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Segment Information | 3 Months Ended
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Mar. 31, 2024
Segment Reporting [Abstract] |
Segment Information | Segment Information Redwood operates in three segments: Residential Consumer Mortgage Banking, Residential Investor 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, 2023. 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 at certain consolidated Legacy Sequoia Securitization 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 2024 and 2023, realized gains from the repurchase of convertible notes), indirect general and administrative expenses and other expense. In the normal course of business, loans are originated and acquired at our mortgage banking segments and may subsequently be transferred to our investment portfolio segment either as whole loans or through the retention of securities from securitizations we sponsor and consolidate under GAAP. All of our loans are accounted for under the fair value option and amounts transferred between segments are accounted for at fair value at the time of transfer. The following tables present financial information by segment for the three months ended March 31, 2024 and 2023. Table 24.1 – Business Segment Financial Information
|  | Three Months Ended March 31, 2024
(In Thousands) |  | Residential Consumer Mortgage Banking |  | Residential Investor Mortgage Banking |  | Investment Portfolio |  | Corporate/ Other |  | Total
Interest income |  | $ | 14,313 |  |  | $ | 3,771 |  |  | $ | 182,600 |  |  | $ | 4,056 |  |  | $ | 204,740 |
Interest expense |  | (8,266) |  |  | (2,877) |  |  | (153,105) |  |  | (16,282) |  |  | (180,530) |
Net interest income (expense) |  | 6,047 |  |  | 894 |  |  | 29,495 |  |  | (12,226) |  |  | 24,210 |
Non-interest income (loss) |  |  |  |  |  |  |  |  |  |
Mortgage banking activities, net |  | 7,827 |  |  | 6,729 |  |  | — |  |  | — |  |  | 14,556 |
Investment fair value changes, net |  | — |  |  | — |  |  | 21,405 |  |  | 432 |  |  | 21,837 |
HEI income, net |  | — |  |  | — |  |  | 9,031 |  |  | — |  |  | 9,031 |
Other income, net |  | — |  |  | 626 |  |  | 4,825 |  |  | (945) |  |  | 4,506 |
Realized gains, net |  | — |  |  | — |  |  | 314 |  |  | 95 |  |  | 409 |
Total non-interest income (loss), net |  | 7,827 |  |  | 7,355 |  |  | 35,575 |  |  | (418) |  |  | 50,339 |
General and administrative expenses |  | (4,789) |  |  | (11,425) |  |  | (2,175) |  |  | (16,180) |  |  | (34,569) |
Portfolio management costs |  | — |  |  | — |  |  | (3,588) |  |  | (9) |  |  | (3,597) |
Loan acquisition costs |  | (572) |  |  | (1,663) |  |  | — |  |  | (2) |  |  | (2,237) |
Other expenses |  | — |  |  | (2,806) |  |  | (555) |  |  | — |  |  | (3,361) |
(Provision for) Benefit from income taxes |  | (1,494) |  |  | 2,136 |  |  | (1,146) |  |  | (19) |  |  | (523) |
Segment Contribution |  | $ | 7,019 |  |  | $ | (5,509) |  |  | $ | 57,606 |  |  | $ | (28,854) |  |  |
Net Income |  |  |  |  |  |  |  |  |  | $ | 30,262 |
Non-cash amortization (expense), net |  | $ | (284) |  |  | $ | (3,073) |  |  | $ | (3,017) |  |  | $ | (1,940) |  |  | $ | (8,314) |
|  | Three Months Ended March 31, 2023
(In Thousands) |  | Residential Consumer Mortgage Banking |  | Residential Investor Mortgage Banking |  | Investment Portfolio |  | Corporate/ Other |  | Total
Interest income |  | $ | 5,510 |  |  | $ | 4,494 |  |  | $ | 163,660 |  |  | $ | 4,852 |  |  | $ | 178,516 |
Interest expense |  | (6,866) |  |  | (4,038) |  |  | (123,452) |  |  | (17,723) |  |  | (152,079) |
Net interest income (expense) |  | (1,356) |  |  | 456 |  |  | 40,208 |  |  | (12,871) |  |  | 26,437 |
Non-interest income (loss) |  |  |  |  |  |  |  |  |  |
Mortgage banking activities, net |  | 3,365 |  |  | 13,306 |  |  | — |  |  | — |  |  | 16,671 |
Investment fair value changes, net |  | 1,076 |  |  | — |  |  | (5,279) |  |  | (189) |  |  | (4,392) |
HEI income, net |  | — |  |  | — |  |  | 4,265 |  |  | — |  |  | 4,265 |
Other income, net |  | — |  |  | 2,408 |  |  | 2,168 |  |  | (20) |  |  | 4,556 |
Realized gains, net |  | — |  |  | — |  |  | (117) |  |  | 115 |  |  | (2) |
Total non-interest income (loss), net |  | 4,441 |  |  | 15,714 |  |  | 1,037 |  |  | (94) |  |  | 21,098 |
General and administrative expenses |  | (4,806) |  |  | (13,678) |  |  | (1,409) |  |  | (15,662) |  |  | (35,555) |
Portfolio management costs |  | — |  |  | — |  |  | (3,510) |  |  | — |  |  | (3,510) |
