0001828937 foa:CommercialLinesOfCreditMember foa:TwoMillionSecuritiesRepoLineMember 2021-01-01 2021-06-30
(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.)
(
Not Applicable
code
Title of each class | Trading Symbol(s) | Name of each exchange on 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
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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.
Financial Information
Item 1. | Financial Statements |
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
(unaudited) | ||||||||||
ASSETS | ||||||||||
Cash and cash equivalents | $ | 157,336 | $ | 233,101 | ||||||
Restricted cash | 354,390 | 306,262 | ||||||||
Reverse mortgage loans held for investment, subject to HMBS related obligations, at fair value | 10,316,027 | 9,929,163 | ||||||||
Mortgage loans held for investment, subject to nonrecourse debt, at fair value | 5,424,621 | 5,396,167 | ||||||||
Mortgage loans held for investment, at fair value | 1,225,090 | 730,821 | ||||||||
Mortgage loans held for sale, at fair value | 2,057,542 | 2,222,811 | ||||||||
Debt securities | 8,694 | 10,773 | ||||||||
Mortgage servicing rights, at fair value, $65,129 and $14,088, subject to nonrecourse MSR financing liability, respectively | 290,938 | 180,684 | ||||||||
Derivative assets | 61,811 | 92,065 | ||||||||
Fixed assets and leasehold improvements, net | 28,669 | 24,512 | ||||||||
Goodwill | 1,298,324 | 121,233 | ||||||||
Intangible assets, net | 704,243 | 16,931 | ||||||||
Other assets, net | 300,253 | 300,632 | ||||||||
TOTAL ASSETS | $ | 22,227,938 | $ | 19,565,155 | ||||||
LIABILITIES, CONTINGENTLY REDEEMABLE NONCONTROLLING INTEREST (“CRNCI”) AND EQUITY | ||||||||||
HMBS related obligation, at fair value | $ | 10,168,224 | $ | 9,788,668 | ||||||
Nonrecourse debt, at fair value | 5,425,732 | 5,271,842 | ||||||||
Other financing lines of credit | 3,412,234 | 2,973,743 | ||||||||
Payables and other liabilities | 488,735 | 400,058 | ||||||||
Notes payable, net | 353,718 | 336,573 | ||||||||
TOTAL LIABILITIES | 19,848,643 | 18,770,884 | ||||||||
Commitments and Contingencies (Note 23) | ||||||||||
CRNCI (Note 25) | 0 | 166,231 | ||||||||
EQUITY (Note 35) | ||||||||||
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; 59,881,714 shares issued and outstanding at June 30, 2021 | 6 | — | ||||||||
Class B Common Stock (Successor), $0.0001 par value; 1,000,000 shares authorized, 7 shares issued and outstanding at June 30, 2021 | 0 | — | ||||||||
Additional paid-in capital (Successor) | 807,521 | — | ||||||||
Accumulated deficit (Successor) | (69,548 | ) | — | |||||||
Accumulated other comprehensive (loss) income | (27 | ) | 9 | |||||||
Noncontrolling interest | 1,641,343 | (145 | ) | |||||||
TOTAL EQUITY | 2,379,295 | 628,040 | ||||||||
TOTAL LIABILITIES, CRNCI AND EQUITY | $ | 22,227,938 | $ | 19,565,155 | ||||||
June 30, 2021 | December 31, 2020 | |||||||||||
Successor | Predecessor | |||||||||||
(unaudited) | ||||||||||||
ASSETS | ||||||||||||
Restricted cash | $ | 334,984 | $ | 293,580 | ||||||||
Mortgage loans held for investment, subject to nonrecourse debt, at fair value | ||||||||||||
2021 FASST HB1 | 506,482 | — | ||||||||||
2020 RTL1 ANTLR | — | 137,989 | ||||||||||
2019 FASST JR2 | 437,641 | 488,760 | ||||||||||
2020 FASST HB2 | 397,121 | 398,480 | ||||||||||
2018 FASST JR1 | 395,716 | 449,069 | ||||||||||
2019 FASST JR3 | 370,209 | 450,703 | ||||||||||
2020 FASST JR3 | 341,385 | 372,015 | ||||||||||
2019 FASST JR4 | 331,302 | 377,265 | ||||||||||
2020 FASST S3 | 313,728 | 316,774 | ||||||||||
2020 FASST JR2 | 312,160 | 341,439 | ||||||||||
2019 FASST JR1 | 295,605 | 331,244 | ||||||||||
2020 FASST S2 | 289,129 | 311,721 | ||||||||||
2021 FASST JR1 | 562,333 | — | ||||||||||
2018 FASST JR2 | 234,665 | 264,622 | ||||||||||
2020 FASST JR4 | 228,248 | 237,100 | ||||||||||
2020 FASST S1 | 173,955 | 189,243 | ||||||||||
2020 FASST JR1 | 0 | 263,266 | ||||||||||
2018 RTL1 ANTLR | 0 | 82,393 | ||||||||||
2019 RTL1 ANTLR | 0 | 118,161 | ||||||||||
2020 FASST HB1 | 0 | 265,923 | ||||||||||
2021 RTL1 ANTLR | 234,942 | — | ||||||||||
Other assets | 76,056 | 79,528 | ||||||||||
TOTAL ASSETS | $ | 5,835,661 | $ | 5,769,275 | ||||||||
LIABILITIES | ||||||||||||
Nonrecourse debt, at fair value | ||||||||||||
2021 FASST HB1 | $ | 537,618 | $ | — | ||||||||
2021 FASST JR1 | 507,721 | — | ||||||||||
2020 FASST HB2 | 445,758 | 472,074 | ||||||||||
2019 FASST JR2 | 425,568 | 463,568 | ||||||||||
2018 FASST JR1 | 405,161 | 450,268 | ||||||||||
2019 FASST JR3 | 374,391 | 423,406 | ||||||||||
2020 FASST JR3 | 316,738 | 337,024 | ||||||||||
2019 FASST JR4 | 316,203 | 350,514 | ||||||||||
2019 FASST JR1 | 301,889 | 326,367 | ||||||||||
2020 FASST S2 | 287,139 | 298,435 | ||||||||||
2020 FASST S3 | 286,549 | 294,226 | ||||||||||
2020 FASST JR2 | 280,978 | 297,046 | ||||||||||
2021 RTL1 ANTLR | 266,461 | — | ||||||||||
2018 FASST JR2 | 240,078 | 265,695 | ||||||||||
2020 FASST JR4 | 198,582 | 217,362 | ||||||||||
2020 FASST S1 | 169,769 | 181,630 | ||||||||||
2020 FASST JR1 | 0 | 238,438 | ||||||||||
2020 RTL1 ANTLR | 0 | 140,441 | ||||||||||
2018 RTL1 ANTLR | 0 | 80,767 | ||||||||||
2019 RTL1 ANTLR | 0 | 121,580 | ||||||||||
2020 FASST HB1 | 0 | 298,913 | ||||||||||
Payables and other liabilities | 117 | 291 | ||||||||||
TOTAL LIABILITIES | $ | 5,360,720 | $ | 5,258,045 | ||||||||
Net fair value of assets subject to nonrecourse debt | $ | 474,941 | $ | 511,230 | ||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
REVENUES | ||||||||||||||||||||
Gain on sale and other income from mortgage loans held for sale, net | $ | 187,577 | $ | 291,334 | $ | 298,291 | $ | 428,975 | ||||||||||||
Net fair value gains on mortgage loans and related obligations | 131,151 | 76,663 | 112,303 | 125,683 | ||||||||||||||||
Fee income | 90,864 | 161,371 | 76,656 | 146,627 | ||||||||||||||||
Net interest expense: | ||||||||||||||||||||
Interest income | 13,151 | 12,661 | 11,507 | 19,678 | ||||||||||||||||
Interest expense | (33,626 | ) | (34,366 | ) | (33,298 | ) | (67,230 | ) | ||||||||||||
Net interest expense | (20,475 | ) | (21,705 | ) | (21,791 | ) | (47,552 | ) | ||||||||||||
TOTAL REVENUES | 389,117 | 507,663 | 465,459 | 653,733 | ||||||||||||||||
EXPENSES | ||||||||||||||||||||
Salaries, benefits and related expenses | 274,731 | 238,530 | 230,275 | 374,653 | ||||||||||||||||
Occupancy, equipment rentals and other office related expenses | 6,720 | 7,597 | 7,208 | 14,611 | ||||||||||||||||
General and administrative expenses | 119,301 | 127,217 | 81,214 | 159,780 | ||||||||||||||||
TOTAL EXPENSES | 400,752 | 373,344 | 318,697 | 549,044 | ||||||||||||||||
OTHER, NET | (2,103 | ) | (8,862 | ) | (28 | ) | (44 | ) | ||||||||||||
NET (LOSS) INCOME BEFORE INCOME TAXES | (13,738 | ) | 125,457 | 146,734 | 104,645 | |||||||||||||||
Provision for income taxes | 1,086 | 1,137 | 448 | 766 | ||||||||||||||||
NET (LOSS) INCOME | (14,824 | ) | 124,320 | 146,286 | 103,879 | |||||||||||||||
CRNCI | 0 | 4,260 | (2,620 | ) | (18,006 | ) | ||||||||||||||
Noncontrolling interest | (17,089 | ) | 201 | 571 | 800 | |||||||||||||||
NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST | $ | 2,265 | $ | 119,859 | $ | 148,335 | $ | 121,085 | ||||||||||||
EARNINGS PER SHARE (Note 33) | ||||||||||||||||||||
Basic weighted average shares outstanding | 59,881,714 | |||||||||||||||||||
Basic net income per share | $ | 0.04 | ||||||||||||||||||
Diluted weighted average shares outstanding | 191,200,000 | |||||||||||||||||||
Diluted net loss per share | $ | (0.05 | ) | |||||||||||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
NET (LOSS) INCOME | $ | (14,824 | ) | $ | 124,320 | $ | 146,286 | $ | 103,879 | |||||||||||
COMPREHENSIVE LOSS ITEM: | ||||||||||||||||||||
Impact of foreign currency translation adjustment | (27 | ) | (11 | ) | 18 | 11 | ||||||||||||||
TOTAL COMPREHENSIVE LOSS | (14,851 | ) | 124,309 | 146,304 | 103,890 | |||||||||||||||
Less: Comprehensive loss attributable to the noncontrolling interest and CRNCI | (17,108 | ) | 4,461 | (2,049 | ) | (17,206 | ) | |||||||||||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST | $ | 2,257 | $ | 119,848 | $ | 148,353 | $ | 121,096 | ||||||||||||
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 | |||||||
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 | Accumulated (Deficit) | Accumulated Other Comprehensive Loss | Class A LLC Units | Amount | Total Equity | |||||||||||||||||||||||||||||||
Successor: | ||||||||||||||||||||||||||||||||||||||||
Balance at April 1, 2021 | 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 interest contributions | — | — | — | — | — | — | — | — | 24 | 24 | ||||||||||||||||||||||||||||||
Noncontrolling interest distributions | — | — | — | — | — | — | — | — | (137 | ) | (137 | ) | ||||||||||||||||||||||||||||
Vesting of restricted stock units | — | — | — | — | 49,278 | — | — | — | — | 49,278 | ||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | (27 | ) | — | — | (27 | ) | ||||||||||||||||||||||||||||
Balance at June 30, 2021 | 59,881,714 | $ | 6 | 7 | $ | — | $ | 807,521 | $ | (69,548 | ) | $ | (27 | ) | 131,318,286 | $ | 1,641,343 | $ | 2,379,295 | |||||||||||||||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the six months ended June 30, 2020 | ||||||||||||||
Successor | Predecessor | |||||||||||||||
Operating Activities | ||||||||||||||||
Net (loss) income | $ | (14,824 | ) | $ | 124,320 | $ | 103,879 | |||||||||
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | 5,172 | (6,277 | ) | (221,079 | ) | |||||||||||
Net cash (used in) provided by operating activities | (9,652 | ) | 118,043 | (117,200 | ) | |||||||||||
Investing Activities | ||||||||||||||||
Purchases and originations of mortgage loans held for investment | (1,241,085 | ) | (1,151,925 | ) | (2,056,834 | ) | ||||||||||
Proceeds/payments received on mortgage loans held for investment | 689,215 | 677,777 | 681,376 | |||||||||||||
Purchases and origination of mortgage loans held for investment, subject to nonrecourse debt | (12,319 | ) | (12,247 | ) | (20,429 | ) | ||||||||||
Proceeds/payments on mortgage loans held for investment, subject to nonrecourse debt | 251,152 | 217,452 | 511,615 | |||||||||||||
Purchases of debt securities | (1,449 | ) | (557 | ) | (9,044 | ) | ||||||||||
Proceeds/payments on debt securities | 1,888 | 2,096 | 26,673 | |||||||||||||
Purchases of mortgage servicing rights | (61 | ) | (9,014 | ) | — | |||||||||||
Proceeds on sale of mortgage servicing rights | — | 7,765 | — | |||||||||||||
Acquisition of subsidiaries, net of cash acquired | (20,000 | ) | (749 | ) | 364 | |||||||||||
Purchase of investments | — | — | (2,250 | ) | ||||||||||||
Acquisition of fixed assets | (4,915 | ) | (4,178 | ) | (4,129 | ) | ||||||||||
Acquisition of deferred purchase price liability | — | — | — | |||||||||||||
Payments on deferred purchase price liability | (311 | ) | (657 | ) | (949 | ) | ||||||||||
Issuance of convertible notes receivable | — | (2,550 | ) | — | ||||||||||||
DIP Financing | — | (35,260 | ) | — | ||||||||||||
Net cash used in investing activities | (337,885 | ) | (312,047 | ) | (873,607 | ) | ||||||||||
Financing Activities | ||||||||||||||||
Proceeds from securitizations of reverse mortgage loans, subject to HMBS related obligations | 795,334 | 602,172 | 898,118 | |||||||||||||
Payments of HMBS related obligations | (597,892 | ) | (506,142 | ) | (1,002,412 | ) | ||||||||||
Proceeds from issuance of nonrecourse debt, net | 600,595 | 579,518 | 1,645,039 | |||||||||||||
Payments on nonrecourse debt | (498,966 | ) | (658,300 | ) | (512,689 | ) | ||||||||||
Proceeds from other financing lines of credit | 8,758,149 | 10,027,696 | 15,347,541 | |||||||||||||
Payments on other financing lines of credit | (8,620,873 | ) | (9,660,588 | ) | (15,354,635 | ) | ||||||||||
Debt issuance costs | (580 | ) | (2,467 | ) | (2,828 | ) | ||||||||||
Payments on notes payable | — | — | (10,000 | ) | ||||||||||||
Principal payments under capital lease obligation | — | — | (415 | ) | ||||||||||||
Member contributions | — | 1,426 | 502 | |||||||||||||
Member distributions | — | (75,000 | ) | — | ||||||||||||
Settlement of CRNCI | (203,216 | ) | — | — | ||||||||||||
Noncontrolling interest contributions | 023 | — | 16 | |||||||||||||
Noncontrolling interest distributions | (137 | ) | (620 | ) | (310 | ) | ||||||||||
Net cash provided by financing activities | 232,437 | 307,695 | 1,007,927 | |||||||||||||
Foreign currency translation adjustment | (1 | ) | (7 | ) | 5 | |||||||||||
Net (decrease) increase in cash and restricted cash | (115,101 | ) | 113,684 | 17,125 | ||||||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the six months ended June 30, 2020 | ||||||||||||||
Successor | Predecessor | |||||||||||||||
Cash and restricted cash, beginning of period | 626,827 | 539,363 | 382,664 | |||||||||||||
Cash and restricted cash, end of period | $ | 511,726 | $ | 653,047 | $ | 399,789 | ||||||||||
Supplementary Cash Flows Information | ||||||||||||||||
Cash paid for interest | $ | 68,186 | $ | 50,071 | $ | 206,536 | ||||||||||
Cash paid for taxes, net | 1,521 | 63 | 276 | |||||||||||||
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 | 238,811 | |||||||||||||
Loans transferred to mortgage loans held for sale, at fair value, from mortgage loans held for investment, at fair value | 03,084 | — | 777,256 | |||||||||||||
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 | 79 | 71 | 72,469 | |||||||||||||
Loans transferred to mortgage loans held for investment, subject to nonrecourse debt, at fair value, from mortgage loans held for investment, at fair value | 505,378 | 272,098 | 1,885,291 | |||||||||||||
Loans transferred to mortgage loans held for investment, subject to HMBS, at fair value, from mortgage loans held for investment, at fair value | 701,375 | 42,909 | — | |||||||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the six months ended June 30, 2020 | ||||||||||||||
Successor | Predecessor | |||||||||||||||
Consideration Transferred | ||||||||||||||||
Total cash consideration | $ | 342,270 | ||||||||||||||
Blocker rollover equity | 221,811 | |||||||||||||||
Seller earnout contingent consideration | 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 | ||||||||||||||
Acquisition Related Activity | ||||||||||||||||
Assets Acquired | ||||||||||||||||
Cash and cash equivalents | $ | 336,075 | ||||||||||||||
Restricted cash | 305,292 | |||||||||||||||
Non-cash assets acquired: | ||||||||||||||||
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 | 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 | |||||||||||||||
Tangible net assets acquired | 1,143,524 | |||||||||||||||
Goodwill | $ | 1,271,324 | ||||||||||||||
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 accompanying notes are an integral part
1. | Organization and Description of Business |
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 accompanying notes are an integral part of these unaudited financial statements.
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 accompanying notes are an integral part of these unaudited 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 accompanying notes are an integral part of these unaudited financial statements.
REPLAY ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 1—Description of Organization and Business Operations
Replay Acquisition Corp. (theAmerica Companies Inc. (“FoA”, “Company”, or “Successor”) was incorporated asin Delaware on October 9, 2020. FoA is a Cayman Islands exempted company on November 6, 2018. The Company was formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). Although the Company is not limited to a particular business, industry or geographical location for purposes of consummating a Business Combination, the Company intends to focus its search for a target in Argentina and/or Brazil focused on industries that the Company believes have favorable prospects and a high likelihood of generating strong risk-adjusted returns for its shareholders. These industries include, but are not limited to, the consumer, telecommunications and technology, energy, financial services holding company which, through its operating subsidiaries, is a leading originator and real estate sectors. The Company is an emerging growth companyservicer of residential mortgage loans and as such, the Company is subject toprovider of complementary financial services.
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 plan 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.
