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REDWOOD TRUST

VALUEx Vail 2013

Patrick Brennan, CFA

Hutchinson Capital Management

Guide

What exactly is Redwood?!


Tax Advantaged Structure

Sequoia 2.0
Strong Risk Adjusted Returns/New Markets

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

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

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

Many ComparablesWith Vastly Different Models

Price

Mkt Cap
($mm)

Total
Assets
($mm)

Assets/
Equity

ROE

P/B

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
AMERICAN CAPITAL MORTGAGE IN
ANNALY CAPITAL MANAGEMENT IN
ANWORTH MORTGAGE ASSET CORP
ARMOUR RESIDENTIAL REIT INC
CAPITALSOURCE INC
CAPSTEAD MORTGAGE CORP
HATTERAS FINANCIAL CORP

$25.52
$20.17
$13.65
$5.79
$4.83
$9.15
$12.61
$26.17

$10,117
$1,189
$12,930
$839
$1,807
$1,794
$1,205
$2,586

$93,369
$9,363
$125,502
$9,556
$27,753
$8,483
$14,490
$26,099

8.7x
7.2x
8.8x
9.3x
9.7x
5.4x
11.1x
9.4x

8.46%
21.19%
10.95%
8.91%
13.02%
33.11%
10.53%
12.23%

0.9x
0.8x
0.9x
0.8x
0.7x
1.2x
0.9x
0.9x

19.5%
17.8%
14.3%
10.9%
23.0%
5.9%
10.9%
11.8%

6.8x
6.1x
9.3x
11.0x
5.9x
15.1x
9.6x
10.2x

6.3x
6.3x
9.6x
10.2x
5.8x
13.4x
9.2x
9.7x

-23%
-23%
-13%
-7%
-25%
-6%
-5%
-4%

-31%
-24%
-23%
-18%
-39%
-7%
-14%
-12%

Diversified MREITS
CHIMERA INVESTMENT CORP
DYNEX CAPITAL INC
MFA FINANCIAL INC
TWO HARBORS INVESTMENT CORP

$3.13
$10.52
$8.71
$11.05

$3,216
$578
$3,147
$4,036

$7,747
$4,628
$13,653
$19,003

2.7x
7.8x
4.3x
4.8x

4.08%
13.43%
9.98%
12.51%

1.1x
1.0x
1.0x
1.0x

16.2%
11.0%
15.6%
14.7%

8.1x
8.2x
10.3x
8.7x

8.2x
8.2x
9.7x
8.3x

-6%
-4%
-8%
-11%

-6%
-5%
-9%
-15%

Mortgage Originators/Servicers
HOME LOAN SERVICING SOLUTION
NATIONSTAR MORTGAGE HOLDINGS
OCWEN FINANCIAL CORP
PENNYMAC MORTGAGE INVESTMENT

$24.01
$42.46
$45.59
$21.86

$1,365
$3,846
$6,184
$1,290

$4,070
$8,886
$7,248
$2,927

4.3x
10.2x
4.0x
2.3x

9.33%
30.82%
13.26%
18.89%

1.5x
4.7x
3.7x
1.1x

5.2%
0.0%
0.0%
10.2%

13.1x
9.9x
10.7x
6.6x

12.6x
6.2x
8.4x
6.6x

-3%
-9%
-3%
-15%

-3%
-9%
-4%
-24%

Name

Dividend 2013E
Yield
P/E

2014E 30 Day 52 Week


P/E Change Change

Source: Bloomberg; all data as of 06/14/13

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

Accounting Masks Lower Leverage


RWT Balance Sheet 03/31/2013

Residential Loans
Commercial Loans
Real Estate Securities - Third Party
Real Estate Securities - Sequoia
Cash
Total Earning Assets

Redwood
At
Consolidated
Redwood
Adjusted Adjustments RWT Sequoia Entities Consolidated
$832
$832
$2,133
$2,965
$247
($154)
$401
$401
$798
($148)
$946
$946
$284
$284
$284
$79
$79
$79
$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

$721
$78
$0
$16
$815

($309)
($428)
($737)

$721
$78
$309
$444
$1,552

Stockholders Equity

$1,529

$428

Total Liabilities/Equity

Short-Term Debt
Other Liabilities
Asset Backed Securities Issued
Long-Term Debt
Total Liabilities

Leverage (Assets/Equity)

$2,058

$721
$80
$2,365
$444
$3,610

$1,101

$86

$1,187

$2,344

$2,653

$2,144

$4,797

1.5x

2.4x

$2
$2,056

4.0x

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 the
non-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 to
convert to equity (conversion price equals $24.31).

