DISCONTINUED OPERATIONS

12 Months Ended

Dec. 31, 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 December 31, 2019 and December 31, 2018:



(in thousands)	December 31, 2019			December 31, 2018
Assets
Loans held for sale, at fair value	$	132,655		$	94,050
Premises and equipment, net	1,073			1,867
Mortgage servicing rights, at fair value	12,299			11,500
Mortgage banking derivatives	2,329			3,254
Right-of-use asset	3,462			—
Deferred tax	(3,418		)	(3,270		)
Other assets	5,732			6,858
Total assets	$	154,132		$	114,259
Liabilities
Customer payments in process	$	15,372		$	6,584
Lease liability	3,494			—
Other liabilities	7,615			3,013
Total liabilities	$	26,481		$	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 years ended December 31, 2019, 2018, and 2017:



	Years Ended December 31,
(in thousands)	2019			2018			2017
Interest income	$	6,085		$	5,267		$	5,182
Interest expense	3,372			2,131			1,350
Net interest income	2,713			3,136			3,832
Non-interest income	38,517			35,574			51,445
Total net revenue	41,230			38,710			55,277
Non-interest expense	46,769			43,477			46,732
(Loss)/income from discontinued operations before income taxes	(5,539		)	(4,767		)	8,545
Income tax expense	(1,468		)	(1,313		)	2,414
Net income from discontinued operations	$	(4,071	)	$	(3,454	)	$	6,131

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.