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Segment Information (Tables)
 9 Months Ended
Sep. 30, 2017
Segment Reporting [Abstract]  
Business Segment Financial Information
The following tables present financial information by segment for the three and nine months ended September 30, 2017 and 2016.
Table 21.1 – Business Segment Financial Information
 
 
Three Months Ended September 30, 2017
(In Thousands)
 
Investment Portfolio
 
 Residential Mortgage Banking
 
 Corporate/
Other
 
 Total
Interest income
 
$
47,023

 
$
10,626

 
$
5,088

 
$
62,737

Interest expense
 
(9,445
)
 
(4,135
)
 
(13,863
)
 
(27,443
)
Net interest income (loss)
 
37,578


6,491


(8,775
)
 
35,294

Non-interest income
 
 
 
 
 
 
 
 
Mortgage banking activities, net
 
—

 
21,200

 
—

 
21,200

MSR income, net
 
1,615

 
—

 
—

 
1,615

Investment fair value changes, net
 
1,372

 
—

 
(1,048
)
 
324

Other income
 
1,197

 
—

 
—

 
1,197

Realized gains, net
 
1,734

 
—

 
—

 
1,734

Total non-interest income, net
 
5,918


21,200


(1,048
)
 
26,070

Direct operating expenses
 
(1,324
)
 
(6,107
)
 
(12,491
)
 
(19,922
)
Provision for income taxes
 
(433
)
 
(4,829
)
 
—

 
(5,262
)
Segment Contribution
 
$
41,739


$
16,755


$
(22,314
)
 
 
Net Income
 
 
 
 
 
 
 
$
36,180

Non-cash amortization income (expense)
 
$
5,222

 
$
(25
)
 
$
(787
)
 
$
4,410

 
 
Three Months Ended September 30, 2016
(In Thousands)
 
Investment Portfolio
 
 Residential Mortgage Banking
 
 Corporate/
Other
 
 Total
Interest income
 
$
47,176

 
$
8,831

 
$
4,899

 
$
60,906

Interest expense
 
(5,013
)
 
(3,826
)
 
(12,758
)
 
(21,597
)
Net interest income (loss)
 
42,163

 
5,005

 
(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, net
 
3,770

 
—

 
—

 
3,770

Investment fair value changes, net
 
12,176

 
—

 
(258
)
 
11,918

Other income
 
1,643

 
—

 
—

 
1,643

Realized gains, net
 
6,615

 
—

 
—

 
6,615

Total non-interest income, net
 
24,204

 
9,766

 
(258
)
 
33,712

Direct operating expenses
 
(2,751
)
 
(5,807
)
 
(11,797
)
 
(20,355
)
Provision for income taxes
 
(732
)
 
(240
)
 
—

 
(972
)
Segment Contribution
 
$
63,743

 
$
8,724


$
(19,914
)
 
 
Net Income
 
 
 
 
 
 
 
$
52,553

Non-cash amortization income (expense)
 
$
6,123

 
$
(28
)
 
$
(983
)
 
$
5,112


 
 
Nine Months Ended September 30, 2017
(In Thousands)
 
Investment Portfolio
 
 Residential Mortgage Banking
 
 Corporate/
Other
 
 Total
Interest income
 
$
135,106

 
$
26,515

 
$
14,968

 
$
176,589

Interest expense
 
(21,940
)
 
(11,462
)
 
(39,306
)
 
(72,708
)
Net interest income (loss)
 
113,166


15,053

 
(24,338
)
 
103,881

Non-interest income
 
 
 
 
 
 
 
 
Mortgage banking activities, net
 
—

 
50,850

 
—

 
50,850

MSR income, net
 
6,106

 
—

 
—

 
6,106

Investment fair value changes, net
 
13,846

 
—

 
(3,856
)
 
9,990

Other income
 
3,367

 
—

 
—

 
3,367

Realized gains, net
 
9,561

 
—

 
(752
)
 
8,809

Total non-interest income, net
 
32,880


50,850

 
(4,608
)
 
79,122

Direct operating expenses
 
(4,371
)
 
(18,009
)
 
(34,409
)
 
(56,789
)
Provision for income taxes
 
(4,490
)
 
(12,251
)
 
—

 
(16,741
)
Segment Contribution
 
$
137,185

 
$
35,643


$
(63,355
)
 
 
Net Income
 
 
 
 
 
 
 
$
109,473

Non-cash amortization income (expense)
 
$
16,263

 
$
(79
)
 
$
(2,528
)
 
$
13,656


 
 
Nine Months Ended September 30, 2016
(In Thousands)
 
Investment Portfolio
 
 Residential Mortgage Banking
 
 Corporate/
Other
 
 Total
Interest income
 
$
149,985

 
$
24,610

 
$
15,426

 
$
190,021

Interest expense
 
(18,679
)
 
