aamc-20220930
000155507412/312022Q3FalseP3D100015550742022-01-012022-09-3000015550742022-10-28xbrli:shares00015550742022-09-30iso4217:USD00015550742021-12-31iso4217:USDxbrli:shares00015550742022-07-012022-09-3000015550742021-07-012021-09-3000015550742021-01-012021-09-300001555074us-gaap:CommonStockMember2021-12-310001555074us-gaap:AdditionalPaidInCapitalMember2021-12-310001555074us-gaap:RetainedEarningsMember2021-12-310001555074us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001555074us-gaap:TreasuryStockCommonMember2021-12-310001555074us-gaap:CommonStockMember2022-01-012022-03-310001555074us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-3100015550742022-01-012022-03-310001555074us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310001555074us-gaap:RetainedEarningsMember2022-01-012022-03-310001555074us-gaap:CommonStockMember2022-03-310001555074us-gaap:AdditionalPaidInCapitalMember2022-03-310001555074us-gaap:RetainedEarningsMember2022-03-310001555074us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310001555074us-gaap:TreasuryStockCommonMember2022-03-3100015550742022-03-310001555074us-gaap:CommonStockMember2022-04-012022-06-300001555074us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-3000015550742022-04-012022-06-300001555074us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-300001555074us-gaap:RetainedEarningsMember2022-04-012022-06-300001555074us-gaap:CommonStockMember2022-06-300001555074us-gaap:AdditionalPaidInCapitalMember2022-06-300001555074us-gaap:RetainedEarningsMember2022-06-300001555074us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300001555074us-gaap:TreasuryStockCommonMember2022-06-3000015550742022-06-300001555074us-gaap:CommonStockMember2022-07-012022-09-300001555074us-gaap:TreasuryStockCommonMember2022-07-012022-09-300001555074us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-300001555074us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-012022-09-300001555074us-gaap:RetainedEarningsMember2022-07-012022-09-300001555074us-gaap:CommonStockMember2022-09-300001555074us-gaap:AdditionalPaidInCapitalMember2022-09-300001555074us-gaap:RetainedEarningsMember2022-09-300001555074us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-300001555074us-gaap:TreasuryStockCommonMember2022-09-300001555074us-gaap:CommonStockMember2020-12-310001555074us-gaap:AdditionalPaidInCapitalMember2020-12-310001555074us-gaap:RetainedEarningsMember2020-12-310001555074us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001555074us-gaap:TreasuryStockCommonMember2020-12-3100015550742020-12-310001555074us-gaap:CommonStockMember2021-01-012021-03-310001555074us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001555074us-gaap:TreasuryStockCommonMember2021-01-012021-03-3100015550742021-01-012021-03-310001555074us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001555074us-gaap:RetainedEarningsMember2021-01-012021-03-310001555074us-gaap:CommonStockMember2021-03-310001555074us-gaap:AdditionalPaidInCapitalMember2021-03-310001555074us-gaap:RetainedEarningsMember2021-03-310001555074us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001555074us-gaap:TreasuryStockCommonMember2021-03-3100015550742021-03-310001555074us-gaap:CommonStockMember2021-04-012021-06-300001555074us-gaap:TreasuryStockCommonMember2021-04-012021-06-3000015550742021-04-012021-06-300001555074us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001555074us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300001555074us-gaap:RetainedEarningsMember2021-04-012021-06-300001555074us-gaap:CommonStockMember2021-06-300001555074us-gaap:AdditionalPaidInCapitalMember2021-06-300001555074us-gaap:RetainedEarningsMember2021-06-300001555074us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001555074us-gaap:TreasuryStockCommonMember2021-06-3000015550742021-06-300001555074us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001555074us-gaap:RetainedEarningsMember2021-07-012021-09-300001555074us-gaap:CommonStockMember2021-09-300001555074us-gaap:AdditionalPaidInCapitalMember2021-09-300001555074us-gaap:RetainedEarningsMember2021-09-300001555074us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-09-300001555074us-gaap:TreasuryStockCommonMember2021-09-3000015550742021-09-3000015550742014-03-3100015550742014-01-012014-03-31xbrli:pure0001555074us-gaap:SeriesAPreferredStockMember2020-02-030001555074aamc:LuxorCapitalPartnersGroupLuxorMembersrt:MinimumMember2020-02-032020-02-0300015550742020-02-030001555074aamc:LuxorCapitalPartnersGroupLuxorMember2020-02-032020-02-030001555074aamc:LuxorCapitalGroupLPetal.v.AltisourceAssetManagementCorporationMemberus-gaap:SeriesAPreferredStockMemberaamc:PutnamEquitySpectrumFundandPutnamCapitalSpectrumFundPutnamMember2021-02-172021-02-170001555074aamc:LuxorCapitalGroupLPetal.v.AltisourceAssetManagementCorporationMemberus-gaap:CommonStockMemberaamc:PutnamEquitySpectrumFundandPutnamCapitalSpectrumFundPutnamMember2021-02-170001555074aamc:LuxorCapitalGroupLPetal.v.AltisourceAssetManagementCorporationMemberaamc:PutnamEquitySpectrumFundandPutnamCapitalSpectrumFundPutnamMember2021-02-172021-02-1700015550742021-02-172021-02-170001555074aamc:SettlementAgreementWithWellingtonMember2021-08-272021-08-270001555074us-gaap:SeriesAPreferredStockMemberaamc:SettlementAgreementWithWellingtonMember2021-08-272021-08-270001555074us-gaap:SeriesAPreferredStockMemberaamc:SettlementAgreementWithWellingtonMember2021-08-270001555074aamc:SettlementAgreementWithWellingtonMember2021-07-012021-09-3000015550742022-01-06aamc:investor0001555074aamc:LuxorCapitalGroupLPetal.v.AltisourceAssetManagementCorporationMemberus-gaap:SeriesAPreferredStockMember2022-01-062022-01-060001555074us-gaap:SeriesAPreferredStockMember2022-01-062022-01-060001555074us-gaap:SeriesAPreferredStockMember2022-01-060001555074aamc:LuxorCapitalGroupLPetal.v.AltisourceAssetManagementCorporationMember2022-01-012022-03-3100015550742022-07-182022-07-180001555074us-gaap:SegmentDiscontinuedOperationsMember2021-01-012021-09-300001555074aamc:LoansHeldForSaleMember2022-09-300001555074aamc:LoansHeldForSaleMember2021-12-310001555074aamc:LoanHeldForInvestmentMember2022-09-300001555074aamc:LoanHeldForInvestmentMember2021-12-31aamc:loan0001555074aamc:LoansHeldForSaleMember2022-01-012022-09-300001555074aamc:LoanHeldForInvestmentMember2022-01-012022-09-300001555074stpr:FL2022-09-300001555074stpr:FL2021-12-310001555074stpr:NY2022-09-300001555074stpr:NY2021-12-310001555074stpr:NJ2022-09-300001555074stpr:NJ2021-12-310001555074stpr:CA2022-09-300001555074stpr:CA2021-12-310001555074stpr:WA2022-09-300001555074stpr:WA2021-12-310001555074stpr:CT2022-09-300001555074stpr:CT2021-12-310001555074stpr:TX2022-09-300001555074stpr:TX2021-12-310001555074stpr:IL2022-09-300001555074stpr:IL2021-12-310001555074aamc:OtherStateMember2022-09-300001555074aamc:OtherStateMember2021-12-310001555074us-gaap:FairValueMeasurementsRecurringMember2021-12-310001555074us-gaap:FairValueMeasurementsRecurringMember2022-09-300001555074us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2022-09-300001555074us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2022-09-300001555074us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2022-09-300001555074us-gaap:ValuationTechniqueDiscountedCashFlowMember2022-01-012022-09-300001555074aamc:PortfolioLoansMemberus-gaap:ValuationTechniqueDiscountedCashFlowMember2022-01-012022-09-300001555074us-gaap:EquitySecuritiesMember2022-07-012022-09-300001555074us-gaap:EquitySecuritiesMember2021-07-012021-09-300001555074us-gaap:EquitySecuritiesMember2022-01-012022-09-300001555074us-gaap:EquitySecuritiesMember2021-01-012021-09-300001555074us-gaap:CommonStockMember2022-07-012022-09-300001555074us-gaap:CommonStockMember2021-07-012021-09-300001555074us-gaap:CommonStockMember2022-01-012022-09-300001555074us-gaap:CommonStockMember2021-01-012021-09-300001555074aamc:MasterRepurchaseAgreementWithFlagstarBankFSBMemberus-gaap:LineOfCreditMember2022-08-310001555074aamc:MasterRepurchaseAgreementWithFlagstarBankFSBMemberus-gaap:LineOfCreditMember2022-08-012022-08-310001555074aamc:MasterRepurchaseAgreementWithFlagstarBankFSBMemberus-gaap:LineOfCreditMember2022-09-300001555074aamc:MasterRepurchaseAgreementWithFlagstarBankFSBMemberus-gaap:LineOfCreditMember2022-01-012022-09-300001555074aamc:FormerChiefExecutiveOfficerIndroneelChatterjeeMemberus-gaap:SubsequentEventMember2022-10-192022-10-190001555074aamc:ErbeyHoldingCorporationEtAlVBlackrockManagementIncEtAlMember2021-12-310001555074aamc:ErbeyHoldingCorporationEtAlVBlackrockManagementIncEtAlMember2022-09-300001555074us-gaap:RestrictedStockMembersrt:ManagementMember2022-05-122022-05-12aamc:installment0001555074us-gaap:RestrictedStockMembersrt:ManagementMember2021-09-202021-09-200001555074us-gaap:RestrictedStockMembersrt:ManagementMember2022-09-202022-09-200001555074us-gaap:RestrictedStockMembersrt:ManagementMember2021-06-282021-06-280001555074us-gaap:RestrictedStockMembersrt:ManagementMember2022-06-282022-06-280001555074us-gaap:RestrictedStockMembersrt:ManagementMember2021-02-242021-02-240001555074us-gaap:RestrictedStockMembersrt:ManagementMember2020-10-152020-10-150001555074srt:ChiefExecutiveOfficerMemberus-gaap:RestrictedStockMember2020-01-302020-01-300001555074srt:ChiefExecutiveOfficerMember2020-01-302020-01-300001555074us-gaap:RestrictedStockMember2021-04-162021-04-1600015550742021-04-162021-04-160001555074us-gaap:RestrictedStockMembersrt:DirectorMember2022-01-012022-09-300001555074us-gaap:RestrictedStockMembersrt:DirectorMember2021-01-012021-12-3100015550742021-01-012021-12-31aamc:employee0001555074us-gaap:RestrictedStockMember2022-07-012022-09-300001555074us-gaap:RestrictedStockMember2021-07-012021-09-300001555074us-gaap:RestrictedStockMember2022-01-012022-09-300001555074us-gaap:RestrictedStockMember2021-01-012021-09-300001555074us-gaap:PreferredStockMember2022-07-012022-09-300001555074us-gaap:PreferredStockMember2021-07-012021-09-300001555074us-gaap:PreferredStockMember2022-01-012022-09-300001555074us-gaap:PreferredStockMember2021-01-012021-09-30aamc:segment


