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Segment Reporting
 3 Months Ended
Mar. 31, 2020
Segment Reporting  
Segment Reporting

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, 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.

 

Acquisitions

 

Through the 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. The Company also acquires purchased future receivables through our Knight Capital platform.

 

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 March 31, 2020 are summarized in the below table.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

SBA Originations,

    

Residential

    

 

    

 

 

 

 

 

SBC

 

Acquisitions,

 

Mortgage

 

Corporate-

 

 

(In Thousands)

 

Acquisitions

 

Originations

 

and Servicing

 

Banking

 

Other

 

Consolidated

Interest income

 

$

16,494

 

$

39,269

 

$

12,471

 

$

1,317

 

$

 —

 

$

69,551

Interest expense

 

 

(11,205)

 

 

(25,627)

 

 

(8,513)

 

 

(1,585)

 

 

 —

 

 

(46,930)

Net interest income before provision for loan losses

 

$

5,289

 

$

13,642

 

$

3,958

 

$

(268)

 

$

 —

 

$

22,621

Provision for loan losses

 

 

(5,722)

 

 

(29,828)

 

 

(4,254)

 

 

 —

 

 

 —

 

 

(39,804)

Net interest income after provision for loan losses

 

$

(433)

 

$

(16,186)

 

$

(296)

 

$

(268)

 

$

 —

 

$

(17,183)

Non-interest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage banking activities

 

$

 —

 

$

 —

 

$

 —

 

$

36,669

 

$

 —

 

$

36,669

Net realized gain (loss) on financial instruments

 

 

(739)

 

 

3,649

 

 

4,262

 

 

 —

 

 

 —

 

 

7,172

Net unrealized gain (loss) on financial instruments

 

 

(9,423)

 

 

(6,491)

 

 

(1,082)

 

 

(16,438)

 

 

 —

 

 

(33,434)

Servicing income

 

 

355

 

 

532

 

 

1,074

 

 

6,136

 

 

 —

 

 

8,097

Income on purchased future receivables, net of allowance for doubtful accounts

 

 

3,483

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

3,483

Loss from unconsolidated joint ventures

 

 

(3,537)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(3,537)

Other income

 

 

2,336

 

 

1,283

 

 

295

 

 

60

 

 

99

 

 

4,073

Total non-interest income (loss)

 

$

(7,525)

 

$

(1,027)

 

$

4,549

 

$

26,427

 

$

99

 

$

22,523

Non-interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

$

(2,833)

 

$

(2,710)

 

$

(3,910)

 

$

(8,741)

 

$

(742)

 

$

(18,936)

Allocated employee compensation and benefits from related party

 

 

(125)

 

 

 —

 

 

 —

 

 

 —

 

 

(1,125)

 

 

(1,250)

Variable expenses on residential mortgage banking activities

 

 

 —

 

 

 —

 

 

 —

 

 

(20,129)

 

 

 —

 

 

(20,129)

Professional fees

 

 

(235)

 

 

(338)

 

 

(289)

 

 

(287)

 

 

(1,407)

 

 

(2,556)

Management fees – related party

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(2,561)

 

 

(2,561)

Loan servicing expense

 

 

(1,365)

 

 

(1,580)

 

 

(335)

 

 

(2,258)

 

 

(32)

 

 

(5,570)

Merger related expenses

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(47)

 

 

(47)

Other operating expenses

 

 

(6,245)

 

 

(3,457)

 

 

(1,559)

 

 

(1,785)

 

 

(698)

 

 

(13,744)

Total non-interest expense

 

$

(10,803)

 

$

(8,085)

 

$

(6,093)

 

$

(33,200)

 

$

(6,612)

 

$

(64,793)

Net loss before provision for income taxes

 

$

(18,761)

 

$

(25,298)

 

$

(1,840)

 

$

(7,041)

 

$

(6,513)

 

$

(59,453)

Total assets

 

$

1,209,617

 

$

2,704,301

 

$

703,331

 

$

418,421

 

$

234,380

 

$

5,270,050

 

Reportable business segments, along with remaining unallocated amounts recorded within Corporate- Other, for the three months ended March 31, 2019 are summarized in the below table.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

SBA Originations,

    

Residential

    

 

    

 

 

 

 

 

SBC

 

Acquisitions,

 

Mortgage

 

Corporate-

 

 

(In Thousands)

 

Acquisitions

 

Originations

 

and Servicing

 

Banking

 

Other

 

Consolidated

Interest income

 

$

10,674

 

$

28,188

 

$

9,109

 

$

782

 

$

 —

 

$

48,753

Interest expense

 

 

(7,705)

 

 

(20,666)

 

 

(6,490)

 

 

(914)

 

 

 —

 

 

(35,775)

Net interest income before provision for loan losses

 

$

2,969

 

$

7,522

 

$

2,619

 

$

(132)

 

$

 —

 

$

12,978

Provision for loan losses

 

 

(133)

 

 

41

 

 

(426)

 

 

 —

 

 

 —

 

 

(518)

Net interest income after provision for loan losses

 

$

2,836

 

$

7,563

 

$

2,193

 

$

(132)

 

$

 —

 

$

12,460

Non-interest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage banking activities

 

$

 —

 

$

 —

 

$

 —

 

$

14,587

 

$

 —

 

$

14,587

Net realized gain (loss) on financial instruments

 

 

(49)

 

 

3,540

 

 

3,791

 

 

 —

 

 

 —

 

 

7,282

Net unrealized gain (loss) on financial instruments

 

 

(19)

 

 

810

 

 

(575)

 

 

(7,128)

 

 

 —

 

 

(6,912)

Servicing income

 

 

 1

 

 

436

 

 

1,015

 

 

5,300

 

 

 —

 

 

6,752

Income on unconsolidated joint ventures

 

 

2,929

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

2,929

Other income

 

 

68

 

 

786

 

 

14

 

 

17

 

 

15

 

 

900

Gain on bargain purchase

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

30,728

 

 

30,728

Total non-interest income

 

$

2,930

 

$

5,572

 

$

4,245

 

$

12,776

 

$

30,743

 

$

56,266

Non-interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

$

(1)

 

$

(2,260)

 

$

(3,768)

 

$

(4,595)

 

$

(824)

 

$

(11,448)

Allocated employee compensation and benefits from related party

 

 

(85)

 

 

 —

 

 

 —

 

 

 —

 

 

(768)

 

 

(853)

Variable expenses on residential mortgage banking activities

 

 

 —

 

 

 —

 

 

 —

 

 

(9,176)

 

 

 —

 

 

(9,176)

Professional fees

 

 

(170)

 

 

(301)

 

 

(187)

 

 

(236)

 

 

(935)

 

 

(1,829)

Management fees – related party

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(1,997)

 

 

(1,997)

Loan servicing expense

 

 

(801)

 

 

(1,215)

 

 

143

 

 

(1,740)

 

 

(35)

 

 

(3,648)

Merger related expenses

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(5,467)

 

 

(5,467)

Other operating expenses

 

 

(421)

 

 

(2,117)

 

 

(1,050)

 

 

(2,073)

 

 

(1,200)

 

 

(6,861)

Total non-interest expense

 

$

(1,478)

 

$

(5,893)

 

$

(4,862)

 

$

(17,820)

 

$

(11,226)

 

$

(41,279)

Net income (loss) before provision for income taxes

 

$

4,288

 

$

7,242

 

$

1,576

 

$

(5,176)

 

$

19,517

 

$

27,447

Total assets

 

$

864,881

 

$

1,823,166

 

$

251,778

 

$

277,727

 

$

61,462

 

$

3,279,014