UNITED STATES VIRGIN ISLANDS | 66-0783125 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large Accelerated Filer | o | Accelerated Filer | x | |
Non-Accelerated Filer | o | (Do not check if a smaller reporting company) | Smaller Reporting Company | o |
• | our ability to implement our business strategy and the business strategy of Residential; |
• | our ability to retain Residential as a client; |
• | our ability to retain and maintain our strategic relationships; |
• | the ability of Residential to generate a return on invested capital in excess of applicable hurdle rates or cash available for distribution to its stockholders under our management; |
• | our ability to obtain additional asset management clients; |
• | our ability to effectively compete with our competitors; |
• | Residential's ability to complete future or pending transactions; |
• | the failure of ASPS to effectively perform its obligations under their agreements with us and Residential; |
• | the failure of Residential’s servicers to effectively perform their services to Residential; |
• | general economic and market conditions; and |
• | governmental regulations, taxes and policies. |
September 30, 2016 | December 31, 2015 | ||||||
Assets: | |||||||
Real estate held for use: | |||||||
Land (from previously consolidated VIE as of December 31, 2015) | $ | — | $ | 56,346 | |||
Rental residential properties (net of accumulated depreciation of $7,127 as of December 31, 2015 - from previously consolidated VIE) | — | 224,040 | |||||
Real estate owned (from previously consolidated VIE as of December 31, 2015) | — | 455,483 | |||||
Total real estate held for use, net | — | 735,869 | |||||
Real estate assets held for sale (from previously consolidated VIE as of December 31, 2015) | — | 250,557 | |||||
Mortgage loans at fair value (from previously consolidated VIE as of December 31, 2015) | — | 960,534 | |||||
Mortgage loans held for sale (from previously consolidated VIE as of December 31, 2015) | — | 317,336 | |||||
Cash and cash equivalents (including $116,702 from previously consolidated VIE as of December 31, 2015) | 41,893 | 184,544 | |||||
Restricted cash (from previously consolidated VIE as of December 31, 2015) | — | 20,566 | |||||
Available-for-sale securities | 17,707 | — | |||||
Accounts receivable, net (including $45,903 from previously consolidated VIE as of December 31, 2015) | — | 46,026 | |||||
Related party receivables | 4,926 | — | |||||
Prepaid expenses and other assets (including $1,126 from previously consolidated VIE as of December 31, 2015) | 1,415 | 3,169 | |||||
Total assets | $ | 65,941 | $ | 2,518,601 | |||
Liabilities: | |||||||
Repurchase and loan agreements (from previously consolidated VIE as of December 31, 2015) | $ | — | $ | 763,369 | |||
Other secured borrowings (from previously consolidated VIE as of December 31, 2015) | — | 502,599 | |||||
Accrued salaries and employee benefits | 3,131 | 4,006 | |||||
Accounts payable and other accrued liabilities (including $32,448 from previously consolidated VIE as of December 31, 2015) | 2,544 | 34,716 | |||||
Total liabilities | 5,675 | 1,304,690 | |||||
Commitments and contingencies (Note 6) | |||||||
Redeemable preferred stock: | |||||||
Preferred stock, $0.01 par value, 250,000 shares issued and outstanding as of September 30, 2016 and December 31, 2015; redemption value $250,000 | 249,288 | 249,133 | |||||
Stockholders' (deficit) equity: | |||||||
Common stock, $0.01 par value, 5,000,000 authorized shares; 2,603,439 and 1,637,821 shares issued and outstanding, respectively, as of September 30, 2016 and 2,556,828 and 2,048,223 shares issued and outstanding, respectively, as of December 31, 2015 | 26 | 26 | |||||
Additional paid-in capital | 28,285 | 23,419 | |||||
Retained earnings | 47,860 | 50,678 | |||||
Accumulated other comprehensive loss | (2,889 | ) | — | ||||
Treasury stock, at cost, 965,618 shares as of September 30, 2016 and 508,605 shares as of December 31, 2015 | (262,304 | ) | (254,984 | ) | |||
Total stockholders' deficit | (189,022 | ) | (180,861 | ) | |||
Noncontrolling interest in consolidated affiliate | — | 1,145,639 | |||||
Total (deficit) equity | (189,022 | ) | 964,778 | ||||
Total liabilities and equity | $ | 65,941 | $ | 2,518,601 |
Three months ended September 30, 2016 | Three months ended September 30, 2015 | Nine months ended September 30, 2016 | Nine months ended September 30, 2015 | ||||||||||||
Revenues: | |||||||||||||||
Management fees | $ | 4,208 | $ | — | $ | 12,838 | $ | — | |||||||
Conversion fees | 450 | — | 1,396 | — | |||||||||||
Expense reimbursements | 196 | — | 553 | — | |||||||||||
Rental revenues | — | 4,021 | — | 7,561 | |||||||||||
Change in unrealized gain on mortgage loans | — | 27,499 | — | 130,842 | |||||||||||
Net realized gain on mortgage loans | — | 12,874 | — | 47,528 | |||||||||||
Net realized gain on mortgage loans held for sale | — | 100 | — | 505 | |||||||||||
Net realized gain on real estate | — | 13,914 | — | 36,926 | |||||||||||
Interest and dividend income | 248 | 115 | 789 | 595 | |||||||||||
Total revenues | 5,102 | 58,523 | 15,576 | 223,957 | |||||||||||
Expenses: | |||||||||||||||
Salaries and employee benefits | 2,619 | 2,986 | 7,556 | 6,325 | |||||||||||
Share-based compensation | 2,432 | 1,429 | 7,188 | 4,461 | |||||||||||
Legal and professional fees | 420 | 2,333 | 1,503 | 10,024 | |||||||||||
Residential property operating expenses | — | 16,574 | — | 45,890 | |||||||||||
Real estate depreciation and amortization | — | 2,050 | — | 4,392 | |||||||||||
Selling costs and impairment | — | 10,705 | — | 34,235 | |||||||||||
Mortgage loan servicing costs | — | 13,477 | — | 47,989 | |||||||||||
Interest expense | — | 14,194 | — | 38,914 | |||||||||||
General and administrative | 561 | 2,187 | 1,653 | 5,655 | |||||||||||
Total expenses | 6,032 | 65,935 | 17,900 | 197,885 | |||||||||||
Other income: | |||||||||||||||
Other income | — | — | 55 | — | |||||||||||
Total other income | — | — | 55 | — | |||||||||||
(Loss) income before income taxes | (930 | ) | (7,412 | ) | (2,269 | ) | 26,072 | ||||||||
Income tax expense (benefit) | 141 | (97 | ) | 1,003 | 240 | ||||||||||
Net (loss) income | (1,071 | ) | (7,315 | ) | (3,272 | ) | 25,832 | ||||||||
Net loss (income) attributable to noncontrolling interest in consolidated affiliate | — | 5,335 | — | (20,181 | ) | ||||||||||
Net (loss) income attributable to stockholders | $ | (1,071 | ) | $ | (1,980 | ) | $ | (3,272 | ) | $ | 5,651 | ||||
(Loss) earnings per share of common stock – basic: | |||||||||||||||
(Loss) earnings per basic share | $ | (0.67 | ) | $ | (0.92 | ) | $ | (1.89 | ) | $ | 2.49 | ||||
Weighted average common stock outstanding – basic | 1,676,651 | 2,208,658 | 1,813,929 | 2,210,448 | |||||||||||
(Loss) earnings per share of common stock – diluted: | |||||||||||||||
(Loss) earnings per diluted share | $ | (0.67 | ) | $ | (0.92 | ) | $ | (1.89 | ) | $ | 2.07 | ||||
Weighted average common stock outstanding – diluted | 1,676,651 | 2,208,658 | 1,813,929 | 2,733,747 |
Three months ended September 30, 2016 | Three months ended September 30, 2015 | Nine months ended September 30, 2016 | Nine months ended September 30, 2015 | ||||||||||||
Net (loss) income attributable to stockholders | $ | (1,071 | ) | $ | (1,980 | ) | $ | (3,272 | ) | $ | 5,651 | ||||
Other comprehensive income (loss): | |||||||||||||||
Change in unrealized loss on available-for-sale securities | 2,778 | — | (1,908 | ) | — | ||||||||||
Total other comprehensive income (loss) | 2,778 | — | (1,908 | ) | — | ||||||||||
Comprehensive income (loss) | $ | 1,707 | $ | (1,980 | ) | $ | (5,180 | ) | $ | 5,651 |
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Noncontrolling Interest in Previously Consolidated Affiliate | Total Deficit | ||||||||||||||||||||||||
Number of Shares | Amount | |||||||||||||||||||||||||||||
December 31, 2015 | 2,556,828 | $ | 26 | $ | 23,419 | $ | 50,678 | $ | — | $ | (254,984 | ) | $ | 1,145,639 | $ | 964,778 | ||||||||||||||
Cumulative effect of adoption of ASU 2015-02 (Note 1) | — | — | (2,330 | ) | 609 | (981 | ) | — | (1,145,639 | ) | (1,148,341 | ) | ||||||||||||||||||
January 1, 2016 | 2,556,828 | 26 | 21,089 | 51,287 | (981 | ) | (254,984 | ) | — | (183,563 | ) | |||||||||||||||||||
Issuance of common stock, including option exercises | 46,611 | — | 8 | — | — | — | — | 8 | ||||||||||||||||||||||
Treasury shares repurchased | — | — | — | — | — | (7,320 | ) | — | (7,320 | ) | ||||||||||||||||||||
Amortization of preferred stock issuance costs | — | — | — | (155 | ) | — | — | — | (155 | ) | ||||||||||||||||||||
Share-based compensation, net of tax | — | — | 7,188 | — | — | — | — | 7,188 | ||||||||||||||||||||||
Change in unrealized loss on available-for-sale securities | — | — | — | — | (1,908 | ) | — | — | (1,908 | ) | ||||||||||||||||||||
Net loss | — | — | — | (3,272 | ) | — | — | — | (3,272 | ) | ||||||||||||||||||||
September 30, 2016 | 2,603,439 | $ | 26 | $ | 28,285 | $ | 47,860 | $ | (2,889 | ) | $ | (262,304 | ) | $ | — | $ | (189,022 | ) |
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Noncontrolling Interest in Consolidated Affiliate | Total Equity | ||||||||||||||||||||||||
Number of Shares | Amount | |||||||||||||||||||||||||||||
December 31, 2014 | 2,452,101 | $ | 25 | $ | 14,152 | $ | 54,174 | $ | — | $ | (245,468 | ) | $ | 1,326,911 | $ | 1,149,794 | ||||||||||||||
Issuance of common stock, including option exercises | 63,596 | — | 20 | — | — | — | — | 20 | ||||||||||||||||||||||
Treasury shares repurchased | — | — | — | — | — | (6,604 | ) | — | (6,604 | ) | ||||||||||||||||||||
Capital contribution from noncontrolling interest | — | — | — | — | — | — | 103 | 103 | ||||||||||||||||||||||
Distribution from noncontrolling interest | — | — | — | — | — | — | (98,123 | ) | (98,123 | ) | ||||||||||||||||||||
Repurchase of noncontrolling interest in subsidiaries by affiliate | — | — | — | — | — | — | (19,983 | ) | (19,983 | ) | ||||||||||||||||||||
Acquisition of noncontrolling interest in subsidiaries | — | — | 2,314 | — | — | — | (7,321 | ) | (5,007 | ) | ||||||||||||||||||||
Amortization of preferred stock issuance costs | — | — | — | (155 | ) | — | — | — | (155 | ) | ||||||||||||||||||||
Share-based compensation, net of tax | — | — | 4,491 | — | — | — | 139 | 4,630 | ||||||||||||||||||||||
Net income | — | — | — | 5,651 | — | — | 20,181 | 25,832 | ||||||||||||||||||||||
September 30, 2015 | 2,515,697 | $ | 25 | $ | 20,977 | $ | 59,670 | $ | — | $ | (252,072 | ) | $ | 1,221,907 | $ | 1,050,507 |
Nine months ended September 30, 2016 | Nine months ended September 30, 2015 | ||||||
Operating activities: | |||||||
Net (loss) income | $ | (3,272 | ) | $ | 25,832 | ||
Adjustments to reconcile net (loss) income to net cash used in operating activities: | |||||||
Change in unrealized gain on mortgage loans | — | (130,842 | ) | ||||
Net realized gain on mortgage loans | — | (47,528 | ) | ||||
Net realized gain on mortgage loans held for sale | — | (505 | ) | ||||
Net realized gain on real estate | — | (36,926 | ) | ||||
Real estate depreciation and amortization | — | 4,392 | |||||
Selling costs and impairment | — | 34,235 | |||||
Accretion of interest on re-performing mortgage loans | — | (581 | ) | ||||
Share-based compensation | 7,188 | 4,461 | |||||
Amortization of deferred financing costs | — | 4,271 | |||||
Loss on retirement of leasehold improvements | — | 212 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 123 | (998 | ) | ||||
Related party receivables | (4,926 | ) | — | ||||
Prepaid expenses and other assets | 617 | (355 | ) | ||||
Deferred leasing costs | — | (1,287 | ) | ||||
Accrued salaries and employee benefits | (875 | ) | 1,110 | ||||
Accounts payable and accrued liabilities | 276 | 13,961 | |||||
Related party payables | (2,180 | ) | — | ||||
Net cash used in operating activities | (3,049 | ) | (130,548 | ) | |||
Investing activities: | |||||||
Decrease in cash due to deconsolidation of Residential (Note 1) | (116,702 | ) | — | ||||
Purchases of securities | (15,588 | ) | — | ||||
Investment in real estate | — | (111,423 | ) | ||||
Investment in renovations | — | (15,936 | ) | ||||
Real estate tax advances | — | (18,438 | ) | ||||
Disposition of real estate | — | 119,368 | |||||
Mortgage loan resolutions and dispositions | — | 190,146 | |||||
Mortgage loan payments | — | 19,268 | |||||
Change in restricted cash | — | (12,229 | ) | ||||
Investment in subsidiary | — | (5,007 | ) | ||||
Net cash (used in) provided by investing activities | (132,290 | ) | 165,749 | ||||
Financing activities: | |||||||
Issuance of common stock, including stock option exercises | 33 | 584 | |||||
Repurchase of common stock | (7,320 | ) | (6,604 | ) | |||
Payment of tax withholdings on exercise of stock options | (25 | ) | (564 | ) | |||
Capital contribution from noncontrolling interest | — | 103 | |||||
Distribution to noncontrolling interest | — | (67,506 | ) | ||||
Repurchase of noncontrolling interest in subsidiaries by affiliate | — | (19,983 | ) | ||||
Proceeds from repurchase and loan agreements | — | 285,967 | |||||
Repayments of repurchase and loan agreements | — | (371,489 | ) | ||||
Proceeds from issuance of other secured debt | — | 221,691 | |||||
Repayments of secured notes | — | (32,298 | ) | ||||
Payment of deferred financing costs | — | (9,250 | ) | ||||
Net cash (used in) provided by financing activities | (7,312 | ) | 651 | ||||
Altisource Asset Management Corporation Consolidated Statements of Cash Flows (continued) (In thousands) (Unaudited) | |||||||
Nine months ended September 30, 2016 | Nine months ended September 30, 2015 | ||||||
Net change in cash and cash equivalents | (142,651 | ) | 35,852 | ||||
