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Segment Information | 9 Months Ended
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Sep. 30, 2023
Segment Reporting [Abstract] |
Segment Information | Segment Information Redwood operates in three segments: Residential Mortgage Banking, Business Purpose Mortgage Banking and Investment Portfolio. 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 Part I, Item 1—Business in our Annual Report on Form 10-K for the year ended December 31, 2022. 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 nine months ended September 30, 2023 and 2022. Table 24.1 – Business Segment Financial Information
|  | Three Months Ended September 30, 2023
(In Thousands) |  | Residential Mortgage Banking |  | Business Purpose Mortgage Banking |  | Investment Portfolio |  | Corporate/ Other |  | Total
Interest income |  | $ | 6,063 |  |  | $ | 4,618 |  |  | $ | 162,251 |  |  | $ | 4,142 |  |  | $ | 177,074 |
Interest expense |  | (4,826) |  |  | (3,888) |  |  | (131,303) |  |  | (16,706) |  |  | (156,723) |
Net interest income (expense) |  | 1,237 |  |  | 730 |  |  | 30,948 |  |  | (12,564) |  |  | 20,351 |
Non-interest income (loss) |  |  |  |  |  |  |  |  |  |
Mortgage banking activities, net |  | 8,964 |  |  | 10,476 |  |  | — |  |  | — |  |  | 19,440 |
Investment fair value changes, net |  | — |  |  | — |  |  | (31,315) |  |  | (115) |  |  | (31,430) |
Other income, net |  | — |  |  | 1,278 |  |  | 2,622 |  |  | (1,554) |  |  | 2,346 |
Realized gains, net |  | — |  |  | — |  |  | 26 |  |  | 24 |  |  | 50 |
Total non-interest income (loss), net |  | 8,964 |  |  | 11,754 |  |  | (28,667) |  |  | (1,645) |  |  | (9,594) |
General and administrative expenses |  | (4,521) |  |  | (9,402) |  |  | (1,340) |  |  | (14,434) |  |  | (29,697) |
Portfolio management costs |  | — |  |  | — |  |  | (3,636) |  |  | (25) |  |  | (3,661) |
Loan acquisition costs |  | (395) |  |  | (1,485) |  |  | — |  |  | — |  |  | (1,880) |
Other expenses |  | — |  |  | (3,108) |  |  | (1,525) |  |  | — |  |  | (4,633) |
(Provision for) Benefit from income taxes |  | (813) |  |  | 318 |  |  | (1,457) |  |  | 256 |  |  | (1,696) |
Segment Contribution |  | $ | 4,472 |  |  | $ | (1,193) |  |  | $ | (5,677) |  |  | $ | (28,412) |  |  |
Net (Loss) |  |  |  |  |  |  |  |  |  | $ | (30,810) |
Non-cash amortization (expense), net |  | $ | (266) |  |  | $ | (3,294) |  |  | $ | (1,687) |  |  | $ | (2,099) |  |  | $ | (7,346) |
|  | Nine Months Ended September 30, 2023
(In Thousands) |  | Residential Mortgage Banking |  | Business Purpose Mortgage Banking |  | Investment Portfolio |  | Corporate/ Other |  | Total
Interest income |  | $ | 14,007 |  |  | $ | 13,509 |  |  | $ | 492,514 |  |  | $ | 14,541 |  |  | $ | 534,571 |
Interest expense |  | (13,392) |  |  | (11,599) |  |  | (384,610) |  |  | (52,086) |  |  | (461,687) |
Net interest income (expense) |  | 615 |  |  | 1,910 |  |  | 107,904 |  |  | (37,545) |  |  | 72,884 |
Non-interest income (loss) |  |  |  |  |  |  |  |  |  |
Mortgage banking activities, net |  | 19,390 |  |  | 33,273 |  |  | — |  |  | — |  |  | 52,663 |
Investment fair value changes, net |  | 1,076 |  |  | — |  |  | (34,166) |  |  | (3,063) |  |  | (36,153) |
Other income, net |  | — |  |  | 4,762 |  |  | 8,803 |  |  | (2,505) |  |  | 11,060 |
