Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations

v3.23.3
Discontinued Operations
 9 Months Ended
Sep. 30, 2023
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations
4. Discontinued Operations
In 2023 and 2022, the Company reevaluated the business strategy and implemented a series of transformational actions to restructure the organization into a modern retirement solutions platform. This plan included the wind-down of the previously reported Mortgage Originations segment and sale of the previously reported Commercial Originations and Lender Services segments. This constitutes a strategic shift that has or will have a major effect on our operations and financial results. As such, the results of our previously reported Mortgage Originations, Commercial Originations, and Lender Services segments are reported as discontinued operations for all periods presented, in accordance with ASC 205.
Mortgage Originations Segment
On October 20, 2022, the Board of the Company authorized a plan to discontinue the operations of the Company’s previously reported Mortgage Originations segment, other than the Home Improvement channel. The Disposition commenced in the fourth quarter of 2022 and was completed on February 28, 2023. On August 31, 2023, FAM entered into an agreement to sell certain operational assets of the Home Improvement channel. This transaction closed on September 15, 2023 for cash consideration of $0.3 million. The Company is now in the process of winding down its Home Improvement channel and expects to close the remaining pipeline of home improvement loans by the end of March 2024. The wind-down of the Home Improvement channel is not considered by the Company to be a strategic shift that has or will have a major effect on our operations and financial results. Therefore, the operations of the Home Improvement channel are reported as part of the Company's Retirement Solutions segment rather than as discontinued operations.
Lender Services Segment
On February 1, 2023, the Company's indirect subsidiary, Incenter, entered into an agreement to sell one hundred percent of (i) the issued and outstanding shares of capital stock of ANTIC, a direct subsidiary of Incenter and an indirect subsidiary of the Company, and (ii) the issued and outstanding membership interests of BNT, a direct subsidiary of Incenter and an indirect subsidiary of the Company. The closing of the ANTIC and BNT sale was completed on July 3, 2023. Incenter received $92.6 million in cash, which is the base purchase price of $100.0 million adjusted at closing in accordance with the provisions of the agreement, and transferred $27.0 million of cash to the purchaser. The Company has historically included the operations of ANTIC and BNT in its previously reported Lender Services segment.
On March 30, 2023, the FoA Equity Board authorized a plan to sell assets making up the remainder of the Company's previously reported Lender Services segment, with the exception of its Incenter Solutions LLC operating service subsidiary. The Company sold such assets on June 30, 2023 in two separate transactions for an aggregate consideration of $17.5 million which includes $4.8 million in cash and a $12.7 million note receivable subject to subsequent certain contractual purchase price adjustments. The note receivable is included in the Condensed Consolidated Statements of Cash Flows as a non-cash investing activity. During the quarter ended September 30, 2023, the Company ceased the operations of the Company's Incenter Solutions LLC operating service subsidiary. The Company expects the wind-down of Incenter Solutions LLC to be substantially complete by the end of December 2023. The wind-down of Incenter Solutions LLC is not considered by the Company to be a strategic shift that has or will have a major effect on our operations and financial results. Therefore, the operations of Incenter Solutions LLC are reported as part of the Company's Corporate and Other segment rather than as discontinued operations.
Commercial Originations Segment
On February 19, 2023, the Company entered into an agreement to sell certain operational assets of FAM operating as FACo. This transaction closed on March 14, 2023 for consideration of $2.5 million of which $0.5 million is cash consideration. The Company has historically included the operations of FACo in its previously reported Commercial Originations segment.
The following table summarizes the major classes of assets and liabilities classified as discontinued operations as of September 30, 2023 and December 31, 2022 (in thousands):

September 30, 2023 December 31, 2022
Assets
Cash and cash equivalents $ —  $ 36,212 
Restricted cash —  311 
Loans held for sale, at fair value —  141,994 
Derivative assets —  676 
Fixed assets and leasehold improvements, net 81  9,884 
Intangible assets, net —  77,436 
Other assets, net 8,275  46,847 
Assets of discontinued operations $ 8,356  $ 313,360 
Liabilities
Other financing lines of credit $ —  $ 127,735 
Payables and other liabilities 18,360  99,379 
Liabilities of discontinued operations $ 18,360  $ 227,114 
The following table summarizes the major components of net loss from discontinued operations (in thousands):

For the three months ended September 30, 2023 For the three months ended September 30, 2022 For the nine months ended September 30, 2023 For the nine months ended September 30, 2022
Revenues
Gain on sale and other income from loans held for sale, net $ —  $ 42,687  $ 278  $ 226,578 
Net fair value gains on loans and related obligations —  3,868  308  10,781 
Fee income 3  60,300  68,128  244,572 
Net interest income:
Interest income —  9,495  828  36,428 
Interest expense —  (7,702) (970) (26,861)
Net interest income —  1,793  (142) 9,567 
Total revenues 3  108,648  68,572  491,498 
Expenses
Salaries, benefits, and related expenses 962  100,597  51,664  386,064 
Occupancy, equipment rentals, and other office related expenses 126  5,427  1,977  16,637 
General and administrative expenses 1,106  60,546  58,440  213,571 
Total expenses 2,194  166,570  112,081  616,272 
Impairment of intangibles and other assets(1)
—  (134,384) (4,455) (134,384)
Other, net(2)
(261) 862  1,660  3,628 
Net loss from discontinued operations before income taxes (2,452) (191,444) (46,304) (255,530)
Provision (benefit) for income taxes from discontinued operations 12  5,517  (1,093) 1,165 
Net loss from discontinued operations (2,464) (196,961) (45,211) (256,695)
Net loss attributable to noncontrolling interest from discontinued operations (1,629) (128,066) (29,182) (173,087)
Net loss from discontinued operations attributable to controlling interest $ (835) $ (68,895) $ (16,029) $ (83,608)
(1) The Company evaluates the carrying value of long-lived assets, including intangible assets, fixed assets, leasehold improvements as well as right-of-use assets in operating leases when indicators of impairment exist in accordance with ASC 360, Property, Plant, and Equipment. Based on the analyses, the Company recognized impairment charges for the nine months ended September 30, 2023 related to the sales of the previously reported Lender Services and Commercial Originations segments.
For the three and nine months ended September 30, 2022, the Company recognized impairment of intangibles and other assets in the previously reported Mortgage Originations and Commercial Originations segments due to the length and magnitude of the downturn in mortgage demand.
(2) Amounts include gains on disposals of $0.2 million and $2.2 million for the three and nine months ended September 30, 2023, respectively. The gains on disposals consist of a $0.2 million gain on the sale of ANTIC and BNT, a $12.2 million gain on the sale of the remaining assets of the Lender Services segment, and a $10.2 million loss on the sale of our commercial originations operational assets.
The Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 included the following material activities related to discontinued operations (in thousands):
For the nine months ended September 30, 2023 For the nine months ended September 30, 2022
Gain on sale and other income from loans held for sale, net $ 278  $ 226,578 
Unrealized fair value changes on loans, related obligations, and derivatives 308  10,781 
Impairment of intangibles and other assets 4,455  134,384 
Depreciation and amortization 2,778  18,797 
Acquisition of fixed assets (1,815) (5,971)