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Market Overview

Redwood Trust Reports Third Quarter 2019 Financial Results

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MILL VALLEY, Calif., Oct. 30, 2019 /PRNewswire/ -- Redwood Trust, Inc. (NYSE:RWT), a leading innovator in housing credit investing, today reported its financial results for the quarter ended September 30, 2019.

Redwood Trust Logo (PRNewsfoto/Redwood Trust, Inc.)

Key Financial Results

  • GAAP net income was $34 million, or $0.31 per diluted common share
  • Non-GAAP core earnings(1) were $43 million, or $0.37 per diluted common share
  • Book value per common share was $15.92 at September 30, 2019
  • Economic return on book value(2) of 1.3% for the third quarter of 2019
  • Recourse debt-to-equity leverage ratio(3) of 2.7x at September 30, 2019
  • Paid a regular quarterly cash dividend of $0.30 per common share

Business Highlights

  • Closed three Sequoia securitizations totaling $1.1 billion, including our 100th overall, and sold $0.5 billion of whole loans
  • Purchased $1.5 billion of jumbo loans as volumes remained stable from the second quarter
  • Originated $162 million of business purpose residential loans in the third quarter of 2019
  • Deployed $152 million of capital into new investments in the third quarter of 2019
  • Raised $228 million of equity capital from a follow-on offering of common stock and generated $248 million of capital through portfolio optimization activities
  • In September, we issued $201 million of 5.75% exchangeable debt due in 2025 to replace our $201 million of exchangeable debt maturing in November 2019
  • In October, we completed our acquisition of CoreVest for $492 million

"The third quarter marked a historic time for Redwood, a time where we made significant progress positioning the company for the future of housing finance," said Chris Abate, Chief Executive Officer of Redwood Trust. "While the rate environment offered a variety of opportunities and challenges, we were able to leverage the strength of our business model to navigate through continued market volatility and execute on our long-term strategic initiatives. We spent ample time in the third quarter focused on the acquisition of CoreVest, our long-term funding needs, and our portfolio optimization goals, which we believe will deliver strong and durable returns for our shareholders."

Abate concluded, "As we look ahead, the strength and agility of our business model has positioned us to perform well under varying market conditions, and we've established a proven competency to capitalize on strategic initiatives as opportunities arise. Our 25-year track record speaks to our ability to develop nascent, emerging products into scalable  funding solutions that are transformative in nature. And with an eye towards integrating our consumer mortgage and  BPL businesses over time across our national correspondent network, our vision of becoming the preeminent specialty finance operator in the mortgage industry can be realized."







(1)

During the third quarter of 2019, Redwood updated its definition of core earnings. 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.



(2)

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.



(3)

Recourse debt excludes $8.5 billion of consolidated securitization debt (ABS issued and servicer advance financing) that is non-recourse to Redwood.

Third Quarter 2019 Redwood Review Available Online

A further discussion of Redwood's business, financial results, core earnings and taxable income, as well as a discussion of management's 2019 outlook, is included in the third quarter 2019 Redwood Review, which is available on the Company's website at www.redwoodtrust.com.

REDWOOD TRUST, INC.














Financial Performance


Three Months Ended

($ in millions, except per share data)


9/30/2019


6/30/2019


9/30/2018








GAAP net income


$

34



$

31



$

41


GAAP net income per diluted common share


$

0.31



$

0.30



$

0.42









Non-GAAP core earnings


$

43



$

43



$

36


Non-GAAP core earnings per diluted common share


$

0.37



$

0.39



$

0.38









REIT taxable income (estimated)


$

39



$

25



$

23


REIT taxable income per share (estimated)


$

0.34



$

0.25



$

0.27









GAAP book value per share


$

15.92



$

16.01



$

16.42


Dividends per common share

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