UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended JuneSeptember  30, 2019

OR

For the transition period from __________________ to __________________

Commission File Number 001‑11981

MMA CAPITAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes ☑   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act).  Yes ☐ No ☑

There were 5,886,7245,763,623 shares of common shares outstanding at AugustNovember 1, 2019.

MMA Capital Holdings, Inc.

Table of Contents

Cautionary Statement Regarding Forward Looking Statements

This Quarterly Report on Form 10‑Q for the period ended JuneSeptember 30, 2019 (this “Report”) should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Annual Report”), filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”), to which reference is hereby made. This Report contains forward-looking statements intended to qualify for the safe harbor contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Forward-looking statements often include words such as “may,“anticipate,” “will,“believe,” “should,“continue,” “anticipate,“could,” “estimate,” “expect,” “project,“intend,” “intend,“may,” “plan,” “believe,“potential,” “project,” “see,” “seek,” “would,“should,” “could,“will,” “would,” and similar words or expressions and are made in connection with discussions of future events and future operating or financial performance.

Forward-looking statements reflect our management’s expectations at the date of this Report regarding future conditions, events or results.  They are not guarantees of future performance.  By their nature, forward-looking statements are subject to risks and uncertainties.  Our actual results and financial condition may differ materially from what is anticipated in the forward-looking statements.  There are many factors that could cause actual conditions, events or results to differ from those anticipated by the forward-looking statements contained in this Report.  Risks that could cause our actual results to differ materially include, but are not limited to, changes in market rates of return, additional competitors entering the marketplace (which would reduce nominal rates of return from competition for new borrowers), limits on access to investible capital that would limit new investments that could be made by the Company, changes in the law and the Company’s dependence on a small, specialized team of the External Manager for underwriting activities, as well as the risks and uncertainties described in Part I, Item 1A. “Risk Factors” of our 2018 Annual Report.

Readers are cautioned not to place undue reliance on forward-looking statements in this Report or that we may make from time to time, and to consider carefully the factors discussed in Part I, Item 1A. “Risk Factors” of our 2018 Annual Report in evaluating these forward-looking statements.  We do not undertake to update any forward-looking statements contained herein, except as required by law.

PART I – FINANCIAL INFORMATION

MMA Capital Holdings, Inc.

Consolidated Financial Highlights

(Unaudited)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

Overview

MMA Capital Holdings, Inc. invests in debt associated with renewable energy infrastructure and real estate. Unless the context otherwise requires, and when used in this Report, the “Company,” “MMA,” “we,” “our” or “us” refers to MMA Capital Holdings,  Inc. and its subsidiaries. We were originally organized as a Delaware limited liability company in 1996 and converted to a Delaware corporation on January 1, 2019. 

We focus on investments with attractive risk-adjusted returns that generate positive environmental or social impacts, with an emphasis on renewable energy debt investments. Our assets and liabilities are organized into two portfolios:

In emphasizingGiven the depth of opportunities we see in the renewable energy debt investments,market, our objective is to grow the Company’s return on equity by recycling equity out of existing investments in the OA&L portfolio that are generating lower returns, into the Energy Capital portfolio, which we believe will generate higher returns. In this regard, we actively seek out ways to support additional growth in the Energy Capital portfolio by optimizing how the Company is capitalized, including where appropriate,through the efficient deployment of leverage. As further discussed below, the Company established a revolving credit facility with various lenders in the third quarter of 2019 that was executed for purposes of leveraging its investments in the Energy Capital portfolio.

We  are externally managed by Hunt Investment Management, LLC (our “External Manager”), an affiliate of Hunt Companies, Inc. (Hunt Companies, Inc. and its affiliates are hereinafter referred to as “Hunt”). Refer to Notes to Consolidated Financial Statements – Note 13, “Related Party Transactions and Transactions with Affiliates,” for additional information.

We operate as a single reporting segment.

Energy Capital Portfolio

Overview

In our Energy Capital portfolio, we invest in loans that finance renewable energy projects to enable developers, design and build contractors and system owners to develop, build and operate renewable energy systems throughout North America. TheseWe generally invest in these loans, which include late-stage development, construction and permanent loans.  We typically invest in these loans, directly through joint ventures (such joint ventures, together with our wholly owned subsidiary, Renewable Energy Lending, LLC (“REL”), are hereinafter referred to as the “Solar Ventures”).  In this regard, through our External Manager’s relationships, we invest in a wholly owned subsidiarylarge, segmented market that is growing and that we believe to be underserved, which has enabled us to achieve attractive risk-adjusted returns.