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR TRANSITION PERIOD FROM __________ TO __________

COMMISSION FILE NUMBER: 001-36063

https://cdn.kscope.io/80c1b12fd86c5c62519551c829406932-aamc-20220930_g1.jpg

Altisource Asset Management Corporation
(Exact name of registrant as specified in its charter)
U.S. Virgin Islands66-0783125
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

5100 Tamarind Reef
Christiansted, U.S. Virgin Islands 00820
(Address of principal executive office)

(704) 275-9113
(Registrant’s telephone number, including area code)

Securities registered or to be registered pursuant to Section 12(b) of the Act:
  
Title of each class
Trading Symbol(s)
 
Name of each exchange on which registered
Common stock, par value $0.01 per shareAAMCNYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated FilerAccelerated Filer
Non-Accelerated FilerSmaller Reporting Company
Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of October 28, 2022, 1,777,205 shares of our common stock were outstanding (excluding 1,647,853 shares held as treasury stock).




Altisource Asset Management Corporation
September 30, 2022
Table of Contents

i


(table of contents)
References in this report to “we,” “our,” “us,” “AAMC” or the “Company” refer to Altisource Asset Management Corporation and its consolidated subsidiaries, unless otherwise indicated. References in this report to “Front Yard” refer to Front Yard Residential Corporation and its consolidated subsidiaries, unless otherwise indicated.

Special note on forward-looking statements

Our disclosure and analysis in this Quarterly Report on Form 10-Q contain, and our officers, directors and authorized spokespersons may make, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “targets,” “predicts” or “potential” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.

The forward-looking statements contained in this report reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual business, operations, results or financial condition to differ significantly from those expressed in any forward-looking statement. Factors that may materially affect such forward-looking statements include, but are not limited to:

Our ability to develop and implement new businesses or, to the extent such businesses are developed, our ability to make them successful or sustain the performance of any such businesses;
Developments in the litigation regarding our redemption obligations under the Certificate of Designations of our Series A Convertible Preferred Stock (the “Series A Shares”), including our ability to obtain declaratory relief confirming that we were not obligated to redeem any of the Series A Shares on the March 15, 2020 redemption date if we do not have funds legally available to redeem all, but not less than all, of the Series A Shares requested to be redeemed on that redemption date;
Current inflationary economic and market conditions, including the current rising interest rate environment and developments in the credit market;
Access to existing and new debt capital to continue to fund our origination and acquisition platforms;
The ability of the Company to execute on its Action Plan ("The Plan") submitted to the NYSE American, LLC ("NYSE") to allow the Company to maintain its listing status on the NYSE;
The failure of our information technology systems, a breach thereto, and our ability to integrate and improve those systems at a pace fast enough to keep up with competitors and security threats; and

While forward-looking statements reflect our good faith beliefs, assumptions, and expectations, they are not guarantees of future performance. Such forward-looking statements speak only as of their respective dates, and we assume no obligation to update them to reflect changes in underlying assumptions, new information or otherwise. For a further discussion of these and other factors that could cause our future results to differ materially from any forward-looking statements, please see Part II, Item 1A in this Quarterly Report on Form 10-Q and “Item 1A. Risk factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.

Available Information

Our internet address is www.altisourceamc.com. Our financial filings with the SEC on investor relations are located at https://ir.altisourceamc.com/financial-information/sec-filings on our website, where we make available, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as well as proxy statements, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Also posted on our website, and available in print upon request of any shareholder to our Investor Relations Department (Investor Relations), are our certificate of incorporation and by-laws, charters for our Audit, Compensation, and Nomination/Governance Committees. Within the time period specified by the SEC, we will post on our website any amendment to the Code of Business Conduct and Ethics and any waiver applicable to any executive officer, director, or senior financial officer. Our website also includes information about purchases and sales of our equity securities by our executive officers and directors.

Investor Relations can be contacted at Altisource Asset Management Corporation, 5100 Tamarind Reef, Christiansted, USVI 00820, Attn: Investor Relations, telephone 1-704-275-9113, email: IR@AltisourceAMC.com. We use our website
ii


(table of contents)
(www.altisourceamc.com) and may use other social media channels, to disclose public information to investors, the media, and others.

Our officers may use social media channels such as Twitter, Instagram, and others to disclose public information. It is possible that certain information we or our officers post on our website and on social media could be deemed material, and we encourage investors, the media and others interested in the Company to review the business and financial information we or our officers post on our website and on the social media channels identified above. The information on our website and those social media channels is not incorporated by reference into this Form 10-Q.
iii


(table of contents)
Part I
Item 1. Financial statements (unaudited)

Altisource Asset Management Corporation
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
September 30, 2022December 31, 2021
(unaudited)
ASSETS
Loans held for sale, at fair value$7,158 $ 
Loans held for investment, at fair value90,514  
Cash and cash equivalents10,195 78,349 
Restricted cash3,000  
Other assets4,811 3,127 
Total assets$115,678 $81,476 
LIABILITIES AND EQUITY
Liabilities
Accrued expenses and other liabilities$3,887 $7,145 
Lease liabilities976 859 
Credit facility52,467  
Total liabilities57,330 8,004 
Commitments and contingencies (Note 7)
  
Redeemable preferred stock:
Preferred stock, $0.01 par value, 250,000 shares authorized as of September 30, 2022 and December 31, 2021. 144,212 shares issued and outstanding and $144,212 redemption value as of September 30, 2022 and 150,000 shares issued and outstanding and $150,000 redemption value as of December 31, 2021.
144,212 150,000 
Stockholders' deficit:
Common stock, $0.01 par value, 5,000,000 authorized shares; 3,425,058 and 1,777,205 shares issued and outstanding, respectively, as of September 30, 2022 and 3,416,541 and 2,055,561 shares issued and outstanding, respectively, as of December 31, 2021.
34 34 
Additional paid-in capital148,900 143,523 
Retained earnings45,635 57,450 
Accumulated other comprehensive income25 54 
Treasury stock, at cost, 1,647,853 shares as of September 30, 2022 and 1,360,980 shares as of December 31, 2021.
(280,458)(277,589)
Total stockholders' deficit(85,864)(76,528)
Total Liabilities and Equity$115,678 $81,476 
See accompanying notes to condensed consolidated financial statements.
1

