|
|
☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
Maryland
|
|
68-0329422
|
(State or Other Jurisdiction of
Incorporation or Organization) |
|
(I.R.S. Employer
Identification No.) |
|
Large accelerated filer
|
☒
|
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
|
Smaller reporting company
|
☐
|
|
|
|
Emerging growth company
|
☐
|
Title of each class
|
Trading symbol(s)
|
Name of each exchange on which registered
|
Common stock, par value $0.01 per share
|
RWT
|
New York Stock Exchange
|
Common Stock, $0.01 par value per share
|
|
112,689,511
|
|
shares outstanding as of November 5, 2019
|
(In Thousands, except Share Data)
(Unaudited)
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
ASSETS (1)
|
|
|
|
|
||||
Residential loans, held-for-sale, at fair value
|
|
$
|
925,887
|
|
|
$
|
1,048,801
|
|
Residential loans, held-for-investment, at fair value
|
|
7,755,916
|
|
|
6,205,941
|
|
||
Business purpose residential loans, at fair value
|
|
336,035
|
|
|
141,258
|
|
||
Multifamily loans, held-for-investment, at fair value
|
|
3,791,622
|
|
|
2,144,598
|
|
||
Real estate securities, at fair value
|
|
1,285,426
|
|
|
1,452,494
|
|
||
Other investments
|
|
347,707
|
|
|
438,518
|
|
||
Cash and cash equivalents
|
|
394,628
|
|
|
175,764
|
|
||
Restricted cash
|
|
111,518
|
|
|
29,313
|
|
||
Goodwill and intangible assets
|
|
49,121
|
|
|
—
|
|
||
Accrued interest receivable
|
|
57,464
|
|
|
47,105
|
|
||
Derivative assets
|
|
43,649
|
|
|
35,789
|
|
||
Other assets
|
|
377,310
|
|
|
217,825
|
|
||
Total Assets
|
|
$
|
15,476,283
|
|
|
$
|
11,937,406
|
|
|
|
|
|
|
||||
LIABILITIES AND EQUITY (1)
|
|
|
|
|
||||
Liabilities
|
|
|
|
|
||||
Short-term debt, net (2)
|
|
$
|
1,980,817
|
|
|
$
|
2,400,279
|
|
Accrued interest payable
|
|
46,881
|
|
|
42,528
|
|
||
Derivative liabilities
|
|
234,011
|
|
|
84,855
|
|
||
Accrued expenses and other liabilities
|
|
129,742
|
|
|
78,719
|
|
||
Asset-backed securities issued, at fair value
|
|
8,346,051
|
|
|
5,410,073
|
|
||
Long-term debt, net
|
|
2,953,722
|
|
|
2,572,158
|
|
||
Total liabilities
|
|
13,691,224
|
|
|
10,588,612
|
|
||
Commitments and Contingencies (see Note 16)
|
|
|
|
|
|
|
||
Equity
|
|
|
|
|
||||
Common stock, par value $0.01 per share, 270,000,000 and 180,000,000 shares authorized; 112,101,731 and 84,884,344 issued and outstanding
|
|
1,121
|
|
|
849
|
|
||
Additional paid-in capital
|
|
2,244,834
|
|
|
1,811,422
|
|
||
Accumulated other comprehensive income
|
|
38,124
|
|
|
61,297
|
|
||
Cumulative earnings
|
|
1,529,981
|
|
|
1,409,941
|
|
||
Cumulative distributions to stockholders
|
|
(2,029,001
|
)
|
|
(1,934,715
|
)
|
||
Total equity
|
|
1,785,059
|
|
|
1,348,794
|
|
||
Total Liabilities and Equity
|
|
$
|
15,476,283
|
|
|
$
|
11,937,406
|
|
(1)
|
Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At September 30, 2019 and December 31, 2018, assets of consolidated VIEs totaled $9,596,537 and $6,331,191, respectively. At September 30, 2019 and December 31, 2018, liabilities of consolidated VIEs totaled $8,582,595 and $5,709,807, respectively. See Note 4 for further discussion.
|
(2)
|
Includes $201 million of convertible notes, which were reclassified from Long-term debt, net to Short-term debt as the maturity of the notes was less than one year as of November 15, 2018. See Note 13 for further discussion.
|
(In Thousands, except Share Data)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(Unaudited)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Interest Income
|
|
|
|
|
|
|
|
|
||||||||
Residential loans
|
|
$
|
77,070
|
|
|
$
|
63,265
|
|
|
$
|
230,308
|
|
|
$
|
169,010
|
|
Business purpose residential loans
|
|
5,446
|
|
|
1,445
|
|
|
12,231
|
|
|
1,445
|
|
||||
Multifamily loans
|
|
36,829
|
|
|
5,578
|
|
|
94,134
|
|
|
5,578
|
|
||||
Real estate securities
|
|
23,047
|
|
|
27,063
|
|
|
72,514
|
|
|
79,054
|
|
||||
Other interest income
|
|
7,725
|
|
|
2,046
|
|
|
20,513
|
|
|
3,905
|
|
||||
Total interest income
|
|
150,117
|
|
|
99,397
|
|
|
429,700
|
|
|
258,992
|
|
||||
Interest Expense
|
|
|
|
|
|
|
|
|
||||||||
Short-term debt
|
|
(24,239
|
)
|
|
(14,146
|
)
|
|
(70,732
|
)
|
|
(40,756
|
)
|
||||
Asset-backed securities issued
|
|
(71,065
|
)
|
|
(27,421
|
)
|
|
(196,473
|
)
|
|
(55,171
|
)
|
||||
Long-term debt
|
|
(21,300
|
)
|
|
(22,784
|
)
|
|
(64,895
|
)
|
|
(58,151
|
)
|
||||
Total interest expense
|
|
(116,604
|
)
|
|
(64,351
|
)
|
|
(332,100
|
)
|
|
(154,078
|
)
|
||||
Net Interest Income
|
|
33,513
|
|
|
35,046
|
|
|
97,600
|
|
|
104,914
|
|
||||
Non-interest Income
|
|
|
|
|
|
|
|
|
||||||||
Mortgage banking activities, net
|
|
9,515
|
|
|
11,224
|
|
|
40,984
|
|
|
48,396
|
|
||||
Investment fair value changes, net
|
|
11,444
|
|
|
10,332
|
|
|
34,741
|
|
|
12,830
|
|
||||
Other income, net
|
|
1,825
|
|
|
3,453
|
|
|
7,819
|
|
|
8,893
|
|
||||
Realized gains, net
|
|
4,714
|
|
|
7,275
|
|
|
18,227
|
|
|
21,352
|
|
||||
Total non-interest income, net
|
|
27,498
|
|
|
32,284
|
|
|
101,771
|
|
|
91,471
|
|
||||
Operating expenses
|
|
(26,815
|
)
|
|
(21,490
|
)
|
|
(76,229
|
)
|
|
(63,529
|
)
|
||||
Net Income before Provision for Income Taxes
|
|
34,196
|
|
|
45,840
|
|
|
123,142
|
|
|
132,856
|
|
||||
Benefit from (provision for) income taxes
|
|
114
|
|
|
(4,919
|
)
|
|
(3,102
|
)
|
|
(12,343
|
)
|
||||
Net Income
|
|
$
|
34,310
|
|
|
$
|
40,921
|
|
|
$
|
120,040
|
|
|
$
|
120,513
|
|
|
|
|
|
|
|
|
|
|
||||||||
Basic earnings per common share
|
|
$
|
0.33
|
|
|
$
|
0.49
|
|
|
$
|
1.20
|
|
|
$
|
1.51
|
|
Diluted earnings per common share
|
|
$
|
0.31
|
|
|
$
|
0.42
|
|
|
$
|
1.09
|
|
|
$
|
1.30
|
|
Basic weighted average shares outstanding
|
|
101,872,126
|
|
|
80,796,856
|
|
|
97,214,064
|
|
|
77,211,188
|
|
||||
Diluted weighted average shares outstanding
|
|
136,522,709
|
|
|
114,682,688
|
|
|
131,202,689
|
|
|
107,792,029
|
|
(In Thousands)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(Unaudited)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net Income
|
|
$
|
34,310
|
|
|
$
|
40,921
|
|
|
$
|
120,040
|
|
|
$
|
120,513
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
||||||||
Net unrealized gain (loss) on available-for-sale securities
|
|
4,484
|
|
|
(2,408
|
)
|
|
19,764
|
|
|
(9,749
|
)
|
||||
Reclassification of unrealized gain on available-for-sale securities to net income
|
|
(3,492
|
)
|
|
(5,686
|
)
|
|
(15,807
|
)
|
|
(19,821
|
)
|
||||
Net unrealized (loss) gain on interest rate agreements
|
|
(11,791
|
)
|
|
4,801
|
|
|
(27,130
|
)
|
|
16,649
|
|
||||
Total other comprehensive loss
|
|
(10,799
|
)
|
|
(3,293
|
)
|
|
(23,173
|
)
|
|
(12,921
|
)
|
||||
Total Comprehensive Income
|
|
$
|
23,511
|
|
|
$
|
37,628
|
|
|
$
|
96,867
|
|
|
$
|
107,592
|
|
(In Thousands, except Share Data)
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Other
Comprehensive
Income
|
|
Cumulative
Earnings
|
|
Cumulative
Distributions
to Stockholders
|
|
Total
|
|||||||||||||||
(Unaudited)
|
|
Shares
|
|
Amount
|
|
|
|
|
|
||||||||||||||||||
June 30, 2019
|
|
97,715,021
|
|
|
$
|
977
|
|
|
$
|
2,013,044
|
|
|
$
|
48,923
|
|
|
$
|
1,495,671
|
|
|
$
|
(1,994,583
|
)
|
|
$
|
1,564,032
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34,310
|
|
|
—
|
|
|
34,310
|
|
||||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,799
|
)
|
|
—
|
|
|
—
|
|
|
(10,799
|
)
|
||||||
Issuance of common stock
|
|
14,375,000
|
|
|
144
|
|
|
228,339
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
228,483
|
|
||||||
Employee stock purchase and incentive plans
|
|
11,710
|
|
|
—
|
|
|
154
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
154
|
|
||||||
Non-cash equity award compensation
|
|
—
|
|
|
—
|
|
|
3,297
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,297
|
|
||||||
Common dividends declared ($0.30 per share)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(34,418
|
)
|
|
(34,418
|
)
|
||||||
September 30, 2019
|
|
112,101,731
|
|
|
$
|
1,121
|
|
|
$
|
2,244,834
|
|
|
$
|
38,124
|
|
|
$
|
1,529,981
|
|
|
$
|
(2,029,001
|
)
|
|
$
|
1,785,059
|
|
(In Thousands, except Share Data)
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Other
Comprehensive
Income
|
|
Cumulative
Earnings
|
|
Cumulative
Distributions
to Stockholders
|
|
Total
|
|||||||||||||||
(Unaudited)
|
|
Shares
|
|
Amount
|
|
|
|
|
|
||||||||||||||||||
December 31, 2018
|
|
84,884,344
|
|
|
$
|
849
|
|
|
$
|
1,811,422
|
|
|
$
|
61,297
|
|
|
$
|
1,409,941
|
|
|
$
|
(1,934,715
|
)
|
|
$
|
1,348,794
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
120,040
|
|
|
—
|
|
|
120,040
|
|
||||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(23,173
|
)
|
|
—
|
|
|
—
|
|
|
(23,173
|
)
|
||||||
Issuance of common stock
|
|
26,666,191
|
|
|
267
|
|
|
418,324
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
418,591
|
|
||||||
Direct stock purchase and dividend reinvestment plan
|
|
399,838
|
|
|
4
|
|
|
6,303
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,307
|
|
||||||
Employee stock purchase and incentive plans
|
|
151,358
|
|
|
1
|
|
|
(1,767
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,766
|
)
|
||||||
Non-cash equity award compensation
|
|
—
|
|
|
—
|
|
|
10,552
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,552
|
|
||||||
Common dividends declared ($0.90 per share)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(94,286
|
)
|
|
(94,286
|
)
|
||||||
September 30, 2019
|
|
112,101,731
|
|
|
$
|
1,121
|
|
|
$
|
2,244,834
|
|
|
$
|
38,124
|
|
|
$
|
1,529,981
|
|
|
$
|
(2,029,001
|
)
|
|
$
|
1,785,059
|
|
(In Thousands, except Share Data)
|
|
Common Stock
|
|
Additional
Paid-In Capital |
|
Accumulated
Other Comprehensive Income |
|
Cumulative
Earnings |
|
Cumulative
Distributions to Stockholders |
|
Total
|
|||||||||||||||
(Unaudited)
|
|
Shares
|
|
Amount
|
|
|
|
|
|
||||||||||||||||||
June 30, 2018
|
|
75,742,719
|
|
|
$
|
757
|
|
|
$
|
1,665,749
|
|
|
$
|
75,620
|
|
|
$
|
1,369,933
|
|
|
$
|
(1,883,104
|
)
|
|
$
|
1,228,955
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40,921
|
|
|
—
|
|
|
40,921
|
|
||||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,293
|
)
|
|
—
|
|
|
—
|
|
|
(3,293
|
)
|
||||||
Issuance of common stock
|
|
7,187,500
|
|
|
72
|
|
|
116,964
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
117,036
|
|
||||||
Employee stock purchase and incentive plans
|
|
62
|
|
|
—
|
|
|
94
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
94
|
|
||||||
Non-cash equity award compensation
|
|
—
|
|
|
—
|
|
|
3,150
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,150
|
|
||||||
Common dividends declared ($0.30 per share)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(25,536
|
)
|
|
(25,536
|
)
|
||||||
September 30, 2018
|
|
82,930,281
|
|
|
$
|
829
|
|
|
$
|
1,785,957
|
|
|
$
|
72,327
|
|
|
$
|
1,410,854
|
|
|
$
|
(1,908,640
|
)
|
|
$
|
1,361,327
|
|
(In Thousands, except Share Data)
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Other
Comprehensive
Income
|
|
Cumulative
Earnings
|
|
Cumulative
Distributions
to Stockholders
|
|
Total
|
|||||||||||||||
(Unaudited)
|
|
Shares
|
|
Amount
|
|
|
|
|
|
||||||||||||||||||
December 31, 2017
|
|
76,599,972
|
|
|
$
|
766
|
|
|
$
|
1,673,845
|
|
|
$
|
85,248
|
|
|
$
|
1,290,341
|
|
|
$
|
(1,837,913
|
)
|
|
$
|
1,212,287
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
120,513
|
|
|
—
|
|
|
120,513
|
|
||||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,921
|
)
|
|
—
|
|
|
—
|
|
|
(12,921
|
)
|
||||||
Issuance of common stock
|
|
7,187,500
|
|
|
72
|
|
|
116,964
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
117,036
|
|
||||||
Employee stock purchase and incentive plans
|
|
183,638
|
|
|
1
|
|
|
(101
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(100
|
)
|
||||||
Non-cash equity award compensation
|
|
—
|
|
|
—
|
|
|
10,783
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,783
|
|
||||||
Share repurchases
|
|
(1,040,829
|
)
|
|
(10
|
)
|
|
(15,534
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,544
|
)
|
||||||
Common dividends declared ($0.88 per share)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(70,727
|
)
|
|
(70,727
|
)
|
||||||
September 30, 2018
|
|
82,930,281
|
|
|
$
|
829
|
|
|
$
|
1,785,957
|
|
|
$
|
72,327
|
|
|
$
|
1,410,854
|
|
|
$
|
(1,908,640
|
)
|
|
$
|
1,361,327
|
|
(In Thousands)
(Unaudited) |
|
Nine Months Ended September 30,
|
||||||
|
2019
|
|
2018
|
|||||
Cash Flows From Operating Activities:
|
|
|
|
|
||||
Net income
|
|
$
|
120,040
|
|
|
$
|
120,513
|
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
|
||||
Amortization of premiums, discounts, and securities issuance costs, net
|
|
(3,486
|
)
|
|
(11,091
|
)
|
||
Depreciation and amortization of non-financial assets
|
|
5,673
|
|
|
922
|
|
||
Originations of held-for-sale loans
|
|
(124,392
|
)
|
|
—
|
|
||
Purchases of held-for-sale loans
|
|
(4,002,509
|
)
|
|
(5,596,326
|
)
|
||
Proceeds from sales of held-for-sale loans
|
|
2,971,811
|
|
|
4,097,211
|
|
||
Principal payments on held-for-sale loans
|
|
77,100
|
|
|
51,853
|
|
||
Net settlements of derivatives
|
|
(32,902
|
)
|
|
36,721
|
|
||
Non-cash equity award compensation expense
|
|
10,552
|
|
|
10,783
|
|
||
Market valuation adjustments
|
|
(62,720
|
)
|
|
(53,666
|
)
|
||
Realized gains, net
|
|
(18,227
|
)
|
|
(21,352
|
)
|
||
Net change in:
|
|
|
|
|
||||
Accrued interest receivable and other assets
|
|
(141,197
|
)
|
|
(32,722
|
)
|
||
Accrued interest payable and accrued expenses and other liabilities
|
|
(1,049
|
)
|
|
34,137
|
|
||
Net cash used in operating activities
|
|
(1,201,306
|
)
|
|
(1,363,017
|
)
|
||
Cash Flows From Investing Activities:
|
|
|
|
|
||||
Originations of loans held-for-investment
|
|
(171,915
|
)
|
|
—
|
|
||
Purchases of loans held-for-investment
|
|
(49,489
|
)
|
|
(111,231
|
)
|
||
Proceeds from sales of loans held-for-investment
|
|
9,422
|
|
|
—
|
|
||
Principal payments on loans held-for-investment
|
|
1,091,652
|
|
|
550,973
|
|
||
Purchases of real estate securities
|
|
(309,839
|
)
|
|
(482,150
|
)
|
||
Purchases of residential securities held in consolidated securitization trust
|
|
(193,212
|
)
|
|
—
|
|
||
Purchases of multifamily securities held in consolidated securitization trusts
|
|
(68,601
|
)
|
|
(54,957
|
)
|
||
Proceeds from sales of real estate securities
|
|
487,469
|
|
|
432,199
|
|
||
Principal payments on real estate securities
|
|
62,711
|
|
|
61,278
|
|
||
Purchases of servicer advance investments
|
|
(69,610
|
)
|
|
—
|
|
||
Principal repayments from servicer advance investments
|
|
150,512
|
|
|
—
|
|
||
Acquisition of 5 Arches, net of cash acquired
|
|
(3,714
|
)
|
|
—
|
|
||
Net investment in participation in loan warehouse facility
|
|
38,209
|
|
|
(37,814
|
)
|
||
Net investment in multifamily loan fund
|
|
(33,090
|
)
|
|
—
|
|
||
Other investing activities, net
|
|
(24,989
|
)
|
|
(3,731
|
)
|
||
Net cash provided by investing activities
|
|
915,516
|
|
|
354,567
|
|
||
Cash Flows From Financing Activities:
|
|
|
|
|
||||
Proceeds from borrowings on short-term debt
|
|
4,009,083
|
|
|
4,760,083
|
|
||
Repayments on short-term debt
|
|
(4,435,823
|
)
|
|
(5,274,664
|
)
|
||
Proceeds from issuance of asset-backed securities
|
|
1,020,136
|
|
|
1,658,848
|
|
||
Repayments on asset-backed securities issued
|
|
(720,651
|
)
|
|
(305,528
|
)
|
||
Proceeds from issuance of long-term debt
|
|
387,053
|
|
|
199,000
|
|
||
Deferred long-term debt issuance costs paid
|
|
(7,023
|
)
|
|
(4,977
|
)
|
||
Net proceeds from issuance of common stock
|
|
426,970
|
|
|
117,311
|
|
||
Net payments on repurchase of common stock
|
|
—
|
|
|
(16,315
|
)
|
||
Dividends paid
|
|
(94,286
|
)
|
|
(70,727
|
)
|
||
Other financing activities, net
|
|
1,400
|
|
|
(619
|
)
|
||
Net cash provided by financing activities
|
|
586,859
|
|
|
1,062,412
|
|
||
Net increase in cash, cash equivalents and restricted cash
|
|
301,069
|
|
|
53,962
|
|
||
Cash, cash equivalents and restricted cash at beginning of period (1)
|
|
205,077
|
|
|
146,807
|
|
||
Cash, cash equivalents and restricted cash at end of period (1)
|
|
$
|
506,146
|
|
|
$
|
200,769
|
|
(In Thousands)
(Unaudited) |
|
Nine Months Ended September 30,
|
||||||
|
2019
|
|
2018
|
|||||
Supplemental Cash Flow Information:
|
|
|
|
|
||||
Cash paid during the period for:
|
|
|
|
|
||||
Interest
|
|
$
|
319,036
|
|
|
$
|
139,003
|
|
Taxes
|
|
6,977
|
|
|
6,372
|
|
||
Supplemental Noncash Information:
|
|
|
|
|
||||
Real estate securities retained from loan securitizations
|
|
$
|
7,759
|
|
|
$
|
46,872
|
|
Retention of mortgage servicing rights from loan securitizations and sales
|
|
868
|
|
|
—
|
|
||
Consolidation of residential loans held in securitization trusts
|
|
1,190,995
|
|
|
—
|
|
||
Consolidation of residential ABS
|
|
997,783
|
|
|
—
|
|
||
Consolidation of multifamily loans held in securitization trusts
|
|
1,481,554
|
|
|
946,650
|
|
||
Consolidation of multifamily ABS
|
|
1,408,002
|
|
|
880,602
|
|
||
Transfers from loans held-for-sale to loans held-for-investment
|
|
1,361,015
|
|
|
1,981,170
|
|
||
Transfers from loans held-for-investment to loans held-for-sale
|
|
22,808
|
|
|
15,717
|
|
||
Transfers from residential loans to real estate owned
|
|
5,280
|
|
|
2,139
|
|
||
Right-of-use asset obtained in exchange for operating lease liability
|
|
13,016
|
|
|
—
|
|
(1)
|
Cash, cash equivalents, and restricted cash at September 30, 2019 includes cash and cash equivalents of $395 million and restricted cash of $112 million, and at December 31, 2018 includes cash and cash equivalents of $176 million and restricted cash of $29 million.
|
(In Thousands)
|
|
March 1, 2019
|
||
Purchase price:
|
|
|
||
Cash
|
|
$
|
12,575
|
|
Contingent consideration, at fair value
|
|
24,621
|
|
|
Purchase option, at fair value
|
|
5,082
|
|
|
Equity method investment, at fair value
|
|
8,052
|
|
|
Total consideration
|
|
$
|
50,330
|
|
|
|
|
||
Allocated to:
|
|
|
||
Tangible net assets acquired (1)
|
|
$
|
985
|
|
Goodwill
|
|
28,747
|
|
|
Intangible assets
|
|
24,800
|
|
|
Deferred tax liability
|
|
(4,202
|
)
|
|
Total net assets acquired
|
|
$
|
50,330
|
|
(1)
|
5 Arches net assets acquired consisted of assets of $19 million and liabilities of $18 million as of March 1, 2019.
|
(Dollars in Thousands)
|
|
Carrying Value at December 31, 2018
|
|
Additions
|
|
Amortization Expense
|
|
Carrying Value at September 30, 2019
|
|
Weighted Average Amortization Period (in years)
|
||||||||
Finite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||
Broker network
|
|
$
|
—
|
|
|
$
|
18,100
|
|
|
$
|
(2,112
|
)
|
|
$
|
15,988
|
|
|
5
|
Non-compete agreements
|
|
—
|
|
|
2,900
|
|
|
(564
|
)
|
|
2,336
|
|
|
3
|
||||
Loan administration fees on existing loan assets
|
|
—
|
|
|
2,600
|
|
|
(1,517
|
)
|
|
1,083
|
|
|
1
|
||||
Tradename
|
|
—
|
|
|
1,200
|
|
|
(233
|
)
|
|
967
|
|
|
3
|
||||
Total
|
|
$
|
—
|
|
|
$
|
24,800
|
|
|
$
|
(4,426
|
)
|
|
$
|
20,374
|
|
|
4
|
(In Thousands)
|
|
September 30, 2019
|
||
2019 (3 months)
|
|
$
|
1,897
|
|
2020
|
|
5,420
|
|
|
2021
|
|
4,987
|
|
|
2022
|
|
3,848
|
|
|
2023 and thereafter
|
|
4,222
|
|
|
Total Future Intangible Asset Amortization
|
|
$
|
20,374
|
|
(In Thousands)
|
|
Nine Months Ended
September 30, 2019
|
||
Beginning balance
|
|
$
|
—
|
|
Goodwill recognized from 5 Arches acquisition
|
|
28,728
|
|
|
Measurement period adjustment
|
|
19
|
|
|
Impairment
|
|
—
|
|
|
Ending Balance
|
|
$
|
28,747
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Supplementary pro forma information:
|
|
|
|
|
|
|
|
|
||||||||
Net interest income
|
|
$
|
33,513
|
|
|
$
|
35,231
|
|
|
$
|
98,101
|
|
|
$
|
105,660
|
|
Non-interest income
|
|
27,498
|
|
|
22,280
|
|
|
98,780
|
|
|
84,684
|
|
||||
Net income
|
|
34,310
|
|
|
32,636
|
|
|
115,809
|
|
|
111,072
|
|
|
|
Gross Amounts of Recognized Assets (Liabilities)
|
|
Gross Amounts Offset in Consolidated Balance Sheet
|
|
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet
|
|
Gross Amounts Not Offset in Consolidated
Balance Sheet (1) |
|
Net Amount
|
||||||||||||||
September 30, 2019
(In Thousands) |
|
|
|
|
Financial Instruments
|
|
Cash Collateral (Received) Pledged
|
|
||||||||||||||||
Assets (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate agreements
|
|
$
|
33,642
|
|
|
$
|
—
|
|
|
$
|
33,642
|
|
|
$
|
(25,802
|
)
|
|
$
|
(4,379
|
)
|
|
$
|
3,461
|
|
TBAs
|
|
5,250
|
|
|
—
|
|
|
5,250
|
|
|
(3,448
|
)
|
|
(1,040
|
)
|
|
762
|
|
||||||
Total Assets
|
|
$
|
38,892
|
|
|
$
|
—
|
|
|
$
|
38,892
|
|
|
$
|
(29,250
|
)
|
|
$
|
(5,419
|
)
|
|
$
|
4,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Liabilities (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate agreements
|
|
$
|
(228,150
|
)
|
|
$
|
—
|
|
|
$
|
(228,150
|
)
|
|
$
|
25,802
|
|
|
$
|
202,348
|
|
|
$
|
—
|
|
TBAs
|
|
(4,192
|
)
|
|
—
|
|
|
(4,192
|
)
|
|
3,448
|
|
|
483
|
|
|
(261
|
)
|
||||||
Loan warehouse debt
|
|
(233,224
|
)
|
|
—
|
|
|
(233,224
|
)
|
|
233,224
|
|
|
—
|
|
|
—
|
|
||||||
Security repurchase agreements
|
|
(1,157,646
|
)
|
|
—
|
|
|
(1,157,646
|
)
|
|
1,157,646
|
|
|
—
|
|
|
—
|
|
||||||
Total Liabilities
|
|
$
|
(1,623,212
|
)
|
|
$
|
—
|
|
|
$
|
(1,623,212
|
)
|
|
$
|
1,420,120
|
|
|
$
|
202,831
|
|
|
$
|
(261
|
)
|
|
|
Gross Amounts of Recognized Assets (Liabilities)
|
|
Gross Amounts Offset in Consolidated Balance Sheet
|
|
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet
|
|
Gross Amounts Not Offset in Consolidated
Balance Sheet (1) |
|
Net Amount
|
||||||||||||||
December 31, 2018
(In Thousands) |
|
|
|
|
Financial Instruments
|
|
Cash Collateral (Received) Pledged
|
|
||||||||||||||||
Assets (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate agreements
|
|
$
|
28,211
|
|
|
$
|
—
|
|
|
$
|
28,211
|
|
|
$
|
(28,211
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
TBAs
|
|
4,665
|
|
|
—
|
|
|
4,665
|
|
|
(3,391
|
)
|
|
(835
|
)
|
|
439
|
|
||||||
Total Assets
|
|
$
|
32,876
|
|
|
$
|
—
|
|
|
$
|
32,876
|
|
|
$
|
(31,602
|
)
|
|
$
|
(835
|
)
|
|
$
|
439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Liabilities (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate agreements
|
|
$
|
(70,908
|
)
|
|
$
|
—
|
|
|
$
|
(70,908
|
)
|
|
$
|
28,211
|
|
|
$
|
42,697
|
|
|
$
|
—
|
|
TBAs
|
|
(13,215
|
)
|
|
—
|
|
|
(13,215
|
)
|
|
3,391
|
|
|
5,620
|
|
|
(4,204
|
)
|
||||||
Loan warehouse debt
|
|
(860,650
|
)
|
|
—
|
|
|
(860,650
|
)
|
|
860,650
|
|
|
—
|
|
|
—
|
|
||||||
Security repurchase agreements
|
|
(988,890
|
)
|
|
—
|
|
|
(988,890
|
)
|
|
988,890
|
|
|
—
|
|
|
—
|
|
||||||
Total Liabilities
|
|
$
|
(1,933,663
|
)
|
|
$
|
—
|
|
|
$
|
(1,933,663
|
)
|
|
$
|
1,881,142
|
|
|
$
|
48,317
|
|
|
$
|
(4,204
|
)
|
(1)
|
Amounts presented in these columns are limited in total to the net amount of assets or liabilities presented in the prior column by instrument. In certain cases, there is excess cash collateral or financial assets we have pledged to a counterparty (which may, in certain circumstances, be a clearinghouse) that exceed the financial liabilities subject to a master netting arrangement or similar agreement. Additionally, in certain cases, counterparties may have pledged excess cash collateral to us that exceeds our corresponding financial assets. In each case, any of these excess amounts are excluded from the table although they are separately reported in our consolidated balance sheets as assets or liabilities, respectively.
|
(2)
|
Interest rate agreements and TBAs are components of derivatives instruments on our consolidated balance sheets. Loan warehouse debt, which is secured by residential mortgage loans, and security repurchase agreements are components of Short-term debt on our consolidated balance sheets.