Cash and cash equivalents as of beginning of the period | 184,544 | 116,782 | |||||
Cash and cash equivalents as of end of the period | $ | 41,893 | $ | 152,634 | |||
Supplemental disclosure of cash flow information | |||||||
Cash paid for interest | $ | — | $ | 34,152 | |||
Transfer of mortgage loans to real estate owned, net | — | 359,378 | |||||
Transfer of mortgage loans at fair value to mortgage loans held for sale | — | 250,346 | |||||
Change in accrued capital expenditures | — | 164 | |||||
Changes in receivables from mortgage loan resolutions, payments and real estate tax advances, net | — | 2,550 | |||||
Changes in receivables from real estate owned dispositions | — | 1,949 | |||||
Decrease in noncontrolling interest due to deconsolidation (Note 1) | (1,145,639 | ) | — | ||||
Decrease in repurchase and loan agreements and other secured borrowings due to deconsolidation of Residential (Note 1) | (1,265,968 | ) | — | ||||
Decrease in real estate assets and mortgage loans due to deconsolidation of Residential (Note 1) | 2,264,296 | — |
December 31, 2015 | ||||||||||||
As Previously Reported | Adjustments | Current Presentation | ||||||||||
Assets: | ||||||||||||
Deferred leasing and financing costs (1) | $ | 7,886 | $ | (7,886 | ) | $ | — | |||||
Prepaid expenses and other assets (1) | 2,458 | 711 | 3,169 | |||||||||
Liabilities: | ||||||||||||
Repurchase agreements | 767,513 | (4,144 | ) | 763,369 | ||||||||
Other secured borrowings | 505,630 | (3,031 | ) | 502,599 |
(1) | Upon adoption of ASU 2015-03, Residential reclassified its deferred leasing costs to prepaid expenses and other assets. |
Number of Loans | Carrying Value | Unpaid Principal Balance | Market Value of Underlying Properties | |||||||||||
December 31, 2015 | ||||||||||||||
Current | 730 | $ | 124,595 | $ | 165,645 | $ | 177,348 | |||||||
30 | 80 | 12,003 | 18,142 | 21,858 | ||||||||||
60 | 38 | 5,688 | 8,088 | 8,766 | ||||||||||
90 | 984 | 130,784 | 216,717 | 196,963 | ||||||||||
Foreclosure | 3,907 | 687,464 | 946,962 | 917,671 | ||||||||||
Mortgage loans at fair value | 5,739 | $ | 960,534 | $ | 1,355,554 | $ | 1,322,606 |
Number of Loans | Carrying Value | Unpaid Principal Balance | Market Value of Underlying Properties | |||||||||||
December 31, 2015 | ||||||||||||||
Current | 58 | $ | 10,864 | $ | 13,466 | $ | 17,776 | |||||||
30 | 26 | 7,616 | 10,013 | 12,200 | ||||||||||
60 | 6 | 668 | 775 | 1,063 | ||||||||||
90 | 328 | 73,164 | 101,121 | 103,395 | ||||||||||
Foreclosure | 879 | 225,024 | 314,991 | 330,573 | ||||||||||
Mortgage loans held for sale | 1,297 | $ | 317,336 | $ | 440,366 | $ | 465,007 |
Accretable Yield | Three months ended September 30, 2015 | Nine months ended September 30, 2015 | ||||||
Balance at the beginning of the period | $ | 3,886 | $ | 7,640 | ||||
Payments and other reductions, net | — | (3,285 | ) | |||||
Accretion | (112 | ) | (581 | ) | ||||
Balance at the end of the period | $ | 3,774 | $ | 3,774 |
Level 1 | Level 2 | Level 3 | |||||||||
Quoted Prices in Active Markets | Observable Inputs other than Level 1 Prices | Unobservable Inputs | |||||||||
September 30, 2016 | |||||||||||
Recurring basis (assets) | |||||||||||
Available-for-sale securities: Residential common stock | $ | 17,707 | $ | — | $ | — |
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Residential common stock | $ | 20,596 | $ | — | $ | 2,889 | $ | 17,707 | |||||||
Total available-for-sale securities | $ | 20,596 | $ | — | $ | 2,889 | $ | 17,707 |
Level 1 | Level 2 | Level 3 | |||||||||
Quoted Prices in Active Markets | Observable Inputs other than Level 1 Prices | Unobservable Inputs | |||||||||
December 31, 2015 | |||||||||||
Recurring basis (assets) | |||||||||||
Mortgage loans at fair value | $ | — | $ | — | $ | 960,534 | |||||
Nonrecurring basis (assets) | |||||||||||
Real estate assets held for sale | — | — | 250,557 | ||||||||
Not recognized on consolidated balance sheets at fair value (assets) | |||||||||||
Mortgage loans held for sale | — | — | 317,336 | ||||||||
Not recognized on consolidated balance sheets at fair value (liabilities) | |||||||||||
Repurchase and loan agreements | — | 767,513 | — | ||||||||
Other secured borrowings | — | 502,268 | — |
Three months ended September 30, 2015 | Nine months ended September 30, 2015 | |||||||
Mortgage loans at fair value | ||||||||
Beginning balance | $ | 1,716,489 | $ | 1,959,044 | ||||
Change in unrealized gain on mortgage loans | 27,499 | 130,842 | ||||||
Net realized gain on mortgage loans | 12,874 | 47,528 | ||||||
Transfer of mortgage loans to mortgage loans held for sale | (250,346 | ) | (250,346 | ) | ||||
Mortgage loan resolutions, dispositions and payments | (57,882 | ) | (205,120 | ) | ||||
Real estate tax advances to borrowers | 6,611 | 18,002 | ||||||
Reclassification of realized gains on real estate sold from unrealized gains | 16,026 | 40,003 | ||||||
Transfer of mortgage loans to real estate owned, net | (90,696 | ) | (359,378 | ) | ||||
Ending balance | $ | 1,380,575 | $ | 1,380,575 | ||||
Change in unrealized gain on mortgage loans held at the end of the period | $ | 13,022 | $ | 93,874 |
Input | December 31, 2015 | |
Equity discount rate | 15.0% | |
Debt to asset ratio | 65.0% | |
Cost of funds | 3.5% over 1 month LIBOR | |
Annual change in home pricing index | 0.0% to 10.2% | |
Loan resolution probabilities — modification | 0% to 44.7% | |
Loan resolution probabilities — rental | 0% to 100.0% | |
Loan resolution probabilities — liquidation | 0% to 100.0% | |
Loan resolution timelines (in years) | 0.1 to 5.6 | |
Value of underlying properties | $3,000 - $4,500,000 |
Maximum Borrowing Capacity | Book Value of Collateral | Amount Outstanding | Amount of Available Funding | ||||||||||||
December 31, 2015 | |||||||||||||||
Repurchase agreement due April 18, 2016 | $ | 275,000 | $ | 335,184 | $ | 194,346 | $ | 80,654 | |||||||
Repurchase agreement due September 27, 2017 | 750,000 | 708,275 | 371,130 | 378,870 | |||||||||||
Repurchase agreement due March 11, 2016 | 54,944 | 130,863 | 54,944 | — | |||||||||||
Loan agreement due April 8, 2016 | 200,000 | 204,578 | 147,093 | 52,907 | |||||||||||
Less: deferred debt issuance costs | — | — | (4,144 | ) | — | ||||||||||
$ | 1,279,944 | $ | 1,378,900 | $ | 763,369 | $ | 512,431 |
Interest Rate | Amount Outstanding | |||||
December 31, 2015 | ||||||
ARLP Securitization Trust, Series 2015-1 | ||||||
ARLP 2015-1 Class A Notes due May 25, 2055 (1) | 4.01 | % | $ | 203,429 | ||
ARLP 2015-1 Class M Notes due May 25, 2044 | — | % | 60,000 | |||
ARLP Securitization Trust, Series 2014-2 | ||||||
ARLP 2014-2 Class A Notes due January 26, 2054 (2) | 3.63 | % | 244,935 | |||
ARLP 2014-2 Class M Notes due January 26, 2054 | — | % | 234,010 | |||
ARLP Securitization Trust, Series 2014-1 | ||||||
ARLP 2014-1 Class A Notes due September 25, 2044 (3) | 3.47 | % | 136,404 | |||
ARLP 2014-1 Class M Notes due September 25, 2044 (4) | 4.25 | % | 32,000 | |||
Intercompany eliminations | ||||||
Elimination of ARLP 2015-1 Class A Notes due to ARNS, Inc. | (34,000 | ) | ||||
Elimination of ARLP 2015-1 Class M Notes due to ARLP | (60,000 | ) | ||||
Elimination of ARLP 2014-2 Class A Notes due to ARNS, Inc. | (45,138 | ) | ||||
Elimination of ARLP 2014-2 Class M Notes due to ARLP | (234,010 | ) | ||||
Elimination of ARLP 2014-1 Class M Notes due to ARNS, Inc. | (32,000 | ) | ||||
Less: deferred debt issuance costs | (3,031 | ) | ||||
$ | 502,599 |
(1) | The expected redemption date for the Class A Notes ranged from June 25, 2018 to June 25, 2019. |
(2) | The expected redemption date for the Class A Notes ranged from November 27, 2017 to November 27, 2018. |
(3) | The expected redemption date for the Class A Notes ranged from September 25, 2017 to September 25, 2018. |
(4) | The expected redemption date for the Class M Notes was September 25, 2018. |
• | Base Management Fee. We are entitled to a quarterly Base Management Fee equal to 1.5% of the product of (i) Residential’s average invested capital (as defined in the New AMA) for the quarter multiplied by (ii) 0.25, while Residential has fewer than 2,500 single family rental properties actually rented (“Rental Properties”). The Base Management Fee percentage increases to 1.75% of invested capital while Residential has between 2,500 and 4,499 rental properties and increases to 2.0% of invested capital while Residential has 4,500 or more rental properties; |
• | Incentive Management Fee. We are entitled to a quarterly Incentive Management Fee equal to 20% of the amount by which Residential's return on invested capital (based on AFFO, defined as net income attributable to holders of common stock calculated in accordance with GAAP plus real estate depreciation expense minus recurring capital expenditures on all real estate assets owned by Residential) exceeds an annual hurdle return rate of between 7.0% and 8.25% (depending on the 10-year treasury rate). The Incentive Management Fee increases to 22.5% while Residential has between 2,500 and 4,499 Rental Properties and increases to 25% while Residential has 4,500 or more Rental Properties; and |
• | Conversion Fee. We are entitled to a quarterly Conversion Fee equal to 1.5% of the market value of the single-family homes leased by Residential for the first time during the quarter. |
Three months ended September 30, 2016 | Three months ended September 30, 2015 | Nine months ended September 30, 2016 | Nine months ended September 30, 2015 | ||||||||||||
Base management fees | $ | 4,208 | $ | 4,659 | $ | 12,838 | $ | 9,411 | |||||||
Conversion fees | 450 | 329 | 1,396 | 728 | |||||||||||
Management incentive fees (1) | — | — | — | 14,900 | |||||||||||
Expense reimbursements | 196 | — | 553 | 750 | |||||||||||
Professional fee sharing for negotiation of New AMA | — | — | — | 2,000 |
(1) | Pursuant to the terms of the New AMA, the management incentive fees for the first quarter of 2015 were recalculated during the fourth quarter of 2015, and it was determined that $6.9 million was reimbursable by us to Residential. |
Three months ended September 30, 2016 | Three months ended September 30, 2015 | Nine months ended September 30, 2016 | Nine months ended September 30, 2015 | ||||||||||||
Numerator | |||||||||||||||
Net (loss) income attributable to stockholders | $ | (1,071 | ) | $ | (1,980 | ) | $ | (3,272 | ) | 5,651 | |||||
Amortization of preferred stock issuance costs | (51 | ) | (52 | ) | (155 | ) | (155 | ) | |||||||
Numerator for basic EPS – (loss) income available to common stockholders | (1,122 | ) | (2,032 | ) | (3,427 | ) | 5,496 | ||||||||
Add back amortization of preferred stock issuance costs | — | — | — | 155 | |||||||||||
Numerator for diluted EPS – (loss) income available to common stockholders after assumed conversions | $ | (1,122 | ) | $ | (2,032 | ) | $ | (3,427 | ) | $ | 5,651 | ||||
Denominator | |||||||||||||||
Weighted average common stock outstanding – basic | 1,676,651 | 2,208,658 | 1,813,929 | 2,210,448 | |||||||||||
Stock options using treasury method | — | — | — | 229,383 | |||||||||||
Restricted stock | — | — | — | 93,916 | |||||||||||
Preferred stock, if converted | — | — | — | 200,000 | |||||||||||
Weighted average common stock outstanding – diluted | 1,676,651 | 2,208,658 | 1,813,929 | 2,733,747 | |||||||||||
(Loss) earnings per basic common share | $ | (0.67 | ) | $ | (0.92 | ) | $ | (1.89 | ) | $ | 2.49 | ||||
(Loss) earnings per diluted common share | $ | (0.67 | ) | $ | (0.92 | ) | $ | (1.89 | ) | $ | 2.07 |
Three months ended September 30, 2016 | Three months ended September 30, 2015 | Nine months ended September 30, 2016 | Nine months ended September 30, 2015 | ||||||||||||
Numerator ($ in thousands) | |||||||||||||||
Amortization of preferred stock issuance costs | $ | 51 | $ | 52 | $ | 155 | $ | — | |||||||
Denominator (in weighted-average shares) | |||||||||||||||
Stock options | 164,836 | 222,310 | 167,385 | — | |||||||||||
Restricted stock | 31,711 | 15,730 | 41,001 | 25,026 | |||||||||||
Preferred stock, if converted | 200,000 | 200,000 | 200,000 | — |
• | Base Management Fee. We are entitled to a quarterly Base Management Fee equal to 1.5% of the product of (i) Residential's average invested capital (as defined in the New AMA) for the quarter multiplied by (ii) 0.25, while it has fewer than 2,500 single-family rental properties actually rented (“Rental Properties”). The Base Management Fee percentage increases to 1.75% of invested capital while Residential has between 2,500 and 4,499 Rental Properties and increases to 2.0% of invested capital while it has 4,500 or more Rental Properties; |
• | Incentive Management Fee. We are entitled to a quarterly Incentive Management Fee equal to 20% of the amount by which Residential's return on invested capital (based on AFFO, defined as net income attributable to holders of common stock calculated in accordance with GAAP plus real estate depreciation expense minus recurring capital expenditures on all real estate assets owned by Residential) exceeds an annual hurdle return rate of between 7.0% and 8.25% (depending on the 10-year treasury rate). The Incentive Management Fee increases to 22.5% while Residential has between 2,500 and 4,499 Rental Properties and increases to 25% while it has 4,500 or more Rental Properties; and |
• | Conversion Fee. We are entitled to a quarterly Conversion Fee equal to 1.5% of the market value of assets converted into leased single-family homes by Residential for the first time during the quarter. |
i. | Rental revenues. Minimum contractual rents from leases were recognized on a straight-line basis over the terms of the leases in residential rental revenues. Therefore, actual amounts billed in accordance with the lease during any given period may have been higher or lower than the amount of rental revenue recognized for the period. |
