Redwood Trust, Inc. · NYSE:RWT
Redwood Trust — Q1 2024 Earnings Presentation
33 slides from Redwood Trust's earnings presentation, Apr 30, 2024
Slide 1: Q1 2024 Redwood Review
Q1 2024 Redwood Review April 30, 2024 REDWOODTRUST.COM
Slide 2: Cautionary Statement; Forward-Looking Statements
Cautionary Statement; Forward-Looking Statements This presentation contains forward-looking statements, including statements regarding our 2024 forward outlook, current illustrative returns related to capital deployment opportunities, estimates of upside and potential earnings in our investment port
Slide 3: Redwood is a Full Spectrum Residential Housing Finance Platform
Redwood is a Full Spectrum Residential Housing Finance Platform Redwood provides liquidity across the entire single-family residential market Residential Residential Investment Portfolio Mortgage Banking Platforms Securities Consumer Investor Includes assets organically created Market leading non-Ag
Slide 4: Q1'24 Financial Performance
Q1’24 Financial Performance Earnings Per Share GAAP Book Value Common Dividend GAAP EPS Non-GAAP $0.16 (Diluted) $8.78 $0.16 EAD Per Share(1) $0.21 (Basic) $8.64 $0.15 $0.08 $0.05 Q4'23 Q1'24 Q4'23 Q1'24 Q1’24 Total Economic Return: 10.0% Indicative Dividend Yield Q4'23 Q1'24 Q4'23 Q1'24 +3.5%(2) as
Slide 5: Q1'24 Business Performance
Q1’24 Business Performance • At March 31, 2024: – Unrestricted cash and cash equivalents of $275 million – $2.7 billion of excess capacity on warehouse facilities Financing & Capital • Procured $750 million of new or renewed capacity, including a $250 million secured financing facility through partn
Slide 6: Upward Trajectory for Net Interest Income
Upward Trajectory for Net Interest Income Through our operating platforms and investments, we are positioned to deliver across market environments, including a potential “higher for longer” scenario In this environment, we are Growing Net Interest Income & Yield(2) positioned to… Accretive deploymen
Slide 7: Overview of Strategic Partnership with CPP Investments
Overview of Strategic Partnership with CPP Investments In March 2024 we announced a strategic partnership with CPP Investments, inclusive of a joint venture and financing facility Joint Venture Financing Facility Capital Commitment Initial Product Eligibility Initial Product Eligibility $500mm Up to
Slide 8: Robust Liquidity Supports Capital Deployment Opportunities
Robust Liquidity Supports Capital Deployment Opportunities Q1’24 represented our most active quarter of capital deployment since Q3’22 Liquidity Overview We have continued to grow our liquidity position and believe we could generate an incremental ~$250 million of capital organically through financi
Slide 9: Key Drivers of Earnings Growth
Key Drivers of Earnings Growth We believe that our positioning provides a path towards further GAAP earnings and EAD growth Progress Growing Earnings in Q1’24 $0.21 ▪ Mortgage Banking: Grew Residential Consumer Mortgage Banking Volumes, maintained healthy Earnings Per Share $0.15 margins, improved a
Slide 10: Operating Businesses & Investment Portfolio
Operating Businesses & Investment Portfolio 10
Slide 11: Residential Consumer Mortgage Banking
Residential Consumer Mortgage Banking We continue to see opportunities to grow lock volumes from our diverse network of loan sellers Q1’24 Quarterly Overview • $1.8 billion of locked loans,(1) up 53% QoQ driven by strength in bulk and flow purchases • Q1’24 flow volume was up 31% relative to Q4’23 •
Slide 12: Strategic Progress in Residential Consumer Mortgage Banking to Meet Market Opportunity
Strategic Progress in Residential Consumer Mortgage Banking to Meet Market Opportunity Our differentiated platform supports our growing market share opportunity We are Gaining Market Share by: Growing Market Opportunity Jumbo Securitization Activity Has Been Increasing(1) Growing our network of loan
Slide 13: Our Differentiated Residential Consumer Platform
Our Differentiated Residential Consumer Platform We are uniquely positioned to deliver products and capture market share even as rates remain elevated #1 Non-Bank Jumbo 190+ Partners Securitization in Loan Seller Platform(1) Network Execution 2- High-Quality 3x Faster Products & Than Peers Underwrit
Slide 14: Residential Investor Mortgage Banking
Residential Investor Mortgage Banking We remain focused on originating loans secured by assets with strong fundamentals and business plans with experienced sponsorship teams Q1’24 Quarterly Overview Composition of Q1’24 Quarterly Fundings(2) • CoreVest funded $326 million of loans in Q1’24 (64% Mult
Slide 15: Residential Investor – Market Trends
Residential Investor – Market Trends Market and credit fundamentals have continued to support strong demand for our residential investor products Demand and Return Drivers Occupancy Levels Remain Elevated ✓ Continued borrower demand amid higher interest rates 100.0% 95.0% ✓ Positive tenant trends, s
Slide 16: Investment Portfolio
