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Segment Information | 12 Months Ended
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Dec. 31, 2021
Segment Reporting [Abstract] |
Segment Information | Segment Information Redwood operates in three segments: Residential Mortgage Banking, Business Purpose Mortgage Banking and Investment Portfolio. During the fourth quarter of 2021 we re-organized our segments to conform with changes in how we manage and evaluate our operations, moving all retained investments previously held in our Residential Lending and Business Purpose Lending segments to a newly-created Investment Portfolio Segment, where they are now combined with our third-party portfolio investments. Our mortgage banking activities are now reflected in standalone Residential Mortgage Banking and Business Purpose Mortgage Banking segments. 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 for our convertible notes and trust preferred securities (and in 2020, realized gains from the repurchase of convertible notes), indirect general and administrative expenses and other expense. The following tables present financial information by segment for the years ended December 31, 2021, 2020, and 2019. Table 23.1 – Business Segment Financial Information
|  | Year Ended December 31, 2021
(In Thousands) |  | Residential Mortgage Banking |  | Business Purpose Mortgage Banking |  | Investment Portfolio |  | Corporate/ Other |  | Total
Interest income |  | $ | 48,953 |  |  | $ | 14,054 |  |  | $ | 507,173 |  |  | $ | 4,746 |  |  | $ | 574,926 |
Interest expense |  | (26,963) |  |  | (7,230) |  |  | (351,635) |  |  | (40,921) |  |  | (426,749) |
Net interest income |  | 21,990 |  |  | 6,824 |  |  | 155,538 |  |  | (36,175) |  |  | 148,177 |
Non-interest income |  |  |  |  |  |  |  |  |  |
Mortgage banking activities, net |  | 127,151 |  |  | 108,593 |  |  | — |  |  | — |  |  | 235,744 |
Investment fair value changes, net |  | — |  |  | — |  |  | 129,614 |  |  | (1,565) |  |  | 128,049 |
Other income, net |  | — |  |  | 1,046 |  |  | 10,021 |  |  | 951 |  |  | 12,018 |
Realized gains, net |  | — |  |  | — |  |  | 17,993 |  |  | — |  |  | 17,993 |
Total non-interest income, net |  | 127,151 |  |  | 109,639 |  |  | 157,628 |  |  | (614) |  |  | 393,804 |
General and administrative expenses |  | (33,574) |  |  | (46,586) |  |  | (13,633) |  |  | (77,066) |  |  | (170,859) |
Loan acquisition costs |  | (7,480) |  |  | (8,100) |  |  | (752) |  |  | (4) |  |  | (16,336) |
Other expenses |  | 104 |  |  | (15,127) |  |  | (1,689) |  |  | 17 |  |  | (16,695) |
(Provision for) benefit from income taxes |  | (25,777) |  |  | (8,122) |  |  | (3,862) |  |  | 19,283 |  |  | (18,478) |
Segment Contribution |  | $ | 82,414 |  |  | $ | 38,528 |  |  | $ | 293,230 |  |  | $ | (94,559) |  |  |
Net Income |  |  |  |  |  |  |  |  |  | $ | 319,613 |
Non-cash amortization (expense) income, net |  | $ | (82) |  |  | $ | (16,452) |  |  | $ | (20,781) |  |  | $ | (7,878) |  |  | $ | (45,193) |
|  | Year Ended December 31, 2020
(In Thousands) |  | Residential Mortgage Banking |  | Business Purpose Mortgage Banking |  | Investment Portfolio |  | Corporate/ Other |  | Total
Interest income |  | $ | 17,839 |  |  | $ | 19,200 |  |  | $ | 525,741 |  |  | $ | 9,136 |  |  | $ | 571,916 |
Interest expense |  | (11,978) |  |  | (13,145) |  |  | (375,262) |  |  | (47,620) |  |  | (448,005) |
Net interest income |  | 5,861 |  |  | 6,055 |  |  | 150,479 |  |  | (38,484) |  |  | 123,911 |