(table of contents)
Altisource Asset Management Corporation
Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)
Three months ended September 30,Nine months ended September 30,
2022202120222021
Revenues:
Loan interest income $1,739 $ $2,263 $ 
Loan fee income166  175  
Servicing fee revenue1  1  
Total revenues1,906  2,439  
Expenses:
Salaries and employee benefits1,563 878 4,042 4,078 
Legal fees796 2,207 3,532 5,726 
Professional fees262 165 837 1,186 
General and administrative 779 585 2,336 1,889 
Servicing and asset management expense252  433  
Acquisition charges 1,353 513 1,353 
Interest expense435  435 60 
Direct loan expense99  99  
Loan sales and marketing expense5  5  
Total expenses4,191 5,188 12,232 14,292 
Other income (expense):
Change in fair value of loans(1,563) (1,888) 
Change in fair value of equity securities (3,310) 146 
Gain on sale of equity securities 1,987  8,347 
Dividend income 20  3,061 
Other8 8 24 87 
Total other (expense) income(1,555)(1,295)(1,864)11,641 
Net loss from continuing operations before income taxes(3,840)(6,483)(11,657)(2,651)
Income tax expense (benefit)146 (786)158 1,175 
Net loss from continuing operations$(3,986)$(5,697)$(11,815)$(3,826)
Gain on discontinued operations (net of income tax expense of $1,272)
   6,213 
Net (loss) income attributable to common stockholders$(3,986)$(5,697)$(11,815)$2,387 
Continuing operations earnings per share
Net loss from continuing operations$(3,986)(5,697)$(11,815)(3,826)
Gain on preferred stock transaction 16,101 5,122 87,984 
Numerator for earnings per share from continuing operations$(3,986)$10,404 $(6,693)$84,158 
Earnings per share of common stock – Basic:
Continuing operations$(2.24)$5.06 $(3.41)$42.41 
Discontinued operations   3.13 
Total$(2.24)$5.06 $(3.41)$45.54 
Weighted average common stock outstanding1,777,009 2,055,561 1,964,198 1,984,294 
Earnings per share of common stock – Diluted:
Continuing operations$(2.24)$4.76 $(3.41)$39.06 
Discontinued operations   2.88 
Total$(2.24)$4.76 $(3.41)$41.94 
Weighted average common stock outstanding1,777,009 2,187,585 1,964,198 2,154,597 
See accompanying notes to condensed consolidated financial statements.
2

(table of contents)
Altisource Asset Management Corporation
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
(Unaudited)

Three months ended September 30,Nine months ended September 30,
2022202120222021
Net (loss) income: $(3,986)$(5,697)$(11,815)$2,387 
Other comprehensive loss:
Currency translation adjustments, net(10) (29)(6)
Total other comprehensive loss:(10) (29)(6)
Comprehensive (loss) income:$(3,996)$(5,697)$(11,844)$2,381 

See accompanying notes to condensed consolidated financial statements.
3

(table of contents)
Altisource Asset Management Corporation
Condensed Consolidated Statements of Stockholders' Deficit
(In thousands, except share amounts)
(Unaudited)


Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive IncomeTreasury StockTotal Stockholders' Deficit
Number of SharesAmount
December 31, 20213,416,541 $34 $143,523 $57,450 $54 $(277,589)$(76,528)
Common shares issued under share-based compensation plans, net of shares withheld for employee taxes5,850 — 25 — — — 25 
Share-based compensation, net of tax— — 72 — — — 72 
Currency translation adjustments, net— — — — (6)— (6)
Preferred stock conversion— — 5,122 — — 5,122 
Net loss— — — (3,697)— — (3,697)
March 31, 20223,422,391 34 148,742 53,753 48 (277,589)(75,012)
Common shares issued under share-based compensation plans, net of shares withheld for employee taxes1,667 — — — — — — 
Share-based compensation, net of tax— — 79 — — — 79 
Currency translation adjustments, net— — — — (13)— (13)
Net loss— — — (4,132)— — (4,132)
June 30, 20223,424,058 34 148,821 49,621 35 (277,589)0(79,078)
Common shares issued under share-based compensation plans, net of shares withheld for employee taxes1,000 — — — — — — 
Treasury shares repurchased— — — — — (2,869)(2,869)
Share-based compensation, net of tax— — 79 — — — 79 
Currency translation adjustments, net— — — — (10)— (10)
Net loss— — — (3,986)— — (3,986)
September 30, 20223,425,058 $34 $148,900 $45,635 $25 $(280,458)$(85,864)
See accompanying notes to condensed consolidated financial statements.
4

(table of contents)
Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Stockholders' Deficit
Number of SharesAmount
December 31, 20202,966,207 $30 $46,574 $63,426 $(65)$(276,543)$(166,578)
Common shares issued under share-based compensation plans, net of shares withheld for employee taxes153,429 2 (2)— — (800)(800)
Share-based compensation, net of tax— — 2,446 — — (219)2,227 
Currency translation adjustments, net— (2)(2)
Acquisition and disposition of subsidiaries28 125 153 
Preferred stock conversion288,283 2 78,935 — 78,937 
Net income — — — 5,856 — — 5,856 
March 31, 20213,407,919 34 127,953 69,310 58 (277,562)(80,207)
Common shares issued under share-based compensation plans, net of shares withheld for employee taxes8,622 — — — — — — 
Treasury shares repurchased— — — — — (27)(27)
Share-based compensation, net of tax— — (581)— — — (581)
Currency translation adjustments, net— — — — (4)— (4)
Net income — — — 2,228 — — 2,228 
June 30, 20213,416,541 34 127,372 71,538 54 (277,589)(78,591)
Common shares issued under share-based compensation plans, net of shares withheld for employee taxes— — 17 — — — 17 
Preferred stock conversion— — 16,101 — — — 16,101 
Net loss— — — (5,697)— — (5,697)
September 30, 20213,416,541 $34 $143,490 $65,841 $54 $(277,589)$(68,170)
See accompanying notes to condensed consolidated financial statements.
5

(table of contents)
Altisource Asset Management Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

Nine months ended September 30,
20222021
Operating activities:
Net (loss) income $(11,815)$2,387 
Less: Income from discontinued operations, net of tax 6,213 
Loss from continuing operations(11,815)(3,826)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:
Depreciation181 237 
Share-based compensation2301,883 
Amortization of operating lease right-of-use assets165 105 
Change in fair value of loans 1,888  
Dividend income (3,061)
Change in fair value of equity securities (146)
Gain on securities (8,347)
Changes in operating assets and liabilities, net of effects from discontinued operations and acquisition of subsidiary:
Originations of held for sale loans(6,862) 
Additional fundings of held for sale loans(401) 
Other assets and liabilities(3,836)(7,202)
Receivable from Front Yard 3,414 
Net cash used in continuing operations(20,450)(16,943)
Net cash provided by discontinued operations 5,439 
Net cash used in operating activities(20,450)(11,504)
Investing activities:
Purchase of loans held for investment(98,350) 
Additional fundings of loans held for investment(7,185) 
Principal payments on loans held for investment13,238  
Purchase of equity securities (96,950)
Dividends received 3,061 
Proceeds from sale of equity securities 152,796 
Investment in property and equipment (511)
Net cash (used in) provided by continuing operations(92,297)58,396 
Net cash provided by discontinued operations 511 
Net cash (used in) provided by investing activities(92,297)58,907 
Financing activities:
Conversion of preferred stock(1,893)(3,740)
Proceeds from borrowed funds54,733 28,549 
Repayment of borrowed funds(2,266)(28,549)
Deferred financing fees(104) 
Proceeds and payment of tax withholding on stock options exercised, net25 5 
Shares withheld for taxes upon vesting of restricted stock (1,046)
Net payment to subsidiaries included in disposal group (80)
Repurchase of common stock(2,869) 
Net cash provided by (used in) continuing operations47,626(4,861)
Net cash provided by discontinued operations 80 
Net cash provided by (used in) financing activities47,626 (4,781)
Net change in cash and cash equivalents(65,121)42,622 
Effect of exchange rate changes on cash and cash equivalents(33)115 
Consolidated cash, cash equivalents and restricted cash, beginning of period78,349 41,807 
Consolidated cash, cash equivalents and restricted cash, end of the period$13,195 $84,544 