2. | Summary of Significant Accounting Policies |
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 OfferingJune 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 ended 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
six months ended June 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 closing of the Initial Public Offering, or April 8, 2021, (the “Combination Period”) or (b) with respect to any other provision relating to shareholders’ rights or pre-initial Business Combination activity, unless the Company provides the Public Shareholders with the opportunity to redeem their ordinary shares in conjunction with any such amendment.
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 Issued 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 unauditedaudited consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“GAAP”)Predecessor as of and for interim financial information and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP.year ended December 31, 2020. In the opinion of management, such financial information reflects all normal and recurring adjustments (consisting of normal accruals) considerednecessary for a fair presentation have been included.of the financial position and the results of operations for such interim periods in accordance with GAAP. Operating results for the nine months ended September 30, 2020interim period are not necessarily indicative of the results that may be expected for any future period or for the year ending December 31, 2020.
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)formation of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company as an emerging growtha publicly traded company can adopton the new or revised standard atNew York Stock Exchange (“NYSE”), and the time private companies adoptCompany controlling FoA Equity in an
Concentrationspolicies described below, together with the other notes that follow, are an integral part of Credit Risk
Financial instruments that potentially subjectthe consolidated financial statements.
Cashmore other businesses. Assets acquired 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 value and requires disclosures about fair value measurements. Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability in an orderly transaction between market participantscorporate level tax rates at the measurement date.federal, state and local levels. Therefore, the amount of income taxes recorded prior to the Business Combination are not representative of the expenses expected in the future.
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 prioritylikelihood of recovering deferred tax assets existing as of the balance sheet date. The estimates used to unobservable inputs (Level 3 measurements). These tiers include:
Level 1, definedcompute the provision for income taxes may change throughout the year as observable inputs suchnew events occur, additional information is obtained or as quoted pricestax laws and regulations change. Accordingly, the effective tax rate for identical instruments in active markets;
Level 2, defined as inputs other than quoted prices in active markets that
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 disclose the fair value of financial instruments, bothcurrent year, deferred tax assets and liabilities for which it is practicablethe expected future tax consequences attributable to estimate fair value. As of September 30, 2020temporary differences between the financial statement carrying amounts and December 31, 2019, the recorded values of cash, prepaid expenses, accounts payable, and accrued expenses approximate the fair values due to the short-term nature of the instruments. The Company’s investments held in the Trust Account are comprised of investments in U.S. government securities with an original maturity of 180 days or less. The fair value for trading securities is determined using quoted market prices in active markets.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amountstheir respective tax bases of assets and liabilities and disclosurethe expected benefits of contingentnet operating loss and credit carryforwards. Deferred tax assets and liabilities atare measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period enacted. A valuation allowance is provided when it is more likely than not that a portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the reversal of deferred tax liabilities during the period in which related temporary differences become deductible.
Offering Costs Associated with the Initial Public Offering
Offering costs incurred in connection with preparation of the Initial Public Offering, of approximately $15.1 million consisted principally of underwriter discounts of $14.4 million (including $9.2 million of which payment is deferred) and approximately $638,000 of professional, printing, filing, regulatory and other costs. These expenses, together with the underwriting discounts and commissions, were allocated to the ordinary shares and the public warrants. Amounts allocated to the ordinary shares were recognized as a reduction to the ordinary shares carrying value, and the amounts allocated to the public warrants were expensed immediately.
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 redemptionbeing sustained 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, at 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% for the Public Shares and 20% for the Founder Shares.
For the nine months ended September 30, 2020, basic and diluted net loss per share of Public Shares were calculatedexamination by dividing 80% of the total loss allocable to all shares, of approximately $3.6 million, by 28,750,000, the weighted average number of Public Shares outstanding for the period. For the nine months ended September 30, 2020, 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 $3.6 million, by 7,187,500, the weighted average number of Founder Shares outstanding for the period.
For the nine months ended September 30, 2019, basic and diluted net loss per share of Public Shares were calculated by dividing 80% of the total loss allocable to all shares of approximately $25.0 million, plus the remeasurement of the ordinary shares subject to possible redemption, of approximately $30.1 million, by 28,750,000, the weighted average number of Public Shares outstanding for the period. For the nine 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 $25.0 million, by 7,187,500, the weighted average number of Founder Shares outstanding for the period.
For the three months ended September 30, 2020, basic and diluted net loss per share of Public Shares were calculated by dividing 80% of the total loss allocable 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% of the total loss allocable to all shares of approximately $2.2 million, by 7,187,500, the weighted average number of Founder Shares outstanding for the period.
For the three months ended September 30, 2019, basic and diluted net income per share of Public Shares were calculated by dividing 80% of the total loss allocable to all shares, of approximately $1.1 million, by 28,750,000, 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. As a result, diluted loss per share is the same as basic loss per share for the periods presented.
Income Taxes
FASB ASC 740, Income Taxes, prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement oftaxing authorities. Differences between tax positions taken or expected to be taken in a tax return. For those benefitsreturn and the benefit recognized and measured pursuant to bethe interpretation are referred to as “unrecognized benefits.” A liability is recognized (or amount of net operating loss carryover or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents a potential future obligation to the taxing authority for a tax position must be more likely thanthat was not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of September 30, 2020recognized. Interest costs and December 31, 2019. The Company’s management determined that the Cayman Islands is the Company’s only major tax jurisdiction. The Company recognizes accrued interest andrelated penalties related to unrecognized tax benefits are required to be calculated, if applicable and are recognized as income tax expense. No amounts were accrued for the paymentgeneral and administrative expenses.
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.
Risks 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 transferredFoA Equity prior 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, with an initial fair value of $6,975,000. The difference between the proceeds received and the fair value was recognized as a capital contribution in additional paid-in capital on the Statements of Changes in Shareholders’ Equity. A portion of the net proceeds from the Private Placement Warrants was added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as theyClosing are held by the Sponsor or its permitted transferees.
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 rightentitled to receive sharesan earnout exchangeable for Class A Common Stock if, at any time during the six years following Closing, the volume weighted average price (the “VWAP”) 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,trading day is greater than or at the lender’s discretion, upequal 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.
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. As of September 30, 2020 and December 31, 2019, there were no preference shares issued or outstanding.
Warrants—Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering, or April 8, 2020; provided in each case that the Company has an effective registration statement under the Securities Act covering the ordinary shares issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the ordinary shares issuable upon exercise of the Public Warrants. If the shares issuable upon exercise of the warrants are not registered under the Securities Act, the Company will be required to permit holders to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available. Notwithstanding the above, if the
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 redeemable 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$12.50 for any 20 trading days within a 30-trading day consecutive
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, ASU2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, ASU2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, ASU2019-10, Financial Instruments—Credit Losses (Topic 326), ASU2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, ASU2020-03, 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 ASU2016-13 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 a requirement to 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 (Subtopic350-40): 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 aninternal-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 | 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 ReportingASU 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 (Subtopic470-50), Compensation—Stock Compensation(Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic815-40): 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. | |||
3. | Variable Interest Entities and Securitizations |
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 purposesSPEs created in connection with its securitizations are VIEs. A VIE is an entity that has either a total equity investment that is insufficient to permit the closingentity to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest. A VIE is consolidated by its primary beneficiary, which is the entity that, through its variable interests has both the power to direct the activities that significantly impact the VIE’s economic performance and the obligations to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
ASSETS | �� | |||||||||
Restricted cash | $ | 334,984 | $ | 293,580 | ||||||
Mortgage loans held for investment, subject to nonrecourse debt, at fair value | ||||||||||
2021 FASST JR1 | 562,333 | — | ||||||||
2021 FASST HB1 | 506,482 | — | ||||||||
2019 FASST JR2 | 437,641 | 488,760 | ||||||||
2020 FASST HB2 | 397,121 | 398,480 | ||||||||
2018 FASST JR1 | 395,716 | 449,069 | ||||||||
2019 FASST JR3 | 370,209 | 450,703 | ||||||||
2020 FASST JR3 | 341,385 | 372,015 | ||||||||
2019 FASST JR4 | 331,302 | 377,265 | ||||||||
2020 FASST S3 | 313,728 | 316,774 | ||||||||
2020 FASST JR2 | 312,160 | 341,439 | ||||||||
2019 FASST JR1 | 295,605 | 331,244 | ||||||||
2020 FASST S2 | 289,129 | 311,721 | ||||||||
2021 RTL1 ANTLR | 234,942 | — | ||||||||
2018 FASST JR2 | 234,665 | 264,622 | ||||||||
2020 FASST JR4 | 228,248 | 237,100 | ||||||||
2020 FASST S1 | 173,955 | 189,243 | ||||||||
2020 FASST JR1 | — | 263,266 | ||||||||
2020 RTL1 ANTLR | — | 137,989 | ||||||||
2018 RTL1 ANTLR | — | 82,393 | ||||||||
2019 RTL1 ANTLR | — | 118,161 | ||||||||
2020 FASST HB1 | — | 265,923 | ||||||||
Other assets | 76,056 | 79,528 | ||||||||
TOTAL ASSETS | $ | 5,835,661 | $ | 5,769,275 | ||||||
LIABILITIES | ||||||||||
Nonrecourse debt, at fair value | ||||||||||
2021 FASST HB1 | $ | 537,618 | $ | — | ||||||
2021 FASST JR1 | 534,444 | — | ||||||||
2020 FASST HB2 | 448,333 | 474,599 | ||||||||
2019 FASST JR2 | 447,966 | 487,966 | ||||||||
2018 FASST JR1 | 412,370 | 458,279 | ||||||||
2019 FASST JR3 | 394,096 | 445,691 | ||||||||
2020 FASST JR3 | 333,373 | 354,762 | ||||||||
2019 FASST JR4 | 332,846 | 368,963 | ||||||||
2019 FASST JR1 | 317,778 | 343,544 | ||||||||
2020 FASST S2 | 302,253 | 314,144 | ||||||||
2020 FASST S3 | 301,631 | 309,713 | ||||||||
2020 FASST JR2 | 296,093 | 313,057 | ||||||||
2021 RTL1 ANTLR | 268,428 | — | ||||||||
2018 FASST JR2 | 243,734 | 269,741 | ||||||||
2020 FASST JR4 | 209,035 | 228,804 | ||||||||
2020 FASST S1 | 178,704 | 191,189 | ||||||||
2020 FASST JR1 | — | 250,988 | ||||||||
2020 RTL1 ANTLR | — | 140,839 | ||||||||
2018 RTL1 ANTLR | — | 80,767 | ||||||||
2019 RTL1 ANTLR | — | 127,981 | ||||||||
2020 FASST HB1 | — | 298,914 | ||||||||
Payables and other liabilities | 117 | 291 | ||||||||
TOTAL VIE LIABILITIES | 5,558,819 | 5,460,232 | ||||||||
Retained bonds and beneficial interests eliminated in consolidation | (198,099 | ) | (202,187 | ) | ||||||
TOTAL CONSOLIDATED LIABILITIES | $ | 5,360,720 | $ | 5,258,045 | ||||||
Trust. The Company accounts fordetermined that the Public Warrantssecuritization structure meets the definition of a VIE 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. Becauseconcluded that the Company does not controlhold a significant variable interest in the occurrence of events, suchsecuritization and that the contractual role as servicer is not a tender offer or exchange,variable interest and does not give the Company the power to direct the activities that may trigger cash settlementmost significantly affect the economic performance of the warrants where not allVIE. The transfer 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 adjustmentsloans to the settlement amountVIE was determined to be a sale. The Company derecognized the mortgage loans and did not consolidate the trust.
the securitization were $299.0 million. The Company recorded a derivative liability upongain on sale on the issuancesecuritization of $12.5 million.
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
Unconsolidated Securitization Trusts: | ||||||||||
Total collateral balances – UPB | $ | 300,318 | $0 | |||||||
Total certificate balances | $ | 300,047 | $0 | |||||||
REPLAY ACQUISITION CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 7 — Fair Value Measurements
The following tables present information about the Company’s financial assets that are measured at fair value on a recurring basis as of SeptemberJune 30, 20202021 (Successor) and December 31, 20192020 (Predecessor), there were $0.1 million of mortgage loans transferred 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. 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 concludeunconsolidated securitization trusts that its financial statements should be restated are the result60 days or less past due.
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. The restated classification and reported values of the Warrants as accounted for under ASC 815-40 are included in the financial statements herein.
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 | |||||
4. |
Acquisitions |
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 hold 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”) retain a 68.7%
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.
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. |
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 | ||||||
| (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. |
(in thousands) | For the three months ended June 30, | For the six months ended June 30, | ||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Pro forma revenues | $ | 387,014 | $ | 454,249 | $ | 895,203 | $ | 639,377 | ||||||||
Pro forma net income | 19,672 | 100,413 | 111,055 | 7,121 | ||||||||||||
Pro forma net income attributable to controlling interest | 6,748 | 27,492 | 37,734 | 12,985 | ||||||||||||
Pro forma net income (loss) attributable to noncontrolling interest | 12,924 | 72,921 | 73,321 | (5,864 | ) | |||||||||||
5. | Fair Value |
June 30, 2021 | December 31, 2020 | |||||||||||||||||
Predecessor | Successor | |||||||||||||||||
Range of Input | Weighted Average of Input | Range of Input | Weighted Average of Input | |||||||||||||||
Conditional repayment rate | NM | 20.3 | % | NM | 20.0 | % | ||||||||||||
Loss frequency | NM | 4.3 | % | NM | 4.4 | % | ||||||||||||
Loss severity | 4.9% - 11.7% | 5.2 | % | 5.1% - 13.3% | 5.4 | % | ||||||||||||
Discount rate | NM | 1.9 | % | NM | 1.6 | % | ||||||||||||
Average draw rate | NM | 1.1 | % | NM | 1.1 | % | ||||||||||||
June 30, 2021 | December 31, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||
Range of Input | Weighted Average of Input | Range of Input | Weighted Average of Input | |||||||||||||||
Conditional repayment rate | NM | 40.6 | % | NM | 42.9 | % | ||||||||||||
Loss frequency | 25.0% - 100.0% | 52.5 | % | 25.0% - 100.0% | 54.8 | % | ||||||||||||
Loss severity | 4.9% - 11.7% | 7.0 | % | 5.1% - 13.3% | 7.5 | % | ||||||||||||
Discount rate | NM | 3.6 | % | NM | 4.1 | % | ||||||||||||
June 30, 2021 | December 31, 2020 | |||||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Range of Input | Weighted Average of Input | Range of Input | Weighted Average of Input | |||||||||||||||||
Weighted average remaining life in years | NM | 8.7 | NM | 8.5 | ||||||||||||||||
Conditional repayment rate | NM | 13.7 | % | NM | 14.7 | % | ||||||||||||||
Loss severity | 4.9% - 11.7% | 8.6 | % | 5.1% - 13.3% | 7.7 | % | ||||||||||||||
Discount rate | NM | 3.4 | % | NM | 3.5 | % | ||||||||||||||
June 30, 2021 | December 31, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||
Range of Input | Weighted Average of Input | Range of Input | Weighted Average of Input | |||||||||||||||
Weighted-average remaining life in years | NM | 7.1 | NM | 6.9 | ||||||||||||||
Loan to value | 0.1% - 75.7% | 50.0 | % | 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 | 3.9% - 8.8% | 5.9 | % | 1.1% - 8.9% | 5.6 | % | ||||||||||||
Discount rate | NM | 3.7 | % | NM | 3.6 | % | ||||||||||||
June 30, 2021 | December 31, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||
Range of Input | Weighted Average of Input | Range of Input | Weighted Average of Input | |||||||||||||||
Prepayment rate (SMM) | NM | 15.3 | % | NM | 17.1 | % | ||||||||||||
Discount rate | 5.1% - 10.0% | 5.1 | % | 6.7% - 10.0% | 6.7 | % | ||||||||||||
Loss frequency | 0.3% - 77.2% | 0.7 | % | 0.2% - 44.0% | 0.6 | % | ||||||||||||
June 30, 2021 | December 31, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||
Range of Input | Weighted Average of Input | Range of Input | Weighted Average of Input | |||||||||||||||
Conditional repayment rate | NM | 45.8 | % | NM | 44.0 | % | ||||||||||||
Loss frequency | NM | 53.6 | % | NM | 46.9 | % | ||||||||||||
Loss severity | NM | 9.4 | % | NM | 10.5 | % | ||||||||||||
Discount rate | NM | 3.6 | % | NM | 4.1 | % | ||||||||||||
June 30, 2021 | December 31, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||
Range of Input | Weighted Average of Input | Range of Input | Weighted Average of Input | |||||||||||||||
Weighted-average remaining life in years | NM | 8.0 | NM | 8.0 | ||||||||||||||
Loan to value | 0.4% - 62.8% | 44.6 | % | 0.1% - 62.1% | 44.0 | % | ||||||||||||
Conditional repayment rate | NM | 16.9 | % | NM | 16.8 | % | ||||||||||||
Loss severity | NM | 10.0 | % | NM | 10.0 | % | ||||||||||||
Home price appreciation | 3.9% - 8.8% | 5.9 | % | 1.1% - 8.9% | 5.5 | % | ||||||||||||
Discount rate | NM | 3.7 | % | NM | 3.6 | % | ||||||||||||
June 30, 2021 | ||||||||
Successor | ||||||||
Range of Input | Weighted Average of Input | |||||||
Prepayment rate (SMM) | NM | 12.5 | % | |||||
Discount rate | NM | 5.4 | % | |||||
Loss frequency | NM | 0.4 | % | |||||
June 30, 2021 | December 31, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||
Range of Input | Weighted Average of Input | Range of Input | Weighted Average of Input | |||||||||||||||
Discount rate | NM | 4.7 | % | NM | 6.4 | % | ||||||||||||
Prepayment rate (SMM) | 10.0% - 100.0% | 28.3 | % | 0% - 1.0% | 0.7 | % | ||||||||||||
Default rate (CDR) | NM | 1.0 | % | 0% - 2.0% | 0.4 | % | ||||||||||||
June 30, 2021 | December 31, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||
Range of Input | Weighted Average of Input | Range of Input | Weighted Average of Input | |||||||||||||||
Prepayment rate (CPR) | 1.0% - 17.0% | 14.0 | % | 1.0% - 17.1% | 15.4 | % | ||||||||||||
Discount rate | NM | 3.3 | % | NM | 5.0 | % | ||||||||||||
Default rate (CDR) | 1.0% - 54.0% | 2.4 | % | 1.0% - 64.9% | 3.6 | % | ||||||||||||
June 30, 2021 | December 31, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||
Range of Input | Weighted Average of Input | Range of Input | Weighted Average of Input | |||||||||||||||
Prepayment rate (CPR) | 0.0% - 14.8% | 8.1 | % | 0% - 15.0% | 9.3 | % | ||||||||||||
Discount rate | NM | 3.8 | % | NM | 4.9 | % | ||||||||||||
Default rate (CDR) | 1.0% - 27.1% | 1.7 | % | 1.0% - 42.7% | 2.0 | % | ||||||||||||
December 31, 2020 | ||||||||
Predecessor | ||||||||
Range of Input | Weighted Average of Input | |||||||
Prepayment rate (SMM) | NM | 12.4 | % | |||||
Discount rate | 6.7% - 10.0% | 7.2 | % | |||||
Loss frequency | NM | 0.8 | % | |||||
June 30, 2021 | December 31, 2020 | |||||||||||
Successor | Predecessor | |||||||||||
Capitalization servicing rate | 1.0 | % | 0.8 | % | ||||||||
Capitalization servicing multiple | 3.8 | 3.2 | ||||||||||
Weighted-average servicing fee (in basis points) | 25 | 25 | ||||||||||
June 30, 2021 | December 31, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||
Range of Input | Weighted Average of Input | Range of Input | Weighted Average of Input | |||||||||||||||
Weighted average prepayment speed (CPR) | 5.7% - 19.9% | 10.1 | % | 6.6% - 24.9% | 12.1 | % | ||||||||||||
Discount rate | NM | 10.4 | % | NM | 12.1 | % | ||||||||||||
Weighted average delinquency rate | 1.2% - 9.1% | 1.3 | % | 1.2% - 9.2% | 1.3 | % | ||||||||||||
June 30, 2021 | ||||||||||||
Successor | ||||||||||||
Weighted Average Prepayment Speed | Discount Rate | Weighted Average Delinquency Rate | ||||||||||
Impact on fair value of 10% adverse change | $ | (10,734 | ) | $ | (10,921 | ) | $ | (138 | ) | |||
Impact on fair value of 20% adverse change | (20,763 | ) | (21,093 | ) | (348 | ) | ||||||
June 30, 2021 | December 31, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||
Range of Input | Weighted Average of Input | Range of Input | Weighted Average of Input | |||||||||||||||
Conditional repayment rate | NM | 20.2 | % | NM | 19.9 | % | ||||||||||||
Discount rate | NM | 1.7 | % | NM | 1.4 | % | ||||||||||||
June 30, 2021 | December 31, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||
Range of Input | Weighted Average of Input | Range of Input | Weighted Average of Input | |||||||||||||||
Performing/Nonperforming HECM securitizations | ||||||||||||||||||
Weighted-average remaining life (in years) | 0.6 - 1.2 | 0.9 | 0.2 - 1.5 | 1.0 | ||||||||||||||
Conditional repayment rate | 19.6% - 29.1% | 23.9 | % | 34.3% - 56.3% | 42.8 | % | ||||||||||||
Discount rate | NM | 2.1 | % | NM | 3.1 | % | ||||||||||||
Securitized Non-Agency Reverse | ||||||||||||||||||
Weighted-average remaining life (in years) | 1.3 - 2.1 | 1.9 | 0.3 - 2.7 | 2.1 | ||||||||||||||
Conditional repayment rate | 20.6% - 31.2% | 25.6 | % | 19.6% - 35.8% | 23.9 | % | ||||||||||||
Discount rate | NM | 2.0 | % | NM | 2.2 | % | ||||||||||||
June 30, 2021 | December 31, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||
Range of Input | Weighted Average of Input | Range of Input | Weighted Average of Input | |||||||||||||||
Nonrecourse debt | ||||||||||||||||||
Weighted-average remaining life (in months) | NM | 3.8 | 1.9 | 3.4 | ||||||||||||||
Weighted-average prepayment speed (SMM) | NM | 17.1 | % | 17.7% - 32.0% | 21.4 | % | ||||||||||||
Discount rate | NM | 2.5 | % | NM | 5.8 | % | ||||||||||||
June 30, 2021 | December 31, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||
Range of Input | Weighted Average of Input | Range of Input | Weighted Average of Input | |||||||||||||||
Weighted average prepayment speed (CPR) | 6.0% - 16.0% | 9.2 | % | 6.9% - 12.7% | 11.6 | % | ||||||||||||
Discount rate | 10.9% - 11.0% | 11.0 | % | 11.7% - 12.0% | 12.0 | % | ||||||||||||
Weighted average delinquency rate | NM | 1.0 | % | NM | 1.8 | % | ||||||||||||
June 30, 2021 | ||||||||||||
Successor | ||||||||||||
Weighted Average Prepayment Speed | Discount Rate | Weighted Average Delinquency Rate | ||||||||||
Impact on fair value of 10% adverse change | $ | (1,231 | ) | $ | (2,112 | ) | $ | (23 | ) | |||
Impact on fair value of 20% adverse change | (2,889 | ) | (4,552 | ) | (58 | ) | ||||||
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 to the restatement of Replay’s financial statements, as more fully described in Note 8 to 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.”
