Home Loan Servicing Solutions, Ltd. Reports EPS of $0.44 and Net Income of $24.8 Million in the First Quarter of 2013 and Decla
April 18 2013 - 7:30AM
Home Loan Servicing Solutions, Ltd. ("HLSS" or the "Company")
(Nasdaq:HLSS) today reported net income of $24.8 million, or $0.44
per ordinary share, for the first quarter of 2013. Additionally,
the Company's Board of Directors today declared a monthly dividend
of $0.14 per ordinary share for the months of April, May and June
2013.
"Despite continued low mortgage interest rates and
modest improvement in the housing market, the trend toward lower
prepayment speeds for HLSS' portfolio, which started in the middle
of last year, has continued in the first quarter of this year,"
said Chairman William Erbey. "Our outlook on prepayment speeds for
this portfolio has become increasingly positive fueled in part by
Ocwen's continued success in resolving delinquent loans. This was
certainly a factor in the Board's decision to increase our dividend
to $0.14 per share for the second quarter of 2013."
"First quarter results were in line with our
expectations after accounting for the benefit from lower than
expected prepayments and amortization and the timing of the first
quarter flow purchase from Ocwen," said President John Van Vlack.
"Stable prepayment rates and access to long-term financing in the
ABS market give us even greater visibility into our future
earnings."
First quarter business performance highlights
include:
- On January 22, completed the issuance of $650 million one-year,
$350 million three-year and $150 million five-year term notes
secured by servicing advance receivables at a weighted average
interest spread over LIBOR of 0.94%. Total proceeds of $1.15
billion were used to reduce borrowings on variable funding notes
with a weighted average interest rate of one-month LIBOR plus
2.32%. Concurrent with this issuance, the aggregate commitment on
our variable funding notes was reduced from $2 billion to $1
billion.
- On March 13, completed the flow acquisition of mortgage
servicing assets related to non-agency mortgage loans with UPB of
$15.9 billion from Ocwen Financial Corporation ("Ocwen") (NYSE:OCN)
resulting in UPB of $92.5 billion as of March 31,
2013. Concurrent with this acquisition, the aggregate
commitment on our variable funding notes was increased from $1.0
billion to $1.3 billion.
- Earnings included a $0.03 per share benefit from lower than
expected amortization resulting from the 12.7% annualized
prepayment rate for the first quarter versus the benchmark rate of
15%.
- There was no change in servicing asset valuation during the
quarter.
For more information on prior releases and SEC Filings, please
refer to the "Shareholders" section of our website at
www.hlss.com.
Home Loan Servicing Solutions, Ltd. ("HLSS") is an
internally-managed owner of non-agency mortgage servicing assets
with historically stable valuations and cash flows. HLSS'
assets are predominately mortgage servicing advances that, along
with the related servicing rights, are over-collateralized 23 times
by residential real estate. HLSS' objective is to generate stable,
recurring fee-based earnings and dividends throughout the economic
cycle. For more information, visit www.hlss.com.
This news release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. Forward-looking statements are not guarantees
of future performance, and involve a number of assumptions, risks
and uncertainties that could cause actual results to differ
materially. Important factors that could cause actual results to
differ materially from those suggested by the forward-looking
statements include, but are not limited to, the following: general
economic and market conditions, prevailing interest rates,
governmental regulations and policies, availability of
adequate and timely sources of liquidity, our ability to maintain
our PFIC status, real estate market conditions and other risks
detailed in HLSS' reports and filings with the Securities and
Exchange Commission. The forward looking statements speak only as
of the date they are made and should not be relied upon. HLSS'
undertakes no obligation to update or revise the forward-looking
statements.
The following table presents our condensed
consolidated results of operations in accordance with U.S. GAAP
reconciled to our internally reported financial
results. Accordingly, adjustments are made to reflect
Servicing fee revenue, Servicing expense and Amortization expense
on a gross rather than a net basis.
Our income from operations as presented in our Management
Reporting shown below should be considered in addition to, and not
as a substitute for, income from operations determined in
accordance with GAAP.
