Lennar Financial Services Segment (Tables)

6 Months Ended

May 31, 2017

Segment Reporting [Abstract]

Schedule of Assets and Liabilities

Financial information relating to the Company’s operations was as follows:

(In thousands)	May 31, 2017		November 30, 2016
Assets:
Homebuilding East (1)	$	4,764,611	3,512,990
Homebuilding Central	2,032,627		1,993,403
Homebuilding West	4,684,956		4,318,924
Homebuilding Other	903,137		907,523
Rialto	1,364,421		1,276,210
Lennar Financial Services	1,444,294		1,754,672
Lennar Multifamily	653,229		526,131
Corporate and unallocated	907,230		1,071,928
Total assets	$	16,754,505	15,361,781
Lennar Homebuilding goodwill (2)	$	136,633	—
Rialto goodwill	$	5,396	5,396
Lennar Financial Services goodwill (2)	$	59,838	39,838

(1) Homebuilding East segment includes the provisional fair values of homebuilding assets acquired as part of the WCI acquisition.

(2) In connection with the WCI acquisition, the Company allocated $136.6 million of goodwill to the Lennar Homebuilding East reportable segment and $20.0 million to the Lennar Financial Services segment. These amounts are provisional pending completion of the fair value analysis of acquired assets and liabilities.

	Three Months Ended					Six Months Ended
	May 31,					May 31,
(In thousands)	2017			2016		2017		2016
Revenues:
Homebuilding East	$	1,194,890		954,298		1,962,616		1,613,352
Homebuilding Central	682,342			608,987		1,198,523		1,022,827
Homebuilding West	770,194			718,059		1,322,992		1,269,398
Homebuilding Other	238,315			169,541		420,304		331,789
Lennar Financial Services	208,363			175,940		356,406		299,896
Rialto	67,988			44,838		149,994		88,549
Lennar Multifamily	99,800			74,152		188,485		113,668
Total revenues (1)	$	3,261,892		2,745,815		5,599,320		4,739,479
Operating earnings (loss):
Homebuilding East (2)	$	153,707		142,938		97,998		227,644
Homebuilding Central	75,944			68,762		128,802		101,957
Homebuilding West	71,224			113,807		124,584		202,641
Homebuilding Other	31,705			17,189		52,534		31,092
Lennar Financial Services	43,727			44,088		64,391		59,019
Rialto	(6,462		)	(18,086	)	(7,305	)	(16,476	)
Lennar Multifamily	6,529			14,943		25,712		27,125
Total operating earnings	376,374			383,641		486,716		633,002
Corporate general and administrative expenses	66,774			55,802		127,473		103,470
Earnings before income taxes	$	309,600		327,839		359,243		529,532

(1) Total revenues were net of sales incentives of $174.5 million ($22,700 per home delivered) and $298.1 million ($22,700 per home delivered) for the three and six months ended May 31, 2017, respectively, compared to $146.1 million ($21,800 per home delivered) and $249.8 million ($21,700 per home delivered) for the three and six months ended May 31, 2016, respectively.

(2)

Homebuilding East operating earnings for the six months ended May 31, 2017 included a $140 million loss due to litigation (see Note 17).The assets and liabilities related to the Lennar Financial Services segment were as follows:

(In thousands)	May 31, 2017		November 30, 2016
Assets:
Cash and cash equivalents	$	107,436	123,964
Restricted cash	13,311		17,053
Receivables, net (1)	213,550		409,528
Loans held-for-sale (2)	820,443		939,405
Loans held-for-investment, net	32,691		30,004
Investments held-to-maturity	54,824		41,991
Investments available-for-sale (3)	56,005		53,570
Goodwill (4)	59,838		39,838
Other (5)	86,196		99,319
	$	1,444,294	1,754,672
Liabilities:
Notes and other debts payable	$	792,623	1,077,228
Other (6)	245,040		241,055
	$	1,037,663	1,318,283

(1) Receivables, net primarily related to loans sold to investors for which the Company had not yet been paid as of May 31, 2017 and November 30, 2016, respectively.

(2) Loans held-for-sale related to unsold loans carried at fair value.

(3) Investments available-for-sale are carried at fair value with changes in fair value recorded as a component of accumulated other comprehensive income (loss).

(4) As of May 31, 2017, goodwill included $20.0 million of goodwill related to the WCI acquisition. The amount provided herein is provisional, pending completion of the fair value analysis of WCI's acquired assets and liabilities assumed (see Note 2).

