Prospectus Supplement No. 1 (to prospectus dated June 4, 2021)		Filed Pursuant to Rule 424(b)(3) Registration Statement No. 333-256453

Finance of America Companies Inc.

186,461,906 Shares of Class A Common Stock offered by Selling Securityholders

Up to 14,374,971 Shares of Class A Common Stock offered by Finance of America Companies Inc.

 

 

This prospectus supplement is being filed to update and supplement the information contained in the prospectus dated June 4, 2021 (as it may be supplemented or amended from time to time, the “Prospectus”), with the information contained in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, which we filed with the Securities and Exchange Commission on August 16, 2021 (the “Quarterly Report”). Accordingly, we have attached the Quarterly Report to this prospectus supplement.

The Prospectus and this prospectus supplement relate to: (a) the offer and sale from time to time by the selling securityholders named in the Prospectus (the “Selling Securityholders”) of up to 186,461,906 shares of our Class A Common Stock, including up to 131,318,286 shares of Class A Common Stock that we may issue from time to time to the Selling Securityholders upon exchange of an equal number of limited liability company interests (“FoA Units”) in Finance of America Equity Capital LLC (“FoA”), held by them; and (b) the offer and sale by us of up to an aggregate of 14,374,971 shares of our Class A Common Stock that are issuable upon the exercise of 14,374,971 Warrants originally issued in the initial public offering of Replay Acquisition LLC (f/ka/ Replay Acquisition Corp.).

This prospectus supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This prospectus supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information in this prospectus supplement.

Our Class A Common Stock and our Warrants are listed on the New York Stock Exchange, or NYSE, under the symbols “FOA” and “FOA.WS,” respectively. On August 16, 2021, the closing price of our Class A Common Stock was $5.20 and the closing price for our Warrants was $0.74.

We are an “emerging growth company” as defined under the federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements for future filings. See “Summary—Implications of Being an Emerging Growth Company” in the Prospectus.

 

 

See the section entitled “Risk Factors ” beginning on page 7 of the Prospectus to read about factors you should consider before buying our securities.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of the Prospectus or this prospectus supplement. Any representation to the contrary is a criminal offense.

 

 

The date of this prospectus supplement is August 17, 2021.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                 

Commission file number 001-40308

 

 

FINANCE OF AMERICA COMPANIES INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		85-3474065
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
909 Lake Carolyn Parkway, Suite 1550,
Irving, Texas		75039
(Address of Principal Executive Offices)		(Zip Code)

(972) 999-1833

Registrant’s telephone number, including area code

(Former name, former address and former fiscal year, if changed since last report)

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

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A common stock, par value $0.0001 per share		FOA		The New York Stock Exchange
Warrants to purchase shares of Class A Common Stock		FOA.WS		The New York Stock Exchange

 

 

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

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

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

 

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated filer		☒		Smaller reporting company		☒
				Emerging growth company		☒

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

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

As of August 16, 2021, 59,881,714 of the registrant’s Class A common stock, par value $0.0001 per share, were issued and outstanding

 

 

 

Finance of America Companies Inc.

and Subsidiaries

 

 

 

Table of Contents		Page
Part I—Financial Information			3
Item 1. Financial Statements			3
Consolidated Financial Statements			3
Consolidated Statements of Financial Condition			3
Consolidated Statements of Operations			5
Consolidated Statements of Comprehensive Income			6
Consolidated Statements of Changes in Equity			7
Consolidated Statements of Cash Flows			9
Notes to Consolidated Financial Statements			12
Item  2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			89