As used in this Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, “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 or 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. References to the “Sponsor” shall mean Replay Sponsor, LLC. The following discussion should be read in conjunction with our unaudited financial statements and related notes thereto included elsewhere in this Report.
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 the share price on the date of exercise. 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.
June 30, 2021 | ||||||||||||||||
Successor | ||||||||||||||||
Total Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Reverse mortgage loans held for investment, subject to HMBS related obligations | $ | 10,316,027 | $ | — | $ | — | $ | 10,316,027 | ||||||||
Mortgage loans held for investment, subject to nonrecourse debt: | ||||||||||||||||
Reverse mortgage loans | 5,189,679 | — | — | 5,189,679 | ||||||||||||
Fix & flip mortgage loans | 234,942 | — | — | 234,942 | ||||||||||||
Mortgage loans held for investment: | ||||||||||||||||
Reverse mortgage loans | 1,020,143 | — | — | 1,020,143 | ||||||||||||
Fix & flip mortgage loans | 44,578 | — | — | 44,578 | ||||||||||||
Agricultural loans | 160,369 | — | — | 160,369 | ||||||||||||
Mortgage loans held for sale: | ||||||||||||||||
Residential mortgage loans | 1,908,107 | — | 1,896,654 | 11,453 | ||||||||||||
SRL | 96,569 | — | — | 96,569 | ||||||||||||
Portfolio | 52,866 | — | — | 52,866 | ||||||||||||
Mortgage servicing rights | 290,938 | — | — | 290,938 | ||||||||||||
Investments | 6,000 | — | — | 6,000 | ||||||||||||
Derivative assets: | ||||||||||||||||
Forward commitments, TBAs, and Treasury Futures | 1,187 | 32 | 319 | 836 | ||||||||||||
IRLCs | 34,647 | — | — | 34,647 | ||||||||||||
Forward MBS | 996 | — | 996 | — | ||||||||||||
Interest rate swap futures | 24,981 | 24,981 | — | — | ||||||||||||
Other assets: | ||||||||||||||||
Retained bonds | 15,671 | — | — | 15,671 | ||||||||||||
Total assets | $ | 19,397,700 | $ | 25,013 | $ | 1,897,969 | $ | 17,474,718 | ||||||||
Liabilities | ||||||||||||||||
HMBS related obligation | $ | 10,168,224 | $ | — | $ | — | $ | 10,168,224 | ||||||||
Nonrecourse debt: | ||||||||||||||||
Nonrecourse debt in VIE trusts | 5,360,603 | — | — | 5,360,603 | ||||||||||||
Nonrecourse MSR financing liability | 65,129 | — | — | 65,129 | ||||||||||||
Deferred purchase price liabilities: | ||||||||||||||||
Deferred purchase price liabilities | 11,663 | — | — | 11,663 | ||||||||||||
TRA obligation | 32,810 | — | — | 32,810 | ||||||||||||
Derivative liabilities: | ||||||||||||||||
Forward MBS | 4,364 | — | 4,364 | — | ||||||||||||
Forward commitments, TBAs, and Treasury Futures | 1,176 | 31 | 34 | 1,111 | ||||||||||||
Interest rate swap futures | 13,789 | 13,789 | — | — | ||||||||||||
Warrants | 19,261 | 19,261 | — | — | ||||||||||||
Total liabilities | $ | 15,677,019 | $ | 33,081 | $ | 4,398 | $ | 15,639,540 | ||||||||
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 | ||||||||||||
Investments | 18,934 | — | — | 18,934 | ||||||||||||
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 | — | ||||||||||||
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 | 18,634 | — | 18,634 | — | ||||||||||||
Forward commitments and TBAs | 1,332 | — | 248 | 1,084 | ||||||||||||
Interest rate swaps and interest rate swap futures | 755 | 186 | 569 | — | ||||||||||||
Total liabilities | $ | 15,085,073 | $ | 186 | $ | 19,451 | $ | 15,065,436 | ||||||||
Successor | ||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||
June 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 | $ | — | $ | 9,470 | ||||||||||||||
Total gain or losses included in earnings | 153,690 | 80,408 | 1,816 | (3,066 | ) | (26,536 | ) | 666 | (3,470 | ) | ||||||||||||||||||
Purchases, settlements and transfers: | ||||||||||||||||||||||||||||
Purchases and additions, net | 1,428,976 | 22,041 | 256,438 | — | 50,110 | 15,078 | — | |||||||||||||||||||||
Sales and settlements | (615,958 | ) | (522,141 | ) | (275,956 | ) | (25 | ) | — | (73 | ) | — | ||||||||||||||||
Transfers in/(out) between categories | (597,327 | ) | 552,869 | 42,909 | — | — | — | — | ||||||||||||||||||||
Ending balance, June 30, 2021 | $ | 11,541,117 | $ | 5,424,621 | $ | 160,888 | $ | 35,483 | $ | 290,938 | $ | 15,671 | $ | 6,000 | ||||||||||||||
Successor | ||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
June 30, 2021 | HMBS related 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 | ) | $ | — | |||||||
Total gains or losses included in earnings | (44,651 | ) | $ | — | (1,760 | ) | (32,601 | ) | 4,123 | (860 | ) | |||||||||||||
Purchases, settlements and transfers: | ||||||||||||||||||||||||
Purchases and additions, net | (795,333 | ) | — | (7,000 | ) | (796,376 | ) | (47,201 | ) | (31,950 | ) | |||||||||||||
Settlements | 597,892 | (175 | ) | 311 | 674,266 | — | — | |||||||||||||||||
Ending balance, June 30, 2021 | $ | (10,168,224 | ) | $ | (1,111 | ) | $ | (11,663 | ) | $ | (5,360,603 | ) | $ | (65,129 | ) | $ | (32,810 | ) | ||||||
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: | ||||||||
June 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 | $ | 10,316,027 | $ | 9,406,924 | ||||
Mortgage loans held for investment, subject to nonrecourse debt: | ||||||||
Reverse mortgage loans | 5,189,680 | 4,615,128 | ||||||
Commercial mortgage loans | 234,941 | 229,858 | ||||||
Mortgage loans held for investment: | ||||||||
Reverse mortgage loans | 1,020,143 | 879,794 | ||||||
Commercial mortgage loans | 204,947 | 202,195 | ||||||
Mortgage loans held for sale: | ||||||||
Residential mortgage loans | 1,908,107 | 1,858,087 | ||||||
Commercial mortgage loans | 149,435 | 144,789 | ||||||
Liabilities at fair value under the fair value option | ||||||||
HMBS related obligations | 10,168,224 | 9,406,924 | ||||||
Nonrecourse debt: | ||||||||
Nonrecourse debt in VIE trusts | 5,360,603 | 5,276,781 | ||||||
Nonrecourse MSR financing liability | 65,129 | 65,129 | ||||||
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 | ||||||
Nonrecourse MSR financing liability | 14,088 | 14,088 | ||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Net fair value gains (losses) on mortgage loans and related obligations: | ||||||||||||||||||
Interest income on mortgage loans | $ | 173,940 | $ | 160,568 | $ | 217,841 | $ | 401,513 | ||||||||||
Change in fair value of mortgage loans | 84,983 | (51,346 | ) | 180,904 | 82,338 | |||||||||||||
Change in fair value of mortgage backed securities | — | — | (1,470 | ) | 817 | |||||||||||||
Fair value gains on mortgage loans | 258,923 | 109,222 | 397,275 | 484,668 | ||||||||||||||
Interest expense on related obligations | (113,474 | ) | (119,201 | ) | (127,488 | ) | (261,845 | ) | ||||||||||
Change in fair value of derivatives | (46,478 | ) | 43,972 | 8,567 | (5,743 | ) | ||||||||||||
Change in fair value of related obligations | 32,180 | 42,670 | (166,051 | ) | (91,397 | ) | ||||||||||||
Fair value losses on related obligations | (127,772 | ) | (32,559 | ) | (284,972 | ) | (358,985 | ) | ||||||||||
Net fair value gains on mortgage loans and related obligations | $ | 131,151 | $ | 76,663 | $ | 112,303 | $ | 125,683 | ||||||||||
6. | Reverse Mortgages Portfolio Composition |
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
Reverse mortgage loans: | ||||||||||
Reverse mortgage loans held for investment, subject to HMBS related obligations | $ | 9,406,924 | $ | 9,045,104 | ||||||
Reverse mortgage loans held for investment: | ||||||||||
Non-agency reverse mortgages | 536,739 | 215,688 | ||||||||
Loans not securitized (1) | 254,004 | 168,292 | ||||||||
Unpoolable loans (2) | 80,487 | 197,395 | ||||||||
Unpoolable tails | 8,564 | 8,054 | ||||||||
Total reverse mortgage loans held for investment | 879,794 | 589,429 | ||||||||
Reverse mortgage loans held for investment, subject to nonrecourse debt: | ||||||||||
Performing HECM buyouts | 276,177 | 141,691 | ||||||||
Nonperforming HECM buyouts | 634,342 | 538,768 | ||||||||
Non-agency reverse mortgages | 3,704,609 | 3,777,346 | ||||||||
Total reverse mortgage loans held for investment, subject to nonrecourse debt | 4,615,128 | 4,457,805 | ||||||||
Total owned reverse mortgage portfolio | 14,901,846 | 14,092,338 | ||||||||
Loans reclassified as government guaranteed receivable | 49,813 | 49,255 | ||||||||
Loans serviced for others | 18,099 | 123,324 | ||||||||
Total serviced reverse mortgage loan portfolio | $ | 14,969,758 | $ | 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. |
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
Fixed rate loans | $ | 5,181,814 | $ | 5,010,659 | ||||||
Adjustable rate loans | 9,720,032 | 9,081,679 | ||||||||
Total owned reverse mortgage portfolio | $ | 14,901,846 | $ | 14,092,338 | ||||||
7. | Reverse Mortgage Loans Held for Investment, Subject to HMBS Related Obligations, at Fair Value |
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
Reverse mortgage loans held for investment, subject to HMBS related obligations—UPB | $ | 9,406,924 | $ | 9,045,104 | ||||||
Fair value adjustments | 909,103 | 884,059 | ||||||||
Total reverse mortgage loans held for investment, subject to HMBS related obligations, at fair value | $ | 10,316,027 | $ | 9,929,163 | ||||||
8. | Mortgage Loans Held for Investment, Subject to Nonrecourse Debt, at Fair Value |
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
Mortgage loans held for investment, subject to nonrecourse debt—UPB: | ||||||||||
Reverse mortgage loans | $ | 4,615,128 | $ | 4,457,805 | ||||||
Commercial mortgage loans | 229,858 | 333,344 | ||||||||
Fair value adjustments | 579,635 | 605,018 | ||||||||
Total mortgage loans held for investment, subject to nonrecourse debt, at fair value | $ | 5,424,621 | $ | 5,396,167 | ||||||
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
Loans 90 days or more past due and on non-accrual status | ||||||||||
Mortgage loans held for investment: | ||||||||||
Fair value: | ||||||||||
Commercial mortgage loans | $ | 33,764 | $ | 32,377 | ||||||
Total fair value | 33,764 | 32,377 | ||||||||
Aggregate UPB: | ||||||||||
Commercial mortgage loans | $ | 34,159 | 33,888 | |||||||
Total aggregate UPB | 34,159 | 33,888 | ||||||||
Difference | $ | (395 | ) | $ | (1,511 | ) | ||||
9. | Mortgage Loans Held for Investment, at Fair Value |
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
Mortgage loans held for investment—UPB: | ||||||||||
Reverse mortgage loans | $ | 879,794 | $ | 589,429 | ||||||
Commercial mortgage loans | 202,195 | 69,127 | ||||||||
Fair value adjustments | 143,101 | 72,265 | ||||||||
Total mortgage loans held for investment, at fair value | $ | 1,225,090 | $ | 730,821 | ||||||
10. | Mortgage Loans Held for Sale, at Fair Value |
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
Mortgage loans held for sale—UPB: | ||||||||||
Residential mortgage loans | $ | 1,858,087 | $ | 2,000,795 | ||||||
Commercial mortgage loans | 144,789 | 140,693 | ||||||||
Fair value adjustments | 54,666 | 81,323 | ||||||||
Total mortgage loans held for sale, at fair value | $ | 2,057,542 | $ | 2,222,811 | ||||||
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
Loans 90 days or more past due and on non-accrual status | ||||||||||
Mortgage loans held for sale: | ||||||||||
Fair value: | ||||||||||
Residential mortgage loans | $ | 11,453 | $ | 10,628 | ||||||
Commercial mortgage loans | 3,203 | 5,051 | ||||||||
Total fair value | 14,656 | 15,679 | ||||||||
Aggregate UPB: | ||||||||||
Residential mortgage loans | 12,594 | 13,236 | ||||||||
Commercial mortgage loans | 3,360 | 5,317 | ||||||||
Total aggregate UPB | 15,954 | 18,553 | ||||||||
Difference | $ | (1,298 | ) | $ | (2,874 | ) | ||||
Overview
We are a blank check company incorporated as a Cayman Islands exempted company on November 6, 2018loans.
