Home Loan Servicing Solutions, Ltd. Reports EPS of $0.61 and Net Income of $43.7 Million in the First Quarter of 2014 and Rai...
April 17 2014 - 7:30AM
Home Loan Servicing Solutions, Ltd. ("HLSS", "our", "we" or the
"Company") (Nasdaq:HLSS) today reported net income of $43.7
million, or $0.61 per ordinary share, for the first quarter of
2014. Additionally, the Company's Board of Directors today declared
monthly dividends of $0.16 per ordinary share for April, May and
June 2014.
First quarter business performance highlights:
- Earned a record $43.7 million, or $0.61 per ordinary
share. Earnings include a $0.06 per ordinary share benefit as
a result of the lower annualized prepayment speed of 9.9 percent
this quarter relative to the 12.4 percent annualized prepayment
speed in the fourth quarter of 2013.
- Completed first acquisition of Government National Mortgage
Association ("GNMA") whole loans through the GNMA early buy-out
("EBO") program. The purchase price for these loans was $556.6
million.
- Opened a new $600 million mortgage loan facility to finance the
GNMA EBO purchase.
- Completed the issuance of $600 million of one-year term notes
and $200 million of three-year term notes secured by servicing
advance receivables at a weighted average interest spread over
LIBOR of 1.09%.
- There was no change in servicing asset valuation.
Subsequent to the end of the first quarter of 2014:
- On April 17, 2014, declared monthly dividends of $0.16 per
ordinary share for each of the months of April, May and June
2014.
"Lower prepayment speeds led to another quarter of record
earnings at HLSS," said Chairman William Erbey. "Prepayment speeds
declined due to a reduction in the already low refinancing activity
and slower liquidations on seriously delinquent loans. While the
prepayment speed for this non-agency portfolio could rebound in the
near term, I believe that the longer-term trend remains favorable
and that the company is very well positioned."
"Our purchase of Ginnie Mae early buyout loans marks the
beginning of our diversification into other asset classes," said
President and CEO John Van Vlack. "We are pleased to have added new
assets with an attractive risk and return profile that are similar
to our existing portfolio and look forward to continuing
discussions with servicers beyond Ocwen."
For more information on prior releases and SEC Filings, please
refer to the "Shareholders" section of our website at
www.hlss.com.
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 more than 23 times by the underlying
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 consolidated results of
operations in accordance with U.S. GAAP ("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 format 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, 2014: |
Consolidated Results
(GAAP) |
Adjustments |
Management Reporting
(Non-GAAP) |
Revenue |
|
|
|
Servicing fee revenue |
$ — |
$189,157 |
$189,157 |
Interest income - notes
receivable – Rights to MSRs |
81,852 |
(81,852) |
— |
Interest income – other |
2,961 |
— |
2,961 |
Related party revenue (1) |
628 |
— |
628 |
Total revenue |
85,441 |
107,305 |
192,746 |
|
|
|
|
Operating expenses |
|
|
|
Compensation and benefits |
1,599 |
— |
1,599 |
Servicing expense |
— |
90,644 |
90,644 |
Amortization of MSRs |
— |
16,661 |
16,661 |
Related party expenses (2) |
372 |
— |
372 |
General and administrative
expenses |
2,285 |
— |
2,285 |
Total operating expenses |
4,256 |
107,305 |
111,561 |
Income from operations |
$81,185 |
$ — |
$81,185 |
|
|
|
|
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 Services
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 three months
ended March 31, |
2014 |
2013 |
Revenue |
|
|
Interest income – notes
receivable – Rights to MSRs |
$81,852 |
$44,750 |
Interest income – other |
2,961 |
102 |
Total interest income |
84,813 |
44,672 |
Related party revenue |
628 |
407 |
Total revenue |
85,441 |
45,079 |
|
|
|
Operating expenses |
|
|
Compensation and benefits |
1,599 |
1,166 |
Related party expenses |
372 |
226 |
General and administrative
expenses |
2,285 |
645 |
Total operating expenses |
4,256 |
2,037 |
Income from operations |
81,185 |
43,042 |
|
|
|
Other expense |
|
|
Interest expense |
37,511 |
18,242 |
Total other expense |
37,511 |
18,242 |
Income before income taxes |
43,674 |
24,800 |
Income tax expense |
— |
12 |
Net
income |
$43,674 |
$24,788 |
|
|
|
|
|
|
Earnings per share |
|
|
Basic |
$0.61 |
$0.44 |
Diluted |
$0.61 |
$0.44 |
|
|
|
Weighted average ordinary shares
outstanding |
|
|
Basic |
71,016,771 |
56,628,828 |
Diluted |
71,016,771 |
56,628,828 |
|
|
|
Dividends declared per
share |
$0.45 |
$0.38 |
|
HOME LOAN SERVICING
SOLUTIONS, LTD. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(Dollars in thousands,
except share data) |
(UNAUDITED) |
|
|
|
|
March 31, |
December 31, |
|
2014 |
2013 |
Assets |
|
|
Cash and cash equivalents |
$75,920 |
$87,896 |
Match funded advances |
6,343,397 |
6,387,781 |
Notes receivable – Rights to
MSRs |
634,399 |
651,060 |
Loans held for investment |
552,644 |
— |
Related party receivables |
67,599 |
70,049 |
Deferred tax assets |
1,024 |
1,024 |
Other assets |
192,769 |
130,153 |
Total assets |
$7,867,752 |
$7,327,963 |
|
|
|
Liabilities and Equity |
|
|
Liabilities |
|
|
Match funded liabilities |
$5,775,180 |
$5,715,622 |
Other borrowings |
815,431 |
343,386 |
Dividends payable |
10,653 |
10,653 |
Income taxes payable |
600 |
682 |
Deferred tax liabilities |
1,188 |
1,266 |
Related party payables |
7,885 |
10,732 |
Other liabilities |
11,510 |
11,884 |
Total liabilities |
$6,622,447 |
$6,094,225 |
|
|
|
|
|
|
Equity |
|
|
Equity – Ordinary shares, $.01
par value; 200,000,000 shares authorized; 71,016,771 and 71,016,771
shares issued and outstanding at March 31, 2014 and December 31,
2013, respectively |
710 |
710 |
Additional paid-in capital |
1,210,057 |
1,210,057 |
Retained earnings |
32,520 |
20,804 |
Accumulated other comprehensive
income, net of tax |
2,018 |
2,167 |
Total equity |
1,245,305 |
1,233,738 |
Total liabilities and
equity |
$7,867,752 |
$7,327,963 |
CONTACT: James E. Lauter
Senior Vice President &
Chief Financial Officer
T: +1 345-815-3932
E: James.Lauter@hlss.com
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