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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

 

For the quarterly report year ended March 31, 2020

 

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 001‑11981

MMA CAPITAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware
(State or other jurisdiction of incorporation or organization)

52‑1449733
(I.R.S. Employer Identification No.)

3600 O’Donnell Street, Suite 600

Baltimore, Maryland 21224
(Address of principal executive offices,

including zip code)

 

(443) 263‑2900
(Registrant’s telephone number, including area code)

 

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

 

 

 

 

 

 

 

 

 

Title of each class
Common Shares, no par value

Common Stock Purchase Rights

Trading Symbol(s)

MMAC

MMAC

Name of each exchange on which registered
Nasdaq Capital Market

Nasdaq Capital Market

 

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 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 Exchange Act).  Yes ☐ No ☑

There were 5,700,646 shares of common shares outstanding at May 1, 2020.

 

 

 

 

 

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MMA Capital Holdings, Inc.

Table of Contents

 

 

 

 

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS 

2

 

 

 

 

 

 

PART I – FINANCIAL INFORMATION 

3

 

 

 

 

 

 

 

Item 1. 

Financial Statements (Unaudited)

25

 

 

 

 

 

 

 

 

(a)

Consolidated Balance Sheets at March 31, 2020 and December 31, 2019

25

 

 

 

 

 

 

 

 

(b)

Consolidated Statements of Operations for the three months ended March 31, 2020 and March 31, 2019

26

 

 

 

 

 

 

 

 

(c)

Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2020 and March 31, 2019

28

 

 

 

 

 

 

 

 

(d)

Consolidated Statements of Equity for the three months ended March 31, 2020 and March 31, 2019

 

29

 

 

 

 

 

 

 

 

(e)

Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and March 31, 2019

 

30

 

 

 

 

 

 

 

 

(f)

Notes to Consolidated Financial Statements

32

 

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

5

 

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

55

 

 

 

 

 

 

 

Item 4.

Controls and Procedures

55

 

 

 

 

 

 

PART II – OTHER INFORMATION 

 

56

 

 

 

 

 

 

 

Item 1

Legal Proceedings

 

56

 

 

 

 

 

 

 

Item 1A.

Risk Factors

 

56

 

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

57

 

 

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

57

 

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures

 

58

 

 

 

 

 

 

 

Item 5.

Other Information

 

58

 

 

 

 

 

 

 

Item 6.

Exhibits

 

59

 

 

 

 

 

 

SIGNATURES 

S-1

 

 

 

 

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Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10‑Q for the period ended March 31, 2020 (this “Report”) should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Annual Report”), filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”), to which reference is hereby made. This Report contains forward-looking statements intended to qualify for the safe harbor contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Forward-looking statements often include words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “project,” “see,” “seek,” “should,” “will,” “would,” and similar words or expressions and are made in connection with discussions of future events and future operating or financial performance.

Forward-looking statements reflect our management’s expectations at the date of this Report regarding future conditions, events or results.  They are not guarantees of future performance.  By their nature, forward-looking statements are subject to risks and uncertainties including the uncertain aspect of the novel strain of coronavirus pandemic, known as COVID-19.  Our actual results and financial condition may differ materially from what is anticipated in the forward-looking statements.  There are many factors that could cause actual conditions, events or results to differ from those anticipated by the forward-looking statements contained in this Report.  For a discussion of certain risks and uncertainties and the factors that could cause our actual results to differ materially because of those risks and uncertainties, see Part II, Item 1A. “Risk Factors” of this Report and Part I, Item 1A. “Risk Factors” of our 2019 Annual Report.

Readers are cautioned not to place undue reliance on forward-looking statements in this Report or that we may make from time to time, and to consider carefully the factors discussed in Part II, Item 1A. “Risk Factors” of this Report and Part I, Item 1A. “Risk Factors” of our 2019 Annual Report in evaluating these forward-looking statements.  We do not undertake to update any forward-looking statements contained herein, except as required by law.

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PART I  – FINANCIAL INFORMATION

 

MMA Capital Holdings, Inc.

Consolidated Financial Highlights

(Unaudited)

 

 

 

 

 

 

 

 

 

 

As of and for the three months ended

(in thousands, except per common share data)

    

March 31, 2020

    

December 31, 2019

Selected income statement data

 

 

 

 

 

 

Net interest income

 

$

559

 

$

2,276

Non-interest income

 

 

2,429

 

 

10,666

Other expenses

 

 

7,237

 

 

4,213

Net (loss) income from continuing operations before income taxes

 

 

(4,249)

 

 

8,729

 

 

 

 

 

 

 

Income tax benefit (1)

 

 

1,191

 

 

60,571

Net (loss) income

 

$

(3,058)

 

$

69,300

 

 

 

 

 

 

 

Earnings per share data

 

 

 

 

 

 

Net (loss) income: Basic and Diluted

 

$

(0.53)

 

$

11.84

 

 

 

 

 

 

 

Net (loss) income from continuing operations before income taxes per share: Basic and Diluted

 

$

(0.73)

 

$

1.49

 

 

 

 

 

 

 

Average shares:   Basic and Diluted

 

 

5,804

 

 

5,855

 

 

 

 

 

 

 

Market and per common share data

 

 

 

 

 

 

Market capitalization

 

$

141,021

 

$

181,322

Common shares at period-end

 

 

5,807

 

 

5,805

Share price during period:

 

 

 

 

 

 

High

 

 

32.70

 

 

33.00

Low

 

 

20.00

 

 

29.01

Closing price at period-end

 

 

24.73

 

 

31.80

Book Value per common share: Basic and Diluted

 

 

47.82

 

 

48.43

Adjusted Book Value per common share: Basic and Diluted (2)

 

 

37.59

 

 

38.49

 

 

 

 

 

 

 

Selected balance sheet data

 

 

 

 

 

 

Cash and cash equivalents

 

$

23,164

 

$

8,555

Investments in debt securities

 

 

29,645

 

 

31,365

Investment in partnerships

 

 

368,598

 

 

316,677

Deferred tax assets, net

 

 

59,394

 

 

57,711

Loans held for investment

 

 

1,271

 

 

54,100

All other assets

 

 

26,000

 

 

17,234

Total assets

 

$

508,072

 

$

485,642

 

 

 

 

 

 

 

Debt

 

$

223,653

 

$

201,816

All other liabilities

 

 

6,750

 

 

2,701

Total liabilities

 

 

230,403

 

 

204,517

Common shareholders' equity ("Book Value")

 

$

277,669

 

$

281,125

 

 

 

 

 

 

 

Rollforward of Book Value

 

 

 

 

 

 

Book Value - at beginning of period

 

$

281,125

 

$

212,910

Net (loss) income

 

 

(3,058)

 

 

100,977

Other comprehensive loss

 

 

(453)

 

 

(30,064)

Common share repurchases

 

 

(41)

 

 

(2,730)

Other changes in common shareholders' equity

 

 

96

 

 

32

Book Value - at end of period

 

$

277,669

 

$

281,125

 

 

 

 

 

 

 

Less: Deferred tax assets, net

 

 

59,394

 

 

57,711

Adjusted Book Value (2) - at end of period

 

$

218,275

 

$

223,414

 

 

 

 


 

 

 

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(1)

The Company recognized a net $57.7 million deferred tax asset (“DTA”) in the fourth quarter of 2019 that was driven by an increase in the amount of net operating loss carryforwards (“NOLs”) that, at December 31, 2019, the Company assessed were more likely than not to be utilized prior to their expiration.

 

 

(2)

Book Value excluding deferred tax assets (“Adjusted Book Value”) and Adjusted Book Value per share are financial measures that are determined other than in accordance with generally accepted accounting principles in the United States of America (“GAAP”). These non-GAAP financial measures are used to show the amount of our net worth in the aggregate and on a per-share basis, without giving effect to changes in Book Value due to the partial release of our deferred tax asset valuation allowance as of March 31, 2020 and December 31, 2019. Refer to “Use of Non-GAAP Measures” for more information, including a  reconciliation of these non-GAAP financial measures to the most directly comparable historical measures determined under GAAP.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

INTRODUCTION


Overview

MMA Capital Holdings, Inc. focuses on infrastructure-related investments that generate positive environmental and social impacts and deliver attractive risk-adjusted total returns to our shareholders, with an emphasis on debt associated with renewable energy projects and infrastructure. Unless the context otherwise requires, and when used in this Report, the “Company,” “MMA,” “we,” “our” or “us” refers to MMA Capital Holdings,  Inc. and its subsidiaries. We were originally organized as a Delaware limited liability company in 1996, converted to a Delaware corporation on January 1, 2019 and are externally managed by Hunt Investment Management, LLC (our “External Manager”), an affiliate of Hunt Companies, Inc. (Hunt Companies, Inc. and its affiliates are hereinafter referred to as “Hunt”). 

Our current objective is to produce attractive risk-adjusted returns by investing in the large, growing and fragmented renewable energy market in the United States (“U.S.”). We believe that we are well positioned to take advantage of these investment opportunities because of our External Manager’s origination network built off of extensive relationships and credit expertise gathered through years of experience. We also seek to increase the Company’s return on equity by prudently deploying debt and recycling equity out of lower yielding investments that are unrelated to renewable energy. 

In addition to renewable energy investments, we continue to own a limited number of bond investments and real estate-related investments, as well as have subordinated debt with beneficial economic terms. Further, we have significant net operating loss carryforwards (“NOLs”) that may be used to offset future federal income tax obligations, a portion of which were reported as deferred tax assets (“DTAs”) in our Consolidated Balance Sheets at March 31, 2020 and December 31, 2019. Effective December 31, 2019, we no longer organize our assets and liabilities into discrete portfolios (in each Quarterly Report on Form 10-Q that was filed in 2019, assets and liabilities of the Company were allocated to one of two portfolios, “Energy Capital” and “Other Assets and Liabilities”). 

We operate as a single reporting segment.

COVID-19 and Related Business Impacts

General

In December 2019, a novel coronavirus (“COVID-19”) was reported to have surfaced in Wuhan, China. Following its spread to over 100 countries, including the U.S., the World Health Organization declared a global pandemic on March 11, 2020. On March 13, 2020, the U.S. declared a national emergency with respect to COVID-19.

In many countries, including the U.S., the outbreak of COVID-19 has adversely impacted overall economic activity and contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak is rapidly evolving and many countries, including the U.S., have instituted quarantines, business closures, governmental agency closures and restrictions on travel to contain COVID-19.

The long-term impact of COVID-19 on our operational and financial performance will depend on future developments, including the duration, spread and intensity of COVID-19, all of which are uncertain and difficult to predict. Due to the speed with which the situation is developing, we are not able at this time to estimate the long-term effects of these factors on our business, but the adverse impact on our business, results of operations, financial condition and cash flows could be material. Given such uncertainty, we have updated the risk factors included in our 2019 Annual Report to reflect risks posed by COVID-19. Refer to Part II, Item 1A. “Risk Factors” of this Report for additional information.

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Business Operations

We are managed by our External Manager. We also rely upon other third-party vendors to conduct business operations, including vendors that provide information technology services, legal and accounting services or other support services.

Through May 4, 2020, there were no disruptions to the services provided by the External Manager and support provided by other third parties in connection with our business operations.

Renewable Energy Investments

Through May 4, 2020, the construction and development of renewable energy projects that have been financed through loans made by the Solar Ventures (as defined below) were generally on schedule as the development and construction of such projects qualified as critical infrastructure or essential services. Furthermore, most of the unpaid principal balances associated with the Solar Ventures’ loans related to projects that are located in rural and less populated areas allowing for required social distancing. While we have not encountered any significant supply chain issues to date due to COVID-19, the shutdown of manufacturing plants in China in January and February had a minor impact on delivery schedules to certain renewable energy projects financed by the Solar Ventures. Although production levels in China have subsequently returned to near normal levels, supplies were also sourced during the first quarter of 2020 from other countries, such as Mexico and India, where production levels were not consequentially impacted by COVID-19.

At May 4, 2020, all loans made by the Solar Ventures were assessed to be adequately secured and were currently expected to be repaid in full. In most cases, the repayment of the Solar Venture loans, or their “take-out,” is dependent upon the refinancing of a given loan or the sale of an underlying renewable energy project to third-parties, both of which typically require some combination of tax credit equity, sponsor equity and construction or permanent debt financing. Given deteriorating macro-economic conditions, uncertainty in the financial markets and our dependence on a functioning renewable energy finance market, we will continue to closely monitor loan performance and expected sources of repayment. 

 

Given adverse economic and market conditions that stemmed from COVID-19, origination volumes at the Solar Ventures between April 1, 2020, and May 4, 2020, declined compared to the volume of loans originated by the Solar Ventures during the same timeframes in 2019. Disruption to origination activities at the Solar Ventures is not expected to be long term.

 

Market yields associated with certain funded loans at the Solar Ventures increased in the first quarter of 2020 as credit spreads widened given deteriorating economic conditions. As a result, the fair value of the loan portfolio of the Solar Ventures, particularly those loans with longer remaining terms than average and without take-out financing commitments, declined during such reporting period by $9.0 million, or 1.2%, of outstanding unpaid principal balance (“UPB”) of the loan portfolio at March 31, 2020.  The Company recognized its share of such unrealized losses ($4.0 million) and other components of net income of the Solar Ventures in the first quarter of 2020.  Given performance expectations and the short tenor of loans at the Solar Ventures, we currently expect these unrealized loan losses to reverse over time upon the repayment of such loans. Nonetheless, the measurement of fair value of the loan portfolio of the Solar Ventures in future reporting periods is expected to remain volatile until market conditions moderate.

DTAs

The Company’s assessment of the likelihood of realizing tax benefits related to DTAs recognized in the fourth quarter of 2019 did not change in the first quarter of 2020. That is, while COVID-19 caused a sharp deterioration in macro-economic conditions, the potential amount and permanence of long-term impacts of those conditions on the Company’s business was uncertain at March 31, 2020. Consequently, the Company did not make an adjustment in the first quarter of 2020 to the carrying value of DTAs that were recognized at December 31, 2019.  However, given such uncertainty, we believe it is reasonably possible that, within the next 12 months, a reduction to the carrying value of recognized DTAs that is material to the Company’s financial statements could be recognized. However, the exact timing and amount of loss recognition depends upon future circumstances and, therefore, cannot be predicted at this time.

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In the first quarter of 2020, the Company recognized a $1.7 million increase in the carrying value of recognized DTAs due to incremental tax benefits stemming from the recognition of a $3.5 million comprehensive loss during such reporting period. Refer to the comparative discussion of our Consolidated Results of Operations for more information about the Company’s results in the first quarter of 2020. 

Other Investments and Hedging Instruments

Market yields associated with the Company’s bond investments generally increased in the first quarter of 2020 given deteriorating conditions associated with the economy. Consequently, the Company recognized $1.8 million of net unrealized fair value losses in the first quarter associated with such investments. Changes in the fair value of these investments are expected to remain volatile until market conditions moderate.    

Given decreases in benchmark interest rates that generally stemmed from actions taken by central banks to stem the tide of the economic downturn, the fair value of interest rate hedge positions of the Company decreased by $2.8 million in the first quarter of 2020 while, given its terms, the Company’s foreign exchange hedge position increased by $1.1 million. Changes in the fair value of these instruments are expected to remain volatile until market conditions moderate.

The Company’s real estate-related investments are accounted for at cost, in the case of our one land investment, or follow the equity method of accounting, in the case of our equity investments in unconsolidated funds or ventures. None of such investments were assessed to be other-than-temporarily impaired at March 31, 2020. However, with respect to the Company’s 80% ownership interest in a joint venture that owns a mixed-use town center development and undeveloped land parcels and whose incremental tax revenues secure our Infrastructure Bond (hereinafter, the “SF Venture”), the downturn in the economy that stems from COVID-19 could impair the underlying real estate value. In this regard, we anticipate that we will continue to recognize equity in losses from the SF Venture related to our equity investment and that such losses may increase, possibly significantly, as the SF Venture consists of hotel tenants, retail tenants and undeveloped land parcels. However, the severity and duration of expected losses cannot be currently quantified due to uncertainty about the duration of COVID-19 and restrictions on business openings and operations.  Nonetheless, we believe that it is reasonably possible that, within the next 12 months, a loss that is material to the Company’s financial statements could be recognized due to the residual economic effects of the measures taken to combat COVID-19, which could weigh on the performance of the development and underlying real estate value. However, the exact timing and amount of loss recognition is based upon future circumstances and, therefore, cannot be predicted at this time.

Liquidity and Capital Resources

The Company is committed to make additional capital contributions to certain of its investments in partnerships and ventures. Through May 4, 2020, the Company has honored all such commitments and we believe that we will continue to do so as these commitments arise.

Through May 4, 2020, the Company was in compliance with all its debt covenants. 

Renewable Energy Investments

We invest in loans that finance renewable energy projects to enable developers, design and build contractors and system owners to develop, build and operate renewable energy systems throughout the U.S. Renewable energy debt in which we invest is primarily structured as senior secured fixed rate loans that are made through joint ventures or directly on our balance sheet. These loans, which are generally short term in nature, are typically made to borrowers when they are in the late stages of development or construction of their commercial, utility and community solar scale photovoltaic (“PV”) facilities that are located across different states and benefit from various state and federal regulatory programs. The short duration of loans in which we invest also helps us to efficiently manage interest rate risk, mitigate long-term risks such as credit exposure to off-take counterparties and provide us flexibility to target investments.

We generally invest in renewable energy investments through the following joint ventures: Solar Construction Lending, LLC (“SCL”); Solar Permanent Lending, LLC (“SPL”); Solar Development Lending, LLC (“SDL”); these  joint ventures together with our wholly owned subsidiary, Renewable Energy Lending, LLC (“REL”), are hereinafter referred to as the

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Solar Ventures.” We are a 50% investor member in the renewable energy joint ventures in which we invest though, on occasion, we may periodically become a minority investor as a result of non-pro rata capital contributions made by our capital partner pursuant to non-pro rata funding agreements between our capital partner and us. At March 31, 2020,  we were a minority investor in SDL and SCL with a 44.5% interest in such ventures.

Lending Activities of the Solar Ventures

The Solar Ventures typically lend on a senior secured basis collateralized by solar projects, but may also invest in subordinated loans and revolving loans and may finance non-solar renewable technologies such as wind and battery storage, or provide equipment financing and other customized debt solutions for borrowers. The Solar Ventures have historically targeted loans that are underwritten to generate internal rates of return (“IRR”) ranging from 10% to 15%, before expenses, with origination fees that range from 1.0% to 3.0% on committed capital and fixed-rate coupons that range from 7.0% to 14.0%. These loans generally range in size from $2 million to over $50 million. 

Since their inception in 2015, the Solar Ventures have invested in more than 180 project-based loans that total $2.6 billion of debt commitments for the development and construction of over 660 renewable energy project sites. When completed, these projects will contribute to the generation of over 6.2 gigawatts of renewable energy, thereby eliminating approximately 178 million metric tons of carbon emissions over their project lives. The Solar Ventures closed $287.1 million of commitments across 11 loans during the first quarter of 2020 as compared to $210.0 million and 18 loans during the fourth quarter of 2019.

Through March 31, 2020,  $1.5 billion of commitments across 121 project-based loans had been repaid with no loss of principal, resulting in a weighted-average IRR (“WAIRR”) of 17.0% that was on average higher than originally underwritten loan IRRs.  Additionally, for the three months ended March 31, 2020,  10 loans totaling $207.1 million of commitments had been repaid, resulting in a WAIRR of 16.1%. WAIRR is measured as the total return in dollars of all repaid loans divided by the total commitment amount associated with such loans, where (i) the total return for each repaid loan was calculated as the product of each loan’s IRR and its commitment amount and (ii) IRR for each repaid loan was established by solving for a discount rate that made the net present value of all loan cash flows equal zero. WAIRR has been higher than the net return on the Company's investments in the Solar Ventures because it is a measure of gross returns earned by the Solar Ventures on repaid loans and does not include the impact of certain items, including: (i) operating expenses of the Solar Ventures; (ii) the amortization of the purchase premium paid by the Company in the second quarter of 2018 to buyout our former investment partner’s interest in REL; and (iii) the opportunity cost of idle capital. 

At March 31, 2020,  loans funded through the Solar Ventures had an aggregate UPB of $745.8 million and total fair value (“FV”) of $736.8 million or 98.8% of UPB, a weighted-average remaining maturity of eight months and a weighted-average coupon of 9.7%. At December 31, 2019, loans funded through the Solar Ventures had an aggregate UPB and total fair value of $654.4 million, a weighted-average maturity of 10 months and a weighted-average coupon of 10.8%. 

Table 1 provides financial information about the composition of the Solar Ventures’ loan portfolio at March 31, 2020 and December 31, 2019.

Table 1: Composition of the Solar Venture’s Loan Portfolio

 

 

 

 

 

 

 

At

 

At

 

March 31,

 

December 31,

(in thousands)

2020

 

2019

Late-stage development

$

224,901

 

$

298,609

Construction

 

484,180

 

 

321,809

Permanent

 

8,960

 

 

23,597

Other loans associated with renewable energy

 

27,715

 

 

10,345

Total UPB

$

745,756

 

$

654,360

 

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The Solar Ventures had $435.0 million of unfunded loan commitments that required borrowers to meet various conditions set forth in governing loan agreements in order for funding to occur. At March 31, 2020, $217.9 million of such commitments were attributable to the Company based upon its interest in these ventures.  Unfunded loan commitments that qualify for funding are anticipated to be funded primarily by capital within the Solar Ventures through a combination of existing loan redemptions and idle capital. To the extent capital within the Solar Ventures is not sufficient to meet their funding obligations, additional capital contributions by the members of the Solar Ventures would be required.

Investment Interests and Related Carrying Values

The carrying value and income-related information related to investments that we have made in, or related to, the Solar Ventures are further discussed below. During the first quarter of 2020, the Company and our capital partner in SDL and SCL executed various non-pro rata funding agreements pursuant to which our capital partner contributed $36.5 million of $83.0 million in SDL capital calls and $61.0 million of $97.5 million in SCL capital calls, while the Company contributed the balance. In addition, our capital partner in SDL and SCL received distributions of $32.0 million and $37.5 million, respectively, while the Company received $15.0 million and $10.5 million, respectively. As a consequence of these non-pro rata capital contributions and distributions during the first quarter of 2020,  our ownership interest in SDL and SCL increased in percentage terms from December 31, 2019. At  March 31, 2020,  through MMA Energy Holdings, LLC, the Company held ownership interests of 44.5%, 50.0%, 44.5% and 100% in SCL, SPL, SDL and REL, respectively. 

In addition to investments in the Solar Ventures, in the fourth quarter of 2019, the Company invested in a loan originated by our External Manager with a $2.1 million commitment made to a special purpose entity that is secured by land, which is subject to a 25-year ground lease to a community solar project, and by the equity interests in the borrower. The UPB and fair value of this loan, which bears interest at a fixed rate of 8.0% and matures in December 2022, was $1.3 million at March 31, 2020.

Table 2 provides financial information about the carrying value of the Company’s renewable energy investments at March 31, 2020 and December  31, 2019.  

Table 2:  Carrying Values of the Company’s Renewable Energy Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

At

 

March 31,

 

December 31,

(in thousands)

2020

 

2019

Equity investments in the Solar Ventures

$

344,601

 

$

289,123

Loan receivable

 

1,271

 

 

500

Total carrying value

$

345,872

 

$

289,623

 

The carrying value of the Company’s equity investments in the Solar Ventures increased  $55.5 million during the three months ended March 31, 2020 as a result of $51.0 million of net capital contributions made, which were sourced primarily from the $53.6 million repayment of the secured loan receivable from Hunt. Such increase was also driven in part by $4.5 million of equity in income in the Solar Ventures that was recognized during the three months of March 31, 2020.

Investment Income and Return on Investment

The Company applies the equity method of accounting to its equity investments in the Solar Ventures, which are not consolidated by the Company for reporting purposes. Accordingly, the Company recognizes its allocable share of the Solar Ventures’ net income based on the Company’s weighted-average percentage ownership during each reporting period.  Separately, the Company recognizes interest income associated with the aforementioned loan using the interest method.

Table 3 summarizes income recognized by the Company in connection with our renewable energy investments for the periods presented.

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Table 3:  Income Recognized from Renewable Energy Investments

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

  

2020

  

2019

Equity in income from the Solar Ventures

 

$

4,542

 

$

3,720

Interest income

 

 

19

 

 

 ─

Net losses on loans

 

 

(9)

 

 

 ─

Total investment income

 

$

4,552

 

$

3,720

 

Equity in income from the Solar Ventures recognized by the Company in the first quarter of 2020 included its allocable share, or $4.0 million, of $9.0 million of net fair value losses that were recognized by the Solar Ventures related to its loan portfolio.  The Company generated an unlevered net return on investment from our renewable energy investments, as measured on an annualized twelve-month trailing basis, of 10.4% and 9.3% for the three months ended March 31, 2020 and March 31, 2019, respectively. These returns were measured by dividing total investment income from renewable energy investments by the average carrying value of renewable energy investments on a trailing four quarter basis.

Refer to the comparative discussion of our Consolidated Results of Operations for more information about income that was recognized in connection with the Company’s renewable energy investments.

Leveraging our Renewable Energy Investments

On September 19, 2019, MMA Energy Holdings, LLC (“MEH” or “Borrower”), a wholly owned subsidiary of the Company, entered into a $125.0 million (the “Facility Amount”) revolving credit agreement with various lenders. During the first quarter of 2020, the maximum Facility Amount was increased to $175.0 million and the committed amount of the revolving credit facility increased from $100.0 million to $120.0 million upon the joinder of an additional lender and an increase in commitment by one of the existing lenders. 

Obligations associated with the revolving credit facility are guaranteed by the Company and are secured by specified assets of the Borrower and a pledge of all of the Company’s equity interest in the Borrower through pledge and security documentation. Availability and amounts advanced under the revolving credit facility, which may be used for various business purposes, are subject to compliance with a borrowing base comprised of assets that comply with certain eligibility criteria, and includes late-stage development, construction and permanent loans to finance renewable energy projects and cash.

Borrowing on the revolving credit facility bears interest at the one-month London Interbank Offered Rate (“LIBOR”), adjusted for statutory reserve requirements (subject to a 1.5% floor), plus a fixed spread of 2.75% per annum. The Borrower has also agreed to pay certain customary fees and expenses and to provide certain indemnities. In certain circumstances where the interest rate is unable to be determined, including in the event LIBOR ceases to be published, the administrative agent to the credit agreement will select a new rate in its reasonable judgment, including any adjustment to the replacement rate to reflect a different credit spread. The maturity date of the credit agreement is September 19, 2022, subject to a 12-month extension solely to allow refinancing or orderly repayment of the facility. 

At March 31, 2020, the UPB and carrying value of amounts borrowed under the revolving credit facility was $120.0 million and the Company recognized $1.3 million of related interest expense in the Consolidated Statements of Operations during the three months ended March 31, 2020.  

The liquidity accessed by the Company through the revolving credit facility has increased the amount of capital invested in the Solar Ventures.

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Deferred Tax Assets

Deferred taxes arise from differences between assets and liabilities measured for financial reporting versus income tax return purposes.  DTAs are recognized if we assess that it is more likely than not that tax benefits, including NOLs and other tax attributes, will be realized prior to their expiration.  

At March 31, 2020, the reported carrying value of the Company’s net DTA was $59.4 million. A valuation allowance was also maintained at such reporting date against the portion of our DTAs that correspond to federal and state NOL carryforwards that we expected will expire prior to utilization based upon our forecast of pretax book income. 

Investments in Bonds

The Company has one unencumbered tax-exempt municipal bond that financed the development of infrastructure for a mixed-use town center development in Spanish Fort, Alabama and is secured by incremental tax revenues generated from the development (this investment is hereinafter referred to as our “Infrastructure Bond”). At March 31, 2020, the Infrastructure Bond had a stated fixed interest rate of 6.3% and had a UPB and fair value of $26.9 million and $23.5 million, respectively.

At March 31, 2020, we also held one subordinate unencumbered tax-exempt multifamily bond investment with a UPB and fair value of $4.0 million and $6.1 million, respectively.

Real Estate-Related Investments

At March 31, 2020, we were an equity partner in a real estate-related investment with an 80% ownership interest in the SF Venture. The carrying value of this investment was $19.2 million at March 31, 2020.  

At March 31, 2020, the Company maintained an 11.85% ownership interest in the South Africa Workforce Housing Fund (“SAWHF”).  SAWHF is a multi-investor fund whose term matured in April 2020. However, the fund does not anticipate fully exiting all its remaining investments until December 31, 2021.  The carrying value of the Company’s investment in SAWHF was $4.8 million at March 31, 2020.

At March 31, 2020, we also owned one direct investment in real estate consisting of a parcel of land that is currently in the process of development. This real estate is located just outside the city of Winchester in Frederick County, Virginia.  On January 15, 2020, the Company invested $5.9 million in additional land improvements that were capitalized, increasing the carrying value of our investment. As of March 31, 2020, the carrying value of this investment was $14.3 million.

Debt Obligations

At March 31, 2020, the Company’s nonrenewable energy debt obligations included the subordinated debt, notes payable and other debt used to finance the Company’s 11.85% ownership interest in SAWHF, and debt obligations to the Morrison Grove Management, LLC (“MGM”) principals.

The carrying value and weighted-average yield of the Company’s nonrenewable energy debt obligations was $103.7 million and 3.7%, respectively, at March 31, 2020. Refer to Table 9, “Debt,” for more information.

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SUMMARY OF FINANCIAL PERFORMANCE

 

Net Worth

Common shareholders’ equity (“Book Value”) decreased  $3.5 million in the first quarter of 2020 to $277.7 million at March 31, 2020.  This change was driven by $3.5 million of comprehensive loss.

Book Value per share decreased $0.61, or  1.3%, in the first quarter of 2020 to $47.82 at March 31, 2020.  

Book Value adjusted to exclude the carrying value of our net DTAs (“Adjusted Book Value”) decreased $5.1 million in the first quarter of 2020 to $218.3 million at March 31, 2020. This change was driven by $4.2 million of Net loss from continuing operations before income taxes and $0.9 million of other decreases in Book Value.

Adjusted Book Value per share decreased $0.90, or 2.3%, in the first quarter of 2020 to $37.59 at March 31, 2020. 

Refer to “Use of Non-GAAP Measures” for more information regarding the reconciliation of Adjusted Book Value and Adjusted Book Value per share to our most comparable GAAP measures.

Comprehensive Loss

We recognized a  comprehensive loss of $3.5 million during the first quarter of 2020, which consisted of $3.1 million of net loss and $0.4 million of other comprehensive loss.  In comparison, we recognized $0.2 million of comprehensive loss in the quarter ended March 31, 2019, which consisted of $2.9 million of net income and $3.1 million of other comprehensive loss.

The $3.1 million net loss recognized in the first quarter of 2020 was primarily driven by $5.7  million of net fair value losses that were recognized in connection with derivative instruments and the Company’s interests in loans of the Solar Ventures. Refer to “Consolidated Results of Operations,” for more information.

Net loss from continuing operations before income taxes in the first quarter of 2020 was $4.2 million, or $0.73 per share, as compared to $2.9 million net income in the first quarter of 2019. 

Other comprehensive loss of $0.4 million that we reported in the first quarter of 2020 was primarily attributable to net fair value losses that we recognized in connection with our bond investments.

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CONSOLIDATED BALANCE SHEET ANALYSIS

 

This section provides an overview of changes in our assets, liabilities and equity and should be read together with our consolidated financial statements, including the accompanying notes to the financial statements.

Table 4 provides Consolidated Balance Sheets for the periods presented.  

Table 4:  Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

 

 

 

At

 

At

 

 

 

 

 

March 31,

 

December 31,

 

 

(in thousands, except per share data)

    

2020

    

2019

    

Change  

Assets  

  

 

 

  

 

 

  

 

 

Cash and cash equivalents

 

$

23,164

 

$

8,555

 

$

14,609

Restricted cash

 

 

7,009

 

 

4,250

 

 

2,759

Investments in debt securities

 

 

29,645

 

 

31,365

 

 

(1,720)

Investments in partnerships

 

 

368,598

 

 

316,677

 

 

51,921

Deferred tax assets, net

 

 

59,394

 

 

57,711

 

 

1,683

Loans held for investment

 

 

1,271

 

 

54,100

 

 

(52,829)

Other assets

 

 

18,991

 

 

12,984

 

 

6,007

Total assets

 

$

508,072

 

$

485,642

 

$

22,430

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Debt

 

$

223,653

 

$

201,816

 

$

21,837

Accounts payable and accrued expenses

 

 

4,300

 

 

2,527

 

 

1,773

Other liabilities

 

 

2,450

 

 

174

 

 

2,276

Total liabilities

 

$

230,403

 

$

204,517

 

$

25,886

 

 

 

 

 

 

 

 

 

 

Book Value: Basic and Diluted

 

$

277,669

 

$

281,125

 

$

(3,456)

 

 

 

 

 

 

 

 

 

 

Less: Deferred tax assets, net

 

 

59,394

 

 

57,711

 

 

1,683

Adjusted Book Value: Basic and Diluted

 

$

218,275

 

$

223,414

 

$

(5,139)

 

 

 

 

 

 

 

 

 

 

Common shares outstanding: Basic and Diluted

 

 

5,807

 

 

5,805

 

 

 2

 

 

 

 

 

 

 

 

 

 

Book Value per common share: Basic and Diluted

 

$

47.82

 

$

48.43

 

$

(0.61)

 

 

 

 

 

 

 

 

 

 

Adjusted Book Value per common share: Basic and Diluted

 

$

37.59

 

$

38.49

 

$

(0.90)

 

Cash and cash equivalents increased primarily due to advances from the revolving credit facility.  

Restricted cash increased primarily as a result of an increase in the amount of cash collateral that was posted to counterparties in connection with our interest rate hedging instruments.

Investments in debt securities decreased primarily due to the recognition of net fair value losses related to such investments in the first quarter of 2020 as credit spreads related to such investments widened during such reporting period.

Investments in partnerships increased primarily as a result of net capital contributions of $51.0 million that we made to the Solar Ventures and the recognition of $4.5 million of equity in income of our investees.

Deferred tax assets, net increased $1.7 million due to the recognition of a net loss in the first quarter of 2020.

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Loans held for investment decreased primarily as a result of the repayment of the Company’s $53.6 million loan receivable from Hunt (the “Hunt Note”) on January 3, 2020. 

Other Assets increased primarily as a result of $5.9 million of land improvement costs that were capitalized in connection with a real estate investment that is in process of development.

Debt increased primarily as a result of advances from the revolving credit facility.    

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CONSOLIDATED RESULTS OF OPERATIONS

 

This section provides a comparative discussion of our Consolidated Results of Operations and should be read in conjunction with our consolidated financial statements, including the accompanying notes.  See “Critical Accounting Policies and Estimates,” for more information concerning the most significant accounting policies and estimates applied in determining our results of operations.

Net Income

Table 5 summarizes net income for the periods presented.

