Quarterly report pursuant to Section 13 or 15(d)

Financing Receivables

v3.22.2.2
Financing Receivables
 9 Months Ended
Sep. 30, 2022
Receivables [Abstract]  
Financing Receivables Financing Receivables
Sunlight recognizes receivables primarily related to (a) advances that Sunlight remits to contractors to facilitate the installation of residential solar and home improvement equipment and (b) loans and loan participations. Loans and loan participations primarily include Sunlight’s undivided 5.0% participation in certain Indirect Channel Loans and Indirect Channel Loans purchased from its Bank Partner. The following tables summarize Sunlight’s financing receivables and changes thereto:
Advances(a)
Loans and Loan Participations(b)
Total
September 30, 2022 (Successor)
Amounts outstanding $ 64,066  $ 4,095  $ 68,161 
Unamortized discount —  (328) (328)
Allowance for credit losses (7,458) (186) (7,644)
Carrying value $ 56,608  $ 3,581  $ 60,189 
December 31, 2021 (Successor)
Amounts outstanding $ 67,077  $ 4,875  $ 71,952 
Unamortized discount —  (414) (414)
Allowance for credit losses (238) (148) (386)
Carrying value $ 66,839  $ 4,313  $ 71,152 
a.Represents advance payments made by Sunlight to certain contractors, generally on a short-term basis, in anticipation of a project’s substantial completion, including advances of $6.6 million and $9.0 million, net of allowances of $2.6 million and $0.0 million, to Sunlight contractors not associated with specific installation projects at September 30, 2022 and December 31, 2021, respectively.
b.Represents (i) Sunlight’s 5.0% participation interest in a pool of residential solar loans with an aggregate UPB of $3.8 million and $4.6 million at September 30, 2022 and December 31, 2021, respectively, and (ii) Indirect Channel Loans purchased by Sunlight with an aggregate UPB of $0.3 million and $0.3 million at September 30, 2022 and December 31, 2021, respectively. No loans or loan participations were individually evaluated for impairment at September 30, 2022 or December 31, 2021.
Successor Predecessor Successor Predecessor
For the Three Months Ended September 30, 2022 For the Period July 10, 2021 to September 30, 2021 For the Period July 1, 2021 to July 9, 2021 For the Nine Months Ended September 30, 2022 For the Period January 1, 2021 to July 9, 2021
Allowance for Credit Losses — Advances
Beginning Balance $ 3,487  $ —  $ 211  $ 238  $ 121 
Provision for credit losses 36,587  —  —  39,836  90 
Realized losses(a)
(32,616) —  —  (32,616) — 
Ending Balance $ 7,458  $ —  $ 211  $ 7,458  $ 211 
Allowance for Credit Losses — Loans and Loan Participations
Beginning Balance $ 146  $ —  $ 111  $ 148  $ 125 
Provision for credit losses 660  254  —  2,091  1,082 
Realized losses (620) (254) —  (2,053) (1,096)
Ending Balance $ 186  $ —  $ 111  $ 186  $ 111 
Changes in Carrying Value — Loans and Loan Participations
Beginning Balance $ 3,794  $ 5,105  $ 4,707  $ 4,313  $ 5,333 
Purchases, net(b)
620  254  —  2,058  1,170 
Proceeds from principal repayments, net (194) (351) —  (780) (832)
Accretion of loan discount 21  35  5  81  123 
Provision for credit losses (660) (254) —  (2,091) (1,082)
Ending Balance $ 3,581  $ 4,789  $ 4,712  $ 3,581  $ 4,712 
a.Sunlight charged-off advances totaling $32.4 million attributable to the insolvency of one of Sunlight’s largest contractors.
b.During the periods July 10, 2021 through September 30, 2021, July 1, 2021 through July 9, 2021, and January 1, 2021 through July 9, 2021, Sunlight purchased (i) 5.0% participation interests in 0, 0, and 54 loans with an aggregate UPB of $0.0 million, $0.0 million and $0.1 million, respectively, as well as (ii) 8, 0, and 51 Indirect Channel Loans with an aggregate UPB of $0.1 million $0.0 million and $1.1 million, respectively. During three and nine months ended September 30, 2022, Sunlight purchased 19 and 67 Indirect Channel Loans with an aggregate UPB of $0.5 million and $1.6 million, respectively.

In September 2022, one of Sunlight’s largest contractors experienced a liquidity shortfall that caused the installer to substantially wind down its business by the end of that month and to begin liquidation of its business in October 2022. As a result, Sunlight determined it would be unable to collect $32.4 million Sunlight advanced to the contractor at September 30, 2022, representing the total net amounts advanced to the contractor at that time.
Advances — The following section presents certain characteristics of Sunlight’s advances.

Risk Ratings — As further described in Note 2, management evaluates Sunlight’s advances for impairment using risk ratings assigned on a scale of “1” (low risk) through “5” (higher risk). The following table allocates the advance amount outstanding based on Sunlight’s internal risk ratings:

Total
Risk Tier(a)
Contractors Amount Outstanding % of Amount Outstanding
September 30, 2022 (Successor)
1 Low risk 112  $ 15,019  23.4  %
2 Low-to-medium risk 141  32,225  50.3 
3 Medium risk 70  6,126  9.6 
4 Medium-to-high risk 17  7,796  12.2 
5 Higher risk 5  2,900  4.5 
345  $ 64,066  100.0  %
December 31, 2021 (Successor)
1 Low risk 76  $ 14,575  21.7  %
2 Low-to-medium risk 77  38,955  58.1 
3 Medium risk 17  13,547  20.2 
4 Medium-to-high risk —  —  — 
5 Higher risk —  —  — 
170  $ 67,077  100.0  %
a.At September 30, 2022 and December 31, 2021, the average risk rating of Sunlight’s advances was 2.2 (“low-to-medium risk”) and 2.0 (“low-to-medium risk”), weighted by total advance amounts outstanding, respectively.

