GEORGE TOWN, Grand Cayman, Oct. 17, 2013 (GLOBE NEWSWIRE) -- Home Loan Servicing Solutions, Ltd. ("HLSS" or the "Company") (Nasdaq:HLSS) today reported net income of $34.9 million, or $0.49 per ordinary share, for the third quarter of 2013. Additionally, the Company's Board of Directors today declared monthly dividends of $0.15 per ordinary share for October, November and December 2013.
"The asset purchase from Ocwen completed on July 1, 2013 fully deployed the proceeds from our June term loan and equity issuances and nearly doubled the unpaid principal balance of our portfolio," said President and CEO John Van Vlack. "The earnings from this accretive acquisition fueled growth in EPS despite the somewhat higher prepayment rate on assets recently boarded on Ocwen's platform which resulted in an overall annualized prepayment rate of 13.7% in the third quarter. Loss mitigation activities on new portfolios often result in higher initial prepayment speeds but ultimately will result in lower default related prepayments."
"Our capital structure continues to focus on committed fixed rate match funded term notes without exposure to repo or mark-to-market risk" said Chairman William Erbey. "The conservative way we finance our business complements our limited asset valuation exposure and highlights the attractiveness of HLSS' earnings and dividend yield."
Third quarter business performance highlights:
- On July 1, 2013, used the proceeds from the second quarter issuance of ordinary shares and senior secured term note facility to purchase mortgage servicing assets related to non-agency mortgage loans with UPB of $83.3 billion from Ocwen;
- On August 8, completed the issuance of $200 million one-year and $200 million three-year term notes. Issuance of these notes allowed us to reduce the borrowings on all classes of our variable funding notes;
- On August 30, renewed our variable funding notes at improved terms;
- On September 18, completed the issuance of $350 million one-year term notes. Issuance of these notes allowed us to reduce borrowings on all classes of our variable funding notes;
- On September 26, placed a new money market note at a reduced interest rate and amended the related draw note to reduce the interest rate; and
- 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.
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 25 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 ("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.
We believe the presentation of these non-GAAP performance measures may provide additional meaningful comparisons between current results and results in prior periods. 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 September 30, 2013: |
Condensed Consolidated Results (GAAP) |
Adjustments |
Management Reporting (Non-GAAP) |
| Revenue | |||
| Servicing fee revenue | $ — | $ 200,838 | $ 200,838 |
| Interest income - notes receivable – Rights to MSRs | 74,204 | (74,204) | — |
| Interest income – other | 697 | — | 697 |
| Related party revenue (1) | 491 | — | 491 |
| Total revenue | 75,392 | 126,634 | 202,026 |
| Operating expenses | |||
| Compensation and benefits | 2,109 | — | 2,109 |
| Servicing expense | — | 102,040 | 102,040 |
| Amortization of MSRs | — | 24,594 | 24,594 |
| Related party expenses (2) | 228 | — | 228 |
| General and administrative expenses | 1,275 | — | 1,275 |
| Total operating expenses | 3,612 | 126,634 | 130,246 |
| Income from operations | $ 71,780 | $ — | $ 71,780 |
| (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) | ||||
| Three months | Nine months | |||
| For the periods ended September 30, | 2013 | 2012 | 2013 | 2012 |
| Revenue | ||||
| Interest income – notes receivable – Rights to MSRs | $ 74,204 | $ 14,017 | $ 168,626 | $ 27,542 |
| Interest income – other | 697 | 146 | 896 | 283 |
| Total interest income | 74,901 | 14,163 | 169,522 | 27,825 |
| Related party revenue | 491 | 669 | 1,458 | 1,664 |
| Total revenue | 75,392 | 14,832 | 170,980 | 29,489 |
| Operating expenses | ||||
| Compensation and benefits | 2,109 | 1,152 | 4,877 | 2,442 |
| Related party expenses | 228 | 227 | 680 | 525 |
| General and administrative expenses | 1,275 | 557 | 2,654 | 1,340 |
| Total operating expenses | 3,612 | 1,936 | 8,211 | 4,307 |
| Income from operations | 71,780 | 12,896 | 162,769 | 25,182 |
| Other expense | ||||
| Interest expense | 36,080 | 6,252 | 74,356 | 12,507 |
| Total other expense | 36,080 | 6,252 | 74,356 | 12,507 |
| Income before income taxes | 35,700 | 6,644 | 88,413 | 12,675 |
| Income tax expense | 777 | 72 | 816 | 149 |
| Net income | $ 34,923 | $ 6,572 | $ 87,597 | $ 12,526 |
|
Earnings per share |
||||
| Basic | $ 0.49 | $ 0.37 | $ 1.42 | $ 1.04 |
| Diluted | $ 0.49 | $ 0.37 | $ 1.42 | $ 1.04 |
| Weighted average ordinary shares outstanding | ||||
| Basic | 71,016,771 | 17,581,593 | 61,812,369 | 12,008,394 |
| Diluted | 71,016,771 | 17,581,593 | 61,812,369 | 12,008,394 |
| Dividends declared per share | $ 0.45 | $ 0.30 | $ 1.25 | $ 0.68 |
| HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (Dollars in thousands, except share data) | ||
| (UNAUDITED) | ||
|
September 30, 2013 |
December 31, 2012 |
|
| Assets | ||
| Cash and cash equivalents | $ 76,832 | $ 76,048 |
| Match funded advances | 5,925,128 | 3,098,198 |
| Notes receivable – Rights to MSRs | 643,595 | 303,705 |
| Related party receivables | 10,110 | 28,271 |
| Other assets | 157,690 | 79,091 |
| Total assets | $ 6,813,355 | $ 3,585,313 |
| Liabilities and Equity | ||
| Liabilities | ||
| Match funded liabilities | $ 5,187,427 | $ 2,690,821 |
| Other borrowings | 344,072 | — |
| Dividends payable | 10,653 | 6,706 |
| Income taxes payable | 367 | 46 |
| Deferred tax liabilities | 1,019 | — |
| Related party payables | 32,607 | 2,874 |
| Other liabilities | 12,127 | 4,233 |
| Total liabilities | 5,588,272 | 2,704,680 |
| Equity | ||
| Equity – Ordinary shares, $.01 par value; 200,000,000 shares authorized; 71,016,771 and 55,884,718 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively | 710 | 559 |
| Additional paid-in capital | 1,210,042 | 876,657 |
| Retained earnings | 12,665 | 4,493 |
| Accumulated other comprehensive income (loss), net of tax | 1,666 | (1,076) |
| Total equity | 1,225,083 | 880,633 |
| Total liabilities and equity | $ 6,813,355 | $ 3,585,313 |