Redwood Trust, Inc. · NYSE:RWT
Redwood Trust — Investor Presentation (November 2020)
35 slides from Redwood Trust's investor presentation, Nov 16, 2020
Slide 1: Investor Presentation
Investor Presentation November 16, 2020
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains forward-looking statements, including statements regarding our belief that we can increase the market share of our residential lending platform by 4 to 5 times by the end of 2025 and estimated yields on our investment portfolio. Forward-looking s
Slide 3: Our Mission
Our Mission Redwood’s mission is to help make quality housing, whether rented or owned, accessible to all Americans.
Slide 4: Redwood Trust provides significant liquidity to the U.S. housing market
Redwood Trust provides significant liquidity to the U.S. housing market Through our market leading brands we: Aggregate mortgages made to homeowners and landlords who don’t qualify for government programs Structure loans into securities and other investments, connecting borrowers with institutional
Slide 5: Most segments of the U.S. housing market rely on some form of private capital
Most segments of the U.S. housing market rely on some form of private capital $3T+ potential non- • There is a substantial need for private capital to support agency financing housing finance activities where government loan opportunity(1) programs fall short • Over the past several years, the GSEs
Slide 6: We address a vast and growing market spanning the entire U.S. housing finance industry
We address a vast and growing market spanning the entire U.S. housing finance industry Non-Agency Consumer Lending • Leading non-agency conduit providing liquidity to a broad set of originators • Best-in-class customer service and user experience for originators and investors Business Purpose Lendin
Slide 7: As the market leader in the non-agency sector, we are poised to capitalize on secular shifts in housing
As the market leader in the non-agency sector, we are poised to capitalize on secular shifts in housing Serving Growing Markets Macro Tailwinds Competitive Advantages • Housing demand continues to • Strong demand for single- • First-to-market brand outpace supply in both owner- family detached homes
Slide 8: Household equity continues to increase, outpacing loan balance limits for government lending programs
Household equity continues to increase, outpacing loan balance limits for government lending programs Value of the US Single Family Housing Market(1) Growing Markets will Likely Require Increased Access to Non-Agency Lending GSE 2020 Median Change in HPA Since Conforming Home Price(2) Limit since 20
Slide 9: Single-family rent growth remains strong and has historically stayed positive even in recessions
Single-family rent growth remains strong and has historically stayed positive even in recessions(1) Home Price Appreciation vs. Single-Family Rent vs. Apartment Rent National YOY % change Home price appreciation Single-family rent Apartment rent 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% 1982 1
Slide 10: Changing consumer preference and affordability are driving demand for single-family homes held for rent
Changing consumer preference and affordability are driving demand for single-family homes held for rent Rental Homes as Percentage of All Housing Units Trailing 12-month Single-family rental homes Rental homes (2-9 units) Rental homes (10+ units) 12.0% d de ad 11.5% es h om n illio 5. 1m 11.0% d dde
Slide 11: We have delivered innovative solutions to the non-agency consumer sector for over 25 years
We have delivered innovative solutions to the non-agency consumer sector for over 25 years Enhances housing availability as a leading intermediary between mortgage investors and originators Key source of liquidity for the Channel of interaction for buyers market and sellers • Unparalleled correspond
Slide 12: We are the market leader in non-agency residential securitization, whole loan trading, and credit investing
We are the market leader in non-agency residential securitization, whole loan trading, and credit investing Significant More securitizations Strong Performance opportunity to gain than any other share sponsor • ~3%(1) delinquency rate versus market average • $400B(4) annual market • 108 Sequoia of ~
Slide 13: We have completed over $80B in purchases life-to-date with substantial room for growth
We have completed over $80B in purchases life-to- date with substantial room for growth 2020: 108th securitization SEMT 2020-4 ($304m) 2019: 100th securitization SEMT 2019-2 ($405m) 2017: First “Choice” securitization SEMT 2017-CH1 ($308m) $85B 2013: 50th securitization SEMT 2013-10 ($405m) $75B 201
Slide 14: We believe we can increase our market share 4 - 5x by 2025
We believe we can increase our market share 4 - 5x by the end of 2025(1) Customer Acquisition Production / Customer • Tech-enabled with high-touch Retention customer service • Turn capital efficiently • Best-in-class user • “Rapid Funding” program experience • Industry leading close • Pipeline monit
Slide 15: We lead the industry in providing capital to a growing market of sophisticated housing investors
We lead the industry in providing capital to a growing market of sophisticated housing investors Highly scalable infrastructure with proprietary processes and technology Target Market Originations Products Loan Book(1) • Small and mid-sized • Robust digital media • Term loans for • $11.3B+ in loans
Slide 16: SFR lending is a $90B addressable market opportunity with limited competitors
SFR lending is a $90B addressable market opportunity with limited competitors Investor Share of Current SFR Property Market(1) Total Housing Market (140.1M inventory)(2)(3) 14.1M Vacant 15.4M Units in All Other Large Buildings (10+ units) Investors Smaller investors 98% dominate the SFR Small Buildi
Slide 17: We have runway for significant growth as the leading provider of credit for housing investors
