Segment Information

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Segment Information

Segment Information

Redwood operates in three segments: Residential Mortgage Banking, Business Purpose 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, 2022.

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 interest expense from our convertible notes and trust preferred securities, indirect general and administrative expenses and other expense.

The following tables present financial information by segment for the three months ended March 31, 2023 and 2022.

Table 24.1 – Business Segment Financial Information

	Three Months Ended March 31, 2023
(In Thousands)	Residential Mortgage Banking		Business Purpose 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 (loss)	(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		—		(1,014)		(189)		(127)
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 (provision for) 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) income, net	$	(255)	$	(3,701)	$	(2,833)	$	(2,106)	$	(8,895)

	Three Months Ended March 31, 2022
(In Thousands)	Residential Mortgage Banking		Business Purpose Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
Interest income	$	12,967	$	4,841	$	170,572	$	1,020	$	189,400
Interest expense	(6,936)		(2,568)		(116,581)		(10,213)		(136,298)
Net interest income (loss)	6,031		2,273		53,991		(9,193)		53,102
Non-interest income (loss)
Mortgage banking activities, net	7,935		8,380		—		—		16,315
Investment fair value changes, net	—		—		(5,406)		(714)		(6,120)
Other income, net	—		575		5,282		126		5,983
Realized gains, net	—		—		2,581		—		2,581
Total non-interest income (loss), net	7,935		8,955		2,457		(588)		18,759
General and administrative expenses	(6,101)		(10,472)		(1,555)		(15,148)		(33,276)
Portfolio management costs	—		—		(1,578)		—		(1,578)
Loan acquisition costs	(1,417)		(3,048)		—		—		(4,465)
Other expenses	—		(3,534)		(551)		—		(4,085)
Benefit from (provision for) income taxes	1,007		3,281		(1,830)		—		2,458
Segment Contribution	$	7,455	$	(2,545)	$	50,934	$	(24,929)
Net Income									$	30,915
Non-cash amortization income (expense), net	$	104	$	(3,890)	$	7,300	$	(2,033)	$	1,481

The following table presents the components of Corporate/Other for the three months ended March 31, 2023 and 2022.

Table 24.2 – Components of Corporate/Other

	Three Months Ended March 31,
	2023						2022
(In Thousands)	Legacy Consolidated VIEs (1)		Other		Total		Legacy Consolidated VIEs (1)		Other		Total
Interest income	$	2,543	$	2,309	$	4,852	$	1,012	$	8	$	1,020
Interest expense	(2,504)		(15,219)		(17,723)		(701)		(9,512)		(10,213)
Net interest income (loss)	39		(12,910)		(12,871)		311		(9,504)		(9,193)
Non-interest income (loss)
Investment fair value changes, net	(94)		(95)		(189)		(714)		—		(714)
Other income	—		(20)		(20)		—		126		126
Realized gains, net	—		115		115		—		—		—
Total non-interest income (loss), net	(94)		—		(94)		(714)		126		(588)
General and administrative expenses	—		(15,662)		(15,662)		—		(15,148)		(15,148)
Total	$	(55)	$	(28,572)	$	(28,627)	$	(403)	$	(24,526)	$	(24,929)

(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, 2023 and December 31, 2022.

Table 24.3 – Supplemental Segment Information

(In Thousands)	Residential Mortgage Banking		Business Purpose Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
March 31, 2023
Residential loans	$	26,975	$	—	$	5,295,883	$	170,000	$	5,492,858
Business purpose loans	—		371,385		4,993,264		—		5,364,649
Consolidated Agency multifamily loans	—		—		426,599		—		426,599
Real estate securities	1,700		—		241,646		—		243,346
Home equity investments	—		—		416,783		—		416,783
Other investments	—		—		324,293		57,397		381,690
Goodwill	—		23,373		—		—		23,373
Intangible assets	—		37,784		—		—		37,784
Total assets	43,095		469,959		11,898,454		709,778		13,121,286
December 31, 2022
Residential loans	$	628,160	$	—	$	4,800,096	$	184,932	$	5,613,188
Business purpose loans	—		364,073		4,968,513		—		5,332,586
Consolidated Agency multifamily loans	—		—		424,551		—		424,551
Real estate securities	—		—		240,475		—		240,475
Home equity investments	—		—		403,462		—		403,462
Other investments	—		—		334,420		56,518		390,938
Goodwill	—		23,373		—		—		23,373
Intangible assets	—		40,892		—		—		40,892
Total assets	660,916		487,159		11,303,991		578,833		13,030,899