UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from      to

Walter Investment Management Corp.

Maryland (State or other Jurisdiction of Incorporation or Organization)		13-3950486 (I.R.S. Employer Identification No.)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The registrant had 27,642,619 shares of common stock outstanding as of August 3, 2011.

 

 

WALTER INVESTMENT MANAGEMENT CORP.

FORM 10-Q

INDEX

		Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements			3
Consolidated Balance Sheets as of June 30, 2011 (unaudited) and December 31, 2010			3
Consolidated Statements of Income for the Three and Six Months Ended June 30, 2011 and 2010 (unaudited)			4
Consolidated Statement of Stockholders’ Equity and Comprehensive Income for the Six Months Ended June 30, 2011 (unaudited)			5
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010 (unaudited)			6
Notes to Consolidated Financial Statements (unaudited)			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3. Quantitative and Qualitative Disclosures About Market Risk			35
Item 4. Controls and Procedures			37
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			38
Item 1A. Risk Factors			38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			56
Item 3. Defaults Upon Senior Securities			56
Item 4. (Removed and Reserved)			56
Item 5. Other Information			56
Item 6. Exhibits			56
Signatures			57
EX-10.6
EX-10.7
EX-10.8
EX-31.1
EX-31.2
EX-32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements
WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

		June 30, 2011				December 31, 2010
		(Unaudited)
ASSETS
Cash and cash equivalents		$	289,947			$	114,352
Restricted cash and cash equivalents			53,591				52,289
Receivables, net			1,287				2,643
Servicing advances and receivables, net			8,979				11,223
Residential loans, net of allowance for loan losses of $13,234 and $15,907, respectively			1,632,887				1,621,485
Subordinate security			1,844				1,820
Real estate owned, net			56,244				67,629
Deferred debt issuance costs			23,949				19,424
Deferred income tax asset, net			222				221
Other assets			4,151				4,404
Total assets		$	2,073,101			$	1,895,490
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and other accrued liabilities		$	43,493			$	33,640
Dividend payable			—				13,431
Mortgage-backed debt			1,463,357				1,281,555
Servicing advance facility			—				3,254
Accrued interest			9,386				8,122
Total liabilities			1,516,236				1,340,002
Commitments and contingencies (Note 17)
Stockholders’ equity:
Preferred stock, $0.01 par value per share:
Authorized — 10,000,000 shares
Issued and outstanding — 0 shares at June 30, 2011 and December 31, 2010			—				—
Common stock, $0.01 par value per share:
Authorized — 90,000,000 shares
Issued and outstanding — 25,830,087 and 25,785,693 shares at June 30, 2011 and December 31, 2010, respectively			259				258
Additional paid-in capital			128,702				127,143
Retained earnings			426,931				426,836
Accumulated other comprehensive income			973				1,251
Total stockholders’ equity			556,865				555,488
Total liabilities and stockholders’ equity		$	2,073,101			$	1,895,490

The following table presents the assets and liabilities of the Company’s consolidated variable interest entities, or securitization trusts, which are included in the Consolidated Balance Sheets above. The assets in the table below include those assets that can only be used to settle obligations of the consolidated securitization trusts. The liabilities in the table below include third-party liabilities of the consolidated securitization trusts only, and for which, creditors or beneficial interest holders do not have recourse to the Company, and exclude intercompany balances that eliminate in consolidation.

CONSOLIDATED BALANCE SHEETS

		June 30, 2011				December 31, 2010
		(Unaudited)
ASSETS OF THE CONSOLIDATED SECURITIZATION TRUSTS THAT CAN ONLY BE USED TO SETTLE THE OBLIGATIONS OF THE CONSOLIDATED SECURITIZATION TRUSTS:
Restricted cash and cash equivalents		$	44,424			$	42,859
Residential loans, net of allowance for loan losses of $12,929 and $15,217, respectively			1,629,951				1,527,830
Real estate owned, net			36,438				38,234
Deferred debt issuance costs			21,873				19,424
Total assets		$	1,732,686			$	1,628,347
LIABILITIES OF THE CONSOLIDATED SECURITIZATION TRUSTS FOR WHICH CREDITORS OR BENEFICIAL INTEREST HOLDERS DO NOT HAVE RECOURSE TO THE COMPANY:
Accounts payable and other accrued liabilities		$	1,357			$	471
Mortgage-backed debt			1,463,357				1,281,555
Accrued interest			9,386				8,122
Total liabilities		$	1,474,100			$	1,290,148

The accompanying notes are an integral part of the consolidated financial statements.

WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except share and per share data)

		For the Three Months Ended								For the Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
Net interest income:
Interest income		$	42,029			$	41,882			$	83,384			$	83,510
Less: Interest expense			21,661				20,692				42,053				41,695
Net interest income			20,368				21,190				41,331				41,815
Less: Provision for loan losses			875				1,709				1,500				3,164
Net interest income after provision for loan losses			19,493				19,481				39,831				38,651
Non-interest income:
Premium revenue			2,137				2,167				4,169				4,858
Servicing revenue and fees			3,310				—				6,247				—
Other income, net			584				1,016				1,283				1,776
Total non-interest income			6,031				3,183				11,699				6,634
Non-interest expenses:
Claims expense			2,073				913				2,950				1,825
Salaries and benefits			8,585				5,858				17,724				12,839
Legal and professional			10,191				994				14,222				1,962
Occupancy			481				328				931				673
Technology and communication			958				673				1,946				1,401
Depreciation and amortization			180				93				360				184
General and administrative			3,801				3,119				7,692				5,737
Real estate owned expenses, net			2,725				1,738				5,542				3,473
Total non-interest expenses			28,994				13,716				51,367				28,094
Income (loss) before income taxes			(3,470	)			8,948				163				17,191
Income tax expense (benefit)			(75	)			385				68				516
Net income (loss)		$	(3,395	)		$	8,563			$	95			$	16,675
Basic earnings (loss) per common and common equivalent share		$	(0.13	)		$	0.32			$	—			$	0.62
Diluted earnings (loss) per common and common equivalent share		$	(0.13	)		$	0.32			$	—			$	0.62
Total dividends declared per common and common equivalent share		$	—			$	0.50			$	—			$	0.50
Weighted-average common and common equivalent shares outstanding — basic			26,646,189				26,414,338				26,621,326				26,379,005
Weighted-average common and common equivalent shares outstanding — diluted			26,646,189				26,512,492				26,749,597				26,456,769

The accompanying notes are an integral part of the consolidated financial statements.

WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME
(Unaudited)

(in thousands, except share data)

																										Accumulated
						Member Unit/ Common								Additional												Other
						Stock								Paid-In				Comprehensive				Retained				Comprehensive
		Total				Shares				Amount				Capital				Income (Loss)				Earnings				Income
Balance at December 31, 2010		$	555,488				25,785,693			$	258			$	127,143							$	426,836			$	1,251
Comprehensive income (loss):
Net income			95															$	95				95
Other comprehensive income (loss), net of tax:
Change in postretirement plans, net of $27 tax effect			(217	)															(217	)							(217	)
Net unrealized gain on subordinate security, net of $0 tax effect			24																24								24
Net amortization of realized gain on closed hedges, net of $0 tax effect			(85	)															(85	)							(85	)
Comprehensive loss																		$	(183	)
Share-based compensation			1,460												1,460
Shares issued upon exercise of stock options and vesting of RSUs			100				44,394				1				99
Balance at June 30, 2011		$	556,865				25,830,087			$	259			$	128,702							$	426,931			$	973

The accompanying notes are an integral part of the consolidated financial statements.

WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

		For the Six Months
		Ended June 30,
		2011				2010
Operating activities:
Net income		$	95			$	16,675
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for loan losses			149				2,647
Amortization of residential loan discount to interest income			(6,961	)			(6,745	)
Depreciation and amortization			360				184
Change in contingent earn-out payment liability			(338	)			—
(Gains) losses on real estate owned, net			633				(1,318	)
Expense (benefit) from deferred income taxes			57				(30	)
Amortization of deferred debt issuance costs to interest expense			593				547
Share-based compensation			1,460				2,109
Other			(312	)			(247	)
Decrease (increase) in assets:
Receivables			2,147				1,326
Servicing advances and receivables, net			2,244				—
Other			(88	)			(187	)
Increase (decrease) in liabilities:
Accounts payable and other accrued liabilities			7,610				(1,301	)
Accrued interest			1,264				(414	)
Cash flows provided by operating activities			8,913				13,246
Investing activities:
Purchases of residential loans			(44,794	)			(19,735	)
Principal payments received on residential loans			48,957				51,139
Cash proceeds from sales of real estate owned, net			1,208				2,705
Additions to property and equipment, net			(19	)			(79	)
(Increase) decrease in restricted cash and cash equivalents			(1,302	)			2,157
Cash flows provided by investing activities			4,050				36,187
Financing activities:
Issuance of mortgage-backed debt			223,065				—
Payments on mortgage-backed debt			(39,941	)			(43,063	)
Mortgage-backed debt extinguishment			(1,338	)			—
Payments on servicing advance facility			(3,254	)			—
Dividends and dividend equivalents paid			(13,431	)			(26,648	)
Shares issued upon exercise of stock options			100				526
Repurchase and cancellation of common stock			—				(264	)
Debt issuance costs paid			(2,569	)			—
Cash flows provided by (used in) financing activities			162,632				(69,449	)
Net increase (decrease) in cash and cash equivalents			175,595				(20,016	)
Cash and cash equivalents at the beginning of the period			114,352				99,286
Cash and cash equivalents at the end of the period		$	289,947			$	79,270
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Real estate owned acquired through foreclosure		$	31,422			$	41,796
Residential loans originated to finance the sale of real estate owned			40,874				41,586

The accompanying notes are an integral part of the consolidated financial statements.

WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Business

     The Company is a mortgage servicer and mortgage portfolio owner specializing in credit-challenged, non-conforming residential loans primarily in the southeastern United States, or U.S. The Company originates, purchases, and provides property insurance for residential loans. The Company also provides ancillary mortgage advisory services.

     The Company’s business, headquartered in Tampa, Florida, was established in 1958 as the financing segment of Walter Energy, Inc., formerly known as Walter Industries, Inc., or Walter Energy. Throughout the Company’s history, it purchased residential loans originated by Walter Energy’s homebuilding affiliate, Jim Walter Homes, Inc., or JWH, originated and purchased residential loans on its own behalf, and serviced these residential loans to maturity. The Company has continued these servicing activities since spinning off from Walter Energy in 2009. In 2010, the Company began acquiring pools of residential loans. Over the past 50 years, the Company has developed significant expertise in servicing credit-challenged accounts through its differentiated high-touch approach which involves significant face-to-face borrower contact by trained servicing personnel strategically located in the markets where its borrowers reside. As of June 30, 2011, the Company serviced approximately 34,000 individual residential loans for its owned portfolio and approximately 5,500 for other investors.

     Throughout this Quarterly Report on Form 10-Q, references to “residential loans” refer to residential mortgage loans and residential retail installment agreements and references to “borrowers” refer to borrowers under our residential mortgage loans and installment obligors under our residential retail installment agreements.

The Acquisition of GTCS Holdings, LLC

     On March 28, 2011, the Company executed a Membership Interest Purchase Agreement to acquire 100% of the outstanding ownership interests of GTCS Holdings LLC, or Green Tree. The acquisition was effective as of July 1, 2011. See Note 3 for further information.

The Acquisition of Marix Servicing, LLC

     On August 25, 2010, the Company entered into a definitive agreement with Marathon Asset Management, L.P., or Marathon, and an individual seller to purchase 100% of the outstanding ownership interests of Marix Servicing, LLC, or Marix. The acquisition was effective as of November 1, 2010. See Note 3 for further information.

2. Basis of Presentation

Interim Financial Reporting

     The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and related notes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ended December 31, 2011. These unaudited interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

     The consolidated financial statements have been prepared in accordance with GAAP, which requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual results could differ from those estimates. All significant intercompany balances have been eliminated in the consolidated financial statements.

  Recent Accounting Guidance

  Recently Adopted Accounting Guidance

     In January 2010, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update to require new disclosures for fair value measurements and to provide clarification for existing disclosure requirements of which certain disclosure provisions were deferred to fiscal periods beginning after December 15, 2010, and interim periods within those fiscal years. Specifically, the changes require a reporting entity to disclose, in the reconciliation of fair value measurements using significant unobservable inputs (Level 3), separate information about purchases, sales, issuances, and settlements (that is, on a gross basis rather than as one net number). The adoption of this guidance on January 1, 2011 did not have a significant impact on the Company’s disclosures.

     In December 2010, the FASB issued an accounting standards update focused on the disclosure of supplementary pro-forma information in business combinations. The purpose of the update was to eliminate diversity in practice surrounding the interpretation of select revenue and expense pro-forma disclosures. The update provides guidance as to the acquisition date that should be selected when preparing the pro-forma disclosures. In the event that comparative financial statements are presented, the acquisition date assumed for the pro-forma disclosure shall be the first day of the preceding comparative year. The adoption of this standard was effective January 1, 2011 and is being applied to the supplemental pro-forma disclosures relative to the Company’s acquisition of Green Tree.

  Recently Issued

     In January 2011, the FASB issued an accounting standards update that related to the disclosures of troubled debt restructurings. The amendments in this standard deferred the effective date related to these disclosures, enabling creditors to provide such disclosures after the FASB completes their project clarifying the guidance for determining what constitutes a troubled debt restructuring. As the provisions of this standard only defer the effective date of disclosure requirements related to troubled debt restructurings, the adoption of this standard will have no impact on the Company’s disclosures.

     In April 2011, the FASB issued an accounting standards update to provide additional guidance related to a troubled debt restructuring. The standard provides guidance in determining whether a creditor has granted a concession, includes factors and examples for creditors to consider in evaluating whether a restructuring results in a delay in payment that is insignificant, prohibits creditors from using the borrower’s effective rate test to evaluate whether a concession has been granted to the borrower, and adds factors for creditors to use in determining whether a borrower is experiencing financial difficulties. A provision in this standard also ends the FASB’s deferral of the additional disclosures about troubled debt restructurings. The provisions of this guidance are effective for the Company’s reporting period ending September 30, 2011. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

     In May 2011, the FASB issued an accounting standards update on fair value measurements and disclosures that was the result of work completed by them and the International Accounting Standards Board to develop common requirements for measuring fair value and for disclosing of information about fair value measurements. The amendments in this standard are effective for interim and annual periods beginning January 1, 2012. The Company is currently evaluating the standard and its impact on the consolidated financial statements and related disclosures.

     In June 2011, the FASB issued an accounting standards update that eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. Under the new standard, the components of net income and other comprehensive income can be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. The accounting standard is effective for interim and annual periods beginning January 1, 2012. Adoption of the standard is not expected to have a material impact on the Company’s consolidated financial statements.

  Reclassifications

     In order to provide comparability between periods presented, certain amounts have been reclassified from the previously reported consolidated financial statements to conform to the consolidated financial statement presentation of the current period. The Company reclassified certain trust expenses from interest expense to general and administrative expenses on the consolidated statements of income. Additionally, the Company reclassified certain expenses from general and administrative expenses to legal and professional expenses. The Company also reclassified amounts between provision for loan losses, gains (losses) on real estate owned, net and cash proceeds from sales of real estate owned, net on the consolidated statements of cash flows. As a result, there were reclassifications to real estate owned acquired through foreclosure and residential loans originated to finance the sale of real estate owned.

3. Acquisitions

  Green Tree

     On July 1, 2011, the Company acquired all of the outstanding shares of Green Tree (the “Acquisition”). Green Tree, based in St. Paul, Minnesota, is an independent, fee-based business services company which provides high-touch, third-party servicing of credit-sensitive consumer loans. The acquisition of Green Tree increases the Company’s ability to provide specialty servicing and to generate recurring fee-for-service revenues from an asset-light platform which may provide the Company with diversified revenue streams from complementary businesses. As a result of the transaction, the Company will no longer qualify as a Real Estate Investment Trust (“REIT”). The results of operations for Green Tree will be combined with those of the Company beginning on July 1, 2011, the date of acquisition.

     The table below details the estimated fair value of the consideration transferred in connection with the Acquisition (in thousands):

		Amount
Cash to owners of Green Tree (1)		$	737,651
Cash to settle Green Tree senior secured credit facility (1)(2)			274,794
Company common stock (1,812,532 shares at $22.19 per share) (3)			40,220
Total estimated consideration		$	1,052,665

     In order to partially fund the Acquisition, on July 1, 2011, the Company entered into a $500 million first lien senior secured term loan and a $265 million second lien senior secured term loan, or 2011 Term Loans. In addition, on July 1, 2011, the Company entered into a $45 million senior secured revolving credit facility, or Revolver. The Company’s obligations under the 2011 Term Loans and Revolver are guaranteed by certain of the Company’s subsidiaries and are secured by substantially all assets of certain subsidiaries. These agreements contain customary events of default and covenants, including among others, covenants that restrict the Company’s ability to incur certain additional indebtedness, create or permit liens on assets, pay dividends and repurchase stock, engage in mergers or consolidations and make investments. These agreements also include certain financial covenants that must be maintained.