|
September 30, 2019
|
|
Legacy
Sequoia
|
|
Sequoia
Choice
|
|
Freddie Mac SLST
|
|
Freddie Mac
K-Series
|
|
Servicing Investment
|
|
Total
Consolidated
VIEs
|
||||||||||||
(Dollars in Thousands)
|
|
|
|
|
|
|
||||||||||||||||||
Residential loans, held-for-investment
|
|
$
|
429,159
|
|
|
$
|
2,618,316
|
|
|
$
|
2,441,223
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,488,698
|
|
Multifamily loans, held-for-investment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,791,622
|
|
|
—
|
|
|
3,791,622
|
|
||||||
Other investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
238,316
|
|
|
238,316
|
|
||||||
Cash and cash equivalents
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,240
|
|
|
21,240
|
|
||||||
Restricted cash
|
|
143
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
21,450
|
|
|
21,608
|
|
||||||
Accrued interest receivable
|
|
716
|
|
|
10,806
|
|
|
7,215
|
|
|
11,300
|
|
|
4,472
|
|
|
34,509
|
|
||||||
REO
|
|
460
|
|
|
—
|
|
|
84
|
|
|
—
|
|
|
—
|
|
|
544
|
|
||||||
Total Assets
|
|
$
|
430,478
|
|
|
$
|
2,629,137
|
|
|
$
|
2,448,522
|
|
|
$
|
3,802,922
|
|
|
$
|
285,478
|
|
|
$
|
9,596,537
|
|
Short-term debt
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
191,203
|
|
|
$
|
191,203
|
|
Accrued interest payable
|
|
456
|
|
|
8,949
|
|
|
5,498
|
|
|
10,805
|
|
|
247
|
|
|
25,955
|
|
||||||
Accrued expenses and other liabilities
|
|
—
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
19,371
|
|
|
19,386
|
|
||||||
Asset-backed securities issued
|
|
419,890
|
|
|
2,361,111
|
|
|
1,987,473
|
|
|
3,577,577
|
|
|
—
|
|
|
8,346,051
|
|
||||||
Total Liabilities
|
|
$
|
420,346
|
|
|
$
|
2,370,075
|
|
|
$
|
1,992,971
|
|
|
$
|
3,588,382
|
|
|
$
|
210,821
|
|
|
$
|
8,582,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Number of VIEs
|
|
20
|
|
|
9
|
|
|
2
|
|
|
4
|
|
|
3
|
|
|
38
|
|
December 31, 2018
|
|
Legacy
Sequoia
|
|
Sequoia
Choice |
|
Freddie Mac SLST
|
|
Freddie Mac
K-Series
|
|
Servicing Investment
|
|
Total
Consolidated
VIEs
|
||||||||||||
(Dollars in Thousands)
|
|
|
|
|
|
|
||||||||||||||||||
Residential loans, held-for-investment
|
|
$
|
519,958
|
|
|
$
|
2,079,382
|
|
|
$
|
1,222,669
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,822,009
|
|
Multifamily loans, held-for-investment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,144,598
|
|
|
—
|
|
|
2,144,598
|
|
||||||
Other investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
312,688
|
|
|
312,688
|
|
||||||
Restricted cash
|
|
146
|
|
|
1,022
|
|
|
—
|
|
|
—
|
|
|
25,363
|
|
|
26,531
|
|
||||||
Accrued interest receivable
|
|
822
|
|
|
8,988
|
|
|
3,926
|
|
|
6,595
|
|
|
1,091
|
|
|
21,422
|
|
||||||
REO
|
|
3,943
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,943
|
|
||||||
Total Assets
|
|
$
|
524,869
|
|
|
$
|
2,089,392
|
|
|
$
|
1,226,595
|
|
|
$
|
2,151,193
|
|
|
$
|
339,142
|
|
|
$
|
6,331,191
|
|
Short-term debt
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
262,740
|
|
|
$
|
262,740
|
|
Accrued interest payable
|
|
571
|
|
|
7,180
|
|
|
2,907
|
|
|
6,239
|
|
|
483
|
|
|
17,380
|
|
||||||
Accrued expenses and other liabilities
|
|
—
|
|
|
1,022
|
|
|
—
|
|
|
—
|
|
|
18,592
|
|
|
19,614
|
|
||||||
Asset-backed securities issued
|
|
512,240
|
|
|
1,885,010
|
|
|
993,748
|
|
|
2,019,075
|
|
|
—
|
|
|
5,410,073
|
|
||||||
Total Liabilities
|
|
$
|
512,811
|
|
|
$
|
1,893,212
|
|
|
$
|
996,655
|
|
|
$
|
2,025,314
|
|
|
$
|
281,815
|
|
|
$
|
5,709,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Number of VIEs
|
|
20
|
|
|
6
|
|
|
1
|
|
|
3
|
|
|
3
|
|
|
33
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Principal balance of loans transferred
|
|
$
|
366,999
|
|
|
$
|
327,511
|
|
|
$
|
1,116,092
|
|
|
$
|
2,735,644
|
|
Trading securities retained, at fair value
|
|
1,228
|
|
|
2,583
|
|
|
4,736
|
|
|
48,831
|
|
||||
AFS securities retained, at fair value
|
|
1,069
|
|
|
776
|
|
|
3,023
|
|
|
6,728
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Proceeds from new transfers
|
|
$
|
376,126
|
|
|
$
|
329,231
|
|
|
$
|
1,138,778
|
|
|
$
|
2,723,012
|
|
MSR fees received
|
|
2,919
|
|
|
3,405
|
|
|
9,084
|
|
|
10,216
|
|
||||
Funding of compensating interest, net
|
|
(76
|
)
|
|
(46
|
)
|
|
(213
|
)
|
|
(102
|
)
|
||||
Cash flows received on retained securities
|
|
6,603
|
|
|
7,267
|
|
|
20,892
|
|
|
21,720
|
|
|
|
Three Months Ended September 30, 2019
|
|
Three Months Ended September 30, 2018
|
||||||||
At Date of Securitization
|
|
Senior IO Securities
|
|
Subordinate Securities
|
|
Senior IO Securities
|
|
Subordinate Securities
|
||||
Prepayment rates
|
|
37
|
%
|
|
15
|
%
|
|
9
|
%
|
|
9
|
%
|
Discount rates
|
|
14
|
%
|
|
7
|
%
|
|
14
|
%
|
|
7
|
%
|
Credit loss assumptions
|
|
0.20
|
%
|
|
0.20
|
%
|
|
0.20
|
%
|
|
0.20
|
%
|
|
|
Nine Months Ended September 30, 2019
|
|
Nine Months Ended September 30, 2018
|
||||||||
At Date of Securitization
|
|
Senior IO Securities
|
|
Subordinate Securities
|
|
Senior IO Securities
|
|
Subordinate Securities
|
||||
Prepayment rates
|
|
25
|
%
|
|
15
|
%
|
|
9
|
%
|
|
10
|
%
|
Discount rates
|
|
14
|
%
|
|
7
|
%
|
|
14
|
%
|
|
5
|
%
|
Credit loss assumptions
|
|
0.20
|
%
|
|
0.20
|
%
|
|
0.20
|
%
|
|
0.20
|
%
|
(In Thousands)
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
On-balance sheet assets, at fair value:
|
|
|
|
|
||||
Interest-only, senior and subordinate securities, classified as trading
|
|
$
|
106,691
|
|
|
$
|
129,111
|
|
Subordinate securities, classified as AFS
|
|
141,568
|
|
|
162,314
|
|
||
Mortgage servicing rights
|
|
37,904
|
|
|
58,572
|
|
||
Maximum loss exposure (1)
|
|
$
|
286,163
|
|
|
$
|
349,997
|
|
Assets transferred:
|
|
|
|
|
||||
Principal balance of loans outstanding
|
|
$
|
10,360,700
|
|
|
$
|
10,580,216
|
|
Principal balance of loans 30+ days delinquent
|
|
28,782
|
|
|
21,805
|
|
(1)
|
Maximum loss exposure from our involvement with unconsolidated VIEs pertains to the carrying value of our securities and MSRs retained from these VIEs and represents estimated losses that would be incurred under severe, hypothetical circumstances, such as if the value of our interests and any associated collateral declines to zero. This does not include, for example, any potential exposure to representation and warranty claims associated with our initial transfer of loans into a securitization.
|
September 30, 2019
|
|
MSRs
|
|
Senior
Securities (1)
|
|
Subordinate Securities
|
||||||
(Dollars in Thousands)
|
|
|
|
|||||||||
Fair value at September 30, 2019
|
|
$
|
37,904
|
|
|
$
|
41,827
|
|
|
$
|
206,433
|
|
Expected life (in years) (2)
|
|
6
|
|
|
5
|
|
|
13
|
|
|||
Prepayment speed assumption (annual CPR) (2)
|
|
14
|
%
|
|
16
|
%
|
|
16
|
%
|
|||
Decrease in fair value from:
|
|
|
|
|
|
|
||||||
10% adverse change
|
|
$
|
1,893
|
|
|
$
|
1,977
|
|
|
$
|
454
|
|
25% adverse change
|
|
4,486
|
|
|
5,189
|
|
|
1,802
|
|
|||
Discount rate assumption (2)
|
|
11
|
%
|
|
13
|
%
|
|
5
|
%
|
|||
Decrease in fair value from:
|
|
|
|
|
|
|
||||||
100 basis point increase
|
|
$
|
1,259
|
|
|
$
|
848
|
|
|
$
|
19,313
|
|
200 basis point increase
|
|
2,436
|
|
|
1,977
|
|
|
35,950
|
|
|||
Credit loss assumption (2)
|
|
N/A
|
|
|
0.21
|
%
|
|
0.21
|
%
|
|||
Decrease in fair value from:
|
|
|
|
|
|
|
||||||
10% higher losses
|
|
N/A
|
|
|
$
|
—
|
|
|
$
|
1,666
|
|
|
25% higher losses
|
|
N/A
|
|
|
—
|
|
|
4,153
|
|
December 31, 2018
|
|
MSRs
|
|
Senior
Securities (1)
|
|
Subordinate Securities
|
||||||
(Dollars in Thousands)
|
|
|
|
|||||||||
Fair value at December 31, 2018
|
|
$
|
58,572
|
|
|
$
|
61,178
|
|
|
$
|
230,247
|
|
Expected life (in years) (2)
|
|
8
|
|
|
7
|
|
|
15
|
|
|||
Prepayment speed assumption (annual CPR) (2)
|
|
7
|
%
|
|
10
|
%
|
|
9
|
%
|
|||
Decrease in fair value from:
|
|
|
|
|
|
|
||||||
10% adverse change
|
|
$
|
1,668
|
|
|
$
|
2,151
|
|
|
$
|
201
|
|
25% adverse change
|
|
4,027
|
|
|
5,127
|
|
|
1,372
|
|
|||
Discount rate assumption (2)
|
|
11
|
%
|
|
12
|
%
|
|
6
|
%
|
|||
Decrease in fair value from:
|
|
|
|
|
|
|
||||||
100 basis point increase
|
|
$
|
2,323
|
|
|
$
|
2,190
|
|
|
$
|
21,982
|
|
200 basis point increase
|
|
4,493
|
|
|
4,226
|
|
|
40,641
|
|
|||
Credit loss assumption (2)
|
|
N/A
|
|
|
0.20
|
%
|
|
0.20
|
%
|
|||
Decrease in fair value from:
|
|
|
|
|
|
|
||||||
10% higher losses
|
|
N/A
|
|
|
$
|
—
|
|
|
$
|
1,387
|
|
|
25% higher losses
|
|
N/A
|
|
|
—
|
|
|
3,471
|
|
(1)
|
Senior securities included $42 million and $61 million of interest-only securities at September 30, 2019 and December 31, 2018, respectively.
|
(2)
|
Expected life, prepayment speed assumption, discount rate assumption, and credit loss assumption presented in the tables above represent weighted averages.
|
(In Thousands)
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
Mortgage-Backed Securities
|
|
|
|
|
||||
Senior
|
|
$
|
141,264
|
|
|
$
|
185,107
|
|
Mezzanine
|
|
589,189
|
|
|
547,249
|
|
||
Subordinate
|
|
306,713
|
|
|
428,713
|
|
||
Total Mortgage-Backed Securities
|
|
1,037,166
|
|
|
1,161,069
|
|
||
Excess MSR
|
|
17,212
|
|
|
15,092
|
|
||
Total Investments in Third-Party Sponsored VIEs
|
|
$
|
1,054,378
|
|
|
$
|
1,176,161
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||
|
|
Carrying
Value
|
|
Fair
Value
|
|
Carrying
Value
|
|
Fair
Value
|
||||||||
(In Thousands)
|
|
|
|
|
||||||||||||
Assets
|
|
|
|
|
|
|
|
|
||||||||
Residential loans, held-for-sale
|
|
|
|
|
|
|
|
|
||||||||
At fair value
|
|
$
|
925,780
|
|
|
$
|
925,780
|
|
|
$
|
1,048,690
|
|
|
$
|
1,048,690
|
|
At lower of cost or fair value
|
|
107
|
|
|
126
|
|
|
111
|
|
|
131
|
|
||||
Residential loans, held-for-investment
|
|
7,755,916
|
|
|
7,755,916
|
|
|
6,205,941
|
|
|
6,205,941
|
|
||||
Business purpose residential loans
|
|
336,035
|
|
|
336,035
|
|
|
141,258
|
|
|
141,258
|
|
||||
Multifamily loans
|
|
3,791,622
|
|
|
3,791,622
|
|
|
2,144,598
|
|
|
2,144,598
|
|
||||
Trading securities
|
|
1,013,785
|
|
|
1,013,785
|
|
|
1,118,612
|
|
|
1,118,612
|
|
||||
Available-for-sale securities
|
|
271,641
|
|
|
271,641
|
|
|
333,882
|
|
|
333,882
|
|
||||
Servicer advance investments (1)
|
|
222,591
|
|
|
222,591
|
|
|
300,468
|
|
|
300,468
|
|
||||
MSRs (1)
|
|
39,837
|
|
|
39,837
|
|
|
60,281
|
|
|
60,281
|
|
||||
Participation in loan warehouse facility (1)
|
|
—
|
|
|
—
|
|
|
39,703
|
|
|
39,703
|
|
||||
Excess MSRs (1)
|
|
32,937
|
|
|
32,937
|
|
|
27,312
|
|
|
27,312
|
|
||||
Shared home appreciation options (1)
|
|
11,372
|
|
|
11,372
|
|
|
—
|
|
|
—
|
|
||||
Cash and cash equivalents
|
|
394,628
|
|
|
394,628
|
|
|
175,764
|
|
|
175,764
|
|
||||
Restricted cash
|
|
111,518
|
|
|
111,518
|
|
|
29,313
|
|
|
29,313
|
|
||||
Accrued interest receivable
|
|
57,464
|
|
|
57,464
|
|
|
47,105
|
|
|
47,105
|
|
||||
Derivative assets
|
|
43,649
|
|
|
43,649
|
|
|
35,789
|
|
|
35,789
|
|
||||
REO (2)
|
|
5,069
|
|
|
5,124
|
|
|
3,943
|
|
|
4,396
|
|
||||
Margin receivable (2)
|
|
226,727
|
|
|
226,727
|
|
|
100,773
|
|
|
100,773
|
|
||||
FHLBC stock (2)
|
|
43,393
|
|
|
43,393
|
|
|
43,393
|
|
|
43,393
|
|
||||
Guarantee asset (2)
|
|
1,784
|
|
|
1,784
|
|
|
2,618
|
|
|
2,618
|
|
||||
Pledged collateral (2)
|
|
57,832
|
|
|
57,832
|
|
|
42,433
|
|
|
42,433
|
|
||||
Liabilities
|
|
|
|
|
|
|
|
|
||||||||
Short-term debt facilities
|
|
$
|
1,589,062
|
|
|
$
|
1,589,062
|
|
|
$
|
1,937,920
|
|
|
$
|
1,937,920
|
|
Short-term debt - servicer advance financing
|
|
191,203
|
|
|
191,203
|
|
|
262,740
|
|
|
262,740
|
|
||||
Accrued interest payable
|
|
46,881
|
|
|
46,881
|
|
|
42,528
|
|
|
42,528
|
|
||||
Margin payable (3)
|
|
6,658
|
|
|
6,658
|
|
|
835
|
|
|
835
|
|
||||
Guarantee obligation (3)
|
|
15,016
|
|
|
14,661
|
|
|
16,711
|
|
|
16,774
|
|
||||
Contingent consideration (3)
|
|
25,167
|
|
|
25,167
|
|
|
—
|
|
|
—
|
|
||||
Derivative liabilities
|
|
234,011
|
|
|
234,011
|
|
|
84,855
|
|
|
84,855
|
|
||||
ABS issued at fair value
|
|
8,346,051
|
|
|
8,346,051
|
|
|
5,410,073
|
|
|
5,410,073
|
|
||||
FHLBC long-term borrowings
|
|
1,999,999
|
|
|
1,999,999
|
|
|
1,999,999
|
|
|
1,999,999
|
|
||||
Subordinate securities financing facility
|
|
184,664
|
|
|
185,803
|
|
|
—
|
|
|
—
|
|
||||
Convertible notes, net
|
|
830,995
|
|
|
853,471
|
|
|
633,196
|
|
|
618,271
|
|
||||
Trust preferred securities and subordinated notes, net
|
|
138,616
|
|
|
92,070
|
|
|
138,582
|
|
|
102,533
|
|
(1)
|
These investments are included in Other investments on our consolidated balance sheets.
|
(2)
|
These assets are included in Other assets on our consolidated balance sheets.
|
(3)
|
These liabilities are included in Accrued expenses and other liabilities on our consolidated balance sheets.
|
September 30, 2019
|
|
Carrying
Value
|
|
Fair Value Measurements Using
|
||||||||||||
(In Thousands)
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||
Assets
|
|
|
|
|
|
|
|
|
||||||||
Residential loans
|
|
$
|
8,681,696
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,681,696
|
|
Business purpose residential loans
|
|
336,035
|
|
|
—
|
|
|
—
|
|
|
336,035
|
|
||||
Multifamily loans
|
|
3,791,622
|
|
|
—
|
|
|
—
|
|
|
3,791,622
|
|
||||
Trading securities
|
|
1,013,785
|
|
|
—
|
|
|
—
|
|
|
1,013,785
|
|
||||
Available-for-sale securities
|
|
271,641
|
|
|
—
|
|
|
—
|
|
|
271,641
|
|
||||
Servicer advance investments
|
|
222,591
|
|
|
—
|
|
|
—
|
|
|
222,591
|
|
||||
MSRs
|
|
39,837
|
|
|
—
|
|
|
—
|
|
|
39,837
|
|
||||
Excess MSRs
|
|
32,937
|
|
|
—
|
|
|
—
|
|
|
32,937
|
|
||||
Shared home appreciation options
|
|
11,372
|
|
|
—
|
|
|
—
|
|
|
11,372
|
|
||||
Derivative assets
|
|
43,649
|
|
|
5,250
|
|
|
33,642
|
|
|
4,757
|
|
||||
Pledged collateral
|
|
57,832
|
|
|
57,832
|
|
|
—
|
|
|
—
|
|
||||
FHLBC stock
|
|
43,393
|
|
|
—
|
|
|
43,393
|
|
|
—
|
|
||||
Guarantee asset
|
|
1,784
|
|
|
—
|
|
|
—
|
|
|
1,784
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|||||||
Contingent consideration
|
|
$
|
25,167
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25,167
|
|
Derivative liabilities
|
|
234,011
|
|
|
4,192
|
|
|
228,150
|
|
|
1,669
|
|
||||
ABS issued
|
|
8,346,051
|
|
|
—
|
|
|
—
|
|
|
8,346,051
|
|
December 31, 2018
|
|
Carrying
Value
|
|
Fair Value Measurements Using
|
||||||||||||
(In Thousands)
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||
Assets
|
|
|
|
|
|
|
|
|
||||||||
Residential loans
|
|
$
|
7,254,631
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,254,631
|
|
Business purpose residential loans
|
|
141,258
|
|
|
—
|
|
|
—
|
|
|
141,258
|
|
||||
Multifamily loans
|
|
2,144,598
|
|
|
—
|
|
|
—
|
|
|
2,144,598
|
|
||||
Trading securities
|
|
1,118,612
|
|
|
—
|
|
|
—
|
|
|
1,118,612
|
|
||||
Available-for-sale securities
|
|
333,882
|
|
|
—
|
|
|
—
|
|
|
333,882
|
|
||||
Servicer advance investments
|
|
300,468
|
|
|
—
|
|
|
—
|
|
|
300,468
|
|
||||
MSRs
|
|
60,281
|
|
|
—
|
|
|
—
|
|
|
60,281
|
|
||||
Excess MSRs
|
|
27,312
|
|
|
—
|
|
|
—
|
|
|
27,312
|
|
||||
Derivative assets
|
|
35,789
|
|
|
4,665
|
|
|
28,211
|
|
|
2,913
|
|
||||
Pledged collateral
|
|
42,433
|
|
|
42,433
|
|
|
—
|
|
|
—
|
|
||||
FHLBC stock
|
|
43,393
|
|
|
—
|
|
|
43,393
|
|
|
—
|
|
||||
Guarantee asset
|
|
2,618
|
|
|
—
|
|
|
—
|
|
|
2,618
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Liabilities
|
|
|
|
|
|
|
|
|
||||||||
Derivative liabilities
|
|
$
|
84,855
|
|
|
$
|
13,215
|
|
|
$
|
70,908
|
|
|
$
|
732
|
|
ABS issued
|
|
5,410,073
|
|
|
—
|
|
|
—
|
|
|
5,410,073
|
|
|
|
Assets
|
||||||||||||||||||||||||||||||||||
|
|
Residential Loans
|
|
Business Purpose
Residential Loans
|
|
Multifamily Loans
|
|
Trading Securities
|
|
AFS
Securities
|
|
Servicer Advance Investments
|
|
MSRs
|
|
Excess MSRs
|
|
Shared Home Appreciation Options
|
||||||||||||||||||
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Beginning balance -
December 31, 2018
|
|
$
|
7,254,631
|
|
|
$
|
141,258
|
|
|
$
|
2,144,598
|
|
|
$
|
1,118,612
|
|
|
$
|
333,882
|
|
|
$
|
300,468
|
|
|
$
|
60,281
|
|
|
$
|
27,312
|
|
|
$
|
—
|
|
Acquisitions
|
|
5,257,800
|
|
|
29,093
|
|
|
1,481,554
|
|
|
296,484
|
|
|
21,115
|
|
|
69,610
|
|
|
868
|
|
|
7,762
|
|
|
11,343
|
|
|||||||||
Originations
|
|
—
|
|
|
296,955
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||||
Sales
|
|
(2,941,592
|
)
|
|
(46,855
|
)
|
|
—
|
|
|
(418,168
|
)
|
|
(82,384
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||||
Principal paydowns
|
|
(1,068,878
|
)
|
|
(84,410
|
)
|
|
(12,904
|
)
|
|
(33,730
|
)
|
|
(28,981
|
)
|
|
(150,512
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||||
Gains (losses) in net income, net
|
|
179,964
|
|
|
4,990
|
|
|
178,374
|
|
|
55,538
|
|
|
24,052
|
|
|
3,025
|
|
|
(21,312
|
)
|
|
(2,137
|
)
|
|
29
|
|
|||||||||
Unrealized losses in OCI, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,957
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||||
Other settlements, net (1)
|
|
(229
|
)
|
|
(4,996
|
)
|
|
—
|
|
|
(4,951
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||||
Ending Balance -
September 30, 2019
|
|
$
|
8,681,696
|
|
|
$
|
336,035
|
|
|
$
|
3,791,622
|
|
|
$
|
1,013,785
|
|
|
$
|
271,641
|
|
|
$
|
222,591
|
|
|
$
|
39,837
|
|
|
$
|
32,937
|
|
|
$
|
11,372
|
|
|
|
Assets
|
|
|
|
Liabilities
|
||||||||||
|
|
Guarantee Asset
|
|
Derivatives (2)
|
|
Contingent Consideration
|
|
ABS
Issued
|
||||||||
(In Thousands)
|
|
|
|
|
||||||||||||
Beginning balance - December 31, 2018
|
|
$
|
2,618
|
|
|
$
|
2,181
|
|
|
$
|
—
|
|
|
$
|
5,410,073
|
|
Acquisitions
|
|
—
|
|
|
—
|
|
|
24,621
|
|
|
3,423,561
|
|
||||
Principal paydowns
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(718,293
|
)
|
||||
Gains (losses) in net income, net
|
|
(834
|
)
|
|
42,415
|
|
|
546
|
|
|
230,710
|
|
||||
Other settlements, net (1)
|
|
—
|
|
|
(41,508
|
)
|
|
—
|
|
|
—
|
|
||||
Ending Balance - September 30, 2019
|
|
$
|
1,784
|
|
|
$
|
3,088
|
|
|
$
|
25,167
|
|
|
$
|
8,346,051
|
|
(1)
|
Other settlements, net for residential and business purpose residential loans represents the transfer of loans to REO, and for derivatives, the settlement of forward sale commitments and the transfer of the fair value of loan purchase commitments at the time loans are acquired to the basis of residential loans. Other settlements, net for trading securities relates to the consolidation of a Freddie Mac K-Series entity during the second quarter of 2019.
|
(2)
|
For the purpose of this presentation, derivative assets and liabilities, which consist of loan purchase and forward sale commitments, are presented on a net basis.
|
|
|
Included in Net Income
|
||||||||||||||
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Assets
|
|
|
|
|
|
|
|
|
||||||||
Residential loans at Redwood
|
|
$
|
17,771
|
|
|
$
|
(18,100
|
)
|
|
$
|
82,408
|
|
|
$
|
(70,316
|
)
|
Residential loans at consolidated Sequoia entities
|
|
(11,132
|
)
|
|
(8,978
|
)
|
|
10,111
|
|
|
11,936
|
|
||||
Residential loans at consolidated Freddie Mac SLST entities
|
|
39,783
|
|
|
—
|
|
|
94,788
|
|
|
—
|
|
||||
Business purpose residential loans
|
|
584
|
|
|
(20
|
)
|
|
4,069
|
|
|
(20
|
)
|
||||
Multifamily loans at consolidated Freddie Mac K-Series entities
|
|
47,353
|
|
|
(4,199
|
)
|
|
178,374
|
|
|
(4,199
|
)
|
||||
Trading securities
|
|
11,206
|
|
|
3,821
|
|
|
33,196
|
|
|
(1,956
|
)
|
||||
Available-for-sale securities
|
|
—
|
|
|
(33
|
)
|
|
—
|
|
|
(90
|
)
|
||||
Servicer advance investments
|
|
1,585
|
|
|
—
|
|
|
3,025
|
|
|
—
|
|
||||
MSRs
|
|
(5,892
|
)
|
|
337
|
|
|
(16,971
|
)
|
|
4,861
|
|
||||
Excess MSRs
|
|
(1,634
|
)
|
|
—
|
|
|
(2,137
|
)
|
|
—
|
|
||||
Shared home appreciation options
|
|
29
|
|
|
—
|
|
|
29
|
|
|
—
|
|
||||
Loan purchase commitments
|
|
4,678
|
|
|
2,168
|
|
|
4,757
|
|
|
2,157
|
|
||||
Other assets - Guarantee asset
|
|
(216
|
)
|
|
(51
|
)
|
|
(834
|
)
|
|
15
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Liabilities
|
|
|
|
|
|
|
|
|
||||||||
Loan purchase commitments
|
|
$
|
(1,668
|
)
|
|
$
|
(2,314
|
)
|
|
$
|
(1,669
|
)
|
|
$
|
(2,388
|
)
|
Contingent consideration
|
|
(235
|
)
|
|
—
|
|
|
(546
|
)
|
|
—
|
|
||||
ABS issued
|
|
(49,399
|
)
|
|
12,536
|
|
|
(230,709
|
)
|
|
(8,478
|
)
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) for
|
||||||||||||||
September 30, 2019
|
|
Carrying
Value
|
|
Fair Value Measurements Using
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||
(In Thousands)
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
September 30, 2019
|
|
September 30, 2019
|
|||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
REO
|
|
$
|
4,525
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,525
|
|
|
$
|
(332
|
)
|
|
$
|
(470
|
)
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Mortgage Banking Activities, Net
|
|
|
|
|
|
|
|
|
||||||||
Residential loans held-for-sale, at fair value
|
|
$
|
(6,623
|
)
|
|
$
|
5,626
|
|
|
$
|
289
|
|
|
$
|
16,522
|
|
Residential loan purchase and forward sale commitments
|
|
12,943
|
|
|
1,610
|
|
|
41,142
|
|
|
(8,116
|
)
|
||||
Single-family rental loans held-for-sale, at fair value
|
|
1,283
|
|
|
(99
|
)
|
|
4,200
|
|
|
(99
|
)
|
||||
Single-family rental loan purchase commitments
|
|
564
|
|
|
(22
|
)
|
|
1,273
|
|
|
(22
|
)
|
||||
Residential bridge loans
|
|
1,010
|
|
|
—
|
|
|
2,108
|
|
|
—
|
|
||||
Risk management derivatives, net
|
|
(2,972
|
)
|
|
3,796
|
|
|
(15,387
|
)
|
|
38,378
|
|
||||
Total mortgage banking activities, net (1)
|
|
$
|
6,205
|
|
|
$
|
10,911
|
|
|
$
|
33,625
|
|
|
$
|
46,663
|
|
Investment Fair Value Changes, Net
|
|
|
|
|
|
|
|
|
||||||||
Residential loans held-for-investment, at Redwood
|
|
$
|
7,667
|
|
|
$
|
(17,063
|
)
|
|
$
|
71,323
|
|
|
$
|
(71,058
|
)
|
Single-family rental loans held-for-investment
|
|
22
|
|
|
—
|
|
|
22
|
|
|
—
|
|
||||
Residential bridge loans held-for-investment
|
|
(742
|
)
|
|
53
|
|
|
(1,363
|
)
|
|
53
|
|
||||
Trading securities
|
|
15,275
|
|
|
6,314
|
|
|
55,577
|
|
|
2,429
|
|
||||
Servicer advance investments
|
|
1,585
|
|
|
—
|
|
|
3,025
|
|
|
—
|
|
||||
Excess MSRs
|
|
(1,635
|
)
|
|
—
|
|
|
(2,137
|
)
|
|
—
|
|
||||
Shared home appreciation options
|
|
29
|
|
|
—
|
|
|
29
|
|
|
—
|
|
||||
REO
|
|
(331
|
)
|
|
—
|
|
|
(470
|
)
|
|
—
|
|
||||
Net investments in Legacy Sequoia entities (2)
|
|
(407
|
)
|
|
(248
|
)
|
|
(904
|
)
|
|
(976
|
)
|
||||
Net investments in Sequoia Choice entities (2)
|
|
2,722
|
|
|
(943
|
)
|
|
8,866
|
|
|
43
|
|
||||
Net investments in Freddie Mac SLST entities (2)
|
|
17,300
|
|
|
—
|
|
|
31,702
|
|
|
—
|
|
||||
Net investments in Freddie Mac K-Series entities (2)
|
|
7,445
|
|
|
511
|
|
|
13,810
|
|
|
511
|
|
||||
Risk-sharing investments
|
|
(53
|
)
|
|
(126
|
)
|
|
(191
|
)
|
|
(474
|
)
|
||||
Risk management derivatives, net
|
|
(37,433
|
)
|
|
21,867
|
|
|
(144,548
|
)
|
|
82,391
|
|
||||
Impairments on AFS securities
|
|
—
|
|
|
(33
|
)
|
|
—
|
|
|
(89
|
)
|
||||
Total investment fair value changes, net
|
|
$
|
11,444
|
|
|
$
|
10,332
|
|
|
$
|
34,741
|
|
|
$
|
12,830
|
|
Other Income (Expense), Net
|
|
|
|
|
|
|
|
|
||||||||
MSRs
|
|
$
|
(7,489
|
)
|
|
$
|
(823
|
)
|
|
$
|
(21,243
|
)
|
|
$
|
1,324
|
|
Risk management derivatives, net
|
|
4,389
|
|
|
(890
|
)
|
|
13,157
|
|
|
(7,151
|
)
|
||||
Gain on re-measurement of 5 Arches investment
|
|
—
|
|
|
—
|
|
|
2,440
|
|
|
—
|
|
||||
Total other expense, net (3)
|
|
$
|
(3,100
|
)
|
|
$
|
(1,713
|
)
|
|
$
|
(5,646
|
)
|
|
$
|
(5,827
|
)
|
Total Market Valuation Gains, Net
|
|
$
|
14,549
|
|
|
$
|
19,530
|
|
|
$
|
62,720
|
|
|
$
|
53,666
|
|
(1)
|
Mortgage banking activities, net presented above does not include fee income or provisions for repurchases that are components of Mortgage banking activities, net presented on our consolidated statements of income, as these amounts do not represent market valuation changes.
|
(2)
|
Includes changes in fair value of the residential loans held-for-investment, REO and the ABS issued at the entities, which netted together represent the change in value of our investments at the consolidated VIEs.
|
(3)
|
Other income (expense), net presented above does not include net MSR fee income or provisions for repurchases for MSRs, as these amounts do not represent market valuation adjustments.
