0001828937 us-gaap:MeasurementInputLossSeverityMember srt:MinimumMember foa:HecmBuyoutsMember 2020-01-01 2020-12-31
(Amendment No. 1)
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2021
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
File Number: file number of incorporation or organization) Identification No.) Irving, Texas75039
(
Not Applicable
code
Title of each class | Trading Symbol(s) | Name of each exchangeon which registered | ||
Class A | FOA | The New York Stock Exchange | ||
Warrants to purchase shares of Class A Common Stock | FOA.WS | The New York Stock Exchange |
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
| Emerging growth company | ☒ | |||||
EXPLANATORY NOTE
As previously disclosed, on April 1, 2021, Finance of America Equity Capital LLC (“FoA”) and Replay Acquisition Corp. (“Replay”), a publicly traded special purpose acquisition company (“SPAC”), completed their previously announced business combination whereby Replay combined with FoA in a series of transactions (collectively, the “Business Combination”) that resulted in Finance of America Companies Inc. (the “Company”) becoming a publicly-traded company on the New York Stock Exchange. As a result of the Business Combination and by operation of Rule 12g-3(a) promulgated under the Securities Exchange Act of 1934, as amended, the Company became the successor issuer to Replay, and the Company is filing this Amendment No. 1 (this “Amendment”) to Replay’s
Table of Contents | Page | |||
1 | ||||
1 | ||||
1 | ||||
1 | ||||
3 | ||||
4 | ||||
5 | ||||
7 | ||||
9 | ||||
76 | ||||
Background of Restatement
Following the Business Combination, on April 12, 2021, the SEC released a public statement (the “Public Statement”) informing market participants that warrants issued by SPACs may require classification as liabilities rather than equity, with changes in the fair valuemeaning of the warrants reported in earnings each period, due to certain common“safe harbor” provisions in SPAC warrant agreements providing for cash settlement in certain circumstances. Prior to the Business Combination, Replay classified the outstanding warrants as equity. For a full description of Replay’s warrants, please refer to Replay’s final prospectus, dated April 3, 2019, filed with the SEC in connection with its initial public offering.
On May 5, 2021, management of the CompanyU.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts or statements of current conditions, but instead represent only management’s beliefs regarding future events, many of which, by their nature, are inherently uncertain and the Audit Committeeoutside of the Board of Directors ofCompany’s control. It is possible that our actual results, financial condition and liquidity may differ, possibly materially, from the Company determined that Replay’s auditedanticipated results, financial statements for the Affected Periods should no longer be relied upon due to guidancecondition and liquidity in the SEC’s Public Statement indicating that Replay’s warrants should have been classified as liabilities on Replay’s Balance Sheets rather than equity.
Following consideration of the guidance in the SEC’s Public Statement, the Company concluded the warrants did not meet the conditions to be classified as equitythese forward-looking statements. The Company’s actual results may differ from its expectations, estimates, and instead the warrant agreement governing Replay’s warrants includes a tender offerprojections and, make-whole provision that would require both the public warrants and private placement warrants issued in connection with Replay’s initial public offering to be classified as a liability measured at fair value, with changes in fair value reported each period in earnings, and following such guidance, the warrants should have been classified as equity in the previously issued financial statements. In addition, management has identified errors made in the historical financial statements related to its shareholders’ equity where on the date of issuance of the units, Replay improperly allocated the net proceeds among the ordinary shares subject to possible redemption and public warrants. Additionally, the ordinary shares issued during the initial public offering can be redeemed or become redeemable subject to the occurrence of future events considered outside Company control. Therefore, management concluded that Replay should have classified the redeemable shares in temporary equity and remeasured these to their redemption value (i.e., $10.00 per share) as of the end of the first reporting period after the date of the Replay initial public offering. Management has also noted a reclassifications error related to temporary equity and permanent equity.
As all material restatement information will be included in this Report and in Replay’s amended Annual Report on Form 10-K/A for the year ended December 31, 2020 and amended Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2020 (such reports, together with this Report, the “Amended Reports”), we do not intend to amend Replay’s Annual Report on Form 10-K for the year ended December 31, 2019 or any of our previously filed Quarterly Reports on Form 10-Q for the periods ended June 30, 2019, September 30, 2019 or March 31, 2020. Accordingly, investors and others should rely only on the financial information and other disclosures regarding the periods described above in the Amended Reports and in future filings with the SEC (as applicable) andconsequently, you should not rely on any previously issued or filed reports, press releases, corporate presentations or similar communications relating to the Affected Periods.
Internal Control Considerations
In connection with the restatement, management has re-evaluated the effectiveness of Replay’s disclosure controls and procedures and internal control over financial reporting. As a result of that assessment and in light of the Public Statement, management has concluded that Replay’s disclosure controls and procedures and internal controls over financial reporting were not effective as of September 30, 2020, due to a material weakness in Replay’s internal control over financial reporting related to the accounting for equity instruments. For a discussion of management’s consideration of Replay’s disclosure controls and procedures, internal controls over financial reporting, and the material weaknesses identified, see Part I, Item 4, “Controls and Procedures” of this Report
Items Amended
Each of the following items are amended and restated in their entirety in this Report: (i) Part I, Item 1. Financial Statements; (ii) Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations; and (iii) Part I, Item 4. Controls and Procedures. Additionally, in accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, the Company is including with this Amendment currently dated certifications from our Principal Executive Officer and Principal Financial Officer. These certifications are filed or furnished, as applicable, in Part II, Item 6. as Exhibits 31.1, 31.2, 32.1 and 32.2.
Except for the foregoing amended and/or restated information required to reflect the effects of the restatement of the financial statements, and applicable cross-references within this Report, this Amendment does not amend, update or change any other items or disclosures contained in the Original Filing. This Report continues to describe conditions as of the date of the Original Filing, and the disclosures herein have not been updated to reflect events, results or developments that have occurred after the date of the Original Filing, or to modify or update those disclosures affected by subsequent events, including the closing of the Business Combination. Accordingly, forward looking statements included in this Report represent management’s views as of the date of the Original Filing and should not be assumed to be accurate as of any date thereafter. This Amendment should be read in conjunction with the Original Filing and our filings made with the SEC subsequent to the Original Filing date.
Forward-Looking Statements
Certain statements in this Amendment may constitute “forward-looking statements” for purposes of the federal securities laws. The Company’sthese forward-looking statements include, but are not limited to, statements regarding its or its management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizationsas predictions of future events or circumstances, including any underlying assumptions, are forward-looking statements. The wordsevents. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “appear,“intend,” “approximate,“plan,” “believe,“may,” “continue,“will,” “could,” “estimate,“should,” “expect,“believes,” “foresee,” “intends,” “may,” “might,” “plan,” “possible,“predicts,” “potential,” “predict,“continue,” “project,” “seek,” “should,” “would” and similar expressions (or the negative versionversions of such words or expressions) mayare intended to identify such forward-looking statements. The Company cautions readers not to place undue reliance upon any forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Amendment may include, for example, statements about:
the expected benefits of the Business Combination;
the Company’s financial performance following the Business Combination;
changes in the Company’s strategy, future operations, financial position, estimated revenues and losses, projected costs, margins, cash flows, prospects and plans;
the impact of health epidemics, including the COVID-19 pandemic, on the Company’s business and the actions the Company may take in response thereto;
expansion plans and opportunities; and
the outcome of any known and unknown litigation and regulatory proceedings.
These forward-looking statementswhich are based on information availablecurrent only as of the date of this Amendment, and current expectations, forecasts and assumptions, and involve a numberreport. Results for any specified quarter are not necessarily indicative of judgments, risks and uncertainties. Accordingly, forward-looking statements should notthe results that may be relied upon as representingexpected for the Company’s views as offull year or any subsequent date, and thefuture period. The Company does not undertake or accept any obligation or undertaking to updaterelease publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions, or circumstances after the date they were made, whether as a result of new information, future events or otherwise,on which any such statement is based, except as may be required under applicable securities laws.
As a result of a number of known and unknownby law. Such forward-looking statements are subject to various risks and uncertainties the Company’s actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:
the risk that the recently consummated Business Combination disrupts current plans and operations of the Company;
the ability to recognize the anticipated benefits of the Business Combination, which may be affected by,including, among other things, competition and the ability of the combined business to grow and manage growth profitably;
costs related to the Business Combination;
changes in applicable laws or regulations;
others; the effect of the COVID-19 pandemic on the Company’s business;
changes in prevailing interest rates or U.S. monetary policies that affect interest rates that may have a detrimental effect on our business; the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors;
factors in our markets; our ability to obtain sufficient capital to meet the inability to maintainfinancing requirements of our business; the listinguse estimates in measuring or determining the fair value of the Company’s sharesmajority of Class A Common Stock onour assets and liabilities; the NYSE;possibility of disruption in the secondary home loan market, including the mortgage-backed securities market; and
other risks and uncertainties set forth in the section entitled “Risk Factors” included in this Report and in the Company’s Reportour Registration Statement on Form 8-K/A,S-1 originally filed with the SEC on May 17, 2021.
PART I—FINANCIAL INFORMATION
REPLAY ACQUISITION CORP.
BALANCE SHEETS
| September 30, 2020 | December 31, 2019 | |||||||
(Unaudited) As Restated | As Restated | |||||||
Assets: | ||||||||
Current assets: | ||||||||
Cash | $ | 974,317 | $ | 1,589,795 | ||||
Prepaid expenses | 47,084 | 62,738 | ||||||
|
|
|
| |||||
Total current assets | 1,021,401 | 1,652,533 | ||||||
Investments held in Trust Account | 293,255,540 | 292,054,158 | ||||||
|
|
|
| |||||
Total assets | $ | 294,276,941 | $ | 293,706,691 | ||||
|
|
|
| |||||
Liabilities and Shareholders’ Equity: | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 371,225 | $ | 86,595 | ||||
Accrued expenses | 414,571 | 8,860 | ||||||
|
|
|
| |||||
Total current liabilities | 785,796 | 95,455 | ||||||
Warrant liability | 21,096,250 | 18,817,500 | ||||||
Deferred underwriting commissions | 9,187,500 | 9,187,500 | ||||||
|
|
|
| |||||
Total liabilities | 31,069,546 | 28,100,455 | ||||||
|
|
|
| |||||
Commitments and contingencies (Note 5) | ||||||||
Ordinary shares, $0.0001 par value; 28,750,000 shares subject to possible redemption at $10.00 per share at September 30, 2020 and December 31, 2019 | 287,500,000 | 287,500,000 | ||||||
Shareholders’ Equity: | ||||||||
Preference shares, $0.0001 par value; 2,000,000 shares authorized; none issued and outstanding | — | — | ||||||
Ordinary shares, $0.0001 par value; 200,000,000 shares authorized; 7,187,500 shares issued and outstanding (excluding 28,750,000 shares subject to possible redemption) at September 30, 2020 and December 31, 2019 | 719 | 719 | ||||||
Accumulated deficit | (24,293,324 | ) | (21,894,483 | ) | ||||
|
|
|
| |||||
Total shareholders’ equity | (24,292,605 | ) | (21,893,764 | ) | ||||
|
|
|
| |||||
Total Liabilities and Shareholders’ Equity | $ | 294,276,941 | $ | 293,706,691 | ||||
|
|
|
| |||||
The
September 30, 2021 | December 31, 2020 | |||||||
Successor | Predecessor | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 191,736 | $ | 233,101 | ||||
Restricted cash | 325,226 | 306,262 | ||||||
Reverse mortgage loans held for investment, subject to HMBS related obligations, at fair value | 10,347,459 | 9,929,163 | ||||||
Mortgage loans held for investment, subject to nonrecourse debt, at fair value | 5,939,651 | 5,396,167 | ||||||
Mortgage loans held for investment, at fair value | 1,077,670 | 730,821 | ||||||
Mortgage loans held for sale, at fair value | 2,047,015 | 2,222,811 | ||||||
Debt securities | 7,317 | 10,773 | ||||||
Mortgage servicing rights, at fair value, $96,073 and $14,088, subject to nonrecourse MSR financing liability, respectively | 340,949 | 180,684 | ||||||
Derivative assets | 54,993 | 92,065 | ||||||
Fixed assets and leasehold improvements, net | 29,503 | 24,512 | ||||||
Goodwill | 1,298,796 | 121,233 | ||||||
Intangible assets, net | 692,676 | 16,931 | ||||||
Other assets, net | 315,102 | 300,632 | ||||||
TOTAL ASSETS | $ | 22,668,093 | $ | 19,565,155 | ||||
LIABILITIES, CONTINGENTLY REDEEMABLE NONCONTROLLING INTEREST (“CRNCI”) AND EQUITY | ||||||||
HMBS related obligation, at fair value | $ | 10,216,310 | $ | 9,788,668 | ||||
Nonrecourse debt, at fair value | 5,831,083 | 5,271,842 | ||||||
Other financing lines of credit | 3,325,156 | 2,973,743 | ||||||
Payables and other liabilities | 509,803 | 400,058 | ||||||
Notes payable, net | 353,567 | 336,573 | ||||||
TOTAL LIABILITIES | 20,235,919 | 18,770,884 | ||||||
Commitments and Contingencies (Note 21) | 0 | 0 | ||||||
CRNCI | 0 | 166,231 | ||||||
EQUITY (Note 30) | ||||||||
FoA Equity Capital LLC member’s equity | 0 | 628,176 | ||||||
Class A Common Stock (Successor), $0.0001 par value; 6,000,000,000 shares authorized; 58,936,744 shares issued and outstanding at September 30, 2021 | 6 | — | ||||||
Class B Common Stock (Successor), $0.0001 par value; 1,000,000 shares authorized, 6 shares issued and outstanding at September 30, 2021 | 0 | — | ||||||
Additional paid-in capital (Successor) | 821,316 | — | ||||||
Accumulated deficit (Successor) | (48,164 | ) | — | |||||
Accumulated other comprehensive (loss) income | (92 | ) | 9 | |||||
Noncontrolling interest | 1,659,108 | (145 | ) | |||||
TOTAL EQUITY | 2,432,174 | 628,040 | ||||||
TOTAL LIABILITIES, CRNCI AND EQUITY | $ | 22,668,093 | $ | 19,565,155 | ||||
REPLAY ACQUISITION CORP.
UNAUDITED STATEMENTS OF OPERATIONS
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| As Restated | As Restated | As Restated | As Restated | |||||||||||||
General and administrative expenses | $ | 1,058,292 | $ | 111,750 | $ | 1,321,473 | $ | 245,980 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Loss from operations | (1,058,292 | ) | (111,750 | ) | (1,321,473 | ) | (245,980 | ) | ||||||||
Issuance costs allocated to the public warrants | — | — | — | (648,239 | ) | |||||||||||
(Loss) gain on revaluation of warrant liability | (1,106,250 | ) | (951,250 | ) | (2,278,750 | ) | 2,666,250 | |||||||||
Gain on marketable securities, dividends and interest held in Trust Account | 86,803 | 1,561,854 | 1,201,382 | 3,322,448 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net (loss) income | $ | (2,077,739 | ) | $ | 498,854 | $ | (2,398,841 | ) | $ | 5,094,479 | ||||||
|
|
|
|
|
|
|
| |||||||||
Basic and diluted weighted average shares outstanding of Public Shares | 28,750,000 | 28,750,000 | 28,750,000 | 28,750,000 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Basic and diluted net (loss) income per share, Public Shares | $ | (0.06 | ) | $ | 0.02 | $ | (0.06 | ) | $ | 0.35 | ||||||
|
|
|
|
|
|
|
| |||||||||
Basic and diluted weighted average shares outstanding of Founder Shares | 7,187,500 | 7,187,500 | 7,187,500 | 7,187,500 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Basic and diluted net loss per share, Founder Shares | $ | (0.06 | ) | $ | (0.03 | ) | $ | (0.10 | ) | $ | (0.70 | ) | ||||
|
|
|
|
|
|
|
| |||||||||
The
September 30, 2021 | December 31, 2020 | |||||||
Successor | Predecessor | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Restricted cash | $ | 306,615 | $ | 293,580 | ||||
Mortgage loans held for investment, subject to nonrecourse debt, at fair value | 5,939,651 | 5,396,167 | ||||||
Other assets | 69,947 | 79,528 | ||||||
TOTAL ASSETS | $ | 6,316,213 | $ | 5,769,275 | ||||
LIABILITIES | ||||||||
Nonrecourse debt, at fair value | $ | 5,735,010 | $ | 5,257,754 | ||||
Payables and other liabilities | 117 | 291 | ||||||
TOTAL LIABILITIES | $ | 5,735,127 | $ | 5,258,045 | ||||
Net fair value of assets subject to nonrecourse debt | $ | 581,086 | $ | 511,230 | ||||
REPLAY ACQUISITION CORP.
UNAUDITED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
| For the nine months ended September 30, 2020 | ||||||||||||||||||||
| Ordinary Shares | Additional Paid- | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amounts | In Capital | Deficit | Equity | ||||||||||||||||
Balance - December 31, 2019, as restated | 7,187,500 | $ | 719 | $ | — | $ | (21,894,483 | ) | $ | (21,893,764 | ) | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income, as restated | — | — | — | 6,725,368 | 6,725,368 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance - March 31, 2020, as restated (unaudited) | 7,187,500 | 719 | $ | — | (15,169,115 | ) | (15,168,396 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net loss, as restated | — | — | — | (7,046,470 | ) | (7,046,470 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance - June 30, 2020, as restated (unaudited) | 7,187,500 | 719 | $ | — | (22,215,585 | ) | (22,214,866 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net loss, as restated | — | — | — | (2,077,739 | ) | (2,077,739 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance - September 30, 2020, as restated (unaudited) | 7,187,500 | $ | 719 | $ | — | $ | (24,293,324 | ) | $ | (24,292,605 | ) | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| For the nine months ended September 30, 2019 | ||||||||||||||||||||
| Ordinary Shares | Additional Paid- | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amounts | In Capital | Deficit | Equity | ||||||||||||||||
Balance - December 31, 2018, as previously reported | 7,187,500 | $ | 719 | $ | 24,281 | $ | (2,694 | ) | $ | 22,306 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net loss, as previously reported | — | — | — | (13,739 | ) | (13,739 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance - March 31, 2019, as previously reported (unaudited) | 7,187,500 | 719 | 24,281 | (16,433 | ) | 8,567 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Proceeds from sale of private warrants in excess of fair value, as restated | — | — | 775,000 | — | 775,000 | |||||||||||||||
Remeasurement of ordinary shares subject to possible redemption | — | — | (799,281 | ) | (25,990,309 | ) | (26,789,590 | ) | ||||||||||||
Net income, as restated | — | — | — | 4,609,364 | 4,609,364 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance - June 30, 2019, as restated (unaudited) | 7,187,500 | 719 | $ | — | (21,397,378 | ) | (21,396,659 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income, as restated | — | — | — | 498,854 | 498,854 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance - September 30, 2019, as restated (unaudited) | 7,187,500 | $ | 719 | $ | — | $ | (20,898,524 | ) | $ | (20,897,805 | ) | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
The
months ended
September 30,
2021
September 30,
2021
months ended
September 30,
2020
months ended
September 30,
2020 $ 291,334 $ 407,926 $ 836,901 76,663 95,955 221,638 161,371 119,375 266,002 12,661 9,937 29,615 (34,366 ) (25,935 ) (93,165 ) (21,705 ) (15,998 ) (63,550 ) 507,663 607,258 1,260,991 238,530 240,381 615,034 7,597 8,184 22,795 127,217 113,804 273,584 373,344 362,369 911,413 (8,862 ) (2,470 ) (2,514 ) 125,457 242,419 347,064 1,137 808 1,574 124,320 241,611 345,490 4,260 (4,953 ) (22,959 ) 201 276 1,076 $ 119,859 $ 246,288 $ 367,373 are an integral partto unaudited consolidated financial statements
REPLAY ACQUISITION CORP.
UNAUDITED STATEMENTS OF CASH FLOWS
| For the nine months ended September 30, | ||||||||
| 2020 | 2019 | |||||||
| As Restated | As Restated | |||||||
Cash Flows from Operating Activities: | ||||||||
Net (loss) income | $ | (2,398,841 | ) | $ | 5,094,479 | |||
Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||
General and administrative expenses paid by related party | — | 2,206 | ||||||
Gain on marketable securities, dividends and interest held in Trust Account | (1,201,382 | ) | (3,322,448 | ) | ||||
Loss (gain) on revaluation of warrant liability | 2,278,750 | (2,666,250 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | 15,654 | (101,988 | ) | |||||
Accounts payable | 284,630 | 79,620 | ||||||
Accrued expenses | 405,711 | (87,694 | ) | |||||
|
|
|
| |||||
Net cash used in operating activities | (615,478 | ) | (1,002,075 | ) | ||||
|
|
|
| |||||
Cash Flows from Investing Activities: | ||||||||
Cash deposited in Trust Account | — | (287,500,000 | ) | |||||
|
|
|
| |||||
Net cash used in investing activities | — | (287,500,000 | ) | |||||
|
|
|
| |||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from note payable to related party | — | 250,000 | ||||||
Repayment of note payable and advances from related party | — | (252,206 | ) | |||||
Proceeds received from initial public offering | — | 287,500,000 | ||||||
Proceeds from private placement | — | 7,750,000 | ||||||
Offering costs paid | — | (5,151,990 | ) | |||||
|
|
|
| |||||
Net cash provided by financing activities | — | 290,095,804 | ||||||
|
|
|
| |||||
Net change in cash | (615,478 | ) | 1,593,729 | |||||
Cash - beginning of period | 1,589,795 | 25,000 | ||||||
|
|
|
| |||||
Cash - end of period | $ | 974,317 | $ | 1,618,729 | ||||
|
|
|
| |||||
Supplemental disclosure of noncash activities: | ||||||||
Offering costs included in accrued expenses | $ | — | $ | 85,000 | ||||
Offering costs included in accounts payable | $ | — | $ | 2,600 | ||||
Remeasurement of ordinary shares subject to possible redemption | $ | — | $ | 26,789,590 | ||||
Deferred underwritting commissions | $ | — | $ | 9,187,500 | ||||
The
months ended
September 30,
2021
2021
months ended
September 30,
2020
months ended
September 30,
2020 $ 124,320 $ 241,611 $ 345,490 (11 ) 26 37 124,309 241,637 345,527 4,461 (4,677 ) (21,883 ) $ 119,848 $ 246,314 $ 367,410 are an integral partto unaudited consolidated financial statements
FoA Equity Capital LLC Member’s Equity | Accumulated Other Comprehensive (Loss) Income | Noncontrolling Interest | Total | |||||||||||||
Predecessor: | ||||||||||||||||
Balance at December 31, 2019 (audited) | $ | 482,719 | $ | (51 | ) | $ | 145 | $ | 482,813 | |||||||
Contributions from members | 1,042 | — | — | 1,042 | ||||||||||||
Net (loss) income | (27,249 | ) | — | 229 | (27,020 | ) | ||||||||||
Foreign currency translation adjustment | — | (8 | ) | — | (8 | ) | ||||||||||
Balance at March 31, 2020 | 456,512 | (59 | ) | 374 | 456,827 | |||||||||||
Distributions to members | (578 | ) | — | — | (578 | ) | ||||||||||
Noncontrolling interest distributions | — | — | (310 | ) | (310 | ) | ||||||||||
Net income | 148,335 | — | 571 | 148,906 | ||||||||||||
Foreign currency translation adjustment | — | 18 | — | 18 | ||||||||||||
Balance at June 30, 2020 | 604,269 | (41 | ) | 635 | 604,863 | |||||||||||
Distributions to members | (1,781 | ) | — | — | (1,781 | ) | ||||||||||
Noncontrolling interest contributions | — | — | 16 | 16 | ||||||||||||
Noncontrolling interest distributions | — | — | (702 | ) | (702 | ) | ||||||||||
Net income | 246,288 | — | 276 | 246,564 | ||||||||||||
Foreign currency translation adjustment | — | 27 | — | 27 | ||||||||||||
Balance at September 30, 2020 | $ | 848,776 | $ | (14 | ) | $ | 225 | $ | 848,987 | |||||||
Balance at December 31, 2020 (audited) | $ | 628,176 | $ | 9 | $ | (145 | ) | $ | 628,040 | |||||||
Contributions from members | 1,426 | — | — | 1,426 | ||||||||||||
Distributions to members | (75,000 | ) | — | — | (75,000 | ) | ||||||||||
Noncontrolling interest distributions | — | — | (620 | ) | (620 | ) | ||||||||||
Net income | 119,859 | — | 201 | 120,060 | ||||||||||||
Accretion of CRNCI to redemption price | (32,725 | ) | — | — | (32,725 | ) | ||||||||||
Foreign currency translation adjustment | — | (11 | ) | — | (11 | ) | ||||||||||
Balance at March 31, 2021 | $ | 641,736 | $ | (2 | ) | $ | (564 | ) | $ | 641,170 | ||||||
Class A Common Stock | Class B Common Stock | Noncontrolling Interest | ||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Additional Paid-in Capital | Retained Earnings / Accumulated Deficit | Accumulated Other Comprehensive Loss | Class A LLC Units | Amount | Total Equity | |||||||||||||||||||||||||||||||
Successor: | ||||||||||||||||||||||||||||||||||||||||
Balance | 59,881,714 | $ | 6 | 7 | $ | — | $ | 758,243 | $ | (71,813 | ) | $ | — | 131,318,286 | $ | 1,658,545 | $ | 2,344,981 | ||||||||||||||||||||||
Net (loss) income | — | — | — | — | — | 2,265 | — | — | (17,089 | ) | (14,824 | ) | ||||||||||||||||||||||||||||
Noncontrolling contributions | — | — | — | — | — | — | — | — | 24 | 24 | ||||||||||||||||||||||||||||||
Noncontrolling distributions | — | — | — | — | — | — | — | — | (137 | ) | (137 | ) | ||||||||||||||||||||||||||||
Equity compensation - Restricted Stock Units (“RSUs”) | — | — | — | — | 49,278 | — | — | — | — | 49,278 | ||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | (27 | ) | — | — | (27 | ) | ||||||||||||||||||||||||||||
Balance | 59,881,714 | $ | 6 | 7 | $ | — | $ | 807,521 | $ | (69,548 | ) | $ | (27 | ) | 131,318,286 | $ | 1,641,343 | $ | 2,379,295 | |||||||||||||||||||||
Net income | — | — | — | — | — | 21,384 | — | — | 28,726 | 50,110 | ||||||||||||||||||||||||||||||
Noncontrolling distributions | — | — | — | — | — | — | — | — | (418 | ) | (418 | ) | ||||||||||||||||||||||||||||
Equity based compensation | — | — | — | — | 12,036 | — | — | — | — | 12,036 | ||||||||||||||||||||||||||||||
Net surrender to settle RSUs | (944,970 | ) | — | (1 | ) | — | 1,759 | — | — | (829,222 | ) | (10,543 | ) | (8,784 | ) | |||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | (65 | ) | — | 0 | (65 | ) | ||||||||||||||||||||||||||||
Balance at September 30, 2021 | 58,936,744 | $ | 6 | 6 | $ | 0 | $ | 821,316 | $ | (48,164 | ) | $ | (92 | ) | 130,489,064 | $ | 1,659,108 | $ | 2,432,174 | |||||||||||||||||||||
April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the nine months ended September 30, 2020 | ||||||||||
Successor | Predecessor | |||||||||||
Operating Activities | ||||||||||||
Net income | $ | 35,286 | $ | 124,320 | $ | 345,490 | ||||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | (107,899 | ) | (6,277 | ) | (722,262 | ) | ||||||
Net cash (used in) provided by operating activities | (72,613 | ) | 118,043 | (376,772 | ) | |||||||
Investing Activities | ||||||||||||
Purchases and originations of mortgage loans held for investment | (2,658,540 | ) | (1,151,925 | ) | (2,974,275 | ) | ||||||
Proceeds/payments received on mortgage loans held for investment | 1,446,930 | 677,777 | 1,373,034 | |||||||||
Purchases and origination of mortgage loans held for investment, subject to nonrecourse debt | (25,081 | ) | (12,247 | ) | (31,730 | ) | ||||||
Proceeds/payments on mortgage loans held for investment, subject to nonrecourse debt | 556,466 | 217,452 | 548,901 | |||||||||
Purchases of debt securities | (1,449 | ) | (557 | ) | (38,749 | ) | ||||||
Proceeds/payments on debt securities, net | 3,238 | 2,096 | 138,320 | |||||||||
Purchases of mortgage servicing rights | (2,352 | ) | (9,014 | ) | — | |||||||
Proceeds on sale of mortgage servicing rights | 2,501 | 7,765 | — | |||||||||
Acquisition of subsidiaries, net of cash acquired | (22,838 | ) | (749 | ) | 351 | |||||||
Purchase of investments | — | — | (3,938 | ) | ||||||||
Acquisition of fixed assets | (8,636 | ) | (4,178 | ) | (5,611 | ) | ||||||
Payments on deferred purchase price liability | (311 | ) | (657 | ) | (1,504 | ) | ||||||
Issuance of convertible notes receivable | — | (2,550 | ) | — | ||||||||
DIP Financing | — | (35,260 | ) | — | ||||||||
Net cash used in investing activities | (710,072 | ) | (312,047 | ) | (995,201 | ) | ||||||
Financing Activities | ||||||||||||
Proceeds from securitizations of reverse mortgage loans, subject to HMBS related obligations | 1,587,902 | 602,172 | 1,433,324 | |||||||||
Payments of HMBS related obligations | (1,221,327 | ) | (506,142 | ) | (1,495,917 | ) | ||||||
Proceeds from issuance of nonrecourse debt, net | 1,270,334 | 579,518 | 2,554,115 | |||||||||
Payments on nonrecourse debt | (809,184 | ) | (658,300 | ) | (1,132,984 | ) | ||||||
Proceeds from other financing lines of credit | 18,451,706 | 10,027,696 | 25,119,693 | |||||||||
Payments on other financing lines of credit | (18,401,507 | ) | (9,660,588 | ) | (24,942,223 | ) | ||||||
Debt issuance costs | (1,342 | ) | (2,467 | ) | (3,191 | ) | ||||||
Payments on notes payable | — | — | (26,771 | ) | ||||||||
Principal payments under capital lease obligation | — | — | (680 | ) | ||||||||
Member contributions | 0 | 1,426 | 234 | |||||||||
Member distributions | 0 | (75,000 | ) | (1,552 | ) | |||||||
Settlement of CRNCI | (203,216 | ) | — | — | ||||||||
Noncontrolling interest contributions | 24 | — | 16 | |||||||||
Noncontrolling interest distributions | (555 | ) | (620 | ) | (1,012 | ) | ||||||
Net cash provided by financing activities | 672,835 | 307,695 | 1,503,052 | |||||||||
Foreign currency translation adjustment | (15 | ) | (7 | ) | 12 | |||||||
Net (decrease) increase in cash and restricted cash | (109,865 | ) | 113,684 | 131,091 | ||||||||
Cash and restricted cash, beginning of period | 626,827 | 539,363 | 382,664 | |||||||||
April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the nine months ended September 30, 2020 | ||||||||||
Successor | Predecessor | |||||||||||
Cash and restricted cash, end of period | $ | 516,962 | $ | 653,047 | $ | 513,755 | ||||||
Supplementary Cash Flows Information | ||||||||||||
Cash paid for interest | $ | 124,312 | $ | 50,071 | $ | 103,578 | ||||||
Cash paid for taxes, net | 1,882 | 63 | 1,026 | |||||||||
Loans transferred to mortgage loans held for investment, at fair value, from mortgage loans held for investment, subject to nonrecourse debt, at fair value | 242,650 | 283,428 | 444,238 | |||||||||
Loans transferred to mortgage loans held for sale, at fair value, from mortgage loans held for investment, at fair value | 48,759 | — | 167,590 | |||||||||
Loans transferred to government guaranteed receivables from mortgage loans held for investment, at fair value, and mortgage loans held for investment, subject to nonrecourse debt, at fair value | 343 | 71 | 57,554 | |||||||||
Loans transferred to mortgage loans held for investment, subject to nonrecourse debt, at fair value, from mortgage loans held for investment, at fair value | 1,309,669 | 272,098 | 2,591,455 | |||||||||
Loans transferred to mortgage loans held for investment, subject to HMBS, at fair value, from mortgage loans held for investment, at fair value | 1,393,897 | 42,909 | — | |||||||||
Replay Acquisition Corp. (the
FoA Equity, FOAF and FAH, known as “holding company subsidiaries”).