Investment Portfolio During the first quarter, we actively deployed capital into accretive new investments Q1’24 Quarterly Performance • Credit fundamentals within our single-family investment portfolio remained strong • We deployed $115 million of capital into organic and third-party assets, our hi
Slide 17: Potential Book Value Per Share Upside Driven by Underlying Asset Strength
Potential Book Value Per Share Upside Driven by Underlying Asset Strength Continued robust credit performance in our underlying securities portfolio could contribute to further upside in our book value and recovery of portfolio discount over time Strong Investment Portfolio Characteristics & …Suppor
Slide 18: Investment Portfolio – Residential Investor Bridge Loans
Investment Portfolio – Residential Investor Bridge Loans We maintain a diversified portfolio of organically created bridge loans Bridge Portfolio Characteristics(1) Evolution of Bridge Portfolio(2) Coupon Range Maturity by Quarter • Since the end of 2022, we have strategically increased ($mm) focus
Slide 19: RWT Horizons
RWT Horizons® We added two new investments in Q1’24, including one follow-on in an existing RWT Horizons portfolio company RWT Horizons Opportunity Thesis Enhance efficiency Early-stage Partnerships drive Alignment with and scale in Redwood companies with growth and Redwood’s mission, businesses opp
Slide 20: Financial Results
REDWOOD TRUST Financial Results
Slide 21: Income Statement
Income Statement ($ in millions, except per share data) Three Months Ended 3/31/2024 12/31/2023 Net interest income Investment portfolio $ 29 $ 31 Mortgage banking 7 2 Corporate (unsecured debt)(1) (12) (12) Total net interest income 24 20 Non-interest income Residential consumer mortgage banking ac
Slide 22: Balance Sheet
Balance Sheet ($ in millions) 3/31/2024 12/31/2023 Residential consumer loans - held-for-sale $ 512 $ 911 Residential consumer loans - held-for-investment 7,105 6,139 Residential investor loans - held-for-sale 281 180 Residential investor loans - held-for-investment 4,901 5,040 Consolidated Agency m
Slide 23: Capital Allocation Summary
Capital Allocation Summary ($ in millions) As of March 31, 2024 As of 12/31/23 Fair Value of Recourse Non-Recourse Assets (1) Debt Debt (2) Total Capital Total Capital Residential Consumer Mortgage Banking Loans and other working capital (3) $ 671 $ (366) $ (104) $ 200 $ 165 Residential Investor Mor
Slide 24: Mortgage Banking Key Results
Mortgage Banking Key Results ($ in millions) Q1 2024 Q4 2023 Residential Residential Residential Residential Investor Consumer Investor Consumer Mortgage Mortgage Mortgage Mortgage Banking Banking Total Banking Banking Total Net interest income $ 1 $ 6 $ 7 $ 1 $ 1 $ 2 Mortgage banking activities, ne
Slide 25: Investment Portfolio Key Results
Investment Portfolio Key Results ($ in millions) Three Months Ended 3/31/2024 12/31/2023 Net interest income $ 29 $ 31 Investment fair value changes, net 21 15 HEI income, net 9 12 Other income, net 5 2 Operating expenses (6) (8) (Provision for) benefit from income taxes (1) — Net contribution (GAAP
Slide 26: Recourse Debt Balances
Recourse Debt Balances ($ in millions) At March 31, 2024 At December 31, 2023 Secured Debt Fair Value Non- Total Total Average Total Average of Secured Marginable Marginable Secured Unsecured Recourse Borrowing Recourse Borrowing Assets Debt (1) Debt (1) Debt Debt Debt Cost (2) Debt Cost (2) Corpora
Slide 27: Endnotes
REDWOOD TRUST Endnotes
Slide 28: Non-GAAP Measures
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 stockholders and GAAP return on common equity (“GAAP ROE”), respectively. EAD is defined as: GAA
Slide 29: Non-GAAP Measures
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 profitab
Slide 30: Endnotes
Endnotes Slide 3 (Redwood is a Full Spectrum Residential Housing Finance Platform) Slide 4 (Q1’24 Financial Performance) Source: Company financial data as of March 31, 2024 unless otherwise noted. Source: Company financial data as of March 31, 2024 unless otherwise noted. Market 1. Allocated capita
Slide 31: Endnotes
Endnotes Slide 6 (Upward Trajectory for Net Interest Income) Slide 14 (Residential Investor Mortgage Banking) Source: Company financial data as of March 31, 2024 unless otherwise noted. Source: Company financial data as of March 31, 2024 unless otherwise noted. 1. Represents management’s estimates
Slide 32: Endnotes
Endnotes Slide 18 (Investment Portfolio – Residential Investor Bridge Slide 24 (Appendix: Mortgage Banking Key Results) Loans) 1. EAD Net Contribution and EAD Net Contribution Return on Capital are non-GAAP Source: Company financial data as of March 31, 2024 unless otherwise noted. measures. Please
Slide 33: Glossary of Terms
Glossary of Terms Term Definition Term Definition BFR Build for rent MB Mortgage banking bps Basis points MSR Mortgage servicing rights CAFL® CoreVest securitization program Non-QM Non-qualified mortgage CES Closed end second liens QM Qualified mortgage CRE Commercial real estate QoQ Quarter over qu