PR Newswire | Jul 30, 2020 04:16PM EDT

07/30 15:15 CDT

Redwood Trust Reports Second Quarter 2020 Financial Results MILL VALLEY, Calif., July 30, 2020

MILL VALLEY, Calif., July 30, 2020 /PRNewswire/ -- Redwood Trust, Inc. (NYSE:RWT), a leading innovator in housing credit investing, today reported its financial results for the quarter ended June 30, 2020.

Q2'20 Key Financial Results and Metrics

* GAAP net income was $165 million, or $1.00 per diluted common share * GAAP book value per common share was $8.15 at June 30, 2020 * Economic return on book value(1) of 31% * Unrestricted cash balance of $529 million at June 30, 2020 * Total recourse leverage ratio(2) of 2.1x at June 30, 2020 * Declared and paid a regular quarterly cash dividend of $0.125 per common share for the second quarter

Q2'20 Business Highlights

* Book value recovered nearly one-third of unrealized losses recorded in the first quarter * Repositioned our secured debt structure significantly; reducing total recourse debt from $4.6 billion at March 31, 2020 to $1.8 billion at June 30, 2020 and marginable debt from $3.5 billion at March 31, 2020 to $375 million at June 30, 2020 * Repurchased $125 million of convertible debt below carrying value, resulting in realized gains of $25 million * Completed the sales of nearly all residential loans held for investment; completed the sales of nearly all of our remaining pre-COVID jumbo loan inventory including through a Sequoia securitization totaling $271 million * Originated $234 million in business purpose loans and sold a significant portion of our pre-COVID single-family rental loans through a securitization totaling $221 million

"We are pleased with the progress we made in the second quarter. We executed our liquidity plan, strengthened our balance sheet, and materially reduced our use of marginable debt without raising dilutive outside capital. While the true impact from COVID-19 to the U.S. economy and mortgage industry is yet to be seen, we've taken great care to position our workforce, our balance sheet, and our business lines in what we believe is the best possible way to navigate the ongoing pandemic and emerge stronger in the marketplace. As a result of the actions taken, we entered the third quarter in a unique position, with significant capital to invest in our operating businesses and otherwise opportunistically deploy," said Chris Abate, Chief Executive Officer of Redwood Trust.

Second Quarter 2020 Redwood Review Available Online

A further discussion of Redwood's business, financial results and taxable income is included in the second quarter 2020 Redwood Review, which is available within the "Investor Information-Redwood Review" section on the Company's website at www.redwoodtrust.com.



Economic return on book value is based on the period change in GAAP book (1)value per common share plus dividends declared per common share in the period

Recourse leverage ratio is defined as recourse debt at Redwood divided by tangible stockholders' equity. Recourse debt excludes $7.5 billion of (2)consolidated securitization debt (ABS issued and servicer advance financing) and other debt that is non-recourse to Redwood, and tangible stockholders' equity excludes $65 million of intangible assets.

REDWOOD TRUST, INC.



Financial Performance Three Months Ended

($ in millions, except per share data) 6/30/20203/31/20206/30/2019



GAAP net income (loss) $165 $(943) $31

GAAP net income (loss) per diluted common share $1.00 $(8.28)$0.30



REIT taxable (loss) income (estimated) $(58) $38 $25

REIT taxable (loss) income per share (estimated)$(0.50)$0.33 $0.25



GAAP book value per share $8.15 $6.32 $16.01

Dividends per common share $0.125 $0.32 $0.30

Conference Call and WebcastRedwood will host an earnings call today, July 30, 2020, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to discuss its second quarter 2020 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 #13706019. A replay of the call will be available through midnight on August 13, 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 #13706019.

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 Quarterly Report on Form 10-Q with the Securities and Exchange Commission by Monday, August 10, 2020, and also make it available on Redwood's website.

About Redwood TrustRedwood Trust, Inc. (NYSE: RWT) is a specialty finance company focused on making credit-sensitive investments in single-family residential and multifamily 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 2020 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 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 under the caption "Risk Factors," and in our Current Report on Form 8-K filed on April 2, 2020. 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.