     The table below provides the terms of the debt.

Debt Agreement		Interest Rate		Amortization		Maturity/Expiration
$500 million first lien term loan		LIBOR plus 625 basis points		3.75% per quarter; remainder at final maturity		June 30, 2016
$265 million second lien term loan		LIBOR plus 1100 basis points		Bullet payment at maturity		December 31, 2016
$45 million revolver		LIBOR plus 625 basis points		Not applicable		June 30, 2016

     The debt agreements have a minimum LIBOR floor of 1.5%. The first and second lien agreements also stipulate that on an annual basis 75% of the excess cash flow, as defined therein, will be paid to the lender to amortize the debt outstanding. These excess cash flow payments will be made during the first quarter of each fiscal year beginning 2013.

     At August 5, 2011, the Company has drawn $13 million on the Revolver. The commitment fee on the unused portion of the Revolver is .75% per year. The Company recognized $2.1 million in deferred debt issuance costs associated with the issuance of debt which will be amortized beginning on the acquisition date.

     Due to limited time since the closing date, the Company is unable to provide amounts recognized as of the closing date for the major classes of assets acquired and liabilities assumed, including the information required for contingent liabilities, goodwill, pro forma revenues and earnings, and segments of the combined entity.

     The Company incurred expenses related to the Acquisition of approximately $9.1 million and $12.2 million during the three and six months ended June 30, 2011, respectively, which are included in legal and professional expenses.

  Marix

     On November 1, 2010, the Company completed its acquisition of a 100% interest in Marix. Marix is a high-touch specialty mortgage servicer, based in Phoenix, Arizona, focused on default management, borrower outreach, loss mitigation, liquidation strategies, component servicing and specialty servicing.

     The purchase price for the acquisition was a cash payment due at closing of less than $0.1 million plus estimated contingent earn-out payments of $2.1 million. The earn-out payments are driven by net servicing revenue in Marix’s existing business in excess of a base of $3.8 million per quarter. The payments are due within 30 days after the end of each fiscal quarter through the three year period ended December 31, 2013. The estimated liability for future earn-out payments is recorded in accounts payable and other accrued liabilities. In accordance with the accounting guidance on business combinations, any future adjustments to the estimated earn-out liability will be recognized in the earnings of that period. At March 31, 2011, the fair value of the estimated earn-out payments was re-evaluated and reduced by $0.3 million which resulted in a credit to the consolidated statement of income. At June 30, 2011 the estimated earn-out payment was re-evaluated and no adjustment was required for the three months ended June 30, 2011. At June 30, 2011, the estimated earn-out payable equaled $1.8 million.

     The fair value of the estimated earn-out liability is based on the present value of the expected future payments to be made to the seller of Marix in accordance with the provisions outlined in the purchase agreement. In determining fair value, Marix’s future performance is estimated using financial projections developed by management. The expected future payments are estimated on the basis of the earn-out formula specified in the purchase agreement compared to the associated financial projections. These payments are then discounted to present value using a risk-adjusted rate that takes into consideration the likelihood that the forecasted earn-out payments will be made.

4. Fair Value

     Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A three-tier fair value hierarchy is used to prioritize the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The three levels of the fair value hierarchy are as follows:

  Basis or Measurement

     Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

     Level 2 Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

     Level 3 Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

     The accounting guidance concerning fair value allows the Company to elect to measure certain items at fair value and report the changes in fair value through the statements of income. This election can only be made at certain specified dates and is irrevocable once made. The Company does not have a policy regarding specific assets or liabilities to elect to measure at fair value, but rather makes the election on an instrument by instrument basis as they are acquired or incurred. The Company has not made the fair value election for any financial assets or liabilities as of June 30, 2011.

     The Company determines fair value based upon quoted broker prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market rates commensurate with the credit quality and duration of the investment.

  Items Measured at Fair Value on a Recurring Basis

     The subordinate security is measured in the consolidated financial statements at fair value on a recurring basis in accordance with the accounting guidance concerning debt and equity securities and is categorized in the table below based upon the lowest level of significant input to the valuation (in thousands):

		Quoted Prices in
		Active Markets								Significant
		for Identical				Significant Other				Unobservable
		Assets				Observable Inputs				Inputs
		(Level 1)				(Level 2)				(Level 3)				Estimated Fair Value
June 30, 2011		$	—			$	—			$	1,844			$	1,844
December 31, 2010			—				—				1,820				1,820

     The subordinate security consists of a single, fixed-rate security backed by notes that are collateralized by manufactured housing. Approximately one-third of the notes include attached real estate on which the manufactured housing is located as additional collateral. The subordinate security has a coupon of 8.0% and a contractual maturity of 2038. The underlying notes were originated primarily in 2004 and 2005, have a weighted-average coupon rate of 9.5% and a weighted-average maturity of 18.3 years. The subordinate security has an overcollateralization level of 10.9% with a 1.2% annual loss rate.

     To estimate the fair value, the Company used a discounted cash flow approach. The significant inputs for the valuation model at June 30, 2011 include the following:

	•		Yield: 18.4%
	•		Probability of default: 2.3%
	•		Loss severity: 61.8%
	•		Prepayment: 2.7%

     The following table provides a reconciliation of the beginning and ending balances of the Company’s subordinate security which is measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2011 and the year ended December 31, 2010 (in thousands):

		As of and for the				As of and for the
		Six Months Ended				Year Ended
		June 30, 2011				December 31, 2010
Balance at beginning of period		$	1,820			$	1,801
Total gains (losses):
Included in other comprehensive income			24				19
Balance at end of period		$	1,844			$	1,820

  Items Measured at Fair Value on a Non-Recurring Basis

     At the time a residential loan becomes real estate owned, or REO, the Company records the property at the lower of its carrying amount or estimated fair value less estimated costs to sell. Upon foreclosure and through liquidation, the Company evaluates the property’s fair value as compared to its carrying amount and records a valuation adjustment when the carrying amount exceeds fair value. Any valuation adjustment at the time the loan becomes REO is charged to the allowance for loan losses. Subsequent declines in value, as well as gains and losses on the sale of REO, are reported in real estate owned expenses, net in the consolidated statements of income.

     Carrying values and the corresponding fair value adjustments during the period for assets and liabilities measured in the consolidated financial statements at fair value on a non-recurring basis are as follows (in thousands):

		Fair Value Measurements at Reporting Date Using
						Quoted Prices in
		Estimated				Active Markets for				Significant Other				Significant				Fair Value				Fair Value
		Fair				Identical Assets				Observable Inputs				Unobservable Inputs				Adjustment for the				Adjustment for the
		Value				(Level 1)				(Level 2)				(Level 3)				Three Months Ended				Six Months Ended
Real estate owned:
June 30, 2011		$	56,244			$	—			$	—			$	56,244			$	(872	)		$	(1,965	)
June 30, 2010			62,175				—				—				62,175				(632	)			(1,289	)

     These REO properties are generally located in rural areas and are primarily concentrated in Texas, Mississippi, Alabama, Florida, South Carolina, Louisiana and Georgia. The REO properties have a weighted-average holding period of 12 months. To estimate the fair value, the Company utilized historical loss severity rates experienced on similar REO properties previously sold by the Company.

  Fair Value of Financial Instruments

     The following table presents the carrying values and estimated fair values of financial assets and liabilities that are required to be recorded or disclosed at fair value as of June 30, 2011 and December 31, 2010, respectively (in thousands):

		June 30, 2011								December 31, 2010
		Carrying Amount				Estimated Fair Value				Carrying Amount				Estimated Fair Value
Financial assets:
Cash and cash equivalents		$	289,947			$	289,947			$	114,352			$	114,352
Restricted cash and cash equivalents			53,591				53,591				52,289				52,289
Receivables, net			1,287				1,287				2,643				2,643
Servicing advances and receivables, net			8,979				8,979				11,223				11,223
Residential loans, net			1,632,887				1,552,000				1,621,485				1,566,000
Subordinate security			1,844				1,844				1,820				1,820
Financial liabilities:
Accounts payable and other accrued liabilities			43,493				43,493				33,640				33,640
Dividend payable			—				—				13,431				13,431
Mortgage-backed debt, net of deferred debt issuance costs			1,439,408				1,384,000				1,262,131				1,235,000
Servicing advance facility			—				—				3,254				3,254
Accrued interest			9,386				9,386				8,122				8,122

For assets and liabilities measured in the consolidated financial statements on a historical cost basis, the estimated fair value shown in the above table is for disclosure purposes only. The following methods and assumptions were used to estimate fair value:

     Cash and cash equivalents, restricted cash and cash equivalents, receivables, accounts payable and other accrued liabilities, dividend payable, and accrued interest — The estimated fair value of these financial instruments approximates their carrying value due to their high liquidity or short-term nature.

