Redwood Trust, Inc. · NYSE:RWT

Redwood Trust — Q2 2022 Earnings Presentation

40 slides from Redwood Trust's earnings presentation, Jul 28, 2022

1. Slide 1: Q2 2022 Redwood Review

   1 Q2 2022 Redwood Review July 28, 2022 Exhibit 99.3

2. 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, estimates of upside and potential earnings in our investment portfolio from embedded disc

3. 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

4. Slide 4: Redwood Operates Across Three Complementary Business Lines

   4Detailed Endnotes are included at the end of this presentation. Redwood Operates Across Three Complementary Business Lines Redwood’s business model is geared toward providing strategic capital for sustainable innovation in housing finance Residential Mortgage Banking Business Purpose Mortgage Banki

5. Slide 5: Q2'22 Financial Performance

   5 Q2’22 Financial Performance $(0.85) per diluted share  ~$(0.74) due to estimated market valuation adjustments on long-term investments $1.8 billion of allocated capital Detailed Endnotes are included at the end of this presentation. GAAP Net Loss GAAP Book Value Common Dividend Capital Allocation

6. Slide 6: Summary of Q2'22 Market Drivers and Performance

   6  Witnessed continued momentum in Business Purpose Lending (“BPL”) driven by elevated demand for short- duration bridge products  Continued focus on residential loan product development  Increased investable capital for attractive deployment opportunities  Unrealized negative investment fair va

7. Slide 7: Q2'22 Business Performance

   7 Q2’22 Business Performance Detailed Endnotes are included at the end of this presentation.  $1.0 billion of locks(3) and $1.1 billion of loan purchases  Sold $1.2 billion of whole loans; total net loan exposure of $751 million as of June 30, 2022 (down 44% compared to the end of Q1’22)(4) Reside

8. Slide 8: Q2'22 Corporate Highlights

   8 Q2’22 Corporate Highlights Detailed Endnotes are included at the end of this presentation. Convertible Notes Offering Acquisition ESG Share Repurchase Published Inaugural ESG Tear Sheet Announced and Closed Acquisition of Riverbend Lending, a Leading Single Asset Bridge Lender(2) Issued $215 Milli

9. Slide 9: Recent Strategic Actions Position Redwood to Deliver on Goals

   9 Recent Strategic Actions Position Redwood to Deliver on Goals Detailed Endnotes are included at the end of this presentation. Despite market volatility, we have continued to focus on positioning ourselves for the long term and executing on our goals Risk Management Capital Management Strategic Exe

10. Slide 10: Strong Capital Position Focused on Value Creation

    10 Strong Capital Position Focused on Value Creation Detailed Endnotes are included at the end of this presentation. We have a diverse set of organic and third-party opportunities where we believe we can deploy capital accretively in today’s markets 1 2 3 4 Capital Deployment Opportunities Organic I

11. Slide 11: Liquidity and Near-Term Corporate Debt Maturities

    11 $412 $450 Cash & Financeable Loans Pledgable & Unencumbered Assets Excess Warehouse Capacity for Newly Originated Loans Liquidity and Near-Term Corporate Debt Maturities $199 $150 $172 $355 Aug-23 Jul-24 Oct-25 Beyond 2025 ($mm) Corporate Debt Scheduled Maturities Sources of Liquidity and Capital

12. Slide 12: Attractive Funding Structure

    12 Attractive Funding Structure Our overall funding structure limits our exposure to rising interest rates and is well constructed for the current environment Financing and Leverage Summary  Redwood has a balanced financing profile that includes both fixed and floating rate liabilities, cushioning

13. Slide 13: Investment Portfolio

    13 HEI, Multifamily, CRT and Other, $403 RPL Securities, $437 Business Purpose Bridge Loans, $1,652 SFR (CAFL) Securities, $307 Called Residential Jumbo Loans, $221 Residential Jumbo (Sequoia) Securities, $350 MSRs & Other, $50 Investment Portfolio Investment Portfolio by Economic Investments ($mm)(

14. Slide 14: Investment Portfolio (Continued)

    14 Investment Portfolio (Continued) Detailed Endnotes are included at the end of this presentation. Credit performance in our underlying portfolio remains stable and supported by significant levels of HPA, seasoning and other favorable credit characteristics  During the second quarter, our investme

15. Slide 15: Investment Portfolio (Deep Dive into SLST 2018-2)

    15 Investment Portfolio (Deep Dive into SLST 2018-2) Detailed Endnotes are included at the end of this presentation. Our SLST 2018-2 investment serves as an example of the strong and stable underlying credit performance of our RPL investments Original (July 2018) Current (July 2022) Balance ($bn) $1

16. Slide 16: Potential Upside to Book Value

    16 YoY Actual Book Value Change Detailed Endnotes are included at the end of this presentation. Potential Upside to Book Value P O T E N T I A L U P S I D E T O B O O K V A L U E  At June 30, 2022, our securities portfolio had approximately $391 million of net discount to par value, which we have t

17. Slide 17: Business Purpose Mortgage Banking Quarterly Highlights

    17 $312 $394 $366 $505 $361 $215 $245 $367 $415 $561 $527 $639 $733 $920 $923 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 SFR Bridge Business Purpose Mortgage Banking Quarterly Highlights Composition of Quarterly Fundings(1) Detailed Endnotes are included at the end of this presentation. CoreVest continues to see

