ValueXVail 2013 - Patrick Brennan

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
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
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

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
VALUEx Vail 2013
Guide

Sequoia 2.0
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)
Loan origination and sales
VALUEx Vail 2013
Guide

Sequoia 2.0
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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
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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 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
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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)
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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
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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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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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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
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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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
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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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

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
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%
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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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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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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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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
VALUEx Vail 2013
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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
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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.
VALUEx Vail 2013
34
REDWOOD TRUST (RWT)
APPENDIX
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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
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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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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.
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
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
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
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
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).
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%
VALUEx Vail 2013
44

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
VALUEx Vail 2013
45

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REDWOOD TRUST

VALUEx Vail 2013

Patrick Brennan, CFA

Hutchinson Capital Management

What exactly is Redwood?!

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

Redwood Trust (RWT)

Residential (Core)/ Commercial (Possible Sale)

Return of Private Label

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

Many ComparablesWith Vastly Different Models

REDWOOD TRUST INC

2014E 30 Day 52 Week

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

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

Accounting Masks Lower Leverage

VALUEx Vail 2013

2009:2010: Buying Carnage

2010-2013: Sequoia 2.0

VALUEx Vail 2013

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

What exactly is Redwood?!

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

Pay Dividends / Avoid Taxes /

Loan acquisition and sales

Please see important disclosures accompanying this presentation

Loan origination and sales

VALUEx Vail 2013

What exactly is Redwood?!

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

30 Year Jumbo Less 30 Year Conforming

VALUEx Vail 2013

Government Guaranteeing ~ 90% of New Mortgages

Source: Inside Mortgage Finance

VALUEx Vail 2013

Further securitizations: Attract loans/attract AAA

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

Loans: Need to attract selling banks

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

Jumbo Share (right axis)

Source: Inside Mortgage Finance

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

But securitization volume remains anemic

Jumbo Securitization Volume

Jumbo Securitization volume

Source: Inside Mortgage Finance

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

Conforming Loan Fees Lowered

Further decreases are possiblebut an increase in G-Fees

Please see important disclosures accompanying this presentation

VALUEx Vail 2013

And Guarantee (G Fees) Fees Increasing

April 2012 Increase

December 2012 Increase