Segment Reporting

12 Months Ended

Dec. 31, 2020

Segment Reporting

Segment Reporting

Note 27. Segment reporting

The Company reports its results of operations through the following four business segments: i) 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 year ended December 31, 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	$	61,156	$	150,369	$	39,430	$	7,681	$	—	$	258,636
Interest expense		(43,383)		(95,061)		(27,472)		(8,294)		(1,271)		(175,481)
Net interest income before provision for loan losses	$	17,773	$	55,308	$	11,958	$	(613)	$	(1,271)	$	83,155
(Provision for) recovery of loan losses		(3,502)		(23,432)		(7,792)		—		—		(34,726)
Net interest income after (provision for) recovery of loan losses	$	14,271	$	31,876	$	4,166	$	(613)	$	(1,271)	$	48,429
Non-interest income
Residential mortgage banking activities	$	—	$	—	$	—	$	252,720	$	—	$	252,720
Net realized gain on financial instruments and real estate owned		(5,077)		18,426		18,564		—		—		31,913
Net unrealized gain (loss) on financial instruments		(7,189)		(2,574)		(1,084)		(37,254)		—		(48,101)
Other income		7,240		4,431		29,473		183		189		41,516
Servicing income		723		2,265		10,377		25,229		—		38,594
Income on purchased future receivables, net of allowance for doubtful accounts		15,711		—		—		—		—		15,711
Income (loss) on unconsolidated joint ventures		2,404		—		—		—		—		2,404
Total non-interest income	$	13,812	$	22,548	$	57,330	$	240,878	$	189	$	334,757
Non-interest expense
Employee compensation and benefits	$	(9,491)	$	(14,137)	$	(19,516)	$	(45,368)	$	(3,408)	$	(91,920)
Allocated employee compensation and benefits from related party		(700)		—		—		—		(6,300)		(7,000)
Variable expenses on residential mortgage banking activities		—		—		—		(114,510)		—		(114,510)
Professional fees		(1,796)		(1,224)		(993)		(1,777)		(7,570)		(13,360)
Management fees – related party		—		—		—		—		(10,682)		(10,682)
Incentive fees – related party		—		—		—		—		(5,973)		(5,973)
Loan servicing expense		(6,017)		(8,373)		(675)		(15,754)		(37)		(30,856)
Merger related expenses		—		—		—		—		(63)		(63)
Other operating expenses		(16,259)		(13,582)		(12,550)		(8,737)		(3,241)		(54,369)
Total non-interest expense	$	(34,263)	$	(37,316)	$	(33,734)	$	(186,146)	$	(37,274)	$	(328,733)
Income (loss) before provision for income taxes	$	(6,180)	$	17,108	$	27,762	$	54,119	$	(38,356)	$	54,453
Total assets	$	1,189,825	$	2,621,478	$	734,196	$	626,035	$	200,561	$	5,372,095

