Segment Reporting

6 Months Ended

Jun. 30, 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 June 30, 2020 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	$	14,977	$	37,497	$	8,808	$	1,929	$	—	$	63,211
Interest expense		(10,654)		(23,507)		(6,839)		(2,036)		(372)		(43,408)
Net interest income before provision for loan losses	$	4,323	$	13,990	$	1,969	$	(107)	$	(372)	$	19,803
Provision for loan losses		(1,965)		5,821		(2,765)		(500)		—		591
Net interest income after provision for loan losses	$	2,358	$	19,811	$	(796)	$	(607)	$	(372)	$	20,394
Non-interest income
Residential mortgage banking activities	$	—	$	—	$	—	$	80,564	$	—	$	80,564
Net realized gain on financial instruments		(396)		6,232		1,602		—		—		7,438
Net unrealized gain on financial instruments		(1,016)		(716)		31		(12,043)		—		(13,744)
Other income		1,419		1,439		28,674		46		16		31,594
Servicing income		172		399		2,393		6,018		—		8,982
Income on purchased future receivables, net of allowance for doubtful accounts		5,586		—		—		—		—		5,586
Income from unconsolidated joint ventures		507		—		—		—		—		507
Total non-interest income	$	6,272	$	7,354	$	32,700	$	74,585	$	16	$	120,927
Non-interest expense
Employee compensation and benefits		(2,638)		(4,689)		(3,485)		(15,843)		(633)		(27,288)
Allocated employee compensation and benefits from related party		(125)		—		—		—		(1,125)		(1,250)
Variable expenses on residential mortgage banking activities		—		—		—		(36,446)		—		(36,446)
Professional fees		(251)		(104)		(138)		(271)		(1,155)		(1,919)
Management fees – related party		—		—		—		—		(2,666)		(2,666)
Incentive fees – related party		—		—		—		—		(3,506)		(3,506)
Loan servicing expense		(1,500)		(1,711)		(247)		(6,861)		(8)		(10,327)
Merger related expenses		—		—		—		—		(11)		(11)
Other operating expenses		(4,072)		(4,429)		(6,530)		(1,973)		(741)		(17,745)
Total non-interest expense	$	(8,586)	$	(10,933)	$	(10,400)	$	(61,394)	$	(9,845)	$	(101,158)
Net income (loss) before provision for income taxes	$	44	$	16,232	$	21,504	$	12,584	$	(10,201)	$	40,163
Total assets	$	1,125,035	$	2,620,406	$	804,355	$	568,353	$	342,783	$	5,460,932

Reportable business segments, along with remaining unallocated amounts recorded within Corporate- Other, for the six months ended June 30, 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	$	31,470	$	76,766	$	21,279	$	3,247	$	—	$	132,762
Interest expense		(21,859)		(49,134)		(15,352)		(3,621)		(372)		(90,338)
Net interest income before provision for loan losses	$	9,611	$	27,632	$	5,927	$	(374)	$	(372)	$	42,424
Provision for loan losses		(7,688)		(24,007)		(7,019)		(500)		—		(39,214)
Net interest income after provision for loan losses	$	1,923	$	3,625	$	(1,092)	$	(874)	$	(372)	$	3,210
Non-interest income
Residential mortgage banking activities	$	—	$	—	$	—	$	117,233	$	—	$	117,233
Net realized gain (loss) on financial instruments		(1,135)		9,881		5,864		—		—		14,610
Net unrealized gain (loss) on financial instruments		(10,439)		(7,207)		(1,051)		(28,481)		—		(47,178)
Servicing income		527		931		3,467		12,154		—		17,079
Income on purchased future receivables, net of allowance for doubtful accounts		9,069		—		—		—		—		9,069
Loss from unconsolidated joint ventures		(3,030)		—		—		—		—		(3,030)
Other income		3,755		2,722		28,969		106		115		35,667
Total non-interest income (loss)	$	(1,253)	$	6,327	$	37,249	$	101,012	$	115	$	143,450
Non-interest expense
Employee compensation and benefits	$	(5,471)	$	(7,399)	$	(7,395)	$	(24,584)	$	(1,375)	$	(46,224)
Allocated employee compensation and benefits from related party		(250)		—		—		—		(2,250)		(2,500)
Variable expenses on residential mortgage banking activities		—		—		—		(56,575)		—		(56,575)
Professional fees		(486)		(442)		(427)		(558)		(2,562)		(4,475)
Management fees – related party		—		—		—		—		(5,227)		(5,227)
Incentive fees – related party		—		—		—		—		(3,506)		(3,506)
Loan servicing expense		(2,866)		(3,291)		(582)		(9,119)		(40)		(15,898)
Merger related expenses		—		—		—		—		(58)		(58)
Other operating expenses		(10,317)		(7,886)		(8,089)		(3,758)		(1,437)		(31,487)
Total non-interest expense	$	(19,390)	$	(19,018)	$	(16,493)	$	(94,594)	$	(16,455)	$	(165,950)
Net loss before provision for income taxes	$	(18,720)	$	(9,066)	$	19,664	$	5,544	$	(16,712)	$	(19,290)
Total assets	$	1,125,035	$	2,620,406	$	804,355	$	568,353	$	342,783	$	5,460,932

