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Segment Information | 9 Months Ended
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Sep. 30, 2014
Segment Information | Note 21. Segment Information Redwood operates in three segments: residential mortgage banking, residential investments, and commercial mortgage banking and investments. Our segments are based on our organizational and management structure, which aligns with how our results are monitored and performance is assessed. The accounting policies of the reportable segments are the same as those described in Note 3—Summary of Significant Accounting Policies. For a full description of our segments, see Note 1—Redwood Trust. Segment contribution represents the measure of profit that management uses to assess the performance of our business segments and make resource allocation and operating decisions. Certain expenses not directly assigned or allocated to one of the three primary segments, as well as activity from certain legacy Sequoia entities consolidated for GAAP financial reporting purposes, are included in the Corporate/Other column as reconciling items to our consolidated financial statements. These unallocated expenses primarily include interest expense associated with certain long-term debt, indirect operating expenses, and other expense. The following tables present financial information by segment for the three and nine months ended September 30, 2014 and 2013. Business Segment Financial Information
|  | Three Months Ended September 30, 2014 |
(In Thousands) |  | Residential Mortgage Banking |  |  | Residential Investments |  |  | Commercial Mortgage Banking and Investments |  |  | Corporate/ Other |  |  | Total |
Interest income |  | $ | 16,911 |  |  | $ | 27,600 |  |  | $ | 12,603 |  |  | $ | 6,237 |  |  | $ | 63,351 |
Interest expense |  |  | (4,192) |  |  |  | (3,142) |  |  |  | (4,526) |  |  |  | (11,490) |  |  |  | (23,350) |
Net interest income (loss) |  |  | 12,719 |  |  |  | 24,458 |  |  |  | 8,077 |  |  |  | (5,253) |  |  |  | 40,001 |
Reversal of provision (provision) for loan losses |  |  | - |  |  |  | - |  |  |  | 888 |  |  |  | 708 |  |  |  | 1,596 |
Mortgage banking activities, net |  |  | 11,386 |  |  |  | - |  |  |  | 6,486 |  |  |  | - |  |  |  | 17,872 |
MSR income (loss), net |  |  | - |  |  |  | 5,821 |  |  |  | - |  |  |  | - |  |  |  | 5,821 |
Other market valuation adjustments, net |  |  | 43 |  |  |  | (3,371) |  |  |  | - |  |  |  | (378) |  |  |  | (3,706) |
Realized gains, net |  |  | - |  |  |  | 7,836 |  |  |  | - |  |  |  | 696 |  |  |  | 8,532 |
Operating expenses |  |  | (9,982) |  |  |  | (802) |  |  |  | (2,279) |  |  |  | (8,343) |  |  |  | (21,406) |
Other income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,600 |  |  |  | 1,600 |
(Provision for) benefit from income taxes |  |  | (3,352) |  |  |  | 150 |  |  |  | (1,764) |  |  |  | (247) |  |  |  | (5,213) |
Segment Contribution |  | $ | 10,814 |  |  | $ | 34,092 |  |  | $ | 11,408 |  |  | $ | (11,217) |  |  |  |  |
Net Income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 45,097 |
Non-cash amortization income (expense) |  |  | (43) |  |  |  | 10,890 |  |  |  | (191) |  |  |  | (2,049) |  |  |  | 8,607 |
|  | Three Months Ended September 30, 2013 |
(In Thousands) |  | Residential Mortgage Banking |  |  | Residential Investments |  |  | Commercial Mortgage Banking and Investments |  |  | Corporate/ Other |  |  | Total |
Interest income |  | $ | 15,954 |  |  | $ | 22,887 |  |  | $ | 10,740 |  |  | $ | 7,839 |  |  | $ | 57,420 |
Interest expense |  |  | (3,501) |  |  |  | (2,229) |  |  |  | (3,560) |  |  |  | (12,435) |  |  |  | (21,725) |
