Redwood Trust, Inc. · NYSE:RWT
Redwood Trust — Q3 2023 Earnings Presentation
39 slides from Redwood Trust's earnings presentation, Oct 30, 2023
Slide 1: Q3 2023 Redwood Review
1 Q3 2023 Redwood Review October 30, 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, current illustrative returns on assets that are either distributed through our various channels or retained on our balance sheet, estimat
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: Poised to Capitalize on Generational Shift in How Mortgages are Funded
4 Poised to Capitalize on Generational Shift in How Mortgages are Funded Long-Tenured Bank & Non-Bank Seller Network Solutions Provider to Parts of Housing Market Not Well Served by Government Programs Diversified Product Set Serving Homeowners and Housing Investors Deep Distribution Channels that S
Slide 5: Redwood is a Full Spectrum Mortgage Platform
5 ~$1tr+ Jumbo Loan Sales 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 is a Full Spectrum Mortgage Platform Redwood provides
Slide 6: Q3'23 Financial Performance
6 Q3’23 Financial Performance $1.5 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 infor
Slide 7: Q3'23 Business Performance
7 Q3’23 Business Performance Detailed Endnotes are included at the end of this presentation. Note: Totals may not foot due to rounding. ▪ Increased capital allocated to this segment to $150 million, up from $80 million in Q2’23 ▪ Distributed $391 million of loans through securitization ($338 million
Slide 8: Select Q3'23 Corporate Highlights
8 Select Q3’23 Corporate Highlights Detailed Endnotes are included at the end of this presentation. ESG Distribution Activity Product & Platform Launch Launched Aspire, In-House HEI Platform Distributed ~$730 Million of Loans Issued Annual ESG Report with Enhanced Disclosure ✓ For the second consecu
Slide 9: Basel III Endgame: Bank Regulatory Capital in Focus
9 Basel III Endgame: Bank Regulatory Capital in Focus Detailed Endnotes are included at the end of this presentation. While it will take time for the Basel III regulations to be finalized, banks have already begun responding to forthcoming changes Summary of Basel III Endgame Banks are Already Prepa
Slide 10: Substantial Opportunity for Redwood Residential
10 Substantial Opportunity for Redwood Residential Detailed Endnotes are included at the end of this presentation. Shifting regulatory landscape could result in massive opportunity for our Residential Mortgage Banking platform(1) Jumbo Market Share by Lender Type(3) A significant portion of this mar
Slide 11: Update on Our Progress in Residential Mortgage Banking
11 Update on Our Progress in Residential Mortgage Banking Detailed Endnotes are included at the end of this presentation. Even if volumes in the jumbo origination market remain lower than historical averages, we still see considerable opportunity to capture incremental market share(1) Market Share B
Slide 12: Asset Creation + Fee-Based Revenue
12 Asset Creation + Fee-Based Revenue Through our operating businesses (Residential and Business Purpose Mortgage Banking) we organically create assets that are either distributed through our various channels or retained on our balance sheet Redwood’s Ability to Source, Retain and Distribute Assets
Slide 13: Continued Evolution of Distribution Channels
13 Continued Evolution of Distribution Channels Detailed Endnotes are included at the end of this presentation. Distribution has served as our key differentiator and we continue to evolve our channels as institutions place a premium on access to our assets ▪ Since inception, Redwood has built best-i
Slide 14: Launch of Home Equity Investment (HEI) Platform
14 Launch of Home Equity Investment (“HEI”) Platform Detailed Endnotes are included at the end of this presentation. In Q3’23, we formally launched our in-house HEI platform, Aspire, to support homeowners’ ability to access the equity in their homes ▪ After nearly five years of investing in third-pa
Slide 15: Strong Balance Sheet Supports Our Strategic Objectives
15 Strong Balance Sheet Supports Our Strategic Objectives Detailed Endnotes are included at the end of this presentation. Leverage Secured FinancingLiquidity ▪ Recourse leverage remains below historical range, notwithstanding an increase in warehouse borrowings to support growth in Residential Mortg
Slide 16: Operating Businesses & Investment Portfolio
16 Operating Businesses & Investment Portfolio
Slide 17: Residential Mortgage Banking Q3'23 Quarterly Overview
17 ▪ $1.6 billion of locked loans(1) and $0.8 billion of loans purchased ▪ 50% of purchase volume came from depositories, up from 10% in Q2’23 ▪ Significant increase in lock and purchase volumes in Q3’23 driven by: ▪ Onboarding of new depository loan sellers during the second and third quarter ▪ Inc
Slide 18: Business Purpose Mortgage Banking Q3'23 Quarterly Overview
18 Business Purpose Mortgage Banking Q3’23 Quarterly Overview Composition of Q3’23 Quarterly Fundings(1) Detailed Endnotes are included at the end of this presentation. We remain focused on originating loans secured by strong asset fundamentals and business plans with experienced sponsorship teams Q
Slide 19: Business Purpose Lending – Market Trends
19 Business Purpose Lending – Market Trends Detailed Endnotes are included at the end of this presentation. Demand for our BPL products remains strong and supported by market fundamentals BPL Demand and Return Drivers Housing Affordability Crisis Drives Rental Demand(2) Occupancy Levels Remain Eleva