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):
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Cash flows: | ||||||||||||||||||
Sales proceeds | $ | 5,181,557 | $ | 6,387,933 | $ | 2,631,554 | $ | 2,868,960 | ||||||||||
Fair value of retained beneficial interest (1) | 49,308 | 66,400 | 43,500 | 44,855 | ||||||||||||||
Gross servicing fees received | 14,278 | 13,877 | 1,544 | 1,824 | ||||||||||||||
Repurchases | (6,818 | ) | (4,144 | ) | (3,380 | ) | (8,547 | ) | ||||||||||
Gain | 197,129 | 284,948 | 282,424 | 291,671 | ||||||||||||||
(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 |
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
Fannie Mae/Freddie Mac | $ | 29,705,985 | $ | 20,501,504 | ||||||
Ginnie Mae | 553,800 | 1,727,831 | ||||||||
Private investors | 332,402 | 40,027 | ||||||||
Total UPB | $ | 30,592,187 | $ | 22,269,362 | ||||||
Weighted average interest rate | 3.0 | % | 3.1 | % | ||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Beginning UPB | $ | 26,675,358 | $ | 22,269,362 | $ | 402,852 | $ | 288,057 | ||||||||||
Originated MSR | 5,139,859 | 6,312,227 | 6,849,850 | 6,986,237 | ||||||||||||||
Purchased MSR | 5,537 | 866,806 | — | — | ||||||||||||||
Payoffs, sales and curtailments | (1,228,567 | ) | (2,773,037 | ) | (40,859 | ) | (62,451 | ) | ||||||||||
Ending UPB | $ | 30,592,187 | $ | 26,675,358 | $ | 7,211,843 | $ | 7,211,843 | ||||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Beginning balance | $ | 267,364 | $ | 180,684 | 3,119 | $ | 2,600 | |||||||||||
Originations | 50,049 | 65,964 | 43,561 | 44,855 | ||||||||||||||
Purchases | 61 | 9,014 | — | — | ||||||||||||||
Sales | — | (8,647 | ) | — | — | |||||||||||||
Changes in fair value due to: | ||||||||||||||||||
Changes in market inputs or assumptions used in valuation model | (16,051 | ) | 35,109 | (2,749 | ) | (3,424 | ) | |||||||||||
Changes in fair value due to portfolio runoff and other | (10,485 | ) | (14,760 | ) | (1,247 | ) | (1,347 | ) | ||||||||||
Ending balance | $ | 290,938 | $ | 267,364 | $ | 42,684 | $ | 42,684 | ||||||||||
June 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 |
June 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 | $ | 34,647 | $ | 2,539,030 | $ | (52,929 | ) | $ | — | $ | — | $ | — | |||||||||||
Forward commitments, TBAs securities, and treasury futures | 1,187 | 895,807 | (619 | ) | 1,176 | 954,493 | 156 | |||||||||||||||||
Interest rate swaps and futures contracts | 24,981 | 4,616,698 | 22,298 | 13,789 | 1,082,600 | (13,034 | ) | |||||||||||||||||
Forward MBS | 996 | 802,500 | 996 | 4,364 | 1,988,500 | 14,271 | ||||||||||||||||||
Net fair value of derivative financial instruments | $ | 61,811 | $ | 8,854,035 | $ | (30,254 | ) | $ | 19,329 | $ | 4,025,593 | $ | 1,393 | |||||||||||
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 |
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Beginning balance | $ | 0 | $ | 121,233 | $ | 121,137 | $ | 121,137 | ||||||||||
Additions from acquisitions | 1,298,324 | 7,517 | 617 | 617 | ||||||||||||||
Ending balance | $ | 1,298,324 | $ | 128,750 | $ | 121,754 | $ | 121,754 | ||||||||||
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
Reporting units: | ||||||||||
Mortgage Originations | $ | 711,306 | $ | 44,429 | ||||||
Reverse Originations | 404,441 | — | ||||||||
Commercial Originations | 75,350 | 43,113 | ||||||||
Lender Services | 100,128 | 25,247 | ||||||||
Portfolio Management | 7,099 | 8,444 | ||||||||
Total goodwill | $ | 1,298,324 | $ | 121,233 | ||||||
14. | Intangible Assets, Net |
June 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 | $ | (13,237 | ) | $ | 517,663 | ||||||||
Trade names | 10 | 8,800 | (220 | ) | 8,580 | |||||||||||
Total amortizing intangibles | $ | 539,700 | $ | (13,457 | ) | $ | 526,243 | |||||||||
Total intangibles | $ | 717,700 | $ | (13,457 | ) | $ | 704,243 | |||||||||
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 | $ | 26,914 | ||
2022 | 53,828 | |||
2023 | 53,828 | |||
2024 | 53,828 | |||
2025 | 53,828 | |||
Thereafter | 284,017 | |||
Total future amortization expense | $ | 526,243 | ||
15. | Other Assets, Net |
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
Right-of-use | $ | 62,835 | $ | 46,609 | ||||||
Government guaranteed receivables | 48,087 | 46,481 | ||||||||
Receivables, net of allowance of $1,452 and $788, respectively | 48,666 | 67,011 | ||||||||
Loan subject to repurchase from GNMA | 30,027 | 42,148 | ||||||||
Prepaid expenses | 26,070 | 17,536 | ||||||||
Retained bonds | 15,671 | — | ||||||||
Investments, at fair value | 6,554 | 18,934 | ||||||||
Servicer advances, net of allowance of $2,002 and $1,661, respectively | 6,318 | 5,795 | ||||||||
Deposits | 2,438 | 14,188 | ||||||||
Receivable from clearing organization | 2,041 | 2,043 | ||||||||
Other | 51,546 | 39,887 | ||||||||
Total other assets, net | $ | 300,253 | $ | 300,632 | ||||||
16. | HMBS Related Obligations, at Fair Value |
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
GNMA loan pools—UPB | $ | 9,406,924 | $ | 9,045,104 | ||||||
Fair value adjustments | 761,300 | 743,564 | ||||||||
Total HMBS related obligations, at fair value | $ | 10,168,224 | $ | 9,788,668 | ||||||
Weighted average remaining life | 4.4 | 4.5 | ||||||||
Weighted average interest rate | 2.6 | % | 3.0 | % | ||||||
17. | Nonrecourse Debt, at Fair Value |
Issue Date | Class of Note | Final Maturity Date | Interest Rate | Original Issue Amount | June 30, 2021 | December 31, 2020 | ||||||||||||||||||
Successor | Predecessor | |||||||||||||||||||||||
Securitization of nonperforming HECM loans: | ||||||||||||||||||||||||
2021 FASST HB1 | February 2021 | A, M1, M2, M3, M4, M5 | February 2031 | 0.9%—9.0% | $ | 571,448 | $ | 537,299 | $ | — | ||||||||||||||
2020 FASST HB2 | July 2020 | A, M1, M2, M3, M4, M5 | July 2030 | 1.71%—7.75% | 594,171 | 446,413 | 476,147 | |||||||||||||||||
2020 FASST HB1 | February 2020 | A, M1, M2, M3, M4, M5 | February 2030 | 2.0%—6.0% | 373,912 | 0 | 298,883 | |||||||||||||||||
Securitization of non-agency reverse loans: | ||||||||||||||||||||||||
2021 FASST JR 1 | April 2021 | A1, A2 | April 2026 | 1.5%—2.0% | 562,512 | 512,794 | — | |||||||||||||||||
2019 FASST JR2 | June 2019 | A, A2 | June 2069 | 2.0% | 499,000 | 406,709 | 440,141 | |||||||||||||||||
2018 FASST JR1 | May 2018 | A | May 2068 | 4.3% | 559,197 | 386,548 | 428,671 | |||||||||||||||||
2019 FASST JR3 | September 2019 | A | September 2069 | 2.0% | 450,104 | 359,772 | 404,057 | |||||||||||||||||
2020 FASST JR3 | August 2020 | A, A2 | August 2025 | 2.0%—3.0% | 360,713 | 315,570 | 337,099 | |||||||||||||||||
2019 FASST JR4 | November 2019 | A | November 2069 | 2.0% | 365,685 | 305,097 | 335,945 | |||||||||||||||||
2019 FASST JR1 | March 2019 | A | March 2069 | 2.0% | 347,000 | 288,654 | 309,840 | |||||||||||||||||
2020 FASST S3 | December 2020 | A1, A2 | December 2025 | 1.5%—2.5% | 313,357 | 288,383 | 297,871 | |||||||||||||||||
2020 FASST S2 | June 2020 | A1, A2 | March 2025 | 2.0% | 320,460 | 286,734 | 299,401 | |||||||||||||||||
2020 FASST JR2 | May 2020 | A1A, A1B, A2 | May 2023 | 0.0%—2.0% | 305,658 | 277,694 | 291,827 | |||||||||||||||||
2018 FASST JR2 | December 2018 | A | December 2068 | 4.5% | 280,400 | 229,872 | 253,325 | |||||||||||||||||
2020 FASST JR4 | October 2020 | A, A2 | August 2025 | 2.0%—3.0% | 241,664 | 197,970 | 217,385 | |||||||||||||||||
2020 FASST S1 | March 2020 | A1, A2 | March 2025 | 2.0%—3.7% | 199,000 | 168,761 | 181,059 | |||||||||||||||||
2020 FASST JR1 | April 2020 | A, A2 | April 2023 | 2.0% | 254,805 | 0 | 240,563 | |||||||||||||||||
Issue Date | Class of Note | Final Maturity Date | Interest Rate | Original Issue Amount | June 30, 2021 | December 31, 2020 | ||||||||||||||||||
Successor | Predecessor | |||||||||||||||||||||||
Securitization of Fix & Flip loans: | ||||||||||||||||||||||||
2021 RTL1 ANTLR | April 2021 | A1, A2, M | November 2024 (A1); January 2025 (A2); May 2025 (M) | 2.1%—5.4% | 268,511 | 268,511 | — | |||||||||||||||||
2020 RTL1 ANTLR | May 2020 | A1, A2 | May 2022 (A1, A2) | 6.9%—8.0% | 306,517 | — | 140,072 | |||||||||||||||||
2018 RTL1 ANTLR | September 2018 | A1, A2, A-VFN, M | July 2022 (A1, A2); March 2023 (M) | 4.3%—7.4% | 210,296 | — | 80,949 | |||||||||||||||||
2019 RTL1 ANTLR | March 2019 | A1, A2, A-VFN, M | June 2022 (A1, A2); January 2023 (M) | 4.5%—6.9% | 217,100 | — | 121,772 | |||||||||||||||||
Total nonrecourse debt | 5,276,781 | 5,155,007 | ||||||||||||||||||||||
Nonrecourse MSR financing liability, at fair value | 65,129 | 14,088 | ||||||||||||||||||||||
Fair value adjustments | 83,822 | 102,747 | ||||||||||||||||||||||
Total nonrecourse debt, at fair value | $ | 5,425,732 | $ | 5,271,842 | ||||||||||||||||||||
18. | Other Financing Lines of Credit |
Outstanding Borrowings at | ||||||||||||||||||||
June 30, 2021 | December 31, 2020 | |||||||||||||||||||
Facility | Maturity Date | Interest Rate | Collateral Pledged | Total Capacity (1) | Successor | Predecessor | ||||||||||||||
Mortgage Lines: | ||||||||||||||||||||
March 2022 $300M Facility | March 2022 | LIBOR + applicable margin | First Lien Mortgages | $ | 300,000 | $ | 192,417 | $ | 182,015 | |||||||||||
March 2022 $200M Facility | March 2022 | LIBOR + applicable margin | N/A | 200,000 | 189,464 | 302,877 | ||||||||||||||
May 2022 $200M Facility | May 2022 | LIBOR + applicable margin | First Lien Mortgages | 200,000 | 189,050 | 109,463 | ||||||||||||||
February 2022 $300M Facility | February 2022 | LIBOR + applicable margin | First Lien Mortgages | 300,000 | 186,754 | 0 | ||||||||||||||
July 2021 $200M Facility (2) | July 2021 | LIBOR + applicable margin | First Lien Mortgages | 200,000 | 167,207 | 122,075 | ||||||||||||||
October 2021 $200M Facility | October 2021 | LIBOR + applicable margin | First Lien Mortgages | 200,000 | 166,564 | 158,114 | ||||||||||||||
March 2022 $225M Facility | March 2022 | LIBOR + applicable margin | First Lien Mortgages | 225,000 | 163,678 | 154,097 | ||||||||||||||
March 2022 $200M Facility | March 2022 | LIBOR + applicable margin | First Lien Mortgages | 200,000 | 155,468 | 97,225 | ||||||||||||||
March 2026 $150M Facility - MSR | March 2026 | LIBOR + applicable margin | MSRs | 150,000 | 125,113 | 0 | ||||||||||||||
April 2022 $250M Facility | April 2022 | LIBOR + applicable margin | First Lien Mortgages | 250,000 | 122,412 | 225,837 | ||||||||||||||
May 2022 $350M Facility | May 2022 | LIBOR + applicable margin | First Lien Mortgages | 350,000 | 102,332 | 283,821 | ||||||||||||||
October 2021 $250M Facility | October 2021 | LIBOR + applicable margin | First Lien Mortgages | 250,000 | 65,541 | 170,174 | ||||||||||||||
August 2021 $200M Facility | August 2021 | LIBOR + applicable margin | First Lien Mortgages | 200,000 | 59,663 | 126,047 | ||||||||||||||
August 2021 $300M Facility (2) | August 2021 | LIBOR + applicable margin | First Lien Mortgages | 300,000 | 40,562 | 15,719 | ||||||||||||||
Securities Repo Line | N/A | LIBOR + applicable margin | Mortgage Related Asset | 13,951 | 13,951 | — | ||||||||||||||
February 2021 $50M Facility - MSR (3) | February 2021 | Prime + applicable margin; 5.00% floor | MSRs | 50,000 | — | 50,000 | ||||||||||||||
June 2023 $300M Facility | June 2023 | LIBOR + applicable margin | First Lien Mortgages | 300,000 | — | — | ||||||||||||||
Subtotal mortgage lines of credit | $ | 3,688,951 | $ | 1,940,176 | $ | 1,997,464 | ||||||||||||||
Reverse Lines: | ||||||||||||||||||||
October 2021 $400M Facility | October 2021 | LIBOR + applicable margin | First Lien Mortgages | $ | 400,000 | $ | 257,257 | $ | 84,124 | |||||||||||
April 2022 $250M Facility | April 2022 | LIBOR + applicable margin | First Lien Mortgages | 250,000 | 214,245 | 173,484 | ||||||||||||||
$200M Repo Facility | N/A | Bond accrual rate + applicable margin | Mortgage Related Assets | 200,000 | 176,549 | 174,578 | ||||||||||||||
February 2024 $90M Facility | February 2024 | LIBOR + applicable margin | MSRs | 90,000 | 89,497 | 0 | ||||||||||||||
December 2021 $100M Facility | December 2021 | LIBOR + applicable margin | First Lien Mortgages | 100,000 | 89,226 | 61,220 | ||||||||||||||
March 2022 $100M Facility | March 2022 | LIBOR + applicable margin | First Lien Mortgages | 100,000 | 87,936 | 15,803 | ||||||||||||||
Outstanding Borrowings at | ||||||||||||||||||||||||
June 30, 2021 | December 31, 2020 | |||||||||||||||||||||||
Facility | Maturity Date | Interest Rate | Collateral Pledged | Total Capacity (1) | Successor | Predecessor | ||||||||||||||||||
June 2022 $75M Facility | June 2022 | LIBOR + applicable margin | | First Lien Mortgages | | 75,000 | 72,479 | 11,423 | ||||||||||||||||
April 2022 $52.5M Facility | April 2022 | LIBOR + applicable margin | | | Mortgage Related Assets | | 52,500 | 52,500 | 50,239 | |||||||||||||||
April 2022 $50M Facility | April 2022 | | Prime + applicable margin; 6.00% floor | | Unsecuritized Tails | | 50,000 | 38,757 | 37,442 | |||||||||||||||
April 2022 $45M Facility | April 2022 | 9.00% | | Mortgage Related Assets | | 45,000 | 28,220 | 26,875 | ||||||||||||||||
June 2022 $200M Facility (2) | June 2022 | LIBOR + applicable margin | | First Lien Mortgages | | 200,000 | 26,883 | 128,723 | ||||||||||||||||
August 2021 $50M Facility | August 2021 | LIBOR + applicable margin | | First Lien Mortgages | | 50,000 | 24,329 | 2,860 | ||||||||||||||||
$1.2M Repo Facility | N/A | LIBOR + applicable margin | | | Mortgage Related Assets | | 1,215 | 1,215 | 1,188 | |||||||||||||||
Subtotal reverse lines of credit | $ | 1,613,715 | $ | 1,159,093 | $ | 767,959 | ||||||||||||||||||
Commercial Lines: | ||||||||||||||||||||||||
September 2022 $150M Facility | September 2022 | LIBOR + applicable margin | | | Encumbered Agricultural Loans | | $ | 150,000 | $ | 112,229 | $ | 52,300 | ||||||||||||
April 2023 $145M Facility | April 2023 | LIBOR + applicable margin | | First Lien Mortgages | | 145,000 | 86,055 | 100,070 | ||||||||||||||||
February 2022 $150M Facility | February 2022 | LIBOR + applicable margin | | First Lien Mortgages | | 150,000 | 33,768 | — | ||||||||||||||||
November 2023 $65M Facility | November 2023 | LIBOR + applicable margin | | First Lien Mortgages | | 65,000 | 30,528 | 28,064 | ||||||||||||||||
August 2022 $75M | August 2022 | 2.50% - 3.25% | | Encumbered Agricultural Loans | | 75,000 | 24,746 | — | ||||||||||||||||
August 202 2 $25M Facility | August 2022 | 10.00% | Second Lien Mortgages | | 25,000 | 20,900 | 21,475 | |||||||||||||||||
$4M Securities Repo Line | N/A | LIBOR + applicable margin | | | Mortgage Related Assets | | 4,024 | 4,024 | — | |||||||||||||||
February 2022 $150M Facility | February 2022 | LIBOR + applicable margin | | First Lien Mortgages | | 150,000 | 715 | — | ||||||||||||||||
$2M Securities Repo Line | N/A | Distributed Bond Interest + 50 bps | | | Mortgage Related Assets | | — | — | 6,411 | |||||||||||||||
Subtotal commercial lines of credit | $ | 764,024 | $ | 312,965 | $ | 208,320 | ||||||||||||||||||
Total other financing lines of credit | $ | 6,066,690 | $ | 3,412,234 | $ | 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 June 30, 2021. |
(2) | See Note 36 - Subsequent Events for additional information on facility amendments. |
(3) | The February 2021 $50M facility - MSR was paid off and terminated in February 2021. |
Successor | ||||||||||||
Financial Covenants | Requirement | June 30, 2021 | Maximum Allowable Distribution (1) | |||||||||
FAM | ||||||||||||
Adjusted Tangible Net Worth | $ | 150,000 | $ | 191,383 | $ | 41,383 | ||||||
Liquidity | 40,000 | 60,697 | 20,697 | |||||||||
Leverage Ratio | 15:1 | 13.3:1 | 21,591 | |||||||||
Material Decline in Lender Adjusted Net Worth: | ||||||||||||
Lender Adjusted Tangible Net Worth (Quarterly requirement) | $ | 294,790 | $ | 191,383 | $ | (103,406 | ) | |||||
Lender Adjusted Tangible Net Worth (Two-Consecutive Quarterly requirement) | 215,803 | 191,383 | (24,419 | ) | ||||||||
FACo | ||||||||||||
Adjusted Tangible Net Worth | $ | 85,000 | $ | 93,411 | $ | 8,411 | ||||||
Liquidity | 20,000 | 28,579 | 8,579 | |||||||||
Leverage Ratio | 6:1 | 3.6:1 | 37,192 | |||||||||
FAR | ||||||||||||
Adjusted Tangible Net Worth | $ | 398,288 | $ | 449,271 | $ | 50,983 | ||||||
Liquidity | 20,000 | 25,120 | 5,120 | |||||||||
Leverage Ratio | 6:1 | 3.6:1 | 180,788 | |||||||||
Material Decline in Lender Adjusted Net Worth: | ||||||||||||
Lender Adjusted Tangible Net Worth (Quarterly requirement) | $ | 302,921 | $ | 448,047 | $ | 145,126 | ||||||
Lender Adjusted Tangible Net Worth (Two-Consecutive Quarterly requirement) | 354,344 | 448,047 | 93,703 | |||||||||
(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. |
19. | Payables and Other Liabilities |
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
Accrued compensation expense | $ | 131,831 | $ | 150,214 | ||||||
Accrued liabilities | 97,902 | 83,427 | ||||||||
Lease liabilities | 64,496 | 48,250 | ||||||||
Deferred tax liability, net | 28,455 | — | ||||||||
GNMA reverse mortgage buy-out payable | 32,607 | 32,317 | ||||||||
Liability for loans eligible for repurchase from GNMA | 30,027 | 42,148 | ||||||||
Derivative liabilities | 19,329 | 20,722 | ||||||||
Warrant liability | 19,261 | — | ||||||||
Estimate of claim losses | 11,839 | 8,609 | ||||||||
Deferred purchase price liabilities | 44,473 | 3,842 | ||||||||
Repurchase reserves | 8,515 | 10,529 | ||||||||
Total payables and other liabilities | $ | 488,735 | $ | 400,058 | ||||||
20. | Leases |
SimultaneouslyOperations. The Company recognizes variable lease payments associated with the consummationCompany’s leases when the variability is resolved. Variable lease payments are recorded in general and administrative expenses in the Consolidated Statements of our Initial Public OfferingOperations along with expenses arising from fixed lease payments.
