Report on Form 10-K under the caption “Risk Factors.” Other risks, uncertainties, and factors that could cause actual results to differ materially from those projected may be described from time to time in reports we file with the Securities and Exchange Commission (SEC), including reports on Forms 10-Q and 8-K. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

 

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REDWOOD TRUST, INC.                    
                     
                     
Consolidated Income Statements(1)  Fourth   Third   Second   First   Fourth 
($ in millions, except share data)  Quarter   Quarter   Quarter   Quarter   Quarter 
   2011   2011   2011   2011   2010 
                          
Interest income  $56   $53   $53   $54   $56 
Interest expense   (29)   (24)   (24)   (22)   (22)
Net interest income   27    29    29    32    34 
Provision for loan losses   (8)   (4)   (2)   (3)   (8)
Market valuation adjustments, net   (10)   (13)   (11)   (6)   - 
Net interest income after provision and   10    12    17    24    26 
market valuation adjustments                         
Operating expenses   (13)   (12)   (12)   (12)   (13)
Realized gains on sales and calls, net   0    1    6    4    2 
Provision for income taxes   -    -    -    -    - 
Net (loss) income   (3)   1    10    16    15 
Less: Net income (loss) attributable to noncontrolling interest   -    -    1    (2)   - 
Net (Loss) Income Attributable to Redwood Trust, Inc.  $(3)  $1   $9   $18   $15 
                          
                          
Average diluted shares (thousands)  78,370   78,471   79,478   79,372   78,944 
Diluted (loss) earnings per share  $(0.03)  $0.01   $0.11   $0.22   $0.18 
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.

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REDWOOD TRUST, INC.        
         
         
Consolidated Income Statements(1)        
($ in millions, except share data)  Years Ended December 31, 
   2011   2010 
           
Interest income  $217   $230 
Interest expense   (99)   (85)
Net interest income   118    145 
Provision for loan losses   (16)   (24)
Market valuation adjustments, net   (40)   (20)
Net interest income after provision and   62    102 
market valuation adjustments          
Operating expenses   (48)   (54)
Realized gains on sales and calls, net   11    63 
Provision for income taxes   (0)   (0)
Net income   25    111 
Less: Net (loss) income attributable to noncontrolling interest   (1)   1 
Net Income Attributable to Redwood Trust, Inc.  $26   $110 
           
           
Average diluted shares (thousands)   78,300    78,811 
Diluted earnings per share  $0.31   $1.36 
Regular dividends declared per common share  $1.00   $1.00 


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

 

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REDWOOD TRUST, INC.                    
                     
                     
Consolidated Balance Sheets(1)  31-Dec   30-Sep   30-Jun   31-Mar   31-Dec 
($ in millions, except share data)  2011   2011   2011   2011   2010 
                          
Residential real estate loans  $4,195   $4,158   $3,860   $3,796   $3,797 
Commercial real estate loans   170    111    84    62    50 
Real estate securities, at fair value:                         
Trading securities   253    278    297    322    330 
Available-for-sale securities   729    755    741    782    825 
Cash and cash equivalents   267    133    80    220    47 
Other assets   130    119    103    101    95 
Total Assets  $5,743   $5,554   $5,165   $5,283   $5,144 
                          
Short-term debt  $428   $-   $41   $-   $44 
Other liabilities   144    163    119    104    123 
Asset-backed securities issued   4,139    4,293    3,839    3,957    3,761 
Long-term debt   140    140    140    140    140 
Total liabilities   4,851    4,595    4,138    4,201    4,068 
Stockholders’ equity   893    959    1,025    1,075    1,065 
Noncontrolling interest   -    -    2    7    11 
Total equity   893    959    1,027    1,082    1,076 
                          
Total Liabilities and Equity  $5,743   $5,554   $5,165   $5,283   $5,144 
                          
Shares outstanding at period end (thousands)   78,556    78,495    78,555    78,139    78,125 
GAAP book value per share  $11.36   $12.22   $13.04   $13.76   $13.63 


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

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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 and twelve months ended December 31, 2011.

 

 

Consolidating Income Statement(1)                          
Three Months Ended December 31, 2011         New    Other           
($ in millions)    Redwood    Sequoia    Consolidated      Intercompany     Redwood 
     (Parent) (2)    Entities     Entities      Adjustments     Consolidated 
                          
Interest income  $20   $8   $21   $-   $49 
Net discount (premium) amortization   9    (0)   (1)   -    8 
Total interest income   29    8    20    -    56 
Interest expense   (5)   (7)   (18)   -    (29)
Net interest income   24    1    2    -    27 
Provision for loan losses   (1)   -    (7)   -    (8)
Market valuation adjustments, net   (11)   -    1    -    (10)
Net interest income (loss) after provision   12    1    (4)   -    10 
and market valuation adjustments                         
Operating expenses   (13)   -    (0)   -    (13)
Realized gains on sales and calls, net   -    -    0    -    0 
Income from New Sequoia Entities   1    -    -    (1)   - 
Loss from Other Consolidated Entities   (3)   -    -    3    - 
Noncontrolling interest   -    -    -    -    - 
Provision for income taxes   -    -    -    -    - 
Net (Loss) Income  $(3)  $1   $(3)  $2   $(3)

