valuexvail 2013 - patrick brennan
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VAL U E x Va i l 2 0 1 3
REDWOOD TRUST
Patrick Brennan, CFAHutchinson Capital Management
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Guide
What exactly is Redwood?!
Tax Advantaged Structure
Sequoia 2.0
Strong Risk Adjusted Returns/New Markets
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Redwood Trust (RWT)
$1.5 billion Non-Agency Mortgage REIT
History Strong Credit/Capital Management
Jumbo First Loss - Eats Own Cooking Residential (Core)/ Commercial (Possible Sale)
Investment Thesis
Strong History With Jumbos/Capital Management
Return of Private Label
12-15% ROEs with Low Leverage
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Many ComparablesWith Vastly Different Models
Name PriceMkt Cap($mm)
TotalAssets($mm)
Assets/Equity
ROE P/BDividend
Yield2013E
P/E2014E
P/E30 DayChange
52 WeekChange
REDWOOD TRUST INC $18.87 $1,550 $4,797 4.0x 14.87% 1.3x 5.4% 10.1x 9.2x -24% -24%
AGENCY MREITS
AMERICAN CAPITAL AGENCY CORP $25.52 $10,117 $93,369 8.7x 8.46% 0.9x 19.5% 6.8x 6.3x -23% -31%
AMERICAN CAPITAL MORTGAGE IN $20.17 $1,189 $9,363 7.2x 21.19% 0.8x 17.8% 6.1x 6.3x -23% -24%ANNALY CAPITAL MANAGEMENT IN $13.65 $12,930 $125,502 8.8x 10.95% 0.9x 14.3% 9.3x 9.6x -13% -23%
ANWORTH MORTGAGE ASSET CORP $5.79 $839 $9,556 9.3x 8.91% 0.8x 10.9% 11.0x 10.2x -7% -18%
ARMOUR RESIDENTIAL REIT INC $4.83 $1,807 $27,753 9.7x 13.02% 0.7x 23.0% 5.9x 5.8x -25% -39%
CAPITALSOURCE INC $9.15 $1,794 $8,483 5.4x 33.11% 1.2x 5.9% 15.1x 13.4x -6% -7%
CAPSTEAD MORTGAGE CORP $12.61 $1,205 $14,490 11.1x 10.53% 0.9x 10.9% 9.6x 9.2x -5% -14%
HATTERAS FINANCIAL CORP $26.17 $2,586 $26,099 9.4x 12.23% 0.9x 11.8% 10.2x 9.7x -4% -12%
Diversified MREITS
CHIMERA INVESTMENT CORP $3.13 $3,216 $7,747 2.7x 4.08% 1.1x 16.2% 8.1x 8.2x -6% -6%
DYNEX CAPITAL INC $10.52 $578 $4,628 7.8x 13.43% 1.0x 11.0% 8.2x 8.2x -4% -5%
MFA FINANCIAL INC $8.71 $3,147 $13,653 4.3x 9.98% 1.0x 15.6% 10.3x 9.7x -8% -9%
TWO HARBORS INVESTMENT CORP $11.05 $4,036 $19,003 4.8x 12.51% 1.0x 14.7% 8.7x 8.3x -11% -15%
Mortgage Originators/Servicers
HOME LOAN SERVICING SOLUTION $24.01 $1,365 $4,070 4.3x 9.33% 1.5x 5.2% 13.1x 12.6x -3% -3%
NATIONSTAR MORTGAGE HOLDINGS $42.46 $3,846 $8,886 10.2x 30.82% 4.7x 0.0% 9.9x 6.2x -9% -9%
OCWEN FINANCIAL CORP $45.59 $6,184 $7,248 4.0x 13.26% 3.7x 0.0% 10.7x 8.4x -3% -4%
PENNYMAC MORTGAGE INVESTMENT $21.86 $1,290 $2,927 2.3x 18.89% 1.1x 10.2% 6.6x 6.6x -15% -24%
Source: Bloomberg; all data as of 06/14/13
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Accounting Masks Lower Leverage
Redwood Adjusted reflects adjustment for securities where Redwood has an economic interest. Asset backed debt is backed out as this debt is a liability of thenon-recourse securitization entity. Long-term debt and equity are adjusted for $140mm in debt due in 2037 as well as a convertible note which is assumed toconvert to equity (conversion price equals $24.31).
