Slide 1: Slide 1
Slide 2: Fourth quarter earnings drivers
Ø Valuation adjustments are discussed in detail in the Mark-to-Market Adjustments module later in this Review. Ø Net interest income for the fourth quarter decreased by $5 million from the previous quarter. Net interest income from Acacia securitization entities was $4 million lower due to lower dis
Slide 3: Taxable income and Sequoia IO tax basis
Ø As discussed further under Investment in Sequoia, the tax basis on Sequoia IOs we own is $75 million. Most of the underlying pools of loans have paid down or will pay down within the next year to levels where they are callable. When these are called, losses on these IOs will be incurred and our ta
Slide 4: Quarterly Update
Quarterly Update · Our net liquid assets at December 31, 2007 totaled $297 million and included $290 unrestricted cash, $5 million residential real estate loans, and $10 million AAA-rated securities, less $8 million of Redwood debt. · Our total capital base declined from $0.9 billion at September 30
Slide 5: Dividend distributions
· Total dividend distributions over the last four quarters were $5.00 per share. Assuming the February 29, 2008 Redwood stock price of $33.42, indicated dividend yield would be 15.0% based on the last twelve months of dividends and would be 9.0% based on the current regular dividend rate of $3.00 pe
Slide 6: Factors driving market value declines
Ø Factors fueling the broad re-pricing include declines in home prices and the values of commercial properties, a rapid increase in the number of delinquent residential mortgage loans, the reduced willingness of investors to acquire commercial paper or other short-term debt backed by mortgage collat
Slide 7: Impairment decision flowchart for securities
stop1 _Hereerpected casn| "2S | Seauriyis Pp flows declined? inpsied No , eaps Intention and ability No ‘ P to hold the security? Yes ’ Will fair value Ne recover in a |" Step 3 reasonable amount of time? Yes ’ ’ a Negative valuation ro adjustments through] Stockholders’ Equity incare Sicionient
Slide 8: Credit reserves versus expected losses example
Ø As an example, serious delinquencies on 2004 and prior vintage CES are currently 0.41% of collateral loan balances (see chart above). If we assume a default rate of seriously delinquent loans of 70% and a loss severity of 35%, total expected credit losses from these delinquencies would equal 0.10%
Slide 9: Jumbo refinancing activity and mortgage spreads
Ø Historically, increases in jumbo refinancing activity have occurred due to several factors. The most significant factor is lower mortgage interest rates, which drove prepayments from 2001-2003. Mortgage rates on jumbos can fall when interest rates fall or when jumbo mortgage spreads move closer to
Slide 10: Prime CES underlying loan characteristics
Ø We believe the loan characteristics of our prime portfolio illustrate the high quality of these loans, including relatively low LTV ratios and high FICO scores. As the following table also illustrates, we have geographically diverse pools of loans that are generally seasoned over two years. Prime
Slide 11: Delinquencies in underlying loan pools
Ø Please see page 30 for an explanation of the table and chart above. Ø Some poorly performing pools of loans underlying some of our securities are significantly increasing the aggregate delinquencies. The amount of losses that our securities can absorb is limited to the principal face amount of tha
Slide 12: Alt-A securities underlying loan characteristics
Ø Below is a table that details the characteristics of the underlying alt-a loans that we credit enhance. Alt-a Securities at Redwood Underlying Loan Characteristics December 31, 2007 Number of loans 47,588 Wtd avg FICO Total loan face ($ in millions) 18,367 FICO: <= 620 <1% Average loan size ($ in
Slide 13: Poorly performing loans and aggregate delinquencies
Ø As noted earlier, a few poorly performing loans are significantly increasing the aggregate delinquencies. Redwood Review 4th Quarter
Slide 14: Sequoia residential loan portfolio characteristics
Ø following table summarizes the high-quality characteristics of the loans owned by the Sequoia entities. Sequoia Residential Loan Portfolio Loan Characteristics December 31, 2007 Number of loans 21,000 Wtd Avg FICO Total loan face ($ in millions) 7,106 FICO: <= 620 1% Average loan size ($ in 1000's