18. Slide 18: Business Purpose Lending Market Opportunity

    18 Business Purpose Lending Market Opportunity Durability of BPL Demand Amidst Higher Rates Estimated CoreVest Market Share Growth(3) Detailed Endnotes are included at the end of this presentation. Current dynamics in the housing market continue to support growth in Business Purpose Lending and dema

19. Slide 19: Residential Mortgage Banking Quarterly Highlights

    19 - 5 10 15 20 25 ≤ 2.75 3 3.25 3.5 3.75 4 4.25 4.5 4.75 5 > 5.00 Ou tst an din g B ala nc e ( $b n) WAC '22 '21 '20 ≤ '19  Conservatively positioned given market backdrop  $1.0 billion of quarterly locks, down 62% from $2.6 billion in Q1’22(1)  Moved risk quickly (including through forward loan

20. Slide 20: Industry Leading Distribution Platform is a Clear Differentiator

    20 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. Distribution channels were challenged during Q2’22 as investor demand slowed in light of

21. Slide 21: RWT Horizons by the Numbers

    21 R W T H O R I Z O N S Horizons by the Numbers Detailed Endnotes are included at the end of this presentation. Invests primarily in early-stage companies that drive innovation in financial and real estate technologyTM Horizons Opportunity Thesis Enhance efficiency and scale in Redwood businesses E

22. Slide 22: Components of RWT's Strategy

    22 Components of RWT’s Strategy Expanding Share of Housing Market Consumer Demand for Expanded Credit Products Technology Drives Innovation Credit Remains Solid  We continue to target increased wallet share by broadening our focus in the non-government areas of housing including debt & equity  Gre

23. Slide 23: Financial Results

    Financial Results Pa © fn

24. Slide 24: 24 Detailed Endnotes are included at the end of this presentation.

    24 Detailed Endnotes are included at the end of this presentation.

25. Slide 25: 25 Detailed Endnotes are included at the end of this presentation.

    25 Detailed Endnotes are included at the end of this presentation.

26. Slide 26: 26 Detailed Endnotes are included at the end of this presentation.

    26 Detailed Endnotes are included at the end of this presentation.

27. Slide 27: (1)

    27 (1) Detailed Endnotes are included at the end of this presentation.

28. Slide 28: 28 Detailed Endnotes are included at the end of this presentation.

    28 Detailed Endnotes are included at the end of this presentation.

29. Slide 29: Non-GAAP measures note

    29 Detailed Endnotes are included at the end of this presentation. Details regarding non-GAAP measures, including Adjusted Net Contribution and Adjusted Return on Capital, are reconciled to corresponding GAAP measures on slide 35 of this presentation.

30. Slide 30: Non-GAAP measures note

    30 Detailed Endnotes are included at the end of this presentation. Details regarding non-GAAP measures, including Adjusted Net Contribution and Adjusted Return on Capital, are reconciled to corresponding GAAP measures on slide 35 of this presentation.

31. Slide 31: 31 Detailed Endnotes are included at the end of this presentation.

    31 Detailed Endnotes are included at the end of this presentation.

32. Slide 32: 32 Detailed Endnotes are included at the end of this presentation.

    32 Detailed Endnotes are included at the end of this presentation.

33. Slide 33: 33 Detailed Endnotes are included at the end of this presentation.

    33 Detailed Endnotes are included at the end of this presentation.

34. Slide 34: Endnotes

    RWT Endnotes

35. Slide 35: Non-GAAP Measures

    35 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. Adjusted Net Contribution presents a measure of the profitability of ou

36. Slide 36: Endnotes

    36 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 June 30, 2022 unless otherwise noted. Market data per Bloomberg as of June 30, 2022. Slide 4 (Redwood Operates Across Three Complementar

37. Slide 37: Endnotes

    37 Endnotes Slide 7 (Q2’22 Business Performance) Source: Company financial data as of June 30, 2022. 1. Non-marginable debt and marginable debt refers to whether such debt is subject to margin calls based solely on the lender’s determination, in its discretion, of the market value of underlying coll

38. Slide 38: Endnotes

    38 Slide 14 (Investment Portfolio Continued) Source: Company financial data as of June 30, 2022 unless otherwise noted. 1. Source: Bloomberg (HPI LTV (Amort) %), Home Price Indexed Amortized Loan to Value. Slide 15 (Investment Portfolio Deep Dive into SLST 2018-2)​ Source: Company financial data as

39. Slide 39: Endnotes: Appendix Consolidated Balance Sheet

    39 Endnotes Slide 25 (Appendix: Consolidated Balance Sheet) 1. The format of this consolidated balance sheet is provided to more clearly delineate between the assets and liabilities belonging to securitization entities (Consolidated VIEs) that we are required to consolidate on our balance sheet in a

40. Slide 40: Endnotes: Appendix Investment Portfolio Key Results

    40 Endnotes Slide 30 (Appendix: Investment Portfolio Key Results) 1. Realized gains and investment fair value changes presented in this table to calculate Adjusted Net Contribution (non-GAAP), are presented on a tax-adjusted basis. 2. Adjusted Net Contribution and Adjusted Return on Capital are non-

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