     Servicing advances and receivables — The estimated fair value of these advances approximates their carrying value as the advances have no stated maturity, are non-interest bearing and are generally realized within a short period of time.

     Residential loans — The fair value of residential loans is estimated by discounting the net cash flows estimated to be generated from the asset. The discounted cash flows were determined using assumptions such as, but not limited to, interest rates, prepayment speeds, default rates, loss severities, and a risk-adjusted market discount rate.

     Subordinate security — The fair value of the subordinate security is measured in the consolidated financial statements at fair value on a recurring basis by discounting the net cash flows estimated to be generated from the asset. Unrealized gains and losses are reported in accumulated other comprehensive income. To the extent that the cost basis exceeds the fair value and the unrealized loss is considered to be other-than-temporary, an impairment charge is recognized and the amount recorded in accumulated other comprehensive income or loss is reclassified to earnings as a realized loss.

     Mortgage-backed debt, net of deferred debt issuance costs — The fair value of mortgage-backed debt is determined by discounting the net cash outflows estimated to be used to repay the debt. These obligations are to be satisfied using the proceeds from the residential loans that secure these obligations and are non-recourse to the Company.

     Servicing advance facility — The fair value of the servicing advance facility approximates the carrying value due to the short-term nature of the facility.

5. Servicing Advances and Receivables, net

     Servicing advances represent payments made on behalf of borrowers or on foreclosed properties in the owned and serviced for other investor portfolios. The Company began servicing for other investors as a result of the acquisition of Marix in November 2010. The following table presents servicing advances and receivables, net (in thousands):

		June 30, 2011				December 31, 2010
Principal and interest		$	3,626			$	3,285
Taxes and insurance			14,554				17,128
Other servicing advances			4,865				4,183
Subservicing fees receivable			731				783
Servicing advances and receivables			23,776				25,379
Less: Allowance for uncollectible servicing advances			(14,797	)			(14,156	)
Servicing advances and receivables, net		$	8,979			$	11,223

     At December 31, 2010, there were servicing advances of $4.5 million pledged as collateral for the servicing advance facility. The facility was terminated and repaid on March 31, 2011.

6. Residential Loans, Net

     Residential loans are held for investment and consist primarily of residential loans held in securitization trusts. Residential loans held in securitization trusts consist of residential loans that the Company has securitized in structures that are consolidated. The Company has determined that the securitization trusts are variable interest entities in which it holds variable interests. In addition, the Company has determined that it is the primary beneficiary of the securitization trusts because (1) as the servicer the Company has the right to direct the activities that most significantly impact the economic performance of the securitization trusts through its ability to manage the delinquent assets of the trusts and (2) as holder of all or a portion of the residual securities issued by the trusts, the Company has the obligation to absorb losses of the trusts, to the extent of its investment, and the right to receive benefits from the trusts both of which could potentially be significant. Specifically, the Company, as servicer to the eleven trusts beneficially owned by the Company, subject to applicable contractual provisions, has discretion, consistent with prudent mortgage servicing practices, to determine whether to sell or work out any loans securitized through the securitization trusts that become troubled. Accordingly, the loans in these securitizations remain on the balance sheet as residential loans. Given this treatment, retained interests are not created and securitization mortgage-backed debt is reflected on the balance sheet as a liability.

     The Company is not contractually required to provide any financial support to the securitization trusts. The Company may, from time to time at its sole discretion, purchase certain assets from the securitization trusts to cure delinquency or loss triggers for the sole purpose of releasing excess overcollateralization to the Company. The Company does not expect to provide financial support to the securitization trusts based on current performance trends.

     The assets of the securitization trusts are pledged as collateral for the mortgage-backed debt, and are not available to satisfy claims of general creditors of the Company. The mortgage-backed debt issued by the securitization trusts is to be satisfied solely from the proceeds of the residential loans and other collateral held in securitization trusts, are not cross-collateralized and are non-recourse to the Company (see Note 9). The Company records interest income on residential loans held in securitization trusts and interest expense on mortgage-backed debt issued in the securitizations over the life of the securitizations.

     Residential loans, net are summarized in the table below (in thousands):

		June 30, 2011				December 31, 2010
Residential loans, principal balance		$	1,823,092			$	1,803,758
Less: Yield adjustment, net (1)			(176,971	)			(166,366	)
Less: Allowance for loan losses			(13,234	)			(15,907	)
Residential loans, net (2)		$	1,632,887			$	1,621,485

  Residential Loan Pool Acquisitions

     The Company acquired residential loans to be held for investment in the amount of $44.8 million and $19.7 million, adding $62.8 million and $24.2 million of unpaid principal to the residential loan portfolio in the six months ended June 30, 2011 and June 30, 2010, respectively. The 2011 acquisitions were financed with proceeds from the Company’s private placement securitization that closed on December 1, 2010, or 2010 securitization. The 2010 acquisitions were financed using proceeds from the Company’s secondary offering that closed on October 21, 2009. The residential loans acquired included performing and non-performing, fixed and adjustable rate loans, on single-family, owner occupied and investor residences located within the Company’s existing southeastern United States geographic footprint.

     At acquisition, the fair value of residential loans acquired outside of a business combination is the purchase price of the residential loans, which is generally based on the outstanding principal balance, probability of default and estimated loss given default.

  Purchased Credit-Impaired Residential Loans

     During the six months ended June 30, 2011, the Company acquired certain residential loans it deemed to be credit-impaired as detailed in the table below (in thousands). There were no credit-impaired residential loans acquired during the six months ended June 30, 2010.

		For the Six Months
		Ended
		June 30, 2011
Contractually required cash flows for acquired loans at acquisition		$	46,779
Nonaccretable difference			(22,707	)
Expected cash flows for acquired loans at acquisition			24,072
Accretable yield			(7,431	)
Purchase price		$	16,641

     The table below sets forth the accretable yield activity for purchased credit-impaired residential loans for the six months ended June 30, 2011 (in thousands):

		For the
		Six Months
		Ended
		June 30, 2011
Balance at December 31, 2010		$	4,174
Additions			7,431
Accretion			(1,135	)
Reclassifications from nonaccretable difference			3,369
Balance at June 30, 2011		$	13,839

     The table below provides additional information about purchased credit-impaired residential loans (in thousands):

		June 30, 2011				December 31, 2010
Outstanding balance (1)		$	72,034			$	26,277
Carrying amount			25,921				9,340

  Disclosures About the Credit Quality of Residential Loans and the Allowance for Loan Losses

     The allowance for loan losses represents management’s estimate of probable incurred credit losses inherent in our residential loan portfolio as of the balance sheet date. The Company has one portfolio segment and class that consists primarily of less-than prime, credit challenged residential loans. The risk characteristics of the portfolio segment and class relate to credit exposure. The method for monitoring and assessing the credit risk is the same throughout the portfolio. The allowance for loan losses on residential loans includes two components: (1) specifically identified residential loans that are evaluated individually for impairment and (2) all other residential loans that are considered a homogenous pool that are collectively evaluated for impairment.

     The Company reviews all residential loans for impairment and determines a residential loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the original contractual terms of the loan agreement. Factors considered in assessing collectability include, but are not limited to, a borrower’s extended delinquency and the initiation of foreclosure proceedings. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Company determines a specific impairment allowance generally based on the difference between the carrying value of the residential loan and the estimated fair value of the collateral.

     The determination of the level of the allowance for loan losses and, correspondingly, the provision for loan losses, for the residential loans evaluated collectively is based on, but not limited to, delinquency levels and trends, default frequency, prior loan loss severity experience, and management’s judgment and assumptions regarding various matters, including the composition of the residential loan portfolio, known and inherent risks in the portfolio, the estimated value of the underlying real estate collateral, the level of the allowance in relation to total loans and to historical loss levels, current economic and market conditions within the applicable geographic areas surrounding the underlying real estate, changes in unemployment levels and the impact that changes in interest rates have on a borrower’s ability to refinance their loan and to meet their repayment obligations. Management continuously evaluates these assumptions and various other relevant factors impacting credit quality and inherent losses when quantifying our exposure to credit losses and assessing the adequacy of our allowance for loan losses as of each reporting date. The level of the allowance is adjusted based on the results of management’s analysis. Generally, as residential loans age, the credit exposure is reduced, resulting in decreasing provisions.

