Redwood Trust, Inc. · NYSE:RWT
Redwood Trust — Q2 2024 Earnings Presentation
35 slides from Redwood Trust's earnings presentation, Aug 1, 2024
Slide 1: Q2 2024 Redwood Review
Q2 2024 Redwood Review August 1, 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 and key drivers to increase earnings, current target returns related to capital deployment opportunities, estimates of upside and potential
Slide 3: Market Outlook Promotes Our Value Proposition
Market Outlook Promotes Our Value Proposition Demonstrated ability to capture additional market share amidst a changing regulatory environment Investment Portfolio and Mortgage Banking have significant upside into the next rate cycle Evolution of capital structure has freed up capital for accretive
Slide 4: Our Products Serve Some of the Largest Addressable Markets in Housing Finance
Our Products Serve Some of the Largest Addressable Markets in Housing Finance Redwood Segments Redwood Business Total Addressable Market(1) Clients Served Housing Investors ~$120 Billion 4 Detailed Endnotes are included at the end of this presentation.
Slide 5: 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 INVESTMENT PORTFOLIO RESIDENTIAL MORTGAGE BANKING PLATFORMS Investments & Securities Consumer Investor Includes assets organically created through
Slide 6: Q2'24 Financial Performance
Q2’24 Financial Performance Earnings Per Share GAAP Book Value Common Dividend GAAP EPS Non-GAAP $8.78 $8.73 $0.16 $0.16 (Diluted) EAD Per Share(1) (Basic) $0.21 $0.10 $0.13 $0.08 Q1'24 Q2'24 Q1'24 Q2'24 Q2’24 Total Economic Return: 10.0% Indicative Dividend Yield Q1'24 Q2'24 Q1'24 Q2'24 +1.3%(2) as
Slide 7: Q2'24 Business Performance
Q2’24 Business Performance • At June 30, 2024: – Unrestricted cash and cash equivalents of $276 million Financing & Capital – Unencumbered assets of $332 million • Issued $85 million of senior unsecured notes due 2029 • $2.7 billion of lock volume(1), up 49% QoQ Residential Consumer – Increase drive
Slide 8: Strength of Operating Platforms
Strength of Operating Platforms Our operating platforms continue to achieve increased scale and distribution Volume Growth Distribution Strength Across all Channels Residential Residential Residential Residential Investor Consumer Investor Consumer Figures Figures $mm $mm $1,431 +41% +49% $1,389 $2,
Slide 9: Operating Efficiencies
Operating Efficiencies Ongoing efforts have resulted in improved efficiencies across our operating platforms Cost Per Loan (bps) Efficiency Drivers 30 - 35bps historical 71 target range ✓ Various channels for Residential distribution Consumer 36 22 ✓ Fewer days on balance sheet FY'23 Q1'24 Q2'24 Net
Slide 10: Update on CPP Investments Partnership
Update on CPP Investments Partnership Our partnership with CPP Investments supports operating scale and durable earnings power Joint Venture Financing Facility Drew $125 million Commenced Established multiple from revolving term contributing loans to warehouse facilities to facility to support JV in
Slide 11: Key Drivers to Further Increase Earnings
Key Drivers to Further Increase Earnings Progress in Earnings Growth YTD’24 Earnings ROE 7.4% $0.31 Earnings Per Share 5.2% $0.21 3.7% $0.15 $(0.14) -2.5% GAAP Non-GAAP EAD GAAP Non-GAAP EAD 2H'23 1H'24 2H'23 1H'24 Key Drivers to Further Increase Earnings Residential Consumer Residential Investor Ne
Slide 12: Operating Businesses & Investment Portfolio
Operating Businesses & Investment Portfolio 12
Slide 13: Residential Consumer Mortgage Banking
Residential Consumer Mortgage Banking We are seeing opportunities to grow volumes with our diverse network of loan sellers, including banks looking to reduce exposure to seasoned collateral Q2’24 Quarterly Overview • $2.7 billion of locked loans(1), up 49% QoQ driven by strength across our seller ba
Slide 14: Significant Opportunity in Residential Consumer
Significant Opportunity in Residential Consumer We are complementing wallet share gains in forward flow production with bulk purchases of seasoned collateral Bulk Opportunities Flow Opportunities Working with banks to support capital relief and liquidity Unlocking market share by building and re-est