The Company’s sponsor is Replay Sponsor, LLC, a Delaware limited liability company (the “Sponsor”). The Company’s ability to commence operations is contingent upon obtaining adequate financial resources. The registration statement for the Company’s Initial Public Offering was declared effective on April 3, 2019. On April 8, 2019, the Company consummated its Initial Public Offering of 28,750,000 units (“Units”), including the issuance of 3,750,000 Unitsforbearance as a result of the underwriters’ full exercise of their over-allotment option, at $10.00 per Unit, generating gross proceeds of $287.5 million,economic impacts caused by
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 7,750,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant to the Sponsor, generating gross proceeds of $7.75 million (Note 4).
On August 15, 2019, the Company received a written notice (the “Notice”) from the staff of NYSE Regulation of the New York Stock Exchange (“NYSE”) indicating that the Company is not currently in compliance with Section 802.01B of the NYSE Listed Company Manual (the “Manual”), which requires the Company to maintain a minimum of 300 public shareholdersmay have an adverse effect on a continuous basis.
Pursuant to the Notice, the Company was subject to the procedures set forth in Sections 801 and 802 of the Manual. The Company submitted a business plan that demonstrates how the Company expects to return to compliance with the minimum public shareholders requirement within 18 months of receipt of the Notice. The Company anticipates that it will satisfy this listing requirement within such time period once it consummates an initial Business Combination.
On October 24, 2019, the Company was notified by the staff of NYSE Regulation that the NYSE’s Listings Operations Committee has agreed to accept the Company’s business plan. results of future operations, financial position, intangible assets and liquidity in fiscal year 2021.
The Company’s ordinary shares, warrants and Units, which trade under the symbols “RPLA,” “RPLA WS” and “RPLA.U,” respectively, will continue to be listed and traded on the NYSE during the cure period, subject to the Company’s compliance with the NYSE’s other applicable continued listing standards, and will bear the indicator “.BC” on the consolidated tape to indicate noncompliance with the NYSE’s continued listing standards.
REPLAY ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Trust Account
Upon the closing of the Initial Public Offering and Private Placement, $287.5 million ($10.00 per Unit) of the net proceeds of the sale of the Units in the Initial Public OfferingSeptember 30, 2021, and the Private Placement was placed in a trust account (the “Trust Account”), located infinancial statements of FoA Equity and its controlled subsidiaries for the United States at J.P. Morgan Chase Bank, N.A., with Continental Stock Transfer & Trust Company acting as trustee,Predecessor periods from January 1, 2021 to March 31, 2021 and invested only in U.S. government securities, withinfor the meaning set forth in Section 2(a)(16) of the Investment Company Act 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3)three months and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.
Initial Business Combination
nine months ended September 30, 2020. The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
The Company will provide its holders (the “Public Shareholders”) of its ordinary shares, par value $0.0001 per share, sold in the Initial Public Offering (the “Public Shares”), with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share). The per-share amount to be distributed to Public Shareholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 5). These Public Shares were classified as temporary equity upon the completion of the Initial Public Offeringconsolidated financial statements have been prepared in accordance with the Financial Accounting Standards Board’sU.S. generally accepted accounting principles (“FASB”GAAP”) Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity (“ASC 480”). In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combinationfor interim financial statements and a majority of the shares voted are voted in favor of the Business Combination. If a shareholder vote is not required by law and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association (the “Amended and Restated Memorandum and Articles of Association”), conduct the redemptions pursuant to the tender offeraccounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, shareholder approval. The Consolidated Statement of the transactions is required by law, or the Company decides to obtain shareholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each Public Shareholder may elect to redeem their Public Shares irrespectiveFinancial Condition as of whether they vote for or against the proposed transaction. If the Company seeks shareholder approval in connection with a Business Combination, the initial shareholders (as defined below) agreed to vote their Founder Shares (as defined below in Note 4) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. Subsequent to the consummation of the Initial Public Offering, the Company will adopt an insider trading policy which will require insiders to: (i) refrain from purchasing shares during certain blackout periods and when they are in possession of any material non-public information and (ii) to clear all trades with the Company’s legal counsel prior to execution. In addition, the initial shareholders agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination.
REPLAY ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Notwithstanding the foregoing, the Amended and Restated Memorandum and Articles of Association provide that a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the ordinary shares sold in the Initial Public Offering, without the prior consent of the Company.
The Company’s Sponsor, officers and directors (the “initial shareholders”) agreed not to propose an amendment to the Amended and Restated Memorandum and Articles of Association (a) that would modify the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination within 24 monthsDecember 31, 2020 has been derived from the closingaudited consolidated financial
If the Company is unable to complete a Business Combination within the Combination Period, the Company will (1) cease all operations except for the purpose of winding up, (2) as promptly as reasonably possible but no more than 10 business days thereafter, subject to lawfully available funds therefor, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (less up to $100,000 of interest to pay dissolution expenses and which interest shall be net of taxes payable), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (3) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining shareholders and its board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.
The initial shareholders agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the initial shareholders should acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters agreed to waive their rights to their deferred underwriting commissions (see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the $10.00 per share initially held in the Trust Account. In order to protect the amounts held in the Trust Account, the Sponsor agreed to be liable to the Company if and to the extent any claims by a third party (other than the Company’s independent auditors) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account below (1) $10.00 per Public Share or (2) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”).
Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (other than the Company’s independent auditors), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
REPLAY ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Going Concern Consideration
As of September 30, 2020, the Company had approximately $1.02 million outside of the Trust Account, approximately $5.8 million of investment income available in the Trust Account to pay for tax obligations (less up to $100,000 of interest to pay dissolution expenses), and working capital of approximately $236,000.
Through September 30, 2020, the Company’s liquidity needs have been satisfied through receipt of a $25,000 capital contribution from the Sponsor in exchange for the issuance of the Founder Shares (Note 4) to the Sponsor, $250,000 in note payable to the Sponsor and approximately $2,000 of general and administrative expenses paid by a related party on behalf of the Company. Subsequent to the consummation of the Initial Public Offering, the Company received the net proceeds from the consummation of the Private Placement not held in the Trust Account of $2.0 million. The Company fully repaid the note and the advances to the Sponsor and the related party in May 2019.
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company Working Capital Loans (Note 4). Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. To date, the Company has no borrowings under the Working Capital Loans.
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (COVID-19). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic (the “COVID-19 pandemic”), based on the rapid increase in exposure globally. The full impact of the COVID-19 pandemic continues to evolve. The impact of the COVID-19 pandemic on the Company’s results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the pandemic and related advisories and restrictions. These developments and the impact of the COVID-19 pandemic on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s results of operations, financial position and cash flows may be materially adversely affected. Additionally, the Company’s ability to complete an initial Business Combination, may be materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 pandemic or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit the
REPLAY ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Company’s ability to have meetings with potential investors or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial Business Combination in a timely manner. The Company’s ability to consummate an initial Business Combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 pandemic and the resulting market downturn.
In connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that in light of the upcoming Business Combination, whereby the Company became a wholly owned subsidiary of New Pubco, Replay will continue to operate as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after April 8, 2021. Refer to Note 9 - Subsequent Events for further detail on the upcoming Business Combination.
Restatement of Previously IssuedUnaudited Consolidated Financial Statements
The Company has restated its unaudited financial statements as of September 30, 2020 and December 31, 2019, as well as the unaudited financial statements for the three and nine month periods ended September 30, 2020 and 2019, to correct misstatements in those prior periods primarily related to misstatements identified in improperly applying accounting guidance on certain warrants, recognizing them as equity instead of a warrant liability, under the guidance of ASC 815-40, Contracts in Entity’s Own Equity, and not properly accounting for the entire amount of redeemable ordinary shares as temporary equity carried at redemption value in accordance with the guidance in ASC 480.
See Note 8 - Restatement of Previously Issued Financial Statements for additional information regarding the errors identified and the restatement adjustments made to the financial statements.
Note 2—Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited financial
full year. The accompanying unauditedconsolidated interim financial statements, including the significant accounting policies, should be read in conjunction with the audited consolidated financial statements of FoA Equity and notes thereto included on Form 10-K/A filed byfor the year ended December 31, 2020 (Predecessor).
Emerging Growth Company
Section 102(b)(1)other notes that follow, are an integral part of the Jumpstart Ourconsolidated financial statements.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to credit risk consist principally of cash and investments held in the Trust Account. Cash is maintained in accounts with financial institutions, which, at times may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on its cash accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant. The Company’s investments held in the Trust Account consists entirely of U.S. government securities with an original maturity of 180 days or less.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
REPLAY ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Investments Held in Trust Account
The Company’s portfolio of investments held in the Trust Accountliabilities assumed are comprised solely of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 180 days or less, classified as trading securities. Trading securities are presented on the Balance Sheetsmeasured at fair value as of the acquisition date. Liabilities related to contingent consideration are recognized at the end ofacquisition date and
circumstances indicate that the related carrying amounts may not be recoverable.
Fair Value Measurements
ASC 820, Fair Value Measurement, defines fair valuethe Business Combination.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements)earnings and taxable income, and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
Level 1, definedlikelihood of recovering deferred tax assets existing as observable inputs such as quoted prices for identical instruments in active markets;
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
ASC 825, Financial Instruments, requires all entities to discloseof the fair valuestatement of financial instruments, bothposition date. The
LLC unit holders.
Offering Costs Associated withestimates and assumptions due to factors such as changes in the Initial Public Offering
Offeringeconomy, interest rates, secondary market pricing, prepayment assumptions, home prices or discrete events affecting specific borrowers, and such differences could be material.
Standard | Description | Effective Date | Effect on Consolidated Financial Statements | |||
| ASU 2016-13 , Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, ASU 2020-03, Codification Improvements to Financial Instruments | Requires use of the current expected credit loss model that is based on expected losses (net of expected recoveries), rather than incurred losses, to determine our allowance for credit losses on financial assets measured at amortized cost, certain net investments in leases and certain off-balance sheet arrangements. Replaces current accounting for purchased credit impaired (“PCI”) and impaired loans. Amends the other-than-temporary impairment model for available for sale debt securities. The new guidance requires that credit losses be recorded through an allowance approach, rather than through permanent write-downs for credit losses and subsequent accretion of positive changes through interest income over time. | January 2020 | The Company determined that certain servicer advances and other receivables, net of reserves included in other assets are within the scope of ASU 2016-13. The Company determined that these receivables have limited expected credit-related losses due to the contractual servicing agreements with agencies and loan product guarantees. Furthermore, the Company determined that for outstanding servicer and other advances, the majority of estimated losses are attributable to losses due to operational servicing defects and credit-related losses are not significant because of the contractual relationship with the agencies. The adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated financial statements. | |||
| ASU 2018-17 , Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities | The amendments in this Update require that indirect interests held through related parties under common control be considered on a proportional basis when determining whether fees paid to decision makers or service providers are variable interests. These amendments align with the determination of whether a reporting entity within a related party group is the primary beneficiary of a VIE. | January 2020 | The Company adopted this guidance using the prospective method of adoption. Adoption of this standard did not have a material impact on the consolidated financial statements. | |||
| ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment | Historical guidance for goodwill impairment testing prescribed that the Company must compare each reporting unit’s carrying value to its fair value. If the carrying value exceeds fair value, an entity performs the second step, which assigns the reporting unit’s fair value to its assets and liabilities, including unrecognized assets and liabilities, in the same manner as required in purchase accounting and then records an impairment. This ASU eliminates the second step. Under the new guidance, an impairment of a reporting unit’s goodwill is determined based on the amount by which the reporting unit’s carrying value exceeds its fair value, limited to the amount of goodwill allocated to the reporting unit. | January 2020 | The Company adopted this guidance using the prospective method of adoption. Adoption of this standard did not have a material impact on the consolidated financial statements. | |||
Standard | Description | Effective Date | Effect on Consolidated Financial Statements | |||
| ASU 2018-13 , Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement | The amendments in this Update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurements, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. Certain disclosure requirements were either removed, modified, or added. This guidance removes the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 fair value measurement methodologies, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements. It also adds requirements for the disclosure of a) changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and b) the range and weighted average of significant unobservable inputs used to develop Level 3 measurements. For certain unobservable inputs, entities may disclose other quantitative information in lieu of the weighted average if the other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. | January 2020 | The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. | |||
| ASU 2018-15 , Intangibles - Goodwill and Other - Internal- Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract | The amendments in this Update align the requirements for capitalizing implementation costs incurred in a service-contract hosting arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). | January 2020 | The Company adopted this guidance using the prospective method of adoption. Adoption of this standard did not have a material impact on the Company’s consolidated financial statements. | |||
| ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes | This amendment simplifies various aspects of the guidance on accounting for income taxes. | January 2021 | The Company adopted this guidance using the prospective method of adoption. Adoption of this standard did not have a material impact on the Company’s consolidated financial statements. | |||
Standard | Description | Effective Date | Effect on Consolidated Financial Statements | |||
| ASU 2021-06, Presentation of Financial Statements (Topic 205), Financial Services—Depository and Lending (Topic 942), and Financial Services—Investment Companies (Topic 946): Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants | In August 2021, the FASB issued ASU 2021-06 to align the SEC paragraphs in the codification with the new SEC rules issued in May 2020 relating to changes to the disclosure requirements for acquisitions and dispositions. ASU No. 2021-06 amends and supersedes various SEC paragraphs in FASB’s Topic 205, Presentation of Financial Statements, and Topic 946, Investment Companies. In May 2020, the SEC issued Release No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, to update the financial disclosure requirements in Regulation S-X for acquisitions and dispositions of businesses. In addition, to address the unique attributes of investment companies and business development companies, the SEC adopted new requirements regarding fund acquisitions specific to registered investment companies and business development companies. Regulation S-X Rule 3-05 generally requires a registrant to provide separate audited annual and unaudited interim pre-acquisition financial statements of the business if it is significant to the registrant using the investment, asset, and income tests. The amendments in this Update include changes to the investment and income tests when measuring significance, and raising the significance threshold for reporting the disposition of a business on Form 8-K from 10% to 20% to conform to requirements for reporting business acquisitions. | January 2021 | This ASU is effective for all acquisitions and disposals occurring after January 1, 2021. The Company adopted this guidance using the retrospective method of adoption. The Company evaluated the significance of all material acquisitions and disposals using the final amendments and determined it was in compliance. Adoption of this standard did not have a material impact on the Company’s consolidated financial statements. |
Standard | Description | Date of Planned Adoption | Effect on Consolidated Financial Statements | |||
ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ASU 2021-01, Reference Rate Reform (Topic 848): Codification Clarification | The amendments in this Update provide temporary optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Inter-Bank Offered Rate (“LIBOR”) or other interbank offered rates expected to be discontinued. In January 2021, FASB issued an Update which refines the scope of ASU Topic 848 and clarifies the guidance issued to facilitate the effects of reference rate reform on financial reporting. The amendment permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, computing variation margin settlements and calculating price alignment interest in connection with reference rate reform activities. | TBD | This ASU is effective from March 12, 2020 through December 31, 2022. If LIBOR ceases to exist or if the methods of calculating LIBOR change from the current methods for any reasons, interest rates on our floating rate loans, obligation derivatives, and other financial instruments tied to LIBOR rates, may be affected and need renegotiation with its lenders. The Company continues to assess the potential impact that the adoption of this ASU will have on the Company’s consolidated financial statements and related disclosures. | |||
| ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation(Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options | The amendments in this Update affect all entities that issue freestanding written call options that are classified in equity. Specifically, the amendments affect those entities when a freestanding equity-classified written call option is modified or exchanged and remains equity classified after the modification or exchange. The amendments that relate to the recognition and measurement of EPS for certain modifications or exchanges of freestanding equity-classified written call options affect entities that present EPS in accordance with the guidance in Topic 260, Earnings Per Share. | January 2022 | This ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The adoption of this standard is not expected to have any material impact on the Company’s consolidated financial statements as it currently does not apply. | |||
Ordinary Shares Subject to Possible Redemption
The Company accounts for its ordinary shares subject to possible redemption in accordance with the guidance in ASC 840. Ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at redemption value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, atPredecessor three months ended September 30, 2020 and December 31, 2019, 28,750,000 ordinary shares subject to possible redemption are presented as temporary equity outside of the shareholders’ equity section of the Company’s Balance Sheets.
The ordinary shares subject to possible redemption are subject to the subsequent measurement guidance in ASC 480. Under such guidance, the Company must subsequently measure the shares to their redemption amount because, as a result of the allocation of net proceeds to the Public Warrants, the initial carrying amount of the Ordinary Shares is less than $10.00 per share. In accordance with the guidance, the Company has elected to measure the Ordinary Shares subject to possible redemption to their redemption amount (i.e., $10.00 per share) immediately as if the end of the first reporting period after the IPO, June 30, 2019, was the redemption date.
REPLAY ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Net Income (Loss) Per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, Earnings Per Share.The Statements of Operations include a presentation of (loss) income per Public Shares and loss per Founder Shares following the two-class method of income per share. In order to determine the net (loss) income attributable to both the Public and Founder Shares, the Company first considered the total (loss) income allocable to both classes of shares. This is calculated using the total net (loss) income less any dividends paid. For purposes of calculating net (loss) income per share, any remeasurement of the ordinary shares subject to possible redemption was considered to be dividends paid to the public shareholders. Subsequent to calculating the total (loss) income allocable to both classes of shares, the Company allocated the amount using a ratio reflective of the respective participation rights of each class of shares. This resulted in an allocation of 80%or for the Public Shares and 20% for the Founder Shares.
For the nine months ended September 30, 2020, basic2020.
September 30, 2021 | December 31, 2020 | |||||||
Successor | Predecessor | |||||||
ASSETS | ||||||||
Restricted cash | $ | 306,615 | $ | 293,580 | ||||
Mortgage loans held for investment, subject to nonrecourse debt, at fair value | 5,939,651 | 5,396,167 | ||||||
Other assets | 69,947 | 79,528 | ||||||
TOTAL ASSETS | $ | 6,316,213 | $ | 5,769,275 | ||||
LIABILITIES | ||||||||
Nonrecourse debt, at fair value | $ | 5,956,832 | $ | 5,459,941 | ||||
Payables and other liabilities | 117 | 291 | ||||||
TOTAL VIE LIABILITIES | 5,956,949 | 5,460,232 | ||||||
Retained bonds and beneficial interests eliminated in consolidation | (221,822 | ) | (202,187 | ) | ||||
TOTAL CONSOLIDATED LIABILITIES | $ | 5,735,127 | $ | 5,258,045 | ||||
For the nine months ended September 30, 2019, basic and diluted net loss per share of Public Shares were calculated by dividing 80%VIEs. The transfer of the totalloans to the VIEs was determined to be a sale. The Company derecognized the mortgage loans and did not consolidate the trusts.
For the three months ended September 30, 2020, basic and diluted net loss per share of Public Shares were calculated by dividing 80%loan sale agreements. Creditors of the total loss allocableVIE have no recourse to all shares, of approximately $2.2 million, by 28,750,000, the weighted average number of Public Shares outstanding for the period. For the three months ended September 30, 2020, basic and diluted net loss per share of Founder Shares were calculated by dividing 20%FAM’s assets or general credit. The underlying performance of the total loss allocable to all shares of approximately $2.2 million, by 7,187,500,mortgage loans transferred has a direct impact on the weighted average number of Founder Shares outstanding for the period.
For the three months ended September 30, 2019, basicfair values and diluted net income per share of Public Shares were calculated by dividing 80%cash flows of the total loss allocable to all shares, of approximately $1.1 million, by 28,750,000,beneficial interests held and the weighted average number of Public Shares outstanding for the period. For the three months ended September 30, 2019, basic and diluted net loss per share of Founder Shares were calculated by dividing 20% of the total loss allocable to all shares, of approximately $1.1 million, by 7,187,500, the weighted average number of Founder Shares outstanding for the period.
At September 30, 2020 and September 30, 2019, we did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in our earnings. servicing asset recognized.
Income Taxes
FASB ASC 740, Income Taxes, prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of September 30, 2020 and December 31, 2019. The Company’s management determined that2021 (Successor), the Cayman Islands isinterests retained upon transfer of the Company’s only major tax jurisdiction. The Company recognizes accruedmortgage loans consisted of an interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the paymentin each class of interest and penalties at September 30, 2020 and December 31, 2019. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception. There is currently no taxation imposed on incomesecurities issued by the Government of the Cayman Islands. In accordance with Cayman income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s financial statements.
There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s financial statements.
RisksVIE and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited financial statements. The unaudited financial statements do not include any adjustments that might result from the outcome of this uncertainty.
REPLAY ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
Note 3—Initial Public Offering
On April 8, 2019, the Company sold 28,750,000 Units, including the issuance of 3,750,000 Units as a result of the underwriters’ full exercise of their over-allotment option, at a purchase price of $10.00 per Unit in the Initial Public Offering. Of these, an aggregate of 2,500,000 Units in the Initial Public Offering (“Affiliate Units”) were purchased by certain affiliates of the Sponsor for gross proceeds of $25.0 million.
Each Unit consists of one ordinary share and one-half of one redeemable warrant (each, a “Public Warrant”). Each whole Public Warrant entitles the holder to purchase one ordinary share at a price of $11.50 per share, subject to adjustment (see Note 6).
Note 4—Related Party Transactions
Founder Shares and Private Placement Warrants
In December 2018, the Sponsor purchased 7,187,500 ordinary shares, par value $0.0001 per share (the “Founder Shares”), for an aggregate price of $25,000. In March 2019, the Sponsor transferred to the Company’s independent directors an aggregate of 90,000 Founder Shares for an aggregate purchase price of $313. The Sponsor agreed to forfeit up to 937,500 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters. The forfeiture was to be adjusted to the extent that the over-allotment option was not exercised in full by the underwriters so that the Founder Shares would represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering. On April 5, 2019, the underwriters fully exercised their over-allotment option which closed simultaneously with the Initial Public Offering; thus, the 937,500 Founder Shares were no longer subject to forfeiture.
The initial shareholders agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last reported sale price of the ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, amalgamation, share exchange, reorganization or other similar transaction that results in all of the Company’s shareholders having the right to exchange their ordinary shares for cash, securities or other property.
Simultaneously with the closing of the Initial Public Offering on April 8, 2019, the Company sold 7,750,000 Private Placement Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant, generating gross proceeds of $7.75 million. Each Private Placement Warrant is exercisable for one ordinary share at a price of $11.50 per share. The Private Placement Warrants have been accounted for as liabilities, withhad an initial fair value of $6,975,000.$42.0
The Sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.
REPLAY ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
PIPE Agreements
Concurrently with the execution of the Transaction Agreement, the Company entered into the Replay PIPE Agreements (as defined below) with various investors, including an affiliate of the Sponsor, pursuant to which such investors agreed to purchase ordinary shares (which ordinary shares will be converted into Replay LLC Units pursuant to the Domestication and then will be converted into the right to receive shares of Class A Common Stock pursuant to the Replay Merger (as defined below)). In the aggregate, the PIPE Investors (as defined below) have committed to purchase $250.0 million of PIPE Shares (as defined below), at a purchase price of $10.00 per PIPE Share, including $10.0 million of PIPE Shares to be purchased by an affiliate of the Sponsor.
Related Party Loans
On December 1, 2018, the Sponsor agreed to loan the Company an aggregate of up to $250,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). This loan was non-interest bearing and payable on the earlier of June 30, 2019 or the completion of the Initial Public Offering. The Company borrowed $250,000 under the Note, and fully repaid on May 6, 2019.
In addition to the Note, the Company borrowed approximately $2,000 from a related party for general and administrative expenses. The Company repaid this amount on May 7, 2019.
