REDWOOD TRUST, INC. MILL VALLEY, Calif., Aug. 8, 2016 /PRNewswire/ -- Redwood Trust, Inc. (NYSE:RWT) today reported net income for the second quarter of 2016 of $41 million, or $0.48 per fully diluted share. This compares to net income of $12 million, or $0.15 per fully diluted share, for the first quarter of 2016 and net income of $27 million, or $0.31 per fully diluted share, for the second quarter of 2015. Redwood also reported non-GAAP core earnings for the second quarter of 2016 of $40 million, or $0.47 per fully diluted share. This compares to core earnings of $37 million, or $0.44 per fully diluted share, for the first quarter of 2016.
A reconciliation of GAAP earnings to core earnings, along with additional information about Redwood's core earnings measure, is included in the tables that follow. A further discussion of core earnings is included in the Management's Discussion and Analysis section of Redwood's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016.
Redwood also reported estimated REIT taxable income of $28 million, or $0.36 per share, for the second quarter of 2016. This compares to estimated REIT taxable income of $17 million, or $0.23 per share, for the first quarter of 2016 and estimated REIT taxable income of $18 million, or $0.21 per share, for the second quarter of 2015.
At June 30, 2016, Redwood reported GAAP book value per share of $14.20, as compared to $14.17 at March 31, 2016, and $14.67 at December 31, 2015.
For the full year of 2016, Redwood continues to expect GAAP earnings to fall within a range of $1.20 - $1.50 per share. Additional details on Redwood's 2016 earnings outlook are provided in the second quarter Redwood Review, which is available on the company's website at www.redwoodtrust.com.
Redwood will host an earnings call today, August 8, 2016, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to discuss its second quarter 2016 financial results. The number to dial in order to listen to the conference call is 1-888-801-6507 in the U.S. and Canada. International callers must dial 1-913-312-0654. Callers should reference call ID #9114709. A replay of the call will be available through midnight on August 8, 2016, and can be accessed by dialing 1-877-870-5176 in the U.S. and Canada or 1-858-384-5517 internationally and entering access code #9114709. Live audio of the conference call will also be accessible over the internet at www.redwoodtrust.com, where a link to the call will be posted on Redwood's home page. To listen to the call over the internet, go to the Redwood website at least 15 minutes before the call to register and to download and install any needed audio software. An audio replay of the call will also be available on Redwood's website following the call.
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 this Quarterly Report with the Securities and Exchange Commission by Tuesday, August 9, 2016, and make it available on Redwood's website.
Cautionary Statement: This press release and the related conference call contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including Redwood's 2016 earnings outlook, expected 2016 GAAP earnings, statements related to estimates of 2016 REIT taxable income, and the expected timing for the filing of Redwood's Quarterly Report on Form 10-Q. Forward-looking statements involve numerous risks and uncertainties. Redwood's actual results may differ from Redwood's 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 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.
Important factors, among others, that may affect our actual results in 2016 include: interest rate volatility, changes in credit spreads, and changes in liquidity in the market for real estate securities and loans; changes in the demand from investors for residential mortgages and investments, and our ability to distribute an increased volume of residential mortgages through our whole-loan distribution channel; our ability to finance our investments in securities and our acquisition of residential mortgages with short-term debt; the availability of assets for purchase at attractive risk-adjusted returns and our ability to reinvest the proceeds from the potential sale of securities and investments we hold; changes in the values of assets we own; higher than expected operating expenses due to delays or decreases in the realization of expected operating expense reductions related to the repositioning of our conforming mortgage banking activities and commercial loan origination activities; and other unforeseen expenses.
REDWOOD TRUST, INC.
Consolidated Income
Statements (1) Second First Fourth Third Second
-------------------
($ in millions,
except share and
per share data) Quarter Quarter Quarter Quarter Quarter
2016 2016 2015 2015 2015
---- ---- ---- ---- ----
Interest income $67 $62 $69 $63 $63
Interest expense (22) (24) (25) (24) (23)
--- --- --- --- ---
Net interest income 44 38 44 40 40
Reversal of
provision for loan
losses 7 - - - -
--- --- --- --- ---
Net interest income
after provision 51 38 44 40 41
Non-interest income
(loss)
Mortgage banking
activities, net 8 7 - 1 7
MSR income, net 3 6 3 4 1
Investment fair
value changes, net (11) (20) (4) (14) (2)
Other income 2 1 1 - 1
Realized gains, net 10 10 20 6 6
--- --- --- --- ---
Total non-interest
income (loss) 11 4 20 (3) 14
Operating expenses (20) (30) (23) (24) (25)
Benefit from
(provision for)
income taxes - - - 7 (2)
--- --- --- ---
Net income $41 $12 $41 $19 $27
=== === === === ===
Weighted average
diluted shares
(thousands) (2) 97,762 77,138 103,377 85,075 94,950
Diluted earnings per
share $0.48 $0.15 $0.46 $0.22 $0.31
Regular dividends
declared per common
share $0.28 $0.28 $0.28 $0.28 $0.28
(1) Certain totals may not foot due
to rounding.
(2) In the second quarter of 2016 and
the fourth and second quarters
of 2015, weighted average
diluted shares included shares
from the assumed conversion of
our convertible and/or
exchangeable debt in accordance
with GAAP diluted EPS
provisions. Actual shares
outstanding at June 30, 2016,
December 31, 2015, and June 30,
2015 were 76,935, 78,163, and
84,552, respectively.
REDWOOD TRUST, INC.