Realized gains, net |  | — |  |  | — |  |  | 858 |  |  | 246 |  |  | 1,104 |
Total non-interest income (loss), net |  | 20,466 |  |  | 38,035 |  |  | (24,505) |  |  | (5,322) |  |  | 28,674 |
General and administrative expenses |  | (13,065) |  |  | (34,718) |  |  | (3,990) |  |  | (44,284) |  |  | (96,057) |
Portfolio management costs |  | — |  |  | — |  |  | (10,233) |  |  | (38) |  |  | (10,271) |
Loan acquisition costs |  | (719) |  |  | (3,894) |  |  | — |  |  | — |  |  | (4,613) |
Other expenses |  | — |  |  | (9,323) |  |  | (3,969) |  |  | — |  |  | (13,292) |
(Provision for) Benefit from income taxes |  | (887) |  |  | 2,427 |  |  | (3,135) |  |  | 953 |  |  | (642) |
Segment Contribution |  | $ | 6,410 |  |  | $ | (5,563) |  |  | $ | 62,072 |  |  | $ | (86,236) |  |  |
Net (Loss) |  |  |  |  |  |  |  |  |  | $ | (23,317) |
Non-cash amortization (expense), net |  | $ | (813) |  |  | $ | (10,291) |  |  | $ | (6,167) |  |  | $ | (6,292) |  |  | $ | (23,563) |
|  | Three Months Ended September 30, 2022
(In Thousands) |  | Residential Mortgage Banking |  | Business Purpose Mortgage Banking |  | Investment Portfolio |  | Corporate/ Other |  | Total
Interest income |  | $ | 9,882 |  |  | $ | 9,082 |  |  | $ | 156,882 |  |  | $ | 1,816 |  |  | $ | 177,662 |
Interest expense |  | (8,083) |  |  | (5,971) |  |  | (111,876) |  |  | (16,797) |  |  | (142,727) |
Net interest income (expense) |  | 1,799 |  |  | 3,111 |  |  | 45,006 |  |  | (14,981) |  |  | 34,935 |
Non-interest income (loss) |  |  |  |  |  |  |  |  |  |
Mortgage banking activities, net |  | 2,158 |  |  | 14,377 |  |  | — |  |  | — |  |  | 16,535 |
Investment fair value changes, net |  | — |  |  | — |  |  | (61,780) |  |  | 4,083 |  |  | (57,697) |
Other income, net |  | — |  |  | 399 |  |  | 3,906 |  |  | (278) |  |  | 4,027 |
Realized gains, net |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total non-interest income (loss), net |  | 2,158 |  |  | 14,776 |  |  | (57,874) |  |  | 3,805 |  |  | (37,135) |
General and administrative expenses |  | (5,735) |  |  | (18,535) |  |  | (1,639) |  |  | (12,335) |  |  | (38,244) |
Portfolio management costs |  | — |  |  | — |  |  | (1,863) |  |  | — |  |  | (1,863) |
Loan acquisition costs |  | (550) |  |  | (1,876) |  |  | — |  |  | — |  |  | (2,426) |
Other expenses |  | — |  |  | (3,891) |  |  | (370) |  |  | — |  |  | (4,261) |
Benefit from income taxes |  | 1,688 |  |  | 2,559 |  |  | (5,664) |  |  | — |  |  | (1,417) |
Segment Contribution |  | $ | (640) |  |  | $ | (3,856) |  |  | $ | (22,404) |  |  | $ | (23,511) |  |  |
Net (Loss) |  |  |  |  |  |  |  |  |  | $ | (50,411) |
Non-cash amortization (expense), net |  | $ | (185) |  |  | $ | (3,609) |  |  | $ | (3,658) |  |  | $ | (2,843) |  |  | $ | (10,295) |
|  | Nine Months Ended September 30, 2022
(In Thousands) |  | Residential Mortgage Banking |  | Business Purpose Mortgage Banking |  | Investment Portfolio |  | Corporate/ Other |  | Total
Interest income |  | $ | 36,048 |  |  | $ | 22,509 |  |  | $ | 471,932 |  |  | $ | 4,028 |  |  | $ | 534,517 |
Interest expense |  | (23,316) |  |  | (12,797) |  |  | (331,047) |  |  | (38,832) |  |  | (405,992) |
Net interest income (expense) |  | 12,732 |  |  | 9,712 |  |  | 140,885 |  |  | (34,804) |  |  | 128,525 |