VALUEx Vail 2013


Please see important disclosures accompanying this presentation

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?
Please see important disclosures accompanying this presentation

VALUEx Vail 2013

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 presentation

VALUEx Vail 2013

Guide

What exactly is Redwood?!


Tax Advantaged Structure

Sequoia 2.0
Strong Risk Adjusted Returns/New Markets

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

Pay Dividends / Avoid Taxes /


Grow Book Value
REIT
(Investment Portfolio)
RMBS Sequoia
RMBS Third Party
Commercial Loans

Taxable Subsidiary

Taxable Subsidiary

(Residential Mortgage
Banking)

(Commercial Mortgage
Banking)

Loan acquisition and sales


Sequoia Securitizations
MSRs (Mortgage Servicing
Rights)

Please see important disclosures accompanying this presentation

Loan origination and sales

VALUEx Vail 2013

Guide

What exactly is Redwood?!


Tax Advantaged Structure

Sequoia 2.0
Strong Risk Adjusted Returns/New Markets

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

10

30 Year Jumbo Less 30 Year Conforming

2.50%

2.00%

1.50%

1.00%

0.50%

0.00%

-0.50%
Jumbo Less Conforming 30 Year Rates
Source: Bankrate.com US Home Home Mortgage 30 Year Less Banxquote Avg Conforming Mortgage US 30 Year
Please see important disclosures accompanying this presentation

VALUEx Vail 2013

11

Government Guaranteeing ~ 90% of New Mortgages

Source: Inside Mortgage Finance

VALUEx Vail 2013


Please see important disclosures accompanying this presentation

12

Further securitizations: Attract loans/attract AAA

Bank: like wealthy but should fear interest rate risk - no 10


year CDs to match funding
Money Centers Taking Duration Risk Currently

Loans: Need to attract selling banks


Securitizations: Need to gain confidence of AAA buyers

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

13

Jumbo Underwriting:
Accelerating but well below prior levels
$4,500

30%

$4,000
25%
$3,500
20%

$2,500
15%
$2,000
$1,500

10%

Jumbo Share

Originations

$3,000

$1,000
5%
$500
$0

0%

Jumbo Org's

Total Org's

Jumbo Share (right axis)

Source: Inside Mortgage Finance

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VALUEx Vail 2013

14

But securitization volume remains anemic

250

50%
45%
40%
35%

150

30%
25%

100

20%
15%

50

% Securitized

Jumbo Securitization Volume

200

10%
5%

0%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Jumbo Securitization volume

% Securitized

Source: Inside Mortgage Finance

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VALUEx Vail 2013

15

Conforming Loan Fees Lowered


World 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-Fees


accomplishes the same goal

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VALUEx Vail 2013

16

And Guarantee (G Fees) Fees Increasing

70
60
20
50
40

10

30

10
46

20
10

21

23

22

24

26

26

2007

2008

2009

2010

2011

2012

0
Average Targed G Fee

April 2012 Increase

December 2012 Increase

Estimated 2013 G-Fee Increase

2013

Source: Federal Housing Finance Agency/Compass Point

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VALUEx Vail 2013

17

Redwood Activity Increasing

$3,500

100

$3,000

80

Loans Identified ($mm)

$2,000

60

$1,500

40

$1,000
20

$500
$0

Active Sellers

$2,500

Q1 2012

Q2 2012

Q3 2012

Q4 2012

Loans Identified For Purchase

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VALUEx Vail 2013

Q1 2013

Active Sellers

18

8.0

$4.0

7.0

$3.5

6.0

$3.0

5.0

$2.5

4.0

$2.0

3.0

$1.5

2.0

$1.0

1.0

$0.5

0.0

$0.0
2010

2011
Number of deals

Loans Securitized

Number of deals

Redwood Activity Increasing

2012
2013
Loans securitized

Source: Bloomberg; 2013 data as of 05/22/13

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VALUEx Vail 2013

19

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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VALUEx Vail 2013

20

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 presentation

VALUEx Vail 2013

21

Guide

What exactly is Redwood?!


