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Segment Information | 6 Months Ended
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Jun. 30, 2021
Segment Reporting [Abstract] |
Segment Information | Segment Information Redwood operates in three segments: Residential Lending, Business Purpose Lending, and Third-Party Investments. For a full description of our segments, see Part I, Item 1—Business in our Annual Report on Form 10-K for the year ended December 31, 2020. 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 from 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 three and six months ended June 30, 2021 and 2020. Table 23.1 – Business Segment Financial Information
|  | Three Months Ended June 30, 2021
(In Thousands) |  | Residential Lending |  | Business Purpose Lending |  | Third-Party Investments |  | Corporate/ Other |  | Total
Interest income |  | $ | 33,033 |  |  | $ | 70,515 |  |  | $ | 33,972 |  |  | $ | 1,175 |  |  | $ | 138,695 |
Interest expense |  | (21,056) |  |  | (54,442) |  |  | (22,334) |  |  | (10,233) |  |  | (108,065) |
Net interest income |  | 11,977 |  |  | 16,073 |  |  | 11,638 |  |  | (9,058) |  |  | 30,630 |
Non-interest income |  |  |  |  |  |  |  |  |  |
Mortgage banking activities, net |  | 21,265 |  |  | 33,154 |  |  | — |  |  | — |  |  | 54,419 |
Investment fair value changes, net |  | 3,927 |  |  | 3,782 |  |  | 42,018 |  |  | (247) |  |  | 49,480 |
Other income, net |  | 839 |  |  | 1,017 |  |  | 5 |  |  | 265 |  |  | 2,126 |
Realized gains, net |  | 6,687 |  |  | 390 |  |  | 1,307 |  |  | — |  |  | 8,384 |
Total non-interest income (loss), net |  | 32,718 |  |  | 38,343 |  |  | 43,330 |  |  | 18 |  |  | 114,409 |
General and administrative expenses |  | (7,793) |  |  | (13,688) |  |  | (930) |  |  | (18,183) |  |  | (40,594) |
Loan acquisition costs |  | (1,887) |  |  | (1,861) |  |  | — |  |  | — |  |  | (3,748) |
Other expenses |  | — |  |  | (3,873) |  |  | (112) |  |  | — |  |  | (3,985) |
Provision for income taxes |  | (4,171) |  |  | (2,182) |  |  | (334) |  |  | — |  |  | (6,687) |
Segment Contribution |  | $ | 30,844 |  |  | $ | 32,812 |  |  | $ | 53,592 |  |  | $ | (27,223) |  |  |
Net Income |  |  |  |  |  |  |  |  |  | $ | 90,025 |
Non-cash amortization (expense) income, net |  | $ | 1,339 |  |  | $ | (5,584) |  |  | $ | 185 |  |  | $ | (1,955) |  |  | $ | (6,015) |
|  | Six Months Ended June 30, 2021
(In Thousands) |  | Residential Lending |  | Business Purpose Lending |  | Third-Party Investments |  | Corporate/ Other |  | Total
Interest income |  | $ | 60,581 |  |  | $ | 134,920 |  |  | $ | 68,962 |  |  | $ | 2,537 |  |  | $ | 267,000 |
Interest expense |  | (40,093) |  |  | (104,517) |  |  | (45,513) |  |  | (20,494) |  |  | (210,617) |
Net interest income |  | 20,488 |  |  | 30,403 |  |  | 23,449 |  |  | (17,957) |  |  | 56,383 |
Non-interest income |  |  |  |  |  |  |  |  |  |
Mortgage banking activities, net |  | 82,700 |  |  | 54,326 |  |  | — |  |  | — |  |  | 137,026 |
Investment fair value changes, net |  | 6,673 |  |  | 7,081 |  |  | 81,734 |  |  | (921) |  |  | 94,567 |
Other income, net |  | 3,692 |  |  | 1,860 |  |  | 5 |  |  | 412 |  |  | 5,969 |
