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Segment Information
 9 Months Ended
Sep. 30, 2020
Segment Reporting [Abstract]  
Segment Information Segment Information
Redwood operates in three segments: Residential Lending, Business Purpose Lending, and Third-Party Investments. Beginning in the second quarter of 2020, we combined what was previously our Multifamily Investments segment and Third-Party Residential Investments segment into a new segment called Third-Party Investments. Prior periods have been conformed to the current presentation. Following is a full description of our current segments.
Residential Lending – consists of a mortgage loan conduit that acquires residential loans from third-party originators for subsequent sale, securitization, or transfer into our investment portfolio, as well as the investments we retain from these activities. We typically acquire prime, jumbo mortgages and the related mortgage servicing rights on a flow basis from our network of loan sellers and distribute those loans through our Sequoia private-label securitization program or to institutions that acquire pools of whole loans. Our investments in this segment primarily consist of residential mortgage-backed securities ("RMBS") retained from our Sequoia securitizations (some of which we consolidate for GAAP purposes) and MSRs retained from jumbo whole loans we sold or securitized. This segment also includes various derivative financial instruments that we utilize to manage certain risks associated with our inventory of residential loans held-for-sale and long-term investments we hold within this segment. This segment’s main source of revenue is net interest income from its long-term investments and its inventory of loans held-for-sale, as well as income from mortgage banking activities, which includes valuation increases (or gains) on loans we acquire and subsequently sell, securitize, or transfer into our investment portfolio, and the hedges used to manage risks associated with these activities. Additionally, this segment may realize gains and losses upon the sale of securities. Funding expenses, direct operating expenses, and tax expenses associated with these activities are also included in this segment.
Business Purpose Lending – consists of a platform that originates and acquires business purpose residential loans for subsequent securitization or transfer into our investment portfolio, as well as the investments we retain from these activities. We typically originate single-family rental and residential bridge loans and distribute certain single-family rental loans through our CoreVest American Finance Lender ("CAFL") private-label securitization program and retain others for investment along with our residential bridge loans. Single-family rental loans are business purpose residential mortgage loans to investors in single-family (1-4 unit) rental properties. Residential bridge loans are business purpose residential mortgage loans to investors rehabilitating and subsequently reselling or renting residential properties. Our investments in this segment primarily consist of securities retained from our CAFL securitizations (which we consolidate for GAAP purposes), and residential bridge loans. This segment also includes various derivative financial instruments that we utilize to manage certain risks associated with our inventory of single-family rental loans held-for-sale and our investments. This segment’s main source of revenue is net interest income from its investments and loans held-for-sale, as well as income from mortgage banking activities, which includes valuation increases (or gains) on loans we originate or acquire and subsequently sell, securitize or transfer into our investment portfolio, and the hedges used to manage risks associated with these activities. Additionally, this segment may realize gains and losses upon the sale of securities. Funding expenses, direct operating expenses, and tax expenses associated with these activities are also included in this segment.
Third-Party Investments – consists of investments in RMBS issued by third parties, investments in Freddie Mac K-Series multifamily loan securitizations and SLST reperforming loan securitizations (which we consolidate for GAAP purposes), our servicer advance investments, and other residential and multifamily credit investments not generated through our Residential or Business Purpose Lending segments. This segment’s main sources of revenue are interest income from securities and loans held-for-investment. Additionally, this segment may realize gains and losses upon the sale of securities. Funding expenses, hedging expenses, direct operating expenses, and tax provisions associated with these activities are also included in this segment.
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 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, 2020 and 2019.
Table 23.1 – Business Segment Financial Information
Three Months Ended September 30, 2020
(In Thousands)Residential LendingBusiness Purpose LendingThird-Party Investments Corporate/
Other 		 Total
Interest income$26,672 $55,930 $37,576 $1,804 $121,982 
Interest expense(22,541)(46,027)(27,534)(4,309)(100,411)
Net interest income4,131 9,903 10,042 (2,505)21,571 
Non-interest income
Mortgage banking activities, net11,864 47,531 — — 59,395 
Investment fair value changes, net2,443 16,892 87,890 (178)107,047 
Other income, net(2,011)623 340 934 (114)
Realized gains, net— — 602 — 602 
Total non-interest income, net12,296 65,046 88,832 756 166,930 
General and administrative expenses(4,602)(9,321)(709)(12,998)(27,630)
Loan acquisition costs(304)(1,660)(194)— (2,158)
Other expenses(3,309)(3,874)(470)(135)(7,788)
(Provision for) benefit from income taxes(826)(8,544)257 — (9,113)
Segment Contribution$7,386 $51,550 $97,758 $(14,882)
Net Income$141,812 
Non-cash amortization (expense) income, net$1,785 $(6,719)$117 $(1,516)$(6,333)
Nine Months Ended September 30, 2020
(In Thousands)Residential LendingBusiness Purpose LendingThird-Party Investments Corporate/
Other 		 Total
Interest income$123,956 $162,732 $155,583 $7,738 $450,009 
Interest expense(94,112)(119,854)(123,160)(12,622)(349,748)
Net interest income29,844 42,878 32,423 (4,884)100,261 
Non-interest income
Mortgage banking activities, net(19,222)43,733 — — 24,511 
Investment fair value changes, net(159,107)(84,837)(366,696)(917)(611,557)
Other income, net(2,278)3,493 1,072 1,692 3,979 
Realized gains, net2,001 — 3,236 25,182 30,419 
Total non-interest income, net(178,606)(37,611)(362,388)25,957 (552,648)
General and administrative expenses(12,901)(29,977)(4,230)(37,724)(84,832)
Loan acquisition costs(1,512)(5,630)(567)(7)(7,716)
Other expenses(3,309)(100,743)347 (581)(104,286)
Benefit from income taxes7,827 477 4,775 — 13,079 
Segment Contribution$(158,657)$(130,606)$(329,640)$(17,239)
Net Loss$(636,142)
Non-cash amortization (expense) income, net$602 $(18,050)$1,105 $(3,035)$(19,378)
Other significant non-cash expense: goodwill impairment$— $(88,675)$— $— $(88,675)
Three Months Ended September 30, 2019
(In Thousands)Residential LendingBusiness Purpose LendingThird-Party Investments Corporate/
Other 		 Total
Interest income$69,586 $5,527 $70,709 $4,295 $150,117 
Interest expense(48,798)(2,813)(61,541)(3,452)(116,604)
Net interest income20,788 2,714 9,168 843 33,513 
Non-interest income
Mortgage banking activities, net5,016 4,499 — — 9,515 
Investment fair value changes, net(11,088)(1,073)24,057 (452)11,444 
Other income, net1,878 1,918 560 — 4,356 
Realized gains, net— — 4,714 — 4,714 
Total non-interest income, net(4,194)5,344 29,331 (452)30,029 
General and administrative expenses(5,581)(6,028)(676)(12,614)(24,899)
Loan acquisition costs(867)(756)(180)(113)(1,916)
Other expenses— (1,900)(395)(236)(2,531)
Benefit from (provision for) income taxes228 (8)(106)— 114 
Segment Contribution$10,374 $(634)$37,142 $(12,572)
Net Income$34,310 
Non-cash amortization income (expense), net$2,537 $(2,107)$— $(1,148)$(718)