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. To date, the Company had no borrowings under the Working Capital Loans.
Reimbursement
The Sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company’s behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. The Company’s Audit Committee will review on a quarterly basis all payments that were made to the Sponsor, officers, directors or the Company’s or any of their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on the Company’s behalf.
September 30, 2021 | December 31, 2020 | |||||||
Successor | Predecessor | |||||||
Unconsolidated securitization trusts: | ||||||||
Total collateral balances – UPB | $ | 795,077 | $ | 0 | ||||
Total certificate balances | $ | 795,077 | $ | 0 | ||||
REPLAY ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 5—Commitments and Contingencies
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, and any ordinary shares underlying such securities, are entitled to registration rights pursuant to a Registration Rights Agreement entered into on April 3, 2019. These holders will be entitled to certain demand and “piggyback” registration rights. However, the Registration Rights Agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day option from the date of the final prospectus relating to the Initial Public Offering to purchase up to 3,750,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. On April 5, 2019, the underwriters fully exercised their over-allotment option which closed simultaneously with the Initial Public Offering.
Except on the Affiliate Units, the underwriters were entitled to an underwriting discount of $0.20 per Unit, or $5.25 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per Unit, or approximately $9.19 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Note 6—Shareholders’ Equity
Ordinary Shares—The Company is currently authorized to issue 200,000,000 ordinary shares with a par value of $0.0001 per share. Holders of ordinary shares are entitled to one vote for each share. The Company sold 28,750,000 Units in the Initial Public Offering, and 7,187,500 ordinary shares to the Sponsor (Founders Shares). As a result, as of September 30, 2020 and December 31, 2019, there were 35,937,500 ordinary shares issued and outstanding, including 28,750,000 ordinary shares subject to possible redemption.
Preference Shares—The Company is authorized to issue 2,000,000 preference shares with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors.
Warrants—Public Warrants may only be exercised for a whole number$1.6
REPLAY ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Company’s ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but the Company will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the ordinary shares issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the initial purchasers or such purchasers’ permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemablemortgage loans transferred by the Company and exercisable by such holders on the same basis as the Public Warrants.
The Company may call the Public Warrants for redemption (except with respect to the Private Placement Warrants):
in whole and not in part;
at a price of $0.01 per warrant;
upon a minimum of 30 days’ prior written notice of redemption; and
if, and only if, the last reported closing price of the ordinary shares equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.
The exercise price and number of ordinary shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, recapitalization, reorganization, merger or consolidation. In addition, if (x) the Company issues additional ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.20 per ordinary share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the Company’s initial Business Combination on the date of the consummation of such initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price. Additionally, in no event will the Company be required to net cash settle the warrant shares. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
The Company accounts for the Public Warrants and Private Placement Warrants as liabilities in accordance with the guidance contained in ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity. Because the Company does not control the occurrence of events, such as a tender offer or exchange, that may trigger cash settlement of the warrants where not all of the shareholders also receive cash, the warrants do not meet the criteria for equity treatment thereunder, as such, the warrants must be recorded as derivative liability.
Additionally, certain adjustments to the settlement amount of the Private Placement Warrants are based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under ASC 815-40, and thus the Private Placement Warrants are not considered indexed to the Company’s own stock and not eligible for an exception from derivative accounting.
The Company recorded a derivative liability upon the issuance of the warrants. Accordingly, the Company classified each warrant as a liability at its fair value. The Public Warrants were allocated a portion of the proceeds from the issuance of the Units equal to its fair value determined by the Monte Carlo simulation. The warrant liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s Statements of Operations. The Company will reassess the classification of the warrants at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification.
REPLAY ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 7 — Fair Value Measurements
The following tables present information about the Company’s financial assetsunconsolidated securitization trusts that are measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019 by level within the fair value hierarchy:
September 30, 2020
Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
Assets: | ||||||||||||
Investments held in Trust Account | $ | 293,255,540 | $ | — | $ | — | ||||||
Liabilities: | ||||||||||||
Warrants | $ | — | $ | 21,096,250 | $ | — | ||||||
December 31, 2019
Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
Assets: | ||||||||||||
Investments held in Trust Account | $ | 292,054,158 | $ | — | $ | — | ||||||
Liabilities: | ||||||||||||
Warrants | $ | — | $ | 18,817,500 | $ | — | ||||||
The Company has determined that the Warrants are subject to treatment as a liability.90 days or less past due. As the transfer of the Private Placement Warrants to anyone other than the purchasers or their permitted transferees would result in the Private Placement Warrants having substantially the same terms as the Public Warrants issued in the Offering. The Company has determined that the fair value of each Warrant issued as part of the Private Placement Warrants is the same as that of a Warrant issued in the Offering, with an insignificant adjustment for short-term marketability restrictions. Accordingly, the Warrants are classified as Level 2 financial instruments.
Note 8 — Restatement of Previously Issued Financial Statements
The Company has restated previously issued financial statements after considering newly released guidance by the SEC regarding the accounting and reporting for warrants.
On April 12, 2021, the Staff of the Securities and Exchange Commission issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). The errors that caused the Company to conclude that its financial statements should be restated are the result of a misapplication of the guidance on accounting for certain of its issued warrants, which came to light when the SEC issued the SEC Statement. The SEC Statement addresses certain accounting and reporting considerations related to warrants of a kind similar to those issued by the Company at the time of its initial public offering on April 8, 2021. Based on ASC 815-40 warrant instruments that do not meet the criteria to be considered indexed to an entity’s own stock shall be initially classified as liabilities at their estimated fair values. In periods subsequent to issuance, changes in the estimated fair value of the derivative instruments should be reported in the statement of operations. Refer to Note 6 - Shareholders’ Equity for further detail on the Warrants.
The Company’s management and the audit committee of the Company’s Board of Directors concluded that it is appropriate to restate (i) the Company’s previously issued audited financial statements as of December 31, 2020, and December 31, 2019, as previously reported in its Form 10-K and (ii) quarterly unaudited financial statements for the quarterly periods ended June 30, 2019, September 30, 2019, March 31, 2020, June 30, 2020 and September 30, 2020. there were no unconsolidated securitization trusts.
In addition, management has identified errors made in the historical financial statements related to its shareholders’ equity where, on the date of issuance of the units, Replay improperly allocated the net proceeds among the ordinary shares subject to possible redemption and public warrants. Additionally, due to the redemption features tied to the ordinary shares subject to possible redemption, such shares will be redeemed or become redeemable. As a result, Replay should have remeasured the ordinary shares subject to possible redemption to their redemption amount (i.e., $10.00 per share) immediately as of the end of the first reporting period after the IPO (June 30, 2019) were the redemption date. Management also noted a reclassifications error related to temporary equity and permanent equity.
The following presents the restated financial statements as of September 30, 2020 and December 31, 2019, as well as the statements for the three and nine month period ended September 30, 2020 and 2019.
REPLAY ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
The following presents a reconciliation of the Balance Sheets, Statements of Operations, and Statements of Cash Flows from the prior periods as previously reported to the restated amounts as of September 30, 2020 and December 31, 2019. The Statements of Shareholders’ Equity for the three and nine month period ended September 30, 2020 and 2019 have been restated respectively, for the restatement impact to net (loss) income and common stock subject to possible redemption. See the Statement of Operations reconciliation tables below for additional information on the restatement and impact to net (loss) income.
| September 30, 2020 | ||||||||||||
| As Reported | Restatement Adjustments | As Restated | ||||||||||
Assets: | ||||||||||||
Current assets: | ||||||||||||
Cash | $ | 974,317 | $ | — | $ | 974,317 | ||||||
Prepaid expenses | 47,084 | — | 47,084 | |||||||||
|
|
|
|
|
| |||||||
Total current assets | 1,021,401 | — | 1,021,401 | |||||||||
Investments held in Trust Account | 293,255,540 | — | 293,255,540 | |||||||||
|
|
|
|
|
| |||||||
Total assets | $ | 294,276,941 | $ | — | $ | 294,276,941 | ||||||
|
|
|
|
|
| |||||||
Liabilities and Shareholders’ Equity: | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 371,225 | $ | — | $ | 371,225 | ||||||
Accrued expenses | 414,571 | — | 414,571 | |||||||||
|
|
|
|
|
| |||||||
Total current liabilities | 785,796 | — | 785,796 | |||||||||
Warrant liability | — | 21,096,250 | (a) | 21,096,250 | ||||||||
Deferred underwriting commissions | 9,187,500 | — | 9,187,500 | |||||||||
|
|
|
|
|
| |||||||
Total liabilities | 9,973,296 | 21,096,250 | 31,069,546 | |||||||||
|
|
|
|
|
| |||||||
Commitments and contingencies | ||||||||||||
Ordinary shares, $0.0001 par value; 28,750,000 shares subject to possible redemption at $10.00 per share at September 30, 2020 | 279,303,640 | 8,196,360 | (a) | 287,500,000 | ||||||||
Shareholders’ Equity: | ||||||||||||
Preference shares, $0.0001 par value; 2,000,000 shares authorized; none issued and outstanding | — | — | — | |||||||||
Ordinary shares, $0.0001 par value; 200,000,000 shares authorized; 7,187,500 shares issued and outstanding (excluding 28,750,000 shares subject to possible redemption) at September 30, 2020 | 801 | (82 | )(a) | 719 | ||||||||
Additional paid-in capital | 895,230 | (895,230 | )(a) | — | ||||||||
Retained earnings / (Accumulated deficit) | 4,103,974 | (28,397,298 | )(a) | (24,293,324 | ) | |||||||
|
|
|
|
|
| |||||||
Total shareholders’ equity | 5,000,005 | (29,292,610 | ) | (24,292,605 | ) | |||||||
|
|
|
|
|
| |||||||
Total Liabilities and Shareholders’ Equity | $ | 294,276,941 | $ | — | $ | 294,276,941 | ||||||
|
|
|
|
|
| |||||||
REPLAY ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
| December 31, 2019 | ||||||||||||
| As Reported | Restatement Adjustments | As Restated | ||||||||||
Assets: | ||||||||||||
Current assets: | ||||||||||||
Cash | $ | 1,589,795 | $ | — | $ | 1,589,795 | ||||||
Prepaid expenses | 62,738 | — | 62,738 | |||||||||
|
|
|
|
|
| |||||||
Total current assets | 1,652,533 | — | 1,652,533 | |||||||||
Investments held in Trust Account | 292,054,158 | — | 292,054,158 | |||||||||
|
|
|
|
|
| |||||||
Total assets | $ | 293,706,691 | $ | — | $ | 293,706,691 | ||||||
|
|
|
|
|
| |||||||
Liabilities and Shareholders’ Equity: | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 86,595 | $ | — | $ | 86,595 | ||||||
Accrued expenses | 8,860 | — | 8,860 | |||||||||
|
|
|
|
|
| |||||||
Total current liabilities | 95,455 | — | 95,455 | |||||||||
Warrant liability | — | 18,817,500 | (a) | 18,817,500 | ||||||||
Deferred underwriting commissions | 9,187,500 | — | 9,187,500 | |||||||||
|
|
|
|
|
| |||||||
Total liabilities | 9,282,955 | 18,817,500 | 28,100,455 | |||||||||
|
|
|
|
|
| |||||||
Commitments and contingencies | ||||||||||||
Ordinary shares, $0.0001 par value; 28,750,000 shares subject to possible redemption at $10.00 per share at December 31, 2019 | 279,423,730 | 8,076,270 | (a) | 287,500,000 | ||||||||
Shareholders’ Equity: | ||||||||||||
Preference shares, $0.0001 par value; 2,000,000 shares authorized; none issued and outstanding | — | — | — | |||||||||
Ordinary shares, $0.0001 par value; 200,000,000 shares authorized; 7,187,500 shares issued and outstanding (excluding 28,750,000 and shares subject to possible redemption) at December 31, 2019 | 800 | (81 | )(a) | 719 | ||||||||
Additional paid-in capital | 775,141 | (775,141 | )(a) | — | ||||||||
Retained earnings / (Accumulated deficit) | 4,224,065 | (26,118,548 | )(a) | (21,894,483 | ) | |||||||
|
|
|
|
|
| |||||||
Total shareholders’ equity | 5,000,006 | (26,893,770 | ) | (21,893,764 | ) | |||||||
|
|
|
|
|
| |||||||
Total Liabilities and Shareholders’ Equity | $ | 293,706,691 | $ | — | $ | 293,706,691 | ||||||
|
|
|
|
|
| |||||||
REPLAY ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
The following tables contain the restatement of previously reported unaudited Statements of Operations for the three and nine month periods ended September 30, 2020 and 2019.
| For the three months ended September 30, 2020 | ||||||||||||
| As Reported | Restatement Adjustments | As Restated | ||||||||||
General and administrative expenses | $ | 1,058,292 | $ | — | $ | 1,058,292 | ||||||
|
|
|
|
|
| |||||||
Loss from operations | (1,058,292 | ) | — | (1,058,292 | ) | |||||||
Loss on revaluation of warrant liability | — | (1,106,250 | )(a) | (1,106,250 | ) | |||||||
Loss on marketable securities, dividends and interest held in Trust Account | 86,803 | — | 86,803 | |||||||||
|
|
|
|
|
| |||||||
Net loss | $ | (971,489 | ) | $ | (1,106,250 | ) | $ | (2,077,739 | ) | |||
|
|
|
|
|
| |||||||
Basic and diluted weighted average shares outstanding of Public Shares | 28,750,000 | — | 28,750,000 | |||||||||
|
|
|
|
|
| |||||||
Basic and diluted net loss per share, Public Shares | $ | — | $ | (0.06 | )(a) | $ | (0.06 | ) | ||||
|
|
|
|
|
| |||||||
Basic and diluted weighted average shares outstanding of Founder Shares | 7,187,500 | — | 7,187,500 | |||||||||
|
|
|
|
|
| |||||||
Basic and diluted net loss per share, Founder Shares | $ | (0.15 | ) | $ | 0.09 | (a) | $ | (0.06 | ) | |||
|
|
|
|
|
| |||||||
| For the three months ended September 30, 2019 | ||||||||||||
| As Reported | Restatement Adjustments | As Restated | ||||||||||
General and administrative expenses | $ | 111,750 | $ | — | $ | 111,750 | ||||||
|
|
|
|
|
| |||||||
Loss from operations | (111,750 | ) | — | (111,750 | ) | |||||||
Issuance costs allocated to the public warrants | — | — | — | |||||||||
Loss on revaluation of warrant liability | — | (951,250 | )(a) | (951,250 | ) | |||||||
Gain on marketable securities, dividends and interest held in Trust Account | 1,561,854 | — | 1,561,854 | |||||||||
|
|
|
|
|
| |||||||
Net income | $ | 1,450,104 | $ | (951,250 | ) | $ | 498,854 | |||||
|
|
|
|
|
| |||||||
Basic and diluted weighted average shares outstanding of Public Shares | 28,750,000 | — | 28,750,000 | |||||||||
|
|
|
|
|
| |||||||
Basic and diluted net income (loss) per share, Public Shares | $ | 0.05 | $ | (0.03 | )(a) | $ | 0.02 | |||||
|
|
|
|
|
| |||||||
Basic and diluted weighted average shares outstanding of Founder Shares | 7,187,500 | — | 7,187,500 | |||||||||
|
|
|
|
|
| |||||||
Basic and diluted net loss per share, Founder Shares | $ | (0.02 | ) | $ | (0.01 | )(a) | $ | (0.03 | ) | |||
|
|
|
|
|
| |||||||
REPLAY ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
| For the nine months ended September 30, 2020 | ||||||||||||
| As Reported | Restatement Adjustments | As Restated | ||||||||||
General and administrative expenses | $ | 1,321,473 | $ | — | $ | 1,321,473 | ||||||
|
|
|
|
|
| |||||||
Loss from operations | (1,321,473 | ) | — | (1,321,473 | ) | |||||||
Loss on revaluation of warrant liability | — | (2,278,750 | )(a) | (2,278,750 | ) | |||||||
Gain on marketable securities, dividends and interest held in Trust Account | 1,201,382 | — | 1,201,382 | |||||||||
|
|
|
|
|
| |||||||
Net loss | $ | (120,091 | ) | $ | (2,278,750 | ) | $ | (2,398,841 | ) | |||
|
|
|
|
|
| |||||||
Basic and diluted weighted average shares outstanding of Public Shares | 28,750,000 | — | 28,750,000 | |||||||||
|
|
|
|
|
| |||||||
Basic and diluted net income (loss) per share, Public Shares | $ | 0.04 | $ | (0.10 | )(a) | $ | (0.06 | ) | ||||
|
|
|
|
|
| |||||||
Basic and diluted weighted average shares outstanding of Founder Shares | 7,187,500 | — | 7,187,500 | |||||||||
|
|
|
|
|
| |||||||
Basic and diluted net loss per share, Founder Shares | $ | (0.18 | ) | $ | 0.08 | (a) | $ | (0.10 | ) | |||
|
|
|
|
|
| |||||||
| For the nine months ended September 30, 2019 | ||||||||||||
| As Reported | Restatement Adjustments | As Restated | ||||||||||
General and administrative expenses | $ | 245,980 | $ | — | $ | 245,980 | ||||||
|
|
|
|
|
| |||||||
Loss from operations | (245,980 | ) | — | (245,980 | ) | |||||||
Issuance costs allocated to the public warrants | — | (648,239 | )(a) | (648,239 | ) | |||||||
Gain on revaluation of warrant liability | — | 2,666,250 | (a) | 2,666,250 | ||||||||
Gain on marketable securities, dividends and interest held in Trust Account | 3,322,448 | — | 3,322,448 | |||||||||
|
|
|
|
|
| |||||||
Net income | $ | 3,076,468 | $ | 2,018,011 | $ | 5,094,479 | ||||||
|
|
|
|
|
| |||||||
Basic and diluted weighted average shares outstanding of Public Shares | 28,750,000 | — | 28,750,000 | |||||||||
|
|
|
|
|
| |||||||
Basic and diluted net income per share, Public Shares | $ | 0.12 | $ | 0.23 | (a) | $ | 0.35 | |||||
|
|
|
|
|
| |||||||
Basic and diluted weighted average shares outstanding of Founder Shares | 7,187,500 | — | 7,187,500 | |||||||||
|
|
|
|
|
| |||||||
Basic and diluted net loss per share, Founder Shares | $ | (0.03 | ) | $ | (0.67 | )(a) | $ | (0.70 | ) | |||
|
|
|
|
|
| |||||||
REPLAY ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
The following tables contain the restatement of previously reported unaudited Statements of Cash Flows for the three and nine month periods ended September 30, 2020 and 2019.
| For the nine months ended September 30, 2020 | ||||||||||||
| As Reported | Restatement Adjustments | As Restated | ||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net loss | $ | (120,091 | ) | $ | (2,278,750 | )(a) | $ | (2,398,841 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
Gain on marketable securities, dividends and interest held in Trust Account | (1,201,382 | ) | — | (1,201,382 | ) | |||||||
Loss on revaluation of warrant liability | — | 2,278,750 | (a) | 2,278,750 | ||||||||
Changes in operating assets and liabilities: | ||||||||||||
Prepaid expenses | 15,654 | — | 15,654 | |||||||||
Accounts payable | 284,630 | — | 284,630 | |||||||||
Accrued expenses | 405,711 | — | 405,711 | |||||||||
|
|
|
|
|
| |||||||
Net cash used in operating activities | (615,478 | ) | — | (615,478 | ) | |||||||
|
|
|
|
|
| |||||||
Net change in cash | (615,478 | ) | — | (615,478 | ) | |||||||
Cash - beginning of period | 1,589,795 | — | 1,589,795 | |||||||||
|
|
|
|
|
| |||||||
Cash - end of period | $ | 974,317 | $ | — | $ | 974,317 | ||||||
|
|
|
|
|
| |||||||
Supplemental disclosure of noncash activities: | ||||||||||||
Remeasurement of ordinary shares subject to possible redemption | $ | (120,090 | ) | $ | 120,090 | (a) | $ | — | ||||
REPLAY ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
| For the nine months ended September 30, 2019 | ||||||||||||
| As Reported | Restatement Adjustments | As Restated | ||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net income | $ | 3,076,468 | $ | 2,018,011 | (a) | $ | 5,094,479 | |||||
Adjustments to reconcile net income to net cash used in operating activities: |
| |||||||||||
General and administrative expenses paid by related party | 2,206 | — | 2,206 | |||||||||
Gain on marketable securities, dividends and interest held in Trust Account | (3,322,448 | ) | — | (3,322,448 | ) | |||||||
Gain on revaluation of warrant liability | — | (2,666,250 | )(a) | (2,666,250 | ) | |||||||
Changes in operating assets and liabilities: | ||||||||||||
Prepaid expenses | (101,988 | ) | — | (101,988 | ) | |||||||
Accounts payable | 79,620 | — | 79,620 | |||||||||
Accrued expenses | (87,694 | ) | — | (87,694 | ) | |||||||
|
|
|
|
|
| |||||||
Net cash used in operating activities | (353,836 | ) | (648,239 | ) | (1,002,075 | ) | ||||||
|
|
|
|
|
| |||||||
Cash Flows from Investing Activities: | ||||||||||||
Cash deposited in Trust Account | (287,500,000 | ) | — | (287,500,000 | ) | |||||||
|
|
|
|
|
| |||||||
Net cash used in investing activities | (287,500,000 | ) | — | (287,500,000 | ) | |||||||
|
|
|
|
|
| |||||||
Cash Flows from Financing Activities: | ||||||||||||
Proceeds from note payable to related party | 250,000 | — | 250,000 | |||||||||
Repayment of note payable and advances from related party | (252,206 | ) | — | (252,206 | ) | |||||||
Proceeds received from initial public offering | 287,500,000 | — | 287,500,000 | |||||||||
Proceeds from private placement | 7,750,000 | — | 7,750,000 | |||||||||
Offering costs paid | (5,800,229 | ) | 648,239 | (a) | (5,151,990 | ) | ||||||
|
|
|
|
|
| |||||||
Net cash provided by financing activities | 289,447,565 | 648,239 | 290,095,804 | |||||||||
|
|
|
|
|
| |||||||
Net change in cash | 1,593,729 | — | 1,593,729 | |||||||||
Cash - beginning of period | 25,000 | — | 25,000 | |||||||||
|
|
|
|
|
| |||||||
Cash - end of period | $ | 1,618,729 | $ | — | $ | 1,618,729 | ||||||
|
|
|
|
|
| |||||||
Supplemental disclosure of noncash activities: | ||||||||||||
Offering costs included in accrued expenses | $ | 85,000 | $ | — | $ | 85,000 | ||||||
Offering costs included in accounts payable | $ | 2,600 | $ | — | $ | 2,600 | ||||||
Remeasurement of ordinary shares subject to possible redemption | $ | 278,273,440 | $ | (251,483,850 | )(a) | $ | 26,789,590 | |||||
Deferred underwritting commissions | $ | — | $ | 9,187,500 | (a) | $ | 9,187,500 | |||||
|
REPLAY ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 9 — Subsequent Events
In accordance with ASC Topic 855, Subsequent Events, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company evaluated subsequent events and transactions that occurred after September 30, 2020, the balance sheet date, up to the date that the financial statements were available to be issued. As a result, the following transactions were identified as subsequent events as of May 28, 2021.
On October 12, 2020, the Company, Replay and FoA New Pubco, Replay Merger Sub, Blocker Merger Sub, Blocker, Blocker GP, the Sellers and BTO Urban and Family Holdings, solely in their joint capacity as the Seller Representative,Equity entered into thea Transaction Agreement (the “Transaction Agreement”) pursuant to which the CompanyReplay agreed to combine with FoA Equity in a series of transactions that resulted in the Proposed Business Combination that will result in New PubcoCompany becoming a publicly-traded company on the NYSENew York Stock Exchange (“NYSE”) and controlling FoA Equity in an “UP-C”
The Proposed Business Combination encompasses At the Closing on April 1, 2021, Replay domesticated into a series of transactions to effect an “UP-C” structure, pursuant to which, among other things: (i)Delaware corporation, and the Company will change its jurisdiction of incorporation fromwas formed. Following the Cayman Islands toClosing, the State ofpublic investors held Class A Common Stock representing approximately a 31.3% economic interest, and BTO Urban Holdings L.L.C., a Delaware by deregistering as an exempted company in the Cayman Islands and continuing and domesticating as Finance of America Companies, Inc. a limited liability company formed under(“BTO Urban”), Blackstone Family Tactical Opportunities Investment Partnership – NQ – ESC L.P., a Delaware limited partnership (“ESC”), Libman Family Holdings LLC, a Connecticut limited liability company (“Family Holdings”), The Mortgage Opportunity Group LLC, a Connecticut limited liability company (“TMO”), L and TF, LLC, a North Carolina limited liability company (“L&TF”), UFG Management Holdings LLC, a Delaware limited liability company (“Management Holdings”), and Joe Cayre (each of BTO Urban, ESC, Family Holdings, TMO, L&TF, Management Holdings and Joe Cayre, a “Seller” and, collectively, the laws“Sellers” or the “Continuing Unitholders”) retained a 68.7% economic interest in FoA Equity in the form of Class A LLC Units. Additionally, the Company issued to the Continuing Unitholders shares of Class B Common Stock, which have no economic rights but entitle each holder to a number of votes that is equal to the aggregate number of Class A LLC Units held by such holder on all matters on which shareholders of the State of Delaware (the “Domestication”).
On April 1,Company are entitled to vote generally. Subsequent to the Closing, the Company consummatedcontrols FoA Equity as the Proposed Business Combinationsole appointer of the board of managers and is a holding company with New Pubco resultingno assets or operations other than its equity interest in the Domestication, whereby the Company became a wholly owned consolidated subsidiary of New Pubco. FoA Equity.