Realized gains, net |  | 9,095 |  |  | 498 |  |  | 1,507 |  |  | — |  |  | 11,100 |
Total non-interest income, net |  | 102,160 |  |  | 63,765 |  |  | 83,246 |  |  | (509) |  |  | 248,662 |
General and administrative expenses |  | (21,550) |  |  | (24,847) |  |  | (2,061) |  |  | (35,687) |  |  | (84,145) |
Loan acquisition costs |  | (3,303) |  |  | (3,913) |  |  | (87) |  |  | (4) |  |  | (7,307) |
Other expenses |  | (6) |  |  | (7,650) |  |  | (442) |  |  | 17 |  |  | (8,081) |
Provision for income taxes |  | (14,150) |  |  | (3,503) |  |  | (577) |  |  | — |  |  | (18,230) |
Segment Contribution |  | $ | 83,639 |  |  | $ | 54,255 |  |  | $ | 103,528 |  |  | $ | (54,140) |  |  |
Net Income |  |  |  |  |  |  |  |  |  | $ | 187,282 |
Non-cash amortization (expense) income, net |  | $ | 3,005 |  |  | $ | (11,441) |  |  | $ | 41 |  |  | $ | (3,850) |  |  | $ | (12,245) |
|  | Three Months Ended June 30, 2020
(In Thousands) |  | Residential Lending |  | Business Purpose Lending |  | Third-Party Investments |  | Corporate/ Other |  | Total
Interest income |  | $ | 36,653 |  |  | $ | 53,742 |  |  | $ | 36,811 |  |  | $ | 2,740 |  |  | $ | 129,946 |
Interest expense |  | (28,762) |  |  | (36,631) |  |  | (24,927) |  |  | (12,346) |  |  | (102,666) |
Net interest income |  | 7,891 |  |  | 17,111 |  |  | 11,884 |  |  | (9,606) |  |  | 27,280 |
Non-interest income |  |  |  |  |  |  |  |  |  |
Mortgage banking activities, net |  | (8,005) |  |  | 2,023 |  |  | — |  |  | — |  |  | (5,982) |
Investment fair value changes, net |  | 35,085 |  |  | 40,401 |  |  | 76,972 |  |  | (230) |  |  | 152,228 |
Other income, net |  | 230 |  |  | 686 |  |  | (509) |  |  | 758 |  |  | 1,165 |
Realized gains, net |  | 205 |  |  | — |  |  | 578 |  |  | 25,182 |  |  | 25,965 |
Total non-interest income, net |  | 27,515 |  |  | 43,110 |  |  | 77,041 |  |  | 25,710 |  |  | 173,376 |
General and administrative expenses |  | (3,700) |  |  | (9,016) |  |  | (1,986) |  |  | (13,818) |  |  | (28,520) |
Loan acquisition costs |  | (175) |  |  | (1,277) |  |  | (120) |  |  | — |  |  | (1,572) |
Other expenses |  | — |  |  | (3,884) |  |  | (1,065) |  |  | (134) |  |  | (5,083) |
Benefit from (provision for) income taxes |  | 3,323 |  |  | 2,439 |  |  | (5,799) |  |  | — |  |  | (37) |
Segment Contribution |  | $ | 34,854 |  |  | $ | 48,483 |  |  | $ | 79,955 |  |  | $ | 2,152 |  |  |
Net Income |  |  |  |  |  |  |  |  |  | $ | 165,444 |
Non-cash amortization income (expense), net |  | $ | (1,265) |  |  | $ | (6,391) |  |  | $ | 312 |  |  | $ | (1,619) |  |  | $ | (8,963) |
|  | Six Months Ended June 30, 2020
(In Thousands) |  | Residential Lending |  | Business Purpose Lending |  | Third-Party Investments |  | Corporate/ Other |  | Total
Interest income |  | $ | 97,284 |  |  | $ | 106,802 |  |  | $ | 118,007 |  |  | $ | 5,934 |  |  | $ | 328,027 |
Interest expense |  | (66,324) |  |  | (68,984) |  |  | (87,428) |  |  | (26,601) |  |  | (249,337) |
Net interest income |  | 30,960 |  |  | 37,818 |  |  | 30,579 |  |  | (20,667) |  |  | 78,690 |
Non-interest income |  |  |  |  |  |  |  |  |  |
Mortgage banking activities, net |  | (31,086) |  |  | (3,798) |  |  | — |  |  | — |  |  | (34,884) |