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the U.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 outside of the Company’s control. It is possible that our actual results, financial condition and liquidity may differ, possibly materially, from the anticipated results, financial condition and liquidity in these forward-looking statements. The Company’s actual results may differ from its expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions (or the negative versions of such words or expressions) are intended to identify such forward-looking statements. The Company cautions readers not to place undue reliance upon any forward-looking statements, which are current only as of the date of this report. Results for any specified quarter are not necessarily indicative of the results that may be expected for the full year or any future period. The Company does not undertake or accept any obligation or undertaking to release 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 on which any such statement is based, except as required by law. Such forward-looking statements are subject to various risks and uncertainties including, among 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 in our markets; our ability to obtain sufficient capital to meet the financing requirements of our business; the use estimates in measuring or determining the fair value of the majority of our assets and liabilities; the 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 our Registration Statement on Form S-1 originally filed with the SEC on May 25, 2021, as such factors may be further updated from time to time in the Company’s periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report and in the Company’s other filings with the SEC.

Website Disclosure

The Company may use its website as a distribution channel of material company information. Financial and other important information regarding the Company is routinely posted on and accessible through the Company’s investor relations website at https://www.financeofamerica.com/investors. In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting “Email Alerts” under the “News & Events” tab of our investor relations website. Information on the Company’s website is not incorporated by reference herein and is not a part of this Form 10-Q.

Part I—Financial Information

 

Item 1.

Financial Statements

Finance of America Companies Inc. and Subsidiaries

Consolidated Statements of Financial Condition

(In thousands, except for share data)

 

 

 

		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)			—						166,231
EQUITY (Note 35)
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						—
Class B Common Stock (Successor), $0.0001 par value; 1,000,000 shares authorized, 7 shares issued and outstanding at June 30, 2021			—						—
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

See accompanying notes to unaudited consolidated financial statements

 

3

Finance of America Companies Inc. and Subsidiaries

Consolidated Statements of Financial Condition

(In thousands)

 

 

The following table presents the assets and liabilities of the Company’s consolidated variable interest entities, which are included on the Consolidated Statements of Financial Condition above, and excludes intercompany balances, retained bonds and beneficial interests that eliminate in consolidation.

 

		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			—								263,266
2018 RTL1 ANTLR			—								82,393
2019 RTL1 ANTLR			—								118,161
2020 FASST HB1			—								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			—								238,438
2020 RTL1 ANTLR			—								140,441
2018 RTL1 ANTLR			—								80,767
2019 RTL1 ANTLR			—								121,580
2020 FASST HB1			—								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

See accompanying notes to unaudited consolidated financial statements

 

4

Finance of America Companies Inc. and Subsidiaries

Consolidated Statements of Operations

(In thousands, except share data)

(Unaudited)

 

 

 

		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			—								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	)

See accompanying notes to unaudited consolidated financial statements

 

5

Finance of America Companies Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Dollars in thousands)

(Unaudited)

 

 

 

		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

See accompanying notes to unaudited consolidated financial statements

 

6

Finance of America Companies Inc. and Subsidiaries

Consolidated Statements of Equity

(Dollars in thousands)

(Unaudited)

 

 

 

		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

See accompanying notes to unaudited consolidated financial statements

 

7

Finance of America Companies Inc. and Subsidiaries

Consolidated Statements of Equity

(In thousands, except share data)

(Unaudited)

 

 

 

		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

See accompanying notes to unaudited consolidated financial statements

 

8

Finance of America Companies Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

 

 

 

		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			23								—				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

 

9

Finance of America Companies Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

 

 

 

		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			3,084								—				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				—

See accompanying notes to unaudited consolidated financial statements

 

10

Finance of America Companies Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

 

 

 

		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

See accompanying notes to unaudited consolidated financial statements

 

11

Finance of America Companies Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

 

 

 

1.	Organization and Description of Business

Finance of America Companies Inc. (“FoA”, “Company”, or “Successor”) was incorporated in Delaware on October 9, 2020. FoA is a financial services holding company which, through its operating subsidiaries, is a leading originator and servicer of residential mortgage loans and provider of complementary financial services.

