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Segment Information (Tables)
 6 Months Ended
Jun. 30, 2017
Segment Reporting [Abstract]  
Business Segment Financial Information
The following tables present financial information by segment for the three and six months ended June 30, 2017 and 2016.
Table 21.1 – Business Segment Financial Information
 
 
Three Months Ended June 30, 2017
(In Thousands)
 
Investment Portfolio
 
 Residential Mortgage Banking
 
 Corporate/
Other
 
 Total
Interest income
 
$
45,833

 
$
8,415

 
$
4,976

 
$
59,224

Interest expense
 
(7,231
)
 
(4,403
)
 
(12,600
)
 
(24,234
)
Net interest income (loss)
 
38,602


4,012


(7,624
)
 
34,990

Non-interest income
 
 
 
 
 
 
 
 
Mortgage banking activities, net
 
—

 
12,046

 
—

 
12,046

MSR income, net
 
2,778

 
—

 
—

 
2,778

Investment fair value changes, net
 
9,115

 
—

 
(1,000
)
 
8,115

Other income
 
986

 
—

 
—

 
986

Realized gains, net
 
2,124

 
—

 
(752
)
 
1,372

Total non-interest income, net
 
15,003


12,046


(1,752
)
 
25,297

Direct operating expenses
 
(1,454
)
 
(6,021
)
 
(11,166
)
 
(18,641
)
Provision for income taxes
 
(2,320
)
 
(3,002
)
 
—

 
(5,322
)
Segment Contribution
 
$
49,831


$
7,035


$
(20,542
)
 
 
Net Income
 
 
 
 
 
 
 
$
36,324

Non-cash amortization income (expense)
 
$
5,194

 
$
(27
)
 
$
(744
)
 
$
4,423

 
 
Three Months Ended June 30, 2016
(In Thousands)
 
Investment Portfolio
 
 Residential Mortgage Banking
 
 Corporate/
Other
 
 Total
Interest income
 
$
54,046

 
$
7,910

 
$
4,831

 
$
66,787

Interest expense
 
(6,159
)
 
(3,604
)
 
(12,681
)
 
(22,444
)
Net interest income (loss)
 
47,887

 
4,306

 
(7,850
)
 
44,343

Reversal of provision for loan losses
 
6,532

 
—

 
—

 
6,532

Non-interest income
 
 
 
 
 
 
 
 
Mortgage banking activities, net
 
—

 
7,728

 
—

 
7,728

MSR income, net
 
2,783

 
—

 
—

 
2,783

Investment fair value changes, net
 
(10,779
)
 
—

 
(287
)
 
(11,066
)
Other income
 
1,559

 
—

 
—

 
1,559

Realized gains, net
 
9,884

 
—

 
—

 
9,884

Total non-interest income, net
 
3,447

 
7,728

 
(287
)
 
10,888

Direct operating expenses
 
(2,827
)
 
(6,047
)
 
(11,281
)
 
(20,155
)
Provision for income taxes
 
(327
)
 
—

 
—

 
(327
)
Segment Contribution
 
$
54,712

 
$
5,987


$
(19,418
)
 
 
Net Income
 
 
 
 
 
 
 
$
41,281

Non-cash amortization income (expense)
 
$
6,332

 
$
(31
)
 
$
(1,005
)
 
$
5,296


 
 
Six Months Ended June 30, 2017
(In Thousands)
 
Investment Portfolio
 
 Residential Mortgage Banking
 
 Corporate/
Other
 
 Total
Interest income
 
$
88,083

 
$
15,889

 
$
9,880

 
$
113,852

Interest expense
 
(12,495
)
 
(7,327
)
 
(25,443
)
 
(45,265
)
Net interest income (loss)
 
75,588


8,562

 
(15,563
)
 
68,587

Non-interest income
 
 
 
 
 
 
 
 
Mortgage banking activities, net
 
—

 
29,650

 
—

 
29,650

MSR income, net
 
4,491

 
—

 
—

 
4,491

Investment fair value changes, net
 
12,474

 
—

 
(2,808
)
 
9,666

Other income
 
2,170

 
—

 
—

 
2,170

Realized gains, net
 
7,827

 
—

 
(752
)
 
7,075

Total non-interest income, net
 
26,962


29,650

 
(3,560
)
 
53,052

Direct operating expenses
 
(3,047
)
 
(11,902
)
 
(21,918
)
 
(36,867
)
Provision for income taxes
 
(4,057
)
 
(7,422
)
 
—

 
(11,479
)
Segment Contribution
 
$
95,446

 
$
18,888


$
(41,041
)
 
 
Net Income
 
 
 
 
 
 
 
$
73,293

Non-cash amortization income (expense)
 
$
11,041

 
$
(54
)
 
$
(1,741
)
 
$
9,246


 
 
Six Months Ended June 30, 2016
(In Thousands)
 
Investment Portfolio
 
 Residential Mortgage Banking
 
 Corporate/
Other
 
 Total
Interest income
 
$
102,809

 
$
15,779

 
$
10,527

 
$
129,115

Interest expense
 
(13,666
)
 
(6,893
)
 
(25,835
)
 
(46,394
)
Net interest income (loss)
 
89,143


8,886

 
(15,308
)
 
82,721

Reversal of provision for loan losses
 
6,243

 
—

 
—

 
6,243

Non-interest income
 
 
 
 
 
 
 