Additional disclosures
Consideration transferred: | ||||
Total cash consideration | $ | 342,270 | ||
Blocker rollover equity | 221,811 | |||
Seller earnout contingent consideration (1) | 160,272 | |||
Tax receivable agreement obligations to the seller | 31,950 | |||
Total consideration transferred | 756,303 | |||
Noncontrolling interest | 1,658,545 | |||
Total equity value | $ | 2,414,848 | ||
Assets acquired: | ||||
Cash and cash equivalents | $ | 336,075 | ||
Restricted cash | 305,292 | |||
Reverse mortgage loans held for investment, subject to HMBS related obligations, at fair value | 10,071,192 | |||
Mortgage loans held for investment, subject to nonrecourse debt, at fair value | 5,291,443 | |||
Mortgage loans held for investment, at fair value | 1,100,544 | |||
Mortgage loans held for sale, at fair value | 2,140,361 | |||
Debt securities | 9,230 | |||
Mortgage servicing rights, at fair value | 267,364 | |||
Derivative assets | 116,479 | |||
Fixed assets and leasehold improvements, net | 26,079 | |||
Intangible assets, net (2) | 717,700 | |||
Other assets, net | 279,155 | |||
Total assets acquired | $ | 20,660,914 | ||
Liabilities assumed: | ||||
HMBS related obligations, at fair value | $ | 9,926,131 | ||
Nonrecourse debt, at fair value | 5,227,942 | |||
Other financing lines of credit | 3,340,345 | |||
Payables and other liabilities | 669,048 | |||
Notes payable, net | 353,924 | |||
Total liabilities assumed | $ | 19,517,390 | ||
Net identifiable assets acquired | 1,143,524 | |||
Goodwill (3) | $ | 1,271,324 | ||
| (1) | Represents the estimated fair market value of earnout shares issued to Sellers, which will be settled with shares of Class A Common Stock and is accounted for as equity classified contingent consideration. These estimated fair values are preliminary and subject to adjustments in subsequent periods. |
(2) | Intangible assets were identified that met either the separability criterion or contractual legal criterion. The evaluations of the facts and circumstances available as of April 1, 2021, to assign provisional fair values to assets acquired and liabilities assumed are ongoing, including the assessments of the economic characteristics of intangible assets. These evaluations may result in changes to the provisional amounts recorded based on third party valuations performed. The indefinite lived trade names and definite lived trade names intangible assets represent the values of all the Company’s trade names. The broker/customer relationships intangible asset represents the existing broker/customer relationships. |
(3) | Goodwill represents the excess of the gross consideration transferred over the provisional fair value of the underlying net tangible and identifiable intangible assets acquired. Goodwill represents future economic benefits arising from acquiring FoA Equity, primarily due to its strong market position and its assembled workforce that are not individually identified and separately recognized as intangible assets. Approximately $85.2 million of the goodwill recognized is expected to be deductible for income tax purposes. |
Identifiable intangible assets | Provisional Fair value (in thousands) | Provisional Useful life (in years) | ||||||
Indefinite lived trade names | $ | 178,000 | N/A | |||||
Definite lived trade names | 8,800 | 10 | ||||||
Broker/customer relationships | 530,900 | 8-15 | ||||||
Total | $ | 717,700 | ||||||
(in thousands) | For the three months ended September 30, | For the nine months ended September 30, | ||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Pro forma revenues | $ | 456,500 | $ | 600,540 | $ | 1,354,046 | $ | 1,240,824 | ||||||||
Pro forma net income | 50,797 | 188,723 | 161,614 | 193,622 | ||||||||||||
Pro forma net income attributable to controlling interest | 21,424 | 45,300 | 50,406 | 53,958 | ||||||||||||
Pro forma net income (loss) attributable to noncontrolling interest | 29,373 | 143,423 | 111,208 | 139,664 | ||||||||||||
Acquisition Date Fair Value | ||||
L oans held for sale, at fairvalue (1) | $ | 35,226 | ||
Intangible assets | 1,890 | |||
Goodwill | 5,627 | |||
Other assets, net | 753 | |||
Net assets acquired | $ | 43,496 | ||
(1) | These loans held for sale, at fair value are included as a component of mortgage loans held for sale, at fair value on the Consolidated Statements of Financial Condition. |
Provisional Fair Value (in thousands) | Provisional Useful Life (in years) | |||||||
Technology | $ | 1,890 | 5 | |||||
5. | Fair Value |
September 30, 2021 | December 31, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||
Inputs | Range | Weighted Average | Range | Weighted Average | ||||||||||||
Conditional repayment rate | NM | 20.8 | % | NM | 20.0 | % | ||||||||||
Loss frequency | NM | 4.8 | % | NM | 4.4 | % | ||||||||||
Loss severity | 4.1% - 11.8% | 4.4 | % | 5.1% - 13.3% | 5.4 | % | ||||||||||
Discount rate | NM | 2.2 | % | NM | 1.6 | % | ||||||||||
Average draw rate | NM | 1.1 | % | NM | 1.1 | % | ||||||||||
September 30, 2021 | December 31, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||
Inputs | Range | Weighted Average | Range | Weighted Average | ||||||||||||
Conditional repayment rate | NM | 41.2 | % | NM | 42.9 | % | ||||||||||
Loss frequency | 25.0% - 100.0% | 59.9 | % | 25.0% - 100.0% | 54.8 | % | ||||||||||
Loss severity | 4.1% - 11.8% | 6.1 | % | 5.1% - 13.3% | 7.5 | % | ||||||||||
Discount rate | NM | 3.6 | % | NM | 4.1 | % | ||||||||||
September 30, 2021 | December 31, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||
Inputs | Range | Weighted Average | Range | Weighted Average | ||||||||||||
Weighted average remaining life (in years) | NM | 9.3 | NM | 8.5 | ||||||||||||
Conditional repayment rate | NM | 12.8 | % | NM | 14.7 | % | ||||||||||
Loss severity | 4.1% - 11.8% | 8.6 | % | 5.1% - 13.3% | 7.7 | % | ||||||||||
Discount rate | NM | 3.6 | % | NM | 3.5 | % | ||||||||||
September 30, 2021 | December 31, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||
Inputs | Range | Weighted Average | Range | Weighted Average | ||||||||||||
Weighted-average remaining life (in years) | NM | 7.2 | NM | 6.9 | ||||||||||||
Loan to value | 0.1% - 63.1% | 42.9 | % | 9.0% - 73.1% | 48.2 | % | ||||||||||
Conditional repayment rate | NM | 19.2 | % | NM | 18.7 | % | ||||||||||
Loss severity | NM | 10.0 | % | NM | 10.0 | % | ||||||||||
Home price appreciation | 3.4% - 9.6% | 4.7 | % | 1.1% - 8.9% | 5.6 | % | ||||||||||
Discount rate | NM | 3.4 | % | NM | 3.6 | % | ||||||||||
September 30, 2021 | December 31, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||
Inputs | Range | Weighted Average | Range | Weighted Average | ||||||||||||
Prepayment rate (SMM) | NM | 14.3 | % | NM | 17.1 | % | ||||||||||
Discount rate | NM | 5.2 | % | 6.7% - 10.0% | 6.7 | % | ||||||||||
Loss frequency | 0.3% - 74.3% | 0.5 | % | 0.2% - 44.0% | 0.6 | % | ||||||||||
September 30, 2021 | December 31, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||
Inputs | Range | Weighted Average | Range | Weighted Average | ||||||||||||
Conditional repayment rate | NM | 44.0 | % | NM | 44.0 | % | ||||||||||
Loss frequency | NM | 59.1 | % | NM | 46.9 | % | ||||||||||
Loss severity | NM | 5.5 | % | NM | 10.5 | % | ||||||||||
Discount rate | NM | 3.6 | % | NM | 4.1 | % | ||||||||||
September 30, 2021 | December 31, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||
Inputs | Range | Weighted Average | Range | Weighted Average | ||||||||||||
Weighted average remaining life (in years) | NM | 7.8 | NM | 8.0 | ||||||||||||
Loan to value | 7.4% - 68.3% | 47.9 | % | 0.1% - 62.1% | 44.0 | % | ||||||||||
Conditional repayment rate | NM | 16.5 | % | NM | 16.8 | % | ||||||||||
Loss severity | NM | 10.0 | % | NM | 10.0 | % | ||||||||||
Home price appreciation | 3.4% - 9.6% | 4.7 | % | 1.1% - 8.9% | 5.5 | % | ||||||||||
Discount rate | NM | 3.4 | % | NM | 3.6 | % | ||||||||||
September 30, 2021 | ||||||||
Successor | ||||||||
Inputs | Range | Weighted Average | ||||||
Prepayment rate (SMM) | NM | 12.2 | % | |||||
Discount rate | NM | 5.4 | % | |||||
Loss frequency | NM | 0.4 | % | |||||
September 30, 2021 | December 31, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||
Inputs | Range | Weighted Average | Range | Weighted Average | ||||||||||||
Discount rate | NM | 4.8 | % | NM | 6.4 | % | ||||||||||
Prepayment rate (SMM) | 9.2% - 100.0% | 26.2 | % | 0% - 1.0% | 0.7 | % | ||||||||||
Default rate (CDR) | NM | 0.9 | % | 0% - 2.0% | 0.4 | % | ||||||||||
September 30, 2021 | December 31, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||
Inputs | Range | Weighted Average | Range | Weighted Average | ||||||||||||
Prepayment rate (CPR) | 1.0% - 17.1% | 14.0 | % | 1.0% - 17.1% | 15.4 | % | ||||||||||
Discount rate | NM | 3.1 | % | NM | 5.0 | % | ||||||||||
Default rate (CDR) | 1.0% - 54.0% | 2.4 | % | 1.0% - 64.9% | 3.6 | % | ||||||||||
September 30, 2021 | December 31, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||
Inputs | Range | Weighted Average | Range | Weighted Average | ||||||||||||
Prepayment rate (CPR) | 0% - 14.8% | 5.9 | % | 0% - 15.0% | 9.3 | % | ||||||||||
Discount rate | NM | 3.8 | % | NM | 4.9 | % | ||||||||||
Default rate (CDR) | 1.0% - 45.4% | 2.9 | % | 1.0% - 42.7% | 2.0 | % | ||||||||||
December 31, 2020 | ||||||||
Predecessor | ||||||||
Inputs | Range | Weighted Average | ||||||
Prepayment rate (SMM) | NM | 12.4 | % | |||||
Discount rate | 6.7% - 10.0% | 7.2 | % | |||||
Loss frequency | NM | 0.8 | % | |||||
September 30, 2021 | December 31, 2020 | |||||||
Successor | Predecessor | |||||||
Capitalization servicing rate | 1.0 | % | 0.8 | % | ||||
Capitalization servicing multiple | 4.0 | 3.2 | ||||||
Weighted average servicing fee (in basis points) | 25 | 25 | ||||||
September 30, 2021 | December 31, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||
Inputs | Range | Weighted Average | Range | Weighted Average | ||||||||||||
Weighted average prepayment speed (CPR) | 7.0% - 18.3% | 9.5 | % | 6.6% - 24.9% | 12.1 | % | ||||||||||
Discount rate | NM | 9.7 | % | NM | 12.1 | % | ||||||||||
Weighted average delinquency rate | 1.2% - 8.9% | 1.2 | % | 1.2% - 9.2% | 1.3 | % | ||||||||||
September 30, 2021 | ||||||||||||
Successor | ||||||||||||
Weighted Average Prepayment Speed | Discount Rate | Weighted Average Delinquency Rate | ||||||||||
Impact on fair value of 10% adverse change | $ | (12,591 | ) | $ | (12,721 | ) | $ | (393 | ) | |||
| Impact on fair value of 20% adverse change | (24,163 | ) | (24,393 | ) | (643 | ) | ||||||
September 30, 2021 | December 31, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||
Inputs | Range | Weighted Average | Range | Weighted Average | ||||||||||||
Conditional repayment rate | NM | 20.9 | % | NM | 19.9 | % | ||||||||||
Discount rate | NM | 2.1 | % | NM | 1.4 | % | ||||||||||
September 30, 2021 | December 31, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||
Inputs | Range | Weighted Average | Range | Weighted Average | ||||||||||||
Performing/Nonperforming HECM securitizations | ||||||||||||||||
Weighted average remaining life (in years) | 0.4 - 1.0 | 0.7 | 0.2 - 1.5 | 1.0 | ||||||||||||
Conditional repayment rate | 24.7% - 28.4% | 26.4 | % | 34.3% - 56.3% | 42.8 | % | ||||||||||
Discount rate | NM | 2.1 | % | NM | 3.1 | % | ||||||||||
Securitized Non-Agency Reverse | ||||||||||||||||
Weighted average remaining life (in years) | 1.1 - 2.4 | 1.7 | 0.3 - 2.7 | 2.1 | ||||||||||||
Conditional repayment rate | 18.2% - 36.3% | 27.0 | % | 19.6% - 35.8% | 23.9 | % | ||||||||||
Discount rate | NM | 1.7 | % | NM | 2.2 | % | ||||||||||
September 30, 2021 | December 31, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||
Inputs | Range | Weighted Average | Range | Weighted Average | ||||||||||||
Weighted average remaining life (in months) | NM | 4.0 | 1.9 - 4.1 | 3.4 | ||||||||||||
Weighted average prepayment speed (SMM) | NM | 14.0 | % | 17.7% - 32.0% | 21.4 | % | ||||||||||
Discount rate | NM | 2.6 | % | NM | 5.8 | % | ||||||||||
September 30, 2021 | December 31, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||
Inputs | Range | Weighted Average | Range | Weighted Average | ||||||||||||
Weighted average prepayment speed (CPR) | 7.7% - 10.2% | 8.7 | % | 6.9% - 12.7% | 11.6 | % | ||||||||||
Discount rate | 10.1% - 10.4% | 10.3 | % | 11.7% - 12.0% | 12.0 | % | ||||||||||
Weighted average delinquency rate | NM | 1.0 | % | NM | 1.8 | % | ||||||||||
September 30, 2021 | ||||||||||||
Successor | ||||||||||||
Weighted Average Prepayment Speed | Discount Rate | Weighted Average Delinquency Rate | ||||||||||
Impact on fair value of 10% adverse change | $ | (2,249 | ) | $ | (3,329 | ) | $ | (93 | ) | |||
| Impact on fair value of 20% adverse change | (5,023 | ) | (7,062 | ) | (152 | ) | ||||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” has been amended and restated to give effect tofair value calculations provided by the restatement of Replay’s financial statements, as more fully described in Note 8 tointernal valuation model. The following table presents the financial statements entitled “Restatement of Previously Issued Financial Statements”. For further detail regarding the restatement, see “Explanatory Note” and Part I, Item 4. “Controls and Procedures.”
Asweighted average significant unobservable inputs used in this Part I. Item 2. Management’s Discussion and Analysisthe fair value measurement of Financial Condition and Results of Operations, “we” and “our” shall mean Replay or Replay’s management, asretained bonds for the context may require, if relating to a statement made prior toperiod indicated:
September 30, 2021 | ||||||||
Successor | ||||||||
Inputs | Range | Weighted Average | ||||||
Weighted average remaining life (in years) | 2.6 - 25.2 | 5.1 | ||||||
Discount rate | 1.5% - 8.3 | % | 2.5 | % | ||||
Cautionary Note Regarding Forward-Looking Statements
This Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. All statements, other than statements of historical fact included in this Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, including the impact of the recent coronavirus (COVID-19) pandemic on our search for a Business Combination (as defined below), are forward-looking statements. These forward-looking statements are subject to knowntreatment as a liability. The warrants issued are exercisable for shares of Class A Common Stock of FoA at an exercise price of $11.50 per share. The warrants are publicly traded and unknown risks, uncertaintiesare valued based on the closing market price of the applicable date of the Consolidated Statements of Financial Condition. Accordingly, the warrants are classified as Level 1 financial instruments.
September 30, 2021 | ||||||||||||||||
Successor | ||||||||||||||||
Total Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Reverse mortgage loans held for investment, subject to HMBS related obligations | $ | 10,347,459 | $ | 0 | $ | 0 | $ | 10,347,459 | ||||||||
Mortgage loans held for investment, subject to nonrecourse debt: | ||||||||||||||||
Reverse mortgage loans | 5,665,424 | 0 | 0 | 5,665,424 | ||||||||||||
Fix & flip mortgage loans | 274,227 | 0 | 0 | 274,227 | ||||||||||||
Mortgage loans held for investment: | ||||||||||||||||
Reverse mortgage loans | 842,268 | 0 | 0 | 842,268 | ||||||||||||
Fix & flip mortgage loans | 48,076 | 0 | 0 | 48,076 | ||||||||||||
Agricultural loans | 187,326 | 0 | 0 | 187,326 | ||||||||||||
Mortgage loans held for sale: | ||||||||||||||||
Residential mortgage loans | 1,904,109 | 0 | 1,888,208 | 15,901 | ||||||||||||
SRL | 96,665 | 0 | 0 | 96,665 | ||||||||||||
Portfolio | 46,241 | 0 | 0 | 46,241 | ||||||||||||
Mortgage servicing rights | 340,949 | 0 | 0 | 340,949 | ||||||||||||
Derivative assets: | ||||||||||||||||
Forward commitments, TBAs, and Treasury Futures | 974 | 44 | 930 | 0 | ||||||||||||
IRLCs | 29,175 | 0 | 0 | 29,175 | ||||||||||||
Forward MBS | 12,237 | 0 | 12,237 | 0 | ||||||||||||
Interest rate swap futures | 12,607 | 12,607 | 0 | 0 | ||||||||||||
Other assets: | ||||||||||||||||
Investments | 6,000 | 0 | 0 | 6,000 | ||||||||||||
Retained bonds | 41,250 | 0 | 0 | 41,250 | ||||||||||||
Total assets | $ | 19,854,987 | $ | 12,651 | $ | 1,901,375 | $ | 17,940,961 | ||||||||
Liabilities | ||||||||||||||||
HMBS related obligation | $ | 10,216,310 | $ | 0 | $ | 0 | $ | 10,216,310 | ||||||||
Nonrecourse debt: | ||||||||||||||||
Nonrecourse debt in VIE trusts | 5,735,010 | 0 | 0 | 5,735,010 | ||||||||||||
Nonrecourse MSR financing liability | 96,073 | 0 | 0 | 96,073 | ||||||||||||
Deferred purchase price liabilities: | ||||||||||||||||
Deferred purchase price liabilities | 12,175 | 0 | 0 | 12,175 | ||||||||||||
TRA obligation | 35,142 | 0 | 0 | 35,142 | ||||||||||||
Derivative liabilities: | ||||||||||||||||
Forward MBS | 1,061 | 0 | 1,061 | 0 | ||||||||||||
Forward commitments, TBAs, and Treasury Futures | 105 | 44 | 61 | 0 | ||||||||||||
Interest rate swap futures | 10,617 | 10,617 | 0 | 0 | ||||||||||||
Warrants | 9,342 | 9,342 | 0 | 0 | ||||||||||||
Total liabilities | $ | 16,115,835 | $ | 20,003 | $ | 1,122 | $ | 16,094,710 | ||||||||
December 31, 2020 | ||||||||||||||||
Predecessor | ||||||||||||||||
Total Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Reverse mortgage loans held for investment, subject to HMBS related obligations | $ | 9,929,163 | $ | — | $ | — | $ | 9,929,163 | ||||||||
Mortgage loans held for investment, subject to nonrecourse debt: | ||||||||||||||||
Reverse mortgage loans | 5,057,624 | — | — | 5,057,624 | ||||||||||||
Fix & flip mortgage loans | 338,543 | — | — | 338,543 | ||||||||||||
Mortgage loans held for investment: | ||||||||||||||||
Reverse mortgage loans | 661,790 | — | — | 661,790 | ||||||||||||
Agricultural loans | 69,031 | — | — | 69,031 | ||||||||||||
Mortgage loans held for sale: | ||||||||||||||||
Residential mortgage loans | 2,080,585 | — | 2,069,957 | 10,628 | ||||||||||||
SRL | 60,467 | — | — | 60,467 | ||||||||||||
Portfolio | 38,850 | — | — | 38,850 | ||||||||||||
Fix & flip mortgage loans | 42,909 | — | — | 42,909 | ||||||||||||
Mortgage servicing rights | 180,684 | — | — | 180,684 | ||||||||||||
Derivative assets: | ||||||||||||||||
Forward commitments and TBAs | 1,806 | — | 722 | 1,084 | ||||||||||||
IRLCs | 87,576 | — | — | 87,576 | ||||||||||||
Interest rate swaps and interest rate swap futures | 2,683 | 186 | 2,497 | — | ||||||||||||
Other assets: | ||||||||||||||||
Investments | 18,934 | — | — | 18,934 | ||||||||||||
Total assets | $ | 18,570,645 | $ | 186 | $ | 2,073,176 | $ | 16,497,283 | ||||||||
Liabilities | ||||||||||||||||
HMBS related obligation | $ | 9,788,668 | $ | — | $ | — | $ | 9,788,668 | ||||||||
Nonrecourse debt: | ||||||||||||||||
Nonrecourse debt in VIE trusts | 5,257,754 | — | — | 5,257,754 | ||||||||||||
Nonrecourse MSR financing liability | 14,088 | — | — | 14,088 | ||||||||||||
Deferred purchase price liabilities | 3,842 | — | — | 3,842 | ||||||||||||
Derivative liabilities: | ||||||||||||||||
Forward MBS | 18,635 | — | 18,635 | — | ||||||||||||
Forward commitments and TBAs | 1,332 | — | 248 | 1,084 | ||||||||||||
Interest rate swaps and interest rate swap futures | 755 | 186 | 569 | — | ||||||||||||
Total liabilities | $ | 15,085,074 | $ | 186 | $ | 19,452 | $ | 15,065,436 | ||||||||
Successor | ||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||
September 30, 2021 | Mortgage loans held for investment | Mortgage loans held for investment, subject to nonrecourse debt | Mortgage loans held for sale | Derivative assets | Mortgage servicing rights | Retained bonds | Investments | |||||||||||||||||||||
Beginning balance, April 1, 2021 | $ | 11,171,736 | $ | 5,291,444 | $ | 135,681 | $ | 38,574 | $ | 267,364 | $ | 0— | $ | 9,470 | ||||||||||||||
Total gain or losses included in earnings | 143,362 | 120,763 | 2,202 | (8,264 | ) | (28,567 | ) | 1,505 | (3,470 | ) | ||||||||||||||||||
Purchases, settlements and transfers: | ||||||||||||||||||||||||||||
Purchases and additions, net | 2,831,336 | 49,898 | 541,088 | — | 104,653 | 39,840 | — | |||||||||||||||||||||
Sales and settlements | (1,354,871 | ) | (888,318 | ) | (526,014 | ) | (1,135 | ) | (2,501 | ) | (095 | ) | — | |||||||||||||||
Transfers in/(out) between categories | (1,366,434 | ) | 1,365,864 | 5,850 | — | — | 0— | — | ||||||||||||||||||||
Ending balance, September 30, 2021 | $ | 11,425,129 | $ | 5,939,651 | $ | 158,807 | $ | 29,175 | $ | 340,949 | $ | 041,250 | $ | 6,000 | ||||||||||||||
Successor | ||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
September 30, 2021 | HMBS obligations | Derivative liabilities | Deferred purchase price liabilities | Nonrecourse debt in VIE trusts | Nonrecourse MSR financing liability | TRA Liability | ||||||||||||||||||
Beginning balance, April 1, 2021 | $ | (9,926,132 | ) | $ | (936 | ) | $ | (3,214 | ) | $ | (5,205,892 | ) | $ | (22,051 | ) | $ | 0— | |||||||
Total gains or losses included in earnings | 76,397 | 98 | (1,997 | ) | (77,717 | ) | 3,411 | (1,896 | ) | |||||||||||||||
Purchases, settlements and transfers: | ||||||||||||||||||||||||
Purchases and additions, net | (1,587,902 | ) | — | (7,275 | ) | (1,260,585 | ) | (77,433 | ) | (33,246 | ) | |||||||||||||
Settlements | 1,221,327 | 838 | 311 | 809,184 | — | 0— | ||||||||||||||||||
Ending balance, September 30, 2021 | $ | (10,216,310 | ) | $ | 0 | $ | (12,175 | ) | $ | (5,735,010 | ) | $ | (96,073 | ) | $ | (035,142 | ) | |||||||
Predecessor | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||
March 31, 2021 | Mortgage loans held for investment | Mortgage loans held for investment, subject to nonrecourse debt | Mortgage loans held for sale | Derivative assets | Mortgage servicing rights | Investments | ||||||||||||||||||
Beginning balance, January 1, 2021 | $ | 10,659,984 | $ | 5,396,167 | $ | 152,854 | $ | 88,660 | $ | 180,684 | $ | 18,934 | ||||||||||||
Total gain or losses included in earnings | 132,499 | (37,757 | ) | 2,764 | (50,040 | ) | 20,349 | (9,464 | ) | |||||||||||||||
Purchases, settlements and transfers: | ||||||||||||||||||||||||
Purchases and additions, net | 1,143,109 | 21,064 | 175,551 | — | 74,978 | — | ||||||||||||||||||
Sales and settlements | (534,738 | ) | (360,128 | ) | (152,579 | ) | (46 | ) | (8,647 | ) | — | |||||||||||||
Transfers in/(out) between categories | (229,118 | ) | 272,098 | (42,909 | ) | — | — | — | ||||||||||||||||
Ending balance, March 31, 2021 | $ | 11,171,736 | $ | 5,291,444 | $ | 135,681 | $ | 38,574 | $ | 267,364 | $ | 9,470 | ||||||||||||
Predecessor | ||||||||||||||||||||
Liabilities | ||||||||||||||||||||
March 31, 2021 | HMBS related obligations | Derivative liabilities | Deferred purchase price liability | Nonrecourse debt in VIE trusts | Nonrecourse MSR financing liability | |||||||||||||||
Beginning balance, January 1, 2021 | $ | (9,788,668 | ) | $ | (1,084 | ) | $ | (3,842 | ) | $ | (5,257,754 | ) | $ | (14,088 | ) | |||||
Total gain or losses included in earnings | (41,434 | ) | — | (29 | ) | (30,770 | ) | 390 | ||||||||||||
Purchases, settlements and transfers: | ||||||||||||||||||||
Purchases and additions, net | (602,172 | ) | — | — | (575,668 | ) | (8,353 | ) | ||||||||||||
Sales and settlements | 506,142 | 148 | 657 | 658,300 | — | |||||||||||||||
Ending balance, March 31, 2021 | $ | (9,926,132 | ) | $ | (936 | ) | $ | (3,214 | ) | $ | (5,205,892 | ) | $ | (22,051 | ) | |||||
Predecessor | ||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||
December 31, 2020 | Mortgage loans held for investment | Mortgage loans held for investment, subject to nonrecourse debt | Mortgage loans held for sale | Derivative assets | Mortgage servicing rights | Debt securities | Investments | |||||||||||||||||||||
Beginning balance, January 1, 2020 | $ | 10,894,577 | $ | 3,511,212 | $ | 182,973 | $ | 14,008 | $ | 2,600 | $ | 102,260 | $ | 20,508 | ||||||||||||||
Total gain or losses included in earnings | 627,251 | 304,663 | (2,158 | ) | 74,470 | 4,562 | 2,288 | (5,512 | ) | |||||||||||||||||||
Purchases, settlements and transfers: | ||||||||||||||||||||||||||||
Purchases and additions, net | 3,616,667 | 136,838 | 409,467 | 182 | 173,522 | 24,489 | 3,938 | |||||||||||||||||||||
Sales and settlements | (1,536,977 | ) | (1,285,902 | ) | (605,018 | ) | — | — | (129,037 | ) | — | |||||||||||||||||
Transfers in/(out) between categories | (2,941,534 | ) | 2,729,356 | 167,590 | — | — | — | — | ||||||||||||||||||||
Ending balance, December 31, 2020 | $ | 10,659,984 | $ | 5,396,167 | $ | 152,854 | $ | 88,660 | $ | 180,684 | $ | — | $ | 18,934 | ||||||||||||||
Predecessor | ||||||||||||||||||||
Liabilities | ||||||||||||||||||||
December 31, 2020 | HMBS related obligations | Derivative liabilities | Deferred purchase price liabilities | Nonrecourse debt in VIE trusts | Nonrecourse MSR Financing Liability | |||||||||||||||
Beginning balance, January 1, 2020 | $ | (9,320,209 | ) | $ | (68 | ) | $ | (4,300 | ) | $ | (3,490,196 | ) | $ | — | ||||||
Total gain or losses included in earnings | (359,951 | ) | (834 | ) | (3,014 | ) | (294,802 | ) | 798 | |||||||||||
Purchases, settlements and transfers: | ||||||||||||||||||||
Purchases and additions, net | (2,051,953 | ) | (182 | ) | (138 | ) | (3,110,368 | ) | (15,101 | ) | ||||||||||
Sales and settlements | 1,943,445 | — | 3,610 | 1,637,612 | 215 | |||||||||||||||
Ending balance, December 31, 2020 | $ | (9,788,668 | ) | $ | (1,084 | ) | $ | (3,842 | ) | $ | (5,257,754 | ) | $ | (14,088 | ) | |||||
Successor: | ||||||||
September 30, 2021 | Estimated Fair Value | Unpaid Principal Balance | ||||||
Assets at fair value under the fair value option | ||||||||
Reverse mortgage loans held for investment, subject to HMBS related obligations | $ | 10,347,459 | $ | 9,617,079 | ||||
Mortgage loans held for investment, subject to nonrecourse debt: | ||||||||
Reverse mortgage loans | 5,665,424 | 4,986,876 | ||||||
Commercial mortgage loans | 274,227 | 268,288 | ||||||
Mortgage loans held for investment: | ||||||||
Reverse mortgage loans | 842,268 | 721,012 | ||||||
Commercial mortgage loans | 235,402 | 233,101 | ||||||
Mortgage loans held for sale: | ||||||||
Residential mortgage loans | 1,904,109 | 1,859,842 | ||||||
Commercial mortgage loans | 142,906 | 138,101 | ||||||
Liabilities at fair value under the fair value option | ||||||||
HMBS related obligations | 10,216,310 | 9,617,079 | ||||||
Nonrecourse debt: | ||||||||
Nonrecourse debt in VIE trusts | 5,735,010 | 5,654,826 | ||||||
Predecessor: | ||||||||
December 31, 2020 | Estimated Fair Value | Unpaid Principal Balance | ||||||
Assets at fair value under the fair value option | ||||||||
Reverse mortgage loans held for investment, subject to HMBS related obligations | $ | 9,929,163 | $ | 9,045,104 | ||||
Mortgage loans held for investment, subject to nonrecourse debt: | ||||||||
Reverse mortgage loans | 5,057,624 | 4,457,805 | ||||||
Commercial mortgage loans | 338,543 | 333,344 | ||||||
Mortgage loans held for investment: | ||||||||
Reverse mortgage loans | 661,790 | 589,429 | ||||||
Commercial mortgage loans | 69,031 | 69,127 | ||||||
Mortgage loans held for sale: | ||||||||
Residential mortgage loans | 2,080,585 | 2,000,795 | ||||||
Commercial mortgage loans | 142,226 | 140,693 | ||||||
Liabilities at fair value under the fair value option | ||||||||
HMBS related obligations | 9,788,668 | 9,045,104 | ||||||
Nonrecourse debt: | ||||||||
Nonrecourse debt in VIE trusts | 5,257,754 | 5,155,017 | ||||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Net fair value gains on mortgage loans and related obligations: | ||||||||||||||||||||
Interest income on mortgage loans | $ | 160,683 | $ | 334,623 | $ | 160,568 | $ | 150,276 | $ | 492,066 | ||||||||||
Change in fair value of mortgage loans | (119,690 | ) | (34,707 | ) | (51,346 | ) | 160,480 | 302,541 | ||||||||||||
Change in fair value of mortgage-backed securities | — | — | — | 1,621 | 2,438 | |||||||||||||||
Net fair value gains on mortgage loans | 40,993 | 299,916 | 109,222 | 312,377 | 797,045 | |||||||||||||||
Interest expense on related obligations | (107,593 | ) | (221,067 | ) | (119,201 | ) | (121,777 | ) | (383,622 | ) | ||||||||||
Change in fair value of derivatives | 6,841 | (39,637 | ) | 43,972 | 149 | (5,594 | ) | |||||||||||||
Change in fair value of related obligations | 182,268 | 214,448 | 42,670 | (94,794 | ) | (186,191 | ) | |||||||||||||
Net fair value gains (losses) on related obligations | 81,516 | (46,256 | ) | (32,559 | ) | (216,422 | ) | (575,407 | ) | |||||||||||
Net fair value gains on mortgage loans and related obligations | $ | 122,509 | $ | 253,660 | $ | 76,663 | $ | 95,955 | $ | 221,638 | ||||||||||
September 30, 2021 | December 31, 2020 | |||||||
Successor | Predecessor | |||||||
Reverse mortgage loans: | ||||||||
Reverse mortgage loans held for investment, subject to HMBS related obligations | $ | 9,617,079 | $ | 9,045,104 | ||||
Reverse mortgage loans held for investment: | ||||||||
Non-agency reverse mortgages | 346,705 | 215,688 | ||||||
Loans not securitized (1) | 270,273 | 168,292 | ||||||
Unpoolable loans (2) | 93,459 | 197,395 | ||||||
Unpoolable tails | 10,575 | 8,054 | ||||||
Total reverse mortgage loans held for investment | 721,012 | 589,429 | ||||||
Reverse mortgage loans held for investment, subject to nonrecourse debt: | ||||||||
Performing HECM buyouts | 276,351 | 141,691 | ||||||
Nonperforming HECM buyouts | 614,824 | 538,768 | ||||||
Non-agency reverse mortgages | 4,095,701 | 3,777,346 | ||||||
Total reverse mortgage loans held for investment, subject to nonrecourse debt | 4,986,876 | 4,457,805 | ||||||
Total owned reverse mortgage portfolio | 15,324,967 | 14,092,338 | ||||||
Loans reclassified as government guaranteed receivable | 44,333 | 49,255 | ||||||
Loans serviced for others | 18,281 | 123,324 | ||||||
Total serviced reverse mortgage loan portfolio | $ | 15,387,581 | $ | 14,264,917 | ||||
(1) | Loans not securitized represent primarily newly originated loans. |
(2) | Unpoolable loans represent primarily loans that have reached 98% of their MCA. |
September 30, 2021 | December 31, 2020 | |||||||
Successor | Predecessor | |||||||
Fixed rate loans | $ | 5,266,718 | $ | 5,010,659 | ||||
Adjustable rate loans | 10,058,249 | 9,081,679 | ||||||
| �� | ||||||||
Total owned reverse mortgage portfolio | $ | 15,324,967 | $ | 14,092,338 | ||||
7. | Reverse Mortgage Loans Held for Investment, Subject to HMBS Related Obligations, at Fair Value |
September 30, 2021 | December 31, 2020 | |||||||
Successor | Predecessor | |||||||
Reverse mortgage loans held for investment, subject to HMBS related obligations - UPB | $ | 9,617,079 | $ | 9,045,104 | ||||
Fair value adjustments | 730,380 | 884,059 | ||||||
Total reverse mortgage loans held for investment, subject to HMBS related obligations, at fair value | $ | 10,347,459 | $ | 9,929,163 | ||||
8. | Mortgage Loans Held for Investment, Subject to Nonrecourse Debt, at Fair Value |
September 30, 2021 | December 31, 2020 | |||||||
Successor | Predecessor | |||||||
Mortgage loans held for investment, subject to nonrecourse debt - UPB: | ||||||||
Reverse mortgage loans | $ | 4,986,876 | $ | 4,457,805 | ||||
Commercial mortgage loans | 268,288 | 333,344 | ||||||
Fair value adjustments | 684,487 | 605,018 | ||||||
Total mortgage loans held for investment, subject to nonrecourse debt, at fair value | $ | 5,939,651 | $ | 5,396,167 | ||||
September 30, 2021 | December 31, 2020 | |||||||
Successor | Predecessor | |||||||
Loans 90 days or more past due and on non-accrual status | ||||||||
Fair value: | ||||||||
Commercial mortgage loans | $ | 30,720 | $ | 32,377 | ||||
Total fair value | 30,720 | 32,377 | ||||||
Aggregate UPB: | ||||||||
Commercial mortgage loans | 30,871 | 33,888 | ||||||
Total aggregate UPB | 30,871 | 33,888 | ||||||
Difference | $ | (151 | ) | $ | (1,511 | ) | ||
9. | Mortgage Loans Held for Investment, at Fair Value |
September 30, 2021 | December 31, 2020 | |||||||
Successor | Predecessor | |||||||
Mortgage loans held for investment - UPB: | ||||||||
Reverse mortgage loans | $ | 721,012 | $ | 589,429 | ||||
Commercial mortgage loans | 233,101 | 69,127 | ||||||
Fair value adjustments | 123,557 | 72,265 | ||||||
Total mortgage loans held for investment, at fair value | $ | 1,077,670 | $ | 730,821 | ||||
10. | Mortgage Loans Held for Sale, at Fair Value |
September 30, 2021 | December 31, 2020 | |||||||
Successor | Predecessor | |||||||
Mortgage loans held for sale - UPB: | ||||||||
Residential mortgage loans | $ | 1,859,842 | $ | 2,000,795 | ||||
Commercial mortgage loans | 138,101 | 140,693 | ||||||
Fair value adjustments | 49,072 | 81,323 | ||||||
Total mortgage loans held for sale, at fair value | $ | 2,047,015 | $ | 2,222,811 | ||||
September 30, 2021 | December 31, 2020 | |||||||
Successor | Predecessor | |||||||
Loans 90 days or more past due and on non-accrual status | ||||||||
Fair value: | ||||||||
Residential mortgage loans | $ | 3,256 | $ | 10,628 | ||||
Commercial mortgage loans | 2,952 | 5,051 | ||||||
Total fair value | 6,208 | 15,679 | ||||||
Aggregate UPB: | ||||||||
Residential mortgage loans | 3,905 | 13,236 | ||||||
Commercial mortgage loans | 3,141 | 5,317 | ||||||
Total aggregate UPB | 7,046 | 18,553 | ||||||
Difference | $ | (838 | ) | $ | (2,874 | ) | ||
Overview
We are a blank check company incorporated as a Cayman Islands exempted company on November loans.
