1. Presented by Jun Yuan (Jason) Chan, Michael De Renzo, Rob Jannusch and Harout Sahakian April 15 th, 2014 Presented by Jun Yuan (Jason) Chan, Michael De Renzo, Rob Jannusch and Harout Sahakian April 15 th, 2014 The Ryland Group, Inc.

2. A GENDA Introduction Company Overview Macroeconomic Outlook Relevant Stock Market Prospects Financial Analysis Valuation Recommendation 2

3. C OMPANY O VERVIEW Founded in 1967 Homebuilder and mortgage finance company Builds single family detached and attached homes on-site The company uses direct acquisition and lot option purchase contracts to control lot inventory On-site construction is done by independent contractors 3 Ticker: RYL (NYSE) Market Cap: 1.8B P/E: 5.7 DIV Yield:.31% Number of Employees: 1,395 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

4. F ULL S ERVICE R EAL E STATE C OMPANY 4 Planning Styling Financing Building Closing F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

5. O PERATING S EGMENTS 5 Texas US Cities include: Austin, Dallas, Houston FY 2013 Revenue: $448M Gross profit margin: 20.5% West US Cities include: Denver, Las Vegas, Southern California FY 2013 Revenue: $425M Gross profit margin: 21.8% North US Cities include: Baltimore, Chicago, Philadelphia FY 2013 Revenue: $617M Gross profit margin: 19.3% Southeast US Cities include: Atlanta, Charlotte, Orlando FY 2013 Revenue: $597M Gross profit margin: 21.8% Financial Services Mortgage related, insurance, title, and escrow services FY 2013 Revenue: $51M Corporate Non-operating business segment Purpose of supporting operations F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

6. R ECENT F INANCIAL P ERFORMANCE 6 Ryland’s Closings & Closing Prices F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

7. M ANAGEMENT ’ S A CTIONS AND O UTLOOK 7 Downsized operations Exited or reduced investments in certain markets Redesigned its product to be more affordable Recent Actions Housing market as a whole may continue to progress Mortgage interest rate rise most likely accompanied by improvements in economic conditions Strength of balance sheet, additional liquidity, and improved operating leverage puts the company in a position to take advantage of changes in the marketplace Forward Outlook Source: Ryland 2013 10-K F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

8. M ACROECONOMIC O UTLOOK – K EY E XTERNAL D RIVERS 30 –year Mortgage rates Credit Availability Employment Growth/Increase in Payrolls Number of Households Geographic Region 8 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION Sources: http://clients1.ibisworld.com/reports/us/industry/currentperformance.aspx?entid=169#CP

9. U NDERSTANDING M ARKET P OWER 9 StrengthsWeaknesses -Multiple business segments (one stop shop for homebuyers) -Financing arm (if used properly) -Limited geographic regions -Long-term capital costs (Moody’s credit rating of B1) -Outsource development to third party contractors OpportunitiesThreats -Short-term industry outlook -Geographical expansion -Accretive acquisitions -Cyclicality of industry -Long-term interest rates and credit availability -Asset bubbles -Government regulation (e.g. tax subsidies, HAFA Program) F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION Source: MarketLine, Ryland 2013 10-K, Bloomberg

10. I NDUSTRY O VERVIEW – R EAL E STATE 10 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION Sources: http://clients1.ibisworld.com/reports/us/industry/currentperformance.aspx?entid=169#CP Current Performance Highly Turbulent Case-Shiller Index increased by 13.5% in 2013 Many Tax Credit and Pricing Opportunities Keys to Success Opportunistic regions where growth is not priced in Reduced cost structure Tax subsidies and incentives Access to reliable contractors Good track record/success rate

11. I NDUSTRY O VERVIEW – R EAL E STATE (H OME B UILDERS ) Industry Trends Prices undervalued by 30% relative to renting Rise of institutional investors – Investors accounted for 21% of home purchases Market for rentals growing More competitors after 2008 11 Sources: http://clients1.ibisworld.com/reports/us/industry/currentperformance.aspx?entid=169#CP F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

12. 12 I NDUSTRY A NALYSIS – R EAL E STATE (H OME B UILDERS ) RevenueRevenue Growth Revenue increased from 2010 to 2014 with a CAGR of 9.32% In addition, housing starts forecasted to grow 19.4% in 2015 and 12.5% in 2016 Projected revenue growth frontloaded in 2015 and 2016 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION Sources: http://clients1.ibisworld.com/reports/us/industry/currentperformance.aspx?entid=169#CP

13. P ORTERS ’ F IVE F ORCES 13 Power of Suppliers: StrongSubstitutes: High Housing input prices lag housing prices set forth in contracts Banks/Credit availability Renting vs. home ownership Second-hand market for homes Barriers to Entry: MediumPower of Buyers: High State-based licenses and registration Industry mostly based on reputation and proven performance Availability and cost of building warranty insurance for contractors Learning curve steep Customers able to exert pressure to drive down prices Switching costs low Competition: Medium Designs of products can easily be differentiated Recovery in housing market F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION Sources: Marketline

14. R ECENT S TOCK P ERFORMANCE 14 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION Currently Ryland’s stock price is slightly below the 20 and 200 moving averages Watch carefully for a stock price move in either direction Source: Yahoo Finance

15. F INANCIAL R ATIO A NALYSIS 15 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

16. F INANCIAL R ATIO A NALYSIS 16 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

17. D ISCOUNT R ATE C ALCULATION 17 70% weight applied to CAPM, 30% weight applied to ROE F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

18. DCF V ALUATION 18 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

19. C OMPARABLE C OMPANIES 19 Ryland’s number of house closings is on the lower end compared to its competitors Ryland’s average sales price and sales price range is in line with competitors Sources: Company 2013 10-Ks F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

20. C OMPARABLE C OMPANY G REENBLATT A NALYSIS 20 Ryland’s Greenblatt Ratios are higher than the peer group’s average and median values As Ryland continues to recover from the recession its EBIT/Tangible Assets should trend upward Sources: Company 2013 10-Ks F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

21. C OMPARABLE C OMPANY V ALUATION 21 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

22. R ECOMMENDATION 22 W ATCH L IST Ryland is currently trading at $39.02 Ryland’s DCF intrinsic value: $26.83 Ryland’s triangulated intrinsic value: $29.82