 
Mortgage banking activities, net
 
—

 
17,008

 
(2,062
)
 
14,946

MSR income, net
 
9,064

 
—

 
—

 
9,064

Investment fair value changes, net
 
(28,681
)
 
—

 
(1,923
)
 
(30,604
)
Other income
 
2,514

 
—

 
—

 
2,514

Realized gains, net
 
19,130

 
—

 
292

 
19,422

Total non-interest income, net
 
2,027


17,008

 
(3,693
)
 
15,342

Direct operating expenses (1)
 
(4,938
)
 
(11,368
)
 
(34,301
)
 
(50,607
)
Provision for income taxes
 
(355
)
 
—

 
—

 
(355
)
Segment Contribution
 
$
92,120

 
$
14,526

 
$
(53,302
)
 
 
Net Income
 
 
 
 
 
 
 
$
53,344

Non-cash amortization income (expense)
 
$
14,384

 
$
(74
)
 
$
(1,995
)
 
$
12,315


(1)
For the six months ended June 30, 2016, $11 million of costs 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.
Components of Corporate and Other
The following tables present the components of Corporate/Other for the three and six months ended June 30, 2017 and 2016.
Table 21.2 – Components of Corporate/Other
 
 
Three Months Ended June 30,
 
 
2017
 
2016
(In Thousands)
 
Legacy Consolidated VIEs (1)
 
Other
 
Total
 
Legacy Consolidated VIEs (1)
 
Other
 
 Total
Interest income
 
$
4,863

 
$
113

 
$
4,976

 
$
4,911

 
$
(80
)
 
$
4,831

Interest expense
 
(3,692
)
 
(8,908
)
 
(12,600
)
 
(3,271
)
 
(9,410
)
 
(12,681
)
Net interest income (loss)
 
1,171

 
(8,795
)
 
(7,624
)
 
1,640

 
(9,490
)
 
(7,850
)
Non-interest income
 
 
 
 
 
 
 
 
 
 
 
 
Investment fair value changes, net
 
(987
)
 
(13
)
 
(1,000
)
 
(251
)
 
(36
)
 
(287
)
Realized gains, net
 
—

 
(752
)
 
(752
)
 
—

 
—

 
—

Total non-interest income, net
 
(987
)
 
(765
)
 
(1,752
)
 
(251
)
 
(36
)
 
(287
)
Direct operating expenses
 
—

 
(11,166
)
 
(11,166
)
 
—

 
(11,281
)
 
(11,281
)
Total
 
$
184

 
$
(20,726
)
 
$
(20,542
)
 
$
1,389

 
$
(20,807
)
 
$
(19,418
)
 
 
Six Months Ended June 30,
 
 
2017
 
2016
(In Thousands)
 
Legacy Consolidated
VIEs (1)
 
Other
 
Total
 
Legacy Consolidated
VIEs (1)
 
Other
 
 Total
Interest income
 
$
9,701

 
$
179

 
$
9,880

 
$
9,688

 
$
839

 
$
10,527

Interest expense
 
(7,208
)
 
(18,235
)
 
(25,443
)
 
(6,568
)
 
(19,267
)
 
(25,835
)
Net interest income (loss)
 
2,493

 
(18,056
)
 
(15,563
)
 
3,120

 
(18,428
)
 
(15,308
)
Non-interest income
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage banking activities, net
 
—

 
—

 
—

 
—

 
(2,062
)
 
(2,062
)
Investment fair value changes, net
 
(2,797
)
 
(11
)
 
(2,808
)
 
(1,831
)
 
(92
)
 
(1,923
)
Realized gains, net
 
—

 
(752
)
 
(752
)
 
—

 
292

 
292

Total non-interest income, net
 
(2,797
)
 
(763
)
 
(3,560
)
 
(1,831
)
 
(1,862
)
 
(3,693
)
Direct operating expenses
 
—

 
(21,918
)
 
(21,918
)
 
—

 
(34,301
)
 
(34,301
)
Total
 
$
(304
)
 
$
(40,737
)
 
$
(41,041
)
 
$
1,289

 
$
(54,591
)
 
$
(53,302
)
(1)
Legacy consolidated VIEs represent legacy Sequoia entities that are consolidated for GAAP financial reporting purposes. See Note 4 for further discussion on VIEs.
Supplemental Information by Segment
The following table presents supplemental information by segment at June 30, 2017 and December 31, 2016.
Table 21.3 – Supplemental Segment Information
(In Thousands)
 
Investment Portfolio
 
Residential Mortgage Banking
 
Corporate/
Other
 
Total
June 30, 2017
 
 
 
 
 
 
 
 
Residential loans
 
$
2,360,234

 
$
837,371

 
$
707,686

 
$
3,905,291

Real estate securities
 
1,218,503

 
—

 
—

 
1,218,503

Mortgage servicing rights
 
63,770

 
—

 
—

 
63,770

Total assets
 
3,809,618

 
859,706

 
986,158

 
5,655,482

 
 
 
 
 
 
 
 
 
December 31, 2016
 
 
 
 
 
 
 
 
Residential loans
 
$
2,261,016

 
$
835,399

 
$
791,636

 
$
3,888,051

Real estate securities
 
1,018,439

 
—

 
—

 
1,018,439

Mortgage servicing rights
 
118,526

 
—

 
—

 
118,526

Total assets
 
3,615,535

 
866,356

 
1,001,586

 
5,483,477