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Finance of America Reports Fourth Quarter and Full Year 2021 Results

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– Net loss for the quarter of $1,336 million or $(6.61) per basic share and $(6.72) per fully diluted share entirely due to a $1,381 million impairment of goodwill and intangible assets –

– Adjusted net income* for the quarter of $70 million or $0.37 per fully diluted share, in line with fourth quarter earnings guidance –

IRVING, Texas, March 02, 2022--(BUSINESS WIRE)--Finance of America Companies Inc., ("Finance of America" or the "Company") (NYSE: FOA), a high growth, consumer and specialty lending business, reported financial results for the quarter and year-ended December 31, 2021.

Fourth Quarter and Full Year 2021 Financial Highlights

  • Full year 2021 total originations were $35.6 billion, an increase of 9% compared to 2020 due to strong growth in Reverse and Commercial segments.

  • Total revenue for 2021 of $1,736 million represented a 4% decrease compared to the full year 2020, as a 53% increase in Specialty Finance and Services (SF&S) segments revenue almost entirely offset the decline in Mortgage revenue similarly experienced by the broader market.

  • The Company performed its annual goodwill impairment analysis as part of the year end 2021 financial statement close process. Due to a sustained decline in the Company’s stock price, the Company recognized a $1,381 million accounting impairment of the outstanding goodwill and certain intangible assets in the fourth quarter of 2021 to align the Company’s book value with a supportable control premium.

  • The above-mentioned impairment contributed to a net loss for the quarter of $1,336 million or $(6.61) of basic EPS and $(6.72) of diluted EPS. Excluding the impairment charge and related tax benefit, the Company generated net income of $15 million for the fourth quarter of 2021.

  • For the fourth quarter of 2021, the Company generated adjusted net income* of $70 million and adjusted diluted EPS* of $0.37, in line with fourth quarter earnings guidance.

*See the sections titled "Reconciliation to GAAP" and "Non-GAAP Financial Measures" for reconciliations to the most directly comparable GAAP measures and other important disclosures.

"Finance of America delivered another solid quarter and met our guidance despite a decline in the mortgage market," stated Patricia Cook, Chief Executive Officer. "Our SF&S businesses returned record growth in the full year and in the fourth quarter represented over 51% of our revenue and the bulk of adjusted net income. This performance by SF&S demonstrates the value of our unique business model, as these segments delivered strong revenue and earnings growth in a period where the refinance mortgage market declined.

We believe our Reverse and Commercial businesses operate in markets with systemic tailwinds and we will continue to invest in these businesses to fuel further growth. Lender Services saw an expansion in third-party clients as well as increased sales to existing clients, which lead to an increase in operating margins. We remain focused on the growth and profitability of our Home Improvement business and anticipate it will begin contributing to our bottom line in 2022."

"In our Mortgage business we remain focused on profitability as the market pivots to purchase. Our non-agency products continue to find traction as volume grew 25% quarter over quarter and 113% year over year. Furthermore, we believe there is substantial opportunity for our loan officers and brokers to sell Reverse and Commercial products given the expected decrease in refinance volumes."

Fourth Quarter Financial Summary

($ amounts in millions, except margin and per share data)

Variance (%)

Variance (%)

Variance (%)

Q4'21

Q3'21

Q4'21 vs Q3'21

Q4'20

Q4'21 vs Q4'20

2021

2020

2021 vs 2020

Successor

Predecessor(5)

Combined(1)

Predecessor(5)

Funded volume

$

8,793

$

8,988

(2

)%

$

9,769

(10

)%

$

35,637

$

32,628

9

%

Total revenue

383

457

(16

)%

539

(29

)%

1,736

1,800

(4

)%

Total expenses and other, net

364

402

(9

)%

386

(6

)%

1,562

1,300

20

%

Pre-tax income (loss)

(1,362

)

55

(2576

)%

152

(996

)%

(1,196

)

500

(339

)%

Net income (loss)

(1,336

)

