DISCONTINUED OPERATIONS

6 Months Ended

Jun. 30, 2019

Discontinued Operations and Disposal Groups [Abstract]

During the first quarter of 2019, the Company reached the decision to pursue the sale of the national mortgage banking operations of First Choice Loan Services, Inc. (“FCLS”) – a subsidiary of the Bank. The decision was based on a number of strategic priorities and other factors, including the competitiveness of the mortgage industry. FCLS continues to operate and serve its customers as the Company initiates the process of identifying a buyer. The potential transaction is expected to close within 12 months. As a result of these actions, the Company classified the operations of FCLS as discontinued under ASC 205-20. The Consolidated Balance Sheets, Consolidated Statements of Income, and Consolidated Statements of Cash Flows present discontinued operations retrospectively for current and prior periods.

The following is a summary of the assets and liabilities of the discontinued operations of FCLS at June 30, 2019 and December 31, 2018:



(in thousands)	June 30, 2019		December 31, 2018
Assets
Loans held for sale, at fair value	$	182,882	$	94,050
Premises and equipment, net	1,710		1,867
Other assets	28,153		18,342
Total assets	$	212,745	$	114,259
Liabilities
Other liabilities	$	26,256	$	9,597
Total liabilities	$	26,256	$	9,597

FCLS funds its lending operations and maintains working capital through an intercompany line-of-credit with the Bank. Although the sale of FCLS will contemplate settlement of these borrowings, debt was not allocated to discontinued operations due to the intercompany nature of the borrowings. When the transaction closes, the Company will reallocate these funds to various purposes, including but not limited to, pay-down of short-term debt with the Federal Home Loan Bank.

The following presents operating results of the discontinued operations of FCLS for the three and six months ended June 30, 2019 and June 30, 2018:



	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2019		2018		2019		2018
Interest income	$	1,818	$	1,395	$	2,862	$	2,489
Interest expense	1,062		566		1,646		947
Net interest income	756		829		1,216		1,542
Non-interest income	13,246		10,407		22,059		21,035
Total net revenue	14,002		11,236		23,275		22,577
Non-interest expense	11,920		10,810		22,047		22,313
Income from discontinued operations before income taxes	2,082		426		1,228		264
Income tax expense	588		106		371		67
Net income from discontinued operations	$	1,494	$	320	$	857	$	197

FCLS also originates mortgages designated as held-for-investment. This component of FCLS’s operations was not considered discontinued, since the Company expects to continue to originate mortgages designated as held-for-investment in its footprint on a small scale through processes considered as continuing operations.