Industry-Leading Reverse Mortgage Lender American Financial (FOA) swung into the red again in the second quarter of 2024, but it managed to edge closer to profitability while also expanding dollar loan volume through other business metrics that showed improvement.
That’s according to the company’s second-quarter 2024 financial results and a statement provided to analysts during the Q&A portion of this week’s earnings call.
overall financial performance
The amount of FOA-funded loans increased from $424 million in the first quarter of 2024 to $447 million in the second quarter, a 5% quarterly increase but roughly the same as a year ago. Year-to-date, FOA’s loan volume has reached $871 million, compared with $804 million in the same period in 2023.
Its total revenue was US$79 million, an increase of 5% from the previous quarter, and year-to-date revenue has increased significantly compared with the same period last year. As of the end of the second quarter of 2023, FOA’s year-to-date revenue was $29 million. The financial report shows that one year later, FOA’s revenue reached US$154 million.
However, the company’s pre-tax loss and net loss this quarter were US$4 million and US$5 million respectively. These losses are significantly lower than the levels of $16 million each in the first quarter of 2024, and year-to-date losses are also significantly reduced. Pre-tax losses and net losses in the first half of last year were US$166 million and US$165 million, respectively, but only US$20 million and US$21 million in the same period of 2024.
“Overall, I’m pleased to report that fundamentals across American Financial’s business continued to improve in the second quarter, resulting in our fourth consecutive quarter of improved results. [adjusted net income (ANI)]”, FOA chief executive Graham Fleming said on the earnings call.
Fleming said the company has been rigorously adhering to a strategic plan that has improved operating strength and overall profitability, resulting in loan volume and revenue growth while expenses have improved compared to the first quarter of 2024 has declined.
Fleming also mentioned that the complete process of completing the FOA merger American Consulting Group (AAG) Getting into the business can help steer finances in a positive direction.
“Looking back, the second quarter of 2023 was the first quarter of the combined business. [FOA] and Asia AG. Since then, our revenue, excluding other fair value changes, has increased 33% while our expenses have decreased 26%,” he said. “Compared to the same period last year, our ANI significantly decreased from $26 million to $1 million. In addition, we also achieved a significant turnaround in adjusted EBITDA, improving from negative $26 million in 2023 to positive $9 million in 2024 Dollar.
Inventory operations, warehouse lines, HMBS 2.0
Fleming also detailed the company’s recent reverse stock split to bring its stock price into compliance with continued listing standards. New York Stock Exchange (New York Stock Exchange). He described how the move would bring the share price back into compliance and the impact the debt swap agreement is expected to have on the company’s financial position.
“As of today, more than 99% of holders of senior unsecured notes have indicated their intention to [to participate in the exchange offer],” Fleming said. “This is an important milestone for the company and the transactions contemplated by the exchange offer support agreement will have later maturity dates, enhance our financial flexibility and help align our cash flows with our debt obligations. , thereby improving our future capital structure.
Fleming also revealed on the call that the company has closed two warehouse financing facilities with “two new lending partners entering the reverse space to help minimize cuts to our proprietary loan production.” He said this illustrates the growing interest from outside parties in the reverse mortgage sector.
In the end, Fleming was right Ginnie Maehas developed a new Home Equity Conversion Mortgage (HECM)-backed securities (HMBS) program, dubbed “HMBS 2.0,” and said it expects to help further improve the company’s liquidity position.
“This exciting program provides a more favorable HMBS structure that will significantly reduce the capital required for acquisitions and allow these acquisitions to be securitized from a Ginnie Mae-backed pool,” he explained. “This has the potential to have a positive impact on earnings, net tangible value and liquidity.”
During the Q&A portion at the end of the call, some investors weighed in on the company’s growth trajectory outlined in the earnings report. “Congratulations on the great second quarter,” one analyst said.
In Wednesday trading, FOA stock rose to $7.38 per share, recovering from a low of $7.00 per share over the past five days.