Lending Activities of the Company, or with an institutional capital partnerSolar Ventures

The Solar Ventures in multiple ventures thatwhich we have invested include: Solar Construction Lending, LLC (“SCL”); Solar Permanent Lending, LLC (“SPL”) and; Solar Development Lending, LLC (“SDL”) (REL, SCL, SPL; and SDL are collectively referred to hereinafter as the “Solar Ventures”).  The investment period with our institutional capital partner extends to July 15, 2023, for SDL, SCL and SPL, subject to certain buyout provisions.REL.  Carrying value and income-related information related to investments that we have made in, or related to, the Solar Ventures are further discussed below. 

Investments Related to the Solar Ventures

At JuneSeptember 30, 2019, the Company held 50%, 50%, 44.7% and 100% equity ownership interests in SCL, SPL, SDL and REL, respectively. Additionally, the Company held a 5.1% equity interest in SDL at September 30, 2019, that was acquired in the second quarter of 50%, 50%2019 from Hunt through a transaction that was reported as a secured lending transaction. While cash paid to settle this purchase was recognized as a loan receivable and 44.6%, respectively,the acquired equity interest in SDL was deemed to be collateral that did not get financial statement recognition, the Company acquired all legal rights and 100% of the equity interests in REL. obligations related to such 5.1% ownership interest.

During July 2019, the Company and its capital partner in SDL entered into anexecuted a  non-pro rata funding agreement wherebypursuant to which our capital partner contributed 98% of a $30.0 million capital call and the Company contributed the balance. As a consequence of these capital contributions, our ownership interest in SDL decreased in percentage terms. Further, under such agreement,However, on September 20, 2019, the Company ceded all loan workout decision making control to itscontributed 100% of a $28.8 million capital call, which caused the non-pro rata funding agreement with our capital partner in SDL until such time that the Company and our capital partner return to equal ownership interests in SDL.

In addition to equity investments in the Solar Ventures, the Company paid $11.3 million to Hunt on April 1, 2019, in connection with the Company’s acquisition of Hunt’s 5.4%  ownership interest in SDL. However, because such transfer did not qualify as a purchase for reporting purposes, cash consideration paid by the Company was recognized as a loan receivable that is secured by the interest in SDL that Hunt conveyed to the Company. At June 30, 2019, this loan receivable had an effective interest rate of 17.3%. Refer to Notes to Consolidated Financial Statements — Note 13, “Related Party Transactions and Transactions with Affiliates,” for more information about this transaction.

Table 2 summarizes income recognized by the Company in connection with investments related to the Solar Ventures for the periods presented.

Table 2:  Income Recognized from Investments Related to the Solar Ventures

OA&L Portfolio

In our OA&L portfolio, we manage the Company’s cash, investments in bonds, loan receivables, real estate-related investments, subordinated debt and other assets and liabilities of the Company.  An overview of the primary assets and liabilities within this portfolio follows.

Hunt Note

The Company has a secured loan receivable from Hunt (the “Hunt Note”) that had a carrying value of $67.0 million and bore interest at a rate of 5.0% per annum at September 30, 2019. The Hunt Note is prepayable at any time and will amortize in 20 equal quarterly payments of $3.35 million beginning on March 31, 2020.

Refer to Notes to Consolidated Financial Statements — Note 13, “Related Party Transactions and Transactions with Affiliates,” for more information.

Investments in Bonds 

Our investments in bonds are tax-exempt, fixed rate, unrated and finance affordable housing and infrastructure in the U.S. Our affordable housing bonds are collateralized by affordable multifamily rental properties. Substantially all of the rental units in these multifamily properties, some of which may be subsidized by the government, have tenant income and rent restrictions. At JuneSeptember 30, 2019, we held fourtwo unencumbered tax-exempt multifamily bond investments with a UPB and fair value of $8.0$6.2 million and $10.5$8.7 million, respectively. On July 23,November 6, 2019, one of our two remaining non-performingtax-exempt multifamily bond investments, were fully

of negative and positive evidence, including our historical profitability and projections of future taxable income. The Company’s DTAs remain fully reserved at JuneSeptember  30, 2019. The Company believes there is more than a remote but less than likely chance that, within the next 12 months, the portion of DTAs for which a valuation allowance is maintained could materially change due to potential changes in the Company’s investment strategy and other factors.

Debt Obligations

At September 30, 2019, the debt obligations in our OA&L portfolio included the Company’s subordinated debt, notes payable and other debt used to finance the Company’s 11.85% ownership interest in SAWHF and debt obligation to the Morrison Grove Management, LLC (“MGM”) principals.

The carrying value and weighted-average yield of the Company’s debt obligations in the OA&L portfolio was $107.9$106.3 million and 4.6%4.2%, respectively, at JuneSeptember 30, 2019. Refer to Table 8, “Asset Related Debt and Other Debt,“Debt,” for more information.

