Note 27 – Segment reporting

The Company reports its results of operations through the following four business segments: i) Loan Acquisitions, ii) SBC Originations, iii) SBA Originations, Acquisitions and Servicing, and iv) Residential Mortgage Banking. The Company’s organizational structure is based on a number of factors that the Chief Operating Decision Maker (“CODM”), the Chief Executive Officer (“CEO”), uses to evaluate, view, and run its business operations, which includes customer base and nature of loan program types. The segments are based on this organizational structure and the information reviewed by the CODM and management to evaluate segment results.

Loan acquisitions

Through the Loan Acquisitions segment, the Company acquires performing and non-performing SBC loans and intends to continue to acquire these loans as part of the Company’s business strategy.

SBC originations

Through the SBC Originations segment, the Company originates SBC loans secured by stabilized or transitional investor properties using multiple loan origination channels. Additionally, as part of this segment, we originate and service multi-family loan products under the Freddie Mac program. This segment also reflects the impact of our SBC securitization activities.

SBA originations, acquisitions, and servicing

Through the SBA Originations, Acquisitions, and Servicing segment, the Company acquires, originates and services loans guaranteed by the SBA under the SBA Section 7(a) Program. This segment also reflects the impact of our SBA securitization activities.

Residential mortgage banking

Through the Residential Mortgage Banking segment, the Company originates residential mortgage loans eligible to be purchased, guaranteed or insured by Fannie Mae, Freddie Mac, FHA, USDA and VA through retail, correspondent and broker channels.

Corporate - Other

Corporate - Other consists primarily of unallocated corporate financing, including interest expense relating to our senior secured and convertible notes on funds yet to be deployed, allocated employee compensation from our Manager, management and incentive fees paid to our Manager and other general corporate overhead expenses.

Results of business segments and all other

Reportable business segments, along with remaining unallocated amounts recorded within Corporate- Other, for the three months ended September 30, 2019 are summarized in the below table.


					SBA Originations,		Residential
	Loan		SBC		Acquisitions,		Mortgage		Corporate-
(In Thousands)	Acquisitions		Originations		and Servicing		Banking		Other		Consolidated
Interest income	$	18,880	$	32,354	$	7,235	$	1,254	$	—	$	59,723
Interest expense		(11,076)		(23,835)		(2,739)		(1,740)		—		(39,390)
Net interest income before provision for loan losses	$	7,804	$	8,519	$	4,496	$	(486)	$	—	$	20,333
Provision for loan losses		(94)		(33)		(566)		—		—		(693)
Net interest income after provision for loan losses	$	7,710	$	8,486	$	3,930	$	(486)	$	—	$	19,640
Non-interest income
Residential mortgage banking activities	$	—	$	—	$	—	$	29,013	$	—	$	29,013
Net realized gain on financial instruments		(437)		5,065		2,749		—		—		7,377
Net unrealized gain on financial instruments		(206)		(865)		772		(7,582)		—		(7,881)
Other income		925		1,118		812		80		44		2,979
Servicing income		—		488		1,180		5,781		—		7,449
Income from unconsolidated joint ventures		1,047		—		—		—		—		1,047
Gain on bargain purchase		—		—		—		—		—		—
Total non-interest income	$	1,329	$	5,806	$	5,513	$	27,292	$	44	$	39,984
Non-interest expense
Employee compensation and benefits		(26)		(1,420)		(4,070)		(7,091)		(831)		(13,438)
Allocated employee compensation and benefits from related party		(150)		—		—		—		(1,350)		(1,500)
Variable expenses on residential mortgage banking activities		—		—		—		(17,318)		—		(17,318)
Professional fees		(195)		(571)		(279)		(344)		(641)		(2,030)
Management fees – related party		—		—		—		—		(2,495)		(2,495)
Incentive fees – related party		—		—		—		—		—		—
Loan servicing expense		(1,461)		(1,495)		(205)		(1,672)		(33)		(4,866)
Merger related expenses		—		—		—		—		(51)		(51)
Other operating expenses		(770)		(3,369)		(1,508)		(1,691)		(806)		(8,144)
Total non-interest expense	$	(2,602)	$	(6,855)	$	(6,062)	$	(28,116)	$	(6,207)	$	(49,842)
Net income (loss) before provision for income taxes	$	6,437	$	7,437	$	3,381	$	(1,310)	$	(6,163)	$	9,782
Total assets	$	1,165,470	$	2,266,076	$	273,217	$	327,162	$	91,094	$	4,123,019

Reportable business segments, along with remaining unallocated amounts recorded within Corporate- Other, for the nine months ended September 30, 2019 are summarized in the below table.


