GOODWILL AND OTHER INTANGIBLE ASSETS

3 Months Ended

Mar. 31, 2020

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and Other Intangible Assets

NOTE 7—GOODWILL AND OTHER INTANGIBLE ASSETS

Activity related to goodwill for the three months ended March 31, 2020 and 2019 follows:

	For the three months ended
	March 31,
Roll Forward of Goodwill (in thousands)	2020		2019
Beginning balance	$	180,424	$	173,904
Additions from acquisitions		64,462		6,520
Impairment		—		—
Ending balance	$	244,886	$	180,424

The additions from acquisitions shown in the table above during the three months ended March 31, 2020 relates to the immaterial purchases of certain assets and the assumption of certain liabilities from two debt brokerage companies for aggregate consideration of $64.9 million, which consisted of cash of $43.8 million, $5.0 million of the Company’s stock, and $16.1 million of contingent consideration. The contingent consideration may be earned over either a four-year period or five-year period after the closing of each acquisition, provided certain revenue targets have been met. The contingent consideration included for the acquisitions is non-cash consideration and thus not reflected in the amount of cash consideration paid in the Condensed Consolidated Statement of Cash Flows. The Company estimated the fair value of the contingent consideration using a probability-based, discounted cash flow estimate for the revenue targets (Level 3).

The acquired businesses operate in the Columbus, Ohio and New York City metropolitan areas. These acquisitions expand the Company’s network of loan originators and geographical reach and provide further diversification to its loan origination platform. Substantially all of the value associated with the acquisitions was related to the assembled workforces and commercial lending platform, resulting in substantially all of the consideration being allocated to goodwill. The Company expects all goodwill to be tax deductible, with the tax-deductible amount of goodwill related to the contingent consideration to be determined once the cash payments to settle the contingent consideration are made. The other assets acquired and the liabilities assumed were immaterial. The operations of these two companies have since been merged into the Company’s existing operations. The goodwill resulting from the acquisitions is allocated to the Company’s single reporting unit. The purchase accounting for the two acquisitions has been completed as of March 31, 2020.

The additions from acquisitions during the three months ended March 31, 2019 shown in the table above relates to an immaterial acquisition of a technology company, which was completed in the first quarter of 2019.

As of March 31, 2020 and December 31, 2019, the balance of intangible assets acquired from acquisitions totaled $2.4 million and $2.5 million, respectively. As of March 31, 2020, the weighted-average period over which the Company expects the intangible assets to be amortized is 4.5 years.

A summary of the Company’s contingent consideration liabilities, which is included in Other liabilities, as of and for the three months ended March 31, 2020 and 2019 follows:

	For the three months ended
	March 31,
Roll Forward of Contingent Consideration Liabilities (in thousands)	2020		2019
Beginning balance	$	5,752	$	11,630
Additions		16,073		—
Accretion		227		143
Payments		(5,800)		(6,450)
Ending balance	$	16,252	$	5,323

The contingent consideration liabilities above relate to acquisitions completed in 2017 and 2020. The last of the five earn-out periods related to these contingent consideration liabilities ends in the first quarter of 2025.

The global economic disruption caused by the COVID-19 Crisis has led to significant declines in the value of the U.S. equity markets. Certain sectors of the market have seen substantial impacts to their operations, cash flows, and liquidity. The commercial real estate finance

industry has also been impacted, particularly as it relates to financing and property sales activity for office, retail and hospitality assets. The Company has considered whether the disruption from the COVID-19 Crisis represents a triggering event with respect to impairment of its goodwill. Despite the disruption to many sectors of commercial real estate debt finance, financing activity for multifamily assets, which represents over 80% of the Company’s transaction volumes over the past several years and over 90% of its servicing portfolio, has not been as adversely impacted as a result of Fannie Mae’s, Freddie Mac’s, and HUD’s presence in the market. Consequently, the Company concluded that as of March 31, 2020, the COVID-19 Crisis and its direct impacts to the Company, its operations, available liquidity, and its cash flows does not represent a triggering event.