Table 5:  Net (Loss) Income

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

 

 

 

March 31,

 

 

 

(in thousands)

  

2020

  

2019

  

Change

Net interest income

 

$

559

 

$

1,679

 

$

(1,120)

Non-interest income

 

 

 

 

 

 

 

 

 

Equity in income from unconsolidated funds and ventures

 

 

4,148

 

 

3,976

 

 

172

Net (losses) gains

 

 

(1,720)

 

 

2,118

 

 

(3,838)

Other income

 

 

 1

 

 

17

 

 

(16)

Other expenses

 

 

 

 

 

 

 

 

 

Other interest expense

 

 

(2,269)

 

 

(1,209)

 

 

(1,060)

Operating expenses

 

 

(4,968)

 

 

(3,679)

 

 

(1,289)

Net (loss) income from continuing operations before income taxes

 

 

(4,249)

 

 

2,902

 

 

(7,151)

Income tax benefit (expense)

 

 

1,191

 

 

(13)

 

 

1,204

Net loss from discontinued operations, net of tax

 

 

 —

 

 

(7)

 

 

 7

Net (loss) income

 

$

(3,058)

 

$

2,882

 

$

(5,940)

 

Net Interest Income

Net interest income represents interest income earned on our investments in bonds, loans and other interest-earning assets less our cost of funding associated with the debt that we use to finance these assets.

Net interest income for the three months ended March 31, 2020, declined compared to that reported for the three months ended March 31, 2019, primarily due to the full repayment of the Hunt Note and the disposition and redemption of various bond-related investments throughout 2019.

Equity in Income from Unconsolidated Funds and Ventures

Equity in income from unconsolidated funds and ventures includes our allocable share of the earnings or losses from the funds and ventures in which we have an equity interest.

Table 6 summarizes equity in income from unconsolidated funds and ventures for the periods presented.

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Table 6:  Equity in Income from Unconsolidated Funds and Ventures

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

 

 

 

March 31,

 

 

 

(in thousands)

  

2020

  

2019

  

Change

Solar Ventures

 

$

4,542

 

$

3,720

 

$

822

U.S. real estate partnerships

 

 

(586)

 

 

12

 

 

(598)

SAWHF

 

 

192

 

 

244

 

 

(52)

Equity in income from unconsolidated funds and ventures

 

$

4,148

 

$

3,976

 

$

172

 

Equity in income from the Solar Ventures for the three months ended March 31, 2020, increased compared to that reported for the three months ended March 31, 2019, primarily as a result of a significant period-over-period increase in the volume of loans originated by the Solar Ventures, which drove net income of the Solar Ventures and the Company’s share thereof higher.  The amount of equity in income from the Solar Ventures recognized in the first quarter of 2020 included the Company’s allocable share, or $4.0 million, of $9.0 million of net fair value losses that were recognized by the Solar Ventures in connection with the funded portion of loan commitments. The fair value of the loan portfolio of the Solar Ventures decreased in the first quarter of 2020 as certain loan-related credit spreads widened due to deteriorating macro-economic conditions. 

Equity in income from U.S. real estate partnerships for the three months ended March 31, 2020,  decreased compared to that reported for the three months ended March 31, 2019, primarily as a result of $0.6 million of net losses attributable to the Company from the SF Venture.    

Equity in income from the Company’s equity investment in SAWHF for the three months ended March 31, 2020,  decreased compared to that reported for the three months ended March 31, 2019, primarily as a result of a decrease in net fair value gains that were recognized by SAWHF in connection with its real estate-related investments.

Net (Losses) Gains

Net (losses) gains may include net realized and unrealized gains or losses relating to bonds, loans, derivatives, real estate and other investments as well as gains or losses realized by the Company in connection with the extinguishment of debt obligations.

Net losses for the three months ended March 31, 2020,  increased compared to net gains reported for the three months ended March 31, 2019, primarily due to (i) nonrecurring gains of $3.6 million that were recognized in the first quarter of 2019 in connection with the sale or redemption of bond investments and (ii) a $0.3 million increase in net fair value losses related to derivative instruments that was driven by changes in reference interest and foreign exchange rates.

Other Interest Expense

Other interest expense for the three months ended March 31, 2020, increased compared to that reported for the three months ended March 31, 2019, primarily due to advances on the Company’s revolving credit facility. 

Operating Expenses

Operating expenses include management fees and reimbursable expenses payable to our External Manager, general and administrative expense, professional fees and other miscellaneous expenses.

Table 7 summarizes operating expenses for the periods presented.

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Table 7:  Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

 

 

 

March 31,

 

 

 

(in thousands)

  

2020

  

2019

  

Change

External management fees and reimbursable expenses

 

$

(2,760)

 

$

(2,268)

 

$

(492)

General and administrative

 

 

(359)

 

 

(314)

 

 

(45)

Professional fees

 

 

(709)

 

 

(967)

 

 

258

Other expenses

 

 

(1,140)

 

 

(130)

 

 

(1,010)

Total operating expenses

 

$

(4,968)

 

$

(3,679)

 

$

(1,289)

 

Operating expenses for the three months ended March 31, 2020,  increased compared to that reported for the three months ended March 31, 2019, primarily due to (i) $1.1 million of losses recognized in the first quarter of 2020 in connection with the remeasurement of foreign currency-denominated assets into U.S. dollars for reporting purposes as the rand weakened against the U.S. dollar in the first quarter of 2020 and (ii) an increase in the amount of compensation-related expense reimbursements that were payable to the External Manager. 

Income Tax Benefit (Expense)

The Company recognized a $1.2 million income tax benefit for the three months ended March 31, 2020, as compared to income tax expense reported for the three months ended March 31, 2019, primarily due to the recognition of a net loss from operations in the first quarter of 2020.

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LIQUIDITY AND CAPITAL RESOURCES

 

Liquidity

Liquidity is a measure of our ability to meet potential short-term (within one year) and long-term cash requirements, including ongoing commitments to repay borrowings, fund and maintain our current and future assets and other general business needs. Our sources of liquidity include: (i) cash and cash equivalents; (ii) cash flows from operating activities; (iii) cash flows from investing activities; and (iv) cash flows from financing activities.

Summary of Cash Flows

Table 8 provides a consolidated view of the change in cash, cash equivalents and restricted cash of the Company for the periods presented.  At  March 31, 2020 and March 31, 2019,  $7.0 million and $5.7 million, respectively, of amounts presented below represented restricted cash.

Table 8:  Net Increase in Cash, Cash Equivalents and Restricted Cash

 

 

 

 

 

 

For the three months ended

(in thousands)

 

March 31, 2020

Cash, cash equivalents and restricted cash at beginning of period

  

$

12,805

Net cash provided by (used in):

 

 

 

Operating activities

 

 

3,414

Investing activities

 

 

(8,817)

Financing activities

 

 

22,771

Net increase in cash, cash equivalents and restricted cash

 

 

17,368

Cash, cash equivalents and restricted cash at end of period

 

$

30,173

 

 

 

 

 

 

 

For the three months ended

(in thousands)

 

March 31, 2019

Cash, cash equivalents and restricted cash at beginning of period

  

$

33,878

Net cash (used in) provided by:

 

 

 

Operating activities

 

 

(649)

Investing activities

 

 

2,409

Financing activities

 

 

(1,197)

Net increase in cash, cash equivalents and restricted cash

 

 

563

Cash, cash equivalents and restricted cash at end of period

 

$

34,441

 

Operating Activities

Cash flows from operating activities include, but are not limited to, interest income on our investments,  and income distributions from our investments in unconsolidated funds and ventures.

Net cash flows provided by operating activities during the three months ended March 31, 2020 increased  $4.1 million compared to such net cash flows during the three months ended March 31, 2019. This net increase was primarily driven by a $4.9 million increase in distributions received from the Company’s investment in partnerships that related to the Solar Ventures. The impact of this increase was partially offset by (i) a $0.5 million increase in interest expense primarily attributable to the Company’s revolving credit facility and (ii) a decline in net cash flows from bond-related investments given the disposition and redemption of various bond investments and termination of TRS agreements in 2019.  

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Investing Activities

Net cash flows associated with investing activities include, but are not limited to, principal payments; capital contributions and distributions; advance of loans held for investment; and sales proceeds from the sale of bonds, loans and real estate and other investments.

Net cash flows used in investing activities during the three months ended March 31, 2020 increased $11.2 million compared to such net cash flows during the three months ended March 31, 2019. This net increase was primarily driven by (i) a $31.0 million increase in capital contributions made to the Solar Ventures and (ii) a $23.0 million decrease in capital distributions received from the Company’s investments in partnerships that primarily related to its investments in the Solar Ventures. The impact of these items was partially offset by a $45.0 million increase in net principal payments and bond-related sales proceeds received on bonds and loans held for investment primarily due to the full repayment of the $53.6 million Hunt Note during the first quarter of 2020.

Financing Activities

Net cash flows provided by financing activities during the three months ended March 31, 2020 increased $24.0 million compared to such net cash flows during the three months ended March 31, 2019. This increase was primarily attributable to $25.5 million of net advances from the revolving credit facility. The impact of this increase was partially offset by $0.5 million of debt issuance costs incurred in connection with the increased capacity of the revolving credit facility during the first quarter of 2020.  

Capital Resources

Our debt obligations include liabilities that we recognized in connection with our subordinated debt, revolving credit facility debt obligations and other notes payable. The major types of debt obligations of the Company are further discussed below. We use the revolving credit facility to finance our investments in the Solar Ventures. See Notes to Consolidated Financial Statements – Note 6, “Debt,” for more information.

Table 9 summarizes the carrying values and weighted-average effective interest rates of the Company’s debt obligations that were outstanding at March 31, 2020 and December 31, 2019.

Table 9:  Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31, 2020

 

December 31, 2019

 

  

 

 

 

Wtd. Avg.

 

 

 

 

Wtd. Avg.

 

 

 

 

 

Effective 

 

 

 

 

Effective 

 

 

Carrying

 

Interest

 

Carrying

 

Interest

(dollars in thousands)

    

Value (1)

    

Rate (1)

 

Value (1)

    

Rate (1)

Subordinated debt

 

$

94,923

 

3.1

%

 

$

95,488

 

3.2

%

Revolving credit facility debt obligations

 

 

120,000

 

5.3

 

 

 

94,500

 

5.6

 

Notes payable and other debt

 

 

8,730

 

9.7

 

 

 

8,328

 

13.0

 

Asset related debt

 

 

 ─

 

 ─

 

 

 

3,500

 

5.0

 

Total debt

 

$

223,653

 

4.5

%

 

$

201,816

 

4.8

%


(1)

Carrying value amounts and weighted-average interest rates reported in this table include the effects of any discounts, premiums and other cost basis adjustments. An effective interest rate represents an internal rate of return of a debt instrument that makes the net present value of all cash flows, inclusive of cash flows that give rise to cost basis adjustments, equal zero and in the case of (i) fixed rate instruments, is measured as of an instrument’s issuance date and (ii) variable rate instruments, is measured as of each date that a reference interest rate resets.

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Subordinated Debt

At March 31, 2020 and December 31, 2019, the Company had subordinated debt obligations that had a total UPB of $87.6 million and $88.0 million, respectively. This debt included four tranches that amortize 2.0% per annum over their contractual lives, are due to mature with balloon payments between March 2035 and July 2035 and require the Company to pay interest based upon three-month LIBOR plus a fixed spread of 2.0%. At  March 31, 2020 the weighted average interest rate on the outstanding debt was 3.8%.

Revolving Credit Facility Debt Obligations

At March 31, 2020,  a wholly owned subsidiary of the Company had borrowed the full committed amount of $120.0 million from the revolving credit facility. This debt obligation, which is guaranteed by the Company and secured by (i) specific assets of the Borrower and (ii) a pledge of all of the Company’s equity interest in the Borrower, which in turn owns our equity investments in the Solar Ventures, matures on September 19, 2022, and is subject to a 12-month extension solely to allow refinancing or orderly repayment of the debt obligation. This debt obligation bears interest equal to one-month LIBOR (subject to a 1.5% floor) plus a fixed spread of 2.75%, which, at March 31, 2020 was 4.3%. 

Notes Payable and Other Debt

At March 31, 2020 and December 31, 2019,  the Company had notes payable and other debt with a UPB of $8.8 million and $8.4 million, respectively.  

At March 31, 2020 and December 31, 2019, $4.2 million and $6.8 million, respectively, of this debt relates to financing that was obtained to complete the purchase of the Company’s 11.85% ownership interest in SAWHF. This debt, which is denominated in South African rand, amortizes over its contractual life, is due to mature on September 8, 2020, and requires the Company to pay interest based upon the Johannesburg Interbank Agreed Rate (“JIBAR”) plus a fixed spread of 5.15%, which at March 31, 2020 was 11.6%.

At March 31, 2020 and December 31, 2019, $4.5 million and $1.5 million, respectively, of the notes payable and other debt relates to debt obligations to the MGM principals. This debt bears interest at 5.0%. The $3.0 million debt obligation amortizes over its contractual life and is due to mature on January 1, 2026. The $1.5 million debt obligation is interest only until March 31, 2026 and then amortizes in three equal installments until its maturity date of January 1, 2027.

Asset Related Debt

Asset related debt is debt that finances interest-bearing assets of the Company. The interest expense associated with this debt is included within “Net interest income” on the Company’s Consolidated Statements of Operations.

Non-bond Related Debt

At December 31, 2019, the Company had a debt obligation to MGM principals with a UPB of $3.5 million. Upon the full redemption of the Hunt Note on January 3, 2020, this asset related debt obligation to the MGM principals was reclassified to notes payable and other debt.

Covenant Compliance

At March 31, 2020 and December 31, 2019, the Company was in compliance with all covenants under its debt arrangements.

Off-Balance Sheet Arrangements

At March 31, 2020 and December 31, 2019, the Company had no off-balance sheet arrangements.

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Other Contractual Commitments

The Company is committed to make additional capital contributions to certain of its investments in partnerships and ventures.  Refer to Notes to Consolidated Financial Statements - Note 3, “Investments in Partnerships,” for more information.

At March 31, 2020 and December 31, 2019, the Company, through its wholly owned subsidiary of REL had unfunded loan commitments of $0.8 million and $1.6 million, respectively.  Refer to Notes to Consolidated Financial Statements - Note 4, “Loans Held for Investment (“HFI”)” for more information.

The Company uses derivative instruments to hedge interest rate and foreign currency risks. Depending upon movements in reference interest and foreign exchange rates, the Company may be required to make payments to the counterparties to these agreements. Refer to Notes to Consolidated Financial Statements – Note 7, “Derivative Instruments,” for more information about these instruments.

Other Capital Resources

Common Shares

The Company’s 2019 share repurchase program expired on December 31, 2019.

Dividend Policy

The Board makes the final determination regarding dividends based on our External Manager’s recommendation, which is based on an evaluation of a number of factors, including our financial condition, business prospects, the predictability of recurring cash flows from operations, available cash and other factors the Board may deem relevant. The Board does not believe paying a dividend is appropriate at the current time.

Tax Benefits Rights Agreement

Effective May 5, 2015, the Company adopted a Rights Plan designed to help preserve the Company’s NOLs.  In connection with adopting the Rights Plan, the Company declared a distribution of one right per common share to shareholders of record as of May 15, 2015.  The rights do not trade apart from the current common shares until the distribution date, as defined in the Rights Plan.  Under the Rights Plan, the acquisition by an investor (or group of related investors) of greater than a 4.9% stake in the Company, could result in all existing shareholders other than the new 4.9% holder having the right to acquire new shares for a nominal cost, thereby significantly diluting the ownership interest of the acquiring person. On March 11, 2020, the Board approved an extension of the original five-year term of the Rights Plan until May 5, 2023, or until the Board determines that the plan is no longer needed, whichever comes first. The Board has asked shareholders for an advisory vote to ratify its decision to extend the Rights Plan at the Company’s 2020 annual meeting of shareholders.

On January 3, 2018, the Board approved a waiver of the 4.9% ownership limitation with respect to Hunt, increasing the limitation to 9.9% of the Company’s issued and outstanding shares in any rolling 12-month period without causing a triggering event.

At March 31, 2020, the Company had two shareholders, including one of its executive officers, Michael L. Falcone, who held greater than a 4.9% interest in the Company.  On March 11, 2020, the Board named Mr. Falcone an exempted person in accordance with the Rights Plan for open-market share purchases of up to an additional 7,500 common shares, to be completed by December 31, 2020, with the Board reserving all its rights under the Rights Plan for any subsequent purchase. As a result of the Board’s action, purchases made by Mr. Falcone up to the authorized 7,500 common shares would not be a triggering event for purposes of the Rights Plan if purchased prior to December 31, 2020.  

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

 

The preparation of our consolidated financial statements is based on the application of GAAP, which requires us to make certain estimates and assumptions that affect the reported amounts and classification of the amounts in our consolidated financial statements.  These estimates and assumptions require us to make difficult, complex and subjective judgments involving matters that are inherently uncertain.  We base our accounting estimates and assumptions on historical experience and on judgments that we believe to be reasonable under the circumstances known to us at the time.  Actual results could differ materially from these estimates.  We applied our critical accounting policies and estimation methods consistently in all material respects and for all periods presented and have discussed those policies with our Audit Committee.

We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as necessary based on changing conditions.  Management has discussed any significant changes in judgments and assumptions in applying our critical accounting policies with the Audit Committee of our Board.  See Part I, Item 1A. “Risk Factors” in our 2019 Annual Report for a discussion of the risks associated with the need for management to make judgments and estimates in applying our accounting policies and methods.  We have identified three of our accounting policies as critical because they involve significant judgments and assumptions about highly complex and inherently uncertain matters, and the use of reasonably different estimates and assumptions could have a material impact on our reported results of operations or financial condition.  These policies govern:

·

Income taxes;

·

fair value measurement of financial instruments; and

·

consolidation.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates” in our 2019 Annual Report for a discussion of these critical accounting policies and estimates.

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ACCOUNTING AND REPORTING DEVELOPMENTS

 

We identify and discuss the expected impact on our consolidated financial statements of recently issued accounting guidance in Notes to Consolidated Financial Statements – Note 1, “Summary of Significant Accounting Policies.”

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USE OF NON-GAAP MEASURES

 

We present certain non-GAAP financial measures that supplement the financial measures we disclose that are calculated under GAAP. Non-GAAP financial measures are those that include or exclude certain items that are otherwise excluded or included, respectively, from the most directly comparable measures calculated in accordance with GAAP. The non-GAAP financial measures that we disclose are not intended as a substitute for GAAP financial measures and may not be defined or calculated the same way as similar non-GAAP financial measures used by other companies. 

Adjusted Book Value represents Book Value reduced by the carrying value of the Company’s DTAs. We believe this measure is useful to investors in assessing the Company’s underlying fundamental performance and trends in our business because it eliminates potential volatility in results brought on by tax considerations in a given year. As a result, reporting upon, and measuring changes in, Adjusted Book Value enables for a better comparison of period-to-period operating performance.

Adjusted Book Value per common share represents Adjusted Book Value at the period end divided by the common shares outstanding at the period end. 

Management intends to continually evaluate the usefulness, relevance, limitations and calculations of our reported non-GAAP performance measures to determine how best to provide relevant information to the public.

Table 10 provides reconciliations of the non-GAAP financial measures that are included in this Report to the most directly comparable GAAP financial measures.

Table 10:  Non-GAAP Reconciliations

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

(in thousands, except per share data)

    

2020

 

2019

Reconciliation of Book Value to Adjusted Book Value

 

 

 

 

 

 

Book Value (total shareholders' equity), as reported

 

$

277,669

 

$

281,125

Less: DTAs, net

 

 

59,394

 

 

57,711

Adjusted Book Value

 

$

218,275

 

$

223,414

 

 

 

 

 

 

 

Common shares outstanding

 

 

5,807

 

 

5,805

 

 

 

 

 

 

 

Reconciliation of Book Value per share to Adjusted Book Value per common share

 

 

 

 

 

 

Book Value (total shareholders' equity) per common share, as reported

 

$

47.82

 

$

48.43

Less: DTAs, net per common share

 

 

10.23

 

 

9.94

Adjusted Book Value per common share

 

$

37.59

 

$

38.49

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Item 1.  Financial Statements

MMA Capital Holdings, Inc.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

 

    

2020

    

2019

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

23,164

 

$

8,555

Restricted cash

 

 

7,009

 

 

4,250

Investments in debt securities

 

 

29,645

 

 

31,365

Investments in partnerships (includes $349,362 and $296,855 pledged as collateral at March 31, 2020 and December 31, 2019, respectively)

 

 

368,598

 

 

316,677

Deferred tax assets, net

 

 

59,394

 

 

57,711

Loans held for investment (includes zero and $53,600 of related party loans at March 31, 2020 and December 31, 2019)

 

 

1,271

 

 

54,100

Other assets

 

 

18,991

 

 

12,984

Total assets

 

$

508,072

 

$

485,642

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Debt

 

$

223,653

 

$

201,816

Accounts payable and accrued expenses

 

 

4,300

 

 

2,527

Other liabilities

 

 

2,450

 

 

174

Total liabilities

 

 

230,403

 

 

204,517

 

 

 

 

 

 

 

Commitments and contingencies (see Note 10)

 

 

 ─

 

 

 ─

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

 

Preferred shares, no par value, 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2020 and December 31, 2019

 

 

 ─

 

 

 ─

Common shares, no par value, 50,000,000 shares are authorized (5,702,423 and 5,701,946 shares issued and outstanding and 104,916 and 103,069 non-employee directors' deferred shares issued at March 31, 2020 and December 31, 2019, respectively)

 

 

270,489

 

 

273,492

Accumulated other comprehensive income ("AOCI") 

 

 

7,180

 

 

7,633

Total shareholders’ equity

 

 

277,669

 

 

281,125

Total liabilities and equity

 

$

508,072

 

$

485,642

 

 

The accompanying notes are an integral part of these consolidated financial statements.

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MMA Capital Holdings, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

 

    

2020

    

2019

Interest income

  

 

 

  

 

 

Interest on bonds

 

$

468

 

$

1,043

Interest on loans and short-term investments

 

 

91

 

 

935

Total interest income

 

 

559

 

 

1,978

Asset related interest expense

 

 

 

 

 

 

Bond related debt

 

 

 ─

 

 

237

Non-bond related debt

 

 

 ─

 

 

62

Total interest expense

 

 

 ─

 

 

299

Net interest income

 

 

559

 

 

1,679

 

 

 

 

 

 

 

Non-interest income

 

 

 

 

 

 

Equity in income from unconsolidated funds and ventures

 

 

4,148

 

 

3,976

Net gains on bonds

 

 

 ─

 

 

3,571

Net losses on derivatives

 

 

(1,711)

 

 

(1,442)

Net losses on loans and extinguishment of liabilities

 

 

(9)

 

 

(11)

Other income

 

 

 1

 

 

17

Non-interest income

 

 

2,429

 

 

6,111

 

 

 

 

 

 

 

Other expenses

 

 

 

 

 

 

Interest expense

 

 

2,269

 

 

1,209

External management fees and reimbursable expenses

 

 

2,760

 

 

2,268

General and administrative

 

 

359

 

 

314

Professional fees

 

 

709

 

 

967

Other expenses

 

 

1,140

 

 

130

Total other expenses

 

 

7,237

 

 

4,888

 

 

 

 

 

 

 

Net (loss) income from continuing operations before income taxes

 

 

(4,249)

 

 

2,902

Income tax benefit (expense)

 

 

1,191

 

 

(13)

Net (loss) income from continuing operations

 

 

(3,058)

 

 

2,889

Net loss from discontinued operations, net of tax

 

 

 ─

 

 

(7)

Net (loss) income

 

$

(3,058)

 

$

2,882

 

The accompanying notes are an integral part of these consolidated financial statements.

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MMA Capital Holdings, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS – (continued)

(Unaudited)

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

 

    

2020

    

2019

Basic and diluted income per common share:

  

 

 

  

 

 

(Loss) income from continuing operations

 

$

(0.53)

 

$

0.49

Loss from discontinued operations

 

 

 ─

 

 

 ─

(Loss) income per common share

 

$

(0.53)

 

$

0.49

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

Basic and diluted

 

 

5,804

 

 

5,882

 

 

The accompanying notes are an integral part of these consolidated financial statements.

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MMA Capital Holdings, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

 

 

2020

    

2019

Net (loss) income

  

$

(3,058)

  

$

2,882

 

 

 

 

 

 

 

Other comprehensive loss

 

 

 

 

 

 

Bond related changes:

 

 

 

 

 

 

Net unrealized (losses) gains

 

 

(1,763)

 

 

406

Reclassification of fair value gains on sold or redeemed bonds into the Consolidated Statements of Operations

 

 

 ─

 

 

(3,571)

Income tax benefit

 

 

484

 

 

 ─

Net change in other comprehensive loss due to bonds, net of taxes

 

 

(1,279)

 

 

(3,165)

Foreign currency translation adjustment

 

 

826

 

 

25

Other comprehensive loss

 

 

(453)

 

 

(3,140)

 

 

 

 

 

 

 

Comprehensive loss

 

$

(3,511)

 

$

(258)

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

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MMA Capital Holdings, Inc.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended March 31, 2020

 

 

 

 

 

 

Total Common

 

 

Common Equity Before

 

 

 

 

Shareholders’

 

 

AOCI

 

AOCI

 

Equity

 

  

Shares

  

Amount

  

 

 

  

 

 

Balance, January 1, 2020

 

5,805

 

$

273,492

 

$

7,633

 

$

281,125

Net loss

 

 ─

 

 

(3,058)

 

 

 ─

 

 

(3,058)

Other comprehensive loss

 

 ─

 

 

 ─

 

 

(453)

 

 

(453)

Common shares (restricted and deferred) issued under employee and non-employee director share plans

 

 3

 

 

96

 

 

 ─

 

 

96

Common share repurchases

 

(1)

 

 

(41)

 

 

 ─

 

 

(41)

Balance, March 31, 2020

 

5,807

 

 

270,489

 

 

7,180

 

 

277,669

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

Total Common

 

 

Common Equity Before

 

 

 

 

Shareholders’

 

 

AOCI

 

AOCI

 

Equity

 

  

Shares

  

Amount

  

 

 

  

 

 

Balance, January 1, 2019

 

5,882

 

$

175,213

 

$

37,697

 

$

212,910

Net income

 

 ─

 

 

2,882

 

 

 ─

 

 

2,882

Other comprehensive loss

 

 ─

 

 

 ─

 

 

(3,140)

 

 

(3,140)

Common shares (restricted and deferred) issued under employee and non-employee director share plans

 

 2

 

 

82

 

 

 ─

 

 

82

Cumulative change due to change in accounting principle

 

 ─

 

 

(267)

 

 

 ─

 

 

(267)

Balance, March 31, 2019

 

5,884

 

 

177,910

 

 

34,557

 

 

212,467

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

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MMA Capital Holdings, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

 

    

2020

    

2019

CASH FLOWS FROM OPERATING ACTIVITIES:

  

 

 

  

 

 

Net income

 

$

(3,058)

 

$

2,882

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Net equity in income from investments in partnerships

 

 

(4,148)

 

 

(3,976)

Net gains on bonds

 

 

 ─

 

 

(3,571)

Net losses on derivatives

 

 

1,736

 

 

1,923

Net losses on loans and extinguishment of liabilities

 

 

 9

 

 

11

Current and deferred federal income tax (benefit) expense

 

 

(1,183)

 

 

50

Distributions received from investments in partnerships

 

 

6,564

 

 

1,615

Depreciation and amortization

 

 

122

 

 

(96)

Foreign currency losses

 

 

1,140

 

 

44

Stock-based compensation expense

 

 

96

 

 

82

Other, net

 

 

2,136

 

 

387

Net cash provided by (used in) operating activities

 

 

3,414

 

 

(649)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Principal payments and sales proceeds received on bonds and loans held for investment (includes $53,600 and zero from a related party)

 

 

53,600

 

 

8,640

Advances on and originations of loans held for investment

 

 

(702)

 

 

 ─

Investments in partnerships and real estate

 

 

(88,939)

 

 

(56,447)

Capital distributions received from investments in partnerships

 

 

27,224

 

 

50,216

Net cash (used in) provided by investing activities

 

 

(8,817)

 

 

2,409

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from borrowing activity

 

 

79,500

 

 

 ─

Repayment of borrowings

 

 

(56,236)

 

 

(1,197)

Debt issuance costs

 

 

(452)

 

 

 ─

Repurchase of common shares

 

 

(41)

 

 

 ─

Net cash provided by (used in) financing activities

 

 

22,771

 

 

(1,197)

Net decrease in cash, cash equivalents and restricted cash

 

 

17,368

 

 

563

Cash, cash equivalents and restricted cash at beginning of period

 

 

12,805

 

 

33,878

Cash, cash equivalents and restricted cash at end of period

 

$

30,173

 

$

34,441

 

The accompanying notes are an integral part of these consolidated financial statements.

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MMA Capital Holdings, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS – (continued)

(Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

 

    

2020

    

2019

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

  

 

 

  

 

 

Interest paid

 

$

2,118

 

$

1,593

Income taxes paid

 

 

 ─

 

 

 ─

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

Unrealized losses included in other comprehensive income

 

 

(453)

 

 

(3,140)

Debt and liabilities extinguished through sales and collections on bonds

 

 

 ─

 

 

7,624

Decrease in investments in debt securities and common shareholders' equity due to change in accounting principle

 

 

 ─

 

 

266

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

March 31,

 

 

2020

 

2019

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

 

 

 

 

Cash and cash equivalents

 

$

23,164

 

$

28,773

Restricted cash

 

 

7,009

 

 

5,668

Total cash, cash equivalents and restricted cash shown in statement of cash flows

 

$

30,173

 

$

34,441

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

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MMA Capital Holdings, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1— Summary of Significant Accounting Policies

Organization

MMA Capital Holdings, Inc. focuses on infrastructure-related investments that generate positive environmental and social impacts and deliver attractive risk-adjusted total returns to our shareholders, with an emphasis on debt associated with renewable energy projects and infrastructure. Unless the context otherwise requires, and when used in these Notes, the “Company,” “MMA,” “we,” “our” or “us” refers to MMA Capital Holdings, Inc. and its subsidiaries. We were originally organized as a Delaware limited liability company in 1996, converted to a Delaware corporation on January 1, 2019, and are externally managed by Hunt Investment Management, LLC (our “External Manager”), an affiliate of Hunt Companies, Inc. (Hunt Companies, Inc. and its affiliates are hereinafter referred to as “Hunt”).

Our current objective is to produce attractive risk adjusted returns by investing in the large, growing and fragmented renewable energy market in the United States (“U.S”). We believe that we are well positioned to take advantage of these investment opportunities because of our External Manager’s origination network built off of extensive relationships and credit expertise gathered through years of experience. We also seek to increase the Company’s return on equity by prudently deploying debt and recycling equity out of lower yielding investments that are unrelated to renewable energy.

In addition to renewable energy investments, we continue to own a limited number of bond investments and real estate-related investments, as well as have subordinated debt with beneficial economic terms. Further, we have significant net operating loss carryforwards (“NOLs”) that may be used to offset future federal income tax obligations, a portion of which were reported as deferred tax assets (“DTAs”) in our Consolidated Balance Sheets at March 31, 2020 and December 31, 2019. Effective December 31, 2019, we no longer organize our assets and liabilities into discrete portfolios (in each Quarterly Report on Form 10-Q that was filed in 2019, assets and liabilities of the Company were allocated to one of two portfolios, “Energy Capital” and “Other Assets and Liabilities”).  

We operate as a single reporting segment.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

The Company evaluates subsequent events through the date of filing with the U.S. Securities and Exchange Commission (“SEC”).

Changes in Presentation

We have made certain reclassifications to prior year financial statements in order to enhance their comparability with current year financial statements.

Use of Estimates

The preparation of the Company’s financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, commitments and contingencies, and revenues and expenses. Management made estimates in certain areas, including the determination of the Company’s valuation allowance established against its DTAs as well as in the fair value measurement of bonds and derivative instruments. Actual results could differ materially from these estimates.

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Principles of Consolidation

The consolidated financial statements include the accounts of the Company as well as those entities in which the Company has a controlling financial interest, including wholly owned subsidiaries of the Company. All intercompany transactions and balances have been eliminated in consolidation. Equity investments in unconsolidated entities where the Company has the ability to exercise significant influence over the operations of the entity, but is not considered the primary beneficiary, are accounted for using the equity method of accounting.

Accounting Guidance

Adoption of Accounting Standards

Accounting for Financial Instruments

In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.” This guidance amends the amortization period for certain callable debt securities held at a premium, shortening the period to the earliest call date. We adopted this new guidance on its effective date of January 1, 2019. Upon adoption of this guidance, the Company assessed that certain of our bond investments were being held at a premium resulting in a reduction in amortization periods used for interest income recognition. Accordingly, during the first quarter of 2019, the Company recognized a cumulative effect adjustment of $0.3 million charge to retained earnings.

Accounting for Income Taxes

In February 2018, the FASB issued ASU No. 2018‑02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This guidance permits companies to reclassify stranded tax effects caused by the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) from AOCI to retained earnings and also requires new disclosures. We adopted this guidance on its effective date of January 1, 2019. The adoption of this guidance did not impact the Company’s Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Equity or Consolidated Statements of Cash Flows as of the adoption date.

Accounting for Stock Compensation

In June 2018, the FASB issued ASU 2018‑07,  Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” This guidance expands the scope of ASC Topic 718 to include all share-based payment arrangements related to the acquisition of goods and services from both nonemployees and employees. We adopted this new guidance on its effective date of January 1, 2019. The adoption of this guidance did not impact the Company’s Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Equity or Consolidated Statements of Cash Flows as of the adoption date.

Accounting for Financial Instruments – Fair Value Measurement

In August 2018, the FASB issued ASU No. 2018‑13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” This guidance eliminates certain disclosure requirements for fair value measurements, requires public entities to disclose certain new information and modifies some disclosure requirements. We adopted this guidance on its effective date of January 1, 2020. The adoption of this guidance did not impact the Company’s Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Equity or Consolidated Statements of Cash Flows as of the adoption date.

Accounting for Financial Instruments – Rate Reform

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This guidance is elective and is provided for contract modifications that meet certain Codification topics and subtopics. The optional amendment of this new guidance is effective March 12, 2020 through December 31, 2022. We did not make any elections provided by this new guidance and, therefore, the

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adoption of these accounting principles did not impact the Company’s Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Equity or Consolidated Statements of Cash Flows as of the adoption date.

Issued Accounting Standards Not Yet Adopted

Accounting for Financial Instruments – Credit Losses

In November 2019, the FASB issued ASU No. 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): Effective Dates.” This guidance gives private companies, not-for-profit organizations, and certain smaller reporting companies additional time to implement FASB standards on credit losses, leases, derivatives and hedging and intangible-goodwill and other (ASC 350). Because the Company is a smaller reporting company the following “credit loss” ASUs will become effective for the Company on January 1, 2023.

In June 2016, the FASB issued ASU No. 2016‑13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Improvements.” This guidance is intended to reduce the complexity of U.S. GAAP by decreasing the number of credit impairment models that entities use to account for debt instruments. This guidance establishes an impairment methodology that reflects lifetime expected credit losses rather than incurred losses. This guidance requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This new guidance is effective on January 1, 2023, with early adoption permitted. We are currently evaluating the potential impact of the new guidance on our consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” This guidance is intended to clarify aspects of accounting for credit losses, hedging activities, and financial instruments. This new guidance is effective on January 1, 2023, with early adoption permitted. We are currently evaluating the potential impact of the new guidance on our consolidated financial statements.

In May 2019, the FASB issued ASU No. 2019-05, “Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief.” This guidance provides transition relief for entities adopting ASU 2016-13. This guidance allows entities to elect the fair value options on certain financial instruments. This new guidance is effective on January 1, 2023, with early adoption permitted. We are currently evaluating the potential impact of the new guidance on our consolidated financial statements.

In November 2019, the FASB issued ASU No. 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” This guidance amends certain aspects of the FASB’s new credit losses standard, including an amendment requiring entities to include certain expected recoveries in the amortized cost basis in the allowance for credit losses for purchased credit deteriorated assets. This new guidance is effective on January 1, 2023, with early adoption permitted. We are currently evaluating the potential impact of the new guidance on our consolidated financial statements.

