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Segment Information
 12 Months Ended
Dec. 31, 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 Item 1 — Business in this Annual Report on Form 10-K.

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 as of and for the years ended December 31, 2014, 2013 and 2012.

Business Segment Financial Information

 

     Year Ended December 31, 2014  

(In Thousands)

    Residential
Mortgage
Banking		     Residential
Investments		     Commercial
Mortgage
Banking and
Investments		     Corporate/
Other		     Total  

Interest income

    $ 58,272      $ 110,433      $ 47,567      $ 25,798      $ 242,070   

Interest expense

      (12,776 )      (11,848 )      (15,836 )      (47,003 )      (87,463 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net interest income (loss)

   45,496      98,585      31,731      (21,205 )    154,607   

Provision for loan losses

   —        —        (84 )    (877 )    (961 ) 

Non interest income

Mortgage banking activities

   21,498      —        13,440      —        34,938   

MSR income (loss)

   —        (4,261 )    —        —        (4,261 ) 

Other market valuation adjustments

   56      (9,178 )    —        (1,024 )    (10,146 ) 

Realized gains, net

   —        13,777      —        1,701      15,478   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total non-interest income, net

   21,554      338      13,440      677      36,009   

Direct operating expenses

   (37,664 )    (3,681 )    (11,324 )    (37,454 )    (90,123 ) 

Other income

   —        181      —        1,600      1,781   

(Provision for) benefit from income taxes

   (1,774 )    1,340      (234 )    (76 )    (744 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

Segment Contribution

 $ 27,612    $ 96,763    $ 33,529    $ (57,334 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net Income

 $ 100,569   
          

 

 

  

Supplemental Disclosures

Residential loans

 $ 1,342,519    $ 581,668    $ —      $ 1,474,386    $ 3,398,573   

Commercial loans

   —        —        566,927      —        566,927   

Real estate securities

   93,802      1,285,428      —        —        1,379,230   

Mortgage servicing rights

   —        139,293      —        —        139,293   

Total assets

   1,468,856      2,057,256      575,943      1,816,911      5,918,966   

Non-cash amortization income (expense)

   (181 )    42,784      (673 )    (8,232 )    33,698   

 

     Year Ended December 31, 2013  

(In Thousands)

    Residential
Mortgage
Banking		     Residential
Investments		     Commercial
Mortgage
Banking and
Investments		     Corporate/
Other		     Total  

Interest income

    $ 52,517      $ 96,399      $ 43,420      $ 33,820      $ 226,156   

Interest expense

      (10,167 )      (10,067 )      (12,677 )      (48,060 )      (80,971 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net interest income (loss)

   42,350      86,332      30,743      (14,240 )    145,185   

Provision for loan losses

   —        —        (3,288 )    (1,449 )    (4,737 ) 

Non interest income

Mortgage banking activities

   79,393      —        23,102      —        102,494   

MSR income (loss)

   —        20,309      —        —        20,309   

Other market valuation adjustments

   38      (5,134 )    —        (613 )    (5,709 ) 

Realized gains, net

   —        24,765      210      284      25,259   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total non-interst income, net

   79,431      39,940      23,311      (329 )    142,353   

Direct operating expenses

   (22,880 )    (4,035 )    (9,580 )    (50,113 )    (86,607 ) 

Other expense

   —        —        —        (12,000 )    (12,000 ) 

(Provision for) benefit from income taxes

   (5,947 )    (3,027 )    (3,827 )    1,853      (10,948 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

Segment Contribution

 $ 92,954    $ 119,210    $ 37,360    $ (76,278 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net Income

 $ 173,246   
          

 

 

  

Supplemental Disclosures

Residential loans

 $ 404,267    $ —      $ —      $ 1,762,167    $ 2,166,434   

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   

Non-cash amortization income (expense)

   —        34,578      (798 )    (7,338 )    26,442   

 

     Year Ended December 31, 2012  

(In Thousands)

    Residential
Mortgage
Banking		     Residential
Investments		     Commercial
Mortgage
Banking and
Investments		     Corporate/
Other		     Total  

Interest income

    $ 19,714      $ 93,266      $ 26,048      $ 92,356      $ 231,384   

Interest expense

      (3,179 )      (11,065 )      (1,123 )      (105,338 )      (120,705 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net interest income (loss)

   16,535      82,201      24,925      (12,982 )    110,679   

Provision for loan losses

   —        —        (3,477 )    (171 )    (3,648 ) 

Non interest income

Mortgage banking activities

   35,438      —        1,155      —        36,593   

MSR income (loss)

   —        (1,391 )    —        —        (1,391 ) 

Other market valuation adjustments

   623      (5,228 )    —        6,144      1,539   

Realized gains, net

   —        32,451      —        22,470      54,921   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total non-interst income, net

   35,793      25,832      1,423      28,614      91,662   

Direct operating expenses

   (13,214 )    (5,711 )    (11,085 )    (35,623 )    (65,633 ) 

Provision for income taxes

   —        —        (13 )    (1,278 )    (1,291 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

Segment Contribution

 $ 39,382    $ 102,322    $ 11,505    $ (21,440 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net Income

 $ 131,769   
          

 

 

  

Supplemental Disclosures

Residential loans

 $ 562,658    $ —      $ —      $ 2,272,812    $ 2,835,470   

Commercial loans

   —        —        313,010      —        313,010   

Real estate securities

   10,409      1,098,344      —        —        1,108,753   

Mortgage servicing rights

   5,315      —        —        —        5,315   

Total assets

   583,117      1,112,948      320,670      2,427,363      4,444,098   

Non-cash amortization income (expense)

   —        30,576      556      (3,472 )    24,660   

The following table presents the components of Corporate/Other for the years ended December 31, 2014, 2013 and 2012.

 

     Years Ended December 31,  
     2014     2013     2012  

(In Thousands)

    Legacy
Consolidated
VIEs		     Other     Legacy
Consolidated
VIEs		     Other     Legacy
Consolidated
VIEs		     Other  

Interest income

    $ 25,786      $ 12      $ 33,663      $ 157      $ 92,296      $ 60   

Interest expense

      (20,844 )      (26,159 )      (25,876 )      (22,184 )      (95,807 )      (9,531 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net interest income (loss)

   4,942      (26,147 )    7,787      (22,027 )    (3,511 )    (9,471 ) 

Non interest income

Provision for loan losses

   (877 )    —        (1,449 )    —        (171 )    —     

Mortgage banking activities

   —        —        —        —        —        —     

MSR income (loss)

   —        —        —        —        —        —     

Other market valuation adjustments

   (894 )    (130 )    (613 )    —        6,144      —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total non interest income, net

   (1,771 )    (130 )    (2,062 )    —        5,973      —     

Realized gains, net

   1,701      —        284      —        22,470      —     

Direct operating expenses

   (165 )    (37,289 )    (231 )    (49,882 )    (148 )    (35,475 ) 

Other expense

   —        1,600      —        (12,000 )    —        —     

Provision for income taxes

   —        (76 )    —        1,853      —        (1,278 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

 $ 4,707    $ (62,041 )  $ 5,778    $ (82,056 )  $ 24,784    $ (46,224 )