Provided By Business Wire
Last update: Jul 28, 2022
Redwood Trust, Inc. (NYSE:RWT; "Redwood" or the "Company"), a leader in expanding access to housing for homebuyers and renters, today reported its financial results for the quarter ended June 30, 2022.
Key Financial Results and Metrics
Operational Business Highlights
Investment Portfolio
Business Purpose Mortgage Banking
Residential Mortgage Banking
Financing and Capital Markets Highlights
RWT Horizons Highlights
Environmental, Social, Governance ("ESG") Highlights
Post Q2'22 Activity
"Our financial results reflect the historic volatility and spread widening that characterized markets during the second quarter,” said Christopher Abate, Chief Executive Officer of Redwood. “The magnitude of rapidly rising rates impacted our Residential Mortgage Banking business, while demand for shorter-term financing from our business purpose lending borrowers proved more resilient. Despite a challenging environment for execution and loan distribution, we enter the third quarter in a healthy risk position with low levels of inventory due to the depth of our distribution channels, and sound credit fundamentals within our investment portfolio."
Continued Abate, "With our recent capital raise, we are well-positioned to take advantage of an array of opportunities for our investment portfolio or within our capital structure, further driving shareholder value."
_____________________
(1) |
Economic return on book value is based on the period change in GAAP book value per common share plus dividends declared per common share in the period. |
|
(2) |
Recourse leverage ratio is defined as recourse debt at Redwood divided by tangible stockholders' equity. Recourse debt excludes $9.3 billion of consolidated securitization debt (ABS issued and servicer advance financing) and other debt that is non-recourse to Redwood, and tangible stockholders' equity excludes $35 million of intangible assets. |
|
(3) |
Total net jumbo loan exposure represents the sum of $1.0 billion of loans held on balance sheet and $0.3 billion of loans identified for purchase (locked loans not yet purchased), less $0.5 billion of loans subject to forward sale commitments, each at June 30, 2022. |
|
(4) |
Lock volume does not account for potential fallout from pipeline that typically occurs through the lending process. |
|
(5) |
Loan purchase commitments include estimated potential fallout from locked pipeline that typically occurs through the lending process. |
|
(6) |
Available capital of $190 million represents our available investable capital at June 30, 2022 and is adjusted for the cash purchase price paid for Riverbend Lending at closing of approximately $44 million (subject to certain adjustments including potential earnout consideration). |
|
(7) |
Subject to certain adjustments including potential earnout consideration. |
Second Quarter 2022 Redwood Review Available Online
A further discussion of Redwood's business and financial results is included in the second quarter 2022 Shareholder Letter and Redwood Review which are available within the “Quarterly Results” section under "Financials" on the Company’s investor relations website at ir.redwoodtrust.com.
Conference Call and Webcast
Redwood will host an earnings call today, July 28, 2022, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to discuss its second quarter 2022 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. A replay of the call will be available through midnight on Thursday, August 11, 2022, 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 #13729620.
The conference call will be webcast live in listen-only mode through the Events and Presentations section of Redwood Trust's Investor Relations website at https://ir.redwoodtrust.com/events-and-presentations/events. To listen to the webcast, please go to Redwood's website at least 15 minutes before the call to register and to 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 Tuesday, August 9, 2022, and also make it available on Redwood’s website.
About Redwood
Redwood Trust, Inc. (NYSE: RWT) is a specialty finance company focused on several distinct areas of housing credit. Our operating platforms occupy a unique position in the housing finance value chain, providing liquidity to growing segments of the U.S. housing market not well served by government programs. We deliver customized housing credit investments to a diverse mix of investors, through our best-in-class securitization platforms; whole-loan distribution activities; and our publicly traded shares. Our aggregation, origination and investment activities have evolved to incorporate a diverse mix of residential, business purpose and multifamily assets. Our goal is to provide attractive returns to shareholders through a stable and growing stream of earnings and dividends, capital appreciation, and a commitment to technological innovation that facilitates risk-minded scale. We operate our business in three segments: Residential Mortgage Banking, Business Purpose Mortgage Banking and Investment Portfolio. Additionally, through RWT Horizons™, our venture investing initiative, we invest in early-stage companies strategically aligned with our business across the lending, real estate, and financial technology sectors to drive innovations across our residential and business-purpose lending platforms. Since going public in 1994, we have managed our business through several cycles, built a track record of innovation, and established a best-in-class reputation for service and a common-sense approach to credit investing. Redwood Trust 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 or connect with us on LinkedIn, Twitter, or Facebook.
