Redwood Trust, Inc. · NYSE:RWT
Redwood Trust — Q1 2022 Earnings Presentation
37 slides from Redwood Trust's earnings presentation, Apr 28, 2022
Slide 1: Q1 2022 Redwood Review
1 Q1 2022 Redwood Review April 28, 2022 Exhibit 99.3
Slide 2: Forward Looking Statements
2 Forward Looking Statements This presentation contains forward-looking statements, including statements regarding our 2022 forward outlook, statements related to increasing our market share of BPL origination, and estimates of upside and potential earnings in our investment portfolio from embedded
Slide 3: Redwood's mission and differentiators
3 Redwood’s mission is to help make quality housing, whether rented or owned, accessible to all American households R W T H O R I Z O N S Innovative Technology Organically and Through Partnerships Industry Leading Operating Platforms Ability to Organically Create Assets for Balance Sheet Best-in-Cla
Slide 4: Complementary business lines drive balanced and durable earnings
4Detailed Endnotes are included at the end of this presentation. Details regarding non-GAAP measures, including Adjusted Return on Capital, are included in the Endnotes. Business Purpose Mortgage Banking (“BPL”) Strategy | Products Average Q1’22 Capital Allocation Annualized Addressable Market Oppor
Slide 5: Redwood Q1'22 Financial Highlights
5 Redwood Q1’22 Financial Highlights $31 million, or $0.24 per diluted share ▪ 8.6% Return on Equity (annualized) $1.8 billion of capital Detailed Endnotes are included at the end of this presentation. GAAP Net Income GAAP Book Value Common Dividend Capital Allocation(3) Adj. Return on Capital(4) Ca
Slide 6: Redwood Q1'22 Business Highlights
6 Redwood Q1’22 Business Highlights Detailed Endnotes are included at the end of this presentation. ▪ $2.6 billion of locks(1) and $2.0 billion of loan purchases ▪ $1.8 billion of whole loan sales and one securitization of $0.7 billion of loans ▪ Gross margins of 71bps, near low end of our 75 – 100b
Slide 7: Attractive Funding Structure
7 1.00% 2.00% 3.00% 4.00% 5.00% Q2'21 Q3'21 Q4'21 Q1'22 C o s t o f F u n d s Recourse Non-Recourse Attractive Funding Structure Our overall funding structure limits our exposure to rising interest rates and is well constructed for the current environment Cost of Funds Summary ▪ Redwood has limited
Slide 8: Investment Portfolio
8 Multifamily, CRT and Other, $381 RPL Securities, $500 Business Purpose Bridge Loans, $1,212 SFR (CAFL) Securities, $306 Called Residential Jumbo Loans, $246 Residential Jumbo (Sequoia) Securities, $374 MSRs & Other, $46 Multifamily, CRT and Other 27% RPL Securities 28% Business Purpose Bridge Loan
Slide 9: Solid Investment Portfolio Performance Driven by Strong Housing Credit Fundamentals
9 Solid Investment Portfolio Performance Driven by Strong Housing Credit Fundamentals… Detailed Endnotes are included at the end of this presentation. Our investment portfolio is predominantly concentrated in housing credit assets that benefit from positive trends in housing fundamentals ▪ During th
Slide 10: Further Upside to Book Value
10 $10.76 $1.25 $12.01 $0.34 $2.15 $8.00 $10.00 $12.00 $14.00 $16.00 Book Value 3/31/21 YoY Change in Book Value Book value 3/31/22 Potential Premium of Callable Loans(1) Potential Book Value Upside on Securities(2) B o o k V a lu e p e r S h a re YoY Actual Book Value Build Detailed Endnotes are in
Slide 11: Redwood's Book Value in a Rising Rate Environment
11 Redwood’s Book Value in a Rising Rate Environment Detailed Endnotes are included at the end of this presentation. ▪ During the last Fed rate hike cycle, Redwood’s book value increased 9% while delivering total economic return of 35% and an average quarterly dividend yield of 7.4% ▪ Since the last
Slide 12: Business Purpose Mortgage Banking
12 Multifamily 27% Renovate / Build to Rent 15% Fix and Flip 2%Other 1% SFR 55% Business Purpose Mortgage Banking Quarterly Highlights Composition of Quarterly Fundings(1) Detailed Endnotes are included at the end of this presentation. ▪ CoreVest achieved record quarterly funded volume of $920 milli
Slide 13: Business Purpose Lending Market Opportunity
13 Business Purpose Lending Market Opportunity CoreVest DifferentiatorsAppeal for BPL Continues to Strengthen ✓ Broad suite of products with proven scale, track record and distribution ✓ Organic growth in lending book through mature platform and deep bench that outperforms the market ✓ Data-driven m
Slide 14: Residential Mortgage Banking
14 $4.6 $3.9 $4.7 $2.8 $2.6 $3.1 $3.5 $3.2 $3.2 $2.0 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Locked Jumbo Loans Purchased Jumbo Loans Residential Mortgage Banking Quarterly Volume ($bn) Gross Margins Quarterly Highlights Business Trends ▪ $2.6 billion of locks, down 7% from $2.8 billion in Q4’21(1) ▪ QoQ decl
Slide 15: Redwood Residential Launches Expanded Credit Products
15 Redwood Residential Launches Expanded Credit Products ▪ In April 2022, Redwood Residential launched new expanded product offerings through our Choice Program and a new product geared towards addressing the growing cohort of self-employed borrowers ▪ As Redwood continues to support avenues for gre
