Lennar Financial Services Segment (Tables)

9 Months Ended

Aug. 31, 2018

Segment Reporting [Abstract]

Schedule of Assets and Liabilities

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

(In thousands)	August 31, 2018		November 30, 2017
Assets:
Homebuilding East	$	7,455,782	4,754,581
Homebuilding Central	3,414,907		2,037,905
Homebuilding West	7,812,183		5,165,218
Homebuilding Other	1,726,472		960,541
Lennar Financial Services	2,042,024		1,689,508
Rialto	834,882		1,153,840
Lennar Multifamily	890,057		710,725
Corporate and unallocated (1)	4,113,088		2,272,716
Total assets	$	28,289,395	18,745,034
Lennar Homebuilding goodwill (1)	$	3,457,999	136,566
Lennar Financial Services goodwill (1)	$	231,245	59,838
Rialto goodwill	$	5,396	5,396

(1) In connection with the CalAtlantic acquisition, the Company recorded a provisional amount of homebuilding goodwill of $3.3 billion. The allocation of goodwill by homebuilding reporting segment has not yet been finalized. A provisional amount of goodwill related to

the CalAtlantic acquisition of $169 million was allocated to Lennar Financial Services. In connection with the WCI acquisition in 2017, the Company allocated $136.6 million of goodwill to the Lennar Homebuilding East reportable segment and $20 million to the Lennar Financial Services segment.

	Three Months Ended					Nine Months Ended
	August 31,					August 31,
(In thousands)	2018			2017		2018	2017
Revenues:
Homebuilding East	$	2,028,989		1,255,797		5,000,182	3,218,413
Homebuilding Central	1,231,170			602,901		3,041,003	1,801,424
Homebuilding West	1,505,858			823,500		3,775,488	2,146,492
Homebuilding Other	519,725			202,997		1,195,159	623,301
Lennar Financial Services	236,268			215,056		639,543	571,462
Rialto	49,495			57,810		149,033	207,804
Lennar Multifamily	101,064			103,415		312,013	291,900
Total revenues (1)	$	5,672,569		3,261,476		14,112,421	8,860,796
Operating earnings (loss) (2):
Homebuilding East (3)	$	228,657		179,908		504,019	277,906
Homebuilding Central	135,978			66,184		264,463	194,986
Homebuilding West (4)	186,847			112,749		581,461	237,333
Homebuilding Other	60,555			27,435		101,349	79,969
Lennar Financial Services	56,628			49,057		128,705	113,448
Rialto	9,444			(3,192	)	25,558	(10,497	)
Lennar Multifamily	(3,853		)	9,104		9,734	34,816
Total operating earnings	674,256			441,245		1,615,289	927,961
Acquisition and integration costs related to CalAtlantic	11,992			—		140,062	—
Corporate general and administrative expenses	96,346			72,860		249,071	200,333
Earnings before income taxes	$	565,918		368,385		1,226,156	727,628

(1) Total revenues were net of sales incentives of $289.0 million ($22,900 per home delivered) and $717.0 million ($22,800 per home delivered) for the three and nine months ended August 31, 2018, respectively, compared to $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.

(2) All homebuilding segments and Homebuilding Other were impacted by purchase accounting adjustments for the three and nine months ended August 31, 2018.

(3) Homebuilding East operating earnings for the nine months ended August 31, 2017 included a $140 million loss due to litigation (see Note 17).

(4)

Homebuilding West operating earnings includes $164.9 million related to a gain on the sale of an 80% interest in one of Lennar Homebuilding's strategic joint ventures, Treasure Island Holdings, during the nine months ended August 31, 2018.The assets and liabilities related to the Lennar Financial Services segment were as follows:

(In thousands)	August 31, 2018		November 30, 2017
Assets:
Cash and cash equivalents	$	165,051	117,410
Restricted cash	12,111		12,006
Receivables, net (1)	386,448		313,252
Loans held-for-sale (2)	945,387		937,516
Loans held-for-investment, net	74,669		44,193
Investments held-to-maturity	64,203		52,327
Investments available-for-sale (3)	47,034		57,439
Goodwill (4)	231,245		59,838
Other assets (5)	115,876		95,527
	$	2,042,024	1,689,508
Liabilities:
Notes and other debts payable	$	966,626	937,431
Other liabilities (6)	274,482		240,383
	$	1,241,108	1,177,814

(1) Receivables, net primarily related to loans sold to investors for which the Company had not yet been paid as of August 31, 2018 and November 30, 2017, 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) on the condensed consolidated balance sheet.

