MILL VALLEY, Calif.,
Feb. 27, 2020 /PRNewswire/
-- Redwood Trust, Inc. (NYSE:RWT), a leading innovator in
housing credit investing, today reported its financial results for
the quarter ended December 31, 2019 and selected financial
results for the full year ended December 31,
2019.
Key Financial Results
- GAAP net income was $49 million,
or $0.38 per diluted common
share
- Non-GAAP core earnings(1) were $61 million, or $0.45 per diluted common share
- GAAP return on equity was 10.9% for the fourth quarter; 10.6%
for the year
- Non-GAAP core return on equity was 13.6% for the fourth
quarter; 11.6% for the year
- Book value per common share was $15.98 at December 31,
2019
- Economic return on book value(2) of 2.3% for the
fourth quarter; 8.1% for the year
- Recourse leverage ratio(3) of 3.1x at December 31, 2019
- Paid a regular quarterly cash dividend of $0.30 per common share for the fourth quarter;
$1.20 per common share for the
year
Business Highlights
- Completed our acquisition of CoreVest for $492 million in October
- Originated $750 million of
business purpose residential loans
- Purchased $1.8 billion of jumbo
loans as volumes improved from the third quarter
- Closed two Select securitizations totaling $776 million and our first single-family rental
(SFR) securitization totaling $395
million; sold $1.4 billion of
jumbo whole loans
- Deployed $634 million of capital
into new investments in the fourth quarter of 2019, bringing full
year 2019 deployment to a record $1.09
billion
- In November, retired $201 million
of 5.625% exchangeable debt at maturity
- In February, announced a 6.7% dividend increase to $0.32 per share for the first quarter of
2020
"The fourth quarter capped a historic year for Redwood. We made
significant progress executing on our strategic initiatives;
optimizing our portfolio, expanding our reach into multifamily and
business purpose lending and implementing operational efficiencies.
We are now one of the largest originators of business purpose
residential loans and have two of the largest and most highly
regarded issuance platforms in the private-label securitization
market," said Chris Abate, Chief
Executive Officer of Redwood Trust. "Our hard work is reflected in
our fourth quarter and full year results, which culminated in
today's announcement of a 6.7% dividend increase to $0.32 per share for the first quarter of
2020."
Abate concluded, "We are committed to serving our mission to
help make quality housing accessible to all Americans, whether it's
rented or owned, and generating solid risk-adjusted returns that
can sustainably grow our dividend over time for our
shareholders."
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(1)
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A reconciliation of
GAAP net income to non-GAAP core earnings and a reconciliation of
GAAP earnings per diluted share to non-GAAP core earnings per
diluted share, along with additional information about Redwood's
core earnings measure, is included in the tables that
follow.
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(2)
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Economic return on
book value is based on the periodic change in GAAP book value per
common share plus dividends declared per common share during the
period.
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(3)
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Recourse leverage
ratio is defined as recourse debt at Redwood divided by tangible
stockholders' equity. Recourse debt excludes $10.7 billion of
consolidated securitization debt (ABS issued and servicer advance
financing) that is non-recourse to Redwood and tangible
stockholders' equity excludes $161 million of goodwill and
intangible assets.
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Fourth Quarter 2019 Redwood Review Available Online
A further discussion of Redwood's business, financial results,
core earnings and taxable income is included in the fourth quarter
2019 Redwood Review, which is available on the Company's website at
www.redwoodtrust.com.
REDWOOD TRUST,
INC.
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Financial
Performance
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Three Months
Ended
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Year
Ended
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($ in millions,
except per share data)
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12/31/2019
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9/30/2019
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12/31/2019
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GAAP net
income
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$
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49
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$
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34
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$
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169
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GAAP net income per
diluted common share
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$
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0.38
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$
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0.31
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$
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1.46
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Non-GAAP core
earnings
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$
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61
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$
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43
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$
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186
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Non-GAAP core
earnings per diluted common share
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$
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0.45
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$
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0.37
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$
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1.58
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GAAP return on
equity
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10.9
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%
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8.6
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%
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10.6
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%
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Non-GAAP return on
equity
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13.6
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%
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10.9
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%
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11.6
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%
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REIT taxable income
(estimated)
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$
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44
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$
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39
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$
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136
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REIT taxable income
per share (estimated)
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$
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0.39
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$
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0.34
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$
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1.28
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GAAP book value per
share
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$
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15.98
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$
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15.92
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$
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15.98
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Dividends per common
share
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$
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0.30
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$
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0.30
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$
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1.20
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Economic return on
book value
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2.3
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%
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1.3
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%
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8.1
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%
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Recourse leverage
ratio (1)
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3.1x
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2.7x
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3.1x
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Capital
deployment
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$
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634
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$
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152
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$
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1,086
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Jumbo loans
purchased
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$
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1,835
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$
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1,483
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$
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5,902
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Jumbo loans
securitized or sold
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$
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2,200
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$
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1,574
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$
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5,132
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(1)
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Recourse leverage
ratio is defined as recourse debt at Redwood divided by tangible
stockholders' equity. Recourse debt excludes $10.7 billion and $8.5
billion of consolidated securitization debt (ABS issued and
servicer advance financing) that is non-recourse to Redwood at
December 31, 2019 and September 30, 2019, respectively. Tangible
stockholder's equity excludes $161 million and $49 million of
goodwill and intangible assets at December 31, 2019 and September
30, 2019, respectively.
