Finance of America Companies Inc.

Thank you for joining us today. These dynamics create a durable need for responsible home equity solutions and reinforce the long-term relevance of our platform. We believe Finance of America is well positioned to serve that need, given our specialized platform, broad product capabilities, and focus on helping homeowners thoughtfully incorporate home equity into their retirement planning. The macroeconomic and demographic need is clear. Kristen will now discuss how the investments we have made across distribution, technology, and proprietary products are strengthening our ability to capture that opportunity.

Thank you, Graham. And good afternoon, everyone. Last quarter, I said we were reaching an inflection point in the platform. The second quarter gives us greater confidence in that view. The investments we've made over the past two years across distribution, technology and product are beginning to compound. The results are stronger demand, a more productive operating model and a platform with increasing long term earnings power. First, demand is strengthening. Turning to slide eight, submissions exceeded $1 billion during the quarter, even in a rising rate environment, increasing approximately 11% sequentially and 19% year over year, while funded volume increased approximately 21% year over year to $730 million. Second, we're converting demand more efficiently. The clearest proof point shown on slide nine is retail, Retail opportunities increased 9%, submissions increased 19%, and funded loans increased 33%. Importantly, we achieved that growth with stable sales capacity, resulting in meaningful productivity improvements. Funded loans per call center loan officer increased nearly 30% from the first quarter. These results reflect structural improvements in how we engage customers, convert demand, and move borrowers through the origination process. Historically, growth depended more heavily on generating additional top of funnel opportunities. Now we're demonstrating our ability to generate more production from the pipeline we already have. Our proprietary technology platform and AI-enabled capabilities are also supporting these improvements, helping us better understand customer needs, match homeowners with appropriate solutions, and improve efficiency throughout the origination process. Our digital experience is showing similar progress. In June, approximately 10,000 site visitors engaged with our prequalification engine, achieving our year-end monthly target six months ahead of schedule. More importantly, monthly prequalification offers increased nearly 90% from the first quarter, and time to application improved approximately 57%. These metrics demonstrate that we're creating a larger pool of engaged borrowers while making it easier and faster for customers to move through the application process. our platform is becoming more valuable and scalable. Our proprietary products continue expanding the addressable market by providing customers greater flexibility and additional ways to access home equity. During the quarter, proprietary submissions increased approximately 20% and proprietary fundings increased approximately 25%. As shown on slide 10, our retail and wholesale channels continue to reinforce one another. Retail provides direct consumer engagement, and greater visibility into the customer journey while wholesale extends our reach through trusted partners and brings our proprietary solutions to more borrowers across more markets. Together, they create multiple avenues for profitable growth while leveraging the same product platform and operating infrastructure. Stepping back, three things stood out this quarter. Demand is strengthening, conversion is improving and our investments are compounding into a more scalable platform with durable earnings power. The market opportunity ahead of us is still large and underpenetrated, but the real story this quarter is conviction. We're building a stronger, more valuable business, not simply a bigger one. With that, I'll turn it over to Matt.