Tax Advantaged Structure

Sequoia 2.0
Strong Risk Adjusted Returns/New Markets

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

22

2009-2013 Choppy But Progressing

Q1 2009
Q2 2009
Q3 2009
Q4 2009
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013

GAAP
REIT Taxable Annualized
GAAP
Income (Loss) Income per
GAAP
Book Value Dividends
per Share
Share1
ROE
Per Share Per Share
($0.65)
($0.22)
-25.0%
$8.40
$0.25
$0.10
($0.16)
5.0%
$10.35
$0.25
$0.34
($0.30)
13.0%
$11.68
$0.25
$0.51
($0.44)
17.0%
$12.50
$0.25
$0.58
$0.13
19.0%
$12.84
$0.25
$0.35
$0.04
11.0%
$12.71
$0.25
$0.25
($0.11)
8.0%
$13.02
$0.25
$0.18
($0.01)
6.0%
$13.63
$0.25
$0.22
$0.09
8.0%
$13.76
$0.25
$0.11
$0.02
4.0%
$13.04
$0.25
$0.01
$0.09
1.0%
$12.22
$0.25
($0.03)
$0.04
-1.0%
$11.36
$0.25
$0.37
$0.13
13.0%
$12.22
$0.25
$0.24
$0.22
8.0%
$12.00
$0.25
$0.48
$0.19
16.0%
$12.88
$0.25
$0.50
$0.23
15.0%
$13.95
$0.25
$0.69
$0.20
21.0%
$14.54
$0.28

1 2012/2013 Taxable income is estimated

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VALUEx Vail 2013

23

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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VALUEx Vail 2013

24

Structure of Recent Securitization $8 Billion


Tranche
A1
AIO
B1 AA
B2 A
B3 BBB
B4 BB
Credit

Credit
Coupon
Rating
3.00%
AAA
0.55%
AAA
3.55%
AA
3.55%
A
3.55%
BBB
3.55%
BB
3.55% Not Rated

Tranche
A1
AIO
B1 AA
B2 A
B3 BBB
B4 BB
Credit

Please see important disclosures accompanying this presentation

Coupon
3.00%
0.55%
3.55%
3.55%
3.55%
3.55%
3.55%

Credit
Rating
AAA
AAA
AA
A
BBB
BB
Not Rated

Org Face
7,480,000,000
7,480,000,000
144,000,000
132,000,000
120,000,000
40,000,000
84,000,000
8,000,000,000

% of
Total Orig Face
93.50%
93.50%
1.80%
1.65%
1.50%
0.50%
1.05%
100.00%

Estimated Value
Sold
7,498,700,000
154,275,000
139,680,000
118,800,000
102,000,000
24,000,000
16,800,000

Value Sold/
Estimated Face
100.25%
2.06%
97.00%
90.00%
85.00%
60.00%
20.00%

VALUEx Vail 2013

25

Simplified Return on Investments1


Junior pieces=Secret Sauce
Higher Volume is Key
Maximize B4/Credit Holdings
Possibly Sell Mezz Pieces
Approximate Non GAAP Yield on retained investments
Year 1
Face

RWT

Purchase as %

Security

Value

Purchase Price

of Face Value

Coupon

Cash Interest Discount

Annual

B1 AA

$144,000,000

$139,680,000

97%

3.55%

B2 A

$132,000,000

$118,800,000

90%

B3 BBB $120,000,000

$102,000,000

B4 BB

$40,000,000

$24,000,000

Credit

$84,000,000

$16,800,000

Total Interest Unlevered

IRR

Income

Yield

Repo debt

Equity

Range

$5,112,000

$5,112,000

3.66%

$104,760,000 $34,920,000

9-10%

3.55%

$4,686,000

$4,686,000

3.94%

$79,200,000 $39,600,000

11-12%

85%

3.55%

$4,260,000

$4,260,000

4.18%

$51,000,000 $51,000,000

60%

3.55%

$1,420,000

$1,420,000

5.92%

$0

$24,000,000

12-15%

20%

3.55%

$2,982,000

$2,982,000

17.75%

$0

$16,800,000

20%+

9-12%

1Assumes 6.5% subordination level, loan coupon interest equaling hedging costs, warehouse and mezzanine financing costs of 1.5% and 7
year total collateral life.