Reportable business segments, along with remaining unallocated amounts recorded within Corporate- Other, for the three months ended June 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	$	18,208	$	30,639	$	7,124	$	1,063	$	—	$	57,034
Interest expense		(10,602)		(21,401)		(2,300)		(1,450)		—		(35,753)
Net interest income before provision for loan losses	$	7,606	$	9,238	$	4,824	$	(387)	$	—	$	21,281
Provision for loan losses		(544)		(350)		(454)		—		—		(1,348)
Net interest income after provision for loan losses	$	7,062	$	8,888	$	4,370	$	(387)	$	—	$	19,933
Non-interest income
Residential mortgage banking activities	$	—	$	—	$	—	$	21,021	$	—	$	21,021
Net realized gain on financial instruments		453		1,627		4,175		—		—		6,255
Net unrealized gain (loss) on financial instruments		(661)		(76)		71		(6,340)		—		(7,006)
Other income		957		1,661		39		85		50		2,792
Servicing income		—		461		1,818		5,532		—		7,811
Income from unconsolidated joint ventures		2,083		—		—		—		—		2,083
Total non-interest income	$	2,832	$	3,673	$	6,103	$	20,298	$	50	$	32,956
Non-interest expense
Employee compensation and benefits	$	(26)	$	(1,774)	$	(4,424)	$	(5,445)	$	(840)		(12,509)
Allocated employee compensation and benefits from related party		(125)		—		—		—		(1,125)		(1,250)
Variable expenses on residential mortgage banking activities		—		—		—		(13,501)		—		(13,501)
Professional fees		(47)		(313)		(169)		(229)		(828)		(1,586)
Management fees – related party		—		—		—		—		(2,495)		(2,495)
Incentive fees – related party		—		—		—		—		—		—
Loan servicing (expense) income		(1,117)		(1,475)		(260)		(1,677)		(42)		(4,571)
Merger related expenses		—		—		—		—		(603)		(603)
Other operating expenses		(882)		(2,712)		(2,076)		(2,054)		(361)		(8,085)
Total non-interest expense	$	(2,197)	$	(6,274)	$	(6,929)	$	(22,906)	$	(6,294)	$	(44,600)
Net income (loss) before provision for income taxes	$	7,697	$	6,287	$	3,544	$	(2,995)	$	(6,244)	$	8,289
Total assets	$	1,158,351	$	2,055,751	$	261,326	$	303,465	$	61,430	$	3,840,323

Reportable business segments, along with remaining unallocated amounts recorded within Corporate- Other, for the six months ended June 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	$	28,881	$	58,828	$	16,233	$	1,845	$	—	$	105,787
Interest expense		(18,307)		(42,068)		(8,790)		(2,364)		—		(71,529)
Net interest income before provision for loan losses	$	10,574	$	16,760	$	7,443	$	(519)	$	—	$	34,258
Provision for loan losses		(677)		(309)		(880)		—		—		(1,866)
Net interest income after provision for loan losses	$	9,897	$	16,451	$	6,563	$	(519)	$	—	$	32,392
Non-interest income
Residential mortgage banking activities	$	—	$	—	$	—	$	35,608	$	—	$	35,608
Net realized gain (loss) on financial instruments		404		5,167		7,966		—		—		13,537
Net unrealized gain (loss) on financial instruments		(680)		734		(504)		(13,468)		—		(13,918)
Servicing income		1		897		2,833		10,832		—		14,563
Income on unconsolidated joint ventures		5,012		—		—		—		—		5,012
Other income		1,025		2,447		53		102		65		3,692
Gain on bargain purchase		—		—		—		—		30,728		30,728
Total non-interest income	$	5,762	$	9,245	$	10,348	$	33,074	$	30,793	$	89,222
Non-interest expense
Employee compensation and benefits	$	(27)	$	(4,034)	$	(8,192)	$	(10,040)	$	(1,664)	$	(23,957)
Allocated employee compensation and benefits from related party		(210)		—		—		—		(1,893)		(2,103)
Variable expenses on residential mortgage banking activities		—		—		—		(22,677)		—		(22,677)
Professional fees		(217)		(614)		(356)		(465)		(1,763)		(3,415)
Management fees – related party		—		—		—		—		(4,492)		(4,492)
Loan servicing expense		(1,918)		(2,690)		(117)		(3,417)		(77)		(8,219)
Merger related expenses		—		—		—		—		(6,070)		(6,070)
Other operating expenses		(1,304)		(4,829)		(3,126)		(4,127)		(1,561)		(14,947)
Total non-interest expense	$	(3,676)	$	(12,167)	$	(11,791)	$	(40,726)	$	(17,520)	$	(85,880)
Net income (loss) before provision for income taxes	$	11,983	$	13,529	$	5,120	$	(8,171)	$	13,273	$	35,734
Total assets	$	1,158,351	$	2,055,751	$	261,326	$	303,465	$	61,430	$	3,840,323