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8-K - FORM 8-K - DITECH HOLDING Corp | b83306e8vk.htm |
EX-99.2 - EX-99.2 - DITECH HOLDING Corp | b83306exv99w2.htm |
Exhibit 99.1
Press Release
[NOT] FOR IMMEDIATE RELEASE November 3, 2010 |
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Investor and Media Contact: Whitney Finch Director of Investor Relations 813.421.7694 wfinch@walterinvestment.com |
WALTER INVESTMENT MANAGEMENT CORP. ANNOUNCES THIRD QUARTER 2010 FINANCIAL RESULTS
(Tampa, Fla.) Walter Investment Management Corp. (NYSE Amex: WAC) (Walter Investment or
the Company) today announced results for the quarter ended September 30, 2010.
The Company reported income before income taxes for the quarter ended September 30, 2010 of $10.0
million, or $0.37 per diluted share, as compared to income before income taxes for the year ago
period of $9.6 million, or $0.46 per diluted share. Net income for the third quarter of 2010 was
$9.7 million, or $0.36 per diluted share, as compared to net income for the third quarter 2009 of
$8.2 million, or $0.40 per diluted share. Results for this quarter included a $1.7 million gain
on debt extinguishment associated with temporary investments of excess cash in the Companys
securitization debt.
Mark J. OBrien, Walter Investments Chairman and CEO, said, We are pleased with the continued
strong performance of both our legacy portfolio and the residential loan pools we have acquired
this year. We believe these excellent results are due to our high-touch servicing platform. While
we are selective about the assets we choose to purchase using the capital from last years equity
raise, we continue to find attractively priced assets which meet our investment criteria, albeit at
a slower pace than originally anticipated.
Third Quarter 2010 Dividend Declaration
On November 2, 2010, the Board of Directors of the Company declared a dividend of $0.50 per share
to shareholders of record as of November 12, 2010, which will be paid on November 24, 2010.
Purchase of Marix Servicing, LLC
On November 2, 2010, the Company finalized the purchase transaction of Marix Servicing, LLC
(Marix) a high-touch specialty servicer based in Phoenix, Arizona. The Company anticipates the
acquisition of Marix will enhance its portfolio acquisition opportunities by providing a servicing
platform with a nationwide footprint. Additionally, Marix provides an independent revenue stream,
expanding the Companys revenue growth opportunities, as well as a highly developed information
technology infrastructure which will be leveraged by both organizations.
Third Quarter 2010 Operating Highlights
| Reflecting continued strong performance, consolidated delinquencies were 4.56 percent at September 30, 2010, as compared to 4.26 percent at June 30, 2010 and 5.55 percent at September 30, 2009. Walter Investments delinquency rates (adjusted to reflect comparable methodologies) remain better than the most recently released Mortgage Bankers Associations subprime industry survey average by more than 50 percent. | ||
| On an annualized basis, the asset yield for the quarter ended September 30, 2010 was 10.14 percent and the Companys interest cost on outstanding debt was 6.75 percent. The net interest margin for the quarter, which is net interest income as a percentage of average earning assets, was 5.15 percent, in-line with the third quarter of 2009. | ||
| Loss severities were 16.9 percent in the third quarter, as compared to 14.3 percent for the second quarter of 2010 and 16.9 percent in the third quarter of 2009. | ||
| During the third quarter of 2010, the Company paid dividends on August 27, 2010 of $12.9 million to its shareholders. |
Charles E. Cauthen, Walter Investments President and COO, said, Our field servicing organization
continues to deliver superior results from our residential loan portfolio, including the recently
acquired pools of loans. We are also working actively on opportunities to integrate the Walter
Investment and Marix servicing operations to leverage the best attributes of both platforms.
In
reference to recent concerns in the market regarding foreclosure
processes and procedures, Mr. Cauthen said, We recently
conducted a review of such processes and procedures for both our servicing group and Marix. We are
comfortable that proper compliance policies and procedures are in
place and being followed. We expect this issue will have no direct
effect on our operations.
Third Quarter 2010 Financial Summary
Net interest income for the quarter was $21.0 million as compared to $20.8 million in the year-ago
period. The increase reflects lower outstanding balances and lower voluntary prepayment speeds,
offset by an improvement in seriously delinquent accounts.
The provision for loan losses was $3.2 million, compared with $2.7 million in the year ago period.
Although overall default rates and loss severities have remained relatively flat as compared to the
prior year quarter, defaults and severities were more concentrated
in the accounts with higher average
loan balances, have increased, resulting in a higher provision for losses in the current year
period.
Non-interest income was $2.2 million in the third quarter of 2010 as compared to $3.3 million in
the prior year period, primarily due to lower revenues from advisory services coupled with lower
insurance premium revenue. The prior year period includes a gain from the sale of the Companys
third party insurance agency portfolio.
