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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