Slide 15: 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 opportunities to grow our market share We are Gaining Market Share by: Continued Market Share Growth(1) Growing network of loan sellers to over 200, nearly half of which are ba
Slide 16: 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 Q2’24 Quarterly Overview Composition of Q2’24 Quarterly Fundings(1) • $459 million of loan fundings (53% bridge / 47% term), u
Slide 17: 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% ✓ Positive tenant trends, such as
Slide 18: Investment Portfolio
Investment Portfolio During the first quarter, we actively deployed capital into accretive new investments Q2’24 Quarterly Performance • Credit fundamentals within our single-family investment portfolio remained strong • We deployed $133 million of capital into organic and third-party assets, our hi
Slide 19: Potential Book Value Per Share Upside Driven by Underlying Asset Strength
Potential Book Value Per Share Upside Driven by Underlying Asset Strength Continued robust credit performance in our underlying securities portfolio could contribute to further upside in book value and recovery of portfolio discount over time Strong Investment Portfolio Characteristics & …Support Ou
Slide 20: Investment Portfolio – Residential Investor Bridge Loans
Investment Portfolio – Residential Investor Bridge Loans We maintain a diversified portfolio of organically created bridge loans Bridge Portfolio Characteristics(1) Evolution of Bridge Portfolio(2) Coupon Range Maturity by Quarter • Since the end of 2022, we have strategically increased ($mm) focus
Slide 21: RWT Horizons
RWT Horizons® We added three new investments in Q2’24, including two follow-ons in existing RWT Horizons portfolio companies RWT Horizons Opportunity Thesis Enhance efficiency Early-stage Partnerships drive Alignment with and scale in Redwood companies with growth and Redwood’s mission, businesses o
Slide 22: Financial Results
REDWOOD TRUST Financial Results
Slide 23: Detailed Endnotes are included at the end of this presentation. Note: Numbers may not
Detailed Endnotes are included at the end of this presentation. Note: Numbers may not foot due to rounding. 23
Slide 24: Detailed Endnotes are included at the end of this presentation. Note: Numbers may not
Detailed Endnotes are included at the end of this presentation. Note: Numbers may not foot due to rounding. 24
Slide 25: Detailed Endnotes are included at the end of this presentation Note: Numbers may not
Detailed Endnotes are included at the end of this presentation Note: Numbers may not foot due to rounding. 25 .
Slide 26: Appendix: Mortgage Banking Key Results
Detailed Endnotes are included at the end of this presentation. 26 Note: Numbers may not foot due to rounding.
Slide 27: Appendix: Investment Portfolio Key Results
Detailed Endnotes are included at the end of this presentation. 27 Note: Numbers may not foot due to rounding.
Slide 28: Recourse Debt Scheduled Maturities
Recourse Debt Scheduled Maturities ($ in millions) Detailed Endnotes are included at the end of this presentation. 28 Note: Numbers may not foot due to rounding.
Slide 29: Endnotes
REDWOOD TRUST Endnotes
Slide 30: 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 31: 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 32: Endnotes
Endnotes Slide 3 (Market Outlook Promotes Our Value Proposition) Slide 6 (Q2’24 Financial Performance) Source: Company financial data as of June 30, 2024 unless otherwise noted. Source: Company financial data as of June 30, 2024 unless otherwise noted. Market data per Bloomberg as of June 28, 2024.
Slide 33: Endnotes
Endnotes Slide 8 (Strength of Operating Platforms) Slide 16 (Residential Investor Mortgage Banking) Source: Company financial data as of June 30, 2024 unless otherwise noted. Source: Company financial data as of June 30, 2024 unless otherwise noted. 1. Composition percentages are based on unpaid p
Slide 34: Endnotes
Endnotes Slide 20 (Investment Portfolio – Residential Investor Bridge Slide 26 (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 June 30, 2024 unless otherwise noted. measures. Please
Slide 35: 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