Non-interest expenses decreased from $11.8 million in the third quarter of 2009 to $10.0 million
for the third quarter of 2010. The 2010 amount is net of a $1.7 million gain recognized as a
result of the extinguishment of debt associated with the purchase of Mid-State Trust 2006-1 and
Trust VIII bonds.
Third Quarter 2010 Liquidity Summary
At September 30, 2010, the Company had $40.2 million of cash. The Company had no borrowings under
its $15 million revolving credit facility at September 30, 2010.
Purchase of Pools of Loans
During the third quarter of 2010, the Company completed the purchase of two pools of primarily
performing, fixed-rate residential loans on single-family, owner occupied residences located within
the Companys existing southern United States geographic footprint. These purchases utilized $21.0
million of proceeds from the Companys 2009 equity offering.
The Company has also recently entered into letters of intent to purchase additional pools of
performing and nonperforming residential loans which, when settled,
are expected to utilize approximately $10 million of proceeds from the equity offering.
Purchase of Bonds
During the quarter, the Company invested approximately $17.5 million to purchase a portion of the
Companys mortgage-backed debt from its 2006-1 securitization and approximately $2.4 million from
its Trust VIII securitization through brokerage transactions. These purchases resulted in gains of
approximately $1.7 million recognized in the results for the third quarter.
On November 1, 2010, the Company invested approximately $14.4 million to purchase a portion of the
Companys mortgage-backed debt from its Trust 2006-1 securitization through a brokerage
transaction. The Company anticipates the purchase will result in a gain of approximately $2.3
million which will be recognized in the fourth quarter.
Conference Call Webcast
Members of the Companys leadership team will discuss Walter Investments third quarter results and
other general business matters during a conference call and live webcast to be held on Thursday,
November 4, 2010, at 10 a.m. Eastern Time. To listen to the event live or in an archive which will
be available for 30 days, visit the Companys website at
www.walterinvestment.com.
About Walter Investment Management Corp.
Walter Investment Management Corp. is an asset manager, mortgage servicer and mortgage portfolio
owner specializing in non-conforming, less-than-prime, and other credit-challenged mortgage assets.
Based in Tampa, Fla., the Company currently has $1.8 billion of assets under management and annual
revenues of approximately $180 million. The Company is structured as a real estate investment
trust (REIT) and employs approximately 340 people. For more information about Walter Investment
Management Corp., please visit the Companys website at
www.walterinvestment.com.
Safe Harbor Statement
Certain statements in this release and in any of Walter Investment Management Corp.s public
documents referred to herein, contain or incorporate by reference forward-looking statements as
defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Walter Investment Management Corp. is including this cautionary
statement to make applicable and take advantage of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Statements that are not historical fact are
forward-looking statements. Words such as expect, believe, anticipate, project, estimate,
forecast, objective, plan, goal and similar expressions, and the opposites of such words
and expressions are intended to identify forward-looking statements. Forward-looking statements
are based on the Companys current beliefs, intentions and expectations; however, forward-looking
statements involve known and unknown risks, uncertainties and other important factors that could
cause actual results, performance or achievements, to differ materially from those reflected in the
statements made or incorporated in this release. Thus, these forward-looking statements are not
guarantees of future performance and should not be relied upon as predictions of future events.
The risks and uncertainties referred to above include, but are not limited to, the continued
availability of loan portfolios meeting the Companys performance criteria at prices that will
result in desired returns and financing sources to purchase additional portfolios, the completion
of the Marix transaction in accordance with the terms and conditions of the purchase agreement; the
accuracy of managements due diligence on and its assessment of the Marix business; future economic
and business conditions; the loss by Marix of key customers or reduction in the services contracted
for by any such customers; the failure of the market for Marixs services to develop; the
possibility that the Company may not be able to integrate the business, operations and employees of
Marix successfully; the inability to manage growth; the effects of competition from a variety of
local, regional, national and other mortgage servicers and other risks detailed from time to time
in the Companys filings with the Securities and Exchange Commission (the SEC), including its
Annual Report on Form 10-K for the year ended December 31, 2009 filed with the SEC on March 2,
2010.
All forward-looking statements set forth herein are qualified by this cautionary statement and are
made only as of November 3, 2010. The Company undertakes no obligation to update or revise the
information contained herein, including without limitation, any forward-looking statements, whether
as a result of new information, subsequent events or circumstances, or otherwise, unless otherwise
required by law.
