Redwood Trust Reports Second Quarter 2012 Results

MILL VALLEY, Calif., Aug. 2, 2012 /PRNewswire/ -- Redwood Trust, Inc. (NYSE: RWT) today reported net income for the second quarter of 2012 of $20 million, or $0.24 per fully diluted share. This compares to net income of $30 million, or $0.37 per fully diluted share, for the first quarter of 2012, and net income of $9 million, or $0.11 per fully diluted share, for the second quarter of 2011.

Redwood also reported estimated taxable income of $17 million, or $0.22 per share, for the second quarter of 2012. This compares to estimated taxable income of $8 million, or $0.11 per share, for the first quarter of 2012, and an estimated taxable loss of less than $1 million, or less than $0.01 per share, for the second quarter of 2011.

Additional information on Redwood's business, financial results, and non-GAAP metrics can be found in The Redwood Review, a quarterly publication available on Redwood's website at www.redwoodtrust.com. In order to complete the formatting of its Quarterly Report on Form 10-Q with eXtensible Business Reporting Language (XBRL) tags, Redwood plans to file the Quarterly Report with the Securities and Exchange Commission by Tuesday, August 7, 2012, and also make it available on the 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.

REDWOOD TRUST, INC.


Consolidated Income Statements⁽¹⁾	Second		First		Fourth		Third		Second
($ in millions, except share data)	Quarter		Quarter		Quarter		Quarter		Quarter
	2012		2012		2011		2011		2011

Interest income	$	60	$	59	$	56	$	53	$	53
Interest expense		(29)		(31)		(29)		(24)		(24)
Net interest income		31		28		27		29		29
Reversal of (provision for) loan losses		1		-		(8)		(4)		(2)
Other market valuation adjustments, net		(5)		(1)		(10)		(13)		(11)
Net interest income after provision and		27		27		10		12		17
other market valuation adjustments
Mortgage banking activities, net		2		4		-		-		-
Operating expenses		(15)		(15)		(13)		(12)		(12)
Realized gains, net		7		14		0		1		6
Provision for income taxes		(1)		-		-		-		-
Net income (loss)		20		30		(3)		1		10
Less: Net income attributable to noncontrolling interest		-		-		-		-		1
Net Income (Loss) Attributable to Redwood Trust, Inc.	$	20	$	30	$	(3)	$	1	$	9


Average diluted shares (thousands)	78,815		79,892		78,370		78,471		79,478
Diluted earnings (loss) per share	$	0.24	$	0.37	$	(0.03)	$	0.01	$	0.11
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 Income Statements⁽¹⁾
($ in millions, except share data)	Six Months Ended June 30,
	2012		2011

Interest income	$	118	$	107
Interest expense		(60)		(46)
Net interest income		59		62
Reversal of (provision for) loan losses		1		(4)
Other market valuation adjustments, net		(6)		(17)
Net interest income after provision and		54		40
other market valuation adjustments
Mortgage banking activities, net		6		-
Operating expenses		(30)		(24)
Realized gains, net		21		10
Provision for income taxes		(1)		-
Net income		50		27
Less: Net loss attributable to noncontrolling interest		-		(1)
Net Income Attributable to Redwood Trust, Inc.	$	50	$	28


Average diluted shares (thousands)	79,965		79,425
Diluted earnings per share	$	0.61	$	0.34
Regular dividends declared per common share	$	0.50	$	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)	2012		2012		2011		2011		2011

Residential loans, held-for-sale	$	256	$	303	$	395	$	2	$	2
Residential loans, held-for-investment		3,216		3,348		3,800		4,156		3,858
Commercial loans		259		190		170		111		84
Real estate securities, at fair value		1,311		1,262		982		1,033		1,038
Cash and cash equivalents		70		150		267		133		80
Other assets		134		119		130		119		103
Total Assets	$	5,246	$	5,372	$	5,743	$	5,554	$	5,165

Short-term debt	$	455	$	441	$	428	$	-	$	41
Other liabilities		136		126		144		163		119
Asset-backed securities issued		3,564		3,704		4,139		4,293		3,839
Long-term debt		140		140		140		140		140
Total liabilities		4,295		4,410		4,851		4,595		4,138

Stockholders' equity		951		962		893		959		1,025
Noncontrolling interest		-		-		-		-		2
Total equity		951		962		893		959		1,027

Total Liabilities and Equity	$	5,246	$	5,372	$	5,743	$	5,554	$	5,165


Shares outstanding at period end (thousands)		78,756		78,756		78,556		78,495		78,555
GAAP book value per share	$	12.00	$	12.22	$	11.36	$	12.22	$	13.04

(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 Entities had on GAAP income for the three and six months ended June 30, 2012.