RWT Balance Sheet 03/31/2013
Redwood At Consolidated Redwood
Adjusted Adjustments RWT Sequoia Entities Consolidated
Residential Loans $832 $832 $2,133 $2,965
Commercial Loans $247 ($154) $401 $401
Real Estate Securities - Third Party $798 ($148) $946 $946
Real Estate Securities - Sequoia $284 $284 $284
Cash $79 $79 $79
Total Earning Assets $2,240 $2,542 $2,133 $4,675
Other Assets $103 ($7) $110 $10 $120
Total Assets $2,344 ($309) $2,653 $2,143 $4,796
Short-Term Debt $721 $721 $721
Other Liabilities $78 $78 $2 $80
Asset Backed Securities Issued $0 ($309) $309 $2,056 $2,365
Long-Term Debt $16 ($428) $444 $444
Total Liabilities $815 ($737) $1,552 $2,058 $3,610
Stockholders Equity $1,529 $428 $1,101 $86 $1,187
Total Liabilities/Equity $2,344 $2,653 $2,144 $4,797
Leverage (Assets/Equity) 1.5x 2.4x 4.0x
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Recent History
2008-2009: Traditional Business Shut Down
Jumbo spike
No private label securitization
RMBS price plummets
2009:2010: Buying Carnage
Existing/New Equity
High teens target40%+ result (Strategy Orchestrated by current CEO/President)
Successful but limited opportunity
2010-2013: Sequoia 2.0
Private label rebirth? no waiting for Godot
Mezzanine/Senior Commercial Loans Costs front-end loaded
2013+
MSR (Mortgage Serving Rights) purchases
Conforming risk share?
Sale of Commercial?
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Commercial Summary
$247mm economic value
Attributes
Maturity 6+ years
Unleveraged yield 10%+
LTV: 73% at origination
DSCR: 1.29x
Originally Mezzanine, then Senior
Limit of $300mm of equity
Strong Q1 2013 (20%+ ROE) but less clear on franchise value
Please see important disclosures accompanying this presentationVALUEx Vail 2013 7
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Guide
What exactly is Redwood?!
Tax Advantaged Structure
Sequoia 2.0
Strong Risk Adjusted Returns/New Markets
Please see important disclosures accompanying this presentationVALUEx Vail 2013 8
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Pay Dividends / Avoid Taxes /Grow Book Value
RMBS Sequoia RMBS Third Party Commercial Loans
Loan acquisition and sales Sequoia Securitizations MSRs (Mortgage Servicing
Rights)
REIT(Investment Portfolio)
Taxable Subsidiary(Residential Mortgage
Banking)
Loan origination and sales
Taxable Subsidiary(Commercial Mortgage
Banking)
Please see important disclosures accompanying this presentationVALUEx Vail 2013 9
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Guide
What exactly is Redwood?!
Tax Advantaged Structure
Sequoia 2.0
Strong Risk Adjusted Returns/New Markets
Please see important disclosures accompanying this presentationVALUEx Vail 2013 10
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30 Year Jumbo Less 30 Year Conforming
-0.50%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
Jumbo Less Conforming 30 Year Rates
Source: Bankrate.com US Home Home Mortgage 30 Year Less Banxquote Avg Conforming Mortgage US 30 Year
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Government Guaranteeing ~ 90% of New Mortgages
Source: Inside Mortgage Finance
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Further securitizations: Attract loans/attract AAA
Bank: like wealthy but should fear interest rate risk - no 10year CDs to match funding
Money Centers Taking Duration Risk Currently
Loans: Need to attract selling banks
Securitizations: Need to gain confidence of AAA buyers
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Jumbo Underwriting:Accelerating but well below prior levels
Source: Inside Mortgage Finance
0%
5%
10%
15%
20%
25%
30%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
JumboShare
Originations
Jumbo Org's Total Org's Jumbo Share (right axis)
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But securitization volume remains anemic
Source: Inside Mortgage Finance
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0
50
100
150
200
250
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
%Securitized
JumboSecuritizationVolume
Jumbo Securitization volume % Securitized
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Conforming Loan Fees LoweredWorld Didnt End
Conforming Loans
2008: Increased from $417,000 to as high as $729,750
2011: Decreased to max of $625,500
Further decreases are possiblebut an increase in G-Feesaccomplishes the same goal
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And Guarantee (G Fees) Fees Increasing
21 23 22 2426 26
46
10
10
20
0
10
20
30
40
50
60
70
2007 2008 2009 2010 2011 2012 2013
Average Targed G Fee April 2012 Increase
December 2012 Increase Estimated 2013 G-Fee Increase
Source: Federal Housing Finance Agency/Compass Point
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Redwood Activity Increasing
0
20
40
60
80
100
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013
Active
Sellers
Lo
ansIdentified
($mm)
Loans Identified For Purchase Active Sellers
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Redwood Activity Increasing
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2010 2011 2012 2013
LoansSecuritized
Numberofdeals
Number of deals Loans securitized
Source: Bloomberg; 2013 data as of 05/22/13
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Need for Jumbo
Source: IPUMS-USA and Goldman Sachs Mortgage Strategy Research.
