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)
3 Months Ended
Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Total Consideration for Shellpoint Acquisition 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. New Residential derived a fair value of the 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 March 31, 2019, the contingent consideration had a fair value of $42.9 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 an allocation of the total consideration of $425.5 million to Shellpoint’s assets and liabilities, as set forth below. The final amount and allocation of total consideration reflects certain measurement period adjustments identified during the fourth quarter of 2018.
Total Consideration ($ in millions)
 
$
425.5

Assets
 
 
Cash and cash equivalents
 
$
79.2

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(B)
 
18.4

Other assets
 
81.5

Total Assets Acquired
 
$
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
 
50.6

Total Liabilities Assumed
 
$
801.3

 
 
 
Noncontrolling Interest
 
$
8.3

 
 
 
Net Assets
 
$
400.9

 
 
 
Goodwill
 
$
24.6


(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.
(B)
Includes intangible assets 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 and tradenames will be amortized over finite useful lives of five years and 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.
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 months ended March 31, 2019 and 2018 prepared as if the Shellpoint Acquisition had been consummated on January 1, 2018.
 
 
Three Months Ended  
 March 31,
 
 
2019
 
2018
Pro Forma
 
 
 
 
Servicing and Originations Revenue
 
$
209,748

 
$
217,236

Income Before Income Taxes
 
193,261

 
614,598