Segments and Related Information

9 Months Ended

Sep. 30, 2013

Segments and Related Information

Segments and Related Information

Note 24—Segments and Related Information

The Company has two operating segments: mortgage banking and investment management.

The mortgage banking segment represents the Company’s operations aimed at originating, purchasing, selling and servicing newly originated mortgage loans and servicing mortgage loans sourced and managed by the investment management segment, including executing the loan resolution strategy identified by the investment management segment relating to distressed mortgage loans.

The investment management segment represents the activities of the Company’s investment manager, which include sourcing, performing diligence, bidding and completion of asset acquisitions and managing the acquired assets for the Advised Entities.

The investment management segment presently focuses on managing investments in distressed mortgage assets, which include mortgage loans that are either in default or are perceived to be at higher risk of default. The investment management segment then seeks to maximize the value of the mortgage loans on behalf of investors through the direction of effective “high touch” servicing by the mortgage banking segment. “High touch” servicing is based on significant levels of borrower outreach and contact, and the ability to implement long-term, sustainable loan modification and restructuring programs that address borrowers’ ability and willingness to pay their mortgage loans. Where this is not possible, the investment management segment seeks to effect property resolution in a timely, orderly and economically efficient manner for the investor.

Financial highlights by operating segment are as follows:

	Quarter ended September 30, 2013
	Mortgage banking			Investment management		Total
	(in thousands)
Revenues:
Net gains on mortgage loans held for sale at fair value	$	25,949		$	—	$	25,949
Loan origination fees	6,280			—		6,280
Fulfillment fees from PMT	18,327			—		18,327
Net servicing income	21,399			—		21,399
Management fees	—			10,540		10,540
Carried Interest from Investment Funds	—			2,812		2,812
Net interest income:
Interest income	5,089			4		5,093
Interest expense	(4,156		)	—		(4,156		)
	933			4		937
Other	(22		)	972		950
	72,866			14,328		87,194
Expenses:
Compensation	33,969			1,861		35,830
Other	16,240			207		16,447
	50,209			2,068		52,277
Income before provision for income taxes	$	22,657		$	12,260	$	34,917
Segment assets at period end	$	1,208,156		$	46,228	$	1,254,384

	Quarter ended September 30, 2012
	Mortgage banking			Investment management		Total
	(in thousands)
Revenues:
Net gains on mortgage loans held for sale at fair value	$	39,760		$	—	$	39,760
Loan origination fees	2,752			—		2,752
Fulfillment fees from PMT	17,258			—		17,258
Net servicing income	6,112			—		6,112
Management fees	—			6,114		6,114
Carried Interest from Investment Funds	—			3,355		3,355
Net interest income (expense):
Interest income	1,913			1		1,914
Interest expense	(2,042		)	—		(2,042		)
	(129		)	1		(128		)
Other	1			1,008		1,009
	65,754			10,478		76,232
Expenses:
Compensation	29,089			2,767		31,856
Other	6,375			138		6,513
	35,464			2,905		38,369
Income before provision for income taxes	$	30,290		$	7,573	$	37,863
Segment assets at period end	$	709,733		$	17,529	$	727,262

	Nine months ended September 30, 2013
	Mortgage banking			Investment management		Total
	(in thousands)
Revenues:
Net gains on mortgage loans held for sale at fair value	$	108,560		$	—	$	108,560
Loan origination fees	18,260			—		18,260
Fulfillment fees from PMT	68,625			—		68,625
Net servicing income	59,510			—		59,510
Management fees	—			29,375		29,375
Carried Interest from Investment Funds	—			10,411		10,411
Net interest income (expense):
Interest income	11,296			14		11,310
Interest expense	(11,686		)	—		(11,686		)
	(390		)	14		(376		)
Other	(22		)	1,796		1,774
	254,543			41,596		296,139
Expenses:
Compensation	106,584			7,266		113,850
Other	41,354			496		41,850
	147,938			7,762		155,700
Income before provision for income taxes	$	106,605		$	33,834	$	140,439
Segment assets at period end	$	1,208,156		$	46,228	$	1,254,384

	Nine months ended September 30, 2012
	Mortgage banking			Investment management		Total
	(in thousands)
Revenues:
Net gains on mortgage loans held for sale at fair value	$	68,487		$	—	$	68,487
Loan origination fees	5,439			—		5,439
Fulfillment fees from PMT	31,097			—		31,097
Net servicing income	25,346			—		25,346
Management fees	—			15,163		15,163
Carried Interest from Investment Funds	—			7,255		7,255
Net interest income:
Interest income	4,488			3		4,491
Interest expense	(4,226		)	—		(4,226		)
	262			3		265
Other	1			2,514		2,515
	130,632			24,935		155,567
Expenses:
Compensation	71,541			6,214		77,755
Other	14,443			466		14,909
	85,984			6,680		92,664
Income before provision for income taxes	$	44,648		$	18,255	$	62,903
Segment assets at period end	$	709,733		$	17,529	$	727,262