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 fourth quarter ended December 31, 2022.
Key Q4 2022 Financial Results and Metrics
Operational Business Highlights
Investment Portfolio
Business Purpose Mortgage Banking
Residential Mortgage Banking
Financing and Capital Markets Highlights
RWT Horizons Highlights
Q1 2023 Corporate Highlights
"While historic dislocations like we witnessed last year made for a challenging fourth quarter, these dislocations are now creating opportunities," said Christopher Abate, Chief Executive Officer of Redwood. "We entered 2023 with great momentum, executing on several strategic, financing, and organizational initiatives, all while a number of industry participants have decided to pull back. With nearly 30 years in housing finance, we're excited to be positioned to once again take advantage of evolutions in our market, with best in class operating platforms, distinct investment portfolio and strong liquidity."
_____________________
Fourth Quarter 2022 Redwood Review and Supplemental Tables Available Online
A further discussion of Redwood's business and financial results is included in the fourth quarter 2022 Shareholder Letter and Redwood Review which are available under "Financial Info" within the Investor Relations section of the Company’s website at redwoodtrust.com/investor-relations. Additional supplemental financial tables can also be found within this section of the Company's website.
Conference Call and Webcast
Redwood will host an earnings call today, February 9, 2023, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to discuss its fourth 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, February 23, 2023, 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 #13735175.
The conference call will be webcast live in listen-only mode through the News & Events section of Redwood’s Investor Relations website at https://www.redwoodtrust.com/investor-relations/news-events/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-K with the Securities and Exchange Commission by Wednesday, March 1, 2023, 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.
Cautionary Statement; 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 fourth 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, our expected 2023 run-rate G&A expense, and the expected timing for the filing of Redwood's Annual Report on Form 10-K. 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 and our Current Report on Form 8-K filed with the SEC on January 9, 2023 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.
In addition, Redwood’s financial statement audit for the year ended December 31, 2022 is not yet complete, and the quarterly and full year 2022 results reported herein are unaudited and may vary from Redwood’s audited financial results for the year ended December 31, 2022, presented in Redwood’s Annual Report on Form 10-K for 2022 that will be filed with the SEC. Redwood’s 2022 annual financial statement audit is scheduled to conclude in late February 2023 in connection with Redwood’s Form 10-K filing and it should be noted, and considered in the context of the “Risk Factor” set forth in Redwood’s Current Report on Form 8-K filed with the SEC on January 9, 2023, that the year-end 2022 book value reported herein includes a $0.37 per share deferred tax asset. As Redwood’s 2022 financial statement audit is completed, Redwood will determine whether, under GAAP, any non-cash valuation allowance should be applied against Redwood’s deferred tax assets, which would reduce the value of these deferred tax assets and correspondingly result in a lower level of earnings and book value being reported in Redwood’s Annual Report on Form 10-K for 2022 than is reported herein for our fourth quarter and full year 2022.
REDWOOD TRUST, INC.
($ in millions, except per share data) |
Three Months Ended |
|||||||
|
12/31/2022 |
|
9/30/2022 |
|||||
Financial Performance |
|
|
|
|||||
Net income (loss) per diluted common share |
$ |
(0.40 |
) |
|
$ |
(0.44 |
) |
|
Net income (loss) per basic common share |
$ |
(0.40 |
) |
|
$ |
(0.44 |
) |
|
EAD per basic common share (non-GAAP) |
$ |
(0.11 |
) |
|
$ |
0.16 |
|
|
|
|
|
|
|||||
Return on Equity (annualized) |
|
(16 |
) % |
|
|
(16 |
) % |
|
EAD Return on Equity (annualized, non-GAAP) |
|
(4 |
) % |
|
|
6 |
% |
|
|
|
|
|
|||||
Book Value per Share |
$ |
9.55 |
|
|
$ |
10.18 |
|
|
Dividend per Share |
$ |
0.23 |
|
|
$ |
0.23 |
|
|
Economic Return on Book Value (1) |
|
(3.9 |
) % |
|
|
(3.4 |
) % |
|
|
|
|
|
|||||
Recourse Leverage Ratio (2) |
2.8x |
|
2.6x |
|||||
Operating Metrics |
||||||||
Business Purpose Loans |
|
|
|
|||||
Term fundings |
$ |
135 |
|
|
$ |
99 |
|
|
Bridge fundings |
|
289 |
|
|
|
470 |
|
|
Term securitized |
|
— |
|
|
|
274 |
|
|
Bridge securitized |
|
— |
|
|
|
— |
|
|
Term sold |
|
61 |
|
|
|
37 |
|
|
Bridge sold |
|
31 |
|
|
|
48 |
|
|
Residential Jumbo Loans |
|
|
|
|||||
Locks |
$ |
43 |
|
|
$ |
461 |
|
|
Purchases |
|
106 |
|
|
|
338 |
|
|
Securitized |
|
— |
|
|
|
— |
|
|
Sold |
|
131 |
|
|
|
612 |
|
(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 December 31, 2022 and September 30, 2022, recourse debt excluded $8.9 billion and $8.9 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 $64 million and $68 million, respectively, of goodwill and intangible assets. |
REDWOOD TRUST, INC.