Walter Investment Management Corp. and Subsidiaries
Consolidated Statements of Income
Consolidated Statements of Income
(dollars in thousands, except share and per share amounts)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net interest income: |
||||||||||||||||
Interest income |
$ | 41,307 | $ | 43,019 | $ | 124,817 | $ | 133,525 | ||||||||
Less: Interest expense |
20,316 | 22,229 | 62,612 | 67,972 | ||||||||||||
Total net interest income |
20,991 | 20,790 | 62,205 | 65,553 | ||||||||||||
Less: Provision for loan losses |
3,234 | 2,701 | 11,224 | 10,663 | ||||||||||||
Total net interest income after provision for loan losses |
17,757 | 18,089 | 50,981 | 54,890 | ||||||||||||
Non-interest income: |
||||||||||||||||
Premium revenue |
1,778 | 2,025 | 6,636 | 8,086 | ||||||||||||
Other income, net |
437 | 1,263 | 2,213 | 2,066 | ||||||||||||
Total non-interest income |
2,215 | 3,288 | 8,849 | 10,152 | ||||||||||||
Non-interest expenses: |
||||||||||||||||
Claims expense |
914 | 1,098 | 2,739 | 3,760 | ||||||||||||
Salaries and benefits |
5,708 | 5,441 | 18,547 | 15,254 | ||||||||||||
Legal and professional |
1,014 | 615 | 2,849 | 3,215 | ||||||||||||
Occupancy |
350 | 223 | 1,023 | 1,023 | ||||||||||||
Technology and communication |
681 | 687 | 2,082 | 2,236 | ||||||||||||
Depreciation and amortization |
59 | 105 | 243 | 336 | ||||||||||||
General and administrative |
2,868 | 3,219 | 8,131 | 8,286 | ||||||||||||
Gain on debt extinguishment |
(1,680 | ) | | (1,680 | ) | | ||||||||||
Losses (gains) on real estate owned, net |
60 | 401 | (1,293 | ) | 548 | |||||||||||
Related party allocated corporate charges |
| | | 853 | ||||||||||||
Total non-interest expenses |
9,974 | 11,789 | 32,641 | 35,511 | ||||||||||||
Income before income taxes |
9,998 | 9,588 | 27,189 | 29,531 | ||||||||||||
Income tax expense (benefit) |
312 | 1,345 | 828 | (75,725 | ) | |||||||||||
Net income |
$ | 9,686 | $ | 8,243 | $ | 26,361 | $ | 105,256 | ||||||||
Basic earnings per common and common equivalent share |
$ | 0.36 | $ | 0.40 | $ | 0.98 | $ | 5.16 | ||||||||
Diluted earnings per common and common equivalent share |
$ | 0.36 | $ | 0.40 | $ | 0.98 | $ | 5.15 | ||||||||
Total dividends declared per common and common equivalent shares |
$ | 0.50 | $ | 0.50 | $ | 1.00 | $ | 0.50 | ||||||||
Weighted average common and common equivalent shares outstanding basic |
26,474,001 | 20,586,199 | 26,411,018 | 20,299,435 | ||||||||||||
Weighted average common and common equivalent shares outstanding diluted |
26,569,897 | 20,687,965 | 26,492,850 | 20,357,139 |
Walter Investment Management Corp. and Subsidiaries
Consolidated Balance Sheets
Consolidated Balance Sheets
(dollars in thousands, except share amounts)
September 30, | December 31, | |||||||
2010 | 2009 | |||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ | 40,199 | $ | 99,286 | ||||
Restricted cash |
10,875 | 8,963 | ||||||
Restricted cash of securitization trusts |
38,192 | 42,691 | ||||||
Receivables, net |
3,524 | 3,052 | ||||||
Residential loans, net of allowance for loan losses of $5,388 and $3460,
respectively |
355,212 | 333,636 | ||||||
Residential loans of securitization trusts, net of allowance for loan losses of
$10,893 and $14,201, respectively |
1,256,404 | 1,310,710 | ||||||
Subordinate security |
1,820 | 1,801 | ||||||
Real estate owned |
28,259 | 21,981 | ||||||
Real estate owned of securitization trusts |
35,949 | 41,143 | ||||||
Deferred debt issuance costs |
17,360 | 18,450 | ||||||
Other assets |
4,979 | 5,961 | ||||||
Total assets |
$ | 1,792,773 | $ | 1,887,674 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Accounts payable |
$ | 590 | $ | 13,489 | ||||
Accounts payable of securitization trusts |
539 | 556 | ||||||
Accrued expenses |
28,386 | 28,296 | ||||||
Deferred income taxes, net |
118 | 173 | ||||||
Mortgage-backed debt of securitization trusts |
1,183,636 | 1,267,454 | ||||||
Accrued interest of securitization trusts |
8,129 | 8,755 | ||||||
Other liabilities |
801 | 767 | ||||||
Total liabilities |
1,222,199 | 1,319,490 | ||||||
Stockholders equity: |
||||||||