In February 2020, the FASB issued ASU No. 2020-02, “Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) (SEC Update).” This guidance updates certain SEC guidance in the Codification for the issuance of SEC Staff Accounting Bulletin 119 and effective date related to the leases standard. This new guidance is effective upon issuance on February 6, 2020. However, because the Company is a smaller reporting company the ASU will become effective for the Company on January 1, 2023. We are currently evaluating the potential impact of this new guidance on our consolidated financial statements.

Accounting for Financial Instruments – General

In March 2020, the FASB issued ASU No. 2020-03, “Codification Improvements to Financial Instruments.” This guidance amends certain topics including fair value option disclosures and credit losses. This guidance is effective upon issuance on March 9, 2020 for some topics and on January 1, 2023 for topics relating to credit loss. The adoption of this guidance that is effective upon issuance did not impact the Company’s Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Equity or Consolidated Statements of Cash Flows. For those aspects of the new guidance that are not effective until January 1, 2023, we are evaluating the potential impact of the new guidance on our consolidated financial statements.

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Accounting for Income Taxes

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This guidance eliminates certain exceptions to the general principles in Topic 740. This new guidance is effective for us on January 1, 2021, with early adoption permitted. We are evaluating the potential impact of the new guidance on our consolidated financial statements.

Note 2—Investments in Debt Securities

At March 31, 2020 and December 31, 2019, the Company’s investments in debt securities consist of one subordinate multifamily tax-exempt mortgage revenue bond and one tax-exempt infrastructure bond. These investments are classified as available-for-sale for reporting purposes and are measured on a fair value basis in our Consolidated Balance Sheets.

Multifamily tax-exempt bonds are issued by state and local governments or their agencies or authorities to finance affordable multifamily rental housing. Generally, the only source of security on these bonds is either a first mortgage or a subordinate mortgage on the underlying property. The Company’s non-amortizing subordinated cash flow bond principal is due in full on November 2044.

The Company’s infrastructure bond financed the development of infrastructure for a mixed-use town center development in Spanish Fort, Alabama and is secured by incremental tax revenues generated from the development and its landowners (this investment is hereinafter referred to as our “Infrastructure Bond”). At March 31, 2020, the Company’s Infrastructure Bond amortizes on a scheduled basis and has a stated maturity date of December 2048.

The following tables provide information about the unpaid principal balance (“UPB”), amortized cost, gross unrealized gains and fair value (“FV”) associated with the Company’s investments in bonds that are classified as available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

March 31, 2020

 

  

 

  

 

  

Gross

  

 

 

  

 

 

 

 

 

Amortized

 

Unrealized

 

 

 

FV as a %

(in thousands)

    

UPB

    

Cost (1)

    

Gains

 

FV

    

of UPB

Infrastructure Bond

 

$

26,885

 

$

20,840

 

$

2,691

 

$

23,531

 

 

88%

Multifamily tax-exempt bonds

 

 

4,000

 

 

 ─

 

 

6,114

 

 

6,114

 

 

153%

Total

 

$

30,885

 

$

20,840

 

$

8,805

 

$

29,645

 

 

96%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

December 31, 2019

 

  

 

  

 

  

Gross

  

 

 

  

 

 

 

 

 

Amortized

 

Unrealized

 

 

 

 

FV as a %

(in thousands)

    

UPB

    

Cost (1)

    

Gains

    

FV

 

    

of UPB

Infrastructure Bond

 

$

26,885

 

$

20,797

 

$

4,542

 

$

25,339

 

 

94%

Multifamily tax-exempt bonds

 

 

4,000

 

 

 ─

 

 

6,026

 

 

6,026

 

 

151%

Total

 

$

30,885

 

$

20,797

 

$

10,568

 

$

31,365

 

 

102%

(1)

Amortized cost consists of the UPB, unamortized premiums, discounts and other cost basis adjustments, as well as OTTI recognized in “Impairments” in our Consolidated Statements of Operations.

See Note 8, “Fair Value,” which describes factors that contributed to the $1.7 million decrease in the reported fair value of the Company’s investments in debt securities for the three months ended March 31, 2020.

Nonaccrual Bonds

At March 31, 2020 and December 31, 2019, the Company had no bonds that were on nonaccrual status. 

Interest income on bonds that was recognized on a cash basis for the three months ended March 31, 2019 was $0.1 million.

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Interest income not recognized on bond investments that were on nonaccrual status for the three months ended March 31, 2019 was $0.1 million.

Bond Sales and Redemptions

There were no sales or redemption in full of investments in bonds during the three months ended March 31, 2020.

The Company received cash proceeds in connection with the sale or redemption in full of investments in bonds of $8.6 million for the three months ended March 31, 2019.

The following table provides information about gains or losses that were recognized in the Company’s Consolidated Statements of Operations in connection with the Company’s investments in bonds:

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Gains recognized at time of sale or redemption

 

$

 ─

 

$

3,571

 

 

Note 3—Investments in Partnerships

The following table provides information about the carrying value of the Company’s investments in partnerships and ventures:

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

(in thousands)

    

2020

    

2019

Investment in Solar Ventures

  

$

344,601

  

$

289,123

Investments in U.S. real estate partnerships

 

 

19,236

 

 

19,822

Investment in South Africa Workforce Housing Fund ("SAWHF")

 

 

4,761

 

 

7,732

Total investments in partnerships

 

$

368,598

 

$

316,677

 

Investments Related to the Solar Ventures

At March 31, 2020, the Company held 44.5%, 50.0%, 44.5% and 100% equity interests in Solar Construction Lending, LLC (“SCL”), Solar Permanent Lending, LLC (“SPL”), Solar Development Lending, LLC (“SDL”) and Renewable Energy Lending, LLC (“REL”), respectively (collectively referred to as the “Solar Ventures”).

At March 31, 2020, the carrying value of the Company’s equity investments in SCL, SPL and SDL was $231.1 million, zero and $113.5 million, respectively. None of these investees were assessed to constitute a Variable Interest Entity (“VIE”) and the Company accounts for all of these investments using the equity method of accounting. At March 31, 2020, these joint ventures had $434.2 million of unfunded loan commitments that required borrowers to meet various conditions set forth in governing loan agreements in order for funding to occur. The unfunded loan commitments that qualified for funding, were anticipated to be funded primarily by capital within the joint ventures through a combination of existing loan redemptions and idle capital. To the extent capital within the joint ventures is not sufficient to meet their funding obligations additional capital contributions by the members would be required.

During the three months ended March 31, 2020, the Company and its capital partner in SDL and SCL executed various non-pro rata funding agreements pursuant to which our capital partner in SDL contributed in total $36.5 million of $83.0 million in capital calls and our capital partner in SCL contributed in total $61.0 million of $97.5 million in capital calls, while the Company contributed the balance. In addition, our capital partner in SDL and SCL received distributions of $32.0 million and $37.5 million, respectively, while the Company received $15.0 million and $10.5 million, respectively. As a consequence of these non-pro rata capital contributions and distributions during the first quarter of 2020, our ownership interest in these ventures increased in percentage terms from December 31, 2019.

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The Company paid $5.1 million for the buyout of our prior investment partner’s ownership interest in REL, on June 1, 2018, which was allocated to the net assets acquired based upon their relative fair values. This allocation resulted in a cumulative basis adjustment of $4.5 million to the Company’s investments that is amortized over the remaining investment period of SCL. For the three months ended March 31, 2020 and March 31, 2019, the amortization expense related to the Company’s basis difference was $0.2 million. At March 31, 2020 and December 31, 2019, the unamortized balance of the Company’s basis difference was $2.9 million and $3.1 million, respectively.

The following table provides information about the carrying amount of total assets and liabilities of all renewable energy related investees in which the Company had an equity method investment:

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

 

    

2020

    

2019

(in thousands)

  

 

 

  

 

 

Total assets (1) 

 

$

781,734

 

$

706,792

Other liabilities (2)

 

 

14,360

 

 

22,135


(1)

Assets of these ventures are primarily comprised of loans that are carried at fair value. 

 

(2)

Other liabilities of these ventures are primarily comprised of interest reserves.

 

The following table provides information about the gross revenue, operating expenses and net income of all renewable energy related investees in which the Company had an equity method investment:

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Gross revenue

 

$

21,821

 

$

10,334

Operating expenses

 

 

2,021

 

 

1,894

Net income and net income attributable to the entities (1)

 

 

10,825

 

 

8,492


(1)

Net income includes $9.0 million net fair value loan losses and $0.1 million of net fair value loan gains recognized as of March 31, 2020 and March 31, 2019, respectively. 

 

 

Investments in U.S. Real Estate Partnerships

At March 31, 2020, the $19.2 million reported carrying value of investments in U.S. real estate partnerships represented the Company’s 80% ownership interest in a joint venture that owns and operates a mixed-use town center and undeveloped land parcels in Spanish Fort, Alabama (“SF Venture”). The Company has the right to a preferred return on its unreturned capital contributions, as well as the right to share in excess cash flows of the real estate venture. As of March 31, 2020, the Company held an 80% economic interest based upon the partnership’s distribution waterfall. This entity was determined not to be a VIE because decision-making rights are shared equally among its members. Accordingly, the Company accounts for this investment using the equity method of accounting.

The following table provides information about the total assets, debt and other liabilities of the U.S. real estate partnerships in which the Company held an equity investment:

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

 

    

2020

    

2019

(in thousands)

  

 

 

  

 

 

Total assets

 

$

51,237

 

$

51,718

Debt

 

 

6,657

 

 

6,426

Other liabilities

 

 

20,536

 

 

20,493

 

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The following table provides information about the gross revenue, operating expenses and net loss of U.S. real estate partnerships in which the Company had an equity investment:

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Gross revenue

 

$

642

 

$

664

Operating expenses

 

 

715

 

 

470

Net loss and net loss attributable to the entities

 

 

(755)

 

 

(879)

 

Refer to Note 10, “Commitments and Contingencies,” for more information about risks and uncertainties that existed at March 31, 2020, that could significantly affect the amounts reported in the near term related to the Company’s equity investment in the SF Venture.

 

Investment in SAWHF

At March 31, 2020, the carrying value of the Company’s 11.85% equity investment in SAWHF was $4.8 million, which reflects a $3.0 million decline from December 31, 2019 due to investment dispositions and foreign currency translation losses due to the weakening of the rand against the U.S. dollar in the first quarter of 2020. The SAWHF was determined not to be a VIE, and therefore, the Company accounts for this investment using the equity method of accounting.

The following table provides information about the carrying value of total assets and other liabilities of SAWHF:

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

 

    

2020

    

2019

(in thousands)

  

 

 

  

 

 

Total assets

 

$

32,890

 

$

56,356

Other liabilities

 

 

339

 

 

130

 

The following table provides information about the gross revenue, operating expenses and net income of SAWHF:

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Gross revenue

 

$

1,112

 

$

199

Operating expenses

 

 

491

 

 

331

Net income and net income attributable to the entity

 

 

76

 

 

2,034

 

 

Note 4—Loans Held for Investment (“HFI”)

We report the carrying value of HFI loans at their UPB, net of unamortized premiums, discounts and other cost basis adjustments and related allowances for loan losses, except in instances where we have elected the fair value option as further discussed below.

The following table provides information about the UPB and fair value adjustments that were recognized in the Company’s Consolidated Balance Sheets related to loans that it classified as HFI:

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

(in thousands)

    

2020

    

2019

UPB

 

$

1,280

 

$

54,100

Fair value adjustments

 

 

(9)

 

 

 ─

Loans HFI, net

 

$

1,271

 

$

54,100

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On January 3, 2020, the entire $53.6 million UPB of the Hunt Note was fully repaid. At March 31, 2020 and December 31, 2019, the Company had one and two HFI loans, respectively, that had a combined UPB and fair value of $1.3 million and $54.1 million, respectively.

The Company elected the fair value option for one of its HFI loans that had a UPB and fair value of $1.3 million and $0.5 million at March 31, 2020 and December 31, 2019, respectively. The fair value option was elected upon its recognition so as to minimize certain operational challenges associated with accounting for this loan.

At March 31, 2020 and December 31, 2019, the Company had no HFI loans that were on nonaccrual status or that were past due in scheduled principal or interest payments and still accruing interest.

Unfunded Loan Commitments

At March 31, 2020 and December 31, 2019, the Company, through its wholly owned subsidiary of REL, had $0.8 million and $1.6 million, respectively, of unfunded loan commitments.

Note 5—Other Assets

The following table provides information related to the carrying value of the Company’s other assets:

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

(in thousands)

    

2020

    

2019

Other assets:

 

 

 

 

 

 

Real estate owned

 

$

14,341

 

$

8,397

Debt issue costs

 

 

2,879

 

 

2,675

Derivative assets

 

 

924

 

 

597

Accrued interest receivable

 

 

612

 

 

853

Other assets

 

 

235

 

 

462

Total other assets

 

$

18,991

 

$

12,984

 

Real Estate Owned (“REO”)

The following table provides information about the carrying value of the Company’s REO held for use, net:

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

(in thousands)

    

2020

    

2019

Land improvements

 

$

11,722

 

$

5,778

Land

 

 

2,619

 

 

2,619

Total

 

$

14,341

 

$

8,397

 

Land improvements are depreciated over a period of 15 years.

The Company’s investments include the Company’s REO, which consists of a parcel of land that is currently in the process of being developed. During the first quarter of 2020, the Company invested $5.9 million in additional land improvements that were capitalized as part of our investment balance. Since the asset has not been placed in service, no depreciation expense was recognized in connection with this land investment for the three months ended March 31, 2020 and March 31, 2019, nor were any impairment losses recognized by the Company during these periods in connection with REO.

Debt Issuance Costs

During the first quarter of 2020, the Company incurred, but deferred in the Consolidated Balance Sheets, $0.5 million of additional debt issuance costs in connection with the execution by MMA Energy Holdings, LLC (“MEH” or “Borrower”),

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a wholly owned subsidiary of the Company, of a credit agreement for a revolving credit facility with various lenders. These additional costs were due to the joinder of an additional lender and an increase in commitment by one of the existing lenders. These costs are being amortized ratably over the three-year term of the revolving credit facility. During the three months ended March 31, 2020, the Company recognized $0.2 million of interest expense in the Company’s Consolidated Statements of Operations related to the amortization of debt issuance costs for the revolving credit facility. At March 31, 2020 and December 31, 2019, the unamortized balance of debt issuance costs was $2.9 million and $2.7 million, respectively. See Note 6, “Debt,” for more information.

Derivative Assets

At March 31, 2020 and December 31, 2019, the Company recognized $0.9 million and $0.6 million, respectively, of derivative assets. See Note 7, “Derivative Instruments,” for more information.    

Note 6—Debt

The table below provides information about the carrying values and weighted-average effective interest rates of the Company’s debt obligations that were outstanding at March 31, 2020 and December 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

At

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

 

 

Wtd. Avg.

 

 

 

 

Wtd. Avg.

 

 

 

 

 

 

Effective 

 

 

 

 

 

Effective

 

 

 

Carrying

 

Interest

 

 

Carrying

 

Interest

 

(dollars in thousands)

  

Value (3)

  

Rate (3)

    

  

Value (3)

  

Rate (3)    

 

Other Debt

 

 

 

 

 

 

 

 

 

 

 

 

Subordinated debt (1)

 

 

 

 

 

 

 

 

 

 

 

 

Due within one year

 

 

2,206

 

3.1

 

 

 

2,212

 

3.2

 

Due after one year

 

 

92,717

 

3.1

 

 

 

93,276

 

3.2

 

Revolving credit facility debt obligations

 

 

 

 

 

 

 

 

 

 

 

 

Due within one year

 

 

 ─

 

 ─

 

 

 

 ─

 

 ─

 

Due after one year

 

 

120,000

 

5.3

 

 

 

94,500

 

5.6

 

Notes payable and other debt (2)

 

 

 

 

 

 

 

 

 

 

 

 

Due within one year

 

 

4,430

 

14.3

 

 

 

6,828

 

14.7

 

Due after one year

 

 

4,300

 

5.0

 

 

 

1,500

 

5.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other debt

 

 

223,653

 

4.5

 

 

 

198,316

 

4.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset Related Debt

 

 

 

 

 

 

 

 

 

 

 

 

Notes Payable and Other Debt

 

 

 

 

 

 

 

 

 

 

 

 

Non-bond related debt

 

 

 

 

 

 

 

 

 

 

 

 

Due within one year

 

$

 ─

 

 ─

%

 

$

650

 

5.0

%

Due after one year

 

 

 ─

 

 ─

 

 

 

2,850

 

5.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total asset related debt

 

 

 ─

 

 ─

 

 

 

3,500

 

5.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total debt

 

$

223,653

 

4.5

 

 

$

201,816

 

4.8

 


(1)

The subordinated debt balances include net cost basis adjustments of $7.3 million and $7.4 million at March 31, 2020 and December 31, 2019, respectively, that pertain to premiums and debt issuance costs.

(2)

Included in Other Debt – notes payable and other debt were unamortized debt issue costs of $0.1 million at December 31, 2019. The balance at March 31, 2020 was de minimis.

(3)

Carrying value amounts and weighted-average interest rates reported in this table include the effects of any discounts, premiums and other cost basis adjustments. An effective interest rate represents an internal rate of return of a debt instrument that makes the net present value of all cash flows, inclusive of cash flows that give rise to cost basis adjustments, equal zero and in the case of (i)

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fixed rate instruments, is measured as of an instrument’s issuance date and (ii) variable rate instruments, is measured as of each date that a reference interest rate resets.

Covenant Compliance and Debt Maturities

The following table provides information about scheduled principal payments associated with the Company’s debt agreements that were outstanding at March 31, 2020:

 

 

 

 

 

 

Asset Related Debt

(in thousands)

    

and Other Debt

2020

  

$

5,733

2021

 

 

1,913

2022

 

 

121,879

2023

 

 

1,846

2024

 

 

1,813

Thereafter

 

 

83,197

Net premium and debt issue costs

 

 

7,272

Total debt

 

$

223,653

 

At March 31, 2020, the Company was in compliance with all covenants under its debt obligations.

Other Debt

Other debt of the Company finances non-interest-bearing assets and other business activities of the Company. The interest expense associated with this debt is classified as “Interest expense” under “Other expenses” on the Consolidated Statements of Operations.

Subordinated Debt

The table below provides information about the key terms of the subordinated debt that was issued by MMA Financial Holdings, Inc. (“MFH”), the Company’s wholly owned subsidiary, and that was outstanding at March 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

Net Premium

 

 

 

 

Interim

 

 

 

 

 

 

 

 

 

and Debt

 

Carrying 

 

Principal

 

 

 

 

Issuer

    

UPB

    

Issuance Costs

    

Value

    

Payments (1)

    

Maturity Date

    

Coupon

MFH 

  

$

25,869

  

$

2,229

  

$

28,098

  

Amortizing

  

March 30, 2035

  

three-month LIBOR plus 2.0%

MFH

 

 

23,523

 

 

2,034

 

 

25,557

 

Amortizing

 

April 30, 2035

 

three-month LIBOR plus 2.0%

MFH

 

 

13,559

 

 

1,084

 

 

14,643

 

Amortizing

 

July 30, 2035

 

three-month LIBOR plus 2.0%

MFH

 

 

24,654

 

 

1,971

 

 

26,625

 

Amortizing

 

July 30, 2035

 

three-month LIBOR plus 2.0%

Total

 

$

87,605

 

$

7,318

 

$

94,923

 

 

 

 

 

 


(1)

The subordinated principal amortizes 2.0% per annum.

 

Revolving Credit Facility Debt Obligations

On September 19, 2019, MEH entered into a $125.0 million (the “Facility Amount”) revolving credit agreement with various lenders. During the first quarter of 2020, the maximum Facility Amount increased to $175.0 million and the committed amount of the revolving credit facility increased from $100.0 million to $120.0 million upon the joinder of an additional lender and an increase in commitment by one of the existing lenders.

Obligations associated with the revolving credit facility are guaranteed by the Company and are secured by specified assets of the Borrower and a pledge of all of the Company’s equity interest in the Borrower, which holds the equity interests in the Solar Ventures, through pledge and security documentation. Availability and amounts advanced under the revolving credit facility are subject to compliance with a borrowing base comprised of assets that comply with certain eligibility

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criteria, and includes late-stage development, construction and permanent loans to finance renewable energy projects and cash.

The revolving credit facility contains affirmative and negative covenants binding on the Borrower that are customary for credit facilities of this type. Additionally, the credit agreement includes collateral performance tests and the following financial covenants of the Company and its consolidated subsidiaries: minimum debt service coverage ratio, maximum debt to net worth, minimum consolidated net worth and minimum consolidated net income.

Borrowing under the revolving credit facility bears interest at the one-month London Interbank Offered Rate (“LIBOR”), adjusted for statutory reserve requirements (subject to a 1.5% floor), plus a fixed spread of 2.75% per annum. At March 31, 2020, the LIBOR base rate plus the fixed spread was 4.3%. At March 31, 2020, the weighted-average effective interest rate of the Company’s obligation was 5.3%. The Borrower has also agreed to pay certain customary fees and expenses and to provide certain indemnities. In certain circumstances where the interest rate is unable to be determined, including in the event LIBOR ceases to be published, the administrative agent to the credit agreement will select a new rate in its reasonable judgment, including any adjustment to the replacement rate to reflect a different credit spread. The maturity date of the credit agreement is September 19, 2022, subject to a 12-month extension solely to allow refinancing or orderly repayment of the facility. 

At March 31, 2020, the UPB and carrying value of amounts borrowed from the revolving credit facility was $120.0 million. The Company recognized $1.3 million of related interest expense in the Consolidated Statements of Operations for the three months ended March 31, 2020.

Notes Payable and Other Debt

At March 31, 2020, the UPB and carrying value of notes payable and other debt that was used to finance the Company’s 11.85% ownership interest in SAWHF was $4.3 million and $4.2 million, respectively. This debt, which is denominated in South African rand, has a contractual maturity date of September 8, 2020, and requires the Company to pay its counterparty a rate equal to the Johannesburg Interbank Agreed Rate (“JIBAR”) plus a fixed spread of 5.15%. At March 31, 2020, the JIBAR base rate was 6.48%, while the weighted-average effective interest rate of the Company’s debt obligation that was used to finance its ownership in SAWHF was 14.7%.

At March 31, 2020, the UPB and carrying value of notes payable and other debt obligations to the Morrison Grove Management, LLC (“MGM”) principals was $4.5 million. This debt bears interest at 5.0%. The $3.0 million debt obligation amortizes over its contractual life and is due to mature on January 1, 2026. The $1.5 million debt obligation pays interest only until March 31, 2026 and then amortizes in three equal installments until its maturity date of January 1, 2027.

Asset Related Debt

Asset related debt is debt that finances interest-bearing assets of the Company. The interest expense associated with this debt is included within “Net interest income” on the Consolidated Statements of Operations.

Non-bond Related Debt

During the first quarter of 2020, this $3.5 million debt obligation to MGM was reclassified to Other Debt upon the full repayment of the Hunt Note.

Letters of Credit

The Company had no letters of credit outstanding at March 31, 2020 and December 31, 2019.

Note 7—Derivative Instruments

The Company uses derivative instruments for various purposes. Pay-fixed interest rate swaps, interest rate basis swaps and interest rate caps are used to manage interest rate risk. Foreign currency forward exchange agreements are used to manage currency risk associated with the financing of our SAWHF equity investment. TRS agreements were used by the Company

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to obtain, or retain, the economic risks and rewards associated with tax exempt municipal bonds. During the second quarter of 2019, the Company terminated all remaining TRS agreements.

Derivative instruments that are recognized in the Consolidated Balance Sheets are measured on a fair value basis. Because the Company does not designate any of its derivative instruments as fair value or cash flow hedges, changes in fair value of these instruments are recognized in the Consolidated Statements of Operations as a component of “Net losses on derivatives.”  Derivative assets are presented in the Consolidated Balance Sheets as a component of “Other assets” and derivative liabilities are presented in the Consolidated Balance Sheets as a component of “Other liabilities.”

The following table provides information about the carrying value of the Company’s derivative instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value

 

 

At

 

At

 

 

March 31, 2020

 

December 31, 2019

(in thousands)

    

Assets

    

Liabilities

    

Assets

    

Liabilities

Basis swaps

 

$

 ─

 

$

750

 

$

318

 

$

 ─

Interest rate caps

 

 

91

 

 

 ─

 

 

227

 

 

 ─

Interest rate swaps

 

 

 ─

 

 

1,562

 

 

52

 

 

 ─

Foreign currency forward exchange

 

 

833

 

 

 ─

 

 

 ─

 

 

117

Total carrying value of derivative instruments

 

$

924

 

$

2,312

 

$

597

 

$

117

 

The following table provides information about the notional amounts of the Company’s derivative instruments:

 

 

 

 

 

 

 

 

 

Notional Amounts

 

 

At

 

At

 

 

March 31,

 

December 31,

(in thousands)

    

2020

    

2019

Basis swaps

 

$

35,000

 

$

35,000

Interest rate caps

 

 

35,000

 

 

35,000

Interest rate swaps

 

 

35,000

 

 

35,000

Foreign currency forward exchange

 

 

3,677

 

 

4,685

Total notional amount of derivative instruments

 

$

108,677

 

$

109,685

 

The following table provides information about the net losses that were recognized by the Company in connection with its derivative instruments:

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Total return swaps (1) 

 

$

 ─

 

$

(4)

Basis swaps (2)

 

 

(1,079)

 

 

(73)

Interest rate caps

 

 

(136)

 

 

(477)

Interest rate swaps (3) 

 

 

(1,578)

 

 

(881)

Foreign currency forward exchange

 

 

1,082

 

 

(7)

Total net losses of derivative instruments

 

$

(1,711)

 

$

(1,442)


(1)

The accrual of net interest payments that are made in connection with TRS agreements that are reported as derivative instruments are classified as a component of “Net losses on derivatives” on the Consolidated Statements of Operations. Net cash received was $0.2 million for the three months ended March 31, 2019.

(2)

The accrual of net interest payments that are made in connection with basis swaps is classified as a component of “Net losses on derivatives” on the Consolidated Statements of Operations. The net cash received was de minimis for the three months ended March 31, 2020 and March 31, 2019.

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(3)

The accrual of net interest payments that are made in connection with interest rate swaps is classified as a component of “Net losses on derivatives” on the Consolidated Statements of Operations. Net cash paid was de minimis for the three months ended March 31, 2020, while the net cash received was $0.1 million for the three months ended March 31, 2019, respectively.

 

 

 

 

Note 8—Fair Value

We use fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Assets and liabilities recorded at fair value on a recurring basis are presented in the first table below in this Note. From time to time, we may be required to measure at fair value other assets on a nonrecurring basis such as certain loans held for investment or investments in partnerships. These nonrecurring fair value adjustments typically involve application of lower-of-cost-or-market accounting or write-downs of individual assets.

Fair Value Hierarchy

The Company measures the fair value of its assets and liabilities based upon their contractual terms and using relevant market information. A description of the methods used by the Company to measure fair value is provided below. Fair value measurements are subjective in nature, involve uncertainties and often require the Company to make significant judgments. Changes in assumptions could significantly affect the Company’s measurement of fair value.

GAAP establishes a three-level hierarchy that prioritizes inputs into the valuation techniques used to measure fair value. Fair value measurements associated with assets and liabilities are categorized into one of the following levels of the hierarchy based upon how observable the valuation inputs are that are used in the fair value measurements.

·

Level 1:  Valuation is based upon quoted prices in active markets for identical instruments.

·

Level 2:  Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs or significant value drivers are observable in active markets.

·

Level 3:  Valuation is generated from techniques that use significant assumptions that are not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability.

Recurring Changes in Fair Value

The following tables present the carrying amounts of assets and liabilities that are measured at fair value on a recurring basis by instrument type and based upon the level of the fair value hierarchy within which fair value measurements of our assets and liabilities are categorized:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

Fair Value Measurements

(in thousands)

    

2020

    

Level 1

    

Level 2

    

Level 3

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Investments in debt securities

 

$

29,645

 

$

 ─

 

$

 ─

 

$

29,645

Loans held for investment

 

 

1,271

 

 

 ─

 

 

 ─

 

 

1,271

Derivative instruments

 

 

924

 

 

 ─

 

 

924

 

 

 ─

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative instruments

 

$

2,312

 

$

 ─

 

$

2,312

 

$

 ─

 

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At

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

Fair Value Measurements

(in thousands)

    

2019

    

Level 1

    

Level 2

    

Level 3

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Investments in debt securities

 

$

31,365

 

$

 ─

 

$

 ─

 

$

31,365

Loans held for investment

 

 

500

 

 

 ─

 

 

 ─

 

 

500

Derivative instruments

 

 

597

 

 

 ─

 

 

597

 

 

 ─

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative instruments

 

$

117

 

$

 ─

 

$

117

 

$

 ─

 

Changes in Fair Value

Changes in the fair value of assets and liabilities that are measured at fair value on a recurring basis and that are categorized as Level 3 within the fair value hierarchy are attributed in the following table to identified activities that occurred during the three months ended March 31, 2020:

 

 

 

 

 

 

 

 

    

Investments

    

 

 

 

in Debt

 

Loans Held for 

(in thousands)

    

Securities

    

Investment

Balance, January 1, 2020

 

$

31,365

 

$

500

Net losses included in earnings (1)

 

 

 ─

 

 

(9)

Net change in AOCI (2) 

 

 

(1,763)

 

 

 ─

Impact from loan originations / advances

 

 

 ─

 

 

780

Impact from settlements (3)

 

 

43

 

 

 ─

Balance, March 31, 2020

 

$

29,645

 

$

1,271


(1)

This amount represents $9 thousand of unrealized losses recognized during this reporting period in connection with the Company’s loan investment held at March 31, 2020. This amount is classified as “net losses on loans and extinguishment of liabilities” in the Company’s Consolidated Statement of Operations.

(2)

This amount represents $1.8 million of net unrealized losses recognized during this reporting period in connection with the Company’s bond investments.

(3)

This impact considers the effect of principal payments received and amortization of cost basis adjustments. 

Changes in the fair value of assets and liabilities that are measured at fair value on a recurring basis and that are categorized as Level 3 within the fair value hierarchy are attributed in the following table to identified activities that occurred during the three months ended March 31, 2019:

 

 

 

 

 

 

 

 

    

Investments

    

 

 

 

 

in Debt

 

Derivative

(in thousands)

    

Securities

    

Assets

Balance, January 1, 2019

 

$

97,190

 

$

1,130

Net losses included in earnings

 

 

 ─

 

 

(152)

Net change in AOCI (1) 

 

 

(3,165)

 

 

 ─

Impact from sales or redemptions

 

 

(12,590)

 

 

 ─

Impact from settlements (2)

 

 

(333)

 

 

(202)

Balance, March 31, 2019

 

$

81,102

 

$

776


(1)

This amount represents the reclassification into the Consolidated Statements of Operations of $3.6 million of net fair value gains related to bonds that were sold or redeemed during this reporting period. This decline was partially offset by $0.4 million of net unrealized holding gains recognized during the period in connection with the Company’s bond investments.

(2)

This impact considers the effect of principal payments received and amortization of cost basis adjustments. Included in this amount is $0.3 million of cumulative transition adjustment to retained earnings that was recognized in connection with the Company’s

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adoption of ASU No. 2017-08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-10):  Premium Amortization on Purchased Callable Debt Securities” on January 1, 2019.

The following table provides information about the amount of realized and unrealized (losses) gains that were reported in the Company’s Consolidated Statements of Operations for the three months ended March 31, 2019, related to activity presented in the preceding table:

 

 

 

 

 

 

 

 

    

 

    

 

 

 

 

Net gains on

 

Net losses on

(in thousands)

    

bonds (1)

    

derivatives (2)

Change in unrealized losses related to assets and liabilities held at March 31, 2019

 

$

 ─

 

$

(72)

Change in unrealized losses related to assets and liabilities held at January 1, 2019, but settled during 2019

 

 

 ─

 

 

(80)

Additional realized gains recognized

 

 

3,571

 

 

148

Total net gains (losses) reported in earnings

 

$

3,571

 

$

(4)


(1)

Amounts are classified as “Net gains on bonds” in the Company’s Consolidated Statements of Operations.

(2)

Amounts are classified as “Net losses on derivatives” in the Company’s Consolidated Statements of Operations.

Fair Value Measurements of Instruments That Are Classified as Level 3

Significant unobservable inputs presented in the tables that follow are those we consider significant to the fair value of the Level 3 asset or liability. We consider unobservable inputs to be significant if, by their exclusion, the fair value of the Level 3 asset or liability would be impacted by a predetermined percentage change, or based on qualitative factors, such as nature of the instrument, type of valuation technique used and the significance of the unobservable inputs relative to other inputs used within the valuation. Following is a description of the significant unobservable inputs that are referenced in the tables below:

·

Market yield – is a market rate of return used to calculate the present value of future expected cash flows to arrive at the fair value of an instrument. The market yield typically consists of a benchmark rate component and a risk premium component. The benchmark rate component, for example, MMD or SIFMA, is generally observable within the market and is necessary to appropriately reflect the time value of money. The risk premium component reflects the amount of compensation market participants require due to the uncertainty inherent in the instrument’s cash flows resulting from risks such as credit and liquidity. A significant decrease in this input in isolation would result in a significantly higher fair value measurement.

·

Capitalization rate – is calculated as the ratio between the NOI produced by a commercial real estate property and the price for the asset. A significant decrease in this input in isolation would result in a significantly higher fair value measurement.

·

NOI annual growth rate – is the amount of future growth in NOI that the Company projects each property to generate on an annual basis over the 10‑year projection period. These annual growth estimates take into account the Company’s expectation about the future increases, or decreases, in rental rates, vacancy rates, bad debt expense, concessions and operating expenses for each property. Generally, an increase in NOI will result in an increase to the fair value of the property.

·

Valuation technique weighting factors – represent factors that, in the aggregate, sum to 100% and that are individually applied to two or more indications of fair value considering the reasonableness of the range indicated by those results.

·

Contract or bid prices – represents a third-party sale agreement or purchase offer executed in connection with the pending sale of an affordable housing property that secures one of the Company’s bond investments. In instances where multiple purchase offers have been received an average of the offers received is utilized. Estimated proceeds from the sale, or average offers, of such property that are determined to be allocable to a bond investment are used to measure the investment’s fair value at a given reporting date.