ii. | Net realized gain on mortgage loans. Residential recorded net realized gains, including the reclassification of previously accumulated net unrealized gains, upon the liquidation of a loan, which may have consisted of short sale, third party sale of the underlying property, refinancing or full debt pay-off of the loan. |
iii. | Change in unrealized gains from the conversion of loans to REO. Upon conversion of loans to REO, Residential marked the properties to the then-most recent market value. The difference between the carrying value of the asset at the time of conversion and the then-most recent market value, based on BPOs, was recorded in Residential's statement of operations as change in unrealized gain on mortgage loans. |
iv. | Change in unrealized gains from the change in fair value of loans. After Residential's sub-performing and non-performing mortgage loans were acquired, the fair value of each loan was adjusted in each subsequent reporting period as the loan proceeded to a particular resolution (i.e., modification or conversion to real estate owned). As a loan approached resolution, the resolution timeline for that loan decreased and costs embedded in the discounted cash flow model for loan servicing, foreclosure costs and property insurance were incurred and removed from future expenses. The shorter resolution timelines and reduced future expenses each increased the fair value of the loan. The increase in the value of the loan was recognized in change in unrealized gain on mortgage loans in Residential's statements of operations. |
v. | Net realized gain on real estate. REO properties that did not meet Residential's investment criteria were sold out of its taxable REIT subsidiary. The realized gain or loss recognized in financial statements reflects the net amount of realized and unrealized gains on sold REOs from the time of acquisition to sale completion. |
Residential (GAAP) | NewSource Stand-alone (Non-GAAP) | AAMC Stand-alone (Non-GAAP) | Consolidating Entries | AAMC Consolidated (GAAP) | |||||||||||||||
Revenues: | |||||||||||||||||||
Base management fees | $ | — | $ | — | $ | 4,869 | $ | (4,869 | ) | $ | — | ||||||||
Conversion fees | — | — | 329 | (329 | ) | — | |||||||||||||
Expense reimbursements | — | — | — | — | — | ||||||||||||||
Rental revenues | 4,021 | — | — | — | 4,021 | ||||||||||||||
Change in unrealized gain on mortgage loans | 27,499 | — | — | — | 27,499 | ||||||||||||||
Net realized gain on mortgage loans | 12,874 | — | — | — | 12,874 | ||||||||||||||
Net realized gain on mortgage loans held for sale | 100 | — | — | — | 100 | ||||||||||||||
Net realized gain on real estate | 13,914 | — | — | — | 13,914 | ||||||||||||||
Interest income | 115 | 242 | — | (242 | ) | 115 | |||||||||||||
Total revenues | 58,523 | 242 | 5,198 | (5,440 | ) | 58,523 | |||||||||||||
Expenses: | |||||||||||||||||||
Salaries and employee benefits | — | — | 2,986 | — | 2,986 | ||||||||||||||
Share-based compensation | 45 | — | 1,384 | — | 1,429 | ||||||||||||||
Legal and professional fees | 1,390 | 40 | 903 | — | 2,333 | ||||||||||||||
Residential property operating expenses | 16,574 | — | — | — | 16,574 | ||||||||||||||
Real estate depreciation and amortization | 2,050 | — | — | — | 2,050 | ||||||||||||||
Selling costs and impairment | 10,705 | — | — | — | 10,705 | ||||||||||||||
Mortgage loan servicing costs | 13,477 | — | — | — | 13,477 | ||||||||||||||
Interest expense | 14,436 | — | — | (242 | ) | 14,194 | |||||||||||||
General and administrative | 1,712 | — | 475 | — | 2,187 | ||||||||||||||
Related party general and administrative | 4,988 | 210 | — | (5,198 | ) | — | |||||||||||||
Total expenses | 65,377 | 250 | 5,748 | (5,440 | ) | 65,935 | |||||||||||||
Other income | 1,518 | — | 178 | (1,696 | ) | — | |||||||||||||
Loss before income taxes | (5,336 | ) | (8 | ) | (372 | ) | (1,696 | ) | (7,412 | ) | |||||||||
Income tax expense (benefit) | 27 | — | (124 | ) | — | (97 | ) | ||||||||||||
Net loss | (5,363 | ) | (8 | ) | (248 | ) | (1,696 | ) | (7,315 | ) | |||||||||
Net loss attributable to noncontrolling interest in consolidated affiliate | — | — | — | 5,335 | 5,335 | ||||||||||||||
Net loss attributable to stockholders | $ | (5,363 | ) | $ | (8 | ) | $ | (248 | ) | $ | 3,639 | $ | (1,980 | ) |
Residential (GAAP) | NewSource Stand-alone (Non-GAAP) | AAMC Stand-alone (Non-GAAP) | Consolidating Entries | AAMC Consolidated (GAAP) | |||||||||||||||
Revenues: | |||||||||||||||||||
Base management fees | $ | — | $ | — | $ | 10,041 | $ | (10,041 | ) | $ | — | ||||||||
Incentive management fees | — | — | 14,900 | (14,900 | ) | — | |||||||||||||
Conversion fees | — | — | 728 | (728 | ) | — | |||||||||||||
Expense reimbursements | — | — | 750 | (750 | ) | — | |||||||||||||
Rental revenues | 7,561 | — | — | — | 7,561 | ||||||||||||||
Change in unrealized gain on mortgage loans | 130,842 | — | — | — | 130,842 | ||||||||||||||
Net realized gain on mortgage loans | 47,528 | — | — | — | 47,528 | ||||||||||||||
Net realized gain on mortgage loans held for sale | 505 | — | — | — | 505 | ||||||||||||||
Net realized gain on real estate | 36,926 | — | — | — | 36,926 | ||||||||||||||
Interest income | 595 | 563 | — | (563 | ) | 595 | |||||||||||||
Total revenues | 223,957 | 563 | 26,419 | (26,982 | ) | 223,957 | |||||||||||||
Expenses: | |||||||||||||||||||
Salaries and employee benefits | — | — | 6,325 | — | 6,325 | ||||||||||||||
Share-based compensation | 139 | — | 4,322 | — | 4,461 | ||||||||||||||
Legal and professional fees | 5,502 | 158 | 4,364 | — | 10,024 | ||||||||||||||
Residential property operating expenses | 45,890 | — | — | — | 45,890 | ||||||||||||||
Real estate depreciation and amortization | 4,392 | — | — | — | 4,392 | ||||||||||||||
Selling costs and impairment | 34,235 | — | — | — | 34,235 | ||||||||||||||
Mortgage loan servicing costs | 47,989 | — | — | — | 47,989 | ||||||||||||||
Interest expense | 39,477 | — | — | (563 | ) | 38,914 | |||||||||||||
General and administrative | 3,856 | — | 1,799 | — | 5,655 | ||||||||||||||
Related party general and administrative | 25,789 | 630 | 2,000 | (28,419 | ) | — | |||||||||||||
Total expenses | 207,269 | 788 | 18,810 | (28,982 | ) | 197,885 | |||||||||||||
Other income | 3,518 | — | 178 | (3,696 | ) | — | |||||||||||||
Income (loss) before income taxes | 20,206 | (225 | ) | 7,787 | (1,696 | ) | 26,072 | ||||||||||||
Income tax expense | 53 | — | 187 | — | 240 | ||||||||||||||
Net income (loss) | 20,153 | (225 | ) | 7,600 | (1,696 | ) | 25,832 | ||||||||||||
Net income attributable to noncontrolling interest in consolidated affiliate | — | — | — | (20,181 | ) | (20,181 | ) | ||||||||||||
Net income (loss) attributable to stockholders | $ | 20,153 | $ | (225 | ) | $ | 7,600 | $ | (21,877 | ) | $ | 5,651 |
Residential (GAAP) | NewSource stand-alone (Non-GAAP) | AAMC Stand-alone (Non-GAAP) | Consolidating Entries | AAMC Consolidated (GAAP) | |||||||||||||||
Assets: | |||||||||||||||||||
Real estate held for use: | |||||||||||||||||||
Land | $ | 56,346 | $ | — | $ | — | $ | — | $ | 56,346 | |||||||||
Rental residential properties, net | 224,040 | — | — | — | 224,040 | ||||||||||||||
Real estate owned | 455,483 | — | — | — | 455,483 | ||||||||||||||
Total real estate held for use, net | 735,869 | — | — | — | 735,869 | ||||||||||||||
Real estate assets held for sale | 250,557 | — | — | — | 250,557 | ||||||||||||||
Mortgage loans at fair value | 960,534 | — | — | — | 960,534 | ||||||||||||||
Mortgage loans held for sale | 317,336 | — | — | — | 317,336 | ||||||||||||||
Cash and cash equivalents | 116,702 | 4,583 | 63,259 | — | 184,544 | ||||||||||||||
Restricted cash | 20,566 | — | — | — | 20,566 | ||||||||||||||
Accounts receivable, net | 45,903 | — | 123 | — | 46,026 | ||||||||||||||
Related party receivables | 2,180 | — | — | (2,180 | ) | — | |||||||||||||
Investment in affiliate | — | — | 12,007 | (12,007 | ) | — | |||||||||||||
Prepaid expenses and other assets | 1,126 | 5 | 2,028 | 10 | 3,169 | ||||||||||||||
Total assets | $ | 2,450,773 | $ | 4,588 | $ | 77,417 | $ | (14,177 | ) | $ | 2,518,601 | ||||||||
Liabilities: | |||||||||||||||||||
Repurchase agreement | $ | 763,369 | $ | — | $ | — | $ | — | $ | 763,369 | |||||||||
Other secured borrowings | 502,599 | — | — | — | 502,599 | ||||||||||||||
Accrued salaries and employee benefits | — | — | 4,006 | — | 4,006 | ||||||||||||||
Accounts payable and other accrued liabilities | 32,448 | 1,546 | 722 | — | 34,716 | ||||||||||||||
Related party payables | — | — | 2,180 | (2,180 | ) | — | |||||||||||||
Total liabilities | 1,298,416 | 1,546 | 6,908 | (2,180 | ) | 1,304,690 | |||||||||||||
Commitments and contingencies | — | — | — | — | — | ||||||||||||||
Redeemable preferred stock | — | — | 249,133 | — | 249,133 | ||||||||||||||
Stockholders' equity (deficit): | |||||||||||||||||||
Common stock | 556 | — | 26 | (556 | ) | 26 | |||||||||||||
Additional paid-in capital | 1,202,418 | 7,000 | 21,089 | (1,207,088 | ) | 23,419 | |||||||||||||
(Accumulated deficit) retained earnings | (50,617 | ) | (3,958 | ) | 55,245 | 50,008 | 50,678 | ||||||||||||
Treasury stock | — | — | (254,984 | ) | — | (254,984 | ) | ||||||||||||
Total stockholders' equity (deficit) | 1,152,357 | 3,042 | (178,624 | ) | (1,157,636 | ) | (180,861 | ) | |||||||||||
Noncontrolling interest in consolidated affiliate | — | — | — | 1,145,639 | 1,145,639 | ||||||||||||||
Total equity (deficit) | 1,152,357 | 3,042 | (178,624 | ) | (11,997 | ) | 964,778 | ||||||||||||
Total liabilities and equity | $ | 2,450,773 | $ | 4,588 | $ | 77,417 | $ | (14,177 | ) | $ | 2,518,601 |
Nine months ended September 30, 2016 | Nine months ended September 30, 2015 | ||||||
Net cash used in operating activities | $ | (3,049 | ) | $ | (130,548 | ) | |
Net cash (used in) provided by investing activities (1) | (132,290 | ) | 165,749 | ||||
Net cash (used in) provided by financing activities | (7,312 | ) | 651 | ||||
Total cash flows | $ | (142,651 | ) | $ | 35,852 |
(1) | Upon deconsolidation of Residential effective January 1, 2016, we recognized a reduction in cash of $116.7 million, which represented the cash attributable to Residential within our consolidated balance sheet as of December 31, 2015. |
(a) Total Number of Shares Purchased | (b) Average Price Paid per Share | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Dollar Value of Shares that may yet be Purchased Under Plans or Programs (1) | |||||||||||
July 2016 | — | $ | — | 901,202 | $ | 44,367 | ||||||||
August 2016 | 4,151 | 12.93 | 905,353 | 44,313 | ||||||||||
September 2016 | 45,744 | 14.61 | 951,097 | 43,645 | ||||||||||
Quarter ended September 30, 2016 | 49,895 | 14.47 | 951,097 | 43,645 |
(1) | Since Board approval of repurchases is based on dollar amount, we cannot estimate the number of shares remaining to be purchased. |
Exhibit Number | Description | |
2.1 | Separation Agreement, dated as of December 21, 2012, between Altisource Asset Management Corporation and Altisource Portfolio Solutions S.A. (incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed with the Commission on December 28, 2012). | |
3.1 | Amended and Restated Articles of Incorporation of Altisource Asset Management Corporation (incorporated by reference to Exhibit 3.1 of the Registrant's Registration Statement on Form 10 filed with the Commission on December 5, 2012). | |
3.2 | First Amended and Restated Bylaws of Altisource Asset Management Corporation (incorporated by reference to Exhibit 3.2 of the Registrant's Registration Statement on Form 10 filed with the Commission on December 5, 2012). | |
3.3 | Certificate of Designations establishing the Company’s Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the Commission on March 19, 2014). | |
10.1* | Separation Agreement, dated as of October 26, 2016, between the Company and Kenneth D. Najour. | |
31.1* | Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act | |
31.2* | Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act | |
32.1* | Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act | |
32.2* | Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act | |
101.INS* | XBRL Instance Document | |
101.SCH* | XBRL Taxonomy Extension Schema Document | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | XBRL Extension Labels Linkbase | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
Altisource Asset Management Corporation | ||||
Date: | November 7, 2016 | By: | /s/ | Robin N. Lowe |
Robin N. Lowe | ||||
Chief Financial Officer |
1. | The parties agree that Employee’s employment with AAMC ended, effective August 5, 2016 and that Employee has received all salary, incentive compensation and compensation for unused eligible Paid Time-Off through August 5, 2016, that he is entitled to. |
2. | Except for amounts set forth in paragraph 6 below and base salary owed, if any, for time worked through August 5, 2016, Employee acknowledges that he has been paid or will be paid in the payroll scheduled for August 12, 2016, full consideration therefor or waives any right thereto and that he is entitled to no further compensation of any sort whatsoever. |
3. | Employee acknowledges (i) that he was provided twenty-one (21) days to consider the terms of this Agreement, (ii) that he had the opportunity to discuss the terms of this Agreement with an attorney and other professional advisors unrelated to the Company prior to signing this Agreement, and (iii) that he is entering into this Agreement freely, knowingly and voluntarily with a full understanding of its terms. |
