Quarterly report pursuant to Section 13 or 15(d)

ORGANIZATION AND BASIS OF PRESENTATION ORGANIZATION AND BASIS OF PRESENTATION (Tables)

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ORGANIZATION AND BASIS OF PRESENTATION ORGANIZATION AND BASIS OF PRESENTATION (Tables)
9 Months Ended
Sep. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Total Consideration for Shellpoint Acquisition
The total consideration is summarized as follows:
Total Consideration
 
Amount
Cash Consideration
 
$
212.3

Earnout Payment(A)
 
42.8

Effective Settlement of Preexisting Relationships(B)
 
180.3

Total Consideration
 
$
435.4


(A)
The range of outcomes for this contingent consideration is from $0 to $60.0 million, dependent on the performance of Shellpoint. New Residential derived a fair value of the contingent consideration payment in three years of $48.7 million inclusive of payments to Shellpoint employees of $5.9 million. Contingent payments to the long-term employee incentive plans require continuing employment and will be 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 a result, New Residential recorded contingent consideration of $42.8 million.
(B)
Represents the effective settlement of preexisting relationships between New Residential and Shellpoint including 1) MSR acquisitions, 2) a note payable and 3) 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 condensed consolidated statements of income.

New Residential has performed a preliminary allocation of the total consideration of $435.4 million to Shellpoint’s assets and liabilities, as set forth below. The final amount and allocation of total consideration may differ from the amounts included herein to reflect new information obtained primarily relating to the valuation of contingent consideration and intangible assets that existed as of the acquisition date.
Total Consideration ($ in millions)
 
$
435.4

Assets
 
 
Cash and cash equivalents
 
$
84.1

Restricted cash
 
9.9

Residential mortgage loans, held-for-sale, at fair value
 
488.2

Mortgage servicing rights, at fair value(A)
 
286.6

Residential mortgage loans, held-for-investment, at fair value
 
125.3

Residential mortgage loans subject to repurchase
 
121.4

Intangible assets
 
4.3

Other assets
 
81.1

Total Assets Acquired
 
$
1,200.9

 
 
 
Liabilities
 
 
Repurchase agreements
 
$
439.6

Notes and bonds payable
 
25.4

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
 
50.7

Total Liabilities Assumed
 
$
806.1

 
 
 
Noncontrolling Interest
 
$
8.3

 
 
 
Net Assets
 
$
386.5

 
 
 
Goodwill
 
$
48.9


(A)
Includes $135.3 million of Ginnie Mae MSRs where New Residential acquired the rights to the economic value of the servicing rights from Shellpoint prior to the acquisition date.
Pro Forma Financial Information
The following table presents unaudited pro forma combined Servicing and Originations Revenue, which is comprised of 1) servicing revenue, net and 2) gain on sale of originated mortgage loans, net, and Income Before Income Taxes for the three and nine months ended September 30, 2018 and 2017 prepared as if the Shellpoint Acquisition had been consummated on January 1, 2017.
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended  
 September 30,
 
 
2018
 
2017
 
2018
 
2017
Pro Forma
 
 
 
 
 
 
 
 
Servicing and Originations Revenue
 
$
221,087

 
$
141,002

 
$
710,742

 
$
513,076

Income Before Income Taxes
 
199,040

 
278,274

 
1,006,743

 
850,509