Finance of America Reports Preliminary Third Quarter 2020 Results
IRVING, Texas----Finance of America Companies, (“Finance of America”) which is expected to complete a business combination with Replay Acquisition Corp. (NYSE: RPLA) (“Replay Acquisition”) that will result in Finance of America becoming a publicly-listed company, reported preliminary quarter ended September 30, 2020 results. Finance of America is a diversified, vertically integrated lending platform. The Company operates in three lending segments: Forward Originations, Reverse Originations, Commercial Originations, and two non-lending segments: Lender Services and Portfolio Management.
Third Quarter 2020 Highlights
Year-To-Date 2020 Highlights
*See reconciliation of Adjusted EBITDA to Pre-tax net income.
“Finance of America’s outstanding third quarter and year-to-date results that have more than quintupled over the prior year demonstrate the power of our diversified lending platform,” stated Patricia Cook, CEO of Finance of America. “Furthermore, our platform continues to benefit from the significant and persistently low interest rates in our forward originations segment. In addition, our other four segments are well-positioned for further growth. I want to express my immense gratitude to the team members of Finance of America for their tireless efforts and exceptional ongoing performance. Beyond our accomplishments to date, the entire organization is even more excited to build on value we are creating for all our stakeholders.”
Third Quarter Financial Summary
($ amounts in millions) |
| Q3’20 |
| Q2’20 |
| Variance (%) |
| YTD Q3’20 |
| YTD Q3’19 |
| Variance (%) |
Funded volume | 9,170 |
| 8,353 |
| 10% |
| 22,857 |
| 13,633 |
| 68% | |
Net rate lock volume | 9,286 |
| 6,801 |
| 37% |
| 22,303 |
| 12,551 |
| 78% | |
Total revenue | 605 |
| 465 |
| 30% |
| 1,258 |
| 644 |
| 95% | |
Total expenses | 362 |
| 319 |
| 13% |
| 911 |
| 581 |
| 57% | |
Pre-tax net income | 242 |
| 147 |
| 65% |
| 347 |
| 63 |
| 451% | |
Net income | 242 |
| 146 |
| 66% |
| 345 |
| 61 |
| 466% | |
Adjusted EBITDA(1) | 235 |
| 153 |
| 54% |
| 423 |
| 101 |
| 319% | |
Gain on sale margin, Forward originations only | 4.69% |
| 4.19% |
| 12% |
| 4.21% |
| 3.30% |
| 28% | |
(1) Reflects updated year-to-date information. See reconciliation of Adjusted EBITDA to Pre-tax net income. |
Discussion of Third Quarter 2020 Results:
Balance Sheet Highlights
($ amounts in millions) | September 30, | December 31, | ||
Cash and cash equivalents | 205 |
| 118 | |
Total Assets | 19,022 |
| 16,584 | |
Total Liabilities | 18,008 |
| 15,913 | |
CRNCI and Member’s Equity | 1,014 |
| 671 |
Segment Results
Forward Originations
The Forward Originations segment generates revenue through fee income from loan originations and gain on sale of mortgage loans into the secondary market.
($ amounts in millions) | Q3’20 | Q2’20 | Variance (%) | YTD Q3’20 | YTDQ3’19 | Variance (%) | ||||||
Funded volume | 8,454 |
| 7,582 |
| 12% |
| 20,257 |
| 10,997 |
| 84% | |
Net rate lock volume | 9,286 |
| 6,801 |
| 37% |
| 22,303 |
| 12,551 |
| 78% | |
Revenue | 444 |
| 333 |
| 33% |
| 925 |
| 383 |
| 142% | |
Gain on sale margin | 4.69% |
| 4.19% |
| 12% |
| 4.21% |
| 3.30% |
| 28% | |
Pre-tax net income | 204 |
| 117 |
| 74% |
| 331 |
| 18 |
| 1739% |
Reverse Originations
The Reverse Originations segment generates revenue and earnings in the form of net origination gains and origination fees earned on the origination of reverse mortgage loans.
($ amounts in millions) | Q3’20 | Q2’20 | Variance (%) | YTD Q3’20 | YTD Q3’19 | Variance (%) | ||||||
Funded volume | 626 |
| 770 |
| -19% |
| 2,052 |
| 1,801 |
| 14% | |
Revenue | 49 |
| 55 |
| -11% |
| 139 |
| 108 |
| 29% | |
Pre-tax net income | 24 |
| 33 |
| -27% |
| 74 |
| 52 |
| 42% |
Commercial Originations
The Commercial Originations segment provides business purpose lending solutions for residential real estate investors. The Commercial Originations segment generates revenue and earnings in the form of net origination gains and origination fees earned on the origination of mortgage loans.