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VALUEx Vail 2013

26

Sequoia Magic Formula:


Rich people=better credit risk

SEMP 2013-6 Borrower Details


Deal Closing Date

4/30/2013

Original Collateral Principal (in millions)


Average Loan Balance

$425
$780,000

Original 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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VALUEx Vail 2013

27

12%...Not Awful
2012
$966

2013E
$1,140

2014E
$1,484

2015E
$1,605

2016E
$1,739

2017E
$1,887

2018E
$2,038

$132
($82)

$185
($95)

$201
($97)

$218
($99)

$236
($114)

$255
($116)

$1,140

$157
($92)
$279
$0
$1,484

$30
$1,605

$30
$1,739

$30
$1,887

$30
$2,038

$30
$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


Payout Ratio

$1.00
62%

$1.12
63%

$1.12
58%

$1.12
54%

$1.12
51%

$1.12
48%

$1.12
46%

Ending Shares Outstanding

82

94

96

99

101

103

105

Average Shares Outstanding

82

88

95

97

100

102

104

$1.61
$13.88

$1.79
$15.76

$1.95
$16.66

$2.06
$17.65

$2.19
$18.76

$2.32
$19.87

$2.46
$21.11

Assumed Multiple of Book Value


Price Target at 130% of Book Value
Cumulative Return

130%
$20.49
10.8%

130%
$21.65
22.8%

130%
$22.94
35.5%

130%
$24.39
49.0%

130%
$25.83
62.5%

130%
$27.45
76.9%

Price at 10x earnings


Cumulative Return

$17.91
-2.8%

$19.46
11.3%

$20.59
23.1%

$21.85
35.6%

$23.18
48.5%

$24.60
61.9%

Beginning Period Adjusted Equity1


Plus Operating Earnings at Assumed Return on
Equity
Less Dividends
Convert
ATM Follow-On Proceeds
Adjusted Common shareholders' equity

Estimated Earnings Per Share


Calculated Book Value Per Share

Assumes full conversion of convertible note in 2013; note is convertible until April 2018 at $24.31

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VALUEx Vail 2013

28

Cumulative Return Upside/Downside

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VALUEx Vail 2013

29

New Markets
MSRs
Basel forced selling
Fee stream
Appreciation potential
Conforming Market
Fee
New Risk Share Securities

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

30

RISKS
Low Traction in Securitization
Big Banks Take Duration Risk
Elimination of Mortgage Interest Deduction
Commercial Drag
Mark-To-Market Volatility

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

31

Patrick Brennan, CFA


Hutchinson Capital Management
patrick.brennan@hutchinsoncapital.com

REDWOOD TRUST (RWT)


VALUEx Vail 2013
VALUEx Vail 2013

32

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 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

As of March 31, 2013*, the ten largest holdings of


Hutchinson Capital Management were:

Name of Issuer
JOHNSON CONTROLS INC
WELLS FARGO & CO
BANK OF NEW YORK CO (New)
CVS CAREMARK CORPORATION
GENERAL MOTORS CORP.
OMNICOM GROUP INC
EMERSON ELECTRIC CO
UNILEVER PLC ADR
MARKEL CORP COM
MICROSOFT CORPORATION

% of Portfolio
6.24%
5.65%
5.64%
5.60%
5.54%
5.48%
5.34%
5.34%
5.29%
5.29%

03/31/13
Price
$35.07
$36.99
$27.99
$54.99
$27.82
$58.90
$55.87
$42.24
$503.50
$28.61

