Lennar Financial Services Segment (Tables)

9 Months Ended

Aug. 31, 2017

Segment Reporting [Abstract]

Schedule of Assets and Liabilities

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

(In thousands)	August 31, 2017		November 30, 2016
Assets:
Homebuilding East (1)	$	4,812,569	3,512,990
Homebuilding Central	2,092,624		1,993,403
Homebuilding West	5,093,996		4,318,924
Homebuilding Other	913,250		907,523
Lennar Financial Services	1,385,188		1,754,672
Rialto	1,195,407		1,276,210
Lennar Multifamily	683,258		526,131
Corporate and unallocated	763,081		1,071,928
Total assets	$	16,939,373	15,361,781
Lennar Homebuilding goodwill (2)	$	140,270	—
Lennar Financial Services goodwill (2)	$	59,838	39,838
Rialto goodwill	$	5,396	5,396

(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 $140.3 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					Nine Months Ended
	August 31,					August 31,
(In thousands)	2017			2016		2017		2016
Revenues:
Homebuilding East	$	1,255,797		1,002,584		3,218,413		2,615,936
Homebuilding Central	602,901			622,304		1,801,424		1,645,131
Homebuilding West	823,500			671,122		2,146,492		1,940,520
Homebuilding Other	202,997			200,959		623,301		532,748
Lennar Financial Services	215,056			191,444		571,462		491,340
Rialto	57,810			63,885		207,804		152,434
Lennar Multifamily	103,415			81,596		291,900		195,264
Total revenues (1)	$	3,261,476		2,833,894		8,860,796		7,573,373
Operating earnings (loss):
Homebuilding East (2)	$	179,908		161,789		277,906		389,433
Homebuilding Central	66,184			67,759		194,986		169,716
Homebuilding West	112,749			92,308		237,333		294,949
Homebuilding Other	27,435			23,026		79,969		54,118
Lennar Financial Services	49,057			53,248		113,448		112,267
Rialto	(3,192		)	(57	)	(10,497	)	(16,533	)
Lennar Multifamily	9,104			2,649		34,816		29,774
Total operating earnings	441,245			400,722		927,961		1,033,724
Corporate general and administrative expenses	72,860			61,164		200,333		164,634
Earnings before income taxes	$	368,385		339,558		727,628		869,090

(1) Total revenues were net of sales incentives of $165.4 million ($21,800 per home delivered) and $463.4 million ($22,400 per home delivered) for the three and nine months ended August 31, 2017, respectively, compared to $152.3 million ($22,500 per home delivered) and $402.2 million ($22,000 per home delivered) for the three and nine months ended August 31, 2016, respectively.

(2) Homebuilding East operating earnings for the nine months ended August 31, 2017 included a $140 million loss due to litigation (see Note 17). For both the three and nine months ended August 31, 2016 operating earnings included a gain of $8.7 million on the sale of a clubhouse.

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

(In thousands)	August 31, 2017		November 30, 2016
Assets:
Cash and cash equivalents	$	115,016	123,964
Restricted cash	14,152		17,053
Receivables, net (1)	286,902		409,528
Loans held-for-sale (2)	661,649		939,405
Loans held-for-investment, net	37,665		30,004
Investments held-to-maturity	53,631		41,991
Investments available-for-sale (3)	57,784		53,570
Goodwill (4)	59,838		39,838
Other (5)	98,551		99,319
	$	1,385,188	1,754,672
Liabilities:
Notes and other debts payable	$	719,727	1,077,228
Other (6)	230,371		241,055
	$	950,098	1,318,283

(1) Receivables, net primarily related to loans sold to investors for which the Company had not yet been paid as of August 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 August 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 August 31, 2017 and November 30, 2016, other assets included mortgage loan commitments carried at fair value of $17.5 million and $7.4 million, respectively, and mortgage servicing rights carried at fair value of $27.7 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 August 31, 2017 and November 30, 2016, other liabilities included $56.1 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 $5.5 millionAugust 31, 2017.

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

(In thousands)	August 31, 2017		November 30, 2016
Assets:
Cash and cash equivalents	$	154,814	148,827
Restricted cash (1)	30,928		9,935
Receivables, net (2)	—		204,518
Loans held-for-sale (3)	304,984		126,947
Loans receivable, net	52,779		111,608
Real estate owned, net	123,695		243,703
Investments in unconsolidated entities	249,551		245,741
Investments held-to-maturity	142,462		71,260
Other	136,194		113,671
	$	1,195,407	1,276,210
Liabilities:
Notes and other debts payable (4)	$	617,152	622,335
Other	86,177		85,645
	$	703,329	707,980

(1) Restricted cash primarily consisted of cash set aside for future investments on behalf of a real estate investment trust that Rialto is a sub-advisor to. It also included 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 November 30, 2016.

(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 August 31, 2017 and November 30, 2016, notes and other debts payable primarily included $349.2 million and $348.7 million, respectively, related to Rialto's 7.00% senior notes due 2018, and $182.7 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)	August 31, 2017		November 30, 2016
Assets:
Cash and cash equivalents	$	3,305	6,600
Receivables (1)	71,464		58,929
Land under development	179,965		139,713
Investments in unconsolidated entities	397,119		318,559
Other assets	31,405		2,330
	$	683,258	526,131
Liabilities:
Accounts payable and other liabilities	$	128,162	117,973

(1) Receivables primarily related to general contractor services, net of deferrals and management fee income receivables due from unconsolidated entities as of August 31, 2017 and November 30, 2016, respectively.

Schedule of Line of Credit Facilities

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

(In thousands)	Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures September 2017 (1)	$	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
364-day warehouse repurchase facility that matures June 2018	600,000
Total	$	1,450,000

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

(2) Maximum aggregate commitment includes an uncommitted amount of $250 million.

(3) Maximum aggregate commitment includes an uncommitted amount of $75 million.

At August 31, 2017, Rialto warehouse facilities were as follows:

(In thousands)	Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures October 2017 (1)	$	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) (2)	100,000
Total	$	1,050,000

(1) Subsequent to August 31, 2017, Rialto executed an amendment and extension of this facility, providing for, among other things, the extension of the maximum term facility to October 2018, with the option for an additional one year extension, and decreased the maximum aggregate commitment of the facility to$400 million.

(2) 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 $34.4 million and $43.3 million as of August 31, 2017 and November 30, 2016, respectively.

Schedule of Loan Origination Liabilities

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

	Three Months Ended					Nine Months Ended
	August 31,					August 31,
(In thousands)	2017			2016		2017		2016
Loan origination liabilities, beginning of period	$	25,912		20,994		24,905		19,492
Provision for losses	1,056			1,288		3,000		3,186
Adjustments to pre-existing provisions for losses from changes in estimates	(4,440		)	1,224		(4,440	)	1,224
Payments/settlements	(651		)	(17	)	(1,588	)	(413	)
Loan origination liabilities, end of period	$	21,877		23,489		21,877		23,489