($ amounts in millions) | Q3’20 | Q2’20 | Variance (%) | YTD Q3’20 | YTD Q3’19 | Variance (%) | ||||||
Funded volume | 90 |
| 1 |
| 8900% |
| 548 |
| 835 |
| -34% | |
Revenue | 5 |
| 0 |
| 500% |
| 24 |
| 46 |
| -48% | |
Pre-tax net income (loss) | -2 |
| -6 |
| 67% |
| -5 |
| 10 |
| -150% |
Portfolio Management
The Portfolio Management segment generates revenue and earnings in the form of gain on sale of loans, fair value gains, interest income, servicing income, fees for underwriting, advisory and valuation services and other ancillary fees.
($ amounts in millions) | Q3’20 | Q2’20 | Variance (%) | YTD Q3’20 | YTD Q3’19 | Variance (%) | ||||||
Assets under management | 16,639 |
| 16,145 |
| 3% |
| 16,639 |
| 14,626 |
| 14% | |
Revenue | 42 |
| 39 |
| 8% |
| 31 |
| 49 |
| -37% | |
Pre-tax net income (loss) | 19 |
| 18 |
| 6% |
| -30 |
| 5 |
| -700% |
Lender Services
The Lender Services business generates revenue and earnings in the form of fees. Lender Services supports over 1,000 third party clients across the lending industry.
($ amounts in millions) | Q3’20 | Q2’20 | Variance (%) | YTD Q3’20 | YTD Q3’19 | Variance (%) | ||||||
Revenue | 53 |
| 44 |
| 20% |
| 139 |
| 79 |
| 76% | |
Pre-tax net income | 8 |
| 5 |
| 60% |
| 15 |
| 4 |
| 275% |
Reconciliation to GAAP:
($ amounts in millions) | Q3’20 | Q2’20 | YTD Q3’20 | YTD Q3’19 | ||||
Pre-tax net income | 242 |
| 147 |
| 347 |
| 63 | |
Adjustments for: |
|
|
|
|
|
|
| |
Change in fair value of loans and securities HFI due to market/model assumption changes | -17 |
| 0 |
| 54 |
| 18 | |
Interest expense on non-funding debt | 0 |
| 2 |
| 3 |
| 2 | |
Depreciation, amortization, and other impairments | 2 |
| 2 |
| 7 |
| 6 | |
Other fair value adjustments on earnouts | 0 |
| 0 |
| 0 |
| 0 | |
Shared based compensation | - |
| - |
| - |
| 3 | |
Change in fair value of minority investments | - |
| - |
| - |
| -1 | |
Certain non-recurring costs | 8 |
| 2 |
| 12 |
| 10 | |
Adjusted EBITDA | 235 |
| 153 |
| 423 |
| 101 |
2020 Outlook
Based on current business conditions, origination trends, and other factors, the Company is raising its previously provided 2020 pre-tax net income outlook to now range from $435 million to $495 million, from $393 million, and adjusted EBITDA to range from $535 million to $565 million from $478 million.
Finance of America Equity Capital LLC and Subsidiaries | ||||||
Consolidated Statements of Financial Position | ||||||
(Amounts in $000s) | ||||||
| 09/30/2020 |
| 12/31/2019 | |||
| (unaudited) |
|
| |||
ASSETS |
|
|
| |||
Cash and cash equivalents | $ | 205,444 |
| $ | 118,083 | |
Restricted cash |
| 308,311 |
|
| 264,581 | |
Reverse mortgage loans held for investment, subject to HMBS obligations, at fair value |
| 9,811,263 |
|
| 9,480,504 | |
Mortgage loans held for investment, subject to nonrecourse debt, at fair value |
| 5,180,911 |
|
| 3,511,212 | |
Mortgage loans held for investment, at fair value |
| 984,475 |
|
| 1,414,073 | |
Mortgage loans held for sale, at fair value |
| 1,893,555 |
|
| 1,251,574 | |
Debt securities, at fair value |
| 13,368 |
|
| 114,701 | |
Mortgage servicing rights, at fair value |
| 100,539 |
|
| 2,600 | |
Derivative assets, at fair value |
| 114,563 |
|
| 15,553 | |
Fixed assets and leasehold improvements, less accumulated depreciation and amortization |
| 25,784 |
|
| 26,686 | |
Goodwill |
| 121,754 |
|
| 121,137 | |
Intangible assets, net |
| 16,855 |
|
| 18,743 | |
Due from related parties |
| 1,171 |
|
| 2,814 | |
Other assets |
| 244,023 |
|
| 241,840 | |
Total Assets | $ | 19,022,016 |
| $ | 16,584,101 | |
|
|
|
| |||
LIABILITIES |
|
|
| |||
HMBS related obligations, at fair value | $ | 9,662,342 |
| $ | 9,320,209 | |
Nonrecourse debt, at fair value |
| 5,064,324 |
|
| 3,490,196 | |
Other secured lines of credit |
| 2,924,269 |
|
| 2,749,413 | |
Payables and accrued liabilities |
| 356,929 |
|
| 326,176 | |
Notes payable |
| 145 |
|
| 27,313 | |
Total Liabilities |