See accompanying notes to condensed consolidated financial statements.
6

(table of contents)
Altisource Asset Management Corporation
Condensed Consolidated Statements of Cash Flows (Continued)
(In thousands)
(Unaudited)

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets:

As of:
September 30, 2022December 31, 2021
Cash and cash equivalents$10,195 $78,349 
Restricted cash3,000  
Total cash, cash equivalents, and restricted cash$13,195 $78,349 

Nine months ended September 30,
20222021
Supplemental disclosure of cash flow information (continuing and discontinued operations):
Cash paid for interest$12 $60 
Income taxes paid3,794 812 
Right-of-use lease assets recognized - operating leases277 308 
Operating lease liabilities recognized277  

See accompanying notes to condensed consolidated financial statements.
7

(table of contents)

Altisource Asset Management Corporation
Notes to Condensed Consolidated Financial Statements
September 30, 2022
(Unaudited)

1. Organization and Basis of Presentation
Altisource Asset Management Corporation (“we,” “our,” “us,” or the “Company”) was incorporated in the U.S. Virgin Islands (“USVI”) on March 15, 2012 (our “inception”) and commenced operations on December 21, 2012.Our primary business was to provide asset management and certain corporate governance services to institutional investors. In October 2013, we applied for and were granted registration by the Securities and Exchange Commission (the “SEC”) as a registered investment adviser under Section 203(c) of the Investment Advisers Act of 1940. We historically operated in a single segment focused on providing asset management and certain corporate governance services to investment vehicles. Our primary client was Front Yard Residential Corporation (“Front Yard”), a public real estate investment trust (“REIT”) focused on acquiring and managing quality, affordable single-family rental (“SFR”) properties throughout the United States.

On August 13, 2020, we entered into a Termination and Transition Agreement (the “Termination Agreement”) with Front Yard and Front Yard Residential L.P. (“FYR LP”) to terminate the Amended and Restated Asset Management Agreement, dated as of May 7, 2019 (the “Amended AMA”), by and among Front Yard, FYR LP and AAMC, and to provide for a transition plan to facilitate the internalization of Front Yard’s asset management function (the “Transition Plan”). The Termination Agreement was effective on December 31, 2020, the date that the parties mutually agreed that the Transition Plan had been satisfactorily completed (the “Termination Date”) and the Amended AMA was terminated in its entirety.

As disclosed in our public filings, the Company’s prior business operations ceased in the first week of 2021. During 2021, the Company engaged in a comprehensive search to acquire an operating company with the proceeds received from the sale of its operations in accordance with the Termination Agreement. A range of industries were included in the search, including, but not limited to, real estate lending, cryptocurrency, block-chain technology and insurance operations. Outside professional firms, including among others, Cowen and Company, LLC, an investment bank, and Norton Rose Fulbright LLP, a global law practice, were engaged to provide due diligence, legal and valuation expertise to assist in our search.

In March 2022, AAMC created the Alternative Lending Group (ALG). The Company has committed over $50 million to grow the operations of the ALG to perform the following:

Build out a niche origination platform as well as a loan acquisition team;
Fund the originated or acquired alternative loans from a combination of Company equity and existing or future lines of credit;
Sell the originated and acquired alternative loans through forward commitment and repurchase contracts;
Leverage senior management’s expertise in this space; and
Utilize AAMC’s existing operations in India to drive controls and cost efficiencies.

ALG's primary sources of income is derived from mortgage banking activities generated through the origination and acquisition of loans, and their subsequent sale or securitization as well as net interest income from loans while held on the balance sheet for investment.

Basis of presentation and use of estimates

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). All wholly owned subsidiaries are included, and all intercompany accounts and transactions have been eliminated.

The Company changed its balance sheet presentation from classified (distinguishing between short-term and long-term accounts) to unclassified (no such distinction) in the second quarter of 2022. This change was prompted by the Company's strategic decision to launch an alternative lending operation, ALG, in March 2022, as described above. The presentation of an unclassified balance sheet is consistent with that of the Company’s peers within the lending industry. Further, the previous classified presentation was not utilized to derive any metric by which the Company is measured or will be measured on a prospective basis. As the Company is now presenting an unclassified balance sheet, reclassification adjustments have been
8

(table of contents)
made to the historical Condensed Consolidated Balance Sheet at December 31, 2021 in order for it to conform with the current unclassified presentation.

In management's opinion, the unaudited interim condensed consolidated financial statements 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 condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q as permitted by SEC rules and regulations. These condensed consolidated financial statements should be read in conjunction with our annual consolidated financial statements included within our Annual Report on Form 10-K for the year ended December 31, 2021.

Use of estimates

The preparation of condensed 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Loans held for sale or investment, carried at fair market value

We originate and purchase alternative loans. These loans will either be classified as held for investment or held for sale depending upon the determination of management. We have elected to measure these alternative loans at fair value on a loan by loan basis. This option is available when we first recognize a financial asset. Subsequent changes in the fair value of these loans will be recorded in our condensed consolidated statements of operations in the period of the change. Purchased loans, also known as correspondent loans, can be bought with a net strip interest component in that the seller of the loan will receive an agreed upon percentage of the coupon interest generated from the sold loan. This strip component is reflected as service and asset management expense on the condensed consolidated statements of operations.

