Discontinued Operations and Assets and Liabilities For Sale

12 Months Ended

Dec. 31, 2023

Discontinued operations and assets and liabilities held for sale

Discontinued operations and assets and liabilities held for sale

Note 9. Discontinued operations and assets and liabilities held for sale

In the fourth quarter of 2023, the Board approved a plan to strategically shift the Company’s core focus to LMM commercial real estate lending and government backed small business loans, which contemplates the disposition of assets and liabilities of the Company’s residential mortgage banking activities. Accordingly, as of December 31, 2023, the Residential Mortgage Banking segment met the criteria to be classified as held for sale on the consolidated balance sheets,

presented as discontinued operations on the consolidated statements of income, and excluded from continuing operations for all periods presented. We expect to consummate this transaction in the first half of 2024.

The table below presents the assets and liabilities of the Residential Mortgage Banking segment classified as held for sale.

(in thousands)		December 31, 2023		December 31, 2022
Assets
Cash and cash equivalents	$	13,694	$	15,642
Restricted cash		6,314		7,781
Loans, net		2,778		4,511
Loans, held for sale		133,204		134,642
Loans eligible for repurchase from Ginnie Mae		86,872		66,193
Derivative instruments		847		431
Servicing rights(1)		188,855		192,203
Other assets		22,032		17,788
Total Assets	$	454,596	$	439,191
Liabilities
Secured borrowings		230,965		182,558
Liabilities for loans eligible for repurchase from Ginnie Mae		86,872		66,193
Derivative instruments		1,321		267
Accounts payable and other accrued liabilities		13,999		22,906
Total Liabilities	$	333,157	$	271,924

(1) Servicing rights are Level 3 assets that had been measured at fair value using the income approach valuation technique. See Note 7- Fair value measurements for further details.

The table below presents the operating results of the Residential Mortgage Banking segment presented as discontinued operations.

	For the Year Ended December 31,
(in thousands)	2023		2022			2021
Interest income	$	7,148	$	7,953	$	8,300
Interest expense		(7,655)		(8,414)		(9,193)
Net interest income (loss) before provision for loan losses	$	(507)	$	(461)	$	(893)
Non-interest income
Residential mortgage banking activities		33,439		23,973		137,297
Net unrealized gain (loss) on financial instruments		(15,426)		46,063		16,921
Servicing income, net of amortization and impairment		37,181		34,497		30,392
Other income		47		38		2,153
Total non-interest income	$	55,241	$	104,571	$	186,763
Non-interest expense
Employee compensation and benefits		(19,177)		(24,237)		(32,973)
Variable expenses on residential mortgage banking activities		(21,822)		(4,340)		(75,133)
Professional fees		(641)		(791)		(2,951)
Loan servicing expense		(10,130)		(9,222)		(9,417)
Other operating expenses		(6,743)		(7,650)		(8,499)
Total non-interest expense	$	(58,513)	$	(46,240)	$	(128,973)
Income (loss) from discontinued operations before provision for income taxes		(3,779)		57,870		56,897
Income tax (provision) benefit		945		(14,258)		(14,224)
Net income (loss) from discontinued operations	$	(2,834)	$	43,612	$	42,673