Segment Information

12 Months Ended

Dec. 31, 2021

Segment Reporting [Abstract]

Segment Information

Segment Information

Redwood operates in three segments: Residential Mortgage Banking, Business Purpose Mortgage Banking and Investment Portfolio. During the fourth quarter of 2021 we re-organized our segments to conform with changes in how we manage and evaluate our operations, moving all retained investments previously held in our Residential Lending and Business Purpose Lending segments to a newly-created Investment Portfolio Segment, where they are now combined with our third-party portfolio investments. Our mortgage banking activities are now reflected in standalone Residential Mortgage Banking and Business Purpose Mortgage Banking segments. We 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 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 for our convertible notes and trust preferred securities (and in 2020, realized gains from the repurchase of convertible notes), indirect general and administrative expenses and other expense.

The following tables present financial information by segment for the years ended December 31, 2021, 2020, and 2019.

Table 23.1 – Business Segment Financial Information

	Year Ended December 31, 2021
(In Thousands)	Residential Mortgage Banking		Business Purpose Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
Interest income	$	48,953	$	14,054	$	507,173	$	4,746	$	574,926
Interest expense	(26,963)		(7,230)		(351,635)		(40,921)		(426,749)
Net interest income	21,990		6,824		155,538		(36,175)		148,177
Non-interest income
Mortgage banking activities, net	127,151		108,593		—		—		235,744
Investment fair value changes, net	—		—		129,614		(1,565)		128,049
Other income, net	—		1,046		10,021		951		12,018
Realized gains, net	—		—		17,993		—		17,993
Total non-interest income, net	127,151		109,639		157,628		(614)		393,804
General and administrative expenses	(33,574)		(46,586)		(13,633)		(77,066)		(170,859)
Loan acquisition costs	(7,480)		(8,100)		(752)		(4)		(16,336)
Other expenses	104		(15,127)		(1,689)		17		(16,695)
(Provision for) benefit from income taxes	(25,777)		(8,122)		(3,862)		19,283		(18,478)
Segment Contribution	$	82,414	$	38,528	$	293,230	$	(94,559)
Net Income									$	319,613
Non-cash amortization (expense) income, net	$	(82)	$	(16,452)	$	(20,781)	$	(7,878)	$	(45,193)

	Year Ended December 31, 2020
(In Thousands)	Residential Mortgage Banking		Business Purpose Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
Interest income	$	17,839	$	19,200	$	525,741	$	9,136	$	571,916
Interest expense	(11,978)		(13,145)		(375,262)		(47,620)		(448,005)
Net interest income	5,861		6,055		150,479		(38,484)		123,911
Non-interest income
Mortgage banking activities, net	3,721		74,622		129		—		78,472
Investment fair value changes, net	—		(101)		(586,333)		(2,004)		(588,438)
Other income, net	—		3,228		(1,725)		2,685		4,188
Realized gains, net	—		—		5,242		25,182		30,424
Total non-interest income (loss), net	3,721		77,749		(582,687)		25,863		(475,354)
General and administrative expenses	(16,297)		(37,460)		(8,547)		(52,900)		(115,204)
Loan acquisition costs	(2,727)		(5,860)		(2,426)		(10)		(11,023)
Other expenses	(4,114)		(104,147)		194		(718)		(108,785)
Benefit from (provision for) income taxes	4,567		(4,063)		4,104		—		4,608
Segment Contribution	$	(8,989)	$	(67,726)	$	(438,883)	$	(66,249)
Net Loss									$	(581,847)
Non-cash amortization income (expense), net	$	(662)	$	(18,426)	$	(1,282)	$	(4,954)	$	(25,324)
Other significant non-cash expense: goodwill impairment	$	—	$	(88,675)	$	—	$	—	$	(88,675)

	Year Ended December 31, 2019
(In Thousands)	Residential Mortgage Banking		Business Purpose Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
Interest income	$	40,901	$	8,212	$	555,519	$	17,649	$	622,281
Interest expense	(21,503)		(4,972)		(390,188)		(63,145)		(479,808)
Net interest income	19,398		3,240		165,331		(45,496)		142,473
Non-interest income
Mortgage banking activities, net	47,743		39,523		—		—		87,266
Investment fair value changes, net	(1)		(175)		37,293		(1,617)		35,500
Other income, net	—		5,139		11,407		2,711		19,257
Realized gains, net	—		—		23,821		—		23,821
Total non-interest income, net	47,742		44,487		72,521		1,094		165,844
General and administrative expenses	(21,724)		(24,832)		(9,313)		(52,868)		(108,737)
Loan acquisition costs	(3,954)		(4,226)		(1,618)		(137)		(9,935)
Other expense	—		(8,521)		(1,106)		(3,395)		(13,022)
Provision for income taxes	(4,074)		(947)		(2,419)		—		(7,440)
Segment Contribution	$	37,388	$	9,201	$	223,396	$	(100,802)
Net Income									$	169,183
Non-cash amortization income (expense), net	$	(97)	$	(8,896)	$	10,445	$	(4,813)	$	(3,361)

The following table presents the components of Corporate/Other for the years ended December 31, 2021, 2020, and 2019.

Table 23.2 – Components of Corporate/Other

	Years Ended December 31,
	2021						2020						2019
(In Thousands)	Legacy Consolidated VIEs (1)		Other		Total		Legacy Consolidated VIEs (1)		Other		Total		Legacy Consolidated VIEs (1)		Other		Total
Interest income	$	4,709	$	37	$	4,746	$	9,060	$	76	$	9,136	$	17,649	$	—	$	17,649
Interest expense	(3,040)		(37,881)		(40,921)		(5,945)		(41,675)		(47,620)		(14,418)		(48,727)		(63,145)
Net interest income (loss)	1,669		(37,844)		(36,175)		3,115		(41,599)		(38,484)		3,231		(48,727)		(45,496)
Non-interest income
Investment fair value changes, net	(1,558)		(7)		(1,565)		(1,512)		(492)		(2,004)		(1,545)		(72)		(1,617)
Other income, net	—		951		951		—		2,685		2,685		—		2,711		2,711
Realized gains, net	—		—		—		—		25,182		25,182		—		—		—
Total non-interest (loss) income, net	(1,558)		944		(614)		(1,512)		27,375		25,863		(1,545)		2,639		1,094
General and administrative expenses	—		(77,066)		(77,066)		—		(52,900)		(52,900)		—		(52,868)		(52,868)
Loan acquisition costs	—		(4)		(4)		—		(10)		(10)		—		(137)		(137)
Other expenses	—		17		17		—		(718)		(718)		—		(3,395)		(3,395)
Benefit from income taxes	—		19,283		19,283		—		—		—		—		—		—
Total	$	111	$	(94,670)	$	(94,559)	$	1,603	$	(67,852)	$	(66,249)	$	1,686	$	(102,488)	$	(100,802)

(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, 2021 and 2020.

Table 23.3 – Supplemental Segment Information

(In Thousands)	Residential Mortgage Banking		Business Purpose Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
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
December 31, 2020
Residential loans	$	176,641	$	—	$	3,786,475	$	285,935	$	4,249,051
Business purpose loans	—		245,394		3,890,959		—		4,136,353
Multifamily loans	—		—		492,221		—		492,221
Real estate securities	5,279		—		338,846		—		344,125
Other investments	—		—		343,724		4,451		348,175
Intangible assets	—		56,865		—		—		56,865
Total assets	242,060		328,564		8,970,633		813,809		10,355,066