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
Right-of-use | $ | 62,835 | $ | 46,609 | ||||||
Lease liabilities | $ | 64,496 | $ | 48,250 | ||||||
Weighted-average remaining lease term (in years) | 6.61 | 3.61 | ||||||||
Weighted-average discount rate | 7.08 | % | 7.42 | % | ||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Operating lease cost | $ | 5,591 | $ | 5,490 | $ | 7,046 | $ | 13,658 | ||||||||||||
Short-term lease cost | 888 | 1,035 | (593 | ) | 1,438 | |||||||||||||||
Total operating and short term lease cost | 6,479 | 6,525 | 6,453 | 15,096 | ||||||||||||||||
Variable lease cost | 1,997 | 1,808 | 718 | 1,422 | ||||||||||||||||
Sublease income | (516 | ) | (464 | ) | (574 | ) | (1,270 | ) | ||||||||||||
Net lease cost | $ | 7,960 | $ | 7,869 | $ | 6,597 | $ | 15,248 | ||||||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||||||
Operating cash flows from operating leases | $ | 5,291 | $ | 5,423 | $ | 6,255 | $ | 12,540 | ||||||||||
Leased assets obtained in exchange for new operating lease liabilities | 22,752 | 701 | 1,134 | 4,598 | ||||||||||||||
2021 | $ | 10,083 | ||
2022 | 16,846 | |||
2023 | 13,104 | |||
2024 | 9,025 | |||
2025 | 6,045 | |||
2026 | 3,585 | |||
Thereafter | 24,742 | |||
Total undiscounted lease payments | 83,430 | |||
Less: amounts representing interest | (18,934 | ) | ||
Total lease liabilities | $ | 64,496 | ||
21. | Notes Payable, Net |
Description | Maturity Date | Interest Rate | June 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) | 3,718 | 0 | ||||||||||||||
Less: Debt issuance costs | — | (13,436 | ) | |||||||||||||
Total notes payable, net | $ | 353,718 | $ | 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. |
22. | Litigation |
23. | Commitments and Contingencies |
24. | 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, April 1, 2021 | 0— | 0— | 0— | |||||||||||||||||
Granted | 14,819,483 | 0— | 14,819,483 | $ | 9.48 | $ | 140,489 | |||||||||||||
Vested | (4,066,069 | ) | 4,066,069 | — | $ | 9.48 | $ | 38,546 | ||||||||||||
Outstanding, June 30, 2021 | 10,753,414 | 4,066,069 | 14,819,483 | |||||||||||||||||
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— | |||||||||||||||||
Granted | 1,550,880 | 0— | 1,550,880 | $ | 8.91 | $ | 13,811 | |||||||||||||
Outstanding, June 30, 2021 | 1,550,880 | 0— | 1,550,880 | |||||||||||||||||
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.
25. | Changes in Contingently Redeemable Noncontrolling Interest |
Predecessor: | ||||
Balance at December 31, 2019 (audited) | $ | 187,981 | ||
Net loss | (15,386 | ) | ||
Balance at March 31, 2020 | 172,595 | |||
Net loss | (2,620 | ) | ||
Balance at June 30, 2020 | $ | 169,975 | ||
Balance at December 31, 2020 (audited) | $ | 166,231 | ||
Net income | 4,260 | |||
Accretion to redemption price | 32,725 | |||
Balance at March 31, 2021 | 203,216 | |||
Successor: | ||||
Balance at April 1, 2021 | $ | 203,216 | ||
Settlement of CRNCI in connection with the Business Combination | (203,216 | ) | ||
Balance at June 30, 2021 | $ | 0— | ||
26. | General and Administrative Expenses |
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Title and closing | $ | 25,191 | $ | 25,061 | $ | 12,682 | $ | 28,677 | ||||||||||
Loan origination expenses | 17,725 | 20,503 | 14,126 | 34,573 | ||||||||||||||
Depreciation and amortization | 16,462 | 3,484 | 3,488 | 6,957 | ||||||||||||||
Loan portfolio expenses | 15,433 | 15,200 | 9,426 | 18,603 | ||||||||||||||
Communications and data processing | 12,568 | 11,324 | 8,025 | 14,327 | ||||||||||||||
Securitization expenses | 10,831 | 6,944 | 8,349 | 8,349 | ||||||||||||||
Business development | 9,647 | 10,607 | 9,321 | 17,590 | ||||||||||||||
Licensing and insurance | 3,457 | 2,487 | 1,474 | 3,266 | ||||||||||||||
Fair value change in deferred purchase price liability | 1,760 | 30 | (62 | ) | 0 | |||||||||||||
Other expenses | 6,227 | 31,577 | 14,385 | 27,438 | ||||||||||||||
Total general and administrative expenses | $ | 119,301 | $ | 127,217 | $ | 81,214 | $ | 159,780 | ||||||||||
27. | Business Segment Reporting |
April 1, 2021 to June 30, 2021 | ||||||||||||||||||||||||||||||||||||
Successor | ||||||||||||||||||||||||||||||||||||
Mortgage Originations | Reverse Originations | Commercial Originations | Portfolio Management | Lender Services | Total Operating Segments | Corporate and Other | Elim | Total | ||||||||||||||||||||||||||||
REVENUES | ||||||||||||||||||||||||||||||||||||
Gain on sale of loans, net | $ | 185,386 | $ | — | $ | — | $ | 7,748 | $ | — | $ | 193,134 | $ | — | $ | (5,557 | ) | $ | 187,577 | |||||||||||||||||
Net fair value gains | — | 94,536 | 10,822 | 11,223 | — | 116,581 | — | 14,570 | 131,151 | |||||||||||||||||||||||||||
Fee income | 30,345 | 954 | 12,124 | 3,577 | 81,130 | 128,130 | 0 | (37,266 | ) | 90,864 | ||||||||||||||||||||||||||
Net interest income (expense) | 1,976 | (9 | ) | — | (15,851 | ) | (15 | ) | (13,899 | ) | (6,567 | ) | (9 | ) | (20,475 | ) | ||||||||||||||||||||
Total revenues | 217,707 | 95,481 | 22,946 | 6,697 | 81,115 | 423,946 | (6,567 | ) | (28,262 | ) | 389,117 | |||||||||||||||||||||||||
Total expenses | 224,191 | 42,246 | 20,049 | 33,190 | 73,317 | 392,993 | 36,021 | (28,262 | ) | 400,752 | ||||||||||||||||||||||||||
Other, net | — | 104 | 140 | (245 | ) | 83 | 82 | (2,185 | ) | — | (2,103 | ) | ||||||||||||||||||||||||
Net (loss) income before taxes | $ | (6,484 | ) | $ | 53,339 | $ | 3,037 | $ | (26,738 | ) | $ | 7,881 | $ | 31,035 | $ | (44,773 | ) | $ | — | $ | (13,738 | ) | ||||||||||||||
Depreciation and amortization | $ | 1,433 | $ | (151 | ) | $ | 127 | $ | (107 | ) | $ | 2,818 | $ | 4,120 | $ | 12,342 | $ | — | $ | 16,462 | ||||||||||||||||
Total assets | 2,994,779 | 768,229 | 109,434 | 17,996,903 | 336,687 | $ | 22,206,032 | 2,115,780 | (2,093,874 | ) | $ | 22,227,938 | ||||||||||||||||||||||||
January 1, 2021 to March 31, 2021 | ||||||||||||||||||||||||||||||||||||
Predecessor | ||||||||||||||||||||||||||||||||||||
Mortgage Originations | Reverse Originations | Commercial Originations | Portfolio Management | Lender Services | Total Operating Segments | Corporate and Other | Elim | Total | ||||||||||||||||||||||||||||
REVENUES | ||||||||||||||||||||||||||||||||||||
Gain on sale of loans, net | $ | 286,481 | $ | — | $ | — | $ | 5,065 | $ | — | $ | 291,546 | $ | — | $ | (212 | ) | $ | 291,334 | |||||||||||||||||
Net fair value gains | — | 68,449 | 5,431 | 2,750 | — | 76,630 | — | 33 | 76,663 | |||||||||||||||||||||||||||
Fee income | 32,731 | 524 | 8,930 | 36,191 | 76,383 | 154,759 | 0 | 6,612 | 161,371 | |||||||||||||||||||||||||||
Net interest expense | 891 | — | — | (14,816 | ) | (36 | ) | (13,961 | ) | (7,744 | ) | — | (21,705 | ) | ||||||||||||||||||||||
Total revenues | 320,103 | 68,973 | 14,361 | 29,190 | 76,347 | 508,974 | (7,744 | ) | 6,433 | 507,663 | ||||||||||||||||||||||||||
Total expenses | 224,246 | 23,693 | 13,391 | 24,406 | 62,970 | 348,706 | 18,683 | 5,955 | 373,344 | |||||||||||||||||||||||||||
Other, net | — | 34 | 149 | 895 | 2 | 1,080 | (9,464 | ) | (478 | ) | (8,862 | ) | ||||||||||||||||||||||||
Net income (loss) before taxes | $ | 95,857 | $ | 45,314 | $ | 1,119 | $ | 5,679 | $ | 13,379 | $ | 161,348 | $ | (35,891 | ) | $ | — | $ | 125,457 | |||||||||||||||||
Depreciation and amortization | $ | 1,423 | $ | 151 | $ | 125 | $ | 146 | $ | 1,268 | $ | 3,113 | $ | 371 | $ | — | $ | 3,484 | ||||||||||||||||||
Total assets | 2,425,529 | 35,861 | 82,375 | 17,378,088 | 125,317 | $ | 20,047,170 | 379,562 | (326,313 | ) | $ | 20,100,419 | ||||||||||||||||||||||||
For the three months ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||
Predecessor | ||||||||||||||||||||||||||||||||||||
Mortgage Originations | Reverse Originations | Commercial Originations | Portfolio Management | Lender Services | Total Operating Segments | Corporate and Other | Elim | Total | ||||||||||||||||||||||||||||
REVENUES | ||||||||||||||||||||||||||||||||||||
| Gain on sale of loans, net | $ | 298,333 | $ | — | $ | — | $ | — | $ | — | $ | 298,333 | $ | — | $ | (42 | ) | $ | 298,291 | |||||||||||||||||
| Net fair value gains | — | 54,689 | 21 | 57,237 | — | 111,947 | — | 356 | 112,303 | |||||||||||||||||||||||||||
| Fee income | 33,795 | 509 | 350 | 1,431 | 44,312 | 80,397 | 28 | (3,769 | ) | 76,656 | ||||||||||||||||||||||||||
| Net interest expense | 778 | — | — | (19,708 | ) | (42 | ) | (18,972 | ) | (2,804 | ) | (15 | ) | (21,791 | ) | |||||||||||||||||||||
Total revenues | 332,906 | 55,198 | 371 | 38,960 | 44,270 | 471,705 | (2,776 | ) | (3,470 | ) | 465,459 | |||||||||||||||||||||||||
Total expenses | 215,958 | 22,156 | 6,552 | 21,374 | 39,554 | 305,594 | 16,573 | (3,470 | ) | 318,697 | ||||||||||||||||||||||||||
Other, net | — | — | — | — | — | — | (28 | ) | — | (28 | ) | |||||||||||||||||||||||||
Net income (loss) before taxes | $ | 116,948 | $ | 33,042 | $ | (6,181 | ) | $ | 17,586 | $ | 4,716 | $ | 166,111 | $ | (19,377 | ) | $ | — | $ | 146,734 | ||||||||||||||||
| Depreciation and amortization | $ | 1,520 | $ | 286 | $ | 142 | $ | 11 | $ | 1,050 | $ | 3,009 | $ | 479 | $ | — | $ | 3,488 | ||||||||||||||||||
Total assets | $ | 1,816,879 | $ | 86,335 | $ | 59,439 | $ | 16,194,177 | $ | 92,413 | $ | 18,249,243 | $ | 484,973 | $ | (638,216 | ) | $ | 18,096,000 | |||||||||||||||||
For the six months ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||
Predecessor | ||||||||||||||||||||||||||||||||||||
Mortgage Originations | Reverse Originations | Commercial Originations | Portfolio Management | Lender Services | Total Operating Segments | Corporate and Other | Elim | Total | ||||||||||||||||||||||||||||
REVENUES | ||||||||||||||||||||||||||||||||||||
| Gain on sale of loans, net | $ | 425,624 | $ | — | $ | — | $ | 5,617 | $ | — | $ | 431,241 | $ | — | $ | (2,266 | ) | $ | 428,975 | |||||||||||||||||
| Net fair value gains | — | 89,278 | 8,582 | 25,881 | — | 123,741 | — | 1,942 | 125,683 | |||||||||||||||||||||||||||
| Fee income | 54,322 | 1,112 | 11,185 | 2,392 | 85,570 | 154,581 | 44 | (7,998 | ) | 146,627 | ||||||||||||||||||||||||||
| Net interest expense | 1,264 | — | — | (44,481 | ) | (33 | ) | (43,250 | ) | (4,220 | ) | (82 | ) | (47,552 | ) | |||||||||||||||||||||
Total revenues | 481,210 | 90,390 | 19,767 | (10,591 | ) | 85,537 | 666,313 | (4,176 | ) | (8,404 | ) | 653,733 | ||||||||||||||||||||||||
Total expenses | 354,149 | 40,740 | 22,442 | 38,746 | 78,149 | 534,226 | 23,222 | (8,404 | ) | 549,044 | ||||||||||||||||||||||||||
Other, net | — | — | — | — | — | — | (44 | ) | — | (44 | ) | |||||||||||||||||||||||||
Net income (loss) before taxes | $ | 127,061 | $ | 49,650 | $ | (2,675 | ) | $ | (49,337 | ) | $ | 7,388 | $ | 132,087 | $ | (27,442 | ) | $ | — | $ | 104,645 | |||||||||||||||
| Depreciation and amortization | $ | 3,087 | $ | 455 | $ | 306 | $ | 23 | $ | 2,105 | $ | 5,976 | $ | 981 | $ | — | $ | 6,957 | ||||||||||||||||||
Total assets | $ | 1,816,879 | $ | 86,335 | $ | 59,439 | $ | 16,194,177 | $ | 92,413 | $ | 18,249,243 | $ | 484,973 | $ | (638,216 | ) | $ | 18,096,000 | |||||||||||||||||
28. | Liquidity and Capital Requirements |
29. | Concentrations of Risk |
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
California | 36 | % | 37 | % | ||||||
Oregon | 8 | 7 | ||||||||
Washington | 8 | 8 | ||||||||
Arizona | 6 | 6 | ||||||||
New Jersey | 5 | 5 | ||||||||
Other | 37 | 37 | ||||||||
100 | % | 100 | % | |||||||
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
California | 44 | % | 44 | % | ||||||
New York | 8 | 8 | ||||||||
Florida | 5 | 5 | ||||||||
Texas | 5 | 5 | ||||||||
Other | 38 | 38 | ||||||||
100 | % | 100 | % | |||||||
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
California | 79 | % | 84 | % | ||||||
Other | 21 | 16 | ||||||||
100 | % | 100 | % | |||||||
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
Puerto Rico | 16 | % | 21 | % | ||||||
New York | 16 | 15 | ||||||||
California | 10 | 9 | ||||||||
Texas | 10 | 9 | ||||||||
Florida | 6 | 5 | ||||||||
Other | 42 | 41 | ||||||||
100 | % | 100 | % | |||||||
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
Illinois | 7 | % | 7 | % | ||||||
Minnesota | 8 | 5 | ||||||||
New Jersey | 6 | 9 | ||||||||
New York | 3 | 7 | ||||||||
California | 4 | 9 | ||||||||
Connecticut | 2 | 5 | ||||||||
Florida | 5 | 6 | ||||||||
Texas | 5 | 5 | ||||||||
New Mexico | 13 | 1 | ||||||||
Other | 47 | 46 | ||||||||
100 | % | 100 | % | |||||||
30. | Related Party Transactions |
31. | Condensed Financial Information of Registrant (Parent Company Only) |
June 30, 2021 | December 31, 2020 | |||||||||
Successor | Predecessor | |||||||||
ASSETS | ||||||||||
Fixed assets and leasehold improvements, net | $ | — | $ | 23 | ||||||
Investment in subsidiaries | 814,440 | 639,011 | ||||||||
Other assets, net | — | 2,184 | ||||||||
TOTAL ASSETS | $ | 814,440 | $ | 641,218 | ||||||
LIABILITIES AND EQUITY | ||||||||||
Payables and other liabilities | $ | 76,469 | $ | 13,033 | ||||||
TOTAL LIABILITIES | $ | 76,469 | $ | 13,033 | ||||||
EQUITY | ||||||||||
FoA Equity Capital LLC member’s equity | — | 628,176 | ||||||||
Class A Common Stock (Successor), $0.0001 par value; 6,000,000,000 shares authorized; 59,881,714 shares issued and outstanding at June 30, 2021 | 6 | — | ||||||||
Additional paid-in capital (Successor) | 807,521 | — | ||||||||
Accumulated deficit (Successor) | (69,548 | ) | — | |||||||
Accumulated other comprehensive (loss) income | (8 | ) | 9 | |||||||
TOTAL EQUITY | 737,971 | 628,185 | ||||||||
TOTAL LIABILITIES AND EQUITY | $ | 814,440 | $ | 641,218 | ||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
REVENUES | ||||||||||||||||||||
Interest expense | $ | — | $ | (46 | ) | $ | (2,477 | ) | $ | (3,601 | ) | |||||||||
TOTAL REVENUES | — | (46 | ) | (2,477 | ) | (3,601 | ) | |||||||||||||
EXPENSES | ||||||||||||||||||||
Salaries and benefits | — | 4,041 | 3,162 | 4,263 | ||||||||||||||||
Occupancy and equipment rentals | — | 161 | 143 | 312 | ||||||||||||||||
General and administrative | — | 357 | 215 | 736 | ||||||||||||||||
TOTAL EXPENSES | — | 4,559 | 3,520 | 5,311 | ||||||||||||||||
OTHER, NET | (2,152 | ) | — | — | — | |||||||||||||||
NET LOSS BEFORE INCOME TAXES | (2,152 | ) | (4,605 | ) | (5,997 | ) | (8,912 | ) | ||||||||||||