4. | Employee acknowledges that he will have seven (7) days following his execution of this Agreement to revoke this Agreement by notifying AAMC in writing. Otherwise, this Agreement will become enforceable and effective seven (7) days following the date of execution of this Agreement by Employee. |
5. | Employee agrees that: |
/s/ Kenneth D. Najour | |||
Kenneth D. Najour |
SEAL | /s/ Jennifer Morrill | ||
Notary Public |
ATTEST | ALTISOURCE ASSET MANAGEMENT CORPORATION | ||
/s/ Julie Paterson | By: | /s/ Stephen H. Gray | |
Stephen H. Gray | |||
General Counsel and Secretary |
Date: | November 7, 2016 | By: | /s/ | George G. Ellison |
George G. Ellison | ||||
Chief Executive Officer |
Date: | November 7, 2016 | By: | /s/ | Robin N. Lowe |
Robin N. Lowe | ||||
Chief Financial Officer |
Date: | November 7, 2016 | By: | /s/ | George G. Ellison |
George G. Ellison | ||||
Chief Executive Officer |
Date: | November 7, 2016 | By: | /s/ | Robin N. Lowe |
Robin N. Lowe | ||||
Chief Financial Officer |
Document and entity information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Oct. 28, 2016 |
|
Document and Entity Information [Abstract] | ||
Entity registrant name | Altisource Asset Management Corporation | |
Entity central index key | 0001555074 | |
Current fiscal year end date | --12-31 | |
Entity filer category | Accelerated Filer | |
Document type | 10-Q | |
Document period end date | Sep. 30, 2016 | |
Document fiscal year focus | 2016 | |
Document fiscal period focus | Q3 | |
Amendment flag | false | |
Entity common stock, shares outstanding | 1,579,722 |
Consolidated Statements of Comprehensive (Loss) Income - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net (loss) income attributable to stockholders | $ (1,071) | $ (1,980) | $ (3,272) | $ 5,651 |
Other comprehensive income (loss): | ||||
Change in unrealized loss on available-for-sale securities | 2,778 | 0 | (1,908) | 0 |
Total other comprehensive income (loss) | 2,778 | 0 | (1,908) | 0 |
Comprehensive income (loss) | $ 1,707 | $ (1,980) | $ (5,180) | $ 5,651 |
Organization and basis of presentation |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization and basis of presentation | Organization and basis of presentation We were incorporated in the United States Virgin Islands on March 15, 2012 (our “inception”). Subsequent to our separation from Altisource Portfolio Solutions S.A. (“ASPS”) on December 21, 2012, we immediately commenced operations. Our primary business is to provide asset management and certain corporate governance services to institutional investors. In October 2013, we applied for and were granted registration by the SEC as a registered investment adviser under section 203(c) of the Investment Advisers Act of 1940. Our primary client currently is Altisource Residential Corporation (“Residential”), a public real estate investment trust (“REIT”) that is focused on acquiring and managing quality, affordable single-family rental properties for working class families throughout the United States. Substantially all of our standalone revenue since inception has been generated through our asset management agreement with Residential. Residential conducts substantially all of its activities through its wholly owned subsidiary Altisource Residential, L.P. (“ARLP”) and its subsidiaries. Initially, Residential acquired its rental properties primarily through the acquisition of sub-performing and non-performing mortgage loan portfolios; however, commencing in the second quarter of 2015, it refocused its acquisition strategy to opportunistically acquire single-family rental properties directly, both individually and in pools, in light of substantial increases in the acquisition price of NPL portfolios as an avenue to more quickly achieve scale in its rental portfolio. Residential has property management contracts with two separate third-party service providers to provide to Residential, among other things, leasing and lease management, operations, maintenance, repair, property management and property disposition services in respect of its SFR and REO portfolios. Residential also has servicing agreements with two separate mortgage servicers for the remaining mortgage loans in its portfolio. We initially provided services to Residential pursuant to a 15-year asset management agreement beginning December 21, 2012 (the “Original AMA”). On March 31, 2015, we entered into a new asset management agreement with Residential (the “New AMA”) under which we will continue to be the exclusive asset manager for Residential for an initial term of 15 years from April 1, 2015, with two potential five-year extensions. The Original AMA had a different incentive fee structure that gave us a share of Residential’s cash flow available for distribution to its stockholders as well as reimbursement for certain overhead and operating expenses. The New AMA provides for a new fee structure in which we are entitled to a base management fee, an incentive management fee and a conversion fee for loans and real estate owned (“REO”) properties that become rental properties during each quarter. Accordingly, our operating results continue to be highly dependent on Residential's operating results. See Note 7 for additional details of the New AMA. Additionally, we provide management services to NewSource Reinsurance Company Ltd. (“NewSource”), a title insurance and reinsurance company in Bermuda. In October 2013, we invested $2.0 million in 100% of the common stock of NewSource, and in September 2015, we contributed an additional $5.0 million to NewSource. On December 2, 2013, NewSource became registered as a licensed reinsurer with the Bermuda Monetary Authority (“BMA”). NewSource commenced reinsurance activities during the second quarter of 2014. In December 2014, NewSource determined that the economics of the initial business did not warrant the continuation of its initial reinsurance quota share agreement with an unrelated third party. NewSource therefore transferred all of the risk of claims and future losses underwritten to an unrelated third party. Basis of presentation and use of estimates The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates. The unaudited interim consolidated financial statements and accompanying unaudited consolidated financial information, in our opinion, contain all adjustments that are of a normal recurring nature and are necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. The interim results are not necessarily indicative of results for a full year. We have omitted certain notes and other information from the interim consolidated financial statements presented in this Quarterly Report on Form 10-Q as permitted by the Securities and Exchange Commission (“SEC”) rules and regulations. These consolidated financial statements should be read in conjunction with our annual consolidated financial statements included within our 2015 Annual Report on Form 10-K, which was filed with the SEC on February 29, 2016. Effective January 1, 2016, the accompanying consolidated financial statements include the accounts of AAMC and its consolidated subsidiaries, which are comprised of voting interest entities in which we are determined to have a controlling financial interest under Accounting Standards Codification (“ASC”) 810, as amended by Accounting Standards Update (“ASU”) 2015-02, Consolidation (Topic 810) – Amendments to the Consolidation Analysis (“ASU 2015-02”). Our voting interest entities consist entirely of our wholly owned subsidiaries. We also consider variable interest entities (“VIEs”) for consolidation where we are the primary beneficiary as described below. With the adoption of the ASU 2015-02 effective January 1, 2016, we no longer consolidate Residential as a VIE, and we currently do not have any other potential VIEs. For legal entities evaluated for consolidation, we must determine whether the interests that we hold and fees paid to us qualify as a variable interest in the entity. This includes an evaluation of fees paid to us where we act as a decision maker or service provider to the entity being evaluated. Fees received by us are not variable interests if (i) the fees are compensation for services provided and are commensurate with the level of effort required to provide those services, (ii) the service arrangement includes only terms, conditions or amounts that are customarily present in arrangements for similar services negotiated at arm’s length and (iii) our other economic interests in the VIE held directly and indirectly through our related parties, as well as economic interests held by related parties under common control, where applicable, would not absorb more than an insignificant amount of the entity’s losses or receive more than an insignificant amount of the entity’s benefits. For those entities in which we have a variable interest, we perform an analysis to first determine whether the entity is a VIE. This determination includes considering whether the entity’s equity investment at risk is sufficient, whether the voting rights of an investor are not proportional to its obligation to absorb the income or loss of the entity and substantially all of the entity's activities either involve or are conducted on behalf of that investor and its related parties and whether the entity’s at-risk equity holders have the characteristics of a controlling financial interest. A VIE must be consolidated by its primary beneficiary. Performance of such analysis requires the exercise of judgment. The primary beneficiary of a VIE is generally defined as the party who has a controlling financial interest in the VIE. We are generally deemed to have a controlling financial interest in a VIE if we have (i) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. For purposes of evaluating (ii) above, fees paid to us are excluded if the fees are compensation for services provided commensurate with the level of effort required to be performed and the arrangement includes only customary terms, conditions or amounts present in arrangements for similar services negotiated at arm’s length. We also evaluate our economic interests in the VIE held directly by us and indirectly through our related parties, as well as economic interests held by related parties under common control, where applicable. The primary beneficiary evaluation is generally performed qualitatively on the basis of all facts and circumstances. However, quantitative information may also be considered in the analysis, as appropriate. These analyses require judgment. Changes in the economic interests (either by us, our related parties or third parties) or amendments to the governing documents of the VIE could affect an entity's status as a VIE or the determination of the primary beneficiary. The primary beneficiary evaluation is updated periodically. For voting interest entities, we shall consolidate the entity if we have a controlling financial interest. We have a controlling financial interest in a voting interest entity if (i) for legal entities other than limited partnerships, we own a majority voting interest in the entity or, for limited partnerships and similar entities, we own a majority of the entity’s kick-out rights through voting limited partnership interests and (ii) non-controlling shareholders or partners do not hold substantive participating rights and no other conditions exist that would indicate that we do not control the entity. Prior to our deconsolidation of Residential as described below, our consolidated financial statements also include those VIEs that were included within Residential's consolidated financial statements. Residential had three securitization trusts, ARLP Securitization Trust, Series 2014-1 (“ARLP 2014-1”), ARLP Securitization Trust, Series 2014-2 (“ARLP 2014-2”) and ARLP Securitization Trust, Series 2015-1 (“ARLP 2015-1”), which were classified as VIEs. Because Residential was the primary beneficiary, these entities were included in the consolidated financial statements of Residential but are no longer included in our consolidated financial statements since the deconsolidation effective January 1, 2016. See Note 5 for more information regarding these securitization trusts. Deconsolidation of Residential Effective January 1, 2016, we adopted the provisions of ASU 2015-02, and we performed an analysis of our relationship with Residential pursuant to the amended guidance. We determined that the compensation we receive in return for our services to Residential is commensurate with the level of effort required to perform such services and the arrangement includes customary terms, conditions or amounts present in arrangements for similar services negotiated at arm’s length; therefore, Residential is no longer a VIE under the amended guidance. As a result, effective January 1, 2016, we no longer consolidate the accounts of Residential. We have applied ASU 2015-02 using the modified retrospective approach, which has resulted in a cumulative-effect adjustment to equity on January 1, 2016. As a result, periods ending prior to the adoption were not impacted. The adoption effectively removed those balances previously disclosed that related to Residential from our consolidated financial statements and eliminated the amounts previously reported as noncontrolling interests in Residential as a consolidated affiliate. Subsequent to adoption, our consolidated revenues consist primarily of management fees received from Residential under the New AMA and interest and dividend income, and our consolidated expenses consist primarily of salaries and employee benefits, share-based compensation, legal and professional fees and general and administrative expenses. As a result of our deconsolidation of Residential, we have also reclassified certain prior period amounts for consistency with the current period