(10,719
)
 
(38,593
)
 
(67,991
)
Net interest income (loss)
 
131,306


13,891

 
(23,167
)
 
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, net
 
12,834

 
—

 
—

 
12,834

Investment fair value changes, net
 
(16,505
)
 
—

 
(2,181
)
 
(18,686
)
Other income
 
4,157

 
—

 
—

 
4,157

Realized gains, net
 
25,745

 
—

 
292

 
26,037

Total non-interest income, net
 
26,231


26,774

 
(3,951
)
 
49,054

Direct operating expenses (1)
 
(7,689
)
 
(17,175
)
 
(46,098
)
 
(70,962
)
Provision for income taxes
 
(1,087
)
 
(240
)
 
—

 
(1,327
)
Segment Contribution
 
$
155,863

 
$
23,250

 
$
(73,216
)
 
 
Net Income
 
 
 
 
 
 
 
$
105,897

Non-cash amortization income (expense)
 
$
20,507

 
$
(102
)
 
$
(2,978
)
 
$
17,427


(1)
For the nine months ended September 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 nine months ended September 30, 2017 and 2016.
Table 21.2 – Components of Corporate/Other
 
 
Three Months Ended September 30,
 
 
2017
 
2016
(In Thousands)
 
Legacy Consolidated VIEs (1)
 
Other
 
Total
 
Legacy Consolidated VIEs (1)
 
Other
 
 Total
Interest income
 
$
4,875

 
$
213

 
$
5,088

 
$
4,837

 
$
62

 
$
4,899

Interest expense
 
(3,838
)
 
(10,025
)
 
(13,863
)
 
(3,274
)
 
(9,484
)
 
(12,758
)
Net interest income (loss)
 
1,037

 
(9,812
)
 
(8,775
)
 
1,563

 
(9,422
)
 
(7,859
)
Non-interest income
 
 
 
 
 
 
 
 
 
 
 
 
Investment fair value changes, net
 
(1,045
)
 
(3
)
 
(1,048
)
 
(255
)
 
(3
)
 
(258
)
Total non-interest income, net
 
(1,045
)
 
(3
)
 
(1,048
)
 
(255
)
 
(3
)
 
(258
)
Direct operating expenses
 
—

 
(12,491
)
 
(12,491
)
 
—

 
(11,797
)
 
(11,797
)
Total
 
$
(8
)
 
$
(22,306
)
 
$
(22,314
)
 
$
1,308

 
$
(21,222
)
 
$
(19,914
)
 
 
Nine Months Ended September 30,
 
 
2017
 
2016
(In Thousands)
 
Legacy Consolidated
VIEs (1)
 
Other
 
Total
 
Legacy Consolidated
VIEs (1)
 
Other
 
 Total
Interest income
 
$
14,576

 
$
392

 
$
14,968

 
$
14,525

 
$
901

 
$
15,426

Interest expense
 
(11,046
)
 
(28,260
)
 
(39,306
)
 
(9,842
)
 
(28,751
)
 
(38,593
)
Net interest income (loss)
 
3,530

 
(27,868
)
 
(24,338
)
 
4,683

 
(27,850
)
 
(23,167
)
Non-interest income
 
 
 
 
 
 
 
 
 
 
 
 
Investment fair value changes, net
 
(3,842
)
 
(14
)
 
(3,856
)
 
(2,086
)
 
(95
)
 
(2,181
)
Realized gains, net
 
—

 
(752
)
 
(752
)
 
—

 
292

 
292

Total non-interest income, net
 
(3,842
)
 
(766
)
 
(4,608
)
 
(2,086
)
 
(1,865
)
 
(3,951
)
Direct operating expenses
 
—

 
(34,409
)
 
(34,409
)
 
—

 
(46,098
)
 
(46,098
)
Total
 
$
(312
)
 
$
(63,043
)
 
$
(63,355
)
 
$
2,597

 
$
(75,813
)
 
$
(73,216
)
(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 September 30, 2017 and December 31, 2016.
Table 21.3 – Supplemental Segment Information
(In Thousands)
 
Investment Portfolio
 
Residential Mortgage Banking
 
Corporate/
Other
 
Total
September 30, 2017
 
 
 
 
 
 
 
 
Residential loans
 
$
2,586,105

 
$
925,681

 
$
673,134

 
$
4,184,920

Real estate securities
 
1,356,272

 
—

 
—

 
1,356,272

Mortgage servicing rights
 
62,928

 
—

 
—

 
62,928

Total assets
 
4,236,023

 
947,503

 
947,173

 
6,130,699

 
 
 
 
 
 
 
 
 
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