We have runway for significant growth as the leading provider of credit for housing investors 2020: Thirteenth securitization, CAFL 2020- 3 ($293M) $11B 2020: 16th consecutive month exceeding $100M in funding $10B $9B 2019: CoreVest acquired by Redwood Trust $8B 2017: Closed first $7B Freddie wrappe
Slide 18: We lead the business purpose lending market with technology-enabled proprietary processes
We lead the business purpose lending market with technology-enabled proprietary processes Sourcing Production • Highly curated organic lead • Automated interactions with generation Capital Markets and • In house analytics and Underwriting ensure teams drive all lead consistency and efficiency genera
Slide 19: Our technology is a competitive advantage that solidifies our market leadership position
Our technology is a competitive advantage that solidifies our market leadership position – Highly scalable loan lifecycle system underpins shortest time to close in the industry with highest number of automated controls – Systems drive key performance indicators including over 50% repeat borrower ra
Slide 20: Our investment portfolio supports our operating platforms and third-party mortgage lending activity
Our investment portfolio supports our operating platforms and third-party mortgage lending activity THIRD-PARTY INVESTMENTS • Retained Sequoia securities • Retained CAFL securities • Credit-enhancement for GSE – Subordinate – Subordinate portfolios – Interest only – Interest only – Reperforming loan
Slide 21: Our combined portfolios generate strong risk-adjusted returns with lower leverage than our competitors
Our combined portfolios generate strong risk-adjusted returns with lower leverage than our competitors $2.1 Billion Housing Credit Investments(1) $1.1 Billion Secured Financing (1)(2) Marginable debt 7% Residential Investments Third-Party 19% Non- Investments marginable, 36% Non-marginable non-recou
Slide 22: We believe best-in-class corporate responsibility is good for our shareholders, partners and employees
We believe best-in-class corporate responsibility is good for our shareholders, partners and employees Corporate Governance Human Capital • Committed to best practices that provide a • A values-based culture enables us to meet our strong foundation for fulfilling our mission and strategic goals to g
Slide 23: Appendix – Financial Tables
Appendix – Financial Tables
Slide 24: A further discussion of Redwood's business, financial results and taxable income is included in
A further discussion of Redwood's business, financial results and taxable income is included in the third quarter 2020 Redwood Review, which is available within the 24 “Financials-Redwood Review” section on the Company’s investor relations website at ir.redwoodtrust.com
Slide 25: A further discussion of Redwood's business, financial results and taxable income is included in
A further discussion of Redwood's business, financial results and taxable income is included in the third quarter 2020 Redwood Review, which is available within the 25 “Financials-Redwood Review” section on the Company’s investor relations website at ir.redwoodtrust.com
Slide 26: Capital Allocation
Capital Allocation (1) Detailed Endnotes are included at the end of this presentation A further discussion of Redwood's business, financial results and taxable income is included in the third quarter 2020 Redwood Review, which is available within the 26 “Financials-Redwood Review” section on the Com
Slide 27: A further discussion of Redwood's business, financial results and taxable income is included in
(1) (1) A further discussion of Redwood's business, financial results and taxable income is included in the third quarter 2020 Redwood Review, which is available within the 27 “Financials-Redwood Review” section on the Company’s investor relations website at ir.redwoodtrust.com
Slide 28: Combined Investment Portfolio at September 30, 2020
Combined Investment Portfolio at September 30, 2020 ($ in millions) Non Fair Value Recourse Recourse Net Capital of Assets Debt Debt (1) Invested Sequoia securities $ 356 $ (225) $ 0 $ 132 SFR securitites 229 (103) 0 126 Third-party securities 648 (31) (208) 409 Total securities 1,233 (359) (208) 66
Slide 29: A further discussion of Redwood's business, financial results and taxable income is included in
A further discussion of Redwood's business, financial results and taxable income is included in the third quarter 2020 Redwood Review, which is available within the 29 “Financials-Redwood Review” section on the Company’s investor relations website at ir.redwoodtrust.com
Slide 30: Appendix – Endnotes
Appendix – Endnotes
Slide 31: End Notes
Slide 10 (Consumer preference and affordability are driving demand for single-family homes held for rent) End Notes 1. Information sourced from John Burns Real Estate Consulting report “Single Family Rental Analysis and Forecast”, September 11, 2020. John Burns Real Estate Consulting Slide 5 (Most s
Slide 32: End Notes (continued)
End Notes (continued) Slide 15 (We lead the industry providing capital to a growing Slide 21 (Our combined portfolios generate strong risk-adjusted market of sophisticated housing investors) returns with lower leverage than our competitors) 1. Information as of September 30, 2020. Includes 5 Arch or
Slide 33: End Notes (continued)
End Notes (continued) Slide 25 (Financial Tables – Mortgage Banking Key Operating Slide 26 (Financial Tables - Capital Allocation Details Table) Metrics) 1. Other assets and liabilities are presented on a net basis within this 1. "Mortgage banking income" within this table represents the sum of colu
Slide 34: End Notes (continued)
End Notes (continued) Slide 28 (Financial Tables – Combined Investment Portfolio at Slide 29 (Financial Tables – Business Purpose and Multifamily September 30, 2020) Investments Credit Characteristics) 1. Non-recourse debt presented in this table excludes consolidated 1. Average current debt service
Slide 35: Redwood Trust
REDWOOD TRUST
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