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Segment Information
3 Months Ended
Mar. 31, 2018
Segment Reporting [Abstract]  
Segment Information
Segment Information
Redwood operates in two segments: Investment Portfolio and Residential Mortgage Banking. Our segments are based on our organizational and management structure, which aligns with how our results are monitored and performance is assessed. For a full description of our segments, see Item 1—Business in our Annual Report on Form 10-K for the year ended December 31, 2017.
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 two 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 associated with certain long-term debt, indirect operating expenses, and other expense.
The following tables present financial information by segment for the three months ended March 31, 2018 and 2017.
Table 21.1 – Business Segment Financial Information
 
 
Three Months Ended March 31, 2018
(In Thousands)
 
Investment Portfolio
 
 Residential Mortgage Banking
 
 Corporate/
Other
 
 Total
Interest income
 
$
58,757

 
$
12,897

 
$
4,965

 
$
76,619

Interest expense
 
(19,863
)
 
(6,137
)
 
(15,514
)
 
(41,514
)
Net interest income (loss)
 
38,894


6,760


(10,549
)
 
35,105

Non-interest income
 
 
 
 
 
 
 
 
Mortgage banking activities, net
 

 
26,576

 

 
26,576

MSR income, net
 
957

 

 

 
957

Investment fair value changes, net
 
1,590

 

 
19

 
1,609

Other income
 
1,161

 

 

 
1,161

Realized gains, net
 
9,363

 

 

 
9,363

Total non-interest income, net
 
13,071


26,576


19

 
39,666

Direct operating expenses
 
(2,007
)
 
(8,632
)
 
(12,391
)
 
(23,030
)
Provision for income taxes
 
(888
)
 
(4,008
)
 

 
(4,896
)
Segment Contribution
 
$
49,070


$
20,696


$
(22,921
)
 
 
Net Income
 
 
 
 
 
 
 
$
46,845

Non-cash amortization income (expense), net
 
$
4,617

 
$
(22
)
 
$
(858
)
 
$
3,737

 
 
Three Months Ended March 31, 2017
(In Thousands)
 
Investment Portfolio
 
 Residential Mortgage Banking
 
 Corporate/
Other
 
 Total
Interest income
 
$
42,250

 
$
7,474

 
$
4,904

 
$
54,628

Interest expense
 
(5,264
)
 
(2,924
)
 
(12,843
)
 
(21,031
)
Net interest income (loss)
 
36,986

 
4,550

 
(7,939
)
 
33,597

Non-interest income
 
 
 
 
 
 
 
 
Mortgage banking activities, net
 

 
17,604

 

 
17,604

MSR income, net
 
1,713

 

 

 
1,713

Investment fair value changes, net
 
3,359

 

 
(1,808
)
 
1,551

Other income
 
1,184

 

 

 
1,184

Realized gains, net
 
5,703

 

 

 
5,703

Total non-interest income, net
 
11,959

 
17,604

 
(1,808
)
 
27,755

Direct operating expenses
 
(1,593
)
 
(5,881
)
 
(10,752
)
 
(18,226
)
Provision for income taxes
 
(1,737
)
 
(4,420
)
 

 
(6,157
)
Segment Contribution
 
$
45,615

 
$
11,853


$
(20,499
)
 
 
Net Income
 
 
 
 
 
 
 
$
36,969

Non-cash amortization income (expense)
 
$
5,847

 
$
(27
)
 
$
(997
)
 
$
4,823


The following table presents the components of Corporate/Other for the three months ended March 31, 2018 and 2017.
Table 21.2 – Components of Corporate/Other
 
 
Three Months Ended March 31,
 
 
2018
 
2017
(In Thousands)
 
Legacy Consolidated VIEs (1)
 
Other
 
Total
 
Legacy Consolidated VIEs (1)
 
Other
 
 Total
Interest income
 
$
4,812

 
$
153

 
$
4,965

 
$
4,838

 
$
66

 
$
4,904

Interest expense
 
(3,852
)
 
(11,662
)
 
(15,514
)
 
(3,516
)
 
(9,327
)
 
(12,843
)
Net interest income (loss)
 
960

 
(11,509
)
 
(10,549
)
 
1,322

 
(9,261
)
 
(7,939
)
Non-interest income
 
 
 
 
 
 
 
 
 
 
 
 
Investment fair value changes, net
 
(8
)
 
27

 
19

 
(1,810
)
 
2

 
(1,808
)
Total non-interest income, net
 
(8
)
 
27

 
19

 
(1,810
)
 
2

 
(1,808
)
Direct operating expenses
 

 
(12,391
)
 
(12,391
)
 

 
(10,752
)
 
(10,752
)
Total
 
$
952

 
$
(23,873
)
 
$
(22,921
)
 
$
(488
)
 
$
(20,011
)
 
$
(20,499
)
(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, 2018 and December 31, 2017.
Table 21.3 – Supplemental Segment Information
(In Thousands)
 
Investment Portfolio
 
Residential Mortgage Banking
 
Corporate/
Other
 
Total
March 31, 2018
 
 
 
 
 
 
 
 
Residential loans
 
$
3,389,404

 
$
1,130,185

 
$
626,151

 
$
5,145,740

Real estate securities
 
1,357,720

 

 

 
1,357,720

Mortgage servicing rights
 
66,496

 

 

 
66,496

Total assets
 
5,012,235

 
1,154,413

 
832,925

 
6,999,573

 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
 
Residential loans
 
$
3,054,448

 
$
1,427,945

 
$
632,817

 
$
5,115,210

Real estate securities
 
1,476,510

 

 

 
1,476,510

Mortgage servicing rights
 
63,598

 

 

 
63,598

Total assets
 
4,743,873

 
1,453,069

 
842,880

 
7,039,822