Delinquencies — The following table presents the payment status of advances held by Sunlight:

Payment Delinquency
Amount Outstanding(a)
% of Amount Outstanding
September 30, 2022 (Successor)
Current $ 43,721  76.0  %
Less than 30 days 3,516  6.1 
30 days 2,911  5.1 
60 days 787  1.4 
90+ days(b)
6,576  11.4 
$ 57,511  100.0  %
December 31, 2021 (Successor)
Current $ 54,586  94.0  %
Less than 30 days 1,956  3.4 
30 days 534  0.9 
60 days 361  0.6 
90+ days(b)
640  1.1 
$ 58,077  100.0  %
a.Excludes advances of $6.6 million and $9.0 million to Sunlight contractors not associated with specific installation projects and was not delinquent at September 30, 2022 and December 31, 2021, respectively.
b.As further discussed in Note 2, Sunlight generally evaluates amounts delinquent for 90 days or more for impairment. Advances to contractors may remain outstanding as a result of operational and various other factors that are unrelated to the contractor’s creditworthiness. Sunlight assessed advances 90 days or more, along with other factors that included the contractor’s risk tier and historical loss experience, and established loss allowances of $1.2 million and $0.2 million at September 30, 2022 and December 31, 2021, respectively.
Concentrations — The following table presents the concentration of advances, by counterparty:

Successor
September 30, 2022 December 31, 2021
Contractor Amount Outstanding % of Total Amount Outstanding % of Total
1 $ 10,099  15.8  % $ 9,496  14.2  %
2 6,560  10.2  1,745  2.6 
3 6,155  9.6  20,894  31.1 
4 3,873  6.0  2,610  3.9 
5 3,441  5.4  2,093  3.1 
6 2,808  4.4  2,571  3.8 
7 2,130  3.3  855  1.3 
8 1,109  1.7  302  0.5 
9 1,071  1.7  99  0.1 
10 963  1.5  486  0.7 
Other(a)
25,857  40.4  25,926  38.7 
$ 64,066  100.0  % $ 67,077  100.0  %
a.At September 30, 2022 and December 31, 2021, Sunlight recorded advances receivable from 335 and 160 counterparties not individually listed in the table above with average balances of $0.1 million and $0.1 million, respectively. At December 31, 2021, Sunlight recorded advances receivable from individual counterparties of $12.5 million, $0.6 million, $0.6 million, $0.5 million, and $0.4 million that represent the largest advance concentrations included in “Other,” based on the amount outstanding.

Loans and Loan Participations — The following section presents certain characteristics of Sunlight’s investments in loans and loan participations. Unless otherwise indicated, loan participation amounts are shown at Sunlight’s 5.0% interest in the underlying loan pool.

Delinquencies — The following table presents the payment status of loans and loan participations held by Sunlight:

Payment Delinquency(a)
Loan Participations Bank Partner Loans Total
Loans UPB Loans UPB Loans UPB % of UPB
September 30, 2022 (Successor)
Current 3,391  $ 3,694  14  $ 238  3,405  $ 3,932  96.0  %
Less than 30 days 74  92  2  40  76  132  3.2 
30 days 16  21  —  —  16  21  0.5 
60 days 4  4  —  —  4  4  0.1 
90+ days 5  6  —  —  5  6  0.2 
3,490  $ 3,817  16  $ 278  3,506  $ 4,095  100.0  %
December 31, 2021 (Successor)
Current 3,780  $ 4,442  14  $ 268  3,794  $ 4,710  96.6  %
Less than 30 days 73  96  1  11  74  107  2.2 
30 days 15  23  —  —  15  23  0.5 
60 days 10  14  —  —  10  14  0.3 
90+ days 7  9  1  12  8  21  0.4 
3,885  $ 4,584  16  $ 291  3,901  $ 4,875  100.0  %
a.As further described in Note 2, Sunlight places loans delinquent greater than 90 days on nonaccrual status. Such loans had carrying values of $0.0 million and $0.0 million at September 30, 2022 and December 31, 2021, respectively. Sunlight does not consider the average carrying values and interest income recognized (including interest income recognized using a cash-basis method) material.
Loan Collateral Concentrations — The following table presents the UPB of Balance Sheet Loans, including Sunlight’s relevant participation percentage of the Indirect Channel Loans underlying the participation interests held by Sunlight, based upon the state in which the borrower lived at the time of loan origination:

Successor
September 30, 2022 December 31, 2021
State UPB % of Total UPB % of Total
Texas $ 773  18.9  % $ 930  19.1  %
California 729  17.8  867  17.8 
Florida 350  8.5  423  8.7 
New York 278  6.8  325  6.7 
New Jersey 263  6.4  302  6.2 
Arizona 186  4.5  220  4.5 
Massachusetts 178  4.3  201  4.1 
Pennsylvania 170  4.2  202  4.1 
South Carolina 146  3.6  178  3.7 
Missouri 120  2.9  135  2.8 
Other(a)
902  22.1  1,092  22.3 
$ 4,095  100.0  % $ 4,875  100.0  %
a.Sunlight only participates in residential solar loans originated within the United States, including 31 and 31 states not individually listed in the table above, none of which individually amount to more than 2.7% and 2.6% of the UPB at September 30, 2022 and December 31, 2021, respectively.