Source: IPUMS-USA and Goldman Sachs Mortgage Strategy Research.
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Loans/Securitizations: Advantage RWT
RWT advantage in buying loans
Correspondent Lending Exodus
Bank of America/Ally/MetLife out
Citigroup/PHH pull back RWT not a bank: therefore not competitor
RWT advantage in securitizing
RWT: Track record with ~70 basis points in cumulative losses
Best Reps/Warranties on Deals; No Sunsets
Not burdened by Dodd Frank/Basel 3
Strong alignment with AAA interests
Please see important disclosures accompanying this presentationVALUEx Vail 2013 21
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Guide
What exactly is Redwood?!
Tax Advantaged Structure
Sequoia 2.0
Strong Risk Adjusted Returns/New Markets
Please see important disclosures accompanying this presentationVALUEx Vail 2013 22
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2009-2013 Choppy But Progressing
1 2012/2013 Taxable income is estimated
GAAP REIT Taxable Annualized GAAP
Income (Loss) Income per GAAP Book Value Dividends
per Share Share1 ROE Per Share Per Share
Q1 2009 ($0.65) ($0.22) -25.0% $8.40 $0.25
Q2 2009 $0.10 ($0.16) 5.0% $10.35 $0.25
Q3 2009 $0.34 ($0.30) 13.0% $11.68 $0.25
Q4 2009 $0.51 ($0.44) 17.0% $12.50 $0.25
Q1 2010 $0.58 $0.13 19.0% $12.84 $0.25Q2 2010 $0.35 $0.04 11.0% $12.71 $0.25
Q3 2010 $0.25 ($0.11) 8.0% $13.02 $0.25
Q4 2010 $0.18 ($0.01) 6.0% $13.63 $0.25
Q1 2011 $0.22 $0.09 8.0% $13.76 $0.25
Q2 2011 $0.11 $0.02 4.0% $13.04 $0.25
Q3 2011 $0.01 $0.09 1.0% $12.22 $0.25
Q4 2011 ($0.03) $0.04 -1.0% $11.36 $0.25
Q1 2012 $0.37 $0.13 13.0% $12.22 $0.25
Q2 2012 $0.24 $0.22 8.0% $12.00 $0.25
Q3 2012 $0.48 $0.19 16.0% $12.88 $0.25
Q4 2012 $0.50 $0.23 15.0% $13.95 $0.25
Q1 2013 $0.69 $0.20 21.0% $14.54 $0.28
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Strong Risk Adjusted Returns
Target 12-15% ROE
Returns come from
Return on Residential Securitization (25-50 BP)
Return on Residential Investments
Commercial (sale?)
New Markets
Accounting overstates leverage
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Structure of Recent Securitization $8 Billion
Credit % of
Tranche Coupon Rating Org Face Total Orig Face
A1 3.00% AAA 7,480,000,000 93.50%
AIO 0.55% AAA 7,480,000,000 93.50%
B1 AA 3.55% AA 144,000,000 1.80%
B2 A 3.55% A 132,000,000 1.65%
B3 BBB 3.55% BBB 120,000,000 1.50%
B4 BB 3.55% BB 40,000,000 0.50%
Credit 3.55% Not Rated 84,000,000 1.05%
8,000,000,000 100.00%
Credit Estimated Value Value Sold/
Tranche Coupon Rating Sold Estimated Face
A1 3.00% AAA 7,498,700,000 100.25%
AIO 0.55% AAA 154,275,000 2.06%
B1 AA 3.55% AA 139,680,000 97.00%
B2 A 3.55% A 118,800,000 90.00%
B3 BBB 3.55% BBB 102,000,000 85.00%
B4 BB 3.55% BB 24,000,000 60.00%
Credit 3.55% Not Rated 16,800,000 20.00%
Please see important disclosures accompanying this presentationVALUEx Vail 2013 25
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Simplified Return on Investments1
Junior pieces=Secret Sauce
Higher Volume is Key
Maximize B4/Credit Holdings
Possibly Sell Mezz Pieces
1Assumes 6.5% subordination level, loan coupon interest equaling hedging costs, warehouse and mezzanine financing costs of 1.5% and 7year total collateral life.