Investment fair value changes, net |  | (161,550) |  |  | (101,729) |  |  | (454,586) |  |  | (739) |  |  | (718,604) |
Other income, net |  | (267) |  |  | 2,870 |  |  | 732 |  |  | 758 |  |  | 4,093 |
Realized gains, net |  | 2,001 |  |  | — |  |  | 2,634 |  |  | 25,182 |  |  | 29,817 |
Total non-interest income, net |  | (190,902) |  |  | (102,657) |  |  | (451,220) |  |  | 25,201 |  |  | (719,578) |
General and administrative expenses |  | (8,299) |  |  | (20,656) |  |  | (3,521) |  |  | (24,726) |  |  | (57,202) |
Loan acquisition costs |  | (1,208) |  |  | (3,970) |  |  | (373) |  |  | (7) |  |  | (5,558) |
Other expenses |  | — |  |  | (96,869) |  |  | 817 |  |  | (446) |  |  | (96,498) |
Benefit from income taxes |  | 8,653 |  |  | 9,021 |  |  | 4,518 |  |  | — |  |  | 22,192 |
Segment Contribution |  | $ | (160,796) |  |  | $ | (177,313) |  |  | $ | (419,200) |  |  | $ | (20,645) |  |  |
Net Loss |  |  |  |  |  |  |  |  |  | $ | (777,954) |
Non-cash amortization income (expense), net |  | $ | (1,053) |  |  | $ | (11,316) |  |  | $ | 1,053 |  |  | $ | (1,728) |  |  | $ | (13,044) |
Other significant non-cash expense: goodwill impairment |  | $ | — |  |  | $ | (88,675) |  |  | $ | — |  |  | $ | — |  |  | $ | (88,675) |
The following table presents the components of Corporate/Other for the three and six months ended June 30, 2021 and 2020. Table 23.2 – Components of Corporate/Other
|  | Three Months Ended June 30,
|  | 2021 |  | 2020
(In Thousands) |  | Legacy Consolidated VIEs (1) |  | Other |  | Total |  | Legacy Consolidated VIEs (1) |  | Other |  | Total
Interest income |  | $ | 1,169 |  |  | $ | 6 |  |  | $ | 1,175 |  |  | $ | 2,685 |  |  | $ | 55 |  |  | $ | 2,740 |
Interest expense |  | (755) |  |  | (9,478) |  |  | (10,233) |  |  | (1,518) |  |  | (10,828) |  |  | (12,346) |
Net interest income |  | 414 |  |  | (9,472) |  |  | (9,058) |  |  | 1,167 |  |  | (10,773) |  |  | (9,606) |
Non-interest income |  |  |  |  |  |  |  |  |  |  |  |
Investment fair value changes, net |  | (216) |  |  | (31) |  |  | (247) |  |  | (230) |  |  | — |  |  | (230) |
Other income |  | — |  |  | 265 |  |  | 265 |  |  | — |  |  | 758 |  |  | 758 |
Realized gains, net |  | — |  |  | — |  |  | — |  |  | — |  |  | 25,182 |  |  | 25,182 |
Total non-interest income, net |  | (216) |  |  | 234 |  |  | 18 |  |  | (230) |  |  | 25,940 |  |  | 25,710 |
General and administrative expenses |  | — |  |  | (18,183) |  |  | (18,183) |  |  | — |  |  | (13,818) |  |  | (13,818) |
Other expenses |  | — |  |  | — |  |  | — |  |  | — |  |  | (134) |  |  | (134) |
Total |  | $ | 198 |  |  | $ | (27,421) |  |  | $ | (27,223) |  |  | $ | 937 |  |  | $ | 1,215 |  |  | $ | 2,152 |
|  | Six Months Ended June 30,
|  | 2021 |  | 2020
(In Thousands) |  | Legacy Consolidated VIEs (1) |  | Other |  | Total |  | Legacy Consolidated VIEs (1) |  | Other |  | Total
Interest income |  | $ | 2,517 |  |  | $ | 20 |  |  | $ | 2,537 |  |  | $ | 5,879 |  |  | $ | 55 |  |  | $ | 5,934 |
Interest expense |  | (1,630) |  |  | (18,864) |  |  | (20,494) |  |  | (4,040) |  |  | (22,561) |  |  | (26,601) |
Net interest income |  | 887 |  |  | (18,844) |  |  | (17,957) |  |  | 1,839 |  |  | (22,506) |  |  | (20,667) |