Consolidated Income Statements (1) |
|
Three Months Ended |
||||||||||||||||||
($ in millions, except share and per share data) |
|
12/31/22 |
|
9/30/22 |
|
6/30/22 |
|
3/31/22 |
|
12/31/21 |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest income |
|
$ |
173 |
|
|
$ |
178 |
|
|
$ |
167 |
|
|
$ |
189 |
|
|
$ |
162 |
|
Interest expense |
|
|
(146 |
) |
|
|
(143 |
) |
|
|
(127 |
) |
|
|
(136 |
) |
|
|
(112 |
) |
Net interest income |
|
|
27 |
|
|
|
35 |
|
|
|
40 |
|
|
|
53 |
|
|
|
50 |
|
Non-interest income (loss) |
|
|
|
|
|
|
|
|
|
|
||||||||||
Residential mortgage banking activities, net |
|
|
(14 |
) |
|
|
2 |
|
|
|
(18 |
) |
|
|
8 |
|
|
|
12 |
|
Business purpose mortgage banking activities, net |
|
|
(3 |
) |
|
|
14 |
|
|
|
(12 |
) |
|
|
8 |
|
|
|
24 |
|
Investment fair value changes, net |
|
|
(24 |
) |
|
|
(58 |
) |
|
|
(88 |
) |
|
|
(6 |
) |
|
|
7 |
|
Other income, net |
|
|
4 |
|
|
|
4 |
|
|
|
7 |
|
|
|
6 |
|
|
|
4 |
|
Realized gains, net |
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
Total non-interest income (loss), net |
|
|
(33 |
) |
|
|
(37 |
) |
|
|
(111 |
) |
|
|
19 |
|
|
|
47 |
|
General and administrative expenses |
|
|
(39 |
) |
|
|
(38 |
) |
|
|
(30 |
) |
|
|
(33 |
) |
|
|
(37 |
) |
Portfolio management costs |
|
|
(3 |
) |
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(2 |
) |
Loan acquisition costs |
|
|
(1 |
) |
|
|
(2 |
) |
|
|
(3 |
) |
|
|
(4 |
) |
|
|
(4 |
) |
Other expenses |
|
|
(4 |
) |
|
|
(4 |
) |
|
|
(3 |
) |
|
|
(4 |
) |
|
|
(5 |
) |
(Provision for) benefit from income taxes |
|
|
9 |
|
|
|
(1 |
) |
|
|
9 |
|
|
|
2 |
|
|
|
(5 |
) |
Net income (loss) |
|
$ |
(44 |
) |
|
$ |
(50 |
) |
|
$ |
(100 |
) |
|
$ |
31 |
|
|
$ |
44 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Weighted average basic shares (thousands) |
|
|
113,363 |
|
|
|
116,088 |
|
|
|
119,660 |
|
|
|
119,884 |
|
|
|
114,641 |
|
Weighted average diluted shares (thousands) (2) |
|
|
113,363 |
|
|
|
116,088 |
|
|
|
119,660 |
|
|
|
140,506 |
|
|
|
143,540 |
|
Earnings (loss) per basic common share |
|
$ |
(0.40 |
) |
|
$ |
(0.44 |
) |
|
$ |
(0.85 |
) |
|
$ |
0.25 |
|
|
$ |
0.37 |
|
Earnings (loss) per diluted common share |
|
$ |
(0.40 |
) |
|
$ |
(0.44 |
) |
|
$ |
(0.85 |
) |
|
$ |
0.24 |
|
|
$ |
0.34 |
|
Regular dividends declared per common share |
|
$ |
0.23 |
|
|
$ |
0.23 |
|
|
$ |
0.23 |
|
|
$ |
0.23 |
|
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
(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 December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, were 113,485, 113,343, 116,753, 120,289, and 114,892, respectively. |
Analysis of Income Statement - Changes from Third to Fourth Quarter 2022
REDWOOD TRUST, INC.