Thank you, Kristen, and good afternoon, everyone. As Graham mentioned, the second quarter demonstrated continued strength in the underlying business, while reported earnings reflected several market-driven and non-operating items. I will provide additional color on the quarter, which is summarized by segment on slide 11 and in today's earnings release. We recognized a GAAP net loss of $29 million for the quarter, while adjusted net income totaled $19 million, or 84 cents per share. The difference primarily reflects non-cash fair value adjustments on our portfolio, combined with certain one-time impacts during the quarter, which negatively impacted our GAAP results. We've recorded $84 million of negative fair value adjustments during the quarter. In addition to those impacting our portfolio related to higher interest rates, this also includes a $24 million adjustment related to our convertible notes as our stock price increased nearly $11 per share during the quarter. Because the convertible notes are carried at fair value indexed to our stock price, an increase in our stock price increases the value of the associated liability, creating a non-cash expense under GAAP. We also released our deferred tax asset valuation allowance, creating a tax benefit in the quarter of $42 million. This non-cash accounting adjustment reflects our expectation that future taxable income will support realization of these tax assets, and investors should expect a more normalized effective tax rate going forward. While these accounting adjustments can create meaningful quarter-to-quarter volatility in our gap earnings, they do not affect the underlying operating performance or cash generation of the business. We believe that adjusted net income continues to provide the clearest picture of the underlying earnings power of FOA. Adjusted earnings per share of 84 cents is a 53% improvement over the second quarter of 2025, and first half 2026 adjusted EPS of $1.94 improved 81% over the first half of 2025. Beginning with retirement solutions, continued demand as evidenced by the 21% increase in funded volume compared to the second quarter of 2025 allowed the business to contribute relatively stable adjusted earnings for the sequential quarter, even while we continued investing in the business with higher personnel and marketing expenses to support future production. For the first half of 2026, Retirement Solutions generated a 21% increase in adjusted net income on 14% higher funded volume compared to the first half of 25. And we believe these investments will continue to support higher production, stronger operating leverage, and increased earnings power over time. Portfolio management completed a securitization of over 1 billion during June, which contributed to FOA's strong cash flow from Originations and Capital Markets Activity for the quarter. For the first half of the year, the segment has recognized 46 million in adjusted net income, a 24% improvement over the first half of 2025. Based on our first half performance and continued momentum across submissions and funded production, we are reaffirming our full year guidance of funded volume between 2.8 and 3.1 billion and adjusted EPS between 450 and $5 per share. Turning to our balance sheet and cash flows, as shown in slide 12, cash generation from originations and capital markets activities remained strong at $58 million in the quarter and approximately $116 million for the first half of 2026. This enabled us to complete the entity portfolio acquisition, make the semi-annual interest payment on our non-funding corporate debt, and maintain strong quarter-end cash balances. As we have said before, strengthening the balance sheet remains foundational to unlocking the full value of the operating franchise we have built over the past several years. We are very pleased with the progress we have made. When we think about our balance sheet, we identify three key components, inventory loans, HECM MSR, and the residual fair value of our proprietary securitizations. The first category is inventory loans held at fair value that are yet to be sold or securitized. This is represented by loans held for investment and loans held for sale on our balance sheet. At the time of sale or securitization, we will recognize a cash premium, and depending on the securitization type, we'll record a HECM MSR or residual interest at fair value. These loans are financed via warehouse facilities, and we hold a small balance of haircut equity in them. When loans are securitized, in most cases, the assets will remain on our balance sheet with a corresponding liability in accordance with GAAP. For HECM loans, these are HMBS obligations, and for proprietary loans, these are non-recourse securitizations. For both categories, FOA recognizes an accreted yield on the adjusted net asset value we hold. Regarding the HECM MSR, the adjusted net asset value, or the delta between the loans held for investment subject to HMBS obligations and the corresponding HMBS obligations, totals $326 million. as of June 30th, with financing of only 46 million, or roughly 14% leverage. We continue to pursue increased financing secured by this asset at a more appropriate attachment point. With respect to our residuals and proprietary securitizations, we have the ability over time to monetize the equity held in these assets through the call and reissue of the non-recourse securitizations. Proceeds from the monetization of the HECM MSR and proprietary residuals provides financial flexibility to our business. Our first priority is retiring the remaining $150 million of senior secured notes this November, which will materially reduce our non-funding debt, lower our financing costs, and improve recurring earnings. Looking ahead, once that debt is retired, the company will have greater options for a broad range of potential actions, such as further due leveraging, stock repurchases, dividends, or business investment. Before wrapping up, I want to call your attention to an amendment effective July 31st to the reporting structure of our Class B shares. which establishes a one-to-one alignment of the reported Class B shares with the underlying LLC ownership. This amendment does not change economic ownership or voting power, but provides a clearer view of fully diluted shares and market capitalization. With that, I'll turn the call back to Graham.

Thank you, Matt. The second quarter demonstrated continued progress across the business. We delivered strong growth in funded volume, expanded adjusted earnings, generated significant cash, completed the Onity transaction and continued strengthening our balance sheet. The long-term opportunity in reverse mortgages continues to expand, and we believe Finance of America remains strategically positioned to capitalize on that opportunity. Just as importantly, the operational improvements we have discussed over the past several quarters are producing measurable results. Demand is strengthening, conversion and sales productivity are improving, and our proprietary products are expanding the ways we can serve older homeowners. We remain confident in our full-year outlook and focus on discipline and execution. As we continue reducing debt and improving the efficiency and scalability of the platform, we believe Finance of America is well positioned to capture the long-term opportunity in home equity and create durable shareholder value. Thank you for joining us today. We'll now open the line for questions.

We will now begin the question and answer session. Please limit yourself to one question and one follow up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Gaurav Mehta with Alliance Global Partners. Your line is open. Please go ahead.

Thank you. I wanted to ask you on some of your comments around demand and submission volume. I was wondering if you were seeing any difference between the demand for your proprietary products and HECA products.

Yeah, we've seen growing demand for proprietary products recently, mostly as a function of the proprietary products offering better cash flow to the consumer. So those products, the amount available changes as interest rates change. So it's typically whatever is best suited for the customers where that demand lands. And right now that's with the proprietary channel.

Okay, as a follow-up, I wanted to ask you on your tangible equity value per share. It seems like it was slightly lower than 1Q. Can you help us understand why the tangible equity value went lower this quarter?

