North Bay Business Journal

Thursday, February 21, 2013, 6:05 pm

Redwood Trust earnings quadruple in 2012

2013 plans: $7B in RMBS, $150M in CMBS, $1B in mezzanine loans


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    MILL VALLEY — Redwood Trust, Inc. (NYSE: RWT) on Thursday reported net income quadrupled in 2012, propelled by earnings from the company’s mortgage banking arm, lower loss provisions and the outcome of investments in late 2012.

    Net income last year was $132 million, up 407 percent from $26 million for 2011.

    Earnings for the year were equivalent to $1.59 per share, up from 31 cents in 2011. The company paid $1 in shareholder dividends in 2012 and announced Thursday that it also would be paying a 28 cent quarterly dividend — the first increase in six years — on March 15.

    Net interest revenue was down 5.9 percent from that of 2011. But a lower loss provision and other market valuation adjustments resulted in net revenue of $97 million and an overall increase of 56.5 percent from the prior year.

    New mortgage banking activities created $47 million in revenue, boosted by a currently large spread between mortgage purchasing prices and prices paid for those who bundle those into investment securities, according to the company.

    Real estate investment trust activities generated taxable income of $18 million in fourth quarter, compared with $15 million in the third quarter and $3 million for the final three months of 2011.

    Redwood Trust sold a number of subsidiary investment interests in the fourth quarter, resulting in a one-time $4 million increase in fourth-quarter earnings. Offloading those assets and liabilities, Redwood Trust announced $4.4 billion in assets at the end of 2012, versus $5.7 billion at the end of 2011.

    The company acquired $2.3 billion in residential real estate loans in 2012 and completed six securitizations, or bundling of mortgages for sale on secondary markets. Redwood Trust also invested $150 million in new securitizations through its Sequoia subsidiary.

    On the commercial loan side, the company obtained financing for its commercial lending activities and originated $156 million in mezzanine commercial loans. The company originated $61 million in senior commercial loans during the year.

    For 2013, Redwood Trust said it aims to acquire and securitize approximately $7 billion in residential mortgage loans, $150 million in commercial loans for investment and $1 billion in senior commercial loans for sale.

    Redwood Trust’s stock price increased 1 percent Thursday, closing at $20.21 a share.

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    1 Comment

    1. February 22, 2013, 7:29 am

      by Mark S.

      Redwood really is a great company poised for a lot more growth in the sector and in the stock. Making smart management decisions, including expanding their corporate footprint outside of California to avoid whatever insane taxes the state is going to impose on us in the future. I’m a stockholder and glad I am. I just wish the dividends were taxed a little differently. Unlike many of the rest of the industry, these guys actually know how to find the quality in MBS. And the new management has done a tremendous job holding down costs and unwinding itself from the financial crisis.

      Congratulations to a well run company. I’m glad I own a few pieces.

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