Loan acquisition costs |  | (175) |  |  | (1,114) |  |  | — |  |  | — |  |  | (1,289) |
Other expenses |  | — |  |  | (3,108) |  |  | (576) |  |  | — |  |  | (3,684) |
Benefit from income taxes |  | 633 |  |  | 703 |  |  | (213) |  |  | — |  |  | 1,123 |
Segment Contribution |  | $ | (1,263) |  |  | $ | (1,027) |  |  | $ | 35,537 |  |  | $ | (28,627) |  |  |
Net Income |  |  |  |  |  |  |  |  |  | $ | 4,620 |
Non-cash amortization (expense), net |  | $ | (255) |  |  | $ | (3,701) |  |  | $ | (2,833) |  |  | $ | (2,106) |  |  | $ | (8,895) |
The following table presents the components of Corporate/Other for the three months ended March 31, 2024 and 2023. Table 24.2 – Components of Corporate/Other
|  | Three Months Ended March 31,
|  | 2024 |  | 2023
(In Thousands) |  | Legacy Consolidated VIEs (1) |  | Other |  | Total |  | Legacy Consolidated VIEs (1) |  | Other |  | Total
Interest income |  | $ | 2,298 |  |  | $ | 1,758 |  |  | $ | 4,056 |  |  | $ | 2,543 |  |  | $ | 2,309 |  |  | $ | 4,852 |
Interest expense |  | (2,194) |  |  | (14,088) |  |  | (16,282) |  |  | (2,504) |  |  | (15,219) |  |  | (17,723) |
Net interest income (expense) |  | 104 |  |  | (12,330) |  |  | (12,226) |  |  | 39 |  |  | (12,910) |  |  | (12,871) |
Non-interest income (loss) |  |  |  |  |  |  |  |  |  |  |  |
Investment fair value changes, net |  | (218) |  |  | 650 |  |  | 432 |  |  | (94) |  |  | (95) |  |  | (189) |
Other income, net |  | — |  |  | (945) |  |  | (945) |  |  | — |  |  | (20) |  |  | (20) |
Realized gains, net |  | — |  |  | 95 |  |  | 95 |  |  | — |  |  | 115 |  |  | 115 |
Total non-interest income (loss), net |  | (218) |  |  | (200) |  |  | (418) |  |  | (94) |  |  | — |  |  | (94) |
General and administrative expenses |  | — |  |  | (16,180) |  |  | (16,180) |  |  | — |  |  | (15,662) |  |  | (15,662) |
Portfolio management costs |  | — |  |  | (9) |  |  | (9) |  |  | — |  |  | — |  |  | — |
Loan acquisition costs |  | — |  |  | (2) |  |  | (2) |  |  | — |  |  | — |  |  | — |
Benefit from income taxes |  | — |  |  | (19) |  |  | (19) |  |  | — |  |  | — |  |  | — |
Total |  | $ | (114) |  |  | $ | (28,740) |  |  | $ | (28,854) |  |  | $ | (55) |  |  | $ | (28,572) |  |  | $ | (28,627) |
(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 March 31, 2024 and December 31, 2023. Table 24.3 – Supplemental Segment Information
(In Thousands) |  | Residential Consumer Mortgage Banking |  | Residential Investor Mortgage Banking |  |  |  | Investment Portfolio |  | Corporate/ Other |  | Total
March 31, 2024 |  |  |  |  |  |  |  |  |  |  |  |
Residential consumer loans |  | $ | 511,706 |  |  | $ | — |  |  |  |  | $ | 6,973,027 |  |  | $ | 131,859 |  |  | $ | 7,616,592 |
Residential investor loans |  | — |  |  | 280,551 |  |  |  |  | 4,901,443 |  |  | — |  |  | 5,181,994 |
Consolidated Agency multifamily loans |  | — |  |  | — |  |  |  |  | 422,788 |  |  | — |  |  | 422,788 |
Real estate securities |  | 62,815 |  |  | — |  |  |  |  | 149,492 |  |  | — |  |  | 212,307 |
Home equity investments |  | — |  |  | — |  |  |  |  | 560,325 |  |  | 420 |  |  | 560,745 |
Other investments |  | — |  |  | — |  |  |  |  | 279,737 |  |  | 57,608 |  |  | 337,345 |
Goodwill |  | — |  |  | 23,373 |  |  |  |  | — |  |  | — |  |  | 23,373 |
Intangible assets |  | — |  |  | 25,657 |  |  |  |  | — |  |  | — |  |  | 25,657 |
Total assets |  | 594,842 |  |  | 383,090 |  |  |  |  | 13,560,010 |  |  | 520,032 |  |  | 15,057,974 |
December 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |
Residential consumer loans |  | $ | 911,192 |  |  | $ | — |  |  |  |  | $ | 5,999,706 |  |  | $ | 139,739 |  |  | $ | 7,050,637 |
Residential investor loans |  | — |  |  | 180,250 |  |  |  |  | 5,040,048 |  |  | — |  |  | 5,220,298 |
Consolidated Agency multifamily loans |  | — |  |  | — |  |  |  |  | 425,285 |  |  | — |  |  | 425,285 |
Real estate securities |  | 4,995 |  |  | — |  |  |  |  | 122,802 |  |  | — |  |  | 127,797 |
Home equity investments |  | — |  |  | — |  |  |  |  | 550,323 |  |  | 113 |  |  | 550,436 |
Other investments |  | — |  |  | — |  |  |  |  | 287,822 |  |  | 56,108 |  |  | 343,930 |
Goodwill |  | — |  |  | 23,373 |  |  |  |  | — |  |  | — |  |  | 23,373 |
Intangible assets |  | — |  |  | 28,462 |  |  |  |  | — |  |  | — |  |  | 28,462 |
Total assets |  | 971,535 |  |  | 293,225 |  |  |  |  | 12,718,201 |  |  | 521,366 |  |  | 14,504,327 |

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