Basis of Presentation (Tables)

9 Months Ended

Sep. 30, 2019

Schedule of Assets Acquired and Liabilities Assumed

Through September 30, 2019, there have been no significant changes to our preliminary purchase price allocation, which is summarized in the following table.

Table 2.1 – 5 Arches Purchase Price Allocation



(In Thousands)	March 1, 2019
Purchase price:
Cash	$	12,575
Contingent consideration, at fair value	24,621
Purchase option, at fair value	5,082
Equity method investment, at fair value	8,052
Total consideration	$	50,330

Allocated to:
Tangible net assets acquired ⁽¹⁾	$	985
Goodwill	28,747
Intangible assets	24,800
Deferred tax liability	(4,202		)
Total net assets acquired	$	50,330

(1)

5 Arches net assets acquired consisted of assets of $19 million and liabilities of $18 million as of March 1, 2019.

Schedule of Finite-Lived Intangible Assets

The amortization period for each of these assets and the activity for the period from March 1, 2019 to September 30, 2019 is summarized in the table below.

Table 2.2 – Intangible Assets – Activity



(Dollars in Thousands)	Carrying Value at December 31, 2018		Additions		Amortization Expense			Carrying Value at September 30, 2019		Weighted Average Amortization Period (in years)
Finite-lived intangible assets:
Broker network	$	—	$	18,100	$	(2,112	)	$	15,988	5
Non-compete agreements	—		2,900		(564		)	2,336		3
Loan administration fees on existing loan assets	—		2,600		(1,517		)	1,083		1
Tradename	—		1,200		(233		)	967		3
Total	$	—	$	24,800	$	(4,426	)	$	20,374	4

Finite-lived Intangible Assets Amortization Expense

All of our intangible assets are amortized on a straight-line basis. Estimated amortization expense for the remainder of 2019 and the following years is summarized in the table below.

Table 2.3 – Intangible Asset Amortization Expense by Year



(In Thousands)	September 30, 2019
2019 (3 months)	$	1,897
2020	5,420
2021	4,987
2022	3,848
2023 and thereafter	4,222
Total Future Intangible Asset Amortization	$	20,374

Schedule of Goodwill

The following table presents the goodwill activity for the nine months ended September 30, 2019.

Table 2.4 – Goodwill – Activity



(In Thousands)	Nine Months Ended September 30, 2019
Beginning balance	$	—
Goodwill recognized from 5 Arches acquisition	28,728
Measurement period adjustment	19
Impairment	—
Ending Balance	$	28,747

Pro Forma Information

The following unaudited pro forma financial information presents Net interest income, Non-interest income, and Net income of Redwood and 5 Arches combined, as if the acquisition occurred as of January 1, 2018. These pro forma amounts have been adjusted to include the amortization of intangible assets for both periods, and to exclude the income statement impacts related to our equity method investment in 5 Arches. The unaudited pro forma financial information is not intended to represent or be indicative of the consolidated financial results of operations that would have been reported if the acquisition had been completed as of January 1, 2018 and should not be taken as indicative of our future consolidated results of operations. During the period from March 1, 2019 to September 30, 2019, 5 Arches had mortgage banking income of $12 million and a net loss of $3 million. Included in the net loss for this period was intangible asset amortization expense of $4 million.

Table 2.5 – Unaudited Pro Forma Financial Information



	Three Months Ended September 30,				Nine Months Ended September 30,
(In Thousands)	2019		2018		2019		2018
Supplementary pro forma information:
Net interest income	$	33,513	$	35,231	$	98,101	$	105,660
Non-interest income	27,498		22,280		98,780		84,684
Net income	34,310		32,636		115,809		111,072