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Segment Information | 12 Months Ended
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Dec. 31, 2020
Segment Reporting [Abstract] |
Segment Information | Segment Information Redwood operates in three segments: Residential Lending, Business Purpose Lending, and Third-Party Investments. During 2020, we reorganized our segments and combined what was previously our Multifamily Investments segment and Third-Party Residential Investments into a new segment called Third-Party Investments, and began including convertible debt and trust-preferred interest expense in our Corporate/Other segment. We conformed the presentation of prior periods. The accounting policies of the reportable segments are the same as those described in Note 3 — Summary of Significant Accounting Policies. For a full description of our segments, see Item 1—Business in this Annual Report on Form 10-K. 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 three 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 and realized gains from the repurchase of our convertible notes and trust preferred securities, indirect general and administrative expenses and other expense. The following tables present financial information by segment for the years ended December 31, 2020, 2019, and 2018. Table 23.1 – Business Segment Financial Information
|  | Year Ended December 31, 2020
(In Thousands) |  | Residential Lending |  | Business Purpose Lending |  | Third-Party Investments |  | Corporate/ Other |  | Total
Interest income |  | $ | 150,906 |  |  | $ | 218,890 |  |  | $ | 192,984 |  |  | $ | 9,136 |  |  | $ | 571,916 |
Interest expense |  | (107,371) |  |  | (157,292) |  |  | (135,722) |  |  | (47,620) |  |  | (448,005) |
Net interest income |  | 43,535 |  |  | 61,598 |  |  | 57,262 |  |  | (38,484) |  |  | 123,911 |
Non-interest income |  |  |  |  |  |  |  |  |  |
Mortgage banking activities, net |  | 3,721 |  |  | 74,751 |  |  | — |  |  | — |  |  | 78,472 |
Investment fair value changes, net |  | (153,388) |  |  | (81,042) |  |  | (352,004) |  |  | (2,004) |  |  | (588,438) |
Other income, net |  | (4,642) |  |  | 4,651 |  |  | 1,494 |  |  | 2,685 |  |  | 4,188 |
Realized gains, net |  | 2,001 |  |  | — |  |  | 3,241 |  |  | 25,182 |  |  | 30,424 |
Total non-interest income, net |  | (152,308) |  |  | (1,640) |  |  | (347,269) |  |  | 25,863 |  |  | (475,354) |
General and administrative expenses |  | (17,939) |  |  | (39,319) |  |  | (5,046) |  |  | (52,900) |  |  | (115,204) |
Loan acquisition costs |  | (2,785) |  |  | (7,544) |  |  | (684) |  |  | (10) |  |  | (11,023) |
Other expenses |  | (4,114) |  |  | (104,147) |  |  | 194 |  |  | (718) |  |  | (108,785) |
Provision for income taxes |  | 4,567 |  |  | (4,063) |  |  | 4,104 |  |  | — |  |  | 4,608 |
Segment Contribution |  | $ | (129,044) |  |  | $ | (95,115) |  |  | $ | (291,439) |  |  | $ | (66,249) |  |  |
Net Loss |  |  |  |  |  |  |  |  |  | $ | (581,847) |
Non-cash amortization (expense) income, net |  | $ | 2,401 |  |  | $ | (24,638) |  |  | $ | 1,867 |  |  | $ | (4,954) |  |  | $ | (25,324) |
Other significant non-cash expense: goodwill impairment |  | $ | — |  |  | $ | (88,675) |  |  | $ | — |  |  | $ | — |  |  | $ | (88,675) |
|  | Year Ended December 31, 2019
(In Thousands) |  | Residential Lending |  | Business Purpose Lending |  | Third-Party Investments |  | Corporate/ Other |  | Total
Interest income |  | $ | 268,559 |  |  | $ | 54,372 |  |  | $ | 281,701 |  |  | $ | 17,649 |  |  | $ | 622,281 |
