Annual report pursuant to Section 13 and 15(d)

BUSINESS ACQUISITIONS (Tables)

v3.19.3.a.u2
BUSINESS ACQUISITIONS (Tables)
12 Months Ended
Dec. 31, 2019
Business Combinations [Abstract]  
Schedule of Purchase Price Allocation
New Residential has performed an allocation of the total consideration paid to acquire the assets and liabilities of the companies acquired, as set forth below.
 
 
2019
 
2018
 
 
Ditech
 
Guardian
 
Total
 
Shellpoint
Total Consideration ($ in millions)
 
$
1,218.2

 
$
21.5

 
$
1,239.7

 
$
425.5

Assets
 
 
 
 
 
 
 
 
Mortgage servicing rights, at fair value(A)
 
$
387.2

 
$

 
$
387.2

 
$
286.6

Residential mortgage loans, held-for-investment, at fair value
 

 

 

 
125.3

Residential mortgage loans, held-for-sale, at fair value
 
627.4

 

 
627.4

 
488.2

Residential mortgage loans subject to repurchase
 

 

 

 
121.4

 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 

 
1.8

 
1.8

 
79.2

Restricted cash
 

 

 

 
9.9

Servicer Advance Receivable
 
238.0

 

 
238.0

 
22.4

Intangible assets(B) (C) (D)
 
10.5

 
11.7

 
22.2

 
18.4

Other assets(E)
 
64.8

 
6.6

 
71.4

 
59.1

Total Assets Acquired
 
$
1,327.9

 
$
20.1

 
$
1,348.0

 
$
1,210.5

 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
Repurchase agreements
 
$

 
$

 
$

 
$
439.6

Notes and bonds payable
 

 

 

 
20.7

Mortgage-backed securities issued, at fair value
 

 

 

 
120.7

Residential mortgage loans repurchase liability
 

 

 

 
121.4

Excess spread financing, at fair value
 

 

 

 
48.3

Accrued expenses and other liabilities
 
60.2

 
3.7

 
63.9

 
50.6

Total Liabilities Assumed
 
$
60.2

 
$
3.7

 
$
63.9

 
$
801.3

 
 
 
 
 
 
 
 
 
Noncontrolling Interest
 
$

 
$

 
$

 
$
8.3

 
 
 
 
 
 
 
 
 
Net Assets
 
$
1,267.7

 
$
16.4

 
$
1,284.1

 
$
400.9

 
 
 
 
 
 
 
 
 
Goodwill (Bargain Purchase Gain)
 
$
(49.5
)
 
$
5.1

 
$
(44.4
)
 
$
24.6


(A)
Includes $135.3 million of Ginnie Mae MSRs related to the Shellpoint acquisition where New Residential acquired the rights to the economic value of the servicing rights from Shellpoint prior to the acquisition date.
(B)
Includes intangible assets acquired as part of the Ditech acquisition in the form of correspondent customer relationships and servicing contracts tied to the recovery of defaulted loans. These intangibles will be amortized over a finite life of three years based on the expected useful life of these intangibles.
(C)
Includes intangible assets acquired as part of the Guardian acquisition in the form of customer relationships and a tradename. Customer relationships will be amortized over a finite life of seven years based on the expected useful life of these intangibles. New Residential has determined that the tradename has an indefinite useful life and will be evaluated for impairment given no legal, regulatory, contractual, competitive or economic factors that would limited useful life.
(D)
Includes intangible assets acquired as part of the Shellpoint acquisition in the form of mortgage origination and servicing licenses, internally developed software and a tradename. New Residential determined that mortgage origination and servicing licenses have an indefinite useful life and will be evaluated for impairment given no legal, regulatory, contractual, competitive or economic factors that would limit the useful life. Internally developed software will be amortized over a
finite useful life of five years and tradenames were fully amortized over six months, respectively, based on the expected software development timeline and New Residential’s determination of the time to change a tradename with limited value.
(E)
Includes post loan charge off deficiency balances acquired through the Ditech Acquisition.
Schedule of Total Consideration
The acquisition date fair value of the consideration transferred includes $1.2 billion in cash consideration and $4.9 million in effective settlement of preexisting relationships. The total consideration is summarized as follows:
Total Consideration (in millions)
 
