XML 40 R29.htm IDEA: XBRL DOCUMENT v3.4.0.3
Segment Information
 3 Months Ended
Mar. 31, 2016
Segment Reporting [Abstract]  
Segment Information
Segment Information
Redwood operates in three segments: Residential Mortgage Banking, Residential Investments, and Commercial. Beginning in the first quarter of 2016, we renamed our former "Commercial mortgage banking and investments" segment to our "Commercial" segment, as a result of our announcement to discontinue the origination of commercial loans. 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, 2015.
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.
The following tables present financial information by segment for the three months ended March 31, 2016 and 2015.
Table 22.1 – Business Segment Financial Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2016
(In Thousands)
 
 Residential Mortgage Banking
 
 Residential Investments
 
 Commercial
 
 Corporate/
Other
 
 Total
Interest income
 
$
7,869

 
$
39,936

 
$
9,581

 
$
4,942

 
$
62,328

Interest expense
 
(3,289
)
 
(4,953
)
 
(2,952
)
 
(12,756
)
 
(23,950
)
Net interest income (loss)
 
4,580

 
34,983

 
6,629

 
(7,814
)
 
38,378

Reversal of provision for loan losses
 
—

 
—

 
(289
)
 
—

 
(289
)
Non-interest income
 
 
 
 
 
 
 
 
 
 
Mortgage banking activities, net
 
9,280

 
—

 
(2,062
)
 
—

 
7,218

MSR income (loss), net
 
—

 
6,281

 
—

 
—

 
6,281

Investment fair value changes, net
 
—

 
(17,765
)
 
(137
)
 
(1,636
)
 
(19,538
)
Other income
 
—

 
955

 
—

 
—

 
955

Realized gains, net
 
—

 
9,246

 
—

 
292

 
9,538

Total non-interest income, net
 
9,280

 
(1,283
)
 
(2,199
)
 
(1,344
)
 
4,454

Direct operating expenses (1)
 
(5,321
)
 
(1,861
)
 
(1,602
)
 
(21,668
)
 
(30,452
)
Provision for income taxes
 
—

 
(28
)
 
—

 
—

 
(28
)
Segment Contribution
 
$
8,539

 
$
31,811

 
$
2,539

 
$
(30,826
)
 
 
Net Income
 
 
 
 
 
 
 
 
 
$
12,063

Non-cash amortization income (expense)
 
$
(43
)
 
$
8,068

 
$
(16
)
 
$
(990
)
 
$
7,019


(1)
For the three months ended March 31, 2016, charges associated with the restructuring of our conforming residential mortgage loan operations and commercial operations are presented under the Corporate/Other column. See Note 11 for further discussion of these restructuring charges.

 
 
Three Months Ended March 31, 2015
(In Thousands)
 
 Residential Mortgage Banking
 
 Residential Investments
 
 Commercial
 
 Corporate/
Other
 
 Total
Interest income
 
$
15,795

 
$
30,012

 
$
10,914

 
$
7,025

 
$
63,746

Interest expense
 
(3,778
)
 
(2,810
)
 
(3,489
)
 
(13,884
)
 
(23,961
)
Net interest income (loss)
 
12,017

 
27,202

 
7,425

 
(6,859
)
 
39,785

Provision for loan losses
 
—

 
—

 
(206
)
 
—

 
(206
)
Non-interest income
 
 
 
 
 
 
 
 
 
 
Mortgage banking activities, net
 
2,215

 
—

 
(292
)
 
—

 
1,923

MSR income (loss), net
 
—

 
(10,924
)
 
—

 
—

 
(10,924
)
Investment fair value changes, net
 
2

 
(19
)
 
—

 
(1,128
)
 
(1,145
)
Other income
 
—

 
809

 
—

 
—

 
809

Realized gains, net
 
—

 
4,306

 
—

 
—

 
4,306

Total non-interest income, net
 
2,217

 
(5,828
)
 
(292
)
 
(1,128
)
 