presentation, including reclassification of amounts from accounts payable and other accrued liabilities to accrued salaries and benefits within the consolidated balance sheet and from general and administrative expenses to salaries and benefits, share-based compensation and legal and professional fees within the consolidated statement of operations. These reclassifications had no effect on the reported results of operations. Available-for-sale securities The securities we hold consist solely of the common stock of Residential. These securities are classified as available for sale and are reported at fair value. We adjust our investment in Residential common stock to fair value based on unadjusted quoted market prices in active markets. Changes in the fair value are recorded in accumulated other comprehensive income (loss) as changes in unrealized gain (loss) on available-for-sale securities. Our ability to sell these securities, or the price ultimately realized for these securities, depends upon the demand in the market and potential restrictions on the timing at which we may be able to sell the Residential common stock when desired. Deferred debt issuance costs In April 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires that debt issuance costs are presented on the balance sheet as a deduction from the carrying amount of the related debt liability instead of being presented as an asset. Debt disclosures include the face amount of the debt liability and the effective interest rate. In August 2015, the FASB issued ASU 2015-15, Interest - Imputation of Interest (Subtopic 835-30) - Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. ASU 2015-15 provides additional guidance to ASU 2015-03, which did not address presentation or subsequent measurement of debt issuance costs related to line of credit arrangements. ASU 2015-15 noted that the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line of credit arrangement, regardless of whether there are any outstanding borrowings on the line of credit arrangement. Residential's application of ASU 2015-03 represents a change in accounting principle and has been applied retrospectively, which resulted in i) a reclassification of the deferred debt issuance cost component of Residential's deferred leasing and financing costs to repurchase and loan agreements and other secured borrowings and ii) a reclassification of deferred leasing cost component of Residential's deferred leasing and financing costs to prepaid expenses and other assets in our consolidated balance sheets. The following table represents the effect of the reclassification of prior period balances as a result this adoption ($ in thousands):
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Recently issued accounting standards In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The amendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under Topic 230. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted, including adoption during an interim period. We do not expect the impact of adopting this standard to have a material impact on our consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718). ASU 2016-09 makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. This update standard is effective for interim and annual reporting periods beginning after December 15, 2016, although early adoption is permitted. We are currently evaluating the impact of this ASU on our consolidated financial statements. In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires that lessees recognize assets and liabilities for leases with lease terms greater than twelve months in the statement of financial position and also requires improved disclosures to help users of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases. This update is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of this ASU on our consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10). ASU 2016-01 requires all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee). The amendments also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, the amendments eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities and the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public business entities. The amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. Upon our adoption of ASU 2016-01, we expect to retrospectively reclassify our other comprehensive income related to our available-for-sale equity securities into our consolidated statement of operations. This reclassification will not impact our previously reported total equity. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In August 2015, FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which effectively delayed the adoption date of ASU 2014-09 by one year. ASU 2014-09 is therefore effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2016. We do not expect this amendment to have a significant effect on our consolidated financial statements. |
Real estate assets, net |
9 Months Ended |
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Sep. 30, 2016 | |
Real Estate [Abstract] | |
Real estate assets, net | Real estate assets, net As of September 30, 2016, we had no real estate assets. The following describes Residential's real estate assets that were included in our consolidated financial statements as of December 31, 2015. These real estate assets are no longer included in our consolidated financial statements effective from January 1, 2016. Real estate held for use As of December 31, 2015, Residential had 4,933 REO properties held for use. Of these properties, 2,118 had been leased, 264 were being listed and ready for rent and 350 were in varying stages of renovation and unit turn status. With respect to the remaining 2,201 REO properties, we were in the process of determining whether these properties would meet Residential's rental profile. Real estate held for sale As of December 31, 2015, Residential classified 1,583 properties having an aggregate carrying value of $250.6 million as real estate held for sale. Management determined to divest of these properties because they did not meet Residential's rental property investment criteria. |
Mortgage loans |
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Mortgage Loans on Real Estate [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage loans | Mortgage loans As of September 30, 2016, we had no mortgage loans due to the deconsolidation of Residential. The following describes Residential's mortgage loans that were included in our consolidated financial statements as of December 31, 2015 as well as certain related activity recognized in our consolidated financial statements for the three and nine months ended September 30, 2015. The following table sets forth the fair value of Residential's mortgage loans at fair value, the related unpaid principal balance and market value of underlying properties by delinquency status as of December 31, 2015 ($ in thousands):
The following table sets forth the carrying value of Residential's mortgage loans held for sale, the related unpaid principal balance and market value of underlying properties by delinquency status as of December 31, 2015 ($ in thousands):
Re-performing residential mortgage loans For the three and nine months ended September 30, 2015, Residential recognized no provision for loan loss and no adjustments to the amount of the accretable yield. For the three and nine months ended September 30, 2015, Residential accreted $0.1 million and $0.6 million, respectively, into interest income with respect to these re-performing loans. As of December 31, 2015, these re-performing loans, having a UPB of $6.0 million and a carrying value of $4.0 million, were included in mortgage loans held for sale. Due to the deconsolidation of Residential, no re-performing residential mortgage loans were included in our consolidated financial statements effective from January 1, 2016. The following table presents changes in the balance of the accretable yield for the periods indicated:
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Fair value of financial instruments |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value of financial instruments | Fair value of financial instruments The following table sets forth the fair value of financial assets by level within the fair value hierarchy as of September 30, 2016 ($ in thousands):
We did not transfer any assets from one level to another level during the nine months ended September 30, 2016 or during the year ended December 31, 2015. The carrying values of our cash and cash equivalents, related party receivables, accrued salaries and employee benefits and accounts payable and other accrued liabilities are equal to or approximate fair value. The fair value of our available-for-sale securities is based on unadjusted quoted market prices from active markets. As of September 30, 2016, we held 1,624,465 shares of Residential's common stock, representing approximately 3.02% of Residential's then-outstanding common stock, which is included as available-for-sale securities in our consolidated balance sheet as of September 30, 2016. At December 31, 2015, we held 324,465 shares of Residential's common stock, representing approximately 0.58% of Residential's then-outstanding common stock. All of our shares of Residential's common stock were acquired in open market transactions. As of December 31, 2015, we eliminated our investment in Residential common stock upon consolidation (see Note 1). The following table presents the amortized cost and fair value of our available-for-sale securities as of September 30, 2016 ($ in thousands):
We have recognized no other-than-temporary impairment related to our investment in Residential's common stock. Management believes that the declines in the fair value driven by temporary market fluctuations. During the nine months ended September 30, 2016 and 2015, we acquired 1,300,000 and 324,465 shares, respectively, of Residential's common stock in open market transactions at an average purchase price of $11.97 and $15.41 per share, respectively. Due to the deconsolidation of Residential effective January 1, 2016, we did not have any level 3 assets in our consolidated financial statements for the nine months ended September 30, 2016. The following describes Residential's financial assets and liabilities that were included in our consolidated financial statements as of December 31, 2015 as well as certain related activity recognized in our consolidated financial statements for the three and nine months ended September 30, 2015. The following table sets forth the fair value of Residential's financial assets and liabilities by level within the fair value hierarchy as of December 31, 2015 ($ in thousands):
Residential did not transfer any assets from one level to another level during the year ended December 31, 2015. The carrying values of Residential's cash and cash equivalents, restricted cash, related party receivables, accrued salaries and employee benefits, accounts payable and other accrued liabilities and related party payables were equal to or approximated fair value. The fair values of Residential's mortgage loans at fair value and non-performing mortgage loans held for sale were estimated using our proprietary pricing model. The fair value of Residential's real estate assets held for sale was estimated using BPOs, estimated sales prices from pending contracts and discounted cash flow models. The fair value of Residential's re-performing mortgage loans held for sale was estimated using the present value of the future estimated principal and interest payments of the loan, with the discount rate used in the present value calculation representing the estimated effective yield of the loan. The fair value of Residential's repurchase agreements was estimated using the income approach based on credit spreads available currently in the market for similar floating rate debt. The fair value of Residential's other secured borrowings was estimated using observable market data. The following table sets forth the changes in Residential's level 3 assets that are measured at fair value on a recurring basis for the three and nine months ended September 30, 2015 ($ in thousands):
The significant unobservable inputs used in the fair value measurement of Residential's mortgage loans are discount rates, forecasts of future home prices, alternate loan resolution probabilities, resolution timelines and the value of underlying properties. Significant changes in any of these inputs in isolation could result in a significant change to the fair value measurement. A decline in the discount rate in isolation would increase the fair value. A decrease in the housing pricing index in isolation would decrease the fair value. Individual loan characteristics such as location and value of underlying collateral affect the loan resolution probabilities and timelines. An increase in the loan resolution timeline in isolation would decrease the fair value. A decrease in the value of underlying properties in isolation would decrease the fair value. The following table sets forth quantitative information about the significant unobservable inputs used to measure the fair value of Residential's mortgage loans as of December 31, 2015:
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Borrowings |
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Borrowings | Borrowings As of September 30, 2016, we had no outstanding debt due to the deconsolidation of Residential. The following describes Residential's repurchase and loan agreements and its other secured borrowings that were included in our consolidated financial statements as of December 31, 2015. Repurchase and loan agreements The following table sets forth data with respect to Residential's repurchase and loan agreements as of December 31, 2015 ($ in thousands):