Interest expense |  | (171,119) |  |  | (32,232) |  |  | (213,312) |  |  | (63,145) |  |  | (479,808) |
Net interest income |  | 97,440 |  |  | 22,140 |  |  | 68,389 |  |  | (45,496) |  |  | 142,473 |
Non-interest income |  |  |  |  |  |  |  |  |  |
Mortgage banking activities, net |  | 47,743 |  |  | 39,523 |  |  | — |  |  | — |  |  | 87,266 |
Investment fair value changes, net |  | (27,920) |  |  | (6,722) |  |  | 71,759 |  |  | (1,617) |  |  | 35,500 |
Other income |  | 9,210 |  |  | 5,852 |  |  | 1,484 |  |  | 2,711 |  |  | 19,257 |
Realized gains, net |  | 8,292 |  |  | — |  |  | 15,529 |  |  | — |  |  | 23,821 |
Total non-interest income (loss), net |  | 37,325 |  |  | 38,653 |  |  | 88,772 |  |  | 1,094 |  |  | 165,844 |
General and administrative expenses |  | (26,717) |  |  | (25,591) |  |  | (3,561) |  |  | (52,868) |  |  | (108,737) |
Loan acquisition costs |  | (3,954) |  |  | (5,064) |  |  | (780) |  |  | (137) |  |  | (9,935) |
Other expenses |  | — |  |  | (8,521) |  |  | (1,106) |  |  | (3,395) |  |  | (13,022) |
Provision for income taxes |  | (4,074) |  |  | (947) |  |  | (2,419) |  |  | — |  |  | (7,440) |
Segment Contribution |  | $ | 100,020 |  |  | $ | 20,670 |  |  | $ | 149,295 |  |  | $ | (100,802) |  |  |
Net Income |  |  |  |  |  |  |  |  |  | $ | 169,183 |
Non-cash amortization income (expense), net |  | $ | 3,669 |  |  | $ | (9,173) |  |  | $ | 6,956 |  |  | $ | (4,813) |  |  | $ | (3,361) |
|  | Year Ended December 31, 2018
(In Thousands) |  | Residential Lending |  | Business Purpose Lending |  | Third-Party Investments |  | Corporate/ Other |  | Total
Interest income |  | $ | 245,124 |  |  | $ | 4,588 |  |  | $ | 108,969 |  |  | $ | 20,036 |  |  | $ | 378,717 |
Interest expense |  | (134,590) |  |  | (1,598) |  |  | (41,887) |  |  | (60,964) |  |  | (239,039) |
Net interest income |  | 110,534 |  |  | 2,990 |  |  | 67,082 |  |  | (40,928) |  |  | 139,678 |
Non-interest income |  |  |  |  |  |  |  |  |  |
Mortgage banking activities, net |  | 59,623 |  |  | (57) |  |  | — |  |  | — |  |  | 59,566 |
Investment fair value changes, net |  | (21,686) |  |  | (29) |  |  | (2,978) |  |  | (996) |  |  | (25,689) |
Other income |  | 12,452 |  |  | — |  |  | — |  |  | 618 |  |  | 13,070 |
Realized gains, net |  | 7,709 |  |  | — |  |  | 19,332 |  |  | — |  |  | 27,041 |
Total non-interest income (loss), net |  | 58,098 |  |  | (86) |  |  | 16,354 |  |  | (378) |  |  | 73,988 |
General and administrative expenses |  | (26,897) |  |  | (1,948) |  |  | (2,140) |  |  | (44,313) |  |  | (75,298) |
Loan acquisition costs |  | (5,242) |  |  | (649) |  |  | (1,584) |  |  | (9) |  |  | (7,484) |
Other expense |  | — |  |  | — |  |  | (18) |  |  | (178) |  |  | (196) |
Provision for income taxes |  | (8,033) |  |  | — |  |  | (3,055) |  |  | — |  |  | (11,088) |
Segment Contribution |  | $ | 128,460 |  |  | $ | 307 |  |  | $ | 76,639 |  |  | $ | (85,806) |  |  |
Net Income |  |  |  |  |  |  |  |  |  | $ | 119,600 |
Non-cash amortization income (expense), net |  | $ | 4,486 |  |  | $ | (290) |  |  | $ | 12,294 |  |  | $ | (4,111) |  |  | $ | 12,379 |
The following table presents the components of Corporate/Other for the years ended December 31, 2020, 2019, and 2018. Table 23.2 – Components of Corporate/Other
|  | Years Ended December 31,
|  | 2020 |  | 2019 |  | 2018
(In Thousands) |  | Legacy Consolidated VIEs (1) |  | Other |  | Total |  | Legacy Consolidated VIEs (1) |  | Other |  | Total |  | Legacy Consolidated VIEs (1) |  | Other |  | Total
