Exhibit 99.1
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| Redwood Trust, Inc. | | CONTACT: | | Harold Zagunis |
| Monday, February 27, 2006 | | | | (415) 389-7373 |
REDWOOD TRUST REPORTS FOURTH QUARTER 2005 RESULTS
MILL VALLEY, California — February 27, 2006— Redwood Trust, Inc. (NYSE: RWT) today reported GAAP earnings of $42 million ($1.68 per share) for the fourth quarter of 2005 and $200 million ($7.96 per share) for the year ended December 31, 2005. In 2004, GAAP earnings were $54 million ($2.22 per share) for the fourth quarter and $233 million ($10.47 per share) for the year ended December 31, 2004.
The reduction in our net income of $33 million from 2004 to 2005 resulted from a decrease in net interest income of $14 million, an increase in operating expenses of $11 million, and an increase in GAAP provisions for income taxes of $10 million. Net gains on sales and calls increased by $2 million. The reduction in net interest income reflects the impact of increased prepayment rates and reduced balances for residential adjustable rate mortgages consolidated on our balance sheet from Sequoia securitization entities we have sponsored, lower yields on our portfolio of residential credit-enhancement securities as seasoned higher-yielding securities have been prepaid, called, or sold, and higher levels of uninvested cash. Operating expenses increased in part due to the rapid growth we experienced in 2003 and 2004 and also due to continuing investments we are making in systems, infrastructure, and new employees to position our business for additional growth. Provisions for income taxes increased in 2005 because we benefited from net operating loss carryforwards in 2004.
At the end of 2004, GAAP book value per share was $35.78. After declaring dividends of $5.80 per share, GAAP book value increased during 2005 by 4% to $37.20 per share.
Fourth Quarter Summary
From the fourth quarter of 2004 to the fourth quarter of 2005, net income decreased by $12 million. Net interest income decreased by $17 million and operating expenses increased by $4 million. These decreases in income, driven by the factors discussed above, were partially offset by an increase in realized gains on sales and calls of assets and net recognized market valuation adjustments of $9 million as a result of increased sales activity.
Additional Information
Additional information on our GAAP results is available in our Annual Report on Form 10-K for the year ended December 31, 2005 which was filed today with the Securities and Exchange Commission. Today we also released our first “Redwood Review”, covering the fourth quarter of 2005. The Review (formerly the supplemental information package) contains a discussion of 2005 and fourth quarter activity, taxable income and other non-GAAP performance measures, and a review of Redwood’s business and outlook. Our 10-K and the Redwood Review are available on our web site (www.redwoodtrust.com).
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REDWOOD TRUST, INC.
(All dollars in millions, except per share data)
| | | | | | | | | | | | | | | | | | | | | |
| | | Fourth | | | Third | | | Second | | | First | | | Fourth | |
| | | Quarter | | | Quarter | | | Quarter | | | Quarter | | | Quarter | |
| CONSOLIDATED INCOME STATEMENT | | 2005 | | | 2005 | | | 2005 | | | 2005 | | | 2004 | |
| Interest Income | | $ | 230.9 | | | $ | 243.5 | | | $ | 248.4 | | | $ | 237.2 | | | $ | 205.2 | |
| Interest Expense | | | (189.7 | ) | | | (196.6 | ) | | | (195.2 | ) | | | (176.0 | ) | | | (147.2 | ) |
| | | | | | | | | | | | | | | | |
| Net Interest Income | | | 41.2 | | | | 46.9 | | | | 53.2 | | | | 61.2 | | | | 58.0 | |
| | | | | | | | | | | | | | | | | | | | | |
| Operating Expenses | | | (12.1 | ) | | | (10.9 | ) | | | (11.1 | ) | | | (10.7 | ) | | | (7.9 | ) |
| Net Recognized Gains and Valuation Adjustments | | | 17.8 | | | | 24.9 | | | | 3.1 | | | | 15.0 | | | | 8.9 | |
| Variable Stock Option (Expense) Income | | | 0.0 | | | | 0.0 | | | | (0.0 | ) | | | 0.1 | | | | (0.0 | ) |
| Excise Tax (Expense) Credit | | | (0.3 | ) | | | (0.3 | ) | | | (0.3 | ) | | | (0.3 | ) | | | 0.2 | |
| Provision For Income Taxes | | | (4.1 | ) | | | (4.7 | ) | | | (4.0 | ) | | | (4.7 | ) | | | (4.8 | ) |
| Reversal of Deferred Tax Valuation Allowance | | | 0.0 | | | | 0.0 | | | | 0.0 | | | | 0.0 | | | | 0.0 | |
| | | | | | | | | | | | | | | | |
| GAAP Earnings | | $ | 42.5 | | | $ | 55.9 | | | $ | 40.9 | | | $ | 60.6 | | | $ | 54.4 | |
| | | | | | | | | | | | | | | | | | | | | |
| Average Diluted Shares (thousands) | | | 25,311 | | | | 25,314 | | | | 25,196 | | | | 25,021 | | | | 24,491 | |
| GAAP Earnings per Share (Diluted) | | $ | 1.68 | | | $ | 2.21 | | | $ | 1.62 | | | $ | 2.42 | | | $ | 2.22 | |
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| Regular Dividends per Share | | $ | 0.70 | | | $ | 0.70 | | | $ | 0.70 | | | $ | 0.70 | | | $ | 0.67 | |
| Special Dividends per Share | | | 3.00 | | | | 0.00 | | | | 0.00 | | | | 0.00 | | | | 5.50 | |
| | | | | | | | | | | | | | | | |
| Total Dividends per Share | | $ | 3.70 | | | $ | 0.70 | | | $ | 0.70 | | | $ | 0.70 | | | $ | 6.17 | |
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REDWOOD TRUST, INC.