Consolidated Income Statements (1) |
|
Year Ended December 31, |
||||||
($ in millions, except share and per share data) |
|
2022 |
|
2021 |
||||
|
|
|
|
|
||||
Interest income |
|
$ |
708 |
|
|
$ |
575 |
|
Interest expense |
|
|
(552 |
) |
|
|
(427 |
) |
Net interest income |
|
|
155 |
|
|
|
148 |
|
Non-interest income (loss) |
|
|
|
|
||||
Residential mortgage banking activities, net |
|
|
(21 |
) |
|
|
127 |
|
Business purpose mortgage banking activities, net |
|
|
8 |
|
|
|
109 |
|
Investment fair value changes, net |
|
|
(176 |
) |
|
|
128 |
|
Other income |
|
|
21 |
|
|
|
12 |
|
Realized gains, net |
|
|
5 |
|
|
|
18 |
|
Total non-interest income (loss), net |
|
|
(163 |
) |
|
|
394 |
|
General and administrative expenses |
|
|
(141 |
) |
|
|
(165 |
) |
Portfolio management costs |
|
|
(8 |
) |
|
|
(6 |
) |
Loan acquisition costs |
|
|
(12 |
) |
|
|
(16 |
) |
Other expenses |
|
|
(16 |
) |
|
|
(17 |
) |
Benefit from (provision for) income taxes |
|
|
20 |
|
|
|
(18 |
) |
Net income (loss) |
|
$ |
(164 |
) |
|
$ |
320 |
|
|
|
|
|
|
||||
Weighted average basic shares (thousands) |
|
|
117,228 |
|
|
|
113,230 |
|
Weighted average diluted shares (thousands) |
|
|
117,228 |
|
|
|
142,070 |
|
Earnings (loss) per basic common share |
|
$ |
(1.43 |
) |
|
$ |
2.73 |
|
Earnings (loss) per diluted common share |
|
$ |
(1.43 |
) |
|
$ |
2.37 |
|
Regular dividends declared per common share |
|
$ |
0.92 |
|
|
$ |
0.78 |
|
|
|
|
|
|
(1) | Certain totals may not foot due to rounding. |
REDWOOD TRUST, INC.