|
September 30, 2019
|
|
Fair
Value
|
|
|
|
Input Values
|
||||||||||||||
(Dollars in Thousands, except Input Values)
|
|
|
Unobservable Input
|
|
Range
|
|
|
Weighted
Average
|
||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Residential loans, at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Jumbo fixed-rate loans
|
|
$
|
2,452,300
|
|
|
Prepayment rate (annual CPR)
|
|
20
|
|
-
|
20
|
|
%
|
|
20
|
|
%
|
|||
|
|
|
|
Whole loan spread to TBA price
|
|
$
|
0.56
|
|
-
|
$
|
1.56
|
|
|
|
$
|
1.55
|
|
|
||
|
|
|
|
Whole loan spread to swap rate
|
|
94
|
|
-
|
375
|
|
bps
|
|
184
|
|
bps
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Jumbo hybrid loans
|
|
321,793
|
|
|
Prepayment rate (annual CPR)
|
|
15
|
|
-
|
15
|
|
%
|
|
15
|
|
%
|
||||
|
|
|
|
Whole loan spread to swap rate
|
|
90
|
|
-
|
345
|
|
bps
|
|
146
|
|
bps
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Jumbo loans committed to sell
|
|
418,905
|
|
|
Whole loan committed sales price
|
|
$
|
101.88
|
|
-
|
$
|
102.91
|
|
|
|
$
|
102.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Loans held by Legacy Sequoia (1)
|
|
429,159
|
|
|
Liability price
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Loans held by Sequoia Choice (1)
|
|
2,618,316
|
|
|
Liability price
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Loans held by Freddie Mac SLST (1)
|
|
2,441,223
|
|
|
Liability price
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Business purpose residential loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Single-family rental loans
|
|
129,145
|
|
|
Senior credit spread
|
|
110
|
|
-
|
110
|
|
bps
|
|
110
|
|
bps
|
||||
|
|
|
|
Subordinate credit spread
|
|
143
|
|
-
|
1,250
|
|
bps
|
|
308
|
|
bps
|
|||||
|
|
|
|
Senior credit support
|
|
35
|
|
-
|
36
|
|
%
|
|
36
|
|
%
|
|||||
|
|
|
|
IO discount rate
|
|
5
|
|
-
|
8
|
|
%
|
|
8
|
|
%
|
|||||
|
|
|
|
Prepayment rate (annual CPR)
|
|
1
|
|
-
|
10
|
|
%
|
|
5
|
|
%
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Residential bridge loans
|
|
206,890
|
|
|
Discount rate
|
|
6
|
|
-
|
10
|
|
%
|
|
7
|
|
%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Multifamily loans held by Freddie Mac K-Series (1)
|
|
3,791,622
|
|
|
Liability price
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Trading and AFS securities
|
|
1,285,426
|
|
|
Discount rate
|
|
2
|
|
-
|
15
|
|
%
|
|
5
|
|
%
|
||||
|
|
|
|
Prepayment rate (annual CPR)
|
|
—
|
|
-
|
60
|
|
%
|
|
13
|
|
%
|
|||||
|
|
|
|
Default rate
|
|
—
|
|
-
|
20
|
|
%
|
|
1
|
|
%
|
|||||
|
|
|
|
Loss severity
|
|
—
|
|
-
|
40
|
|
%
|
|
21
|
|
%
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Servicer advance investments
|
|
222,591
|
|
|
Discount rate
|
|
5
|
|
-
|
5
|
|
%
|
|
5
|
|
%
|
||||
|
|
|
|
Prepayment rate (annual CPR)
|
|
8
|
|
-
|
15
|
|
%
|
|
14
|
|
%
|
|||||
|
|
|
|
Expected remaining life (2)
|
|
2
|
|
-
|
2
|
|
years
|
|
2
|
|
years
|
|||||
|
|
|
|
Mortgage servicing income
|
|
8
|
|
-
|
14
|
|
bps
|
|
10
|
|
bps
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
MSRs
|
|
39,837
|
|
|
Discount rate
|
|
11
|
|
-
|
13
|
|
%
|
|
11
|
|
%
|
||||
|
|
|
|
Prepayment rate (annual CPR)
|
|
6
|
|
-
|
53
|
|
%
|
|
14
|
|
%
|
|||||
|
|
|
|
Per loan annual cost to service
|
|
$
|
82
|
|
-
|
$
|
82
|
|
|
|
$
|
82
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Excess MSRs
|
|
32,937
|
|
|
Discount rate
|
|
11
|
|
-
|
16
|
|
%
|
|
14
|
|
%
|
||||
|
|
|
|
Prepayment rate (annual CPR)
|
|
9
|
|
-
|
14
|
|
%
|
|
11
|
|
%
|
|||||
|
|
|
|
Excess mortgage servicing income
|
|
8
|
|
-
|
17
|
|
bps
|
|
13
|
|
bps
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Shared home appreciation options
|
|
11,372
|
|
|
Discount rate
|
|
11
|
|
-
|
11
|
|
%
|
|
11
|
|
%
|
||||
|
|
|
|
Prepayment rate (annual CPR)
|
|
10
|
|
-
|
30
|
|
%
|
|
23
|
|
%
|
|||||
|
|
|
|
Home price appreciation
|
|
3
|
|
-
|
3
|
|
%
|
|
3
|
|
%
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Guarantee asset
|
|
1,784
|
|
|
Discount rate
|
|
11
|
|
-
|
11
|
|
%
|
|
11
|
|
%
|
||||
|
|
|
|
Prepayment rate (annual CPR)
|
|
16
|
|
-
|
16
|
|
%
|
|
16
|
|
%
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
Fair
Value
|
|
|
|
Input Values
|
||||||||||||||
(Dollars in Thousands, except Input Values)
|
|
|
Unobservable Input
|
|
Range
|
|
|
Weighted
Average
|
||||||||||||
Assets (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
REO
|
|
$
|
4,525
|
|
|
Loss severity
|
|
16
|
|
-
|
16
|
|
%
|
|
16
|
|
%
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Residential loan purchase commitments, net
|
|
3,042
|
|
|
MSR multiple
|
|
0.6
|
|
-
|
4.6
|
|
x
|
|
2.5
|
|
x
|
||||
|
|
|
|
Pull-through rate
|
|
9
|
|
-
|
100
|
|
%
|
|
71
|
|
%
|
|||||
|
|
|
|
Whole loan spread to TBA price
|
|
$
|
0.56
|
|
-
|
$
|
1.56
|
|
|
|
$
|
1.55
|
|
|
||
|
|
|
|
Whole loan spread to swap rate - fixed rate
|
|
115
|
|
-
|
375
|
|
bps
|
|
257
|
|
bps
|
|||||
|
|
|
|
Prepayment rate (annual CPR)
|
|
15
|
|
-
|
20
|
|
%
|
|
20
|
|
%
|
|||||
|
|
|
|
Whole loan spread to swap rate - hybrid
|
|
90
|
|
-
|
330
|
|
bps
|
|
128
|
|
bps
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
ABS issued (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
At consolidated Sequoia entities
|
|
2,781,001
|
|
|
Discount rate
|
|
3
|
|
-
|
15
|
|
%
|
|
4
|
|
%
|
||||
|
|
|
|
Prepayment rate (annual CPR)
|
|
8
|
|
-
|
40
|
|
%
|
|
20
|
|
%
|
|||||
|
|
|
|
Default rate
|
|
—
|
|
-
|
7
|
|
%
|
|
2
|
|
%
|
|||||
|
|
|
|
Loss severity
|
|
20
|
|
-
|
29
|
|
%
|
|
21
|
|
%
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
At consolidated Freddie Mac SLST entities
|
|
1,987,473
|
|
|
Discount rate
|
|
2
|
|
-
|
13
|
|
%
|
|
3
|
|
%
|
||||
|
|
|
|
Prepayment rate (annual CPR)
|
|
6
|
|
-
|
6
|
|
%
|
|
6
|
|
%
|
|||||
|
|
|
|
Default rate
|
|
22
|
|
-
|
22
|
|
%
|
|
22
|
|
%
|
|||||
|
|
|
|
Loss severity
|
|
30
|
|
-
|
30
|
|
%
|
|
30
|
|
%
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
At consolidated Freddie Mac K-Series entities
|
|
3,577,577
|
|
|
Discount rate
|
|
2
|
|
-
|
9
|
|
%
|
|
2
|
|
%
|
||||
|
|
|
|
Prepayment rate (annual CPR)
|
|
—
|
|
-
|
—
|
|
%
|
|
—
|
|
%
|
|||||
|
|
|
|
Default rate
|
|
1
|
|
-
|
1
|
|
%
|
|
1
|
|
%
|
|||||
|
|
|
|
Loss severity
|
|
20
|
|
-
|
20
|
|
%
|
|
20
|
|
%
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Contingent consideration
|
|
25,167
|
|
|
Discount rate
|
|
23
|
|
-
|
23
|
|
%
|
|
23
|
|
%
|
||||
|
|
|
|
Probability of outcomes (3)
|
|
—
|
|
-
|
100
|
|
%
|
|
90
|
|
%
|
(1)
|
The fair value of the loans held by consolidated entities was based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable, in accordance with accounting guidance for collateralized financing entities. At September 30, 2019, the fair value of securities we owned at the consolidated Sequoia, Freddie Mac SLST and Freddie Mac K-Series entities was $266 million, $454 million, and $214 million, respectively.
|
(2)
|
Represents the estimated average duration of outstanding servicer advances at a given point in time (not taking into account new advances made with respect to the pool).
|
(3)
|
Represents the probability of a full payout of contingent purchase consideration.
|
September 30, 2019
|
|
|
|
Legacy
|
|
Sequoia
|
|
Freddie Mac
|
|
|
||||||||||
(In Thousands)
|
|
Redwood
|
|
Sequoia
|
|
Choice
|
|
SLST
|
|
Total
|
||||||||||
Held-for-sale
|
|
|
|
|
|
|
|
|
|
|
||||||||||
At fair value
|
|
$
|
925,780
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
925,780
|
|
At lower of cost or fair value
|
|
107
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
107
|
|
|||||
Total held-for-sale
|
|
925,887
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
925,887
|
|
|||||
Held-for-investment at fair value
|
|
2,267,218
|
|
|
429,159
|
|
|
2,618,316
|
|
|
2,441,223
|
|
|
7,755,916
|
|
|||||
Total Residential Loans
|
|
$
|
3,193,105
|
|
|
$
|
429,159
|
|
|
$
|
2,618,316
|
|
|
$
|
2,441,223
|
|
|
$
|
8,681,803
|
|
December 31, 2018
|
|
|
|
Legacy
|
|
Sequoia
|
|
Freddie Mac
|
|
|
||||||||||
(In Thousands)
|
|
Redwood
|
|
Sequoia
|
|
Choice
|
|
SLST
|
|
Total
|
||||||||||
Held-for-sale
|
|
|
|
|
|
|
|
|
|
|
||||||||||
At fair value
|
|
$
|
1,048,690
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,048,690
|
|
At lower of cost or fair value
|
|
111
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
111
|
|
|||||
Total held-for-sale
|
|
1,048,801
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,048,801
|
|
|||||
Held-for-investment at fair value
|
|
2,383,932
|
|
|
519,958
|
|
|
2,079,382
|
|
|
1,222,669
|
|
|
6,205,941
|
|
|||||
Total Residential Loans
|
|
$
|
3,432,733
|
|
|
$
|
519,958
|
|
|
$
|
2,079,382
|
|
|
$
|
1,222,669
|
|
|
$
|
7,254,742
|
|
September 30, 2019
|
|
Single-Family
|
|
Residential
|
|
|
||||||
(In Thousands)
|
|
Rental
|
|
Bridge
|
|
Total
|
||||||
Held-for-sale at fair value
|
|
$
|
110,434
|
|
|
$
|
—
|
|
|
$
|
110,434
|
|
Held-for-investment at fair value
|
|
18,711
|
|
|
206,890
|
|
|
225,601
|
|
|||
Total Business Purpose Residential Loans
|
|
$
|
129,145
|
|
|
$
|
206,890
|
|
|
$
|
336,035
|
|
December 31, 2018
|
|
Single-Family
|
|
Residential
|
|
|
||||||
(In Thousands)
|
|
Rental
|
|
Bridge
|
|
Total
|
||||||
Held-for-sale at fair value
|
|
$
|
28,460
|
|
|
$
|
—
|
|
|
$
|
28,460
|
|
Held-for-investment at fair value
|
|
—
|
|
|
112,798
|
|
|
112,798
|
|
|||
Total Business Purpose Residential Loans
|
|
$
|
28,460
|
|
|
$
|
112,798
|
|
|
$
|
141,258
|
|
(In Thousands)
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
Trading
|
|
$
|
1,013,785
|
|
|
$
|
1,118,612
|
|
Available-for-sale
|
|
271,641
|
|
|
333,882
|
|
||
Total Real Estate Securities
|
|
$
|
1,285,426
|
|
|
$
|
1,452,494
|
|
(In Thousands)
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
Senior
|
|
$
|
149,634
|
|
|
$
|
158,670
|
|
Mezzanine
|
|
644,571
|
|
|
610,819
|
|
||
Subordinate
|
|
219,580
|
|
|
349,123
|
|
||
Total Trading Securities
|
|
$
|
1,013,785
|
|
|
$
|
1,118,612
|
|
(In Thousands)
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
Senior
|
|
$
|
33,457
|
|
|
$
|
87,615
|
|
Mezzanine
|
|
13,967
|
|
|
36,407
|
|
||
Subordinate
|
|
224,217
|
|
|
209,860
|
|
||
Total AFS Securities
|
|
$
|
271,641
|
|
|
$
|
333,882
|
|
September 30, 2019
|
|
|
|
|
|
|
||||||||||
(In Thousands)
|
|
Senior
|
|
Mezzanine
|
|
Subordinate
|
|
Total
|
||||||||
Principal balance
|
|
$
|
34,272
|
|
|
$
|
13,729
|
|
|
$
|
291,207
|
|
|
$
|
339,208
|
|
Credit reserve
|
|
(588
|
)
|
|
—
|
|
|
(33,623
|
)
|
|
(34,211
|
)
|
||||
Unamortized discount, net
|
|
(12,346
|
)
|
|
(552
|
)
|
|
(119,756
|
)
|
|
(132,654
|
)
|
||||
Amortized cost
|
|
21,338
|
|
|
13,177
|
|
|
137,828
|
|
|
172,343
|
|
||||
Gross unrealized gains
|
|
12,131
|
|
|
790
|
|
|
86,389
|
|
|
99,310
|
|
||||
Gross unrealized losses
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
||||
Carrying Value
|
|
$
|
33,457
|
|
|
$
|
13,967
|
|
|
$
|
224,217
|
|
|
$
|
271,641
|
|
December 31, 2018
|
|
|
|
|
|
|
||||||||||
(In Thousands)
|
|
Senior
|
|
Mezzanine
|
|
Subordinate
|
|
Total
|
||||||||
Principal balance
|
|
$
|
91,736
|
|
|
$
|
36,852
|
|
|
$
|
302,524
|
|
|
$
|
431,112
|
|
Credit reserve
|
|
(7,790
|
)
|
|
—
|
|
|
(33,580
|
)
|
|
(41,370
|
)
|
||||
Unamortized discount, net
|
|
(18,460
|
)
|
|
(3,697
|
)
|
|
(129,043
|
)
|
|
(151,200
|
)
|
||||
Amortized cost
|
|
65,486
|
|
|
33,155
|
|
|
139,901
|
|
|
238,542
|
|
||||
Gross unrealized gains
|
|
22,178
|
|
|
3,252
|
|
|
70,458
|
|
|
95,888
|
|
||||
Gross unrealized losses
|
|
(49
|
)
|
|
—
|
|
|
(499
|
)
|
|
(548
|
)
|
||||
Carrying Value
|
|
$
|
87,615
|
|
|
$
|
36,407
|
|
|
$
|
209,860
|
|
|
$
|
333,882
|
|
|
|
Three Months Ended September 30, 2019
|
|
Nine Months Ended September 30, 2019
|
||||||||||||
|
|
Credit
Reserve
|
|
Unamortized
Discount, Net
|
|
Credit
Reserve |
|
Unamortized
Discount, Net |
||||||||
(In Thousands)
|
|
|
|
|
||||||||||||
Beginning balance
|
|
$
|
34,849
|
|
|
$
|
137,282
|
|
|
$
|
41,370
|
|
|
$
|
151,200
|
|
Amortization of net discount
|
|
—
|
|
|
(1,834
|
)
|
|
—
|
|
|
(5,823
|
)
|
||||
Realized credit losses
|
|
(694
|
)
|
|
—
|
|
|
(1,874
|
)
|
|
—
|
|
||||
Acquisitions
|
|
734
|
|
|
399
|
|
|
2,198
|
|
|
1,103
|
|
||||
Sales, calls, other
|
|
(800
|
)
|
|
(3,071
|
)
|
|
(7,197
|
)
|
|
(14,112
|
)
|
||||
(Release of) transfers to credit reserves, net
|
|
122
|
|
|
(122
|
)
|
|
(286
|
)
|
|
286
|
|
||||
Ending Balance
|
|
$
|
34,211
|
|
|
$
|
132,654
|
|
|
$
|
34,211
|
|
|
$
|
132,654
|
|
|
|
Less Than 12 Consecutive Months
|
|
12 Consecutive Months or Longer
|
||||||||||||||||||||
|
|
Amortized
Cost
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Unrealized
Losses
|
|
Fair
Value |
||||||||||||
(In Thousands)
|
|
|
|
|
|
|
||||||||||||||||||
September 30, 2019
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,254
|
|
|
$
|
(12
|
)
|
|
$
|
6,242
|
|
December 31, 2018
|
|
12,923
|
|
|
(499
|
)
|
|
12,424
|
|
|
7,464
|
|
|
(49
|
)
|
|
7,415
|
|
September 30, 2019
|
|
Range for Securities
|
||
Prepayment rates
|
|
15%
|
-
|
15%
|
Projected losses
|
|
1%
|
-
|
1%
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Balance at beginning of period
|
|
$
|
18,580
|
|
|
$
|
20,967
|
|
|
$
|
18,652
|
|
|
$
|
21,037
|
|
Additions
|
|
|
|
|
|
|
|
|
||||||||
Initial credit impairments
|
|
—
|
|
|
33
|
|
|
—
|
|
|
76
|
|
||||
Reductions
|
|
|
|
|
|
|
|
|
||||||||
Securities sold, or expected to sell
|
|
(6
|
)
|
|
(927
|
)
|
|
(20
|
)
|
|
(1,026
|
)
|
||||
Securities with no outstanding principal at period end
|
|
—
|
|
|
(1,229
|
)
|
|
(58
|
)
|
|
(1,243
|
)
|
||||
Balance at End of Period
|
|
$
|
18,574
|
|
|
$
|
18,844
|
|
|
$
|
18,574
|
|
|
$
|
18,844
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Gross realized gains - sales
|
|
$
|
3,656
|
|
|
$
|
7,275
|
|
|
$
|
13,143
|
|
|
$
|
21,312
|
|
Gross realized gains - calls
|
|
1,058
|
|
|
—
|
|
|
5,084
|
|
|
43
|
|
||||
Gross realized losses - sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
||||
Total Realized Gains on Sales and Calls of AFS Securities, net
|
|
$
|
4,714
|
|
|
$
|
7,275
|
|
|
$
|
18,227
|
|
|
$
|
21,352
|
|
(In Thousands)
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
Servicer advance investments
|
|
$
|
222,591
|
|
|
$
|
300,468
|
|
Mortgage servicing rights
|
|
39,837
|
|
|
60,281
|
|
||
Excess MSRs
|
|
32,937
|
|
|
27,312
|
|
||
Investment in multifamily loan fund
|
|
32,158
|
|
|
—
|
|
||
Shared home appreciation options
|
|
11,372
|
|
|
—
|
|
||
Other
|
|
8,812
|
|
|
—
|
|
||
Participation in loan warehouse facility
|
|
—
|
|
|
39,703
|
|
||
Investment in 5 Arches
|
|
—
|
|
|
10,754
|
|
||
Total Other Investments
|
|
$
|
347,707
|
|
|
$
|
438,518
|
|
•
|
Principal and Interest Advances: cash payments made by the servicer to cover scheduled principal and interest payments on a residential mortgage loan that have not been paid on a timely basis by the borrower.
|
•
|
Escrow Advances (Taxes and Insurance Advances): Cash payments made by the servicer to third parties on behalf of the borrower for real estate taxes and insurance premiums on the property that have not been paid on a timely basis by the borrower.
|
•
|
Corporate Advances: Cash payments made by the servicer to third parties for the reimbursable costs and expenses incurred in connection with the foreclosure, preservation and sale of the mortgaged property, including attorneys’ and other professional fees.
|
(In Thousands)
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
Principal and interest advances
|
|
$
|
54,670
|
|
|
$
|
144,336
|
|
Escrow advances (taxes and insurance advances)
|
|
99,227
|
|
|
94,828
|
|
||
Corporate advances
|
|
51,049
|
|
|
47,614
|
|
||
Total Servicer Advance Receivables
|
|
$
|
204,946
|
|
|
$
|
286,778
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Balance at beginning of period
|
|
$
|
47,396
|
|
|
$
|
64,674
|
|
|
$
|
60,281
|
|
|
$
|
63,598
|
|
Additions
|
|
—
|
|
|
—
|
|
|
868
|
|
|
—
|
|
||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,077
|
)
|
||||
Changes in fair value due to:
|
|
|
|
|
|
|
|
|
||||||||
Changes in assumptions (1)
|
|
(5,150
|
)
|
|
1,099
|
|
|
(15,291
|
)
|
|
6,388
|
|
||||
Other changes (2)
|
|
(2,409
|
)
|
|
(1,988
|
)
|
|
(6,021
|
)
|
|
(5,124
|
)
|
||||
Balance at End of Period
|
|
$
|
39,837
|
|
|
$
|
63,785
|
|
|
$
|
39,837
|
|
|
$
|
63,785
|
|
(1)
|
Primarily reflects changes in prepayment assumptions due to changes in market interest rates.
|
(2)
|
Represents changes due to the realization of expected cash flows.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Servicing income
|
|
$
|
3,850
|
|
|
$
|
4,004
|
|
|
$
|
11,310
|
|
|
$
|
11,601
|
|
Cost of sub-servicer
|
|
(319
|
)
|
|
(324
|
)
|
|
(1,090
|
)
|
|
(1,254
|
)
|
||||
Net servicing fee income
|
|
3,531
|
|
|
3,680
|
|
|
10,220
|
|
|
10,347
|
|
||||
Market valuation changes of MSRs
|
|
(7,489
|
)
|
|
(823
|
)
|
|
(21,243
|
)
|
|
1,324
|
|
||||
Market valuation changes of associated derivatives
|
|
4,389
|
|
|
(890
|
)
|
|
13,157
|
|
|
(7,151
|
)
|
||||
MSR reversal of provision for repurchases
|
|
—
|
|
|
—
|
|
|
208
|
|
|
277
|
|
||||
MSR Income, Net (1)
|
|
$
|
431
|
|
|
$
|
1,967
|
|
|
$
|
2,342
|
|
|
$
|
4,797
|
|
(1)
|
MSR income, net is included in Other income, net on our consolidated statements of income.
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||
|
|
Fair
Value
|
|
Notional
Amount
|
|
Fair
Value
|
|
Notional
Amount
|
||||||||
(In Thousands)
|
|
|
|
|
||||||||||||
Assets - Risk Management Derivatives
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
|
$
|
28,987
|
|
|
$
|
1,190,500
|
|
|
$
|
28,211
|
|
|
$
|
2,106,500
|
|
TBAs
|
|
5,250
|
|
|
1,960,000
|
|
|
4,665
|
|
|
520,000
|
|
||||
Swaptions
|
|
4,655
|
|
|
625,000
|
|
|
—
|
|
|
—
|
|
||||
Assets - Other Derivatives
|
|
|
|
|
|
|
|
|
||||||||
Loan purchase commitments
|
|
4,757
|
|
|
875,707
|
|
|
2,913
|
|
|
331,161
|
|
||||
Total Assets
|
|
$
|
43,649
|
|
|
$
|
4,651,207
|
|
|
$
|
35,789
|
|
|
$
|
2,957,661
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities - Cash Flow Hedges
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
|
$
|
(61,685
|
)
|
|
$
|
139,500
|
|
|
$
|
(34,492
|
)
|
|
$
|
139,500
|
|
Liabilities - Risk Management Derivatives
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
|
(166,465
|
)
|
|
3,896,300
|
|
|
(36,416
|
)
|
|
1,742,000
|
|
||||
TBAs
|
|
(4,192
|
)
|
|
1,655,000
|
|
|
(13,215
|
)
|
|
935,000
|
|
||||
Liabilities - Other Derivatives
|
|
|
|
|
|
|
|
|
||||||||
Loan purchase commitments
|
|
(1,669
|
)
|
|
457,272
|
|
|
(732
|
)
|
|
137,224
|
|
||||
Total Liabilities
|
|
$
|
(234,011
|
)
|
|
$
|
6,148,072
|
|
|
$
|
(84,855
|
)
|
|
$
|
2,953,724
|
|
Total Derivative Financial Instruments, Net
|
|
$
|
(190,362
|
)
|
|
$
|
10,799,279
|
|
|
$
|
(49,066
|
)
|
|
$
|
5,911,385
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net interest expense on cash flows hedges
|
|
$
|
(727
|
)
|
|
$
|
(734
|
)
|
|
$
|
(2,004
|
)
|
|
$
|
(2,536
|
)
|
Total Interest Expense
|
|
$
|
(727
|
)
|
|
$
|
(734
|
)
|
|
$
|
(2,004
|
)
|
|
$
|
(2,536
|
)
|
(In Thousands)
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
Margin receivable
|
|
$
|
226,727
|
|
|
$
|
100,773
|
|
Pledged collateral
|
|
57,832
|
|
|
42,433
|
|
||
FHLBC stock
|
|
43,393
|
|
|
43,393
|
|
||
Investment receivable
|
|
14,375
|
|
|
6,959
|
|
||
Right-of-use asset
|
|
11,076
|
|
|
—
|
|
||
REO
|
|
5,069
|
|
|
3,943
|
|
||
Fixed assets and leasehold improvements (1)
|
|
4,794
|
|
|
5,106
|
|
||
Other
|
|
14,044
|
|
|
15,218
|
|
||
Total Other Assets
|
|
$
|
377,310
|
|
|
$
|
217,825
|
|
(1)
|
Fixed assets and leasehold improvements had a basis of $11 million and accumulated depreciation of $6 million at September 30, 2019.
|
(In Thousands)
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
Contingent consideration
|
|
$
|
25,167
|
|
|
$
|
—
|
|
Payable to minority partner
|
|
18,664
|
|
|
14,331
|
|
||
Accrued compensation
|
|
17,219
|
|
|
19,769
|
|
||
Guarantee obligations
|
|
15,016
|
|
|
16,711
|
|
||
Lease liability
|
|
12,570
|
|
|
—
|
|
||
Deferred tax liabilities
|
|
11,986
|
|
|
9,022
|
|
||
Margin payable
|
|
6,658
|
|
|
835
|
|
||
Accrued operating expenses
|
|
6,036
|
|
|
3,122
|
|
||
Residential bridge loan holdbacks
|
|
4,465
|
|
|
—
|
|
||
Residential loan and MSR repurchase reserve
|
|
3,947
|
|
|
4,189
|
|
||
Legal reserve
|
|
2,000
|
|
|
2,000
|
|
||
Other
|
|
6,014
|
|
|
8,740
|
|
||
Total Accrued Expenses and Other Liabilities
|
|
$
|
129,742
|
|
|
$
|
78,719
|
|
|
|
September 30, 2019
|
||||||||||||||||
(Dollars in Thousands)
|
|
Number of Facilities
|
|
Outstanding Balance
|
|
Limit
|
|
Weighted Average Interest Rate
|
|
Maturity
|
|
Weighted Average Days Until Maturity
|
||||||
Facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Residential loan warehouse (1)
|
|
4
|
|
|
$
|
233,224
|
|
|
$
|
1,425,000
|
|
|
3.51
|
%
|
|
10/2019-3/2020
|
|
96
|
Real estate securities repo (1)
|
|
9
|
|
|
1,157,646
|
|
|
—
|
|
|
3.11
|
%
|
|
10/2019-1/2020
|
|
28
|
||
Single-family rental loan warehouse (2)
|
|
2
|
|
|
59,204
|
|
|
400,000
|
|
|
4.30
|
%
|
|
6/2020-6/2021
|
|
358
|
||
Residential bridge loan warehouse (2)
|
|
4
|
|
|
138,988
|
|
|
330,000
|
|
|
4.54
|
%
|
|
10/2019-5/2022
|
|
707
|
||
Business purpose loan working capital (2)
|
|
1
|
|
|
—
|
|
|
15,000
|
|
|
5.00
|
%
|
|
12/2020
|
|
N/A
|
||
Total Short-Term Debt Facilities
|
|
20
|
|
|
1,589,062
|
|
|
|
|
|
|
|
|
|
||||
Servicer advance financing
|
|
1
|
|
|
191,203
|
|
|
350,000
|
|
|
3.89
|
%
|
|
11/2019
|
|
46
|
||
Convertible notes, net
|
|
N/A
|
|
|
200,552
|
|
|
—
|
|
|
5.63
|
%
|
|
11/2019
|
|
60
|
||
Total Short-Term Debt
|
|
|
|
$
|
1,980,817
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
||||||||||||||||
(Dollars in Thousands)
|
|
Number of Facilities
|
|
Outstanding Balance
|
|
Limit
|
|
Weighted Average Interest Rate
|
|
Maturity
|
|
Weighted Average Days Until Maturity
|
||||||
Facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Residential loan warehouse (1)
|
|
4
|
|
|
$
|
860,650
|
|
|
$
|
1,425,000
|
|
|
4.10
|
%
|
|
2/2019-12/2019
|
|
178
|
Real estate securities repo (1)
|
|
9
|
|
|
988,890
|
|
|
—
|
|
|
3.47
|
%
|
|
1/2019-3/2019
|
|
26
|
||
Single-family rental loan warehouse (2)
|
|
2
|
|
|
22,053
|
|
|
400,000
|
|
|
4.77
|
%
|
|
6/2020-6/2021
|
|
560
|
||
Residential bridge loan warehouse (2)
|
|
2
|
|
|
66,327
|
|
|
80,000
|
|
|
5.20
|
%
|
|
11/2019-4/2021
|
|
629
|
||
Total Short-Term Debt Facilities
|
|
17
|
|
|
1,937,920
|
|
|
|
|
|
|
|
|
|
||||
Servicer advance financing
|
|
1
|
|
|
262,740
|
|
|
350,000
|
|
|
4.32
|
%
|
|
11/2019
|
|
333
|
||
Convertible notes, net
|
|
N/A
|
|
|
199,619
|
|
|
|
|
5.63
|
%
|
|
11/2019
|
|
319
|
|||
Total Short-Term Debt
|
|
|
|
$
|
2,400,279
|
|
|
|
|
|
|
|
|
|
(1)
|
Borrowings under our facilities are generally charged interest based on a specified margin over the one-month LIBOR interest rate. At September 30, 2019, all of these borrowings were under uncommitted facilities and were due within 364 days (or less) of the borrowing date.
|
(2)
|
Due to the revolving nature of the borrowings under these facilities, we have classified these facilities as short-term debt at September 30, 2019. Borrowings under these facilities will be repaid as the underlying loans mature or are sold to third parties or transferred to securitizations.
