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Finance of America Reports Third Quarter 2021 Results

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  • FOA

– Delivered a strong quarter with meaningful growth across all segments –

– Year to date revenue of $1.4 billion, up 7% compared to 2020 –

– Net income for the quarter of $50 million or $0.36 per basic share and $0.22 per fully diluted share –

– Adjusted Net Income* of $75 million or $0.39 per fully diluted share –

IRVING, Texas, November 08, 2021--(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 ended September 30, 2021.

Third Quarter 2021 Financial Highlights

  • Strong growth across segments generated quarterly revenues of $457 million, up 17% compared to the second quarter

  • Mortgage Originations grew net rate lock volume and revenue by 15% and 8%, respectively, compared to the prior quarter

  • A second consecutive quarter of record funded volume and revenue in Reverse Originations delivered $69 million in pre-tax income, a 30% increase compared to the prior quarter

  • Record funded volume in Commercial Originations drove revenue and pre-tax income growth of 22% and 100%, respectively, compared to the prior quarter

  • Record Lender Services revenue generated pre-tax income of $9 million, up 13%, compared to the prior quarter

  • Net income for the quarter of $50 million or $0.36 per basic share and $0.22 per fully diluted share

  • Adjusted Net Income* totaled $75 million, an increase of 32% compared to $57 million in the prior quarter

  • Adjusted diluted EPS* of $0.39, up 30% compared to the prior quarter

*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 solid growth across all segments in the third quarter, demonstrating the power of our diversified platform" stated Patricia Cook, Chief Executive Officer. "We saw strong performance across all of our businesses, reinforcing our strategic goal of building a comprehensive consumer and specialty lender that is primed for growth."

"Our Reverse business, which serves a large, under-penetrated market, generated another consecutive quarter of record revenue and pre-tax income. Our Commercial and Lender Services segments also continued their recent growth trajectories. Strong demand for single family rental loans from both borrowers and investors helped drive volume and margin expansion. The build out of our new Home Improvement business is also progressing well, and we expect it to start contributing to the bottom line in 2022."

"We remain laser focused on building resilience into the Mortgage business and driving meaningful, sustained growth across our other specialty finance and lender services segments through further investments. Our unmatched product offering, distribution and capital markets capabilities allow us to capture substantial lifetime household value as we continue to migrate from a product to a customer-centric organization."

Third Quarter Financial Summary

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

Variance
(%)

Variance
(%)

Variance
(%)

Q3'21

Q2'21

Q3'21 vs
Q2'21

Q3'20

Q3'21 vs
Q3'20

YTD 2021

YTD 2020

2021 vs
2020

Successor

Predecessor

Combined(1)

Predecessor

Funded volume

$

8,988

$

8,342

8

%

$

9,170

(2)

%

$

26,844

$

22,857

17

%

Total revenue

457

389

17

%

607

(25)

%

1,353

1,261

7

%

Total expenses and other, net

402

403

%

365

10

%

1,187

914

30

%

Pre-tax income (loss)

55

(14)

493

%

242

(77)

%

166

347

(52)

%

Net income (loss)

50

(15)

433

%

242

(79)

%

160

345

(54)

%

Adjusted net income(2)

75

57

32

%

173

(57)

%

239

307

(22)

%

Adjusted EBITDA(2)

110

87

26

%

236

(53)

%

351

424

(17)

%

Basic earnings per share

$

0.36

$

0.04

800

%

n/a

n/a

n/a

n/a

n/a

Diluted earnings per share(3)

$

0.22

$

(0.05)

540

%

$

1.29

(83)

%

$

0.80

$

1.92

(58)

%

Adjusted diluted earnings per share(3)

$

0.39

$

0.30

30

%

$

0.91

(57)

%

$

1.25

$

1.61

(22)

%

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

Balance Sheet Highlights

($ amounts in millions)

September 30,

June 30,

Variance (%)

2021

2021

Q3'21 vs Q2'21

Successor

Cash and cash equivalents

$

192

$

157

22

%

Securitized loans held for investment (HMBS & nonrecourse)

16,287

15,741

3

%

Mortgage Servicing Rights (MSR)

341

291

17

%

Total assets

22,668

22,228

2

%

Total liabilities

20,236

19,849

2

%

Total equity

2,432

2,379

2

%

Total tangible equity(1)

441

377

17

%

(1) Total tangible equity calculated as Total equity less Goodwill and Intangible assets, net.

  • Cash and cash equivalents ended the third quarter at $192 million. The $35 million increase was primarily attributable to the successful execution of three securitizations of loans held for investment or sale during the quarter, net of investments in MSR.

  • Total assets grew $440 million from June 30, 2021, primarily as a result of growth in securitized loans held for investment, capitalized MSR, and an increase in cash and cash equivalents.

  • Total liabilities grew $387 million on a sequential quarter basis primarily due to an increase in HMBS related obligations and nonrecourse debt of $453 million offset by a decrease in warehouse financing of $87 million.

