Segment Information

12 Months Ended

Dec. 31, 2019

Redwood operates in four segments: Residential Lending, Business Purpose Lending, Multifamily Investments, and Third-Party Residential Investments. Beginning in the fourth quarter of 2019, we reorganized our segments to align with changes in how we view our business for making operating decisions and assessing performance, and 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 four 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 indirect general and administrative expenses and other expense.

The following tables present financial information by segment for the years ended December 31, 2019, 2018, and 2017.

Table 24.1 – Business Segment Financial Information



	Year Ended December 31, 2019
(In Thousands)	Residential Lending			Business Purpose Lending			Multifamily Investments			Third-Party Residential Investments			Corporate/ Other			Total
Interest income	$	268,559		$	54,372		$	161,692		$	120,009		$	17,649		$	622,281
Interest expense	(192,359		)	(35,663		)	(151,980		)	(85,388		)	(14,418		)	(479,808		)
Net interest income	76,200			18,709			9,712			34,621			3,231			142,473
Non-interest income
Mortgage banking activities, net	47,743			39,523			—			—			—			87,266
Investment fair value changes, net	(27,920		)	(6,722		)	27,097			44,662			(1,617		)	35,500
Other income	9,210			5,852			1,484			—			2,711			19,257
Realized gains, net	8,292			—			134			15,395			—			23,821
Total non-interest income, net	37,325			38,653			28,715			60,057			1,094			165,844
General and administrative expenses	(30,671		)	(30,655		)	(1,498		)	(2,843		)	(53,005		)	(118,672		)
Other expenses	—			(8,521		)	—			(1,106		)	(3,395		)	(13,022		)
Provision for income taxes	(4,074		)	(947		)	(11		)	(2,408		)	—			(7,440		)
Segment Contribution	$	78,780		$	17,239		$	36,918		$	88,321		$	(52,075	)
Net Income																$	169,183
Non-cash amortization income (expense), net	$	3,669		$	(9,173	)	$	(1	)	$	6,957		$	(4,813	)	$	(3,361	)



	Year Ended December 31, 2018
(In Thousands)	Residential Lending			Business Purpose Lending			Multifamily Investments			Third-Party Residential Investments			Corporate/ Other			Total
Interest income	$	245,124		$	4,588		$	40,050		$	68,919		$	20,036		$	378,717
Interest expense	(158,498		)	(2,252		)	(34,324		)	(27,446		)	(16,519		)	(239,039		)
Net interest income	86,626			2,336			5,726			41,473			3,517			139,678
Non-interest income
Mortgage banking activities, net	59,623			(57		)	—			—			—			59,566
Investment fair value changes, net	(21,686		)	(29		)	3,979			(6,957		)	(996		)	(25,689		)
Other income	12,452			—			—			—			618			13,070
Realized gains, net	7,709			—			—			19,332			—			27,041
Total non-interest income (loss), net	58,098			(86		)	3,979			12,375			(378		)	73,988
General and administrative expenses	(32,139		)	(2,597		)	(869		)	(2,855		)	(44,322		)	(82,782		)
Other expenses	—			—			—			(18		)	(178		)	(196		)
Provision for income taxes	(8,033		)	—			(16		)	(3,039		)	—			(11,088		)
Segment Contribution	$	104,552		$	(347	)	$	8,820		$	47,936		$	(41,361	)
Net Income																$	119,600
Non-cash amortization income (expense), net	$	4,486		$	(290	)	$	(1	)	$	12,295		$	(4,111	)	$	12,379