(5) As of May 31, 2017 and November 30, 2016, other assets included mortgage loan commitments carried at fair value of $18.4 million and $7.4 million, respectively, and mortgage servicing rights carried at fair value of $27.4 million and $23.9 million, respectively. In addition, other assets also included forward contracts carried at fair value of $26.5 million as of November 30, 2016.

(6)

As of May 31, 2017 and November 30, 2016, other liabilities included $58.4 million and $57.4 million, respectively, of certain of the Company’s self-insurance reserves related to construction defects, general liability and workers’ compensation. Other liabilities also included forward contracts carried at fair value of $6.8 million as of May 31, 2017.The assets and liabilities related to the Rialto segment were as follows:

(In thousands)	May 31, 2017		November 30, 2016
Assets:
Cash and cash equivalents	$	119,592	148,827
Restricted cash (1)	6,026		9,935
Receivables, net (2)	415,285		204,518
Loans held-for-sale (3)	106,615		126,947
Loans receivable, net	65,326		111,608
Real estate owned, net	160,452		243,703
Investments in unconsolidated entities	244,301		245,741
Investments held-to-maturity	112,452		71,260
Other	134,372		113,671
	$	1,364,421	1,276,210
Liabilities:
Notes and other debts payable (4)	$	781,845	622,335
Other	78,767		85,645
	$	860,612	707,980

(1) Restricted cash primarily consists of upfront deposits and application fees RMF receives before originating loans and is recognized as income once the loan has been originated, as well as cash held in escrow by the Company’s loan servicer provider on behalf of customers and lenders and is disbursed in accordance with agreements between the transacting parties.

(2) Receivables, net primarily related to loans sold but not settled as of May 31, 2017 and November 30, 2016, respectively.

(3) Loans held-for-sale related to unsold loans originated by RMF carried at fair value and loans in the FDIC Portfolios carried at lower of cost or market.

(4)

As of May 31, 2017 and November 30, 2016, notes and other debts payable primarily included $349.0 million and $348.7 million, respectively, related to Rialto's 7.00% senior notes due 2018, and $363.6 million and $223.5 million, respectively, related to Rialto's warehouse repurchase facilities.

The assets and liabilities related to the Lennar Multifamily segment were as follows:

(In thousands)	May 31, 2017		November 30, 2016
Assets:
Cash and cash equivalents	$	9,288	6,600
Receivables (1)	64,740		58,929
Land under development	171,066		139,713
Investments in unconsolidated entities	377,265		318,559
Other assets	30,870		2,330
	$	653,229	526,131
Liabilities:
Accounts payable and other liabilities	$	123,166	117,973

(1)

Receivables primarily related to general contractor services and management fee income receivables due from unconsolidated entities as of May 31, 2017 and November 30, 2016, respectively.

Schedule of Line of Credit Facilities

At May 31, 2017, the Lennar Financial Services segment warehouse facilities were as follows:

(In thousands)	Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures June 2017 (1)	$	600,000
364-day warehouse repurchase facility that matures September 2017	300,000
364-day warehouse repurchase facility that matures December 2017 (2)	400,000
364-day warehouse repurchase facility that matures March 2018 (3)	150,000
Total	$	1,450,000

(1) Subsequent to May 31, 2017, the warehouse repurchase facility maturity date was extended to June 2018.

(2)

Maximum aggregate commitment includes an uncommitted amount of $250 million.At May 31, 2017, Rialto warehouse facilities were as follows:

(In thousands)	Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures October 2017	$	500,000
Warehouse repurchase facility that matures December 2017	200,000
364-day warehouse repurchase facility that matures January 2018	250,000
Total - Loan origination and securitization business (RMF)	$	950,000
Warehouse repurchase facility that matures August 2018 (two - one year extensions) (1)	100,000
Total	$	1,050,000

(1)

Rialto uses this warehouse repurchase facility to finance the origination of floating rate accrual loans, which are reported as accrual loans within loans receivable, net. Borrowings under this facility were $43.3 million as of both May 31, 2017 and November 30, 2016.

Schedule of Loan Origination Liabilities

The activity in the Company’s loan origination liabilities was as follows:

	Three Months Ended					Six Months Ended
	May 31,					May 31,
(In thousands)	2017			2016		2017		2016
Loan origination liabilities, beginning of period	$	25,003		20,108		24,905		19,492
Provision for losses	1,066			1,110		1,944		1,898
Payments/settlements	(157		)	(224	)	(937	)	(396	)
Loan origination liabilities, end of period	$	25,912		20,994		25,912		20,994