Please see important disclosures accompanying this presentationVALUEx Vail 2013 26
Approximate Non GAAP Yield on retained investments
Year 1
Face RWT Purchase as % Annual Total Interest Unlevered IRR
Security Value Purchase Price of Face Value Coupon Cash Interest Discount Income Yield Repo debt Equity Range
B1 AA $144,000,000 $139,680,000 97% 3.55% $5,112,000 $5,112,000 3.66% $104,760,000 $34,920,000 9-10%B2 A $132,000,000 $118,800,000 90% 3.55% $4,686,000 $4,686,000 3.94% $79,200,000 $39,600,000 11-12%
B3 BBB $120,000,000 $102,000,000 85% 3.55% $4,260,000 $4,260,000 4.18% $51,000,000 $51,000,000 9-12%
B4 BB $40,000,000 $24,000,000 60% 3.55% $1,420,000 $1,420,000 5.92% $0 $24,000,000 12-15%
Credit $84,000,000 $16,800,000 20% 3.55% $2,982,000 $2,982,000 17.75% $0 $16,800,000 20%+
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Sequoia Magic Formula:Rich people=better credit risk
SEMP 2013-6 Borrower Details
Deal Closing Date 4/30/2013
Original Collateral Principal (in millions) $425
Average Loan Balance $780,000Original LTV 66.0%
Weighted Average FICO Score 771
Primary Residence 97.0%
CA property location 37.0%
Weighted Average Debt to Income 30.0%
Avg Monthly Income $31,700
Source: Bloomberg
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12%...Not Awful
2012 2013E 2014E 2015E 2016E 2017E 2018EBeginning Period Adjusted Equity1 $966 $1,140 $1,484 $1,605 $1,739 $1,887 $2,038Plus Operating Earnings at Assumed Return onEquity $132 $157 $185 $201 $218 $236 $255Less Dividends ($82) ($92) ($95) ($97) ($99) ($114) ($116)Convert $279
ATM Follow-On Proceeds $0 $30 $30 $30 $30 $30Adjusted Common shareholders' equity $1,140 $1,484 $1,605 $1,739 $1,887 $2,038 $2,207
Assumed Return on Average Equity 12.5% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0%
Assumed Dividend Per Share $1.00 $1.12 $1.12 $1.12 $1.12 $1.12 $1.12
Payout Ratio 62% 63% 58% 54% 51% 48% 46%
Ending Shares Outstanding 82 94 96 99 101 103 105
Average Shares Outstanding 82 88 95 97 100 102 104
Estimated Earnings Per Share $1.61 $1.79 $1.95 $2.06 $2.19 $2.32 $2.46Calculated Book Value Per Share $13.88 $15.76 $16.66 $17.65 $18.76 $19.87 $21.11
Assumed Multiple of Book Value 130% 130% 130% 130% 130% 130%Price Target at 130% of Book Value $20.49 $21.65 $22.94 $24.39 $25.83 $27.45
Cumulative Return 10.8% 22.8% 35.5% 49.0% 62.5% 76.9%
Price at 10x earnings $17.91 $19.46 $20.59 $21.85 $23.18 $24.60
Cumulative Return -2.8% 11.3% 23.1% 35.6% 48.5% 61.9%
Assumes full conversion of convertible note in 2013; note is convertible until April 2018 at $24.31
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Cumulative Return Upside/Downside
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New Markets
MSRs
Basel forced selling
Fee stream
Appreciation potential
Conforming Market
Fee
New Risk Share Securities
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RISKS
Low Traction in Securitization
Big Banks Take Duration Risk
Elimination of Mortgage Interest Deduction
Commercial Drag
Mark-To-Market Volatility
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V A L U E x V a i l 2 0 1 3