A fair value measurement represents the price at which an orderly transaction would occur between willing market participants at the measurement date. We estimate the fair values of the loans held for investment or sale based on available inputs from the marketplace. The market for the loans that we have or will invest in is generally illiquid. Establishing fair values for illiquid assets is inherently subjective and is often dependent upon our estimates and modeling assumptions. In circumstances where relevant market inputs cannot be obtained, increased analysis and management judgment are required to estimate fair value. This generally requires us to establish internal assumptions about future cash flows and appropriate risk-adjusted discount rates. Regardless of the valuation inputs we apply, the objective of fair value measurement for assets is unchanged from what it would be if markets were operating at normal activity levels and/or transactions were orderly; that is, to determine the current exit price.

See Note 3 for further discussion on fair value measurements.

Interest for these loans is recognized as revenue based on the stated coupon when earned and deemed collectible or until a loan becomes more than 90 days past due, at which point the loan is placed on nonaccrual status and any accrued interest is reversed against interest income. When a seriously delinquent loan previously placed on nonaccrual status has been cured, meaning all delinquent principal and interest have been remitted by the borrower, the loan will be placed back on accrual status. Interest accrued as of period end is included within loans held for sale, at fair value or loans held for investment, at fair value in the condensed consolidated balance sheets as applicable.
9


(table of contents)
Redeemable Preferred stock

Issuance of Series A Convertible Preferred Stock in 2014 Private Placement

During the first quarter of 2014, we issued 250,000 shares of convertible preferred stock for $250.0 million (“Series A Shares”) to institutional investors. Under the Certificate of Designations of the Series A Shares (the “Certificate”), we have the option to redeem all of the Series A Shares on March 15, 2020 and on each successive five-year anniversary of March 15, 2020 thereafter. In connection with these same redemption dates, each holder of our Series A Shares has the right to give notice requesting us to redeem all of the Series A Shares held by such holder out of legally available funds. In accordance with the terms of the Certificate, if we have legally available funds to redeem all, but not less than all, of the Series A Shares requested to be redeemed on a redemption date, we will deliver to those holders who have requested redemption in accordance with the Certificate a notice of redemption. If we do not have legally available funds to redeem all, but not less than all, of the Series A Shares requested to be redeemed on a redemption date, we will not provide a notice of redemption. The redemption right will be exercisable in connection with each redemption date every five years until the mandatory redemption date in 2044. If we are required to redeem all of the holder's Series A Shares, we are required to do so for cash at a price equal to $1,000 per share (the issuance price) out of funds legally available therefor. Due to the redemption provisions of the Series A Preferred Stock, we classify these shares as mezzanine equity, outside of permanent stockholders' equity.

The holders of our Series A Shares are not entitled to receive dividends with respect to their Series A Shares. The Series A Shares are convertible into shares of our common stock at a conversion price of $1,250 per share (or an exchange rate of 0.8 shares of common stock for Series A Share), subject to certain anti-dilution adjustments.

Upon certain change of control transactions or upon the liquidation, dissolution or winding up of the Company, holders of the Series A Shares will be entitled to receive an amount in cash per Series A Share equal to the greater of:

(i)  $1,000 plus the aggregate amount of cash dividends paid on the number of shares of common stock into which such Series A Shares were convertible on each ex-dividend date for such dividends; and
(ii)  The number of shares of common stock into which the Series A Shares are then convertible multiplied by the then-current market price of the common stock.

The Certificate confers no voting rights to holders, except with respect to matters that materially and adversely affect the voting powers, rights or preferences of the Series A Shares or as otherwise required by applicable law.

With respect to the distribution of assets upon the liquidation, dissolution or winding up of the Company, the Series A Shares rank senior to our common stock and on parity with all other classes of preferred stock that may be issued by us in the future.

The Series A Shares are recorded net of issuance costs, which were amortized on a straight-line basis through the first potential redemption date in March 2020.

Between January 31, 2020 and February 3, 2020, we received purported notices from all of the holders of our Series A Shares requesting us to redeem an aggregate of $250.0 million liquidation preference of our Series A Shares on March 15, 2020. We did not have legally available funds to redeem all of the Series A Shares on March 15, 2020. As a result, we do not believe, under the terms of the Certificate, that we were obligated to redeem any of the Series A Shares under the Certificate.

Current Litigation

Luxor (plaintiff) v. AAMC (defendant)

On February 3, 2020, Luxor filed a complaint in the Supreme Court of the State of New York, County of New York, against AAMC for breach of contract, specific performance, unjust enrichment, and related damages and expenses. The complaint alleges that AAMC’s position that it will not redeem any of Luxor’s Series A Shares on the March 15, 2020 redemption date is a material breach of AAMC’s redemption obligations under the Certificate. Luxor seeks an order requiring AAMC to redeem its Series A Shares, recovery of no less than $144,212,000 in damages, which is equal to the amount Luxor would receive if AAMC redeemed all of Luxor’s Series A Shares at the redemption price of $1,000 per share set forth in the Certificate, as well as payment of its costs and expenses in the lawsuit. In the alternative, Luxor seeks a return of its initial purchase price of $150,000,000 for the Series A Shares, as well as payment of its costs and expenses in the lawsuit. On May 25, 2020, Luxor’s complaint was amended to add Putnam Equity Spectrum Fund and Putnam Capital Spectrum Fund (collectively, “Putnam”), which also invested in the Series A Shares, as plaintiff. On June 12, 2020, AAMC moved to dismiss the Amended Complaint in
10


(table of contents)
favor of AAMC’s first-filed declaratory judgment action in the U.S. Virgin Islands. On August 4, 2020, the court denied AAMC’s motion to dismiss. On February 17, 2021, in accordance with the terms of the Putnam Agreement described below, Putnam agreed to discontinue all claims against AAMC with prejudice related to the Series A shares. Luxor and AAMC have completed discovery in the action. AAMC and Luxor each filed summary judgment motions on July 18, 2022 and replies to those motions on August 18, 2022 and September 15, 2022. The court has scheduled a hearing for December 1, 2022 for oral arguments on the summary judgment motions.

AAMC continues to pursue its strategic business initiatives despite this litigation. If Luxor were to prevail in its lawsuit, our liquidity could be materially and adversely affected.