|
|
|
September 30, 2019
|
||||||||||||||
(In Thousands)
|
|
Within 30 days
|
|
31 to 90 days
|
|
Over 90 days
|
|
Total
|
||||||||
Collateral Type
|
|
|
|
|
|
|
|
|
||||||||
Held-for-sale residential loans
|
|
$
|
31,031
|
|
|
$
|
108,316
|
|
|
$
|
93,877
|
|
|
$
|
233,224
|
|
Real estate securities
|
|
834,748
|
|
|
293,108
|
|
|
29,790
|
|
|
1,157,646
|
|
||||
Single-family rental loans
|
|
—
|
|
|
—
|
|
|
59,204
|
|
|
59,204
|
|
||||
Residential bridge loans
|
|
—
|
|
|
—
|
|
|
138,988
|
|
|
138,988
|
|
||||
Total Secured Short-Term Debt
|
|
865,779
|
|
|
401,424
|
|
|
321,859
|
|
|
1,589,062
|
|
||||
Servicer advance financing
|
|
—
|
|
|
191,203
|
|
|
—
|
|
|
191,203
|
|
||||
Convertible notes, net
|
|
—
|
|
|
200,552
|
|
|
—
|
|
|
200,552
|
|
||||
Total Short-Term Debt
|
|
$
|
865,779
|
|
|
$
|
793,179
|
|
|
$
|
321,859
|
|
|
$
|
1,980,817
|
|
September 30, 2019
|
|
Legacy
Sequoia
|
|
Sequoia
Choice |
|
Freddie Mac SLST
|
|
Freddie Mac
K-Series
|
|
Total
|
||||||||||
(Dollars in Thousands)
|
|
|
|
|
|
|||||||||||||||
Certificates with principal balance
|
|
$
|
437,793
|
|
|
$
|
2,285,479
|
|
|
$
|
1,885,106
|
|
|
$
|
3,239,009
|
|
|
$
|
7,847,387
|
|
Interest-only certificates
|
|
1,486
|
|
|
16,619
|
|
|
28,758
|
|
|
202,730
|
|
|
249,593
|
|
|||||
Market valuation adjustments
|
|
(19,389
|
)
|
|
59,013
|
|
|
73,609
|
|
|
135,838
|
|
|
249,071
|
|
|||||
ABS Issued, Net
|
|
$
|
419,890
|
|
|
$
|
2,361,111
|
|
|
$
|
1,987,473
|
|
|
$
|
3,577,577
|
|
|
$
|
8,346,051
|
|
Range of weighted average interest rates, by series
|
|
2.22% to 3.49%
|
|
|
4.41% to 5.06%
|
|
|
3.50
|
%
|
|
3.39% to 4.20%
|
|
|
|
||||||
Stated maturities
|
|
2024 - 2036
|
|
|
2047 - 2049
|
|
|
2028 - 2029
|
|
|
2025 - 2049
|
|
|
|
||||||
Number of series
|
|
20
|
|
|
9
|
|
|
2
|
|
|
4
|
|
|
|
December 31, 2018
|
|
Legacy
Sequoia
|
|
Sequoia
Choice |
|
Freddie Mac SLST
|
|
Freddie Mac
K-Series
|
|
Total
|
||||||||||
(Dollars in Thousands)
|
|
|
|
|
|
|||||||||||||||
Certificates with principal balance
|
|
$
|
540,456
|
|
|
$
|
1,838,758
|
|
|
$
|
993,659
|
|
|
$
|
1,936,691
|
|
|
$
|
5,309,564
|
|
Interest-only certificates
|
|
1,537
|
|
|
25,662
|
|
|
—
|
|
|
131,600
|
|
|
158,799
|
|
|||||
Market valuation adjustments
|
|
(29,753
|
)
|
|
20,590
|
|
|
89
|
|
|
(49,216
|
)
|
|
(58,290
|
)
|
|||||
ABS Issued, Net
|
|
$
|
512,240
|
|
|
$
|
1,885,010
|
|
|
$
|
993,748
|
|
|
$
|
2,019,075
|
|
|
$
|
5,410,073
|
|
Range of weighted average interest rates, by series
|
|
1.36% to 3.60%
|
|
|
4.46% to 4.97%
|
|
|
3.51
|
%
|
|
3.39% to 4.08%
|
|
|
|
||||||
Stated maturities
|
|
2024 - 2036
|
|
|
2047 - 2048
|
|
|
2028
|
|
|
2025 - 2049
|
|
|
|
||||||
Number of series
|
|
20
|
|
|
6
|
|
|
1
|
|
|
3
|
|
|
|
(In Thousands)
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
Legacy Sequoia
|
|
$
|
456
|
|
|
$
|
571
|
|
Sequoia Choice
|
|
8,949
|
|
|
7,180
|
|
||
Freddie Mac SLST
|
|
5,498
|
|
|
2,907
|
|
||
Freddie Mac K-Series
|
|
10,805
|
|
|
6,239
|
|
||
Total Accrued Interest Payable on ABS Issued
|
|
$
|
25,708
|
|
|
$
|
16,897
|
|
September 30, 2019
|
|
Legacy
Sequoia
|
|
Sequoia
Choice
|
|
Freddie Mac SLST
|
|
Freddie Mac
K-Series
|
|
Total
|
||||||||||
(In Thousands)
|
|
|
|
|
|
|||||||||||||||
Residential loans
|
|
$
|
429,159
|
|
|
$
|
2,618,316
|
|
|
$
|
2,441,223
|
|
|
$
|
—
|
|
|
$
|
5,488,698
|
|
Multifamily loans
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,791,622
|
|
|
3,791,622
|
|
|||||
Restricted cash
|
|
143
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
158
|
|
|||||
Accrued interest receivable
|
|
716
|
|
|
10,806
|
|
|
7,215
|
|
|
11,300
|
|
|
30,037
|
|
|||||
REO
|
|
460
|
|
|
—
|
|
|
84
|
|
|
—
|
|
|
544
|
|
|||||
Total Collateral for ABS Issued
|
|
$
|
430,478
|
|
|
$
|
2,629,137
|
|
|
$
|
2,448,522
|
|
|
$
|
3,802,922
|
|
|
$
|
9,311,059
|
|
December 31, 2018
|
|
Legacy
Sequoia
|
|
Sequoia
Choice |
|
Freddie Mac SLST
|
|
Freddie Mac
K-Series
|
|
Total
|
||||||||||
(In Thousands)
|
|
|
|
|
|
|||||||||||||||
Residential loans
|
|
$
|
519,958
|
|
|
$
|
2,079,382
|
|
|
$
|
1,222,669
|
|
|
$
|
—
|
|
|
$
|
3,822,009
|
|
Multifamily loans
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,144,598
|
|
|
2,144,598
|
|
|||||
Restricted cash
|
|
146
|
|
|
1,022
|
|
|
—
|
|
|
—
|
|
|
1,168
|
|
|||||
Accrued interest receivable
|
|
822
|
|
|
8,988
|
|
|
3,926
|
|
|
6,595
|
|
|
20,331
|
|
|||||
REO
|
|
3,943
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,943
|
|
|||||
Total Collateral for ABS Issued
|
|
$
|
524,869
|
|
|
$
|
2,089,392
|
|
|
$
|
1,226,595
|
|
|
$
|
2,151,193
|
|
|
$
|
5,992,049
|
|
(In Thousands)
|
|
September 30, 2019
|
||
2024
|
|
$
|
470,171
|
|
2025
|
|
887,639
|
|
|
2026
|
|
642,189
|
|
|
Total FHLBC Borrowings
|
|
$
|
1,999,999
|
|
(In Thousands)
|
|
September 30, 2019
|
||
2019 (3 months)
|
|
$
|
688
|
|
2020
|
|
2,721
|
|
|
2021
|
|
1,864
|
|
|
2022
|
|
1,468
|
|
|
2023 and thereafter
|
|
8,749
|
|
|
Total Lease Commitments
|
|
15,490
|
|
|
Less: Imputed interest
|
|
(2,920
|
)
|
|
Lease Liability
|
|
$
|
12,570
|
|
|
|
Three Months Ended September 30, 2019
|
|
Three Months Ended September 30, 2018
|
||||||||||||
(In Thousands)
|
|
Net Unrealized Gains on Available-for-Sale Securities
|
|
Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges
|
|
Net Unrealized Gains on Available-for-Sale Securities
|
|
Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges
|
||||||||
Balance at beginning of period
|
|
$
|
98,307
|
|
|
$
|
(49,384
|
)
|
|
$
|
106,725
|
|
|
$
|
(31,105
|
)
|
Other comprehensive income (loss)
before reclassifications (1)
|
|
4,484
|
|
|
(11,791
|
)
|
|
(2,408
|
)
|
|
4,801
|
|
||||
Amounts reclassified from other
accumulated comprehensive income
|
|
(3,492
|
)
|
|
—
|
|
|
(5,686
|
)
|
|
—
|
|
||||
Net current-period other comprehensive income (loss)
|
|
992
|
|
|
(11,791
|
)
|
|
(8,094
|
)
|
|
4,801
|
|
||||
Balance at End of Period
|
|
$
|
99,299
|
|
|
$
|
(61,175
|
)
|
|
$
|
98,631
|
|
|
$
|
(26,304
|
)
|
|
|
Nine Months Ended September 30, 2019
|
|
Nine Months Ended September 30, 2018
|
||||||||||||
(In Thousands)
|
|
Net Unrealized Gains on Available-for-Sale Securities
|
|
Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges
|
|
Net Unrealized Gains on Available-for-Sale Securities
|
|
Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges
|
||||||||
Balance at beginning of period
|
|
$
|
95,342
|
|
|
$
|
(34,045
|
)
|
|
$
|
128,201
|
|
|
$
|
(42,953
|
)
|
Other comprehensive income (loss)
before reclassifications (1) |
|
19,764
|
|
|
(27,130
|
)
|
|
(9,749
|
)
|
|
16,649
|
|
||||
Amounts reclassified from other
accumulated comprehensive income |
|
(15,807
|
)
|
|
—
|
|
|
(19,821
|
)
|
|
—
|
|
||||
Net current-period other comprehensive income (loss)
|
|
3,957
|
|
|
(27,130
|
)
|
|
(29,570
|
)
|
|
16,649
|
|
||||
Balance at End of Period
|
|
$
|
99,299
|
|
|
$
|
(61,175
|
)
|
|
$
|
98,631
|
|
|
$
|
(26,304
|
)
|
(1)
|
Amounts presented for net unrealized gains on available-for-sale securities are net of tax benefit (provision) of zero and $0.1 million for the three and nine months ended September 30, 2018, respectively.
|
|
|
|
|
|
|
|
||||
|
|
|
|
Amount Reclassified From Accumulated Other Comprehensive Income
|
||||||
|
|
Affected Line Item in the
|
|
Three Months Ended September 30,
|
||||||
(In Thousands)
|
|
Income Statement
|
|
2019
|
|
2018
|
||||
Net Realized (Gain) Loss on AFS Securities
|
|
|
|
|
|
|
||||
Other than temporary impairment (1)
|
|
Investment fair value changes, net
|
|
$
|
—
|
|
|
$
|
33
|
|
Gain on sale of AFS securities
|
|
Realized gains, net
|
|
(3,492
|
)
|
|
(7,247
|
)
|
||
Gain on sale of AFS securities
|
|
Provision for income taxes
|
|
—
|
|
|
1,528
|
|
||
|
|
|
|
$
|
(3,492
|
)
|
|
$
|
(5,686
|
)
|
|
|
|
|
Amount Reclassified From Accumulated Other Comprehensive Income
|
||||||
|
|
Affected Line Item in the
|
|
Nine Months Ended September 30,
|
||||||
(In Thousands)
|
|
Income Statement
|
|
2019
|
|
2018
|
||||
Net Realized (Gain) Loss on AFS Securities
|
|
|
|
|
|
|
||||
Other than temporary impairment (1)
|
|
Investment fair value changes, net
|
|
$
|
—
|
|
|
$
|
89
|
|
Gain on sale of AFS securities
|
|
Realized gains, net
|
|
(15,807
|
)
|
|
(21,438
|
)
|
||
Gain on sale of AFS securities
|
|
Provision for income taxes
|
|
—
|
|
|
1,528
|
|
||
|
|
|
|
$
|
(15,807
|
)
|
|
$
|
(19,821
|
)
|
(1)
|
For both the three and nine months ended September 30, 2019, there were no other-than-temporary impairments. For the three months ended September 30, 2018, other-than-temporary impairments were $0.4 million, of which less than $0.1 million were recognized through our consolidated statements of income and $0.3 million were recognized in Accumulated other comprehensive income, a component of our consolidated balance sheet. For the nine months ended September 30, 2018, other-than-temporary impairments were $0.6 million, of which $0.1 million were recognized through our consolidated statements of income and $0.5 million were recognized in Accumulated other comprehensive income, a component of our consolidated balance sheet.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In Thousands, except Share Data)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Basic Earnings per Common Share:
|
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Redwood
|
|
$
|
34,310
|
|
|
$
|
40,921
|
|
|
$
|
120,040
|
|
|
$
|
120,513
|
|
Less: Dividends and undistributed earnings allocated to participating securities
|
|
(856
|
)
|
|
(1,231
|
)
|
|
(3,260
|
)
|
|
(3,766
|
)
|
||||
Net income allocated to common shareholders
|
|
$
|
33,454
|
|
|
$
|
39,690
|
|
|
$
|
116,780
|
|
|
$
|
116,747
|
|
Basic weighted average common shares outstanding
|
|
101,872,126
|
|
|
80,796,856
|
|
|
97,214,064
|
|
|
77,211,188
|
|
||||
Basic Earnings per Common Share
|
|
$
|
0.33
|
|
|
$
|
0.49
|
|
|
$
|
1.20
|
|
|
$
|
1.51
|
|
Diluted Earnings per Common Share:
|
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Redwood
|
|
$
|
34,310
|
|
|
$
|
40,921
|
|
|
$
|
120,040
|
|
|
$
|
120,513
|
|
Less: Dividends and undistributed earnings allocated to participating securities
|
|
(1,036
|
)
|
|
(1,284
|
)
|
|
(3,625
|
)
|
|
(3,867
|
)
|
||||
Add back: Interest expense on convertible notes for the period, net of tax
|
|
8,887
|
|
|
8,666
|
|
|
26,271
|
|
|
23,642
|
|
||||
Net income allocated to common shareholders
|
|
$
|
42,161
|
|
|
$
|
48,303
|
|
|
$
|
142,686
|
|
|
$
|
140,288
|
|
Weighted average common shares outstanding
|
|
101,872,126
|
|
|
80,796,856
|
|
|
97,214,064
|
|
|
77,211,188
|
|
||||
Net effect of dilutive equity awards
|
|
362,743
|
|
|
443,191
|
|
|
261,155
|
|
|
251,935
|
|
||||
Net effect of assumed convertible notes conversion to common shares
|
|
34,287,840
|
|
|
33,442,641
|
|
|
33,727,470
|
|
|
30,328,906
|
|
||||
Diluted weighted average common shares outstanding
|
|
136,522,709
|
|
|
114,682,688
|
|
|
131,202,689
|
|
|
107,792,029
|
|
||||
Diluted Earnings per Common Share
|
|
$
|
0.31
|
|
|
$
|
0.42
|
|
|
$
|
1.09
|
|
|
$
|
1.30
|
|
|
|
Nine Months Ended September 30, 2019
|
||||||||||||||||||||||
(In Thousands)
|
|
Restricted Stock Awards
|
|
Restricted Stock Units
|
|
Deferred Stock Units
|
|
Performance Stock Units
|
|
Employee Stock Purchase Plan
|
|
Total
|
||||||||||||
Unrecognized compensation cost at beginning of period
|
|
$
|
3,498
|
|
|
$
|
74
|
|
|
$
|
14,489
|
|
|
$
|
7,061
|
|
|
$
|
—
|
|
|
$
|
25,122
|
|
Equity grants
|
|
—
|
|
|
3,483
|
|
|
4,831
|
|
|
—
|
|
|
160
|
|
|
8,474
|
|
||||||
Equity grant forfeitures
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Equity compensation expense
|
|
(1,137
|
)
|
|
(499
|
)
|
|
(5,871
|
)
|
|
(2,505
|
)
|
|
(120
|
)
|
|
(10,132
|
)
|
||||||
Unrecognized Compensation Cost at End of Period
|
|
$
|
2,361
|
|
|
$
|
3,058
|
|
|
$
|
13,449
|
|
|
$
|
4,556
|
|
|
$
|
40
|
|
|
$
|
23,464
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Residential Mortgage Banking Activities, Net
|
|
|
|
|
|
|
|
|
||||||||
Changes in fair value of:
|
|
|
|
|
|
|
|
|
||||||||
Residential loans, at fair value (1)
|
|
$
|
6,320
|
|
|
$
|
7,236
|
|
|
$
|
41,431
|
|
|
$
|
8,406
|
|
Risk management derivatives (2)
|
|
(1,710
|
)
|
|
3,796
|
|
|
(11,608
|
)
|
|
38,378
|
|
||||
Other income, net (3)
|
|
407
|
|
|
313
|
|
|
1,380
|
|
|
1,733
|
|
||||
Total residential mortgage banking activities, net
|
|
5,017
|
|
|
11,345
|
|
|
31,203
|
|
|
48,517
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Business Purpose Mortgage Banking Activities, Net:
|
|
|
|
|
|
|
|
|
||||||||
Changes in fair value of:
|
|
|
|
|
|
|
|
|
||||||||
Single-family rental loans, at fair value (1)
|
|
1,847
|
|
|
(121
|
)
|
|
5,473
|
|
|
(121
|
)
|
||||
Risk management derivatives (2)
|
|
(1,262
|
)
|
|
—
|
|
|
(3,779
|
)
|
|
—
|
|
||||
Residential bridge loans, at fair value
|
|
1,010
|
|
|
—
|
|
|
2,108
|
|
|
—
|
|
||||
Other income, net (4)
|
|
2,903
|
|
|
—
|
|
|
5,979
|
|
|
—
|
|
||||
Total business purpose mortgage banking activities, net
|
|
4,498
|
|
|
(121
|
)
|
|
9,781
|
|
|
(121
|
)
|
||||
Mortgage Banking Activities, Net
|
|
$
|
9,515
|
|
|
$
|
11,224
|
|
|
$
|
40,984
|
|
|
$
|
48,396
|
|
(1)
|
Includes changes in fair value for associated loan purchase and forward sale commitments.
|
(2)
|
Represents market valuation changes of derivatives that were used to manage risks associated with our accumulation of loans.
|
(3)
|
Amounts in this line item include other fee income from loan acquisitions and the provision for repurchases expense, presented net.
|
(4)
|
Amounts in this line item include other fee income from loan originations.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Investment Fair Value Changes, Net
|
|
|
|
|
|
|
|
|
||||||||
Changes in fair value of:
|
|
|
|
|
|
|
|
|
||||||||
Residential loans held-for-investment at Redwood
|
|
$
|
7,667
|
|
|
$
|
(17,063
|
)
|
|
$
|
71,323
|
|
|
$
|
(71,058
|
)
|
Single-family rental loans held-for-investment
|
|
22
|
|
|
—
|
|
|
22
|
|
|
—
|
|
||||
Residential bridge loans held-for-investment
|
|
(742
|
)
|
|
53
|
|
|
(1,363
|
)
|
|
53
|
|
||||
Trading securities
|
|
15,275
|
|
|
6,314
|
|
|
55,577
|
|
|
2,429
|
|
||||
Servicer advance investments
|
|
1,585
|
|
|
—
|
|
|
3,025
|
|
|
—
|
|
||||
Excess MSRs
|
|
(1,635
|
)
|
|
—
|
|
|
(2,137
|
)
|
|
—
|
|
||||
Shared home appreciation options
|
|
29
|
|
|
—
|
|
|
29
|
|
|
—
|
|
||||
REO
|
|
(331
|
)
|
|
—
|
|
|
(470
|
)
|
|
—
|
|
||||
Net investments in Legacy Sequoia entities (1)
|
|
(407
|
)
|
|
(248
|
)
|
|
(904
|
)
|
|
(976
|
)
|
||||
Net investments in Sequoia Choice entities (1)
|
|
2,722
|
|
|
(943
|
)
|
|
8,866
|
|
|
43
|
|
||||
Net investments in Freddie Mac SLST entities (1)
|
|
17,300
|
|
|
—
|
|
|
31,702
|
|
|
—
|
|
||||
Net investments in Freddie Mac K-Series entities (1)
|
|
7,445
|
|
|
511
|
|
|
13,810
|
|
|
511
|
|
||||
Risk-sharing investments
|
|
(53
|
)
|
|
(126
|
)
|
|
(191
|
)
|
|
(474
|
)
|
||||
Risk management derivatives, net
|
|
(37,433
|
)
|
|
21,867
|
|
|
(144,548
|
)
|
|
82,391
|
|
||||
Impairments on AFS securities
|
|
—
|
|
|
(33
|
)
|
|
—
|
|
|
(89
|
)
|
||||
Investment Fair Value Changes, Net
|
|
$
|
11,444
|
|
|
$
|
10,332
|
|
|
$
|
34,741
|
|
|
$
|
12,830
|
|
(1)
|
Includes changes in fair value of the loans held-for-investment, REO and the ABS issued at the entities, which netted together represent the change in value of our investments at the consolidated VIEs.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
MSR income, net
|
|
$
|
431
|
|
|
$
|
1,967
|
|
|
$
|
2,342
|
|
|
$
|
4,797
|
|
Risk share income
|
|
905
|
|
|
907
|
|
|
2,351
|
|
|
2,706
|
|
||||
FHLBC capital stock dividend
|
|
541
|
|
|
460
|
|
|
1,623
|
|
|
1,271
|
|
||||
Equity investment income
|
|
557
|
|
|
119
|
|
|
552
|
|
|
119
|
|
||||
5 Arches loan administration fee income
|
|
1,344
|
|
|
—
|
|
|
3,298
|
|
|
—
|
|
||||
Amortization of intangible assets
|
|
(1,897
|
)
|
|
—
|
|
|
(4,429
|
)
|
|
—
|
|
||||
Gain on re-measurement of investment in 5 Arches
|
|
—
|
|
|
—
|
|
|
2,441
|
|
|
—
|
|
||||
Other
|
|
(56
|
)
|
|
—
|
|
|
(359
|
)
|
|
—
|
|
||||
Other Income, Net
|
|
$
|
1,825
|
|
|
$
|
3,453
|
|
|
$
|
7,819
|
|
|
$
|
8,893
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Fixed compensation expense
|
|
$
|
9,391
|
|
|
$
|
5,922
|
|
|
$
|
26,848
|
|
|
$
|
18,136
|
|
Variable compensation expense
|
|
4,090
|
|
|
4,923
|
|
|
12,513
|
|
|
13,655
|
|
||||
Equity compensation expense
|
|
3,155
|
|
|
3,033
|
|
|
10,132
|
|
|
9,565
|
|
||||
Total compensation expense
|
|
16,636
|
|
|
13,878
|
|
|
49,493
|
|
|
41,356
|
|
||||
Systems and consulting
|
|
3,230
|
|
|
1,794
|
|
|
7,594
|
|
|
5,434
|
|
||||
Loan acquisition costs (1)
|
|
1,392
|
|
|
1,887
|
|
|
4,385
|
|
|
5,860
|
|
||||
Office costs
|
|
1,517
|
|
|
1,173
|
|
|
4,406
|
|
|
3,397
|
|
||||
Accounting and legal
|
|
1,767
|
|
|
1,170
|
|
|
3,852
|
|
|
3,078
|
|
||||
Corporate costs
|
|
482
|
|
|
462
|
|
|
1,701
|
|
|
1,462
|
|
||||
Other operating expenses
|
|
1,791
|
|
|
1,126
|
|
|
4,798
|
|
|
2,942
|
|
||||
Total Operating Expenses
|
|
$
|
26,815
|
|
|
$
|
21,490
|
|
|
$
|
76,229
|
|
|
$
|
63,529
|
|
(1)
|
Loan acquisition costs primarily includes underwriting and due diligence costs related to the acquisition of residential loans held-for-sale at fair value.
|
|
|
September 30, 2019
|
|
September 30, 2018
|
||
Federal statutory rate
|
|
21.0
|
%
|
|
21.0
|
%
|
State statutory rate, net of Federal tax effect
|
|
8.6
|
%
|
|
8.6
|
%
|
Differences in taxable (loss) income from GAAP income
|
|
(2.5
|
)%
|
|
(1.8
|
)%
|
Change in valuation allowance
|
|
(2.5
|
)%
|
|
(3.2
|
)%
|
Dividends paid deduction
|
|
(22.1
|
)%
|
|
(15.3
|
)%
|
Effective Tax Rate
|
|
2.5
|
%
|
|
9.3
|
%
|
|
|
Three Months Ended September 30, 2019
|
||||||||||||||
(In Thousands)
|
|
Investment Portfolio
|
|
Mortgage Banking
|
|
Corporate/
Other
|
|
Total
|
||||||||
Interest income
|
|
$
|
132,894
|
|
|
$
|
12,491
|
|
|
$
|
4,732
|
|
|
$
|
150,117
|
|
Interest expense
|
|
(94,519
|
)
|
|
(6,657
|
)
|
|
(15,428
|
)
|
|
(116,604
|
)
|
||||
Net interest income (loss)
|
|
38,375
|
|
|
5,834
|
|
|
(10,696
|
)
|
|
33,513
|
|
||||
Non-interest income
|
|
|
|
|
|
|
|
|
||||||||
Mortgage banking activities, net
|
|
—
|
|
|
9,515
|
|
|
—
|
|
|
9,515
|
|
||||
Investment fair value changes, net
|
|
11,896
|
|
|
—
|
|
|
(452
|
)
|
|
11,444
|
|
||||
Other income (expense), net
|
|
2,313
|
|
|
(252
|
)
|
|
(236
|
)
|
|
1,825
|
|
||||
Realized gains, net
|
|
4,714
|
|
|
—
|
|
|
—
|
|
|
4,714
|
|
||||
Total non-interest income, net
|
|
18,923
|
|
|
9,263
|
|
|
(688
|
)
|
|
27,498
|
|
||||
Direct operating expenses
|
|
(2,191
|
)
|
|
(11,907
|
)
|
|
(12,717
|
)
|
|
(26,815
|
)
|
||||
(Provision for) benefit from income taxes
|
|
(89
|
)
|
|
203
|
|
|
—
|
|
|
114
|
|
||||
Segment Contribution
|
|
$
|
55,018
|
|
|
$
|
3,393
|
|
|
$
|
(24,101
|
)
|
|
|
||
Net Income
|
|
|
|
|
|
|
|
$
|
34,310
|
|
||||||
Non-cash amortization income (expense), net
|
|
$
|
2,456
|
|
|
$
|
(2,028
|
)
|
|
$
|
(1,148
|
)
|
|
$
|
(720
|
)
|
|
|
Three Months Ended September 30, 2018
|
||||||||||||||
(In Thousands)
|
|
Investment Portfolio
|
|
Mortgage Banking
|
|
Corporate/
Other |
|
Total
|
||||||||
Interest income
|
|
$
|
79,556
|
|
|
$
|
14,427
|
|
|
$
|
5,414
|
|
|
$
|
99,397
|
|
Interest expense
|
|
(40,852
|
)
|
|
(7,537
|
)
|
|
(15,962
|
)
|
|
(64,351
|
)
|
||||
Net interest income (loss)
|
|
38,704
|
|
|
6,890
|
|
|
(10,548
|
)
|
|
35,046
|
|
||||
Non-interest income
|
|
|
|
|
|
|
|
|
||||||||
Mortgage banking activities, net
|
|
—
|
|
|
11,224
|
|
|
—
|
|
|
11,224
|
|
||||
Investment fair value changes, net
|
|
10,566
|
|
|
—
|
|
|
(234
|
)
|
|
10,332
|
|
||||
Other income, net
|
|
3,334
|
|
|
—
|
|
|
119
|
|
|
3,453
|
|
||||
Realized gains, net
|
|
7,275
|
|
|
—
|
|
|
—
|
|
|
7,275
|
|
||||
Total non-interest income, net
|
|
21,175
|
|
|
11,224
|
|
|
(115
|
)
|
|
32,284
|
|
||||
Direct operating expenses
|
|
(2,659
|
)
|
|
(6,570
|
)
|
|
(12,261
|
)
|
|
(21,490
|
)
|
||||
Provision for income taxes
|
|
(2,840
|
)
|
|
(2,079
|
)
|
|
—
|
|
|
(4,919
|
)
|
||||
Segment Contribution
|
|
$
|
54,380
|
|
|
$
|
9,465
|
|
|
$
|
(22,924
|
)
|
|
|
||
Net Income
|
|
|
|
|
|
|
|
$
|
40,921
|
|
||||||
Non-cash amortization income (expense), net
|
|
$
|
4,019
|
|
|
$
|
(54
|
)
|
|
$
|
(1,176
|
)
|
|
$
|
2,789
|
|
|
|
Nine Months Ended September 30, 2019
|
||||||||||||||
(In Thousands)
|
|
Investment Portfolio
|
|
Mortgage Banking
|
|
Corporate/
Other |
|
Total
|
||||||||
Interest income
|
|
$
|
380,394
|
|
|
$
|
34,220
|
|
|
$
|
15,086
|
|
|
$
|
429,700
|
|
Interest expense
|
|
(266,318
|
)
|
|
(18,816
|
)
|
|
(46,966
|
)
|
|
(332,100
|
)
|
||||
Net interest income (loss)
|
|
114,076
|
|
|
15,404
|
|
|
(31,880
|
)
|
|
97,600
|
|
||||
Non-interest income
|
|
|
|
|
|
|
|
|
||||||||
Mortgage banking activities, net
|
|
—
|
|
|
40,984
|
|
|
—
|
|
|
40,984
|
|
||||
Investment fair value changes, net
|
|
35,749
|
|
|
—
|
|
|
(1,008
|
)
|
|
34,741
|
|
||||
Other income, net
|
|
6,408
|
|
|
(575
|
)
|
|
1,986
|
|
|
7,819
|
|
||||
Realized gains, net
|
|
18,227
|
|
|
—
|
|
|
—
|
|
|
18,227
|
|
||||
Total non-interest income, net
|
|
60,384
|
|
|
40,409
|
|
|
978
|
|
|
101,771
|
|
||||
Direct operating expenses
|
|
(7,110
|
)
|
|
(31,582
|
)
|
|
(37,537
|
)
|
|
(76,229
|
)
|
||||
Provision for income taxes
|
|
(1,327
|
)
|
|
(1,775
|
)
|
|
—
|
|
|
(3,102
|
)
|
||||
Segment Contribution
|
|
$
|
166,023
|
|
|
$
|
22,456
|
|
|
$
|
(68,439
|
)
|
|
|
||
Net Income
|
|
|
|
|
|
|
|
$
|
120,040
|
|
||||||
Non-cash amortization income (expense), net
|
|
$
|
7,446
|
|
|
$
|
(4,765
|
)
|
|
$
|
(3,573
|
)
|
|
$
|
(892
|
)
|
|
|
Nine Months Ended September 30, 2018
|
||||||||||||||
(In Thousands)
|
|
Investment Portfolio
|
|
Mortgage Banking
|
|
Corporate/
Other |
|
Total
|
||||||||
Interest income
|
|
$
|
202,882
|
|
|
$
|
40,408
|
|
|
$
|
15,702
|
|
|
$
|
258,992
|
|
Interest expense
|
|
(87,719
|
)
|
|
(21,303
|
)
|
|
(45,056
|
)
|
|
(154,078
|
)
|
||||
Net interest income (loss)
|
|
115,163
|
|
|
19,105
|
|
|
(29,354
|
)
|
|
104,914
|
|
||||
Non-interest income
|
|
|
|
|
|
|
|
|
||||||||
Mortgage banking activities, net
|
|
—
|
|
|
48,396
|
|
|
—
|
|
|
48,396
|
|
||||
Investment fair value changes, net
|
|
13,756
|
|
|
—
|
|
|
(926
|
)
|
|
12,830
|
|
||||
Other income, net
|
|
8,774
|
|
|
—
|
|
|
119
|
|
|
8,893
|
|
||||
Realized gains, net
|
|
21,352
|
|
|
—
|
|
|
—
|
|
|
21,352
|
|
||||
Total non-interest income, net
|
|
43,882
|
|
|
48,396
|
|
|
(807
|
)
|
|
91,471
|
|
||||
Direct operating expenses
|
|
(6,524
|
)
|
|
(20,941
|
)
|
|
(36,064
|
)
|
|
(63,529
|
)
|
||||
Provision for income taxes
|
|
(4,858
|
)
|
|
(7,485
|
)
|
|
—
|
|
|
(12,343
|
)
|
||||
Segment Contribution
|
|
$
|
147,663
|
|
|
$
|
39,075
|
|
|
$
|
(66,225
|
)
|
|
|
||
Net Income
|
|
|
|
|
|
|
|
$
|
120,513
|
|
||||||
Non-cash amortization income (expense), net
|
|
$
|
13,290
|
|
|
$
|
(99
|
)
|
|
$
|
(3,021
|
)
|
|
$
|
10,170
|
|
|
|
Three Months Ended September 30,
|
||||||||||||||||||||||
|
|
2019
|
|
2018
|
||||||||||||||||||||
(In Thousands)
|
|
Legacy Consolidated VIEs (1)
|
|
Other
|
|
Total
|
|
Legacy Consolidated VIEs (1)
|
|
Other
|
|
Total
|
||||||||||||
Interest income
|
|
$
|
4,295
|
|
|
$
|
437
|
|
|
$
|
4,732
|
|
|
$
|
5,174
|
|
|
$
|
240
|
|
|
$
|
5,414
|
|
Interest expense
|
|
(3,452
|
)
|
|
(11,976
|
)
|
|
(15,428
|
)
|
|
(4,257
|
)
|
|
(11,705
|
)
|
|
(15,962
|
)
|
||||||
Net interest income (loss)
|
|
843
|
|
|
(11,539
|
)
|
|
(10,696
|
)
|
|
917
|
|
|
(11,465
|
)
|
|
(10,548
|
)
|
||||||
Non-interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Investment fair value changes, net
|
|
(407
|
)
|
|
(45
|
)
|
|
(452
|
)
|
|
(248
|
)
|
|
14
|
|
|
(234
|
)
|
||||||
Other income
|
|
—
|
|
|
(236
|
)
|
|
(236
|
)
|
|
—
|
|
|
119
|
|
|
119
|
|
||||||
Total non-interest income, net
|
|
(407
|
)
|
|
(281
|
)
|
|
(688
|
)
|
|
(248
|
)
|
|
133
|
|
|
(115
|
)
|
||||||
Direct operating expenses
|
|
—
|
|
|
(12,717
|
)
|
|
(12,717
|
)
|
|
—
|
|
|
(12,261
|
)
|
|
(12,261
|
)
|
||||||
Total
|
|
$
|
436
|
|
|
$
|
(24,537
|
)
|
|
$
|
(24,101
|
)
|
|
$
|
669
|
|
|
$
|
(23,593
|
)
|
|
$
|
(22,924
|
)
|
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||
|
|
2019
|
|
2018
|
||||||||||||||||||||
(In Thousands)
|
|
Legacy Consolidated
VIEs (1)
|
|
Other
|
|
Total
|
|
Legacy Consolidated
VIEs (1)
|
|
Other
|
|
Total
|
||||||||||||
Interest income
|
|
$
|
13,924
|
|
|
$
|
1,162
|
|
|
$
|
15,086
|
|
|
$
|
15,003
|
|
|
$
|
699
|
|
|
$
|
15,702
|
|
Interest expense
|
|
(11,548
|
)
|
|
(35,418
|
)
|
|
(46,966
|
)
|
|
(12,324
|
)
|
|
(32,732
|
)
|
|
(45,056
|
)
|
||||||
Net interest income (loss)
|
|
2,376
|
|
|
(34,256
|
)
|
|
(31,880
|
)
|
|
2,679
|
|
|
(32,033
|
)
|
|
(29,354
|
)
|
||||||
Non-interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Investment fair value changes, net
|
|
(904
|
)
|
|
(104
|
)
|
|
(1,008
|
)
|
|
(976
|
)
|
|
50
|
|
|
(926
|
)
|
||||||
Other income
|
|
—
|
|
|
1,986
|
|
|
1,986
|
|
|
—
|
|
|
119
|
|
|
119
|
|
||||||
Total non-interest income, net
|
|
(904
|
)
|
|
1,882
|
|
|
978
|
|
|
(976
|
)
|
|
169
|
|
|
(807
|
)
|
||||||
Direct operating expenses
|
|
—
|
|
|
(37,537
|
)
|
|
(37,537
|
)
|
|
—
|
|
|
(36,064
|
)
|
|
(36,064
|
)
|
||||||
Total
|
|
$
|
1,472
|
|
|
$
|
(69,911
|
)
|
|
$
|
(68,439
|
)
|
|
$
|
1,703
|
|
|
$
|
(67,928
|
)
|
|
$
|
(66,225
|
)
|
(1)
|
Legacy consolidated VIEs represent Legacy Sequoia entities that are consolidated for GAAP financial reporting purposes. See Note 4 for further discussion on VIEs.