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Table of Contents

The tables that follow provide quantitative information about the valuation techniques and the range and weighted-average of significant unobservable inputs used in the valuation of substantially all of our Level 3 assets and liabilities measured at fair value on a recurring basis for which we use an internal model to measure fair value. The significant unobservable inputs for Level 3 assets and liabilities that are valued using dealer pricing are not included in the tables, as the specific inputs applied are not provided by the dealer.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement at March 31, 2020

 

 

 

 

 

Significant

 

Significant

 

 

 

 

 

 

 

 

 

 

 

Valuation

 

Unobservable

 

 

 

 

Weighted

 

(dollars in thousands)

Fair Value

    

Techniques

    

Inputs (1)

    

Range (1)

    

Average

 

Recurring Fair Value Measurements:

 

 

 

 

 

 

 

 

 

 

 

Investments in debt securities:

 

 

 

 

 

 

 

 

 

 

 

Infrastructure Bond

$

23,531

 

Discounted cash flow

 

Market yield

 

 

7.8

%

 

N/A

 

Multifamily tax-exempt bonds

 

 

 

 

 

 

 

 

 

 

 

Subordinated cash flow

 

6,114

 

Discounted cash flow

 

Market yield

 

 

7.2

 

 

N/A

 

 

 

 

 

 

 

Capitalization rate

 

 

6.2

 

 

N/A

 

Loans held for investment

 

1,271

 

Discounted cash flow

 

Market yield

 

 

8.4

 

 

N/A

 


(1)

Unobservable inputs reflect information that is not based upon independent sources that are readily available. These inputs are based upon assumptions and internally generated data made by the Company, which may include significant judgment that has been developed based upon available information from third-party sources or dealers about what a market participant would use in valuing the asset.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement at December 31, 2019

 

 

 

 

 

Significant

 

Significant

 

 

 

 

 

 

 

 

 

 

 

Valuation

 

Unobservable

 

 

 

 

Weighted

 

(dollars in thousands)

Fair Value

    

Techniques

    

Inputs (1)

    

Range (1)

    

Average (2)

 

Recurring Fair Value Measurements:

 

 

 

 

 

 

 

 

 

 

 

Investments in debt securities:

 

 

 

 

 

 

 

 

 

 

 

Infrastructure Bond

$

25,339

 

Discounted cash flow

 

Market yield

 

 

7.0

%

 

N/A

 

Multifamily tax-exempt bonds

 

 

 

 

 

 

 

 

 

 

 

Subordinated cash flow

 

6,026

 

Discounted cash flow

 

Market yield

 

 

7.3

 

 

N/A

 

 

 

 

 

 

 

Capitalization rate

 

 

6.2

 

 

N/A

 

 

 

 

 

 

 

Valuation technique weighting factors:

 

 

 

 

 

 

 

 

 

 

 

 

 

•  NOI annual growth rate (50% weighting factor)

 

 

0.7

 

 

N/A

 

 

 

 

 

 

 

•  Bid price (50% weighting factor)

 

$

16,611

 

 

N/A

 

Loans held for investment

 

500

 

Discounted cash flow

 

Market yield

 

 

8.0

 

 

8.0

%


(1)

Unobservable inputs reflect information that is not based upon independent sources that are readily available. These inputs are based upon assumptions and internally generated data made by the Company, which may include significant judgment that has been developed based upon available information from third-party sources or dealers about what a market participant would use in valuing the asset.

(2)

Weighted-averages are calculated using outstanding UPB for cash instruments, such as loans and securities, and notional amounts for derivative instruments.

Nonrecurring Changes in Fair Value

There were no nonrecurring fair value adjustments recorded for the three months ended March 31, 2020 and March 31, 2019.

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Table of Contents

Additional Disclosures Related To The Fair Value of Financial Instruments That Are Not Carried On The Consolidated Balance Sheets at Fair Value

The tables that follow provide information about the carrying amounts and fair values of those financial instruments of the Company for which fair value is not measured on a recurring basis and organizes the information based upon the level of the fair value hierarchy within which fair value measurements are categorized. Assets and liabilities that do not represent financial instruments (e.g., premises and equipment) are excluded from these disclosures.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

March 31, 2020

 

 

Carrying

 

Fair Value

(in thousands)

    

Amount

    

Level 1

    

Level 2

    

Level 3

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

23,164

 

$

23,164

 

$

 ─

 

$

 ─

Restricted cash

 

 

7,009

 

 

7,009

 

 

 ─

 

 

 ─

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Notes payable and other debt - non-bond related

 

 

8,730

 

 

 ─

 

 

 ─

 

 

7,304

Revolving credit facility obligations

 

 

120,000

 

 

 ─

 

 

 ─

 

 

120,000

Subordinated debt issued by MFH 

 

 

94,923

 

 

 ─

 

 

 ─

 

 

30,773

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

December 31, 2019

 

 

Carrying

 

Fair Value

(in thousands)

    

Amount

    

Level 1

    

Level 2

    

Level 3

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,555

 

$

8,555

 

$

 ─

 

$

 ─

Restricted cash

 

 

4,250

 

 

4,250

 

 

 ─

 

 

 ─

Loans held for investment

 

 

53,600

 

 

 ─

 

 

 ─

 

 

54,276

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Notes payable and other debt - non-bond related

 

 

11,828

 

 

 ─

 

 

 ─

 

 

10,888

Revolving credit facility obligations

 

 

94,500

 

 

 ─

 

 

 ─

 

 

94,500

Subordinated debt issued by MFH 

 

 

95,488

 

 

 ─

 

 

 ─

 

 

46,934

 

Valuation Techniques

Cash and cash equivalents and restricted cash – The carrying value of these assets approximated fair value due to the short-term nature and negligible credit risk inherent in them.

Loans held for investment – Fair value is measured using a discounted cash flow methodology pursuant to which contractual payments are discounted based upon market yields for similar credit risks.

Notes payable and other debt – Fair value is measured by discounting contractual cash flows using a market rate of interest or by estimating the fair value of the collateral supporting a debt arrangement, taking into account credit risk.

Subordinated debt – Fair value is measured by discounting projected contractual payments of principal and interest using the instrument’s estimated market yield, which was 15.6% and 11.7% at March 31, 2020 and December 31, 2019, respectively. As outlined in the table above, at March 31, 2020, the aggregate fair value was measured at $30.8 million. At March 31, 2020, the measured fair value of this debt would have been $39.0 million and $25.2 million had its market yield been 12.1% and 19.1%, respectively. The measured fair value of this debt is inherently judgmental and based on management’s assumption of market yields. There can be no assurance that the Company could repurchase the remaining subordinated debt at the measured fair values reflected in the table above or that the debt would trade at that price.

Revolving credit facility debt obligations – Fair value of these debt obligations is measured by discounting projected contractual payments of interest and principal using an estimated market yield.

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Note 9—Guarantees and Collateral

Guarantees

Contemporaneously with the execution of the revolving credit facility, the Company agreed to guarantee all payment and performance obligations of MEH under the credit agreement to the lenders. Currently, the Company expects that it will not need to make any payments under this guarantee.

Collateral and Restricted Assets

The following tables summarize assets that are either pledged or restricted for the Company’s use at March 31, 2020 and December 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

March 31, 2020

 

 

 

 

 

 

Total

 

 

Restricted

 

Investments in

 

Assets

(in thousands)

    

Cash

 

Partnerships

    

Pledged

Debt related to the revolving credit facility

 

$

1,726

 

$

344,601

 

$

346,327

Debt and derivatives related to the Company's 11.85% ownership interest in SAWHF

 

 

1,374

 

 

4,761

 

 

6,135

Interest rate swaps

 

 

3,901

 

 

 ─

 

 

3,901

Other  

 

 

 8

 

 

 ─

 

 

 8

Total

 

$

7,009

 

$

349,362

 

$

356,371

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

December 31, 2019

 

 

 

 

 

 

Total

 

 

Restricted

 

Investments in

 

Assets

(in thousands)

    

Cash

 

Partnerships

    

Pledged

Debt related to the revolving credit facility

 

$

1,070

 

$

289,123

 

$

290,193

Debt and derivatives related to the Company's 11.85% ownership interest in SAWHF

 

 

1,369

 

 

7,732

 

 

9,101

Interest rate swaps

 

 

1,803

 

 

 ─

 

 

1,803

Other

 

 

 8

 

 

 ─

 

 

 8

Total

 

$

4,250

 

$

296,855

 

$

301,105

 

 

Note 10—Commitments and Contingencies

Operating Leases

The Company had no future rental commitments at March 31, 2020.

Litigation and Other Legal Matters

In the ordinary course of business, the Company and its subsidiaries are named from time to time as defendants in various litigation matters or may have other claims made against them. These legal proceedings may include claims for substantial or indeterminate compensatory, consequential or punitive damages, or for injunctive or declaratory relief.

The Company establishes reserves for litigation matters or other loss contingencies when a loss is probable and can be reasonably estimated. Once established, reserves may be adjusted when new information is obtained. At March 31, 2020, we had no significant litigation matters and we were not aware of any other claims that we believe would have a material adverse impact on our financial condition or results of operations. 

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Other Risks and Uncertainties

With respect to the equity investment in the SF Venture, the downturn in the economy that stems from the coronavirus pandemic (“COVID-19”) is expected to reduce the underlying real estate value. In this regard, we anticipate that we will continue to recognize equity in losses from the SF Venture related to our equity investment and that such losses may increase, possibly significantly, as the SF Venture consists of hotel tenants, retail tenants and undeveloped land parcels. However, the severity and duration of expected losses cannot be currently quantified due to uncertainty about the duration of COVID-19. Nonetheless, we believe that it is reasonably possible that, within the next 12 months, a loss that is material to the Company’s financial statements could be recognized due to the residual economic effects of the measures taken to combat COVID-19, which could weigh on the performance of the development and underlying real estate value. However, the exact timing and amount of loss recognition is based upon future circumstances and, therefore, cannot be predicted at this time.

With respect to recognized DTA, the Company’s assessment of the likelihood of realizing tax benefits related to DTAs recognized in the fourth quarter of 2019 did not change in the first quarter of 2020. That is, while COVID-19 caused a sharp deterioration in macro-economic conditions, the potential amount and permanence of long-term impacts of those conditions on the Company’s business was uncertain at March 31, 2020. Consequently, the Company did not make an adjustment in the first quarter to the carrying value of DTAs that were recognized at December 31, 2019. Nonetheless, given such uncertainty, we believe it is reasonably possible that, within the next 12 months, a reduction to the carrying value of recognized DTAs that is material to the Company’s financial statements could be recognized. However, the exact timing and amount of loss recognition depends upon future circumstances and, therefore, cannot be predicted at this time. 

Note 11—Equity

Preferred Share Information

On January 1, 2019, as part of the Company’s conversion to a corporation, the Company was authorized to issue 5,000,000 of preferred shares, in one or more series, with no par value. As of March 31, 2020, the Board of Directors (“Board”) has not authorized any of these shares to be issued and no rights have been established for any of these shares.

Common Share Information

As of March 31, 2020, the Company was authorized to issue 50,000,000 common shares. The following table provides information about net (loss) income to common shareholders as well as provides information that pertains to weighted-average share counts that were used in per share calculations as presented on the Consolidated Statements of Operations:

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Net (loss) income from continuing operations

 

$

(3,058)

 

$

2,889

Net loss from discontinued operations

 

 

 ─

 

 

(7)

Net (loss) income

 

$

(3,058)

 

$

2,882

 

 

 

 

 

 

 

Basic and diluted weighted-average shares (1)

 

 

5,804

 

 

5,882


(1)

Includes common shares issued and outstanding, as well as deferred shares of non-employee directors that have vested but are not issued and outstanding.

Common Shares

Effective May 5, 2015, the Company adopted a Tax Benefits Rights Agreement (the “Rights Plan”) to help preserve the Company’s net operating losses (“NOLs”). In connection with adopting the Rights Plan, the Company declared a distribution of one right per common share to shareholders of record as of May 15, 2015. The rights do not trade apart from the current common shares until the distribution date, as defined in the Rights Plan. Under the Rights Plan, the acquisition by an investor (or group of related investors) of greater than a 4.9% stake in the Company, could result in all existing shareholders other than the new 4.9% holder having the right to acquire new shares for a nominal cost, thereby

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significantly diluting the ownership interest of the acquiring person. On March 11, 2020, the Board approved an extension of the original five-year term of the Rights Plan until May 5, 2023, or until the Board determines the plan is no longer required, whichever comes first. The Board has asked shareholders for an advisory vote to ratify its decision to extend the Rights Plan at the Company’s 2020 annual meeting of shareholders.

On January 3, 2018, the Board approved a waiver of the 4.9% ownership limitation for Hunt, increasing this limitation to the acquisition of 9.9% of the Company’s issued and outstanding shares in any rolling 12‑month period without causing a triggering event.

At March 31, 2020, the Company had two shareholders, including one of its executive officers, Michael L. Falcone, who held greater than a 4.9% interest in the Company. On March 11, 2020, the Board named Mr. Falcone an exempted person in accordance with the Rights Plan for open-market share purchases of up to an additional 7,500 common shares, to be completed by December 31, 2020, with the Board reserving all its rights under the Rights Plan for any subsequent purchases. As a result of the Board’s action, purchases made by Mr. Falcone up to the authorized 7,500 common shares would not be a triggering event for purposes of the Rights Plan if purchased prior to December 31, 2020.

Accumulated Other Comprehensive Income

The following table provides information related to the net change in AOCI for the three months ended March 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

Foreign

 

 

 

 

 

in Debt

 

Currency

 

 

 

(in thousands)

    

Securities

    

Translation

    

AOCI

Balance, January 1, 2020

 

$

7,666

 

$

(33)

 

$

7,633

Net unrealized (losses) gains

 

 

(1,763)

 

 

826

 

 

(937)

Reclassification of fair value gains on sold or redeemed bonds into the Consolidated Statements of Operations

 

 

 ─

 

 

 ─

 

 

 ─

Income tax benefit

 

 

484

 

 

 ─

 

 

484

Net change in AOCI

 

 

(1,279)

 

 

826

 

 

(453)

Balance, March 31, 2020

 

$

6,387

 

$

793

 

$

7,180

 

The following table provides information related to the net change in AOCI for the three months ended March 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

Foreign

 

 

 

 

in Debt

 

Currency

 

 

(in thousands)

    

Securities

    

Translation

    

AOCI

Balance, January 1, 2019

 

$

37,625

 

$

72

 

$

37,697

Net unrealized gains

 

 

406

 

 

25

 

 

431

Reclassification of fair value gains on sold or redeemed bonds into the Consolidated Statements of Operations

 

 

(3,571)

 

 

 ─

 

 

(3,571)

Net change in AOCI

 

 

(3,165)

 

 

25

 

 

(3,140)

Balance, March 31, 2019

 

$

34,460

 

$

97

 

$

34,557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 12—Stock-Based Compensation

On January 8, 2018, the Company engaged the External Manager through the execution of a management agreement with the External Manager (the “Management Agreement”) to externally manage the Company’s operations. In connection therewith, all employees of the Company were hired by the External Manager. The Company has stock-based compensation plans (“Plans”) for non-employee Directors (“Non-employee Directors’ Stock-Based Compensation Plans”) and stock-based incentive compensation plans for employees (“Employees’ Stock-Based Compensation Plans”).

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The following table provides information related to total compensation expense that was recorded for these Plans:

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Non-employee Directors’ Stock-Based Compensation Plans

 

$

194

 

$

164

 

Employees’ Stock-Based Compensation Plans

At March 31, 2020, there were 571,066 share awards available to be issued under Employees’ Stock-Based Compensation Plans. While each existing Employees’ Stock-Based Compensation Plan has been approved by the Board, not all of the Plans have been approved by the Company’s shareholders. The Plans that have not been approved by the Company’s shareholders are currently restricted to the issuance of only stock options. As a result, of the 571,066 shares available under the plans, 73,556 are available to be issued in the form of either stock options or shares, while the remaining 497,510 shares available for issuance must be issued in the form of stock options. Since the Company has no employees, the Company does not expect to issue any of these shares or options.

Non-Employee Directors’ Stock-Based Compensation Plans

The Non-employee Directors’ Stock-based Compensation Plans authorize a total of 1,130,000 shares for issuance, of which 380,536 were available to be issued at March 31, 2020. The Non-employee Directors’ Stock-based Compensation Plans provide for grants of non-qualified common stock options, common shares, restricted shares and deferred shares.

The Non-employee Directors’ Stock-based Compensation Plans provide for directors to be paid $120,000 per year for their services. In addition, the Chairman receives an additional $20,000 per year, the Audit Committee Chair receives an additional $15,000 per year and the other committee chairs receive an additional $10,000 per year. Under this plan, 50% of such compensation is paid in cash and the remaining sum through common share-based grants.

The table below summarizes non-employee director compensation, including cash, vested options and common and deferred shares, for services rendered for the three months ended March 31, 2020 and March 31, 2019. The directors are fully vested in the deferred shares at the grant date.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common

 

Deferred

 

Weighted-average

 

 

 

 

 

 

 

 

Shares

 

Shares

 

Grant Date

 

Options

 

Directors' Fees

 

 

Cash

    

Granted

    

Granted

    

Share Price

    

Vested

    

Expense

March 31, 2020

(1)

$

96,875

  

 

1,777

  

 

1,847

  

$

26.73

  

  

 ─

  

$

193,750

March 31, 2019

 

 

81,875

 

 

560

 

 

2,060

 

 

31.26

 

 

 ─

 

 

163,750

 

 

 

 


(1)

During the first quarter of 2020,  the Board approved the addition of two independent directors.

 

 

Note 13—Related Party Transactions and Transactions with Affiliates

Transactions with Hunt

External Management Fees and Expense Reimbursements

On January 8, 2018, the Company sold certain businesses and assets (the “Disposition”) and entered into the Management Agreement. At the time of the Disposition, all employees of the Company were hired by the External Manager. In consideration for the management services being provided by the External Manager, the Company pays the External Manager a base management fee, which is payable quarterly in arrears in an amount equal to (i) 0.50% of the Company’s first $500 million of common shareholders’ equity determined in accordance with GAAP in the U.S. on a fully diluted basis, adjusted to exclude the effect of (a) the carrying value of the Company’s DTAs, and (b) any gains or losses attributable to noncontrolling interests (“GAAP Common Shareholders’ Equity”); and (ii) 0.25% of the Company’s GAAP Common Shareholders’ Equity in excess of $500 million. Additionally, the Company agreed to pay the External Manager an incentive fee equal to 20% of the total annual return of diluted common shareholders’ equity per share in

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excess of 7%, which excludes the effects of the Company’s DTAs. The Company also agreed to reimburse the External Manager for certain allocable overhead costs including an allocable share of the costs of (i) noninvestment personnel of the External Manager and an affiliate thereof who spend all or a portion of their time managing the Company’s operations and reporting as a public company (based on their time spent on these matters) and (ii) the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) based on the percentage of their time spent managing the Company. Reimbursement of compensation-related expenses is, however, subject to an annual cap of $2.5 million through 2019 and $3.5 million thereafter, until the Company’s GAAP common shareholders’ equity exceeds $500 million.

The current term of the Management Agreement extends to December 31, 2022 and automatically renews thereafter for additional two-year terms. Either the Company or the External Manager may, upon written notice, decline to renew or terminate the Management Agreement without cause, effective at the end of the initial term or any renewal term. If the Company declines to renew or terminates the Management Agreement without cause or the External Manager terminates for cause, the Company is required to pay a termination fee to the External Manager equal to three times the sum of the average annual base and incentive management fees, plus one times the sum of the average renewable energy business expense reimbursements and the employee cost reimbursement expense, in each case, during the prior two-year period. The Company may also terminate the Management Agreement for cause. No termination fee is payable upon a termination by the Company for cause or upon a termination by the External Manager without cause.

For the three months ended March 31, 2020 and March 31, 2019, no incentive fee was earned by our External Manager. During the three months ended March 31, 2020 and March 31, 2019, the Company recognized $2.8 million and $2.3 million, respectively, of management fees and expense reimbursements payable to our External Manager in its Consolidated Statements of Operations. At March 31, 2020 and December 31, 2019, $2.8 million and $1.2 million, respectively, of management fees and expense reimbursements was payable to the External Manager.

Loans HFI and Investment in Partnerships

As consideration for the Disposition, Hunt agreed to pay the Company $57.0 million and to assume certain liabilities of the Company. The Company provided seller financing through a $57.0 million note receivable from Hunt that had an initial term of seven years, prepayable at any time and bearing interest at the rate of 5% per annum. On October 4, 2018, the Company’s receivable from Hunt increased to $67.0 million as part of Hunt’s election to take assignment of the Company’s agreements to acquire (i) the LIHTC business of Morrison Grove Management and (ii) certain assets pertaining to a specific LIHTC property from affiliates of MGM (these agreements are collectively referred hereinafter to as the “MGM Agreements”). On December 20, 2019, Hunt prepaid $13.4 million of the note receivable and as a result, the UPB of the note was $53.6 million at December 31, 2019. On January 3, 2020, the note receivable was fully repaid.

Interest income recognized during the three months ended March 31, 2020 was de minimis, while during the three months ended March 31, 2019, the Company recognized $0.8 million of interest income associated with this note receivable in the Consolidated Statements of Operations. There was no accrued interest payable by Hunt at March 31, 2020. At December 31, 2019, $0.7 million of accrued interest was payable by Hunt.

On April 1, 2019, the Company purchased Hunt’s 30% ownership interest in SDL that pertained to an investment in a specific loan for $11.3 million, which represents the price that was projected to cause the Company and Hunt to achieve the same internal rate of return (“IRR”) on the amount of capital each had invested in the loan for the period of time that each party was invested in the loan. In this regard, upon full repayment of the loan, a post-purchase true-up payment may have been required to be made by one party to the other depending upon the actual IRR achieved by each party on the investment. Due to continuing involvement by Hunt as the transferor, the transfer did not qualify as a purchase for reporting purposes and, as a result, cash consideration paid by the Company was reported as a loan receivable that is secured by the interest in SDL that Hunt conveyed to the Company. On December 20, 2019, the Company and Hunt terminated all obligations relating to the post-purchase true-up payment and, as a result, the Company derecognized this loan receivable and increased its investment in partnership in SDL. 

On December 20, 2019, the Company sold to Hunt a loan and three limited partner interests in partnerships that own affordable housing and in which our ownership interest ranged from 74.25% to 74.92%. This loan had a UPB and carrying value of $1.1 million and $0.3 million, respectively, while the three limited partner interests had a carrying value of $0.9 million at the time of sale. The Company received $3.1 million in sales proceed and recognized $1.9 million of gains in the Consolidated Statements of Operations.

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Investment in Debt Securities

On April 25, 2019, the Company received $13.1 million of net proceeds from the sale of an affordable housing property that secured one of the Company’s non-performing bond investments. Hunt, as bond servicing agent, waived $0.9 million of servicing fees that were otherwise due and payable in priority to the Company’s bond investment. As a result, the Company received $0.9 million of additional bond redemption proceeds that we otherwise would not have received.

Note 14—Segment Information

At March 31, 2020 and December 31, 2019, the Company operates as a single reporting segment. Therefore, all required segment information can be found in our consolidated financial statements.

 

 

 

 

 

 

 

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our filings and submissions to the SEC under the Exchange Act is recorded, processed, and reported within the time periods specified in the SEC’s rules and forms. These controls and procedures include those designed to ensure that information is accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosures.

An evaluation was conducted under the supervision and with the participation of management, including the CEO and CFO, on the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a‑15(e) under the Exchange Act. Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective at March 31, 2020.

Changes in Internal Control Over Financial Reporting

There were no changes in internal control over financial reporting during the three months ended March 31, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

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PART II – OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

For a discussion of legal proceedings see Notes to Consolidated Financial Statements – Note 10, “Commitments and Contingencies,” which is incorporated herein by reference.

ITEM 1A.  RISK FACTORS

We are supplementing the risk factors described under Part I, Item 1A, “Risk Factors,” in the 2019 Annual Report with the additional risk factor set forth below. This additional risk factor supplements, and to the extent inconsistent, supersedes such risk factors.     

The novel coronavirus (“COVID-19”) and actions taken to mitigate its spread and economic impact,  or other outbreak of disease or similar public health threat, could adversely impact or cause disruption of our financial condition and results of operations.

The potential impact and duration of the COVID-19 pandemic and actions taken by governmental and public health authorities to mitigate its spread, such as instituting quarantines, travel restrictions and “shelter in place” orders, have led to significant volatility and negative pressure in financial markets, increases in unemployment and reductions in consumer and business spending.

We believe that our ability to operate and our level of business activity has been and is likely to continue to be impacted by the effects of COVID-19 and could in the future be impacted by another pandemic, and that such impacts could have a material adverse effect on our business, financial condition and results of operations.  Factors that may adversely impact our financial condition and results of operations related to COVID-19, or potentially another pandemic, include the following:

·

the availability of permanent loans, tax credit equity and other monetization events that are the primary sources of repayment of loans made by the Solar Ventures may be limited, which could lead to impairment of loans made by the Solar Ventures and we may lose some or all of our investment;

·

the value of renewable energy infrastructure projects that secure loans made by the Solar Ventures could decline, which would negatively impact the value of loans made by the Solar Ventures, potentially permanently and materially;

·

the disruption in the credit markets could cause a lack of opportunity for future loans through a reduced pipeline of loans for investment by the Solar Ventures. Additionally, if the Company is unable to fund its share of capital contributions to the Solar Ventures as a result of an inability to access the debt and equity capital markets, or our capital partner becomes unwilling or unable to continue to contribute its share of capital to the Solar Ventures, which could cause the Solar Ventures to default on their lending commitments to their borrowers, which would adversely affect our business, cash flows and financial condition and result in damage to our and our External Manager’s reputation; 

·

if we are unable to access the debt or equity capital markets in order to satisfy financial obligations to our capital partner under various non-pro rata funding agreements, our capital partner may have the right to either (i) cause the Solar Ventures to make special distributions disproportionately to it (without distribution to us) of net cash flow from any capital transactions (subject to limitations provided in such non-pro rata funding agreements) or (ii) enter into a mutually agreeable definitive amendment (to be negotiated in good faith) to the relevant operating agreements of the Solar Ventures reflecting the majority funding position of the Company’s capital partner;    

·

construction or development of renewable energy projects that are being or could be financed through loans made by the Company or Solar Ventures may be unable to proceed on a timely basis or at all due to, among other things, government mandated restrictions or moratoriums on construction or the inability to source the necessary construction personnel, equipment or parts;

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·

significant uncertainty and volatility with respect to the current and future values of real estate-related assets as COVID-19 is expected to continue to have a significant impact on local, national and global economies and has resulted in a world-wide economic slowdown. The impact of COVID-19 on our investments is uncertain; however, it is expected to have a negative impact on the overall real estate market. In addition, lower transaction volume may result in less data for assessing real estate values. This increases the risk that our asset values may not reflect the actual realizable value of our underlying properties at any given time, as valuations and appraisals of our properties and real estate-related assets are only estimates of market value as of the end of the period and may not reflect the changes in values resulting from COVID-19. In addition, this impact is occurring rapidly and is not immediately quantifiable. To the extent real estate or other asset values decline after the date we disclose our asset values, whether related to COVID-19 or otherwise, new investors may overpay for their investment in our common stock, which would heighten their risk of loss;

·

restrictions on business operations and re-openings or an economic downturn is likely to negatively impact the development activity related to our equity investment in the SF Venture. Moreover, revenues generated by tenants of the SF Venture may be reduced or the SF Venture may have to grant concessions to tenants both of which could cause losses related to our equity investment in the SF Venture;

·

personnel of our External Manager, including our executive officers and other employees of the External Manager that support our operations may become ill and unavailable; and

·

third-party vendors we rely on to conduct our business, including vendors that provide IT services, legal and accounting services, or other operational support services may become unable to deliver services or support to the Company.

The rapid development and fluidity of the circumstances resulting from COVID-19 preclude any prediction as to the duration and extent of its adverse impact and makes it more difficult to determine the fair value of investments, especially those that rely on estimates and are inherently judgmental. Nevertheless, COVID-19 and the current financial, economic and capital markets environment, and future developments in these and other areas present material uncertainty and risk with respect to our performance, financial condition, volume of business, results of operations and cash flows.

To the extent COVID-19 adversely affects our business and financial results, it may also have the effect of heightening many of the risk factors included in the 2019 Annual Report, including, but not limited to, those relating to our revolving credit facility, our exposure to changes in interest rates, our exposure to collateral calls associated with agreements we used to hedge interest rate risk, our investments in bonds and real estate and the lack of liquidity related to our non-cash assets.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Recent Sales of Unregistered Securities

None for the three months ended March 31, 2020.

Use of Proceeds from Registered Securities

None for the three months ended March 31, 2020.

Issuer Purchases of Equity Securities

None for the three months ended March 31, 2020.  

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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ITEM 4.  MINE SAFETY DISCLOSURES

Not applicable.

 

ITEM 5.  OTHER INFORMATION

None.

 

 

 

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ITEM 6.  EXHIBITS

 

 

 

 

 

 

Exhibit No.

    

Description

    

Incorporation by Reference

 

 

 

 

 

3.1

 

Certificate of Incorporation of MMA Capital Holdings, Inc.

 

Incorporated by reference from the Company’s Current Report on Form 8-K filed on January 2, 2019

 

 

 

 

 

3.2

 

By-laws of MMA Capital Holdings, Inc.

 

Incorporated by reference from the Company’s Current Report on Form 8-K filed on January 2, 2019

 

 

 

 

 

4.1

 

Second Amendment to the Tax Benefits Rights Agreement dated March 12, 2020 between MMA Capital Holdings, Inc. and Broadridge Corporate Issuer Solutions, Inc. as rights agent.

 

Incorporated by reference from the Company’s Report on Form 8-K filed on March 17, 2020

 

 

 

 

 

31.1

 

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

31.2

 

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

32.1

 

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

32.2

 

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

101.INS

 

XBRL Instance Document

 

 

 

 

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema

 

 

 

 

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation

 

 

 

 

 

 

 

101.LAB

 

XBRL Taxonomy Extension Labels

 

 

 

 

 

 

 

101.PRE

 

XBRL Taxonomy Extension Presentation

 

 

 

 

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition

 

 

 

 

 

 

 

104

 

Cover Page Interactive Data File (formatted as an Inline XBRL document and included in Exhibit 101).

 

 

 

 

 

 

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SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

 

 

 

MMA CAPITAL HOLDINGS,  INC.

 

 

 

 

Dated:

May 11, 2020

By:

/s/ Michael L. Falcone

 

 

Name:

Michael L. Falcone

 

 

Title:

Chief Executive Officer

 

 

 

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

 

 

 

 

 

 

By:

/s/ Michael L. Falcone

 

May 11, 2020

 

Name:

Michael L. Falcone

 

 

 

Title:

Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ David C. Bjarnason

 

May 11, 2020

 

Name:

David C. Bjarnason

 

 

 

Title:

Chief Financial Officer

 

 

 

 

(Principal Financial Officer and Principal Accounting Officer)

 

 

 

 

 

 

 

 

 

 

 

 

 

S-1

mmac_Ex31_1

Exhibit 31.1

MMA CAPITAL HOLDINGS,  INC.

CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Certification of Chief Executive Officer

 

I, Michael L. Falcone, certify that:

1.

I have reviewed this quarterly report on Form 10-Q for the period ended March  31, 2020 of MMA Capital Holdings,  Inc. (this “Report”);

2.

Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3.

Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly for the periods for which this Report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide, for the periods covered by this Report, reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

(d)

Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 11, 2020

 

 

/s/ Michael L. Falcone

 

Michael L. Falcone 

 

Chief Executive Officer

 

 

mmac_Ex31_2

Exhibit 31.2

MMA CAPITAL HOLDINGS,  INC.

CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Certification of Chief Financial Officer

 

I, David C. Bjarnason, certify that:

1.

I have reviewed this quarterly report on Form 10-Q for the period ended March  31, 2020 of MMA Capital Holdings,  Inc. (this “Report”);

2.

Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3.

Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly for the periods for which this Report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide, for the periods covered by this Report, reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

(d)

Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or person performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 11, 2020

 

 

/s/ David C. Bjarnason

 

David C. Bjarnason 

 

Chief Financial Officer 

 

 

mmac_Ex32_1

Exhibit 32.1

MMA CAPITAL HOLDINGS,  INC.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the quarterly report of MMA Capital Holdings,  Inc,, a Delaware corporation (the “Company”), on Form 10-Q for the period ended March  31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael L. Falcone, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: May 11, 2020

 

 

/s/ Michael L. Falcone

 

Michael L. Falcone

 

Chief Executive Officer 

 

 

 

A signed original of this written statement required by Section 906 has been provided to MMA Capital Holdings,  Inc. and will be retained by MMA Capital Holdings,  Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 

mmac_Ex32_2

Exhibit 32.2

MMA CAPITAL HOLDINGS,  INC.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the quarterly report of MMA Capital Holdings,  Inc., a Delaware corporation (the “Company”), on Form 10-Q for the period ended March  31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David C. Bjarnason, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: May 11, 2020

 

 

/s/ David C. Bjarnason

 

David C. Bjarnason

 

Chief Financial Officer

 

 

 

A signed original of this written statement required by Section 906 has been provided to MMA Capital Holdings,  Inc. and will be retained by MMA Capital Holdings,  Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 

v3.20.1
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net (loss) income $ (3,058) $ 2,882
Adjustments to reconcile net income to net cash provided by operating activities:    
Net equity in income from investments in partnerships (4,148) (3,976)
Net gains on bonds 0 (3,571)
Net losses on derivatives 1,736 1,923
Net losses on loans and extinguishment of liabilities 9 11
Current and deferred federal income tax benefit (expense) (1,183) 50
Distributions received from investments in partnerships 6,564 1,615
Depreciation and amortization 122 (96)
Foreign currency losses 1,140 44
Stock-based compensation expense 96 82
Other, net 2,136 387
Net cash provided by (used in) operating activities 3,414 (649)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Principal payments and sales proceeds received on bonds and loans held for investment (includes $53,600 and zero from a related party) 53,600 8,640
Advances on and originations of loans held for investment (702) 0
Investments in partnerships and real estate (88,939) (56,447)
Capital distributions received from investments in partnerships 27,224 50,216
Net cash (used in) provided by investing activities (8,817) 2,409
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from borrowing activity 79,500 0
Repayment of borrowings (56,236) (1,197)
Debt issuance costs (452) 0
Repurchase of common shares (41) 0
Net cash provided by (used in) financing activities 22,771 (1,197)
Net decrease in cash, cash equivalents and restricted cash 17,368 563
Cash, cash equivalents and restricted cash at beginning of period 12,805 33,878
Cash, cash equivalents and restricted cash at end of period 30,173 34,441
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION    
Interest paid 2,118 1,593
Income taxes paid   0
Non-cash investing and financing activities:    
Unrealized losses included in other comprehensive income (453) (3,140)
Debt and liabilities extinguished through sales and collections on bonds and loans   7,624
Decrease in investments in debt securities and common shareholders' equity due to change in accounting principle   266
Hunt Companies [Member]    
CASH FLOWS FROM INVESTING ACTIVITIES:    
Principal payments and sales proceeds received on bonds and loans held for investment (includes $53,600 and zero from a related party) $ 53,600 $ 0
v3.20.1
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Statement Of Financial Position [Abstract]    
Investments in partnerships, used as collateral $ 349,362 $ 296,855
Loans to a related party $ 0 $ 53,600
Preferred shares, no par value $ 0 $ 0
Preferred shares, shares authorized 5,000,000 5,000,000
Preferred shares, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0 $ 0
Common stock, authorized 50,000,000 50,000,000
Common shares, shares issued (in shares) 5,702,423 5,701,946
Common shares, shares outstanding (in shares) 5,702,423 5,701,946
Common shares, non-employee directors' and employee deferred shares (in shares) 104,916 103,069
v3.20.1
RELATED PARTY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
3 Months Ended
Mar. 31, 2020
Related Party Transactions and Transactions with Affiliates [Abstract]  
Related Party Transactions and Transactions with Affiliates

Note 13—Related Party Transactions and Transactions with Affiliates

Transactions with Hunt

External Management Fees and Expense Reimbursements

On January 8, 2018, the Company sold certain businesses and assets (the “Disposition”) and entered into the Management Agreement. At the time of the Disposition, all employees of the Company were hired by the External Manager. In consideration for the management services being provided by the External Manager, the Company pays the External Manager a base management fee, which is payable quarterly in arrears in an amount equal to (i) 0.50% of the Company’s first $500 million of common shareholders’ equity determined in accordance with GAAP in the U.S. on a fully diluted basis, adjusted to exclude the effect of (a) the carrying value of the Company’s DTAs, and (b) any gains or losses attributable to noncontrolling interests (“GAAP Common Shareholders’ Equity”); and (ii) 0.25% of the Company’s GAAP Common Shareholders’ Equity in excess of $500 million. Additionally, the Company agreed to pay the External Manager an incentive fee equal to 20% of the total annual return of diluted common shareholders’ equity per share in excess of 7%, which excludes the effects of the Company’s DTAs. The Company also agreed to reimburse the External Manager for certain allocable overhead costs including an allocable share of the costs of (i) noninvestment personnel of the External Manager and an affiliate thereof who spend all or a portion of their time managing the Company’s operations and reporting as a public company (based on their time spent on these matters) and (ii) the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) based on the percentage of their time spent managing the Company. Reimbursement of compensation-related expenses is, however, subject to an annual cap of $2.5 million through 2019 and $3.5 million thereafter, until the Company’s GAAP common shareholders’ equity exceeds $500 million.

