Redwood Trust Inc. has a market cap of $1.12 billion; its shares were traded at around $14.25 with a P/E ratio of 8.4 and P/S ratio of 3.9. The dividend yield of Redwood Trust Inc. stocks is 7%.RWT is in the portfolios of Wallace Weitz of Weitz Wallace R & Co, Arnold Schneider of Schneider Capital Management, NWQ Managers of NWQ Investment Management Co, Diamond Hill Capital of Diamond Hill Capital Management Inc, Jim Simons of Renaissance Technologies LLC, Bruce Kovner of Caxton Associates.
This is the annual revenues and earnings per share of RWT over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of RWT.
Highlight of Business Operations:Financial Results Our third quarter 2010 earnings contained few surprises. We reported $20 million in GAAP income, or $0.25 per fully diluted share. In the second quarter of 2010, we reported $29 million in GAAP income, or $0.35 per fully diluted share. The third quarter contained modest gains on sales of assets: $2 million predominantly related to gains from calls on securities we owned below par. Gains are markedly lower than what was realized in the prior quarters of 2010. We benefited from $16 million in gains in the second quarter of 2010 and from $44 million in gains in the first quarter of 2010. Net interest income in the third quarter was approximately equal to the second quarters level. Loan loss provisions and net negative valuation adjustments were improved from the levels reported in the second quarter of 2010. Operating expenses in the third quarter of 2010 of $12 million were $1 million higher than the prior quarter, roughly in line with expectations.
Redwoods estimated taxable loss for the third quarter of 2010 was $9 million, or $0.11 per share, as compared to estimated taxable loss of $3 million, or $0.03 per share, for the second quarter of 2010. Because of the backlog of unrecognized tax credit losses, we still expect significant credit charges to work their way through taxable income over the balance of 2010 and 2011. This will likely result in a taxable loss for 2010 with the full years dividend classified as a return of capital. However, it is possible that a relatively small portion of this years dividend distribution could be characterized as ordinary income if fourth quarter credit losses come in substantially below third quarter levels.
Book value per share rose to $13.02 at September 30, 2010, a $0.31 increase from the $12.71 per share reported on June 30, 2010. This increase in book value primarily reflected net appreciation in our mortgage securities portfolio, as quarterly GAAP earnings of $0.25 per share matched our dividend of $0.25 per share.
Residential Mortgage Loan Business We are open for business and purchasing mortgage loans, primarily on a flow basis, from a few originators, with the intent of financing those loans over the long-term through securitization. We remain engaged in discussions with additional originators to purchase loans from them in the coming quarters. As of October 31, 2010, we had purchased $160 million of residential mortgage loans, as compared with $5 million at July 31, 2010. As of October 31, 2010, we had commitments to purchase $138 million in mortgage loans, compared with $149 million at July 31, 2010. We continue to target another securitization, likely in the first quarter of 2011, assuming market conditions are favorable and that the rating agency issues are resolved (as discussed below).
During the third quarter, our investment portfolio increased by $63 million to $797 million at September 30, 2010. The increase was driven by $50 million in acquisitions, and $34 million in price appreciation, only partly offset by $21 million in pay downs. We had no sales in the third quarter. In October 2010, we acquired $16 million and had no sales of securities.
Summary of Results of Operations, Financial Condition, Capital Resources, and Liquidity Our reported GAAP net income was $20 million ($0.25 per share) for the third quarter of 2010, as compared to $27 million ($0.34 per share) for the third quarter of 2009. We declared regular quarterly dividends of $0.25 per share for each of the first three quarters of 2010 and 2009.
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