					SBA Originations,		Residential
	Loan		SBC		Acquisitions,		Mortgage		Corporate-
(In Thousands)	Acquisitions		Originations		and Servicing		Banking		Other		Consolidated
Interest income	$	47,761	$	91,182	$	23,468	$	3,099	$	—	$	165,510
Interest expense		(29,383)		(65,903)		(11,529)		(4,104)		—		(110,919)
Net interest income before provision for loan losses	$	18,378	$	25,279	$	11,939	$	(1,005)	$	—	$	54,591
Provision for loan losses		(771)		(342)		(1,446)		—		—		(2,559)
Net interest income after provision for loan losses	$	17,607	$	24,937	$	10,493	$	(1,005)	$	—	$	52,032
Non-interest income
Residential mortgage banking activities	$	—	$	—	$	—	$	64,621	$	—	$	64,621
Net realized gain on financial instruments		(33)		10,232		10,715		—		—		20,914
Net unrealized gain on financial instruments		(886)		(131)		268		(21,050)		—		(21,799)
Other income		1,950		3,565		865		182		109		6,671
Servicing income		—		1,386		4,013		16,613		—		22,012
Income from unconsolidated joint ventures		6,059		—		—		—		—		6,059
Gain on bargain purchase		—		—		—		—		30,728		30,728
Total non-interest income	$	7,090	$	15,052	$	15,861	$	60,366	$	30,837	$	129,206
Non-interest expense
Employee compensation and benefits		(53)		(5,454)		(12,262)		(17,131)		(2,495)		(37,395)
Allocated employee compensation and benefits from related party		(360)		—		—		—		(3,243)		(3,603)
Variable expenses on residential mortgage banking activities		—		—		—		(39,995)		—		(39,995)
Professional fees		(412)		(1,185)		(635)		(809)		(2,404)		(5,445)
Management fees – related party		—		—		—		—		(6,987)		(6,987)
Incentive fees – related party		—		—		—		—		—		—
Loan servicing expense		(3,379)		(4,185)		(322)		(5,089)		(110)		(13,085)
Merger related expenses		—		—		—		—		(6,121)		(6,121)
Other operating expenses		(2,073)		(8,198)		(4,635)		(5,818)		(2,367)		(23,091)
Total non-interest expense	$	(6,277)	$	(19,022)	$	(17,854)	$	(68,842)	$	(23,727)	$	(135,722)
Net income (loss) before provision for income taxes	$	18,420	$	20,967	$	8,500	$	(9,481)	$	7,110	$	45,516
Total assets	$	1,165,470	$	2,266,076	$	273,217	$	327,162	$	91,094	$	4,123,019

Reportable business segments, along with remaining unallocated amounts recorded within Corporate- Other, for the three months ended September 30, 2018 are summarized in the below table.