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Conference Call and Webcast
Redwood will host an earnings call today, February 27,
2020, at 2:00 p.m. Pacific Time /
5:00 p.m. Eastern Time to discuss its
fourth quarter 2019 financial results. The number to dial in order
to listen to the conference call is 1-877-423-9813 in the U.S. and
Canada. International callers must
dial 1-201-689-8573. Callers should reference call ID #13697992. A
replay of the call will be available through midnight on
March 12, 2020, and can be accessed by dialing 1-844-512-2921
in the U.S. and Canada or
1-412-317-6671 internationally and entering access code
#13697992.
The live conference call will also be webcast in listen-only
mode in the Newsroom section of Redwood's website under "Events."
To listen to the webcast, please go to Redwood's website at least
15 minutes prior to the call to register and download and install
any needed audio software. An audio replay of the call will also be
available on Redwood's website following the call. Redwood plans to
file its Annual Report on Form 10-K with the Securities and
Exchange Commission by Monday, March 2, 2020, and also make it
available on Redwood's website.
About Redwood Trust
Redwood Trust, Inc. (NYSE: RWT) is a specialty finance company
focused on making credit-sensitive investments in residential
mortgages and related assets and engaging in mortgage banking
activities. Our goal is to provide attractive returns to
shareholders through a stable and growing stream of earnings and
dividends, as well as through capital appreciation. Redwood Trust
was established in 1994, is internally managed, and structured as a
real estate investment trust ("REIT") for tax purposes. For more
information about Redwood, please visit our website at
www.redwoodtrust.com.
Forward-Looking Statements: 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 statements related to
estimates of 2019 REIT taxable income and the expected timing for
the filing of Redwood's Annual Report on Form 10-K. 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.
REDWOOD TRUST,
INC.
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Consolidated
Income Statements (1)
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Three Months
Ended
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($ in millions,
except share and per share data)
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12/31/19
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9/30/19
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6/30/19
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3/31/19
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12/31/18
|
|
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Interest
income
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$
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193
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$
|
150
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$
|
149
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$
|
131
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|
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$
|
120
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|
Interest
expense
|
|
(148)
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(117)
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(116)
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(99)
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(85)
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Net interest
income
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45
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|
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34
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|
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32
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32
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35
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Non-interest income
(loss)
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Mortgage banking
activities, net
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46
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10
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19
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|
|
12
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|
11
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Investment fair value
changes, net
|
|
1
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|
11
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|
3
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|
20
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(39)
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Other
income
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5
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|
4
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5
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5
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|
|
4
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Realized gains,
net
|
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6
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|
5
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|
3
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|
|
11
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|
6
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Total non-interest
income (loss), net
|
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58
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|
|
30
|
|
|
30
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|
|
48
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(18)
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General and
administrative expenses
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(42)
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(27)
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(26)
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(23)
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(19)
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Other
expenses
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(7)
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(3)
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(2)
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(1)
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—
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(Provision for)
benefit from income taxes
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(4)
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—
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(2)
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(1)
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|
1
|
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Net income
(loss)
|
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$
|
49
|
|
|
$
|
34
|
|
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$
|
31
|
|
|
$
|
54
|
|
|
$
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(1)
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Weighted average
diluted shares (thousands) (2)
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152,983
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136,523
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130,697
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126,278
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|
83,217
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Diluted earnings
(loss) per common share
|
|
$
|
0.38
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$
|
0.31
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$
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0.30
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$
|
0.49
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|
$
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(0.02)
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Regular dividends
declared per common share
|
|
$
|
0.30
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|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
|
|
(1)
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Certain totals may
not foot due to rounding.