|
(In Thousands)
|
|
Investment Portfolio
|
|
Mortgage Banking
|
|
Corporate/
Other
|
|
Total
|
||||||||
September 30, 2019
|
|
|
|
|
|
|
|
|
||||||||
Residential loans
|
|
$
|
7,326,757
|
|
|
$
|
925,887
|
|
|
$
|
429,159
|
|
|
$
|
8,681,803
|
|
Business purpose residential loans
|
|
225,601
|
|
|
110,434
|
|
|
—
|
|
|
336,035
|
|
||||
Multifamily loans
|
|
3,791,622
|
|
|
—
|
|
|
—
|
|
|
3,791,622
|
|
||||
Real estate securities
|
|
1,285,426
|
|
|
—
|
|
|
—
|
|
|
1,285,426
|
|
||||
Other investments
|
|
346,136
|
|
|
1,571
|
|
|
—
|
|
|
347,707
|
|
||||
Goodwill and intangible assets
|
|
—
|
|
|
49,121
|
|
|
—
|
|
|
49,121
|
|
||||
Total assets
|
|
13,347,460
|
|
|
1,166,639
|
|
|
962,184
|
|
|
15,476,283
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2018
|
|
|
|
|
|
|
|
|
||||||||
Residential loans
|
|
$
|
5,685,983
|
|
|
$
|
1,048,801
|
|
|
$
|
519,958
|
|
|
$
|
7,254,742
|
|
Business purpose residential loans
|
|
112,798
|
|
|
28,460
|
|
|
—
|
|
|
141,258
|
|
||||
Multifamily loans
|
|
2,144,598
|
|
|
—
|
|
|
—
|
|
|
2,144,598
|
|
||||
Real estate securities
|
|
1,452,494
|
|
|
—
|
|
|
—
|
|
|
1,452,494
|
|
||||
Other investments
|
|
427,764
|
|
|
—
|
|
|
10,754
|
|
|
438,518
|
|
||||
Total assets
|
|
10,093,993
|
|
|
1,103,090
|
|
|
740,323
|
|
|
11,937,406
|
|
•
|
Overview
|
•
|
Results of Operations
|
•
|
Liquidity and Capital Resources
|
•
|
Off-Balance Sheet Arrangements and Contractual Obligations
|
•
|
Critical Accounting Policies and Estimates
|
•
|
New Accounting Standards
|
•
|
the pace at which we redeploy our available capital into new investments and initiatives;
|
•
|
our ability to scale our platform and systems, particularly with respect to our new initiatives;
|
•
|
interest rate volatility, changes in credit spreads, and changes in liquidity in the market for real estate securities and loans;
|
•
|
changes in the demand from investors for residential mortgages and investments, and our ability to distribute residential mortgages through our whole-loan distribution channel;
|
•
|
our ability to finance our investments in securities and our acquisition of residential mortgages with short-term debt;
|
•
|
changes in the values of assets we own;
|
•
|
general economic trends, the performance of the housing, real estate, mortgage, credit, and broader financial markets, and their effects on the prices of earning assets and the credit status of borrowers;
|
•
|
federal and state legislative and regulatory developments, and the actions of governmental authorities, including the new U.S. presidential administration, and in particular those affecting the mortgage industry or our business (including, but not limited to, the Federal Housing Finance Agency’s rules relating to FHLB membership requirements and the implications for our captive insurance subsidiary’s membership in the FHLB);
|
•
|
state and/or local regulations related to rent control or rent stabilization impacting single-family rental and multifamily properties;
|
•
|
strategic business and capital deployment decisions we make;
|
•
|
our recent acquisitions of business purpose lending origination platforms;
|
•
|
developments related to the fixed income and mortgage finance markets and the Federal Reserve’s statements regarding its future open market activity and monetary policy;
|
•
|
our exposure to credit risk and the timing of credit losses within our portfolio;
|
•
|
the concentration of the credit risks we are exposed to, including due to the structure of assets we hold and the geographical concentration of real estate underlying assets we own;
|
•
|
our exposure to adjustable-rate mortgage loans;
|
•
|
the efficacy and expense of our efforts to manage or hedge credit risk, interest rate risk, and other financial and operational risks;
|
•
|
changes in credit ratings on assets we own and changes in the rating agencies’ credit rating methodologies;
|
•
|
changes in interest rates; changes in mortgage prepayment rates;
|
•
|
changes in liquidity in the market for real estate securities and loans;
|
•
|
our ability to finance the acquisition of real estate-related assets with short-term debt;
|
•
|
the ability of counterparties to satisfy their obligations to us;
|
•
|
our involvement in securitization transactions, the profitability of those transactions, and the risks we are exposed to in engaging in securitization transactions;
|
•
|
exposure to claims and litigation, including litigation arising from our involvement in securitization transactions;
|
•
|
ongoing litigation against various trustees of RMBS transactions;
|
•
|
whether we have sufficient liquid assets to meet short-term needs;
|
•
|
our ability to successfully compete and retain or attract key personnel;
|
•
|
our ability to adapt our business model and strategies to changing circumstances;
|
•
|
changes in our investment, financing, and hedging strategies and new risks we may be exposed to if we expand our business activities;
|
•
|
our exposure to a disruption or breach of the security of our technology infrastructure and systems;
|
•
|
exposure to environmental liabilities;
|
•
|
our failure to comply with applicable laws and regulations;
|
•
|
our failure to maintain appropriate internal controls over financial reporting and disclosure controls and procedures;
|
•
|
the impact on our reputation that could result from our actions or omissions or from those of others;
|
•
|
changes in accounting principles and tax rules;
|
•
|
our ability to maintain our status as a REIT for tax purposes;
|
•
|
limitations imposed on our business due to our REIT status and our status as exempt from registration under the Investment Company Act of 1940;
|
•
|
decisions about raising, managing, and distributing capital; and
|
•
|
other factors not presently identified.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||
(In Thousands, except per Share Data)
|
|
September 30, 2019
|
|
September 30, 2019
|
||||
Net income
|
|
$
|
34,310
|
|
|
$
|
120,040
|
|
Net income per diluted common share
|
|
$
|
0.31
|
|
|
$
|
1.09
|
|
Annualized GAAP return on equity
|
|
9
|
%
|
|
10
|
%
|
||
Book value per share
|
|
$
|
15.92
|
|
|
$
|
15.92
|
|
Economic return on book value (1)
|
|
1.3
|
%
|
|
5.9
|
%
|
||
REIT taxable income per share
|
|
$
|
0.34
|
|
|
$
|
0.89
|
|
Dividends per share
|
|
$
|
0.30
|
|
|
$
|
0.90
|
|
(1)
|
Economic return on book value is based on the periodic change in GAAP book value per common share plus dividends declared per common share during the period.
|
•
|
During the third quarter of 2019, we accelerated our pace of portfolio optimization and raised equity capital in early September, which together generated $476 million of available capital. These activities resulted in increased levels of realized gains, but dampened growth in net interest income, as our average undeployed capital increased. While lower benchmark interest rates generally persisted throughout the quarter, helping maintain residential loan purchase volume levels in our mortgage banking business, we experienced higher prepayments in our investment portfolio, which negatively impacted investment fair value changes. Additionally, mortgage banking margins were negatively impacted by lower benchmark interest rates, which impacted execution on securitizations we completed during the quarter. Execution improved for our most recent Sequoia securitization, completed in October. Despite the rate volatility, overall we continued to see strong demand for yield, resulting in positive overall investment fair value changes for the quarter.
|
•
|
We issued $228 million of common stock and $201 million of 5.75% 6-year exchangeable debt in the third quarter.
|
•
|
We deployed $152 million of capital in the third quarter, including $55 million into proprietary investments and $98 million into third-party investments.
|
•
|
Our 5 Arches platform originated $162 million of business purpose mortgage loans in the third quarter, including $125 million in funded loans and $37 million in associated funding commitments.
|
•
|
Residential jumbo loan purchase commitments were $1.70 billion, and we purchased $1.48 billion of residential jumbo loans during the third quarter of 2019.
|
•
|
During the third quarter, we completed one Sequoia securitization of Select residential jumbo loans totaling $376 million and two Sequoia securitizations of Choice residential jumbo loans totaling $727 million. Additionally, we sold $470 million of residential jumbo loans to third parties.
|
•
|
Our book value per share declined $0.09 per share to $15.92 per share during the third quarter of 2019. While our earnings covered our dividend during the third quarter, this decrease was primarily driven by a $0.11 per share decline in the value of derivatives hedging our long-term debt, which were impacted by the decline in benchmark rates during the third quarter.
|
•
|
In October 2019, we completed the acquisition of CoreVest, an originator of business purpose residential loans. The acquisition included CoreVest's operating platform and approximately $900 million of business purpose loans and securities, a significant portion of which we will hold for investment in our investment portfolio. Total transaction consideration was $492 million of cash and Redwood common stock, net of in-place financing on certain of the financial assets.
|
At September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|||||||||
(Dollars in Thousands)
|
|
Fair Value
|
|
Collateralized Short-Term Debt
|
|
Collateralized Long-Term Debt
|
|
Allocated Capital
|
|
% of Total Capital
|
|||||||||
Investment portfolio
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Residential loans (1)
|
|
$
|
2,419,937
|
|
|
$
|
—
|
|
|
$
|
(1,944,640
|
)
|
|
$
|
475,297
|
|
|
19
|
%
|
Business purpose residential loans
|
|
225,601
|
|
|
(139,476
|
)
|
|
(14,265
|
)
|
|
71,860
|
|
|
3
|
%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Securities portfolio
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Sequoia residential securities (2)
|
|
505,464
|
|
|
(155,185
|
)
|
|
(184,664
|
)
|
|
165,615
|
|
|
6
|
%
|
||||
Agency CRT securities
|
|
140,881
|
|
|
(8,082
|
)
|
|
—
|
|
|
132,799
|
|
|
5
|
%
|
||||
Multifamily securities (3)
|
|
683,414
|
|
|
(516,552
|
)
|
|
—
|
|
|
166,862
|
|
|
7
|
%
|
||||
Re-performing residential loan securities (4)
|
|
626,594
|
|
|
(315,030
|
)
|
|
(41,094
|
)
|
|
270,470
|
|
|
11
|
%
|
||||
Third-party residential securities
|
|
254,158
|
|
|
(162,797
|
)
|
|
—
|
|
|
91,361
|
|
|
4
|
%
|
||||
Total securities portfolio
|
|
2,210,511
|
|
|
(1,157,646
|
)
|
|
(225,758
|
)
|
|
827,107
|
|
|
32
|
%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Other investments
|
|
200,872
|
|
|
—
|
|
|
—
|
|
|
200,872
|
|
|
8
|
%
|
||||
Other assets/(other liabilities)
|
|
|
|
|
|
|
|
(73,548
|
)
|
|
(3
|
)%
|
|||||||
Cash and liquidity capital
|
|
|
|
|
|
|
|
868,013
|
|
|
N/A
|
|
|||||||
Total investment portfolio
|
|
$
|
5,056,921
|
|
|
$
|
(1,297,122
|
)
|
|
$
|
(2,184,663
|
)
|
|
2,369,602
|
|
|
93
|
%
|
|
Residential
|
|
|
|
|
|
|
|
130,000
|
|
|
5
|
%
|
|||||||
Business purpose
|
|
|
|
|
|
|
|
54,516
|
|
|
2
|
%
|
|||||||
Total mortgage banking
|
|
|
|
|
|
|
|
184,516
|
|
|
7
|
%
|
|||||||
Total
|
|
|
|
|
|
|
|
$
|
2,554,118
|
|
|
100
|
%
|
(1)
|
Includes $43 million of FHLB stock, $34 million of cash and cash equivalents, and $77 million of restricted cash.
|
(2)
|
Sequoia residential securities presented above includes $257 million of securities retained from our consolidated Sequoia Choice securitizations. For GAAP purposes we consolidated $2.62 billion of residential loans and $2.36 billion of non-recourse ABS debt associated with these retained securities.
|
(3)
|
Multifamily securities presented above includes $214 million of subordinate investments in the Freddie Mac K-Series securitizations. For GAAP purposes we consolidated $3.79 billion of multifamily loans and $3.58 billion of non-recourse ABS debt associated with these securities.
|
(4)
|
Re-performing residential loan securities presented above represent third-party securities collateralized by seasoned re-performing, and to a lesser extent, non-performing residential loans and includes $454 million of subordinate and mezzanine investments in the Freddie Mac SLST securitizations. For GAAP purposes we consolidated $2.44 billion of residential loans and $1.99 billion of non-recourse ABS debt associated with these securities.
|
|
|
Three Months Ended September 30,
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
||||||||||||||||
(In Thousands, except per Share Data)
|
|
2019
|
|
2018
|
|
Change
|
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Net Interest Income
|
|
$
|
33,513
|
|
|
$
|
35,046
|
|
|
$
|
(1,533
|
)
|
|
|
$
|
97,600
|
|
|
$
|
104,914
|
|
|
$
|
(7,314
|
)
|
Non-interest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage banking activities, net
|
|
9,515
|
|
|
11,224
|
|
|
(1,709
|
)
|
|
|
40,984
|
|
|
48,396
|
|
|
(7,412
|
)
|
||||||
Investment fair value changes, net
|
|
11,444
|
|
|
10,332
|
|
|
1,112
|
|
|
|
34,741
|
|
|
12,830
|
|
|
21,911
|
|
||||||
Other income, net
|
|
1,825
|
|
|
3,453
|
|
|
(1,628
|
)
|
|
|
7,819
|
|
|
8,893
|
|
|
(1,074
|
)
|
||||||
Realized gains, net
|
|
4,714
|
|
|
7,275
|
|
|
(2,561
|
)
|
|
|
18,227
|
|
|
21,352
|
|
|
(3,125
|
)
|
||||||
Total non-interest income, net
|
|
27,498
|
|
|
32,284
|
|
|
(4,786
|
)
|
|
|
101,771
|
|
|
91,471
|
|
|
10,300
|
|
||||||
Operating expenses
|
|
(26,815
|
)
|
|
(21,490
|
)
|
|
(5,325
|
)
|
|
|
(76,229
|
)
|
|
(63,529
|
)
|
|
(12,700
|
)
|
||||||
Net income before income taxes
|
|
34,196
|
|
|
45,840
|
|
|
(11,644
|
)
|
|
|
123,142
|
|
|
132,856
|
|
|
(9,714
|
)
|
||||||
Benefit from (provision for) income taxes
|
|
114
|
|
|
(4,919
|
)
|
|
5,033
|
|
|
|
(3,102
|
)
|
|
(12,343
|
)
|
|
9,241
|
|
||||||
Net Income
|
|
$
|
34,310
|
|
|
$
|
40,921
|
|
|
$
|
(6,611
|
)
|
|
|
$
|
120,040
|
|
|
$
|
120,513
|
|
|
$
|
(473
|
)
|
Diluted earnings per common share
|
|
$
|
0.31
|
|
|
$
|
0.42
|
|
|
$
|
(0.11
|
)
|
|
|
$
|
1.09
|
|
|
$
|
1.30
|
|
|
$
|
(0.21
|
)
|
|
|
Three Months Ended September 30,
|
||||||||||||||||||||
|
|
2019
|
|
2018
|
||||||||||||||||||
(Dollars in Thousands)
|
|
Interest Income/ (Expense)
|
|
Average
Balance (1)
|
|
Yield
|
|
Interest Income/ (Expense)
|
|
Average
Balance (1)
|
|
Yield
|
||||||||||
Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Residential loans, held-for-sale
|
|
$
|
10,583
|
|
|
$
|
973,917
|
|
|
4.3
|
%
|
|
$
|
13,867
|
|
|
$
|
1,193,919
|
|
|
4.6
|
%
|
Residential loans - HFI at Redwood (2)
|
|
22,809
|
|
|
2,325,304
|
|
|
3.9
|
%
|
|
23,326
|
|
|
2,311,347
|
|
|
4.0
|
%
|
||||
Residential loans - HFI at Legacy Sequoia (2)
|
|
4,293
|
|
|
436,963
|
|
|
3.9
|
%
|
|
5,172
|
|
|
565,008
|
|
|
3.7
|
%
|
||||
Residential loans - HFI at Sequoia Choice (2)
|
|
27,555
|
|
|
2,320,989
|
|
|
4.7
|
%
|
|
20,900
|
|
|
1,753,014
|
|
|
4.8
|
%
|
||||
Residential loans - HFI at Freddie Mac SLST (2)
|
|
11,830
|
|
|
1,278,036
|
|
|
3.7
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
||||
Business purpose residential loans
|
|
5,446
|
|
|
296,037
|
|
|
7.4
|
%
|
|
1,445
|
|
|
65,186
|
|
|
8.9
|
%
|
||||
Multifamily loans - HFI at Freddie Mac K-Series
|
|
36,829
|
|
|
3,767,847
|
|
|
3.9
|
%
|
|
5,578
|
|
|
565,793
|
|
|
3.9
|
%
|
||||
Trading securities
|
|
17,877
|
|
|
1,168,952
|
|
|
6.1
|
%
|
|
18,960
|
|
|
1,091,045
|
|
|
7.0
|
%
|
||||
Available-for-sale securities
|
|
5,170
|
|
|
174,530
|
|
|
11.8
|
%
|
|
8,103
|
|
|
281,819
|
|
|
11.5
|
%
|
||||
Other interest income
|
|
7,725
|
|
|
612,554
|
|
|
5.0
|
%
|
|
2,046
|
|
|
202,029
|
|
|
4.1
|
%
|
||||
Total interest income
|
|
150,117
|
|
|
13,355,129
|
|
|
4.5
|
%
|
|
99,397
|
|
|
8,029,160
|
|
|
5.0
|
%
|
||||
Interest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Short-term debt facilities
|
|
(18,209
|
)
|
|
1,974,174
|
|
|
(3.7
|
)%
|
|
(14,146
|
)
|
|
1,567,364
|
|
|
(3.6
|
)%
|
||||
Short-term debt - servicer advance financing
|
|
(2,891
|
)
|
|
212,988
|
|
|
(5.4
|
)%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
||||
Short-term debt - convertible notes, net
|
|
(3,139
|
)
|
|
200,445
|
|
|
(6.3
|
)%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
||||
ABS issued - Legacy Sequoia (2)
|
|
(3,452
|
)
|
|
428,101
|
|
|
(3.2
|
)%
|
|
(4,257
|
)
|
|
555,511
|
|
|
(3.1
|
)%
|
||||
ABS issued - Sequoia Choice (2)
|
|
(23,576
|
)
|
|
2,085,622
|
|
|
(4.5
|
)%
|
|
(18,019
|
)
|
|
1,589,553
|
|
|
(4.5
|
)%
|
||||
ABS issued - Freddie Mac SLST (2)
|
|
(8,709
|
)
|
|
1,023,046
|
|
|
(3.4
|
)%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
||||
ABS issued - Freddie Mac K-Series
|
|
(35,328
|
)
|
|
3,559,970
|
|
|
(4.0
|
)%
|
|
(5,145
|
)
|
|
526,303
|
|
|
(3.9
|
)%
|
||||
Long-term debt - FHLBC
|
|
(12,311
|
)
|
|
1,999,999
|
|
|
(2.5
|
)%
|
|
(11,080
|
)
|
|
1,999,999
|
|
|
(2.2
|
)%
|
||||
Long-term debt - other
|
|
(8,989
|
)
|
|
602,434
|
|
|
(6.0
|
)%
|
|
(11,704
|
)
|
|
770,730
|
|
|
(6.1
|
)%
|
||||
Total interest expense
|
|
(116,604
|
)
|
|
12,086,779
|
|
|
(3.9
|
)%
|
|
(64,351
|
)
|
|
7,009,460
|
|
|
(3.7
|
)%
|
||||
Net Interest Income
|
|
$
|
33,513
|
|
|
|
|
|
|
$
|
35,046
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||
|
|
2019
|
|
2018
|
||||||||||||||||||
(Dollars in Thousands)
|
|
Interest Income/ (Expense)
|
|
Average
Balance (1)
|
|
Yield
|
|
Interest Income/ (Expense)
|
|
Average
Balance (1)
|
|
Yield
|
||||||||||
Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Residential loans, held-for-sale
|
|
$
|
30,056
|
|
|
$
|
886,902
|
|
|
4.5
|
%
|
|
$
|
39,399
|
|
|
$
|
1,174,174
|
|
|
4.5
|
%
|
Residential loans - HFI at Redwood (2)
|
|
71,089
|
|
|
2,368,340
|
|
|
4.0
|
%
|
|
70,643
|
|
|
2,350,322
|
|
|
4.0
|
%
|
||||
Residential loans - HFI at Legacy Sequoia (2)
|
|
13,916
|
|
|
466,580
|
|
|
4.0
|
%
|
|
14,998
|
|
|
593,382
|
|
|
3.4
|
%
|
||||
Residential loans - HFI at Sequoia Choice (2)
|
|
80,026
|
|
|
2,227,573
|
|
|
4.8
|
%
|
|
43,970
|
|
|
1,234,897
|
|
|
4.7
|
%
|
||||
Residential loans - HFI at Freddie Mac SLST (2)
|
|
35,221
|
|
|
1,238,334
|
|
|
3.8
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
||||
Business purpose residential loans
|
|
12,231
|
|
|
219,132
|
|
|
7.4
|
%
|
|
1,445
|
|
|
21,967
|
|
|
8.8
|
%
|
||||
Multifamily loans - HFI at Freddie Mac K-Series
|
|
94,134
|
|
|
3,191,093
|
|
|
3.9
|
%
|
|
5,578
|
|
|
190,670
|
|
|
3.9
|
%
|
||||
Trading securities
|
|
56,138
|
|
|
1,188,563
|
|
|
6.3
|
%
|
|
52,494
|
|
|
989,168
|
|
|
7.1
|
%
|
||||
Available-for-sale securities
|
|
16,376
|
|
|
189,881
|
|
|
11.5
|
%
|
|
26,560
|
|
|
319,240
|
|
|
11.1
|
%
|
||||
Other interest income
|
|
20,513
|
|
|
582,795
|
|
|
4.7
|
%
|
|
3,905
|
|
|
205,297
|
|
|
2.5
|
%
|
||||
Total interest income
|
|
429,700
|
|
|
12,559,193
|
|
|
4.6
|
%
|
|
258,992
|
|
|
7,079,117
|
|
|
4.9
|
%
|
||||
Interest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Short-term debt facilities
|
|
(51,424
|
)
|
|
1,814,088
|
|
|
(3.8
|
)%
|
|
(37,238
|
)
|
|
1,472,436
|
|
|
(3.4
|
)%
|
||||
Short-term debt - servicer advance financing
|
|
(9,905
|
)
|
|
239,218
|
|
|
(5.5
|
)%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
||||
Short-term debt - convertible notes, net
|
|
(9,403
|
)
|
|
200,135
|
|
|
(6.3
|
)%
|
|
(3,518
|
)
|
|
95,375
|
|
|
(4.9
|
)%
|
||||
ABS issued - Legacy Sequoia (2)
|
|
(11,548
|
)
|
|
458,173
|
|
|
(3.4
|
)%
|
|
(12,324
|
)
|
|
583,588
|
|
|
(2.8
|
)%
|
||||
ABS issued - Sequoia Choice (2)
|
|
(68,823
|
)
|
|
2,018,406
|
|
|
(4.5
|
)%
|
|
(37,702
|
)
|
|
1,119,373
|
|
|
(4.5
|
)%
|
||||
ABS issued - Freddie Mac SLST (2)
|
|
(26,014
|
)
|
|
997,460
|
|
|
(3.5
|
)%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
||||
ABS issued - Freddie Mac K-Series
|
|
(90,088
|
)
|
|
3,012,017
|
|
|
(4.0
|
)%
|
|
(5,145
|
)
|
|
177,362
|
|
|
(3.9
|
)%
|
||||
Long-term debt - FHLBC
|
|
(38,728
|
)
|
|
1,999,999
|
|
|
(2.6
|
)%
|
|
(28,939
|
)
|
|
1,999,999
|
|
|
(1.9
|
)%
|
||||
Long-term debt - other
|
|
(26,167
|
)
|
|
582,753
|
|
|
(6.0
|
)%
|
|
(29,212
|
)
|
|
645,681
|
|
|
(6.0
|
)%
|
||||
Total interest expense
|
|
(332,100
|
)
|
|
11,322,249
|
|
|
(3.9
|
)%
|
|
(154,078
|
)
|
|
6,093,814
|
|
|
(3.4
|
)%
|
||||
Net Interest Income
|
|
$
|
97,600
|
|
|
|
|
|
|
$
|
104,914
|
|
|
|
|
|
(1)
|
Average balances for residential loans held-for-sale, residential loans held-for-investment, business purpose residential loans, multifamily loans held-for-investment, and trading securities are calculated based upon carrying values, which represent estimated fair values. Average balances for available-for-sale securities and debt are calculated based upon amortized historical cost, except for ABS issued, which is based upon fair value.
|
(2)
|
Interest income from residential loans held-for-investment ("HFI") at Redwood exclude loans HFI at consolidated Sequoia or Freddie Mac SLST entities. Interest income from residential loans - HFI at Legacy Sequoia and the interest expense from ABS issued - Legacy Sequoia represent activity from our consolidated Legacy Sequoia entities. Interest income from residential loans - HFI at Sequoia Choice and the interest expense from ABS issued - Sequoia Choice represent activity from our consolidated Sequoia Choice entities. Interest income from residential loans - HFI at Freddie Mac SLST and the interest expense from ABS issued - Freddie Mac SLST represent activity from our consolidated Freddie Mac SLST entities.
|
|
|
Three Months Ended September 30,
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
||||||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
Change
|
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Net Interest Income by Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Investment Portfolio
|
|
$
|
38,375
|
|
|
$
|
38,704
|
|
|
$
|
(329
|
)
|
|
|
$
|
114,076
|
|
|
$
|
115,163
|
|
|
$
|
(1,087
|
)
|
Mortgage Banking
|
|
5,834
|
|
|
6,890
|
|
|
(1,056
|
)
|
|
|
15,404
|
|
|
19,105
|
|
|
(3,701
|
)
|
||||||
Corporate/Other
|
|
(10,696
|
)
|
|
(10,548
|
)
|
|
(148
|
)
|
|
|
(31,880
|
)
|
|
(29,354
|
)
|
|
(2,526
|
)
|
||||||
Net Interest Income
|
|
$
|
33,513
|
|
|
$
|
35,046
|
|
|
$
|
(1,533
|
)
|
|
|
$
|
97,600
|
|
|
$
|
104,914
|
|
|
$
|
(7,314
|
)
|
September 30, 2019
|
|
Residential Loans Held-for-Sale
|
|
Single-Family Rental Loans
|
|
Residential Bridge Loans
|
|
Residential
Securities
|
||||
Asset yield
|
|
4.06
|
%
|
|
5.48
|
%
|
|
8.97
|
%
|
|
4.06
|
%
|
Short-term debt yield
|
|
3.51
|
%
|
|
4.30
|
%
|
|
4.54
|
%
|
|
3.11
|
%
|
Net Spread
|
|
0.55
|
%
|
|
1.18
|
%
|
|
4.43
|
%
|
|
0.95
|
%
|
|
|
Three Months Ended September 30,
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
||||||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
Change
|
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Segment Contribution from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Investment Portfolio
|
|
$
|
55,018
|
|
|
$
|
54,380
|
|
|
$
|
638
|
|
|
|
$
|
166,023
|
|
|
$
|
147,663
|
|
|
$
|
18,360
|
|
Mortgage Banking
|
|
3,393
|
|
|
9,465
|
|
|
(6,072
|
)
|
|
|
22,456
|
|
|
39,075
|
|
|
(16,619
|
)
|
||||||
Corporate/Other
|
|
(24,101
|
)
|
|
(22,924
|
)
|
|
(1,177
|
)
|
|
|
(68,439
|
)
|
|
(66,225
|
)
|
|
(2,214
|
)
|
||||||
Net Income
|
|
$
|
34,310
|
|
|
$
|
40,921
|
|
|
$
|
(6,611
|
)
|
|
|
$
|
120,040
|
|
|
$
|
120,513
|
|
|
$
|
(473
|
)
|
|
|
Three Months Ended September 30,
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
||||||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
Change
|
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Interest income
|
|
$
|
132,894
|
|
|
$
|
79,556
|
|
|
$
|
53,338
|
|
|
|
$
|
380,394
|
|
|
$
|
202,882
|
|
|
$
|
177,512
|
|
Interest expense
|
|
(94,519
|
)
|
|
(40,852
|
)
|
|
(53,667
|
)
|
|
|
(266,318
|
)
|
|
(87,719
|
)
|
|
(178,599
|
)
|
||||||
Net interest income
|
|
38,375
|
|
|
38,704
|
|
|
(329
|
)
|
|
|
114,076
|
|
|
115,163
|
|
|
(1,087
|
)
|
||||||
Non-interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Investment fair value changes, net
|
|
11,896
|
|
|
10,566
|
|
|
1,330
|
|
|
|
35,749
|
|
|
13,756
|
|
|
21,993
|
|
||||||
Other income, net
|
|
2,313
|
|
|
3,334
|
|
|
(1,021
|
)
|
|
|
6,408
|
|
|
8,774
|
|
|
(2,366
|
)
|
||||||
Realized gains, net
|
|
4,714
|
|
|
7,275
|
|
|
(2,561
|
)
|
|
|
18,227
|
|
|
21,352
|
|
|
(3,125
|
)
|
||||||
Total non-interest income, net
|
|
18,923
|
|
|
21,175
|
|
|
(2,252
|
)
|
|
|
60,384
|
|
|
43,882
|
|
|
16,502
|
|
||||||
Direct operating expenses
|
|
(2,191
|
)
|
|
(2,659
|
)
|
|
468
|
|
|
|
(7,110
|
)
|
|
(6,524
|
)
|
|
(586
|
)
|
||||||
Segment contribution before income taxes
|
|
55,107
|
|
|
57,220
|
|
|
(2,113
|
)
|
|
|
167,350
|
|
|
152,521
|
|
|
14,829
|
|
||||||
Provision for income taxes
|
|
(89
|
)
|
|
(2,840
|
)
|
|
2,751
|
|
|
|
(1,327
|
)
|
|
(4,858
|
)
|
|
3,531
|
|
||||||
Total Segment Contribution
|
|
$
|
55,018
|
|
|
$
|
54,380
|
|
|
$
|
638
|
|
|
|
$
|
166,023
|
|
|
$
|
147,663
|
|
|
$
|
18,360
|
|
(In Thousands)
|
|
September 30, 2019
|
|
December 31, 2018
|
|
Change
|
||||||
Residential loans held-for-investment at Redwood
|
|
$
|
2,267,218
|
|
|
$
|
2,383,932
|
|
|
$
|
(116,714
|
)
|
Residential bridge loans held-for-investment
|
|
206,890
|
|
|
112,798
|
|
|
94,092
|
|
|||
Single-family rental loans held-for-investment
|
|
18,711
|
|
|
—
|
|
|
18,711
|
|
|||
Residential securities
|
|
816,057
|
|
|
1,023,415
|
|
|
(207,358
|
)
|
|||
Multifamily securities
|
|
469,369
|
|
|
429,079
|
|
|
40,290
|
|
|||
Securities retained from consolidated Sequoia Choice entities (1)
|
|
257,205
|
|
|
194,372
|
|
|
62,833
|
|
|||
Securities issued by consolidated Freddie Mac SLST entities (2)
|
|
453,750
|
|
|
228,921
|
|
|
224,829
|
|
|||
Securities issued by consolidated Freddie Mac K-Series entities (3)
|
|
214,045
|
|
|
125,523
|
|
|
88,522
|
|
|||
Other investments
|
|
346,136
|
|
|
427,764
|
|
|
(81,628
|
)
|
|||
Other assets
|
|
371,918
|
|
|
270,356
|
|
|
101,562
|
|
|||
Economic Assets at Investment Portfolio
|
|
$
|
5,421,299
|
|
|
$
|
5,196,160
|
|
|
$
|
225,139
|
|
(1)
|
Our investment in the consolidated Sequoia Choice entities at September 30, 2019 and December 31, 2018 represents $2.62 billion and $2.08 billion of loans, respectively, offset by $2.36 billion and $1.89 billion of ABS issued, respectively.