Interest income |  | $ | 9,061 |  |  | $ | 75 |  |  | $ | 9,136 |  |  | $ | 17,649 |  |  | $ | — |  |  | $ | 17,649 |  |  | $ | 20,036 |  |  | $ | — |  |  | $ | 20,036 |
Interest expense |  | (5,945) |  |  | (41,675) |  |  | (47,620) |  |  | (14,418) |  |  | (48,727) |  |  | (63,145) |  |  | (16,519) |  |  | (44,445) |  |  | (60,964) |
Net interest income (loss) |  | 3,116 |  |  | (41,600) |  |  | (38,484) |  |  | 3,231 |  |  | (48,727) |  |  | (45,496) |  |  | 3,517 |  |  | (44,445) |  |  | (40,928) |
Non-interest income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investment fair value changes, net |  | (1,512) |  |  | (492) |  |  | (2,004) |  |  | (1,545) |  |  | (72) |  |  | (1,617) |  |  | (1,016) |  |  | 20 |  |  | (996) |
Other income |  | — |  |  | 2,685 |  |  | 2,685 |  |  | — |  |  | 2,711 |  |  | 2,711 |  |  | — |  |  | 618 |  |  | 618 |
Realized gains, net |  | — |  |  | 25,182 |  |  | 25,182 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total non-interest (loss) income, net |  | (1,512) |  |  | 27,375 |  |  | 25,863 |  |  | (1,545) |  |  | 2,639 |  |  | 1,094 |  |  | (1,016) |  |  | 638 |  |  | (378) |
General and administrative expenses |  | — |  |  | (52,900) |  |  | (52,900) |  |  | — |  |  | (52,868) |  |  | (52,868) |  |  | — |  |  | (44,313) |  |  | (44,313) |
Loan acquisition costs |  | — |  |  | (10) |  |  | (10) |  |  | — |  |  | (137) |  |  | (137) |  |  | — |  |  | (9) |  |  | (9) |
Other expenses |  | — |  |  | (718) |  |  | (718) |  |  | — |  |  | (3,395) |  |  | (3,395) |  |  | — |  |  | (178) |  |  | (178) |
Total |  | $ | 1,604 |  |  | $ | (67,853) |  |  | $ | (66,249) |  |  | $ | 1,686 |  |  | $ | (102,488) |  |  | $ | (100,802) |  |  | $ | 2,501 |  |  | $ | (88,307) |  |  | $ | (85,806) |
(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 December 31, 2020 and December 31, 2019. Table 23.3 – Supplemental Segment Information
(In Thousands) |  | Residential Lending |  | Business Purpose Lending |  | Third-Party Investments |  | Corporate/ Other |  | Total
December 31, 2020 |  |  |  |  |  |  |  |  |  |
Residential loans |  | $ | 1,741,963 |  |  | $ | — |  |  | $ | 2,221,153 |  |  | $ | 285,935 |  |  | $ | 4,249,051 |
Business purpose loans |  | — |  |  | 4,136,353 |  |  | — |  |  | — |  |  | 4,136,353 |
Multifamily loans |  | — |  |  | — |  |  | 492,221 |  |  | — |  |  | 492,221 |
Real estate securities |  | 160,780 |  |  | — |  |  | 183,345 |  |  | — |  |  | 344,125 |
Other investments |  | 8,815 |  |  | 21,627 |  |  | 317,282 |  |  | 451 |  |  | 348,175 |
Goodwill and intangible assets |  | — |  |  | 56,865 |  |  | — |  |  | — |  |  | 56,865 |
Total assets |  | 1,989,802 |  |  | 4,323,040 |  |  | 3,232,415 |  |  | 809,809 |  |  | 10,355,066 |
December 31, 2019 |  |  |  |  |  |  |  |  |  |
Residential loans |  | $ | 4,939,745 |  |  | $ | — |  |  | $ | 2,367,215 |  |  | $ | 407,890 |  |  | $ | 7,714,850 |
Business purpose loans |  | — |  |  | 3,506,743 |  |  | — |  |  | — |  |  | 3,506,743 |
Multifamily loans |  | — |  |  | — |  |  | 4,408,524 |  |  | — |  |  | 4,408,524 |
Real estate securities |  | 229,074 |  |  | — |  |  | 870,800 |  |  | — |  |  | 1,099,874 |
Other investments |  | 42,224 |  |  | 21,002 |  |  | 294,904 |  |  | — |  |  | 358,130 |
Goodwill and intangible assets |  | — |  |  | 161,464 |  |  | — |  |  | — |  |  | 161,464 |
Total assets |  | 5,410,540 |  |  | 3,786,641 |  |  | 8,028,946 |  |  | 769,313 |  |  | 17,995,440 |

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