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(2)
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In the periods
presented above, excluding the fourth quarter of 2018, 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 December 31,
2019, September 30, 2019, June 30, 2019, March 31, 2019, and
December 31, 2018 were 114,353, 112,102, 97,715, 96,866, and
84,884, respectively.
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REDWOOD TRUST,
INC.
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Consolidated
Income Statements (1)
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|
Years Ended
December 31,
|
($ in millions,
except share and per share data)
|
|
2019
|
|
2018
|
|
|
|
|
|
Interest
income
|
|
$
|
622
|
|
|
$
|
379
|
|
Interest
expense
|
|
(480)
|
|
|
(239)
|
|
Net interest
income
|
|
142
|
|
|
140
|
|
Non-interest
income
|
|
|
|
|
Mortgage banking
activities, net
|
|
87
|
|
|
60
|
|
Investment fair value
changes, net
|
|
36
|
|
|
(26)
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Other
income
|
|
19
|
|
|
13
|
|
Realized gains,
net
|
|
24
|
|
|
27
|
|
Total non-interest
income
|
|
166
|
|
|
74
|
|
General and
administrative expenses
|
|
(119)
|
|
|
(83)
|
|
Other
expenses
|
|
(13)
|
|
|
—
|
|
Provision for income
taxes
|
|
(7)
|
|
|
(11)
|
|
Net income
|
|
$
|
169
|
|
|
$
|
120
|
|
|
|
|
|
|
Weighted average
diluted shares (thousands)
|
|
136,781
|
|
|
110,028
|
|
Diluted earnings per
common share
|
|
$
|
1.46
|
|
|
$
|
1.34
|
|
Regular dividends
declared per common share
|
|
$
|
1.20
|
|
|
$
|
1.18
|
|
|
|
(1)
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Certain totals may
not foot due to rounding.
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REDWOOD TRUST,
INC.
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Reconciliation of
GAAP Net Income to
Non-GAAP Core Earnings (1) (2)
|
Three Months
Ended
|
|
|
Year
Ended
|
($ in millions,
except per share data)
|
12/31/19
|
|
9/30/19
|
|
|
12/31/19
|
|
|
|
|
|
|
|
GAAP net
income
|
$
|
49
|
|
|
$
|
34
|
|
|
|
169
|
|
Adjustments:
|
|
|
|
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|
Eliminate
mark-to-market changes on long-term investments and associated
derivatives (3)
|
(11)
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(14)
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(42)
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Include cumulative
gain on long-term investments sold, net (4)
|
17
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|
|
20
|
|
|
|
52
|
|
Eliminate purchase
accounting adjustments (5)
|
7
|
|
|
2
|
|
|
|
9
|
|
Eliminate corporate
acquisition and related expenses (5)
|
1
|
|
|
2
|
|
|
|
3
|
|
Income taxes
associated with core earnings adjustments (6)
|
(2)
|
|
|
(1)
|
|
|
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(5)
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Total
adjustments
|
12
|
|
|
9
|
|
|
|
17
|
|
Non-GAAP core
earnings
|
$
|
61
|
|
|
$
|
43
|
|
|
|
$
|
186
|
|
|
|
|
|
|
|
|
GAAP net income
per diluted common share
|
$
|
0.38
|
|
|
$
|
0.31
|
|
|
|
$
|
1.46
|
|
Non-GAAP core
earnings per diluted common share (7)
|
$
|
0.45
|
|
|
$
|
0.37
|
|
|
|
$
|
1.58
|
|
|
|
(1)
|
Certain totals may
not foot due to rounding.
|
|
|
(2)
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Core earnings is a
non-GAAP measure of Redwood's earnings and results of operations.
Specifically, management has defined core earnings as: GAAP net
income adjusted to (i) eliminate the impact of quarterly
mark-to-market changes on the fair value of long-term investments
(and associated derivatives) related to changes in benchmark
interest rates and credit spreads, (ii) include the cumulative net
gains or losses on long-term investments accounted for as trading
securities under GAAP that were sold during the period presented,
net of any gains or losses from derivatives associated with the
investments sold, (iii) exclude certain items related to Redwood's
acquisitions of 5 Arches and CoreVest and (iv) include the
hypothetical income taxes associated with core earnings
adjustments.
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Management utilizes
this core earnings measure internally as one way of analyzing
Redwood's performance over multiple periods, as it believes it
provides useful comparative results absent the impact of certain
quarterly mark-to-market changes and other items that management
believes are not reflective of core 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 fourth quarter 2019 Redwood
Review.
