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Segment Information | 9 Months Ended
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Sep. 30, 2015
Segment Reporting [Abstract] |
Segment Information | 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. For a full description of our segments, see Item 1—Business in our Annual Report on Form 10-K for the year ended December 31, 2014. 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 consolidated 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. Prior to the second quarter of 2015, we utilized certain Sequoia interest only ("IO") securities in part to serve as hedges in our residential mortgage banking segment. As such, we included these securities in the segment’s assets as well as the interest income and valuation adjustments related to the securities in the segment’s results. During the second quarter of 2015, we transferred these securities to our residential investments segment. Additionally, beginning in the second quarter of 2015, we began to record a hedging allocation between our segments. As we currently manage our market interest rate risk on an enterprise-wide basis, we rely on certain assets to serve as natural hedges to other assets, and in some cases these assets can be in different segments. Management uses this allocation to assess the economic returns of each segment on a stand-alone basis and the allocation has no impact on our consolidated results. This was a prospective change in how we are managing our business and allocating capital to each segment. As such, we have not conformed prior period results for our segments. Analysis of our year-over-year results are discussed in Part I, Item 2, Management’s Discussion and Analysis of Results of Operations in this quarterly report on Form 10-Q. The following tables present financial information by segment for the three and nine months ended September 30, 2015 and 2014. Table 21.1 – Business Segment Financial Information
|  | Three Months Ended September 30, 2015
(In Thousands) |  | Residential Mortgage Banking |  | Residential Investments |  | Commercial Mortgage Banking and Investments |  | Corporate/ Other |  | Total
Interest income |  | $ | 12,115 |  |  | $ | 34,074 |  |  | $ | 11,191 |  |  | $ | 6,104 |  |  | $ | 63,484 |
Interest expense |  | (4,313 | ) |  | (2,660 | ) |  | (3,502 | ) |  | (13,400 | ) |  | (23,875 | )
Net interest income (loss) |  | 7,802 |  |  | 31,414 |  |  | 7,689 |  |  | (7,296 | ) |  | 39,609 |
Reversal of provision for loan losses |  | — |  |  | — |  |  | 60 |  |  | — |  |  | 60 |
Non-interest income |  |  |  |  |  |  |  |  |  |
Mortgage banking and investment activities, net (1) |  | 331 |  |  | (13,622 | ) |  | 1,002 |  |  | (547 | ) |  | (12,836 | )
MSR income (loss), net |  | — |  |  | 3,549 |  |  | — |  |  | — |  |  | 3,549 |
Other income |  | — |  |  | 327 |  |  | — |  |  | — |  |  | 327 |
Realized gains, net |  | — |  |  | 5,548 |  |  | — |  |  | — |  |  | 5,548 |
Total non-interest income, net |  | 331 |  |  | (4,198 | ) |  | 1,002 |  |  | (547 | ) |  | (3,412 | )
Direct operating expenses |  | (11,278 | ) |  | (1,311 | ) |  | (3,136 | ) |  | (8,772 | ) |  | (24,497 | )
Benefit from income taxes |  | 2,690 |  |  | 4,082 |  |  | (389 | ) |  | 1,021 |  |  | 7,404 |
Segment Contribution |  | $ | (455 | ) |  | $ | 29,987 |  |  | $ | 5,226 |  |  | $ | (15,594 | ) |  |
Net Income |  |  |  |  |  |  |  |  |  | $ | 19,164 |
Non-cash amortization income (expense) |  | $ | (45 | ) |  | $ | 9,115 |  |  | $ | (61 | ) |  | $ | (1,007 | ) |  | $ | 8,002 |