Other secured debt As of December 31, 2015, Residential's consolidated financial statements included three securitization trusts (ARLP 2015-1, ARLP 2014-2 and ARLP 2014-1), which were VIEs of which Residential was the primary beneficiary. Each trust was a Delaware statutory trust that was wholly owned by Residential's operating partnership with a federally chartered bank as its trustee. As of December 31, 2015, the book value of the underlying securitized assets held by ARLP 2015-1 was $282.1 million, the book value of the underlying securitized assets held by ARLP 2014-2 was $322.5 million, and the book value of the underlying securitized assets held by ARLP 2014-1 was $202.3 million. The following table sets forth data with respect to these notes as of December 31, 2015 ($ in thousands):
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Commitments and contingencies |
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Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and contingencies | Commitments and contingencies Litigation, claims and assessments From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. Set forth below is a summary of legal proceedings to which we are a party during 2016: City of Cambridge Retirement System v. Altisource Asset Management Corp., et al. On January 16, 2015, a putative shareholder class action complaint was filed in the United States District Court of the Virgin Islands by a purported shareholder of AAMC under the caption City of Cambridge Retirement System v. Altisource Asset Management Corp., et al., 15-cv-00004. The action names as defendants AAMC, Mr. Erbey and certain officers of AAMC and alleges that the defendants violated federal securities laws by failing to disclose material information to AAMC shareholders concerning alleged conflicts of interest held by Mr. Erbey with respect to AAMC’s relationship and transactions with Residential, Altisource, Home Loan Servicing Solutions, Ltd., Southwest Business Corporation, NewSource Reinsurance Company and Ocwen, including allegations that the defendants failed to disclose (i) the nature of relationships between Mr. Erbey, AAMC and those entities; and (ii) that the transactions were the result of an allegedly unfair process from which Mr. Erbey failed to recuse himself. The action seeks, among other things, an award of monetary damages to the putative class in an unspecified amount and an award of attorney’s and other fees and expenses. AAMC and Mr. Erbey are the only defendants who have been served with the complaint. On May 12, 2015, the court entered an order granting the motion of Denver Employees Retirement Plan to be lead plaintiff. On May 15, 2015, the court entered a scheduling order requiring plaintiff to file an amended complaint on or before June 19, 2015, and setting a briefing schedule for any motion to dismiss. Plaintiff filed an amended complaint on June 19, 2015. On July 20, 2015, AAMC and Mr. Erbey filed a motion to dismiss the amended complaint. Briefing on the motion to dismiss was completed on September 3, 2015, and we are awaiting a decision from the court on the motion. We believe the amended complaint is without merit. At this time, we are not able to predict the ultimate outcome of this matter, nor can we estimate the range of possible loss, if any. Kanga v. Altisource Asset Management Corporation, et al. On March 12, 2015, a shareholder derivative action was filed in the Superior Court of the Virgin Islands, Division of St. Croix, by a purported shareholder of AAMC under the caption Nanzeen Kanga v. William Erbey, et al., SX-15-CV-105. The action names as defendants William C. Erbey and each of the current and former members of AAMC's Board of Directors and alleges that Mr. Erbey and AAMC’s directors breached fiduciary duties in connection with the disclosures that are the subject of the City of Cambridge Retirement System case described above and certain other matters involving the relationship of Residential and AAMC. On May 15, 2015, the plaintiff and the defendants filed an agreed motion to stay the action until the earliest of any of the following events: (i) the City of Cambridge Retirement System action is dismissed with prejudice; (ii) any of the defendants in the City of Cambridge Retirement System action file an answer in that action; and (iii) defendants do not move to stay any later-filed derivative action purportedly brought on behalf of us arising from similar facts as the Kanga action and relating to the same time frame or such motion to stay is denied. At this time, we are not able to predict the ultimate outcome of this matter, nor can we estimate the range of possible loss, if any. Sokolowski v. Erbey, et al. On December 24, 2014, a shareholder derivative action was filed in the United States District Court for the Southern District of Florida by a purported shareholder of Ocwen. The action named the directors of Ocwen as defendants and alleged, among other things, various breaches of fiduciary duties by the directors of Ocwen. On February 11, 2015, plaintiff filed an amended complaint naming the directors of Ocwen as defendants and also naming Residential, AAMC, Altisource and Home Loan Servicing Solutions, Ltd. as alleged aiders and abettors of the purported breaches of fiduciary duties. The amended complaint alleges that the directors of Ocwen breached their fiduciary duties by, among other things, allegedly failing to exercise oversight over Ocwen’s compliance with applicable laws, rules and regulations; failing to exercise oversight responsibilities with respect to the accounting and financial reporting processes of Ocwen; failing to prevent conflicts of interest and allegedly improper related party transactions; failing to adhere to Ocwen’s code of conduct and corporate governance guidelines; selling personal holdings of Ocwen stock on the basis of material adverse inside information; and disseminating allegedly false and misleading statements regarding Ocwen’s compliance with regulatory obligations and allegedly self-dealing transactions with related companies. Plaintiff claims that as a result of the alleged breaches of fiduciary duties, Ocwen has suffered damages, including settlements with regulatory agencies in excess of $2 billion, injury to its reputation and corporate goodwill and exposure to governmental investigations and securities and consumer class action lawsuits. In addition to the derivative claims, the plaintiff also alleges an individual claim that Ocwen’s 2014 proxy statement allegedly contained untrue statements of material fact and failed to disclose material information in violation of federal securities laws. The plaintiff seeks, among other things, an order requiring the defendants to repay to Ocwen unspecified amounts by which Ocwen has been damaged or will be damaged, an award of an unspecified amount of exemplary damages, changes to Ocwen's corporate governance and an award of attorneys’ and other fees and expenses. On April 13, 2015, nominal defendant Ocwen and defendants Mr. Erbey and Mr. Faris filed a motion to stay the action. On July 16, 2015, we filed a motion to dismiss all claims against us in the action, based upon, among other arguments, lack of personal jurisdiction and failure to state a claim. Co-defendant Residential filed a similar motion to dismiss the complaint as to all claims asserted against it. On December 8, 2015, the court granted Residential's and our motions to dismiss for lack of personal jurisdiction with leave to amend the jurisdiction allegations no later than January 4, 2016. On December 15, 2015, Hutt v. Erbey, et al., Case No. 15-cv-81709-WPD, was transferred to the Southern District of Florida from the Northern District of Georgia. That same day, a third related derivative action, Lowinger v. Erbey, et al., Case No. 15-cv-62628-WPD, was also filed in the Southern District of Florida. The court then requested that the parties file a response stating their positions as to whether the actions should be consolidated. On December 29, 2015, we filed a response stating that we took no position on the issue of consolidation, so long as our defenses were fully reserved should plaintiff Sokolowski seek to file an amended complaint. Neither plaintiff Sokolowski nor plaintiff Hutt opposed consolidation in their responses. On December 30, 2015, the court issued an order that, among other things, extended the deadline for plaintiff Sokolowski to file its amended complaint to cure the jurisdictional defects as to Residential and us until January 13, 2016. On January 8, 2016, the court issued an order consolidating the three related actions. On February 2, 2016, Plaintiffs Sokolowski and Lowinger filed competing motions for appointment of lead counsel in the consolidated action. These motions were fully briefed on February 5, 2016. Subsequently, on February 17, 2016, the court issued an order appointing Sokolowski’s counsel as lead counsel with Lowinger’s and Hutt’s counsel serving on the executive committee of the plaintiffs. It also ordered that a consolidated complaint in the matter shall be filed no later than March 8, 2016. On March 8, 2016, the plaintiffs filed a consolidated certified shareholder derivative complaint (the “Consolidated Complaint”) in the action. On March 11, the Special Litigation Committee of Ocwen sought additional time beyond the March 31, 2016 originally anticipated completion date to analyze the Consolidated Complaint. On March 22, 2016, the parties filed a joint consent motion for entry of an order amending the briefing schedule regarding the Consolidated Complaint. On March 23, 2016, the court entered a scheduling order requiring defendants to file their motions to dismiss on or before May 13, 2016, plaintiffs to file a response to any such motion on or before June 17, 2016 and defendants to file any reply briefs on or before July 15, 2016. On May 13, 2016, we filed a motion to dismiss the Sokolowski action as to us. Subsequently, plaintiffs sought and received an extension to file their opposition to the defendants' motions to dismiss to August 19, 2016 and a further extension to September 29, 2016. On September 13, 2016, plaintiffs, Ocwen, Mr. Erbey, Mr. Faris, and Mr. Britti requested that the court transfer the case to Magistrate Judge Snow in order to assist with settlement negotiations. The court granted the request, and counsel for plaintiffs and Ocwen appeared before Magistrate Judge Snow on October 13, 2016 for a settlement conference. At the conference, plaintiffs and Ocwen reached an agreement in principle to resolve certain claims, which Ocwen has publicly disclosed it believes will be covered in full by its applicable insurance coverage. Based on our understanding of the settlement terms, we believe the settlement agreement will include our release from any and all liability in the matter. Plaintiffs filed a Settlement Term Sheet under seal on October 18, 2016. The Stipulation of Settlement is due on or before November 18, 2016. A Final Approval Hearing will be held on January 18, 2017. We believe the complaint against us is without merit. At this time, until the settlement agreement is finalized and approved, we are not able to predict the ultimate outcome of this matter, nor can we estimate the range of possible loss, if any. Management does not believe that we have incurred an estimable, probable or material loss by reason of any of the above actions. |
Related-party transactions |
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related-party transactions | Related party transactions New asset management agreement with Residential On March 31, 2015, we entered into the New AMA with Residential. The New AMA, which became effective on April 1, 2015, provides for a new management fee structure, which replaces the incentive fee structure under the Original AMA as follows:
Residential has the flexibility to pay up to 25% of the incentive management fee to us in shares of Residential common stock. Under the New AMA, we will continue to be the exclusive asset manager for Residential for an initial term of 15 years from April 1, 2015, with two potential five-year extensions, subject to Residential achieving an average annual return on invested capital of at least 7.0%. Under the New AMA, Residential will not be required to reimburse us for the allocable compensation and routine overhead expenses of our employees and staff, all of which will now be covered by the Base Management Fee described above. Only the compensation and benefits of the general counsel dedicated to Residential and certain other out-of-pocket expenses incurred on Residential's behalf are reimbursed by Residential. Neither party is entitled to terminate the New AMA prior to the end of the initial term, or each renewal term, other than termination by (a) Residential and/or us “for cause” for certain events such as a material breach of the New AMA and failure to cure such breach, (b) Residential for certain other reasons such as Residential’s failure to achieve a return on invested capital of at least 7.0% for two consecutive fiscal years after the third anniversary of the New AMA and (c) Residential in connection with certain change of control events. Summary of related party transactions The following table presents our significant transactions with Residential, which is a related party ($ in thousands). Prior to our adoption of ASU 2015-02 on January 1, 2016, our transactions with Residential were eliminated upon consolidation.