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(3)
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Adjustments eliminate
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. During the third
quarter of 2019, management updated its calculation of this
adjustment. Additional information regarding this adjustment is
included in the Appendix to the fourth quarter 2019 Redwood
Review.
|
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(4)
|
Adjustment includes
the cumulative net gains or losses on long-term investments
accounted for as trading securities under GAAP that were sold
during the period presented, net of any realized gains or losses
from derivatives associated with the investments
sold. Cumulative gains and losses are calculated by
multiplying the difference between the sales price and original
purchase price by the face value of the securities sold.
|
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(5)
|
Core earnings
excludes several items related to the acquisitions of 5 Arches and
CoreVest. These items include the exclusion of a one-time gain
associated with the re-measurement of our initial minority
investment and purchase option in 5 Arches and ongoing adjustments
to exclude amortization of intangible assets; changes in fair value
of the contingent consideration liability related to the remaining
purchase consideration for the 5 Arches platform; and exclusion of
certain transaction expenses associated with our acquisition of
CoreVest. Additional information regarding this adjustment is
included in the Appendix to the fourth quarter 2019 Redwood
Review.
|
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|
(6)
|
We apply estimated
effective tax rates to core earnings adjustments occurring within
Redwood's taxable REIT subsidiaries to estimate the hypothetical
income tax expense or benefit associated with those
adjustments.
|
|
|
(7)
|
Additional
information on the calculation of non-GAAP core diluted EPS can be
found in Table 2 in the Financial Tables section of the
Redwood Reviews for the respective quarters presented.
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REDWOOD TRUST,
INC.
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
Consolidated
Balance Sheets (1)
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions,
except share and per share data)
|
|
12/31/19
|
|
9/30/19
|
|
6/30/19
|
|
3/31/19
|
|
12/31/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
loans
|
|
$
|
7,715
|
|
|
$
|
8,682
|
|
|
$
|
7,283
|
|
|
$
|
7,274
|
|
|
$
|
7,255
|
|
|
Business purpose
residential loans
|
|
3,507
|
|
|
336
|
|
|
251
|
|
|
161
|
|
|
141
|
|
|
Multifamily
loans
|
|
4,409
|
|
|
3,792
|
|
|
3,750
|
|
|
2,176
|
|
|
2,145
|
|
|
Real estate
securities
|
|
1,100
|
|
|
1,285
|
|
|
1,477
|
|
|
1,543
|
|
|
1,452
|
|
|
Other
investments
|
|
358
|
|
|
348
|
|
|
372
|
|
|
414
|
|
|
439
|
|
|
Cash and cash
equivalents
|
|
197
|
|
|
395
|
|
|
218
|
|
|
201
|
|
|
176
|
|
|
Other
assets
|
|
710
|
|
|
639
|
|
|
501
|
|
|
424
|
|
|
330
|
|
|
Total
assets
|
|
$
|
17,995
|
|
|
$
|
15,476
|
|
|
$
|
13,852
|
|
|
$
|
12,193
|
|
|
$
|
11,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
debt
|
|
$
|
2,329
|
|
|
$
|
1,981
|
|
|
$
|
2,463
|
|
|
$
|
2,163
|
|
|
$
|
2,400
|
|
|
Other
liabilities
|
|
370
|
|
|
411
|
|
|
338
|
|
|
270
|
|
|
206
|
|
|
Asset-backed
securities issued
|
|
10,515
|
|
|
8,346
|
|
|
6,913
|
|
|
5,638
|
|
|
5,410
|
|
|
Long-term debt,
net
|
|
2,953
|
|
|
2,954
|
|
|
2,573
|
|
|
2,573
|
|
|
2,572
|
|
|
Total
liabilities
|
|
16,168
|
|
|
13,691
|
|
|
12,288
|
|
|
10,643
|
|
|
10,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
1,827
|
|
|
1,785
|
|
|
1,564
|
|
|
1,550
|
|
|
1,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
equity
|
|
$
|
17,995
|
|
|
$
|
15,476
|
|
|
$
|
13,852
|
|
|
$
|
12,193
|
|
|
$
|
11,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding at
period end (thousands)
|
|
114,353
|
|
|
112,102
|
|
|
97,715
|
|
|
96,866
|
|
|
84,884
|
|
|
GAAP book value per
share
|
|
$
|
15.98
|
|
|
$
|
15.92
|
|
|
$
|
16.01
|
|
|
$
|
16.00
|
|
|
$
|
15.89
|
|
|
|
|
(1)
|
Certain totals may
not foot due to rounding.
|
CONTACTS
Lisa M. Hartman
SVP, Head of Investor Relations
Phone: 866-269-4976
Email: investorrelations@redwoodtrust.com
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SOURCE Redwood Trust, Inc.