Redwood’s GAAP earnings of $1.22 per share for the third quarter increased from $1.20 per share earned in the prior quarter but decreased from earnings of $2.21 per share for the third quarter of 2005.
GAAP book value per share rose from $39.13 to $40.02 during the third quarter of 2006.
Doug Hansen, Redwood’s President, said: “This was another good quarter for Redwood Trust, primarily because credit performance for our residential and commercial real estate assets continues to be excellent.”
Net interest income for the third quarter of 2006 was $49 million, an increase over net interest income of $45 million for the prior quarter and $48 million for the third quarter of 2005. Residential credit-enhancement securities are generating higher GAAP yields due to strong credit performance and rapid prepayment rates.
Income gains from asset sales, calls, and valuation adjustments were $0.4 million for the third quarter of 2006, a substantial decrease from $6 million in the prior quarter and $25 million in the third quarter of 2005. Many of Redwood’s assets continue to appreciate in market value, but for income statement purposes we realized fewer of these gains in this period than in prior periods.
Operating expenses were $13.4 million for the third quarter of 2006, a decrease from $16.0 million for the prior quarter (because due diligence expenses declined) and an increase from $12.3 million for the third quarter of 2005.
Additional Information
Additional information on Redwood's GAAP results for the three and nine months ended September 30, 2006 is available in our Quarterly Report on Form 10-Q filed today with the Securities and Exchange Commission. Today we also released the "Redwood Review," covering the third quarter of 2006. The Redwood Review contains a discussion of third quarter activity, taxable income and other non-GAAP performance measures, and a review of Redwood's business and outlook. Redwood's 10-Q, and the Redwood Review are available on our website (www.redwoodtrust.com).
CAUTIONARY STATEMENT: This press release contains forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature, including the words "anticipated," "estimated," "should," "expect," "believe," "intend," and similar expressions, are intended to identify forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including, among other things, those described in our 2005 Annual Report on Form 10-K under Item 1A "Risk Factors." Other risks, uncertainties, and factors that could cause actual results to differ materially from those projected are detailed from time to time in reports filed by us with the Securities and Exchange Commission, including Forms 10-K, 10-Q, and 8-K. Important factors that may impact our actual results include changes in interest rates and market values; changes in prepayment rates; general economic conditions, particularly as they affect the price of earning assets and the credit status of borrowers; the level of liquidity in the capital markets as it affects our ability to finance our real estate asset portfolio; and other factors not presently identified. In light of these risks, uncertainties, and assumptions, the forward-looking events mentioned in, discussed in, or incorporated by reference into this press release might not occur. Accordingly, our actual results may differ from our current expectations, estimates, and projections. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