During the second quarter of 2019, the Company terminated three total return swap agreements that financed the Company’s bond investments and derecognized $31.6 million of asset-related debt upon the settlement of such transactions.  At June 30, 2019, the Company had no asset-related debt outstanding that financed bond investments.

SUMMARY OF FINANCIAL PERFORMANCE

Net Worth

Common shareholders’ equity increased  $2.2$5.0 million in the secondthird quarter of 2019 to $214.6$219.6 million at JuneSeptember  30, 2019.  This change was primarily driven by $2.1$4.9 million of comprehensive income and $0.1 million of other increases in common shareholders’ equity.

Diluted common shareholders’ equity (“Book Value”) per share increased $0.35$0.83, or 2.3%, in the secondthird quarter of 2019 to $36.46$37.29 at JuneSeptember  30, 2019.

Comprehensive Income

We recognized comprehensive income of $2.1$4.9 million in the secondthird quarter of 2019, which consisted of $23.2$5.6 million of net income and $21.1$0.7 million of other comprehensive loss.  In comparison, we recognized $6.8$5.3 million of comprehensive income in the secondthird quarter of 2018, which consisted of $2.8$8.6 million of net income and $4.0$3.3 million of other comprehensive income.loss.

Net income that we recognized in the secondthird quarter of 2019 was primarily driven by net gains on bonds, equity in income from unconsolidated funds and ventures, net gains on bonds and net interest income.  Refer to “Consolidated Results of Operations,” for more information about changes in common shareholders’ equity attributable to net income.

Other comprehensive loss that we reported in the secondthird quarter of 2019 was primarily attributable to the reclassification of fair value gains out of accumulated other comprehensive income (“AOCI”) and into our Consolidated Statements of Operations due to the saleredemption of certain bond investments during such reporting period. The impact of this reclassification was partially offset by net fair value gains that we recognized in AOCI during the third quarter of 2019 in connection with our bond investments.

CONSOLIDATED BALANCE SHEET ANALYSIS

This section provides an overview of changes in our assets, liabilities and equity and should be read together with our consolidated financial statements, including the accompanying notes to the financial statements.

Table 3 provides Consolidated Balance Sheets for the periods presented.  

Table 3:  Consolidated Balance Sheets

CONSOLIDATED RESULTS OF OPERATIONS

This section provides a comparative discussion of our Consolidated Results of Operations for the three and six months ended June  30, 2019, and June  30, 2018, and should be read in conjunction with our consolidated financial statements, including the accompanying notes.  See “Critical Accounting Policies and Estimates,” for more information concerning the most significant accounting policies and estimates applied in determining our results of operations.

Income (loss) that was attributable to certain businesses orand assets that were conveyed by the Company in the on January 8, 2018 (the “Disposition”) were reclassified for all reporting periods and reported separately as “Net income (loss) income from discontinued operations, net of tax.”

Net Income

Table 4 summarizes net income for the periods presented.

Table 4:  Net Income

Equity in Income from Unconsolidated Funds and Ventures

Equity in income from unconsolidated funds and ventures includes our portion of the income associated with certain funds and ventures in which we have an equity interest.

Table 5 summarizes equity in income from unconsolidated funds and ventures for the periods presented.

Table 5:  Equity in Income from Unconsolidated Funds and Ventures

connection with interest rate derivative instruments and (ii) a  nonrecurring gain of $1.1 million that are used bywas recognized in 2018 in connection with the Company to hedgesale of the Company’s limited partner interest rate risk associated with various debt obligations, compared to $2.1 million and $4.4 million of net fair value gains recognized for the three and six months ended June 30, 2018, respectively.in a partnership that owned affordable housing property.

Other Expenses

Other expenses include salaries and benefits, management fees and reimbursable expenses payable to our External Manager, general and administrative expense, professional fees, salaries and benefits and other miscellaneous expenses.

LIQUIDITY AND CAPITAL RESOURCES

This section supplements and updates information regarding liquidity and capital resources in our 2018 Annual Report. See “MD&A—Liquidity and Capital Resources” and “Risk Factors” in our 2018 Annual Report for additional information, including discussions of our primary sources and uses of funds and capital resources.

Our principal sources of liquidity include: (i) cash and cash equivalents; (ii) cash flows from operating activities; and (iii) cash flows from investing activities.

We believe that cash generated from operating and investing activities, along with available cash and cash equivalents has been, and will continue to be, sufficient to fund our normal operating needs and meet our obligations as they become due.Liquidity

Summary of Cash Flows

Table 7 provides a consolidated view of the change in cash, cash equivalents and restricted cash of the Company for the periods presented, though 2018 changes in such balances that were attributable to consolidated funds and ventures (“CFVs”) are separately identified in such tabular disclosure.  However, changes in net cash flows that are discussed in the narrative that follows Table 7 are exclusive of changes in cash of the CFVs. The Disposition resulted in the deconsolidation from the Company’s Consolidated Balance Sheets in the first quarter of 2018 of all guaranteed Low-Income Housing Tax Credit (“LIHTC”) funds and derecognition of nearly all other CFVs that were recognized in our Consolidated Balance Sheets at December 31, 2017. 