Hedging allocations (1) |  | (1,683 | ) |  | 1,683 |  |  | — |  |  | — |  |  | — |
|  | 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 for loan losses |  | — |  |  | — |  |  | 888 |  |  | 708 |  |  | 1,596 |
Non-interest income |  |  |  |  |  |  |  |  |  |
Mortgage banking and investment activities, net |  | 11,429 |  |  | (3,371 | ) |  | 6,486 |  |  | (378 | ) |  | 14,166 |
MSR income (loss), net |  | — |  |  | 5,821 |  |  | — |  |  | — |  |  | 5,821 |
Other income |  | — |  |  | — |  |  | — |  |  | 1,600 |  |  | 1,600 |
Realized gains, net |  | — |  |  | 7,836 |  |  | — |  |  | 696 |  |  | 8,532 |
Total non-interest income, net |  | 11,429 |  |  | 10,286 |  |  | 6,486 |  |  | 1,918 |  |  | 30,119 |
Direct operating expenses |  | (9,982 | ) |  | (802 | ) |  | (2,279 | ) |  | (8,343 | ) |  | (21,406 | )
(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 |
|  | Nine Months Ended September 30, 2015
(In Thousands) |  | Residential Mortgage Banking |  | Residential Investments |  | Commercial Mortgage Banking and Investments |  | Corporate/ Other |  | Total
Interest income |  | $ | 37,886 |  |  | $ | 98,335 |  |  | $ | 34,784 |  |  | $ | 19,598 |  |  | $ | 190,603 |
Interest expense |  | (11,389 | ) |  | (8,137 | ) |  | (10,488 | ) |  | (40,830 | ) |  | (70,844 | )
Net interest income (loss) |  | 26,497 |  |  | 90,198 |  |  | 24,296 |  |  | (21,232 | ) |  | 119,759 |
Reversal of provision for loan losses |  | — |  |  | — |  |  | 115 |  |  | — |  |  | 115 |
Non-interest income |  |  |  |  |  |  |  |  |  |
Mortgage banking and investment activities, net (1) |  | 7,383 |  |  | (14,745 | ) |  | 3,323 |  |  | (2,360 | ) |  | (6,399 | )
MSR income (loss), net |  | — |  |  | (6,545 | ) |  | — |  |  | — |  |  | (6,545 | )
Other income |  | — |  |  | 2,435 |  |  | — |  |  | — |  |  | 2,435 |
Realized gains, net |  | — |  |  | 16,170 |  |  | — |  |  | — |  |  | 16,170 |
Total non-interest income, net |  | 7,383 |  |  | (2,685 | ) |  | 3,323 |  |  | (2,360 | ) |  | 5,661 |
Direct operating expenses |  | (33,214 | ) |  | (3,600 | ) |  | (9,638 | ) |  | (28,326 | ) |  | (74,778 | )
Benefit from income taxes |  | 3,562 |  |  | 3,824 |  |  | 321 |  |  | 2,565 |  |  | 10,272 |
Segment Contribution |  | $ | 4,228 |  |  | $ | 87,737 |  |  | $ | 18,417 |  |  | $ | (49,353 | ) |  |
Net Income |  |  |  |  |  |  |  |  |  | $ | 61,029 |
Non-cash amortization income (expense) |  | $ | (135 | ) |  | $ | 28,277 |  |  | $ | (188 | ) |  | $ | (2,984 | ) |  | $ | 24,970 |
Hedging allocations (1) |  | 1,120 |  |  | (1,070 | ) |  | — |  |  | (50 | ) |  | — |
|  | 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 |
Reversal of (provision for) loan losses |  | — |  |  | — |  |  | (56 | ) |  | 685 |  |  | 629 |
Non-interest income |  |  |  |  |  |  |  |  |  |
Mortgage banking and investment activities, net |  | 11,704 |  |  | (13,117 | ) |  | 12,300 |  |  | (903 | ) |  | 9,984 |
MSR income (loss), net |  | — |  |  | 4,650 |  |  | — |  |  | — |  |  | 4,650 |
Other income |  | — |  |  | — |  |  | — |  |  | 1,600 |  |  | 1,600 |
Realized gains, net |  | — |  |  | 9,815 |  |  | — |  |  | 872 |  |  | 10,687 |
Total non-interest income, net |  | 11,704 |  |  | 1,348 |  |  | 12,300 |  |  | 1,569 |  |  | 26,921 |
Direct operating expenses |  | (26,577 | ) |  | (2,667 | ) |  | (7,085 | ) |  | (27,330 | ) |  | (63,660 | )
(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 |
(1) | Intersegment hedging allocation presented in the tables above is included in the mortgage banking and investment activities, net line item of the segment income statements for the three and nine months ended September 30, 2015.