The registration statement for our initial public offering (“Initial Public Offering”) was declared effective on April 3, 2019. On April 8, 2019, we consummated our Initial Public Offering of 28,750,000 units (“Units”) at an offering price of $10.00 per Unit, including the issuance of 3,750,000 Unitstransferees as a result of the underwriters’ full exercisesale of mortgage loans in transactions where the Company maintains continuing involvement with the mortgage loans (in thousands):
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Cash flows: | ||||||||||||||||||||
Sales proceeds | $ | 5,529,393 | $ | 10,710,950 | $ | 6,387,933 | $ | 2,464,412 | $ | 5,333,372 | ||||||||||
Fair value of retained beneficial interest (1) | 51,747 | 101,055 | 66,400 | 53,401 | 98,256 | |||||||||||||||
Gross servicing fees received | 14,878 | 29,156 | 13,877 | 5,677 | 7,501 | |||||||||||||||
Repurchases | (5,320 | ) | (12,138 | ) | (4,144 | ) | (10,169 | ) | (18,716 | ) | ||||||||||
Gain | 200,758 | 397,887 | 284,948 | 369,473 | 661,144 | |||||||||||||||
(1) | Fair value of retained beneficial interest includes retained servicing rights and other beneficial interests retained as of the statement of financial condition date. |
11. | Mortgage Servicing Rights, at Fair Value |
September 30, 2021 | December 31, 2020 | |||||||
Successor | Predecessor | |||||||
| Fannie Mae/Freddie Mac | $ | 33,034,877 | $ | 20,501,504 | ||||
| Ginnie Mae | 235,279 | 1,727,831 | ||||||
| Private investors | 820,959 | 40,027 | ||||||
Total UPB | $ | 34,091,115 | $ | 22,269,362 | ||||
Weighted average interest rate | 3.0 | % | 3.1 | % | ||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
| Beginning UPB | $ | 30,592,187 | $ | 26,675,358 | $ | 22,269,362 | $ | 7,211,843 | $ | 288,057 | ||||||||||
| Originated MSR | 5,380,307 | 10,520,166 | 6,312,227 | 7,308,891 | 14,295,128 | |||||||||||||||
| Purchased MSR | 228,470 | 234,007 | 866,806 | — | — | |||||||||||||||
Payoffs, sales and curtailments | (2,109,849 | ) | (3,338,416 | ) | (2,773,037 | ) | (243,225 | ) | (305,676 | ) | ||||||||||
Ending UPB | $ | 34,091,115 | $ | 34,091,115 | $ | 26,675,358 | $ | 14,277,509 | $ | 14,277,509 | ||||||||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Beginning balance | $ | 290,938 | $ | 267,364 | $ | 180,684 | $ | 42,684 | $ | 2,600 | ||||||||||
Originations | 52,252 | 102,301 | 65,964 | 53,401 | 98,256 | |||||||||||||||
Purchases | 2,291 | 2,352 | 9,014 | — | — | |||||||||||||||
Sales | (2,501 | ) | (2,501 | ) | (8,647 | ) | — | — | ||||||||||||
Changes in fair value due to: | ||||||||||||||||||||
Changes in market inputs or assumptions used in valuation model | 13,165 | (2,886 | ) | 35,109 | 8,170 | 4,746 | ||||||||||||||
Changes in fair value due to portfolio runoff and other | (15,196 | ) | (25,681 | ) | (14,760 | ) | (3,716 | ) | (5,063 | ) | ||||||||||
Ending balance | $ | 340,949 | $ | 340,949 | $ | 267,364 | $ | 100,539 | $ | 100,539 | ||||||||||
September 30, 2021 | December 31, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||
Number of Loans | Unpaid Balance | Number of Loans | Unpaid Balance | |||||||||||||
Portfolio delinquency | ||||||||||||||||
30 days | 0.4 | % | 0.4 | % | 0.5 | % | 0.5 | % | ||||||||
60 days | 0.0 | % | 0.0 | % | 0.1 | % | 0.1 | % | ||||||||
90 or more days | 0.1 | % | 0.1 | % | 0.2 | % | 0.1 | % | ||||||||
Total | 0.5 | % | 0.5 | % | 0.8 | % | 0.7 | % | ||||||||
Foreclosure/real estate owned | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||
12. | Derivative and Risk Management Activities |
September 30, 2021 | ||||||||||||||||||||||||
Successor | ||||||||||||||||||||||||
Derivative assets | Derivative liabilities | |||||||||||||||||||||||
Fair value | Notional amount | Unrealized gains (losses) | Fair value | Notional amount | Unrealized gains (losses) | |||||||||||||||||||
Interest rate lock commitments | $ | 29,175 | $ | 2,865,203 | $ | (58,401 | ) | $ | 0 | $ | 0 | $ | 0 | |||||||||||
Forward commitments, TBAs securities and treasury futures | 974 | 2,872,378 | (832 | ) | 105 | 2,880,000 | 1,227 | |||||||||||||||||
Interest rate swaps and futures contracts | 12,607 | 1,260,400 | 9,924 | 10,617 | 1,108,700 | (9,862 | ) | |||||||||||||||||
Forward MBS | 12,237 | 2,391,000 | 12,238 | 1,061 | 458,500 | 17,574 | ||||||||||||||||||
Net fair value of derivative financial instruments | $ | 54,993 | $ | 9,388,981 | $ | (37,071 | ) | $ | 11,783 | $ | 4,447,200 | $ | 8,939 | |||||||||||
December 31, 2020 | ||||||||||||||||||||||||
Predecessor | ||||||||||||||||||||||||
Derivative assets | Derivative liabilities | |||||||||||||||||||||||
Fair value | Notional amount | Unrealized gains (losses) | Fair value | Notional amount | Unrealized gains (losses) | |||||||||||||||||||
Interest rate lock commitments | $ | 87,576 | $ | 2,897,479 | $ | 73,568 | $ | — | $ | 13,822 | $ | 68 | ||||||||||||
Forward commitments, TBAs securities and treasury futures | 1,806 | 399,612 | 968 | 1,332 | 389,422 | (1,248 | ) | |||||||||||||||||
Interest rate swaps and futures contracts | 2,683 | 1,386,400 | 2,324 | 755 | 744,500 | (617 | ) | |||||||||||||||||
Forward MBS | — | — | (348 | ) | 18,635 | 3,187,000 | (16,587 | ) | ||||||||||||||||
Net fair value of derivative financial instruments | $ | 92,065 | $ | 4,683,491 | $ | 76,512 | $ | 20,722 | $ | 4,334,744 | $ | (18,384 | ) | |||||||||||
13. | Goodwill |
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Beginning balance | $ | 1,298,324 | $ | — | $ | 121,233 | $ | 121,754 | $ | 121,137 | ||||||||||
Additions from acquisitions | 472 | 1,298,796 | 7,517 | 0 | 617 | |||||||||||||||
Ending balance | $ | 1,298,796 | $ | 1,298,796 | $ | 128,750 | $ | 121,754 | $ | 121,754 | ||||||||||
September 30, 2021 | December 31, 2020 | |||||||
Successor | Predecessor | |||||||
Reporting units: | ||||||||
Mortgage Originations | $ | 712,524 | $ | 44,429 | ||||
Reverse Originations | 405,445 | — | ||||||
Commercial Originations | 75,768 | 43,113 | ||||||
Lender Services | 102,250 | 25,247 | ||||||
Portfolio Management | 2,809 | 8,444 | ||||||
Total goodwill | $ | 1,298,796 | $ | 121,233 | ||||
14. | Intangible Assets, Net |
September 30, 2021 | Amortization Period (Years) | Cost | Accumulated Amortization | Net | ||||||||||||
Successor: | ||||||||||||||||
Non-amortizing intangibles | ||||||||||||||||
Trade name | N/A | $ | 178,000 | $ | — | $ | 178,000 | |||||||||
Total non-amortizing intangibles | $ | 178,000 | $ | — | $ | 178,000 | ||||||||||
Amortizing intangibles | ||||||||||||||||
Broker/customer relationships | 8 - 15 | $ | 530,900 | $ | (26,474 | ) | $ | 504,426 | ||||||||
Trade names and other | 5 - 10 | 10,690 | (440 | ) | 10,250 | |||||||||||
Total amortizing intangibles | $ | 541,590 | $ | (26,914 | ) | $ | 514,676 | |||||||||
Total intangibles | $ | 719,590 | $ | (26,914 | ) | $ | 692,676 | |||||||||
December 31, 2020 | Amortization Period (Years) | Cost | Accumulated Amortization | Net | ||||||||||||
Predecessor: | ||||||||||||||||
Non-amortizing Intangibles | ||||||||||||||||
Domain name | N/A | $ | 5,422 | $ | — | $ | 5,422 | |||||||||
Total non-amortizing intangibles | $ | 5,422 | $ | — | $ | 5,422 | ||||||||||
Amortizing Intangibles | ||||||||||||||||
Customer list | 5 - 12 | $ | 12,754 | $ | (5,100 | ) | $ | 7,654 | ||||||||
Broker relationships | 10 | 7,627 | (5,429 | ) | 2,198 | |||||||||||
Trade names | 5 - 20 | 2,495 | (1,487 | ) | 1,008 | |||||||||||
Technology assets | 5 | 805 | (156 | ) | 649 | |||||||||||
Total amortizing intangibles | $ | 23,681 | $ | (12,172 | ) | $ | 11,509 | |||||||||
Total intangibles | $ | 29,103 | $ | (12,172 | ) | $ | 16,931 | |||||||||
Year Ending December 31, | Amount | |||
2021 | $ | 13,552 | ||
2022 | 54,206 | |||
2023 | 54,206 | |||
2024 | 54,206 | |||
2025 | 54,206 | |||
Thereafter | 284,300 | |||
Total future amortization expense | $ | 514,676 | ||
15. | HMBS Related Obligations, at Fair Value |
September 30, 2021 | December 31, 2020 | |||||||
Successor | Predecessor | |||||||
Ginnie Mae loan pools - UPB | $ | 9,617,079 | $ | 9,045,104 | ||||
Fair value adjustments | 599,231 | 743,564 | ||||||
Total HMBS related obligations, at fair value | $ | 10,216,310 | $ | 9,788,668 | ||||
Weighted average remaining life | 4.4 | 4.5 | ||||||
Weighted average interest rate | 2.5 | % | 3.0 | % | ||||
16. | Nonrecourse Debt, at Fair Value |
Issue Date | Class of Note | Final Maturity Date | Interest Rate | Original Issue Amount | September 30, 2021 | December 31, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||||
Securitization of nonperforming HECM loans | February 2020 - February 2021 | A, M1, M2, M3, M4, M5 | February 2030 - February 2031 | 0.88 9.00 | % - % | $ | 1,539,531 | $ | 951,251 | $ | 775,030 | |||||||||||
Securitization of non-agency reverse loans | May 2018 - September 2021 | A, A1, A1A, A1B, A2 | April 2023 - November 2069 | 1.25 4.50 | % - % | 5,744,467 | 4,435,064 | 4,037,184 | ||||||||||||||
Securitization of Fix & Flip loans | September 2018 - April 2021 | A1, A2, A-VFN, M | May 2022 - May 2025 | 2.10 8.00 | % - % | 1,002,424 | 268,511 | 342,793 | ||||||||||||||
Issue Date | Class of Note | Final Maturity Date | Interest Rate | Original Issue Amount | September 30, 2021 | December 31, 2020 | ||||||||||||||||||||
Successor | Predecessor | |||||||||||||||||||||||||
Total nonrecourse debt | 5,654,826 | 5,155,007 | ||||||||||||||||||||||||
Nonrecourse MSR financing liability, at fair value | 96,073 | 14,088 | ||||||||||||||||||||||||
Fair value adjustments | 80,184 | 102,747 | ||||||||||||||||||||||||
Total nonrecourse debt, at fair value | $ | 5,831,083 | $ | 5,271,842 | ||||||||||||||||||||||
17. | Other Financing Lines of Credit |
Outstanding Borrowings at | ||||||||||||||||||||
September 30, 2021 | December 31, 2020 | |||||||||||||||||||
Maturity Date | Interest Rate | Collateral Pledged | Total Capacity (1) | Successor | Predecessor | |||||||||||||||
Mortgage Lines: | ||||||||||||||||||||
October 2021 - June 2023 (2) | LIBOR + applicable margin | | First Lien Mortgages | | $ | 3,575,000 | $ | 1,783,544 | $ | 1,997,464 | ||||||||||
| March 2026 | LIBOR + applicable margin | | MSRs | 150,000 | 117,736 | 0 | ||||||||||||||
| December 2021 - November 2022 | LIBOR + applicable margin | | Mortgage Related Assets | | 87,106 | 69,877 | 0 | |||||||||||||
Subtotal mortgage lines of credit | $ | 3,812,106 | $ | 1,971,157 | $ | 1,997,464 | ||||||||||||||
Reverse Lines: | ||||||||||||||||||||
October 2021 - August 2022 (2) | LIBOR + applicable margin | | First Lien Mortgages | | $ | 1,200,000 | $ | 620,418 | $ | 477,637 | ||||||||||
| April 2022 - September 2023 | | Bond accrual rate + applicable margin | | Mortgage Related Assets | | 398,719 | 278,924 | 252,880 | ||||||||||||
| February 2024 | LIBOR + applicable margin | | MSRs | 90,000 | 88,072 | 0 | ||||||||||||||
| April 2022 | Prime + .50%; 6% floor | | Unsecuritized Tails | | 50,000 | 40,954 | 37,442 | |||||||||||||
Subtotal reverse lines of credit | $ | 1,738,719 | $ | 1,028,368 | $ | 767,959 | ||||||||||||||
Commercial Lines: | ||||||||||||||||||||
| February 2022 - November 2023 | LIBOR + applicable margin | | First Lien Mortgages | | $ | 510,000 | $ | 149,787 | $ | 128,134 | ||||||||||
| August 2022 - September 2022 | LIBOR + applicable margin | | | Encumbered Agricultural Loans | | 225,000 | 152,634 | 52,300 | ||||||||||||
| August 2022 | 10% | Second Lien Mortgages | | 25,000 | 21,701 | 21,475 | ||||||||||||||
| N/A | LIBOR + applicable margin | | Mortgage Related Assets | | 1,509 | 1,509 | 6,411 | |||||||||||||
Subtotal commercial lines of credit | $ | 761,509 | $ | 325,631 | $ | 208,320 | ||||||||||||||
Total other financing lines of credit | $ | 6,312,334 | $ | 3,325,156 | $ | 2,973,743 | ||||||||||||||
(1) | Capacity is dependent upon maintaining compliance with, or obtaining waivers of, the terms, conditions and covenants of the respective agreements, including asset-eligibility requirements. Capacity amounts presented are as of September 30, 2021. |
(2) | See Note 31 - Subsequent Events for additional information on f a cility amendments. |
Successor | ||||||||||||
Financial Covenants | Requirement | September 30, 2021 | Maximum Allowable Distribution (1) | |||||||||
FAM | ||||||||||||
Adjusted Tangible Net Worth | $ | 150,000 | $ | 200,718 | $ | 50,718 | ||||||
Liquidity | 40,000 | 67,053 | $ | 27,053 | ||||||||
Leverage Ratio | 15:1 | 12.6:1 | 32,538 | |||||||||
Material Decline in Lender Adjusted Net Worth: | ||||||||||||
Lender Adjusted Tangible Net Worth (Quarterly requirement) | $ | 143,538 | $ | 200,719 | $ | 57,181 | ||||||
Lender Adjusted Tangible Net Worth (Two-Consecutive Quarterly requirement) | 235,832 | 200,719 | $ | (35,113 | ) | |||||||
FACo | ||||||||||||
Adjusted Tangible Net Worth | $ | 85,000 | $ | 101,942 | $ | 16,942 | ||||||
Liquidity | 20,000 | 37,294 | $ | 17,294 | ||||||||
Leverage Ratio | 6:1 | 3.7:1 | 39,855 | |||||||||
FAR | ||||||||||||
Adjusted Tangible Net Worth | $ | 450,000 | $ | 501,822 | $ | 51,822 | ||||||
Liquidity | 20,000 | 33,480 | $ | 13,480 | ||||||||
Leverage Ratio | 6:1 | 2.9:1 | $ | 242,109 | ||||||||
Material Decline in Lender Adjusted Net Worth: | ||||||||||||
Lender Adjusted Tangible Net Worth (Quarterly requirement) | $ | 336,035 | $ | 476,133 | $ | 140,098 | ||||||
Lender Adjusted Tangible Net Worth (Two-Consecutive Quarterly requirement) | 235,832 | 476,133 | $ | 240,301 | ||||||||
| (1) | The Maximum Allowable Distribution for any of the originations subsidiaries is the lowest of the amounts shown for the particular originations subsidiary. |
Predecessor | ||||||||||||
Financial Covenants | Requirement | December 31, 2020 | Maximum Allowable Distribution (1) | |||||||||
FAM | ||||||||||||
Adjusted Tangible Net Worth | $ | 125,000 | $ | 289,163 | $ | 164,163 | ||||||
Liquidity | 40,000 | 56,775 | 16,775 | |||||||||
Leverage Ratio | 15:1 | 9.3:1 | 110,267 | |||||||||
Material Decline in Lender Adjusted Net Worth: | ||||||||||||
Lender Adjusted Tangible Net Worth (Quarterly requirement) | $ | 210,428 | $ | 282,062 | $ | 71,634 | ||||||
Lender Adjusted Tangible Net Worth (Two-Consecutive Quarterly requirement) | 93,763 | 282,062 | 188,299 | |||||||||
FACo | ||||||||||||
Adjusted Tangible Net Worth | $ | 85,000 | $ | 126,672 | $ | 41,672 | ||||||
Liquidity | 20,000 | 46,385 | 26,385 | |||||||||
Leverage Ratio | 6:1 | 1.7:1 | 90,782 | |||||||||
FAR | ||||||||||||
Adjusted Tangible Net Worth | $ | 300,000 | $ | 474,128 | $ | 174,128 | ||||||
Liquidity | 20,000 | 36,425 | 16,425 | |||||||||
Leverage Ratio | 5.5:1 | 2.5:1 | 258,615 | |||||||||
Material Decline in Lender Adjusted Net Worth: | ||||||||||||
Lender Adjusted Tangible Net Worth (Quarterly requirement) | $ | 314,091 | $ | 472,458 | $ | 158,367 | ||||||
Lender Adjusted Tangible Net Worth (Two-Consecutive Quarterly requirement) | 205,619 | 472,458 | 266,839 | |||||||||
(1) | The Maximum Allowable Distribution for any of the originations subsidiaries is the lowest of the amounts shown for the particular originations subsidiary. |
18. | Payables and Other Liabilities |
September 30, 2021 | December 31, 2020 | |||||||
Successor | Predecessor | |||||||
Accrued compensation expense | $ | 150,821 | $ | 150,214 | ||||
Accrued liabilities | 135,747 | 83,427 | ||||||
Lease liabilities | 61,846 | 48,250 | ||||||
Deferred purchase price liabilities | 47,317 | 3,842 | ||||||
Ginnie Mae reverse mortgage buy-out payable | 36,574 | 32,317 | ||||||
Deferred tax liability, net | 27,213 | — | ||||||
Estimate of claim losses | 14,015 | 8,609 | ||||||
Derivative liabilities | 11,783 | 20,722 | ||||||
Warrant liability | 9,342 | — | ||||||
Repurchase reserves | 7,879 | 10,529 | ||||||
Liability for loans eligible for repurchase from Ginnie Mae | 7,266 | 42,148 | ||||||
Total payables and other liabilities | $ | 509,803 | $ | 400,058 | ||||
19. | Notes Payable, Net |
Description | Maturity Date | Interest Rate | September 30, 2021 | December 31, 2020 | ||||||||||||
Successor | Predecessor | |||||||||||||||
Senior Unsecured Notes | November 2025 | 7.9 | % | $ | 350,000 | $ | 350,000 | |||||||||
Financing Agreement | January 2021 | 5.5% | 0 | 9 | ||||||||||||
Total aggregate principle amount | 350,000 | 350,009 | ||||||||||||||
Fair value adjustment, net of amortization (1) | 3,567 | 0 | ||||||||||||||
Less: Debt issuance costs | 0 | (13,436 | ) | |||||||||||||
Total notes payable, net | $ | 353,567 | $ | 336,573 | ||||||||||||
(1) | In conjunction with the Business Combination discussed in Note 4, the Company was required to adjust the liabilities assumed to fair value, resulting in a premium on the Notes and the elimination of the previously recognized debt issuance costs. |
20. | Litigation |
21. | Commitments and Contingencies |
Simultaneouslyaccordance with the consummationterms of our Initial Public Offeringthe loan.