The current term of the Management Agreement extends to December 31, 2022 and automatically renews thereafter for additional two-year terms. Either the Company or the External Manager may, upon written notice, decline to renew or terminate the Management Agreement without cause, effective at the end of the initial term or any renewal term. If the Company declines to renew or terminates the Management Agreement without cause or the External Manager terminates for cause, the Company is required to pay a termination fee to the External Manager equal to three times the sum of the average annual base and incentive management fees, plus one times the sum of the average renewable energy business expense reimbursements and the employee cost reimbursement expense, in each case, during the prior two-year period. The Company may also terminate the Management Agreement for cause. No termination fee is payable upon a termination by the Company for cause or upon a termination by the External Manager without cause.

For the three months ended March 31, 2020 and March 31, 2019, no incentive fee was earned by our External Manager. During the three months ended March 31, 2020 and March 31, 2019, the Company recognized $2.8 million and $2.3 million, respectively, of management fees and expense reimbursements payable to our External Manager in its Consolidated Statements of Operations. At March 31, 2020 and December 31, 2019, $2.8 million and $1.2 million, respectively, of management fees and expense reimbursements was payable to the External Manager.

Loans HFI and Investment in Partnerships

As consideration for the Disposition, Hunt agreed to pay the Company $57.0 million and to assume certain liabilities of the Company. The Company provided seller financing through a $57.0 million note receivable from Hunt that had an initial term of seven years, prepayable at any time and bearing interest at the rate of 5% per annum. On October 4, 2018, the Company’s receivable from Hunt increased to $67.0 million as part of Hunt’s election to take assignment of the Company’s agreements to acquire (i) the LIHTC business of Morrison Grove Management and (ii) certain assets pertaining to a specific LIHTC property from affiliates of MGM (these agreements are collectively referred hereinafter to as the “MGM Agreements”). On December 20, 2019, Hunt prepaid $13.4 million of the note receivable and as a result, the UPB of the note was $53.6 million at December 31, 2019. On January 3, 2020, the note receivable was fully repaid.

Interest income recognized during the three months ended March 31, 2020 was de minimis, while during the three months ended March 31, 2019, the Company recognized $0.8 million of interest income associated with this note receivable in the Consolidated Statements of Operations. There was no accrued interest payable by Hunt at March 31, 2020. At December 31, 2019, $0.7 million of accrued interest was payable by Hunt.

On April 1, 2019, the Company purchased Hunt’s 30% ownership interest in SDL that pertained to an investment in a specific loan for $11.3 million, which represents the price that was projected to cause the Company and Hunt to achieve the same internal rate of return (“IRR”) on the amount of capital each had invested in the loan for the period of time that each party was invested in the loan. In this regard, upon full repayment of the loan, a post-purchase true-up payment may have been required to be made by one party to the other depending upon the actual IRR achieved by each party on the investment. Due to continuing involvement by Hunt as the transferor, the transfer did not qualify as a purchase for reporting purposes and, as a result, cash consideration paid by the Company was reported as a loan receivable that is secured by the interest in SDL that Hunt conveyed to the Company. On December 20, 2019, the Company and Hunt terminated all obligations relating to the post-purchase true-up payment and, as a result, the Company derecognized this loan receivable and increased its investment in partnership in SDL. 

On December 20, 2019, the Company sold to Hunt a loan and three limited partner interests in partnerships that own affordable housing and in which our ownership interest ranged from 74.25% to 74.92%. This loan had a UPB and carrying value of $1.1 million and $0.3 million, respectively, while the three limited partner interests had a carrying value of $0.9 million at the time of sale. The Company received $3.1 million in sales proceed and recognized $1.9 million of gains in the Consolidated Statements of Operations.

Investment in Debt Securities

On April 25, 2019, the Company received $13.1 million of net proceeds from the sale of an affordable housing property that secured one of the Company’s non-performing bond investments. Hunt, as bond servicing agent, waived $0.9 million of servicing fees that were otherwise due and payable in priority to the Company’s bond investment. As a result, the Company received $0.9 million of additional bond redemption proceeds that we otherwise would not have received.

v3.20.1
INVESTMENTS IN PARTNERSHIPS (Tables)
3 Months Ended
Mar. 31, 2020
Schedule of Equity Method Investments [Line Items]  
Schedule of Investments in Partnerships

The following table provides information about the carrying value of the Company’s investments in partnerships and ventures:

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

(in thousands)

    

2020

    

2019

Investment in Solar Ventures

  

$

344,601

  

$

289,123

Investments in U.S. real estate partnerships

 

 

19,236

 

 

19,822

Investment in South Africa Workforce Housing Fund ("SAWHF")

 

 

4,761

 

 

7,732

Total investments in partnerships

 

$

368,598

 

$

316,677

 

U.S. Real Estate Partnerships [Member]  
Schedule of Equity Method Investments [Line Items]  
Schedule of Investments in Partnerships

The following table provides information about the total assets, debt and other liabilities of the U.S. real estate partnerships in which the Company held an equity investment:

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

 

    

2020

    

2019

(in thousands)

  

 

 

  

 

 

Total assets

 

$

51,237

 

$

51,718

Debt

 

 

6,657

 

 

6,426

Other liabilities

 

 

20,536

 

 

20,493

 

The following table provides information about the gross revenue, operating expenses and net loss of U.S. real estate partnerships in which the Company had an equity investment:

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Gross revenue

 

$

642

 

$

664

Operating expenses

 

 

715

 

 

470

Net loss and net loss attributable to the entities

 

 

(755)

 

 

(879)

 

Solar Ventures Investment [Member]  
Schedule of Equity Method Investments [Line Items]  
Schedule of Investments in Partnerships

The following table provides information about the carrying amount of total assets and liabilities of all renewable energy related investees in which the Company had an equity method investment:

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

 

    

2020

    

2019

(in thousands)

  

 

 

  

 

 

Total assets (1) 

 

$

781,734

 

$

706,792

Other liabilities (2)

 

 

14,360

 

 

22,135


(1)

Assets of these ventures are primarily comprised of loans that are carried at fair value. 

 

(2)

Other liabilities of these ventures are primarily comprised of interest reserves.

 

The following table provides information about the gross revenue, operating expenses and net income of all renewable energy related investees in which the Company had an equity method investment:

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Gross revenue

 

$

21,821

 

$

10,334

Operating expenses

 

 

2,021

 

 

1,894

Net income and net income attributable to the entities (1)

 

 

10,825

 

 

8,492


(1)

Net income includes $9.0 million net fair value loan losses and $0.1 million of net fair value loan gains recognized as of March 31, 2020 and March 31, 2019, respectively. 

 

SAWHF  
Schedule of Equity Method Investments [Line Items]  
Schedule of Investments in Partnerships

The following table provides information about the carrying value of total assets and other liabilities of SAWHF:

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

 

    

2020

    

2019

(in thousands)

  

 

 

  

 

 

Total assets

 

$

32,890

 

$

56,356

Other liabilities

 

 

339

 

 

130

 

The following table provides information about the gross revenue, operating expenses and net income of SAWHF:

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Gross revenue

 

$

1,112

 

$

199

Operating expenses

 

 

491

 

 

331

Net income and net income attributable to the entity

 

 

76

 

 

2,034

 

v3.20.1
OTHER ASSETS (Summary of Other Assets) (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Other assets:    
Real estate owned $ 14,341 $ 8,397
Debt issue costs 2,879 2,675
Derivative assets 924 597
Accrued interest receivable 612 853
Other assets 235 462
Other Assets, Total $ 18,991 $ 12,984
v3.20.1
LOANS HELD FOR INVESTMENT (“HFI”) (Narrative) (Details)
3 Months Ended 12 Months Ended
Jan. 03, 2020
USD ($)
Mar. 31, 2020
USD ($)
loan
Dec. 31, 2019
USD ($)
loan
Number of loans held for investment   1 2
UPB   $ 1,280,000 $ 54,100,000
Financing receivable UPB and fair value   $ 1,300,000 $ 54,100,000
Number of loans held for investment on non accrual status | loan   0 0
Repayment of hunt notes $ 53,600,000    
Unfunded loan commitments   $ 800,000 $ 1,600,000
Carrying value of Loan receivable   1,271,000 54,100,000
Finance Receivable Fair Value Option Elected [Member]      
Financing receivable UPB and fair value   $ 1,300,000 $ 500,000
Solar Development Lending, LLC [Member]      
Equity method investment, ownership percentage   44.50%  
v3.20.1
STOCK-BASED COMPENSATION (Summary of Stock-Based Compensation Expense) (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Non-employee Directors' Stock-Based Compensation Plans [Member]    
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]    
Compensation expense $ 194 $ 164
v3.20.1
FAIR VALUE (Fair Value Measurements By Level 3 Valuation Technique) (Details)
Mar. 31, 2020
USD ($)
Dec. 31, 2019
USD ($)
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Investments in debt securities $ 29,645,000 $ 31,365,000
Available-for-sale, Multifamily Tax-exempt, Subordinated Cash Flow Bonds [Member]    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Fair Value $ 6,114,000 $ 6,026,000
NOI annual growth rate   50.00%
Property bids   $ 50
Available-for-sale, Multifamily Tax-exempt, Subordinated Cash Flow Bonds [Member] | Measurement Input, Discount Rate [Member]    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Debt Securities, Available-for-sale, Measurement Input 7.2 7.3
Available-for-sale, Multifamily Tax-exempt, Subordinated Cash Flow Bonds [Member] | Measurement Input, Cap Rate [Member]    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Debt Securities, Available-for-sale, Measurement Input 6.2 6.2
Available-for-sale, Multifamily Tax-exempt, Subordinated Cash Flow Bonds [Member] | Measurement Input, NOI Annual Growth Rate [Member]    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Debt Securities, Available-for-sale, Measurement Input   0.7
Available-for-sale, Multifamily Tax-exempt, Subordinated Cash Flow Bonds [Member] | Measurement Input, Contract Price [Member]    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Debt Securities, Available-for-sale, Measurement Input   16,611,000
Available-for-sale, Infrastructure Bonds [Member]    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Fair Value $ 23,531,000 $ 25,339,000
Available-for-sale, Infrastructure Bonds [Member] | Measurement Input, Discount Rate [Member]    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Debt Securities, Available-for-sale, Measurement Input 7.8 7.0
Loans Held for Investment    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Fair Value $ 1,271,000 $ 500,000
Loans Held for Investment | Measurement Input, Discount Rate [Member]    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Loans receivable, measurement input 8.4 8.0
Weighted Average [Member] | Loans Held for Investment | Measurement Input, Discount Rate [Member]    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Loans receivable, measurement input   8.0
v3.20.1
EQUITY (Narrative) (Details)
3 Months Ended
Mar. 11, 2020
shares
Mar. 31, 2020
shareholder
director
$ / shares
shares
Dec. 31, 2019
$ / shares
shares
Jan. 01, 2019
$ / shares
shares
Jan. 03, 2018
May 05, 2015
shares
Class of Stock [Line Items]            
Preferred shares, shares authorized   5,000,000 5,000,000 5,000,000    
Preferred shares, no par value | $ / shares   $ 0 $ 0 $ 0    
Maximum percentage of Company stock ownership allowed   9.90%     4.90%  
Number of rights issued per common stock           1
Tax benefit agreement term   5 years        
Number of shareholders held more than 4.9% | shareholder   2        
Number of executives held more than 4.9% | director   1        
Common stock, shares, issued   5,702,423 5,701,946      
Common stock, shares authorized   50,000,000 50,000,000      
Executive Officer [Member]            
Class of Stock [Line Items]            
Maximum percentage of Company stock ownership allowed   4.90%        
Additional authorization of share purchase by exempt person 7,500          
v3.20.1
DEBT (Subordinate Debt) (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Debt Instrument [Line Items]    
Net premium and debt issue costs $ 7,272  
Carrying Value $ 223,653 $ 201,816
Subordinated principal (as percent) 2.00%  
Subordinated Loan [Member] | MMA Financial Holdings Inc. Debt [Member]    
Debt Instrument [Line Items]    
Principal amount of debt $ 87,605  
Net premium and debt issue costs 7,318  
Carrying Value 94,923  
Subordinated Loan [Member] | MFH Issue 1 [Member]    
Debt Instrument [Line Items]    
Principal amount of debt 25,869  
Net premium and debt issue costs 2,229  
Carrying Value $ 28,098  
Maturity Date March 30, 2035  
Coupon Interest Rate three-month LIBOR plus 2.0%  
Subordinated Loan [Member] | MFH Issue 2 [Member]    
Debt Instrument [Line Items]    
Principal amount of debt $ 23,523  
Net premium and debt issue costs 2,034  
Carrying Value $ 25,557  
Maturity Date April 30, 2035  
Coupon Interest Rate three-month LIBOR plus 2.0%  
Subordinated Loan [Member] | MFH Issue 3 [Member]    
Debt Instrument [Line Items]    
Principal amount of debt $ 13,559  
Net premium and debt issue costs 1,084  
Carrying Value $ 14,643  
Maturity Date July 30, 2035  
Coupon Interest Rate three-month LIBOR plus 2.0%  
Subordinated Loan [Member] | MFH Issue 4 [Member]    
Debt Instrument [Line Items]    
Principal amount of debt $ 24,654  
Net premium and debt issue costs 1,971  
Carrying Value $ 26,625  
Maturity Date July 30, 2035  
Coupon Interest Rate three-month LIBOR plus 2.0%  
v3.20.1
FAIR VALUE (Narrative) (Details) - Subordinated Debt Obligations [Member] - USD ($)
3 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]    
Long-term Debt, Fair Value $ 30,800,000  
Minimum [Member]    
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]    
Subordinated debt obligation 25,200,000  
Maximum [Member]    
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]    
Subordinated debt obligation $ 39,000,000  
Measurement Input, Discount Rate [Member]    
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]    
Subordinated debt measurement input 15.6 11.7
Measurement Input, Discount Rate [Member] | Minimum [Member]    
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]    
Hypothetical fair value input discount rate 12.1  
Measurement Input, Discount Rate [Member] | Maximum [Member]    
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]    
Hypothetical fair value input discount rate 19.1  
v3.20.1
SEGMENT INFORMATION (Narrative) (Details) - segment
3 Months Ended 12 Months Ended
Mar. 31, 2020
Dec. 31, 2019
SEGMENT INFORMATION [Abstract]    
Number of reportable segments 1 1
v3.20.1
GUARANTEES AND COLLATERAL
3 Months Ended
Mar. 31, 2020
GUARANTEES AND COLLATERAL [Abstract]  
GUARANTEES AND COLLATERAL

Note 9—Guarantees and Collateral

Guarantees

Contemporaneously with the execution of the revolving credit facility, the Company agreed to guarantee all payment and performance obligations of MEH under the credit agreement to the lenders. Currently, the Company expects that it will not need to make any payments under this guarantee.

Collateral and Restricted Assets

The following tables summarize assets that are either pledged or restricted for the Company’s use at March 31, 2020 and December 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

March 31, 2020

 

 

 

 

 

 

Total

 

 

Restricted

 

Investments in

 

Assets

(in thousands)

    

Cash

 

Partnerships

    

Pledged

Debt related to the revolving credit facility

 

$

1,726

 

$

344,601

 

$

346,327

Debt and derivatives related to the Company's 11.85% ownership interest in SAWHF

 

 

1,374

 

 

4,761

 

 

6,135

Interest rate swaps

 

 

3,901

 

 

 ─

 

 

3,901

Other  

 

 

 8

 

 

 ─

 

 

 8

Total

 

$

7,009

 

$

349,362

 

$

356,371

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

December 31, 2019

 

 

 

 

 

 

Total

 

 

Restricted

 

Investments in

 

Assets

(in thousands)

    

Cash

 

Partnerships

    

Pledged

Debt related to the revolving credit facility

 

$

1,070

 

$

289,123

 

$

290,193

Debt and derivatives related to the Company's 11.85% ownership interest in SAWHF

 

 

1,369

 

 

7,732

 

 

9,101

Interest rate swaps

 

 

1,803

 

 

 ─

 

 

1,803

Other

 

 

 8

 

 

 ─

 

 

 8

Total

 

$

4,250

 

$

296,855

 

$

301,105

 

v3.20.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3 Months Ended
Mar. 31, 2020
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
Summary of Significant Accounting Policies

Note 1— Summary of Significant Accounting Policies

Organization

MMA Capital Holdings, Inc. focuses on infrastructure-related investments that generate positive environmental and social impacts and deliver attractive risk-adjusted total returns to our shareholders, with an emphasis on debt associated with renewable energy projects and infrastructure. Unless the context otherwise requires, and when used in these Notes, the “Company,” “MMA,” “we,” “our” or “us” refers to MMA Capital Holdings, Inc. and its subsidiaries. We were originally organized as a Delaware limited liability company in 1996, converted to a Delaware corporation on January 1, 2019, and are externally managed by Hunt Investment Management, LLC (our “External Manager”), an affiliate of Hunt Companies, Inc. (Hunt Companies, Inc. and its affiliates are hereinafter referred to as “Hunt”).

Our current objective is to produce attractive risk adjusted returns by investing in the large, growing and fragmented renewable energy market in the United States (“U.S”). We believe that we are well positioned to take advantage of these investment opportunities because of our External Manager’s origination network built off of extensive relationships and credit expertise gathered through years of experience. We also seek to increase the Company’s return on equity by prudently deploying debt and recycling equity out of lower yielding investments that are unrelated to renewable energy.

In addition to renewable energy investments, we continue to own a limited number of bond investments and real estate-related investments, as well as have subordinated debt with beneficial economic terms. Further, we have significant net operating loss carryforwards (“NOLs”) that may be used to offset future federal income tax obligations, a portion of which were reported as deferred tax assets (“DTAs”) in our Consolidated Balance Sheets at March 31, 2020 and December 31, 2019. Effective December 31, 2019, we no longer organize our assets and liabilities into discrete portfolios (in each Quarterly Report on Form 10-Q that was filed in 2019, assets and liabilities of the Company were allocated to one of two portfolios, “Energy Capital” and “Other Assets and Liabilities”).  

We operate as a single reporting segment.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

The Company evaluates subsequent events through the date of filing with the U.S. Securities and Exchange Commission (“SEC”).

Changes in Presentation

We have made certain reclassifications to prior year financial statements in order to enhance their comparability with current year financial statements.

Use of Estimates

The preparation of the Company’s financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, commitments and contingencies, and revenues and expenses. Management made estimates in certain areas, including the determination of the Company’s valuation allowance established against its DTAs as well as in the fair value measurement of bonds and derivative instruments. Actual results could differ materially from these estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company as well as those entities in which the Company has a controlling financial interest, including wholly owned subsidiaries of the Company. All intercompany transactions and balances have been eliminated in consolidation. Equity investments in unconsolidated entities where the Company has the ability to exercise significant influence over the operations of the entity, but is not considered the primary beneficiary, are accounted for using the equity method of accounting.

Accounting Guidance

Adoption of Accounting Standards

Accounting for Financial Instruments

In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.” This guidance amends the amortization period for certain callable debt securities held at a premium, shortening the period to the earliest call date. We adopted this new guidance on its effective date of January 1, 2019. Upon adoption of this guidance, the Company assessed that certain of our bond investments were being held at a premium resulting in a reduction in amortization periods used for interest income recognition. Accordingly, during the first quarter of 2019, the Company recognized a cumulative effect adjustment of $0.3 million charge to retained earnings.

Accounting for Income Taxes

In February 2018, the FASB issued ASU No. 2018‑02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This guidance permits companies to reclassify stranded tax effects caused by the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) from AOCI to retained earnings and also requires new disclosures. We adopted this guidance on its effective date of January 1, 2019. The adoption of this guidance did not impact the Company’s Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Equity or Consolidated Statements of Cash Flows as of the adoption date.

Accounting for Stock Compensation

In June 2018, the FASB issued ASU 2018‑07,  Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” This guidance expands the scope of ASC Topic 718 to include all share-based payment arrangements related to the acquisition of goods and services from both nonemployees and employees. We adopted this new guidance on its effective date of January 1, 2019. The adoption of this guidance did not impact the Company’s Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Equity or Consolidated Statements of Cash Flows as of the adoption date.

Accounting for Financial Instruments – Fair Value Measurement

In August 2018, the FASB issued ASU No. 2018‑13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” This guidance eliminates certain disclosure requirements for fair value measurements, requires public entities to disclose certain new information and modifies some disclosure requirements. We adopted this guidance on its effective date of January 1, 2020. The adoption of this guidance did not impact the Company’s Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Equity or Consolidated Statements of Cash Flows as of the adoption date.

Accounting for Financial Instruments – Rate Reform

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This guidance is elective and is provided for contract modifications that meet certain Codification topics and subtopics. The optional amendment of this new guidance is effective March 12, 2020 through December 31, 2022. We did not make any elections provided by this new guidance and, therefore, the adoption of these accounting principles did not impact the Company’s Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Equity or Consolidated Statements of Cash Flows as of the adoption date.

Issued Accounting Standards Not Yet Adopted

Accounting for Financial Instruments – Credit Losses

In November 2019, the FASB issued ASU No. 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): Effective Dates.” This guidance gives private companies, not-for-profit organizations, and certain smaller reporting companies additional time to implement FASB standards on credit losses, leases, derivatives and hedging and intangible-goodwill and other (ASC 350). Because the Company is a smaller reporting company the following “credit loss” ASUs will become effective for the Company on January 1, 2023.

In June 2016, the FASB issued ASU No. 2016‑13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Improvements.” This guidance is intended to reduce the complexity of U.S. GAAP by decreasing the number of credit impairment models that entities use to account for debt instruments. This guidance establishes an impairment methodology that reflects lifetime expected credit losses rather than incurred losses. This guidance requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This new guidance is effective on January 1, 2023, with early adoption permitted. We are currently evaluating the potential impact of the new guidance on our consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” This guidance is intended to clarify aspects of accounting for credit losses, hedging activities, and financial instruments. This new guidance is effective on January 1, 2023, with early adoption permitted. We are currently evaluating the potential impact of the new guidance on our consolidated financial statements.

In May 2019, the FASB issued ASU No. 2019-05, “Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief.” This guidance provides transition relief for entities adopting ASU 2016-13. This guidance allows entities to elect the fair value options on certain financial instruments. This new guidance is effective on January 1, 2023, with early adoption permitted. We are currently evaluating the potential impact of the new guidance on our consolidated financial statements.

In November 2019, the FASB issued ASU No. 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” This guidance amends certain aspects of the FASB’s new credit losses standard, including an amendment requiring entities to include certain expected recoveries in the amortized cost basis in the allowance for credit losses for purchased credit deteriorated assets. This new guidance is effective on January 1, 2023, with early adoption permitted. We are currently evaluating the potential impact of the new guidance on our consolidated financial statements.

In February 2020, the FASB issued ASU No. 2020-02, “Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) (SEC Update).” This guidance updates certain SEC guidance in the Codification for the issuance of SEC Staff Accounting Bulletin 119 and effective date related to the leases standard. This new guidance is effective upon issuance on February 6, 2020. However, because the Company is a smaller reporting company the ASU will become effective for the Company on January 1, 2023. We are currently evaluating the potential impact of this new guidance on our consolidated financial statements.

Accounting for Financial Instruments – General

In March 2020, the FASB issued ASU No. 2020-03, “Codification Improvements to Financial Instruments.” This guidance amends certain topics including fair value option disclosures and credit losses. This guidance is effective upon issuance on March 9, 2020 for some topics and on January 1, 2023 for topics relating to credit loss. The adoption of this guidance that is effective upon issuance did not impact the Company’s Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Equity or Consolidated Statements of Cash Flows. For those aspects of the new guidance that are not effective until January 1, 2023, we are evaluating the potential impact of the new guidance on our consolidated financial statements.

Accounting for Income Taxes

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This guidance eliminates certain exceptions to the general principles in Topic 740. This new guidance is effective for us on January 1, 2021, with early adoption permitted. We are evaluating the potential impact of the new guidance on our consolidated financial statements.

v3.20.1
OTHER ASSETS
3 Months Ended
Mar. 31, 2020
OTHER ASSETS [Abstract]  
Other Assets

Note 5—Other Assets

The following table provides information related to the carrying value of the Company’s other assets:

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

(in thousands)

    

2020

    

2019

Other assets:

 

 

 

 

 

 

Real estate owned

 

$

14,341

 

$

8,397

Debt issue costs

 

 

2,879

 

 

2,675

Derivative assets

 

 

924

 

 

597

Accrued interest receivable

 

 

612

 

 

853

Other assets

 

 

235

 

 

462

Total other assets

 

$

18,991

 

$

12,984

 

Real Estate Owned (“REO”)

The following table provides information about the carrying value of the Company’s REO held for use, net:

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

(in thousands)

    

2020

    

2019

Land improvements

 

$

11,722

 

$

5,778

Land

 

 

2,619

 

 

2,619

Total

 

$

14,341

 

$

8,397

 

Land improvements are depreciated over a period of 15 years.

The Company’s investments include the Company’s REO, which consists of a parcel of land that is currently in the process of being developed. During the first quarter of 2020, the Company invested $5.9 million in additional land improvements that were capitalized as part of our investment balance. Since the asset has not been placed in service, no depreciation expense was recognized in connection with this land investment for the three months ended March 31, 2020 and March 31, 2019,  nor were any impairment losses recognized by the Company during these periods in connection with REO.

Debt Issuance Costs

During the first quarter of 2020, the Company incurred, but deferred in the Consolidated Balance Sheets, $0.5 million of additional debt issuance costs in connection with the execution by MMA Energy Holdings, LLC (“MEH” or “Borrower”), a wholly owned subsidiary of the Company, of a credit agreement for a revolving credit facility with various lenders. These additional costs were due to the joinder of an additional lender and an increase in commitment by one of the existing lenders. These costs are being amortized ratably over the three-year term of the revolving credit facility. During the three months ended March 31, 2020, the Company recognized $0.2 million of interest expense in the Company’s Consolidated Statements of Operations related to the amortization of debt issuance costs for the revolving credit facility. At March 31, 2020 and December 31, 2019, the unamortized balance of debt issuance costs was $2.9 million and $2.7 million, respectively. See Note 6, “Debt,” for more information.

Derivative Assets

At March 31, 2020 and December 31, 2019, the Company recognized $0.9 million and $0.6 million, respectively, of derivative assets. See Note 7, “Derivative Instruments,” for more information.    

v3.20.1
INVESTMENTS IN DEBT SECURITIES (Bonds and Related Unrealized Gains and Losses) (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Schedule of Available-for-sale Securities [Line Items]    
Fair Value $ 29,645 $ 31,365
Debt Securities [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Unpaid principal balance of bond investments 30,885 30,885
Amortized Cost 20,840 20,797
Gross Unrealized Gains 8,805 10,568
Fair Value $ 29,645 $ 31,365
FV as a % of UPB 96.00% 102.00%
Multifamily Tax-Exempt Bonds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Unpaid principal balance of bond investments $ 4,000 $ 4,000
Gross Unrealized Gains 6,114 6,026
Fair Value $ 6,114 $ 6,026
FV as a % of UPB 153.00% 151.00%
Infrastructure Bond [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Unpaid principal balance of bond investments $ 26,885 $ 26,885
Amortized Cost 20,840 20,797
Gross Unrealized Gains 2,691 4,542
Fair Value $ 23,531 $ 25,339
FV as a % of UPB 88.00% 94.00%
v3.20.1
EQUITY (Tables)
3 Months Ended
Mar. 31, 2020
EQUITY  
Summary of Net (Loss) Income to Common Shareholders

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Net (loss) income from continuing operations

 

$

(3,058)

 

$

2,889

Net loss from discontinued operations

 

 

 ─

 

 

(7)

Net (loss) income

 

$

(3,058)

 

$

2,882

 

 

 

 

 

 

 

Basic and diluted weighted-average shares (1)

 

 

5,804

 

 

5,882


(1)

Includes common shares issued and outstanding, as well as deferred shares of non-employee directors that have vested but are not issued and outstanding.

Schedule of Accumulated Other Comprehensive Income

The following table provides information related to the net change in AOCI for the three months ended March 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

Foreign

 

 

 

 

 

in Debt

 

Currency

 

 

 

(in thousands)

    

Securities

    

Translation

    

AOCI

Balance, January 1, 2020

 

$

7,666

 

$

(33)

 

$

7,633

Net unrealized (losses) gains

 

 

(1,763)

 

 

826

 

 

(937)

Reclassification of fair value gains on sold or redeemed bonds into the Consolidated Statements of Operations

 

 

 ─

 

 

 ─

 

 

 ─

Income tax benefit

 

 

484

 

 

 ─

 

 

484

Net change in AOCI

 

 

(1,279)

 

 

826

 

 

(453)

Balance, March 31, 2020

 

$

6,387

 

$

793

 

$

7,180

 

The following table provides information related to the net change in AOCI for the three months ended March 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

Foreign

 

 

 

 

in Debt

 

Currency

 

 

(in thousands)

    

Securities

    

Translation

    

AOCI

Balance, January 1, 2019

 

$

37,625

 

$

72

 

$

37,697

Net unrealized gains

 

 

406

 

 

25

 

 

431

Reclassification of fair value gains on sold or redeemed bonds into the Consolidated Statements of Operations

 

 

(3,571)

 

 

 ─

 

 

(3,571)

Net change in AOCI

 

 

(3,165)

 

 

25

 

 

(3,140)

Balance, March 31, 2019

 

$

34,460

 

$

97

 

$

34,557

 

v3.20.1
DERIVATIVE INSTRUMENTS (Schedule of the Company's Derivative Assets and Liabilities) (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Derivatives, Fair Value [Line Items]    
Derivative Asset $ 924 $ 597
Derivative Liability 2,312 117
Basis Swap [Member]    
Derivatives, Fair Value [Line Items]    
Derivative Asset   318
Derivative Liability 750  
Interest rate cap [Member]    
Derivatives, Fair Value [Line Items]    
Derivative Asset 91 227
Interest rate swap [Member]    
Derivatives, Fair Value [Line Items]    
Derivative Asset   52
Derivative Liability 1,562  
Foreign Exchange Forward [Member]    
Derivatives, Fair Value [Line Items]    
Derivative Asset $ 833  
Derivative Liability   $ 117
v3.20.1
FAIR VALUE (Fair Value of Assets and Liabilities) (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Assets:    
Fair value of bond investments $ 29,645 $ 31,365
Loans held for investment 1,271 500
Derivative assets 924 597
Liabilities:    
Derivative liabilities 2,312 117
Level 2 [Member]    
Assets:    
Derivative assets 924 597
Liabilities:    
Derivative liabilities 2,312 117
Level 3 [Member]    
Assets:    
Fair value of bond investments 29,645 31,365
Loans held for investment $ 1,271 $ 500
v3.20.1
RELATED PARTY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES (Details)
1 Months Ended 3 Months Ended
Dec. 20, 2019
USD ($)
Apr. 25, 2019
USD ($)
Apr. 01, 2019
USD ($)
Oct. 04, 2018
USD ($)
Jan. 08, 2018
USD ($)
Dec. 31, 2019
USD ($)
Mar. 31, 2020
USD ($)
Mar. 31, 2019
USD ($)
Base management fee percentage on first $500 million share capital         0.50%      
Base management fee percentage in excess of $500 million share capital         0.25%      
Annual reimbursement cap until 2019         $ 2,500,000      
Annual reimbursement cap after 2019 until share capital exceeds of $500 million         $ 3,500,000      
Renewal period of the agreement         2 years      
Agreement Violation Termination Fee Includes An Amount Times Sum of Average Annual Base and Incentive Management Fee         3      
Agreement Violation Termination Fee Includes An Amount Times Sum of Average Energy Capital Business Expense Reimbursement and Employee Cost Reimbursement Expense         1      
Termination fee period         2 years      
Consideration on disposal             $ 57,000,000  
Notes receivable             $ 57,000,000  
Interest rate for note             5.00%  
HFS loan acquired by Hunt           $ 54,100,000 $ 1,271,000  
Termination fee payable upon termination of Management Agreement             0  
External management fees and reimbursable expenses             $ 2,760,000 $ 2,268,000
Term of note receivable             7 years  
Equity Method Investments           316,677,000 $ 368,598,000  
Reimbursement of compensation related expenses shareholders equity benchmark amount             500,000,000  
Financing Receivable, Net, Unpaid Principal Balance           54,100,000 1,280,000  
Carrying value of Loan receivable           54,100,000 1,271,000  
Investments in partnerships (includes $349,362 and $296,855 pledged as collateral at March 31, 2020 and December 31, 2019, respectively)           316,677,000 368,598,000  
Investment in Debt Securities                
Net proceeds from sale of affordable house property   $ 13,100,000            
Hunt Companies [Member]                
Loans and leases receivable from related party       $ 67,000,000   53,600,000    
Interest income, related party               800,000
Interest Receivable           700,000 0  
Financing Receivable, Net, Unpaid Principal Balance $ 1,100,000              
Carrying value of Loan receivable 300,000              
Investments in partnerships (includes $349,362 and $296,855 pledged as collateral at March 31, 2020 and December 31, 2019, respectively) 900,000              
Proceeds from the sale of real estate and other investments 3,100,000              
Gain (loss) on sale of loans and real estate related investments 1,900,000              
Proceeds from loans receivable $ 13,400,000              
Hunt Companies [Member] | External Management Fees and Expenses Reimbursement                
Incentive fee         20.00%      
External management fee, contract in excess for incentive fee.         7.00%      
Related party incentive fee expense             0 0
External management fees and reimbursable expenses             2,800,000 $ 2,300,000
Hunt Companies [Member] | External Management Fees and Expenses Reimbursement | External Manager [Member]                
Management fees and expense reimbursements payable           $ 1,200,000 $ 2,800,000  
Hunt Companies [Member] | Investment in Debt Securities                
Service fees waived by agent   900,000            
Hunt Companies [Member] | Investment in Debt Securities                
Proceeds from redemption of bonds   $ 900,000            
Solar Development Lending, LLC [Member] | Hunt Companies [Member]                
Ownership interest     30.00%          
Payments to Acquire Equity Method Investments     $ 11,300,000          
Minimum [Member] | Hunt Companies [Member] | Affordable Housing Partnerships [Member]                
Ownership interest 74.25%              
Maximum [Member] | Hunt Companies [Member] | Affordable Housing Partnerships [Member]                
Ownership interest 74.92%              
v3.20.1
INVESTMENTS IN DEBT SECURITIES
3 Months Ended
Mar. 31, 2020
INVESTMENTS IN DEBT SECURITIES [Abstract]  
Investments in Debt Securities

Note 2—Investments in Debt Securities

At March 31, 2020 and December 31, 2019, the Company’s investments in debt securities consist of one subordinate multifamily tax-exempt mortgage revenue bond and one tax-exempt infrastructure bond. These investments are classified as available-for-sale for reporting purposes and are measured on a fair value basis in our Consolidated Balance Sheets.