FoA has a controlling financial interest in Finance of America Equity Capital LLC (“FoA Equity” or “Predecessor”). FoA Equity owns all of the outstanding equity interests or has a controlling financial interest in Finance of America Funding LLC (“FOAF”). FOAF wholly owns Finance of America Holdings LLC (“FAH”) and Incenter LLC (“Incenter” and collectively, with FoA Equity, FOAF and FAH, known as “holding company subsidiaries”).

The Company, through its holding company subsidiary, FAH, operates three lending companies, Finance of America Mortgage LLC (“FAM”), Finance of America Reverse LLC (“FAR”), and Finance of America Commercial LLC (“FACo”) (collectively, the “operating lending subsidiaries”). Through FAM and FAR, the Company originates, purchases, sells and securitizes conventional (conforming to the underwriting standards of Fannie Mae or Freddie Mac; collectively referred to as government sponsored entities (“GSEs”)), government-insured (Federal Housing Administration (“FHA”)), government guaranteed (Department of Veteran Affairs), and proprietary non-agency residential and reverse mortgages. FACo serves as a specialty finance company which originates a variety of commercial mortgage loans to owners and investors of single and multi-family residential rental properties. The Company, through its other holding company subsidiary, Incenter, has operating service companies (the “operating service subsidiaries” and together with the operating lending subsidiaries, the “operating subsidiaries”) which provide lender services, title services, secondary markets advisory, mortgage trade brokerage, appraisal and capital management services to customers in the residential mortgage, student lending, and commercial lending industries. Incenter operates a foreign branch in the Philippines for fulfillment transactional support.

Impact of the COVID-19 Pandemic

The COVID-19 pandemic has adversely impacted global financial markets and contributed to significant volatility in market liquidity and yields required by market investors in the type of financial instruments originated by the Company’s primary operating subsidiaries. The full impact of the COVID-19 pandemic continues to evolve as of the date of this report. The Company’s management is actively monitoring the global situation and its effect on the Company’s financial condition, liquidity, operations, industry, and workforce. Further, the Company cannot estimate the length or gravity of the impact that the COVID-19 pandemic will have on the residential mortgage and commercial lending industries. As of June 30, 2021 (Successor), 551 clients, or 0.57% of the total serviced portfolio, have entered into a forbearance plan as a result of the economic impacts caused by COVID-19. As the pandemic continues, it has the potential to cause additional volatility in the financial markets and may have an adverse effect on the Company’s results of future operations, financial position, intangible assets and liquidity in fiscal year 2021.

 

2.	Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements comprise the financial statements of FoA and its controlled subsidiaries for the Successor period from April 1, 2021 to June 30, 2021 and the financial statements of FoA Equity and its controlled subsidiaries for the Predecessor periods from January 1, 2021 to March 31, 2021 and for the three months ended and six months ended June 30, 2020. The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The Consolidated Statement of Financial Condition as of December 31, 2020 has been derived from the audited consolidated financial statements of the Predecessor as of and for the year ended December 31, 2020. In the opinion of management, such financial information reflects all normal and recurring adjustments necessary for a fair presentation of the financial position and the results of operations for such interim periods in accordance with GAAP. Operating results for the interim period are not necessarily indicative of the results that may be expected for any future period or for the full year. The consolidated 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 for the year ended December 31, 2020 (Predecessor).

 

12

Finance of America Companies Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

 

 

 

On October 12, 2020, the Company, Replay Acquisition Corp. (“Replay”) and FoA Equity entered into the Transaction Agreement pursuant to which Replay agreed to combine with FoA Equity in a series of transactions that resulted in the formation of the Company as a publicly traded company on the New York Stock Exchange (“NYSE”), and the Company controlling FoA Equity in an “UP-C” structure (collectively, the “Business Combination”). At the closing of the Business Combination (the “Closing”) on April 1, 2021 (the “Closing Date”), Replay domesticated into a Delaware corporation and the Company was formed. See Note 4—Acquisitions for additional information.