Net interest income (loss) |  |  | 12,453 |  |  |  | 20,658 |  |  |  | 7,180 |  |  |  | (4,596) |  |  |  | 35,695 |
Reversal of provision (provision) for loan losses |  |  | - |  |  |  | - |  |  |  | (844) |  |  |  | (883) |  |  |  | (1,727) |
Mortgage banking activities, net |  |  | (12,236) |  |  |  | - |  |  |  | 3,538 |  |  |  | - |  |  |  | (8,698) |
MSR income (loss), net |  |  | - |  |  |  | 3,113 |  |  |  | - |  |  |  | - |  |  |  | 3,113 |
Other market valuation adjustments, net |  |  | (11) |  |  |  | 549 |  |  |  | - |  |  |  | (76) |  |  |  | 462 |
Realized gains, net |  |  | - |  |  |  | 10,469 |  |  |  | - |  |  |  | - |  |  |  | 10,469 |
Operating expenses |  |  | (7,874) |  |  |  | (229) |  |  |  | (2,176) |  |  |  | (12,041) |  |  |  | (22,320) |
(Provision for) benefit from income taxes |  |  | 4,867 |  |  |  | 377 |  |  |  | 29 |  |  |  | (338) |  |  |  | 4,935 |
Segment Contribution |  | $ | (2,801) |  |  | $ | 34,937 |  |  | $ | 7,727 |  |  | $ | (17,934) |  |  |  |  |
Net Income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 21,929 |
Non-cash amortization income (expense) |  |  | (13) |  |  |  | 8,702 |  |  |  | (228) |  |  |  | (2,256) |  |  |  | 6,205 |
|  | Nine Months Ended September 30, 2014 |
(In Thousands) |  | Residential Mortgage Banking |  |  | Residential Investments |  |  | Commercial Mortgage Banking and Investments |  |  | Corporate/ Other |  |  | Total |
Interest income |  | $ | 40,015 |  |  | $ | 83,120 |  |  | $ | 34,204 |  |  | $ | 19,481 |  |  | $ | 176,820 |
Interest expense |  |  | (7,674) |  |  |  | (9,106) |  |  |  | (12,234) |  |  |  | (34,546) |  |  |  | (63,560) |
Net interest income (loss) |  |  | 32,341 |  |  |  | 74,014 |  |  |  | 21,970 |  |  |  | (15,065) |  |  |  | 113,260 |
Provision for loan losses |  |  | - |  |  |  | - |  |  |  | (56) |  |  |  | 685 |  |  |  | 629 |
Mortgage banking activities, net |  |  | 11,650 |  |  |  | - |  |  |  | 12,300 |  |  |  | - |  |  |  | 23,950 |
MSR income (loss), net |  |  | - |  |  |  | 4,650 |  |  |  | - |  |  |  | - |  |  |  | 4,650 |
Other market valuation adjustments, net |  |  | 54 |  |  |  | (13,117) |  |  |  | - |  |  |  | (903) |  |  |  | (13,966) |
Realized gains, net |  |  | - |  |  |  | 9,815 |  |  |  | - |  |  |  | 872 |  |  |  | 10,687 |
Operating expenses |  |  | (26,577) |  |  |  | (2,667) |  |  |  | (7,085) |  |  |  | (27,330) |  |  |  | (63,660) |
Other income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,600 |  |  |  | 1,600 |
(Provision for) benefit from income taxes |  |  | (3,258) |  |  |  | 1,826 |  |  |  | (2,159) |  |  |  | (112) |  |  |  | (3,703) |
Segment Contribution |  | $ | 14,210 |  |  | $ | 74,521 |  |  | $ | 24,970 |  |  | $ | (40,253) |  |  |  |  |
Net Income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 73,447 |
Non-cash amortization income (expense) |  |  | (131) |  |  |  | 32,724 |  |  |  | (579) |  |  |  | (6,068) |  |  |  | 25,946 |
|  | Nine Months Ended September 30, 2013 |
(In Thousands) |  | Residential Mortgage Banking |  |  | Residential Investments |  |  | Commercial Mortgage Banking and Investments |  |  | Corporate/ Other |  |  | Total |
Interest income |  | $ | 40,869 |  |  | $ | 70,420 |  |  | $ | 30,534 |  |  | $ | 26,841 |  |  | $ | 168,664 |
Interest expense |  |  | (8,631) |  |  |  | (7,448) |  |  |  | (8,928) |  |  |  | (36,437) |  |  |  | (61,444) |
Net interest income (loss) |  |  | 32,238 |  |  |  | 62,972 |  |  |  | 21,606 |  |  |  | (9,596) |  |  |  | 107,220 |
Reversal of provision (provision) for loan losses |  |  | - |  |  |  | - |  |  |  | (2,419) |  |  |  | 1,926 |  |  |  | (493) |
Mortgage banking activities, net |  |  | 69,278 |  |  |  | - |  |  |  | 16,284 |  |  |  | - |  |  |  | 85,562 |
