Redwood Trust Reports First Quarter 2013 Results

               Redwood Trust Reports First Quarter 2013 Results

PR Newswire

MILL VALLEY, Calif., May 2, 2013

MILL VALLEY, Calif., May 2, 2013 /PRNewswire/ -- Redwood Trust, Inc. (NYSE:
RWT) today reported net income for the first quarter of 2013 of $61 million,
or $0.69 per fully diluted share. This compares to net income of $42 million,
or $0.50 per fully diluted share, for the fourth quarter of 2012, and net
income of $30 million, or $0.37 per fully diluted share, for the first quarter
of 2012.

Redwood also reported estimated REIT taxable income of $16 million, or $0.20
per share, for the first quarter of 2013.This compares to estimated REIT
taxable income of $18 million, or $0.23 per share, for the fourth quarter of
2012, and REIT taxable income of $10 million, or $0.13 per share, for the
first quarter of 2012.

Additional information on Redwood's business, financial results, and taxable
income 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, May 7, 2013, and also
make it 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, including statements related to estimates of
taxable income and the filing of our Quarterly Report on Form 10-Q.
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, 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           First     Fourth    Third     Second    First
Statements ^(1)
($ in millions, except share  Quarter   Quarter   Quarter   Quarter   Quarter
data)
                              2013      2012      2012      2012      2012
Interest income               $ 54      $ 53      $ 60      $ 60      $ 59
Interest expense                (18)      (33)      (28)      (29)      (31)
Net interest income ^(2)        35        20        31        31        28
(Provision for) reversal of     (2)       (3)       (1)       1         -
provision for loan losses
Other market valuation          2         (1)       (3)       (5)       (1)
adjustments, net
Net interest income after
provision and other market      35        16        27        27        27
valuation adjustments
Mortgage banking activities,    44        24        17        2         4
net
Operating expenses             (20)      (18)      (17)      (15)      (15)
Realized gains, net ^(2)        12        20        14        7         14
Provision for income taxes      (11)      -         (1)       (1)       -
Net Income Attributable to    $ 61      $ 42      $ 40      $ 20      $ 30
Redwood Trust, Inc.
Average diluted shares          87,345    82,498    80,764    78,815    79,892
(thousands)
Diluted earnings per share    $ 0.69    $ 0.50    $ 0.48    $ 0.24    $ 0.37
Regular dividends declared    $ 0.28    $ 0.25    $ 0.25    $ 0.25    $ 0.25
per common share



(1) Certain totals may not foot due to rounding.
(2) See the Non-GAAP presentation of fourth quarter 2012 consolidated GAAP
income on page 3 for a review of the way management analyzes Redwood's fourth
quarter 2012 net income and the manner in which management compares the
components of fourth quarter 2012 net income to the components of first
quarter 2013 net income.



REDWOOD TRUST, INC.
During the fourth quarter of 2012, Redwood sold its remaining investment
interests in nine legacy Acacia entities and ten legacy Sequoia entities. The
sale of Redwood's interests in these legacy entities triggered a derecognition
of their underlying assets and liabilities for financial reporting purposes
and resulted in a $4 million net, non-recurring increase to fourth quarter
2012 earnings. The $4 million net, non-recurring increase is not reflected as
a simple line item in Redwood's fourth quarter GAAP income statement. Instead,
it is expressed as an $11 million decrease to net interest income, reflecting
the accelerated recognition of deferred hedging costs relating to Acacia
entities, and a $15 million realized gain upon deconsolidation. The $15
million gain primarily reflects the proceeds received on the sale of the
interests in these legacy entities, as well as recovery of excess loan loss
reserves related to legacy Sequoia entities that Redwood was required to
record in past periods under GAAP.
The table below sets forth the components of Redwood's first quarter 2013 and
fourth quarter 2012 net income, as reported under GAAP, together with a
non-GAAP presentation of the components of Redwood's fourth quarter 2012 net
income. The non-GAAP presentation reflects a reclassification adjustment
which, overall, does not impact reported net income under GAAP, but which we
believe is useful for investors because it reflects the impact of the
deconsolidation of the legacy Acacia and Sequoia entities in a manner
consistent with the way management analyzes Redwood's fourth quarter 2012
results of operations and the manner in which management compares the
components of fourth quarter 2012 net income to the components of first
quarter 2013 net income.



