Basis of Presentation (Tables)

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Schedule of Assets Acquired and Liabilities Assumed

Through December 31, 2019, there were no significant changes to our purchase price allocations, which are summarized in the following table.

Table 2.1 – Purchase Price Allocations

(In Thousands)	5 Arches		CoreVest
Acquisition Date	March 1, 2019		October 15, 2019
Purchase price:
Cash	$	12,575	$	482,311
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	$	482,311
Allocated to:
Business purpose residential loans, at fair value	$	2,022	$	2,610,490
Cash and cash equivalents	2,128		30,685
Restricted cash	9,082		—
Other assets	5,473		67,420
Goodwill	28,747		59,928
Intangible assets	24,800		56,500
Deferred tax asset	—		2,577
Total assets acquired	72,252		2,827,600
Asset-backed securities issued, at fair value	—		1,656,023
Short-term debt, net	3,800		663,275
Accrued expenses and other liabilities	13,920		25,991
Deferred tax liability	4,202		—
Total liabilities assumed	21,922		2,345,289
Total net assets acquired	$	50,330	$	482,311

Schedule of Finite-Lived Intangible Assets

The amortization period for each of these assets and the activity for the year ended December 31, 2019 is summarized in the table below.

Table 2.2 – Intangible Assets – Activity

	Carrying Value at December 31, 2018		Additions		Amortization Expense			Carrying Value at December 31, 2019		Weighted Average Amortization Period (in years)
(Dollars in Thousands)
5 Arches
Broker network	$	—	$	18,100	$	(3,017	)	$	15,083	5
Non-compete agreements	—		2,900		(806		)	2,094		3
Loan administration fees on existing loan assets	—		2,600		(2,167		)	433		1
Tradename	—		1,200		(333		)	867		3
Total 5 Arches	—		24,800		(6,323		)	18,477		5
CoreVest
Borrower network	—		45,300		(1,348		)	43,952		7
Non-compete agreements	—		6,600		(458		)	6,142		3
Tradename	—		2,800		(194		)	2,606		3
Developed technology	—		1,800		(188		)	1,612		2
Total CoreVest	—		56,500		(2,188		)	54,312		6
Total	$	—	$	81,300	$	(8,511	)	$	72,789	6

Finite-lived Intangible Assets Amortization Expense

Estimated future amortization expense is summarized in the table below.

Table 2.3 – Intangible Asset Amortization Expense by Year

December 31, 2019
(In Thousands)	5 Arches		CoreVest		Total
2020	$	5,420	$	10,505	$	15,925
2021	4,987		10,317		15,304
2022	3,848		8,952		12,800
2023	3,620		6,471		10,091
2024	602		6,471		7,073
2025 and thereafter	—		11,596		11,596
Total Future Intangible Asset Amortization	$	18,477	$	54,312	$	72,789

Schedule of Goodwill

The following table presents the goodwill activity for the year ended December 31, 2019.

Table 2.4 – Goodwill – Activity

	Year Ended December 31, 2019
(In Thousands)	5 Arches		CoreVest		Total
Beginning balance	$	—	$	—	$	—
Goodwill recognized from acquisition	28,747		59,928		88,675
Impairment	—		—		—
Ending Balance	$	28,747	$	59,928	$	88,675

Pro Forma Information

The following unaudited pro forma financial information presents Net interest income, Non-interest income, and Net income of Redwood, 5 Arches, and CoreVest combined, as if the acquisitions occurred as of January 1, 2018. These pro forma amounts have been adjusted to include the amortization of intangible assets and acquisition-related compensation expense 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 December 31, 2019, 5 Arches had net interest income of less than $0.1 million, non-interest income of $19 million, and net income of $3 million. In addition, 5 Arches had intangible asset amortization expense of $6 million for this period. During the period from October 15, 2019 to December 31, 2019, CoreVest had net interest income of $11 million, non-interest income of $19 million, and net income of $22 million. In addition, CoreVest had intangible asset amortization expense of $2 million for this period.

Table 2.5 – Unaudited Pro Forma Financial Information

	Years Ended December 31,
(In Thousands)	2019		2018
Supplementary pro forma information:
Net interest income	$	167,680	$	165,849
Non-interest income	193,519		103,179
Net income	185,896		118,125