22. | Incentive Compensation |
Grant Date Fair Value | ||||||||||||||||||||
Replacement RSUs | Number of Units Unvested | Number of Units Vested | Total Number of Units | Weighted Average Price Per Unit | Total Fair Value | |||||||||||||||
Outstanding, July 1, 2021 | 10,753,414 | 4,066,069 | 14,819,483 | $ | 9.48 | $ | 140,489 | |||||||||||||
Vested | (154,788 | ) | 154,788 | — | — | — | ||||||||||||||
Forfeited | (20,640 | ) | — | (20,640 | ) | 9.48 | (196 | ) | ||||||||||||
Settled | — | (4,220,857 | ) | (4,220,857 | ) | 9.48 | (40,014 | ) | ||||||||||||
Outstanding, September 30, 2021 | 10,577,986 | 0 | 10,577,986 | $ | 9.48 | $ | 100,279 | |||||||||||||
Grant Date Fair Value | ||||||||||||||||||||
Replacement RSUs | Number of Units Unvested | Number of Units Vested | Total Number of Units | Weighted Average Price Per Unit | Total Fair Value | |||||||||||||||
Outstanding, April 1, 2021 | 0 | 0 | 0 | $ | 0 | $ | 0 | |||||||||||||
Granted | 14,819,483 | — | 14,819,483 | 9.48 | 140,489 | |||||||||||||||
Vested | (4,220,857 | ) | 4,220,857 | — | — | — | ||||||||||||||
Forfeited | (20,640 | ) | — | (20,640 | ) | 9.48 | (196 | ) | ||||||||||||
Settled | — | (4,220,857 | ) | (4,220,857 | ) | 9.48 | (40,014 | ) | ||||||||||||
Outstanding, September 30, 2021 | 10,577,986 | 0 | 10,577,986 | $ | 9.48 | $ | 100,279 | |||||||||||||
Grant Date Fair Value | ||||||||||||||||||||
Earnout Right RSUs | Number of Units Unvested | Number of Units Vested | Total Number of Units | Weighted Average Price Per Unit | Total Fair Value | |||||||||||||||
Outstanding, July 1, 2021 | 1,550,880 | 0 | 1,550,880 | $ | 8.91 | $ | 13,811 | |||||||||||||
Forfeited | (2,160 | ) | — | (2,160 | ) | 8.91 | (19 | ) | ||||||||||||
Outstanding, September 30, 2021 | 1,548,720 | 0 | 1,548,720 | $ | 8.91 | $ | 13,792 | |||||||||||||
Grant Date Fair Value | ||||||||||||||||||||
Earnout Right RSUs | Number of Units Unvested | Number of Units Vested | Total Number of Units | Weighted Average Price Per Unit | Total Fair Value | |||||||||||||||
Outstanding, April 1, 2021 | 0 | 0 | 0 | $ | 0 | $ | 0 | |||||||||||||
Granted | 1,550,880 | — | 1,550,880 | 8.91 | 13,811 | |||||||||||||||
Forfeited | (2,160 | ) | — | (2,160 | ) | 8.91 | (19 | ) | ||||||||||||
Outstanding, September 30, 2021 | 1,548,720 | — | 1,548,720 | $ | 8.91 | $ | 13,792 | |||||||||||||
If we are unablethe Company and not for ongoing services to complete an initialbe provided in the future that would benefit the post-combination entity. Given that the payment was triggered by the distributions made in connection with the successful closing of the Business Combination, the payment of $24.0 million is considered to have been incurred “on the line.” The balance of the Company’s obligation under the Plan was replaced by the issuance of equity based compensation described above as governed by the Amended and Restated Management Long-Term Incentive Plan.
23. | General and Administrative Expenses |
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||||||
Successor | Predecessor | |||||||||||||||||||||||
Title and closing | $ | 31,358 | $ | 56,549 | $ | 25,061 | $ | 15,835 | $ | 44,512 | ||||||||||||||
Loan origination expenses | 20,983 | 38,708 | 20,503 | 19,771 | 54,344 | |||||||||||||||||||
Depreciation and amortization | 16,492 | 32,953 | 3,484 | 3,367 | 10,324 | |||||||||||||||||||
Loan portfolio expenses | 15,297 | 30,730 | 15,200 | 10,520 | 29,123 | |||||||||||||||||||
Communications and data processing | 14,670 | 27,238 | 11,324 | 8,726 | 23,053 | |||||||||||||||||||
Securitization expenses | 13,237 | 24,068 | 6,944 | 5,243 | 13,592 | |||||||||||||||||||
Business development | 10,492 | 20,139 | 10,607 | 8,247 | 25,837 | |||||||||||||||||||
Licensing and insurance | 2,906 | 6,363 | 2,487 | 1,411 | 4,677 | |||||||||||||||||||
Fair value change in deferred purchase price liability | 237 | 1,997 | 30 | 0 | 0 | |||||||||||||||||||
Other expenses | 15,923 | 22,151 | 31,577 | 40,684 | 68,122 | |||||||||||||||||||
Total general and administrative expenses | $ | 141,595 | $ | 260,896 | $ | 127,217 | $ | 113,804 | $ | 273,584 | ||||||||||||||
24. | Business Segment Reporting |
For the three months ended September 30, 2021 | ||||||||||||||||||||||||||||||||||||
Successor | ||||||||||||||||||||||||||||||||||||
Mortgage Originations | Reverse Originations | Commercial Originations | Lender Services | Portfolio Managemen t | Total Operating Segments | Corporate and Other | Elim | Total | ||||||||||||||||||||||||||||
REVENUES | ||||||||||||||||||||||||||||||||||||
Gain on sale of loans, net | $ | 200,294 | $ | — | $ | — | $ | 0 | $ | 13,664 | $ | 213,958 | $ | — | $ | (3,863 | ) | $ | 210,095 | |||||||||||||||||
Net fair value gains (losses) | 1,145 | 109,408 | 13,604 | 0 | (448 | ) | 123,709 | — | (1,200 | ) | 122,509 | |||||||||||||||||||||||||
Fee income | 30,827 | 1,022 | 14,252 | 87,592 | 14,937 | 148,630 | 0 | (2,905 | ) | 145,725 | ||||||||||||||||||||||||||
Net interest income (expense) | 2,807 | — | — | (77 | ) | (17,799 | ) | (15,069 | ) | (6,720 | ) | (40 | ) | (21,829 | ) | |||||||||||||||||||||
Total revenues | 235,073 | 110,430 | 27,856 | 87,515 | 10,354 | 471,228 | (6,720 | ) | (8,008 | ) | 456,500 | |||||||||||||||||||||||||
Total expenses | 220,331 | 41,354 | 21,678 | 78,688 | 30,068 | 392,119 | 28,672 | (8,913 | ) | 411,878 | ||||||||||||||||||||||||||
Other, net | — | 221 | 133 | 22 | 252 | 628 | 10,205 | (905 | ) | 9,928 | ||||||||||||||||||||||||||
Net income (loss) before taxes | $ | 14,742 | $ | 69,297 | $ | 6,311 | $ | 8,849 | $ | (19,462 | ) | $ | 79,737 | $ | (25,187 | ) | $ | — | $ | 54,550 | ||||||||||||||||
Depreciation and amortization | $ | 2,822 | $ | 9,970 | $ | 638 | $ | 2,892 | $ | 18 | $ | 16,340 | $ | 152 | $ | 0 | $ | 16,492 | ||||||||||||||||||
Total assets | 2,978,565 | 789,351 | 120,116 | 358,684 | 18,429,429 | 22,676,145 | 964,815 | (972,867 | ) | 22,668,093 | ||||||||||||||||||||||||||
April 1, 2021 to September 30, 2021 | ||||||||||||||||||||||||||||||||||||
Successor | ||||||||||||||||||||||||||||||||||||
Mortgage Originations | Reverse Originations | Commercial Originations | Lender Services | Portfolio | Total Operating Segments | Corporate and Other | Elim | Total | ||||||||||||||||||||||||||||
REVENUES | ||||||||||||||||||||||||||||||||||||
Gain on sale of loans, net | $ | 385,680 | $ | — | $ | — | $ | 0 | $ | 21,412 | $ | 407,092 | $ | — | $ | (9,420 | ) | $ | 397,672 | |||||||||||||||||
Net fair value gains | 1,145 | 203,944 | 24,425 | 0 | 10,776 | 240,290 | — | 13,370 | 253,660 | |||||||||||||||||||||||||||
Fee income | 61,172 | 1,976 | 26,376 | 168,722 | 18,514 | 276,760 | 0 | (40,171 | ) | 236,589 | ||||||||||||||||||||||||||
Net interest income (expense) | 4,783 | (9 | ) | — | (92 | ) | (33,650 | ) | (28,968 | ) | (13,287 | ) | (49 | ) | (42,304 | ) | ||||||||||||||||||||
Total revenues | 452,780 | 205,911 | 50,801 | 168,630 | 17,052 | 895,174 | (13,287 | ) | (36,270 | ) | 845,617 | |||||||||||||||||||||||||
Total expenses | 444,522 | 83,600 | 41,727 | 151,962 | 63,325 | 785,136 | 64,669 | (37,175 | ) | 812,630 | ||||||||||||||||||||||||||
Other, net | — | 325 | 273 | 105 | 8 | 711 | 8,019 | (905 | ) | 7,825 | ||||||||||||||||||||||||||
Net income (loss) before taxes | $ | 8,258 | $ | 122,636 | $ | 9,347 | $ | 16,773 | $ | (46,265 | ) | $ | 110,749 | $ | (69,937 | ) | $ | — | $ | 40,812 | ||||||||||||||||
Depreciation and amortization | $ | 4,255 | $ | 9,819 | $ | 1,059 | $ | 5,710 | $ | (89 | ) | $ | 20,754 | $ | 12,199 | $ | 0 | $ | 32,953 | |||||||||||||||||
Total assets | 2,978,565 | 789,351 | 120,116 | 358,684 | 18,429,429 | 22,676,145 | 964,815 | (972,867 | ) | 22,668,093 | ||||||||||||||||||||||||||
January 1, 2021 to March 31, 2021 | ||||||||||||||||||||||||||||||||||||
Predecessor | ||||||||||||||||||||||||||||||||||||
Mortgage Originations | Reverse Originations | Commercial Originations | Lender Services | Portfolio Management | Total Operating Segments | Corporate and Other | Elim | Total | ||||||||||||||||||||||||||||
REVENUES | ||||||||||||||||||||||||||||||||||||
Gain on sale of loans, net | $ | 286,481 | $ | — | $ | — | $ | 0 | $ | 5,065 | $ | 291,546 | $ | — | $ | (212 | ) | $ | 291,334 | |||||||||||||||||
Net fair value gains | — | 68,449 | 5,431 | 0 | 2,750 | 76,630 | — | 33 | 76,663 | |||||||||||||||||||||||||||
Fee income | 32,731 | 524 | 8,930 | 76,383 | 36,191 | 154,759 | — | 6,612 | 161,371 | |||||||||||||||||||||||||||
Net interest expense | 891 | — | — | (36 | ) | (14,816 | ) | (13,961 | ) | (7,744 | ) | — | (21,705 | ) | ||||||||||||||||||||||
Total revenues | 320,103 | 68,973 | 14,361 | 76,347 | 29,190 | 508,974 | (7,744 | ) | 6,433 | 507,663 | ||||||||||||||||||||||||||
Total expenses | 224,246 | 23,693 | 13,391 | 62,970 | 24,406 | 348,706 | 18,683 | 5,955 | 373,344 | |||||||||||||||||||||||||||
Other, net | — | 34 | 149 | 2 | 895 | 1,080 | (9,464 | ) | (478 | ) | (8,862 | ) | ||||||||||||||||||||||||
Net income (loss) before taxes | $ | 95,857 | $ | 45,314 | $ | 1,119 | $ | 13,379 | $ | 5,679 | $ | 161,348 | $ | (35,891 | ) | $ | — | $ | 125,457 | |||||||||||||||||
Depreciation and amortization | $ | 1,423 | $ | 151 | $ | 125 | $ | 1,268 | $ | 146 | $ | 3,113 | $ | 371 | $ | — | $ | 3,484 | ||||||||||||||||||
Total assets | 2,425,529 | 35,861 | 82,375 | 125,317 | 17,378,088 | 20,047,170 | 379,562 | (326,313 | ) | 20,100,419 | ||||||||||||||||||||||||||
For the three months ended September 30, 2020 | ||||||||||||||||||||||||||||||||||||
Predecessor | ||||||||||||||||||||||||||||||||||||
Mortgage Originations | Reverse Originations | Commercial Originations | Lender Services | Portfolio Management | Total Operating Segments | Corporate and Other | Elim | Total | ||||||||||||||||||||||||||||
REVENUES | ||||||||||||||||||||||||||||||||||||
Gain on sale of loans, net | $ | 407,248 | $ | — | $ | — | $ | 0 | $ | 706 | $ | 407,954 | $ | — | $ | (28 | ) | $ | 407,926 | |||||||||||||||||
Net fair value gains | — | 48,251 | 1,357 | 0 | 46,261 | 95,869 | — | 86 | 95,955 | |||||||||||||||||||||||||||
Fee income | 36,080 | 366 | 3,369 | 53,249 | 10,965 | 104,029 | 2,471 | 12,875 | 119,375 | |||||||||||||||||||||||||||
Net interest expense | 451 | — | — | (48 | ) | (15,999 | ) | (15,596 | ) | (385 | ) | (17 | ) | (15,998 | ) | |||||||||||||||||||||
Total revenues | 443,779 | 48,617 | 4,726 | 53,201 | 41,933 | 592,256 | 2,086 | 12,916 | 607,258 | |||||||||||||||||||||||||||
Total expenses | 239,847 | 24,634 | 7,064 | 45,304 | 22,989 | 339,838 | 9,615 | 12,916 | 362,369 | |||||||||||||||||||||||||||
Other, net | — | — | — | — | — | — | (2,470 | ) | — | (2,470 | ) | |||||||||||||||||||||||||
Net income (loss) before taxes | $ | 203,932 | $ | 23,983 | $ | (2,338 | ) | $ | 7,897 | $ | 18,944 | $ | 252,418 | $ | (9,999 | ) | $ | — | $ | 242,419 | ||||||||||||||||
Depreciation and amortization | $ | 1,440 | $ | 269 | $ | 143 | $ | 1,067 | $ | 12 | $ | 2,931 | $ | 436 | $ | — | $ | 3,367 | ||||||||||||||||||
Total assets | 2,170,342 | 15,163 | 57,432 | 103,755 | 16,639,324 | 18,986,016 | 351,841 | (315,842 | ) | 19,022,015 | ||||||||||||||||||||||||||
For the nine months ended September 30, 2020 | ||||||||||||||||||||||||||||||||||||
Predecessor | ||||||||||||||||||||||||||||||||||||
Mortgage Originations | Reverse Originations | Commercial Originations | Lender Services | Portfolio Management | Total Operating Segments | Corporate and Other | Elim | Total | ||||||||||||||||||||||||||||
REVENUES | ||||||||||||||||||||||||||||||||||||
Gain on sale of loans, net | $ | 832,872 | $ | — | $ | — | $ | 0 | $ | 6,323 | 839,195 | $ | — | $ | (2,294 | ) | $ | 836,901 | ||||||||||||||||||
Net fair value gains | — | 137,529 | 9,939 | 0 | 72,142 | 219,610 | — | 2,028 | 221,638 | |||||||||||||||||||||||||||
Fee income | 90,402 | 1,478 | 14,555 | 138,819 | 13,357 | 258,611 | 2,514 | 4,877 | 266,002 | |||||||||||||||||||||||||||
Net interest expense | 1,715 | — | — | (81 | ) | (60,480 | ) | (58,846 | ) | (4,605 | ) | (99 | ) | (63,550 | ) | |||||||||||||||||||||
Total revenues | 924,989 | 139,007 | 24,494 | 138,738 | 31,342 | 1,258,570 | (2,091 | ) | 4,512 | 1,260,991 | ||||||||||||||||||||||||||
Total expenses | 593,996 | 65,374 | 29,506 | 123,453 | 61,735 | 874,064 | 32,837 | 4,512 | 911,413 | |||||||||||||||||||||||||||
Other, net | — | — | — | — | — | — | (2,514 | ) | — | (2,514 | ) | |||||||||||||||||||||||||
Net income (loss) before taxes | $ | 330,993 | $ | 73,633 | $ | (5,012 | ) | $ | 15,285 | $ | (30,393 | ) | $ | 384,506 | $ | (37,442 | ) | $ | — | $ | 347,064 | |||||||||||||||
Depreciation and amortization | $ | 4,527 | $ | 724 | $ | 449 | $ | 3,172 | $ | 35 | 8,907 | $ | 1,417 | $ | — | $ | 10,324 | |||||||||||||||||||
Total assets | 2,170,342 | 15,163 | 57,432 | 103,755 | 16,639,324 | 18,986,016 | 351,841 | (315,842 | ) | $ | 19,022,015 | |||||||||||||||||||||||||
25. | Liquidity and Capital Requirements |
26. | Related Party Transactions |
27. | Income Taxes |
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Net income before income taxes | $ | 54,550 | $ | 40,812 | $ | 125,457 | $ | 242,419 | $ | 347,064 | ||||||||||
Provision for income taxes | 4,440 | 5,526 | 1,137 | 808 | 1,574 | |||||||||||||||
Effective tax provision rate | 8.14 | % | 13.54 | % | 0.91 | % | 0.33 | % | 0.45 | % | ||||||||||
28. | Earnings Per Share |
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | |||||||
Successor | ||||||||
Basic net income per share: | ||||||||
Numerator | ||||||||
Net income | $ | 50,110 | $ | 35,286 | ||||
Less: income attributable to noncontrolling interests (1) | 28,726 | 11,637 | ||||||
Net income attributable to holders of Class A Common Stock - basic | $ | 21,384 | $ | 23,649 | ||||
Denominator | ||||||||
Weighted average shares of Class A Common Stock outstanding - basic | 59,861,171 | 59,871,386 | ||||||
Basic net income per share | $ | 0.36 | $ | 0.39 | ||||
(1) | The Class A LLC Units of FoA Equity, held by the Continuing Unitholders, which comprise the noncontrolling interest in FoA, represents a participating security. Therefore, the numerator was adjusted to reduce net income by the amount of net income attributable to noncontrolling interests. |
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | |||||||
Successor | ||||||||
Diluted net income per share: | ||||||||
Numerator | ||||||||
Net income attributable to holders of Class A Common Stock | $ | 21,384 | $ | 23,649 | ||||
Reallocation of net income assuming exchange of Class A LLC Units (2) | 21,475 | 9,476 | ||||||
Net income attributable to holders of Class A Common Stock - diluted | $ | 42,859 | $ | 33,125 | ||||
Denominator | ||||||||
Weighted average shares of Class A Common Stock outstanding - | 59,861,171 | 59,871,386 | ||||||
Effect of dilutive securities: | ||||||||
Assumed exchange of Class A LLC Units for shares of Class A Common Stock (3) | 131,300,259 | 131,309,223 | ||||||
Weighted average shares of Class A Common Stock outstanding - diluted | 191,161,430 | 191,180,609 | ||||||
Diluted net income per share | $ | 0.22 | $ | 0.17 | ||||
| (2) | This adjustment assumes the after-tax elimination of noncontrolling interest due to the assumed exchange of all Class A LLC Units outstanding for shares of Class A Common Stock in FoA as of the beginning of the period following theif-converted method for calculating diluted net income per share. |
| (3) | The diluted weighted average shares outstanding of Class A Common Stock includes the effects of the if-converted method to reflect the provisions of the Exchange Agreement and assume the Class A LLC unitholders of FoA Equity, representing the noncontrolling interest, exchange their units on a one-for-one basis for shares of Class A Common Stock in FoA. |
29. | Sponsor Earnout |
30. | Equity |
31. | Subsequent Events |
Covid-19
Results of Operations
Our entire activity since November 6, 2018 (inception) through April 8, 2019 was in preparation for our Initial Public Offering, and since our Initial Public Offering, our activity has been limited to the search for a prospective initial Business Combination. We will not generate any operating revenues until the closing and completion of our initial Business Combination. We generate non-operating income in the form of investment income on investments held in the Trust Account after our Initial Public Offering. We are incurring expensesrealize as a result of being(i) tax basis adjustments that will increase the tax basis of the tangible and intangible assets of FoA as a result of sales or exchanges of Class A LLC Units in connection with or after the Business Combination or distributions with respect to the Class A LLC Units prior to or in connection with the Business Combination, (ii) FoA’s utilization of certain tax attributes attributable to the Blocker or the Blocker Shareholders, and (iii) certain other tax benefits related to entering into the TRAs, including tax benefits attributable to payments under the TRAs.
Therefore we believe the combined results for the Successor period from April 1, 2021 to September 30, 2021 and the Predecessor period from January 1, 2021 to March 31, 2021 are comparable to the nine months ended September 30, 2020 and provide enhanced comparability to the reader about the current quarter’s results. We believe this approach provides the most meaningful basis of comparison and is useful in identifying current business trends for the periods presented. The combined results of operations included in our discussion below are not considered to be prepared in accordance with U.S. GAAP and have not been prepared as pro forma results under applicable regulations, may not reflect the actual results we would have achieved had the Business Combination occurred at the beginning of 2021, and should not be viewed as a substitute for the results of operations of the Predecessor and Successor periods presented in accordance with U.S. GAAP.
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Gain on sale and other income from mortgage loans held for sale, net | $ | 210,095 | $ | 397,672 | $ | 291,334 | $ | 407,926 | $ | 836,901 | ||||||||||
Net fair value gains on mortgage loans and related obligations | 122,509 | 253,660 | 76,663 | 95,955 | 221,638 | |||||||||||||||
Fee income | 145,725 | 236,589 | 161,371 | 119,375 | 266,002 | |||||||||||||||
Net interest expense | (21,829 | ) | (42,304 | ) | (21,705 | ) | (15,998 | ) | (63,550 | ) | ||||||||||
Total revenue | 456,500 | 845,617 | 507,663 | 607,258 | 1,260,991 | |||||||||||||||
Total expenses | 411,878 | 812,630 | 373,344 | 362,369 | 911,413 | |||||||||||||||
Other, net | 9,928 | 7,825 | (8,862 | ) | (2,470 | ) | (2,514 | ) | ||||||||||||
NET INCOME BEFORE TAXES | $ | 54,550 | $ | 40,812 | $ | 125,457 | $ | 242,419 | $ | 347,064 | ||||||||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Interest income on loans | $ | 160,683 | $ | 334,623 | $ | 160,568 | $ | 150,276 | $ | 492,066 | ||||||||||
Change in fair value of loans | (119,690 | ) | (34,707 | ) | (51,346 | ) | 160,480 | 302,541 | ||||||||||||
Change in fair value of mortgage-backed securities | — | — | — | 1,621 | 2,438 | |||||||||||||||
Fair value gains on mortgage loans | 40,993 | 299,916 | 109,222 | 312,377 | 797,045 | |||||||||||||||
Interest expense on related obligations | (107,593 | ) | (221,067 | ) | (119,201 | ) | (121,777 | ) | (383,622 | ) | ||||||||||
Change in fair value of derivatives | 6,841 | (39,637 | ) | 43,972 | 149 | (5,594 | ) | |||||||||||||
Change in fair value of related obligations | 182,268 | 214,448 | 42,670 | (94,794 | ) | (186,191 | ) | |||||||||||||
Fair value losses on related obligations | 81,516 | (46,256 | ) | (32,559 | ) | (216,422 | ) | (575,407 | ) | |||||||||||
Net fair value gains on mortgage loans and related obligations | $ | 122,509 | $ | 253,660 | $ | 76,663 | $ | 95,955 | $ | 221,638 | ||||||||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Interest income on commercial and reverse loans | $ | 160,683 | $ | 334,623 | $ | 160,568 | $ | 150,276 | $ | 492,066 | ||||||||||
Interest expense on HMBS and nonrecourse obligations | (107,593 | ) | (221,067 | ) | (119,201 | ) | (121,777 | ) | (383,622 | ) | ||||||||||
Net interest margin included in net fair value gains on mortgage loans (1) | 53,090 | 113,556 | 41,367 | 28,499 | 108,444 | |||||||||||||||
Interest income on mortgage loans held for sale | 15,742 | 28,766 | 12,621 | 10,408 | 29,969 | |||||||||||||||
Interest expense on warehouse lines of credit | (30,735 | ) | (57,643 | ) | (26,546 | ) | (25,973 | ) | (88,837 | ) | ||||||||||
Non-funding debt interest expense | (6,842 | ) | (13,486 | ) | (7,756 | ) | (385 | ) | (4,605 | ) | ||||||||||
Other interest income | 120 | 246 | 40 | 27 | 144 | |||||||||||||||
Other interest expense | (114 | ) | (187 | ) | (64 | ) | (75 | ) | (221 | ) | ||||||||||
Net interest expense | (21,829 | ) | (42,304 | ) | (21,705 | ) | (15,998 | ) | (63,550 | ) | ||||||||||
NET INTEREST MARGIN | $ | 31,261 | $ | 71,252 | $ | 19,662 | $ | 12,501 | $ | 44,894 | ||||||||||
| (1) | Net interest margin included in fair value gains on mortgage loans includes interest income and expense on all commercial and reverse loans and their related nonrecourse obligations. Interest income on mortgage loans and warehouse lines of credit are classified in net interest expense. See Note 2 - Summary of Significant Accounting Policies within the consolidated financial statements for additional information on the Company’s accounting related to commercial and reverse mortgage loans. |
September 30, 2021 compared to $626.7 million for the comparable 2020 period. The Commercial Originations segment originated $447.3 million in loans for the three months ended September 30, 2021 compared to $89.9 million, as the comparable 2020 period saw the production ramp up for the commercial originations segment following the temporary deferment of production activity in Q2 2020 as a result of the COVID-19 outbreak. The increase was partially offset by net $28.8 million in fair value losses from assumption changes to our loans held for investment compared to a gain of $16.8 million in the comparable 2020 period. |
expenses during the three months ended September 30, 2021. The increase is primarily related to on-going expenses as a result of the Business Combination, such as RSUs and amortization of intangibles. During the third quarter of 2021, additional on-going expenses of $10.6 million for the RSUs and $13.5 million of amortization of intangibles were recognized as a result of the Business Combination.