At  JuneSeptember  30, 2019 and JuneSeptember 30, 2018, $2.5$6.1 million and $15.9$10.9 million, respectively, of amounts presented below in Table 7 represented restricted cash.

Table 7:  Net Increase (Decrease)Decrease in Cash, Cash Equivalents and Restricted Cash

Net cash flows associated with operating activities increased by $13.8Ventures; (ii) a $1.5 million decrease in bond related interest expense as the amount of the Company’s bond related debt outstanding declined upon the settlement of sale and redemption transactions and termination of TRS agreements during the sixfourth quarter of 2018 and first nine months ended June 30, 2019, as compared to the six months ended June 30, 2018. This net increase was primarily driven by: (i)of 2019; (iii) the nonrecurring purchase of a $9.0 million senior loan during the first quarter of 2018 from a MGM affiliate that we designated as held for sale; (ii) a $3.8 million increase in distributions received from the Company’s investment in partnerships that primarily related to the Solar Ventures; and (iii)(iv) nonrecurring professional fees incurred in the first quarter of 2018 in connection with the Disposition.Disposition transaction and the disposition of the Company’s interests in MGM. The effects of these items were partially offset by: (i) a decline in interest income on bonds that was due to dispositionas a result of the aforementioned sale and redemption transactions and the related termination of TRS agreements during the fourth quarter of 2018 and first six months of 2019;; (ii) a decrease in asset management fees received as a result of the Disposition; and (iii) an increase in net cash flows used to pay external management fees and reimbursable expenses due to a provision in the management agreement with the External Manager that specifies that, effective July 1, 2018, the basis for calculating the base management fee converts from a fixed fee to a stated fixed percentage of the Company’s diluted common shareholders’ equity.

Investing Activities

Net cash flows associated with investing activities include, but are not limited to: principal payments, capital contributions and distributions, advance of loans held for investment and sales proceeds from the sale of bonds, loans and real estate and other investments.

Net cash flows used in investing activities during the sixnine months ended JuneSeptember 30, 2019, decreasedincreased by $1.5$18.4 million as compared to amounts used in investing activities during the sixnine months ended JuneSeptember 30, 2018. This net decreaseincrease was primarily driven by a $119.4 million increase in capital contributions to the Company’s investments in partnerships during the first nine months of 2019 that primarily related to the Solar Ventures and an $11.3 million origination of a loan held for investment. The effects of these items were partially offset by: (i) a $43.5$70.8 million increase in capital distributions received from the Company’s investment in partnerships that primarily related to the Solar Ventures; (ii) a $17.3$20.1 million increase in principal payments and salessale and redemption proceeds received on our bond-related investments; and (iii) the derecognition of $21.9 million of cash and restricted cash upon settlement of the Disposition during the first quarter of 2018. The effects of these items were partially offset by a $69.9 million increase in capital contributions to the Company’s investments in partnerships during the first six months of 2019 that primarily related to the Solar Ventures and an $11.3 million origination fee of a  loan held for investment.

Financing Activities

Net cash flows used inprovided by financing activities during the sixnine months ended JuneSeptember 30, 2019, increased by $3.4$41.4 million as compared to amounts used duringto the sixnine months ended JuneSeptember 30, 2018. This increase was primarily attributable to no borrowing activity or common share issuances during(i) a $32.8 million increase in proceeds from borrowings from the first six monthsrevolving credit facility that was established in the third quarter of 2019 the impact of which was partially offset byand (ii) a significant$13.0 million and $4.1 million decrease during the first six months of 2019 in the amount of net cash flows used to repay borrowings and repurchase common shares.shares, respectively, during the first nine months of 2019. The effects of these items were partially offset by $8.4 million of nonrecurring cash flows provided by the private placement of 250,000 of the Company’s common shares to Hunt during the first nine months of 2018.

Capital Resources

Our debt obligations primarily include liabilities that we recognized in connection with our subordinated debt, revolving credit facility and other notes payable. At December 31, 2018, our debt obligations also included liabilities in connection with the execution of TRS agreements that were used to finance a portion of our investments in bonds. The major types of debt obligations of the Company are further discussed below.

Table 8 summarizes the carrying values and weighted-average effective interest rates of the Company’s debt obligations that were outstanding at JuneSeptember  30, 2019 and December 31, 2018.  See Notes to Consolidated Financial Statements –Note 6, “Debt,” for more information about these contractual commitments.

Table 8:  Debt