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 the amount of residential mortgage loans that we identified for purchase during the second quarter of 2022, expected fallout and the corresponding volume of residential mortgage loans expected to be available for purchase, residential mortgage loans subject to forward sale commitments, statements related to our authorization to repurchase up to $125 million of common stock, statements relating to our estimates of our available capital, and the expected timing for the filing of Redwood's Quarterly Report on Form 10-Q. Forward-looking statements involve numerous risks and uncertainties. Redwood's actual results may differ from Redwood's beliefs, expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Forward-looking statements are not historical in nature and can be identified by words such as “anticipate,” “estimate,” “will,” “should,” “expect,” “believe,” “intend,” “seek,” “plan” and similar expressions or their negative forms, or by references to strategy, plans, or intentions. These forward-looking statements are subject to risks and uncertainties, including, among other things, those described in our Annual Report on Form 10-K for the year ended December 31, 2021 under the caption “Risk Factors”. Other risks, uncertainties, and factors that could cause actual results to differ materially from those projected may be described from time to time in reports we file with the Securities and Exchange Commission, including reports on Forms 10-Q and 8-K. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
REDWOOD TRUST, INC. |
|||||||
($ in millions, except per share data) |
Three Months Ended |
||||||
|
6/30/2022 |
|
3/31/2022 |
||||
Financial Performance |
|
|
|
||||
Net income (loss) per diluted common share |
$ |
(0.85 |
) |
|
$ |
0.24 |
|
Return on Equity (annualized) |
|
(28.8 |
) % |
|
|
8.6 |
% |
|
|
|
|
||||
Book Value per Share |
$ |
10.78 |
|
|
$ |
12.01 |
|
Dividend per Share |
$ |
0.23 |
|
|
$ |
0.23 |
|
Economic Return on Book Value (1) |
|
(8.3 |
) % |
|
|
1.5 |
% |
|
|
|
|
||||
Available Capital (in millions) |
$ |
190 |
|
|
$ |
140 |
|
Recourse Leverage Ratio (2) |
2.5x |
|
2.1x |
||||
Operating Metrics |
|||||||
Business Purpose Loans |
|
|
|
||||
SFR fundings |
$ |
361 |
|
|
$ |
505 |
|
Bridge fundings |
$ |
561 |
|
|
$ |
415 |
|
SFR securitized |
$ |
313 |
|
|
$ |
— |
|
Bridge securitized |
$ |
250 |
|
|
$ |
— |
|
SFR sold |
$ |
— |
|
|
$ |
332 |
|
Residential Jumbo Loans |
|
|
|
||||
Locks |
$ |
1,011 |
|
|
$ |
2,630 |
|
Purchases |
$ |
1,137 |
|
|
$ |
2,008 |
|
Securitized |
$ |
— |
|
|
$ |
687 |
|
Sold |
$ |
1,238 |
|
|
$ |
1,827 |
|
|
|
|
|
(1) |
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. |
|
(2) |
Recourse leverage ratio is defined as recourse debt at Redwood divided by tangible stockholders' equity. As of June 30, 2022 and March 31, 2022, recourse debt excluded $9.3 billion and $9.6 billion, respectively, of consolidated securitization debt (ABS issued and servicer advance financing) and other debt that is non-recourse to Redwood, and tangible stockholders' equity excluded $35 million and $38 million, respectively, of intangible assets. |
