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Segment Information | 9 Months Ended
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Sep. 30, 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 and nine months ended September 30, 2016 and 2015. Table 22.1 – Business Segment Financial Information
|  | Three Months Ended September 30, 2016
(In Thousands) |  | Residential Mortgage Banking |  | Residential Investments |  | Commercial |  | Corporate/ Other |  | Total
Interest income |  | $ | 8,831 |  |  | $ | 39,981 |  |  | $ | 7,195 |  |  | $ | 4,899 |  |  | $ | 60,906 |
Interest expense |  | (3,826 | ) |  | (4,471 | ) |  | (542 | ) |  | (12,758 | ) |  | (21,597 | )
Net interest income (loss) |  | 5,005 |  |  | 35,510 |  |  | 6,653 |  |  | (7,859 | ) |  | 39,309 |
Reversal of provision for loan losses |  | — |  |  | — |  |  | 859 |  |  | — |  |  | 859 |
Non-interest income |  |  |  |  |  |  |  |  |  |
Mortgage banking activities, net |  | 9,766 |  |  | — |  |  | — |  |  | — |  |  | 9,766 |
MSR income (loss), net |  | — |  |  | 3,770 |  |  | — |  |  | — |  |  | 3,770 |
Investment fair value changes, net |  | — |  |  | 11,973 |  |  | 203 |  |  | (258 | ) |  | 11,918 |
Other income |  | — |  |  | 1,643 |  |  | — |  |  | — |  |  | 1,643 |
Realized gains, net |  | — |  |  | 1,991 |  |  | 4,624 |  |  | — |  |  | 6,615 |
Total non-interest income, net |  | 9,766 |  |  | 19,377 |  |  | 4,827 |  |  | (258 | ) |  | 33,712 |
Direct operating expenses (1) |  | (5,807 | ) |  | (2,498 | ) |  | (253 | ) |  | (11,797 | ) |  | (20,355 | )
Provision for income taxes |  | (240 | ) |  | (732 | ) |  | — |  |  | — |  |  | (972 | )
Segment Contribution |  | $ | 8,724 |  |  | $ | 51,657 |  |  | $ | 12,086 |  |  | $ | (19,914 | ) |  |
Net Income |  |  |  |  |  |  |  |  |  | $ | 52,553 |
Non-cash amortization income (expense) |  | $ | (28 | ) |  | $ | 6,124 |  |  | $ | (1 | ) |  | $ | (983 | ) |  | $ | 5,112 |
|  | Three Months Ended September 30, 2015
(In Thousands) |  | Residential Mortgage Banking |  | Residential Investments |  | Commercial |  | 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 activities, net |  | 331 |  |  | — |  |  | 1,002 |  |  | — |  |  | 1,333 |
MSR income (loss), net |  | — |  |  | 3,549 |  |  | — |  |  | — |  |  | 3,549 |
Investment fair value changes, net |  | — |  |  | (13,622 | ) |  | — |  |  | (547 | ) |  | (14,169 | )
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 | )
(Provision for) 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 |  | (1,683 | ) |  | 1,683 |  |  | — |  |  | — |  |  | — |
|  | Nine Months Ended September 30, 2016
(In Thousands) |  | Residential Mortgage Banking |  | Residential Investments |  | Commercial |  | Corporate/ Other |  | Total
Interest income |  | $ | 24,610 |  |  | $ | 120,812 |  |  | $ | 29,927 |  |  | $ | 14,672 |  |  | $ | 190,021 |
Interest expense |  | (10,719 | ) |  | (14,076 | ) |  | (5,001 | ) |  | (38,195 | ) |  | (67,991 | )
Net interest income (loss) |  | 13,891 |  |  | 106,736 |  |  | 24,926 |  |  | (23,523 | ) |  | 122,030 |
Reversal of provision for loan losses |  | — |  |  | — |  |  | 7,102 |  |  | — |  |  | 7,102 |
Non-interest income |  |  |  |  |  |  |  |  |  |
Mortgage banking activities, net |  | 26,774 |  |  | — |  |  | (2,062 | ) |  | — |  |  | 24,712 |
MSR income (loss), net |  | — |  |  | 12,834 |  |  | — |  |  | — |  |  | 12,834 |
Investment fair value changes, net |  | — |  |  | (16,913 | ) |  | 408 |  |  | (2,181 | ) |  | (18,686 | )
Other income |  | — |  |  | 4,130 |  |  | 27 |  |  | — |  |  | 4,157 |
Realized gains, net |  | — |  |  | 21,312 |  |  | 4,433 |  |  | 292 |  |  | 26,037 |
Total non-interest income, net |  | 26,774 |  |  | 21,363 |  |  | 2,806 |  |  | (1,889 | ) |  | 49,054 |
Direct operating expenses (1) |  | (17,175 | ) |  | (6,517 | ) |  | (2,524 | ) |  | (44,746 | ) |  | (70,962 | )
Provision for income taxes |  | (240 | ) |  | (1,087 | ) |  | — |  |  | — |  |  | (1,327 | )
Segment Contribution |  | $ | 23,250 |  |  | $ | 120,495 |  |  | $ | 32,310 |  |  | $ | (70,158 | ) |  |
Net Income |  |  |  |  |  |  |  |  |  | $ | 105,897 |
Non-cash amortization income (expense) |  | $ | (102 | ) |  | $ | 20,531 |  |  | $ | (24 | ) |  | $ | (2,978 | ) |  | $ | 17,427 |
|  | Nine Months Ended September 30, 2015
(In Thousands) |  | Residential Mortgage Banking |  | Residential Investments |  | Commercial |  | 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 activities, net |  | 7,383 |  |  | — |  |  | 3,323 |  |  | — |  |  | 10,706 |
MSR income (loss), net |  | — |  |  | (6,545 | ) |  | — |  |  | — |  |  | (6,545 | )
Investment fair value changes, net |  | — |  |  | (14,745 | ) |  | — |  |  | (2,360 | ) |  | (17,105 | )
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 |  | 1,120 |  |  | (1,070 | ) |  | — |  |  | (50 | ) |  | — |
(1) | For the three and nine months ended September 30, 2016, charges associated with the restructuring of our conforming residential mortgage loan operations and commercial operations, included in the direct operating expense line item, are presented under the Corporate/Other column. See Note 11 for further discussion of these restructuring charges.