Consolidated Income
Statements (1) Six Months Ended June 30,
------------------- -------------------------
($ in millions, except
share and per share data) 2016 2015
---- ----
Interest income $129 $127
Interest expense (46) (47)
--- ---
Net interest income 83 80
Reversal of provision for
loan losses 6 -
--- ---
Net interest income after
provision 89 80
Non-interest income
Mortgage banking
activities, net 15 9
MSR income (loss), net 9 (10)
Investment fair value
changes, net (31) (3)
Other income 3 2
Realized gains, net 19 11
--- ---
Total non-interest income 15 9
Operating expenses (51) (50)
Benefit from income taxes - 3
--- ---
Net income $53 $42
=== ===
Weighted average diluted
shares (thousands) 88,728 85,474
Diluted earnings per share $0.67 $0.47
Regular dividends declared
per common share $0.56 $0.56
(1) Certain totals may not
foot due to rounding
REDWOOD TRUST, INC.
Reconciliation of
GAAP Net Income to
Core Earnings (1)
(2) Three Months Ended
------------------- ------------------
($ in millions,
except per share
data) June 30, 2016 March 31, 2016
------------- --------------
GAAP net income $41 $12
Adjustments:
Eliminate mark-to-
market changes on
long-term
investments and
associated
derivatives(3) 4 14
Eliminate
restructuring and
related charges(4) - 11
Eliminate reversal of
commercial loan loss
reserve(5) (5) -
Eliminate provision
for income taxes - -
--- ---
Total adjustments (1) 25
Core earnings $40 $37
=== ===
GAAP net income per
diluted common share $0.48 $0.15
Core earnings per
diluted common
share(6) $0.47 $0.44
(1) Certain totals may not foot due to
rounding.
(2) Core earnings is a non-GAAP
measure of Redwood's earnings and
results of operations.
Specifically, management defines
core earnings as: GAAP net income
adjusted to (i) eliminate the
impact of quarterly mark-to-
market changes on the fair value
of our long-term investments (and
associated derivatives) related to
changes in benchmark interest
rates and credit spreads and (ii)
eliminate the impact of the
provision for (or benefit from)
taxes. In addition, Redwood's core
earnings also exclude the impact
of the restructuring and related
charges associated with the recent
restructuring of Redwood's
conforming residential and
commercial mortgage banking
operations in the first quarter of
2016, as well as the reversal of
loan loss provisions in the second
quarter of 2016 associated with
our commercial mezzanine portfolio
loan sale, which is anticipated to
close in the third quarter of
2016.
Management utilizes this core
earnings measure internally as one
way of analyzing Redwood's
performance over multiple periods
and also believes it can provide a
useful basis to compare Redwood's
results with those of other REITs
and competitors who use similar
non-GAAP measures of operating
results. Core earnings should not
be utilized in isolation, nor
should it be considered as an
alternative to GAAP net income or
other measurements of results of
operations computed in accordance
with GAAP. A further discussion of
core earnings is included in the
Management's Discussion and
Analysis section of Redwood's
Quarterly Report on Form 10-Q for
the quarter ended June 30, 2016.
(3) Adjustment eliminates the mark-to-
market changes on the fair value
of loans held-for-investment,
trading securities, other
investments, and associated
derivatives that are primarily
related to changes in benchmark
interest rates and credit spreads.
More details on the components of
investment fair value changes,
net, are included in the Financial
Insights section of the second
quarter Redwood Review.
(4) Adjustment eliminates operating
expense charges from the
restructuring of Redwood's
conforming residential and
commercial mortgage banking
operations, which were announced
during the first quarter of 2016,
and related charges associated
with the subsequent announcement
of the departure of Redwood's
President.
(5) Adjustment eliminates the benefit
to GAAP earnings from the release
of $5 million of commercial loan
loss reserves, which was due to
the anticipated third quarter sale
of all but two of our commercial
mezzanine loans.
(6) Consistent with the calculation of
net income per diluted common
share for GAAP purposes, core
earnings per diluted common share
is calculated following the "two-
class" method. Additional
information on the calculation of
core earnings using the "two-
class" method can be found in
Table 2 in the Financial Tables
section of the Appendix to the
second quarter Redwood Review and
Redwood's Quarterly Report on Form
10-Q, which is being filed with
the SEC.
REDWOOD TRUST, INC.
Consolidated Balance
Sheets (1) 30-Jun 31-Mar 31-Dec 30-Sep 30-Jun
--------------------
($ in millions,
except share and
per share data) 2016 2016 2015 2015 2015
---- ---- ---- ---- ----
Residential loans $4,040 $3,715 $3,929 $4,037 $3,286
Real estate
securities 884 920 1,233 1,085 1,158
Commercial loans 325 364 403 468 551
Mortgage servicing
rights 110 127 192 163 168
Cash and cash
equivalents 217 305 220 235 226
Other assets 322 296 243 269 193
---
Total assets $5,898 $5,727 $6,220 $6,257 $5,583
====== ====== ====== ====== ======
Short-term debt $1,059 $804 $1,855 $1,873 $1,367
Other liabilities 202 195 142 189 123
Asset-backed
securities issued,
net 860 958 1,049 1,178 1,261
Long-term debt, net 2,684 2,683 2,028 1,811 1,567
----- ----- ----- ----- -----
Total liabilities 4,805 4,641 5,074 5,050 4,318
Stockholders' equity 1,093 1,086 1,146 1,207 1,265
Total liabilities
and equity $5,898 $5,727 $6,220 $6,257 $5,583
====== ====== ====== ====== ======
Shares outstanding
at period end
(thousands) 76,935 76,627 78,163 82,125 84,552
GAAP book value per
share $14.20 $14.17 $14.67 $14.69 $14.96
(1) Certain totals may not
foot due to rounding.
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SOURCE Redwood Trust, Inc.