Multifamily tax-exempt bonds are issued by state and local governments or their agencies or authorities to finance affordable multifamily rental housing. Generally, the only source of security on these bonds is either a first mortgage or a subordinate mortgage on the underlying property. The Company’s non-amortizing subordinated cash flow bond principal is due in full on November 2044.

The Company’s infrastructure bond financed the development of infrastructure for a mixed-use town center development in Spanish Fort, Alabama and is secured by incremental tax revenues generated from the development and its landowners (this investment is hereinafter referred to as our “Infrastructure Bond”). At March 31, 2020, the Company’s Infrastructure Bond amortizes on a scheduled basis and has a stated maturity date of December 2048.

The following tables provide information about the unpaid principal balance (“UPB”), amortized cost, gross unrealized gains and fair value (“FV”) associated with the Company’s investments in bonds that are classified as available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

March 31, 2020

 

  

 

  

 

  

Gross

  

 

 

  

 

 

 

 

 

Amortized

 

Unrealized

 

 

 

FV as a %

(in thousands)

    

UPB

    

Cost (1)

    

Gains

 

FV

    

of UPB

Infrastructure Bond

 

$

26,885

 

$

20,840

 

$

2,691

 

$

23,531

 

 

88%

Multifamily tax-exempt bonds

 

 

4,000

 

 

 ─

 

 

6,114

 

 

6,114

 

 

153%

Total

 

$

30,885

 

$

20,840

 

$

8,805

 

$

29,645

 

 

96%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

December 31, 2019

 

  

 

  

 

  

Gross

  

 

 

  

 

 

 

 

 

Amortized

 

Unrealized

 

 

 

 

FV as a %

(in thousands)

    

UPB

    

Cost (1)

    

Gains

    

FV

 

    

of UPB

Infrastructure Bond

 

$

26,885

 

$

20,797

 

$

4,542

 

$

25,339

 

 

94%

Multifamily tax-exempt bonds

 

 

4,000

 

 

 ─

 

 

6,026

 

 

6,026

 

 

151%

Total

 

$

30,885

 

$

20,797

 

$

10,568

 

$

31,365

 

 

102%

(1)

Amortized cost consists of the UPB, unamortized premiums, discounts and other cost basis adjustments, as well as OTTI recognized in “Impairments” in our Consolidated Statements of Operations.

See Note 8, “Fair Value,” which describes factors that contributed to the $1.7 million decrease in the reported fair value of the Company’s investments in debt securities for the three months ended March 31, 2020.

Nonaccrual Bonds

At March 31, 2020 and December 31, 2019, the Company had no bonds that were on nonaccrual status. 

Interest income on bonds that was recognized on a cash basis for the three months ended March 31, 2019 was $0.1 million.

Interest income not recognized on bond investments that were on nonaccrual status for the three months ended March 31, 2019 was $0.1 million.

Bond Sales and Redemptions

There were no sales or redemption in full of investments in bonds during the three months ended March 31, 2020.

The Company received cash proceeds in connection with the sale or redemption in full of investments in bonds of $8.6 million for the three months ended March 31, 2019.

The following table provides information about gains or losses that were recognized in the Company’s Consolidated Statements of Operations in connection with the Company’s investments in bonds:

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Gains recognized at time of sale or redemption

 

$

 ─

 

$

3,571

 

v3.20.1
DEBT
3 Months Ended
Mar. 31, 2020
DEBT [Abstract]  
Debt

Note 6—Debt

The table below provides information about the carrying values and weighted-average effective interest rates of the Company’s debt obligations that were outstanding at March 31, 2020 and December 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

At

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

 

 

Wtd. Avg.

 

 

 

 

Wtd. Avg.

 

 

 

 

 

 

Effective 

 

 

 

 

 

Effective

 

 

 

Carrying

 

Interest

 

 

Carrying

 

Interest

 

(dollars in thousands)

  

Value (3)

  

Rate (3)

    

  

Value (3)

  

Rate (3)    

 

Other Debt

 

 

 

 

 

 

 

 

 

 

 

 

Subordinated debt (1)

 

 

 

 

 

 

 

 

 

 

 

 

Due within one year

 

 

2,206

 

3.1

 

 

 

2,212

 

3.2

 

Due after one year

 

 

92,717

 

3.1

 

 

 

93,276

 

3.2

 

Revolving credit facility debt obligations

 

 

 

 

 

 

 

 

 

 

 

 

Due within one year

 

 

 ─

 

 ─

 

 

 

 ─

 

 ─

 

Due after one year

 

 

120,000

 

5.3

 

 

 

94,500

 

5.6

 

Notes payable and other debt (2)

 

 

 

 

 

 

 

 

 

 

 

 

Due within one year

 

 

4,430

 

14.3

 

 

 

6,828

 

14.7

 

Due after one year

 

 

4,300

 

5.0

 

 

 

1,500

 

5.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other debt

 

 

223,653

 

4.5

 

 

 

198,316

 

4.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset Related Debt

 

 

 

 

 

 

 

 

 

 

 

 

Notes Payable and Other Debt

 

 

 

 

 

 

 

 

 

 

 

 

Non-bond related debt

 

 

 

 

 

 

 

 

 

 

 

 

Due within one year

 

$

 ─

 

 ─

%

 

$

650

 

5.0

%

Due after one year

 

 

 ─

 

 ─

 

 

 

2,850

 

5.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total asset related debt

 

 

 ─

 

 ─

 

 

 

3,500

 

5.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total debt

 

$

223,653

 

4.5

 

 

$

201,816

 

4.8

 


(1)

The subordinated debt balances include net cost basis adjustments of $7.3  million and $7.4 million at March 31, 2020 and December 31, 2019, respectively, that pertain to premiums and debt issuance costs.

(2)

Included in Other Debt – notes payable and other debt were unamortized debt issue costs of $0.1 million at December 31, 2019. The balance at March 31, 2020 was de minimis.

(3)

Carrying value amounts and weighted-average interest rates reported in this table include the effects of any discounts, premiums and other cost basis adjustments. An effective interest rate represents an internal rate of return of a debt instrument that makes the net present value of all cash flows, inclusive of cash flows that give rise to cost basis adjustments, equal zero and in the case of (i) fixed rate instruments, is measured as of an instrument’s issuance date and (ii) variable rate instruments, is measured as of each date that a reference interest rate resets.

Covenant Compliance and Debt Maturities

The following table provides information about scheduled principal payments associated with the Company’s debt agreements that were outstanding at March 31, 2020:

 

 

 

 

 

 

Asset Related Debt

(in thousands)

    

and Other Debt

2020

  

$

5,733

2021

 

 

1,913

2022

 

 

121,879

2023

 

 

1,846

2024

 

 

1,813

Thereafter

 

 

83,197

Net premium and debt issue costs

 

 

7,272

Total debt

 

$

223,653

 

At March 31, 2020, the Company was in compliance with all covenants under its debt obligations.

Other Debt

Other debt of the Company finances non-interest-bearing assets and other business activities of the Company. The interest expense associated with this debt is classified as “Interest expense” under “Other expenses” on the Consolidated Statements of Operations.

Subordinated Debt

The table below provides information about the key terms of the subordinated debt that was issued by MMA Financial Holdings, Inc. (“MFH”), the Company’s wholly owned subsidiary, and that was outstanding at March 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

Net Premium

 

 

 

 

Interim

 

 

 

 

 

 

 

 

 

and Debt

 

Carrying 

 

Principal

 

 

 

 

Issuer

    

UPB

    

Issuance Costs

    

Value

    

Payments (1)

    

Maturity Date

    

Coupon

MFH 

  

$

25,869

  

$

2,229

  

$

28,098

  

Amortizing

  

March 30, 2035

  

three-month LIBOR plus 2.0%

MFH

 

 

23,523

 

 

2,034

 

 

25,557

 

Amortizing

 

April 30, 2035

 

three-month LIBOR plus 2.0%

MFH

 

 

13,559

 

 

1,084

 

 

14,643

 

Amortizing

 

July 30, 2035

 

three-month LIBOR plus 2.0%

MFH

 

 

24,654

 

 

1,971

 

 

26,625

 

Amortizing

 

July 30, 2035

 

three-month LIBOR plus 2.0%

Total

 

$

87,605

 

$

7,318

 

$

94,923

 

 

 

 

 

 


(1)

The subordinated principal amortizes 2.0% per annum.

 

Revolving Credit Facility Debt Obligations

On September 19, 2019, MEH entered into a $125.0 million (the “Facility Amount”) revolving credit agreement with various lenders. During the first quarter of 2020, the maximum Facility Amount increased to $175.0 million and the committed amount of the revolving credit facility increased from $100.0 million to $120.0 million upon the joinder of an additional lender and an increase in commitment by one of the existing lenders.

Obligations associated with the revolving credit facility are guaranteed by the Company and are secured by specified assets of the Borrower and a pledge of all of the Company’s equity interest in the Borrower, which holds the equity interests in the Solar Ventures, through pledge and security documentation. Availability and amounts advanced under the revolving credit facility are subject to compliance with a borrowing base comprised of assets that comply with certain eligibility criteria, and includes late-stage development, construction and permanent loans to finance renewable energy projects and cash.

The revolving credit facility contains affirmative and negative covenants binding on the Borrower that are customary for credit facilities of this type. Additionally, the credit agreement includes collateral performance tests and the following financial covenants of the Company and its consolidated subsidiaries: minimum debt service coverage ratio, maximum debt to net worth, minimum consolidated net worth and minimum consolidated net income.

Borrowing under the revolving credit facility bears interest at the one-month London Interbank Offered Rate (“LIBOR”), adjusted for statutory reserve requirements (subject to a 1.5% floor), plus a fixed spread of 2.75% per annum. At March 31, 2020, the LIBOR base rate plus the fixed spread was 4.3%. At March 31, 2020, the weighted-average effective interest rate of the Company’s obligation was 5.3%.  The Borrower has also agreed to pay certain customary fees and expenses and to provide certain indemnities. In certain circumstances where the interest rate is unable to be determined, including in the event LIBOR ceases to be published, the administrative agent to the credit agreement will select a new rate in its reasonable judgment, including any adjustment to the replacement rate to reflect a different credit spread. The maturity date of the credit agreement is September 19, 2022, subject to a 12-month extension solely to allow refinancing or orderly repayment of the facility. 

At March 31, 2020, the UPB and carrying value of amounts borrowed from the revolving credit facility was $120.0 million. The Company recognized $1.3 million of related interest expense in the Consolidated Statements of Operations for the three months ended March 31, 2020.

Notes Payable and Other Debt

At March 31, 2020, the UPB and carrying value of notes payable and other debt that was used to finance the Company’s 11.85% ownership interest in SAWHF was $4.3 million and $4.2 million, respectively. This debt, which is denominated in South African rand, has a contractual maturity date of September 8, 2020, and requires the Company to pay its counterparty a rate equal to the Johannesburg Interbank Agreed Rate (“JIBAR”) plus a fixed spread of 5.15%. At March 31, 2020, the JIBAR base rate was 6.48%, while the weighted-average effective interest rate of the Company’s debt obligation that was used to finance its ownership in SAWHF was 14.7%.

At March 31, 2020, the UPB and carrying value of notes payable and other debt obligations to the Morrison Grove Management, LLC (“MGM”) principals was $4.5 million. This debt bears interest at 5.0%. The $3.0 million debt obligation amortizes over its contractual life and is due to mature on January 1, 2026. The $1.5 million debt obligation pays interest only until March 31, 2026 and then amortizes in three equal installments until its maturity date of January 1, 2027.

Asset Related Debt

Asset related debt is debt that finances interest-bearing assets of the Company. The interest expense associated with this debt is included within “Net interest income” on the Consolidated Statements of Operations.

Non-bond Related Debt

During the first quarter of 2020, this $3.5 million debt obligation to MGM was reclassified to Other Debt upon the full repayment of the Hunt Note.

Letters of Credit

The Company had no letters of credit outstanding at March 31, 2020 and December 31, 2019.

v3.20.1
COMMITMENTS AND CONTINGENCIES
3 Months Ended
Mar. 31, 2020
COMMITMENTS AND CONTINGENCIES [Abstract]  
Commitments and Contingencies

Note 10—Commitments and Contingencies

Operating Leases

The Company had no future rental commitments at March 31, 2020.

Litigation and Other Legal Matters

In the ordinary course of business, the Company and its subsidiaries are named from time to time as defendants in various litigation matters or may have other claims made against them. These legal proceedings may include claims for substantial or indeterminate compensatory, consequential or punitive damages, or for injunctive or declaratory relief.

The Company establishes reserves for litigation matters or other loss contingencies when a loss is probable and can be reasonably estimated. Once established, reserves may be adjusted when new information is obtained. At March 31, 2020, we had no significant litigation matters and we were not aware of any other claims that we believe would have a material adverse impact on our financial condition or results of operations. 

Other Risks and Uncertainties

With respect to the equity investment in the SF Venture, the downturn in the economy that stems from the coronavirus pandemic (“COVID-19”) is expected to reduce the underlying real estate value. In this regard, we anticipate that we will continue to recognize equity in losses from the SF Venture related to our equity investment and that such losses may increase, possibly significantly, as the SF Venture consists of hotel tenants, retail tenants and undeveloped land parcels. However, the severity and duration of expected losses cannot be currently quantified due to uncertainty about the duration of COVID-19. Nonetheless, we believe that it is reasonably possible that, within the next 12 months, a loss that is material to the Company’s financial statements could be recognized due to the residual economic effects of the measures taken to combat COVID-19, which could weigh on the performance of the development and underlying real estate value. However, the exact timing and amount of loss recognition is based upon future circumstances and, therefore, cannot be predicted at this time.

With respect to recognized DTA, the Company’s assessment of the likelihood of realizing tax benefits related to DTAs recognized in the fourth quarter of 2019 did not change in the first quarter of 2020. That is, while COVID-19 caused a sharp deterioration in macro-economic conditions, the potential amount and permanence of long-term impacts of those conditions on the Company’s business was uncertain at March 31, 2020. Consequently, the Company did not make an adjustment in the first quarter to the carrying value of DTAs that were recognized at December 31, 2019. Nonetheless, given such uncertainty, we believe it is reasonably possible that, within the next 12 months, a reduction to the carrying value of recognized DTAs that is material to the Company’s financial statements could be recognized. However, the exact timing and amount of loss recognition depends upon future circumstances and, therefore, cannot be predicted at this time. 

v3.20.1
INVESTMENTS IN DEBT SECURITIES (Narrative) (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Schedule of Available-for-sale Securities [Line Items]      
Increase (Decrease) in Fair Value Of Bonds $ (1,700)    
Non Accrual Bonds Interest Income Cash Basis Method   $ 100  
Interest Income Nonaccrual Bonds Not Recognized   100  
Proceeds from sale of investments in bonds   $ 8,600  
Investments in debt securities 29,645   $ 31,365
Debt Securities [Member]      
Schedule of Available-for-sale Securities [Line Items]      
Investments in debt securities 29,645   31,365
Unpaid principal balance of bond investments 30,885   30,885
Infrastructure Bond [Member]      
Schedule of Available-for-sale Securities [Line Items]      
Investments in debt securities 23,531   25,339
Unpaid principal balance of bond investments 26,885   26,885
Multifamily Tax-Exempt Bonds [Member]      
Schedule of Available-for-sale Securities [Line Items]      
Investments in debt securities 6,114   6,026
Unpaid principal balance of bond investments $ 4,000   $ 4,000
v3.20.1
GUARANTEES AND COLLATERAL (Tables)
3 Months Ended
Mar. 31, 2020
GUARANTEES AND COLLATERAL [Abstract]  
Schedule of Financial Instruments Owned and Pledged as Collateral

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

March 31, 2020

 

 

 

 

 

 

Total

 

 

Restricted

 

Investments in

 

Assets

(in thousands)

    

Cash

 

Partnerships

    

Pledged

Debt related to the revolving credit facility

 

$

1,726

 

$

344,601

 

$

346,327

Debt and derivatives related to the Company's 11.85% ownership interest in SAWHF

 

 

1,374

 

 

4,761

 

 

6,135

Interest rate swaps

 

 

3,901

 

 

 ─

 

 

3,901

Other  

 

 

 8

 

 

 ─

 

 

 8

Total

 

$

7,009

 

$

349,362

 

$

356,371

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

December 31, 2019

 

 

 

 

 

 

Total

 

 

Restricted

 

Investments in

 

Assets

(in thousands)

    

Cash

 

Partnerships

    

Pledged

Debt related to the revolving credit facility

 

$

1,070

 

$

289,123

 

$

290,193

Debt and derivatives related to the Company's 11.85% ownership interest in SAWHF

 

 

1,369

 

 

7,732

 

 

9,101

Interest rate swaps

 

 

1,803

 

 

 ─

 

 

1,803

Other

 

 

 8

 

 

 ─

 

 

 8

Total

 

$

4,250

 

$

296,855

 

$

301,105

 

v3.20.1
CONSOLIDATED STATEMENTS OF EQUITY - USD ($)
shares in Thousands, $ in Thousands
Common Stock
AOCI
Total
Balance at Dec. 31, 2018 $ 175,213 $ 37,697 $ 212,910
Balance (in shares) at Dec. 31, 2018 5,882    
Net (loss) income $ 2,882   2,882
Other comprehensive loss   (3,140) (3,140)
Common shares (restricted and deferred) issued under employee and non-employee director share plans $ 82   82
Common shares (restricted and deferred) issued under employee and non-employee director share plans (in shares) 2    
Balance at Mar. 31, 2019 $ 177,910 34,557 212,467
Balance (in shares) at Mar. 31, 2019 5,884    
Cumulative Effect of New Accounting Principle in Period of Adoption $ (267)   (267)
Balance at Dec. 31, 2019 $ 273,492 7,633 281,125
Balance (in shares) at Dec. 31, 2019 5,805    
Net (loss) income $ (3,058)   (3,058)
Other comprehensive loss   (453) (453)
Common shares (restricted and deferred) issued under employee and non-employee director share plans $ 96   96
Common shares (restricted and deferred) issued under employee and non-employee director share plans (in shares) 3    
Common share repurchases $ (41)   (41)
Common share repurchases (in shares) (1)    
Balance at Mar. 31, 2020 $ 270,489 $ 7,180 $ 277,669
Balance (in shares) at Mar. 31, 2020 5,807    
v3.20.1
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
ASSETS    
Cash and cash equivalents $ 23,164 $ 8,555
Restricted cash 7,009 4,250
Investments in debt securities 29,645 31,365
Investments in partnerships (includes $349,362 and $296,855 pledged as collateral at March 31, 2020 and December 31, 2019, respectively) 368,598 316,677
Deferred tax assets, net 59,394 57,711
Loans held for investment (includes zero and $53,600 of related party loans at March 31, 2020 and December 31, 2019) 1,271 54,100
Other assets 18,991 12,984
Total assets 508,072 485,642
LIABILITIES AND EQUITY    
Debt 223,653 201,816
Accounts payable and accrued expenses 4,300 2,527
Other liabilities 2,450 174
Total liabilities 230,403 204,517
Commitments and contingencies (see Note 10)
Preferred shares:    
Preferred shares, no par value, 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2020 and December 31, 2019
Common shareholders' equity:    
Common shares, no par value, 50,000,000 shares are authorized (5,702,423 and 5,701,946 shares issued and outstanding and 104,916 and 103,069 non-employee directors' deferred shares issued at March 31, 2020 and December 31, 2019, respectively) 270,489 273,492
Accumulated other comprehensive income ("AOCI") 7,180 7,633
Total shareholders’ equity 277,669 281,125
Total liabilities and equity $ 508,072 $ 485,642
v3.20.1
SEGMENT INFORMATION
3 Months Ended
Mar. 31, 2020
SEGMENT INFORMATION [Abstract]  
Segment Information

Note 14—Segment Information

At March 31, 2020 and December 31, 2019, the Company operates as a single reporting segment. Therefore, all required segment information can be found in our consolidated financial statements.

 

 

v3.20.1
LOANS HELD FOR INVESTMENT (“HFI”) (Tables)
3 Months Ended
Mar. 31, 2020
LOANS HELD FOR INVESTMENT (“HFI”) [Abstract]  
Schedule of loans Held For Investments

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

(in thousands)

    

2020

    

2019

UPB

 

$

1,280

 

$

54,100

Fair value adjustments

 

 

(9)

 

 

 ─

Loans HFI, net

 

$

1,271

 

$

54,100

 

v3.20.1
OTHER ASSETS (Narrative) (Details) - USD ($)
$ in Thousands
3 Months Ended
Jan. 15, 2020
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Sep. 19, 2019
Derivative Asset, Noncurrent   $ 924   $ 597  
Debt issue costs   2,879   2,675  
Interest expense, debt   2,269 $ 1,209    
Impairment losses recognized   0 0    
Revolving Credit Facility [Member]          
Debt issuance costs, gross   500      
Interest expense, debt   1,300      
Unamortized debt issue costs   $ 2,900   $ 2,700  
Debt instrument, term   3 years      
Borrowing capacity   $ 175,000      
Amortization expense   200      
Revolving Credit Facility [Member] | Facility Amount [Member] | Subsidiaries [Member]          
Borrowing capacity         $ 125,000
Revolving Credit Facility [Member] | Committed Amount [Member]          
Borrowing capacity   $ 120,000     $ 100,000
Land improvements          
Property, Plant and Equipment, Useful Life   15 years      
Land investment $ 5,900        
Depreciation   $ 0 $ 0    
Property, Plant and Equipment, Additions $ 5,900        
v3.20.1
INVESTMENTS IN PARTNERSHIPS (Schedule of Income (Loss) in Earnings of Unconsolidated Venture) (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
U.S. Real Estate Partnerships [Member]    
Schedule of Equity Method Investments [Line Items]    
Gross revenue $ 642 $ 664
Operating expenses 715 470
Net income (loss) (755) (879)
Solar Ventures Investment [Member]    
Schedule of Equity Method Investments [Line Items]    
Gross revenue 21,821 10,334
Operating expenses 2,021 1,894
Net income (loss) 10,825 8,492
Realized loan net fair value gain (loss) (9,000) 100
SAWHF    
Schedule of Equity Method Investments [Line Items]    
Gross revenue 1,112 199
Operating expenses 491 331
Net income (loss) $ 76 $ 2,034
v3.20.1
FAIR VALUE (Carrying Amounts and Fair Values of Financial Instruments ) (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Assets:    
Loans held for investment $ 1,271 $ 500
Level 1 [Member] | Fair Value, Nonrecurring [Member]    
Assets:    
Cash and cash equivalents 23,164 8,555
Restricted cash 7,009 4,250
Level 3 [Member]    
Assets:    
Loans held for investment 1,271 500
Level 3 [Member] | Fair Value, Nonrecurring [Member]    
Assets:    
Loans held for investment   54,276
Liabilities:    
Revolving credit facility obligations 120,000 94,500
Non Bond Related Debt [Member] | Level 3 [Member] | Fair Value, Nonrecurring [Member]    
Liabilities:    
Notes payable and other debt 7,304 10,888
Subordinated Loan [Member] | Level 3 [Member] | MFH [Member] | Fair Value, Nonrecurring [Member]    
Liabilities:    
Subordinated debt 30,773 46,934
Reported Value Measurement [Member]    
Assets:    
Cash and cash equivalents 23,164 8,555
Restricted cash 7,009 4,250
Loans held for investment   53,600
Liabilities:    
Revolving credit facility obligations 120,000 94,500
Reported Value Measurement [Member] | Non Bond Related Debt [Member]    
Liabilities:    
Notes payable and other debt 8,730 11,828
Reported Value Measurement [Member] | Subordinated Loan [Member] | MFH [Member]    
Liabilities:    
Subordinated debt $ 94,923 $ 95,488
v3.20.1
EQUITY (Summary of Net (Loss) Income to Common Shareholders) (Details) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
EQUITY    
Net income from continuing operations $ (3,058) $ 2,889
Net income (loss) from discontinued operations   (7)
Net (loss) income $ (3,058) $ 2,882
Basic and diluted weighted-average shares 5,804 5,882
v3.20.1
STOCK-BASED COMPENSATION (Summary of Nonemployee Director Stock Award Activity) (Details) - Non-employee Directors' Stock-Based Compensation Plans [Member] - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Non-employee director compensation, cash $ 96,875 $ 81,875
Weighted - average Grant Date Share Price $ 26.73 $ 31.26
Directors' Fees Expense $ 193,750 $ 163,750
Common Shares [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Granted 1,777 560
Deferred Shares [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Granted 1,847 2,060
v3.20.1
FAIR VALUE (Amount of Activity Pertaining to Level 3 Assets and Liabilities Included in Earnings) (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2019
USD ($)
Bonds [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Additional realized gains recognized $ 3,571
Total net (losses) gains reported in earnings 3,571
Derivatives  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Change in unrealized (losses) gains related to assets and liabilities held (72)
Change in unrealized losses related to assets and liabilities settled during the period (80)
Additional realized gains recognized 148
Total net (losses) gains reported in earnings $ (4)
v3.20.1
DEBT (Principal Commitments) (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
DEBT [Abstract]    
2020 $ 5,733  
2021 1,913  
2022 121,879  
2023 1,846  
2024 1,813  
Thereafter 83,197  
Net premium and debt issue costs (7,272)  
Total $ 223,653 $ 201,816
v3.20.1
DERIVATIVE INSTRUMENTS (Summary of Derivative Activity) (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Derivative Instruments, Gain (Loss) [Line Items]    
Gain (Loss) on Derivative Instruments, Net, Pretax, Total $ (1,711) $ (1,442)
Total Return Swap [Member]    
Derivative Instruments, Gain (Loss) [Line Items]    
Gain (Loss) on Derivative Instruments, Net, Pretax, Total   (4)
Net proceeds from derivative instrument   200
Basis Swap [Member]    
Derivative Instruments, Gain (Loss) [Line Items]    
Gain (Loss) on Derivative Instruments, Net, Pretax, Total (1,079) (73)
Interest rate cap [Member]    
Derivative Instruments, Gain (Loss) [Line Items]    
Gain (Loss) on Derivative Instruments, Net, Pretax, Total (136) (477)
Interest rate swap [Member]    
Derivative Instruments, Gain (Loss) [Line Items]    
Gain (Loss) on Derivative Instruments, Net, Pretax, Total (1,578) (881)
Net proceeds from derivative instrument   100
Foreign Exchange Forward [Member]    
Derivative Instruments, Gain (Loss) [Line Items]    
Gain (Loss) on Derivative Instruments, Net, Pretax, Total $ 1,082 $ (7)
v3.20.1
STOCK-BASED COMPENSATION (Tables)
3 Months Ended
Mar. 31, 2020
STOCK-BASED COMPENSATION [Abstract]  
Summary of Stock-Based Compensation Expense

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Non-employee Directors’ Stock-Based Compensation Plans

 

$

194

 

$

164

 

Summary of Nonemployee Director Stock Award Activity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common

 

Deferred

 

Weighted-average

 

 

 

 

 

 

 

 

Shares

 

Shares

 

Grant Date

 

Options

 

Directors' Fees

 

 

Cash

    

Granted

    

Granted

    

Share Price

    

Vested

    

Expense

March 31, 2020

(1)

$

96,875

  

 

1,777

  

 

1,847

  

$

26.73

  

  

 ─

  

$

193,750

March 31, 2019

 

 

81,875

 

 

560

 

 

2,060

 

 

31.26

 

 

 ─

 

 

163,750

 

 

 

 


(1)

During the first quarter of 2020, the Board approved the addition of two independent directors.

v3.20.1
DERIVATIVE INSTRUMENTS (Tables)
3 Months Ended
Mar. 31, 2020
DERIVATIVE INSTRUMENTS [Abstract]  
Schedule of the Company's Derivative Assets and Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value

 

 

At

 

At

 

 

March 31, 2020

 

December 31, 2019

(in thousands)

    

Assets

    

Liabilities

    

Assets

    

Liabilities

Basis swaps

 

$

 ─

 

$

750

 

$

318

 

$

 ─

Interest rate caps

 

 

91

 

 

 ─

 

 

227

 

 

 ─

Interest rate swaps

 

 

 ─

 

 

1,562

 

 

52

 

 

 ─

Foreign currency forward exchange

 

 

833

 

 

 ─

 

 

 ─

 

 

117

Total carrying value of derivative instruments

 

$

924

 

$

2,312

 

$

597

 

$

117

 

Schedule of Derivative Notional Amounts

 

 

 

 

 

 

 

 

 

Notional Amounts

 

 

At

 

At

 

 

March 31,

 

December 31,

(in thousands)

    

2020

    

2019

Basis swaps

 

$

35,000

 

$

35,000

Interest rate caps

 

 

35,000

 

 

35,000

Interest rate swaps

 

 

35,000

 

 

35,000

Foreign currency forward exchange

 

 

3,677

 

 

4,685

Total notional amount of derivative instruments

 

$

108,677

 

$

109,685

 

Schedule of Net Gains Recognized Recognized In Connection With Derivative Instruments

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Total return swaps (1) 

 

$

 ─

 

$

(4)

Basis swaps (2)

 

 

(1,079)

 

 

(73)

Interest rate caps

 

 

(136)

 

 

(477)

Interest rate swaps (3) 

 

 

(1,578)

 

 

(881)

Foreign currency forward exchange

 

 

1,082

 

 

(7)

Total net losses of derivative instruments

 

$

(1,711)

 

$

(1,442)


(1)

The accrual of net interest payments that are made in connection with TRS agreements that are reported as derivative instruments are classified as a component of “Net losses on derivatives” on the Consolidated Statements of Operations. Net cash received was $0.2 million for the three months ended March 31, 2019.

(2)

The accrual of net interest payments that are made in connection with basis swaps is classified as a component of “Net losses on derivatives” on the Consolidated Statements of Operations. The net cash received was de minimis for the three months ended March 31, 2020 and March 31, 2019.

(3)

The accrual of net interest payments that are made in connection with interest rate swaps is classified as a component of “Net losses on derivatives” on the Consolidated Statements of Operations. Net cash paid was de minimis for the three months ended March 31, 2020, while the net cash received was $0.1 million for the three months ended March 31, 2019, respectively.

v3.20.1
INVESTMENTS IN DEBT SECURITIES (Realized Gains on Bond Sales and Redemptions) (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
INVESTMENTS IN DEBT SECURITIES [Abstract]    
Gains recognized at time of sale or redemption $ 0 $ 3,571
v3.20.1
LOANS HELD FOR INVESTMENT (“HFI”)
3 Months Ended
Mar. 31, 2020
LOANS HELD FOR INVESTMENT (“HFI”) [Abstract]  
Loans Held for Investment (“HFI”)

Note 4—Loans Held for Investment (“HFI”)

We report the carrying value of HFI loans at their UPB, net of unamortized premiums, discounts and other cost basis adjustments and related allowances for loan losses, except in instances where we have elected the fair value option as further discussed below.

The following table provides information about the UPB and fair value adjustments that were recognized in the Company’s Consolidated Balance Sheets related to loans that it classified as HFI:

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

(in thousands)

    

2020

    

2019

UPB

 

$

1,280

 

$

54,100

Fair value adjustments

 

 

(9)

 

 

 ─

Loans HFI, net

 

$

1,271

 

$

54,100

On January 3, 2020, the entire $53.6 million UPB of the Hunt Note was fully repaid. At March 31, 2020 and December 31, 2019, the Company had one and two HFI loans, respectively, that had a combined UPB and fair value of $1.3 million and $54.1 million, respectively.

The Company elected the fair value option for one of its HFI loans that had a UPB and fair value of $1.3 million and $0.5 million at March 31, 2020 and December 31, 2019, respectively. The fair value option was elected upon its recognition so as to minimize certain operational challenges associated with accounting for this loan.

At March 31, 2020 and December 31, 2019, the Company had no HFI loans that were on nonaccrual status or that were past due in scheduled principal or interest payments and still accruing interest.

Unfunded Loan Commitments

At March 31, 2020 and December 31, 2019, the Company, through its wholly owned subsidiary of REL, had $0.8 million and $1.6 million, respectively, of unfunded loan commitments.

v3.20.1
FAIR VALUE
3 Months Ended
Mar. 31, 2020
FAIR VALUE [Abstract]  
Fair Value

Note 8—Fair Value

We use fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Assets and liabilities recorded at fair value on a recurring basis are presented in the first table below in this Note. From time to time, we may be required to measure at fair value other assets on a nonrecurring basis such as certain loans held for investment or investments in partnerships. These nonrecurring fair value adjustments typically involve application of lower-of-cost-or-market accounting or write-downs of individual assets.

Fair Value Hierarchy

The Company measures the fair value of its assets and liabilities based upon their contractual terms and using relevant market information. A description of the methods used by the Company to measure fair value is provided below. Fair value measurements are subjective in nature, involve uncertainties and often require the Company to make significant judgments. Changes in assumptions could significantly affect the Company’s measurement of fair value.

GAAP establishes a three-level hierarchy that prioritizes inputs into the valuation techniques used to measure fair value. Fair value measurements associated with assets and liabilities are categorized into one of the following levels of the hierarchy based upon how observable the valuation inputs are that are used in the fair value measurements.

·

Level 1:  Valuation is based upon quoted prices in active markets for identical instruments.

·

Level 2:  Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs or significant value drivers are observable in active markets.

·

Level 3:  Valuation is generated from techniques that use significant assumptions that are not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability.

Recurring Changes in Fair Value

The following tables present the carrying amounts of assets and liabilities that are measured at fair value on a recurring basis by instrument type and based upon the level of the fair value hierarchy within which fair value measurements of our assets and liabilities are categorized:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

Fair Value Measurements

(in thousands)

    

2020

    

Level 1

    

Level 2

    

Level 3

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Investments in debt securities

 

$

29,645

 

$

 ─

 

$

 ─

 

$

29,645

Loans held for investment

 

 

1,271

 

 

 ─

 

 

 ─

 

 

1,271

Derivative instruments

 

 

924

 

 

 ─

 

 

924

 

 

 ─

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative instruments

 

$

2,312

 

$

 ─

 

$

2,312

 

$

 ─

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

Fair Value Measurements

(in thousands)

    

2019

    

Level 1

    

Level 2

    

Level 3

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Investments in debt securities

 

$

31,365

 

$

 ─

 

$

 ─

 

$

31,365

Loans held for investment

 

 

500

 

 

 ─

 

 

 ─

 

 

500

Derivative instruments

 

 

597

 

 

 ─

 

 

597

 

 

 ─

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative instruments

 

$

117

 

$

 ─

 

$

117

 

$

 ─

 

Changes in Fair Value

Changes in the fair value of assets and liabilities that are measured at fair value on a recurring basis and that are categorized as Level 3 within the fair value hierarchy are attributed in the following table to identified activities that occurred during the three months ended March 31, 2020:

 

 

 

 

 

 

 

 

    

Investments

    

 

 

 

in Debt

 

Loans Held for 

(in thousands)

    

Securities

    

Investment

Balance, January 1, 2020

 

$

31,365

 

$

500

Net losses included in earnings (1)

 

 

 ─

 

 

(9)

Net change in AOCI (2) 

 

 

(1,763)

 

 

 ─

Impact from loan originations / advances

 

 

 ─

 

 

780

Impact from settlements (3)

 

 

43

 

 

 ─

Balance, March 31, 2020

 

$

29,645

 

$

1,271


(1)

This amount represents $9 thousand of unrealized losses recognized during this reporting period in connection with the Company’s loan investment held at March 31, 2020. This amount is classified as “net losses on loans and extinguishment of liabilities” in the Company’s Consolidated Statement of Operations.