|
(2)
|
Our investment in the consolidated Freddie Mac SLST entities at September 30, 2019 and December 31, 2018 represents $2.44 billion and $1.22 billion of loans, respectively, offset by $1.99 billion and $0.99 billion of ABS issued, respectively.
|
(3)
|
Our investment in the consolidated Freddie Mac K-Series entities at September 30, 2019 and December 31, 2018 represents $3.79 billion and $2.14 billion of loans, respectively, offset by $3.58 billion and $2.02 billion of ABS issued, respectively.
|
|
|
Three Months Ended September 30,
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
||||||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
Change
|
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Net interest income from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Residential securities
|
|
$
|
12,200
|
|
|
$
|
19,114
|
|
|
$
|
(6,914
|
)
|
|
|
$
|
39,657
|
|
|
$
|
58,030
|
|
|
$
|
(18,373
|
)
|
Multifamily securities
|
|
732
|
|
|
1,775
|
|
|
(1,043
|
)
|
|
|
3,706
|
|
|
5,526
|
|
|
(1,820
|
)
|
||||||
HFI residential and single-family rental loans at Redwood
|
|
10,558
|
|
|
12,247
|
|
|
(1,689
|
)
|
|
|
32,421
|
|
|
41,704
|
|
|
(9,283
|
)
|
||||||
HFI residential loans at Sequoia Choice
|
|
3,979
|
|
|
2,881
|
|
|
1,098
|
|
|
|
11,203
|
|
|
6,268
|
|
|
4,935
|
|
||||||
HFI residential bridge loans
|
|
2,363
|
|
|
904
|
|
|
1,459
|
|
|
|
5,558
|
|
|
904
|
|
|
4,654
|
|
||||||
HFI residential loans at Freddie Mac SLST
|
|
3,121
|
|
|
—
|
|
|
3,121
|
|
|
|
9,207
|
|
|
—
|
|
|
9,207
|
|
||||||
HFI multifamily loans at Freddie Mac K-Series
|
|
1,501
|
|
|
433
|
|
|
1,068
|
|
|
|
4,046
|
|
|
433
|
|
|
3,613
|
|
||||||
Other interest income
|
|
3,921
|
|
|
1,350
|
|
|
2,571
|
|
|
|
8,278
|
|
|
2,298
|
|
|
5,980
|
|
||||||
NII from Investment Portfolio
|
|
$
|
38,375
|
|
|
$
|
38,704
|
|
|
$
|
(329
|
)
|
|
|
$
|
114,076
|
|
|
$
|
115,163
|
|
|
$
|
(1,087
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Supplemental information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Hedge interest income (expense), net
|
|
$
|
(999
|
)
|
|
$
|
561
|
|
|
$
|
(1,560
|
)
|
|
|
$
|
3,139
|
|
|
$
|
(2,297
|
)
|
|
$
|
5,436
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
||||||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
Change
|
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Market valuation changes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Residential loans held-for-investment at Redwood
|
|
$
|
(9,337
|
)
|
|
$
|
(2,305
|
)
|
|
$
|
(7,032
|
)
|
|
|
$
|
(19,381
|
)
|
|
$
|
(4,593
|
)
|
|
$
|
(14,788
|
)
|
Single-family rental loans held-for-investment
|
|
22
|
|
|
—
|
|
|
22
|
|
|
|
22
|
|
|
—
|
|
|
22
|
|
||||||
Residential bridge loans held-for-investment
|
|
(742
|
)
|
|
52
|
|
|
(794
|
)
|
|
|
(1,363
|
)
|
|
52
|
|
|
(1,415
|
)
|
||||||
Net investments in Sequoia Choice entities (1)
|
|
2,722
|
|
|
(942
|
)
|
|
3,664
|
|
|
|
8,866
|
|
|
44
|
|
|
8,822
|
|
||||||
Net investments in Freddie Mac SLST entities (1)
|
|
17,300
|
|
|
—
|
|
|
17,300
|
|
|
|
31,702
|
|
|
—
|
|
|
31,702
|
|
||||||
Net investments in Freddie Mac K-Series entities (1)
|
|
7,445
|
|
|
511
|
|
|
6,934
|
|
|
|
13,810
|
|
|
511
|
|
|
13,299
|
|
||||||
Residential trading securities
|
|
(4,763
|
)
|
|
8,086
|
|
|
(12,849
|
)
|
|
|
(8,930
|
)
|
|
9,232
|
|
|
(18,162
|
)
|
||||||
Multifamily trading securities
|
|
653
|
|
|
4,762
|
|
|
(4,109
|
)
|
|
|
7,628
|
|
|
11,371
|
|
|
(3,743
|
)
|
||||||
Servicer advance investments
|
|
1,585
|
|
|
—
|
|
|
1,585
|
|
|
|
3,025
|
|
|
—
|
|
|
3,025
|
|
||||||
Excess MSRs
|
|
(1,635
|
)
|
|
—
|
|
|
(1,635
|
)
|
|
|
(2,137
|
)
|
|
—
|
|
|
(2,137
|
)
|
||||||
Shared home appreciation options
|
|
29
|
|
|
—
|
|
|
29
|
|
|
|
29
|
|
|
—
|
|
|
29
|
|
||||||
REO
|
|
(331
|
)
|
|
—
|
|
|
(331
|
)
|
|
|
(470
|
)
|
|
—
|
|
|
(470
|
)
|
||||||
Hedge interest income (expense), net
|
|
(999
|
)
|
|
561
|
|
|
(1,560
|
)
|
|
|
3,139
|
|
|
(2,298
|
)
|
|
5,437
|
|
||||||
Other valuation changes
|
|
(53
|
)
|
|
(159
|
)
|
|
106
|
|
|
|
(191
|
)
|
|
(563
|
)
|
|
372
|
|
||||||
Investment Fair Value Changes, Net
|
|
$
|
11,896
|
|
|
$
|
10,566
|
|
|
$
|
1,330
|
|
|
|
$
|
35,749
|
|
|
$
|
13,756
|
|
|
$
|
21,993
|
|
(1)
|
Includes changes in fair value of the loans held-for-investment and the ABS issued at the entities, which netted together represent the change in value of our investments (senior and subordinate securities) at the consolidated VIEs.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
MSR income, net
|
|
$
|
431
|
|
|
$
|
1,967
|
|
|
$
|
2,342
|
|
|
$
|
4,797
|
|
Risk share income
|
|
905
|
|
|
907
|
|
|
2,351
|
|
|
2,706
|
|
||||
FHLBC capital stock dividend
|
|
541
|
|
|
460
|
|
|
1,623
|
|
|
1,271
|
|
||||
Equity investment income
|
|
560
|
|
|
—
|
|
|
464
|
|
|
—
|
|
||||
Other
|
|
(124
|
)
|
|
—
|
|
|
(372
|
)
|
|
—
|
|
||||
Other Income, Net from Investment Portfolio
|
|
$
|
2,313
|
|
|
$
|
3,334
|
|
|
$
|
6,408
|
|
|
$
|
8,774
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||
(In Thousands)
|
|
September 30, 2019
|
|
September 30, 2019
|
||||
Fair value at beginning of period
|
|
$
|
2,386,883
|
|
|
$
|
2,383,932
|
|
Acquisitions
|
|
—
|
|
|
39,269
|
|
||
Sales
|
|
(6,641
|
)
|
|
(9,421
|
)
|
||
Transfers between portfolios (1)
|
|
8,431
|
|
|
68,825
|
|
||
Principal repayments
|
|
(129,122
|
)
|
|
(286,710
|
)
|
||
Changes in fair value, net
|
|
7,667
|
|
|
71,323
|
|
||
Fair Value at End of Period
|
|
$
|
2,267,218
|
|
|
$
|
2,267,218
|
|
(1)
|
Represents the net transfers of loans into our Investment Portfolio segment from our Mortgage Banking segment and their reclassification from held-for-sale to held-for-investment.
|
September 30, 2019
|
|
|
|
|
|||
(Dollars in Thousands)
|
|
Principal Balance
|
|
Weighted Average Coupon
|
|||
Fixed - 30 year
|
|
$
|
1,888,486
|
|
|
4.16
|
%
|
Fixed - 15, 20, & 25 year
|
|
56,113
|
|
|
3.70
|
%
|
|
Hybrid
|
|
251,067
|
|
|
4.19
|
%
|
|
Total Outstanding Principal
|
|
$
|
2,195,666
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||
(In Thousands)
|
|
September 30, 2019
|
|
September 30, 2019
|
||||
Fair value at beginning of period
|
|
$
|
159,353
|
|
|
$
|
112,798
|
|
Originations
|
|
90,583
|
|
|
218,770
|
|
||
Acquisitions
|
|
—
|
|
|
10,295
|
|
||
Sales
|
|
(3,308
|
)
|
|
(46,857
|
)
|
||
Transfers to REO
|
|
—
|
|
|
(4,995
|
)
|
||
Principal repayments
|
|
(40,006
|
)
|
|
(83,866
|
)
|
||
Changes in fair value, net
|
|
268
|
|
|
745
|
|
||
Fair Value at End of Period
|
|
$
|
206,890
|
|
|
$
|
206,890
|
|
Three Months Ended September 30, 2019
|
|
Residential
|
|
Multifamily
|
|
Total
|
||||||||||||||
(In Thousands)
|
|
Senior
|
|
Mezzanine
|
|
Subordinate
|
|
Mezzanine
|
|
|||||||||||
Beginning fair value
|
|
$
|
215,198
|
|
|
$
|
229,336
|
|
|
$
|
505,030
|
|
|
$
|
527,922
|
|
|
$
|
1,477,486
|
|
Transfers
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Sequoia securities
|
|
1,228
|
|
|
—
|
|
|
1,070
|
|
|
—
|
|
|
2,298
|
|
|||||
Third-party securities
|
|
14,372
|
|
|
9,352
|
|
|
25,772
|
|
|
16,373
|
|
|
65,869
|
|
|||||
Sales
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Sequoia securities
|
|
—
|
|
|
(9,208
|
)
|
|
—
|
|
|
—
|
|
|
(9,208
|
)
|
|||||
Third-party securities
|
|
(29,881
|
)
|
|
(44,042
|
)
|
|
(100,401
|
)
|
|
(75,803
|
)
|
|
(250,127
|
)
|
|||||
Gains on sales and calls, net
|
|
2,570
|
|
|
—
|
|
|
2,144
|
|
|
—
|
|
|
4,714
|
|
|||||
Effect of principal payments (1)
|
|
(8,579
|
)
|
|
(1,203
|
)
|
|
(2,164
|
)
|
|
(10,340
|
)
|
|
(22,286
|
)
|
|||||
Change in fair value, net
|
|
(11,817
|
)
|
|
4,934
|
|
|
12,346
|
|
|
11,217
|
|
|
16,680
|
|
|||||
Ending Fair Value (2)
|
|
$
|
183,091
|
|
|
$
|
189,169
|
|
|
$
|
443,797
|
|
|
$
|
469,369
|
|
|
$
|
1,285,426
|
|
Nine Months Ended September 30, 2019
|
|
Residential
|
|
Multifamily
|
|
Total
|
||||||||||||||
(In Thousands)
|
|
Senior
|
|
Mezzanine
|
|
Subordinate
|
|
Mezzanine
|
|
|||||||||||
Beginning fair value
|
|
$
|
246,285
|
|
|
$
|
218,147
|
|
|
$
|
558,983
|
|
|
$
|
429,079
|
|
|
$
|
1,452,494
|
|
Transfers
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,951
|
)
|
|
(4,951
|
)
|
|||||
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Sequoia securities
|
|
4,736
|
|
|
—
|
|
|
3,024
|
|
|
—
|
|
|
7,760
|
|
|||||
Third-party securities
|
|
45,063
|
|
|
70,169
|
|
|
70,209
|
|
|
124,398
|
|
|
309,839
|
|
|||||
Sales
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Sequoia securities
|
|
—
|
|
|
(31,325
|
)
|
|
(4,727
|
)
|
|
—
|
|
|
(36,052
|
)
|
|||||
Third-party securities
|
|
(68,661
|
)
|
|
(77,142
|
)
|
|
(215,680
|
)
|
|
(103,017
|
)
|
|
(464,500
|
)
|
|||||
Gains on sales and calls, net
|
|
8,319
|
|
|
3,059
|
|
|
6,849
|
|
|
—
|
|
|
18,227
|
|
|||||
Effect of principal payments (1)
|
|
(21,423
|
)
|
|
(9,596
|
)
|
|
(13,110
|
)
|
|
(15,492
|
)
|
|
(59,621
|
)
|
|||||
Change in fair value, net
|
|
(31,228
|
)
|
|
15,857
|
|
|
38,249
|
|
|
39,352
|
|
|
62,230
|
|
|||||
Ending Fair Value (2)
|
|
$
|
183,091
|
|
|
$
|
189,169
|
|
|
$
|
443,797
|
|
|
$
|
469,369
|
|
|
$
|
1,285,426
|
|
(1)
|
The effect of principal payments reflects the change in fair value due to principal payments, which is calculated as the cash principal received on a given security during the period multiplied by the prior quarter ending price or acquisition price for that security.
|
(2)
|
At September 30, 2019, excludes $257 million of securities retained from our consolidated Sequoia Choice securitizations as well as $454 million and $214 million of securities we owned that were issued by consolidated Freddie Mac SLST and Freddie Mac K-Series securitizations, respectively. For additional details on our Choice, Freddie Mac SLST, and multifamily loans, see the subsections titled "Residential Loans Held-for-Investment at Sequoia Choice Portfolio," "Residential Loans Held-for-Investment at Freddie Mac SLST Portfolio," and "Multifamily Loans Held-for-Investment at Freddie Mac K-Series Portfolio" that follow.
|
September 30, 2019
|
|
Real Estate Securities (1)
|
|
Repurchase Debt
|
|
Allocated Capital
|
|
Weighted Average
Price(2)
|
|
Financing Haircut(3)
|
|||||||||
(Dollars in Thousands, except Weighted Average Price)
|
|
|
|
|
|
||||||||||||||
Residential Securities
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Senior
|
|
$
|
83,954
|
|
|
$
|
(76,653
|
)
|
|
$
|
7,301
|
|
|
$
|
101
|
|
|
8
|
%
|
Mezzanine (4)
|
|
289,178
|
|
|
(249,412
|
)
|
|
39,766
|
|
|
104
|
|
|
14
|
%
|
||||
Re-performing
|
|
416,111
|
|
|
(315,029
|
)
|
|
101,082
|
|
|
91
|
|
|
24
|
%
|
||||
Total Residential Securities
|
|
789,243
|
|
|
(641,094
|
)
|
|
148,149
|
|
|
97
|
|
|
19
|
%
|
||||
Multifamily Securities (5)
|
|
653,432
|
|
|
(516,552
|
)
|
|
136,880
|
|
|
88
|
|
|
21
|
%
|
||||
Total
|
|
$
|
1,442,675
|
|
|
$
|
(1,157,646
|
)
|
|
$
|
285,029
|
|
|
|
|
|
(1)
|
Amounts represent carrying value of securities, which are held at GAAP fair value.
|
(2)
|
GAAP fair value per $100 of principal.
|
(3)
|
Allocated capital divided by GAAP fair value.
|
(4)
|
Includes $113 million and $385 million of securities retained from our consolidated Sequoia Choice and Freddie Mac SLST securitizations, respectively, which we consolidate in accordance with GAAP.
|
(5)
|
Includes $209 million of securities we owned that were issued by Freddie Mac K-Series securitizations, which we consolidate in accordance with GAAP.
|
September 30, 2019
|
|
Sequoia 2012-2019
|
|
Third Party 2013-2019
|
|
Agency CRT 2016-2019
|
|
Third Party <=2008
|
|
Total Residential Securities
|
|
Multifamily 2016-2019
|
|
Total Real Estate Securities
|
||||||||||||||
(In Thousands)
|
|
|
|
|
|
|||||||||||||||||||||||
Senior (1)
|
|
$
|
41,826
|
|
|
$
|
107,803
|
|
|
$
|
—
|
|
|
$
|
33,462
|
|
|
$
|
183,091
|
|
|
$
|
—
|
|
|
$
|
183,091
|
|
Mezzanine (2)
|
|
69,349
|
|
|
119,820
|
|
|
—
|
|
|
—
|
|
|
189,169
|
|
|
469,369
|
|
|
658,538
|
|
|||||||
Subordinate (1)
|
|
137,084
|
|
|
153,345
|
|
|
140,881
|
|
|
12,487
|
|
|
443,797
|
|
|
—
|
|
|
443,797
|
|
|||||||
Total Securities (3)
|
|
$
|
248,259
|
|
|
$
|
380,968
|
|
|
$
|
140,881
|
|
|
$
|
45,949
|
|
|
$
|
816,057
|
|
|
$
|
469,369
|
|
|
$
|
1,285,426
|
|
December 31, 2018
|
|
Sequoia 2012-2018
|
|
Third Party 2013-2018
|
|
Agency CRT 2013-2018
|
|
Third Party <=2008
|
|
Total Residential Securities
|
|
Multifamily 2015-2018
|
|
Total Real Estate Securities
|
||||||||||||||
(In Thousands)
|
|
|
|
|
|
|||||||||||||||||||||||
Senior (1)
|
|
$
|
61,179
|
|
|
$
|
96,069
|
|
|
$
|
—
|
|
|
$
|
89,037
|
|
|
$
|
246,285
|
|
|
$
|
—
|
|
|
$
|
246,285
|
|
Mezzanine (2)
|
|
99,977
|
|
|
118,170
|
|
|
—
|
|
|
—
|
|
|
218,147
|
|
|
429,079
|
|
|
647,226
|
|
|||||||
Subordinate (1)
|
|
130,271
|
|
|
135,826
|
|
|
276,894
|
|
|
15,992
|
|
|
558,983
|
|
|
—
|
|
|
558,983
|
|
|||||||
Total Securities (3)
|
|
$
|
291,427
|
|
|
$
|
350,065
|
|
|
$
|
276,894
|
|
|
$
|
105,029
|
|
|
$
|
1,023,415
|
|
|
$
|
429,079
|
|
|
$
|
1,452,494
|
|
(1)
|
At September 30, 2019 and December 31, 2018, senior Sequoia and third-party securities included $58 million and $82 million of IO securities, respectively. At September 30, 2019 and December 31, 2018, subordinate third-party securities included $13 million and $12 million of IO securities, respectively. Our interest-only securities included $29 million and $43 million of A-IO-S securities at September 30, 2019 and December 31, 2018, respectively, that we retained from certain of our Sequoia securitizations. These securities represent certificated servicing strips and therefore may be negatively impacted by the operating and funding costs related to servicing the associated securitized mortgage loans.
|
(2)
|
Mezzanine includes securities initially rated AA through BBB- and issued in 2012 or later.
|
(3)
|
At September 30, 2019, excluded $257 million, $454 million, and $214 million of securities we owned that were issued by consolidated Sequoia Choice, Freddie Mac SLST, and Freddie Mac K-Series securitizations, respectively. At December 31, 2018, excluded $194 million, $229 million, and $126 million of securities we owned that were issued by consolidated Sequoia Choice, Freddie Mac SLST, and Freddie Mac K-Series securitizations, respectively. For GAAP purposes we consolidated $8.85 billion of residential loans and $7.93 billion of non-recourse ABS debt associated with these retained securities.
|
Three Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
Yield as a Result of
|
|||||||||||||||
|
|
Interest Income
|
|
Discount (Premium) Amortization
|
|
Total Interest Income
|
|
Average Amortized Cost
|
|
Interest Income
|
|
Discount (Premium) Amortization
|
|
Total Interest Income
|
|||||||||||
(Dollars in Thousands)
|
|
|
|
|
|
|
|
||||||||||||||||||
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Senior
|
|
$
|
417
|
|
|
$
|
813
|
|
|
$
|
1,230
|
|
|
$
|
23,539
|
|
|
7.09
|
%
|
|
13.83
|
%
|
|
20.92
|
%
|
Mezzanine
|
|
106
|
|
|
25
|
|
|
131
|
|
|
10,988
|
|
|
3.86
|
%
|
|
0.90
|
%
|
|
4.76
|
%
|
||||
Subordinate
|
|
2,813
|
|
|
996
|
|
|
3,809
|
|
|
140,003
|
|
|
8.04
|
%
|
|
2.85
|
%
|
|
10.89
|
%
|
||||
Total AFS Securities
|
|
$
|
3,336
|
|
|
$
|
1,834
|
|
|
$
|
5,170
|
|
|
$
|
174,530
|
|
|
7.65
|
%
|
|
4.20
|
%
|
|
11.85
|
%
|
Three Months Ended September 30, 2018
|
|
|
|
|
|
|
|
|
|
Yield as a Result of
|
|||||||||||||||
|
|
Interest Income
|
|
Discount (Premium) Amortization
|
|
Total Interest Income
|
|
Average Amortized Cost
|
|
Interest Income
|
|
Discount (Premium) Amortization
|
|
Total Interest Income
|
|||||||||||
(Dollars in Thousands)
|
|
|
|
|
|
|
|
||||||||||||||||||
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Senior
|
|
$
|
1,514
|
|
|
$
|
1,977
|
|
|
$
|
3,491
|
|
|
$
|
101,226
|
|
|
5.98
|
%
|
|
7.81
|
%
|
|
13.79
|
%
|
Mezzanine
|
|
353
|
|
|
150
|
|
|
503
|
|
|
33,817
|
|
|
4.18
|
%
|
|
1.77
|
%
|
|
5.95
|
%
|
||||
Subordinate
|
|
2,913
|
|
|
1,196
|
|
|
4,109
|
|
|
146,776
|
|
|
7.94
|
%
|
|
3.26
|
%
|
|
11.20
|
%
|
||||
Total AFS Securities
|
|
$
|
4,780
|
|
|
$
|
3,323
|
|
|
$
|
8,103
|
|
|
$
|
281,819
|
|
|
6.78
|
%
|
|
4.72
|
%
|
|
11.50
|
%
|
Nine Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
Yield as a Result of
|
|||||||||||||||
|
|
Interest Income
|
|
Discount (Premium) Amortization
|
|
Total Interest Income
|
|
Average Amortized Cost
|
|
Interest Income
|
|
Discount (Premium) Amortization
|
|
Total Interest Income
|
|||||||||||
(Dollars in Thousands)
|
|
|
|
|
|
|
|
||||||||||||||||||
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Senior
|
|
$
|
1,793
|
|
|
$
|
2,571
|
|
|
$
|
4,364
|
|
|
$
|
33,303
|
|
|
7.18
|
%
|
|
10.29
|
%
|
|
17.47
|
%
|
Mezzanine
|
|
556
|
|
|
224
|
|
|
780
|
|
|
18,503
|
|
|
4.01
|
%
|
|
1.61
|
%
|
|
5.62
|
%
|
||||
Subordinate
|
|
8,204
|
|
|
3,028
|
|
|
11,232
|
|
|
138,075
|
|
|
7.92
|
%
|
|
2.92
|
%
|
|
10.84
|
%
|
||||
Total AFS Securities
|
|
$
|
10,553
|
|
|
$
|
5,823
|
|
|
$
|
16,376
|
|
|
$
|
189,881
|
|
|
7.41
|
%
|
|
4.09
|
%
|
|
11.50
|
%
|
Nine Months Ended September 30, 2018
|
|
|
|
|
|
|
|
|
|
Yield as a Result of
|
|||||||||||||||
|
|
Interest Income
|
|
Discount (Premium) Amortization
|
|
Total Interest Income
|
|
Average Amortized Cost
|
|
Interest Income
|
|
Discount (Premium) Amortization
|
|
Total Interest Income
|
|||||||||||
(Dollars in Thousands)
|
|
|
|
|
|
|
|
||||||||||||||||||
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Senior
|
|
$
|
5,081
|
|
|
$
|
6,648
|
|
|
$
|
11,729
|
|
|
$
|
116,274
|
|
|
5.83
|
%
|
|
7.62
|
%
|
|
13.45
|
%
|
Mezzanine
|
|
1,651
|
|
|
692
|
|
|
2,343
|
|
|
52,149
|
|
|
4.22
|
%
|
|
1.77
|
%
|
|
5.99
|
%
|
||||
Subordinate
|
|
8,597
|
|
|
3,891
|
|
|
12,488
|
|
|
150,817
|
|
|
7.60
|
%
|
|
3.44
|
%
|
|
11.04
|
%
|
||||
Total AFS Securities
|
|
$
|
15,329
|
|
|
$
|
11,231
|
|
|
$
|
26,560
|
|
|
$
|
319,240
|
|
|
6.40
|
%
|
|
4.69
|
%
|
|
11.09
|
%
|
|
|
Three Months Ended September 30,
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
||||||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
Change
|
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Interest income
|
|
$
|
27,555
|
|
|
$
|
20,900
|
|
|
$
|
6,655
|
|
|
|
$
|
80,046
|
|
|
$
|
43,970
|
|
|
$
|
36,076
|
|
Interest expense
|
|
(23,576
|
)
|
|
(18,019
|
)
|
|
(5,557
|
)
|
|
|
(68,823
|
)
|
|
(37,702
|
)
|
|
(31,121
|
)
|
||||||
Net interest income
|
|
3,979
|
|
|
2,881
|
|
|
1,098
|
|
|
|
11,223
|
|
|
6,268
|
|
|
4,955
|
|
||||||
Investment fair value changes, net
|
|
2,722
|
|
|
(943
|
)
|
|
3,665
|
|
|
|
8,866
|
|
|
44
|
|
|
8,822
|
|
||||||
Net Income from Consolidated Sequoia Choice Entities
|
|
$
|
6,701
|
|
|
$
|
1,938
|
|
|
$
|
4,763
|
|
|
|
$
|
20,089
|
|
|
$
|
6,312
|
|
|
$
|
13,777
|
|
(In Thousands)
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
Residential loans, held-for-investment, at fair value
|
|
$
|
2,618,316
|
|
|
$
|
2,079,382
|
|
Other assets
|
|
10,821
|
|
|
10,010
|
|
||
Total Assets
|
|
$
|
2,629,137
|
|
|
$
|
2,089,392
|
|
Other liabilities
|
|
$
|
8,964
|
|
|
$
|
8,202
|
|
Asset-backed securities issued, at fair value
|
|
2,361,111
|
|
|
1,885,010
|
|
||
Total liabilities
|
|
2,370,075
|
|
|
1,893,212
|
|
||
Equity (fair value of Redwood's retained investments in entities)
|
|
259,062
|
|
|
196,180
|
|
||
Total Liabilities and Equity
|
|
$
|
2,629,137
|
|
|
$
|
2,089,392
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||
(In Thousands)
|
|
September 30, 2019
|
|
September 30, 2019
|
||||
Balance at beginning of period
|
|
$
|
2,147,356
|
|
|
$
|
2,079,382
|
|
New securitization issuance
|
|
727,088
|
|
|
1,076,671
|
|
||
Principal repayments
|
|
(245,099
|
)
|
|
(542,577
|
)
|
||
Changes in fair value, net
|
|
(11,029
|
)
|
|
4,840
|
|
||
Balance at End of Period
|
|
$
|
2,618,316
|
|
|
$
|
2,618,316
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
||||||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
Change
|
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Interest income
|
|
$
|
11,830
|
|
|
$
|
—
|
|
|
$
|
11,830
|
|
|
|
$
|
35,221
|
|
|
$
|
—
|
|
|
$
|
35,221
|
|
Interest expense
|
|
(8,709
|
)
|
|
—
|
|
|
(8,709
|
)
|
|
|
(26,014
|
)
|
|
—
|
|
|
(26,014
|
)
|
||||||
Net interest income
|
|
3,121
|
|
|
—
|
|
|
3,121
|
|
|
|
9,207
|
|
|
—
|
|
|
9,207
|
|
||||||
Investment fair value changes, net
|
|
17,300
|
|
|
—
|
|
|
17,300
|
|
|
|
31,702
|
|
|
—
|
|
|
31,702
|
|
||||||
Net Income from Consolidated Freddie Mac SLST Entities
|
|
$
|
20,421
|
|
|
$
|
—
|
|
|
$
|
20,421
|
|
|
|
$
|
40,909
|
|
|
$
|
—
|
|
|
$
|
40,909
|
|
(In Thousands)
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
Residential loans, held-for-investment, at fair value
|
|
$
|
2,441,223
|
|
|
$
|
1,222,669
|
|
Other assets
|
|
7,299
|
|
|
3,926
|
|
||
Total Assets
|
|
$
|
2,448,522
|
|
|
$
|
1,226,595
|
|
Other liabilities
|
|
$
|
5,498
|
|
|
$
|
2,907
|
|
Asset-backed securities issued, at fair value
|
|
1,987,473
|
|
|
993,748
|
|
||
Total liabilities
|
|
1,992,971
|
|
|
996,655
|
|
||
Equity (fair value of Redwood's investments in entities)
|
|
455,551
|
|
|
229,940
|
|
||
Total Liabilities and Equity
|
|
$
|
2,448,522
|
|
|
$
|
1,226,595
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||
(In Thousands)
|
|
September 30, 2019
|
|
September 30, 2019
|
||||
Balance at beginning of period
|
|
$
|
1,235,089
|
|
|
$
|
1,222,669
|
|
Consolidation of residential loans held in securitization trusts
|
|
1,190,995
|
|
|
1,190,995
|
|
||
Principal repayments
|
|
(24,559
|
)
|
|
(67,144
|
)
|
||
Transfers to REO
|
|
(84
|
)
|
|
(84
|
)
|
||
Changes in fair value, net
|
|
39,782
|
|
|
94,787
|
|
||
Balance at End of Period
|
|
$
|
2,441,223
|
|
|
$
|
2,441,223
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
||||||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
Change
|
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Interest income
|
|
$
|
36,829
|
|
|
$
|
5,578
|
|
|
$
|
31,251
|
|
|
|
$
|
94,134
|
|
|
$
|
5,578
|
|
|
$
|
88,556
|
|
Interest expense
|
|
(35,328
|
)
|
|
(5,145
|
)
|
|
(30,183
|
)
|
|
|
(90,088
|
)
|
|
(5,145
|
)
|
|
(84,943
|
)
|
||||||
Net interest income
|
|
1,501
|
|
|
433
|
|
|
1,068
|
|
|
|
4,046
|
|
|
433
|
|
|
3,613
|
|
||||||
Investment fair value changes, net
|
|
7,445
|
|
|
511
|
|
|
6,934
|
|
|
|
13,810
|
|
|
511
|
|
|
13,299
|
|
||||||
Net Income from Consolidated Freddie Mac K-Series Entities
|
|
$
|
8,946
|
|
|
$
|
944
|
|
|
$
|
8,002
|
|
|
|
$
|
17,856
|
|
|
$
|
944
|
|
|
$
|
16,912
|
|
(In Thousands)
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
Multifamily loans, held-for-investment, at fair value
|
|
$
|
3,791,622
|
|
|
$
|
2,144,598
|
|
Other assets
|
|
11,300
|
|
|
6,595
|
|
||
Total Assets
|
|
$
|
3,802,922
|
|
|
$
|
2,151,193
|
|
Other liabilities
|
|
$
|
10,805
|
|
|
$
|
6,239
|
|
Asset-backed securities issued, at fair value
|
|
3,577,577
|
|
|
2,019,075
|
|
||
Total liabilities
|
|
3,588,382
|
|
|
2,025,314
|
|
||
Equity (fair value of Redwood's retained investments in entities)
|
|
214,540
|
|
|
125,879
|
|
||
Total Liabilities and Equity
|
|
$
|
3,802,922
|
|
|
$
|
2,151,193
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||
(In Thousands)
|
|
September 30, 2019
|
|
September 30, 2019
|
||||
Balance at beginning of period
|
|
$
|
3,749,657
|
|
|
$
|
2,144,598
|
|
Consolidation of multifamily loans held in securitization trusts
|
|
—
|
|
|
1,481,554
|
|
||
Principal repayments
|
|
(5,388
|
)
|
|
(12,904
|
)
|
||
Changes in fair value, net
|
|
47,353
|
|
|
178,374
|
|
||
Balance at End of Period
|
|
$
|
3,791,622
|
|
|
$
|
3,791,622
|
|
(In Thousands)
|
|
Three Months Ended September 30, 2019
|
|
Nine Months Ended September 30, 2019
|
||||
Balance at beginning of period
|
|
$
|
47,396
|
|
|
$
|
60,281
|
|
Additions
|
|
|
|
|
||||
MSRs retained from third-party loan sales
|
|
—
|
|
|
868
|
|
||
Sales
|
|
(69
|
)
|
|
(69
|
)
|
||
Market valuation adjustments
|
|
(7,490
|
)
|
|
(21,243
|
)
|
||
Balance at End of Period
|
|
$
|
39,837
|
|
|
$
|
39,837
|
|
(Dollars in Thousands)
|
|
September 30, 2019
|
||
Unpaid principal balance
|
|
$
|
4,610,339
|
|
Fair value of MSRs
|
|
$
|
39,837
|
|
MSR values as percent of unpaid principal balance
|
|
0.86
|
%
|
|
Gross cash yield (1)
|
|
0.32
|
%
|
|
Number of loans
|
|
7,199
|
|
|
Average loan size
|
|
$
|
640
|
|
Average coupon
|
|
3.98
|
%
|
|
Average loan age (months)
|
|
61
|
|
|
Average original loan-to-value
|
|
67
|
%
|
|
Average original FICO score
|
|
770
|
|
|
60+ day delinquencies
|
|
0.15
|
%
|
(1)
|
Gross cash yield is calculated by dividing the annualized quarterly gross servicing fees we received for the three months ended September 30, 2019, by the weighted average notional balance of loans associated with MSRs we owned during that period.