The following tables present the components of Corporate/Other for the three and nine months ended September 30, 2015 and 2014. Table 21.2 – Components of Corporate/Other
|  | Three Months Ended September 30,
|  | 2015 |  | 2014
(In Thousands) |  | Legacy Consolidated VIEs |  | Other |  | Total |  | Legacy Consolidated VIEs |  | Other |  | Total
Interest income |  | $ | 6,098 |  |  | $ | 6 |  |  | $ | 6,104 |  |  | $ | 6,233 |  |  | $ | 4 |  |  | $ | 6,237 |
Interest expense |  | (3,842 | ) |  | (9,558 | ) |  | (13,400 | ) |  | (5,250 | ) |  | (6,240 | ) |  | (11,490 | )
Net interest income (loss) |  | 2,256 |  |  | (9,552 | ) |  | (7,296 | ) |  | 983 |  |  | (6,236 | ) |  | (5,253 | )
Reversal of provision for loan losses |  | — |  |  | — |  |  | — |  |  | 708 |  |  | — |  |  | 708 |
Non-interest income |  |  |  |  |  |  |  |  |  |  |  |
Mortgage banking and investment activities, net |  | (501 | ) |  | (46 | ) |  | (547 | ) |  | (361 | ) |  | (17 | ) |  | (378 | )
MSR income (loss), net |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Other income |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,600 |  |  | 1,600 |
Realized gains, net |  | — |  |  | — |  |  | — |  |  | 696 |  |  | — |  |  | 696 |
Total non-interest income, net |  | (501 | ) |  | (46 | ) |  | (547 | ) |  | 335 |  |  | 1,583 |  |  | 1,918 |
Direct operating expenses |  | — |  |  | (8,772 | ) |  | (8,772 | ) |  | (26 | ) |  | (8,317 | ) |  | (8,343 | )
(Provision for) benefit from income taxes |  | — |  |  | 1,021 |  |  | 1,021 |  |  | — |  |  | (247 | ) |  | (247 | )
Total |  | $ | 1,755 |  |  | $ | (17,349 | ) |  | $ | (15,594 | ) |  | $ | 2,000 |  |  | $ | (13,217 | ) |  | $ | (11,217 | )
|  | Nine Months Ended September 30,
|  | 2015 |  | 2014
(In Thousands) |  | Legacy Consolidated VIEs |  | Other |  | Total |  | Legacy Consolidated VIEs |  | Other |  | Total
Interest income |  | $ | 19,578 |  |  | $ | 20 |  |  | $ | 19,598 |  |  | $ | 19,473 |  |  | $ | 8 |  |  | $ | 19,481 |
Interest expense |  | (12,372 | ) |  | (28,458 | ) |  | (40,830 | ) |  | (15,950 | ) |  | (18,596 | ) |  | (34,546 | )
Net interest income (loss) |  | 7,206 |  |  | (28,438 | ) |  | (21,232 | ) |  | 3,523 |  |  | (18,588 | ) |  | (15,065 | )
Reversal of provision for loan losses |  | — |  |  | — |  |  | — |  |  | 685 |  |  | — |  |  | 685 |
Non-interest income |  |  |  |  |  |  |  |  |  |  |  |
Mortgage banking and investment activities, net |  | (2,277 | ) |  | (83 | ) |  | (2,360 | ) |  | (825 | ) |  | (78 | ) |  | (903 | )
MSR income (loss), net |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Other income |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,600 |  |  | 1,600 |
Realized gains, net |  | — |  |  | — |  |  | — |  |  | 872 |  |  | — |  |  | 872 |
Total non-interest income, net |  | (2,277 | ) |  | (83 | ) |  | (2,360 | ) |  | 47 |  |  | 1,522 |  |  | 1,569 |
Direct operating expenses |  | — |  |  | (28,326 | ) |  | (28,326 | ) |  | (120 | ) |  | (27,210 | ) |  | (27,330 | )
(Provision for) benefit from income taxes |  | — |  |  | 2,565 |  |  | 2,565 |  |  | — |  |  | (112 | ) |  | (112 | )
Total |  | $ | 4,929 |  |  | $ | (54,282 | ) |  | $ | (49,353 | ) |  | $ | 4,135 |  |  | $ | (44,388 | ) |  | $ | (40,253 | )
The following table presents supplemental information by segment at September 30, 2015 and December 31, 2014. Table 21.3 – Supplemental Segment Information
(In Thousands) |  | Residential Mortgage Banking |  | Residential Investments |  | Commercial Mortgage Banking and Investments |  | Corporate/ Other |  | Total
September 30, 2015 |  |  |  |  |  |  |  |  |  |
Residential loans |  | $ | 1,506,151 |  |  | $ | 1,360,277 |  |  | $ | — |  |  | $ | 1,170,246 |  |  | $ | 4,036,674 |
Commercial loans |  | — |  |  | — |  |  | 468,157 |  |  | — |  |  | 468,157 |
Real estate securities |  | — |  |  | 1,085,224 |  |  | — |  |  | — |  |  | 1,085,224 |
Mortgage servicing rights |  | — |  |  | 162,726 |  |  | — |  |  | — |  |  | 162,726 |
Total assets |  | 1,563,306 |  |  | 2,723,955 |  |  | 475,924 |  |  | 1,505,841 |  |  | 6,269,026 |
December 31, 2014 |  |  |  |  |  |  |  |  |  |  |
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 |

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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 34 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8981-108599 Reference 2: 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=51669610&loc=d3e9038-108599 Reference 3: 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=51669610&loc=d3e8971-108599 Reference 4: 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=51669610&loc=d3e8595-108599 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=51669610&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 32 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8933-108599 Reference 7: 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=51669610&loc=d3e8844-108599 Reference 8: 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=51669610&loc=d3e8984-108599 Reference 9: 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=51669610&loc=d3e9031-108599 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=51669610&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 10 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8538-108599 Reference 12: 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=51669610&loc=d3e8864-108599 Reference 13: 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=51669610&loc=d3e8924-108599 Reference 14: 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=51669610&loc=d3e8906-108599 + Details
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