Provision for income taxes applicable to parent | (99 | ) | — | — | — | |||||||||||||||
NET LOSS | (2,053 | ) | (4,605 | ) | (5,997 | ) | (8,912 | ) | ||||||||||||
Equity in undistributed income from subsidiaries | 4,318 | 124,464 | 154,332 | 129,997 | ||||||||||||||||
NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST | 2,265 | 119,859 | 148,335 | 121,085 | ||||||||||||||||
Other comprehensive (loss) income | (8 | ) | (11 | ) | 18 | 11 | ||||||||||||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST | $ | 2,257 | $ | 119,848 | $ | 148,353 | $ | 121,096 | ||||||||||||
32. | Income Taxes |
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Net (loss) income before income taxes | $ | (13,738 | ) | $ | 125,457 | $ | 146,734 | $ | 104,645 | |||||||||||
Provision for income taxes | 1,086 | 1,137 | 448 | 766 | ||||||||||||||||
Effective tax provision rate | (7.91 | )% | 0.91 | % | 0.31 | % | 0.73 | % | ||||||||||||
33. | Earnings Per Share |
April 1, 2021 to June 30, 2021 | ||||
Successor | ||||
Basic net income (loss) per share: | ||||
Numerator | ||||
Net loss | $ | (14,824 | ) | |
Less: loss attributable to noncontrolling interests (1) | (17,089 | ) | ||
Net income attributable to holders of Class A Common Stock—basic | $ | 2,265 | ||
Denominator | ||||
Weighted average shares of Class A Common Stock outstanding—basic | 59,881,714 | |||
Basic net income per share | $ | 0.04 | ||
(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. |
Additionally, the Class B Common Stock does not participate in earnings or losses of the Company and therefore is not a participating security. The Class B Common Stock has not been included in either the basic or diluted net income per share calculations. |
Loss attributable to noncontrolling interest includes special allocations of recognized expense related to the A&R MLTIP. See Note 24 - Incentive Compensation for additional details. |
April 1, 2021 to June 30, 2021 | ||||
(in thousands, except for share amounts) | Successor | |||
Diluted net loss per share: | ||||
Numerator | ||||
Net income attributable to holders of Class A Common Stock | $ | 2,265 | ||
Reallocation of net loss assuming exchange of Class A LLC Units (2) | (12,001 | ) | ||
Net loss attributable to holders of Class A Common Stock—diluted | $ | (9,736 | ) | |
Denominator | ||||
Weighted average shares of Class A Common Stock outstanding—basic | 59,881,714 | |||
Effect of dilutive securities: | ||||
Assumed exchange of Class A LLC Units for shares of Class A Common Stock (3) | 131,318,286 | |||
Weighted average shares of Class A Common Stock outstanding—diluted | 191,200,000 | |||
Diluted net loss per share | $ | (0.05 | ) | |
(2) This adjustment assumes theafter-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.Following the terms of the A&R LLC Agreement, the Class A LLC unitholders will initially bear approximately 85% of the cost of any vesting associated with the Replacement RSUs and Earnout Right RSUs prior to any distribution by FoA to such Class A LLC unitholders. The remaining compensation cost associated with the Replacement RSUs and Earnout Right RSUs will be shared by Blocker. As a result of the application of the if-converted method, in arriving at diluted net income per share, the entirety of the compensation cost associated with vesting of the Replacement RSUs and Earnout Right RSUs is assumed to be included in the net income attributable to holders of the Company’s Class A Common Stock.(3) The diluted weighted average shares outstanding of Class A Common Stock includes the effects of theif-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 aone-for-one In addition to the Class A LLC Units, the Company also had Replacement RSUs outstanding during the period from April 1, 2021 to June 30, 2021. The effects of the Replacement RSUs following the treasury stock method have been excluded from the computation of diluted net income per share given that the if-converted method was determined to be more dilutive. |
34. | Sponsor Earnout |
35. | Equity |
36. | Subsequent Events |
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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.
For the three months ended September 30, 2020, we hadinclude salaries, benefits and related expenses, occupancy, equipment rentals and other office related expenses, and general and administrative expenses.
state income tax purposes and is subject to U.S. federal income taxes with respect to its allocable share of any taxable income of FoA Equity and is taxed at the prevailing corporate tax rates. Accordingly, a provision for income taxes is recorded for the anticipated tax consequences of FoA’s allocable share of FoA Equity’s reported results of operations for federal income taxes. In addition to tax expenses, we also incur expenses related to our operations, as well as payments under the TRAs, which are significant. FoA Equity distributes an amount sufficient to allow FoA to pay its tax obligations and operating expenses, including distributions to fund any payments due under the TRAs. See “Certain Agreements Related to the Business Combination—Tax Receivable Agreements.” However, our ability to make such distributions may be limited due to, among other things, restrictive covenants in our financing lines of credit and senior notes. FoA is a holding company and its only material asset is its direct and indirect interest in FoA Equity. FoA accordingly is dependent upon distributions from FoA Equity to pay taxes, make payments under the TRAs and pay dividends.
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Gain on sale and other income from mortgage loans held for sale, net | $ | 187,577 | $ | 291,334 | $ | 298,291 | $ | 428,975 | ||||||||||
Net fair value gains on mortgage loans and related obligations | 131,151 | 76,663 | 112,303 | 125,683 | ||||||||||||||
Fee income | 90,864 | 161,371 | 76,656 | 146,627 | ||||||||||||||
Net interest expense | (20,475 | ) | (21,705 | ) | (21,791 | ) | (47,552 | ) | ||||||||||
Total revenue | 389,117 | 507,663 | 465,459 | 653,733 | ||||||||||||||
Total expenses | 400,752 | 373,344 | 318,697 | 549,044 | ||||||||||||||
Other, net | (2,103 | ) | (8,862 | ) | (28 | ) | (44 | ) | ||||||||||
NET (LOSS) INCOME BEFORE TAXES | $ | (13,738 | ) | $ | 125,457 | $ | 146,734 | $ | 104,645 | |||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Interest income on loans | $ | 173,940 | $ | 160,568 | $ | 217,841 | $ | 401,513 | ||||||||||
Change in fair value of loans | 84,983 | (51,346 | ) | 180,904 | 82,338 | |||||||||||||
Change in fair value of mortgage backed securities | — | — | (1,470 | ) | 817 | |||||||||||||
Fair value gains on mortgage loans | 258,923 | 109,222 | 397,275 | 484,668 | ||||||||||||||
Interest expense on related obligations | (113,474 | ) | (119,201 | ) | (127,488 | ) | (261,845 | ) | ||||||||||
Change in fair value of derivatives | (46,478 | ) | 43,972 | 8,567 | (5,743 | ) | ||||||||||||
Change in fair value of related obligations | 32,180 | 42,670 | (166,051 | ) | (91,397 | ) | ||||||||||||
Fair value losses on related obligations | (127,772 | ) | (32,559 | ) | (284,972 | ) | (358,985 | ) | ||||||||||
Net fair value gains on mortgage loans and related obligations | $ | 131,151 | $ | 76,663 | $ | 112,303 | $ | 125,683 | ||||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Interest income on commercial and reverse loans | $ | 173,940 | $ | 160,568 | $ | 217,841 | $ | 401,513 | ||||||||||
Interest expense on HMBS and nonrecourse obligations | (113,474 | ) | (119,201 | ) | (127,488 | ) | (261,845 | ) | ||||||||||
Net interest margin included in net fair value gains on mortgage loans (1) | 60,466 | 41,367 | 90,353 | 139,668 | ||||||||||||||
Interest income on mortgage loans held for sale | 13,024 | 12,621 | 11,468 | 19,561 | ||||||||||||||
Interest expense on warehouse lines of credit | (26,908 | ) | (26,546 | ) | (30,415 | ) | (62,864 | ) | ||||||||||
Non-funding debt interest expense | (6,644 | ) | (7,756 | ) | (2,803 | ) | (4,220 | ) | ||||||||||
Other interest income | 126 | 40 | 39 | 117 | ||||||||||||||
Other interest expense | (73 | ) | (64 | ) | (80 | ) | (146 | ) | ||||||||||
Net interest expense | (20,475 | ) | (21,705 | ) | (21,791 | ) | (47,552 | ) | ||||||||||
NET INTEREST MARGIN | $ | 39,991 | $ | 19,662 | $ | 68,562 | $ | 92,116 | ||||||||||
| (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. |
For the nine months ended September 30, 2020, we had net loss of approximately $2.4 million, which consisted of a loss of approximately $2.3 million on revaluation of the warrant liability and
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Gain on sale and other income from mortgage loans held for sale, net | $ | 7,748 | $ | 5,065 | $ | — | $ | 5,617 | ||||||||||
Net fair value gains | 11,223 | 2,750 | 57,237 | 25,881 | ||||||||||||||
Net interest expense | (15,851 | ) | (14,816 | ) | (19,708 | ) | (44,481 | ) | ||||||||||
Fee income | 3,577 | 36,191 | 1,431 | 2,392 | ||||||||||||||
Total revenue | 6,697 | 29,190 | 38,960 | (10,591 | ) | |||||||||||||
Total expenses | 33,190 | 24,406 | 21,374 | 38,746 | ||||||||||||||
Other, net | (245 | ) | 895 | — | — | |||||||||||||
NET (LOSS) INCOME BEFORE TAXES | $ | (26,738 | ) | $ | 5,679 | $ | 17,586 | $ | (49,337 | ) | ||||||||
| (1) | 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. |
June 30, | December 31, | |||||||||
2021 | 2020 | |||||||||
Successor | Predecessor | |||||||||
Restricted cash | $ | 352,037 | $ | 303,925 | ||||||
Loans held for investment, subject to HMBS liabilities, at fair value | 10,316,027 | 9,929,163 | ||||||||
Loans held for investment, subject to nonrecourse debt, at fair value | 5,424,621 | 5,396,167 | ||||||||
Loans held for investment, at fair value | 1,225,090 | 730,821 | ||||||||
Goodwill | 30,899 | — | ||||||||
Mortgage servicing rights, at fair value | 290,938 | 180,684 | ||||||||
Other assets, net | 158,375 | 165,810 | ||||||||
Total long-term investment assets | 17,797,987 | 16,706,570 | ||||||||
Loans held for sale, at fair value | 149,435 | 142,226 | ||||||||
Total earning assets | 17,947,422 | 16,848,796 | ||||||||
HMBS liabilities, at fair value | 10,168,224 | $ | 9,788,668 | |||||||
Nonrecourse debt, at fair value | 5,425,732 | 5,271,842 | ||||||||
Other secured financing | 1,597,172 | 1,010,669 | ||||||||
Other liabilities | 85,002 | 96,762 | ||||||||
Total financing of portfolio | 17,276,130 | 16,167,941 | ||||||||
Net equity in earning assets | $ | 671,292 | $ | 680,855 | ||||||
June 30, | December 31, | |||||||||
2021 | 2020 | |||||||||
Successor | Predecessor | |||||||||
Mortgage Servicing Rights Portfolio | ||||||||||
Loan count | 94,520 | 69,301 | ||||||||
Ending unpaid principal balance (“UPB”) | $ | 30,294,127 | $ | 22,269,362 | ||||||
Average unpaid principal balance | $ | 321 | $ | 321 | ||||||
Weighted average coupon | 3.04 | % | 3.15 | % | ||||||
Weighted average age (in months) | 7 | 4 | ||||||||
Weighted average FICO credit score | 759 | 760 | ||||||||
90+ day delinquency rate | 0.09 | % | 0.1 | % | ||||||
Total prepayment speed | 10.1 | % | 12.1 | % | ||||||
Reverse Mortgages | ||||||||||
Loan count | 59,258 | 58,230 | ||||||||
Active UPB | $ | 13,973,882 | $ | 13,355,570 | ||||||
Due and payable | $ | 585,656 | $ | 484,233 | ||||||
Foreclosure | $ | 340,588 | $ | 348,768 | ||||||
Claims pending | $ | 69,285 | $ | 76,346 | ||||||
Ending unpaid principal balance | $ | 14,969,411 | $ | 14,264,917 | ||||||
Average unpaid principal balance | $ | 253 | $ | 245 | ||||||
Weighted average coupon | 4.00 | % | 4.30 | % | ||||||
Weighted average age (in months) | 44 | 44 | ||||||||
Percentage in foreclosure | 2.3 | % | 2.4 | % | ||||||
Commercial (SRL/Portfolio/Fix & Flip) | ||||||||||
Loan count | 1,921 | 1,993 | ||||||||
Ending unpaid principal balance | $ | 417,813 | $ | 493,817 | ||||||
Average unpaid principal balance | $ | 217 | $ | 248 | ||||||
Weighted average coupon | 7.52 | % | 8.50 | % | ||||||
Weighted average loan age (in months) | 9 | 12 | ||||||||
SRL conditional prepayment rate | 2.4 | % | 2.9 | % | ||||||
SRL non-performing (60+ DPD) | 1.5 | % | 2.2 | % | ||||||
F&F single month mortality | 9.3 | % | 8.8 | % | ||||||
F&F non-performing (60+ DPD) | 17.4 | % | 6.5 | % | ||||||
Agricultural Loans | ||||||||||
Loan count | 74 | 42 | ||||||||
Ending unpaid principal balance | $ | 159,029 | $ | 69,127 | ||||||
Average unpaid principal balance | $ | 2,149 | $ | 1,646 | ||||||
Weighted average coupon | 7.20 | % | 7.70 | % | ||||||
Weighted average loan age (in months) | 4 | 5 | ||||||||
Conditional prepayment rate | 50.3 | % | 1.0 | % | ||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Investment and Capital Markets | ||||||||||||||||||
Number of structured deals | 3 | 1 | 4 | 6 | ||||||||||||||
Structured deals (size in notes) | $ | 1,132,531 | $ | 571,448 | $ | 1,187,440 | $ | 1,760,352 | ||||||||||
Number of whole loan trades | 10 | 8 | 0 | 2 | ||||||||||||||
UPB of whole loan trades | $ | 218,068 | $ | 195,929 | $ | — | $ | 124,165 | ||||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
REVENUE | ||||||||||||||||||
Gain on sale and other income from mortgage loans held for sale, net | $ | 7,748 | $ | 5,065 | $ | — | $ | 5,617 | ||||||||||
Interest income | 147,945 | 149,875 | 198,156 | 360,994 | ||||||||||||||
Interest expense (nonrecourse) | (111,341 | ) | (114,910 | ) | (134,628 | ) | (262,478 | ) | ||||||||||
Net fair value losses on portfolio assets | (25,381 | ) | (32,215 | ) | (6,291 | ) | (72,635 | ) | ||||||||||
Net fair value gains | 11,223 | 2,750 | 57,237 | 25,881 | ||||||||||||||
Net interest expense | (15,851 | ) | (14,816 | ) | (19,708 | ) | (44,481 | ) | ||||||||||
Servicing income (MSR) | 300 | 33,698 | 1,682 | 1,786 | ||||||||||||||
Underwriting, advisory and valuation fees | 1,901 | 997 | 90 | 180 | ||||||||||||||
Asset management fees | — | 9 | 442 | 953 | ||||||||||||||
Other fees | 1,376 | 1,487 | (783 | ) | (527 | ) | ||||||||||||
| �� | ||||||||||||||||||
Fee income | 3,577 | 36,191 | 1,431 | 2,392 | ||||||||||||||
Total revenue | $ | 6,697 | $ | 29,190 | $ | 38,960 | $ | (10,591 | ) | |||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||
Successor | Predecessor | |||||||||||||||