Consolidated Balance Sheets (1) |
|
|
|
|
|
|
|
|
|
|
|
|||||
($ in millions, except share and per share data) |
|
12/31/22 |
|
9/30/22 |
|
6/30/22 |
|
3/31/22 |
|
12/31/21 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Residential loans |
|
$ |
5,613 |
|
$ |
5,753 |
|
$ |
6,579 |
|
$ |
7,217 |
|
$ |
7,592 |
|
Business purpose loans |
|
|
5,333 |
|
|
5,257 |
|
|
5,203 |
|
|
4,755 |
|
|
4,791 |
|
Consolidated Agency multifamily loans |
|
|
425 |
|
|
427 |
|
|
443 |
|
|
452 |
|
|
474 |
|
Real estate securities |
|
|
240 |
|
|
259 |
|
|
284 |
|
|
359 |
|
|
377 |
|
Home equity investments (HEI) |
|
|
403 |
|
|
340 |
|
|
276 |
|
|
227 |
|
|
193 |
|
Other investments |
|
|
391 |
|
|
413 |
|
|
403 |
|
|
408 |
|
|
449 |
|
Cash and cash equivalents |
|
|
259 |
|
|
297 |
|
|
371 |
|
|
409 |
|
|
450 |
|
Other assets |
|
|
367 |
|
|
399 |
|
|
316 |
|
|
425 |
|
|
380 |
|
Total assets |
|
$ |
13,031 |
|
$ |
13,146 |
|
$ |
13,876 |
|
$ |
14,253 |
|
$ |
14,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Short-term debt |
|
$ |
2,030 |
|
$ |
2,110 |
|
$ |
1,870 |
|
$ |
1,647 |
|
$ |
2,177 |
|
Other liabilities |
|
|
197 |
|
|
208 |
|
|
197 |
|
|
325 |
|
|
249 |
|
Asset-backed securities issued |
|
|
7,987 |
|
|
8,139 |
|
|
8,584 |
|
|
8,872 |
|
|
9,254 |
|
Long-term debt, net |
|
|
1,733 |
|
|
1,534 |
|
|
1,966 |
|
|
1,964 |
|
|
1,641 |
|
Total liabilities |
|
|
11,947 |
|
|
11,992 |
|
|
12,617 |
|
|
12,808 |
|
|
13,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Stockholders' equity |
|
|
1,084 |
|
|
1,154 |
|
|
1,258 |
|
|
1,445 |
|
|
1,386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities and equity |
|
$ |
13,031 |
|
$ |
13,146 |
|
$ |
13,876 |
|
$ |
14,253 |
|
$ |
14,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Shares outstanding at period end (thousands) |
|
|
113,485 |
|
|
113,343 |
|
|
116,753 |
|
|
120,289 |
|
|
114,892 |
|
GAAP book value per share |
|
$ |
9.55 |
|
$ |
10.18 |
|
$ |
10.78 |
|
$ |
12.01 |
|
$ |
12.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Certain totals may not foot due to rounding. |
Non-GAAP Disclosures
Reconciliation of GAAP Net Income (Loss) to non-GAAP Earnings Available for Distribution (1)(2) |
|
Three Months Ended |
|||||||
($ in millions, except share and per share data) |
|
12/31/22 |
|
9/30/22 |
|
||||
|
|
|
|
|
|
||||
GAAP net income (loss) |
|
$ |
(44 |
) |
|
$ |
(50 |
) |
|
|
|
|
|
|
|
||||
Adjustments: |
|
|
|
|
|
||||
Investment fair value changes, net(3) |
|
|
24 |
|
|
|
58 |
|
|
Change in economic basis of investments(4) |
|
|
6 |
|
|
|
2 |
|
|
Realized (gains)/losses, net(5) |
|
|
(3 |
) |
|
|
— |
|
|
Acquisition related expenses(6) |
|
|
3 |
|
|
|
4 |
|
|
Organizational restructuring charges(7) |
|
|
3 |
|
|
|
4 |
|
|
Tax effect of adjustments(8) |
|
|
(1 |
) |
|
|
2 |
|
|
|
|
|
|
|
|
||||
Earnings Available for Distribution (non-GAAP) |
|
$ |
(12 |
) |
|
$ |
19 |
|
|
|
|
|
|
|
|
||||
Earnings per basic common share |
|
$ |
(0.40 |
) |
|
$ |
(0.44 |
) |
|
EAD per basic common share (non-GAAP) |
|
$ |
(0.11 |
) |
|
$ |
0.16 |
|
|
|
|
|
|
|
|
||||
GAAP ROE (annualized) |
|
|
(16 |
) % |
|
|
(16 |
) % |
|
EAD ROE (non-GAAP, annualized)(9) |
|
|
(4 |
) % |
|
|
6 |
% |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20230209005336/en/
Investor Relations
Kaitlyn Mauritz
SVP, Head of Investor Relations
Phone: 866-269-4976
Email: [email protected]