Consolidating Income Statement⁽¹⁾
Three Months Ended June 30, 2012
($ in millions)	Redwood		Consolidated		Redwood
	(Parent) ⁽²⁾		Entities		Consolidated

Interest income	$	27	$	27	$	53
Net discount (premium) amortization		8		(2)		7
Total interest income		35		25		60
Interest expense		(6)		(23)		(29)
Net interest income		29		2		31
Reversal of (provision for) loan losses		-		2		1
Other market valuation adjustments, net		(6)		1		(5)
Net interest income after provision		22		4		27
and other market valuation adjustments
Mortgage banking activities, net		2		-		2
Operating expenses		(15)		-		(15)
Realized gains, net		7		-		7
Provision for income taxes		(1)		-		(1)
Net Income	$	16	$	4	$	20



Consolidating Income Statement⁽¹⁾
Six Months Ended June 30, 2012
($ in millions)	Redwood		Consolidated		Redwood
	(Parent) ⁽²⁾		Entities		Consolidated

Interest income	$	51	$	55	$	105
Net discount (premium) amortization		16		(3)		14
Total interest income		67		52		118
Interest expense		(11)		(48)		(60)
Net interest income		55		4		59
(Provision for) reversal of loan losses		(1)		2		1
Market valuation adjustments, net		(7)		1		(6)
Net interest income after provision		48		6		54
and other market valuation adjustments
Mortgage banking activities, net		6		-		6
Operating expenses		(30)		-		(30)
Realized gains, net		13		7		21
Provision for income taxes		(1)		-		(1)
Net Income	$	37	$	13	$	50

(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) and our Consolidated Entities had on our GAAP balance sheet at June 30, 2012.

Consolidating Balance Sheet⁽¹⁾
June 30, 2012
($ in millions)	Redwood		Consolidated		Redwood
	(Parent) ⁽²⁾		Entities		Consolidated

Residential loans, held-for-sale	$	256	$	-	$	256
Residential loans, held-for-investment		-		3,216		3,216
Commercial loans		247		12		259
Real estate securities, at fair value		1,057		255		1,311
Cash and cash equivalents		70		-		70
Total earning assets		1,629		3,483		5,112
Other assets		97		37		134
Total Assets	$	1,726	$	3,520	$	5,246

Short-term debt	$	455	$	-	$	455
Other liabilities		74		62		136
Asset-backed securities issued		193		3,371		3,564
Long-term debt		140		-		140
Total liabilities		862		3,433		4,295

Stockholders' equity		864		87		951
Noncontrolling interest		-		-		-
Total equity		864		87		951

Total Liabilities and Equity	$	1,726	$	3,520	$	5,246

(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 June 30, 2012, the resecuritization accounted for $323 million of available-for-sale securities and $193 million of asset-backed securities issued and our investment in this resecuritization is reflected in the difference between these assets and liabilities.

REDWOOD TRUST, INC.


Tax / GAAP Differences⁽¹⁾
Three Months Ended June 30, 2012
($ in millions, except per share data)
	Tax (Est.)		GAAP		Differences
Interest income	$	42	$	60	$	(18)
Interest expense		(6)		(29)		23
Net Interest Income		36		31		5
Reversal of (provision for) loan losses		-		1		(1)
Realized credit losses		(5)		-		(5)
Other market valuation adjustments, net		-		(5)		5
Mortgage banking activities, net		(1)		4		(5)
Operating expenses		(13)		(15)		2
Realized gains, net		-		7		(7)
Provision for income taxes		-		(1)		1
Net Income	$	17	$	20	$	(3)

Income per share	$	0.22	$	0.24	$	(0.02)



Tax / GAAP Differences⁽¹⁾
Six Months Ended June 30, 2012
($ in millions, except per share data)
	Tax (Est.)		GAAP		Differences
Interest income	$	80	$	118	$	(38)
Interest expense		(12)		(60)		48
Net Interest Income		68		59		10
Reversal of (provision for) loan losses		-		1		(1)
Realized credit losses		(16)		-		(16)
Other market valuation adjustments, net		-		(6)		6
Mortgage banking activities, net		(1)		6
Operating expenses		(26)		(30)		4
Realized gains, net		-		21		(21)
Provision for income taxes		-		(1)		1
Net Income	$	26	$	50	$	(23)

Income per share	$	0.33	$	0.61	$	(0.28)


(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.

SOURCE Redwood Trust, Inc.

Released August 2, 2012

Redwood Trust Reports Second Quarter 2012 Results

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