Consolidated Income Statements ^(1) Three Months Ended

($ in millions, except share and per6/30/20 3/31/20 12/31/199/30/19 6/30/19 share data)



Interest income $130 $198 $193 $150 $149

Interest expense (103) (147) (148) (117) (116)

Net interest income 27 51 45 34 32

Non-interest income (loss)

Mortgage banking activities, net (6) (28) 46 10 19

Investment fair value changes, net 152 (871) 1 11 3

Other income 1 2 5 4 5

Realized gains, net 26 4 6 5 3

Total non-interest income (loss), 173 (893) 58 30 30 net

General and administrative expenses (30) (33) (42) (27) (26)

Other expenses (5) (91) (7) (3) (2)

(Provision for) benefit from income - 22 (4) - (2) taxes

Net income (loss) $165 $(943) $49 $34 $31



Weighted average diluted shares 147,099114,077 152,983136,523130,697(thousands) ^(2)

Diluted earnings (loss) per common $1.00 $(8.28)$0.38 $0.31 $0.30 share

Regular dividends declared per $0.125$0.32 $0.30 $0.30 $0.30 common share



Certain totals may (1) not foot due to rounding.

In the periods presented above, excluding the first quarter of 2020, weighted average diluted shares included shares from the assumed conversion (2)of our convertible and/or exchangeable debt in accordance with GAAP diluted EPS provisions. Actual shares outstanding at June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019, and June 30, 2019 were 114,940, 114,838, 114,353, 112,102, and 97,715, respectively.

REDWOOD TRUST, INC.



Consolidated Income Statements ^(1) Six Months Ended June 30,

($ in millions, except share and per share data)2020 2019



Interest income $ 328 $280

Interest expense (249) (215)

Net interest income 79 64

Non-interest (loss) income

Mortgage banking activities, net (34) 31

Investment fair value changes, net (719) 23

Other income 3 9

Realized gains, net 30 14

Total non-interest (loss) income (720) 78

General and administrative expenses (63) (49)

Other expenses (96) (3)

Benefit from (provision for) income taxes 22 (3)

Net (loss) income $ (778) $86



Weighted average diluted shares (thousands) 114,235 128,499

Diluted (loss) earnings per common share $ (6.82) $0.78

Regular dividends declared per common share $ 0.445 $0.60

REDWOOD TRUST, INC.



Consolidated Balance Sheets ^(1)

($ in millions, except share and per6/30/20 3/31/20 12/31/19 9/30/19 6/30/19 share data)



Residential loans $4,534 $6,711 $7,715 $8,682 $7,283

Business purpose residential loans 3,782 3,464 3,507 336 251

Multifamily loans 489 470 4,409 3,792 3,750

Real estate securities 316 293 1,100 1,285 1,477

Other investments 430 446 358 348 372

Cash and cash equivalents 529 378 197 395 218

Other assets 281 538 710 639 501

Total assets $10,362$12,301$17,995$15,476$13,852



Short-term debt $663 $2,342 $2,329 $1,981 $2,463

Other liabilities 168 318 370 411 338

Asset-backed securities issued 6,856 6,462 10,515 8,346 6,913

Long-term debt, net 1,738 2,454 2,953 2,954 2,573

Total liabilities 9,425 11,576 16,168 13,691 12,288



Stockholders' equity 937 725 1,827 1,785 1,564



Total liabilities and equity $10,362$12,301$17,995$15,476$13,852



Shares outstanding at period end 114,940 114,838 114,353 112,102 97,715 (thousands)

GAAP book value per share $8.15 $6.32 $15.98 $15.92 $16.01



(1)Certain totals may not foot due to rounding.

CONTACTSLisa M. HartmanSVP, Head of Investor RelationsPhone: 866-269-4976Email: investorrelations@redwoodtrust.com

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SOURCE Redwood Trust, Inc.