50

(2772

)%

152

(979

)%

(1,177

)

498

(336

)%

Pre-tax income excluding impairment of goodwill and intangible assets(4)

18

55

(67

)%

152

(88

)%

184

500

(63

)%

Adjusted net income(2)

70

75

(7

)%

122

(43

)%

308

430

(28

)%

Adjusted EBITDA(2)

104

110

(5

)%

172

(40

)%

456

598

(24

)%

Basic earnings (loss) per share

$

(6.61

)

$

0.36

(1936

)%

N/A

N/A

N/A

N/A

N/A

Diluted earnings (loss) per share(3)

$

(6.72

)

$

0.22

(3155

)%

N/A

N/A

N/A

N/A

N/A

Adjusted diluted earnings per share(3)

$

0.37

$

0.39

(5

)%

$

0.64

(42

)%

$

1.61

$

2.25

(28

)%

(1) Financial results of combined successor and predecessor of the business combination with Replay.

(2) See Reconciliation to GAAP section for a reconciliation of Adjusted Net Income and Adjusted EBITDA to Net Income (Loss).

(3) Calculated on an if-converted basis. See Reconciliation to GAAP section for more detail.

(4) Calculated for each period as Pre-tax income (loss), excluding impairment of goodwill and intangible assets.

(5) Predecessor includes all periods as of and prior to March 31, 2021.

Balance Sheet Highlights

($ amounts in millions)

December 31

September 30,

Variance (%)

2021

2021

Q4'21 vs Q3'21

Cash and cash equivalents

$

141

$

192

(27

)%

Securitized loans held for investment (HMBS & nonrecourse)

16,774

16,287

3

%

Mortgage Servicing Rights (MSR)

428

341

26

%

Total assets

21,789

22,668

(4

)%

Total liabilities

20,706

20,236

2

%

Total equity

1,083

2,432

(55

)%

Total tangible equity(1)

480

441

9

%

(1) Total Tangible Equity calculated as Total Equity less Goodwill and Intangible assets, net.

  • Cash and cash equivalents ended the fourth quarter at $141 million. The $51 million decrease was primarily attributable to increased cash invested in proprietary assets and periodic outflows related to payroll and other expenses that are accrued monthly but paid less frequently.

  • Total assets declined 4% from prior quarter due to the impairment of goodwill and intangible assets partially offset by increased securitized loans held for investment.

  • Total liabilities grew $470 million on a sequential quarter basis primarily due to an increase in HMBS related obligations and nonrecourse debt of $486 million.

  • The decline in total equity is solely due to the impairment of goodwill and intangible assets during the quarter. Total tangible equity increased $39 million during the fourth quarter.

Segment Results

Mortgage Originations

The Mortgage Originations segment generates revenue through fee income from loan originations and gain on sale of mortgage loans into the secondary market.

($ amounts in millions)

Variance (%)

Variance (%)

Variance (%)

Q4'21

Q3'21

Q4'21 vs Q3'21

Q4'20

Q4'21 vs Q4'20

2021

2020

2021 vs 2020

Successor

Predecessor

Combined (1)

Predecessor

Funded volume (Total)

$

6,891

$

7,383

(7

)%

$

8,808

(22

)%

$

29,607

$

29,064

2

%

Funded volume (Purchase)

3,405

3,759

(9

)%

3,097

10

%

13,323

9,877

35

%

Funded volume (Non-agency)

1,242

994

25

%

1,123

11

%

4,068

1,914

113

%

Net rate lock volume

6,198

7,679

(19

)%

7,855

(21

)%

28,952

30,158

(4

)%

Mortgage originations margin

2.52

%

2.61

%

(3

)%

4.31

%

(42

)%

2.86

%

3.88

%

(26

)%

Total revenue

187

235

(20

)%

367

(49

)%

959

1,292

(26

)%

Impairment of goodwill and intangible assets

$

(775

)

$

N/A

$

N/A

$

(775

)

$

N/A

Pre-tax income (loss)

$

(783

)

$

15

(5320

)%

$

129

(707

)%

$

(679

)

$

460

(248

)%

Pre-tax income (loss) excluding impairment of goodwill and intangible assets(2)

$

(8

)

$

15

(153

)%

$

129

(106

)%

$

96

$

460

(79

)%

(1) Financial results of combined successor and predecessor of the business combination with Replay.