(All dollars in millions, except per share data)
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| CONSOLIDATED INCOME STATEMENT | | 2005 | | | 2004 | | | 2003 | |
| Interest Income | | $ | 960.0 | | | $ | 648.1 | | | $ | 331.0 | |
| Interest Expense | | | (757.5 | ) | | | (431.9 | ) | | | (202.4 | ) |
| | | | | | | | | | |
| Net Interest Income | | | 202.5 | | | | 216.2 | | | | 128.1 | |
| | | | | | | | | | | | | |
| Operating Expenses | | | (44.8 | ) | | | (33.1 | ) | | | (30.0 | ) |
| Net Recognized Gains and Valuation Adjustments | | | 60.8 | | | | 59.1 | | | | 46.7 | |
| Variable Stock Option (Expense) Income | | | 0.1 | | | | (1.0 | ) | | | (5.7 | ) |
| Excise Tax (Expense) Credit | | | (1.2 | ) | | | (0.6 | ) | | | (1.2 | ) |
| Provision For Income Taxes | | | (17.5 | ) | | | (13.2 | ) | | | (5.5 | ) |
| Reversal of Deferred Tax Valuation Allowance | | | 0.0 | | | | 5.2 | | | | 0.0 | |
| Dividends and Income Allocated to Preferred Stock | | | — | | | | — | | | | (0.7 | ) |
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| GAAP Earnings | | $ | 199.9 | | | $ | 232.6 | | | $ | 131.7 | |
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| Average Diluted Shares (thousands) | | | 25,121 | | | | 22,229 | | | | 18,812 | |
| GAAP Earnings per Share (Diluted) | | $ | 7.96 | | | $ | 10.47 | | | $ | 7.04 | |
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| Regular Dividends per Share | | $ | 2.80 | | | $ | 2.68 | | | $ | 2.60 | |
| Special Dividends per Share | | | 3.00 | | | | 6.00 | | | | 4.75 | |
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| Total Dividends per Share | | $ | 5.80 | | | $ | 8.68 | | | $ | 7.35 | |
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REDWOOD TRUST, INC.
(All dollars in millions, except per share data)
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| | | 31-Dec | | | 30-Sep | | | 30-Jun | | | 31-Mar | | | 31-Dec | |
| CONSOLIDATED BALANCE SHEET | | 2005 | | | 2005 | | | 2005 | | | 2005 | | | 2004 | |
| Residential Real Estate Loans | | $ | 13,875 | | | $ | 16,556 | | | $ | 19,630 | | | $ | 21,772 | | | $ | 22,504 | |
| Residential Loan Credit-Enhancement Securities | | | 613 | | | | 664 | | | | 706 | | | | 611 | | | | 562 | |
| Commercial Real Estate Loans | | | 60 | | | | 56 | | | | 42 | | | | 57 | | | | 54 | |
| Commercial Loan Credit-Enhancement Securities | | | 58 | | | | 44 | | | | 29 | | | | 29 | | | | 14 | |
| Securities Portfolio | | | 1,749 | | | | 1,783 | | | | 1,649 | | | | 1,505 | | | | 1,381 | |
| Cash and Cash Equivalents | | | 176 | | | | 163 | | | | 72 | | | | 65 | | | | 57 | |
| Other Assets | | | 246 | | | | 239 | | | | 218 | | | | 246 | | | | 206 | |
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| Total Consolidated Assets | | $ | 16,777 | | | $ | 19,505 | | | $ | 22,346 | | | $ | 24,285 | | | $ | 24,778 | |
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| Redwood Trust Debt | | $ | 170 | | | $ | 162 | | | $ | 453 | | | $ | 199 | | | $ | 203 | |
| Consolidated Asset-Back Securities Issued | | | 15,585 | | | | 18,237 | | | | 20,815 | | | | 23,057 | | | | 23,630 | |
| Other Liabilities | | | 87 | | | | 90 | | | | 86 | | | | 81 | | | | 81 | |
| Equity | | | 935 | | | | 1,016 | | | | 992 | | | | 948 | | | | 864 | |
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| Total Liabilities and Equity | | $ | 16,777 | | | $ | 19,505 | | | $ | 22,346 | | | $ | 24,285 | | | $ | 24,778 | |
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| Shares Outstanding at Period End (thousands) | | | 25,133 | | | | 24,764 | | | | 24,647 | | | | 24,514 | | | | 24,154 | |
| GAAP Equity (GAAP Book Value) per Share | | $ | 37.20 | | | $ | 41.03 | | | $ | 40.24 | | | $ | 38.67 | | | $ | 35.78 | |
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