Non-interest income |  |  |  |  |  |  |  |  |  |
Mortgage banking activities, net |  | 3,721 |  |  | 74,622 |  |  | 129 |  |  | — |  |  | 78,472 |
Investment fair value changes, net |  | — |  |  | (101) |  |  | (586,333) |  |  | (2,004) |  |  | (588,438) |
Other income, net |  | — |  |  | 3,228 |  |  | (1,725) |  |  | 2,685 |  |  | 4,188 |
Realized gains, net |  | — |  |  | — |  |  | 5,242 |  |  | 25,182 |  |  | 30,424 |
Total non-interest income (loss), net |  | 3,721 |  |  | 77,749 |  |  | (582,687) |  |  | 25,863 |  |  | (475,354) |
General and administrative expenses |  | (16,297) |  |  | (37,460) |  |  | (8,547) |  |  | (52,900) |  |  | (115,204) |
Loan acquisition costs |  | (2,727) |  |  | (5,860) |  |  | (2,426) |  |  | (10) |  |  | (11,023) |
Other expenses |  | (4,114) |  |  | (104,147) |  |  | 194 |  |  | (718) |  |  | (108,785) |
Benefit from (provision for) income taxes |  | 4,567 |  |  | (4,063) |  |  | 4,104 |  |  | — |  |  | 4,608 |
Segment Contribution |  | $ | (8,989) |  |  | $ | (67,726) |  |  | $ | (438,883) |  |  | $ | (66,249) |  |  |
Net Loss |  |  |  |  |  |  |  |  |  | $ | (581,847) |
Non-cash amortization income (expense), net |  | $ | (662) |  |  | $ | (18,426) |  |  | $ | (1,282) |  |  | $ | (4,954) |  |  | $ | (25,324) |
Other significant non-cash expense: goodwill impairment |  | $ | — |  |  | $ | (88,675) |  |  | $ | — |  |  | $ | — |  |  | $ | (88,675) |
|  | Year Ended December 31, 2019
(In Thousands) |  | Residential Mortgage Banking |  | Business Purpose Mortgage Banking |  | Investment Portfolio |  | Corporate/ Other |  | Total
Interest income |  | $ | 40,901 |  |  | $ | 8,212 |  |  | $ | 555,519 |  |  | $ | 17,649 |  |  | $ | 622,281 |
Interest expense |  | (21,503) |  |  | (4,972) |  |  | (390,188) |  |  | (63,145) |  |  | (479,808) |
Net interest income |  | 19,398 |  |  | 3,240 |  |  | 165,331 |  |  | (45,496) |  |  | 142,473 |
Non-interest income |  |  |  |  |  |  |  |  |  |
Mortgage banking activities, net |  | 47,743 |  |  | 39,523 |  |  | — |  |  | — |  |  | 87,266 |
Investment fair value changes, net |  | (1) |  |  | (175) |  |  | 37,293 |  |  | (1,617) |  |  | 35,500 |
Other income, net |  | — |  |  | 5,139 |  |  | 11,407 |  |  | 2,711 |  |  | 19,257 |
Realized gains, net |  | — |  |  | — |  |  | 23,821 |  |  | — |  |  | 23,821 |
Total non-interest income, net |  | 47,742 |  |  | 44,487 |  |  | 72,521 |  |  | 1,094 |  |  | 165,844 |
General and administrative expenses |  | (21,724) |  |  | (24,832) |  |  | (9,313) |  |  | (52,868) |  |  | (108,737) |
Loan acquisition costs |  | (3,954) |  |  | (4,226) |  |  | (1,618) |  |  | (137) |  |  | (9,935) |
Other expense |  | — |  |  | (8,521) |  |  | (1,106) |  |  | (3,395) |  |  | (13,022) |
Provision for income taxes |  | (4,074) |  |  | (947) |  |  | (2,419) |  |  | — |  |  | (7,440) |
Segment Contribution |  | $ | 37,388 |  |  | $ | 9,201 |  |  | $ | 223,396 |  |  | $ | (100,802) |  |  |
Net Income |  |  |  |  |  |  |  |  |  | $ | 169,183 |
Non-cash amortization income (expense), net |  | $ | (97) |  |  | $ | (8,896) |  |  | $ | 10,445 |  |  | $ | (4,813) |  |  | $ | (3,361) |
The following table presents the components of Corporate/Other for the years ended December 31, 2021, 2020, and 2019. Table 23.2 – Components of Corporate/Other
|  | Years Ended December 31,
|  | 2021 |  | 2020 |  | 2019
(In Thousands) |  | Legacy Consolidated VIEs (1) |  | Other |  | Total |  | Legacy Consolidated VIEs (1) |  | Other |  | Total |  | Legacy Consolidated VIEs (1) |  | Other |  | Total
