Redwood Trust (RWT) missed analyst estimates significantly in the first quarter, reporting net income of $12 million, or $0.14 per fully diluted share, less than half of expectations.
This compares to net income of $25 million, or $0.29 per fully diluted share, for the fourth quarter of 2013, and net income of $61 million, or $0.69 per fully diluted share, for the first quarter of 2013.
Its activity in the mortgage market slowed significantly; a trend executives don't expect to continue forever.
"Over time, we expect that the mortgage market and interest rates will stabilize such that our earnings will more consistently reflect our operational progress each quarter and serve as a primary valuation metric for the company," write the CEO, Martin Hughes, and president, Brett Nicholas, in a letter to shareholders. "But we are not there yet."
Redwood also reported estimated REIT taxable income of $15 million, or $0.19 per share, for the first quarter of 2014. This compares to estimated REIT taxable income of $20 million, or $0.24 per share, for the fourth quarter of 2013 and REIT taxable income of $16 million, or $0.20 per share, for the first quarter of 2013.
At March 31, 2014, Redwood reported a book value per share of $15.14, as compared to $15.10 at December 31, 2013.
A quick look at the income and expense breakdown show vividly how much of a beating the firm’s mortgage business has taken. The numbers below are in millions.
Pay special attention to the collapse in mortgage banking activiy and mortgage-servicing rights income from last quarter's results.