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Segment Information | 6 Months Ended
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Jun. 30, 2018
Segment Reporting [Abstract] |
Segment Information | Segment Information Redwood operates in two segments: Investment Portfolio and Residential Mortgage Banking. 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, 2017. 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 corporate expenses not directly assigned or allocated to one of our two segments, as well as activity from certain consolidated Sequoia entities, are included in the Corporate/Other column as reconciling items to our consolidated financial statements. These unallocated corporate 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 six months ended June 30, 2018 and 2017. Table 20.1 – Business Segment Financial Information
|  | Three Months Ended June 30, 2018
(In Thousands) |  | Investment Portfolio |  | Residential Mortgage Banking |  | Corporate/ Other |  | Total
Interest income |  | $ | 64,569 |  |  | $ | 13,084 |  |  | $ | 5,323 |  |  | $ | 82,976 |
Interest expense |  | (27,004 | ) |  | (7,629 | ) |  | (13,580 | ) |  | (48,213 | )
Net interest income (loss) |  | 37,565 |  |  | 5,455 |  |  | (8,257 | ) |  | 34,763 |
Non-interest income |  |  |  |  |  |  |  |
Mortgage banking activities, net |  | — |  |  | 10,596 |  |  | — |  |  | 10,596 |
Investment fair value changes, net |  | 1,600 |  |  | — |  |  | (711 | ) |  | 889 |
Other income, net |  | 3,322 |  |  | — |  |  | — |  |  | 3,322 |
Realized gains, net |  | 4,714 |  |  | — |  |  | — |  |  | 4,714 |
Total non-interest income, net |  | 9,636 |  |  | 10,596 |  |  | (711 | ) |  | 19,521 |
Direct operating expenses |  | (1,858 | ) |  | (5,611 | ) |  | (11,540 | ) |  | (19,009 | )
Provision for income taxes |  | (1,130 | ) |  | (1,398 | ) |  | — |  |  | (2,528 | )
Segment Contribution |  | $ | 44,213 |  |  | $ | 9,042 |  |  | $ | (20,508 | ) |  |
Net Income |  |  |  |  |  |  |  | $ | 32,747 |
Non-cash amortization income (expense), net |  | $ | 4,654 |  |  | $ | (23 | ) |  | $ | (814 | ) |  | $ | 3,817 |
|  | 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 |
Investment fair value changes, net |  | 9,115 |  |  | — |  |  | (1,000 | ) |  | 8,115 |
Other income, net |  | 3,764 |  |  | — |  |  | — |  |  | 3,764 |
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 |
|  | Six Months Ended June 30, 2018
(In Thousands) |  | Investment Portfolio |  | Residential Mortgage Banking |  | Corporate/ Other |  | Total
Interest income |  | $ | 123,326 |  |  | $ | 25,981 |  |  | $ | 10,288 |  |  | $ | 159,595 |
Interest expense |  | (46,867 | ) |  | (13,766 | ) |  | (29,094 | ) |  | (89,727 | )
Net interest income (loss) |  | 76,459 |  |  | 12,215 |  |  | (18,806 | ) |  | 69,868 |
Non-interest income |  |  |  |  |  |  |  |
Mortgage banking activities, net |  | — |  |  | 37,172 |  |  | — |  |  | 37,172 |
Investment fair value changes, net |  | 3,190 |  |  | — |  |  | (692 | ) |  | 2,498 |
Other income, net |  | 5,440 |  |  | — |  |  | — |  |  | 5,440 |
Realized gains, net |  | 14,077 |  |  | — |  |  | — |  |  | 14,077 |
Total non-interest income, net |  | 22,707 |  |  | 37,172 |  |  | (692 | ) |  | 59,187 |
Direct operating expenses |  | (3,865 | ) |  | (14,243 | ) |  | (23,931 | ) |  | (42,039 | )
Provision for income taxes |  | (2,018 | ) |  | (5,406 | ) |  | — |  |  | (7,424 | )
Segment Contribution |  | $ | 93,283 |  |  | $ | 29,738 |  |  | $ | (43,429 | ) |  |
Net Income |  |  |  |  |  |  |  | $ | 79,592 |
Non-cash amortization income (expense) |  | $ | 9,271 |  |  | $ | (45 | ) |  | $ | (1,672 | ) |  | $ | 7,554 |