Amount
Cash Consideration
 
$
1,213.3

Effective Settlement of Preexisting Relationships(A)
 
4.9

Total Consideration
 
$
1,218.2


(A)
Represents the effective settlement of preexisting relationships between New Residential and Ditech related to operating accounts receivable and payable existing prior to the acquisition date. The effective settlement of these preexisting relationships had no impact to New Residential’s Consolidated Statements of Income. New Residential recognized the effective settlement of preexisting relationships separately from the acquisition of assets and assumption of liabilities in the business combination.

The total consideration is summarized as follows:
Total Consideration (in millions)
 
Amount
Cash Consideration
 
$
212.3

Earnout Payment(A)
 
39.3

Effective Settlement of Preexisting Relationships(B)
 
173.9

Total Consideration
 
$
425.5


(A)
The range of outcomes for this contingent consideration is from $0 to $60.0 million, dependent on the performance of Shellpoint. At acquisition date, New Residential derived a fair value of the remaining contingent consideration payment in three years of $39.3 million. This amount excludes contingent payments to the long-term employee incentive plans that require continuing employment and are recognized as compensation expense within General and Administrative expenses in the post-acquisition consolidated financial statements separate from New Residential’s acquisition of assets and assumption of liabilities in the business combination. As of December 31, 2019, the contingent consideration had a fair value of $40.9 million.
(B)
Represents the effective settlement of preexisting relationships between New Residential and Shellpoint. The effective settlement of these preexisting relationships had no impact to New Residential’s Consolidated Statements of Income.
The acquisition date fair value of the consideration transferred includes $7.6 million in cash consideration and $13.9 million in contingent consideration. The total consideration is summarized as follows:
Total Consideration (in millions)
 
Amount
Cash Consideration
 
$
7.6

Earnout Payment(A)
 
13.9

Total Consideration
 
$
21.5


(A)
The range of outcomes for this contingent consideration is from $0 to $17.5 million dependent on the performance of Guardian.
Schedule of Unaudited Supplemental Pro Forma Financial Information The following table presents unaudited pro forma combined Income Before Income Taxes for the years ended December 31, 2019 and 2018 prepared as if the Guardian Acquisition had been consummated on January 1, 2018.
 
 
Years Ended December 31,
 
 
2019
 
2018
Pro Forma (in millions)
 
 
 
 
Income Before Income Taxes
 
$
651.5

 
$
932.2


The following table presents unaudited pro forma combined Servicing and Origination Revenue, which is comprised of 1) servicing revenue, net and 2) gain on originated mortgage loans, held-for-sale, net, and Income Before Income Taxes for the years ended December 31, 2019 and 2018 prepared as if the Ditech Acquisition had been consummated on January 1, 2018.
 
 
Years Ended December 31,
 
 
2019
 
2018
Pro Forma (in millions)
 
 
 
 
Servicing and Origination Revenue
 
$
1,104.0

 
$
1,238.1

Income Before Income Taxes
 
552.8

 
923.3


The following table presents unaudited pro forma combined Servicing and Origination Revenue, which is comprised of 1) servicing revenue, net and 2) gain on originated mortgage loans, held-for-sale, net, and Income Before Income Taxes for the years ended December 31, 2018 and 2017 prepared as if the Shellpoint Acquisition had been consummated on January 1, 2017.
 
 
Years Ended December 31,
 
 
2018
 
2017
Pro Forma (in millions)
 
 
 
 
Servicing and Origination Revenue
 
$
767.0

 
$
749.0

Income Before Income Taxes
 
948.1

 
1,197.5