Interest income |  | $ | 4,709 |  |  | $ | 37 |  |  | $ | 4,746 |  |  | $ | 9,060 |  |  | $ | 76 |  |  | $ | 9,136 |  |  | $ | 17,649 |  |  | $ | — |  |  | $ | 17,649 |
Interest expense |  | (3,040) |  |  | (37,881) |  |  | (40,921) |  |  | (5,945) |  |  | (41,675) |  |  | (47,620) |  |  | (14,418) |  |  | (48,727) |  |  | (63,145) |
Net interest income (loss) |  | 1,669 |  |  | (37,844) |  |  | (36,175) |  |  | 3,115 |  |  | (41,599) |  |  | (38,484) |  |  | 3,231 |  |  | (48,727) |  |  | (45,496) |
Non-interest income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investment fair value changes, net |  | (1,558) |  |  | (7) |  |  | (1,565) |  |  | (1,512) |  |  | (492) |  |  | (2,004) |  |  | (1,545) |  |  | (72) |  |  | (1,617) |
Other income, net |  | — |  |  | 951 |  |  | 951 |  |  | — |  |  | 2,685 |  |  | 2,685 |  |  | — |  |  | 2,711 |  |  | 2,711 |
Realized gains, net |  | — |  |  | — |  |  | — |  |  | — |  |  | 25,182 |  |  | 25,182 |  |  | — |  |  | — |  |  | — |
Total non-interest (loss) income, net |  | (1,558) |  |  | 944 |  |  | (614) |  |  | (1,512) |  |  | 27,375 |  |  | 25,863 |  |  | (1,545) |  |  | 2,639 |  |  | 1,094 |
General and administrative expenses |  | — |  |  | (77,066) |  |  | (77,066) |  |  | — |  |  | (52,900) |  |  | (52,900) |  |  | — |  |  | (52,868) |  |  | (52,868) |
Loan acquisition costs |  | — |  |  | (4) |  |  | (4) |  |  | — |  |  | (10) |  |  | (10) |  |  | — |  |  | (137) |  |  | (137) |
Other expenses |  | — |  |  | 17 |  |  | 17 |  |  | — |  |  | (718) |  |  | (718) |  |  | — |  |  | (3,395) |  |  | (3,395) |
Benefit from income taxes |  | — |  |  | 19,283 |  |  | 19,283 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | 111 |  |  | $ | (94,670) |  |  | $ | (94,559) |  |  | $ | 1,603 |  |  | $ | (67,852) |  |  | $ | (66,249) |  |  | $ | 1,686 |  |  | $ | (102,488) |  |  | $ | (100,802) |
(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, 2021 and 2020. Table 23.3 – Supplemental Segment Information
(In Thousands) |  | Residential Mortgage Banking |  | Business Purpose Mortgage Banking |  | Investment Portfolio |  | Corporate/ Other |  | Total
December 31, 2021 |  |  |  |  |  |  |  |  |  |
Residential loans |  | $ | 1,673,235 |  |  | $ | — |  |  | $ | 5,688,742 |  |  | $ | 230,455 |  |  | $ | 7,592,432 |
Business purpose loans |  | — |  |  | 347,860 |  |  | 4,443,129 |  |  | — |  |  | 4,790,989 |
Multifamily loans |  | — |  |  | — |  |  | 473,514 |  |  | — |  |  | 473,514 |
Real estate securities |  | 4,927 |  |  | — |  |  | 372,484 |  |  | — |  |  | 377,411 |
Other investments |  | — |  |  | — |  |  | 606,267 |  |  | 35,702 |  |  | 641,969 |
Intangible assets |  | — |  |  | 41,561 |  |  | — |  |  | — |  |  | 41,561 |
Total assets |  | 1,716,285 |  |  | 464,967 |  |  | 11,770,486 |  |  | 755,206 |  |  | 14,706,944 |
December 31, 2020 |  |  |  |  |  |  |  |  |  |
Residential loans |  | $ | 176,641 |  |  | $ | — |  |  | $ | 3,786,475 |  |  | $ | 285,935 |  |  | $ | 4,249,051 |
Business purpose loans |  | — |  |  | 245,394 |  |  | 3,890,959 |  |  | — |  |  | 4,136,353 |
Multifamily loans |  | — |  |  | — |  |  | 492,221 |  |  | — |  |  | 492,221 |
Real estate securities |  | 5,279 |  |  | — |  |  | 338,846 |  |  | — |  |  | 344,125 |
Other investments |  | — |  |  | — |  |  | 343,724 |  |  | 4,451 |  |  | 348,175 |
Intangible assets |  | — |  |  | 56,865 |  |  | — |  |  | — |  |  | 56,865 |
Total assets |  | 242,060 |  |  | 328,564 |  |  | 8,970,633 |  |  | 813,809 |  |  | 10,355,066 |

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