*As of March 31, 2013 13F filing. For a complete list of holdings, please see our most recent 13F filing on the
following SEC website: http://www.sec.gov/edgar/searchedgar/companysearch.html

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

33

Disclosures
Past performance is not indicative of future results, which may vary. The value of investments and the income derived
from investments can go down as well as up. It shall not be assumed that recommendations made in the future will be
profitable 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 from
those of the benchmark.
Although HCM follows the same investment strategy for each advisory client with similar investment objectives and
financial condition, differences in client holdings are dictated by variations in clients investment guidelines and risk
tolerances. HCM may continue to hold a certain security in one client account while selling it for another client account
when client guidelines or risk tolerances mandate a sale for a particular client. In some cases, consistent with client
objectives and risk, HCM may purchase a security for one client while selling it for another. Consistent with specific
client objectives and risk tolerance, clients trades may be executed at different times and at different prices. Each of
these 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 an
offer 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 engaging
HCM, prospective clients are strongly urged to perform additional due diligence and to ask additional questions of HCM
as they deem appropriate, and to discuss any prospective investment with their legal and tax advisers.

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

34

REDWOOD TRUST (RWT)

APPENDIX

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VALUEx Vail 2013

35

Mortgage Originations:
Historical Purchase vs. Refinance

1990

Mortgage
Originations: 1-4
Family Total ($B)
$459

Mortgage
Originations: 1-4
Family Purchase ($B)
$389

Mortgage
Originations: 1-4
Family Refinance ($B)
$70

1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Q1 2013

$563
$893
$1,020
$769
$640
$785
$833
$1,656
$1,379
$1,139
$2,243
$2,854
$3,812
$2,773
$3,027
$2,726
$2,306
$1,509
$1,995
$1,698
$1,436
$1,750
$482

$385
$472
$486
$557
$494
$559
$590
$795
$878
$905
$960
$1,097
$1,280
$1,309
$1,512
$1,399
$1,140
$731
$664
$530
$505
$503
$125

$177
$421
$535
$211
$145
$225
$243
$862
$500
$234
$1,283
$1,757
$2,532
$1,463
$1,514
$1,326
$1,166
$777
$1,331
$1,168
$931
$1,247
$357

Source: Mortgage Bankers Association

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

36

Agency vs. Non-Agency

Agency = Federal Guaranteed Bonds = Interest Rate Risk


Non-Agency=Non-Federally Guaranteed Bonds=Credit Risk

Redwood=Non-Agency + Operator

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

37

Residential Security Summary


<=2004 2005 2006-2008 2012-2013
Seniors
Prime
Non-Prime
Total Seniors

$21
$97
$118

Total Re-REMIC

$187
$159
$346

$240
$6
$246

$67

$97

$55
$55

% of Total
Total Securities
$503
$262
$765

41%
21%
62%

$164

13%

24%
0%
25%
100%

Subordinates
Prime
Non-prime
Total Subordinates

$53
$2
$55

$16

$2

$229

$16

$2

$229

$300
$2
$302

Total real estate securities

$173

$429

$345

$284

$1,231

To 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

Non-prime residential securities consist of $262mm of Alt-A senior and subordinate


securities and $2 million of subprime subordinate securities.

All 2012-2013 securities are from Sequoia securitizations.

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

38

Residential Security Summary


Senior
Prime Non-Prime Re-REMIC Subordinate
Available-for-sale securities
Current face
Credit reserve
Net unamortized discount
Amortized Cost

Total

$460
($28)
($49)
$383

$269
($18)
($41)
$210

$215
($50)
($65)
$100

$436
($89)
($71)
$276

$1,380
($185)
($226)
$969

Unrealized Gains
Unrealized Losses

$64

$30

$63

$28
($2)

$185
($2)

Trading securities

$55

$22

$1

$78

Fair Value of residential securities

$502

$262

$303

$1,230

$163

To 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

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

39

$60

6.0%

$50

5.0%

$40

4.0%

$30

3.0%

$20

2.0%

$10

1.0%

$-

RWT Share

Jumbo Originations ($b)

RWT Jumbo Share Increasing

0.0%
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13
Jumbo Org.