Nine Months Ended September 30, 2019
(In Thousands)Residential LendingBusiness Purpose LendingThird-Party Investments Corporate/
Other 		 Total
Interest income$204,036 $12,595 $199,145 $13,924 $429,700 
Interest expense(145,795)(6,590)(168,167)(11,548)(332,100)
Net interest income58,241 6,005 30,978 2,376 97,600 
Non-interest income
Mortgage banking activities, net31,202 9,782 — — 40,984 
Investment fair value changes, net(20,910)(1,833)58,492 (1,008)34,741 
Other income, net6,317 4,213 600 2,710 13,840 
Realized gains, net7,728 — 10,499 — 18,227 
Total non-interest income, net24,337 12,162 69,591 1,702 107,792 
General and administrative expenses(17,591)(13,452)(2,239)(37,440)(70,722)
Loan acquisition costs(2,859)(2,017)(503)(128)(5,507)
Other expenses— (4,432)(864)(725)(6,021)
(Provision for) benefit from income taxes(1,757)25 (1,370)— (3,102)
Segment Contribution$60,371 $(1,709)$95,593 $(34,215)
Net Income$120,040 
Non-cash amortization income (expense), net$6,780 $(4,907)$(824)$(1,939)$(890)
The following table presents the components of Corporate/Other for the three and nine months ended September 30, 2020 and 2019.

Table 23.2 – Components of Corporate/Other
Three Months Ended September 30,
20202019
(In Thousands)
Legacy Consolidated VIEs (1)
OtherTotal
Legacy Consolidated VIEs (1)
Other Total
Interest income$1,795 $9 $1,804 $4,295 $— $4,295 
Interest expense(1,058)(3,251)(4,309)(3,452)— (3,452)
Net interest income737 (3,242)(2,505)843 — 843 
Non-interest income
Investment fair value changes, net(81)(97)(178)(407)(45)(452)
Other income— 934 934 — — — 
Total non-interest income, net(81)837 756 (407)(45)(452)
General and administrative expenses— (12,998)(12,998)— (12,614)(12,614)
Loan acquisition costs— — — — (113)(113)
Other expenses— (135)(135)— (236)(236)
Total$656 $(15,538)$(14,882)$436 $(13,008)$(12,572)

Nine Months Ended September 30,
20202019
(In Thousands)
Legacy Consolidated VIEs (1)
OtherTotal
Legacy Consolidated VIEs (1)
Other Total
Interest income$7,675 $63 $7,738 $13,924 $— $13,924 
Interest expense(5,098)(7,524)(12,622)(11,548)— (11,548)
Net interest income2,577 (7,461)(4,884)2,376 — 2,376 
Non-interest income
Investment fair value changes, net(702)(215)(917)(904)(104)(1,008)
Other income— 1,692 1,692 — 2,710 2,710 
Realized gains, net— 25,182 25,182 — — — 
Total non-interest income, net(702)26,659 25,957 (904)2,606 1,702 
General and administrative expenses— (37,724)(37,724)— (37,440)(37,440)
Loan acquisition costs— (7)(7)— (128)(128)
Other expenses— (581)(581)— (725)(725)
Total$1,875 $(19,114)$(17,239)$1,472 $(35,687)$(34,215)
(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, 2020 and December 31, 2019.
Table 23.3 – Supplemental Segment Information
(In Thousands)Residential LendingBusiness Purpose LendingThird-Party Investments Corporate/
Other		Total
September 30, 2020
Residential loans$1,941,489 $— $2,256,682 $296,765 $4,494,936 
Business purpose residential loans— 3,956,101 — — 3,956,101 
Multifamily loans— — 491,415 — 491,415 
Real estate securities146,608 — 204,727 — 351,335 
Other investments14,878 25,713 344,037 — 384,628 
Goodwill and intangible assets— 60,737 — — 60,737 
Total assets2,148,643 4,134,913 3,315,039 803,817 10,402,412 
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 securities229,074 — 870,800 — 1,099,874 
Other investments42,224 21,002 294,904 — 358,130 
Goodwill and intangible assets— 161,464 — — 161,464 
Total assets5,410,540 3,786,641 8,028,946 769,313 17,995,440