     While the Company considers the allowance for loan losses to be adequate based on information currently available, future adjustments to the allowance may be necessary if circumstances differ substantially from the assumptions used by management in determining the allowance for loan losses.

     The following table summarizes the activity in the allowance for loan losses on residential loans, net (in thousands):

		For the Three								For the Six
		Months Ended								Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
Beginning balance		$	14,920			$	17,324			$	15,907			$	17,661
Provision charged to income			875				1,709				1,500				3,164
Charge-offs, net of recoveries (1)			(2,561	)			(2,300	)			(4,173	)			(4,092	)
Ending balance		$	13,234			$	16,733			$	13,234			$	16,733

     The following table summarizes the ending balance of the allowance for loan losses and the residential loan balance by basis of impairment method (in thousands):

		June 30, 2011				December 31, 2010
Allowance for loan losses:
Loans individually evaluated for loss potential		$	3,173			$	3,599
Loans collectively evaluated for loss potential			10,061				12,308
Loans acquired with deteriorated credit quality			—				—
Total		$	13,234			$	15,907
Recorded investment in residential loans:
Loans individually evaluated for loss potential		$	39,480			$	44,737
Loans collectively evaluated for loss potential			1,580,720				1,583,315
Loans acquired with deteriorated credit quality			25,921				9,340
Total		$	1,646,121			$	1,637,392

Impaired Residential Loans

     The following table presents loans individually evaluated for impairment which consist primarily of residential loans in the process of foreclosure and purchased credit-impaired residential loans (in thousands):

		As of June 30, 2011												For the Six Months Ended June 30, 2011
						Unpaid								Average				Interest
		Recorded				Principal				Related				Recorded				Income
		Investment				Balance				Allowance				Investment				Recognized
Individually impaired:
With no related allowance recorded		$	6,503			$	7,796			$	—			$	8,430			$	18
With an allowance recorded			32,977				35,207				3,173				34,719				39
Purchased credit-impaired:
With no related allowance recorded			25,921				40,471				—				20,313				1,135

		As of December 31, 2010												For the Year Ended December 31, 2010
						Unpaid								Average				Interest
		Recorded				Principal				Related				Recorded				Income
		Investment				Balance				Allowance				Investment				Recognized
Individually impaired:
With no related allowance recorded		$	11,932			$	13,911			$	—			$	10,164			$	13
With an allowance recorded			32,805				35,799				3,599				39,808				106
Purchased credit-impaired:
With no related allowance recorded			9,340				14,329				—				4,670				40

  Aging of Past Due Residential Loans

     Residential loans are placed on non-accrual status when any portion of the principal or interest is 90 days past due. When placed on non-accrual status, the related interest receivable is reversed against interest income of the current period. Interest income on non-accrual loans, if received, is recorded using the cash method of accounting. Residential loans are removed from non-accrual status when the amount financed and the associated interest are no longer 90 days past due. If a non-accrual loan is returned to accruing status the accrued interest, at the date the residential loan is placed on non-accrual status, and forgone interest during the non-accrual period, are recorded as interest income as of the date the loan no longer meets the non-accrual criteria. The past due or delinquency status of residential loans is generally determined based on the contractual payment terms. 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 the bankruptcy court approved mortgage payment obligations. Loan balances are charged off when it becomes evident that balances are not fully collectible. The following table presents the aging of the residential loan portfolio (in thousands):

		30-59				60-89				90 Days												Total				Non-
		Days Past				Days Past				or More				Total								Residential				Accrual
		Due				Due				Past Due				Past Due				Current				Loans				Loans
Recorded investment:
June 30, 2011		$	20,330			$	10,602			$	43,012			$	73,944			$	1,572,177			$	1,646,121			$	43,012
December 31, 2010			24,262				8,274				43,355				75,891				1,561,501				1,637,392				43,355

  Credit Risk Profile Based on Delinquencies

     Factors that are important to managing overall credit quality and minimizing loan losses are sound loan underwriting, monitoring of existing loans, early identification of problem loans, timely resolution of problems, an appropriate allowance for loan losses, and sound nonaccrual and charge-off policies. The Company primarily utilizes delinquency status to monitor the credit quality of the portfolio. Monitoring of residential loans increases when the loan is delinquent. The Company considers all loans 30 days or more past due to be non-performing. The classification of delinquencies, and thus the non-performing calculation, excludes from delinquent amounts those accounts that are in bankruptcy proceedings that are paying their mortgage payments in contractual compliance with the bankruptcy court approved mortgage payment obligations.

     The following table presents residential loans by credit quality indicator (in thousands):

		June 30, 2011				December 31, 2010
Performing		$	1,572,177			$	1,561,501
Non-performing			73,944				75,891
Total		$	1,646,121			$	1,637,392

7. Loan Servicing Portfolio — Third-Party Servicing

     The Company services mortgage loans for itself and, with the acquisition of Marix, for third-party investors. The Company earns servicing income from its third-party servicing portfolio. The Company’s geographic diversification of its serviced for others portfolio, based on outstanding unpaid principal balance, or UPB, is as follows (in thousands, except for number of loans):

		Number of				UPB				Percentage of				Number of				UPB				Percentage of
		Loans at				at				Total at				Loans at				at				Total at
		June 30, 2011				June 30, 2011				June 30, 2011				December 31, 2010				December 31, 2010				December 31, 2010
California			694			$	290,775				21.6	%			700			$	291,192				21.6	%
Florida			748				184,532				13.7				882				216,300				16.0
New York			448				176,736				13.1				422				163,466				12.1
New Jersey			241				73,426				5.4				232				71,875				5.3
Other < 5%			3,381				622,224				46.2				3,303				605,496				45.0
Total			5,512			$	1,347,693				100.0	%			5,539			$	1,348,329				100.0	%

8. Subordinate Security

     The Company’s subordinate security which is classified as available-for-sale totaled $1.8 million at June 30, 2011 and December 31, 2010 and is summarized as follows (in thousands):

		June 30, 2011				December 31, 2010
Principal balance		$	3,812			$	3,812
Purchase price and other adjustments			(2,200	)			(2,200	)
Amortized cost			1,612				1,612
Unrealized gain			232				208
Carrying value (fair value)		$	1,844			$	1,820

     Actual maturities on mortgage-backed securities are generally shorter than the stated contractual maturities because the actual maturities are affected by the contractual lives of the underlying notes, periodic payments of principal, and prepayments of principal. The contractual maturity of the subordinate security is 2038.

9. Mortgage-Backed Debt and Related Collateral

  Mortgage-Backed Debt

     The securitization trusts beneficially owned by the Company, are the issuers of the Company’s outstanding mortgage-backed and asset-backed notes, or the Trust Notes, which consist of nine separate series of public debt offerings and three private offerings, including the new offering in June 2011.

     In May 2011, the Company sold its Class B secured notes that had been issued on November 22, 2010 by Mid-State Capital Trust 2010-1 and held by the Company, increasing mortgage-backed debt by $85.1 million.

     In June 2011, the Company sponsored a $102.0 million residential subprime mortgage securitization and has consolidated the securitization trust WIMC Capital Trust 2011-1, or Trust 2011-1. The Company determined that it is the primary beneficiary of the securitization trust as the Company’s ongoing loss mitigation and resolution responsibilities provides the Company with the power to direct the activities that most significantly impact the economic performance of the securitization trust and the Company’s investment in the subordinate debt and residual interests provide it with the obligation to absorb losses or the right to receive benefits both of which could potentially be significant. Accordingly, the loans in the securitization remain on the consolidated balance sheet as residential loans and the mortgage-backed debt issued by the securitization trust has been recognized as a liability.

     In June 2011, the Company reissued $36 million in mortgage-backed debt that had previously been extinguished.

     These twelve trusts have an aggregate of $1.5 billion of outstanding debt, collateralized by $1.9 billion of assets, including residential loans, REO and restricted cash and cash equivalents. All of the Company’s mortgage-backed debt is non-recourse and not cross-collateralized and, therefore, must be satisfied exclusively from the proceeds of the residential loans and REO held in each securitization trust. The Company services the collateral underlying the eleven securitization trusts owned by the Company.