Non-interest income (loss) |  |  |  |  |  |  |  |  |  |
Mortgage banking activities, net |  | (7,694) |  |  | 10,527 |  |  | — |  |  | — |  |  | 2,833 |
Investment fair value changes, net |  | — |  |  | — |  |  | (165,297) |  |  | 13,508 |  |  | (151,789) |
Other income, net |  | — |  |  | 2,028 |  |  | 15,423 |  |  | (435) |  |  | 17,016 |
Realized gains, net |  | — |  |  | — |  |  | 2,581 |  |  | — |  |  | 2,581 |
Total non-interest income (loss), net |  | (7,694) |  |  | 12,555 |  |  | (147,293) |  |  | 13,073 |  |  | (129,359) |
General and administrative expenses |  | (17,918) |  |  | (40,076) |  |  | (4,468) |  |  | (39,257) |  |  | (101,719) |
Portfolio management costs |  | — |  |  | — |  |  | (5,208) |  |  | — |  |  | (5,208) |
Loan acquisition costs |  | (2,848) |  |  | (7,523) |  |  | — |  |  | — |  |  | (10,371) |
Other expenses |  | 74 |  |  | (10,731) |  |  | (1,157) |  |  | — |  |  | (11,814) |
Benefit from (provision for) income taxes |  | 8,283 |  |  | 9,009 |  |  | (6,808) |  |  | — |  |  | 10,484 |
Segment Contribution |  | $ | (7,371) |  |  | $ | (27,054) |  |  | $ | (24,049) |  |  | $ | (60,988) |  |  |
Net (Loss) |  |  |  |  |  |  |  |  |  | $ | (119,462) |
Non-cash amortization (expense), net |  | $ | (699) |  |  | $ | (11,563) |  |  | $ | 4,385 |  |  | $ | (6,428) |  |  | $ | (14,305) |
The following table presents the components of Corporate/Other for the three and nine months ended September 30, 2023 and 2022. Table 24.2 – Components of Corporate/Other
|  | Three Months Ended September 30,
|  | 2023 |  | 2022
(In Thousands) |  | Legacy Consolidated VIEs (1) |  | Other |  | Total |  | Legacy Consolidated VIEs (1) |  | Other |  | Total
Interest income |  | $ | 2,596 |  |  | $ | 1,546 |  |  | $ | 4,142 |  |  | $ | 1,473 |  |  | $ | 343 |  |  | $ | 1,816 |
Interest expense |  | (2,487) |  |  | (14,219) |  |  | (16,706) |  |  | (1,486) |  |  | (15,311) |  |  | (16,797) |
Net interest income (expense) |  | 109 |  |  | (12,673) |  |  | (12,564) |  |  | (13) |  |  | (14,968) |  |  | (14,981) |
Non-interest income (loss) |  |  |  |  |  |  |  |  |  |  |  |
Investment fair value changes, net |  | (215) |  |  | 100 |  |  | (115) |  |  | (329) |  |  | 4,412 |  |  | 4,083 |
Other income, net |  | — |  |  | (1,554) |  |  | (1,554) |  |  | — |  |  | (278) |  |  | (278) |
Realized gains, net |  | — |  |  | 24 |  |  | 24 |  |  | — |  |  | — |  |  | — |
Total non-interest income (loss), net |  | (215) |  |  | (1,430) |  |  | (1,645) |  |  | (329) |  |  | 4,134 |  |  | 3,805 |
General and administrative expenses |  | — |  |  | (14,434) |  |  | (14,434) |  |  | — |  |  | (12,335) |  |  | (12,335) |
Portfolio management costs |  | — |  |  | (25) |  |  | (25) |  |  | — |  |  | — |  |  | — |
Benefit from income taxes |  | — |  |  | 256 |  |  | 256 |  |  | — |  |  | — |  |  | — |
Total |  | $ | (106) |  |  | $ | (28,306) |  |  | $ | (28,412) |  |  | $ | (342) |  |  | $ | (23,169) |  |  | $ | (23,511) |
|  | Nine Months Ended September 30,
|  | 2023 |  | 2022
(In Thousands) |  | Legacy Consolidated VIEs(1) |  | Other |  | Total |  | Legacy Consolidated VIEs(1) |  | Other |  | Total
Interest income |  | $ | 7,879 |  |  | $ | 6,662 |  |  | $ | 14,541 |  |  | $ | 3,593 |  |  | $ | 435 |  |  | $ | 4,028 |