RWT Share

Source: Inside Mortgage Finance

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

40

APPENDIX
Sequoia 2.0 AAA Summary
% Delinquencies

CUSIP
81745CAA1
81745CAB9
81745BAA1
81745BAB1
81745AAA5
81745AAB3
81744YAA4
81744YAB2
81744YACO
81744YAD8
81745RAA8
81745RAB6
81745MAA9
81744WAA8
81744WAC4
81744NAA8
81744NAB6
81744XAA6
81744VAA0
81744VAB8
81744VAC6
81745FAA4
81745FAB2
81744UAA2
81744UAB0
81744UAC8
81744TAA5
81744TAB3
81744QAA1
81744RAA9
81744PAA3

NAME
SEMT 2013-7 A1
SEMT 2013-7 A2
SEMT 2013-6 A1
SEMT 2013-6 A2
SEMT 2013-5 A1
SEMT 2013-5 A2
SEMT 2013-4 A1
SEMT 2013-4 A2
SEMT 2013-4 A3
SEMT 2013-4 A4
SEMT 2013-3 A1
SEMT 2013-3 A2
SEMT 2013-2 A
SEMT 2013-1 1A1
SEMT 2013-1 2A1
SEMT 2012-6 A1
SEMT 2012-6 A2
SEMT 2012-5 A
SEMT 2012-4 A1
SEMT 2012-4 A2
SEMT 2012-4 A3
SEMT 2012-3 A1
SEMT 2012-3 A2
SEMT 2012-2 A1
SEMT 2012-2 A2
SEMT 2012-2 A3
SEMT 2012-1 1A1
SEMT 2012-1 2A1
SEMT 2011-2 A1
SEMT 2011-1 A1
SEMT 2010-H1 A1

Collateral Orig Credit


Factor Coupon %
Type
Support
1.00
2.5
WH30 3.6
6.55
1.00
3
WH30 3.6
6.55
1.00
2.5
WH30 3.5
6.50
1.00
3
WH30 3.5
6.50
1.00
2.5
WH30 3.5
6.24
1.00
3
WH30 3.5
6.24
1.00
2.325
WH30 3.5
6.25
1.00
2.5
WH30 3.5
6.25
0.99
1.55
WH30 3.5
6.25
1.00
2.75
WH30 3.5
6.25
0.99
2
WH30 3.6
6.54
0.99
2.5
WH30 3.6
6.54
0.96
1.874
WH30 3.7
0.84
1.45
WHARM3.6
7.31
0.88
1.855
WH30 3.7
7.31
0.94
2.5
WH30 3.8
7.05
0.94
1.808
WH30 3.8
7.05
0.91
2.5
WH30 4.0
7.30
0.82
3.5
WH30 4.1
7.39
0.82
3
WH30 4.1
7.39
0.82
2.069
WH30 4.1
7.39
0.72
3.5
WH30 4.2
7.34
0.72
3
WH30 4.2
7.34
0.63
3.5
WH30 4.3
7.16
0.53
3.5
WH30 4.3
7.16
1.00
3.5
WH30 4.3
7.16
0.55
2.865
WHARM4.0
8.31
0.52
3.474
WH30 4.5
8.31
0.36
3.9
WH30 4.6
7.40
0.20
4.125
WH30 4.8
7.55
0.06
3.75
WHARM4.5
6.50

Please see important disclosures accompanying this presentation

Current
Credit
Support
6.55
6.55
6.50
6.50
6.26
6.26
6.26
6.26
6.26
6.26
6.54
6.54
8.31
8.31
7.43
7.43
7.91
8.67
8.67
8.67
9.69
9.69
10.79
10.79
10.79
14.09
14.09
17.84
28.56
28.88

30

60

90

0
0
0
0
0.44
0.44
0.44
0.44
0.08
0.08
0
0
0
0.45
0.45
0
0
0
0
0
0
0
0
0
0
0.4
0
0.68
0

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

VALUEx Vail 2013

Bankrupt Foreclosure

0
0
0
0
0
0
0
0
0
0
0
0
0
0.17
0.17
0
0
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