(5,031
)
Direct operating expenses
 
(10,903
)
 
(1,118
)
 
(3,482
)
 
(9,560
)
 
(25,063
)
Benefit from income taxes
 
8

 
3,510

 
853

 
945

 
5,316

Segment Contribution
 
$
3,339

 
$
23,766

 
$
4,298

 
$
(16,602
)
 
 
Net Income
 
 
 
 
 
 
 
 
 
$
14,801

Non-cash amortization income (expense)
 
$
(46
)
 
$
9,838

 
$
(49
)
 
$
(981
)
 
$
8,762



The following tables present the components of Corporate/Other for the three months ended March 31, 2016 and 2015.
Table 22.2 – Components of Corporate/Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
 
2016
 
2015
(In Thousands)
 
Legacy
VIEs (1)
 
Other
 
Total
 
Legacy
VIEs (1)
 
Other
 
 Total
Interest income
 
$
4,777

 
$
165

 
$
4,942

 
$
7,018

 
$
7

 
$
7,025

Interest expense
 
(3,297
)
 
(9,459
)
 
(12,756
)
 
(4,482
)
 
(9,402
)
 
(13,884
)
Net interest income (loss)
 
1,480

 
(9,294
)
 
(7,814
)
 
2,536

 
(9,395
)
 
(6,859
)
Reversal of provision for loan losses
 
—

 
—

 
—

 
—

 
—

 
—

Non-interest income
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage banking activities, net
 
—

 
—

 
—

 
—

 
—

 
—

MSR income (loss), net
 
—

 
—

 
—

 
—

 
—

 
—

Investment fair value changes, net
 
(1,580
)
 
(56
)
 
(1,636
)
 
(1,093
)
 
(35
)
 
(1,128
)
Other income
 
—

 
—

 
—

 
—

 
—

 
—

Realized gains, net
 
—

 
292

 
292

 
—

 
—

 
—

Total non-interest income, net
 
(1,580
)
 
236

 
(1,344
)
 
(1,093
)
 
(35
)
 
(1,128
)
Direct operating expenses
 
—

 
(21,668
)
 
(21,668
)
 
—

 
(9,560
)
 
(9,560
)
(Provision for) benefit from income taxes
 
—

 
—

 
—

 
—

 
945

 
945

Total
 
$
(100
)
 
$
(30,726
)
 
$
(30,826
)
 
$
1,443

 
$
(18,045
)
 
$
(16,602
)

(1)
Legacy VIEs represent legacy Sequoia entities that are consolidated for GAAP financial reporting purposes. See Note 4 for further discussion on VIEs.

The following table presents supplemental information by segment at March 31, 2016 and December 31, 2015.
Table 22.3 – Supplemental Segment Information
(In Thousands)
 
Residential Mortgage Banking
 
Residential Investments
 
Commercial
 
Corporate/
Other
 
Total
March 31, 2016
 
 
 
 
 
 
 
 
 
 
Residential loans
 
$
441,076

 
$
2,343,953

 
$
—

 
$
930,027

 
$
3,715,056

Commercial loans
 
—

 
—

 
363,893

 
—

 
363,893

Real estate securities
 
—

 
909,569

 
10,358

 
—

 
919,927

Mortgage servicing rights
 
—

 
126,620

 
—

 
—

 
126,620

Total assets
 
472,213

 
3,552,629

 
377,452

 
1,324,586

 
5,726,880

 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
 
 
 
Residential loans
 
$
1,115,738

 
$
1,791,195

 
$
—

 
$
1,021,870

 
$
3,928,803

Commercial loans
 
—

 
—

 
402,647

 
—

 
402,647

Real estate securities
 
197,007

 
1,028,171

 
8,078

 
—

 
1,233,256

Mortgage servicing rights
 
—

 
191,976

 
—

 
—

 
191,976

Total assets
 
1,347,492

 
3,140,604

 
415,716

 
1,316,235

 
6,220,047