The consolidated financial statements include the accounts of the Predecessor, prior to the Business Combination, which was determined to be FoA Equity, a limited liability company that was formed in July 2020. Prior to the Business Combination, FoA Equity was a wholly owned subsidiary of UFG Holdings LLC (“UFG”). FoA Equity owned all of the outstanding equity interests or had a controlling financial interest in FOAF. FAH and Incenter LLC, which were wholly owned subsidiaries of FOAF, as well as their consolidated operating lending subsidiaries and operating service subsidiaries. See Note 1—Organization and Description of Business for additional information.

The significant accounting policies described below, together with the other notes that follow, are an integral part of the consolidated financial statements.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its controlled subsidiaries and certain variable interest entities (“VIEs”) where the Company is the primary beneficiary. The Company is deemed to be the primary beneficiary of a VIE when it has both (1) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and (2) exposure to benefits and/or losses that could potentially be significant to the entity. Assets and liabilities of VIEs and their respective results of operations are consolidated from the date that the Company became the primary beneficiary through the date that the Company ceases to be the primary beneficiary.

FoA Equity consolidates the accounts of Finance of America Commercial Holdings LLC (“FACo Holdings”), which is a direct subsidiary of FAH and an indirect parent company of FACo. Through the date of the Business Combination, the noncontrolling interests of FACo Holdings met the definition of contingently redeemable financial instruments for which the ability to redeem was outside the control of the consolidating entity. The Contingently Redeemable Noncontrolling Interest (“CRNCI”) in this subsidiary was shown as a separate caption between liabilities and equity. Any income or losses attributable to the CRNCI were shown as an addition to or deduction from CRNCI in the Consolidated Statements of Financial Condition. All significant intercompany balances and transactions were eliminated. See Note 25—Changes in CRNCI for further discussion of the CRNCI and additions to or deductions from the CRNCI balance.

Business Combinations

The Company applies the acquisition method to all transactions and other events in which the entity obtains control over one or more other businesses. Assets acquired and liabilities assumed are measured at fair value as of the acquisition date. Liabilities related to contingent consideration are recognized at the acquisition date and re-measured at fair value in each subsequent reporting period. Goodwill is recognized if the consideration transferred exceeds the fair value of the net assets acquired.

Under ASC 805 there is an option to apply push-down accounting, which establishes a new basis for the assets and liabilities of the acquired company based on a “push down” of the acquirer’s stepped-up basis. The push-down accounting election is made in the reporting period in which the change-in-control event occurs. FoA has elected push-down accounting for the Business Combination, and will record the push-down entries at FoA Equity.

Goodwill

Goodwill is the excess of the purchase price over the fair value of the net assets acquired. Goodwill is not amortized, but is reviewed for impairment annually as of October 1 and monitored for interim triggering events on an ongoing basis. If certain events occur, which indicate goodwill might be impaired between annual tests, goodwill must be tested when such events occur. In making this assessment, the Company considers a number of factors including operating results, business plans, economic projections, anticipated future cash flows, etc. There are inherent uncertainties related to these factors and management’s judgment in applying them to the analysis of goodwill impairment. Changes

 

13

Finance of America Companies Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

 

 

 

in economic and operating conditions could result in goodwill impairment in future periods. In testing goodwill for impairment, the Company performs a qualitative assessment of whether it is more likely than not that the fair value of a reporting unit is less than its carrying value including goodwill. If the qualitative assessment determines that it is more likely than not that the fair value of the reporting unit is less than its carrying value including goodwill, the Company will compare the fair value of that reporting unit with its carrying value including goodwill. If the carrying value of a reporting unit exceeds its fair value, goodwill is considered impaired with the impairment loss equal to the amount by which the carrying value of the goodwill exceeds the implied fair value of that goodwill.

Intangible Assets, Net

Intangible assets, net, primarily consist of trade names, customer lists, and broker relationships acquired through various acquisitions. Intangible assets are amortized on a straight line basis over their estimated useful lives. Amortization expense of intangibles is included in general and administrative expenses on the Consolidated Statements of Operations. The Company reviews intangible assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable.