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No Incentive Management Fee was due from Residential for the third quarter of 2016 because Residential's return on invested capital (as defined in the New AMA) for the six quarters covered by the New AMA was below the required hurdle rate. Under the New AMA, to the extent Residential has an aggregate shortfall in its return rate over the previous seven quarters, that aggregate return rate shortfall gets added to the normal quarterly 1.75% return hurdle for the next quarter before we are entitled to an Incentive Management Fee. As of September 30, 2016, Residential's aggregate return shortfall from the prior six quarters under the New AMA was approximately 36.66% of invested capital. Therefore, Residential must achieve a 38.41% return on invested capital in the fourth quarter of 2016 before any Incentive Management Fee will be due from Residential. In future quarters, return on invested capital must exceed the required hurdle for the current quarter plus any carried-forward cumulative additional hurdle shortfall from the prior seven quarters before any Incentive Management Fee will be due from Residential. As of September 30, 2016, we held 1,624,465 shares of Residential's common stock, representing approximately 3.02% of Residential's then-outstanding common stock. At December 31, 2015, we held 324,465 shares of Residential's common stock, representing approximately 0.58% of Residential's then-outstanding common stock. All of our shares of Residential's common stock were acquired in open market transactions. |
Share-based payments |
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Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-based payments | Share-based payments During the nine months ended September 30, 2016, we granted no share-based payments to members of management. During the nine months ended September 30, 2015, we granted 44,132 shares of market-based restricted stock to certain members of executive management under our 2012 Equity Incentive Plan with a weighted average grant date fair value per share of $181.02. Our directors each received annual grants of restricted stock equal to $60 thousand based on the market value of our common stock at the time of the annual stockholders meeting. These shares of restricted stock vest and are issued after a one-year service period subject to each director attending at least 75% of the Board and committee meetings. No dividends are paid on the shares until the award is issued. During the nine months ended September 30, 2016 and 2015, we granted 10,200 and 1,122 shares of restricted stock, respectively, to our directors with a weighted average grant date fair value per share of $18.08 and $162.66, respectively. We recorded $2.4 million and $7.2 million of compensation expense related to these grants for the three and nine months ended September 30, 2016, respectively, and we recorded $1.4 million and $4.5 million for the three and nine months ended September 30, 2015, respectively. As of September 30, 2016 and December 31, 2015, we had an aggregate $11.7 million and $18.7 million, respectively, of total unrecognized share-based compensation cost to be recognized over a weighted average remaining estimated term of 1.6 years and 2.9 years, respectively. |
Income taxes |
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Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income taxes | Income taxes We are domiciled in the United States Virgin Islands (“USVI”) and under current USVI law are obligated to pay taxes in the United States Virgin Islands on income and/or capital gains. We applied for tax benefits from the USVI Economic Development Commission and received our certificate of benefits, effective as of February 1, 2013. Under the certificate of benefits, so long as we comply with the provisions thereunder, we will receive a 90% exemption on our USVI-sourced income taxes until 2043. NewSource is considered a controlled foreign corporation (“CFC”) to AAMC. Subpart F income generated by a CFC is taxed currently in the USVI and is not eligible for the reduced tax rate under the certificate of benefits. As of September 30, 2016 and December 31, 2015, we accrued no interest or penalties associated with any unrecognized tax benefits, nor did we recognize any interest expense or penalty during the nine months ended September 30, 2016 and 2015. As of December 31, 2015, Residential accrued no interest or penalties associated with any unrecognized tax benefits, nor did Residential recognize any interest expense or penalty during the nine months ended September 30, 2015. Residential recorded nominal state and local tax expense on income and property for the three and nine months ended September 30, 2015. Our subsidiaries and we remain subject to tax examination for the period from inception to December 31, 2015. Management assesses the available evidence to estimate if sufficient future taxable income will be generated to utilize existing deferred tax assets. Based on this assessment as of September 30, 2016, we recorded a valuation allowance for the deferred tax assets that we believe are more likely than not to not be realized. This valuation allowance resulted in the recognition of $0.9 million of income tax expense for the nine months ended September 30, 2016, respectively. If, in future periods, we determine that positive evidence exists that these deferred tax assets are more likely than not to be realized, the related valuation allowance would be reversed to the extent that the deferred tax asset is more likely than not to be realized. |
Earnings per share |
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Earnings per share | Earnings per share The following table sets forth the components of diluted earnings (loss) per share (in thousands, except share and per share amounts):
We excluded the items presented below from the calculation of diluted earnings per share as they were antidilutive for the periods indicated:
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Segment information |
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Segment Reporting [Abstract] | |
Segment information | Segment information Our primary business is to provide asset management and certain corporate governance services to institutional investors. Because substantially all of our revenue is derived from the services we provide to Residential under the New AMA, we operate as a single segment focused on providing asset management and corporate governance services. |
Subsequent events |
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Subsequent Events [Abstract] | |
Subsequent events | Subsequent events Management has evaluated the impact of all subsequent events through the issuance of these consolidated interim financial statements and has determined that there were no subsequent events requiring adjustment or disclosure in the financial statements. |
Organization and basis of presentation (Policies) |
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Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of presentation and use of estimates | The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates. The unaudited interim consolidated financial statements and accompanying unaudited consolidated financial information, in our opinion, contain all adjustments that are of a normal recurring nature and are necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. The interim results are not necessarily indicative of results for a full year. We have omitted certain notes and other information from the interim consolidated financial statements presented in this Quarterly Report on Form 10-Q as permitted by the Securities and Exchange Commission (“SEC”) rules and regulations. These consolidated financial statements should be read in conjunction with our annual consolidated financial statements included within our 2015 Annual Report on Form 10-K, which was filed with the SEC on February 29, 2016. Effective January 1, 2016, the accompanying consolidated financial statements include the accounts of AAMC and its consolidated subsidiaries, which are comprised of voting interest entities in which we are determined to have a controlling financial interest under Accounting Standards Codification (“ASC”) 810, as amended by Accounting Standards Update (“ASU”) 2015-02, Consolidation (Topic 810) – Amendments to the Consolidation Analysis (“ASU 2015-02”). Our voting interest entities consist entirely of our wholly owned subsidiaries. We also consider variable interest entities (“VIEs”) for consolidation where we are the primary beneficiary as described below. With the adoption of the ASU 2015-02 effective January 1, 2016, we no longer consolidate Residential as a VIE, and we currently do not have any other potential VIEs. For legal entities evaluated for consolidation, we must determine whether the interests that we hold and fees paid to us qualify as a variable interest in the entity. This includes an evaluation of fees paid to us where we act as a decision maker or service provider to the entity being evaluated. Fees received by us are not variable interests if (i) the fees are compensation for services provided and are commensurate with the level of effort required to provide those services, (ii) the service arrangement includes only terms, conditions or amounts that are customarily present in arrangements for similar services negotiated at arm’s length and (iii) our other economic interests in the VIE held directly and indirectly through our related parties, as well as economic interests held by related parties under common control, where applicable, would not absorb more than an insignificant amount of the entity’s losses or receive more than an insignificant amount of the entity’s benefits. For those entities in which we have a variable interest, we perform an analysis to first determine whether the entity is a VIE. This determination includes considering whether the entity’s equity investment at risk is sufficient, whether the voting rights of an investor are not proportional to its obligation to absorb the income or loss of the entity and substantially all of the entity's activities either involve or are conducted on behalf of that investor and its related parties and whether the entity’s at-risk equity holders have the characteristics of a controlling financial interest. A VIE must be consolidated by its primary beneficiary. Performance of such analysis requires the exercise of judgment. The primary beneficiary of a VIE is generally defined as the party who has a controlling financial interest in the VIE. We are generally deemed to have a controlling financial interest in a VIE if we have (i) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. For purposes of evaluating (ii) above, fees paid to us are excluded if the fees are compensation for services provided commensurate with the level of effort required to be performed and the arrangement includes only customary terms, conditions or amounts present in arrangements for similar services negotiated at arm’s length. We also evaluate our economic interests in the VIE held directly by us and indirectly through our related parties, as well as economic interests held by related parties under common control, where applicable. The primary beneficiary evaluation is generally performed qualitatively on the basis of all facts and circumstances. However, quantitative information may also be considered in the analysis, as appropriate. These analyses require judgment. Changes in the economic interests (either by us, our related parties or third parties) or amendments to the governing documents of the VIE could affect an entity's status as a VIE or the determination of the primary beneficiary. The primary beneficiary evaluation is updated periodically. For voting interest entities, we shall consolidate the entity if we have a controlling financial interest. We have a controlling financial interest in a voting interest entity if (i) for legal entities other than limited partnerships, we own a majority voting interest in the entity or, for limited partnerships and similar entities, we own a majority of the entity’s kick-out rights through voting limited partnership interests and (ii) non-controlling shareholders or partners do not hold substantive participating rights and no other conditions exist that would indicate that we do not control the entity. Prior to our deconsolidation of Residential as described below, our consolidated financial statements also include those VIEs that were included within Residential's consolidated financial statements. Residential had three securitization trusts, ARLP Securitization Trust, Series 2014-1 (“ARLP 2014-1”), ARLP Securitization Trust, Series 2014-2 (“ARLP 2014-2”) and ARLP Securitization Trust, Series 2015-1 (“ARLP 2015-1”), which were classified as VIEs. Because Residential was the primary beneficiary, these entities were included in the consolidated financial statements of Residential but are no longer included in our consolidated financial statements since the deconsolidation effective January 1, 2016. See Note 5 for more information regarding these securitization trusts. |
Deconsolidation of Residential | Effective January 1, 2016, we adopted the provisions of ASU 2015-02, and we performed an analysis of our relationship with Residential pursuant to the amended guidance. We determined that the compensation we receive in return for our services to Residential is commensurate with the level of effort required to perform such services and the arrangement includes customary terms, conditions or amounts present in arrangements for similar services negotiated at arm’s length; therefore, Residential is no longer a VIE under the amended guidance. As a result, effective January 1, 2016, we no longer consolidate the accounts of Residential. We have applied ASU 2015-02 using the modified retrospective approach, which has resulted in a cumulative-effect adjustment to equity on January 1, 2016. As a result, periods ending prior to the adoption were not impacted. The adoption effectively removed those balances previously disclosed that related to Residential from our consolidated financial statements and eliminated the amounts previously reported as noncontrolling interests in Residential as a consolidated affiliate. Subsequent to adoption, our consolidated revenues consist primarily of management fees received from Residential under the New AMA and interest and dividend income, and our consolidated expenses consist primarily of salaries and employee benefits, share-based compensation, legal and professional fees and general and administrative expenses. As a result of our deconsolidation of Residential, we have also reclassified certain prior period amounts for consistency with the current period presentation, including reclassification of amounts from accounts payable and other accrued liabilities to accrued salaries and benefits within the consolidated balance sheet and from general and administrative expenses to salaries and benefits, share-based compensation and legal and professional fees within the consolidated statement of operations. These reclassifications had no effect on the reported results of operations. |
