Redwood Trust Q1 earnings swing back to black

Redwood Trust Inc. (NYSE: RWT) on Wednesday reported first-quarter net income of $97 million, after reporting a $943 million loss in the same period a year earlier.

The Mill Valley-based company said it had quarterly net income of 72 cents per share. Earnings, adjusted for investment gains, were 40 cents per share.

The results surpassed Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was for earnings of 27 cents per share.

The specialty residential and commercial mortgage finance company posted first-quarter revenue of $128 million, down from $198 million a year before.

Its adjusted revenue was $26 million, also topping Street forecasts. Three analysts surveyed by Zacks expected $24.7 million.

“As the economy recovers and home prices reach new highs, our role in providing access to quality housing has never been more important. The durability and diversification of our business model puts us in pole position to address consumer and investor needs for quality access to housing," said Chris Abate, CEO, in an announcement of the results.

He said the company continues to make "significant progress in our technology roadmap,“ intended to disrupt traditional mortgage finance.

Redwood Trust noted these quarterly company highlights:

• Locked a record $4.6 billion of jumbo residential loans, up 22% from the fourth quarter of 2020; loan purchase commitments were $3.5 billion, up 41% from the fourth quarter of 2020
• Lock mix was approximately 38% purchase money loans and 62% refinancing; 95% Select loans and 5% Choice loans
• Loan pipeline as of March 31 included $3.3 billion of loans identified for purchase, up 7% from the fourth quarter of 2020
• Purchased $3.1 billion of jumbo loans and sold $1.4 billion of whole loans
• Completed two securitizations backed by $876 million of Select jumbo loans, in aggregate
• Exercised call options on three Sequoia securitizations, acquiring $19 million of jumbo loans in March and $56 million in April
• As of March 31, funded $274 million of residential loan purchases through "Rapid Funding" since inception, a proprietary technology-enabled program that significantly accelerates purchase timelines for qualified originators
• Originated $386 million in business-purpose loans, down 14% from the seasonally high fourth quarter of 2020, including $253 million of single-family rental (SFR) loans and $133 million of bridge loans; bridge loan volume increased 33% from the fourth quarter of 2020
• Approximately 33% of SFR origination volume in the first quarter was generated from borrowers that previously had a bridge loan with CoreVest and 71% of total origination volumes were from repeat borrowers
• Completed the ramp-up on securitization CAFL 2020-P1, providing $200 million in financing for single-family rental loans including the transfer of $158 million of SFR loans in the first quarter
• During the quarter, the fair value of the securities investment portfolio increased 5%
• Expanded BPL pipeline opportunity through a minority preferred equity investment in Churchill Finance, a vertically-integrated real estate finance company
• Launched RWT Horizons, a venture investment strategy focused on early and mid-stage companies driving innovation in financial and real estate technology, and digital infrastructure
• Initial capital allocation of $25 million expected to grow over time
• Made first investments in three technology companies, two focused on the residential rental market and one focused on the digitization of the mortgage ecosystem through blockchain
• Onboarded majority of active Sequoia securitizations (aggregate notional value at issuance of $17.3 billion) onto the dv01 capital markets technology platform to provide investors secure, real-time data and transparency on the underlying loan performance of these securitizations
• Introduced Rapid Funding+, which includes additional workflow enhancements that enable more customized funding schedules and enables the program to be offered to an expanded group of loan sellers
• Launched pilot of Redwood Live, an app-based tool designed to give loan sellers visibility into the underwriting process with live status updates for each of their loans

The company board declared a quarterly dividend of 16 cents per share.

Redwood Trust shares have climbed 24% since the beginning of the year. In the final minutes of trading on Wednesday, shares hit $10.88, nearly tripling in the last 12 months.