Patrick Brennan, CFAHutchinson Capital Managementpatrick.brennan@hutchinsoncapital.com
REDWOOD TRUST (RWT)
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Disclosures
As of March 31, 2013, Hutchinson Capital Management held:
0 shares of Redwood Trust Company
As of March 31, 2013:
Redwood Trust Company closed at $23.18
As of March 31, 2013*, the ten largest holdings of
Hutchinson Capital Management were:
Name of Issuer % of Portfolio
03/31/13
Price
JOHNSON CONTROLS INC 6.24% $35.07
WELLS FARGO & CO 5.65% $36.99
BANK OF NEW YORK CO (New) 5.64% $27.99
CVS CAREMARK CORPORATION 5.60% $54.99
GENERAL MOTORS CORP. 5.54% $27.82
OMNICOM GROUP INC 5.48% $58.90
EMERSON ELECTRIC CO 5.34% $55.87
UNILEVER PLC ADR 5.34% $42.24
MARKEL CORP COM 5.29% $503.50
MICROSOFT CORPORATION 5.29% $28.61
*As of March 31, 2013 13F filing. For a complete list of holdings, please see our most recent 13F filing on thefollowing SEC website: http://www.sec.gov/edgar/searchedgar/companysearch.html
Please see important disclosures accompanying this presentationVALUEx Vail 2013 33
As of June 17, 2013, Hutchinson Capital Management held:
425, 263 shares of Redwood Trust Company
As of June 17, 2013:
Redwood Trust Company closed at $18.61
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Disclosures
Past performance is not indicative of future results, which may vary. The value of investments and the income derivedfrom investments can go down as well as up. It shall not be assumed that recommendations made in the future will beprofitable or will equal the performance of the securities mentioned here. While Hutchinson Capital Management (HCM)seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate fromthose of the benchmark.
Although HCM follows the same investment strategy for each advisory client with similar investment objectives andfinancial condition, differences in client holdings are dictated by variations in clients investment guidelines and risktolerances. HCM may continue to hold a certain security in one client account while selling it for another client accountwhen client guidelines or risk tolerances mandate a sale for a particular client. In some cases, consistent with clientobjectives and risk, HCM may purchase a security for one client while selling it for another. Consistent with specificclient objectives and risk tolerance, clients trades may be executed at different times and at different prices. Each ofthese factors influence the overall performance of the investment strategies followed by the Firm.
Nothing herein should be construed as a solicitation or offer, or recommendation to buy or sell any security, or as anoffer to provide advisory services in any jurisdiction in which such solicitation or offer would be unlawful under the
securities laws of such jurisdiction. The material provided herein is for informational purposes only. Before engagingHCM, prospective clients are strongly urged to perform additional due diligence and to ask additional questions of HCMas they deem appropriate, and to discuss any prospective investment with their legal and tax advisers.
