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Other Assets and Liabilities

6 Months Ended

Jun. 30, 2024

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other Assets

Other assets at June 30, 2024 and December 31, 2023 are summarized in the following table.

Table 14.1 – Components of Other Assets


(In Thousands)	June 30, 2024		December 31, 2023
Real estate owned	$	99,885	$	93,599
Accrued interest receivable	92,018		69,072
Investment receivable	62,372		67,302
Deferred tax asset	40,116		40,115
Intangible assets	23,454		28,462
Goodwill	23,373		23,373
Operating lease right-of-use assets	10,621		12,532
Margin receivable	9,758		33,414
Fixed assets and leasehold improvements (1)	6,650		7,829




Other	34,934		27,246
Total Other Assets	$	403,181	$	402,944

(1)Fixed assets and leasehold improvements had a basis of $18 million and accumulated depreciation of $11 million at June 30, 2024.

REO

The Company holds REO at the lower of the current carrying amount or fair value less estimated selling costs. The following table summarizes the activity and carrying values of REO assets held at Redwood and at consolidated Sequoia, Freddie Mac SLST, and CAFL entities during the six months ended June 30, 2024.

Table 14.2 – REO Activity


	Six Months Ended June 30, 2024
(In Thousands)	Bridge (1)		Sequoia		Freddie Mac SLST		Term at CAFL			Total
Balance at beginning of period	$	87,757	$	—	$	3,158	$	2,684	2684	93,599
Transfers to REO	3,951		—		1,300		8,582			13,833
Liquidations (2)	(127)		—		(2,334)		—			(2,461)
Changes in fair value, net	(5,489)		—		403		—			(5,086)
Balance at End of Period	$	86,092	$	—	$	2,527	$	11,266		$	99,885

(1)Includes REO held at Redwood and within consolidated CAFL Bridge securitization entities.

(2)For the six months ended June 30, 2024, REO market valuation adjustments and liquidations resulted in net valuation losses of $3 million, which were recorded in Investment fair value changes, net on our consolidated statements of income.

The following table provides detail on the numbers of REO assets at Redwood and at consolidated Sequoia, Freddie Mac SLST, and CAFL entities at June 30, 2024 and December 31, 2023.

Table 14.3 – REO Assets


Number of REO assets	Redwood Bridge	Sequoia	Freddie Mac SLST	Term at CAFL	Total
At June 30, 2024	22	—	20	4	46
At December 31, 2023	16	—	28	1	45

Investment Receivable

Investment receivable primarily consists of amounts receivable from third-party servicers related to principal and interest receivable from residential investor loans and fees receivable from servicer advance investments.

Intangible Assets and Goodwill

On July 1, 2022, we acquired Riverbend Funding LLC ("Riverbend"), a private mortgage lender to residential transitional and commercial real estate investors. Refer to Note 2 of our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information regarding this acquisition, including purchase price allocations. Additionally, in 2019 we acquired 5 Arches and CoreVest, originators of residential investor loans. In connection with these acquisitions, we identified and recorded finite-lived intangible assets totaling $95 million. Intangible Assets are included in Other Assets on our Consolidated Balance Sheets.

The table below presents the amortization period and carrying value of our intangible assets, net of accumulated amortization at June 30, 2024.

Table 14.4 – Intangible Assets – Activity


	Intangible Assets at Acquisition		Accumulated Amortization at June 30, 2024		Carrying Value at June 30, 2024		Weighted Average Amortization Period (in years)
(Dollars in Thousands)
Borrower network	$	56,300	$	(33,612)	$	22,688	7
Broker network	18,100		(18,100)		—		5
Non-compete agreements	11,400		(10,767)		633		3
Tradenames	4,400		(4,267)		133		3
Developed technology	1,800		(1,800)		—		2
Loan administration fees on existing loan assets	2,600		(2,600)		—		1
Total	$	94,600	$	(71,146)	$	23,454	6

All of our intangible assets are amortized on a straight-line basis. For the six months ended June 30, 2024, we recorded intangible asset amortization expense of $5 million. For the six months ended June 30, 2023, we recorded intangible asset amortization expense of $6 million. Estimated future amortization expense is summarized in the table below.