expenses related to the Business Combination. During the second quarter of 2021, one-time initial and accelerated Replacement and Earnout Right RSU expense of $38.6 million was recognized. Additional on-going expenses of $23.4 million for the RSUs and $26.9 million of amortization of intangibles relating to the Business Combination were recognized. |
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Gain on sale and other income from mortgage loans held for sale, net | $ | 200,294 | $ | 385,680 | $ | 286,481 | $ | 407,248 | $ | 832,872 | ||||||||||
Net fair value gains on mortgage loans | 1,145 | 1,145 | — | — | — | |||||||||||||||
Fee income | 30,827 | 61,172 | 32,731 | 36,080 | 90,402 | |||||||||||||||
Net interest income | 2,807 | 4,783 | 891 | 451 | 1,715 | |||||||||||||||
Total revenue | 235,073 | 452,780 | 320,103 | 443,779 | 924,989 | |||||||||||||||
Total expenses | 220,331 | 444,522 | 224,246 | 239,847 | 593,996 | |||||||||||||||
NET INCOME BEFORE TAXES | $ | 14,742 | $ | 8,258 | $ | 95,857 | $ | 203,932 | $ | 330,993 | ||||||||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Loan origination volume (dollars) | ||||||||||||||||||||
Conforming | $ | 4,698,538 | $ | 9,000,708 | $ | 5,397,708 | $ | 5,773,072 | $ | 13,749,364 | ||||||||||
Government | 987,074 | 1,982,731 | 1,068,650 | 1,204,360 | 3,237,231 | |||||||||||||||
Non-conforming | 1,632,513 | 3,204,408 | 1,937,860 | 1,476,952 | 3,270,125 | |||||||||||||||
Home improvement | 64,566 | 123,494 | — | — | — | |||||||||||||||
Total loan origination volume | $ | 7,382,691 | $ | 14,311,341 | $ | 8,404,218 | $ | 8,454,384 | $ | 20,256,720 | ||||||||||
Loan origination volume by type (dollars) | ||||||||||||||||||||
Agency | $ | 6,324,230 | $ | 12,398,694 | $ | 7,367,044 | 8,160,931 | $ | 19,465,514 | |||||||||||
Non-agency | 993,895 | 1,789,153 | 1,037,174 | 293,453 | 791,206 | |||||||||||||||
Home improvement | 64,566 | 123,494 | — | — | — | |||||||||||||||
Total loan origination volume by type | $ | 7,382,691 | $ | 14,311,341 | $ | 8,404,218 | $ | 8,454,384 | $ | 20,256,720 | ||||||||||
Loan origination volume by channel (dollars) | ||||||||||||||||||||
Retail | $ | 4,838,128 | $ | 9,708,682 | $ | 5,622,487 | 6,207,165 | $ | 15,191,608 | |||||||||||
Wholesale/Correspondent | 1,786,304 | 2,987,807 | 1,706,365 | 1,303,448 | 2,882,650 | |||||||||||||||
Consumer direct | 693,693 | 1,491,358 | 1,075,366 | 943,771 | 2,182,462 | |||||||||||||||
Home improvement | 64,566 | 123,494 | — | — | — | |||||||||||||||
Total loan origination volume by channel | $ | 7,382,691 | $ | 14,311,341 | $ | 8,404,218 | $ | 8,454,384 | $ | 20,256,720 | ||||||||||
Loan origination volume by type (dollars) | ||||||||||||||||||||
Purchase | $ | 3,759,059 | $ | 7,253,521 | 2,664,493 | 3,022,815 | 6,780,670 | |||||||||||||
Refinance | 3,559,066 | 6,934,326 | 5,739,725 | 5,431,569 | 13,476,050 | |||||||||||||||
Home improvement | 64,566 | 123,494 | — | — | — | |||||||||||||||
Total loan origination volume by type | $ | 7,382,691 | $ | 14,311,341 | $ | 8,404,218 | $ | 8,454,384 | $ | 20,256,720 | ||||||||||
Loan origination volume (units) | ||||||||||||||||||||
Conforming | 14,522 | 28,658 | 18,090 | 19,294 | 46,570 | |||||||||||||||
Government | 3,041 | 6,182 | 3,426 | 4,106 | 11,120 | |||||||||||||||
Non-conforming | 2,032 | 4,004 | 2,472 | 2,170 | 4,818 | |||||||||||||||
Home improvement | 5,935 | 11,457 | — | — | — | |||||||||||||||
Total loan origination volume | 25,530 | 50,301 | 23,988 | 25,570 | 62,508 | |||||||||||||||
Loan origination volume by type (units) | ||||||||||||||||||||
Agency | 18,400 | 36,678 | 22,763 | 25,113 | 61,296 | |||||||||||||||
Non-agency | 1,195 | 2,166 | 1,225 | 457 | 1,212 | |||||||||||||||
Home improvement | 5,935 | 11,457 | — | — | — | |||||||||||||||
Total loan origination volume by type | 25,530 | 50,301 | 23,988 | 25,570 | 62,508 | |||||||||||||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Loan origination volume by channel (units) | ||||||||||||||||||||
Retail | 13,353 | 27,090 | 16,123 | 19,064 | 47,998 | |||||||||||||||
Wholesale/Correspondent | 4,210 | 7,215 | 4,745 | 3,940 | 8,396 | |||||||||||||||
Consumer direct | 2,032 | 4,539 | 3,120 | 2,566 | 6,114 | |||||||||||||||
Home improvement | 5,935 | 11,457 | — | — | — | |||||||||||||||
Total loan origination volume by channel | 25,530 | 50,301 | 23,988 | 25,570 | 62,508 | |||||||||||||||
Loan origination volume by type (units) | ||||||||||||||||||||
Purchase | 9,801 | 19,129 | 7,534 | 9,325 | 22,286 | |||||||||||||||
Refinance | 9,794 | 19,715 | 16,454 | 16,245 | 40,222 | |||||||||||||||
Home improvement | 5,935 | 11,457 | — | — | — | |||||||||||||||
Total loan origination volume by type | 25,530 | 50,301 | 23,988 | 25,570 | 62,508 | |||||||||||||||
Loan sales by investor (dollars) | ||||||||||||||||||||
Agency | $ | 5,733,609 | $ | 11,541,450 | $ | 7,246,418 | $ | 7,818,882 | $ | 18,026,245 | ||||||||||
Private | 1,574,710 | 2,787,028 | 1,152,810 | 256,456 | 1,447,680 | |||||||||||||||
Total loan sales by investor | $ | 7,308,319 | $ | 14,328,478 | $ | 8,399,228 | $ | 8,075,338 | $ | 19,473,925 | ||||||||||
Loan sales by type (dollars) | ||||||||||||||||||||
Servicing released | $ | 3,313,801 | $ | 5,497,385 | $ | 2,086,550 | $ | 760,215 | $ | 5,168,265 | ||||||||||
Servicing retained | 3,994,518 | 8,831,093 | 6,312,678 | 7,315,123 | 14,305,660 | |||||||||||||||
Total loan sales by type | $ | 7,308,319 | $ | 14,328,478 | $ | 8,399,228 | $ | 8,075,338 | $ | 19,473,925 | ||||||||||
Net rate lock volume | $ | 7,679,106 | $ | 14,347,929 | $ | 8,405,313 | $ | 9,285,616 | 22,302,731 | |||||||||||
Mortgage originations margin (including servicing margin) (1) | 2.61 | % | 2.69 | % | 3.41 | % | 4.39 | % | 3.73 | % | ||||||||||
Capitalized servicing rate (in bps) | 102.6 | 103.1 | 89.1 | 73.1 | 68.7 | |||||||||||||||
(1) | Calculated for each period as Gain on sale and other income from mortgage loans held for sale, net, divided by Net rate lock volume. |
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Gain on sale, net | $ | 221,680 | $ | 390,501 | $ | 200,874 | $ | 396,346 | $ | 853,204 | ||||||||||
Provision for repurchases | (1,970 | ) | (3,783 | ) | (2,258 | ) | (4,277 | ) | (16,256 | ) | ||||||||||
Realized hedge gains (losses) | (22,982 | ) | (39,995 | ) | 74,823 | (33,796 | ) | (141,280 | ) | |||||||||||
Changes in fair value of loans held for sale | (5,561 | ) | 6,041 | (41,485 | ) | 11,538 | 44,948 | |||||||||||||
Changes in fair value of interest rate locks | (5,472 | ) | (8,456 | ) | (49,946 | ) | 34,937 | 98,988 | ||||||||||||
Changes in fair value of derivatives/hedges | 14,599 | 41,372 | 104,473 | 2,500 | (6,732 | ) | ||||||||||||||
Gain on sale and other income from mortgage loans held for sale, net | 200,294 | 385,680 | 286,481 | 407,248 | 832,872 | |||||||||||||||
Net fair value gains on mortgage loans | 1,145 | 1,145 | — | — | — | |||||||||||||||
Origination related fee income | 30,827 | 61,172 | 32,731 | 36,080 | 90,402 | |||||||||||||||
Net interest income | 2,807 | 4,783 | 891 | 451 | 1,715 | |||||||||||||||
Total revenue | $ | 235,073 | $ | 452,780 | $ | 320,103 | $ | 443,779 | $ | 924,989 | ||||||||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Interest income | $ | 15,363 | $ | 28,200 | $ | 12,483 | $ | 10,273 | $ | 29,351 | ||||||||||
Interest expense | (12,556 | ) | (23,417 | ) | (11,592 | ) | (9,822 | ) | (27,636 | ) | ||||||||||
Net interest income | $ | 2,807 | $ | 4,783 | $ | 891 | $ | 451 | $ | 1,715 | ||||||||||
WAC - loans held for sale | 3.0 | % | 3.0 | % | 2.9 | % | 3.0 | % | 3.0 | % | ||||||||||
WAC - warehouse lines of credit | 3.3 | % | 3.1 | % | 3.0 | % | 3.3 | % | 3.0 | % | ||||||||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Commissions and bonus | $ | 106,316 | $ | 209,916 | $ | 111,766 | $ | 140,122 | $ | 325,366 | ||||||||||
Salaries | 48,565 | 104,121 | 46,232 | 41,896 | 108,719 | |||||||||||||||
Other salary related expenses | 11,073 | 24,225 | 18,451 | 12,052 | 37,857 | |||||||||||||||
Total salaries, benefits and related expenses | 165,954 | 338,262 | 176,449 | 194,070 | 471,942 | |||||||||||||||
Loan origination fees | 17,539 | 32,320 | 14,003 | 13,375 | 34,362 | |||||||||||||||
Loan processing expenses | 5,119 | 10,544 | 5,462 | 2,408 | 7,008 | |||||||||||||||
Other general and administrative expenses | 26,918 | 54,506 | 23,112 | 23,936 | 63,974 | |||||||||||||||
Total general and administrative expenses | 49,576 | 97,370 | 42,577 | 39,719 | 105,344 | |||||||||||||||
Occupancy, equipment rentals and other office related expenses | 4,801 | 8,890 | 5,220 | 6,058 | 16,710 | |||||||||||||||
Total expenses | $ | 220,331 | $ | 444,522 | $ | 224,246 | $ | 239,847 | $ | 593,996 | ||||||||||
Business Combination was recognized.
Going Concern Consideration
As ofnine months ended September 30, 2020 we had approximately $1.02(Predecessor)
Throughthe nine months ended September 30, 2020 to 3,063 for the 2021 period due to acquisitions and in order to accommodate the demands of the business. During the second quarter of 2021, one-time initial and accelerated Replacement and Earnout Right RSU expense of $7.7 million was recognized. Additional on-going expenses of $5.1 million were recognized for the RSUs issued at the time of the Business Combination.
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Net origination gains | $ | 109,408 | $ | 203,944 | $ | 68,449 | $ | 48,251 | $ | 137,529 | ||||||||||
Fee income | 1,022 | 1,976 | 524 | 366 | 1,478 | |||||||||||||||
Net interest expense | — | (9 | ) | — | — | — | ||||||||||||||
Total revenue | 110,430 | 205,911 | 68,973 | 48,617 | 139,007 | |||||||||||||||
Total expenses | 41,354 | 83,600 | 23,693 | 24,634 | 65,374 | |||||||||||||||
Other, net | 221 | 325 | 34 | — | — | |||||||||||||||
NET INCOME BEFORE TAXES | $ | 69,297 | $ | 122,636 | $ | 45,314 | $ | 23,983 | $ | 73,633 | ||||||||||
Following our Initial Public Offering and the Private Placement, $287.5 million was placed in the Trust Account,any future fair value adjustments, including approximately $9.2 million of deferred underwriting commissions. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned, on these originated loans are reflected in revenues of our Portfolio Management segment until final disposition.
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Loan origination volume | ||||||||||||||||||||
Total loan origination volume - New originations - dollars (1) | $ | 1,157,212 | $ | 2,170,535 | $ | 768,795 | $ | 626,706 | $ | 2,052,332 | ||||||||||
Total loan origination volume - Tails - dollars (2) | 135,164 | 257,126 | 120,775 | 116,131 | 352,295 | |||||||||||||||
Total loan origination volume - dollars | $ | 1,292,376 | $ | 2,427,661 | $ | 889,570 | $ | 742,837 | $ | 2,404,627 | ||||||||||
Total loan origination volume - units | 3,382 | 6,640 | 2,864 | 2,347 | 7,104 | |||||||||||||||
Loan origination volume by channel (dollars) (3) | ||||||||||||||||||||
Retail | $ | 195,797 | $ | 368,769 | $ | 127,679 | $ | 105,307 | $ | 278,997 | ||||||||||
TPO | 961,415 | 1,801,766 | 641,116 | 521,399 | 1,773,335 | |||||||||||||||
Total loan origination volume by channel | $ | 1,157,212 | $ | 2,170,535 | $ | 768,795 | $ | 626,706 | $ | 2,052,332 | ||||||||||
| (1) | New loan origination volumes consist of initial reverse mortgage loan borrowing amounts. |
(2) | Tails consist of subsequent borrower draws, mortgage insurance premiums, service fees and other advances that we are able to subsequently pool into a security. |
| (3) | Loan origination volumes by channel consist of initial reverse mortgage loan borrowing amounts, exclusive of subsequent borrower draws, mortgage insurance premiums, service fees and other advances that we are able to subsequently pool into a security. |
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Net origination gains | ||||||||||||||||||||
Retail | $ | 30,061 | $ | 47,281 | $ | 16,913 | $ | 13,168 | $ | 28,887 | ||||||||||
TPO | 144,049 | 285,435 | 99,678 | 72,768 | 220,305 | |||||||||||||||
Acquisition costs | (64,702 | ) | (128,772 | ) | (48,142 | ) | (37,685 | ) | (111,663 | ) | ||||||||||
Total net origination gains | 109,408 | 203,944 | 68,449 | 48,251 | 137,529 | |||||||||||||||
Fee income | 1,022 | 1,976 | 524 | 366 | 1,478 | |||||||||||||||
Net interest income | — | (9 | ) | — | — | — | ||||||||||||||
Total revenue | $ | 110,430 | $ | 205,911 | $ | 68,973 | $ | 48,617 | $ | 139,007 | ||||||||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Salaries and bonuses | $ | 18,761 | $ | 38,606 | $ | 11,692 | $ | 12,072 | $ | 32,368 | ||||||||||
Other salary related expenses | 1,605 | 3,613 | 1,395 | 898 | 3,240 | |||||||||||||||
Total salaries, benefits and related expenses | 20,366 | 42,219 | 13,087 | 12,970 | 35,608 | |||||||||||||||
Loan origination fees | 2,120 | 4,881 | 3,258 | 3,587 | 9,323 | |||||||||||||||
Professional fees | 2,444 | 5,120 | 2,079 | 2,711 | 4,933 | |||||||||||||||
Other general and administrative expenses | 15,954 | 30,445 | 4,958 | 4,920 | 14,286 | |||||||||||||||
Total general and administrative expenses | 20,518 | 40,446 | 10,295 | 11,218 | 28,542 | |||||||||||||||
Occupancy, equipment rentals and other office related expenses | 470 | 935 | 311 | 446 | 1,224 | |||||||||||||||
Total expenses | $ | 41,354 | $ | 83,600 | $ | 23,693 | $ | 24,634 | $ | 65,374 | ||||||||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Net origination gains | $ | 13,604 | $ | 24,425 | $ | 5,431 | $ | 1,357 | $ | 9,939 | ||||||||||
Fee income | 14,252 | 26,376 | 8,930 | 3,369 | 14,555 | |||||||||||||||
Total revenue | 27,856 | 50,801 | 14,361 | 4,726 | 24,494 | |||||||||||||||
Total expenses | 21,678 | 41,727 | 13,391 | 7,064 | 29,506 | |||||||||||||||
Other, net | 133 | 273 | 149 | — | — | |||||||||||||||
NET INCOME (LOSS) BEFORE TAXES | $ | 6,311 | $ | 9,347 | $ | 1,119 | $ | (2,338 | ) | $ | (5,012 | ) | ||||||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Loan origination volume (dollars) (1) | ||||||||||||||||||||
Portfolio | $ | 78,547 | $ | 148,574 | $ | 59,458 | $ | 9,244 | $ | 48,939 | ||||||||||
SRL | 197,864 | 368,306 | 104,992 | 11,144 | 100,331 | |||||||||||||||
Fix & flip | 112,312 | 208,366 | 90,018 | 68,049 | 225,765 | |||||||||||||||
New construction | 15,376 | 33,014 | 3,422 | — | 93,454 | |||||||||||||||
Agricultural | 43,216 | 89,525 | 83,013 | 1,450 | 79,947 | |||||||||||||||
Total loan origination volume | $ | 447,315 | $ | 847,785 | $ | 340,903 | $ | 89,887 | $ | 548,436 | ||||||||||
Loan origination volume (units) (1) | ||||||||||||||||||||
Portfolio | 99 | 173 | 71 | 12 | 34 | |||||||||||||||
SRL | 1,082 | 2,041 | 643 | 75 | 618 | |||||||||||||||
Fix & flip | 472 | 917 | 430 | 318 | 1,070 | |||||||||||||||
New construction | 53 | 109 | 13 | (1 | ) | 275 | ||||||||||||||
Agricultural | 8 | 32 | 27 | 1 | 39 | |||||||||||||||
Total loan origination volume | 1,714 | 3,272 | 1,184 | 405 | 2,036 | |||||||||||||||
(1) | Loan origination volume and units consist of approved total borrower commitments. These amounts include amounts available to our borrowers but have not yet been drawn upon. |
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Net origination gains | $ | 13,604 | $ | 24,425 | $ | 5,431 | $ | 1,357 | $ | 9,939 | ||||||||||
Fee income | 14,252 | 26,376 | 8,930 | 3,369 | 14,555 | |||||||||||||||
Total revenue | $ | 27,856 | $ | 50,801 | $ | 14,361 | $ | 4,726 | $ | 24,494 | ||||||||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Salaries | $ | 7,693 | $ | 15,336 | $ | 4,769 | $ | 1,914 | $ | 9,018 | ||||||||||
Commissions and bonus | 3,577 | 6,458 | 2,092 | 1,227 | 4,918 | |||||||||||||||
Other salary related expenses | 1,064 | 2,044 | 797 | 424 | 1,823 | |||||||||||||||
Total salaries, benefits and related expenses | 12,334 | 23,838 | 7,658 | 3,565 | 15,759 | |||||||||||||||
Loan origination fees | 5,216 | 10,155 | 3,140 | 2,306 | 7,618 | |||||||||||||||
Professional fees | 1,148 | 2,480 | 891 | 683 | 3,097 | |||||||||||||||
Other general and administrative expenses | 2,636 | 4,607 | 1,164 | 430 | 2,620 | |||||||||||||||
Total general and administrative expenses | 9,000 | 17,242 | 5,195 | 3,419 | 13,335 | |||||||||||||||
Occupancy, equipment rentals and other office related expenses | 344 | 647 | 538 | 80 | 412 | |||||||||||||||
Total expenses | $ | 21,678 | $ | 41,727 | $ | 13,391 | $ | 7,064 | $ | 29,506 | ||||||||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Fee income | $ | 87,592 | $ | 168,722 | $ | 76,383 | $ | 53,249 | $ | 138,819 | ||||||||||
Net interest expense | (77 | ) | (92 | ) | (36 | ) | (48 | ) | (81 | ) | ||||||||||
Total revenue | 87,515 | 168,630 | 76,347 | 53,201 | 138,738 | |||||||||||||||
Total expenses | 78,688 | 151,962 | 62,970 | 45,304 | 123,453 | |||||||||||||||
Other, net | 22 | 105 | 2 | — | — | |||||||||||||||
NET INCOME BEFORE TAXES | $ | 8,849 | $ | 16,773 | $ | 13,379 | $ | 7,897 | $ | 15,285 | ||||||||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Incenter title agent orders | 59,429 | 114,864 | 54,960 | 45,102 | 122,331 | |||||||||||||||
Incenter title agent closings | 48,694 | 92,252 | 46,991 | 30,228 | 78,088 | |||||||||||||||
Total appraisals | 12,600 | 22,951 | 7,427 | 6,033 | 15,767 | |||||||||||||||
Title insurance underwriter policies | 57,185 | 113,366 | 48,814 | 24,050 | 53,509 | |||||||||||||||
FTE count for fulfillment revenue | 986 | 986 | 858 | 41 | 756 | |||||||||||||||
Total MSR valuations performed | 137 | 274 | 124 | 135 | 391 | |||||||||||||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Title agent and closing services | $ | 24,988 | $ | 58,866 | $ | 31,750 | $ | 24,797 | $ | 68,727 | ||||||||||
Insurance underwriting services | 42,717 | 77,629 | 33,322 | 17,768 | 40,943 | |||||||||||||||
Student and consumer loan origination services | 3,512 | 5,012 | 2,012 | 3,616 | 9,316 | |||||||||||||||
Fulfillment services | 7,337 | 14,160 | 6,779 | 4,492 | 12,030 | |||||||||||||||
MSR trade brokerage, valuation and other services | 8,306 | 12,156 | 2,462 | 2,562 | 7,747 | |||||||||||||||
Other income | 732 | 899 | 58 | 14 | 56 | |||||||||||||||
Net interest expense | (77 | ) | (92 | ) | (36 | ) | (48 | ) | (81 | ) | ||||||||||
Total revenue | $ | 87,515 | $ | 168,630 | $ | 76,347 | $ | 53,201 | $ | 138,738 | ||||||||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Salaries | $ | 18,129 | $ | 36,480 | $ | 16,715 | $ | 10,099 | $ | 29,830 | ||||||||||
Commissions and bonus | 9,755 | 18,445 | 7,045 | 8,017 | 18,570 | |||||||||||||||
Other salary related expenses | 5,183 | 11,445 | 4,001 | 2,805 | 8,200 | |||||||||||||||
Total salaries, benefits and related expenses | 33,067 | 66,370 | 27,761 | 20,921 | 56,600 | |||||||||||||||
Title and closing | 31,358 | 56,548 | 25,062 | 15,835 | 44,512 | |||||||||||||||
Communication and data processing | 3,760 | 6,885 | 2,960 | 2,949 | 7,361 | |||||||||||||||
Fair value change in deferred purchase price liability | 238 | 1,988 | — | 87 | 250 | |||||||||||||||
Other general and administrative expenses | 9,060 | 17,951 | 6,040 | 4,492 | 12,083 | |||||||||||||||
Total general and administrative expenses | 44,416 | 83,372 | 34,062 | 23,363 | 64,206 | |||||||||||||||
Occupancy, equipment rentals and other office related expenses | 1,205 | 2,220 | 1,147 | 1,020 | 2,647 | |||||||||||||||
Total expenses | $ | 78,688 | $ | 151,962 | $ | 62,970 | $ | 45,304 | $ | 123,453 | ||||||||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Gain on sale and other income from mortgage loans held for sale, net | $ | 13,664 | $ | 21,412 | $ | 5,065 | $ | 706 | $ | 6,323 | ||||||||||
Net fair value (losses) gains | (448 | ) | 10,776 | 2,750 | 46,261 | 72,142 | ||||||||||||||
Net interest expense | (17,799 | ) | (33,650 | ) | (14,816 | ) | (15,999 | ) | (60,480 | ) | ||||||||||
Fee income | 14,937 | 18,514 | 36,191 | 10,965 | 13,357 | |||||||||||||||
Total revenue | 10,354 | 17,052 | 29,190 | 41,933 | 31,342 | |||||||||||||||
Total expenses | 30,068 | 63,325 | 24,406 | 22,989 | 61,735 | |||||||||||||||
Other, net | 252 | 8 | 895 | — | — | |||||||||||||||
NET (LOSS) INCOME BEFORE TAXES | $ | (19,462 | ) | $ | (46,265 | ) | $ | 5,679 | $ | 18,944 | $ | (30,393 | ) | |||||||
(1) | Net fair value gains and losses in our Portfolio Management segment for loans held for sale only include fair value adjustments related to loans originated in the Commercial Originations segment. |
September 30, 2021 | December 31, 2020 | |||||||
Successor | Predecessor | |||||||
Cash and cash equivalents | $ | 45,401 | $ | 47,024 | ||||
Restricted cash | $ | 322,887 | $ | 303,925 | ||||
Reverse mortgage loans held for investment, subject to HMBS liabilities, at fair value | 10,347,459 | 9,929,163 | ||||||
Mortgage loans held for investment, subject to nonrecourse debt, at fair value | 5,939,651 | 5,396,167 | ||||||
Mortgage loans held for investment, at fair value | 1,077,670 | 730,821 | ||||||
Mortgage servicing rights, at fair value | 340,949 | 180,684 | ||||||
Other assets, net | 185,898 | 165,810 | ||||||
Total long-term investment assets | 18,259,915 | 16,753,594 | ||||||
Mortgage loans held for sale, at fair value | 142,906 | 142,226 | ||||||
Total earning assets | 18,402,821 | 16,895,820 | ||||||
HMBS related obligations, at fair value | 10,216,310 | $ | 9,788,668 | |||||
Nonrecourse debt, at fair value | 5,831,083 | 5,271,842 | ||||||
Other financing lines of credit | 1,508,916 | 1,010,669 | ||||||
Payables and other liabilities | 66,698 | 96,762 | ||||||
Total financing of portfolio | 17,623,007 | 16,167,941 | ||||||
Net equity in earning assets | $ | 779,814 | $ | 727,879 | ||||
September 30, 2021 | December 31, 2020 | |||||||
Successor | Predecessor | |||||||
Mortgage Servicing Rights Portfolio | ||||||||
Loan count | 103,422 | 69,301 | ||||||
Ending unpaid principal balance (“UPB”) | $ | 33,301,683 | $ | 22,269,362 | ||||
Average unpaid principal balance | $ | 322 | $ | 321 | ||||
Weighted average coupon | 3.02 | % | 3.15 | % | ||||
Weighted average age (in months) | 9 | 4 | ||||||
Weighted average FICO credit score | 758 | 760 | ||||||
90+ day delinquency rate | 0.1 | % | 0.1 | % | ||||
Total prepayment speed | 9.5 | % | 12.1 | % | ||||
Reverse Mortgages | ||||||||
Loan count | 59,556 | 58,230 | ||||||
Active UPB | $ | 14,352,606 | $ | 13,355,570 | ||||
Due and payable | 279,268 | 484,233 | ||||||
Foreclosure | 689,749 | 348,768 | ||||||
Claims pending | 65,352 | 76,346 | ||||||
Ending unpaid principal balance | $ | 15,386,975 | $ | 14,264,917 | ||||
Average unpaid principal balance | $ | 258 | $ | 245 | ||||
Weighted average coupon | 3.94 | % | 4.30 | % | ||||
Weighted average age (in months) | 44 | 44 | ||||||
Percentage in foreclosure | 4.5 | % | 2.4 | % | ||||
Commercial (SRL/Portfolio/Fix & Flip) | ||||||||
Loan count | 2,147 | 1,993 | ||||||
Ending unpaid principal balance | $ | 453,372 | $ | 493,817 | ||||
Average unpaid principal balance | $ | 211 | $ | 248 | ||||
Weighted average coupon | 7.52 | % | 8.50 | % | ||||
Weighted average loan age (in months) | 9 | 12 | ||||||
SRL conditional prepayment rate | 1.9 | % | 2.9 | % | ||||
SRL non-performing (60+ DPD) | 1.4 | % | 2.2 | % | ||||
F&F single month mortality | 8.5 | % | 8.8 | % | ||||
F&F non-performing (60+ DPD) | 14.9 | % | 6.5 | % | ||||
Agricultural Loans | ||||||||
Loan count | 72 | 42 | ||||||
Ending unpaid principal balance | $ | 186,177 | $ | 69,127 | ||||
Average unpaid principal balance | $ | 2,586 | $ | 1,646 | ||||
Weighted average coupon | 7.34 | % | 7.70 | % | ||||
Weighted average loan age (in months) | 7 | 5 | ||||||
Conditional prepayment rate | 1.0 | % | 1.0 | % | ||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Investment and Capital Markets | ||||||||||||||||||||
Number of structured deals | 4 | 7 | 1 | 2 | 8 | |||||||||||||||
Structured deals (size in notes) | $ | 1,443,121 | $ | 2,575,653 | $ | 571,448 | $ | 954,884 | $ | 2,715,236 | ||||||||||
Number of whole loan trades | 11 | 21 | 8 | 1 | 3 | |||||||||||||||
UPB of whole loan trades | $ | 294,898 | $ | 512,966 | $ | 195,929 | $ | 44,704 | $ | 168,869 | ||||||||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
REVENUE | ||||||||||||||||||||
Gain on sale and other income from mortgage loans held for sale, net | $ | 13,664 | $ | 21,412 | $ | 5,065 | $ | 706 | $ | 6,323 | ||||||||||
Net fair value gains: | ||||||||||||||||||||
Interest income | 152,641 | 300,587 | 149,875 | 171,731 | 532,725 | |||||||||||||||
Interest expense (nonrecourse) | (109,766 | ) | (221,107 | ) | (114,910 | ) | (126,426 | ) | (388,904 | ) | ||||||||||
Net fair value (losses) gains on portfolio assets | (43,323 | ) | (68,704 | ) | (32,215 | ) | 956 | (71,679 | ) | |||||||||||
Total net fair value (losses) gains | (448 | ) | 10,776 | 2,750 | 46,261 | 72,142 | ||||||||||||||
Net interest expense | (17,799 | ) | (33,650 | ) | (14,816 | ) | (15,999 | ) | (60,480 | ) | ||||||||||
Fee income: | ||||||||||||||||||||
Servicing income (MSR) | 6,060 | 6,360 | 33,698 | 8,060 | 9,846 | |||||||||||||||
Underwriting, advisory and valuation fees | 5,127 | 7,028 | 997 | — | 180 | |||||||||||||||
Asset management fees | — | — | 9 | 366 | 1,319 | |||||||||||||||
Other fees | 3,750 | 5,126 | 1,487 | 2,539 | 2,012 | |||||||||||||||
Total fee income | 14,937 | 18,514 | 36,191 | 10,965 | 13,357 | |||||||||||||||
Total revenue | $ | 10,354 | $ | 17,052 | $ | 29,190 | $ | 41,933 | $ | 31,342 | ||||||||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Interest income on commercial and reverse loans | $ | 152,641 | $ | 300,585 | $ | 149,875 | $ | 171,244 | $ | 532,725 | ||||||||||
Interest expense on HMBS and nonrecourse obligations | (109,766 | ) | (221,107 | ) | (114,910 | ) | (126,426 | ) | (388,904 | ) | ||||||||||
Net interest margin included in net fair value gains and losses on mortgage loans (1) | 42,875 | 79,478 | 34,965 | 44,818 | 143,821 | |||||||||||||||
Interest income on mortgage loans held for sale | 296 | 483 | 138 | 136 | 619 | |||||||||||||||
Interest expense on warehouse lines of credit | (18,178 | ) | (34,216 | ) | (14,954 | ) | (15,636 | ) | (60,604 | ) | ||||||||||
Other interest income (expense) | 83 | 83 | — | (499 | ) | (495 | ) | |||||||||||||
Net interest expense | (17,799 | ) | (33,650 | ) | (14,816 | ) | (15,999 | ) | (60,480 | ) | ||||||||||
NET INTEREST MARGIN | $ | 25,076 | $ | 45,828 | $ | 20,149 | $ | 28,819 | $ | 83,341 | ||||||||||
