Discontinued Operations and Assets and Liabilities For Sale

3 Months Ended

Mar. 31, 2024

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, 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. The Company expects to consummate this transaction in the current year.

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

(in thousands)		March 31, 2024		December 31, 2023
Assets
Cash and cash equivalents	$	10,555	$	13,694
Restricted cash		4,970		6,314
Loans, net		2,970		2,778
Loans, held for sale		116,061		133,204
Loans eligible for repurchase from Ginnie Mae		86,004		86,872
Derivative instruments		107		847
Servicing rights(1)		191,228		188,855
Other assets		27,406		22,032
Total Assets	$	439,301	$	454,596
Liabilities
Secured borrowings		219,166		230,965
Liabilities for loans eligible for repurchase from Ginnie Mae		86,004		86,872
Derivative instruments		—		1,321
Accounts payable and other accrued liabilities		10,805		13,999
Total Liabilities	$	315,975	$	333,157
(1) Servicing rights are Level 3 assets that had been measured at fair value using the income approach valuation technique. Refer to 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.

	Three Months Ended March 31,
(in thousands)	2024		2023
Interest income	$	1,842	$	1,605
Interest expense		(2,530)		(1,526)
Net interest income (loss) before provision for loan losses	$	(688)	$	79
Non-interest income
Residential mortgage banking activities		9,242		9,169
Net unrealized gain (loss) on financial instruments		—		(6,093)
Servicing income, net of amortization and impairment		9,416		9,361
Other income		4		31
Total non-interest income	$	18,662	$	12,468
Non-interest expense
Employee compensation and benefits		(5,684)		(5,412)
Variable expenses on residential mortgage banking activities		(6,086)		(5,485)
Professional fees		(153)		(174)
Loan servicing expense		(2,329)		(1,808)
Other operating expenses		(1,835)		(1,709)
Total non-interest expense	$	(16,087)	$	(14,588)
Income (loss) from discontinued operations before provision for income taxes		1,887		(2,041)
Income tax (provision) benefit		(472)		510
Net income (loss) from discontinued operations	$	1,415	$	(1,531)