Redwood Trust, Inc. · NYSE:RWT
Redwood Trust — Q1 2023 Earnings Presentation
35 slides from Redwood Trust's earnings presentation, Apr 27, 2023
Slide 1: Q1 2023 Redwood Review
1 Q1 2023 Redwood Review April 27, 2023 Exhibit 99.3
Slide 2: Cautionary Statement; Forward-Looking Statements
2 Cautionary Statement; Forward-Looking Statements This presentation contains forward-looking statements, including statements regarding our 2023 forward outlook, estimates of upside and potential earnings in our investment portfolio from embedded discounts to par value on securities, target yields
Slide 3: Redwood's mission and differentiators
3 Redwood’s mission is to make quality housing, whether rented or owned, accessible to all American households Detailed Endnotes are included at the end of this presentation. 29-Year Track Record of Strong Performance and Earnings Generation Diversified Product Set with Balanced Earnings Streams Ind
Slide 4: Redwood Operates Across Three Complementary Business Lines
4 Detailed Endnotes are included at the end of this presentation. *BPL refers to business purpose loans. RPLs refer to reperforming loans. HEI refers to home equity investments. CRT refers to credit risk transfer. Redwood Operates Across Three Complementary Business Lines Redwood provides strategic
Slide 5: Q1'23 Financial Performance
5 Q1’23 Financial Performance $1.4 billion of allocated capital Detailed Endnotes are included at the end of this presentation. Earnings Available for Distribution (“EAD”) and EAD Return on Equity (“EAD ROE”) are non-GAAP measures. See “Non-GAAP Measures” slides in the Endnotes for additional inform
Slide 6: Q1'23 Business Performance
6 Q1’23 Business Performance Detailed Endnotes are included at the end of this presentation. ▪ $117 million of locks(2) and $52 million of jumbo loan purchases ▪ Distributed $686 million of jumbo loans through two securitizations & additional whole loans sales ▪ Total net loan exposure of $70 millio
Slide 7: Calibrated for the Current Environment
7 Calibrated for the Current Environment Detailed Endnotes are included at the end of this presentation. Over the past year, we have dynamically repositioned our strategic focus towards investing activities relative to traditional loan aggregation, driving increased long-term earnings power and dura
Slide 8: Potential Impacts from Disruptions at Regional Banks
8 Potential Impacts from Disruptions at Regional Banks Detailed Endnotes are included at the end of this presentation. Recent disruptions at regional banks have the potential to shift the landscape and result in significant investing and funding opportunities(1) ▪ Regional banks have historically pr
Slide 9: Investment Portfolio & Operating Businesses
9 Investment Portfolio & Operating Businesses
Slide 10: Investment Portfolio Quarterly Performance
10 Multifamily, CRT and Other, $237 HEI, $297 RPL Securities, $352 Business Purpose Bridge Loans, $2,102 SFR (CAFL) Securities, $295 Residential Jumbo (SEMT) Securities, $332 MSRs & Other, $49 Investment Portfolio Quarterly Performance $3.7 billion Housing Credit Investments Organically Created (76%
Slide 11: Potential Book Value Upside on Securities
11 $6.74 $9.40 $4.10 Share Price 3/31/23 Book Value 3/31/23 Potential Book Value Upside on Securities (1) Net Portfolio Discount to Par by Investment(1) $4.10 Per Share Illustrative Potential Book Value Upside Detailed Endnotes are included at the end of this presentation. Potential Book Value Per S
Slide 12: Investment Portfolio - BPL Bridge Loans
12 Investment Portfolio - BPL Bridge Loans Detailed Endnotes are included at the end of this presentation. Our Bridge loan portfolio is predominantly comprised of multi-asset loans that we originate directly with strict underwriting guidelines ▪ A significant portion of our borrowers utilize Bridge
Slide 13: Investment Portfolio – BPL Bridge Commitments & Maturities
13 Investment Portfolio – BPL Bridge Commitments & Maturities Detailed Endnotes are included at the end of this presentation. Summary of Bridge Maturities & Unfunded Commitments ▪ Existing Bridge financing provides significant capacity to fund outstanding commitments ▪ Bridge unfunded commitments of
Slide 14: Investment Portfolio - Home Equity Investments (HEI)
14 Investment Portfolio - Home Equity Investments (“HEI”) Over the last few years, we have steadily evolved our investment in HEI based on our long-term thesis on the outlook for housing Structure ▪ HEI are an effective and attractive option for homeowners seeking to access the equity in their homes
Slide 15: Business Purpose Mortgage Banking Quarterly Overview
15 Business Purpose Mortgage Banking Quarterly Overview Composition of Q1’23 Quarterly Fundings(2) Detailed Endnotes are included at the end of this presentation. We remain focused on originating loans secured by assets with strong fundamentals and business plans with experienced sponsorship teams Q
Slide 16: Business Purpose Lending Market Opportunity
16 Business Purpose Lending Market Opportunity BPL Demand and Return Drivers Housing Affordability Crisis Leads to Increase in Rental Demand(3) Detailed Endnotes are included at the end of this presentation. Strong fundamentals combined with changing market dynamics support continued growth opportun
Slide 17: Residential Mortgage Banking
17 ▪ Focus in Q1’23 on moving risk ▪ Distributed $686 million of jumbo loans through two securitizations and additional whole loan sales ▪ Inventory remains light; total net loan exposure of just $70 million(1) (down 89% from YE’22) with an average gross mortgage rate of 6.68% ▪ Conservatively posit
