REDWOOD TRUST REPORTS FOURTH QUARTER 2009 RESULTS
MILL VALLEY, CA – February 25, 2010 – Redwood Trust, Inc. (NYSE:RWT) today reported net income for the fourth quarter of 2009 of $40 million, or $0.51 per share. This compares to net income of $27 million, or $0.34 per share, for the third quarter of 2009, and a net loss of $116 million, or $3.46 per share, for the fourth quarter of 2008.
For 2009, Redwood reported net income of $39 million, or $0.55 per share. This compares to a net loss of $444 million, or $13.46 per share, in 2008.
Redwood also reported that it incurred an estimated taxable loss of $34 million, or $0.44 per share, during the fourth quarter of 2009. This compares to an estimated taxable loss of $23 million, or $0.30 per share, for the third quarter of 2009, and a taxable loss of $13 million, or $0.39 per share, for the fourth quarter of 2008.
For 2009, Redwood estimated that it incurred a taxable loss of $83 million, or $1.12 per share. This compares to taxable income of $19 million, or $0.58 per share, in 2008.
GAAP book value at year end was $12.50 per share, an increase of $0.82 per share, or 7%, from the end of the third quarter of 2009, and management’s estimate of non-GAAP economic value increased to $13.03 per share, up $0.75 per share, or 6%, from the end of the third quarter of 2009.
During the fourth quarter of 2009, Redwood acquired $68 million of residential securities, sold $66 million of securities, and ended the quarter with a securities portfolio of $781 million, up from $751 million at the end of the third quarter of 2009. Redwood ended the fourth quarter with $243 million of cash.
Please see the tables that follow for reconciliations between GAAP and non-GAAP metrics. Additional information on Redwood’s business, financial results, and on non-GAAP metrics is available in the Annual Report on Form 10-K for the year ended December 31, 2009 which was filed today with the Securities and Exchange Commission. Redwood’s Form 10-K is available on its website at www.redwoodtrust.com.
The accounting concepts and disclosures relating to Redwood’s financial statements are complex. Today, The Redwood Review was released covering the fourth quarter of 2009. The Redwood Review is an additional publication that provides information about Redwood. The Redwood Review is available at www.redwoodtrust.com.
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 Annual Report on Form 10-K for the year ended December 31, 2009, under the caption “Risk Factors.” Other risks, uncertainties, and factors that could cause actual results to differ materially from those projected are described below and 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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(a) Our investments in Sequoia entities consist predominately of AAA-rated interest-only securities, and to a smaller extent, senior and subordinate securities issued by Sequoia entities. We calculated the $43 million estimate of economic value for these securities using the same valuation process that we follow to fair value our other real estate securities. In contrast, the $72 million of GAAP carrying value of these investments represents the difference between the assets and liabilities owned by the Sequoia entities.
(b) The fair value of our investments in Acacia entities was $3 million and the GAAP carrying value was $3 million. These investments consist of equity and securities in the Acacia entities we sponsor, which have minimal value, as well as management fees we receive from Acacia entities. We valued the management fees at $3 million.
(c) At December 31, 2009, we had $140 million of long-term debt outstanding at an interest rate of LIBOR plus 225 basis points due in 2037. We calculated the $69 million estimate of economic value of this debt using the same valuation process used to fair value our other financial assets and liabilities.
(d) Other assets/liabilities, net are comprised of $3 million of real estate loans, $6 million of accrued interest receivable, and $15 million of other assets, less dividends payable of $19 million and accrued interest and other liabilities of $14 million.