AAMC (plaintiff) v. Nathaniel Redleaf (defendant)

On October 31, 2022, AAMC filed a complaint with demand for jury trial in the Superior Court of the Virgin Islands, Division of St. Croix, against Nathaniel Redleaf alleging breach of fiduciary duty to AAMC. Mr. Redleaf was a member of AAMC’s Board of Directors for five years and the Company’s complaint alleges that he breached his fiduciary duty, by among other things, disclosing AAMC’s confidential information to Luxor. AAMC seeks a number of remedies, including compensatory damages, disgorgement of any benefit received by Luxor or Mr. Redleaf as a result of such breaches.

Luxor Books and Records Demand

On April 26, 2021, Luxor, sent a letter to the Company demanding, under the common law of the USVI, the right to inspect certain books and records of the Company (the “Demand”). According to Luxor, the purpose of the Demand is to investigate whether the Company’s Board of Directors may have considered or engaged in transactions with or at the direction of a significant shareholder of the Company or whether the Company’s Board of Directors and/or Company management may have mismanaged the Company or engaged in wrongdoing, may not have properly discharged their fiduciary duties, or may have conflicts of interest. Luxor further alleges that it seeks an inspection of the Company books and records to determine whether the current directors should continue to serve on the Company’s board or whether a derivative suit should be filed.

On May 10, 2021, the Company sent a letter responding to the Demand and declining to provide the Company’s books and records for inspection (the “Response”). The Response states that Luxor does not have a credible basis for the Demand, which is required under the USVI common law; that, as preferred shareholders with no voting rights, Luxor’s purpose for the Demand is not reasonably related to Luxor’s interests as shareholders of the Company because Luxor cannot vote in connection with Board elections or business transactions of the Company; and that Luxor’s Demand serves only to personally benefit Luxor in its private suit against the Company.

Settlement Activities

On February 17, 2021, the Company entered into a settlement agreement dated as of February 17, 2021 (the “Putnam Agreement”) with Putnam. Pursuant to the Putnam Agreement, AAMC and Putnam exchanged all of Putnam’s 81,800 Series A Shares for 288,283 shares of AAMC’s common stock. Additionally, AAMC paid Putnam $1,636,000 within three business days of the effective date of the Putnam Agreement and $1,227,000 on the one-year anniversary of the effective date of the Putnam Agreement, and in return Putnam released AAMC from all claims related to the Series A Shares and enter into a voting rights agreement as more fully described in the Putnam Agreement. Finally, AAMC granted to Putnam a most favored nations provision with respect to future settlements of the Series A Shares. As a result of this settlement, we recognized a one-time gain directly to Additional paid in capital of $71.9 million in the first quarter of 2021.

On August 27, 2021, the Company entered into a settlement agreement (the “Wellington Agreement”) with certain funds managed by Wellington Management Company LLP (collectively, “Wellington”). Under the Wellington Agreement, the Company paid Wellington $2,093,000 in exchange for 18,200 Series A Shares ($18.2 million of liquidation preference) held by Wellington, and in return Wellington agreed to release AAMC from all claims related to the Series A Shares. As a result of this settlement, we recognized a one-time gain directly to Additional paid in capital of $16.1 million gain in the third quarter of 2021.

11


(table of contents)
On January 6, 2022, the Company entered into a settlement agreement (the "Settlement Agreement") with two institutional investors. Under the Settlement Agreement, the Company paid the institutional investors approximately $665 thousand in cash in exchange for 5,788 Series A shares ($5.79 million of liquidation preference) held by the institutional investors. As a result of this settlement, the Company recognized a one-time gain directly to Additional paid in capital of approximately $5.1 million in the first quarter of 2022.

On July 18, 2022, the Company entered into an agreement (the "Purchase Agreement") with Putnam in which the Company repurchased 286,873 shares of common stock of the Company owned by Putnam (the "Putnam Shares"). The aggregate purchase price of the Putnam Shares was $2,868,730, or $10 per share.

Pursuant to the Purchase Agreement, the Company and Putnam also agreed to terminate the most favored nation clause granted to Putnam in the Putnam Agreement. The Company and Putnam also agreed to terminate all of Putnam's shareholder voting obligations included in the Putnam Agreement.

Recently issued accounting standards

Recently issued accounting standards adopted

In December 2019, the FASB issued ASU 2019-12, “Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740),” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. Our adoption of this standard in the first quarter of 2022 did not have a material impact on our financial statements.

Recently issued accounting standards not yet adopted

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which provides practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments in this update apply only to contracts, hedging relationships, and other transactions that reference the London interbank offered rate (“LIBOR”) or another reference rate expected to be discontinued as a result of reference rate reform. These amendments are not applicable to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. ASU No. 2020-04 is effective as of March 12, 2020 through December 31, 2022 and may be applied to contract modifications and hedging relationships from the beginning of an interim period that includes or is subsequent to March 12, 2020. We will adopt this standard when LIBOR is discontinued. We are evaluating the impact the new standard will have on our consolidated financial statements and related disclosures, but do not anticipate a material impact.

12


(table of contents)
2. Discontinued Operations

Our primary client prior to December 31, 2020 had been Front Yard Residential Corporation (“Front Yard”), a public real estate investment trust (“REIT”) focused on acquiring and managing quality, affordable single-family rental (“SFR”) properties throughout the United States. All of our revenue for all periods presented prior to December 31, 2021 was generated through our asset management agreements with Front Yard.

On August 13, 2020, AAMC and Front Yard entered into a Termination and Transition Agreement (the “Termination Agreement”), pursuant to which the Company and Front Yard have agreed to effectively internalize the asset management function of Front Yard. The Termination Agreement provided that the Amended AMA would terminate following a transition period to enable the internalization of Front Yard’s asset management function, allow for the assignment of certain vendor contracts and implement the transfer of certain employees to Front Yard and the training of required replacement employees at each company. In addition, Front Yard acquired the equity interests of AAMC's Indian subsidiary, the equity interests of AAMC's Cayman Islands subsidiary, the right to solicit and hire designated AAMC employees that oversaw the management of Front Yard's business and other assets of AAMC that were used in connection with the operation of Front Yard's business.