(2) Calculated for each period as Pre-tax income (loss), excluding impairment of goodwill and intangible assets.

  • Funded purchase volume for 2021 totaled $13,323 million, a 35% increase year over year. This represented 45% of total funded volume in 2021.

  • Non-agency volume continued its strong growth, up 25% in Q4 2021 compared to the prior quarter and 113% compared to the prior year.

  • Fourth quarter mortgage originations margin declined 3% relative to last quarter, driven by an increased share of wholesale originations and decreased share of retail originations.

  • Pre-tax loss excluding impairment of goodwill and intangible assets of $8 million for the quarter was entirely driven by the loss in our Home Improvement business that is reported in Mortgage Originations.

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)

Variance (%)

Variance (%)

Variance (%)

Q4'21

Q3'21

Q4'21 vs Q3'21

Q4'20

Q4'21 vs Q4'20

2021

2020

2021 vs 2020

Successor

Predecessor

Combined (1)

Predecessor

Funded volume

$

1,322

$

1,157

14

%

$

655

102

%

$

4,261

$

2,707

57

%

Total revenue

114

111

3

%

55

107

%

389

194

101

%

Impairment of goodwill and intangible assets

(408

)

N/A

N/A

(408

)

N/A

Pre-tax income (loss)

(333

)

69

(583

)%

33

(1109

)%

(165

)

107

(254

)%

Pre-tax income (loss) excluding impairment of goodwill and intangible assets(2)

75

69

9

%

33

127

%

243

107

127

%

(1) Financial results of combined successor and predecessor of the business combination with Replay.

(2) Calculated for each period as Pre-tax income (loss), excluding impairment of goodwill and intangible assets.

  • Fourth quarter funded volume and revenue of $1,322 million and $114 million, respectively, exceeded the highest levels on record that were set in the previous quarter. This was driven by growth in both new originations and refinances due to recent home price appreciation.

  • 2021 funded volume of $4,261 million is up 57% relative to 2020 funded volume of $2,707 million.

  • 2021 revenue of $389 million is up 101% compared to 2020 revenue of $194 million.

  • As a result, Reverse Originations generated $243 million pre-tax income for the year excluding impairment of goodwill and intangible assets during 2021; a new record and 127% higher than the prior year.

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)

Variance (%)

Variance (%)

Variance (%)

Q4'21

Q3'21

Q4'21 vs Q3'21

Q4'20

Q4'21 vs Q4'20

2021

2020

2021 vs 2020

Successor

Predecessor

Combined (1)

Predecessor

Funded volume

$

580

$

448

29

%

$

307

89

%

1,769

$

855

107

%

Total revenue

30

28

7

%

13

131

%

95

37

157

%

Impairment of goodwill and intangible assets

(76

)

N/A

N/A

(76

)

N/A

Pre-tax income (loss)

(68

)

6

(1233

)%

1

(6900

)%

(58

)

(4

)

(1350

)%

Pre-tax income (loss) excluding impairment of goodwill and intangible assets(2)

8

6

33

%

1

700

%

18

(4

)

550

%

(1) Financial results of combined successor and predecessor of the business combination with Replay.

(2) Calculated for each period as Pre-tax income (loss), excluding impairment of goodwill and intangible assets.

  • Fourth quarter funded volume of $580 million set a record for the highest quarterly volume for the third straight quarter; eclipsing the prior quarter’s level by 29%.

  • 2021 produced record funded volume of $1,769 million and revenue of $95 million, an increase of 107% and 157% over 2020, respectively.