Interest income on commercial and reverse loans | $ | 147,944 | $ | 149,875 | $ | 198,643 | $ | 361,481 | ||||||||
Interest expense on HMBS and nonrecourse obligations | (111,341 | ) | (114,910 | ) | (134,628 | ) | (262,478 | ) | ||||||||
Net interest margin included in net fair value gains on mortgage loans (1) | 36,603 | 34,965 | 64,015 | 99,003 | ||||||||||||
Interest income on mortgage loans held for sale | 187 | 138 | 309 | 483 | ||||||||||||
Interest expense on warehouse lines of credit | (16,038 | ) | (14,954 | ) | (20,017 | ) | (44,968 | ) | ||||||||
Other interest income | — | — | — | 4 | ||||||||||||
Net interest expense | (15,851 | ) | (14,816 | ) | (19,708 | ) | (44,481 | ) | ||||||||
NET INTEREST MARGIN | $ | 20,752 | $ | 20,149 | $ | 44,307 | $ | 54,522 | ||||||||
| (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 interim unaudited consolidated financial statements for additional information on the Company’s accounting related to commercial and reverse mortgage loans. |
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Salaries and bonuses | $ | 15,540 | $ | 5,650 | $ | 5,061 | $ | 9,792 | ||||||||||
Other salary related expenses | 405 | 497 | 327 | 696 | ||||||||||||||
Total salaries, benefits and related expenses | 15,945 | 6,147 | 5,388 | 10,488 | ||||||||||||||
Securitization expenses | 4,733 | 4,459 | 5,017 | 8,350 | ||||||||||||||
Servicing related expenses | 8,825 | 8,651 | 7,028 | 12,420 | ||||||||||||||
Other general and administrative expenses | 3,560 | 4,887 | 3,781 | 7,174 | ||||||||||||||
Total general and administrative expenses | 17,118 | 17,997 | 15,826 | 27,944 | ||||||||||||||
Occupancy and equipment rentals | 127 | 262 | 160 | 314 | ||||||||||||||
Total expenses | $ | 33,190 | $ | 24,406 | $ | 21,374 | $ | 38,746 | ||||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Gain on sale and other income from mortgage loans held for sale, net | $ | 185,386 | $ | 286,481 | $ | 298,333 | $ | 425,624 | ||||||||||
Fee income | 30,345 | 32,731 | 33,795 | 54,322 | ||||||||||||||
Net interest income | 1,976 | 891 | 778 | 1,264 | ||||||||||||||
Total revenue | 217,707 | 320,103 | 332,906 | 481,210 | ||||||||||||||
Total expenses | 224,191 | 224,246 | 215,958 | 354,149 | ||||||||||||||
NET INCOME BEFORE TAXES | $ | (6,484 | ) | $ | 95,857 | $ | 116,948 | $ | 127,061 | |||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Loan origination volume (dollars) | ||||||||||||||||||
Conforming | $ | 4,302,170 | $ | 5,397,708 | $ | 5,377,252 | $ | 7,976,292 | ||||||||||
Government | 995,657 | 1,068,650 | 1,238,058 | 2,032,871 | ||||||||||||||
Non-conforming | 1,571,895 | 1,937,860 | 966,514 | 1,793,173 | ||||||||||||||
Home improvement | 58,928 | — | — | — | ||||||||||||||
Total loan origination volume | $ | 6,928,650 | $ | 8,404,218 | $ | 7,581,824 | $ | 11,802,336 | ||||||||||
Loan origination volume by channel (dollars) | ||||||||||||||||||
Retail | $ | 4,870,554 | $ | 5,622,487 | 5,773,656 | $ | 8,984,443 | |||||||||||
Wholesale/Correspondent | 1,201,503 | 1,706,365 | 1,037,824 | 1,579,202 | ||||||||||||||
Consumer direct | 797,665 | 1,075,366 | 770,344 | 1,238,691 | ||||||||||||||
Home improvement | 58,928 | — | — | — | ||||||||||||||
Total loan origination volume by channel | $ | 6,928,650 | $ | 8,404,218 | $ | 7,581,824 | $ | 11,802,336 | ||||||||||
Loan origination volume by type (dollars) | ||||||||||||||||||
Purchase | $ | 3,494,462 | 2,664,493 | 2,059,463 | 3,757,855 | |||||||||||||
Refinance | 3,375,260 | 5,739,725 | 5,522,361 | 8,044,481 | ||||||||||||||
Home improvement | 58,928 | — | — | — | ||||||||||||||
Total loan origination volume by type | $ | 6,928,650 | $ | 8,404,218 | $ | 7,581,824 | $ | 11,802,336 | ||||||||||
Loan origination volume (units) | ||||||||||||||||||
Conforming | 14,136 | 18,090 | 17,910 | 27,276 | ||||||||||||||
Government | 3,141 | 3,426 | 4,145 | 7,014 | ||||||||||||||
Non-conforming | 1,972 | 2,472 | 1,466 | 2,648 | ||||||||||||||
Home improvement | 5,522 | — | — | — | ||||||||||||||
Total loan origination volume | 24,771 | 23,988 | 23,521 | 36,938 | ||||||||||||||
Loan origination volume by channel (units) | ||||||||||||||||||
Retail | 13,737 | 16,123 | 18,349 | 28,934 | ||||||||||||||
Wholesale/Correspondent | 3,005 | 4,745 | 2,986 | 4,456 | ||||||||||||||
Consumer direct | 2,507 | 3,120 | 2,186 | 3,548 | ||||||||||||||
Home improvement | 5,522 | — | — | — | ||||||||||||||
Total loan origination volume by channel | 24,771 | 23,988 | 23,521 | 36,938 | ||||||||||||||
Loan origination volume by type (units) | ||||||||||||||||||
Purchase | 9,328 | 7,534 | 6,890 | 12,961 | ||||||||||||||
Refinance | 9,921 | 16,454 | 16,631 | 23,977 | ||||||||||||||
Home improvement | 5,522 | — | — | — | ||||||||||||||
Total loan origination volume by type | 24,771 | 23,988 | 23,521 | 36,938 | ||||||||||||||
Loan sales by investor (dollars) | ||||||||||||||||||
Agency | $ | 5,807,841 | $ | 7,246,418 | $ | 6,946,820 | $ | 10,207,363 | ||||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Private | 1,212,318 | 1,152,810 | 433,121 | 1,191,224 | ||||||||||||||
Total loan sales by investor | $ | 7,020,159 | $ | 8,399,228 | $ | 7,379,941 | $ | 11,398,587 | ||||||||||
Loan sales by type (dollars) | ||||||||||||||||||
Servicing released | $ | 2,183,584 | $ | 2,086,550 | $ | 525,085 | $ | 4,408,050 | ||||||||||
Servicing retained | 4,836,575 | 6,312,678 | 6,854,856 | 6,990,537 | ||||||||||||||
Total loan sales by type | $ | 7,020,159 | $ | 8,399,228 | $ | 7,379,941 | $ | 11,398,587 | ||||||||||
Net rate lock volume | $ | 6,668,823 | $ | 8,405,313 | $ | 6,800,861 | 13,017,115 | |||||||||||
Mortgage originations margin (including servicing margin) (1) | 2.8 | % | 3.4 | % | 4.4 | % | 3.3 | % | ||||||||||
Capitalized servicing rate (in bps) | 103.5 | 89.1 | 63.6 | 64.2 | ||||||||||||||
(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. |
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Gain on sale, net | $ | 168,821 | $ | 200,874 | $ | 319,444 | $ | 456,858 | ||||||||||
Provision for repurchases | (1,813 | ) | (2,258 | ) | (9,854 | ) | (11,979 | ) | ||||||||||
Realized hedge gains (losses) | (17,013 | ) | 74,823 | (57,922 | ) | (107,484 | ) | |||||||||||
Changes in fair value of loans held for sale | 11,602 | (41,485 | ) | 11,109 | 33,410 | |||||||||||||
Changes in fair value of interest rate locks | (2,984 | ) | (49,946 | ) | 7,706 | 64,051 | ||||||||||||
Changes in fair value of derivatives/hedges | 26,773 | 104,473 | 27,850 | (9,232 | ) | |||||||||||||
Gain on sale and other income from mortgage loans held for sale, net | 185,386 | 286,481 | 298,333 | 425,624 | ||||||||||||||
Origination related fee income | 30,345 | 32,731 | 33,795 | 54,322 | ||||||||||||||
Net interest income | 1,976 | 891 | 778 | 1,264 | ||||||||||||||
Total revenue | $ | 217,707 | $ | 320,103 | $ | 332,906 | $ | 481,210 | ||||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Interest income | $ | 12,837 | $ | 12,483 | $ | 11,160 | $ | 19,078 | ||||||||||
Interest expense | (10,861 | ) | (11,592 | ) | (10,382 | ) | (17,814 | ) | ||||||||||
Net interest income | $ | 1,976 | $ | 891 | $ | 778 | $ | 1,264 | ||||||||||
WAC - loans held for sale | 3.2 | % | 2.9 | % | 3.2 | % | 3.2 | % | ||||||||||
WAC - warehouse lines of credit | 3.2 | % | 3.0 | % | 2.6 | % | 2.6 | % | ||||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Commissions and bonus | $ | 103,600 | $ | 111,766 | $ | 126,415 | $ | 185,244 | ||||||||||
Salaries | 55,556 | 46,232 | 36,116 | 66,823 | ||||||||||||||
Other salary related expenses | 13,152 | 18,451 | 13,355 | 25,805 | ||||||||||||||
Total salaries, benefits and related expenses | 172,308 | 176,449 | 175,886 | 277,872 | ||||||||||||||
Loan origination fees | 14,781 | 14,003 | 11,862 | 20,987 | ||||||||||||||
Loan processing expenses | 5,425 | 5,462 | 2,007 | 4,600 | ||||||||||||||
Other general and administrative expenses | 27,588 | 23,112 | 20,929 | 40,038 | ||||||||||||||
Total general and administrative expenses | 47,794 | 42,577 | 34,798 | 65,625 | ||||||||||||||
Occupancy, equipment rentals and other office related expenses | 4,089 | 5,220 | 5,274 | 10,652 | ||||||||||||||
Total expenses | $ | 224,191 | $ | 224,246 | $ | 215,958 | $ | 354,149 | ||||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Net origination gains | $ | 94,536 | $ | 68,449 | $ | 54,689 | $ | 89,278 | ||||||||||
Fee income | 954 | 524 | 509 | 1,112 | ||||||||||||||
Net interest expense | (9 | ) | — | — | — | |||||||||||||
Total revenue | 95,481 | 68,973 | 55,198 | 90,390 | ||||||||||||||
Total expenses | 42,246 | 23,693 | 22,156 | 40,740 | ||||||||||||||
Other, net | 104 | 34 | — | — | ||||||||||||||
NET INCOME BEFORE TAXES | $ | 53,339 | $ | 45,314 | $ | 33,042 | $ | 49,650 | ||||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Loan origination volume | ||||||||||||||||||||
Total loan origination volume—New originations—dollars (1) | $ | 1,013,323 | $ | 768,795 | $ | 769,349 | $ | 1,425,626 | ||||||||||||
Total loan origination volume—Tails—dollars (2) | 121,962 | 120,775 | 106,179 | 236,164 | ||||||||||||||||
Total loan origination volume—dollars | $ | 1,135,285 | $ | 889,570 | $ | 875,528 | $ | 1,661,790 | ||||||||||||
Total loan origination volume—units | 3,258 | 2,864 | 2,461 | 4,757 | ||||||||||||||||
Loan origination volume by channel (dollars) (3) | ||||||||||||||||||||
Retail | $ | 172,972 | $ | 127,679 | $ | 101,066 | $ | 173,690 | ||||||||||||
TPO | 840,351 | 641,116 | 668,283 | 1,251,936 | ||||||||||||||||
Total loan origination volume by channel | $ | 1,013,323 | $ | 768,795 | $ | 769,349 | $ | 1,425,626 | ||||||||||||
(1) | New loan origination volumes consist of initial reverse mortgage loan borrowing amounts. |
(2) | Tails consist of subsequent borrower advances, mortgage insurance premiums, service fees and advances which 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 advances, mortgage insurance premiums, service fees and advances which we are able to subsequently pool into a security. |
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Net origination gains | ||||||||||||||||||||
Retail | $ | 17,220 | $ | 16,913 | $ | 9,230 | $ | 15,719 | ||||||||||||
TPO | 141,386 | 99,678 | 79,439 | 147,537 | ||||||||||||||||
Acquisition costs | (64,070 | ) | (48,142 | ) | (33,980 | ) | (73,978 | ) | ||||||||||||
Total net origination gains | 94,536 | 68,449 | 54,689 | 89,278 | ||||||||||||||||
Fee income | 954 | 524 | 509 | 1,112 | ||||||||||||||||
Net interest income | (9 | ) | — | — | — | |||||||||||||||
Total revenue | $ | 95,481 | $ | 68,973 | $ | 55,198 | $ | 90,390 | ||||||||||||
volume. The higher origination volumes is attributable to home price appreciation and improved interest rates on the HECM loan products leading to an increase in market size, more equity available to seniors, and increased refinance volumes in 2021. We originated $1,013.3 million of reverse mortgage loans for the three months from April 1, 2021 to June 30, 2021, an increase of 31.7%, compared to $769.3 million for the comparable 2020 period. During the three months from April 1, 2021 to June 30, 2021, the weighted average margin on production was 8.33% compared to 6.25% in 2020, an increase of 33.3%. |
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Salaries and bonuses | $ | 19,845 | $ | 11,692 | $ | 10,593 | $ | 20,296 | ||||||||||||
Other salary related expenses | 2,008 | 1,395 | 1,124 | 2,342 | ||||||||||||||||
Total salaries, benefits and related expenses | 21,853 | 13,087 | 11,717 | 22,638 | ||||||||||||||||
Loan origination fees | 2,761 | 3,258 | 3,117 | 5,736 | ||||||||||||||||
Professional fees | 2,676 | 2,079 | 116 | 2,222 | ||||||||||||||||
Other general and administrative expenses | 14,491 | 4,958 | 6,800 | 9,366 | ||||||||||||||||
Total general and administrative expenses | 19,928 | 10,295 | 10,033 | 17,324 | ||||||||||||||||
Occupancy, equipment rentals and other office related expenses | 465 | 311 | 406 | 778 | ||||||||||||||||
Total expenses | $ | 42,246 | $ | 23,693 | $ | 22,156 | $ | 40,740 | ||||||||||||
Business Combination. During the second quarter of 2021, $9.3 million of amortization of intangibles was recognized as a result of the Business Combination.
Going Concern Consideration
Assupport the increased origination volume, and share based compensation associated with the Business Combination. Average headcount for the six months ended June 30, 2021 was 345 compared to 269 for the 2020 period. During the second quarter of September 30, 2020, we had approximately $1.022021,
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Net origination gains | $ | 10,822 | $ | 5,431 | $ | 21 | $ | 8,582 | ||||||||||||
Fee income | 12,124 | 8,930 | 350 | 11,185 | ||||||||||||||||
Total revenue | 22,946 | 14,361 | 371 | 19,767 | ||||||||||||||||
Total expenses | 20,049 | 13,391 | 6,552 | 22,442 | ||||||||||||||||
Other, net | 140 | 149 | — | — | ||||||||||||||||
NET INCOME (LOSS) BEFORE TAXES | $ | 3,037 | $ | 1,119 | $ | (6,181 | ) | $ | (2,675 | ) | ||||||||||
Through September 30, 2020, our liquidity needs have been satisfied through receipt of a $25,000 capital contributionflip” properties which are undergoing construction or renovation. Revenue from our SponsorCommercial Originations segment include both our initial estimate of fair value gains on the date of origination (“Net origination gains”), which is determined by utilizing quoted prices on similar securities or internally-developed models utilizing observable market inputs, in exchange foraddition to fees earned at the issuancetime of origination of the Founder Shares (defined below)associated loans. We elect to account for all originated loans at fair value. The loans are immediately transferred to our Sponsor, $250,000 in loans from our Sponsor under an unsecured promissory notePortfolio Management segment, and approximately $2,000 in advances from a related party. Subsequent to the consummation of our Initial Public Offering, we received the net proceeds from the consummation of the Private Placement not held in the Trust Account of $2.0 million. We fully repaid the note and the advances to our Sponsor and the related party in May 2019.
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.