Components of
Consolidated Income
^(1)
($ in millions)        Three Months Ended
                       December 31, 2012                           March 31,
                                                                   2013
                       Redwood      Reclassification  (Non-GAAP)   Redwood
                       As Reported  Adjustment ^(2)   As Adjusted  As Reported
Net interest income    $    20      $      11         $    31      $    35
Provision for loan          (3)            -               (3)          (2)
losses
Other market
valuation                   (1)            -               (1)          2
adjustments, net
Mortgage banking            24             -               24           44
activities, net
Operating expenses          (18)           -               (18)         (20)
Total realized gains,
net: ^(3)
Realized gains on           5              -               5            12
sales, net
Realized gain on            15             (11)            4            -
deconsolidation
Provision for income        -              -               -            (11)
taxes
Net Income             $    42      $      -          $    42      $    61



(1) Certain totals may not foot due to rounding.
(2) The Reclassification Adjustment column shows a reclassification adjustment
related to the deconsolidation of certain legacy Acacia and Sequoia entities
that impacts items reported under GAAP, but which, overall, does not impact
reported net income: Net interest income is increased by $11 million to
address the non-recurring decrease to net interest income resulting from
accelerated recognition of $11 million of deferred hedging costs relating to
Acacia entities upon deconsolidation of these entities; and Realized gain on
deconsolidation is decreased by $11 million to reflect that the
deconsolidation of these Sequoia and Acacia entities resulted in a
non-recurring net increase to earnings of only $4 million.
(3) Total realized gains, net were $20 million as reported under GAAP for the
three months ended December 31, 2012.



REDWOOD TRUST, INC.
Consolidated Balance          31-Mar    31-Dec    30-Sep    30-Jun    31-Mar
Sheets ^(1)
($ in millions, except        2013      2012      2012      2012      2012
share data)
Residential loans             $ 2,965   $ 2,836   $ 3,495   $ 3,472   $ 3,651
Commercial loans                401       313       298       259       190
Real estate securities          1,231     1,109     1,313     1,311     1,262
Cash and cash equivalents       79        81        39        70        150
Other assets                    121       106       152       134       119
Total Assets                  $ 4,797   $ 4,444   $ 5,297   $ 5,246   $ 5,372
Short-term debt              $ 721     $ 552     $ 522     $ 455     $ 441
Other liabilities               80        83        156       136       126
Asset-backed securities         2,365     2,529     3,429     3,564     3,704
issued
Long-term debt                 444       140       140       140       140
Total liabilities             3,609     3,304     4,247     4,295     4,410
Stockholders' equity           1,188     1,140     1,050     951       962
Total Liabilities and         $ 4,797   $ 4,444   $ 5,297   $ 5,246   $ 5,372
Equity
Shares outstanding at period    81,706    81,716    81,526    79,263    78,756
end (thousands)
GAAP book value per share     $ 14.54   $ 13.95   $ 12.88   $ 12.00   $ 12.22



(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 months ended
March 31, 2013.



Consolidating Income
Statement ^(1)
Three Months Ended March 31,
2013
($ in millions)                Redwood      Consolidated      Redwood
                                (Parent)  Sequoia Entities  Consolidated
                               ^(2)
Interest income                $     34       $        12         $     45
Net discount (premium)               9                 (2)              8
amortization
Total interest income                43                10               54
Interest expense                     (11)              (7)              (18)
Net interest income                  32                3                35
Provision for loan losses            (1)               (1)              (2)
Other market valuation               1                 -                2
adjustments, net
Net interest income after
provision and other market           33                2                35
valuation adjustments
Mortgage banking activities,         44                -                44
net
Operating expenses                   (20)              -                (20)
Realized gains, net                  12                -                12
Provision for income taxes           (11)              -                (11)
Net Income                     $     59       $        2          $     61



(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 effect that Redwood (Parent) and our
Consolidated Sequoia Entities had on our GAAP balance sheet at March 31,
2013.

Consolidating Balance
Sheet ^(1)
March 31, 2013
($ in millions)          Redwood          Consolidated      Redwood
                          (Parent) ^(2)  Sequoia Entities  Consolidated
Residential loans        $      832         $       2,133       $     2,965
Commercial loans                401                 -                 401
Real estate securities          1,231               -                 1,231
Cash and cash                   79                  -                 79
equivalents
Total earning assets            2,544               2,133             4,677
Other assets                    110                 10                121
Total Assets             $      2,653       $       2,144       $     4,797
Short-term debt          $      721         $       -           $     721
Other liabilities               78                  2                 80
Asset-backed securities         309                 2,056             2,365
issued
Long-term debt                 444                 -                 444
Total liabilities               1,552               2,057             3,609
Stockholders' equity            1,101               86                1,188
Total Liabilities and    $      2,653       $       2,144       $     4,797
Equity



(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 March 31, 2013, the residential resecuritization
accounted for $317 million of real estate securities and other assets and $149
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 March 31, 2013, the commercial securitization accounted for $277
million of commercial loans and other assets and $160 million of asset-backed
securities issued and other liabilities.



SOURCE Redwood Trust, Inc.

Website: http://www.redwoodtrust.com
Contact: Christopher Abate, Chief Financial Officer, (415) 384-3584, or Mike
McMahon, Investor Relations, (415) 384-3805
 
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