     The securitization trusts, with the exception of Trust 2011-1, contain provisions that require the cash payments received from the underlying residential loans be applied to reduce the principal balance of the Trust Notes unless certain overcollateralization or other similar targets are satisfied. The securitization trusts also contain delinquency and loss triggers, that, if exceeded, allocate any excess overcollateralization to paying down the outstanding principal balance of the Trust Notes for that particular securitization at an accelerated pace. Assuming no servicer trigger events have occurred and the overcollateralization targets have been met, any excess cash is released to the Company either monthly or quarterly, in accordance with the terms of the respective underlying trust agreements. Since January 2008, Mid-State Trust 2006-1 has exceeded certain triggers and has not provided any excess cash flow to the Company. The delinquency rate for the trigger calculations, which includes REO, was at 10.42% compared to a trigger level of 8.00%. The delinquency trigger for Mid-State Trust 2005-1 and Trust X were exceeded in November 2009 and October 2006, respectively, and cured in 2010. With the exception of Trust 2006-1, which exceeded its trigger and the cured Trust 2005-1 and Trust X, none of the Company’s other securitization trusts have reached the levels of underperformance that would result in a trigger breach causing a delay in cash releases. For Trust 2011-1, principal and interest payments are not paid on the subordinate note or residual interests, which are held by the Company, until all amounts due on the senior notes are fully paid.

     Borrower remittances received on the residential loan collateral are used to make payments on the mortgage-backed debt. The maturity of the mortgage-backed debt is directly affected by principal prepayments on the related residential loan collateral. As a result, the actual maturity of the mortgage-backed debt is likely to occur earlier than the stated maturity. Certain of the Company’s mortgage-backed debt is also subject to redemption according to specific terms of the respective indenture agreements.

Collateral for Mortgage-Backed Debt

     The following table summarizes the collateral for the mortgage-backed debt at June 30, 2011 and December 31, 2010 (in thousands):

		June 30, 2011				December 31, 2010
Residential loans of securitization trusts, principal balance		$	1,818,969			$	1,682,138
Real estate owned, net			36,438				38,234
Restricted cash and cash equivalents			44,424				42,859
Total mortgage-backed debt collateral		$	1,899,831			$	1,763,231

10. Servicing Revenue and Fees

     The Company’s third-party servicing operations began as a result of the acquisition of Marix in November 2010. The following table presents servicing revenue and fees (in thousands):

		For the Three				For the Six
		Months Ended				Months Ended
		June 30, 2011				June 30, 2011
Servicing fees		$	927			$	1,953
Incentive fees			1,442				2,322
Other servicing fees			542				1,140
Other ancillary fees			399				832
Servicing revenue and fees		$	3,310			$	6,247

11. Share-Based Compensation

     Effective May 10, 2011, the Company has established the 2011 Omnibus Incentive Plan, or the 2011 Plan, which amends and restates the prior plan, the 2009 Long-Term Incentive Plan. The 2011 Plan permits the grants of stock options, restricted stock and other awards to the Company’s officers, employees and consultants, including directors; increases the number of authorized shares of common stock reserved for issuance under the plan by 3,550,000 shares; and extends the term of the plan to May 10, 2021.

     During the six months ended June 30, 2011, the Company granted 735,886 stock options that vest ratably over a 3-year term based upon a service condition. The fair value of the stock options of $8.09 was estimated on the date of grant using the Black-Scholes option pricing model and related assumptions. The Company’s share-based compensation expense has been reflected in the consolidated statements of income in salaries and benefits expense.

12. Credit Agreements

     On April 20, 2009, the Company entered into a syndicated credit agreement, a revolving credit agreement and security agreement, and a support letter of credit agreement. The credit agreements were cancelled on or before April 6, 2011.

13. Servicing Advance Facility

     As of November 11, 2008, Marix entered into a Servicing Advance Financing Facility Agreement, or the Servicing Facility, between Marathon Distressed Subprime Fund L.P., as a lender, an affiliate of Marathon, and Marix as a borrower. The note rate on the Servicing Facility is LIBOR plus 6.0%. The facility was originally set to terminate on September 30, 2010, but was extended as part of the Marix purchase agreement for six months to March 31, 2011. The maximum borrowing capacity on the Servicing Facility was $8.0 million.

     On September 9, 2009, Marix entered into a Servicing Advance Financing Facility Agreement, or Second Facility, between Marathon Structured Finance Fund L.P. as an agent and a lender, an affiliate of Marathon, and Marix as a borrower. The rate on this agreement was converted from one-month LIBOR plus 6.0% to one-month LIBOR plus 3.5% on March 31, 2010. The facility was set to terminate on March 31, 2010, but was extended for twelve months to March 31, 2011. The maximum borrowing capacity on the Second Facility was $2.5 million.

     The collateral for these servicing advance facilities represents servicing advances on mortgage loans serviced by Marix for investors managed by or otherwise affiliated with Marathon, and such advances include principal and interest, taxes and insurance, and corporate advances. During the first quarter of 2011, the Company paid off the servicing advance facilities.

14. Comprehensive Income and Accumulated Other Comprehensive Income

     The components of accumulated other comprehensive income are as follows (in thousands):

		Excess of				Net
		Additional				Unrealized				Net
		Postretirement				Gain on				Amortization of
		Employee Benefits				Subordinate				Realized Gain on
		Liability				Security				Closed Hedges				Total
Balance at December 31, 2010		$	686			$	208			$	357			$	1,251
Pre-tax amount			(122	)			23				(45	)			(144	)
Tax benefit			14				—				—				14
Balance at March 31, 2011		$	578			$	231			$	312			$	1,121
Pre-tax amount			(122	)			1				(40	)			(161	)
Tax benefit			13				—				—				13
Balance at June 30, 2011		$	469			$	232			$	272			$	973

15. Common Stock and Earnings Per Share

     In accordance with the accounting guidance concerning earnings per share, or EPS, unvested share-based payment awards that include non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are considered participating securities. As a result, the awards are required to be included in the calculation of basic earnings per common share pursuant to the “two-class” method. For the Company, participating securities are comprised of certain unvested restricted stock and restricted stock units.

     Under the two-class method, net income is reduced by the amount of dividends declared in the period for common stock and participating securities. The remaining undistributed earnings are then allocated to common stock and participating securities as if all of the net income for the period had been distributed. Basic earnings per share excludes dilution and is calculated by dividing net income allocable to common shares by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is calculated by dividing net income allocable to common shares by the weighted-average number of common shares for the period, as adjusted for the potential dilutive effect of non-participating share-based awards.

     The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations shown on the face of the accompanying consolidated statements of income (in thousands, except per share data):

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2011				2010				2011				2010
Basic earnings (loss) per share:
Net income (loss)		$	(3,395	)		$	8,563			$	95			$	16,675
Less: net income allocated to unvested participating securities			—				(123	)			(1	)			(235	)
Net income (loss) available to common stockholders (numerator)			(3,395	)			8,440				94				16,440
Weighted-average common shares			25,813				25,703				25,806				25,681
Add: vested participating securities			833				711				815				698
Total weighted-average common shares outstanding (denominator)			26,646				26,414				26,621				26,379
Basic earnings (loss) per share		$	(0.13	)		$	0.32			$	—			$	0.62
Diluted earnings (loss) per share:
Net income (loss)		$	(3,395	)		$	8,563			$	95			$	16,675
Less: net income allocated to unvested participating securities			—				(122	)			(1	)			(235	)
Net income (loss) available to common stockholders (numerator)			(3,395	)			8,441				94				16,440
Weighted-average common shares			25,813				25,703				25,806				25,681
Add: vested participating securities			833				711				815				698
Add: dilutive effect of stock options			—				98				129				78
Diluted weighted-average common shares outstanding (denominator)			26,646				26,512				26,750				26,457
Diluted earnings (loss) per share		$	(0.13	)		$	0.32			$	—			$	0.62

     In accordance with applicable accounting standards, the Company’s unvested restricted stock and restricted stock units are considered participating securities. During periods of net income, the calculation of earnings per share for common stock are adjusted to exclude the income attributable to the unvested restricted stock and restricted stock units from the numerator and exclude the dilutive impact of those shares from the denominator. During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company. Due to the net loss recognized during the three months ended June 30, 2011, participating securities in the amount of 0.2 million were excluded from the calculation of basic and diluted loss per share because the effect would be antidilutive.

     The calculation of diluted earnings (loss) per share does not include 0.8 million in options for the three and six months ended June 30, 2011 and 0.2 million and 0.3 million for the same periods in 2010, respectively, because their effect would have been antidilutive.

16. Income Taxes

     At June 30, 2011, the Company had elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. As a result of the acquisition of Green Tree on July 1, 2011, the Company will no longer qualify as a REIT. As a REIT, the Company was generally not subject to United States, or U.S., federal corporate income tax on its taxable income distributed to stockholders. However, even as a REIT, the Company was subject to U.S. federal income and excise taxes in various situations, such as on the Company’s undistributed income. The Company’s failure to qualify as a REIT will be retroactive to January 1, 2011 and the Company will be subject to U.S. federal income and applicable state and local tax at regular corporate rates. In addition, the Company will be precluded from qualifying as a REIT until 2016. As of the date of this filing, the Company is in the process of determining the effect on the financial statements of the change in tax status as of July 1, 2011 retroactive to January 1, 2011, which will be recognized in the consolidated financial statements in the third quarter of 2011.