(4) As of August 31, 2018, goodwill included $20.0 million of goodwill related to the WCI acquisition. The assignment of goodwill to the Company's reporting segments related to the CalAtlantic acquisition has not been completed, however, a provisional amount of goodwill of approximately $169 million was allocated to Lennar Financial Services (see Note 2).

(5) As of August 31, 2018 and November 30, 2017, other assets included mortgage loan commitments carried at fair value of $19.3 million and $9.9 million, respectively, and mortgage servicing rights carried at fair value of $35.1 million and $31.2 million, respectively. In addition, other assets also included forward contracts carried at fair value of $1.7 million as of November 30, 2017.

(6)

As of August 31, 2018 and November 30, 2017, other liabilities included $60.4 million and $57.7 million, respectively, of certain of the Company’s self-insurance reserves related to construction defects, general liability and workers’ compensation.The assets and liabilities related to the Rialto segment were as follows:

(In thousands)	August 31, 2018		November 30, 2017
Assets:
Cash and cash equivalents	$	36,343	241,861
Restricted cash (1)	11,274		22,466
Loans held-for-sale (2)	141,333		236,018
Real estate owned, net	52,644		86,047
Investments in unconsolidated entities	294,465		265,418
Investments held-to-maturity	211,097		179,659
Other assets	87,726		122,371
	$	834,882	1,153,840
Liabilities:
Notes and other debts payable (3)	$	239,392	625,081
Other liabilities	57,737		94,975
	$	297,129	720,056

(1) As of August 31, 2018 and November 30, 2017, restricted cash primarily consisted 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) Loans held-for-sale primarily related to unsold loans originated by RMF carried at fair value.

(3)

In March 2018, Rialto had paid off the remaining principal balance of its 7.00% senior notes due December 2018. As of November 30, 2017, notes and other debts payable primarily included $349.4 million related to Rialto's 7.00% senior notes due December 2018. In addition, as of August 31, 2018 and November 30, 2017, notes and other debt payable included $94.5 million and $162.1 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, 2018		November 30, 2017
Assets:
Cash and cash equivalents	$	13,748	8,676
Receivables (1)	66,265		69,678
Land under development	294,104		208,618
Investments in unconsolidated entities	482,241		407,544
Other assets	33,699		16,209
	$	890,057	710,725
Liabilities:
Accounts payable and other liabilities	$	152,566	149,715

(1)

Receivables primarily related to general contractor services, net of deferrals and management fee income receivables due from unconsolidated entities as of August 31, 2018 and November 30, 2017, respectively.

Schedule of Line of Credit Facilities

At August 31, 2018, the Lennar Financial Services segment warehouse facilities were as follows:

(In thousands)	Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures September 2018 (1)	$	300,000
364-day warehouse repurchase facility that matures December 2018 (2)	400,000
364-day warehouse repurchase facility that matures March 2019 (3)	300,000
364-day warehouse repurchase facility that matures June 2019	700,000
Total	$	1,700,000

(1) Subsequent to August 31, 2018, the warehouse repurchase facility was extended to November 2018.

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

(3)

Maximum aggregate commitment includes an uncommitted amount of $300 million.At August 31, 2018, Rialto's warehouse facilities were as follows:

(In thousands)	Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures November 2018	$	200,000
364-day warehouse repurchase facility that matures December 2018 (extended from October 2018)	250,000
364-day warehouse repurchase facility that matures December 2018	200,000
364-day warehouse repurchase facility that matures December 2019	200,000
Total - Loan origination and securitization business (RMF)	$	850,000
Warehouse repurchase facility that matures December 2018 (one year extensions) (1)	50,000
Total	$	900,000

(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. There were no borrowings under this facility as of both August 31, 2018 and November 30, 2017.

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)	2018			2017		2018		2017
Loan origination liabilities, beginning of period	$	28,016		25,912		22,543		24,905
Provision for losses	1,059			1,056		2,696		3,000
Adjustments to pre-existing provision for losses from changes in estimates	—			(4,440	)	—		(4,440	)
Origination liabilities assumed related to CalAtlantic acquisition	20,500			—		24,459		—
Payments/settlements	(124		)	(651	)	(247	)	(1,588	)
Loan origination liabilities, end of period	$	49,451		21,877		49,451		21,877