MSR income (loss), net |  |  | - |  |  |  | 14,681 |  |  |  | - |  |  |  | - |  |  |  | 14,681 |
Other market valuation adjustments, net |  |  | 67 |  |  |  | (5,759) |  |  |  | - |  |  |  | (407) |  |  |  | (6,099) |
Realized gains, net |  |  | - |  |  |  | 23,032 |  |  |  | 210 |  |  |  | 49 |  |  |  | 23,291 |
Operating expenses |  |  | (18,565) |  |  |  | (3,768) |  |  |  | (8,026) |  |  |  | (36,578) |  |  |  | (66,937) |
(Provision for) benefit from income taxes |  |  | (6,447) |  |  |  | (1,284) |  |  |  | (1,689) |  |  |  | 307 |  |  |  | (9,113) |
Segment Contribution |  | $ | 76,571 |  |  | $ | 89,874 |  |  | $ | 25,966 |  |  | $ | (44,299) |  |  |  |  |
Net Income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 148,112 |
Non-cash amortization income (expense) |  |  | (132) |  |  |  | 24,348 |  |  |  | (639) |  |  |  | (5,637) |  |  |  | 17,940 |
The following tables present the components of Corporate/Other for the three and nine months ended September 30, 2014 and 2013.
|  | Three Months Ended September 30, |
|  | 2014 |  |  | 2013 |
(In Thousands) |  | Legacy Consolidated VIEs |  |  | Other |  |  | Total |  |  | Legacy Consolidated VIEs |  |  | Other |  |  | Total |
Interest income |  | $ | 6,233 |  |  | $ | 4 |  |  | $ | 6,237 |  |  | $ | 7,835 |  |  | $ | 4 |  |  | $ | 7,839 |
Interest expense |  |  | (5,250) |  |  |  | (6,240) |  |  |  | (11,490) |  |  |  | (6,190) |  |  |  | (6,245) |  |  |  | (12,435) |
Net interest income (loss) |  |  | 983 |  |  |  | (6,236) |  |  |  | (5,253) |  |  |  | 1,645 |  |  |  | (6,241) |  |  |  | (4,596) |
Reversal of provision for loan losses |  |  | 708 |  |  |  | - |  |  |  | 708 |  |  |  | (883) |  |  |  | - |  |  |  | (883) |
Mortgage banking activities, net |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
MSR income, net |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Other market valuation adjustments, net |  |  | (361) |  |  |  | (17) |  |  |  | (378) |  |  |  | (76) |  |  |  | - |  |  |  | (76) |
Realized gains, net |  |  | 696 |  |  |  | - |  |  |  | 696 |  |  |  | - |  |  |  | - |  |  |  | - |
Operating expenses |  |  | (26) |  |  |  | (8,317) |  |  |  | (8,343) |  |  |  | (51) |  |  |  | (11,990) |  |  |  | (12,041) |
Other income |  |  | - |  |  |  | 1,600 |  |  |  | 1,600 |  |  |  | - |  |  |  | - |  |  |  | - |
(Provision for) benefit from income taxes |  |  | - |  |  |  | (247) |  |  |  | (247) |  |  |  | - |  |  |  | (338) |  |  |  | (338) |
Total |  | $ | 2,000 |  |  | $ | (13,217) |  |  | $ | (11,217) |  |  | $ | 635 |  |  | $ | (18,569) |  |  | $ | (17,934) |
Non-cash amortization expense |  |  | (1,412) |  |  |  | (637) |  |  |  | (2,049) |  |  |  | (1,724) |  |  |  | (532) |  |  |  | (2,256) |
|  | Nine Months Ended September 30, |
|  | 2014 |  |  | 2013 |
(In Thousands) |  | Legacy Consolidated VIEs |  |  | Other |  |  | Total |  |  | Legacy Consolidated VIEs |  |  | Other |  |  | Total |
Interest income |  | $ | 19,473 |  |  | $ | 8 |  |  | $ | 19,481 |  |  | $ | 26,688 |  |  | $ | 153 |  |  | $ | 26,841 |
Interest expense |  |  | (15,950) |  |  |  | (18,596) |  |  |  | (34,546) |  |  |  | (20,188) |  |  |  | (16,249) |  |  |  | (36,437) |
Net interest income (loss) |  |  | 3,523 |  |  |  | (18,588) |  |  |  | (15,065) |  |  |  | 6,500 |  |  |  | (16,096) |  |  |  | (9,596) |
Reversal of provision (provision) for loan losses |  |  | 685 |  |  |  | - |  |  |  | 685 |  |  |  | 1,926 |  |  |  | - |  |  |  | 1,926 |
Mortgage banking activities, net |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
MSR income, net |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Other market valuation adjustments, net |  |  | (825) |  |  |  | (78) |  |  |  | (903) |  |  |  | (407) |  |  |  | - |  |  |  | (407) |