REDWOOD TRUST, INC. |
||||||||||||||||||||
Consolidated Income Statements (1) |
|
Three Months Ended |
||||||||||||||||||
($ in millions, except share and per share data) |
|
6/30/22 |
|
3/31/22 |
|
12/31/21 |
|
9/30/21 |
|
6/30/21 |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest income |
|
$ |
167 |
|
|
$ |
189 |
|
|
$ |
162 |
|
|
$ |
146 |
|
|
$ |
139 |
|
Interest expense |
|
|
(127 |
) |
|
|
(136 |
) |
|
|
(112 |
) |
|
|
(104 |
) |
|
|
(108 |
) |
Net interest income |
|
|
40 |
|
|
|
53 |
|
|
|
50 |
|
|
|
42 |
|
|
|
31 |
|
Non-interest income (loss) |
|
|
|
|
|
|
|
|
|
|
||||||||||
Residential Mortgage banking activities, net |
|
|
(18 |
) |
|
|
8 |
|
|
|
12 |
|
|
|
33 |
|
|
|
21 |
|
Business Purpose Mortgage banking activities, net |
|
|
(12 |
) |
|
|
8 |
|
|
|
24 |
|
|
|
30 |
|
|
|
33 |
|
Investment fair value changes, net |
|
|
(88 |
) |
|
|
(6 |
) |
|
|
7 |
|
|
|
26 |
|
|
|
49 |
|
Other income, net |
|
|
7 |
|
|
|
6 |
|
|
|
4 |
|
|
|
2 |
|
|
|
2 |
|
Realized gains, net |
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
7 |
|
|
|
8 |
|
Total non-interest income (loss), net |
|
|
(111 |
) |
|
|
19 |
|
|
|
47 |
|
|
|
98 |
|
|
|
114 |
|
General and administrative expenses |
|
|
(32 |
) |
|
|
(35 |
) |
|
|
(39 |
) |
|
|
(48 |
) |
|
|
(41 |
) |
Loan acquisition costs |
|
|
(3 |
) |
|
|
(4 |
) |
|
|
(4 |
) |
|
|
(5 |
) |
|
|
(4 |
) |
Other expenses |
|
|
(3 |
) |
|
|
(4 |
) |
|
|
(5 |
) |
|
|
(4 |
) |
|
|
(4 |
) |
(Provision for) benefit from income taxes |
|
|
9 |
|
|
|
2 |
|
|
|
(5 |
) |
|
|
4 |
|
|
|
(7 |
) |
Net income (loss) |
|
$ |
(100 |
) |
|
$ |
31 |
|
|
$ |
44 |
|
|
$ |
88 |
|
|
$ |
90 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Weighted average diluted shares (thousands) (2) |
|
|
119,660 |
|
|
|
140,506 |
|
|
|
143,540 |
|
|
|
141,855 |
|
|
|
141,761 |
|
Diluted earnings (loss) per common share |
|
$ |
(0.85 |
) |
|
$ |
0.24 |
|
|
$ |
0.34 |
|
|
$ |
0.65 |
|
|
$ |
0.66 |
|
Regular dividends declared per common share |
|
$ |
0.23 |
|
|
$ |
0.23 |
|
|
$ |
0.23 |
|
|
$ |
0.21 |
|
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Certain totals may not foot due to rounding. |
|
(2) |
In the periods presented above, 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 (in thousands) at June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021, and June 30, 2021 were 116,753, 120,289, 114,892, 114,662, and 113,053, respectively. |
Analysis of Income Statement - Changes from First to Second Quarter 2022
REDWOOD TRUST, INC. |
|
|
|
|
||||
Consolidated Income Statements (1) |
|
Six Months Ended June 30, |
||||||
($ in millions, except share and per share data) |
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
||||
Interest income |
|
$ |
357 |
|
|
$ |
267 |
|
Interest expense |
|
|
(263 |
) |
|
|
(211 |
) |
Net interest income |
|
|