|
(Dollars in Thousands)
|
|
September 30, 2019
|
||
Unpaid principal balance
|
|
$
|
8,381,331
|
|
Number of loans
|
|
42,671
|
|
|
Average loan size
|
|
$
|
196
|
|
Average coupon
|
|
5.21
|
%
|
|
Average loan age (months)
|
|
169
|
|
|
Average original loan-to-value
|
|
74
|
%
|
|
Average original FICO score
|
|
696
|
|
|
60+ day delinquencies (1)
|
|
9.17
|
%
|
(1)
|
Includes unpaid principal balance of $501 million, or 6% of total portfolio, of loans in foreclosure or transferred to REO.
|
|
|
Three Months Ended September 30,
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
||||||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
Change
|
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Interest income
|
|
$
|
12,491
|
|
|
$
|
14,427
|
|
|
$
|
(1,936
|
)
|
|
|
$
|
34,220
|
|
|
$
|
40,408
|
|
|
$
|
(6,188
|
)
|
Interest expense
|
|
(6,657
|
)
|
|
(7,537
|
)
|
|
880
|
|
|
|
(18,816
|
)
|
|
(21,303
|
)
|
|
2,487
|
|
||||||
Net interest income
|
|
5,834
|
|
|
6,890
|
|
|
(1,056
|
)
|
|
|
15,404
|
|
|
19,105
|
|
|
(3,701
|
)
|
||||||
Mortgage banking activities, net (1)
|
|
9,515
|
|
|
11,224
|
|
|
(1,709
|
)
|
|
|
40,984
|
|
|
48,396
|
|
|
(7,412
|
)
|
||||||
Other income (expense), net (2)
|
|
(252
|
)
|
|
—
|
|
|
(252
|
)
|
|
|
(575
|
)
|
|
—
|
|
|
(575
|
)
|
||||||
Direct operating expenses (3)
|
|
(11,907
|
)
|
|
(6,570
|
)
|
|
(5,337
|
)
|
|
|
(31,582
|
)
|
|
(20,941
|
)
|
|
(10,641
|
)
|
||||||
Segment contribution before income taxes
|
|
3,190
|
|
|
11,544
|
|
|
(8,354
|
)
|
|
|
24,231
|
|
|
46,560
|
|
|
(22,329
|
)
|
||||||
Provision for income taxes
|
|
203
|
|
|
(2,079
|
)
|
|
2,282
|
|
|
|
(1,775
|
)
|
|
(7,485
|
)
|
|
5,710
|
|
||||||
Segment Contribution
|
|
$
|
3,393
|
|
|
$
|
9,465
|
|
|
$
|
(6,072
|
)
|
|
|
$
|
22,456
|
|
|
$
|
39,075
|
|
|
$
|
(16,619
|
)
|
(1)
|
Mortgage banking activities, net includes $5 million and $4 million from our residential mortgage banking and business purpose mortgage banking operations, respectively, for the three months ended September 30, 2019. Mortgage banking activities, net includes $31 million and $10 million from our residential mortgage banking and business purpose mortgage banking operations, respectively, for the nine months ended September 30, 2019.
|
(2)
|
Other income (expense), net for our business purpose mortgage banking operations includes intangible asset amortization expense of $2 million and $4 million for the three and nine months ended September 30, 2019, respectively, related to our acquisition of 5 Arches.
|
(3)
|
Direct operating expenses includes $6 million from both our residential mortgage banking and business purpose mortgage banking operations for the three months ended September 30, 2019. Direct operating expenses includes $17 million and $14 million from our residential mortgage banking and business purpose mortgage banking operations, respectively, for the nine months ended September 30, 2019.
|
|
|
Three Months Ended September 30,
|
||||||||||||||||||||||
|
|
2019
|
|
2018
|
||||||||||||||||||||
(In Thousands)
|
|
Select
|
|
Choice
|
|
Total
|
|
Select
|
|
Choice
|
|
Total
|
||||||||||||
Balance at beginning of period
|
|
$
|
514,785
|
|
|
$
|
541,502
|
|
|
$
|
1,056,287
|
|
|
$
|
680,816
|
|
|
$
|
423,844
|
|
|
$
|
1,104,660
|
|
Acquisitions
|
|
813,970
|
|
|
668,816
|
|
|
1,482,786
|
|
|
1,169,130
|
|
|
634,995
|
|
|
1,804,125
|
|
||||||
Sales
|
|
(648,829
|
)
|
|
(197,848
|
)
|
|
(846,677
|
)
|
|
(1,110,994
|
)
|
|
(22,084
|
)
|
|
(1,133,078
|
)
|
||||||
Transfers between portfolios (1)
|
|
(8,361
|
)
|
|
(727,088
|
)
|
|
(735,449
|
)
|
|
(6,426
|
)
|
|
(889,703
|
)
|
|
(896,129
|
)
|
||||||
Principal repayments
|
|
(14,000
|
)
|
|
(12,737
|
)
|
|
(26,737
|
)
|
|
(15,046
|
)
|
|
(6,152
|
)
|
|
(21,198
|
)
|
||||||
Changes in fair value, net
|
|
(1,758
|
)
|
|
(2,565
|
)
|
|
(4,323
|
)
|
|
2,117
|
|
|
5,947
|
|
|
8,064
|
|
||||||
Balance at End of Period
|
|
$
|
655,807
|
|
|
$
|
270,080
|
|
|
$
|
925,887
|
|
|
$
|
719,597
|
|
|
$
|
146,847
|
|
|
$
|
866,444
|
|
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||
|
|
2019
|
|
2018
|
||||||||||||||||||||
(In Thousands)
|
|
Select
|
|
Choice
|
|
Total
|
|
Select
|
|
Choice
|
|
Total
|
||||||||||||
Balance at beginning of period
|
|
$
|
716,193
|
|
|
$
|
332,608
|
|
|
$
|
1,048,801
|
|
|
$
|
1,101,356
|
|
|
$
|
326,589
|
|
|
$
|
1,427,945
|
|
Acquisitions
|
|
2,437,192
|
|
|
1,590,275
|
|
|
4,027,467
|
|
|
3,780,284
|
|
|
1,790,701
|
|
|
5,570,985
|
|
||||||
Sales
|
|
(2,459,766
|
)
|
|
(472,405
|
)
|
|
(2,932,171
|
)
|
|
(4,101,597
|
)
|
|
(34,370
|
)
|
|
(4,135,967
|
)
|
||||||
Transfers between portfolios (1)
|
|
4
|
|
|
(1,145,375
|
)
|
|
(1,145,371
|
)
|
|
(28,968
|
)
|
|
(1,936,487
|
)
|
|
(1,965,455
|
)
|
||||||
Principal repayments
|
|
(40,828
|
)
|
|
(35,735
|
)
|
|
(76,563
|
)
|
|
(35,654
|
)
|
|
(17,173
|
)
|
|
(52,827
|
)
|
||||||
Changes in fair value, net
|
|
3,012
|
|
|
712
|
|
|
3,724
|
|
|
4,176
|
|
|
17,587
|
|
|
21,763
|
|
||||||
Balance at End of Period
|
|
$
|
655,807
|
|
|
$
|
270,080
|
|
|
$
|
925,887
|
|
|
$
|
719,597
|
|
|
$
|
146,847
|
|
|
$
|
866,444
|
|
(1)
|
Represents the net transfers of loans out of our Mortgage Banking segment into our Investment Portfolio segment and their reclassification from held-for-sale to held-for-investment. Includes $727 million and $1.08 billion of Choice loans securitized during the three and nine months ended September 30, 2019, respectively, and $796 million and $1.78 billion of Choice loans securitized during the three and nine months ended September 30, 2018, respectively, which were not treated as sales for GAAP purposes and continue to be reported on our consolidated balance sheets within our Investment Portfolio segment.
|
|
|
Three Months Ended September 30,
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
||||||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
Change
|
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Residential Mortgage Banking Activities, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Changes in fair value of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Residential loans, at fair value (1)
|
|
$
|
6,320
|
|
|
$
|
7,236
|
|
|
$
|
(916
|
)
|
|
|
$
|
41,431
|
|
|
$
|
8,406
|
|
|
$
|
33,025
|
|
Risk management derivatives (2)
|
|
(1,710
|
)
|
|
3,796
|
|
|
(5,506
|
)
|
|
|
(11,608
|
)
|
|
38,378
|
|
|
(49,986
|
)
|
||||||
Other income, net (3)
|
|
407
|
|
|
313
|
|
|
94
|
|
|
|
1,380
|
|
|
1,733
|
|
|
(353
|
)
|
||||||
Total residential mortgage banking activities, net
|
|
5,017
|
|
|
11,345
|
|
|
(6,328
|
)
|
|
|
31,203
|
|
|
48,517
|
|
|
(17,314
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Business Purpose Mortgage Banking Activities, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Changes in fair value of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Single-family rental loans, at fair value (1)
|
|
1,847
|
|
|
(121
|
)
|
|
1,968
|
|
|
|
5,473
|
|
|
(121
|
)
|
|
5,594
|
|
||||||
Risk management derivatives (2)
|
|
(1,262
|
)
|
|
—
|
|
|
(1,262
|
)
|
|
|
(3,779
|
)
|
|
—
|
|
|
(3,779
|
)
|
||||||
Residential bridge loans, at fair value
|
|
1,010
|
|
|
—
|
|
|
1,010
|
|
|
|
2,108
|
|
|
—
|
|
|
2,108
|
|
||||||
Other income, net (3)
|
|
2,903
|
|
|
—
|
|
|
2,903
|
|
|
|
5,979
|
|
|
—
|
|
|
5,979
|
|
||||||
Total business purpose mortgage banking activities, net
|
|
4,498
|
|
|
(121
|
)
|
|
4,619
|
|
|
|
9,781
|
|
|
(121
|
)
|
|
9,902
|
|
||||||
Mortgage Banking Activities, Net
|
|
$
|
9,515
|
|
|
$
|
11,224
|
|
|
$
|
(1,709
|
)
|
|
|
$
|
40,984
|
|
|
$
|
48,396
|
|
|
$
|
(7,412
|
)
|
(1)
|
Includes changes in fair value for loan purchase commitments.
|
(2)
|
Represents market valuation changes of derivatives that are used to manage risks associated with our accumulation of loans.
|
(3)
|
Includes other fee income from loan originations and acquisitions as well as the provision for repurchase expense, presented net.
|
September 30, 2019
|
|
Principal Value
|
|
Weighted Average Coupon
|
|||
(Dollars in Thousands)
|
|
|
|||||
First Lien Prime
|
|
|
|
|
|||
Fixed - 30 year
|
|
$
|
696,677
|
|
|
4.28
|
%
|
Fixed - 10, 15, & 20 year
|
|
54,544
|
|
|
3.73
|
%
|
|
Hybrid
|
|
152,761
|
|
|
4.00
|
%
|
|
ARM
|
|
143
|
|
|
4.45
|
%
|
|
Total Outstanding Principal
|
|
$
|
904,125
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
||||||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
Change
|
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Interest income
|
|
$
|
4,295
|
|
|
$
|
5,174
|
|
|
$
|
(879
|
)
|
|
|
$
|
13,924
|
|
|
$
|
15,003
|
|
|
$
|
(1,079
|
)
|
Interest expense
|
|
(3,452
|
)
|
|
(4,257
|
)
|
|
805
|
|
|
|
(11,548
|
)
|
|
(12,324
|
)
|
|
776
|
|
||||||
Net interest income
|
|
843
|
|
|
917
|
|
|
(74
|
)
|
|
|
2,376
|
|
|
2,679
|
|
|
(303
|
)
|
||||||
Investment fair value changes, net
|
|
(407
|
)
|
|
(248
|
)
|
|
(159
|
)
|
|
|
(904
|
)
|
|
(976
|
)
|
|
72
|
|
||||||
Net Income from Consolidated Legacy Sequoia Entities
|
|
$
|
436
|
|
|
$
|
669
|
|
|
$
|
(233
|
)
|
|
|
$
|
1,472
|
|
|
$
|
1,703
|
|
|
$
|
(231
|
)
|
(In Thousands)
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
Residential loans, held-for-investment, at fair value
|
|
$
|
429,159
|
|
|
$
|
519,958
|
|
Other assets
|
|
1,319
|
|
|
4,911
|
|
||
Total Assets
|
|
$
|
430,478
|
|
|
$
|
524,869
|
|
Other liabilities
|
|
$
|
456
|
|
|
$
|
571
|
|
Asset-backed securities issued, at fair value
|
|
419,890
|
|
|
512,240
|
|
||
Total liabilities
|
|
420,346
|
|
|
512,811
|
|
||
Equity (fair value of Redwood's retained investments in entities)
|
|
10,132
|
|
|
12,058
|
|
||
Total Liabilities and Equity
|
|
$
|
430,478
|
|
|
$
|
524,869
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In Thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Balance at beginning of period
|
|
$
|
457,750
|
|
|
$
|
592,029
|
|
|
$
|
519,958
|
|
|
$
|
632,817
|
|
Principal repayments
|
|
(28,390
|
)
|
|
(41,476
|
)
|
|
(95,869
|
)
|
|
(113,567
|
)
|
||||
Transfers to REO
|
|
(98
|
)
|
|
(304
|
)
|
|
(200
|
)
|
|
(2,139
|
)
|
||||
Changes in fair value, net
|
|
(103
|
)
|
|
3,709
|
|
|
5,270
|
|
|
36,847
|
|
||||
Balance at End of Period
|
|
$
|
429,159
|
|
|
$
|
553,958
|
|
|
$
|
429,159
|
|
|
$
|
553,958
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In Thousands, except per Share Data)
|
|
2019 est. (1)
|
|
2018
|
|
2019 est. (1)
|
|
2018
|
||||||||
REIT taxable income
|
|
$
|
38,626
|
|
|
$
|
22,644
|
|
|
$
|
91,948
|
|
|
$
|
82,912
|
|
Taxable REIT subsidiary income
|
|
2,821
|
|
|
17,239
|
|
|
25,865
|
|
|
53,203
|
|
||||
Total Taxable Income
|
|
$
|
41,447
|
|
|
$
|
39,883
|
|
|
$
|
117,813
|
|
|
$
|
136,115
|
|
|
|
|
|
|
|
|
|
|
||||||||
REIT taxable income per share
|
|
$
|
0.34
|
|
|
$
|
0.27
|
|
|
$
|
0.89
|
|
|
$
|
1.06
|
|
Total taxable income per share
|
|
$
|
0.37
|
|
|
$
|
0.48
|
|
|
$
|
1.16
|
|
|
$
|
1.75
|
|
|
|
|
|
|
|
|
|
|
||||||||
Distributions to shareholders
|
|
$
|
33,627
|
|
|
$
|
24,877
|
|
|
$
|
91,931
|
|
|
$
|
68,792
|
|
Distributions to shareholders per share
|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
|
$
|
0.90
|
|
|
$
|
0.88
|
|
(1)
|
Our tax results for the three and nine months ended September 30, 2019 are estimates until we file tax returns for 2019.
|
|
|
Nine Months Ended September 30, 2019
|
|||||||||||||||||||
(In Thousands, except per Share Data)
|
|
REIT (Est.)
|
|
TRS (Est.)
|
|
|
Total Tax (Est.)
|
|
GAAP
|
|
Differences
|
||||||||||
Interest income
|
|
$
|
184,943
|
|
|
$
|
41,231
|
|
|
|
$
|
226,174
|
|
|
$
|
429,700
|
|
|
$
|
(203,526
|
)
|
Interest expense
|
|
(95,686
|
)
|
|
(40,047
|
)
|
|
|
(135,733
|
)
|
|
(332,100
|
)
|
|
196,367
|
|
|||||
Net interest income
|
|
89,257
|
|
|
1,184
|
|
|
|
90,441
|
|
|
97,600
|
|
|
(7,159
|
)
|
|||||
Realized credit losses
|
|
197
|
|
|
—
|
|
|
|
197
|
|
|
—
|
|
|
197
|
|
|||||
Mortgage banking activities, net
|
|
—
|
|
|
39,670
|
|
|
|
39,670
|
|
|
40,984
|
|
|
(1,314
|
)
|
|||||
Investment fair value changes, net
|
|
527
|
|
|
276
|
|
|
|
803
|
|
|
34,741
|
|
|
(33,938
|
)
|
|||||
Operating expenses
|
|
(31,912
|
)
|
|
(39,185
|
)
|
|
|
(71,097
|
)
|
|
(76,229
|
)
|
|
5,132
|
|
|||||
Other income, net
|
|
6,306
|
|
|
9,328
|
|
|
|
15,634
|
|
|
7,819
|
|
|
7,815
|
|
|||||
Realized gains, net
|
|
27,797
|
|
|
14,769
|
|
|
|
42,566
|
|
|
18,227
|
|
|
24,339
|
|
|||||
Provision for income taxes
|
|
(224
|
)
|
|
(177
|
)
|
|
|
(401
|
)
|
|
(3,102
|
)
|
|
2,701
|
|
|||||
Net Income
|
|
$
|
91,948
|
|
|
$
|
25,865
|
|
|
|
$
|
117,813
|
|
|
$
|
120,040
|
|
|
$
|
(2,227
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income per basic common share
|
|
$
|
0.89
|
|
|
$
|
0.27
|
|
|
|
$
|
1.16
|
|
|
$
|
1.20
|
|
|
$
|
(0.04
|
)
|
|
|
Total Number of Shares Purchased or Acquired
|
|
Average
Price per
Share Paid
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Maximum Number (or approximate dollar value) of Shares that May Yet be Purchased under the Plans or Programs
|
||||||
(In Thousands, except per Share Data)
|
|
|
|
|
||||||||||
July 1, 2019 - July 31, 2019
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
August 1, 2019 - August 31, 2019
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
September 1, 2019 - September 30, 2019
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
100,000
|
|
Total
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
100,000
|
|
Exhibit
Number |
|
Exhibit
|
3.1
|
|
|
3.1.1
|
|
|
3.1.2
|
|
|
3.1.3
|
|
|
3.1.4
|
|
|
3.1.5
|
|
|
3.1.6
|
|
|
3.1.7
|
|
|
3.1.8
|
|
|
3.1.9
|
|
|
3.1.10
|
|
|
3.1.11
|
|
|
3.2.1
|
|
|
3.2.2
|
|
|
3.2.3
|
|
|
10.1
|
|
|
10.2
|
|
|
10.3
|
|
|
10.4
|
|
|
10.5
|
|
|
10.6
|
|
|
10.7
|
|
|
10.8
|
|
|
10.9
|
|
|
10.10
|
|
Exhibit
Number |
|
Exhibit
|
10.11
|
|
|
31.1
|
|
|
31.2
|
|
|
32.1
|
|
|
32.2
|
|
|
101
|
|
Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2019, is filed in inline XBRL-formatted interactive data files:
(i) Consolidated Balance Sheets at September 30, 2019 and December 31, 2018;
(ii) Consolidated Statements of Income for the three and nine months ended September 30, 2019 and 2018;
(iii) Statements of Consolidated Comprehensive Income for the three and nine months ended September 30, 2019 and 2018;
(iv) Consolidated Statements of Changes in Stockholders' Equity for the three and nine months ended September 30, 2019 and 2018;
(v) Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018; and
(vi) Notes to Consolidated Financial Statements.
|
104
|
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
|
|
|
REDWOOD TRUST, INC.
|
|
|
|
|
|
Date:
|
November 8, 2019
|
By:
|
/s/ Christopher J. Abate
|
|
|
|
Christopher J. Abate
|
|
|
|
Chief Executive Officer
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
Date:
|
November 8, 2019
|
By:
|
/s/ Collin L. Cochrane
|
|
|
|
Collin L. Cochrane
|
|
|
|
Chief Financial Officer
|
|
|
|
(Principal Financial Officer)
|
|
|
|
|
Date:
|
November 8, 2019
|
By:
|
/s/ Lola Bondar
|
|
|
|
Lola Bondar
|
|
|
|
Managing Director, Chief Accounting Officer
|
|
|
|
(Principal Accounting Officer)
|
1.
|
Tenant’s Trade Name: N/A
|
2.Premises:
|
Suite Nos. 490 (“Suite 490”) and 1150 (“Suite 1150”). Suite 490 and Suite 1150 shall collectively be referred to herein as the “Premises”
|
Address of Building:
|
19800 MacArthur Boulevard, Irvine, CA 92612
|
Project Description:
|
Newport Gateway
|
3.
|
Use of Premises: General office and for no other use.
|
4.
|
Estimated Commencement Date for Suite 1150: 13 weeks following the full and final execution of this Lease
|
5.
|
Lease Term: 72 months, plus such additional days as may be required to cause this Lease to expire on the final day of the calendar month (it being understood the Term for Suite 490, although co-terminus with Suite 1150, shall be slightly less in accordance with Item 6.B. below).
|
6.
|
Basic Rent:
|
A.
|
The Monthly Basic Rent payable with respect to Suite 1150 is the following:
|
Months of Term
or Period
|
Monthly Rate Per Rentable Square Foot
|
Monthly Basic Rent (rounded to the nearest dollar)
|
1 to 12
|
$2.27
|
$16,503.00
|
13 to 24
|
$2.37
|
$17,230.00
|
25 to 36
|
$2.48
|
$18,030.00
|
37 to 48
|
$2.59
|
$18,829.00
|
49 to 60
|
$2.71
|
$19,702.00
|
61 to 72
|
$2.83
|
$20,574.00
|
B.
|
The Monthly Basic Rent payable with respect to Suite 490 is the following:
|
Months of Term
or Period
|
Monthly Rate Per Rentable Square Foot
|
Monthly Basic Rent (rounded to the nearest dollar)
|
Commencement Date for Suite 490 to 12th month following the Commencement Date for Suite 1150
|
$2.18
|
$4,558.00
|
13 to 24
|
$2.28
|
$4,767.00
|
25 to 36
|
$2.38
|
$4,977.00
|
37 to 48
|
$2.49
|
$5,207.00
|
49 to 60
|
$2.60
|
$5,437.00
|
61 to 72
|
$2.72
|
$5,688.00
|
7.
|
Property Tax Base: The Property Taxes per rentable square foot incurred by Landlord and attributable to the twelve month period ending June 30, 2015 (the "Base Year").
|
8.
|
Floor Area of Premises: approximately 9,361 rentable square feet (comprised of 7,270 rentable square feet for Suite 1150 and 2,091 rentable square feet for Suite 490) (Landlord and Tenant stipulate and agree that the Floor Area of Premises is correct).
|
9.
|
Security Deposit: $28,888.00
|
10.
|
Broker(s): Irvine Realty Company ("Landlord's Broker") is the agent of Landlord exclusively and Studley / Irvine ("Tenant's Broker") is the agent of Tenant exclusively
|
11.
|
Parking: Tenant shall have the right but not the obligation to utilize up to 32 unreserved parking passes in accordance with the provisions set forth in Exhibit F to this Lease.
|
12.
|
Address for Payments and Notices:
|
13.
|
List of Lease Exhibits (all exhibits, riders and addenda attached to this Lease are hereby incorporated into and made a part of this Lease):
|
LANDLORD:
THE IRVINE COMPANY LLC,
a Delaware limited liability company
By /s/ Steven M. Case [[Tenant 1 Signature]]
Name: Steven M. Case [[Tenant 1 Name]]
Title: EVP [[Tenant 1 Title]]
Executor 1 Signature]]
[[Executor 1 Name]]
[[Executor 1 Title Line 1]]
[[Executor 1 Title Line 2]]
[Executor 2 Signature]]
[[Executor 2 Name]]
[[Executor 2 Title Line 1]]
[[Executor 2 Title Line 2]]
[[ReviewerInitial1]]
|
TENANT:
5 ARCHES, LLC,
a California limited liability company
By /s/ Gene Clark [[Tenant 1 Signature]]
Name: Gene Clark [[Tenant 1 Name]]
Title: Member [[Tenant 1 Title]]
|
A.
|
Basic Lease Provisions. The Basic Lease Provisions are hereby amended as follows:
|
1.
|
Effective as of the Commencement Date for Suite 950, Item 2 shall be amended by deleting Suite 490 and substituting Suite 950 in lieu thereof:
|
2.
|
Item 4 is hereby amended by deleting “Estimated Commencement Date for Suite 490 and adding the following:
|
3.
|
Effective as of the Commencement Date for Suite 950, Item 6 shall be amended by deleting Item 6.B. and substituting the following for Suite 950:
|
5.
|
Effective as of the Commencement Date for Suite 950, Item 7 shall be amended by adding the following for Suite 950:
|
6.
|
Effective as of the Commencement Date for Suite 950, Item 8 shall be deleted in its entirety and the following shall be substituted in lieu thereof:
|
7.
|
Item 9 is hereby deleted in its entirety and the following substituted in lieu thereof:
|
8.
|
Effective as of the Commencement Date for Suite 950, Item 11 shall be deleted and the following shall be substituted in lieu thereof:
|
C.
|
Delay in Possession. If Landlord, for any reason whatsoever, cannot deliver possession of Suite 950 to Tenant on or before the Estimated Commencement Date for Suite 950 set forth in Section III.A.2 above, this Amendment shall not be void or voidable nor shall Landlord be liable to Tenant for any resulting loss or damage. However, Tenant shall not be liable for any rent for Suite 950 until the Commencement Date for Suite 950 occurs as provided in Section III.B above, except that if Landlord’s failure to substantially complete all work required of Landlord pursuant to Section III.B(i) above is attributable to any action or inaction by Tenant (including without limitation any Tenant Delay described in the Work Letter, if any, attached to this Amendment), then Suite 950 shall be deemed ready for occupancy, and Landlord shall be entitled to full performance by Tenant (including the payment of rent), as of the date Landlord would have been able to substantially complete such work and deliver Suite 950 to Tenant but for Tenant’s delay(s).
|
D.
|
Termination as to Suite 490. The parties agree that Tenant’s lease as to Suite 490 shall terminate at midnight on the date prior to the Commencement Date for Suite 950 (the “Termination Date” for Suite 490), provided that such termination shall not relieve Tenant of (i) any rent or other charges owed by Tenant, or other obligations required of Tenant, as are set forth in the Lease from and after the date of this Amendment through and including the Termination Date for Suite 490, (ii) any obligations which are set forth in this Amendment, and (iii) any indemnity or hold harmless obligations set forth in the Lease as to Suite 490. Tenant shall quit and surrender possession of Suite 490 to Landlord on or
|
E.
|
Security Deposit. Concurrently with Tenant’s delivery of this Amendment, Tenant shall deliver the sum of $18,419.00 to Landlord, which sum shall be added to the Security Deposit presently being held by Landlord in accordance with Section 4.3 of the Lease.
|
F.
|
Operating Expenses. Notwithstanding any contrary provision in the Lease, Landlord hereby agrees that Tenant shall not be obligated to pay Landlord for Operating Expenses accruing during the 12 month period commencing as of the Commencement Date for Suite 950.
|
G.
|
Signage. Landlord, at its sole cost and expense, shall affix and maintain a sign (restricted solely to Tenant’s name as set forth herein) adjacent to the entry door of Suite 950. Any subsequent changes to that initial signage shall be made at Tenant’s expense in accordance with Section 5.2 of the Lease.
|
H.
|
Monument Signage. Subject to Landlord availability in its sole discretion and provided Tenant is not in Default under any provision of the Lease beyond all applicable notice and cure periods and provided further that Tenant is leasing at least 22,000 rentable square feet in the Building (the “Monument Signage RSF Threshold”), Tenant shall have the right to install non-exclusive signage on one slot of the Building monument at the entrance to the Building, which signage shall consist only of the name “5 Arches” The type, location and design of such signage shall be subject to the prior written approval of Landlord and the City of Irvine, and shall be consistent with Landlord's signage criteria for the Project. Fabrication, installation, insurance, and maintenance of such signage shall be at Tenant’s sole cost and expense. Tenant understands and agrees that it shall use Landlord’s designated contractor for installing the monument signage. Should Tenant fail to have the monument signage installed by such date that is 9 months following Landlord’s notice that Tenant is granted such monument signage, then Tenant’s right to install same thereafter shall be deemed null and void. Except for the foregoing, no sign, advertisement or notice visible from the exterior of the Premises shall be inscribed, painted or affixed by Tenant on any part of the Premises without prior consent of Landlord. Tenant’s signage right shall belong solely to Tenant and may not be transferred or assigned without Landlord’s prior written consent, which may be withheld by Landlord in Landlord’s sole discretion. In the event Tenant, exclusive of any subtenant(s), fails to satisfy the Monument Signage RSF Threshold, then Tenant shall, within thirty (30) days following notice from Landlord, remove the monument signage at Tenant’s expense. Tenant shall also remove such signage promptly following the expiration or earlier termination of the Lease. Any such removal shall be at Tenant’s sole expense, and Tenant shall bear the cost of any resulting repairs to the monument that are reasonably necessary due to the removal.
|
I.