     Certain of the Company’s operations or portions thereof, including mortgage advisory and insurance ancillary businesses, were conducted through taxable REIT subsidiaries, or TRSs. A TRS is a C-corporation and as such is subject to U.S. federal corporate income tax. The Company’s TRSs facilitate its ability to offer certain services and conduct activities that generally cannot be offered directly by the REIT. The Company also will be required to pay a 100% tax on any net income on non-arm’s length transactions between the REIT and any of its TRSs.

     Income tax expense of the Company is due solely to the TRSs. The effective tax rate of 41.7% for the six months ended June 30, 2011 is due to state income taxes due on subsidiaries with taxable income that could not be offset with losses of other subsidiaries. The effective tax rate of 3.0% for the six months ended June 30, 2010 is due to the taxable income of the TRSs.

     The Company recognizes tax benefits in accordance with the guidance concerning uncertainty in income taxes. This guidance establishes a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements. As of June 30, 2011 and December 31, 2010, the total gross amount of unrecognized tax benefits was $7.7 million.

17. Commitments and Contingencies

  Transactions with Walter Energy

     Following the spin-off from Walter Energy in 2009, the Company and Walter Energy have operated independently, and neither has any ownership interest in the other. In order to allocate responsibility for overlapping or related aspects of their businesses, the Company and Walter Energy entered into certain agreements pursuant to which the Company and Walter Energy assume responsibility for various aspects of their businesses and agree to indemnify one another against certain liabilities that may arise from their respective businesses, including liabilities relating to certain tax and litigation exposure.

  Securities Sold with Recourse

     In October 1998, Hanover Capital Mortgage Holdings, Inc., or Hanover, sold 15 adjustable-rate FNMA certificates and 19 fixed-rate FNMA certificates that the Company received in a swap for certain adjustable-rate and fixed-rate mortgage loans. These securities were sold with recourse. Accordingly, the Company retains credit risk with respect to the principal amount of these mortgage securities. As of June 30, 2011, the unpaid principal balance of the 12 remaining mortgage securities was approximately $1.4 million.

  Employment Agreements

     At June 30, 2011, the Company had employment agreements with its senior officers, with varying terms that provide for, among other things, base salary, bonus, and change-in-control provisions that are subject to the occurrence of certain triggering events. During the three months ended June 30, 2011, the Company also entered into contracts containing similar terms and conditions with three senior executives of Green Tree that were conditioned upon the closing of the Acquisition.

  Income Tax Exposure

     A dispute exists with regard to federal income taxes owed by the Walter Energy consolidated group. The Company was part of the Walter Energy consolidated group prior to the spin-off from Walter Energy on April 17, 2009. As such, the Company is jointly and severally liable with Walter Energy for any final taxes, interest and/or penalties owed by the Walter Energy consolidated group during the time that the Company was a part of the Walter Energy consolidated group. According to Walter Energy’s most recent public filing on Form 10-Q, they state that the IRS has filed a proof of claim for a substantial amount of taxes, interest and penalties with respect to fiscal years ended August 31, 1983 through May 31, 1994. The public filing goes on to disclose that the issues have been litigated in bankruptcy court and that an opinion was issued by the court in June 2010 as to the remaining disputed issues. The filing further states that the amounts initially asserted by the IRS do not reflect the subsequent resolution of various issues through settlements or concessions by the parties. Walter Energy believes that those portions of the claim which remain in dispute or are subject to appeal substantially overstate the amount of taxes allegedly owing. However, because of the complexity of the issues presented and the uncertainties associated with litigation, Walter Energy is unable to predict the outcome of the adversary proceeding. Finally, Walter Energy believes that all of its current and prior tax filing positions have substantial merit and intends to defend vigorously any tax claims asserted and that they believe that they have sufficient accruals to address any claims, including interest and penalties. Under the terms of the Tax Separation Agreement between the Company and Walter Energy dated April 17, 2009, Walter Energy is responsible for the payment of all federal income taxes (including any interest or penalties applicable thereto) of the consolidated group, which includes the aforementioned claims of the IRS. However, to the extent that Walter Energy is unable to pay any amounts owed, the Company could be responsible for any unpaid amounts.

     In addition, Walter Energy’s most recent public filing disclosed that the IRS completed an audit of Walter Energy’s federal income tax returns for the years ended May 31, 2000 through December 31, 2005. The Company’s predecessors were included within Walter Energy during these years. The IRS issued 30-Day Letters to Walter Energy proposing changes for these tax years which Walter Energy has protested. Walter Energy’s filing states that the disputed issues in this audit period are similar to the issues remaining in the above-referenced dispute and therefore Walter Energy believes that its financial exposure for these years is limited to interest and possible penalties; however, the Company has no knowledge as to the extent of the claim. In addition, Walter Energy reports that the IRS has begun an audit of Walter Energy’s tax returns filed for 2006 through 2008, however, because the examination is in its early stages Walter Energy cannot estimate the amount of any resulting tax deficiency, if any.

     The Tax Separation Agreement also provides that Walter Energy is responsible for the preparation and filing of any tax returns for the consolidated group for the periods when the Company was part of the Walter Energy consolidated group. This arrangement may result in conflicts between Walter Energy and the Company. In addition, the spin-off of the Company from Walter Energy was intended to qualify as a tax-free spin-off under Section 355 of the Code. The Tax Separation Agreement provides generally that if the spin-off is determined not to be tax-free pursuant to Section 355 of the Code, any taxes imposed on Walter Energy or a Walter Energy shareholder as a result of such determination (“Distribution Taxes”) which are the result of the acts or omissions of Walter Energy or its affiliates, will be the responsibility of Walter Energy. However, should Distribution Taxes result from the acts or omissions of the Company or its affiliates, such Distribution Taxes will be the responsibility of the Company. The Tax Separation Agreement goes on to provide that Walter Energy and the Company shall be jointly liable, pursuant to a designated allocation formula, for any Distribution Taxes that are not specifically allocated to Walter Energy or the Company. To the extent that Walter Energy is unable or unwilling to pay any Distribution Taxes for which it is responsible under the Tax Separation Agreement, the Company could be liable for those taxes as a result of being a member of the Walter Energy consolidated group for the year in which the spin-off occurred. The Tax Separation Agreement also provides for payments from Walter Energy in the event that an additional taxable dividend is required to cure a REIT disqualification from the determination of a shortfall in the distribution of non-REIT earnings and profits made immediately following the spin-off. As with Distribution Taxes, the Company will be responsible for this dividend if Walter Energy is unable or unwilling to pay.

  Other Tax Exposure

     On June 28, 2010, the Alabama Department of Revenue, or ADOR, preliminarily assessed financial institution excise tax of approximately $4.2 million, which includes interest and penalties, on a predecessor entity for the years 2004 through 2008. This tax is imposed on financial institutions doing business in the State of Alabama. The Company has contested the assessment and believes that the Company did not meet the definition of a financial institution doing business in the State of Alabama as defined by the Alabama Tax Code.

  Miscellaneous Litigation

     The Company is a party to a number of lawsuits arising in the ordinary course of its business. While the results of such litigation cannot be predicted with certainty, the Company believes that the final outcome of such litigation will not have a materially adverse effect on the Company’s financial condition, results of operations or cash flows.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q and in our results for the year ended December 31, 2010, filed in our Annual Report on Form 10-K on March 8, 2011. Historical results and trends which might appear should not be taken as indicative of future operations, particularly in light of our recent acquisition of GTCS Holdings LLC, or Green Tree, discussed below. Our results of operations and financial condition, as reflected in the accompanying statements and related footnotes, are subject to management’s evaluation and interpretation of business conditions, changing capital market conditions, and other factors.

     The Company’s website can be found at www.walterinvestment.com. The Company makes available, free of charge through the investor relations section of its website, access to its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K, other documents and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as well as proxy statements, as soon as reasonably practicable after it electronically files such material with, or furnishes it to, the Securities and Exchange Commission, or SEC. The Company also makes available, free of charge, access to its Corporate Governance Standards, charters for its Audit Committee, Compensation and Human Resources Committee, and Nominating and Corporate Governance Committee, and its Code of Conduct governing its directors, officers, and employees. Within the time period required by the SEC and the New York Stock Exchange, the Company will post on its website any amendment to the Code of Conduct and any waiver applicable to any executive officer, director, or senior officer (as defined in the Code of Conduct). In addition, the Company’s website includes information concerning purchases and sales of its equity securities by its executive officers and directors, as well as disclosure relating to certain non-GAAP and financial measures (as defined by SEC Regulation G) that it may make public orally, telephonically, by webcast, by broadcast, or by similar means from time to time. The information on the Company’s website is not part of this Quarterly Report on Form 10-Q.