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REDWOOD TRUST (RWT)
APPENDIX
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Mortgage Originations:Historical Purchase vs. Refinance
MortgageOriginations: 1-4Family Total ($B)
MortgageOriginations: 1-4
Family Purchase ($B)
MortgageOriginations: 1-4
Family Refinance ($B)1990 $459 $389 $70
1991 $563 $385 $1771992 $893 $472 $4211993 $1,020 $486 $535
1994 $769 $557 $2111995 $640 $494 $1451996 $785 $559 $2251997 $833 $590 $2431998 $1,656 $795 $8621999 $1,379 $878 $5002000 $1,139 $905 $2342001 $2,243 $960 $1,2832002 $2,854 $1,097 $1,7572003 $3,812 $1,280 $2,5322004 $2,773 $1,309 $1,4632005 $3,027 $1,512 $1,514
2006 $2,726 $1,399 $1,3262007 $2,306 $1,140 $1,1662008 $1,509 $731 $7772009 $1,995 $664 $1,3312010 $1,698 $530 $1,1682011 $1,436 $505 $9312012 $1,750 $503 $1,247
Q1 2013 $482 $125 $357
Source: Mortgage Bankers Association
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Agency vs. Non-Agency
Agency = Federal Guaranteed Bonds = Interest Rate Risk
Non-Agency=Non-Federally Guaranteed Bonds=Credit Risk
Redwood=Non-Agency + Operator
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Residential Security Summary
% of Total
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Residential Security Summary
Senior
Prime Non-Prime Re-REMIC Subordinate Total
Available-for-sale securities
Current face $460 $269 $215 $436 $1,380
Credit reserve ($28) ($18) ($50) ($89) ($185)
Net unamortized discount ($49) ($41) ($65) ($71) ($226)
Amortized Cost $383 $210 $100 $276 $969
Unrealized Gains $64 $30 $63 $28 $185
Unrealized Losses ($2) ($2)
Trading securities $55 $22 $1 $78
Fair Value of residential securities $502 $262 $163 $303 $1,230
1To adjust for economic interest, total residential senior securities would be
decreased by $316mm to $449, Total Re-REMIC would be increased by $157mm, and
total residential securities would be reduced by $159mm to $1,072mm
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Source: Inside Mortgage Finance
RWT Jumbo Share Increasing
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
$-
$10
$20
$30
$40
$50
$60
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13
RWTShare
JumboOriginations($
b)
Jumbo Org. RWT Share
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APPENDIX
Sequoia 2.0 AAA Summary% Delinquencies
CUSIP NAME Factor Coupon %
Collateral
Type
Orig Credit
Support
Current
Credit
Support 30 60 90 Bankrupt Foreclosure REO 60+ 90+ Cum losses
81745CAA1 SEMT 2013-7 A1 1.00 2.5 WH30 3.6 6.55 6.55
81745CAB9 SEMT 2013-7 A2 1.00 3 WH30 3.6 6.55 6.55
81745BAA1 SEMT 2013-6 A1 1.00 2.5 WH30 3.5 6.50 6.50 0 0 0 0 0 0 0 0
81745BAB1 SEMT 2013-6 A2 1.00 3 WH30 3.5 6.50 6.50 0 0 0 0 0 0 0 0
81745AAA5 SEMT 2013-5 A1 1.00 2.5 WH30 3.5 6.24 6.26 0 0 0 0 0 0 0 0
81745AAB3 SEMT 2013-5 A2 1.00 3 WH30 3.5 6.24 6.26 0 0 0 0 0 0 0 0
81744YAA4 SEMT 2013-4 A1 1.00 2.325 WH30 3.5 6.25 6.26 0.44 0 0 0 0 0 0 0
81744YAB2 SEMT 2013-4 A2 1.00 2.5 WH30 3.5 6.25 6.26 0.44 0 0 0 0 0 0 0
