Sunlight Financial Holdings Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Financing Receivables (Tables)

Financing Receivables (Tables)

9 Months Ended

Sep. 30, 2022

Financing receivables and changes thereto

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.

Allocation of advance amount based on internal risk ratings

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.

Payment status

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.

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.

Risk concentration

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.

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.