Redwood Trust (RWT) Tops Q2 EPS by 77c

Redwood Trust (NYSE: RWT) reported Q2 EPS of $1.00, $0.77 better than the analyst estimate of $0.23.

Q2'20 Key Financial Results and Metrics

• GAAP net income was $165 million, or $1.00 per diluted common share
• GAAP book value per common share was $8.15 at June 30, 2020
• Economic return on book value(1) of 31%
• Unrestricted cash balance of $529 million at June 30, 2020
• Total recourse leverage ratio(2) of 2.1x at June 30, 2020
• Declared and paid a regular quarterly cash dividend of $0.125 per common share for the second quarter

Q2'20 Business Highlights

• Book value recovered nearly one-third of unrealized losses recorded in the first quarter
• Repositioned our secured debt structure significantly; reducing total recourse debt from $4.6 billion at March 31, 2020 to $1.8 billion at June 30, 2020 and marginable debt from $3.5 billion at March 31, 2020 to $375 million at June 30, 2020
• Repurchased $125 million of convertible debt below carrying value, resulting in realized gains of $25 million
• Completed the sales of nearly all residential loans held for investment; completed the sales of nearly all of our remaining pre-COVID jumbo loan inventory including through a Sequoia securitization totaling $271 million
• Originated $234 million in business purpose loans and sold a significant portion of our pre-COVID single-family rental loans through a securitization totaling $221 million

"We are pleased with the progress we made in the second quarter. We executed our liquidity plan, strengthened our balance sheet, and materially reduced our use of marginable debt without raising dilutive outside capital. While the true impact from COVID-19 to the U.S. economy and mortgage industry is yet to be seen, we've taken great care to position our workforce, our balance sheet, and our business lines in what we believe is the best possible way to navigate the ongoing pandemic and emerge stronger in the marketplace. As a result of the actions taken, we entered the third quarter in a unique position, with significant capital to invest in our operating businesses and otherwise opportunistically deploy," said Chris Abate, Chief Executive Officer of Redwood Trust.

For earnings history and earnings-related data on Redwood Trust (RWT) click here.

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