Segment Information

3 Months Ended

Mar. 31, 2022

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, 2021.

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, 2022 and 2021.

Table 23.1 – Business Segment Financial Information

	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	6,031		2,273		53,991		(9,193)		53,102
Non-interest income
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, net	7,935		8,955		2,457		(588)		18,759
General and administrative expenses	(6,101)		(10,472)		(3,133)		(15,148)		(34,854)
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 (expense) income, net	$	104	$	(3,890)	$	7,300	$	(2,033)	$	1,481

	Three Months Ended March 31, 2021
(In Thousands)	Residential Mortgage Banking		Business Purpose Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
Interest income	$	7,579	$	2,855	$	116,509	$	1,362	$	128,305
Interest expense	(4,747)		(1,599)		(85,945)		(10,261)		(102,552)
Net interest income	2,832		1,256		30,564		(8,899)		25,753
Non-interest income
Mortgage banking activities, net	61,435		21,172		—		—		82,607
Investment fair value changes, net	—		—		45,761		(674)		45,087
Other income, net	—		122		3,574		147		3,843
Realized gains, net	—		—		2,716		—		2,716
Total non-interest income (loss), net	61,435		21,294		52,051		(527)		134,253
General and administrative expenses	(12,689)		(10,194)		(3,164)		(17,504)		(43,551)
Loan acquisition costs	(1,404)		(1,492)		(659)		(4)		(3,559)
Other expenses	(6)		(3,777)		(330)		17		(4,096)
Provision for income taxes	(9,486)		(1,321)		(736)		—		(11,543)
Segment Contribution	$	40,682	$	5,766	$	77,726	$	(26,917)
Net Income									$	97,257
Non-cash amortization income (expense), net	$	(3)	$	(4,098)	$	(234)	$	(1,895)	$	(6,230)

The following table presents the components of Corporate/Other for the three months ended March 31, 2022 and 2021.

Table 23.2 – Components of Corporate/Other

	Three Months Ended March 31,
	2022						2021
(In Thousands)	Legacy Consolidated VIEs (1)		Other		Total		Legacy Consolidated VIEs (1)		Other		Total
Interest income	$	1,012	$	8	$	1,020	$	1,348	$	14	$	1,362
Interest expense	(701)		(9,512)		(10,213)		(875)		(9,386)		(10,261)
Net interest income	311		(9,504)		(9,193)		473		(9,372)		(8,899)
Non-interest income
Investment fair value changes, net	(714)		—		(714)		(699)		25		(674)
Other income	—		126		126		—		147		147
Total non-interest income, net	(714)		126		(588)		(699)		172		(527)
General and administrative expenses	—		(15,148)		(15,148)		—		(17,504)		(17,504)
Loan acquisition costs	—		—		—		—		(4)		(4)
Other expenses	—		—		—		—		17		17
Total	$	(403)	$	(24,526)	$	(24,929)	$	(226)	$	(26,691)	$	(26,917)

(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, 2022 and December 31, 2021.

Table 23.3 – Supplemental Segment Information

(In Thousands)	Residential Mortgage Banking		Business Purpose Lending Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
March 31, 2022
Residential loans	$	1,101,006	$	—	$	5,893,918	$	222,213	$	7,217,137
Business purpose loans	—		496,280		4,258,498		—		4,754,778
Multifamily loans	—		—		451,804		—		451,804
Real estate securities	7,714		—		351,168		—		358,882
Other investments	—		—		595,056		40,525		635,581
Intangible assets	—		38,027		—		—		38,027
Total assets	1,234,502		607,991		11,546,776		864,023		14,253,292
December 31, 2021
Residential loans	$	1,673,235	$	—	$	5,688,742	$	230,455	$	7,592,432
Business purpose loans	—		347,860		4,443,129		—		4,790,989
Multifamily loans	—		—		473,514		—		473,514
Real estate securities	4,927		—		372,484		—		377,411
Other investments	—		—		606,267		35,702		641,969
Intangible assets	—		41,561		—		—		41,561
Total assets	1,716,285		464,967		11,770,486		755,206		14,706,944