(1) | Net interest margin included in net fair value gains and losses on mortgage loans includes interest income and expense on all commercial and reverse loans and their related nonrecourse obligations. Interest income on mortgage loans and warehouse lines of credit are classified in net interest expense. See Note 2 - Summary of Significant Accounting Policies within the interim unaudited consolidated financial statements for additional information on the Company’s accounting related to commercial and reverse mortgage loans. |
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Salaries and bonuses | $ | 9,080 | $ | 24,621 | $ | 5,650 | $ | 6,043 | $ | 15,835 | ||||||||||
Other salary related expenses | 380 | 827 | 497 | 917 | 1,613 | |||||||||||||||
Total salaries, benefits and related expenses | 9,460 | 25,448 | 6,147 | 6,960 | 17,448 | |||||||||||||||
Securitization expenses | 9,877 | 14,610 | 4,459 | 5,242 | 13,592 | |||||||||||||||
Servicing related expenses | 9,093 | 17,918 | 8,651 | 6,723 | 19,143 | |||||||||||||||
Other general and administrative expenses | 1,441 | 5,026 | 4,887 | 3,918 | 11,092 | |||||||||||||||
Total general and administrative expenses | 20,411 | 37,554 | 17,997 | 15,883 | 43,827 | |||||||||||||||
Occupancy and equipment rentals | 197 | 323 | 262 | 146 | 460 | |||||||||||||||
Total expenses | $ | 30,068 | $ | 63,325 | $ | 24,406 | $ | 22,989 | $ | 61,735 | ||||||||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Fee income | $ | — | $ | — | $ | — | $ | 2,471 | $ | 2,514 | ||||||||||
Net interest expense | (6,720 | ) | (13,287 | ) | (7,744 | ) | (385 | ) | (4,605 | ) | ||||||||||
Total interest and other expense | (6,720 | ) | (13,287 | ) | (7,744 | ) | 2,086 | (2,091 | ) | |||||||||||
Total expenses | 28,672 | 64,669 | 18,683 | 9,615 | 32,837 | |||||||||||||||
Other, net | 10,205 | 8,019 | (9,464 | ) | (2,470 | ) | (2,514 | ) | ||||||||||||
NET LOSS | $ | (25,187 | ) | $ | (69,937 | ) | $ | (35,891 | ) | $ | (9,999 | ) | $ | (37,442 | ) | |||||
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Salaries and bonuses | $ | 35,944 | $ | 82,973 | $ | 22,779 | $ | 16,566 | $ | 44,022 | ||||||||||
Other salary related expenses | 3,379 | 5,611 | 3,306 | 1,196 | 3,011 | |||||||||||||||
Shared services - payroll allocations | (19,520 | ) | (43,954 | ) | (18,657 | ) | (15,867 | ) | (29,356 | ) | ||||||||||
Total salaries, benefits and related expenses | 19,803 | 44,630 | 7,428 | 1,895 | 17,677 | |||||||||||||||
Communication and data processing | 4,368 | 8,208 | 3,015 | 1,300 | 4,141 | |||||||||||||||
Professional fees | 488 | 8,905 | 10,334 | 8,515 | 15,440 | |||||||||||||||
Other general and administrative expenses | 8,141 | 11,621 | 1,481 | 873 | 3,317 | |||||||||||||||
Shared services - general and administrative allocations | (5,404 | ) | (10,669 | ) | (3,694 | ) | (3,402 | ) | (9,080 | ) | ||||||||||
Total general and administrative expenses | 7,593 | 18,065 | 11,136 | 7,286 | 13,818 | |||||||||||||||
Occupancy, equipment rentals and other office related expenses | 1,276 | 1,974 | 119 | 434 | 1,342 | |||||||||||||||
Total expenses | $ | 28,672 | $ | 64,669 | $ | 18,683 | $ | 9,615 | $ | 32,837 | ||||||||||
for the 2020 period. During the second quarter of 2021, one-time initial and accelerated Replacement and Earnout Right RSU expense of $15.3 million was recognized. Additional on-going expenses of $9.2 million were recognized for the RSUs issued at the time of the Business Combination. These increases were partially offset by an increase in allocations, as a portion of the Business Combination expenses were allocated to each segment. |
| 1. | Change in fair value of loans and securities held for investment due to assumption changes |
| 2. | Amortization and other impairments of intangible assets |
| 3. | Share based compensation |
| 4. | Change in fair value of deferred purchase price obligations (including earnouts and TRA obligations), warrant liability, and minority investments |
| 5. | Certain non-recurring costs |
| 6. | Pro-forma tax provision attributable to noncontrolling interest |
| 7. | Pro-forma tax effects of adjustments |
| 1. | Taxes |
| 2. | Interest on non-funding debt |
| 3. | Depreciation |
| 4. | Change in fair value of loans and securities held for investment due to assumption changes |
| 5. | Amortization and other impairments of intangible assets |
| 6. | Equity based compensation |
| 7. | Change in fair value of deferred purchase price obligations (including earnouts and TRA obligations), warrant liability and minority investments |
| 8. | Certain non-recurring costs |
For the three months ended September 30, 2021 | April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | ||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Reconciliation of Net income to Adjusted Net Income and Adjusted EBITDA | ||||||||||||||||||||
Net income | $ | 50,110 | $ | 35,286 | $ | 124,320 | $ | 241,611 | $ | 345,490 | ||||||||||
Adjustments for: | ||||||||||||||||||||
Change in fair value of loans and securities held for investment due to assumption changes (1) | 28,760 | 48,803 | 2,042 | (16,753 | ) | 53,908 | ||||||||||||||
Amortization and impairment of intangibles | 13,457 | 26,914 | 629 | 601 | 1,889 | |||||||||||||||
Change in fair value of deferred purchase price liabilities (2) | 1,273 | 3,893 | 30 | (258 | ) | (111 | ) | |||||||||||||
Change in fair value of warrant liability | (9,919 | ) | (8,627 | ) | — | — | — | |||||||||||||
Equity based compensation | 10,626 | 21,268 | — | — | — | |||||||||||||||
Change in fair value of minority investments (3) | (401 | ) | (274 | ) | 9,464 | — | — | |||||||||||||
Certain non-recurring costs (4) | 2,602 | 46,080 | 6,719 | 7,893 | 12,547 | |||||||||||||||
Tax effect on net income attributable to noncontrolling interest (5)(6) | (7,257 | ) | (2,984 | ) | (31,482 | ) | (62,221 | ) | (88,663 | ) | ||||||||||
Tax effect of adjustments attributable to noncontrolling interest (5) | (10,585 | ) | (29,113 | ) | (4,910 | ) | 2,214 | (17,741 | ) | |||||||||||
Tax effect of adjustments attributable to controlling interest (5) | (4,057 | ) | (9,360 | ) | N/A | N/A | N/A | |||||||||||||
Adjusted Net Income | $ | 74,609 | $ | 131,886 | $ | 106,812 | $ | 173,087 | $ | 307,319 | ||||||||||
Effective income taxes | 26,339 | 46,983 | 37,529 | 60,815 | 107,978 | |||||||||||||||
Depreciation | 2,519 | 4,800 | 2,163 | 1,776 | 5,342 | |||||||||||||||
Interest expense on non-funding debt | 6,842 | 13,536 | 7,706 | 7 | 3,515 | |||||||||||||||
Adjusted EBITDA | $ | 110,309 | $ | 197,205 | $ | 154,210 | $ | 235,685 | $ | 424,154 | ||||||||||
GAAP PER SHARE MEASURES | ||||||||||||||||||||
Net income attributable to controlling interest | $ | 21,384 | $ | 23,649 | N/A | N/A | N/A | |||||||||||||
Weighted average shares outstanding | 59,861,171 | 59,871,386 | N/A | N/A | N/A | |||||||||||||||
Basic earnings per share | 0.36 | 0.39 | N/A | N/A | N/A | |||||||||||||||
If-converted method net income | $ | 42,861 | $ | 33,125 | $ | 119,859 | $ | 246,288 | $ | 367,373 | ||||||||||
Weighted average diluted shares | 191,161,431 | 191,180,610 | 191,200,000 | 191,200,000 | 191,200,000 | |||||||||||||||
Diluted earnings per share | $ | 0.22 | $ | 0.17 | $ | 0.63 | $ | 1.29 | $ | 1.92 | ||||||||||
NON-GAAP PER SHARE MEASURES | ||||||||||||||||||||
Adjusted Net Income | $ | 74,609 | $ | 131,886 | $ | 106,812 | $ | 173,087 | $ | 307,319 | ||||||||||
Weighted average diluted shares | 191,161,431 | 191,180,610 | 191,200,000 | 191,200,000 | 191,200,000 | |||||||||||||||
Adjusted Diluted Earnings per Share | $ | 0.39 | $ | 0.69 | $ | 0.56 | $ | 0.91 | $ | 1.61 | ||||||||||
Book equity | $ | 2,432,174 | $ | 2,432,174 | $ | 844,386 | $ | 1,014,007 | $ | 1,014,007 | ||||||||||
Ending diluted shares | 189,425,808 | 189,425,808 | 191,200,000 | 191,200,000 | 191,200,000 | |||||||||||||||
Book Equity per Diluted Share | $ | 12.84 | $ | 12.84 | $ | 4.42 | $ | 5.30 | $ | 5.30 |
| (1) | Change in Fair Value of Loans and Securities Held for Investment due to Assumption Changes - |
| 1. | Reverse mortgage loans held for investment, subject to HMBS related obligations, at fair value; |
| 2. | Mortgage loans held for investment, subject to nonrecourse debt, at fair value; |
| 3. | Mortgage loans held for investment, at fair value; |
| 4. | Debt Securities; |
| 5. | Mortgage servicing rights, at fair value; |
| 6. | HMBS related obligations, at fair value; and |
| 7. | Nonrecourse debt, at fair value. |
We intend to usemodeling is incorrect.
| (2) | Change in Fair Value of Deferred Purchase Price Obligations |
| (3) | Change in Fair Value of Minority Investments |
(4) | Certain non-recurring costs relate to various one-time expenses and adjustments that management believes should be excluded as these do not relate to a recurring part of the core business operations. These items include certain one-time charges including estimated settlements for legal and regulatory matters, acquisition related expenses, share based compensation associated with the |
(5) | We applied a 26% effective tax rate to pre-tax income and adjustments (excluding change in fair value of warrant liability, which is a permanent book/tax difference) for the respective period to determine the tax effect of net income (loss) and adjustments attributable to the noncontrolling interests and adjustments. |
(6) | This is a component in the numerator of diluted net loss per share. See Note 33 - Earnings Per Share. |
In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors may, but are not obligated to, loan us funds as may be required (“Working Capital Loans”). Except for the foregoing,such distributions. Additionally, the terms of our financing arrangements, including financing lines of credit and senior notes, contain covenants that may restrict FoA Equity and its subsidiaries from paying such Working Capital Loans, if any, have not been determineddistributions,
In connection with our assessment of going concern considerations in accordance with Financial Accounting Standards Board (the “FASB”) Accounting Standards Update 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continueminimum net worth requirements as a Going Concern,” management has determined that in lightresult of the upcoming Business Combination, whereby the Company becametheir mortgage origination and servicing activities. Further, FoA Equity is generally prohibited under Delaware law from making a wholly owned subsidiary of New Pubco, Replay will continuedistribution to operate as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after April 8, 2021. Refer to Note 9 - Subsequent Events for further detail on the upcoming Business Combination.
Related Party Transactions
Founder Shares and Private Placement Warrants
In December 2018, our Sponsor purchased 7,187,500 ordinary shares, par value $0.0001 per share (“Founder Shares”), for an aggregate price of $25,000. In March 2019, our Sponsor transferred to our independent directors an aggregate of 90,000 Founder Shares at the same price originally paid for such shares. Our Sponsor agreed to forfeit up to 937,500 Founder Sharesmember to the extent that, at the over-allotment option wastime of the distribution, after giving effect to the distribution, liabilities of FoA Equity (with certain exceptions) exceed the fair value of its assets. Subsidiaries of FoA Equity are generally subject to similar legal limitations on their ability to make distributions to FoA Equity.
Our Sponsor and our officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of our initial Business Combination or (B) subsequent to our initial Business Combination, (x) if the last reported sale priceTax Receivable Agreements as a result of the ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial Business Combination, or (y) the date on which we complete a liquidation, merger, amalgamation, share exchange, reorganization or other similar transaction that results in alluse of our shareholders having the right to exchange their ordinary shares for cash, securities or other property.
Simultaneously with the closing of our Initial Public Offering on April 8, 2019, we sold 7,750,000 Private Placement Warrants to our Sponsor at a price of $1.00 per Private Placement Warrant, generating gross proceeds of $7.75 million. Each Private Placement Warrant is exercisable for one ordinary share at a price of $11.50 per share. A portion of the net proceeds from the Private Placement was added to the proceeds from our Initial Public Offering heldcertain assumptions in the Trust Account. If we do not complete our initial Business Combination by April 8, 2021,TRAs, including the Private Placement Warrants will expire worthless. use of an assumed weighted average state and local income tax rate to calculate tax benefits.
Our Sponsor and our officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of our initial Business Combination.
Related Party Loans
On December 1, 2018, our Sponsor agreed to loan us an aggregate of up to $250,000 to cover expenses related to our Initial Public Offering pursuant to an unsecured promissory note. This loan was non-interest bearing and payable on the earlier of June 30, 2019 or the completion of our Initial Public Offering. We borrowed $250,000payments that FoA may make under the note, and fully repaid on May 6, 2019.
In additionTRAs are expected to be substantial. The payments under the promissory note, we borrowed approximately $2,000 from a related party for general and administrative expenses. We repaid this amount on May 7, 2019.
In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors may, butTRAs are not obligated to, loan us Working Capital Loans. If we complete a Business Combination, we would repayconditioned upon continued ownership of FoA or FoA Equity by the Working Capital Loans out of the proceeds of the Trust Account released to us. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, we may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. ExceptContinuing Unitholders.
Reimbursement
Our Sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. Our audit committee will review on a quarterly basis all payments that were made to our Sponsor, officers, directors or our or any of their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.
Commitments and Contingencies
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, and any ordinary shares underlying such securities, are entitled to registration rights pursuant to a registration rights agreement entered into on April 3, 2019. These holders will be entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that we will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. We will bear the expenses incurredTRAs arising from exchanges in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option from April 3, 2019 to purchase up to 3,750,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. On April 5, 2019, the underwriters fully exercised their over-allotment option which closed simultaneously with our Initial Public Offering.
Except on the 2,500,000 Affiliate Units sold in our Initial Public Offering, the underwriters were entitled to an underwriting discount of $0.20 per Unit, or $5.25 million in the aggregate, paid upon the closing of our Initial Public Offering. In addition, $0.35 per Unit, or approximately $9.2 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination subject toas follows:
Critical Accounting Policiesincreases in tax basis based on enacted federal and Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilitiesstate tax rates at the date of the financial statements,exchange;
April 1, 2021 to September 30, 2021 | January 1, 2021 to March 31, 2021 | For the nine months ended September 30, 2020 | ||||||||||
Successor | Predecessor | |||||||||||
Net cash (used in) provided by operating activities | (72,613 | ) | 118,043 | (376,772 | ) | |||||||
Net cash used in investing activities | (710,072 | ) | (312,047 | ) | (995,201 | ) | ||||||
Net cash provided by financing activities | 672,835 | 307,695 | 1,503,052 | |||||||||
Mortgage Warehouse Facilities | Maturity Date | Total Capacity | September 30, 2021 | |||||||
Committed | October 2021 - August 2022 | $ | 975,000 | $ | 694,765 | |||||
Uncommitted | October 2021 - March 2022 | 2,600,000 | 1,088,778 | |||||||
Total mortgage warehouse facilities | $ | 3,575,000 | $ | 1,783,543 | ||||||
Reverse Warehouse Facilities | Maturity Date | Total Capacity | September 30, 2021 | |||||||
Committed | October 2021 - June 2022 | $ | 475,000 | $ | 242,170 | |||||
Uncommitted | December 2021 - August 2022 | 725,000 | 378,247 | |||||||
Total reverse warehouse facilities | $ | 1,200,000 | $ | 620,417 | ||||||
Commercial Warehouse Facilities | Maturity Date | Total Capacity | September 30, 2021 | |||||||
Committed | February 2022 - August 2022 | $ | 360,000 | $ | 148,166 | |||||
Uncommitted | February 2022 - November 2023 | 150,000 | 1,621 | |||||||
Total commercial warehouse facilities | $ | 510,000 | $ | 149,787 | ||||||
Other Secured Lines of Credit | Maturity Date | Total Capacity | September 30, 2021 | |||||||
Committed | December 2021 - N/A | $ | 912,500 | $ | 706,069 | |||||
Uncommitted | April 2022 - N/A | 114,834 | 65,338 | |||||||
Total other secured lines of credit (2) | $ | 1,027,334 | $ | 771,407 | ||||||
Total | Less than 1 year | 1- 3 years | 3 - 5 years | More than 5 years | ||||||||||||||||
Contractual cash obligations: | ||||||||||||||||||||
Warehouse lines of credit | $ | 2,553,749 | $ | 2,338,277 | $ | 215,472 | $ | — | $ | — | ||||||||||
MSR line of credit | 205,808 | — | 88,072 | — | 117,736 | |||||||||||||||
Other secured lines of credit | 565,599 | 309,632 | 52,500 | — | 203,467 | |||||||||||||||
Nonrecourse debt (1) | 5,654,826 | 451,941 | 5,202,885 | — | — | |||||||||||||||
Notes payable | 353,567 | — | — | 353,567 | — | |||||||||||||||
Operating leases | 79,450 | 5,014 | 39,991 | 9,710 | 24,735 | |||||||||||||||
Total | $ | 9,412,999 | $ | 3,104,864 | $ | 5,598,920 | $ | 363,277 | $ | 345,938 | ||||||||||
| (1) | Nonrecourse MSR financing liability is excluded from this balance. See below for additional details. |
Recent Accounting Pronouncements
See Note 2 - Summary of Significant Accounting Policies in the notes to unaudited financial statements.
Off-Balance Sheet Arrangements and Contractual Obligations
As of September 30, 2020 and December 31, 2019, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or other long-term liabilities.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
loan or indemnify the purchaser, and any subsequent loss on the loan will be borne by us. If there is no breach of the representation and warranty provision, we have no obligation to indemnify or repurchase the investor against loss. The outstanding UPB plus any premiums on the purchased loans represent the maximum potential exposure on outstanding representation and warranties that we are exposed to.
September 30, 2021 | ||||||||
Down 25 bps | Up 25 bps | |||||||
(in thousands) | ||||||||
Increase (decrease) in assets | ||||||||
Reverse mortgage loans held for investment, subject to HMBS related obligations | $ | 28,291 | $ | (28,571 | ) | |||
Mortgage loans held for investment, subject to nonrecourse debt: | ||||||||
Reverse mortgage loans | 66,599 | (63,586 | ) | |||||
Fix & flip mortgage loans | 475 | (473 | ) | |||||
Mortgage loans held for investment: | ||||||||
Reverse mortgage loans | 6,645 | (6,229 | ) | |||||
Fix & flip mortgage loans | 121 | (120 | ) | |||||
Agricultural loans | 248 | (247 | ) | |||||
Mortgage loans held for sale: | ||||||||
Residential mortgage loans | 16,555 | (22,901 | ) | |||||
SRL | 1,305 | (873 | ) | |||||
Portfolio | 571 | (560 | ) | |||||
Mortgage servicing rights | (17,998 | ) | 14,916 | |||||
Other assets | 477 | (477 | ) | |||||
Derivative assets: | ||||||||
Forward commitments and TBAs | 500 | (370 | ) | |||||
Forward MBS | (28,001 | ) | 36,999 | |||||
IRLCs | 10,524 | (14,558 | ) | |||||
Total assets | $ | 86,312 | $ | (87,050 | ) | |||
Increase (decrease) in liabilities | ||||||||
HMBS related obligation | $ | 25,782 | $ | (26,039 | ) | |||
Nonrecourse debt | 18,016 | (18,613 | ) | |||||
Derivative liabilities: | ||||||||
Forward MBS | 1,974 | (2,609 | ) | |||||
Interest rate swaps and futures contracts | 18,808 | (18,808 | ) | |||||
Total liabilities | $ | 64,580 | $ | (66,069 | ) | |||
The disclosure in Part I. Item 4. Controls and Procedures in the Original Filing is hereby amended by the following. As used in this Item 4. Controls and Procedures, “we” and “our” shall mean Replay or Replay’s management, as the context may require, if relating to a statement made prior to the Business Combination and shall mean the Company (as successor registrant to Replay) or the Company’s management, as the context may require, if relating to a statement made after the consummation of the Business Combination. Any material weakness described herein with respect to an Affected Period means the material weakness of Replay.
As required by Rules 13a-15
level.
Changes in Internal Control Over Financial Reporting
During the quarter ended September 30, 2020, there was no change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting as the circumstances that led to the restatement of Replay’s financial statements described in this Report had not yet been identified.
PART II—OTHER INFORMATION
Item 1A. Risk Factors
The disclosure in Part II. Item 1A. Risk Factors in the Original Filing is hereby amended to add the following risk factors. As used in this Item 1A. Risk Factors, “we” and “our” shall mean Replay or Replay’s management, as the context may require, if relating to a statement made prior to the Business Combination and shall mean the Company (as successor registrant to Replay) or the Company’s management, as the context may require, if relating to a statement made after the consummation of the Business Combination. Any material weakness described herein with respect to an Affected Period means the material weakness of Replay. Except for the additional risk factors below, this Amendment does not amend, update or change any other items or disclosures contained in Item 1A. Risk Factors in the Original Filing. This Amendment should be read in conjunction with the Original Filing.
Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.
On April 12, 2021, the Acting Chief Accountant and Acting Director of the Division of Corporation Finance of the SEC issued the Public Statement. The Public Statement sets forth the conclusion of the SEC’s Office of the Chief Accountant that certain provisions included in the warrant agreements entered into by many special purpose acquisition companies require such warrants to be accounted for as liabilities measured at fair value, rather than as equity securities, with changes in fair value during each financial reporting period reported in earnings. As a result of the Public Statement, we reevaluated the accounting treatment of our 14,375,000 warrants issued in connection with Replay’s IPO (the “Public Warrants”) and 7,750,000 private placement warrants (the “Private Warrants” and, together with the Public Warrants, the “Warrants”), and determined to classify the Warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.
As a result, included on our balance sheets as of September 30, 2020 and December 31, 2019 contained elsewhere in this Report are derivative liabilities related to embedded features contained within our Warrants. Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging (“ASC 815”), provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly, based on factors, which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our Warrants each reporting period and that the amount of such gains or losses could be material.
We have identified a material weakness in Replay’s internal control over financial reporting as of September 30, 2020, and, as a result, we have determined that Replay’s disclosure controls and procedures were not effective as of September 30, 2020. If we are unable to develop and maintain an effective system of internal control over financial reporting and effective disclosure controls and procedures, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
Following this issuance of the Public Statement, after consultation with our independent registered public accounting firm, our management and our audit committee concluded that, in light of the Public Statement, it was appropriate to restate Replay’s previously issued financial statements as of and for the Affected Periods (the “Restatement”). See “—Our warrants are accounted for as liabilities and the changes in value of our Warrants could have a material effect on our financial results.” As part of such process, we identified a material weakness in Replay’s internal controls over financial reporting. In addition, management, along with our principal executive and financial officers, have concluded that Replay’s disclosure controls and procedures were not effective as of September 30, 2020, in light of the material weakness identified in Replay’s internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility exists that a material misstatement of our annual or interim financial statements willcould not be prevented or detected and corrected on a timely basis.
Effective
| a. | While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have enhanced these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards. We require the formalized consideration of obtaining additional technical guidance prior to concluding on all significant or unusual transactions. |
| b. | We expanded and clarified our understanding of the Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) issued by the SEC on April 12, 2021 (the “Staff Statement”) and designed and implemented a control over the calculations of the impact of the issued warrants subject to the Staff statement on our financial statements. |
| c. | We acquired enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third party professionals with whom we consult regarding the application of temporary and permanent equity and complex accounting transactions. |
If we identify any new material weaknesses in the future the Company may need to recognize impairment charges related to goodwill, identified intangible assets and fixed assets that are adjusted to fair value.
| 101.PRE*** | Inline XBRL | |
| Cover Page Interactive Data File (embedded within the Inline XBRL | ||
| * | Filed herewith. | |
| ** | Furnished herewith. | |
| *** | XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. | |
Finance of America Companies Inc. | ||||||
| Dated: | By: | /s/ Johan Gericke | ||||
Johan Gericke | ||||||
| Executive Vice President, | ||||||