Slide 18: RWT Horizons by the Numbers
18 R W T H O R I Z O N S RWT Horizons by the Numbers Detailed Endnotes are included at the end of this presentation. Invests primarily in early-stage companies that drive innovation in financial and real estate technology RWT Horizons Opportunity Thesis Enhance efficiency and scale in Redwood busine
Slide 19: Liquidity & Financing
19 Liquidity & Financing
Slide 20: Low Leverage and Strong Liquidity Position
20 Low Leverage and Strong Liquidity Position Strong liquidity and financing support our strategic objectives Detailed Endnotes are included at the end of this presentation. Lower Leverage Optimized FinancingElevated Liquidity Position ▪ Redwood has consistently operated with lower overall leverage
Slide 21: Financial Results
21 Financial Results
Slide 22: Income Statement
22 Detailed Endnotes are included at the end of this presentation. Income Statement ($ in millions, except per share data) Three Months Ended 3/31/2023 12/31/2022 Net interest income Investment portfolio $ 40 $ 41 Mortgage banking (1) 1 Corporate (unsecured debt)(1) (13) (15) Total net interest inco
Slide 23: Balance Sheet
23 Detailed Endnotes are included at the end of this presentation. Balance Sheet ($ in millions) 3/31/2023 12/31/2022 Residential loans - held-for-sale $ 27 $ 781 Residential loans - held-for-investment 5,466 4,832 Business purpose loans - held-for-sale 371 364 Business purpose loans - held-for-inve
Slide 24: Changes in Book Value per Common Share
24 Detailed Endnotes are included at the end of this presentation. Changes in Book Value per Common Share ($ in per share) Three Months Ended 3/31/2023 12/31/2022 Beginning book value per common share $ 9.55 $ 10.18 Basic earnings (loss) attributable to common shares 0.02 (0.40) Changes in accumulat
Slide 25: Capital Allocation Summary
25 Detailed Endnotes are included at the end of this presentation. Capital Allocation Summary ($ in millions) As of March 31, 2023 As of 12/31/22 Fair Value of Assets (1) Recourse Debt Non-Recourse Debt (2) Total Capital Total Capital Residential Mortgage Banking Loans and other working capital (3)
Slide 26: Mortgage Banking Key Results
26 Detailed Endnotes are included at the end of this presentation, including details regarding our non-GAAP measures. Mortgage Banking Key Results ($ in millions) Q1 2023 Q4 2022 Business Purpose Mortgage Banking Residential Mortgage Banking Total Business Purpose Mortgage Banking Residential Mortga
Slide 27: Investment Portfolio Key Results
27 Detailed Endnotes are included at the end of this presentation, including details regarding our non-GAAP measures. Investment Portfolio Key Results ($ in millions) Three Months Ended 3/31/2023 12/31/2022 Net interest income $ 40 $ 41 Investment fair value changes, net (1) (26) Realized gains/(los
Slide 28: Recourse Debt Scheduled Maturities and Balances
28 Detailed Endnotes are included at the end of this presentation. Recourse Debt Scheduled Maturities ($ in millions) Recourse Debt Balances ($ in millions) At March 31, 2023 At December 31, 2022 Secured Debt Fair Value of Secured Assets Non- Marginable Debt (1) Marginable Debt (1) Total Secured Deb
Slide 29: Endnotes
29 Endnotes
Slide 30: Non-GAAP Measures: EAD and EAD ROE
30 Non-GAAP Measures Earnings Available for Distribution (“EAD”) and EAD Return on Capital (“EAD ROE”) EAD and EAD ROE are non-GAAP measures derived from GAAP Net income (loss) available (related) to common shares and GAAP return on common equity (“GAAP ROE”), respectively. EAD is defined as: GAAP n
Slide 31: Non-GAAP Measures: EAD Net Contribution
31 Non-GAAP Measures EAD Net Contribution and EAD Net Contribution Return on Capital EAD Net Contribution and EAD Net Contribution Return on Capital are non-GAAP measures derived from GAAP Net Contribution and GAAP Return on Capital, respectively. EAD Net Contribution presents a measure of the profi
Slide 32: Endnotes: Redwood Operates Across Three Complementary Business Lines
32 Slide 4 (Redwood Operates Across Three Complementary Business Lines) Source: Company financial data as of March 31, 2023 unless otherwise noted. 1. Allocated capital includes working capital and platform premium for mortgage banking operations and all investments net of associated debt for invest
Slide 33: Endnotes: Q1'23 Business Performance
33 Endnotes Slide 6 (Q1’23 Business Performance) Source: Company financial data as of March 31, 2023 unless otherwise noted. 1. Non-marginable debt and marginable debt refer to whether such debt is subject to margin calls based solely on the lender’s determination in its discretion of the market va
Slide 34: Endnotes: Investment Portfolio - BPL Bridge Loans
34 Endnotes Slide 12 (Investment Portfolio - BPL Bridge Loans) Source: Company financial data as of March 31, 2023 unless otherwise noted. Note: Pie charts include all CoreVest-originated bridge loans as well as those purchased from third parties. Composition percentages are based on unpaid princip
Slide 35: Endnotes: Appendix Capital Allocation Summary
35 Endnotes Slide 25 (Appendix: Capital Allocation Summary) 1. Amounts of assets in our Investment Portfolio, as presented in this table, represent our economic interests (including our economic interests in consolidated VIEs) and do not present the assets within VIEs that we consolidate under GAAP.