  

Consolidating Income Statement(1)                          
Year Ended December 31, 2011         New    Other           
($ in millions)    Redwood    Sequoia    Consolidated    Intercompany    Redwood 
     (Parent) (2)    Entities    Entities    Adjustments    Consolidated 
                          
Interest income  $70   $20   $92   $-   $182 
Net discount (premium) amortization   41    0    (6)   -    35 
Total interest income   111    20    86    -    217 
Interest expense   (13)   (17)   (69)   -    (99)
Net interest income   98    3    18    -    118 
Provision for loan losses   (1)   (0)   (15)   -    (16)
Market valuation adjustments, net   (29)   -    (11)   -    (40)
Net interest income (loss) after provision   67    3    (8)   -    62 
and market valuation adjustments                         
Operating expenses   (47)   (0)   (0)   -    (48)
Realized gains (losses) on sales and calls, net   12    -    (1)   -    11 
Income from New Sequoia Entities   3    -    -    (3)   - 
Loss from Other Consolidated Entities   (8)   -    -    8    - 
Noncontrolling interest   -    -    1    -    1 
Provision for income taxes   (0)   -    -    -    (0)
Net Income (Loss)  $26   $3   $(8)  $5   $26 


(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).

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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 December 31, 2011.
 
 

 

Consolidating Balance Sheet(1)                          
December 31, 2011         New    Other           
($ in millions)    Redwood    Sequoia    Consolidated    Intercompany    Redwood 
    (Parent) (2)    Entities (3)    Entities    Adjustments    Consolidated 
                          
Residential loans  $395   $676   $3,124   $-   $4,195 
Commercial loans   158    -    12    -    170 
Real estate securities, at fair value:                         
Trading securities   22    -    231    -    253 
Available-for-sale securities   729    -    -    -    729 
Cash and cash equivalents   267    -    -    -    267 
Investment in New Sequoia Entities   49    -    -    (49)   - 
Investment in Other Consolidated Entities   42    -    -    (42)   - 
Total earning assets   1,661    676    3,367    (90)   5,614 
Other assets   91    6    33    -    130 
Total Assets  $1,752   $682   $3,400   $(90)  $5,743 
                          
Short-term debt  $428   $-   $-   $-   $428 
Other liabilities   72    2    69    -    144 
Asset-backed securities issued   220    631    3,289    -    4,139 
Long-term debt   140    -    -    -    140 
Total liabilities   859    633    3,358    -    4,851 
Stockholders’ equity   893    49    42    (90)   893 
Noncontrolling interest   -    -    -    -    - 
Total equity   893    49    42    (90)   893 
                          
Total Liabilities and Equity  $1,752   $682   $3,400   $(90)  $5,743 


(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 December 31, 2011, the resecuritization accounted for $325 million of available-for-sale securities and $220 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.

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REDWOOD TRUST, INC.            
             
Tax / GAAP Differences(1)            
Three Months Ended December 31, 2011            
($ in millions, except per share data)            
   Tax (Est.)    GAAP    Differences 
Interest income  $31   $56   $(25)
Interest expense   (7)   (29)   23 
Net Interest Income   25    27    (3)
Provision for loan losses   -    (8)   8 
Realized credit losses   (15)   -    (15)
Market valuation adjustments, net   -    (10)   10 
Operating expenses   (11)   (13)   1 
Realized gains on sales and calls, net   -    0    (0)
Provision for income taxes   (0)   -    (0)
Less: Net loss attributable to noncontrolling interest   -    -    - 
Net Loss  $(1)  $(3)  $2 
                
Income per share  $(0.02)  $(0.03)  $0.01 



Tax / GAAP Differences(1)            
Year Ended December 31, 2011            
($ in millions, except per share data)            
   Tax (Est.)    GAAP    Differences 
Interest income  $128   $217   $(89)
Interest expense   (17)   (99)   82 
Net Interest Income   112    118    (7)
Provision for loan losses   -    (16)   16 
Realized credit losses   (58)   -    (58)
Market valuation adjustments, net   -    (40)   40 
Operating expenses   (45)   (48)   2 
Realized gains on sales and calls, net   -    11    (11)
Provision for income taxes   (0)   (0)   0 
Less: Net loss attributable to noncontrolling interest   -    (1)   1 
Net Income  $9   $26   $(17)
                
Income per share  $0.11   $0.31   $(0.20)


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

Taxable income for 2011 is an estimate until we file our 2011 tax return.

Taxable income per share is based on the number of shares outstanding at the end of each quarter. The taxable income per share for the year ended December 31, 2011 is the sum of the four quarterly per share estimates.

Dividends in 2011 are expected to be characterized as 25% ordinary income, or $19 million, and 75% return of capital, or $59 million. The 2010 dividends were characterized as 62% ordinary income, or $48 million, and 38% return of capital, or $30 million. The portion of Redwood's dividends characterized as a return of capital are not taxable to a shareholder and reduces a shareholder's basis for shares held at each quarterly distribution date.

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