The transition period ended at the close of business, December 31, 2020, the time that AAMC and Front Yard mutually agreed that all required transition activities had been successfully completed (the “Termination Date”). On the Termination Date, the Amended AMA terminated, and the Company completed the assignment of our lease in Charlotte, North Carolina to Front Yard. Additionally, on December 31, 2020, we completed the sale of our Cayman Islands subsidiary. On January 1, 2021, in connection with the Termination Agreement, the Company completed the sale of our India subsidiary.

The Company had no assets and liabilities related to our discontinued operations that constituted the Disposal Group at September 30, 2022 and December 31, 2021.

Discontinued operations includes (i) the management fee revenues generated under our asset management agreements with Front Yard, (ii) expense reimbursements from Front Yard and the underlying expenses, (iii) the results of operations of our India and Cayman Islands subsidiaries, (iv) the employment costs associated with certain individuals wholly dedicated to Front Yard and (v) the costs associated with our lease in Charlotte, North Carolina, that was assumed by Front Yard on December 31, 2020. The operating results of these items are presented in our consolidated statements of operations as discontinued operations for all periods presented and revenues and expenses directly related to discontinued operations were eliminated from our ongoing operations.

The following condensed table details the components comprising net income from our discontinued operations for the nine months ended September 30, 2021. No income was received in the three months ended September 30, 2021. ($ in thousands)

Nine months ended September 30, 2021
Other income from discontinued operations:
Gain on disposal$7,485 
Total other income from discontinued operations7,485 
Net income from discontinued operations before income taxes7,485 
Income tax expense1,272 
Net income from discontinued operations$6,213 

The following table details cash flow information related to our discontinued operations for the nine months ended September 30, 2021 ($ in thousands):

Nine months ended September 30, 2021
Total operating cash flows from discontinued operations$5,439 
Total investing cash flows from discontinued operations511 
Total financing cash flows from discontinued operations80 




13


(table of contents)
3. Loans Held for Sale or Investment at Fair Value

Our loan portfolio consists of business purpose loans secured by single family, multifamily and commercial real estate that were acquired from third party originators or issued by us. The composition of the loan portfolio by classification as of September 30, 2022 and December 31, 2021, is summarized in the tables below ($ in thousands):

Held for SaleHeld for Investment
September 30, 2022December 31, 2021September 30, 2022December 31, 2021
Total loan commitments$13,526 $ $110,818 $ 
Less: construction holdbacks (1)(6,263) (18,521) 
Total principal outstanding7,263  92,297  
Change in fair value of loans(105) (1,783) 
Total loans at fair value$7,158 $ $90,514 $ 
(1) Construction holdbacks include in process accounts such as payments, advances, interest reserve, accrued interest and other accounts.

The loan portfolio consists of 146 loans at September 30, 2022, with a weighted average coupon of 9.3%, of which the Company receives a net yield of 8.4% after taking into account the strip interest to the sellers of the loans. The weighted average life of the portfolio is approximately 9 months. 21 loans represent 60% of the total principal outstanding at September 30, 2022. There were no loans on nonaccrual status or 90 days or more past due at September 30, 2022.

The table below represents activity within the loan portfolio by classification for the period shown ($ in thousands):

Loans Held for SaleLoans Held for Investment
Balance atDecember 31, 2021$ $ 
Acquisitions 98,350 
Originations6,862  
Additional fundings (1)401 7,185 
Payoffs and repayments (13,238)
Fair value adjustment(105)(1,783)
Balance atSeptember 30, 2022$7,158 $90,514 
(1) Includes interest reserve in process, accrued interest and deferred fees.

The composition of the total loan commitment by state as of September 30, 2022 is summarized below ($ in thousands):

StateCommitmentPercent of Portfolio
Florida$34,484 27.7 %
New York23,142 18.6 %
New Jersey12,487 10.0 %
California12,119 9.7 %
Washington9,093 7.3 %
Connecticut8,404 6.8 %
Texas4,815 3.9 %
Illinois4,459 3.6 %
Other15,341 12.4 %
Total$124,344 100.0 %

14

(table of contents)
For financial reporting purposes of our alternative loans, we follow a fair value hierarchy established under GAAP that is used to determine the fair value of financial instruments. This hierarchy prioritizes relevant market inputs in order to determine an "exit price" at the measurement date, or at the price at which an asset could be sold or a liability could be transferred in an orderly process that is not a forced liquidation or distressed sale. Level 1 inputs are observable inputs that reflect quoted prices for identical assets or liabilities in active markets. Level 2 inputs are observable inputs other than quoted prices for an assets or liabilities that are obtained through corroboration with observable market data. Level 3 inputs are unobservable inputs (e.g., our own data or assumptions) that are used when there is little, if any, relevant market activity for the asset or liability required to be measured at fair value.

In certain cases, inputs used to measure fair value fall into different levels of the fair value hierarchy. In such cases, the level at which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. Our assessment of the significance of a particular input requires judgment and considers factors specific to the asset or liability being measured.

The following table presents the assets that are reported at fair value on a recurring basis as of September 30, 2022, as well as the fair value of hierarchy of the valuation inputs used to measure fair value. We did not have any assets that were reported at fair value as of December 31, 2021. We did not have any liabilities to report at fair value on a recurring basis as of September 30, 2022 and December 31, 2021.

September 30, 2022CarryingFair Value Measurements Using
(In thousands)ValueLevel 1Level 2Level 3
Assets
Loans held for sale$7,158 $ $ $7,158 
Loans held for investment90,514   90,514 
Total measured$97,672 $ $ $97,672 

The estimated fair value for our business purpose loans is determined using discounted cash flow modeling ("DCF") for both performing and nonaccrual loans. For performing loans, the DCF is based on the future expected cash flows of each loan in accordance with its contractual terms net of the strip component. Cash flows for performing loans with construction holdbacks incorporate the draws to complete the required improvements to the underlying property securing the loan. For nonaccrual loans, the estimated cash flows are based on the current fair value of the collateral of the loans, in which the Company will utilize a third-party appraisal to determine the fair value (Level 3). At September 30, 2022 the Company had no nonaccrual loans.

On a loan by loan basis, the weighted average discount rate range utilized for the DCF applied to the net yield to be received by the Company was