Redwood Trust Inc. (RWT, Financial) filed Quarterly Report for the period ended 2009-09-30.
REDWOOD TRUST INC. is a self-advised and self-managed real estate investment trust. It specializes in acquiring and managing real estate mortgage assets which may be acquired as whole loans or as mortgage securities reperesenting interest in or obligations backed by pools of mortgage loans. Redwood Trust Inc. has a market cap of $1.11 billion; its shares were traded at around $14.26 with a P/E ratio of 54.9 and P/S ratio of 2. The dividend yield of Redwood Trust Inc. stocks is 7%. Redwood Trust Inc. had an annual average earning growth of 38.3% over the past 5 years.
We believe that the unprecedented level of government intervention in the mortgage markets is most likely unsustainable and are watching and preparing for the eventual withdrawal of government support. The government is currently supporting essentially the entire mortgage market, as Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA) collectively guaranteed over 90% of the $995 billion of industry-wide loan originations in the first half of 2009, up from an average of 50% over the last 20 years. Through late October 2009, the Federal Reserve has also purchased nearly $1 trillion out of a planned $1.25 trillion of agency MBS in an attempt to lower mortgage rates and enable borrowers to refinance and lower their mortgage payments. Once the government withdraws this support (assuming all other things remain unchanged), we will likely see mortgage rates move higher. Unfortunately, this will require a highly complex and lengthy unwinding process that we believe will likely take much longer than most people expect and may have long term lingering effects on large parts of the economy.
Summary of Results of Operations, Financial Condition, Capital Resources and Liquidity Our reported GAAP net income was $27 million ($0.35 per share) for the third quarter of 2009, as compared to a GAAP net loss of $111 million ($3.34 per share) for the third quarter of 2008. Our GAAP book value per common share was $11.68 at September 30, 2009, an increase from $9.02 at December 31, 2008. We declared a regular dividend of $0.25 per share for the third quarter of 2009 and $0.75 per share for the third quarter of 2008.
Operating expenses were $15 million for the third quarter of 2009 as compared to $17 million for the third quarter of 2008, a decrease of $2 million. This decrease was primarily due to a reduction in headcount and fewer legal and consulting expenses, partially offset by an increase in variable compensation expense. We currently anticipate that operating expenses will be lower in the fourth quarter of 2009, as compared to the third quarter of 2009. However, operating expenses could increase in subsequent periods as we focus on our new business development activities.
Realized gains, net, were $18 million for the third quarter of 2009 as compared to less than a $1 million loss for the third quarter of 2008, an increase of $18 million. This increase was due to gains on sales of securities and the repurchase of long-term debt during the third quarter of 2009.
Our estimated total taxable loss was $23 million ($0.30 per share) for the third quarter of 2009 as compared to taxable income of $2 million ($0.07 per share) for the third quarter of 2008, a decrease of $25 million. Our estimated REIT taxable loss was $25 million ($0.32 per share) for the third quarter of 2009 as compared to REIT taxable income of $2 million ($0.07 per share) for the third quarter of 2008, a decrease of $27 million. The increase in the REIT taxable loss was primarily due to an increase in realized credit losses on subordinate securities. Realized credit losses at the REIT for the third quarters of 2009 and 2008 were $67 million and $33 million, or $0.86 and $0.99 per share, respectively.
Read the The complete ReportRWT is in the portfolios of Wallace Weitz of Weitz Wallace R & Co, Wallace Weitz of Weitz Wallace R & Co, Arnold Schneider of Schneider Capital Management, NWQ Managers of NWQ Investment Management Co, John Griffin of Blue Ridge Capital, Richard Aster Jr of Meridian Fund.
REDWOOD TRUST INC. is a self-advised and self-managed real estate investment trust. It specializes in acquiring and managing real estate mortgage assets which may be acquired as whole loans or as mortgage securities reperesenting interest in or obligations backed by pools of mortgage loans. Redwood Trust Inc. has a market cap of $1.11 billion; its shares were traded at around $14.26 with a P/E ratio of 54.9 and P/S ratio of 2. The dividend yield of Redwood Trust Inc. stocks is 7%. Redwood Trust Inc. had an annual average earning growth of 38.3% over the past 5 years.
