Finance of America Companies Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations

Discontinued Operations

3 Months Ended

Mar. 31, 2023

Discontinued Operations and Disposal Groups [Abstract]

4. Discontinued Operations

In 2022 and 2023, 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 Lenders 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 Lenders 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.

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 is expected to occur in July 2023. The Company has historically included the operations of ANTIC and BNT in its previously reported Lender Services operating 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 operating segment, with the exception of its Incenter Solutions LLC operating service subsidiary, which continues to provide fulfillment transaction support. The operations of Incenter Solutions LLC are now reported as part of the Company's Corporate and Other segment. Refer to Note 27 - Subsequent Events for additional information. This sale is committed under the same disposal plan with the sale of ANTIC and BNT and meets the held for sale criteria in accordance with ASC 205, as of March 31, 2023.

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. The Company has historically included the operations of FACo in its previously reported Commercial Originations operating segment.

The following table summarizes the major classes of assets and liabilities classified as discontinued operations as of March 31, 2023 and December 31, 2022 (in thousands):


	March 31, 2023		December 31, 2022
Assets
Cash and cash equivalents	$	33,828	$	36,212
Restricted cash	311		311
Loans held for sale, at fair value	—		141,994
Derivative assets	11		676
Fixed assets and leasehold improvements, net	9,649		9,884
Intangible assets, net	63,580		77,436
Other assets, net	44,071		46,847
Assets of discontinued operations	$	151,450	$	313,360
Liabilities
Other financing lines of credit	$	—	$	127,735
Payables and other liabilities	66,302		99,379
Liabilities of discontinued operations	$	66,302	$	227,114

The following table summarizes the major components of net loss from discontinued operations for the three months ended March 31, 2023 and 2022 (in thousands):


	For the three months ended March 31, 2023		For the three months ended March 31, 2022
Revenues
Gain on sale and other income from loans held for sale, net	$	396	$	112,131
Net fair value gains on loans and related obligations	308		3,475
Fee income	32,628		102,431
Net interest income (expense):
Interest income	517		12,689
Interest expense	(820)		(9,350)
Net interest income (expense)	(303)		3,339
Total revenues	33,029		221,376

Expenses
Salaries, benefits, and related expenses	30,851		149,977
Occupancy, equipment rentals, and other office related expenses	972		5,648
General and administrative expenses	28,533		86,508
Total expenses	60,356		242,133
Impairment of other assets(1)	(1,055)		—
Other, net(2)	(9,089)		1,788
Net loss from discontinued operations before income taxes	(37,471)		(18,969)
Provision (benefit) for income taxes from discontinued operations	3,419		(5,613)
Net loss from discontinued operations	(40,890)		(13,356)
Net loss attributable to noncontrolling interest from discontinued operations	(25,217)		(14,299)
Net income (loss) from discontinued operations attributable to controlling interest	$	(15,673)	$	943

(1) The Company evaluates the carrying value of long-lived assets, including the 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 analysis, the Company recognized an impairment charge following the sale of commercial originations segment.

(2)Amount includes a loss on disposal of $10.2 million for the three months ended March 31, 2023.

The Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2023 and 2022 included the following material activities related to discontinued operations (in thousands):


	For the three months ended March 31, 2023		For the three months ended March 31, 2022
Gain on sale and other income from loans held for sale, net	$	396	$	112,131
Unrealized fair value changes on loans, related obligations, and derivatives	308		3,475
Impairment of intangibles and other assets	1,055		—

Depreciation and amortization	2,778		6,466
Acquisition of fixed assets	(1,815)		(2,612)