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
(%)

Q3'21

Q2'21

Q3'21 vs
Q2'21

Q3'20

Q3'21 vs
Q3'20

YTD 2021

YTD 2020

2021 vs
2020

Successor

Predecessor

Combined(1)

Predecessor

Funded volume (Total)

$

7,383

$

6,928

7

%

$

8,454

(13)

%

$

22,716

$

20,257

12

%

Funded volume (Purchase)

3,759

3,495

8

%

3,023

24

%

9,918

6,781

46

%

Funded volume (Non-agency)

994

795

25

%

293

239

%

2,826

791

257

%

Net rate lock volume

7,679

6,669

15

%

9,286

(17)

%

22,753

22,303

2

%

Total revenue

235

218

8

%

444

(47)

%

773

925

(16)

%

Mortgage originations margin

2.61

%

2.78

%

(6)

%

4.39

%

(41)

%

2.95

%

3.73

%

(21)

%

Pre-tax income (loss)

$

15

$

(6)

350

%

$

204

(93)

%

$

104

$

331

(69)

%

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

  • Net rate lock volume totaled $7,679 million, an increase of 15% relative to the prior quarter, driven by growth in our wholesale channel.

  • Mortgage Originations Margin declined 6% relative to last quarter, driven by an increased share of wholesale originations due to the full quarter impact of the recently announced Parkside acquisition.

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
(%)

Q3'21

Q2'21

Q3'21 vs
Q2'21

Q3'20

Q3'21 vs
Q3'20

YTD 2021

YTD 2020

2021 vs
2020

Successor

Predecessor

Combined(1)

Predecessor

Funded volume

$

1,157

$

1,013

14

%

$

626

85

%

$

2,939

$

2,052

43

%

Total revenue

111

95

17

%

49

127

%

275

139

98

%

Pre-tax income

69

53

30

%

24

188

%

168

74

127

%

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

  • Funded volume and revenue of $1,157 million and $111 million, respectively, exceeded the highest levels on record set in the previous quarter. This was driven by growth in both new originations and cash-out refinances due to recent home price appreciation.

  • As a result, Reverse Originations generated record pre-tax income of $69 million during the third quarter, 30% higher than the previous quarter.

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
(%)

Q3'21

Q2'21

Q3'21 vs
Q2'21

Q3'20

Q3'21 vs
Q3'20

YTD 2021

YTD 2020

2021 vs
2020

Successor

Predecessor

Combined(1)

Predecessor

Funded volume

$

448

$

400

12

%

$

90

398

%

1,189

548

117

%

Total revenue

28

23

22

%

5

460

%

65

24

171

%

Pre-tax income (loss)

6

3

100

%

(2)

400

%

10

(5)

300

%

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

  • Funded volume of $448 million set a record for the highest quarterly volume for the segment, eclipsing the prior quarter’s level by 12%.

  • Revenue grew 22% quarter over quarter driven by growth in funded volume and expanding margins 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 1,700 third party clients across the lending industry.

($ amounts in millions)

Variance
(%)

Variance
(%)

Variance
(%)

Q3'21

Q2'21

Q3'21 vs
Q2'21

Q3'20

Q3'21 vs
Q3'20

YTD 2021

YTD 2020

2021 vs
2020

Successor

Predecessor

Combined(1)

Predecessor

Total revenue

$

88

$

81

9

%

$

53

66

%

245

139

76

%

% of revenue from third-party clients

81

%

80

%

1

%

80

%

1

%

79

%

79

%

%

Pre-tax income

9

8

13

%

8

13

%

30

15

100

%

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

  • The Lender Services segment generated revenue of $88 million; this marks the highest level of revenue on record for the Lender Services segment.

  • We remain focused on expanding business lines to deepen cross-sell and onboarding new third-party customers to drive growth.

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
(%)

Q3'21

Q2'21

Q3'21 vs
Q2'21

Q3'20

Q3'21 vs
Q3'20

YTD 2021

YTD 2020

2021 vs
2020

Successor

Predecessor

Combined(1)

Predecessor

Assets under management

$

18,403

$

17,966

2

%

$

16,639

11

%

18,403

16,639

11

%

Assets excluding HMBS and non-recourse obligations(2)

2,356

2,372

(1)

%

1,904

24

%

2,356

1,904

24

%

Mortgage Servicing Rights (MSR)

341

291

17

%

101

238

%

341

101

238

%

Total revenue

10

7

43

%

42

(76)

%

46

31

48

%

Pre-tax (loss) income

(20)

(27)

26

%

19

(205)

%

(41)

(30)

37

%

(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

  • Completed three securitizations of originations during the quarter totaling $1.2 billion, and served as co-manager on a third-party securitization totaling $0.2 billion.

  • The decrease in revenue and pre-tax income compared to the prior year quarter reflects the impact of fair value adjustments related predominantly to increases in modeled prepayment speeds on securitized mortgage assets and MSR.

Reconciliation to GAAP

($ amounts in millions)

Q3'21

Q2'21

Q3'20

YTD 2021

YTD 2020

Successor

Predecessor

Combined(1)

Predecessor

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

Net income (loss)

$

50

$

(15)

$

$

160

$

345

Adjustments for:

Changes in fair value(2)

20

...

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