Other Investments

9 Months Ended

Sep. 30, 2024

Investments, All Other Investments [Abstract]

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

Table 11.1 – Components of Other Investments


(In Thousands)	September 30, 2024		December 31, 2023
Servicer advance investments, at fair value	$	212,446	$	225,345
Strategic investments, at carrying value	66,054		53,147
Strategic investments, at fair value	2,960		2,960
Excess MSRs, at fair value	33,491		37,367
MSRs, at fair value	26,594		24,877
Other, at fair value	92		234
Total Other Investments	$	341,637	$	343,930

We account for our Servicer advance investments, Strategic investments, Excess MSRs and MSRs at fair value. Refer to Note 6 for further information on the inputs into the fair valuation of these components. Refer to Note 11 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information regarding these components and related transactions.

Income from Other Investments for the three and nine months ended September 30, 2024 are summarized in the following table.

Table 11.2 – Components of Income From Other Investments, net (1)


	Three Months Ended		Nine Months Ended
(In Thousands)	September 30, 2024		September 30, 2024
Service Advance Investments:
Other interest income	$	4,435	$	14,301
Investment fair value changes, net	(2,725)		8,252
Strategic Investments:
Other income, net	(52)		(997)
Investment fair value changes, net	(236)		(1,036)
Excess MSRs:
Other interest income	3,192		9,815
Investment fair value changes, net	(1,263)		(3,876)
MSRs:
Other income, net	251		8,025
Total Other Investments Income, Net	$	3,602	$	34,484

(1)Market valuation gains (losses) on Other investments accounted for under the fair value option are recorded in Investment fair value changes, net. All other market valuation gains (losses) on Other investments are recorded in Other income, etc.

Strategic Investments

At September 30, 2024, we have investments in private companies, including investments through our RWT Horizons venture investment platform, with a total carrying value of $69 million. Depending on the terms of the investments, we may account for these investments under the fair value option or as non-marketable equity securities under the equity method of accounting or the measurement alternative available for such securities under US GAAP. Refer to Note 3 and Note 11 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information regarding these investments.

In the second quarter of 2023, we established a joint venture with an institutional investment manager to invest in residential investor bridge loans originated by our CoreVest subsidiary. At September 30, 2024, the carrying value of our investment in the joint venture was $6 million. We account for our investment in the joint venture under the equity method of accounting as we have a 20% non-controlling interest, but are deemed to be able to exert significant influence over the affairs of the joint venture. We adjust the carrying value of our equity method investment for our share of earnings or losses, dividends or return of capital on a quarterly basis. For both the three and nine months ended September 30, 2024, we recognized net equity method earnings of $0.1 million and $0.3 million, respectively, through Other income, net in our Consolidated statements of income.

In the first quarter of 2024, we established a joint venture with another institutional investment manager to invest in residential investor bridge and term loans originated by us. At September 30, 2024, the carrying value of our investment in the joint venture was $16 million. We account for our investment in the joint venture under the equity method of accounting as we have a minority non-controlling interest approximating 20% across both Redwood's direct equity capital contribution to joint venture entities and joint venture co-investments to be held in Redwood's investment portfolio, but we are deemed to be able to exert significant influence over the affairs of the joint venture. We adjust the carrying value of our equity method investment for our share of earnings or losses, dividends or return of capital on a quarterly basis. We recognized net equity method earnings of $1 million for both the three and nine months ended September 30, 2024, through Other income, net in our Consolidated statements of income.

See Note 8 for further information on residential bridge loans sold to these joint ventures.