Warrant Liability

The Company accounts for warrants for the Company’s Class A Common Stock as liabilities at fair value within payables and other liabilities on the Consolidated Statements of Financial Condition because the warrants do not meet the criteria for classification within equity. The warrants are subject to remeasurement at each statement of financial condition date and any change in fair value is recognized within other, net in the Consolidated Statements of Operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrants.

Tax Receivable Agreement Obligation

In connection with the Business Combination, concurrently with the Closing, the Company entered into Tax Receivable Agreements (“TRA”) with certain owners of FoA Equity prior to the Business Combination (the “TRA Parties”). The TRAs generally provide for the payment by the Company to the TRA Parties of 85% of the cash tax benefits, if any, that the Company is deemed to realize (calculated using certain simplifying assumptions) as a result of (i) tax basis adjustments as a result of sales and exchanges of units in connection with or following the Business Combination and certain distributions with respect to units, (ii) the Company’s utilization of certain tax attributes attributable to Blackstone Tactical Opportunities Associates—NQ L.L.C., a Delaware limited partnership, shareholders (“Blocker GP”), and (iii) certain other tax benefits related to entering into the TRAs, including tax benefits attributable to making payments under the TRAs. These tax basis adjustments generated over time may increase (for tax purposes) the depreciation and amortization deductions available to the Company and, therefore, may reduce the amount of U.S. federal, state and local tax that the Company would otherwise be required to pay in the future, although the IRS may challenge all or part of the validity of that tax basis, and a court could sustain such challenge. The tax basis adjustments upon sales or exchanges of units for shares of Class A Common Stock and certain distributions with respect to Class A LLC Units may also decrease gains (or increase losses) on future dispositions of certain assets to the extent tax basis is allocated to those assets. Actual tax benefits realized by the Company may differ from tax benefits calculated under the Tax Receivable Agreements as a result of the use of certain assumptions in the TRAs, including the use of an assumed weighted average state and local income tax rate to calculate tax benefits.

The payments that FoA may make under the TRAs are expected to be substantial. The payments under the TRAs are not conditioned upon continued ownership of FoA or FoA Equity by the Continuing Unitholders.

The Company accounts for the effects of these increases in tax basis and associated payments under the TRAs arising from exchanges in connection with the Business Combination as follows:

 

•

records an increase in deferred tax assets for the estimated income tax effects of the increases in tax basis based on enacted federal and state tax rates at the date of the exchange;

 

14

Finance of America Companies Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

 

 

 

•

to the extent we estimate that the Company will not realize the full benefit represented by the deferred tax asset, based on an analysis that will consider, among other things, our expectation of future earnings, the Company reduces the deferred tax asset with a valuation allowance; and

 

•

initial measurement of the obligations is at fair value on the acquisition date. Subsequently, the liability will be remeasured at fair value each reporting period, with any changes in fair value recognized through earnings.

The Company records obligations under the TRAs resulting from future exchanges at the gross undiscounted amount of the expected future payments as an increase to the liability along with the deferred tax asset and valuation allowance (if any) with an offset to additional paid-in capital.

As of June 30, 2021 (Successor), the Company had a liability of $32.8 million related to its projected obligations under the TRA, which is included in deferred purchase price liabilities within payables and other liabilities on the Consolidated Statements of Financial Condition.

Income Taxes

Prior to the Business Combination, a portion of the Company’s earnings were subject to certain U.S. Federal and foreign taxes. Subsequent to the Transaction, the portion of earnings allocable to the Registrant is subject to corporate level tax rates at the 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 computation of the effective tax rate and provision at each interim period requires the use of certain estimates and significant judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income that is subject to tax, permanent differences between the Company’s GAAP earnings and taxable income, and the likelihood of recovering deferred tax assets existing as of the balance sheet date. The estimates used to compute the provision for income taxes may change throughout the year as new events occur, additional information is obtained or as tax laws and regulations change. Accordingly, the effective tax rate for future interim periods may vary materially.