Realized gains, net |  |  | 872 |  |  |  | - |  |  |  | 872 |  |  |  | 49 |  |  |  | - |  |  |  | 49 |
Operating expenses |  |  | (120) |  |  |  | (27,210) |  |  |  | (27,330) |  |  |  | (158) |  |  |  | (36,420) |  |  |  | (36,578) |
Other income |  |  | - |  |  |  | 1,600 |  |  |  | 1,600 |  |  |  | - |  |  |  | - |  |  |  | - |
(Provision for) benefit from income taxes |  |  | - |  |  |  | (112) |  |  |  | (112) |  |  |  | - |  |  |  | 307 |  |  |  | 307 |
Total |  | $ | 4,135 |  |  | $ | (44,388) |  |  | $ | (40,253) |  |  | $ | 7,910 |  |  | $ | (52,209) |  |  | $ | (44,299) |
Non-cash amortization expense |  |  | (4,207) |  |  |  | (1,861) |  |  |  | (6,068) |  |  |  | (4,388) |  |  |  | (1,249) |  |  |  | (5,637) |
The following table presents supplemental information by segment at September 30, 2014 and December 31, 2013. Supplemental Disclosures
(In Thousands) |  | Residential Mortgage Banking |  |  | Residential Investments |  |  | Commercial Mortgage Banking and Investments |  |  | Corporate/ Other |  |  | Total |
September 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential loans, held-for-sale |  | $ | 1,502,429 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 1,502,429 |
Residential loans, held-for-investment |  |  | - |  |  |  | 238,651 |  |  |  | - |  |  |  | 1,546,507 |  |  |  | 1,785,158 |
Commercial loans |  |  | - |  |  |  | - |  |  |  | 497,997 |  |  |  | - |  |  |  | 497,997 |
Real estate securities |  |  | 100,613 |  |  |  | 1,294,372 |  |  |  | - |  |  |  | - |  |  |  | 1,394,985 |
Mortgage servicing rights |  |  | - |  |  |  | 135,152 |  |  |  | - |  |  |  | - |  |  |  | 135,152 |
Total assets |  |  | 1,635,463 |  |  |  | 1,696,343 |  |  |  | 527,094 |  |  |  | 1,752,868 |  |  |  | 5,611,768 |
December 31, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential loans, held-for-sale |  | $ | 404,267 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 404,267 |
Residential loans, held-for-investment |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,762,167 |  |  |  | 1,762,167 |
Commercial loans |  |  | - |  |  |  | - |  |  |  | 432,455 |  |  |  | - |  |  |  | 432,455 |
Real estate securities |  |  | 110,505 |  |  |  | 1,572,356 |  |  |  | - |  |  |  | - |  |  |  | 1,682,861 |
Mortgage servicing rights |  |  | - |  |  |  | 64,824 |  |  |  | - |  |  |  | - |  |  |  | 64,824 |
Total assets |  |  | 531,092 |  |  |  | 1,655,209 |  |  |  | 439,139 |  |  |  | 1,983,088 |  |  |  | 4,608,528 |

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 29 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8864-108599 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8933-108599 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8844-108599 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8538-108599 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8380-108599 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8981-108599 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 35 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8984-108599 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e9038-108599 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8906-108599 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e9054-108599 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8924-108599 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e9031-108599 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 33 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8971-108599 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 12 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8595-108599 + Details
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