REO

60+

90+

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0
0
0
0
0.17
0.17
0
0
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0
0
0
0
0.17
0.17
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Cum losses

41

APPENDIX
Sequoia 2.0 AAA Summary Part 2
CUSIP

NAME

WAC

81745CAA1

SEMT 2013-7 A1

3.83

WALA

FICO

GEO1

GEO 2

GEO 3

WALTV

VPR

Highest
LTV

WACPN

% Lim. Doc

1M

3M

6M

12M

Life

3.83

81745CAB9

SEMT 2013-7 A2

3.83

81745BAA1

SEMT 2013-6 A1

3.81

771

CA 37.1

MA 10.2

TX 6.8

64.5

79

3.83
3.81

0.38

0.38

81745BAB1

SEMT 2013-6 A2

3.81

771

CA 37.1

MA 10.2

TX 6.8

64.5

79

3.81

0.38

0.38

81745AAA5

SEMT 2013-5 A1

3.81

772

CA 37.6

WA 7.8

MA 7.6

64.6

79

3.81

2.74

2.74

81745AAB3

SEMT 2013-5 A2

3.81

772

CA 37.6

WA 7.8

MA 7.6

64.6

79

3.81

2.74

2.74

81744YAA4

SEMT 2013-4 A1

3.78

773

CA 42.2

MA 9.8

WA 7.2

63.4

79

3.78

0.75

0.72

81744YAB2

SEMT 2013-4 A2

3.78

773

CA 42.2

MA 9.8

WA 7.2

63.4

79

3.78

0.75

0.72

81744YACO

SEMT 2013-4 A3

3.78

773

CA 42.2

MA 9.8

WA 7.2

63.4

79

3.78

0.75

0.72

81744YAD8

SEMT 2013-4 A4

3.78

773

CA 42.2

MA 9.8

WA 7.2

63.4

79

3.78

0.75

81745RAA8

SEMT 2013-3 A1

3.82

772

CA 43.3

MA 10.5

TX 6.2

64.7

80

3.82

5.14

3.05

3.05

81745RAB6

SEMT 2013-3 A2

3.82

772

CA 43.3

MA 10.5

TX 6.2

64.7

80

3.82

5.14

3.05

3.05

81745MAA9

SEMT 2013-2 A

3.94

776

CA 49.2

MA 15.6

TX 5.7

62.4

82

3.94

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

48.64

34.00

35.89

81744WAC4

SEMT 2013-1 2A1

4.00

771

CA 55.3

MA 13.1

WA 5.1

66.9

83

4.00

14.77

23.89

81744NAA8

SEMT 2012-6 A1

4.07

772

CA 43.5

TX 11.2

WA 6.3

65.9

80

4.07

22.20

18.17

10.04

10.04

81744NAB6

SEMT 2012-6 A2

4.07

772

CA 43.5

TX 11.2

WA 6.3

65.9

80

4.07

22.20

18.17

10.04

10.04

81744XAA6

SEMT 2012-5 A

4.21

770

CA 43.9

TX 13.7

WA 5.6

66.8

80

4.21

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

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

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

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

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

50.34

44.81

37.53

81744UAA2

SEMT 2012-2 A1

4.58

17

769

CA 48.8

TX 10.9

NY 8.4

61.3

80

4.58

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

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

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

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

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

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

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

90.32

71.14

60.73

61.83

54.79

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

0.72

29.83

26.61

42

Commercial Loan Details


1
Property
Number of Weighted Avg 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 T he debt service coverage ratio (DSCR) is defined as the property's annual net
operating income divided by the annual principal and interest payments.
2 T he loan to value calculation is defined as the sum of the sernior and all subordinate
loan amounts divided by the value of the property.
3 T hree of these loans are recourse to the borrowers (two self storage, one office).

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

43

Geographic Breakdown of
Commercial Loan Portfolio
TN, 3%

OR, 3%

Other, 9%

NY, 20%

DE, 3%
WA, 3%
NC, 3%
TX, 4%

MI, 8%

CA, 29%
FL, 9%
IL, 6%

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

44

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 Income<GAAP)=REIT
Cost basis on Mortgages for Tax>GAAP
$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

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

45