ValueXVail 2013 - Patrick Brennan

7/28/2019 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

Please see important disclosures accompanying this presentationVALUEx Vail 2013 2


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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



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Guide



Sequoia 2.0




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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)



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Guide



Sequoia 2.0




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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


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


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



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Guide



Sequoia 2.0




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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%



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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.


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 [email protected]

REDWOOD TRUST (RWT)

VALUEx Vail 2013 32


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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


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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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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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

Documents

ValueXVail 2013 - Patrick Brennan