Yeah, part of it is just the reported loss for the quarter. The gap loss is the number we quoted, which includes the fair value adjustments. So that book number is what's driving it primarily.

Okay, thank you.

Your next question comes from the line of Timothy D'Agostino with B. Reilly Securities. Your line is open. Please go ahead.

Yeah, hi. Thanks for taking the questions today. Just in mind, it'd be great to get an update if there's anything meaningful on the Helix platform and then the Joy AI. There was a slide in the last deck last quarter, and I was just wondering if there's any meaningful updates there and kind of what you're seeing in the accelerating operating leverage through more production, if that's what's driving it.

Yes, it's definitely the foundational platform that's driving those improvements. When we talk about the productivity gains from our loan officers, as well as the improvements in the digital funnel with the metrics that I shared earlier, all of that is being driven through these AI platforms.

Okay, great. Thank you. And if I could ask a second one. Just to clarify, on capital allocation, you know, with the Onity MSR portfolio acquisition behind us and looking forward to the $150 million of potential debt repurchase, it kind of sounds like share buybacks might be on hold until that event. Is that the right way to think about it? Or can you provide a little more color in how you're thinking about capital allocation before the potential repurchase of $150 million. Thank you.

Tim, I think that's fair. I do think that our primary focus is the retirement of the $150 million here in just a few months from now. Past that, I think at our next quarterly range release, we have a better sense of how wrap up 26 and looking forward to 27, where our stock's trading at the time, how the balance sheet looks, and mixing those decisions going forward. between now and then our primary focus is just retiring that 150.

Okay, great. Thank you so much for taking the questions today.

Your next question comes from the line of Gabe Pogge with Raymond James. Your line is open. Please go ahead.

Hey, everybody. Thanks for taking the questions. I've got a couple if it's okay. Can you talk about gain-on-sale margin in the quarter for HECM product and HomeSafe product and how that trended relative to the first quarter?

Yeah, you know, the interest rate volatility did create a little volatility in the gain-on-sale margins as well during the quarter. I think HECM spreads remain tight, not a lot of change there. I think on the proprietary side, We did see a little bit of impact there in terms of the executed securitization price we expect on those assets. I think Graham has talked in the past that when interest rates move suddenly, we don't always choose to reprice our pipeline. We have the ability to, but sometimes we choose not to from a customer disruption standpoint, and that will create some volatility in our margins going forward. But over the long term, we can kind of manage that a little better.

Do you have a specific number you can provide for the quarter for each of those?

I don't think we break that number out right off the top, but let me see if we can get you something on the follow up on that one.

Okay. Rates have obviously moved a lot since June 30th. Do you have any update on kind of, I know it's a gap mark and it's subject to a lot of volatility, but any update on where book value is today on a tangible basis?

So I think it's funny. I think you're absolutely right. I think it's even reversed itself a little bit in the last two days, you know, certainly. But if generally portfolio markdowns are tied to higher interest rates, rates moved up considerably in July and one would expect we would have a fair value right down in July. Now, the first four days of August, that's kind of gone the other way a little bit. I think we would have recouped some of that. So, you know, I can't give the exact numbers. We haven't closed our books for July or for the third quarter yet. but directionally, you're correct on that assessment.

Although, Gabe, just to add to that, right, some other components that go into fair value are home price appreciation, which, you know, has continued to remain strong and ultimately, you know, credit spreads and, you know, we'll get an update on credit spreads in our September transaction. So it's not just driven by, you know, by the movement of rates. It's a three-legged stool.

On the Onity acquisition, can you talk about the kind of the impact of the bottom line? I know there's two parts to it, but what's closed? How do you think about that just beyond diversification of servicers?

Yeah, so, you know, we acquired the asset roughly had a book value of around $70 million. So we'll expect to earn a yield, you know, in the mid-teens and that will flow through the P&L here in the second half of the year.

Do you intend to add that to guidance as you think about guidance in the back half? Or I could say it another way. Is that incorporated in current guidance?

Yes, it's incorporated into the current guidance.

Okay. Okay. That's helpful. And then lastly, just if you can, and maybe we take this offline, can you help tie the $58 million of cash flows you guys are referring to in the 2Q to the $19 million of A&I?

Probably the best way to do that is we'll get our 10Q filed later this week, right? And they'll have additional information there with earnings by segment, which will help you kind of bridge some of that. And I think we can kind of help you walk through that 10Q and the relative disclosures just so we can kind of build you back to that number.

Okay, that works. We can just circle up when the Q is filed. Thank you.

There are no further questions at this time. I will now turn the call back to Graham Fleming for closing remarks.

Thank you everybody for participating in the Q2 call and we will look forward to updating our Q3 results in November. So thank you very much.

This concludes today's call. Thank you for attending. You may now disconnect.