Jefferies Comments On RWT 4Q

Based on Redwood Trust's RWT competitive advantage in the arena of RMBS securitizations, recent GSE reform proposals, and an improving economy, “we view RWT as one of the most compelling investment opportunities in the Specialty Finance universe,” Jefferies reports. “Weakness in GAAP results was largely focused on a higher than anticipated loan loss provision in the Sequoia entity (associated with vintage loans), as well as higher than expected operating expenses. Net interest income for the quarter of $34M was slightly below the 3Q10 number of $35M,” Jefferies writes. “During the quarter RWT invested $30M in commercial loans, $26M in residential securities, and funded $195M in mortgage loans that were subsequently financed via the recent securitization transaction. All of these investment amounts were in-line with our expectations.” Redwood Trust closed Thursday at $16.41.