     The Company’s Investor Relations Department can be contacted at 3000 Bayport Drive, Suite 1100, Tampa, FL 33607, Attn: Investor Relations, telephone (813) 421-7694.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

     The Green Tree acquisition was completed on July 1, 2011 outside the period covered by this Form 10-Q. On July 1, 2011, the Company also entered into credit agreements totaling $765 million of purchase financing for the Acquisition, plus a $45 million senior secured revolving credit facility. For further information on these transactions, see the Company’s filings with the SEC dated March 28 and 30, May 2, 18, and 22, June 22, and July 5 and 8, 2011. While these transactions occurred outside the period covered by this Form 10-Q, the risks related to our business have changed in many material respects as a result of the acquisition and revised risk factors reflecting those changes have been included in Item 1A of this Form 10-Q.

     Certain statements in this report, including, without limitation, matters discussed under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” should be read in conjunction with the financial statements, related notes, and other detailed information included elsewhere in this Quarterly Report on Form 10-Q. The Company 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. Certain of these forward-looking statements can be identified by the use of words such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “estimates,” “assumes,” “may,” “should,” “will,” or other similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors, which could cause actual results, performance or achievements to differ materially from future results, performance or achievements. These forward-looking statements are based on our current beliefs, intentions and expectations. These statements are not guarantees or indicative of future performance. Important assumptions and other important factors that could cause actual results to differ materially from those forward-looking statements include, but are not limited to, those factors, risks and uncertainties described in detail in Part II, Item 1A, “Risk Factors” and as otherwise detailed from time to time in our other securities filings with the SEC.

     In particular (but not by way of limitation), the following important factors and assumptions could affect the Company’s future results and could cause actual results to differ materially from those expressed in the forward-looking statements: local, regional, national and global economic trends and developments in general, and local, regional and national real estate and residential mortgage market trends and developments in particular; risks related to the financing incurred in connection with the acquisition of Green Tree; future interest expense; the failure of our business to achieve expected synergies from the Green Tree acquisition; adverse reactions to our acquisition of Green Tree from current or potential customers; our inability to acquire new business; the impact of third parties on our ability to acquire new business; unanticipated delays in the acquisition of new business; fluctuations in interest rates and levels of mortgage prepayments; increases in costs and other general competitive factors; natural disasters and adverse weather conditions, especially to the extent they result in material payouts under insurance policies placed with our captive insurance subsidiary; changes in federal, state and local policies, laws and regulations affecting our business, including, without limitation, mortgage financing or servicing, changes to licensing requirements, and/or the rights and obligations of property owners, mortgagees and tenants; the effectiveness of risk management strategies; unexpected losses resulting from pending, threatened or unforeseen litigation or other third-party claims against the Company; the ability or willingness of Walter Energy, Inc., or Walter Energy, and other counterparties to satisfy material obligations under agreements with the Company; our continued listing on the NYSE Amex; uninsured losses or losses in excess of insurance limits and the availability of adequate insurance coverage at reasonable costs and the effects of competition from a variety of national and other mortgage servicers.

     On November 1, 2010, the Company closed on a securities purchase agreement to acquire 100% of the ownership interests of Marix Servicing, LLC, or Marix, a mortgage servicing business. On March 28, 2011, the Company executed a Membership Interest Purchase Agreement to acquire 100% of the outstanding ownership interests of Green Tree. See Note 3 in the consolidated financial statements for further information on these acquisitions. Risks and uncertainties related to this acquisitions include, but are not limited to, losses incurred in the Marix and Green Tree businesses, our inability to reduce or eliminate such losses as quickly as anticipated, our ability to retain existing licenses in jurisdictions in which Marix and Green Tree do business, our inability to integrate the Marix and Green Tree businesses and/or to achieve anticipated synergies, and our inability to grow the Marix and Green Tree business as quickly as anticipated.

     All forward looking statements set forth herein are qualified by these cautionary statements and are made only as of the date hereof. 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.

The Company

     The Company is a mortgage servicer and mortgage portfolio owner specializing in credit-challenged, non-conforming residential loans primarily in the southeastern United States, or U.S. The Company originates, purchases, and provides property insurance for residential loans. The Company also provides ancillary mortgage advisory services.

Acquisitions

  Green Tree

     On March 28, 2011, the Company executed a Membership Interest Purchase Agreement to acquire 100% of the outstanding ownership interests of Green Tree (the “Acquisition”). The Acquisition was consummated on July 1, 2011. Green Tree, based in St. Paul, Minnesota, is an independent, fee-based business services company which provides high-touch, third-party servicing of credit-sensitive consumer loans.

     The estimated purchase price for the Acquisition was cash of $1 billion and issuance of common stock with a fair value of $40.2 million. The cash portion of the Acquisition was funded by monetizing certain of the Company’s existing assets, a $500 million first lien senior secured term loan due 2016 at the London Interbank Offered Rate, or LIBOR, plus 625 basis points and a $265 million second lien senior secured term loan due 2016 at LIBOR plus 1100 basis points.

  Marix

     On August 25, 2010, the Company entered into a definitive agreement with Marathon Asset Management, L.P., or Marathon, and an individual seller to purchase 100% of the outstanding ownership interests of Marix. The acquisition was effective as of November 1, 2010. Marix is a high-touch specialty mortgage servicer, based in Phoenix, Arizona, focused on default management, borrower outreach, loss mitigation, liquidation strategies, component servicing and specialty servicing.

     The purchase price for the acquisition was a cash payment due at closing of less than $0.1 million plus contingent earn-out payments. The earn-out payments are driven by net servicing revenue in Marix’s existing business in excess of a base of $3.8 million per quarter. The payments are due within 30 days after the end of each fiscal quarter through the three year period ended December 31, 2013. The estimated liability for future earn-out payments is recorded in accounts payable and other accrued liabilities. In accordance with the accounting guidance on business combinations, any future adjustments to the estimated earn-out liability would be recognized in the earnings of that period. At March 31, 2011, the fair value of the estimated earn-out payments was re-evaluated and reduced by $0.3 million which resulted in a credit to the consolidated statement of income. At June 30, 2011, the estimated earn-out payment was re-evaluated and no adjustment was required for the three months ended June 30, 2011. At June 30, 2011, the estimated earn-out payable equaled $1.8 million.

Critical Accounting Policies

     The significant accounting policies used in preparation of our consolidated financial statements are described in Note 2 of “Notes to Consolidated Financial Statements” for the year ended December 31, 2010 included in our Annual Report on Form 10-K filed with the SEC on March 8, 2011. There have been no material changes to the Company’s critical accounting policies or the methodologies or assumptions it applies under them.

Results of Operations

     For the three and six months ended June 30, 2011, the Company reported net income (loss) of ($3.4) million and $0.1 million, respectively, as compared to $8.6 million and $16.7 million for the same periods, respectively, in the prior year. The main components of the change in net income for the three and six months ended June 30, 2011 as compared to the same periods in 2010 are detailed in the following table (in thousands):

		For the Three Months Ended												For the Six Months Ended
		June 30,								Increase				June 30,								Increase
		2011				2010				(Decrease)				2011				2010				(Decrease)
Net interest income:
Interest income		$	42,029			$	41,882			$	147			$	83,384			$	83,510			$	(126	)
Less: Interest expense			21,661				20,692				969				42,053				41,695				358
Net interest income			20,368				21,190				(822	)			41,331				41,815				(484	)
Less: Provision for loan losses			875				1,709				(834	)			1,500				3,164				(1,664	)
Net interest income after provision for loan losses			19,493				19,481				12				39,831				38,651				1,180
Non-interest income:
Premium revenue			2,137				2,167				(30	)			4,169				4,858				(689	)
Servicing revenue and fees			3,310				—				3,310				6,247				—				6,247
Other income, net			584				1,016				(432	)			1,283				1,776				(493	)
Total non-interest income			6,031				3,183				2,848				11,699				6,634				5,065
Total non-interest expenses:
Total non-interest expenses			28,994				13,716				15,278				51,367				28,094				23,273
Income (loss) before income taxes			(3,470	)			8,948				(12,418	)			163				17,191				(17,028	)
Income tax expense (benefit)			(75	)			385				(460	)			68				516				(448	)
Net income (loss)		$	(3,395	)		$	8,563			$	(11,958	)		$	95			$	16,675			$	(16,580	)