(2)

This amount represents $1.8 million of net unrealized losses recognized during this reporting period in connection with the Company’s bond investments.

(3)

This impact considers the effect of principal payments received and amortization of cost basis adjustments. 

Changes in the fair value of assets and liabilities that are measured at fair value on a recurring basis and that are categorized as Level 3 within the fair value hierarchy are attributed in the following table to identified activities that occurred during the three months ended March 31, 2019:

 

 

 

 

 

 

 

 

    

Investments

    

 

 

 

 

in Debt

 

Derivative

(in thousands)

    

Securities

    

Assets

Balance, January 1, 2019

 

$

97,190

 

$

1,130

Net losses included in earnings

 

 

 ─

 

 

(152)

Net change in AOCI (1) 

 

 

(3,165)

 

 

 ─

Impact from sales or redemptions

 

 

(12,590)

 

 

 ─

Impact from settlements (2)

 

 

(333)

 

 

(202)

Balance, March 31, 2019

 

$

81,102

 

$

776


(1)

This amount represents the reclassification into the Consolidated Statements of Operations of $3.6 million of net fair value gains related to bonds that were sold or redeemed during this reporting period. This decline was partially offset by $0.4 million of net unrealized holding gains recognized during the period in connection with the Company’s bond investments.

(2)

This impact considers the effect of principal payments received and amortization of cost basis adjustments. Included in this amount is $0.3 million of cumulative transition adjustment to retained earnings that was recognized in connection with the Company’s adoption of ASU No. 2017-08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-10):  Premium Amortization on Purchased Callable Debt Securities” on January 1, 2019.

The following table provides information about the amount of realized and unrealized (losses) gains that were reported in the Company’s Consolidated Statements of Operations for the three months ended March 31, 2019, related to activity presented in the preceding table:

 

 

 

 

 

 

 

 

    

 

    

 

 

 

 

Net gains on

 

Net losses on

(in thousands)

    

bonds (1)

    

derivatives (2)

Change in unrealized losses related to assets and liabilities held at March 31, 2019

 

$

 ─

 

$

(72)

Change in unrealized losses related to assets and liabilities held at January 1, 2019, but settled during 2019

 

 

 ─

 

 

(80)

Additional realized gains recognized

 

 

3,571

 

 

148

Total net gains (losses) reported in earnings

 

$

3,571

 

$

(4)


(1)

Amounts are classified as “Net gains on bonds” in the Company’s Consolidated Statements of Operations.

(2)

Amounts are classified as “Net losses on derivatives” in the Company’s Consolidated Statements of Operations.

Fair Value Measurements of Instruments That Are Classified as Level 3

Significant unobservable inputs presented in the tables that follow are those we consider significant to the fair value of the Level 3 asset or liability. We consider unobservable inputs to be significant if, by their exclusion, the fair value of the Level 3 asset or liability would be impacted by a predetermined percentage change, or based on qualitative factors, such as nature of the instrument, type of valuation technique used and the significance of the unobservable inputs relative to other inputs used within the valuation. Following is a description of the significant unobservable inputs that are referenced in the tables below:

·

Market yield – is a market rate of return used to calculate the present value of future expected cash flows to arrive at the fair value of an instrument. The market yield typically consists of a benchmark rate component and a risk premium component. The benchmark rate component, for example, MMD or SIFMA, is generally observable within the market and is necessary to appropriately reflect the time value of money. The risk premium component reflects the amount of compensation market participants require due to the uncertainty inherent in the instrument’s cash flows resulting from risks such as credit and liquidity. A significant decrease in this input in isolation would result in a significantly higher fair value measurement.

·

Capitalization rate – is calculated as the ratio between the NOI produced by a commercial real estate property and the price for the asset. A significant decrease in this input in isolation would result in a significantly higher fair value measurement.

·

NOI annual growth rate – is the amount of future growth in NOI that the Company projects each property to generate on an annual basis over the 10‑year projection period. These annual growth estimates take into account the Company’s expectation about the future increases, or decreases, in rental rates, vacancy rates, bad debt expense, concessions and operating expenses for each property. Generally, an increase in NOI will result in an increase to the fair value of the property.

·

Valuation technique weighting factors – represent factors that, in the aggregate, sum to 100% and that are individually applied to two or more indications of fair value considering the reasonableness of the range indicated by those results.

·

Contract or bid prices – represents a third-party sale agreement or purchase offer executed in connection with the pending sale of an affordable housing property that secures one of the Company’s bond investments. In instances where multiple purchase offers have been received an average of the offers received is utilized. Estimated proceeds from the sale, or average offers, of such property that are determined to be allocable to a bond investment are used to measure the investment’s fair value at a given reporting date.

The tables that follow provide quantitative information about the valuation techniques and the range and weighted-average of significant unobservable inputs used in the valuation of substantially all of our Level 3 assets and liabilities measured at fair value on a recurring basis for which we use an internal model to measure fair value. The significant unobservable inputs for Level 3 assets and liabilities that are valued using dealer pricing are not included in the tables, as the specific inputs applied are not provided by the dealer.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement at March 31, 2020

 

 

 

 

 

Significant

 

Significant

 

 

 

 

 

 

 

 

 

 

 

Valuation

 

Unobservable

 

 

 

 

Weighted

 

(dollars in thousands)

Fair Value

    

Techniques

    

Inputs (1)

    

Range (1)

    

Average

 

Recurring Fair Value Measurements:

 

 

 

 

 

 

 

 

 

 

 

Investments in debt securities:

 

 

 

 

 

 

 

 

 

 

 

Infrastructure Bond

$

23,531

 

Discounted cash flow

 

Market yield

 

 

7.8

%

 

N/A

 

Multifamily tax-exempt bonds

 

 

 

 

 

 

 

 

 

 

 

Subordinated cash flow

 

6,114

 

Discounted cash flow

 

Market yield

 

 

7.2

 

 

N/A

 

 

 

 

 

 

 

Capitalization rate

 

 

6.2

 

 

N/A

 

Loans held for investment

 

1,271

 

Discounted cash flow

 

Market yield

 

 

8.4

 

 

N/A

 


(1)

Unobservable inputs reflect information that is not based upon independent sources that are readily available. These inputs are based upon assumptions and internally generated data made by the Company, which may include significant judgment that has been developed based upon available information from third-party sources or dealers about what a market participant would use in valuing the asset.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement at December 31, 2019

 

 

 

 

 

Significant

 

Significant

 

 

 

 

 

 

 

 

 

 

 

Valuation

 

Unobservable

 

 

 

 

Weighted

 

(dollars in thousands)

Fair Value

    

Techniques

    

Inputs (1)

    

Range (1)

    

Average (2)

 

Recurring Fair Value Measurements:

 

 

 

 

 

 

 

 

 

 

 

Investments in debt securities:

 

 

 

 

 

 

 

 

 

 

 

Infrastructure Bond

$

25,339

 

Discounted cash flow

 

Market yield

 

 

7.0

%

 

N/A

 

Multifamily tax-exempt bonds

 

 

 

 

 

 

 

 

 

 

 

Subordinated cash flow

 

6,026

 

Discounted cash flow

 

Market yield

 

 

7.3

 

 

N/A

 

 

 

 

 

 

 

Capitalization rate

 

 

6.2

 

 

N/A

 

 

 

 

 

 

 

Valuation technique weighting factors:

 

 

 

 

 

 

 

 

 

 

 

 

 

•  NOI annual growth rate (50% weighting factor)

 

 

0.7

 

 

N/A

 

 

 

 

 

 

 

•  Bid price (50% weighting factor)

 

$

16,611

 

 

N/A

 

Loans held for investment

 

500

 

Discounted cash flow

 

Market yield

 

 

8.0

 

 

8.0

%


(1)

Unobservable inputs reflect information that is not based upon independent sources that are readily available. These inputs are based upon assumptions and internally generated data made by the Company, which may include significant judgment that has been developed based upon available information from third-party sources or dealers about what a market participant would use in valuing the asset.

(2)

Weighted-averages are calculated using outstanding UPB for cash instruments, such as loans and securities, and notional amounts for derivative instruments.

Nonrecurring Changes in Fair Value

There were no nonrecurring fair value adjustments recorded for the three months ended March 31, 2020 and March 31, 2019.

Additional Disclosures Related To The Fair Value of Financial Instruments That Are Not Carried On The Consolidated Balance Sheets at Fair Value

The tables that follow provide information about the carrying amounts and fair values of those financial instruments of the Company for which fair value is not measured on a recurring basis and organizes the information based upon the level of the fair value hierarchy within which fair value measurements are categorized. Assets and liabilities that do not represent financial instruments (e.g., premises and equipment) are excluded from these disclosures.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

March 31, 2020

 

 

Carrying

 

Fair Value

(in thousands)

    

Amount

    

Level 1

    

Level 2

    

Level 3

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

23,164

 

$

23,164

 

$

 ─

 

$

 ─

Restricted cash

 

 

7,009

 

 

7,009

 

 

 ─

 

 

 ─

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Notes payable and other debt - non-bond related

 

 

8,730

 

 

 ─

 

 

 ─

 

 

7,304

Revolving credit facility obligations

 

 

120,000

 

 

 ─

 

 

 ─

 

 

120,000

Subordinated debt issued by MFH 

 

 

94,923

 

 

 ─

 

 

 ─

 

 

30,773

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

December 31, 2019

 

 

Carrying

 

Fair Value

(in thousands)

    

Amount

    

Level 1

    

Level 2

    

Level 3

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,555

 

$

8,555

 

$

 ─

 

$

 ─

Restricted cash

 

 

4,250

 

 

4,250

 

 

 ─

 

 

 ─

Loans held for investment

 

 

53,600

 

 

 ─

 

 

 ─

 

 

54,276

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Notes payable and other debt - non-bond related

 

 

11,828

 

 

 ─

 

 

 ─

 

 

10,888

Revolving credit facility obligations

 

 

94,500

 

 

 ─

 

 

 ─

 

 

94,500

Subordinated debt issued by MFH 

 

 

95,488

 

 

 ─

 

 

 ─

 

 

46,934

 

Valuation Techniques

Cash and cash equivalents and restricted cash – The carrying value of these assets approximated fair value due to the short-term nature and negligible credit risk inherent in them.

Loans held for investment – Fair value is measured using a discounted cash flow methodology pursuant to which contractual payments are discounted based upon market yields for similar credit risks.

Notes payable and other debt – Fair value is measured by discounting contractual cash flows using a market rate of interest or by estimating the fair value of the collateral supporting a debt arrangement, taking into account credit risk.

Subordinated debt – Fair value is measured by discounting projected contractual payments of principal and interest using the instrument’s estimated market yield, which was 15.6% and 11.7% at March 31, 2020 and December 31, 2019, respectively. As outlined in the table above, at March 31, 2020, the aggregate fair value was measured at $30.8 million. At March 31, 2020, the measured fair value of this debt would have been $39.0 million and $25.2 million had its market yield been 12.1% and 19.1%, respectively. The measured fair value of this debt is inherently judgmental and based on management’s assumption of market yields. There can be no assurance that the Company could repurchase the remaining subordinated debt at the measured fair values reflected in the table above or that the debt would trade at that price.

Revolving credit facility debt obligations – Fair value of these debt obligations is measured by discounting projected contractual payments of interest and principal using an estimated market yield.

v3.20.1
DEBT (Tables)
3 Months Ended
Mar. 31, 2020
DEBT [Abstract]  
Schedule of Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

At

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

 

 

Wtd. Avg.

 

 

 

 

Wtd. Avg.

 

 

 

 

 

 

Effective 

 

 

 

 

 

Effective

 

 

 

Carrying

 

Interest

 

 

Carrying

 

Interest

 

(dollars in thousands)

  

Value (3)

  

Rate (3)

    

  

Value (3)

  

Rate (3)    

 

Other Debt

 

 

 

 

 

 

 

 

 

 

 

 

Subordinated debt (1)

 

 

 

 

 

 

 

 

 

 

 

 

Due within one year

 

 

2,206

 

3.1

 

 

 

2,212

 

3.2

 

Due after one year

 

 

92,717

 

3.1

 

 

 

93,276

 

3.2

 

Revolving credit facility debt obligations

 

 

 

 

 

 

 

 

 

 

 

 

Due within one year

 

 

 ─

 

 ─

 

 

 

 ─

 

 ─

 

Due after one year

 

 

120,000

 

5.3

 

 

 

94,500

 

5.6

 

Notes payable and other debt (2)

 

 

 

 

 

 

 

 

 

 

 

 

Due within one year

 

 

4,430

 

14.3

 

 

 

6,828

 

14.7

 

Due after one year

 

 

4,300

 

5.0

 

 

 

1,500

 

5.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other debt

 

 

223,653

 

4.5

 

 

 

198,316

 

4.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset Related Debt

 

 

 

 

 

 

 

 

 

 

 

 

Notes Payable and Other Debt

 

 

 

 

 

 

 

 

 

 

 

 

Non-bond related debt

 

 

 

 

 

 

 

 

 

 

 

 

Due within one year

 

$

 ─

 

 ─

%

 

$

650

 

5.0

%

Due after one year

 

 

 ─

 

 ─

 

 

 

2,850

 

5.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total asset related debt

 

 

 ─

 

 ─

 

 

 

3,500

 

5.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total debt

 

$

223,653

 

4.5

 

 

$

201,816

 

4.8

 


(1)

The subordinated debt balances include net cost basis adjustments of $7.3  million and $7.4 million at March 31, 2020 and December 31, 2019, respectively, that pertain to premiums and debt issuance costs.

(2)

Included in Other Debt – notes payable and other debt were unamortized debt issue costs of $0.1 million at December 31, 2019. The balance at March 31, 2020 was de minimis.

(3)

Carrying value amounts and weighted-average interest rates reported in this table include the effects of any discounts, premiums and other cost basis adjustments. An effective interest rate represents an internal rate of return of a debt instrument that makes the net present value of all cash flows, inclusive of cash flows that give rise to cost basis adjustments, equal zero and in the case of (i) fixed rate instruments, is measured as of an instrument’s issuance date and (ii) variable rate instruments, is measured as of each date that a reference interest rate resets.

Schedule of Maturities of Long-term Debt

 

 

 

 

 

 

Asset Related Debt

(in thousands)

    

and Other Debt

2020

  

$

5,733

2021

 

 

1,913

2022

 

 

121,879

2023

 

 

1,846

2024

 

 

1,813

Thereafter

 

 

83,197

Net premium and debt issue costs

 

 

7,272

Total debt

 

$

223,653

 

Schedule of Subordinate Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

Net Premium

 

 

 

 

Interim

 

 

 

 

 

 

 

 

 

and Debt

 

Carrying 

 

Principal

 

 

 

 

Issuer

    

UPB

    

Issuance Costs

    

Value

    

Payments (1)

    

Maturity Date

    

Coupon

MFH 

  

$

25,869

  

$

2,229

  

$

28,098

  

Amortizing

  

March 30, 2035

  

three-month LIBOR plus 2.0%

MFH

 

 

23,523

 

 

2,034

 

 

25,557

 

Amortizing

 

April 30, 2035

 

three-month LIBOR plus 2.0%

MFH

 

 

13,559

 

 

1,084

 

 

14,643

 

Amortizing

 

July 30, 2035

 

three-month LIBOR plus 2.0%

MFH

 

 

24,654

 

 

1,971

 

 

26,625

 

Amortizing

 

July 30, 2035

 

three-month LIBOR plus 2.0%

Total

 

$

87,605

 

$

7,318

 

$

94,923

 

 

 

 

 

 


(1)

The subordinated principal amortizes 2.0% per annum.

v3.20.1
STOCK-BASED COMPENSATION
3 Months Ended
Mar. 31, 2020
STOCK-BASED COMPENSATION [Abstract]  
Stock-Based Compensation

Note 12—Stock-Based Compensation

On January 8, 2018, the Company engaged the External Manager through the execution of a management agreement with the External Manager (the “Management Agreement”) to externally manage the Company’s operations. In connection therewith, all employees of the Company were hired by the External Manager. The Company has stock-based compensation plans (“Plans”) for non-employee Directors (“Non-employee Directors’ Stock-Based Compensation Plans”) and stock-based incentive compensation plans for employees (“Employees’ Stock-Based Compensation Plans”).

The following table provides information related to total compensation expense that was recorded for these Plans:

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Non-employee Directors’ Stock-Based Compensation Plans

 

$

194

 

$

164

 

Employees’ Stock-Based Compensation Plans

At March 31, 2020, there were 571,066 share awards available to be issued under Employees’ Stock-Based Compensation Plans. While each existing Employees’ Stock-Based Compensation Plan has been approved by the Board, not all of the Plans have been approved by the Company’s shareholders. The Plans that have not been approved by the Company’s shareholders are currently restricted to the issuance of only stock options. As a result, of the 571,066 shares available under the plans, 73,556 are available to be issued in the form of either stock options or shares, while the remaining 497,510 shares available for issuance must be issued in the form of stock options. Since the Company has no employees, the Company does not expect to issue any of these shares or options.

Non-Employee Directors’ Stock-Based Compensation Plans

The Non-employee Directors’ Stock-based Compensation Plans authorize a total of 1,130,000 shares for issuance, of which 380,536 were available to be issued at March 31, 2020. The Non-employee Directors’ Stock-based Compensation Plans provide for grants of non-qualified common stock options, common shares, restricted shares and deferred shares.

The Non-employee Directors’ Stock-based Compensation Plans provide for directors to be paid $120,000 per year for their services. In addition, the Chairman receives an additional $20,000 per year, the Audit Committee Chair receives an additional $15,000 per year and the other committee chairs receive an additional $10,000 per year. Under this plan, 50% of such compensation is paid in cash and the remaining sum through common share-based grants.

The table below summarizes non-employee director compensation, including cash, vested options and common and deferred shares, for services rendered for the three months ended March 31, 2020 and March 31, 2019. The directors are fully vested in the deferred shares at the grant date.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common

 

Deferred

 

Weighted-average

 

 

 

 

 

 

 

 

Shares

 

Shares

 

Grant Date

 

Options

 

Directors' Fees

 

 

Cash

    

Granted

    

Granted

    

Share Price

    

Vested

    

Expense

March 31, 2020

(1)

$

96,875

  

 

1,777

  

 

1,847

  

$

26.73

  

  

 ─

  

$

193,750

March 31, 2019

 

 

81,875

 

 

560

 

 

2,060

 

 

31.26

 

 

 ─

 

 

163,750

 

 

 

 


(1)

During the first quarter of 2020, the Board approved the addition of two independent directors.

 

v3.20.1
INVESTMENTS IN DEBT SECURITIES (Tables)
3 Months Ended
Mar. 31, 2020
INVESTMENTS IN DEBT SECURITIES [Abstract]  
Schedule of Available-for-sale Securities Reconciliation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

March 31, 2020

 

  

 

  

 

  

Gross

  

 

 

  

 

 

 

 

 

Amortized

 

Unrealized

 

 

 

FV as a %

(in thousands)

    

UPB

    

Cost (1)

    

Gains

 

FV

    

of UPB

Infrastructure Bond

 

$

26,885

 

$

20,840

 

$

2,691

 

$

23,531

 

 

88%

Multifamily tax-exempt bonds

 

 

4,000

 

 

 ─

 

 

6,114

 

 

6,114

 

 

153%

Total

 

$

30,885

 

$

20,840

 

$

8,805

 

$

29,645

 

 

96%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

December 31, 2019

 

  

 

  

 

  

Gross

  

 

 

  

 

 

 

 

 

Amortized

 

Unrealized

 

 

 

 

FV as a %

(in thousands)

    

UPB

    

Cost (1)

    

Gains

    

FV

 

    

of UPB

Infrastructure Bond

 

$

26,885

 

$

20,797

 

$

4,542

 

$

25,339

 

 

94%

Multifamily tax-exempt bonds

 

 

4,000

 

 

 ─

 

 

6,026

 

 

6,026

 

 

151%

Total

 

$

30,885

 

$

20,797

 

$

10,568

 

$

31,365

 

 

102%

(1)

Amortized cost consists of the UPB, unamortized premiums, discounts and other cost basis adjustments, as well as OTTI recognized in “Impairments” in our Consolidated Statements of Operations.

Gain (Loss) on Investments

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Gains recognized at time of sale or redemption

 

$

 ─

 

$

3,571

 

v3.20.1
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Interest income    
Interest on bonds $ 468 $ 1,043
Interest on loans and short-term investments 91 935
Total interest income 559 1,978
Asset related interest expense    
Bond related debt 0 237
Non-bond related debt 0 62
Total interest expense 0 299
Net interest income 559 1,679
Non-interest income    
Equity in income from unconsolidated funds and ventures 4,148 3,976
Net gains on bonds 0 3,571
Net losses on derivatives (1,711) (1,442)
Net losses on loans and extinguishment of liabilities (9) (11)
Other income 1 17
Non-interest income 2,429 6,111
Other expenses    
Interest expense 2,269 1,209
External management fees and reimbursable expenses 2,760 2,268
General and administrative 359 314
Professional fees 709 967
Other expenses 1,140 130
Total other expenses 7,237 4,888
Net (loss) income from continuing operations before income taxes (4,249) 2,902
Income tax benefit (expense) 1,191 (13)
Net (loss) income from continuing operations (3,058) 2,889
Net loss from discontinued operations, net of tax 0 (7)
Net (loss) income $ (3,058) $ 2,882
Basic and diluted income per common share:    
(Loss) income from continuing operations $ (0.53) $ 0.49
Earnings Per Share, Basic and Diluted, Total $ (0.53) $ 0.49
Weighted-average common shares outstanding:    
Basic and diluted 5,804 5,882
v3.20.1
CONSOLIDATED STATEMENTS OF CASH FLOWS (Reconciliation) - USD ($)
$ in Thousands
Mar. 31, 2020
Mar. 31, 2019
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH    
Cash and cash equivalents $ 23,164 $ 28,773
Restricted cash 7,009 5,668
Total cash, cash equivalents and restricted cash shown in statement of cash flows $ 30,173 $ 34,441
v3.20.1
COMMITMENTS AND CONTINGENCIES (Details)
$ in Thousands
Mar. 31, 2020
USD ($)
COMMITMENTS AND CONTINGENCIES [Abstract]  
Future rental commitments $ 0
v3.20.1
STOCK-BASED COMPENSATION (Narrative) (Details)
3 Months Ended
Mar. 31, 2020
USD ($)
shares
Employees' Stock-Based Compensation Plans [Member]  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Number of shares available for issuance 571,066
Employees' Stock-Based Compensation Plans [Member] | Employee Stock Option [Member]  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Number of shares available for issuance 497,510
Employees' Stock-Based Compensation Plans [Member] | Employee Stock Options or Shares  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Number of shares available for issuance 73,556
Non-employee Directors' Stock-Based Compensation Plans [Member]  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Number of shares available for issuance 1,130,000
Annual compensation | $ $ 120,000
Number of shares currently available for issuance 380,536
Compensation paid in cash (as percentage) 50.00%
Compensation paid in shares (as percentage) 50.00%
Non-employee Directors' Stock-Based Compensation Plans [Member] | Audit Committee Chair [Member]  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Additional Stock based Compensation | $ $ 15,000
Non-employee Directors' Stock-Based Compensation Plans [Member] | Board Of Directors Chairman [Member]  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Additional Stock based Compensation | $ 20,000
Non-employee Directors' Stock-Based Compensation Plans [Member] | Other Committee [Member]  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Additional Stock based Compensation | $ $ 10,000
v3.20.1
LOANS HELD FOR INVESTMENT (“HFI”) (Composition of Loans) (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
LOANS HELD FOR INVESTMENT (“HFI”) [Abstract]    
UPB $ 1,280 $ 54,100
Fair value adjustments (9)  
Financing Receivable, Net $ 1,271 $ 54,100
v3.20.1
INVESTMENTS IN PARTNERSHIPS (Schedule of Real Estate Investment Partnerships) (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Schedule of Equity Method Investments [Line Items]    
Total investments in partnerships $ 368,598 $ 316,677
Solar Ventures Investment [Member]    
Schedule of Equity Method Investments [Line Items]    
Total investments in partnerships 344,601 289,123
U.S. Real Estate Partnerships [Member]    
Schedule of Equity Method Investments [Line Items]    
Total investments in partnerships 19,236 19,822
SAWHF    
Schedule of Equity Method Investments [Line Items]    
Total investments in partnerships $ 4,761 $ 7,732
v3.20.1
OTHER ASSETS (REO held for use, net) (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Real estate held for use, net $ 14,341 $ 8,397
Land    
Real estate held for use, net 2,619 2,619
Land improvements    
Real estate held for use, net $ 11,722 $ 5,778
v3.20.1
EQUITY
3 Months Ended
Mar. 31, 2020
EQUITY  
Equity

Note 11—Equity

Preferred Share Information

On January 1, 2019, as part of the Company’s conversion to a corporation, the Company was authorized to issue 5,000,000 of preferred shares, in one or more series, with no par value. As of March 31, 2020, the Board of Directors (“Board”) has not authorized any of these shares to be issued and no rights have been established for any of these shares.

Common Share Information

As of March 31, 2020, the Company was authorized to issue 50,000,000 common shares. The following table provides information about net (loss) income to common shareholders as well as provides information that pertains to weighted-average share counts that were used in per share calculations as presented on the Consolidated Statements of Operations:

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Net (loss) income from continuing operations

 

$

(3,058)

 

$

2,889

Net loss from discontinued operations

 

 

 ─

 

 

(7)

Net (loss) income

 

$

(3,058)

 

$

2,882

 

 

 

 

 

 

 

Basic and diluted weighted-average shares (1)

 

 

5,804

 

 

5,882


(1)

Includes common shares issued and outstanding, as well as deferred shares of non-employee directors that have vested but are not issued and outstanding.

Common Shares

Effective May 5, 2015, the Company adopted a Tax Benefits Rights Agreement (the “Rights Plan”) to help preserve the Company’s net operating losses (“NOLs”). In connection with adopting the Rights Plan, the Company declared a distribution of one right per common share to shareholders of record as of May 15, 2015. The rights do not trade apart from the current common shares until the distribution date, as defined in the Rights Plan. Under the Rights Plan, the acquisition by an investor (or group of related investors) of greater than a 4.9% stake in the Company, could result in all existing shareholders other than the new 4.9% holder having the right to acquire new shares for a nominal cost, thereby significantly diluting the ownership interest of the acquiring person. On March 11, 2020, the Board approved an extension of the original five-year term of the Rights Plan until May 5, 2023, or until the Board determines the plan is no longer required, whichever comes first. The Board has asked shareholders for an advisory vote to ratify its decision to extend the Rights Plan at the Company’s 2020 annual meeting of shareholders.

On January 3, 2018, the Board approved a waiver of the 4.9% ownership limitation for Hunt, increasing this limitation to the acquisition of 9.9% of the Company’s issued and outstanding shares in any rolling 12‑month period without causing a triggering event.

At March 31, 2020, the Company had two shareholders, including one of its executive officers, Michael L. Falcone, who held greater than a 4.9% interest in the Company. On March 11, 2020, the Board named Mr. Falcone an exempted person in accordance with the Rights Plan for open-market share purchases of up to an additional 7,500 common shares, to be completed by December 31, 2020, with the Board reserving all its rights under the Rights Plan for any subsequent purchases. As a result of the Board’s action, purchases made by Mr. Falcone up to the authorized 7,500 common shares would not be a triggering event for purposes of the Rights Plan if purchased prior to December 31, 2020.

Accumulated Other Comprehensive Income

The following table provides information related to the net change in AOCI for the three months ended March 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

Foreign

 

 

 

 

 

in Debt

 

Currency

 

 

 

(in thousands)

    

Securities

    

Translation

    

AOCI

Balance, January 1, 2020

 

$

7,666

 

$

(33)

 

$

7,633

Net unrealized (losses) gains

 

 

(1,763)

 

 

826

 

 

(937)

Reclassification of fair value gains on sold or redeemed bonds into the Consolidated Statements of Operations

 

 

 ─

 

 

 ─

 

 

 ─

Income tax benefit

 

 

484

 

 

 ─

 

 

484

Net change in AOCI

 

 

(1,279)

 

 

826

 

 

(453)

Balance, March 31, 2020

 

$

6,387

 

$

793

 

$

7,180

 

The following table provides information related to the net change in AOCI for the three months ended March 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

Foreign

 

 

 

 

in Debt

 

Currency

 

 

(in thousands)

    

Securities

    

Translation

    

AOCI

Balance, January 1, 2019

 

$

37,625

 

$

72

 

$

37,697

Net unrealized gains

 

 

406

 

 

25

 

 

431

Reclassification of fair value gains on sold or redeemed bonds into the Consolidated Statements of Operations

 

 

(3,571)

 

 

 ─

 

 

(3,571)

Net change in AOCI

 

 

(3,165)

 

 

25

 

 

(3,140)

Balance, March 31, 2019

 

$

34,460

 

$

97

 

$

34,557

 

v3.20.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policy)
3 Months Ended
Mar. 31, 2020
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

The Company evaluates subsequent events through the date of filing with the U.S. Securities and Exchange Commission (“SEC”).

Changes in Presentation

Changes in Presentation

We have made certain reclassifications to prior year financial statements in order to enhance their comparability with current year financial statements.

Use of Estimates

Use of Estimates

The preparation of the Company’s financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, commitments and contingencies, and revenues and expenses. Management made estimates in certain areas, including the determination of the Company’s valuation allowance established against its DTAs as well as in the fair value measurement of bonds and derivative instruments. Actual results could differ materially from these estimates.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company as well as those entities in which the Company has a controlling financial interest, including wholly owned subsidiaries of the Company. All intercompany transactions and balances have been eliminated in consolidation. Equity investments in unconsolidated entities where the Company has the ability to exercise significant influence over the operations of the entity, but is not considered the primary beneficiary, are accounted for using the equity method of accounting.

New Accounting Guidance

Accounting Guidance

Adoption of Accounting Standards

Accounting for Financial Instruments

In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.” This guidance amends the amortization period for certain callable debt securities held at a premium, shortening the period to the earliest call date. We adopted this new guidance on its effective date of January 1, 2019. Upon adoption of this guidance, the Company assessed that certain of our bond investments were being held at a premium resulting in a reduction in amortization periods used for interest income recognition. Accordingly, during the first quarter of 2019, the Company recognized a cumulative effect adjustment of $0.3 million charge to retained earnings.

Accounting for Income Taxes

In February 2018, the FASB issued ASU No. 2018‑02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This guidance permits companies to reclassify stranded tax effects caused by the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) from AOCI to retained earnings and also requires new disclosures. We adopted this guidance on its effective date of January 1, 2019. The adoption of this guidance did not impact the Company’s Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Equity or Consolidated Statements of Cash Flows as of the adoption date.

Accounting for Stock Compensation

In June 2018, the FASB issued ASU 2018‑07,  Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” This guidance expands the scope of ASC Topic 718 to include all share-based payment arrangements related to the acquisition of goods and services from both nonemployees and employees. We adopted this new guidance on its effective date of January 1, 2019. The adoption of this guidance did not impact the Company’s Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Equity or Consolidated Statements of Cash Flows as of the adoption date.

Accounting for Financial Instruments – Fair Value Measurement

In August 2018, the FASB issued ASU No. 2018‑13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” This guidance eliminates certain disclosure requirements for fair value measurements, requires public entities to disclose certain new information and modifies some disclosure requirements. We adopted this guidance on its effective date of January 1, 2020. The adoption of this guidance did not impact the Company’s Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Equity or Consolidated Statements of Cash Flows as of the adoption date.

Accounting for Financial Instruments – Rate Reform

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This guidance is elective and is provided for contract modifications that meet certain Codification topics and subtopics. The optional amendment of this new guidance is effective March 12, 2020 through December 31, 2022. We did not make any elections provided by this new guidance and, therefore, the adoption of these accounting principles did not impact the Company’s Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Equity or Consolidated Statements of Cash Flows as of the adoption date.

Issued Accounting Standards Not Yet Adopted

Accounting for Financial Instruments – Credit Losses

In November 2019, the FASB issued ASU No. 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): Effective Dates.” This guidance gives private companies, not-for-profit organizations, and certain smaller reporting companies additional time to implement FASB standards on credit losses, leases, derivatives and hedging and intangible-goodwill and other (ASC 350). Because the Company is a smaller reporting company the following “credit loss” ASUs will become effective for the Company on January 1, 2023.

In June 2016, the FASB issued ASU No. 2016‑13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Improvements.” This guidance is intended to reduce the complexity of U.S. GAAP by decreasing the number of credit impairment models that entities use to account for debt instruments. This guidance establishes an impairment methodology that reflects lifetime expected credit losses rather than incurred losses. This guidance requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This new guidance is effective on January 1, 2023, with early adoption permitted. We are currently evaluating the potential impact of the new guidance on our consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” This guidance is intended to clarify aspects of accounting for credit losses, hedging activities, and financial instruments. This new guidance is effective on January 1, 2023, with early adoption permitted. We are currently evaluating the potential impact of the new guidance on our consolidated financial statements.

In May 2019, the FASB issued ASU No. 2019-05, “Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief.” This guidance provides transition relief for entities adopting ASU 2016-13. This guidance allows entities to elect the fair value options on certain financial instruments. This new guidance is effective on January 1, 2023, with early adoption permitted. We are currently evaluating the potential impact of the new guidance on our consolidated financial statements.

In November 2019, the FASB issued ASU No. 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” This guidance amends certain aspects of the FASB’s new credit losses standard, including an amendment requiring entities to include certain expected recoveries in the amortized cost basis in the allowance for credit losses for purchased credit deteriorated assets. This new guidance is effective on January 1, 2023, with early adoption permitted. We are currently evaluating the potential impact of the new guidance on our consolidated financial statements.

In February 2020, the FASB issued ASU No. 2020-02, “Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) (SEC Update).” This guidance updates certain SEC guidance in the Codification for the issuance of SEC Staff Accounting Bulletin 119 and effective date related to the leases standard. This new guidance is effective upon issuance on February 6, 2020. However, because the Company is a smaller reporting company the ASU will become effective for the Company on January 1, 2023. We are currently evaluating the potential impact of this new guidance on our consolidated financial statements.

Accounting for Financial Instruments – General

In March 2020, the FASB issued ASU No. 2020-03, “Codification Improvements to Financial Instruments.” This guidance amends certain topics including fair value option disclosures and credit losses. This guidance is effective upon issuance on March 9, 2020 for some topics and on January 1, 2023 for topics relating to credit loss. The adoption of this guidance that is effective upon issuance did not impact the Company’s Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Equity or Consolidated Statements of Cash Flows. For those aspects of the new guidance that are not effective until January 1, 2023, we are evaluating the potential impact of the new guidance on our consolidated financial statements.