| 18,008,009 |
|
| 15,913,307 | |
|
|
|
| |||
CRNCI |
| 165,022 |
|
| 187,981 | |
Member's equity |
| 848,985 |
|
| 482,813 | |
Total Liabilities, CRNCI and Member's Equity | $ | 19,022,016 |
| $ | 16,584,101 |
Finance of America Equity Capital LLC and Subsidiaries | ||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||
(Amounts in $000s) | ||||||||||||||||
| Three |
| Three |
| Nine Months |
| Nine Months | |||||||||
09/30/2020 |
| 06/30/2020 |
| 09/30/2020 |
| 09/30/2019 | ||||||||||
(unaudited) |
| (unaudited) |
| (unaudited) |
| (unaudited) | ||||||||||
REVENUES | ||||||||||||||||
Gain on mortgage loans held for sale, net | $ | 407,926 |
| $ | 298,291 |
| $ | 836,901 |
| $ | 342,514 |
| ||||
Net fair value gains on mortgage loans and related obligations |
| 95,955 |
|
| 112,303 |
|
| 221,638 |
|
| 236,891 |
| ||||
Fee income |
| 116,905 |
|
| 76,627 |
|
| 263,488 |
|
| 140,522 |
| ||||
Net interest expense: | ||||||||||||||||
Interest income |
| 9,937 |
|
| 11,507 |
|
| 29,615 |
|
| 27,073 |
| ||||
Interest expense |
| (25,935 | ) |
| (33,298 | ) |
| (93,165 | ) |
| (103,072 | ) | ||||
Net interest expense |
| (15,998 | ) |
| (21,791 | ) |
| (63,550 | ) |
| (75,999 | ) | ||||
Total Revenues |
| 604,788 |
|
| 465,430 |
|
| 1,258,477 |
|
| 643,928 |
| ||||
EXPENSES | ||||||||||||||||
Salaries, benefits and related expenses |
| 240,381 |
|
| 230,275 |
|
| 615,034 |
|
| 378,420 |
| ||||
Occupancy, equipment rentals and other office related expenses |
| 8,184 |
|
| 7,208 |
|
| 22,795 |
|
| 23,358 |
| ||||
General and administrative expenses |
| 113,804 |
|
| 81,214 |
|
| 273,584 |
|
| 179,630 |
| ||||
Total Expenses |
| 362,369 |
|
| 318,697 |
|
| 911,413 |
|
| 581,408 |
| ||||
Net income before taxes |
| 242,419 |
|
| 146,733 |
|
| 347,064 |
|
| 62,520 |
| ||||
Provision for income taxes |
| 808 |
|
| 448 |
|
| 1,574 |
|
| 1,206 |
| ||||
Net income |
| 241,611 |
|
| 146,285 |
|
| 345,490 |
|
| 61,314 |
| ||||
CRNCI |
| (4,953 | ) |
| (2,619 | ) |
| (22,959 | ) |
| 16,518 |
| ||||
Noncontrolling interest |
| 276 |
|
| 570 |
|
| 1,076 |
|
| 540 |
| ||||
Net income attributable to FOA Equity Capital LLC | $ | 246,288 |
| $ | 148,335 |
| $ | 367,373 |
| $ | 44,256 |
Finance of America Equity Capital LLC and Subsidiaries | ||||||||||||||||
Consolidated Statement of Changes in Member's Equity | ||||||||||||||||
(Amounts in $000s) | ||||||||||||||||
Member's Equity | NC Interests | AOCI | Total | |||||||||||||
Balance at December 31, 2019 |
| $ | 482,719 |
| $ | 145 |
| $ | (51 | ) | $ | 482,813 |
| |||
Net Income |
| 367,373 |
|
| 1,076 |
|
| - |
|
| 368,449 |
| ||||
Member contributions |
| 502 |
|
| - |
|
| - |
|
| 502 |
| ||||
Member distributions |
| (1,804 | ) |
| (1,012 | ) |
| - |
|
| (2,816 | ) | ||||
Foreign currency translation |
| - |
|
| - |
|
| 37 |
|
| 37 |
| ||||
Balance at September 30, 2020 |
| $ | 848,790 |
| $ | 209 |
| $ | (14 | ) | $ | 848,985 |
|
Webcast and Conference call
Management will host a webcast and conference call on Tuesday, December 1, 2020, at 5:00 pm ET to discuss the Company’s results for the third quarter ending September 30, 2020.
The conference call will be made available in the Investors section of the Company's website at https://www.financeofamerica.com/. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register.
The conference call can also be accessed by the following dial-in information:
Replay
A replay of the call will also be available on the Company's website approximately two hours after the live call through December 15, 2020. To access the replay, dial 1-844-512-2921 (United States) or 1-412-317-6671 (international). The replay pin number is 13713598. The replay can also be accessed on the investors section of the Company's website
Source- https://www.businesswire.com/news/home/20201201006148/en/Finance-of-America-Reports-Preliminary-Third-Quarter-2020-Results
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