For the three months ended
March 31, 2013: |
Condensed Consolidated
Results (GAAP) |
Adjustments |
Management
Reporting (Non-GAAP) |
|
|
|
|
Revenue |
|
|
|
Servicing fee revenue |
$ — |
$ 102,258 |
$ 102,258 |
Interest income - notes receivable –
Rights to MSRs |
44,570 |
(44,570) |
— |
Interest income – other |
102 |
— |
102 |
Related party revenue(1) |
407 |
— |
407 |
Total revenue |
45,079 |
57,688 |
102,767 |
|
|
|
|
Operating expenses |
|
|
|
Compensation and benefits |
1,166 |
— |
1,166 |
Servicing expense |
— |
47,052 |
47,052 |
Amortization of MSRs |
— |
10,636 |
10,636 |
Related party expenses (2) |
226 |
— |
226 |
General and administrative expenses |
645 |
— |
645 |
Total operating expenses |
2,037 |
57,688 |
59,725 |
Income from operations |
$ 43,042 |
$ — |
$ 43,042 |
(1) Revenue earned as part of our Professional
Services Agreement with Ocwen. (2) Expenses incurred as part of our
Professional Services Agreement and Administrative Agreement with
Ocwen and Altisource, respectively.
|
HOME LOAN SERVICING
SOLUTIONS, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS (Dollars in thousands, except share data)
(UNAUDITED) |
|
|
For the periods ended March
31, |
2013 |
2012 |
Revenue |
|
|
Interest income – notes receivable –
Rights to MSRs |
$ 44,570 |
$ 2,945 |
Interest income – other |
102 |
33 |
Total interest income |
44,672 |
2,978 |
Related party revenue |
407 |
251 |
Total revenue |
45,079 |
3,229 |
|
|
|
Operating expenses |
|
|
Compensation and benefits |
1,166 |
365 |
Related party expenses |
226 |
71 |
General and administrative expenses |
645 |
191 |
Total operating expenses |
2,037 |
627 |
|
|
|
Income from operations |
43,042 |
2,602 |
|
|
|
Other expense |
|
|
Interest expense |
18,242 |
1,291 |
Total other expense |
18,242 |
1,291 |
|
|
|
Income before income taxes |
24,800 |
1,311 |
Income tax expense |
12 |
17 |
Net income |
$ 24,788 |
$ 1,294 |
|
|
|
Earnings per
share |
|
|
Basic |
$ 0.44 |
$ 0.31 |
Diluted |
$ 0.44 |
$ 0.31 |
|
|
|
Weighted average ordinary shares
outstanding |
|
|
Basic |
56,628,828 |
4,187,975 |
Diluted |
56,628,828 |
4,187,975 |
|
|
|
Dividends declared per
share |
$ 0.38 |
$ 0.28 |
|
|
HOME LOAN SERVICING
SOLUTIONS, LTD. AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS (Dollars in thousands,
except share data) (UNAUDITED) |
|
March 31,
2013 |
December 31,
2012 |
Assets |
|
|
Cash and cash equivalents |
$ 61,157 |
$ 76,048 |
Match funded advances |
3,524,262 |
3,098,198 |
Notes receivable – Rights to MSRs |
393,776 |
303,705 |
Related party receivables |
14,385 |
28,271 |
Other assets |
76,212 |
79,091 |
Total assets |
$ 4,069,792 |
$ 3,585,313 |
|
|
|
Liabilities and Equity |
|
|
Liabilities |
|
|
Match funded liabilities |
$ 3,120,861 |
$ 2,690,821 |
Dividends payable |
7,391 |
6,706 |
Income taxes payable |
12 |
46 |
Related party payables |
34,950 |
2,874 |
Other liabilities |
5,170 |
4,233 |
Total liabilities |
3,168,384 |
2,704,680 |
|
|
|
|
|
|
Equity |
|
|
Equity – Ordinary shares, $.01 par value;
200,000,000 shares authorized; 56,855,296 and 55,884,718 shares
issued and outstanding at March 31, 2013 and December 31, 2012,
respectively |
$ 569 |
$ 559 |
Additional paid-in capital |
894,226 |
876,657 |
Retained earnings |
7,676 |
4,493 |
Accumulated other comprehensive loss |
(1,063) |
(1,076) |
Total equity |
901,408 |
880,633 |
Total liabilities and equity |
$ 4,069,792 |
$ 3,585,313 |
|
|
|
CONTACT: FOR FURTHER INFORMATION CONTACT:
James E. Lauter
Senior Vice President &
Chief Financial Officer
T: (561) 682-7561
E: James.Lauter@hlss.com
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