Reportable segments for the year ended December 31, 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	$	65,922	$	127,495	$	32,096	$	4,403	$	—	$	229,916
Interest expense		(40,502)		(90,677)		(14,864)		(5,837)		—		(151,880)
Net interest income before provision for loan losses	$	25,420	$	36,818	$	17,232	$	(1,434)	$	—	$	78,036
(Provision for) recovery of loan losses		(808)		(319)		(2,557)		—		—		(3,684)
Net interest income after provision for loan losses	$	24,612	$	36,499	$	14,675	$	(1,434)	$	—	$	74,352
Non-interest income
Residential mortgage banking activities	$	—	$	—	$	—	$	83,539	$	—	$	83,539
Net realized gain (loss) on financial instruments		18		13,750		15,190		—		—		28,958
Net unrealized gain (loss) on financial instruments		(254)		(107)		393		(18,569)		(253)		(18,790)
Other income		4,210		4,907		1,548		249		164		11,078
Income on purchased future receivables, net		2,362		—		—		—		—		2,362
Servicing income		798		1,898		5,330		22,639		—		30,665
Income on unconsolidated joint ventures		6,088		—		—		—		—		6,088
Gain on bargain purchase		—		—		—		—		30,728		30,728
Total non-interest income	$	13,222	$	20,448	$	22,461	$	87,858	$	30,639	$	174,628
Non-interest expense
Employee compensation and benefits	$	(1,855)	$	(6,905)	$	(16,255)	$	(22,882)	$	(3,340)	$	(51,237)
Allocated employee compensation and benefits from related party		(547)		—		—		—		(4,926)		(5,473)
Variable expenses on residential mortgage banking activities		—		—		—		(51,760)		—		(51,760)
Professional fees		(723)		(1,652)		(1,011)		(1,101)		(2,947)		(7,434)
Management fees – related party		—		—		—		—		(9,578)		(9,578)
Incentive fees – related party		—		—		—		—		(106)		(106)
Loan servicing expense		(4,662)		(5,695)		(261)		(7,225)		(133)		(17,976)
Merger related expenses		—		—		—		—		(7,750)		(7,750)
Other operating expenses		(4,573)		(11,199)		(6,591)		(7,717)		(3,082)		(33,162)
Total non-interest expense	$	(12,360)	$	(25,451)	$	(24,118)	$	(90,685)	$	(31,862)	$	(184,476)
Income (loss) before provision for income taxes	$	25,474	$	31,496	$	13,018	$	(4,261)	$	(1,223)	$	64,504
Total assets	$	1,264,226	$	2,492,156	$	760,031	$	330,363	$	130,242	$	4,977,018

Reportable segments for the year ended December 31, 2018 are summarized in the below table.

					SBA Originations,		Residential
			SBC		Acquisitions,		Mortgage		Corporate-
(In Thousands)	Acquisitions		Originations		and Servicing		Banking		Other		Consolidated
Interest income	$	47,243	$	81,752	$	36,706	$	3,798	$	—	$	169,499
Interest expense		(28,946)		(60,879)		(16,218)		(3,195)		—		(109,238)
Net interest income before provision for loan losses	$	18,297	$	20,873	$	20,488	$	603	$	—	$	60,261
Provision for loan losses		(1,727)		(13)		39		—		—		(1,701)
Net interest income after provision for loan losses	$	16,570	$	20,860	$	20,527	$	603	$	—	$	58,560
Non-interest income
Residential mortgage banking activities	$	—	$	—	$	—	$	59,852	$	—	$	59,852
Net realized gain (loss) on financial instruments		5,023		17,482		15,904		—		—		38,409
Net unrealized gain (loss) on financial instruments		(1,156)		142		173		5,694		—		4,853
Servicing income		20		1,396		5,390		20,269		—		27,075
Income on unconsolidated joint venture		12,148		—		—		—		—		12,148
Other income		368		4,366		621		200		31		5,586
Total non-interest income	$	16,403	$	23,386	$	22,088	$	86,015	$	31	$	147,923
Non-interest expense
Employee compensation and benefits		(386)		(8,815)		(13,077)		(33,401)		(923)		(56,602)
Allocated employee compensation and benefits from related party		(420)		—		—		—		(3,780)		(4,200)
Variable expenses on residential mortgage banking activities		—		—		—		(22,228)		—		(22,228)
Professional fees		(1,310)		(1,285)		(820)		(607)		(2,977)		(6,999)
Management fees – related party		—		—		—		—		(8,176)		(8,176)
Incentive fees – related party		—		—		—		—		(1,143)		(1,143)
Loan servicing expense		(3,926)		(3,883)		(260)		(7,444)		(32)		(15,545)
Other operating expenses		(3,214)		(10,392)		(4,070)		(8,254)		(2,817)		(28,747)
Total non-interest expense	$	(9,256)	$	(24,375)	$	(18,227)	$	(71,934)	$	(19,848)	$	(143,640)
Income (loss) before provision for income taxes	$	23,717	$	19,871	$	24,388	$	14,684	$	(19,817)	$	62,843
Total Assets	$	644,512	$	1,606,210	$	455,513	$	260,523	$	70,085	$	3,036,843