81744YACO SEMT 2013-4 A3 0.99 1.55 WH30 3.5 6.25 6.26 0.44 0 0 0 0 0 0 081744YAD8 SEMT 2013-4 A4 1.00 2.75 WH30 3.5 6.25 6.26 0.44 0 0 0 0 0 0 0
81745RAA8 SEMT 2013-3 A1 0.99 2 WH30 3.6 6.54 6.54 0.08 0 0 0 0 0 0 0
81745RAB6 SEMT 2013-3 A2 0.99 2.5 WH30 3.6 6.54 6.54 0.08 0 0 0 0 0 0 0
81745MAA9 SEMT 2013-2 A 0.96 1.874 WH30 3.7 0 0 0 0 0 0 0 0
81744WAA8 SEMT 2013-1 1A1 0.84 1.45 WHARM3.6 7.31 8.31 0 0 0 0 0 0 0 0
81744WAC4 SEMT 2013-1 2A1 0.88 1.855 WH30 3.7 7.31 8.31 0 0 0 0 0 0 0 0
81744NAA8 SEMT 2012-6 A1 0.94 2.5 WH30 3.8 7.05 7.43 0.45 0 0 0.17 0 0 0.17 0.17
81744NAB6 SEMT 2012-6 A2 0.94 1.808 WH30 3.8 7.05 7.43 0.45 0 0 0.17 0 0 0.17 0.17
81744XAA6 SEMT 2012-5 A 0.91 2.5 WH30 4.0 7.30 7.91 0 0 0 0 0 0 0 0
81744VAA0 SEMT 2012-4 A1 0.82 3.5 WH30 4.1 7.39 8.67 0 0 0 0 0 0 0 0
81744VAB8 SEMT 2012-4 A2 0.82 3 WH30 4.1 7.39 8.67 0 0 0 0 0 0 0 0
81744VAC6 SEMT 2012-4 A3 0.82 2.069 WH30 4.1 7.39 8.67 0 0 0 0 0 0 0 0
81745FAA4 SEMT 2012-3 A1 0.72 3.5 WH30 4.2 7.34 9.69 0 0 0 0 0 0 0 0
81745FAB2 SEMT 2012-3 A2 0.72 3 WH30 4.2 7.34 9.69 0 0 0 0 0 0 0 0
81744UAA2 SEMT 2012-2 A1 0.63 3.5 WH30 4.3 7.16 10.79 0 0 0 0 0 0 0 0
81744UAB0 SEMT 2012-2 A2 0.53 3.5 WH30 4.3 7.16 10.79 0 0 0 0 0 0 0 0
81744UAC8 SEMT 2012-2 A3 1.00 3.5 WH30 4.3 7.16 10.79 0 0 0 0 0 0 0 0
81744TAA5 SEMT 2012-1 1A1 0.55 2.865 WHARM4.0 8.31 14.09 0 0 0 0 0 0 0 0
81744TAB3 SEMT 2012-1 2A1 0.52 3.474 WH30 4.5 8.31 14.09 0.4 0 0 0 0 0 0 0
81744QAA1 SEMT 2011-2 A1 0.36 3.9 WH30 4.6 7.40 17.84 0 0 0 0 0 0 0 0
81744RAA9 SEMT 2011-1 A1 0.20 4.125 WH30 4.8 7.55 28.56 0.68 0 0 0 0 0 0 0
81744PAA3 SEMT 2010-H1 A1 0.06 3.75 WHARM4.5 6.50 28.88 0 0 0 0 0 0 0 0
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APPENDIX
Sequoia 2.0 AAA Summary Part 2 VPR
CUSIP NAME WAC WALA FICO GEO1 GEO 2 GEO 3 WALTV
Highest
LTV WACPN % Lim. Doc 1M 3M 6M 12M Life
81745CAA1 SEMT 2013-7 A1 3.83 3.83
81745CAB9 SEMT 2013-7 A2 3.83 3.83
81745BAA1 SEMT 2013-6 A1 3.81 1 771 CA 37.1 MA 10.2 TX 6.8 64.5 79 3.81 0 0.38 0.38
81745BAB1 SEMT 2013-6 A2 3.81 1 771 CA 37.1 MA 10.2 TX 6.8 64.5 79 3.81 0 0.38 0.38
81745AAA5 SEMT 2013-5 A1 3.81 2 772 CA 37.6 WA 7.8 MA 7.6 64.6 79 3.81 0 2.74 2.74
81745AAB3 SEMT 2013-5 A2 3.81 2 772 CA 37.6 WA 7.8 MA 7.6 64.6 79 3.81 0 2.74 2.74
81744YAA4 SEMT 2013-4 A1 3.78 3 773 CA 42.2 MA 9.8 WA 7.2 63.4 79 3.78 0 0.75 0.72
81744YAB2 SEMT 2013-4 A2 3.78 3 773 CA 42.2 MA 9.8 WA 7.2 63.4 79 3.78 0 0.75 0.72
81744YACO SEMT 2013-4 A3 3.78 3 773 CA 42.2 MA 9.8 WA 7.2 63.4 79 3.78 0 0.75 0.72
81744YAD8 SEMT 2013-4 A4 3.78 3 773 CA 42.2 MA 9.8 WA 7.2 63.4 79 3.78 0 0.75 0.72
81745RAA8 SEMT 2013-3 A1 3.82 4 772 CA 43.3 MA 10.5 TX 6.2 64.7 80 3.82 0 5.14 3.05 3.05
81745RAB6 SEMT 2013-3 A2 3.82 4 772 CA 43.3 MA 10.5 TX 6.2 64.7 80 3.82 0 5.14 3.05 3.05
81745MAA9 SEMT 2013-2 A 3.94 8 776 CA 49.2 MA 15.6 TX 5.7 62.4 82 3.94 0 1.73 8.25 8.81
81744WAA8 SEMT 2013-1 1A1 3.89 13 764 TX 28.0 CA 22.6 FL 14.4 62.6 80 3.89 0 48.64 34.00 35.89
81744WAC4 SEMT 2013-1 2A1 4.00 7 771 CA 55.3 MA 13.1 WA 5.1 66.9 83 4.00 0 14.77 23.89 29.83