  • Pre-tax income excluding impairment of goodwill and intangible assets grew 33% quarter over quarter driven by growth in funded volume due to strong borrower and investor demand.

Lender Services

The Lender Services business generates revenue and earnings in the form of fees. Lender Services supports over 1,900 third party clients across the lending industry.

($ amounts in millions)

Variance (%)

Variance (%)

Variance (%)

Q4'21

Q3'21

Q4'21 vs Q3'21

Q4'20

Q4'21 vs Q4'20

2021

2020

2021 vs 2020

Successor

Predecessor

Combined (1)

Predecessor

Total revenue

$

83

$

88

(6

)%

$

66

26

%

$

328

205

60

%

% of revenue from third-party clients

82

%

81

%

1

%

79

%

4

%

81

%

79

%

3

%

Impairment of goodwill and intangible assets

(110

)

N/A

N/A

(110

)

N/A

Pre-tax income (loss)

(101

)

9

(1222

)%

4

(2625

)%

(71

)

20

(455

)%

Pre-tax income (loss) excluding impairment of goodwill and intangible assets(2)

9

9

%

4

125

%

39

20

95

%

(1) Financial results of combined successor and predecessor of the business combination with Replay.

(2) Calculated for each period as Pre-tax income (loss), excluding impairment of goodwill and intangible assets.

  • 2021 total revenue for Lender Services increased by 60%, to $328 million in 2021 from $205 in 2020 due to growth in third party clients and deeper penetration of the existing client base.

  • For the year, Lender Services earned pre-tax income excluding impairment of goodwill and intangible assets of $39 million, a 95% increase over the prior year.

  • Revenue from third-party clients increased to 82% in Q4 2021, up from 79% in Q4 2020.

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)

Variance (%)

Variance (%)

Variance (%)

Q4'21

Q3'21

Q4'21 vs Q3'21

Q4'20

Q4'21 vs Q4'20

2021

2020

2021 vs 2020

Successor

Predecessor

Combined (1)

Predecessor

Assets under management

$

18,974

$

18,403

3

%

$

16,896

12

%

$

18,974

$

16,896

12

%

Assets excluding HMBS and non-recourse obligations(2)

2,431

2,356

3

%

1,835

32

%

2,431

1,835

32

%

Mortgage Servicing Rights (MSR)

428

341

26

%

181

136

%

428

181

136

%

Total revenue

(29

)

10

(390

)%

38

(176

)%

17

69

(75

)%

Impairment of goodwill and intangible assets

(12

)

N/A

N/A

(12

)

N/A

Pre-tax income (loss)

(69

)

(20

)

(245

)%

8

(963

)%

(109

)

(22

)

(395

)%

Pre-tax income (loss) excluding impairment of goodwill and intangible assets(3)

(57

)

(20

)

(185

)%

8

(813

)%

(97

)

(22

)

(341

)%

(1) Financial results of combined successor and predecessor of the business combination with Replay.

(2) Calculated for each period as Assets under management less HMBS related obligations, at fair value and nonrecourse debt, at fair value.

(3) Calculated for each period as Pre-tax income (loss), excluding impairment of goodwill and intangible assets.

  • Fourth quarter Mortgage Servicing Rights grew to $428 million, up 26% from the prior quarter as we retained servicing on agency loans originated in the retail channel.

  • Revenue in the fourth quarter was negative predominantly due to fair value marks resulting from faster than modeled prepayment speeds in Reverse assets. These marks reflect lifetime impacts across the portfolio. The decrease in total revenue and pre-tax income (loss) excluding impairment of goodwill and intangible assets compared to the prior quarter reflects the impact of fair value adjustments related predominantly to Reverse assets.

Reconciliation to GAAP

($ amounts in millions)

Q4'21

Q3'21

Q4'20

2021

2020

Successor

Predecessor

Combined (1)

Predecessor

Reconciliation of Net income (loss) to Adjusted Net income and Adjusted EBITDA

Net income (loss)

$

(1,336

)

$...

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