|  | 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 |
Investment fair value changes, net |  | 12,474 |  |  | — |  |  | (2,808 | ) |  | 9,666 |
Other income, net |  | 6,661 |  |  | — |  |  | — |  |  | 6,661 |
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 |
The following table presents the components of Corporate/Other for the three and six months ended June 30, 2018 and 2017. Table 20.2 – Components of Corporate/Other
|  | Three Months Ended June 30,
|  | 2018 |  | 2017
(In Thousands) |  | Legacy Consolidated VIEs (1) |  | Other |  | Total |  | Legacy Consolidated VIEs (1) |  | Other |  | Total
Interest income |  | $ | 5,017 |  |  | $ | 306 |  |  | $ | 5,323 |  |  | $ | 4,863 |  |  | $ | 113 |  |  | $ | 4,976 |
Interest expense |  | (4,215 | ) |  | (9,365 | ) |  | (13,580 | ) |  | (3,692 | ) |  | (8,908 | ) |  | (12,600 | )
Net interest income (loss) |  | 802 |  |  | (9,059 | ) |  | (8,257 | ) |  | 1,171 |  |  | (8,795 | ) |  | (7,624 | )
Non-interest income |  |  |  |  |  |  |  |  |  |  |  |
Investment fair value changes, net |  | (720 | ) |  | 9 |  |  | (711 | ) |  | (987 | ) |  | (13 | ) |  | (1,000 | )
Realized gains, net |  | — |  |  | — |  |  | — |  |  | — |  |  | (752 | ) |  | (752 | )
Total non-interest income, net |  | (720 | ) |  | 9 |  |  | (711 | ) |  | (987 | ) |  | (765 | ) |  | (1,752 | )
Direct operating expenses |  | — |  |  | (11,540 | ) |  | (11,540 | ) |  | — |  |  | (11,166 | ) |  | (11,166 | )
Total |  | $ | 82 |  |  | $ | (20,590 | ) |  | $ | (20,508 | ) |  | $ | 184 |  |  | $ | (20,726 | ) |  | $ | (20,542 | )
|  | Six Months Ended June 30,
|  | 2018 |  | 2017
(In Thousands) |  | Legacy Consolidated VIEs (1) |  | Other |  | Total |  | Legacy Consolidated VIEs (1) |  | Other |  | Total
Interest income |  | $ | 9,829 |  |  | $ | 459 |  |  | $ | 10,288 |  |  | $ | 9,701 |  |  | $ | 179 |  |  | $ | 9,880 |
Interest expense |  | (8,067 | ) |  | (21,027 | ) |  | (29,094 | ) |  | (7,208 | ) |  | (18,235 | ) |  | (25,443 | )
Net interest income (loss) |  | 1,762 |  |  | (20,568 | ) |  | (18,806 | ) |  | 2,493 |  |  | (18,056 | ) |  | (15,563 | )
Non-interest income |  |  |  |  |  |  |  |  |  |  |  |
Investment fair value changes, net |  | (728 | ) |  | 36 |  |  | (692 | ) |  | (2,797 | ) |  | (11 | ) |  | (2,808 | )
Realized gains, net |  | — |  |  | — |  |  | — |  |  | — |  |  | (752 | ) |  | (752 | )
Total non-interest income, net |  | (728 | ) |  | 36 |  |  | (692 | ) |  | (2,797 | ) |  | (763 | ) |  | (3,560 | )
Direct operating expenses |  | — |  |  | (23,931 | ) |  | (23,931 | ) |  | — |  |  | (21,918 | ) |  | (21,918 | )
Total |  | $ | 1,034 |  |  | $ | (44,463 | ) |  | $ | (43,429 | ) |  | $ | (304 | ) |  | $ | (40,737 | ) |  | $ | (41,041 | )
(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 June 30, 2018 and December 31, 2017. Table 20.3 – Supplemental Segment Information
(In Thousands) |  | Investment Portfolio |  | Residential Mortgage Banking |  | Corporate/ Other |  | Total
June 30, 2018 |  |  |  |  |  |  |  |
Residential loans |  | $ | 3,794,481 |  |  | $ | 1,104,660 |  |  | $ | 592,029 |  |  | $ | 5,491,170 |
Real estate securities |  | 1,453,936 |  |  | — |  |  | — |  |  | 1,453,936 |
Total assets |  | 5,591,778 |  |  | 1,124,300 |  |  | 796,473 |  |  | 7,512,551 |
December 31, 2017 |  |  |  |  |  |  |  |
Residential loans |  | $ | 3,054,448 |  |  | $ | 1,427,945 |  |  | $ | 632,817 |  |  | $ | 5,115,210 |
Real estate securities |  | 1,476,510 |  |  | — |  |  | — |  |  | 1,476,510 |
Total assets |  | 4,743,873 |  |  | 1,453,069 |  |  | 842,880 |  |  | 7,039,822 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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