81744NAA8 SEMT 2012-6 A1 4.07 7 772 CA 43.5 TX 11.2 WA 6.3 65.9 80 4.07 0 22.20 18.17 10.04 10.04
81744NAB6 SEMT 2012-6 A2 4.07 7 772 CA 43.5 TX 11.2 WA 6.3 65.9 80 4.07 0 22.20 18.17 10.04 10.04
81744XAA6 SEMT 2012-5 A 4.21 9 770 CA 43.9 TX 13.7 WA 5.6 66.8 80 4.21 0 29.06 20.00 14.79 12.94
81744VAA0 SEMT 2012-4 A1 4.35 11 774 CA 41.5 TX 16.5 IL 5.2 65.8 80 4.35 0 26.25 35.83 26.02 22.91
81744VAB8 SEMT 2012-4 A2 4.35 11 774 CA 41.5 TX 16.5 IL 5.2 65.8 80 4.35 0 26.25 35.83 26.02 22.91
81744VAC6 SEMT 2012-4 A3 4.35 11 774 CA 41.5 TX 16.5 IL 5.2 65.8 80 4.35 0 26.25 35.83 26.02 22.91
81745FAA4 SEMT 2012-3 A1 4.45 13 768 CA 47.3 TX 14.7 NY 6.6 66.2 80 4.45 0 50.34 44.81 37.53 26.61
81745FAB2 SEMT 2012-3 A2 4.45 13 768 CA 47.3 TX 14.7 NY 6.6 66.2 80 4.45 0 50.34 44.81 37.53 26.61
81744UAA2 SEMT 2012-2 A1 4.58 17 769 CA 48.8 TX 10.9 NY 8.4 61.3 80 4.58 0 31.63 39.99 44.48 32.85 29.75
81744UAB0 SEMT 2012-2 A2 4.58 17 769 CA 48.8 TX 10.9 NY 8.4 61.3 80 4.58 0 31.63 39.99 44.48 32.85 29.75
81744UAC8 SEMT 2012-2 A3 4.58 17 769 CA 48.8 TX 10.9 NY 8.4 61.3 80 4.58 0 31.63 39.99 44.48 32.85 29.75
81744TAA5 SEMT 2012-1 1A1 4.26 23 768 CA 45.2 NY 19.6 TX 11.0 55.1 80 4.26 0 38.17 46.54 46.58 38.19 31.46
81744TAB3 SEMT 2012-1 2A1 4.77 20 766 CA 39.1 TX 14.4 NY 8.6 65.8 80 4.77 0 43.37 46.94 49.93 39.47 34.49
81744QAA1 SEMT 2011-2 A1 4.83 28 770 CA 45.0 NY 11.8 MA 5.8 58.4 77 4.83 0 44.00 52.56 52.66 48.19 41.04
81744RAA9 SEMT 2011-1 A1 5.04 33 769 CA 42.3 NY 13.7 MA 5.5 56.0 80 5.04 0 70.02 65.65 66.21 60.03 44.87
81744PAA3 SEMT 2010-H1 A1 4.80 45 765 CA 29.9 MA 14.3 IL 11.0 56.5 80 4.80 0 90.32 71.14 60.73 61.83 54.79
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Commercial Loan Details
Property Number of Weighted Avg1
Weighted Avg Average Loan
Type Loans DSCR LTV Size ($mm)
Multifamily 18 1.24x 79.0% $6.0
Office 8 1.35x 72.0% $9.8
Hospitality 7 1.38x 61.0% $11.1
Retail 5 1.16x 75.0% $10.1
Self Storage 3 1.34x 79.0% $6.0
Industrial 1 1.67x 65.0% $2.0
Total 42 1.29x 73.0% $8.0
1 The debt service coverage ratio (DSCR) is defined as the property's annual net
operat ing income divided by t he annual principal and interest payments.2 The loan to value calculation is defined as the sum of the sernior and all subordinate
loan amounts divided by t he value of the propert y.
3 T hree of t hese loans are recourse to t he borrowers (two self sto rage, one off ice).
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Geographic Breakdown ofCommercial Loan Portfolio
NY, 20%
CA, 29%
IL, 6%
FL, 9%
MI, 8%
TX, 4%
NC, 3%
WA, 3%
DE, 3%
OR, 3% Other, 9%
TN, 3%
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Tax Advantaged Structure
Pays $1.12 Dividend (6% yield)
Taxable and REIT Subsidiary
REIT=Investments
Taxable=Mortgage Banking Activities
90% payout based on taxable income
Taxable vs. GAAP Income
No accruals for tax purposes (Tax IncomeGAAP
$70mm NOLs at REIT Sub
Company likely to pay little cash taxes at either subsidiary
Structural advantage
RWT can grow book value while paying strong dividend
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