Non-interest income |  |  |  |  |  |  |  |  |  |  |  |
Investment fair value changes, net |  | (915) |  |  | (6) |  |  | (921) |  |  | (621) |  |  | (118) |  |  | (739) |
Other income |  | — |  |  | 412 |  |  | 412 |  |  | — |  |  | 758 |  |  | 758 |
Realized gains, net |  | — |  |  | — |  |  | — |  |  | — |  |  | 25,182 |  |  | 25,182 |
Total non-interest income, net |  | (915) |  |  | 406 |  |  | (509) |  |  | (621) |  |  | 25,822 |  |  | 25,201 |
General and administrative expenses |  | — |  |  | (35,687) |  |  | (35,687) |  |  | — |  |  | (24,726) |  |  | (24,726) |
Loan acquisition costs |  | — |  |  | (4) |  |  | (4) |  |  | — |  |  | (7) |  |  | (7) |
Other expenses |  | — |  |  | 17 |  |  | 17 |  |  | — |  |  | (446) |  |  | (446) |
Total |  | $ | (28) |  |  | $ | (54,112) |  |  | $ | (54,140) |  |  | $ | 1,218 |  |  | $ | (21,863) |  |  | $ | (20,645) |
(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, 2021 and December 31, 2020. Table 23.3 – Supplemental Segment Information
(In Thousands) |  | Residential Lending |  | Business Purpose Lending |  |  |  | Third-Party Investments |  | Corporate/ Other |  | Total
June 30, 2021 |  |  |  |  |  |  |  |  |  |  |  |
Residential loans |  | $ | 3,383,101 |  |  | $ | — |  |  |  |  | $ | 2,098,624 |  |  | $ | 260,875 |  |  | $ | 5,742,600 |
Business purpose loans |  | — |  |  | 4,408,889 |  |  |  |  | — |  |  | — |  |  | 4,408,889 |
Multifamily loans |  | — |  |  | — |  |  |  |  | 485,157 |  |  | — |  |  | 485,157 |
Real estate securities |  | 163,609 |  |  | — |  |  |  |  | 191,277 |  |  | — |  |  | 354,886 |
Other investments |  | 8,721 |  |  | 13,168 |  |  |  |  | 267,851 |  |  | 18,992 |  |  | 308,732 |
Intangible assets |  | — |  |  | 49,119 |  |  |  |  | — |  |  | — |  |  | 49,119 |
Total assets |  | 3,615,860 |  |  | 4,576,139 |  |  |  |  | 3,063,094 |  |  | 741,298 |  |  | 11,996,391 |
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 |
Intangible assets |  | — |  |  | 56,865 |  |  |  |  | — |  |  | — |  |  | 56,865 |
Total assets |  | 1,989,802 |  |  | 4,323,040 |  |  |  |  | 3,232,415 |  |  | 809,809 |  |  | 10,355,066 |

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8924-108599 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8981-108599 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8721-108599 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e9031-108599 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8933-108599 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (e) -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8933-108599 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8844-108599 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e9038-108599 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8933-108599 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 22 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8736-108599 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e9054-108599 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8657-108599 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8721-108599 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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