94 |
|
|
|
56 |
|
Non-interest income (loss) |
|
|
|
|
||||
Mortgage banking activities, net |
|
|
(14 |
) |
|
|
137 |
|
Investment fair value changes, net |
|
|
(94 |
) |
|
|
95 |
|
Other income |
|
|
13 |
|
|
|
6 |
|
Realized gains, net |
|
|
3 |
|
|
|
11 |
|
Total non-interest income (loss) |
|
|
(92 |
) |
|
|
249 |
|
General and administrative expenses |
|
|
(67 |
) |
|
|
(84 |
) |
Loan acquisition costs |
|
|
(8 |
) |
|
|
(7 |
) |
Other expenses |
|
|
(8 |
) |
|
|
(8 |
) |
(Provision for) benefit from income taxes |
|
|
12 |
|
|
|
(18 |
) |
Net income (loss) |
|
$ |
(69 |
) |
|
$ |
187 |
|
|
|
|
|
|
||||
Weighted average diluted shares (thousands) |
|
|
119,772 |
|
|
|
141,139 |
|
Diluted earnings (loss) per common share |
|
$ |
(0.60 |
) |
|
$ |
1.38 |
|
Regular dividends declared per common share |
|
$ |
0.46 |
|
|
$ |
0.34 |
|
|
|
|
|
|
(1) |
Certain totals may not foot due to rounding. |
REDWOOD TRUST, INC. |
|
|
|
|
|
|
|
|
|
|
|
|||||
Consolidated Balance Sheets (1) |
|
|
|
|
|
|
|
|
|
|
|
|||||
($ in millions, except share and per share data) |
|
6/30/22 |
|
3/31/22 |
|
12/31/21 |
|
9/30/21 |
|
6/30/21 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Residential loans |
|
$ |
6,579 |
|
$ |
7,217 |
|
$ |
7,592 |
|
$ |
6,216 |
|
$ |
5,743 |
|
Business purpose loans |
|
|
5,203 |
|
|
4,755 |
|
|
4,791 |
|
|
4,694 |
|
|
4,409 |
|
Consolidated Agency multifamily loans |
|
|
443 |
|
|
452 |
|
|
474 |
|
|
483 |
|
|
485 |
|
Real estate securities |
|
|
284 |
|
|
359 |
|
|
377 |
|
|
353 |
|
|
355 |
|
Other investments |
|
|
680 |
|
|
636 |
|
|
642 |
|
|
422 |
|
|
309 |
|
Cash and cash equivalents |
|
|
371 |
|
|
409 |
|
|
450 |
|
|
557 |
|
|
421 |
|
Other assets |
|
|
316 |
|
|
425 |
|
|
380 |
|
|
347 |
|
|
275 |
|
Total assets |
|
$ |
13,876 |
|
$ |
14,253 |
|
$ |
14,707 |
|
$ |
13,073 |
|
$ |
11,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Short-term debt |
|
$ |
1,870 |
|
$ |
1,647 |
|
$ |
2,177 |
|
$ |
1,751 |
|
$ |
1,485 |
|
Other liabilities |
|
|
197 |
|
|
325 |
|
|
249 |
|
|
263 |
|
|
195 |
|
Asset-backed securities issued |
|
|
8,584 |
|
|
8,872 |
|
|
9,254 |
|
|
8,184 |
|
|
7,537 |
|
Long-term debt, net |
|
|
1,966 |
|
|
1,964 |
|
|
1,641 |
|
|
1,500 |
|
|
1,484 |
|
Total liabilities |
|
|
12,617 |
|
|
12,808 |
|
|
13,321 |
|
|
11,697 |
|
|
10,701 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Stockholders' equity |
|
|
1,258 |
|
|
1,445 |
|
|
1,386 |
|
|
1,376 |
|
|
1,295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities and equity |
|
$ |
13,876 |
|
$ |
14,253 |
|
$ |
14,707 |
|
$ |
13,073 |
|
$ |
11,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Shares outstanding at period end (thousands) |
|
|
116,753 |
|
|
120,289 |
|
|
114,892 |
|
|
114,662 |
|
|
113,053 |
|
GAAP book value per share |
|
$ |
10.78 |
|
$ |
12.01 |
|
$ |
12.06 |
|
$ |
12.00 |
|
$ |
11.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Certain totals may not foot due to rounding. |
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