Slide 20: Investment Portfolio Q3'23 Quarterly Performance
20 Multifamily and Other, $145 HEI, $317 RPL Securities, $256 Business Purpose Bridge Loans, $2,177 SFR (CAFL) Securities, $316 Residential Jumbo (SEMT) Securities, $306 MSRs & Other, $48 Investment Portfolio Q3’23 Quarterly Performance $3.6 Billion Housing Credit Investments Organically Created (80
Slide 21: Potential Book Value Upside on Securities
21 $7.13 $8.77 $3.26 Share Price 9/30/23 Book Value 9/30/23 Potential Book Value Upside on Securities (1) Net Portfolio Discount to Par by Investment(1) $3.26 Per Share Illustrative Potential Book Value Upside(1) Detailed Endnotes are included at the end of this presentation. Potential Book Value Pe
Slide 22: Investment Portfolio - BPL Bridge Loans
22 Investment Portfolio - BPL Bridge Loans Detailed Endnotes are included at the end of this presentation. Note: Pie charts on this slide include all CoreVest-originated bridge loans as well as those purchased from third parties. Composition percentages are based on unpaid principal balance. Our bri
Slide 23: RWT Horizons by the Numbers
23 R W T H O R I Z O N S RWT Horizons by the Numbers Detailed Endnotes are included at the end of this presentation. Invests primarily in early-stage companies that drive innovation in financial and real estate technology RWT Horizons Opportunity Thesis Enhance efficiency and scale in Redwood busine
Slide 24: Financial Results
24 Financial Results
Slide 25: Income Statement
25 Detailed Endnotes are included at the end of this presentation. Income Statement ($ in millions, except per share data) Three Months Ended 9/30/2023 6/30/2023 Net interest income Investment portfolio $ 31 $ 37 Mortgage banking 2 1 Corporate (unsecured debt)(1) (13) (12) Total net interest income
Slide 26: Balance Sheet
26 Detailed Endnotes are included at the end of this presentation. Balance Sheet ($ in millions) 9/30/2023 6/30/2023 Residential loans - held-for-sale $ 611 $ 197 Residential loans - held-for-investment 5,236 5,259 Business purpose loans - held-for-sale 103 283 Business purpose loans - held-for-inve
Slide 27: Changes in Book Value per Common Share
27 Detailed Endnotes are included at the end of this presentation. Changes in Book Value per Common Share ($ in per share) Three Months Ended 9/30/2023 6/30/2023 Beginning book value per common share $ 9.26 $ 9.40 Basic earnings (loss) attributable to common shares (0.29) — Changes in accumulated ot
Slide 28: Capital Allocation Summary
28 Detailed Endnotes are included at the end of this presentation. Capital Allocation Summary ($ in millions) As of September 30, 2023 As of 6/30/23 Fair Value of Assets (1) Recourse Debt Non-Recourse Debt (2) Total Capital Total Capital Residential Mortgage Banking Loans and other working capital (
Slide 29: Mortgage Banking Key Results
29 Detailed Endnotes are included at the end of this presentation, including details regarding our non-GAAP measures. Mortgage Banking Key Results ($ in millions) Q3 2023 Q2 2023 Business Purpose Mortgage Banking Residential Mortgage Banking Total Business Purpose Mortgage Banking Residential Mortga
Slide 30: Investment Portfolio Key Results
30 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 9/30/2023 06/30/2023 Net interest income $ 31 $ 37 Investment fair value changes, net (31) (2) Realized gains/(los
Slide 31: Recourse Debt Scheduled Maturities and Balances
31 Detailed Endnotes are included at the end of this presentation. Recourse Debt Scheduled Maturities ($ in millions) Recourse Debt Balances ($ in millions) At September 30, 2023 At June 30, 2023 Secured Debt Fair Value of Secured Assets Non- Marginable Debt (1) Marginable Debt (1) Total Secured Deb
Slide 32: Endnotes
32 Endnotes
Slide 33: Non-GAAP Measures: EAD and EAD ROE
33 Non-GAAP Measures Earnings Available for Distribution (“EAD”) and EAD Return on Capital (“EAD ROE”) EA D and EA D ROE are non-GAAP measures derived from GAA P Net income (loss) available (related) to common shares and GAA P return on common equity (“GAA P ROE”), respectively. EA D is defined as:
Slide 34: Footnotes Continued
34 Footnotes Continued: 3. Realized (gains)/losses, net includes all amounts w ithin that line item on our consolidated statements of income. 4. Acquisition related expenses include transaction expenses paid to third-parties related to the acquisition of Riverbend, ongoing amortization of intangible
Slide 35: Non-GAAP Measures: EAD Net Contribution
35 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 36: Endnotes: Redwood is a Full Spectrum Mortgage Platform
36 Slide 5 (Redwood is a Full Spectrum Mortgage Platform) Source: Company financial data as of September 30, 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 investment portf
Slide 37: Endnotes: Q3'23 Business Performance
37 Endnotes Slide 7 (Q3’23 Business Performance) Source: Company financial data as of September 30, 2023 unless otherwise noted. 1. Lock volume does not account for potential fallout from pipeline that typically occurs through the lending process. 2. Includes Q4’23 activity through October 28, 2023
Slide 38: Endnotes: Residential Mortgage Banking
38 Endnotes Slide 17 (Residential Mortgage Banking) Source: Company financial data as of September 30, 2023 unless otherwise noted. 1. Lock volume does not account for potential fallout from pipeline that typically occurs through the lending process. 2. Includes Q4’23 activity through October 27, 2
Slide 39: Endnotes: Capital Allocation Summary
39 Endnotes Slide 28 (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