Highlight of Business Operations:
Outlook There are varying opinions on the outlook for residential and commercial real estate investments. If prices continue to remain elevated, it will be more challenging to find senior RMBS investments that both meet our investment criteria and exceed our risk-adjusted return requirements. This is consistent with our long-standing view that the senior RMBS opportunity was just that a limited opportunity created by unprecedented market conditions. We do not intend to react to these market conditions by accepting lower yields, changing our investment risk criteria, or trying to enhance yields with repo or other callable financing. Accordingly, our recent investment pace has slowed, from $341 million in the second quarter, to $246 million in third quarter, and to $6 million in October. It is possible that the trend towards higher prices could reverse if investors perception of credit risk heightens or if government programs do not work as the market expects. If this happens, senior RMBS may once again be an attractive investment opportunity.We believe that the unprecedented level of government intervention in the mortgage markets is most likely unsustainable and are watching and preparing for the eventual withdrawal of government support. The government is currently supporting essentially the entire mortgage market, as Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA) collectively guaranteed over 90% of the $995 billion of industry-wide loan originations in the first half of 2009, up from an average of 50% over the last 20 years. Through late October 2009, the Federal Reserve has also purchased nearly $1 trillion out of a planned $1.25 trillion of agency MBS in an attempt to lower mortgage rates and enable borrowers to refinance and lower their mortgage payments. Once the government withdraws this support (assuming all other things remain unchanged), we will likely see mortgage rates move higher. Unfortunately, this will require a highly complex and lengthy unwinding process that we believe will likely take much longer than most people expect and may have long term lingering effects on large parts of the economy.
Summary of Results of Operations, Financial Condition, Capital Resources and Liquidity Our reported GAAP net income was $27 million ($0.35 per share) for the third quarter of 2009, as compared to a GAAP net loss of $111 million ($3.34 per share) for the third quarter of 2008. Our GAAP book value per common share was $11.68 at September 30, 2009, an increase from $9.02 at December 31, 2008. We declared a regular dividend of $0.25 per share for the third quarter of 2009 and $0.75 per share for the third quarter of 2008.
Operating expenses were $15 million for the third quarter of 2009 as compared to $17 million for the third quarter of 2008, a decrease of $2 million. This decrease was primarily due to a reduction in headcount and fewer legal and consulting expenses, partially offset by an increase in variable compensation expense. We currently anticipate that operating expenses will be lower in the fourth quarter of 2009, as compared to the third quarter of 2009. However, operating expenses could increase in subsequent periods as we focus on our new business development activities.
Realized gains, net, were $18 million for the third quarter of 2009 as compared to less than a $1 million loss for the third quarter of 2008, an increase of $18 million. This increase was due to gains on sales of securities and the repurchase of long-term debt during the third quarter of 2009.
Our estimated total taxable loss was $23 million ($0.30 per share) for the third quarter of 2009 as compared to taxable income of $2 million ($0.07 per share) for the third quarter of 2008, a decrease of $25 million. Our estimated REIT taxable loss was $25 million ($0.32 per share) for the third quarter of 2009 as compared to REIT taxable income of $2 million ($0.07 per share) for the third quarter of 2008, a decrease of $27 million. The increase in the REIT taxable loss was primarily due to an increase in realized credit losses on subordinate securities. Realized credit losses at the REIT for the third quarters of 2009 and 2008 were $67 million and $33 million, or $0.86 and $0.99 per share, respectively.
Read the The complete ReportRWT is in the portfolios of Wallace Weitz of Weitz Wallace R & Co, Wallace Weitz of Weitz Wallace R & Co, Arnold Schneider of Schneider Capital Management, NWQ Managers of NWQ Investment Management Co, John Griffin of Blue Ridge Capital, Richard Aster Jr of Meridian Fund.
