Home Loan Servicing Solutions, Ltd. Reports EPS of $0.61 and Net Income of $43.7 Million in the First Quarter of 2014 and Raises Monthly Dividend to $0.16 Per Share

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| Source: Home Loan Servicing Solutions, Ltd.

GEORGE TOWN, Grand Cayman, April 17, 2014 (GLOBE NEWSWIRE) -- 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
James E. Lauter
Senior Vice President &
Chief Financial Officer
T: +1 345-815-3932
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