The Company accounts for income taxes pursuant to the asset and liability method which requires it to recognize current tax liabilities or receivables for the amount of taxes it estimates are payable or refundable for the current year, deferred tax assets and liabilities for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts and their respective tax bases of assets and liabilities and the expected benefits of net operating loss and credit carryforwards. Deferred tax assets and liabilities are 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.

The benefit of tax positions taken or expected to be taken in the Company’s income tax returns is recognized in the financial statements if such positions are more likely than not of being sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to the 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 that was not recognized. Interest costs and related penalties related to unrecognized tax benefits are required to be calculated, if applicable and are recognized as general and administrative expenses.

 

15

Finance of America Companies Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

 

 

 

Seller Earnout

The equity owners of FoA Equity prior to the Closing are entitled to receive an 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 with respect to a trading day is greater than or equal to $12.50 for any 20 trading days within a consecutive 30-trading-day period, 50% of the earnout units issued to sellers (in conjunction with the Sponsor shares defined below, the “Earnout Securities”) will be issued; and if, at any time during the six years following Closing, the VWAP is greater than or equal to $15.00 for any 20 trading days within a consecutive 30-trading-day period, the remaining 50% of the Earnout Securities will be issued.

The seller earnout is accounted for as contingent consideration and classified as equity. The seller earnout was measured at fair value upon the consummation of the Business Combination, the date of issuance, and will not be subsequently remeasured. The settlement of the seller earnout will be accounted for within equity, if and when, the First or Second Achievement Date occurs.

Sponsor Earnout

The Company classified the Sponsor Earnout Agreement as an equity transaction measured at fair value upon the consummation of the Business Combination, the date of issuance, and will not be subsequently remeasured. Additionally, the settlement of the Sponsor Earnout Agreement will be accounted for within equity, if and when the First or Second Earnout Achievement Date occurs. See Note 34—Sponsor Earnout for additional information.

Noncontrolling Interest

Noncontrolling interest represents the Company’s noncontrolling interest in consolidated subsidiaries which are not attributable, directly or indirectly, to the controlling Class A Common Stock ownership of the Company. Net (loss) income is reduced by the portion of net (loss) income that is attributable to noncontrolling interests as well as special allocations related to the Amended and Restated Long-Term Incentive Plan (“A&R MLTIP”) as defined in the FoA Equity LLC Agreement.

Equity-Based Compensation

Equity-based compensation with service conditions made to employees is measured based on the grant date fair value of the awards and recognized as compensation expense over the period during which the recipient is required to perform services in exchange for the award (the requisite service period). The Company has elected to use a straight-line attribution method for recognizing compensation costs relating to awards that have service conditions only. Forfeitures are recorded as they occur.

For equity-based compensation where there are market conditions as well as service conditions to vesting, the grant date fair value of the awards is recognized as compensation expense using the graded-vesting method over the requisite service period for each separately vesting tranche of the award as if they were multiple awards.

Earnings Per Share

Basic net income per share is based on the weighted average number of shares of Class A Common Stock issued and outstanding during the Successor period. Diluted net income per share is based on the weighted average number of shares of Class A Common Stock issued and outstanding and the effect of all dilutive common stock equivalents and potentially dilutive share based compensation awards outstanding during the Successor period.

For the Predecessor periods, FoA Equity’s capital structure consisted of a single class of outstanding membership units which were held by one member, UFG. Therefore, the Company omitted earnings per unit for the Predecessor periods presented due to the limited number of LLC unit holders.

Reclassifications

Certain amounts from the prior period consolidated financial statements have been reclassified to conform to the current period financial presentation.

 

16

Finance of America Companies Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

 

 

 

Recently Adopted Accounting Guidance

 

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, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, ASU 2020-03, 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 ASU 2016-13 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.

 

17

Finance of America Companies Inc. and Subsidiaries

Notes to Unaudited 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 (Subtopic 350-40): 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 an internal-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.

 

18