Accounting for Income Taxes

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This guidance eliminates certain exceptions to the general principles in Topic 740. This new guidance is effective for us on January 1, 2021, with early adoption permitted. We are evaluating the potential impact of the new guidance on our consolidated financial statements.

v3.20.1
OTHER ASSETS (Tables)
3 Months Ended
Mar. 31, 2020
OTHER ASSETS [Abstract]  
Schedule of Other Assets

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

(in thousands)

    

2020

    

2019

Other assets:

 

 

 

 

 

 

Real estate owned

 

$

14,341

 

$

8,397

Debt issue costs

 

 

2,879

 

 

2,675

Derivative assets

 

 

924

 

 

597

Accrued interest receivable

 

 

612

 

 

853

Other assets

 

 

235

 

 

462

Total other assets

 

$

18,991

 

$

12,984

 

Schedule Of Real Estate Owned, Held For Use

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

(in thousands)

    

2020

    

2019

Land improvements

 

$

11,722

 

$

5,778

Land

 

 

2,619

 

 

2,619

Total

 

$

14,341

 

$

8,397

 

v3.20.1
CONSOLIDATED STATEMENTs OF CASH FLOWS (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Principal payments and sales proceeds received on bonds and loans held for investment $ 53,600 $ 8,640
Advances on and originations of loans held for investment 702 0
Hunt Companies [Member]    
Principal payments and sales proceeds received on bonds and loans held for investment $ 53,600 $ 0
v3.20.1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Statement of Comprehensive Income [Abstract]    
Net (loss) income $ (3,058) $ 2,882
Bond related changes:    
Net unrealized (losses) gains (1,763) 406
Reclassification of fair value gains on sold or redeemed bonds into the Consolidated Statements of Operations 0 (3,571)
Income tax benefit 484 0
Net change in other comprehensive loss due to bonds, net of taxes (1,279) (3,165)
Foreign currency translation adjustment 826 25
Other comprehensive loss (453) (3,140)
Comprehensive loss $ (3,511) $ (258)
v3.20.1
Document And Entity Information - shares
3 Months Ended
Mar. 31, 2020
May 01, 2020
Document And Entity Information [Abstract]    
Document Type 10-Q  
Document Period End Date Mar. 31, 2020  
Entity Registrant Name MMA CAPITAL HOLDINGS, INC.  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Central Index Key 0001003201  
Current Fiscal Year End Date --12-31  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2020  
Amendment Flag false  
Entity Common Stock, Shares Outstanding   5,700,646
Entity Shell Company false  
v3.20.1
GUARANTEES AND COLLATERAL (Collateral and Restricted Assets) (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Financial Instruments Owned and Pledged as Collateral [Line Items]    
Restricted cash $ 7,009 $ 4,250
Investments in partnerships 349,362 296,855
Total Assets Pledged 356,371 301,105
Interest rate swap [Member]    
Financial Instruments Owned and Pledged as Collateral [Line Items]    
Restricted cash 3,901 1,803
Total Assets Pledged 3,901 1,803
Debt and derivatives | SAWHF [Member]    
Financial Instruments Owned and Pledged as Collateral [Line Items]    
Restricted cash 1,374 1,369
Investments in partnerships 4,761 7,732
Total Assets Pledged $ 6,135 $ 9,101
Ownership interest (as a percent) 11.85% 11.85%
Debt and derivatives TRSs [Member]    
Financial Instruments Owned and Pledged as Collateral [Line Items]    
Restricted cash   $ 1,070
Investments in partnerships   289,123
Total Assets Pledged   290,193
Other, Pledged or Restricted [Member]    
Financial Instruments Owned and Pledged as Collateral [Line Items]    
Restricted cash $ 8 8
Total Assets Pledged 8 $ 8
Revolving Credit Facility [Member]    
Financial Instruments Owned and Pledged as Collateral [Line Items]    
Restricted cash 1,726  
Investments in partnerships 344,601  
Total Assets Pledged $ 346,327  
v3.20.1
EQUITY (Schedule of Accumulated Other Comprehensive Income) (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Balance $ 281,125 $ 212,910
Other Comprehensive Income (Loss), before Tax Period Change [Abstract]    
Net change AOCI (453) (3,140)
Other Comprehensive Income (Loss), Tax [Abstract]    
Income tax benefit 484 0
Balance 277,669 212,467
AOCI    
Balance 7,633 37,697
Other Comprehensive Income (Loss), before Tax Period Change [Abstract]    
Net unrealized gains (losses), before tax (937) 431
Reclassification of fair value gains on sold or redeemed bonds into the Consolidated Statements of Operations   3,571
Net change AOCI (453) (3,140)
Other Comprehensive Income (Loss), Tax [Abstract]    
Income tax benefit 484  
Balance 7,180 34,557
Investments in Debt Securities [Member]    
Balance 7,666 37,625
Other Comprehensive Income (Loss), before Tax Period Change [Abstract]    
Net unrealized gains (losses), before tax (1,763) 406
Reclassification of fair value gains on sold or redeemed bonds into the Consolidated Statements of Operations   3,571
Net change AOCI (1,279) (3,165)
Other Comprehensive Income (Loss), Tax [Abstract]    
Income tax benefit 484  
Balance 6,387 34,460
Accumulated Foreign Currency Adjustment Attributable to Parent [Member]    
Balance (33) 72
Other Comprehensive Income (Loss), before Tax Period Change [Abstract]    
Net unrealized gains (losses), before tax 826 25
Net change AOCI 826 25
Other Comprehensive Income (Loss), Tax [Abstract]    
Balance $ 793 $ 97
v3.20.1
DEBT (Narrative) (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
installment
Mar. 31, 2019
USD ($)
Dec. 31, 2019
USD ($)
Sep. 19, 2019
USD ($)
Debt Instrument [Line Items]        
Effective interest rate 4.50%   4.80%  
Carrying Value $ 223,653   $ 201,816  
Letters of credit outstanding 0   $ 0  
Interest expense, debt $ 2,269 $ 1,209    
Other Debt [Member]        
Debt Instrument [Line Items]        
Effective interest rate 4.50%   4.80%  
Carrying Value $ 223,653   $ 198,316  
SAWHF        
Debt Instrument [Line Items]        
Ownership interest (as a percent) 11.85%      
Morrison Grove Management LLC [Member] | Other Debt [Member]        
Debt Instrument [Line Items]        
Notes Payable $ 3,500      
Notes Payable and Other Debt [Member] | SAWHF        
Debt Instrument [Line Items]        
Weighted average effective interest rates of debt obligations 14.70%      
Carrying Value $ 4,200      
Ownership interest (as a percent) 11.85%      
Principal amount of debt $ 4,300      
Bond Related Notes Payable and Other Debt [Member] | Morrison Grove Management LLC [Member]        
Debt Instrument [Line Items]        
Interest rate (as a percent) 5.00%      
Principal amount of debt $ 4,500      
Notes Payable 4,500      
Bond Related Notes Payable and Other Debt [Member] | Morrison Grove Management LLC [Member] | Debt Obligations Mature In 2026        
Debt Instrument [Line Items]        
Notes Payable 3,000      
Bond Related Notes Payable and Other Debt [Member] | Morrison Grove Management LLC [Member] | Debt Obligations Mature In 2027        
Debt Instrument [Line Items]        
Notes Payable $ 1,500      
Number of installments for amortization of debt | installment 3      
Johannesburg Interbank Agreed Rate (JIBAR) [Member] | Notes Payable and Other Debt [Member] | SAWHF        
Debt Instrument [Line Items]        
Fixed spread (as a percent) 5.15%      
Base rate (as percentage) 6.48%      
Revolving Credit Facility [Member]        
Debt Instrument [Line Items]        
Effective interest rate 5.30%      
Carrying Value $ 120,000      
Fixed spread (as a percent) 2.75%      
Principal amount of debt $ 120,000      
Borrowing capacity $ 175,000      
Debt instrument, maturity date Sep. 19, 2022      
Line of credit facility extension period 12 months      
Interest expense, debt $ 1,300      
Debt instrument base rate plus fixed spread percentage rate 4.30%      
Revolving Credit Facility [Member] | Committed Amount [Member]        
Debt Instrument [Line Items]        
Borrowing capacity $ 120,000     $ 100,000
Minimum [Member] | Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member]        
Debt Instrument [Line Items]        
Interest rate (as a percent)       1.50%
Subsidiaries [Member] | Revolving Credit Facility [Member] | Facility Amount [Member]        
Debt Instrument [Line Items]        
Borrowing capacity       $ 125,000
v3.20.1
LOANS HELD FOR INVESTMENT (“HFI”) (Loan Aging Analysis) (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
LOANS HELD FOR INVESTMENT (“HFI”) [Abstract]    
Loans Receivable, Net $ 1,271 $ 54,100
Loans Receivable, Net, Unpaid Principal Balance $ 1,280 $ 54,100
v3.20.1
INVESTMENTS IN PARTNERSHIPS (Schedule of Balance Sheet Accounts Related to Equity Method Investments) (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Solar Ventures Investment [Member]    
Schedule of Equity Method Investments [Line Items]    
Total assets $ 781,734 $ 706,792
Other Liabilities 14,360 22,135
U.S. Real Estate Partnerships [Member]    
Schedule of Equity Method Investments [Line Items]    
Total assets 51,237 51,718
Debt 6,657 6,426
Other Liabilities 20,536 20,493
SAWHF    
Schedule of Equity Method Investments [Line Items]    
Total assets 32,890 56,356
Other Liabilities $ 339 $ 130
v3.20.1
DEBT (Outstanding Debt Balances) (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Debt Instrument [Line Items]    
Debt, Carrying Value $ 223,653 $ 201,816
Debt Instrument, Interest Rate, Effective Percentage 4.50% 4.80%
Asset Related Debt [Member]    
Debt Instrument [Line Items]    
Debt, Carrying Value $ 0 $ 3,500
Debt Instrument, Interest Rate, Effective Percentage 0.00% 5.00%
Other Debt [Member]    
Debt Instrument [Line Items]    
Debt, Carrying Value $ 223,653 $ 198,316
Debt Instrument, Interest Rate, Effective Percentage 4.50% 4.80%
NonBond Related Notes Payable and Other Debt [Member] | Asset Related Debt [Member]    
Debt Instrument [Line Items]    
Debt, Due within one year   $ 650
Debt, Due after one year   $ 2,850
Debt Instrument, Interest Rate, Effective Percentage, Current Portion   5.00%
Debt Instrument, Interest Rate, Effective Percentage, Noncurrent Portion   5.00%
Notes Payable and Other Debt [Member] | Other Debt [Member]    
Debt Instrument [Line Items]    
Debt, Due within one year $ 4,430 $ 6,828
Debt, Due after one year $ 4,300 $ 1,500
Debt Instrument, Interest Rate, Effective Percentage, Current Portion 14.30% 14.70%
Debt Instrument, Interest Rate, Effective Percentage, Noncurrent Portion 5.00% 5.00%
Unamortized debt issue costs   $ 100
Subordinated Loan [Member]    
Debt Instrument [Line Items]    
Net Premium and Debt Issuance Costs $ 7,300 7,400
Subordinated Loan [Member] | Other Debt [Member]    
Debt Instrument [Line Items]    
Debt, Due within one year 2,206 2,212
Debt, Due after one year $ 92,717 $ 93,276
Debt Instrument, Interest Rate, Effective Percentage, Current Portion 3.10% 3.20%
Debt Instrument, Interest Rate, Effective Percentage, Noncurrent Portion 3.10% 3.20%
Revolving Credit Facility [Member]    
Debt Instrument [Line Items]    
Debt, Carrying Value $ 120,000  
Debt Instrument, Interest Rate, Effective Percentage 5.30%  
Unamortized debt issue costs $ 2,900 $ 2,700
Revolving Credit Facility [Member] | Other Debt [Member]    
Debt Instrument [Line Items]    
Debt, Due after one year $ 120,000 $ 94,500
Debt Instrument, Interest Rate, Effective Percentage, Noncurrent Portion 5.30% 5.60%
v3.20.1
DERIVATIVE INSTRUMENTS (Schedule of Derivative Notional Amounts) (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Derivative Instruments and Hedging Activities Disclosures [Line Items]    
Total notional amount of derivative instruments $ 108,677 $ 109,685
Basis Swap [Member]    
Derivative Instruments and Hedging Activities Disclosures [Line Items]    
Total notional amount of derivative instruments 35,000 35,000
Interest rate cap [Member]    
Derivative Instruments and Hedging Activities Disclosures [Line Items]    
Total notional amount of derivative instruments 35,000 35,000
Interest rate swap [Member]    
Derivative Instruments and Hedging Activities Disclosures [Line Items]    
Total notional amount of derivative instruments 35,000 35,000
Foreign Exchange Forward [Member]    
Derivative Instruments and Hedging Activities Disclosures [Line Items]    
Total notional amount of derivative instruments $ 3,677 $ 4,685
v3.20.1
FAIR VALUE (Activity for Assets and Liabilities Measured on Recurring Level 3 Basis) (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Jan. 01, 2019
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]      
Reclassification of net fair value gains on sold/redeemed bonds $ 0 $ 3,571  
Net unrealized gains (losses) arising during the period (1,763) 406  
Investments in Debt Securities      
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]      
Net unrealized gains (losses) arising during the period 1,800    
Loans Held for Investment      
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]      
Balance at start of period 500    
Balance at end of period 1,271    
Level 3 [Member] | Investments in Debt Securities      
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]      
Balance at start of period 31,365 97,190  
Net change in AOCI (1) (1,763) (3,165)  
Impacts from sales/redemptions   (12,590)  
Impacts from settlements 43 (333)  
Balance at end of period 29,645 81,102  
Reclassification of net fair value gains on sold/redeemed bonds   3,600  
Level 3 [Member] | Loans Held for Investment      
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]      
Balance at start of period 500    
Net (losses) gain included in earnings (9)    
Impact from loan originations / advances 780    
Balance at end of period $ 1,271    
Level 3 [Member] | Derivative Assets [Member]      
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]      
Balance at beginning period   1,130  
Net (losses) gains included in earnings   (152)  
Impact from settlements   (202)  
Balance at ending period   $ 776  
Restatement Adjustment [Member] | ASU 2017-08      
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]      
Retained earnings     $ (300)
v3.20.1
INVESTMENTS IN PARTNERSHIPS (Narrative) (Details) - USD ($)
$ in Thousands
3 Months Ended
Jun. 01, 2018
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Schedule of Equity Method Investments [Line Items]        
Carrying value of equity investments   $ 368,598   $ 316,677
Purchase price paid $ 5,100      
Distributions received from investments in partnerships   6,564 $ 1,615  
U.S. Real Estate Partnerships [Member]        
Schedule of Equity Method Investments [Line Items]        
Carrying value of equity investments   19,236   19,822
U.S. Real Estate Partnerships formed in Q4 2014[Member]        
Schedule of Equity Method Investments [Line Items]        
Carrying value of equity investments   $ 19,200    
Equity method investment, ownership percentage   80.00%    
Equity method investment, economic interest percentage   80.00%    
Solar Ventures Investment [Member]        
Schedule of Equity Method Investments [Line Items]        
Carrying value of equity investments   $ 344,601   289,123
Cumulative basis adjustment $ 4,500 2,900   3,100
Amortization expense of basis difference   200 200  
Unfunded loan commitments to borrowers   434,200    
Solar Construction Lending LLC [Member]        
Schedule of Equity Method Investments [Line Items]        
Capital contribution amount for partnership   97,500    
Carrying value of equity investments   $ 231,100    
Equity method investment, ownership percentage   44.50%    
Distributions received from investments in partnerships   $ 10,500    
Solar Construction Lending LLC [Member] | Capital Partner        
Schedule of Equity Method Investments [Line Items]        
Capital contribution amount for partnership   61,000    
Distributions received from investments in partnerships   37,500    
Solar Permanent Lending LLC [Member]        
Schedule of Equity Method Investments [Line Items]        
Carrying value of equity investments   $ 0    
Equity method investment, ownership percentage   50.00%    
Solar Development Lending, LLC [Member]        
Schedule of Equity Method Investments [Line Items]        
Capital contribution amount for partnership   $ 83,000    
Carrying value of equity investments   $ 113,500    
Equity method investment, ownership percentage   44.50%    
Distributions received from investments in partnerships   $ 15,000    
Solar Development Lending, LLC [Member] | Capital Partner        
Schedule of Equity Method Investments [Line Items]        
Capital contribution amount for partnership   36,500    
Distributions received from investments in partnerships   $ 32,000    
Renewable Energy Lending, LLC [Member] | Consolidated Entity Excluding Variable Interest Entities (VIE) [Member]        
Schedule of Equity Method Investments [Line Items]        
Venture equity percentage of ownership   100.00%    
SAWHF        
Schedule of Equity Method Investments [Line Items]        
Carrying value of equity investments   $ 4,761   $ 7,732
Equity method investment, ownership percentage   11.85%    
Equity method investment increase (decrease) in carrying value     $ 3,000  
v3.20.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)
$ in Millions
3 Months Ended 12 Months Ended
Mar. 31, 2020
segment
Dec. 31, 2019
segment
Jan. 01, 2019
USD ($)
Number of reportable segments | segment 1 1  
ASU 2017-08 | Restatement Adjustment [Member]      
Retained earnings | $     $ (0.3)
v3.20.1
FAIR VALUE (Tables)
3 Months Ended
Mar. 31, 2020
FAIR VALUE [Abstract]  
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

Fair Value Measurements

(in thousands)

    

2020

    

Level 1

    

Level 2

    

Level 3

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Investments in debt securities

 

$

29,645

 

$

 ─

 

$

 ─

 

$

29,645

Loans held for investment

 

 

1,271

 

 

 ─

 

 

 ─

 

 

1,271

Derivative instruments

 

 

924

 

 

 ─

 

 

924

 

 

 ─

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative instruments

 

$

2,312

 

$

 ─

 

$

2,312

 

$

 ─

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

Fair Value Measurements

(in thousands)

    

2019

    

Level 1

    

Level 2

    

Level 3

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Investments in debt securities

 

$

31,365

 

$

 ─

 

$

 ─

 

$

31,365

Loans held for investment

 

 

500

 

 

 ─

 

 

 ─

 

 

500

Derivative instruments

 

 

597

 

 

 ─

 

 

597

 

 

 ─

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative instruments

 

$

117

 

$

 ─

 

$

117

 

$

 ─

 

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

Changes in the fair value of assets and liabilities that are measured at fair value on a recurring basis and that are categorized as Level 3 within the fair value hierarchy are attributed in the following table to identified activities that occurred during the three months ended March 31, 2020:

 

 

 

 

 

 

 

 

    

Investments

    

 

 

 

in Debt

 

Loans Held for 

(in thousands)

    

Securities

    

Investment

Balance, January 1, 2020

 

$

31,365

 

$

500

Net losses included in earnings (1)

 

 

 ─

 

 

(9)

Net change in AOCI (2) 

 

 

(1,763)

 

 

 ─

Impact from loan originations / advances

 

 

 ─

 

 

780

Impact from settlements (3)

 

 

43

 

 

 ─

Balance, March 31, 2020

 

$

29,645

 

$

1,271


(1)

This amount represents $9 thousand of unrealized losses recognized during this reporting period in connection with the Company’s loan investment held at March 31, 2020. This amount is classified as “net losses on loans and extinguishment of liabilities” in the Company’s Consolidated Statement of Operations.

(2)

This amount represents $1.8 million of net unrealized losses recognized during this reporting period in connection with the Company’s bond investments.

(3)

This impact considers the effect of principal payments received and amortization of cost basis adjustments. 

Changes in the fair value of assets and liabilities that are measured at fair value on a recurring basis and that are categorized as Level 3 within the fair value hierarchy are attributed in the following table to identified activities that occurred during the three months ended March 31, 2019:

 

 

 

 

 

 

 

 

    

Investments

    

 

 

 

 

in Debt

 

Derivative

(in thousands)

    

Securities

    

Assets

Balance, January 1, 2019

 

$

97,190

 

$

1,130

Net losses included in earnings

 

 

 ─

 

 

(152)

Net change in AOCI (1) 

 

 

(3,165)

 

 

 ─

Impact from sales or redemptions

 

 

(12,590)

 

 

 ─

Impact from settlements (2)

 

 

(333)

 

 

(202)

Balance, March 31, 2019

 

$

81,102

 

$

776


(1)

This amount represents the reclassification into the Consolidated Statements of Operations of $3.6 million of net fair value gains related to bonds that were sold or redeemed during this reporting period. This decline was partially offset by $0.4 million of net unrealized holding gains recognized during the period in connection with the Company’s bond investments.

(2)

This impact considers the effect of principal payments received and amortization of cost basis adjustments. Included in this amount is $0.3 million of cumulative transition adjustment to retained earnings that was recognized in connection with the Company’s adoption of ASU No. 2017-08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-10):  Premium Amortization on Purchased Callable Debt Securities” on January 1, 2019.

The following table provides information about the amount of realized and unrealized (losses) gains that were reported in the Company’s Consolidated Statements of Operations for the three months ended March 31, 2019, related to activity presented in the preceding table:

 

 

 

 

 

 

 

 

    

 

    

 

 

 

 

Net gains on

 

Net losses on

(in thousands)

    

bonds (1)

    

derivatives (2)

Change in unrealized losses related to assets and liabilities held at March 31, 2019

 

$

 ─

 

$

(72)

Change in unrealized losses related to assets and liabilities held at January 1, 2019, but settled during 2019

 

 

 ─

 

 

(80)

Additional realized gains recognized

 

 

3,571

 

 

148

Total net gains (losses) reported in earnings

 

$

3,571

 

$

(4)


(1)

Amounts are classified as “Net gains on bonds” in the Company’s Consolidated Statements of Operations.

(2)

Amounts are classified as “Net losses on derivatives” in the Company’s Consolidated Statements of Operations.

Fair Value Measurements By Level 3 Valuation Technique

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement at March 31, 2020

 

 

 

 

 

Significant

 

Significant

 

 

 

 

 

 

 

 

 

 

 

Valuation

 

Unobservable

 

 

 

 

Weighted

 

(dollars in thousands)

Fair Value

    

Techniques

    

Inputs (1)

    

Range (1)

    

Average

 

Recurring Fair Value Measurements:

 

 

 

 

 

 

 

 

 

 

 

Investments in debt securities:

 

 

 

 

 

 

 

 

 

 

 

Infrastructure Bond

$

23,531

 

Discounted cash flow

 

Market yield

 

 

7.8

%

 

N/A

 

Multifamily tax-exempt bonds

 

 

 

 

 

 

 

 

 

 

 

Subordinated cash flow

 

6,114

 

Discounted cash flow

 

Market yield

 

 

7.2

 

 

N/A

 

 

 

 

 

 

 

Capitalization rate

 

 

6.2

 

 

N/A

 

Loans held for investment

 

1,271

 

Discounted cash flow

 

Market yield

 

 

8.4

 

 

N/A

 


(1)

Unobservable inputs reflect information that is not based upon independent sources that are readily available. These inputs are based upon assumptions and internally generated data made by the Company, which may include significant judgment that has been developed based upon available information from third-party sources or dealers about what a market participant would use in valuing the asset.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement at December 31, 2019

 

 

 

 

 

Significant

 

Significant

 

 

 

 

 

 

 

 

 

 

 

Valuation

 

Unobservable

 

 

 

 

Weighted

 

(dollars in thousands)

Fair Value

    

Techniques

    

Inputs (1)

    

Range (1)

    

Average (2)

 

Recurring Fair Value Measurements:

 

 

 

 

 

 

 

 

 

 

 

Investments in debt securities:

 

 

 

 

 

 

 

 

 

 

 

Infrastructure Bond

$

25,339

 

Discounted cash flow

 

Market yield

 

 

7.0

%

 

N/A

 

Multifamily tax-exempt bonds

 

 

 

 

 

 

 

 

 

 

 

Subordinated cash flow

 

6,026

 

Discounted cash flow

 

Market yield

 

 

7.3

 

 

N/A

 

 

 

 

 

 

 

Capitalization rate

 

 

6.2

 

 

N/A

 

 

 

 

 

 

 

Valuation technique weighting factors:

 

 

 

 

 

 

 

 

 

 

 

 

 

•  NOI annual growth rate (50% weighting factor)

 

 

0.7

 

 

N/A

 

 

 

 

 

 

 

•  Bid price (50% weighting factor)

 

$

16,611

 

 

N/A

 

Loans held for investment

 

500

 

Discounted cash flow

 

Market yield

 

 

8.0

 

 

8.0

%


(1)

Unobservable inputs reflect information that is not based upon independent sources that are readily available. These inputs are based upon assumptions and internally generated data made by the Company, which may include significant judgment that has been developed based upon available information from third-party sources or dealers about what a market participant would use in valuing the asset.

(2)

Weighted-averages are calculated using outstanding UPB for cash instruments, such as loans and securities, and notional amounts for derivative instruments.

Fair Value, by Balance Sheet Grouping

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

March 31, 2020

 

 

Carrying

 

Fair Value

(in thousands)

    

Amount

    

Level 1

    

Level 2

    

Level 3

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

23,164

 

$

23,164

 

$

 ─

 

$

 ─

Restricted cash

 

 

7,009

 

 

7,009

 

 

 ─

 

 

 ─

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Notes payable and other debt - non-bond related

 

 

8,730

 

 

 ─

 

 

 ─

 

 

7,304

Revolving credit facility obligations

 

 

120,000

 

 

 ─

 

 

 ─

 

 

120,000

Subordinated debt issued by MFH 

 

 

94,923

 

 

 ─

 

 

 ─

 

 

30,773

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

December 31, 2019

 

 

Carrying

 

Fair Value

(in thousands)

    

Amount

    

Level 1

    

Level 2

    

Level 3

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,555

 

$

8,555

 

$

 ─

 

$

 ─

Restricted cash

 

 

4,250

 

 

4,250

 

 

 ─

 

 

 ─

Loans held for investment

 

 

53,600

 

 

 ─

 

 

 ─

 

 

54,276

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Notes payable and other debt - non-bond related

 

 

11,828

 

 

 ─

 

 

 ─

 

 

10,888

Revolving credit facility obligations

 

 

94,500

 

 

 ─

 

 

 ─

 

 

94,500

Subordinated debt issued by MFH 

 

 

95,488

 

 

 ─

 

 

 ─

 

 

46,934

 

v3.20.1
INVESTMENTS IN PARTNERSHIPS
3 Months Ended
Mar. 31, 2020
INVESTMENTS IN PARTNERSHIPS [Abstract]  
Investment in Partnerships

Note 3—Investments in Partnerships

The following table provides information about the carrying value of the Company’s investments in partnerships and ventures:

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

(in thousands)

    

2020

    

2019

Investment in Solar Ventures

  

$

344,601

  

$

289,123

Investments in U.S. real estate partnerships

 

 

19,236

 

 

19,822

Investment in South Africa Workforce Housing Fund ("SAWHF")

 

 

4,761

 

 

7,732

Total investments in partnerships

 

$

368,598

 

$

316,677

 

Investments Related to the Solar Ventures

At March 31, 2020, the Company held 44.5%,  50.0%,  44.5% and 100% equity interests in Solar Construction Lending, LLC (“SCL”), Solar Permanent Lending, LLC (“SPL”), Solar Development Lending, LLC (“SDL”) and Renewable Energy Lending, LLC (“REL”), respectively (collectively referred to as the “Solar Ventures”).

At March 31, 2020, the carrying value of the Company’s equity investments in SCL, SPL and SDL was $231.1 million, zero and $113.5 million, respectively. None of these investees were assessed to constitute a Variable Interest Entity (“VIE”) and the Company accounts for all of these investments using the equity method of accounting. At March 31, 2020, these joint ventures had $434.2 million of unfunded loan commitments that required borrowers to meet various conditions set forth in governing loan agreements in order for funding to occur. The unfunded loan commitments that qualified for funding, were anticipated to be funded primarily by capital within the joint ventures through a combination of existing loan redemptions and idle capital. To the extent capital within the joint ventures is not sufficient to meet their funding obligations additional capital contributions by the members would be required.

During the three months ended March 31, 2020, the Company and its capital partner in SDL and SCL executed various non-pro rata funding agreements pursuant to which our capital partner in SDL contributed in total $36.5 million of $83.0 million in capital calls and our capital partner in SCL contributed in total $61.0 million of $97.5 million in capital calls, while the Company contributed the balance. In addition, our capital partner in SDL and SCL received distributions of $32.0 million and $37.5 million, respectively, while the Company received $15.0 million and $10.5 million, respectively. As a consequence of these non-pro rata capital contributions and distributions during the first quarter of 2020, our ownership interest in these ventures increased in percentage terms from December 31, 2019.

The Company paid $5.1 million for the buyout of our prior investment partner’s ownership interest in REL, on June 1, 2018, which was allocated to the net assets acquired based upon their relative fair values. This allocation resulted in a cumulative basis adjustment of $4.5 million to the Company’s investments that is amortized over the remaining investment period of SCL. For the three months ended March 31, 2020 and March 31, 2019, the amortization expense related to the Company’s basis difference was $0.2 million. At March 31, 2020 and December 31, 2019, the unamortized balance of the Company’s basis difference was $2.9 million and $3.1 million, respectively.

The following table provides information about the carrying amount of total assets and liabilities of all renewable energy related investees in which the Company had an equity method investment:

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

 

    

2020

    

2019

(in thousands)

  

 

 

  

 

 

Total assets (1) 

 

$

781,734

 

$

706,792

Other liabilities (2)

 

 

14,360

 

 

22,135


(1)

Assets of these ventures are primarily comprised of loans that are carried at fair value. 

 

(2)

Other liabilities of these ventures are primarily comprised of interest reserves.

 

The following table provides information about the gross revenue, operating expenses and net income of all renewable energy related investees in which the Company had an equity method investment:

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Gross revenue

 

$

21,821

 

$

10,334

Operating expenses

 

 

2,021

 

 

1,894

Net income and net income attributable to the entities (1)

 

 

10,825

 

 

8,492


(1)

Net income includes $9.0 million net fair value loan losses and $0.1 million of net fair value loan gains recognized as of March 31, 2020 and March 31, 2019, respectively. 

 

 

Investments in U.S. Real Estate Partnerships

At March 31, 2020, the $19.2 million reported carrying value of investments in U.S. real estate partnerships represented the Company’s 80% ownership interest in a joint venture that owns and operates a mixed-use town center and undeveloped land parcels in Spanish Fort, Alabama (“SF Venture”). The Company has the right to a preferred return on its unreturned capital contributions, as well as the right to share in excess cash flows of the real estate venture. As of March 31, 2020, the Company held an 80% economic interest based upon the partnership’s distribution waterfall. This entity was determined not to be a VIE because decision-making rights are shared equally among its members. Accordingly, the Company accounts for this investment using the equity method of accounting.

The following table provides information about the total assets, debt and other liabilities of the U.S. real estate partnerships in which the Company held an equity investment:

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

 

    

2020

    

2019

(in thousands)

  

 

 

  

 

 

Total assets

 

$

51,237

 

$

51,718

Debt

 

 

6,657

 

 

6,426

Other liabilities

 

 

20,536

 

 

20,493

 

The following table provides information about the gross revenue, operating expenses and net loss of U.S. real estate partnerships in which the Company had an equity investment:

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Gross revenue

 

$

642

 

$

664

Operating expenses

 

 

715

 

 

470

Net loss and net loss attributable to the entities

 

 

(755)

 

 

(879)

 

Refer to Note 10, “Commitments and Contingencies,” for more information about risks and uncertainties that existed at March 31, 2020, that could significantly affect the amounts reported in the near term related to the Company’s equity investment in the SF Venture.

 

Investment in SAWHF

At March 31, 2020, the carrying value of the Company’s 11.85% equity investment in SAWHF was $4.8 million, which reflects a $3.0 million decline from December 31, 2019 due to investment dispositions and foreign currency translation losses due to the weakening of the rand against the U.S. dollar in the first quarter of 2020. The SAWHF was determined not to be a VIE, and therefore, the Company accounts for this investment using the equity method of accounting.

The following table provides information about the carrying value of total assets and other liabilities of SAWHF:

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

 

    

2020

    

2019

(in thousands)

  

 

 

  

 

 

Total assets

 

$

32,890

 

$

56,356

Other liabilities

 

 

339

 

 

130

 

The following table provides information about the gross revenue, operating expenses and net income of SAWHF:

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Gross revenue

 

$

1,112

 

$

199

Operating expenses

 

 

491

 

 

331

Net income and net income attributable to the entity

 

 

76

 

 

2,034

 

v3.20.1
DERIVATIVE INSTRUMENTS
3 Months Ended
Mar. 31, 2020
DERIVATIVE INSTRUMENTS [Abstract]  
Derivative Instruments

Note 7—Derivative Instruments

The Company uses derivative instruments for various purposes. Pay-fixed interest rate swaps, interest rate basis swaps and interest rate caps are used to manage interest rate risk. Foreign currency forward exchange agreements are used to manage currency risk associated with the financing of our SAWHF equity investment. TRS agreements were used by the Company to obtain, or retain, the economic risks and rewards associated with tax exempt municipal bonds. During the second quarter of 2019, the Company terminated all remaining TRS agreements.

Derivative instruments that are recognized in the Consolidated Balance Sheets are measured on a fair value basis. Because the Company does not designate any of its derivative instruments as fair value or cash flow hedges, changes in fair value of these instruments are recognized in the Consolidated Statements of Operations as a component of “Net losses on derivatives.”  Derivative assets are presented in the Consolidated Balance Sheets as a component of “Other assets” and derivative liabilities are presented in the Consolidated Balance Sheets as a component of “Other liabilities.”

The following table provides information about the carrying value of the Company’s derivative instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value

 

 

At

 

At

 

 

March 31, 2020

 

December 31, 2019

(in thousands)

    

Assets

    

Liabilities

    

Assets

    

Liabilities

Basis swaps

 

$

 ─

 

$

750

 

$

318

 

$

 ─

Interest rate caps

 

 

91

 

 

 ─

 

 

227

 

 

 ─

Interest rate swaps

 

 

 ─

 

 

1,562

 

 

52

 

 

 ─

Foreign currency forward exchange

 

 

833

 

 

 ─

 

 

 ─

 

 

117

Total carrying value of derivative instruments

 

$

924

 

$

2,312

 

$

597

 

$

117

 

The following table provides information about the notional amounts of the Company’s derivative instruments:

 

 

 

 

 

 

 

 

 

Notional Amounts

 

 

At

 

At

 

 

March 31,

 

December 31,

(in thousands)

    

2020

    

2019

Basis swaps

 

$

35,000

 

$

35,000

Interest rate caps

 

 

35,000

 

 

35,000

Interest rate swaps

 

 

35,000

 

 

35,000

Foreign currency forward exchange

 

 

3,677

 

 

4,685

Total notional amount of derivative instruments

 

$

108,677

 

$

109,685

 

The following table provides information about the net losses that were recognized by the Company in connection with its derivative instruments:

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

March 31,

(in thousands)

    

2020

    

2019

Total return swaps (1) 

 

$

 ─

 

$

(4)

Basis swaps (2)

 

 

(1,079)

 

 

(73)

Interest rate caps

 

 

(136)

 

 

(477)

Interest rate swaps (3) 

 

 

(1,578)

 

 

(881)

Foreign currency forward exchange

 

 

1,082

 

 

(7)

Total net losses of derivative instruments

 

$

(1,711)

 

$

(1,442)


(1)

The accrual of net interest payments that are made in connection with TRS agreements that are reported as derivative instruments are classified as a component of “Net losses on derivatives” on the Consolidated Statements of Operations. Net cash received was $0.2 million for the three months ended March 31, 2019.

(2)

The accrual of net interest payments that are made in connection with basis swaps is classified as a component of “Net losses on derivatives” on the Consolidated Statements of Operations. The net cash received was de minimis for the three months ended March 31, 2020 and March 31, 2019.

(3)

The accrual of net interest payments that are made in connection with interest rate swaps is classified as a component of “Net losses on derivatives” on the Consolidated Statements of Operations. Net cash paid was de minimis for the three months ended March 31, 2020, while the net cash received was $0.1 million for the three months ended March 31, 2019, respectively.