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Loan origination volume (dollars) (1) | ||||||||||||||||||||
Portfolio | $ | 70,027 | $ | 59,458 | $ | — | $ | 39,695 | ||||||||||||
SRL | 170,442 | 104,992 | — | 89,187 | ||||||||||||||||
Fix & flip | 96,054 | 90,018 | 543 | 157,378 | ||||||||||||||||
New construction | 17,638 | 3,422 | — | 93,169 | ||||||||||||||||
Agricultural | 46,309 | 83,013 | 13,769 | 78,497 | ||||||||||||||||
Total loan origination volume | $ | 400,470 | $ | 340,903 | $ | 14,312 | $ | 457,926 | ||||||||||||
Loan origination volume (units) (1) | ||||||||||||||||||||
Portfolio | 74 | 71 | — | 22 | ||||||||||||||||
SRL | 959 | 643 | — | 543 | ||||||||||||||||
Fix & flip | 445 | 430 | 3 | 752 | ||||||||||||||||
New construction | 56 | 13 | — | 276 | ||||||||||||||||
Agricultural | 24 | 27 | 10 | 38 | ||||||||||||||||
Total loan origination volume | 1,558 | 1,184 | 13 | 1,631 | ||||||||||||||||
(1) | Loan originations volume and units consist of approved total borrower commitments. These amounts include amounts available to our borrowers but have not yet been drawn upon. |
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Net origination gains | $ | 10,822 | $ | 5,431 | $ | 21 | $ | 8,582 | ||||||||||||
Fee income | 12,124 | 8,930 | 350 | 11,185 | ||||||||||||||||
Total revenue | $ | 22,946 | $ | 14,361 | $ | 371 | $ | 19,767 | ||||||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Salaries | $ | 7,643 | $ | 4,769 | $ | 2,977 | $ | 7,104 | ||||||||||||
Commissions and bonus | 2,881 | 2,092 | 871 | 3,691 | ||||||||||||||||
Other salary related expenses | 980 | 797 | 452 | 1,399 | ||||||||||||||||
Total salaries, benefits and related expenses | 11,504 | 7,658 | 4,300 | 12,194 | ||||||||||||||||
Loan origination fees | 4,939 | 3,140 | 770 | 5,312 | ||||||||||||||||
Professional fees | 1,332 | 891 | 965 | 2,414 | ||||||||||||||||
Other general and administrative expenses | 1,971 | 1,164 | 357 | 2,190 | ||||||||||||||||
Total general and administrative expenses | 8,242 | 5,195 | 2,092 | 9,916 | ||||||||||||||||
Occupancy, equipment rentals and other office related expenses | 303 | 538 | 160 | 332 | ||||||||||||||||
Total expenses | $ | 20,049 | $ | 13,391 | $ | 6,552 | $ | 22,442 | ||||||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Fee income | $ | 81,130 | $ | 76,383 | $ | 44,312 | $ | 85,570 | ||||||||||||
Net interest expense | (15 | ) | (36 | ) | (42 | ) | (33 | ) | ||||||||||||
Total revenue | 81,115 | 76,347 | 44,270 | 85,537 | ||||||||||||||||
Total expenses | 73,317 | 62,970 | 39,554 | 78,149 | ||||||||||||||||
Other, net | 83 | 2 | — | — | ||||||||||||||||
NET INCOME BEFORE TAXES | $ | 7,881 | $ | 13,379 | $ | 4,716 | $ | 7,388 | ||||||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Incenter Title Agent Orders | 55,435 | 54,960 | 42,614 | 77,229 | ||||||||||||||||
Incenter Title Agent Closings | 43,558 | 46,991 | 26,310 | 47,860 | ||||||||||||||||
Total appraisals | 10,351 | 7,427 | 5,713 | 9,734 | ||||||||||||||||
Title Insurance Underwriter Policies | 56,181 | 48,814 | 16,367 | 29,459 | ||||||||||||||||
FTE Count for Fulfillment Revenue | 916 | 858 | 690 | 715 | ||||||||||||||||
Total MSR valuations performed | 137 | 124 | 122 | 256 | ||||||||||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Title agent and closing services | $ | 33,878 | $ | 31,750 | $ | 20,399 | $ | 43,930 | ||||||||||||
Insurance underwriting services | 34,995 | 33,322 | 14,153 | 23,175 | ||||||||||||||||
Student and consumer loan origination services | 1,500 | 2,012 | 2,778 | 5,700 | ||||||||||||||||
Fulfillment services | 6,823 | 6,779 | 3,732 | 7,538 | ||||||||||||||||
MSR trade brokerage, valuation and other services | 3,850 | 2,462 | 3,211 | 5,185 | ||||||||||||||||
Other income | 167 | 58 | 39 | 42 | ||||||||||||||||
Net interest expense | (15 | ) | (36 | ) | (42 | ) | (33 | ) | ||||||||||||
Total revenue | $ | 81,115 | $ | 76,347 | $ | 44,270 | $ | 85,537 | ||||||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||||
Successor | Predecessor | |||||||||||||||||||
Salaries | $ | 18,351 | $ | 16,715 | $ | 11,018 | $ | 19,731 | ||||||||||||
Commissions and bonus | 8,690 | 7,045 | 6,601 | 10,553 | ||||||||||||||||
Other salary related expenses | 6,262 | 4,001 | 2,484 | 5,395 | ||||||||||||||||
Total salaries, benefits and related expenses | 33,303 | 27,761 | 20,103 | 35,679 | ||||||||||||||||
Title and closing | 25,190 | 25,062 | 12,682 | 28,677 | ||||||||||||||||
Communication and data processing | 3,125 | 2,960 | 2,483 | 4,412 | ||||||||||||||||
Fair value change in deferred purchase price liability | 1,750 | — | 94 | 163 | ||||||||||||||||
Other general and administrative expenses | 8,935 | 6,040 | 3,455 | 7,591 | ||||||||||||||||
Total general and administrative expenses | 39,000 | 34,062 | 18,714 | 40,843 | ||||||||||||||||
Occupancy, equipment rentals and other office related expenses | 1,014 | 1,147 | 737 | 1,627 | ||||||||||||||||
Total expenses | $ | 73,317 | $ | 62,970 | $ | 39,554 | $ | 78,149 | ||||||||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Fee income | $ | — | $ | — | $ | 28 | $ | 44 | ||||||||||
Net interest expense | (6,567 | ) | (7,744 | ) | (2,804 | ) | (4,220 | ) | ||||||||||
Total interest and other expense | (6,567 | ) | (7,744 | ) | (2,776 | ) | (4,176 | ) | ||||||||||
Total expenses | 36,021 | 18,683 | 16,573 | 23,222 | ||||||||||||||
Other, net | (2,185 | ) | (9,464 | ) | (28 | ) | (44 | ) | ||||||||||
NET LOSS | $ | (44,773 | ) | $ | (35,891 | ) | $ | (19,377 | ) | $ | (27,442 | ) | ||||||
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Salaries and bonuses | $ | 47,029 | $ | 22,779 | $ | 16,955 | $ | 27,456 | ||||||||||
Other salary related expenses | 2,232 | 3,306 | 94 | 1,815 | ||||||||||||||
Shared services—payroll allocations | (24,434 | ) | (18,657 | ) | (4,168 | ) | (13,489 | ) | ||||||||||
Total salaries, benefits and related expenses | 24,827 | 7,428 | 12,881 | 15,782 | ||||||||||||||
Communication and data processing | 3,840 | 3,015 | 1,507 | 2,841 | ||||||||||||||
Professional fees | 8,417 | 10,334 | 5,510 | 6,925 | ||||||||||||||
Other general and administrative expenses | 3,480 | 1,481 | 1,086 | 2,444 | ||||||||||||||
Shared services—general and administrative allocations | (5,265 | ) | (3,694 | ) | (4,882 | ) | (5,678 | ) | ||||||||||
Total general and administrative expenses | 10,472 | 11,136 | 3,221 | 6,532 | ||||||||||||||
Occupancy, equipment rentals and other office related expenses | 722 | 119 | 471 | 908 | ||||||||||||||
Total expenses | $ | 36,021 | $ | 18,683 | $ | 16,573 | $ | 23,222 | ||||||||||
| 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. | Share 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 |
April 1, 2021 to June 30, 2021 | January 1, 2021 to March 31, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | |||||||||||||||
Successor | Predecessor | |||||||||||||||||
Reconciliation of Net (loss) income to Adjusted Net Income and Adjusted EBITDA | ||||||||||||||||||
Net (loss) income | $ | (14,823 | ) | $ | 124,320 | $ | 146,285 | $ | 103,879 | |||||||||
Adjustments for: | ||||||||||||||||||
Change in fair value of loans and securities held for investment due to assumption changes (1) | 20,043 | 2,042 | 129 | 70,661 | ||||||||||||||
Amortization and impairment of intangibles | 13,457 | 629 | 644 | 1,288 | ||||||||||||||
Change in fair value of deferred purchase price liabilities (2) | 2,620 | 30 | (126 | ) | 147 | |||||||||||||
Change in fair value of warrant liabilities | 1,292 | — | — | — | ||||||||||||||
Share based compensation | 10,642 | — | — | — | ||||||||||||||
Change in fair value of minority investments (3) | 127 | 9,464 | — | — | ||||||||||||||
Certain non-recurring costs(4) | 43,478 | 6,719 | 1,825 | 4,654 | ||||||||||||||
Tax effect on net income (loss) attributable to noncontrolling interest (5) (6) | 4,273 | (31,482 | ) | (37,703 | ) | (26,442 | ) | |||||||||||
Tax effect of adjustments attributable to noncontrolling interest (5) | (18,528 | ) | (4,910 | ) | (643 | ) | (19,955 | ) | ||||||||||
Tax effect of adjustments attributable to controlling interest (5) | (5,303 | ) | N/A | N/A | N/A | |||||||||||||
Adjusted Net Income | $ | 57,278 | $ | 106,812 | $ | 110,411 | $ | 134,232 | ||||||||||
Effective income taxes | 20,644 | 37,529 | 38,794 | 47,163 | ||||||||||||||
Depreciation | 2,281 | 2,163 | 1,837 | 3,566 | ||||||||||||||
Interest expense on non-funding debt | 6,694 | 7,706 | 2,432 | 3,508 | ||||||||||||||
Adjusted EBITDA | $ | 86,897 | $ | 154,210 | $ | 153,474 | $ | 188,469 | ||||||||||
GAAP PER SHARE MEASURES | ||||||||||||||||||
Net income attributable to controlling interest | $ | 2,265 | N/A | N/A | N/A | |||||||||||||
Average shares outstanding | 59,882 | N/A | N/A | N/A | ||||||||||||||
Basic earnings per share | 0.04 | N/A | N/A | N/A | ||||||||||||||
If-converted method net (loss) income | $ | (9,737 | ) | $ | 119,859 | $ | 148,335 | $ | 121,085 | |||||||||
Weighted average diluted shares | 191,200 | 191,200 | 191,200 | 191,200 | ||||||||||||||
Diluted earnings per share | $ | (0.05 | ) | $ | 0.63 | $ | 0.78 | $ | 0.63 | |||||||||
Book equity | $ | 2,379,295 | $ | 844,386 | $ | 774,838 | $ | 774,838 | ||||||||||
Weighted average diluted shares | 191,200 | 191,200 | 191,200 | 191,200 | ||||||||||||||
Book Equity per Diluted Share | $ | 12.44 | $ | 4.42 | $ | 4.05 | $ | 4.05 | ||||||||||
NON-GAAP PER SHARE MEASURES | ||||||||||||||||||
Adjusted Net Income | $ | 57,278 | $ | 106,812 | $ | 110,411 | $ | 134,232 | ||||||||||
Weighted average diluted shares | 191,200 | 191,200 | 191,200 | 191,200 | ||||||||||||||
Adjusted Diluted Earnings per Share | $ | 0.30 | 0.56 | 0.58 | 0.70 | |||||||||||||
| (1) | Change in Fair Value of Loans and Securities Held for Investment due to Assumption Changes— |
| economics or when they will be realized in actual cash flows. We do not record this change as a separate component in our financial records, but have generated this information based on modeling and certain assumptions. Changes in Fair Value of Loans and Securities Held for Investment due to Assumption Changes includes changes in fair value for the following mortgage servicing rights, loans held for investment, and related liabilities: |
| 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 variousone-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 certainone-time charges including estimated settlements for legal and regulatory matters, acquisition related expenses, share based compensation associated with theone-time charges. The Successor period of April 1, 2021 to June 30, 2021 includes $38.6 million of non-recurring share based compensation primarily resulting from the immediate vesting portion of the Replacement RSU awards. |
(5) | We applied a 26% effective tax rate to pre-tax income and adjustments for the respective periods to determine the tax effect of net income (loss) attributable to the controlling and noncontrolling interests. |
(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, subject to certain exceptions. In addition, one of our subsidiaries, FAM, is subject to various regulatory capital 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, we had no borrowings under the Working Capital Loans.
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 June 30, 2021 | January 1, 2021 to March 31, 2021 | For the six months ended June 30, 2020 | ||||||||||||
Successor | Predecessor | |||||||||||||
Net cash (used in) provided by operating activities | (9,652 | ) | 118,043 | (117,200 | ) | |||||||||
Net cash used in investing activities | (337,885 | ) | (312,047 | ) | (873,607 | ) | ||||||||
Net cash provided by financing activities | 232,437 | 307,695 | 1,007,927 | |||||||||||
Mortgage Warehouse Facilities | Maturity Date | Total Capacity | June 30, 2021 | |||||||||
March 2022 $300M Facility (2) | March 2022 | $ | 300,000 | $ | 192,417 | |||||||
March 2022 $200M Facility (2) | March 2022 | 200,000 | 189,464 | |||||||||
May 2022 $200M Facility (1) | May 2022 | 200,000 | 189,050 | |||||||||
February 2022 $300M Facility (2) | February 2022 | 300,000 | 186,754 | |||||||||
July 2021 $200M Facility (1) | July 2021 | 200,000 | 167,207 | |||||||||
October 2021 $200M Facility (2) | October 2021 | 200,000 | 166,564 | |||||||||
March 2022 $225M Facility | March 2022 | 225,000 | 163,678 | |||||||||
March 2022 $200M Facility (2) | March 2022 | 200,000 | 155,468 | |||||||||
April 2022 $250M Facility (2) | April 2022 | 250,000 | 122,412 | |||||||||
May 2022 $350M Facility | May 2022 | 350,000 | 102,332 | |||||||||
October 2021 $250M Facility (2) | October 2021 | 250,000 | 65,541 | |||||||||
August 2021 $200M Facility (2) | August 2021 | 200,000 | 59,663 | |||||||||
August 2021 $300M Facility (1)(2) | August 2021 | 300,000 | 40,562 | |||||||||
June 2023 $300M Facility (2) | June 2023 | 300,000 | — | |||||||||
Total mortgage warehouse facilities | $ | 3,475,000 | $ | 1,801,112 | ||||||||
(1) | See Note 36—Subsequent Events within the interim unaudited consolidated financial statements for additional information on facility amendments. |
(2) | Denotes uncommitted facilities |
Reverse Warehouse Facilities | Maturity Date | Total Capacity | June 30, 2021 | |||||||||
October 2021 $400M Facility | October 2021 | $ | 400,000 | $ | 257,257 | |||||||
April 2022 $250M Facility (1) | April 2022 | 250,000 | 214,245 | |||||||||
December 2021 $100M Facility (1) | December 2021 | 100,000 | 89,226 | |||||||||
March 2022 $100M Facility (1) | March 2022 | 100,000 | 87,936 | |||||||||
June 2022 $75M Facility | June 2022 | 75,000 | 72,479 | |||||||||
June 2022 $200M Facility (1) | June 2022 | 200,000 | 26,883 | |||||||||
August 2021 $50M Facility (1) | August 2021 | 50,000 | 24,329 | |||||||||
Total reverse warehouse facilities | $ | 1,175,000 | $ | 772,355 | ||||||||
(1) | Denotes uncommitted facilities |
Commercial Warehouse Facilities | Maturity Date | Total Capacity | June 30, 2021 | |||||||
September 2022 $150M Facility | September 2022 | $ | 150,000 | $ | 112,229 | |||||
April 2023 $145M Facility | April 2023 | 145,000 | 86,055 | |||||||
February 2022 $150M Facility | February 2022 | 150,000 | 33,768 | |||||||
November 2023 $50M Facility | November 2023 | 65,000 | 30,528 | |||||||
August 2022 $75M Facility | August 2022 | 75,000 | 24,746 | |||||||
February 2022 $150M Facility (1) | February 2022 | 150,000 | 715 | |||||||
Total commercial warehouse facilities | $ | 735,000 | $ | 288,041 | ||||||
(1) | Denotes uncommitted facilities |
Other Secured Lines of Credit | Maturity Date | Interest Rate | Total Capacity | June 30, 2021 | ||||||||||
$200M Repo Facility (2) | N/A | LIBOR + applicable margin | $ | 200,000 | $ | 176,549 | ||||||||
March 2026 $150M Facility—MSR | March 2026 | LIBOR + applicable margin | 150,000 | 125,113 | ||||||||||
February 2024 $90M Facility (2) | February 2024 | LIBOR + applicable margin | 90,000 | 89,497 | ||||||||||
September 2022 $52.5M Facility (2) | September 2022 | LIBOR + applicable margin | 52,500 | 52,500 | ||||||||||
April 2022 $50M Facility (2) | April 2022 | LIBOR + applicable margin | 50,000 | 38,757 | ||||||||||
April 2022 $90M Facility (2) | April 2022 | 9.00% | 90,000 | 28,220 | ||||||||||
August 2022 $25M Facility (2) | August 2022 | 10% | 25,000 | 20,900 | ||||||||||
$14M Securities Repo (2) | September 2021 | LIBOR + applicable margin | 13,951 | 13,951 | ||||||||||
$4M Securities Repo Line | N/A | LIBOR + applicable margin | 4,024 | 4,024 | ||||||||||
$1.2M Repo Facility | N/A | LIBOR + applicable margin | 1,215 | 1,215 | ||||||||||
Total other secured lines of credit | $ | 676,690 | $ | 550,726 | ||||||||||
(1) | See Note 36—Subsequent Events within the interim unaudited consolidated financial statements for additional information on facility amendments. |
(2) | Denotes uncommitted facilities |
Total | Less than 1 year | 1- 3years | 3 - 5 years | More than 5 years | ||||||||||||||||
Contractual cash obligations: | ||||||||||||||||||||
Warehouse lines of credit | $ | 2,724,534 | $ | 2,607,951 | $ | 116,583 | $ | — | $ | — | ||||||||||
MSR line of credit | 228,560 | — | 89,497 | 125,112 | 13,951 | |||||||||||||||
Other secured lines of credit | 459,140 | 277,352 | — | — | 181,788 | |||||||||||||||
Nonrecourse debt (1) | 5,276,781 | 665,628 | 4,611,153 | — | — | |||||||||||||||
Notes payable | 353,718 | — | — | 353,718 | — | |||||||||||||||
Operating leases | 83,430 | 10,083 | 38,975 | 9,630 | 24,742 | |||||||||||||||
Total | $ | 9,126,163 | $ | 3,561,014 | $ | 4,856,208 | $ | 488,460 | $ | 220,481 | ||||||||||
| (1) | Nonrecourse MSR financing liability is excluded from this balance. See below for additional details. |
Recent Accounting Pronouncements
See Note 2 - SummaryTable 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.
Contents
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.
June 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 | $ | 29,589 | $ | (30,004 | ) | |||
Mortgage loans held for investment, subject to nonrecourse debt: | ||||||||
Reverse mortgage loans | 64,917 | (62,262 | ) | |||||
Fix & flip mortgage loans | 385 | (385 | ) | |||||
Mortgage loans held for investment: | ||||||||
Reverse mortgage loans | 7,793 | (6,988 | ) | |||||
Fix & flip mortgage loans | 107 | (107 | ) | |||||
Agricultural loans | 240 | (240 | ) | |||||
Mortgage loans held for sale: | ||||||||
Residential mortgage loans | 25,311 | (34,260 | ) | |||||
SRL | 1,071 | (1,076 | ) | |||||
Portfolio | 615 | (605 | ) | |||||
Mortgage servicing rights | (17,641 | ) | 13,967 | |||||
Other assets | 2 | (2 | ) | |||||
Derivative assets: | ||||||||
Forward commitments and TBAs | 1,043 | (909 | ) | |||||
Forward MBS | (7,983 | ) | 13,630 | |||||
IRLCs | 10,070 | (9,505 | ) | |||||
Total assets | $ | 115,519 | $ | (118,746 | ) | |||
Increase (decrease) in liabilities | ||||||||
HMBS related obligation | $ | 26,901 | $ | (27,269 | ) | |||
Nonrecourse debt | 22,402 | (22,250 | ) | |||||
Nonrecourse MSR financing liability | (3,275 | ) | 2,590 | |||||
Derivative liabilities: | ||||||||
Forward MBS | (37,085 | ) | 44,157 | |||||
Interest rate swaps and futures contracts | 29,749 | (29,749 | ) | |||||
Total liabilities | $ | 38,692 | $ | (32,521 | ) | |||
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 inabove, our management believes the future, any such newlypreviously identified material weakness could limithas been remediated, subject to continuous testing of the operating effectiveness of these internal controls throughout the year.
| * | 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 and Chief Financial Officer (Authorized Signatory and Principal Financial | |||||||