	Year Ended December 31, 2017
(In Thousands)	Residential Lending			Business Purpose Lending		Multifamily Investments			Third-Party Residential Investments			Corporate/ Other			Total
Interest income	$	158,819		$	—	$	9,170		$	60,661		$	19,407		$	248,057
Interest expense	(66,364		)	—		(6,107		)	(21,512		)	(14,833		)	(108,816		)
Net interest income	92,455			—		3,063			39,149			4,574			139,241
Non-interest income
Mortgage banking activities, net	53,908			—		—			—			—			53,908
Investment fair value changes, net	(25,466		)	—		16,196			27,684			(8,040		)	10,374
Other income	12,436			—		—			—			—			12,436
Realized gains, net	3,907			—		—			10,200			(752		)	13,355
Total non-interest income (loss), net	44,785			—		16,196			37,884			(8,792		)	90,073
General and administrative expenses	(28,622		)	—		(425		)	(2,028		)	(46,081		)	(77,156		)
Provision for income taxes	(6,641		)	—		(238		)	(4,873		)	—			(11,752		)
Segment Contribution	$	101,977		$	—	$	18,596		$	70,132		$	(50,299	)
Net Income															$	140,406
Non-cash amortization income (expense), net	$	4,946		$	—	$	(1	)	$	15,927		$	(3,410	)	$	17,462

The following table presents the components of Corporate/Other for the years ended December 31, 2019, 2018, and 2017.

Table 24.2 – Components of Corporate/Other



	Years Ended December 31,
	2019									2018									2017
(In Thousands)	Legacy Consolidated VIEs ⁽¹⁾			Other			Total			Legacy Consolidated VIEs ⁽¹⁾			Other			Total			Legacy Consolidated VIEs ⁽¹⁾			Other			Total
Interest income	$	17,649		$	—		$	17,649		$	20,036		$	—		$	20,036		$	19,407		$	—		$	19,407
Interest expense	(14,418		)	—			(14,418		)	(16,519		)	—			(16,519		)	(14,789		)	(44		)	(14,833		)
Net interest income (loss)	3,231			—			3,231			3,517			—			3,517			4,618			(44		)	4,574
Non-interest income
Investment fair value changes, net	(1,545		)	(72		)	(1,617		)	(1,016		)	20			(996		)	(8,027		)	(13		)	(8,040		)
Other income	—			2,711			2,711			—			618			618			—			—			—
Realized gains, net	—			—			—			—			—			—			—			(752		)	(752		)
Total non-interest (loss) income, net	(1,545		)	2,639			1,094			(1,016		)	638			(378		)	(8,027		)	(765		)	(8,792		)
General and administrative expenses	—			(53,005		)	(53,005		)	—			(44,322		)	(44,322		)	—			(46,081		)	(46,081		)
Other expenses	—			(3,395		)	(3,395		)	—			(178		)	(178		)	—			—			—
Total	$	1,686		$	(53,761	)	$	(52,075	)	$	2,501		$	(43,862	)	$	(41,361	)	$	(3,409	)	$	(46,890	)	$	(50,299	)


(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, 2019 and December 31, 2018.

Table 24.3 – Supplemental Segment Information



(In Thousands)	Residential Lending		Business Purpose Lending		Multifamily Investments		Third-Party Residential Investments		Corporate/ Other		Total
December 31, 2019
Residential loans	$	4,939,745	$	—	$	—	$	2,367,215	$	407,890	$	7,714,850
Business purpose residential loans	—		3,506,743		—		—		—		3,506,743
Multifamily loans	—		—		4,408,524		—		—		4,408,524
Real estate securities	229,074		—		404,128		466,672		—		1,099,874
Other investments	42,224		21,002		61,018		233,886		—		358,130
Goodwill and intangible assets	—		161,464		—		—		—		161,464
Total assets	5,410,540		3,786,641		4,889,330		3,139,616		769,313		17,995,440

December 31, 2018
Residential loans	$	5,512,116	$	—	$	—	$	1,222,668	$	519,958	$	7,254,742
Business purpose residential loans	—		141,258		—		—		—		141,258
Multifamily loans	—		—		2,144,598		—		—		2,144,598
Real estate securities	364,308		—		429,079		659,107		—		1,452,494
Other investments	99,984		10,754		15,092		312,688		—		438,518
Total assets	6,186,889		160,950		2,600,150		2,232,276		757,141		11,937,406