Slide 16: FHFA Changes Create Opportunity for High Balance Loans
16 FHFA Changes Create Opportunity for Redwood to Increase Allocation to High Balance Loans ▪ On April 1, 2022, the revised GSE Enterprise Pricing Framework went into effect, increasing upfront LLPA fees for high balance loans and loans on second homes ▪ We anticipate that these increased fees and t
Slide 17: Industry Leading Distribution Platform is a Clear Differentiator
17 Industry Leading Distribution Platform is a Clear Differentiator Business Purpose Mortgage Banking (CAFL)Residential Mortgage Banking (Sequoia) Detailed Endnotes are included at the end of this presentation. ▪ Industry leader for our speed, innovation, quality and ability to successfully distribu
Slide 18: RWT Horizons by the Numbers
18 R W T H O R I Z O N S Horizons by the NumbersQ1’22 Activity Detailed Endnotes are included at the end of this presentation. Invests in primarily early-stage companies that drive innovation in financial and real estate technology TM ▪ 5 additional investments in Q1’22(1) Horizons Opportunity Thesi
Slide 19: Current Tailwinds for RWT's Strategy
19 Current Tailwinds for RWT’s Strategy Expanding Share of Housing Market Consumer Demand for Expanded Credit Products Technology Drives Innovation Credit Remains Strong ▪ We continue to increase wallet share by broadening our focus in the non-government areas of housing including debt & equity ▪ Gr
Slide 20: Financial Results
20 Financial Results
Slide 21: 21 Detailed Endnotes are included at the end of this presentation.
21 Detailed Endnotes are included at the end of this presentation.
Slide 22: 22 Detailed Endnotes are included at the end of this presentation.
22 Detailed Endnotes are included at the end of this presentation.
Slide 23: (1)
23 (1) Detailed Endnotes are included at the end of this presentation.
Slide 24: 24 Detailed Endnotes are included at the end of this presentation.
24 Detailed Endnotes are included at the end of this presentation.
Slide 25: 25 Detailed Endnotes are included at the end of this presentation.
25 Detailed Endnotes are included at the end of this presentation.
Slide 26: 26 Detailed Endnotes are included at the end of this presentation.
26 Detailed Endnotes are included at the end of this presentation.
Slide 27: 27 Detailed Endnotes are included at the end of this presentation.
27 Detailed Endnotes are included at the end of this presentation.
Slide 28: 28 Detailed Endnotes are included at the end of this presentation.
28 Detailed Endnotes are included at the end of this presentation.
Slide 29: 29 Detailed Endnotes are included at the end of this presentation.
29 Detailed Endnotes are included at the end of this presentation.
Slide 30: 30 Detailed Endnotes are included at the end of this presentation.
30 Detailed Endnotes are included at the end of this presentation.
Slide 31: Endnotes
31 Endnotes
Slide 32: Non-GAAP Measures
32 Non-GAAP Measures Adjusted Net Contribution and Adjusted Return on Capital Adjusted Net Contribution and Adjusted Return on Capital are non-GAAP measures derived from GAAP Net Contribution and Return on Capital, respectively, for our mortgage banking operations and investment portfolio. Adjusted
Slide 33: Endnotes
33 Slide 3 (Redwood’s Mission is to Help Make Quality Housing, Whether Rented or Owned, Accessible to all American Households) Source: Company financial data as of March 31, 2022 unless otherwise noted. Market data per Bloomberg as of March 31, 2022. Slide 4 (Complementary Business Lines Drive Balan
Slide 34: Endnotes
34 Endnotes Slide 7 (Attractive Funding Structure) Source: Company financial data as of March 31, 2022 unless otherwise noted. 1. $3.1 billion of secured debt includes $2.3 billion of recourse debt and $0.8 billion of non-recourse debt financing bridge loans and SLST securities. Slide 8 (Investment
Slide 35: Endnotes
35 Slide 12 (Business Purpose Mortgage Banking) Source: Company financial data as of March 31, 2022. Market data per Bloomberg as of March 31, 2022. 1. Composition percentages are based on unpaid principal balance. Slide 13 (Business Purpose Lending Market Opportunity) Source: Company financial data
Slide 36: Endnotes: Capital Allocation Summary
36 Endnotes Slide 24 (Appendix: Capital Allocation Summary) 1. Amounts of assets in our investment portfolio, as presented in this table, represent our economic investments (including our economic investments in consolidated VIEs) and do not present the assets within VIEs that we consolidate under G
Slide 37: Endnotes: Investment Portfolio Capital Composition
37 Endnotes Slide 28 (Appendix: Investment Portfolio Capital Composition) 1. Amounts in table represent our net capital invested in each investment type. See Investment Portfolio Detail table on slide 27 for further detail on our economic investments and associated secured debt by investment type. S