					SBA Originations,		Residential
	Loan		SBC		Acquisitions,		Mortgage		Corporate-
(In Thousands)	Acquisitions		Originations		and Servicing		Banking		Other		Consolidated
Interest income	$	11,946	$	21,671	$	9,699	$	971	$	—	$	44,287
Interest expense		(7,755)		(16,045)		(4,301)		(824)		—		(28,925)
Net interest income before provision for loan losses	$	4,191	$	5,626	$	5,398	$	147	$	—	$	15,362
Provision for loan losses		(796)		(101)		97		—		—		(800)
Net interest income after provision for loan losses	$	3,395	$	5,525	$	5,495	$	147	$	—	$	14,562
Non-interest income
Residential mortgage banking activities	$	—	$	—	$	—	$	17,011	$	—	$	17,011
Net realized gain on financial instruments		774		3,253		2,919		—		—		6,946
Net unrealized gain (loss) on financial instruments		2,893		2,679		611		2,317		—		8,500
Other income		75		794		279		56		—		1,204
Servicing income		5		389		1,352		5,176		—		6,922
Income from unconsolidated joint ventures		2,178		—		—		—		—		2,178
Total non-interest income	$	5,925	$	7,115	$	5,161	$	24,560	$	—	$	42,761
Non-interest expense
Employee compensation and benefits	$	(98)	$	(2,417)	$	(3,116)	$	(8,375)	$	(157)		(14,163)
Allocated employee compensation and benefits from related party		(120)		—		—		—		(1,080)		(1,200)
Variable expenses on residential mortgage banking activities		—		—		—		(8,337)		—		(8,337)
Professional fees		(467)		(291)		(412)		(123)		(1,001)		(2,294)
Management fees – related party		—		—		—		—		(2,070)		(2,070)
Incentive fees – related party		—		—		—		—		—		—
Loan servicing (expense) income		(1,183)		(1,294)		(198)		(1,572)		—		(4,247)
Other operating expenses		(450)		(2,545)		(929)		(2,080)		(544)		(6,548)
Total non-interest expense	$	(2,318)	$	(6,547)	$	(4,655)	$	(20,487)	$	(4,852)	$	(38,859)
Net income (loss) before provision for income taxes	$	7,002	$	6,093	$	6,001	$	4,220	$	(4,852)	$	18,464
Total assets	$	672,569	$	1,442,601	$	484,387	$	276,284	$	24,918	$	2,900,759

Reportable business segments, along with remaining unallocated amounts recorded within Corporate- Other, for the nine months ended September 30, 2018 are summarized in the below table.


					SBA Originations,		Residential
	Loan		SBC		Acquisitions,		Mortgage		Corporate-
(In Thousands)	Acquisitions		Originations		and Servicing		Banking		Other		Consolidated
Interest income	$	34,602	$	58,423	$	27,411	$	2,859	$	—	$	123,295
Interest expense		(19,853)		(43,838)		(11,892)		(2,413)		—		(77,996)
Net interest income before provision for loan losses	$	14,749	$	14,585	$	15,519	$	446	$	—	$	45,299
Provision for loan losses		(989)		8		410		—		—		(571)
Net interest income after provision for loan losses	$	13,760	$	14,593	$	15,929	$	446	$	—	$	44,728
Non-interest income
Residential mortgage banking activities	$	—	$	—	$	—	$	48,290	$	—	$	48,290
Net realized gain on financial instruments		867		15,484		11,445		—		—		27,796
Net unrealized gain (loss) on financial instruments		3,695		4,441		325		7,503		—		15,964
Other income		342		3,409		447		166		—		4,364
Servicing income		15		972		4,067		14,905		—		19,959
Income on unconsolidated joint ventures		9,420		—		—		—		—		9,420
Total non-interest income	$	14,339	$	24,306	$	16,284	$	70,864	$	—	$	125,793
Non-interest expense
Employee compensation and benefits	$	(410)	$	(7,339)	$	(9,510)	$	(26,025)	$	(471)	$	(43,755)
Allocated employee compensation and benefits from related party		(360)		—		—		—		(3,240)		(3,600)
Variable expenses on residential mortgage banking activities		—		—		—		(18,120)		—		(18,120)
Professional fees		(928)		(1,012)		(1,414)		(347)		(3,642)		(7,343)
Management fees – related party		—		—		—		—		(6,118)		(6,118)
Incentive fees – related party		—		—		—		—		(676)		(676)
Loan servicing expense		(2,748)		(2,819)		89		(5,862)		—		(11,340)
Other operating expenses		(3,267)		(8,512)		(3,009)		(6,760)		(1,927)		(23,475)
Total non-interest expense	$	(7,713)	$	(19,682)	$	(13,844)	$	(57,114)	$	(16,074)	$	(114,427)
Net income (loss) before provision for income taxes	$	20,386	$	19,217	$	18,369	$	14,196	$	(16,074)	$	56,094
Total assets	$	672,569	$	1,442,601	$	484,387	$	276,284	$	24,918	$	2,900,759