Preferred stock, $0.01 par value per share: |
||||||||
Authorized - 10,000,000 shares |
||||||||
Issued and outstanding - 0 shares at September 30, 2010 and
December 31, 2009, respectively |
| | ||||||
Common stock, $0.01 par value per share: |
||||||||
Authorized - 90,000,000 shares |
||||||||
Issued and outstanding - 25,758,716 and 25,642,889 shares at
September 30, 2010 and December 31, 2009, respectively |
258 | 256 | ||||||
Additional paid-in capital |
125,955 | 122,552 | ||||||
Retained earnings |
442,981 | 443,433 | ||||||
Accumulated other comprehensive income |
1,380 | 1,943 | ||||||
Total stockholders equity |
570,574 | 568,184 | ||||||
Total liabilities and stockholders equity |
$ | 1,792,773 | $ | 1,887,674 | ||||
Walter Investment Management Corp. and Subsidiaries
Operating Statistics
Operating Statistics
(dollars in millions, except per share amounts)
2010 | 2010 | 2009 | ||||||||||
Q3 | Q2 | Q3 | ||||||||||
30+ Delinquencies (1) |
4.56 | % | 4.26 | % | 5.55 | % | ||||||
90+ Delinquencies (1) |
2.57 | % | 2.31 | % | 3.24 | % | ||||||
Provision for Losses |
$ | 3.2 | $ | 4.0 | $ | 2.7 | ||||||
Net Charge-offs |
$ | 3.7 | $ | 4.6 | $ | 3.2 | ||||||
Charge-off Ratio (2) |
0.90 | % | 1.13 | % | 0.75 | % | ||||||
Allowance for Losses |
$ | 16.3 | $ | 16.7 | $ | 17.8 | ||||||
Allowance for Losses Ratio (3) |
1.00 | % | 1.02 | % | 1.05 | % | ||||||
30+ Delinquencies (1) |
$ | 80.8 | $ | 75.5 | $ | 102.7 | ||||||
REO (Real Estate Owned) |
64.2 | 62.2 | 56.7 | |||||||||
TIO (Taxes, Insurance, Escrow and Other Advances) |
17.2 | 16.2 | 15.4 | |||||||||
Nonperforming Assets (Delinquencies + REO + TIO) |
$ | 162.2 | $ | 153.9 | $ | 174.8 | ||||||
Nonperforming Assets Ratio (4) |
8.75 | % | 8.32 | % | 9.08 | % | ||||||
Default Rate (5) |
5.15 | % | 6.37 | % | 5.37 | % | ||||||
Fixed Rate Mortgages |
5.10 | % | 5.96 | % | 5.20 | % | ||||||
Adjustable Rate Mortgages |
9.34 | % | 37.07 | % | 14.71 | % | ||||||
Loss Severity (6) |
16.86 | % | 14.30 | % | 16.90 | % | ||||||
Fixed Rate Mortgages |
12.15 | % | 11.69 | % | 12.51 | % | ||||||
Adjustable Rate Mortgages |
64.99 | % | 41.54 | % | 61.75 | % | ||||||
Number of Accounts Serviced (7) |
34,520 | 34,700 | 35,725 | |||||||||
Total Portfolio (8) |
$ | 1,853.8 | $ | 1,850.6 | $ | 1,924.7 | ||||||
ARM Portfolio (9) |
$ | 28.0 | $ | 23.5 | $ | 27.3 | ||||||
Prepayment Rate (Voluntary CPR) |
2.63 | % | 3.13 | % | 3.36 | % | ||||||
Book Value per Share (10) |
$ | 22.15 | $ | 22.28 | $ | 25.60 | ||||||
Debt to Equity Ratio |
2.07:1 | 2.14:1 | 2.54:1 |
(1) | Delinquencies are defined as the percentage of principal balances outstanding which have monthly payments over 30 days past due. The calculation of delinquencies excludes from delinquent amounts those accounts that are in bankruptcy proceedings that are paying their mortgage payments in contractual compliance with bankruptcy court approved mortgage payment obligations. | |
(2) | The charge-off ratio is calculated as annualized net charge-offs, divided by average residential loans before the allowance for losses. | |
(3) | The allowance for losses ratio is calculated as period-end allowance for losses divided by period-end residential loans before the allowance for losses. | |
(4) | The nonperforming assets ratio is calculated as period-end non-performing assets, divided by period-end principal balance of residential loans plus REO and TIO. | |
(5) | Default rate is calculated as the annualized balance of repossessions for the quarter divided by the average total balance of the portfolio for the quarter. | |
(6) | Loss severities are calculated as the loss on sale of REO properties divided by the carrying value of REO. | |
(7) | Includes REO accounts. | |
(8) | Total portfolio includes the principal balance of residential loans, REO and TIO. | |
(9) | ARM portfolio includes the principal balance of adjustable rate residential loans and REO resulting from defaulted adjustable rate residential loans. | |
(10) | Book Value per share is calculated by dividing the Companys equity by total shares issued and outstanding of 25,758,716. | |
NM | Not Meaningful |