Available-for-sale securities | The securities we hold consist solely of the common stock of Residential. These securities are classified as available for sale and are reported at fair value. We adjust our investment in Residential common stock to fair value based on unadjusted quoted market prices in active markets. Changes in the fair value are recorded in accumulated other comprehensive income (loss) as changes in unrealized gain (loss) on available-for-sale securities. Our ability to sell these securities, or the price ultimately realized for these securities, depends upon the demand in the market and potential restrictions on the timing at which we may be able to sell the Residential common stock when desired. |
Deferred debt issuance costs | In April 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires that debt issuance costs are presented on the balance sheet as a deduction from the carrying amount of the related debt liability instead of being presented as an asset. Debt disclosures include the face amount of the debt liability and the effective interest rate. In August 2015, the FASB issued ASU 2015-15, Interest - Imputation of Interest (Subtopic 835-30) - Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. ASU 2015-15 provides additional guidance to ASU 2015-03, which did not address presentation or subsequent measurement of debt issuance costs related to line of credit arrangements. ASU 2015-15 noted that the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line of credit arrangement, regardless of whether there are any outstanding borrowings on the line of credit arrangement. Residential's application of ASU 2015-03 represents a change in accounting principle and has been applied retrospectively, which resulted in i) a reclassification of the deferred debt issuance cost component of Residential's deferred leasing and financing costs to repurchase and loan agreements and other secured borrowings and ii) a reclassification of deferred leasing cost component of Residential's deferred leasing and financing costs to prepaid expenses and other assets in our consolidated balance sheets. |
Recently issued accounting standards | In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718). ASU 2016-09 makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. This update standard is effective for interim and annual reporting periods beginning after December 15, 2016, although early adoption is permitted. We are currently evaluating the impact of this ASU on our consolidated financial statements. In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires that lessees recognize assets and liabilities for leases with lease terms greater than twelve months in the statement of financial position and also requires improved disclosures to help users of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases. This update is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of this ASU on our consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10). ASU 2016-01 requires all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee). The amendments also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, the amendments eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities and the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public business entities. The amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. Upon our adoption of ASU 2016-01, we expect to retrospectively reclassify our other comprehensive income related to our available-for-sale equity securities into our consolidated statement of operations. This reclassification will not impact our previously reported total equity. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In August 2015, FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which effectively delayed the adoption date of ASU 2014-09 by one year. ASU 2014-09 is therefore effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2016. We do not expect this amendment to have a significant effect on our consolidated financial statements. |
Organization and basis of presentation (Tables) |
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | The following table represents the effect of the reclassification of prior period balances as a result this adoption ($ in thousands):
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Mortgage loans (Tables) |
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Mortgage Loans on Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of mortgage loans | The following table sets forth the fair value of Residential's mortgage loans at fair value, the related unpaid principal balance and market value of underlying properties by delinquency status as of December 31, 2015 ($ in thousands):
The following table sets forth the carrying value of Residential's mortgage loans held for sale, the related unpaid principal balance and market value of underlying properties by delinquency status as of December 31, 2015 ($ in thousands):
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Schedule of information for estimates of contractually required payments and cash flows expected | The following table presents changes in the balance of the accretable yield for the periods indicated:
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Fair value of financial instruments (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value measurements, recurring and nonrecurring | The following table sets forth the fair value of Residential's financial assets and liabilities by level within the fair value hierarchy as of December 31, 2015 ($ in thousands):
The following table sets forth the fair value of financial assets by level within the fair value hierarchy as of September 30, 2016 ($ in thousands):
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Fair value, unrealized gains (losses) | The following table presents the amortized cost and fair value of our available-for-sale securities as of September 30, 2016 ($ in thousands):
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Fair value, assets measured on recurring basis, reconciliation | The following table sets forth the changes in Residential's level 3 assets that are measured at fair value on a recurring basis for the three and nine months ended September 30, 2015 ($ in thousands):
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Fair value measurements, recurring and nonrecurring, unobservable inputs | The following table sets forth quantitative information about the significant unobservable inputs used to measure the fair value of Residential's mortgage loans as of December 31, 2015:
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Borrowings (Tables) |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of repurchase agreements | The following table sets forth data with respect to Residential's repurchase and loan agreements as of December 31, 2015 ($ in thousands):
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Schedule of other secured debt | The following table sets forth data with respect to these notes as of December 31, 2015 ($ in thousands):
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Related-party transactions (Tables) |
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of related party transactions | The following table presents our significant transactions with Residential, which is a related party ($ in thousands). Prior to our adoption of ASU 2015-02 on January 1, 2016, our transactions with Residential were eliminated upon consolidation.
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Earnings per share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of earning per share, basic and diluted | The following table sets forth the components of diluted earnings (loss) per share (in thousands, except share and per share amounts):
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Schedule of antidilutive securities excluded from computation of earnings per share | We excluded the items presented below from the calculation of diluted earnings per share as they were antidilutive for the periods indicated:
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Organization and basis of presentation (Details) |
1 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|
Apr. 01, 2015
extension
|
Dec. 21, 2012 |
Sep. 30, 2015
USD ($)
|
Oct. 31, 2013
USD ($)
|
Dec. 31, 2015
securitization_trust
|
Sep. 30, 2016
servicer
|
|
Organization and Basis of Presentation [Line Items] | ||||||
Asset management agreement, term | 15 years | 15 years | ||||
Number of securitization trusts | securitization_trust | 3 | |||||
NewSource Reinsurance Company Ltd. | Common Stock | ||||||
Organization and Basis of Presentation [Line Items] | ||||||
Payments made for investments | $ | $ 5,000,000 | $ 2,000,000 | ||||
Percent of common stock owned of investments | 100.00% | |||||
Affiliated entity | Asset Management Agreement (AMA) | Altisource Residential Corporation | ||||||
Organization and Basis of Presentation [Line Items] | ||||||
Number of potential renewal extensions | extension | 2 | |||||
Automatic renewal term | 5 years | |||||
Altisource Residential Corporation | ||||||
Organization and Basis of Presentation [Line Items] | ||||||
Rental Properties, Number of Third-Party Service Providers | 2 | |||||
Number of mortgage servicers | 2 |
Organization and basis of presentation - Effect of new accounting pronouncement (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Deferred leasing and financing costs | $ 0 | |
Prepaid expenses and other assets | $ 1,415 | 3,169 |
Repurchase agreements | 763,369 | |
Other secured borrowings | $ 0 | 502,599 |
As Previously Reported | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Deferred leasing and financing costs | 7,886 | |
Prepaid expenses and other assets | 2,458 | |
Repurchase agreements | 767,513 | |
Other secured borrowings | 505,630 | |
Adjustments | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Deferred leasing and financing costs | (7,886) | |
Prepaid expenses and other assets | 711 | |
Repurchase agreements | (4,144) | |
Other secured borrowings | $ (3,031) |
Real estate assets, net (Details) |
Sep. 30, 2016
USD ($)
|
Dec. 31, 2015
USD ($)
property
|
---|---|---|
Real Estate [Abstract] | ||
Real estate assets | $ | $ 0 | |
Number of real estate properties held for use | 4,933 | |
Number of real estate properties rented | 2,118 | |
Number of real estate properties listed for rent | 264 | |
Number of real estate properties in renovation or unit turn status | 350 | |
Number of real estate properties under evaluation for rental portfolio | 2,201 | |
Number of real estate properties held for sale | 1,583 | |
Real estate assets held for sale (from previously consolidated VIE as of December 31, 2015) | $ | $ 0 | $ 250,557,000 |
Mortgage loans - Narrative (Details) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2015
USD ($)
|
Sep. 30, 2015
USD ($)
|
Sep. 30, 2016
loan
|
Dec. 31, 2015
USD ($)
loan
|
|
Mortgage Loans on Real Estate [Line Items] | ||||
Accretion | $ 100 | $ 600 | ||
Performing Financing Receivable | Loans receivable | Residential mortgage | ||||
Mortgage Loans on Real Estate [Line Items] | ||||
Balance of performing loans held for investment | $ 6,000 | |||
Mortgage loans held for sale (from consolidated VIE) | $ 4,000 | |||
Residential portfolio segment | Loans receivable | Residential mortgage | ||||
Mortgage Loans on Real Estate [Line Items] | ||||
Number of mortgage loans | loan | 0 | 1,297 | ||
Balance of performing loans held for investment | $ 440,366 |
Mortgage loans - Certain Loans Acquired Not Accounted For As Debt Securities (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period [Line Items] | |||
Balance at the beginning of the period | $ 3,886 | $ 7,640 | |
Payments and other reductions, net | 0 | (3,285) | |
Accretion | (112) | $ 0 | (581) |
Balance at the end of the period | $ 3,774 | $ 3,774 |
Fair value of financial instruments - Narrative (Details) - Common Stock - Altisource Residential Corporation - $ / shares |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
|
Investment Holdings [Line Items] | |||
Shares acquired in Residential | 1,624,465 | 324,465 | |
Investment owned, ownership percentage | 3.02% | ||
Noncontrolling interest, ownership percentage | 0.58% | ||
Additional shares acquired in Residential (shares) | 1,300,000 | 324,465 | |
Average purchase price per share of additional shares acquired in Residential (usd per share) | $ 11.97 | $ 15.41 |
Fair value of financial instruments - Fair value, unrealized gains (losses) (Details) $ in Thousands |
Sep. 30, 2016
USD ($)
|
---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Amortized Cost | $ 20,596 |
Gross Unrealized Gains | 0 |
Gross Unrealized Losses | 2,889 |
Fair Value | 17,707 |
Common Stock | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Amortized Cost | 20,596 |
Gross Unrealized Gains | 0 |
Gross Unrealized Losses | 2,889 |
Fair Value | $ 17,707 |
Commitments and contingencies (Details) - Sokolowski v. Erbey, et al. - Pending litigation |
Jan. 08, 2016
plaintiff
|
Feb. 11, 2015
USD ($)
|
---|---|---|
Loss Contingencies [Line Items] | ||
Amount paid for settlements with regulatory authorities by co-defendant (in excess of) | $ | $ 2,000,000,000 | |
Number of plaintiffs consolidated into one case | plaintiff | 3 |
Income taxes (Details) - USD ($) |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
|
Income Tax Disclosure [Abstract] | |||
Income tax exemption, percentage | 90.00% | ||
Entity Information [Line Items] | |||
Interest and penalties accrued | $ 0 | $ 0 | |
Interest and penalties expensed | 0 | $ 0 | |
Amount of income tax expense recognized from deferred tax asset valuation allowance | $ (900,000) | ||
Residential | |||
Entity Information [Line Items] | |||
Interest and penalties accrued | $ 0 | ||
Interest and penalties expensed | $ 0 |
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