The following tables present the components of Corporate/Other for the three and nine months ended September 30, 2016 and 2015. Table 22.2 – Components of Corporate/Other
|  | Three Months Ended September 30,
|  | 2016 |  | 2015
(In Thousands) |  | Legacy Consolidated VIEs (1) |  | Other |  | Total |  | Legacy Consolidated VIEs (1) |  | Other |  | Total
Interest income |  | $ | 4,837 |  |  | $ | 62 |  |  | $ | 4,899 |  |  | $ | 6,098 |  |  | $ | 6 |  |  | $ | 6,104 |
Interest expense |  | (3,274 | ) |  | (9,484 | ) |  | (12,758 | ) |  | (3,842 | ) |  | (9,558 | ) |  | (13,400 | )
Net interest income (loss) |  | 1,563 |  |  | (9,422 | ) |  | (7,859 | ) |  | 2,256 |  |  | (9,552 | ) |  | (7,296 | )
Non-interest income |  |  |  |  |  |  |  |  |  |  |  |
Investment fair value changes, net |  | (255 | ) |  | (3 | ) |  | (258 | ) |  | (501 | ) |  | (46 | ) |  | (547 | )
Total non-interest income, net |  | (255 | ) |  | (3 | ) |  | (258 | ) |  | (501 | ) |  | (46 | ) |  | (547 | )
Direct operating expenses |  | — |  |  | (11,797 | ) |  | (11,797 | ) |  | — |  |  | (8,772 | ) |  | (8,772 | )
Provision for income taxes |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,021 |  |  | 1,021 |
Total |  | $ | 1,308 |  |  | $ | (21,222 | ) |  | $ | (19,914 | ) |  | $ | 1,755 |  |  | $ | (17,349 | ) |  | $ | (15,594 | )
|  | Nine Months Ended September 30,
|  | 2016 |  | 2015
(In Thousands) |  | Legacy Consolidated VIEs (1) |  | Other |  | Total |  | Legacy Consolidated VIEs (1) |  | Other |  | Total
Interest income |  | $ | 14,525 |  |  | $ | 147 |  |  | $ | 14,672 |  |  | $ | 19,578 |  |  | $ | 20 |  |  | $ | 19,598 |
Interest expense |  | (9,842 | ) |  | (28,353 | ) |  | (38,195 | ) |  | (12,372 | ) |  | (28,458 | ) |  | (40,830 | )
Net interest income (loss) |  | 4,683 |  |  | (28,206 | ) |  | (23,523 | ) |  | 7,206 |  |  | (28,438 | ) |  | (21,232 | )
Non-interest income |  |  |  |  |  |  |  |  |  |  |  |
Investment fair value changes, net |  | (2,086 | ) |  | (95 | ) |  | (2,181 | ) |  | (2,277 | ) |  | (83 | ) |  | (2,360 | )
Realized gains, net |  | — |  |  | 292 |  |  | 292 |  |  | — |  |  | — |  |  | — |
Total non-interest income, net |  | (2,086 | ) |  | 197 |  |  | (1,889 | ) |  | (2,277 | ) |  | (83 | ) |  | (2,360 | )
Direct operating expenses |  | — |  |  | (44,746 | ) |  | (44,746 | ) |  | — |  |  | (28,326 | ) |  | (28,326 | )
Provision for income taxes |  | — |  |  | — |  |  | — |  |  | — |  |  | 2,565 |  |  | 2,565 |
Total |  | $ | 2,597 |  |  | $ | (72,755 | ) |  | $ | (70,158 | ) |  | $ | 4,929 |  |  | $ | (54,282 | ) |  | $ | (49,353 | )
(1) | Legacy consolidated 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 September 30, 2016 and December 31, 2015. Table 22.3 – Supplemental Segment Information
(In Thousands) |  | Residential Mortgage Banking |  | Residential Investments |  | Commercial |  | Corporate/ Other |  | Total
September 30, 2016 |  |  |  |  |  |  |  |  |  |
Residential loans |  | $ | 1,188,514 |  |  | $ | 2,282,674 |  |  | $ | — |  |  | $ | 839,976 |  |  | $ | 4,311,164 |
Commercial loans |  | — |  |  | — |  |  | 30,400 |  |  | — |  |  | 30,400 |
Real estate securities |  | — |  |  | 864,300 |  |  | 72,610 |  |  | — |  |  | 936,910 |
Mortgage servicing rights |  | — |  |  | 106,009 |  |  | — |  |  | — |  |  | 106,009 |
Total assets |  | 1,215,240 |  |  | 3,470,013 |  |  | 103,507 |  |  | 1,083,859 |  |  | 5,872,619 |
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 |

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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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