Interest expense |  | (7,650) |  |  | (44,436) |  |  | (52,086) |  |  | (3,154) |  |  | (35,678) |  |  | (38,832) |
Net interest income (expense) |  | 229 |  |  | (37,774) |  |  | (37,545) |  |  | 439 |  |  | (35,243) |  |  | (34,804) |
Non-interest income (loss) |  |  |  |  |  |  |  |  |  |  |  |
Investment fair value changes, net |  | (319) |  |  | (2,744) |  |  | (3,063) |  |  | (1,379) |  |  | 14,887 |  |  | 13,508 |
Other income, net |  | — |  |  | (2,505) |  |  | (2,505) |  |  | — |  |  | (435) |  |  | (435) |
Realized gains, net |  | — |  |  | 246 |  |  | 246 |  |  | — |  |  | — |  |  | — |
Total non-interest income, net |  | (319) |  |  | (5,003) |  |  | (5,322) |  |  | (1,379) |  |  | 14,452 |  |  | 13,073 |
General and administrative expenses |  | — |  |  | (44,284) |  |  | (44,284) |  |  | — |  |  | (39,257) |  |  | (39,257) |
Portfolio management costs |  | — |  |  | (38) |  |  | (38) |  |  | — |  |  | — |  |  | — |
Benefit from income taxes |  | — |  |  | 953 |  |  | 953 |  |  | — |  |  | — |  |  | — |
Total |  | $ | (90) |  |  | $ | (86,146) |  |  | $ | (86,236) |  |  | $ | (940) |  |  | $ | (60,048) |  |  | $ | (60,988) |
(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 September 30, 2023 and December 31, 2022. Table 24.3 – Supplemental Segment Information
(In Thousands) |  | Residential Mortgage Banking |  | Business Purpose Mortgage Banking |  |  |  | Investment Portfolio |  | Corporate/ Other |  | Total
September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |
Residential loans |  | $ | 610,946 |  |  | $ | — |  |  |  |  | $ | 5,086,239 |  |  | $ | 150,152 |  |  | $ | 5,847,337 |
Business purpose loans |  | — |  |  | 102,777 |  |  |  |  | 5,146,553 |  |  | — |  |  | 5,249,330 |
Consolidated Agency multifamily loans |  | — |  |  | — |  |  |  |  | 420,554 |  |  | — |  |  | 420,554 |
Real estate securities |  | 9,054 |  |  | — |  |  |  |  | 120,391 |  |  | — |  |  | 129,445 |
Home equity investments |  | — |  |  | — |  |  |  |  | 431,159 |  |  | 113 |  |  | 431,272 |
Other investments |  | — |  |  | — |  |  |  |  | 284,507 |  |  | 55,854 |  |  | 340,361 |
Goodwill |  | — |  |  | 23,373 |  |  |  |  | — |  |  | — |  |  | 23,373 |
Intangible assets |  | — |  |  | 31,570 |  |  |  |  | — |  |  | — |  |  | 31,570 |
Total assets |  | 659,520 |  |  | 197,974 |  |  |  |  | 11,701,939 |  |  | 461,705 |  |  | 13,021,138 |
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |
Residential loans |  | $ | 628,160 |  |  | $ | — |  |  |  |  | $ | 4,800,096 |  |  | $ | 184,932 |  |  | $ | 5,613,188 |
Business purpose loans |  | — |  |  | 364,073 |  |  |  |  | 4,968,513 |  |  | — |  |  | 5,332,586 |
Consolidated Agency multifamily loans |  | — |  |  | — |  |  |  |  | 424,551 |  |  | — |  |  | 424,551 |
Real estate securities |  | — |  |  | — |  |  |  |  | 240,475 |  |  | — |  |  | 240,475 |
Home equity investments |  | — |  |  | — |  |  |  |  | 403,462 |  |  | — |  |  | 403,462 |
Other investments |  | — |  |  | — |  |  |  |  | 334,420 |  |  | 56,518 |  |  | 390,938 |
Goodwill |  | — |  |  | 23,373 |  |  |  |  | — |  |  | — |  |  | 23,373 |
Intangible assets |  | — |  |  | 40,892 |  |  |  |  | — |  |  | — |  |  | 40,892 |
Total assets |  | 660,916 |  |  | 487,159 |  |  |  |  | 11,303,991 |  |  | 578,833 |  |  | 13,030,899 |

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