GEORGE TOWN, Grand Cayman, Feb. 6, 2014 (GLOBE NEWSWIRE) -- Home Loan Servicing Solutions, Ltd. ("HLSS" or the "Company") (Nasdaq:HLSS) today reported net income of $40.1 million, or $0.56 per ordinary share, for the fourth quarter of 2013.
Fourth quarter business performance highlights:
- Earned a record $40.1 million, or $0.56 per ordinary share.
- Declared monthly dividends of $0.15 per share totaling $32.0 million for the quarter.
- Completed the issuance of $300 million of three-year term notes secured by servicing advance receivables at a weighted average interest spread over LIBOR of 1.40% in November.
- Earnings include a $0.04 per share benefit from lower than expected annualized prepayment speed of 12.4 percent, a new low for this asset class.
- There was no change in servicing asset valuations.
Subsequent to the end of the fourth quarter of 2013:
- On January 16, 2014, we declared monthly dividends of $0.15 per ordinary share for each of the months of January, February and March 2014.
- On January 17, 2014, we completed the issuance of $600 million of one-year and $200 million of three-year term notes secured by servicing advance receivables at a weighted average interest spread over LIBOR of 1.09%.
- On February 4, 2014, we amended the purchase and subservicing agreements with Ocwen to change the capital charge rate on servicing advances in excess of the contractual target from a fixed rate to a variable rate of LIBOR + 2.75%. This amendment also provides that HLSS will continue to receive income on the loans in its portfolio that are refinanced by Ocwen.
"Prepayment speeds slowed in the fourth quarter reflecting the seasoning of assets on Ocwen's servicing platform and reached a new low for this asset class" said Chairman William Erbey. "This contributed to HLSS' record earnings in the fourth quarter and could continue to provide benefits going forward."
"The amendment to the terms of our agreement with Ocwen enhances the alignment of interests between our businesses and reduces risk for HLSS. Given current forward rates, we see the amendment to the capital charge as neutral to earnings over the life of the contract" said President and CEO John Van Vlack.
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 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 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 December 31, 2013: |
Consolidated Results (GAAP) |
Adjustments |
Management Reporting (Non-GAAP) |
|||
| Revenue | ||||||
| Servicing fee revenue | $ — | $ 201,582 | $ 201,582 | |||
| Interest income - notes receivable – Rights to MSRs | 77,237 | (77,237) | — | |||
| Interest income – other | 1,299 | — | 1,299 | |||
| Related party revenue(1) | 353 | — | 353 | |||
| Total revenue | 78,889 | 124,345 | 203,234 | |||
| Operating expenses | ||||||
| Compensation and benefits | 948 | — | 948 | |||
| Servicing expense | — | 103,115 | 103,115 | |||
| Amortization of MSRs | — | 21,230 | 21,230 | |||
| Related party expenses (2) | 720 | — | 720 | |||
| General and administrative expenses | 1,991 | — | 1,991 | |||
| Total operating expenses | 3,659 | 124,345 | 128,004 | |||
| Income from operations | $ 75,230 | $ — | $ 75,230 | |||
| For the three months ended December 31, 2012: |
Condensed Consolidated Results (GAAP) |
Adjustments |
Management Reporting (Non-GAAP) |
|||
| Revenue | ||||||
| Servicing fee revenue | $ — | $ 60,599 | $ 60,599 | |||
| Interest income - notes receivable – Rights to MSRs | 27,157 | (27,157) | — | |||
| Interest income – other | (173) | — | (173) | |||
| Related party revenue(1) | 652 | — | 652 | |||
| Total revenue | 27,636 | 33,442 | 61,078 | |||
| Operating expenses | ||||||
| Compensation and benefits | 1,069 | — | 1,069 | |||
| Servicing expense | — | 27,080 | 27,080 | |||
| Amortization of MSRs | — | 6,362 | 6,362 | |||
| Related party expenses (2) | 277 | — | 277 | |||
| General and administrative expenses | 497 | — | 497 | |||
| Total operating expenses | 1,843 | 33,442 | 35,285 | |||
| Income from operations | $ 25,793 | $ — | $ 25,793 | |||
| (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) | ||||
| Three months | Twelve months | |||
| For the periods ended December 31, | 2013 | 2012 | 2013 | 2012 |
| Revenue | ||||
| Interest income – notes receivable – Rights to MSRs | $ 77,237 | $ 27,157 | $ 245,863 | $ 54,699 |
| Interest income – other | 1,299 | (173) | 2,195 | 109 |
| Total interest income | 78,536 | 26,984 | 248,058 | 54,808 |
| Related party revenue | 353 | 652 | 1,811 | 2,316 |
| Total revenue | 78,889 | 27,636 | 249,869 | 57,124 |
| Operating expenses | ||||
| Compensation and benefits | 948 | 1,069 | 5,825 | 3,751 |
| Related party expenses | 720 | 277 | 1,400 | 755 |
| General and administrative expenses | 1,991 | 497 | 4,645 | 1,644 |
| Total operating expenses | 3,659 | 1,843 | 11,870 | 6,150 |
| Income from operations | 75,230 | 25,793 | 237,999 | 50,974 |
| Other expense | ||||
| Interest expense | 35,715 | 11,550 | 110,071 | 24,057 |
| Total other expense | 35,715 | 11,550 | 110,071 | 24,057 |
| Income before income taxes | 39,515 | 14,243 | 127,928 | 26,917 |
| Income tax benefit/(expense) | 582 | 103 | (234) | (46) |
| Net income | $ 40,097 | $ 14,346 | $ 127,694 | $ 26,871 |
| Earnings per share | ||||
| Basic | $ 0.56 | $ 0.44 | $ 1.99 | $ 1.56 |
| Diluted | $ 0.56 | $ 0.44 | $ 1.99 | $ 1.56 |
| Weighted average ordinary shares outstanding | ||||
| Basic | 71,016,771 | 32,784,718 | 64,132,383 | 17,230,858 |
| Diluted | 71,016,771 | 32,784,718 | 64,132,383 | 17,230,858 |
| Dividends declared per share | $ 0.45 | $ 0.42 | $ 1.70 | $ 1.45 |
| HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (Dollars in thousands, except share data) | ||
| (UNAUDITED) | ||
| December 31, 2013 | December 31, 2012 | |
| Assets | ||
| Cash and cash equivalents | $ 87,896 | $ 76,048 |
| Match funded advances | 6,387,781 | 3,098,198 |
| Notes receivable – Rights to MSRs | 651,060 | 303,705 |
| Related party receivables | 70,049 | 28,271 |
| Deferred tax assets | 1,024 | — |
| Other assets | 130,153 | 79,091 |
| Total assets | $ 7,327,963 | $ 3,585,313 |
| Liabilities and Equity | ||
| Liabilities | ||
| Match funded liabilities | $ 5,715,622 | $ 2,690,821 |
| Other borrowings | 343,386 | — |
| Dividends payable | 10,653 | 6,706 |
| Income taxes payable | 682 | 46 |
| Deferred tax liabilities | 1,266 | — |
| Related party payables | 10,732 | 2,874 |
| Other liabilities | 11,884 | 4,233 |
| Total liabilities | 6,094,225 | 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 December 31, 2013 and December 31, 2012, respectively | 710 | 559 |
| Additional paid-in capital | 1,210,057 | 876,657 |
| Retained earnings | 20,804 | 4,493 |
| Accumulated other comprehensive income (loss), net of tax | 2,167 | (1,076) |
| Total equity | 1,233,738 | 880,633 |
| Total liabilities and equity | $ 7,327,963 | $ 3,585,313 |