|
Floor Plan of Premises. Effective as of the Commencement Date for Suite 950, page 2 of Exhibit A attached to the Lease shall be deleted and Exhibit A attached to this Amendment shall be substituted in lieu thereof.
|
J.
|
Tenant Improvements. Landlord, at its sole cost, hereby agrees to complete the Tenant Improvements for the Substitution Space in accordance with the provisions of Exhibit B, Work Letter, attached hereto.
|
K.
|
Parking. Notwithstanding any contrary provision in Exhibit F to the Lease, “Parking,” effective as of the Commencement Date for Suite 950, Landlord shall lease to Tenant, and Tenant shall lease from Landlord, a total of up to 22 unreserved parking passes (for Suite 950) (the “Suite 950 Parking Passes”) through the Expiration Date. Landlord agrees that Tenant may convert up to 3 of the Suite 950 Parking Passes to reserved stalls by providing written notice of such election to Landlord (the “Converted Suite 950 Parking Passes”). During the time period commencing as of the Commencement Date for Suite 950 and continuing through the Expiration Date only, Tenant shall pay to Landlord for the lease of the Suite 950 Parking Passes as follows: (i) $50.00 per unreserved Suite 950 Parking Pass per month utilized, and (ii) if applicable, $130.00 for each Converted Suite 950 Parking Pass per month utilized. Thereafter, the parking charge shall be at Landlord’s scheduled parking rates from time to time. In addition but subject to the month-to-month availability of such parking as determined by Landlord, Tenant shall have the right to purchase such additional parking passes for unreserved parking as Tenant shall request from Landlord (the “Additional Parking
|
L.
|
SDN List. Tenant hereby represents and warrants that neither Tenant nor any officer, director, employee, partner, member or other principal of Tenant (collectively, "Tenant Parties") is listed as a Specially Designated National and Blocked Person ("SDN") on the list of such persons and entities issued by the U.S. Treasury Office of Foreign Assets Control (OFAC). In the event Tenant or any Tenant Party is or becomes listed as an SDN, Tenant shall be deemed in breach of the Lease and Landlord shall have the right to terminate the Lease immediately upon written notice to Tenant.
|
M.
|
Right of First Offer. Provided Tenant is not then in Default under any provision of the Lease, and provided further that Tenant is occupying the entire Premises and has not assigned or sublet any of its interest in the Lease (except in connection with a Permitted Transfer of the Lease to an Affiliate as described in Section 9.2 thereof), Landlord hereby grants Tenant a one-time right (“First Right”) to lease, during the initial 72 month Term of the Lease, any contiguous space on the 11th floor in the Building and shown on Exhibit A-1 hereto (“First Right Space”) in accordance with and subject to the provisions of this Section; provided that this First Right shall cease to be effective during the final 12 months of the Term. Except as otherwise provided below, prior to leasing the First Right Space, or any portion thereof, to any other party during the period that this First Right is in effect and after determining that the existing tenant in the First Right Space will not extend or renew the term of its lease, Landlord shall give Tenant written notice of the basic economic terms including but not limited to the Basic Rent, term, operating expense base, security deposit, and tenant improvement allowance (collectively, the “Economic Terms”), upon which Landlord is willing to lease such particular First Right Space to Tenant or to a third party; provided that the Economic Terms shall exclude brokerage commissions and other Landlord payments that do not directly inure to the tenant’s benefit. It is understood that should Landlord intend to lease other office space in addition to the First Right Space as part of a single transaction, then Landlord’s notice shall so provide and all such space shall collectively be subject to the following provisions. Within 5 business days after receipt of Landlord’s notice, Tenant must give Landlord written notice pursuant to which Tenant shall elect to (i) lease all, but not less than all, of the space specified in Landlord’s notice (the “Designated Space”) upon such Economic Terms and the same non-Economic Terms as set forth in the Lease; (ii) refuse to lease the Designated Space, specifying that such refusal is not based upon the Economic Terms, but upon Tenant’s lack of need for the Designated Space, in which event Landlord may lease the Designated Space upon any terms it deems appropriate; or (iii) refuse to lease the Designated Space, specifying that such refusal is based upon said Economic Terms, in which event Tenant shall also specify revised Economic Terms upon which Tenant shall be willing to lease the Designated Space. In the event that Tenant does not so respond in writing to Landlord’s notice within said period, Tenant shall be deemed to have elected clause (ii) above. In the event Tenant gives Landlord notice pursuant to clause (iii) above, Landlord may elect to either (x) lease the Designated Space to Tenant upon such revised Economic Terms and the same other non-Economic Terms as set forth in the Lease, or (y) lease the Designated Space to any third party upon Economic Terms which are not materially more favorable to such party than those Economic Terms proposed by Tenant. Should Landlord so elect to lease the Designated Space to Tenant, then Landlord shall promptly prepare and deliver to Tenant an amendment to the Lease consistent with the foregoing, and Tenant shall execute and return same to Landlord within 10 days. Tenant’s failure to timely return the amendment shall entitle Landlord to specifically enforce Tenant’s commitment to lease the Designated Space or to lease such space to a third party. Notwithstanding the foregoing, it is understood that Tenant’s First Right shall be subject to any extension or expansion rights previously granted by Landlord to any third party tenant in the Building prior to the date hereof, as well as to any such rights which may hereafter be granted by Landlord to any third party tenant occupying the First Right Space or any portion thereof, and Landlord shall in no event be obligated to initiate this First Right prior to leasing any portion of the First Right Space to the then-current occupant thereof. Tenant’s rights under this Section shall be personal to the original Tenant named in the Lease and may not be assigned or transferred (except in connection with a Permitted Transfer of the Lease to an Affiliate as described in Section 9.2 thereof). Any other attempted assignment or transfer shall be void and of no force or effect. Time is specifically made of the essence of this Section.
|
A.
|
Effect of Amendments. The Lease shall remain in full force and effect except to the extent that it is modified by this Amendment.
|
B.
|
Entire Agreement. This Amendment embodies the entire understanding between Landlord and Tenant and can be changed only by a writing signed by Landlord and Tenant. There have been no additional oral or written representations or agreements. Under no circumstances shall Tenant be entitled to any rent abatement, improvement allowance, leasehold improvements, or any similar economic incentives that may have been provided Tenant in connection with entering into the Lease, unless specifically set forth in this Amendment.
|
C.
|
Counterparts; Digital Signatures. If this Amendment is executed in counterparts, each is hereby declared to be an original; all, however, shall constitute but one and the same amendment. In any action or proceeding, any photographic, photostatic, or other copy of this Amendment may be introduced into evidence without foundation. The parties agree to accept a digital image (including but not limited to an image in the form of a PDF, JPEG, GIF file, or other e-signature) of this Amendment, if applicable, reflecting the execution of one or both of the parties, as a true and correct original.
|
D.
|
Defined Terms. All words commencing with initial capital letters in this Amendment and defined in the Lease shall have the same meaning in this Amendment as in the Lease, unless they are otherwise defined in this Amendment.
|
E.
|
Authority. If Tenant is a corporation, limited liability company or partnership, or is comprised of any of them, each individual executing this Amendment for the corporation, limited liability company or partnership represents that he or she is duly authorized to execute and deliver this Amendment on behalf of such entity and that this Amendment is binding upon such entity in accordance with its terms.
|
F.
|
Certified Access Specialist. As of the date of this Amendment, there has been no inspection of the Building and Project by a Certified Access Specialist as referenced in Section 1938 of the California Civil Code.
|
G.
|
Attorneys' Fees. The provisions of the Lease respecting payment of attorneys' fees shall also apply to this Amendment.
|
H.
|
Brokers. Article 18 of the Lease is amended to provide that the parties recognize the following parties as the brokers who negotiated this Amendment, and agree that Landlord shall be responsible for payment of brokerage commissions to such brokers pursuant to its separate agreements with such brokers: Irvine Realty Company (“Landlord’s Broker”) is the agent of Landlord exclusively and Savills Studley/Irvine (“Tenant’s Broker”) is the agent of Tenant exclusively. By the execution of this Amendment, each of Landlord and Tenant hereby acknowledge and confirm (a) receipt of a copy of a Disclosure Regarding Real Estate Agency Relationship conforming to the requirements of California Civil Code 2079.16, and (b) the agency relationships specified herein, which acknowledgement and confirmation is expressly made for the benefit of Tenant’s Broker. By the execution of this Amendment, Landlord and Tenant are executing the confirmation of the agency relationships set forth herein. The warranty and indemnity provisions of Article 18 of the Lease, as amended hereby, shall be binding and enforceable in connection with the negotiation of this Amendment.
|
I.
|
Execution of Amendment. Submission of this Amendment by Landlord is not an offer to enter into this Amendment but rather is a solicitation for such an offer by Tenant. Landlord shall not be bound by this Amendment until Landlord has executed and delivered the same to Tenant.
|
J.
|
Nondisclosure of Terms. Landlord and Tenant acknowledge that the content of this Amendment and any related documents are confidential information. Except to the extent disclosure is required by law, Landlord and Tenant shall each keep such confidential information strictly confidential and shall not disclose such confidential information to any person or entity other than to its respective financial, legal and space-planning consultants, provided, however, that Tenant may disclose the terms to prospective subtenants or assignees under the Lease, as amended, or pursuant to legal requirement.
|
A.
|
Landlord and Tenant are parties to that certain lease dated January 27, 2015 which lease has been previously amended by First Amendment to Lease dated September 9, 2016 (the “First Amendment”) (collectively, the "Lease"). Pursuant to the Lease, Landlord has leased to Tenant space currently containing approximately 13,887 rentable square feet (the “Premises”) described as Suite No. 950 on the 9th floor and Suite No. 1150 on the 11th floor of the building located at 19800 MacArthur Boulevard, Irvine, California (the “Building”).
|
B.
|
Tenant and Landlord mutually desire that the Lease be amended on and subject to the following terms and conditions.
|
I.
|
Amendment. Effective as of the date hereof (unless different effective date(s) is/are specifically referenced in this Section), Landlord and Tenant agree that the Lease shall be amended in accordance with the following terms and conditions:
|
A.
|
Section III.A.3 of the First Amendment is hereby deleted in its entirety and the following shall be substituted in lieu thereof:
|
“3.
|
Effective as of the Commencement Date for Suite 950, Item 6 shall be amended by deleting Item 6.B. and substituting the following for Suite 950:
|
A.
|
Effect of Amendments. The Lease shall remain in full force and effect except to the extent that it is modified by this Amendment.
|
B.
|
Entire Agreement. This Amendment embodies the entire understanding between Landlord and Tenant and can be changed only by a writing signed by Landlord and Tenant. There have been no additional oral or written representations or agreements. Under no circumstances shall Tenant be entitled to any rent abatement, improvement allowance, leasehold improvements, or any similar economic incentives that may have been provided Tenant in connection with entering into the Lease, unless specifically set forth in this Amendment.
|
C.
|
Counterparts; Digital Signatures. If this Amendment is executed in counterparts, each is hereby declared to be an original; all, however, shall constitute but one and the same amendment. In any action or proceeding, any photographic, photostatic, or other copy of this Amendment may be introduced into evidence without foundation. The parties agree to accept a digital image (including
|
D.
|
Defined Terms. All words commencing with initial capital letters in this Amendment and defined in the Lease shall have the same meaning in this Amendment as in the Lease, unless they are otherwise defined in this Amendment.
|
E.
|
Authority. If Tenant is a corporation, limited liability company or partnership, or is comprised of any of them, each individual executing this Amendment for the corporation, limited liability company or partnership represents that he or she is duly authorized to execute and deliver this Amendment on behalf of such entity and that this Amendment is binding upon such entity in accordance with its terms.
|
F.
|
Certified Access Specialist. As of the date of this Amendment, there has been no inspection of the Building and Project by a Certified Access Specialist as referenced in Section 1938 of the California Civil Code.
|
G.
|
Attorneys' Fees. The provisions of the Lease respecting payment of attorneys' fees shall also apply to this Amendment.
|
H.
|
Brokers. Article 18 of the Lease is amended to provide that the parties recognize the following parties as the brokers who negotiated this Amendment, and agree that Landlord shall be responsible for payment of brokerage commissions to such brokers pursuant to its separate agreements with such brokers: Irvine Realty Company (“Landlord’s Broker”) is the agent of Landlord exclusively and Savills Studley/Irvine (“Tenant’s Broker”) is the agent of Tenant exclusively. By the execution of this Amendment, each of Landlord and Tenant hereby acknowledge and confirm (a) receipt of a copy of a Disclosure Regarding Real Estate Agency Relationship conforming to the requirements of California Civil Code 2079.16, and (b) the agency relationships specified herein, which acknowledgement and confirmation is expressly made for the benefit of Tenant’s Broker. By the execution of this Amendment, Landlord and Tenant are executing the confirmation of the agency relationships set forth herein. The warranty and indemnity provisions of Article 18 of the Lease, as amended hereby, shall be binding and enforceable in connection with the negotiation of this Amendment.
|
I.
|
Execution of Amendment. Submission of this Amendment by Landlord is not an offer to enter into this Amendment but rather is a solicitation for such an offer by Tenant. Landlord shall not be bound by this Amendment until Landlord has executed and delivered the same to Tenant.
|
J.
|
Nondisclosure of Terms. Landlord and Tenant acknowledge that the content of this Amendment and any related documents are confidential information. Except to the extent disclosure is required by law, Landlord and Tenant shall each keep such confidential information strictly confidential and shall not disclose such confidential information to any person or entity other than to its respective financial, legal and space-planning consultants, provided, however, that Tenant may disclose the terms to prospective subtenants or assignees under the Lease, as amended, or pursuant to legal requirement.
|
LANDLORD:
THE IRVINE COMPANY LLC,
a Delaware limited liability company
By /s/ Steven M. Case [[Executor 1 Signature]]
Name: Steven M. Case [[Tenant 1 Name]]
Title: EVP [[Tenant
[[Executor 1 Name]]
[[Executor 1 Title Line 1]]
[[Executor 1 Title Line 2]]
Executor 2 Signature]]
[[Executor 2 Name]]
[[Executor 2 Title Line 1]]
[[Executor 2 Title Line 2]]
[[ReviewerInitial1]]
|
TENANT:
5 ARCHES, LLC,
a California limited liability company
By /s/ Gene Clark [[Tenant 1 Signature]]
Name: Gene Clark [[Tenant 1 Name]]
Title: EVP [[Tenant 1 Title]]
|
A.
|
Basic Lease Provisions. The Basic Lease Provisions are hereby amended as follows:
|
1.
|
Effective as of the Commencement Date for Suite 960, Item 2 shall be amended by adding “Suite 960” to the Premises.
|
3.
|
Item 5 is hereby amended by adding the following:
|
4.
|
Effective as of the Commencement Date for Suite 960, Item 6 shall be amended by adding the following for Suite 960:
|
Months of Term
or Period for Suite 960
|
Monthly Rate Per Rentable Square Foot for Suite 960
|
Monthly Basic Rent for Suite 960 (rounded to the nearest dollar)
|
1st to 11th month following the Commencement Date for Suite 950*
|
$3.08
|
$5,482.00
|
12th month following the Commencement Date for Suite 950 to 23 rd month following the Commencement Date for Suite 950
|
$3.10
|
$5,518.00
|
24th month following the Commencement Date for Suite 950 to 35 th month following the Commencement Date for Suite 950
|
$3.34
|
$5,945.00
|
36th month following the Commencement Date for Suite 950 to 47 th month following the Commencement Date for Suite 950
|
$3.48
|
$6,194.00
|
48th month following the Commencement Date for Suite 950 to 6/30/21
|
$3.63
|
$6,461.00
|
5.
|
Effective as of the Commencement Date for Suite 960, Item 7 shall be amended by adding the following for Suite 960:
|
6.
|
Effective as of the Commencement Date for Suite 960, Item 8 shall be amended by adding “and Suite 960 comprising approximately 1,780 rentable square feet.”
|
7.
|
Item 9 is hereby deleted in its entirety and the following substituted in lieu thereof:
|
8.
|
Effective as of the Commencement Date for Suite 960, Item 11 shall be amended by adding the following:
|
C.
|
Delay in Possession. If Landlord, for any reason whatsoever, cannot deliver possession of Suite 960 to Tenant on or before the Estimated Commencement Date for Suite 960 set forth in Section III.A.2 above, this Amendment shall not be void or voidable nor shall Landlord be liable to Tenant for any resulting loss or damage. However, Tenant shall not be liable for any rent for Suite 960 until the Commencement Date for Suite 960 occurs as provided in Section III.B above, except that if Landlord’s failure to substantially complete all work required of Landlord pursuant to Section III.B(i) above is attributable to any action or inaction by Tenant (including without limitation any Tenant Delay described in the Work Letter attached to this Amendment), then Suite 960 shall be deemed ready for occupancy, and Landlord shall be entitled to full performance by Tenant (including the payment of rent), as of the date Landlord would have been able to substantially complete such work and deliver Suite 960 to Tenant but for Tenant’s delay(s).
|
D.
|
Security Deposit. Concurrently with Tenant’s delivery of this Amendment, Tenant shall deliver the sum of $7,108.00 to Landlord, which sum shall be added to the Security Deposit presently being held by Landlord in accordance with Section 4.3 of the Lease.
|
E.
|
Operating Expenses. Notwithstanding any contrary provision in the Lease, Landlord hereby agrees that Tenant shall not be obligated to pay Landlord for Operating Expenses accruing in connection with Suite 960 during the 12 month period commencing as of the Commencement Date for Suite 960.
|
F.
|
Signage. Landlord, at its sole cost and expense, shall affix and maintain a sign (restricted solely to Tenant’s name as set forth herein) adjacent to the entry door of Suite 960, and shall add an identification strip in the lobby directory of the Building. Any subsequent changes to that initial signage shall be made at Tenant’s expense in accordance with Section 5.2 of the Lease.
|
G.
|
Floor Plan of Premises. Effective as of the Commencement Date for Suite 960, Exhibit A-1 attached to this Amendment shall be added to Exhibit A of the Lease.
|
H.
|
Parking. Notwithstanding any contrary provision in Exhibit F to the Lease, “Parking,” effective as of the Commencement Date for Suite 960, Landlord shall lease to Tenant, and Tenant shall lease from Landlord, up to 6 unreserved parking passes (for Suite 960) (the “Suite 960 Parking Passes”) through the Expiration Date. During the time period commencing as of the Commencement Date for Suite 960 and continuing through the Expiration Date only, Tenant shall pay to Landlord $50.00 per unreserved Suite 960 Parking Pass per month utilized. Thereafter, the parking charge shall be at Landlord’s scheduled parking rates from time to time.
|
I.
|
Tenant Improvements. Landlord, at its sole cost, hereby agrees to complete the Tenant Improvements for Suite 960 in accordance with the provisions of Exhibit B, Work Letter, attached hereto.
|
J.
|
SDN List. Tenant hereby represents and warrants that neither Tenant nor any officer, director, employee, partner, member or other principal of Tenant (collectively, "Tenant Parties") is listed as a Specially Designated National and Blocked Person ("SDN") on the list of such persons and entities issued by the U.S. Treasury Office of Foreign Assets Control (OFAC). In the event Tenant or any Tenant Party is or becomes listed as an SDN, Tenant shall be deemed in breach of the Lease and Landlord shall have the right to terminate the Lease immediately upon written notice to Tenant.
|
K.
|
Deleted Provision. Section III.M of the First Amendment entitled “Right of First Offer” is hereby deleted in its entirety and of no further force or effect.
|
A.
|
Effect of Amendments. The Lease shall remain in full force and effect except to the extent that it is modified by this Amendment.
|
B.
|
Entire Agreement. This Amendment embodies the entire understanding between Landlord and Tenant and can be changed only by a writing signed by Landlord and Tenant. There have been no additional oral or written representations or agreements. Under no circumstances shall Tenant be entitled to any rent abatement, improvement allowance, leasehold improvements, or any similar economic incentives that may have been provided Tenant in connection with entering into the Lease, unless specifically set forth in this Amendment.
|
C.
|
Counterparts; Digital Signatures. If this Amendment is executed in counterparts, each is hereby declared to be an original; all, however, shall constitute but one and the same amendment. In any action or proceeding, any photographic, photostatic, or other copy of this Amendment may be introduced into evidence without foundation. The parties agree to accept a digital image (including but not limited to an image in the form of a PDF, JPEG, GIF file, or other e-signature) of this Amendment, if applicable, reflecting the execution of one or both of the parties, as a true and correct original.
|
D.
|
Defined Terms. All words commencing with initial capital letters in this Amendment and defined in the Lease shall have the same meaning in this Amendment as in the Lease, unless they are otherwise defined in this Amendment.
|
E.
|
Authority. If Tenant is a corporation, limited liability company or partnership, or is comprised of any of them, each individual executing this Amendment for the corporation, limited liability company or partnership represents that he or she is duly authorized to execute and deliver this Amendment on behalf of such entity and that this Amendment is binding upon such entity in accordance with its terms.
|
F.
|
Certified Access Specialist. As of the date of this Amendment, there has been no inspection of the Building and Project by a Certified Access Specialist as referenced in Section 1938 of the California Civil Code.
|
G.
|
Attorneys’ Fees. The provisions of the Lease respecting payment of attorneys’ fees shall also apply to this Amendment.
|
H.
|
Nondisclosure of Terms. Landlord and Tenant acknowledge that the content of this Amendment and any related documents are confidential information. Except to the extent disclosure is required by law, Landlord and Tenant shall each keep such confidential information strictly confidential and shall not disclose such confidential information to any person or entity other than to its respective financial, legal and space-planning consultants, provided, however, that Tenant may disclose the terms to prospective subtenants or assignees under the Lease, as amended, or pursuant to legal requirement.
|
I.
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Brokers. Article 18 of the Lease is amended to provide that the parties recognize the following parties as the brokers who negotiated this Amendment, and agree that Landlord shall be responsible for payment of brokerage commissions to such brokers pursuant to its separate agreements with such brokers: Irvine Realty Company (“Landlord’s Broker”) is the agent of Landlord exclusively and Savills Studley/Irvine (“Tenant’s Broker”) is the agent of Tenant exclusively. By the execution of this Amendment, each of Landlord and Tenant hereby acknowledge and confirm (a) receipt of a copy of a Disclosure Regarding Real Estate Agency Relationship conforming to the requirements of California Civil Code 2079.16, and (b) the agency relationships specified herein, which acknowledgement and confirmation is expressly made for the benefit of Tenant’s Broker. By the execution of this Amendment, Landlord and Tenant are executing the confirmation of the agency relationships set forth herein. The warranty and indemnity provisions of Article 18 of the Lease, as amended hereby, shall be binding and enforceable in connection with the negotiation of this Amendment.
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A.
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Basic Lease Provisions. The Basic Lease Provisions are hereby amended as follows:
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1.
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Effective as of the Commencement Date for Suite 490, Item 2 shall be amended by adding “and Suite No. 490” to the Premises.
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3.
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Item 5 is hereby amended by adding the following:
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4.
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Effective as of the Commencement Date for Suite 490, Item 6 shall be amended by adding the following for Suite 490:
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Months of Term
or Period for Suite 490
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Monthly Rate Per Rentable Square Foot for Suite 490
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Monthly Basic Rent for Suite 490 (rounded to the nearest dollar)
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1 to 12
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$2.95
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$6,266.00
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13 to 24
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$3.07
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$6,521.00
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25 to 6/30/21
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$3.19
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$6,776.00
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5.
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Effective as of the Commencement Date for Suite 490, Item 7 shall be amended by adding the following for Suite 490:
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6.
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Effective as of the Commencement Date for Suite 490, Item 8 shall be amended by adding “and Suite 490 comprising approximately 2,124 rentable square feet.”
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7.
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Item 9 is hereby deleted in its entirety and the following substituted in lieu thereof:
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8.
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Effective as of the Commencement Date for Suite 490, Item 11 shall be amended by adding the following:
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B.
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Security Deposit. Concurrently with Tenant’s delivery of this Amendment, Tenant shall deliver the sum of $7,453.00 to Landlord, which sum shall be added to the Security Deposit presently being held by Landlord in accordance with Section 4.3 of the Lease.
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C.
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Operating Expenses. Notwithstanding any contrary provision in the Lease, Landlord hereby agrees that Tenant shall not be obligated to pay Landlord for Operating Expenses accruing in connection with Suite 490 during the 12 month period commencing as of the Commencement Date for Suite 490.
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D.
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Signage.
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1.
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Initial Signage for Suite 490. Landlord, at its sole cost and expense, shall affix and maintain a sign (restricted solely to Tenant’s name as set forth herein) adjacent to the entry door of Suite 490, and shall add an identification strip in the lobby directory of the Building. Any subsequent changes to that initial signage shall be made at Tenant’s expense in accordance with Section 5.2 of the Lease.
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2.
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Monument Signage. Section III.H of the First Amendment to Lease is hereby deleted in its entirety and the foregoing shall be substituted in lieu thereof:
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E.
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Floor Plan of Premises. Effective as of the Commencement Date for Suite 490, Exhibit A-2 attached to this Amendment shall be added to Exhibit A of the Lease.
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F.
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Parking. Notwithstanding any contrary provision in the Lease, effective as of the Commencement Date for Suite 490, Tenant may purchase up to 7 additional Parking Passes for unreserved parking spaces in connection with its leasing of Suite 490 (as reflected in Section III.A.8 of this Amendment) (the “Suite 490 Parking Passes”). Notwithstanding any contrary provision in Exhibit F to the Lease, during the period commencing as of the Commencement Date for Suite 490 and ending June 30, 2021, the monthly charge for the Suite 490 Parking Passes shall be $50.00 per Suite 490 Parking Pass per month. From and after July 1, 2021, the parking shall be at Landlord’s scheduled parking rates from time to time.
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G.
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Tenant Improvements. Landlord hereby agrees to complete the Tenant Improvements for the Premises, including Suite 490, in accordance with the provisions of Exhibit X, Work Letter, attached hereto.
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H.
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Right to Extend. Effective as of the Commencement Date for Suite 490, Suite 490 shall be added to the Premiss with respect to Section 1 of Exhibit G to the Lease entitled “Right to Extend”.
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A.
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Effect of Amendments. The Lease shall remain in full force and effect except to the extent that it is modified by this Amendment.
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B.
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Entire Agreement. This Amendment embodies the entire understanding between Landlord and Tenant with respect to the modifications set forth in “III. MODIFICATIONS” above and can be changed only by a writing signed by Landlord and Tenant.
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C.
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Counterparts; Digital Signatures. If this Amendment is executed in counterparts, each is hereby declared to be an original; all, however, shall constitute but one and the same amendment. In any action or proceeding, any photographic, photostatic, or other copy of this Amendment may be introduced into evidence without foundation. The parties agree to accept a digital image (including but not limited to an image in the form of a PDF, JPEG, GIF file, or other e-signature) of this Amendment, if applicable, reflecting the execution of one or both of the parties, as a true and correct original.
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D.
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Defined Terms. All words commencing with initial capital letters in this Amendment and defined in the Lease shall have the same meaning in this Amendment as in the Lease, unless they are otherwise defined in this Amendment.
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E.
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Authority. If Tenant is a corporation, limited liability company or partnership, or is comprised of any of them, each individual executing this Amendment for the corporation, limited liability company or partnership represents that he or she is duly authorized to execute and deliver this Amendment on behalf of such entity and that this Amendment is binding upon such entity in accordance with its terms.
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F.
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California Certified Access Specialist Inspection. Pursuant to California Civil Code § 1938, Landlord hereby states that the Premises have not undergone inspection by a Certified Access Specialist (CASp) (defined in California Civil Code § 55.52(a)(3)). Pursuant to Section 1938 of the California Civil Code, Landlord hereby provides the following notification to Tenant: "A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction-related accessibility standards under state law. Although state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may not
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G.
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Attorneys’ Fees. The provisions of the Lease respecting payment of attorneys’ fees shall also apply to this Amendment.
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H.
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Nondisclosure of Lease Terms. Tenant acknowledges that the content of this Amendment and any related documents are confidential information. Except to the extent disclosure is required by law, Tenant shall keep such confidential information strictly confidential and shall not disclose such confidential information to any person or entity other than Tenant’s financial, legal and space-planning consultants, provided, however, that Tenant may disclose the terms to prospective subtenants or assignees under the Lease or pursuant to legal requirement.
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I.
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Brokers. Article 18 of the Lease is amended to provide that the parties recognize the following parties as the brokers who negotiated this Amendment, and agree that Landlord shall be responsible for payment of brokerage commissions to such brokers pursuant to its separate agreements with such brokers: Irvine Management Company (“Landlord’s Broker”) is the agent of Landlord exclusively and Savills Studley/Newport Beach (“Tenant’s Broker”) is the agent of Tenant exclusively. By the execution of this Amendment, each of Landlord and Tenant hereby acknowledge and confirm (a) receipt of a copy of a Disclosure Regarding Real Estate Agency Relationship conforming to the requirements of California Civil Code 2079.16, and (b) the agency relationships specified herein, which acknowledgement and confirmation is expressly made for the benefit of Tenant’s Broker. If there is no Tenant’s Broker so identified herein, then such acknowledgement and confirmation is expressly made for the benefit of Landlord’s Broker. By the execution of this Amendment, Landlord and Tenant are executing the confirmation of the agency relationships set forth herein. The warranty and indemnity provisions of Article 18 of the Lease, as amended hereby, shall be binding and enforceable in connection with the negotiation of this Amendment.
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LANDLORD:
NEWPORT GATEWAY OFFICE LLC,
a Delaware limited liability company
By /s/ Steven M. Case [[Tenant 1 Signature]]
Name: Steven M. Case [[Tenant 1 Name]]
Title: EVP [[Executor 1 Name]]
[[Executor 1 Title Line 1]]
[[Executor 1 Title Line 2]]
2 Signature]]
[[Executor 2 Name]]
[[Executor 2 Title Line 1]]
[[Executor 2 Title Line 2]]
[[ReviewerInitial1]]
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TENANT:
5 ARCHES, LLC,
a Delaware limited liability company
By /s/ Shawn Miller [[Tenant 1 Signature]]
Name: Shawn Miller [[Tenant 1 Name]]
Title: CEO [[Tenant 1 Title]]
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A.
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Basic Lease Provisions. The Basic Lease Provisions are hereby amended as follows:
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1.
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Effective as of the Termination Date for Suite 490 (defined below), Item 2 shall be amended by deleting “and Suite No. 490” therefrom. Effective as of the Commencement Date for Suite 1180, Item 2 shall be amended by adding “and Suite No. 1180” to the Premises.
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3.
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Effective as of the Termination Date for Suite 490, Item 5 with respect to the Lease Term for Suite 490 is hereby amended to midnight on February 28, 2019.”
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4.
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Effective as of the Termination Date for Suite 490, Tenant shall no longer be obligated to pay Basic Rent for Suite 490 as set forth in Item 6 of the Basic Lease Provisions.
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Months of Term
or Period for Suite 1180
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Monthly Rate Per Rentable Square Foot for Suite 1180
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Monthly Basic Rent for Suite 1180 (rounded to the nearest dollar)
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1 to 12
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$3.35
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$14,770.00
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13 to 24
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$3.50
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$15,432.00
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25 to 6/30/21
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$3.66
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$16,137.00
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5.
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Effective as of the Commencement Date for Suite 1180, Item 7 shall be amended by adding the following for Suite 1180:
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6.
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Effective as of the Termination Date for Suite 490, Item 8 shall be amended by deleting “and Suite 490 comprising approximately 2,124 rentable square feet”.
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7.
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Item 9 is hereby deleted in its entirety and the following substituted in lieu thereof:
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8.
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Effective as of the Termination Date for Suite 490, the Parking for Suite 490 as provided in Section III.A.8 of the Fourth Amendment to Lease shall be deleted in its entirety.
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1.
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I have reviewed this Quarterly Report on Form 10-Q of Redwood Trust, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over the financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: November 8, 2019
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/s/ Christopher J. Abate
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Christopher J. Abate
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Chief Executive Officer
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1.
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I have reviewed this Quarterly Report on Form 10-Q of Redwood Trust, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over the financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: November 8, 2019
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/s/ Collin L. Cochrane
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Collin L. Cochrane
|
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Chief Financial Officer
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Date: November 8, 2019
|
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/s/ Christopher J. Abate
|
|
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Christopher J. Abate
|
|
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Chief Executive Officer
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Date: November 8, 2019
|
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/s/ Collin L. Cochrane
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Collin L. Cochrane
|
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Chief Financial Officer
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