Table 14.5 – Intangible Asset Amortization Expense by Year



(In Thousands)	June 30, 2024
2024 (6 months)	$	4,406
2025	8,426
2026	6,694
2027	1,571
2028 and thereafter	2,357
Total Future Intangible Asset Amortization	$	23,454

On a quarterly basis, we evaluate our finite-lived intangible assets for impairment indicators and additionally evaluate the useful lives of our intangible assets to determine if revisions to the remaining periods of amortization are warranted. We reviewed our finite-lived intangible assets and determined that the estimated lives were appropriate and that there were no indicators of impairment at June 30, 2024.

Goodwill is tested for impairment annually or more frequently if indicators of impairment exist. We have elected to make the first day of our fiscal fourth quarter as the annual impairment assessment date for goodwill. We recorded total goodwill of $23 million as a result of the total consideration exceeding the fair value of the net assets acquired from Riverbend. For reporting purposes, we included the intangible assets and goodwill from the Riverbend acquisition within our Residential Investor Mortgage Banking segment. There were no changes to the balance of goodwill during the three and six months ended June 30, 2024.

The potential liability resulting from the contingent consideration arrangement with Riverbend was recorded at its acquisition-date fair value of zero as part of the total consideration for the acquisition of Riverbend. At June 30, 2024, the estimated fair value of this contingent liability was zero on our consolidated balance sheets. Our contingent consideration liability is recorded at fair value and periodic changes in the estimated fair value are recorded through Other expenses on our consolidated statements of income. During the six months ended June 30, 2024, we did not record any contingent consideration income or expense related to our acquisition of Riverbend. See Note 18 for additional information on our contingent consideration liability.

Operating Lease Right-of-Use Assets and Operating Lease Liabilities

See Note 18 for additional information on leases.

Margin Receivable and Payable

Margin receivable and payable resulted from margin calls between us and our counterparties under derivatives, master repurchase agreements, and warehouse facilities, whereby we or the counterparty posted collateral. We met all margin calls due through June 30, 2024.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities at June 30, 2024 and December 31, 2023 are summarized in the following table.

Table 14.6 – Components of Accrued Expenses and Other Liabilities


(In Thousands)	June 30, 2024		December 31, 2023
Payable to noncontrolling interests	$	97,215	$	81,177
Accrued interest payable	60,060		52,755
Margin payable	44,583		350
Accrued compensation	21,570		28,140
Operating lease liabilities	12,656		14,725
Accrued operating expenses	9,321		5,527
Current accounts payable	4,698		4,992
Guarantee obligations	4,649		5,781
Accrued taxes payable	4,078		—
Unsettled trades	3,859		—
Residential consumer loan and MSR repurchase reserve	3,631		4,700
Bridge loan holdbacks (1)	2,148		2,059
Preferred stock dividends payable	1,478		1,478
Other	24,290		15,119
Total Accrued Expenses and Other Liabilities	$	294,236	$	216,803

(1)Bridge loan holdbacks represent amounts withheld from the initial loan proceeds and are subsequently disbursed to the borrower to be used in the construction, rehabilitation or purchase of the mortgaged property or to fund interest on the bridge loan.

Legal and Repurchase Reserves

See Note 18 for additional information on legal and repurchase reserves.

Payable to Non-Controlling Interests

Redwood and a third-party co-investor, through two partnership entities consolidated by Redwood, purchased servicer advances and excess MSRs related to a portfolio of residential mortgage loans serviced by the co-investor (see Note 12 and Note 15 for additional information on the partnership entities and associated investments). We account for the co-investor’s interests in the entities as liabilities, and at June 30, 2024, the carrying value of their interests was $25 million, representing their current economic interest in the entities. Earnings from the partnership entities are allocated to the co-investors on a proportional basis and during the three and six

months ended June 30, 2024, we allocated $3 million and $4 million of income to the co-investors, respectively, recorded in Other expenses on our consolidated statements of income.

Additionally, Redwood and a third-party investor co-sponsored the transfer and securitization of HEI through two HEI securitization entities. Other third-party investors contributed HEI into these securitizations through Redwood and retained subordinate beneficial interests issued by the securitization entities alongside Redwood. See Note 11 for a further discussion of the HEI securitization. We account for the co-investors' interests in the HEI securitization entities as liabilities, and at June 30, 2024, the carrying value of their interests was $72 million, representing the fair value of their economic interests in the beneficial interests issued by the HEI entities. During the three and six months ended June 30, 2024, the investors' share of earnings, net from their retained interests was $7 million and $13 million, respectively, recorded through HEI income, net on our consolidated statements of income.