Attached files
| file | filename |
|---|---|
| 8-K - 8-K - DITECH HOLDING Corp | d771531d8k.htm |
| EX-99.1 - EX-99.1 - DITECH HOLDING Corp | d771531dex991.htm |
 Second Quarter 2014 Earnings Presentation
August 11, 2014
Exhibit 99.2 |
 Forward-Looking Statements
1
Certain statements in this report, constitute “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended,
or the Exchange Act. 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, and our actual results, performance or
achievements could differ materially from future results, performance or achievements expressed in
these forward-looking statements. 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 below and in more detail in our Annual Report on Form
10-K for the year ended December 31, 2013 under the caption “Risk Factors,” in Part II, Item 1A. “Risk Factors” of our Quarterly Report on Form
10-Q for the quarter ended June 30, 2013 and in our other filings with the SEC.
In particular (but not by way of limitation), the following important factors, risks and uncertainties
could affect our future results, performance and achievements and could cause actual results, performance and achievements to differ materially
from those expressed in the forward-looking statements:
•
increased scrutiny and potential enforcement actions by federal and state agencies, including a pending
investigation by the CFPB and the FTC, the investigation by the Department of Justice and HUD, and the investigations by the state
attorneys general working group;
•
uncertainties related to our ability to meet increasing performance and compliance standards, such as
those of the National Mortgage Settlement, and reporting obligations and increases to the cost of doing business as a result thereof;
•
uncertainties related to inquiries from government agencies into collection, foreclosure, loss
mitigation, bankruptcy, loan servicing transfers and lender-placed insurance practices;
•
uncertainties relating to interest curtailment obligations and any related financial and litigation
exposure (including exposure relating to false claims);
•
unexpected losses resulting from pending, threatened or unforeseen litigation, arbitration or other
third-party claims against the Company;
•
changes in, and/or more stringent enforcement of, federal, state and local policies, laws and
regulations affecting our business, including mortgage and reverse mortgage originations and servicing and lender-placed insurance;
•
loss of our loan servicing, loan origination, insurance agency, and collection agency licenses, or
changes to our licensing requirements;
•
our ability to remain qualified as a GSE approved seller, servicer or component servicer, including the
ability to continue to comply with the GSEs’ respective loan and selling and servicing guides;
•
the substantial resources (including senior management time and attention) we devote to, and the
significant compliance costs we incur in connection with, regulatory compliance and regulatory examinations and inquiries, and any fines,
penalties or similar payments we make in connection with resolving such matters; •
our ability to earn anticipated levels of performance and incentive fees on serviced business; •
the ability of our customers, under certain circumstances, to terminate our servicing and
sub-servicing agreements, including agreements relating to our management and disposition of real estate owned properties for GSEs and investors;
•
a downgrade in our servicer ratings by one or more of the rating agencies that rate us as a residential
loan servicer; •
our ability to satisfy various GSE and other capital requirements applicable to our business; •
uncertainties relating to the status and future role of GSEs, and the effects of any changes to the
servicing compensation structure for mortgage servicers pursuant to programs of GSEs or various regulatory authorities;
•
changes to HAMP, HARP, the HECM program or other similar government programs; •
uncertainties related to the processes for judicial and non-judicial foreclosure proceedings,
including potential additional costs, delays or moratoria in the future or claims pertaining to past practices;
•
our ability to implement strategic initiatives, particularly as they relate to our ability to raise
capital and develop new business, including acquisitions of mortgage servicing rights, the development of our originations business and the
implementation of delinquency flow loan servicing programs, all of which are subject to customer demand
and various third-party approvals;
•
risks related to our acquisitions, including our ability to successfully integrate large volumes of
assets and servicing rights, as well as businesses and platforms, that we have acquired or may acquire in the future into our business, any delay
or failure to realize the anticipated benefits we expect to realize from such acquisitions, and our
ability to obtain approvals required to acquire and retain servicing rights and other assets in the future;
•
risks related to the financing incurred in connection with past or future acquisitions and operations,
including our ability to achieve cash flows sufficient to carry our debt and otherwise comply with the covenants of our debt;
•
risks related to the high amount of leverage we utilize in the operation of our business; •
our dependence upon third-party funding in order to finance certain of our businesses; •
the effects of competition on our existing and potential future business, including the impact of
competitors with greater financial resources and broader scopes of operation;
•
our ability to successfully develop our loan originations platforms; •
the occurrence of anticipated growth of the specialty servicing sector and the reverse mortgage sector;
•
local, regional, national and global economic trends and developments in general, and local, regional
and national real estate and residential mortgage market trends in particular;
•
continued uncertainty in the United States home sales market, including both the volume and pricing of
sales, due to adverse economic conditions or otherwise;
•
fluctuations in interest rates and levels of mortgage originations and prepayments; •
changes in regards to the rights and obligations of property owners, mortgagors and tenants; •
changes in public, client or investor opinion on mortgage origination, loan servicing and debt
collection practices;
•
the effect of our risk management strategies, including the management and protection of the personal
and private information of our customers and mortgage holders and the protection of our information systems from third-party
interference (cyber security);
•
changes in accounting rules and standards, which are highly complex and continuing to evolve in the
forward and reverse servicing and originations sectors;
•
the satisfactory maintenance of effective internal control over financial reporting and disclosure
controls and procedures;
•
our continued listing on the New York Stock Exchange; and •
the ability or willingness of Walter Energy, our prior parent, and other counterparties to satisfy
material obligations under agreements with us.
All of the above factors, risks and uncertainties are difficult to predict, contain uncertainties that
may materially affect actual results and may be beyond our control. New factors, risks and uncertainties emerge from time to time, and it is not
possible for our management to predict all such factors, risks and uncertainties or to assess the
effect of each such new factor, risk and uncertainty on our business.
Although we believe that the assumptions underlying the forward-looking statements contained herein
are reasonable, any of the assumptions could be inaccurate, and therefore any of these statements included herein may prove to be
inaccurate. In light of the significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions
described in such statements or our objectives and plans will be achieved. We make no commitment to
revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made,
except as otherwise required under the federal securities laws. If we were in any particular instance
to update or correct a forward-looking statement, investors and others should not conclude that we would make additional updates or
corrections thereafter except as otherwise required under the federal securities laws.
|
 Walter
Investment Overview 2
Servicing &
Complementary
Businesses
Originations
Walter Capital
Opportunity Corp.
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
quarter
ended
June
30,
2014 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures.
Diversified Business Centered in the Mortgage Servicing Sector
Value added business model designed to align interest
with owners of credit / GSEs and consumers
Focus on stable, recurring fee based-revenue streams
generated by servicing and complementary
businesses
Servicing platform and servicing quality highly rated
by S&P, Moody's, Fitch and FNMA
Complementary businesses leverage the 2.3 MN unit
servicing portfolio
Forward Originations business focused on retention
opportunity and build out of retail platform
Reverse Mortgage business a leading issuer and
highly regarded servicer in reverse mortgage sector
Investment Management business manages third-party
assets, driving fee-based revenue |
 Significant Alignment Exists in the Specialty Servicing
Industry Between Key Constituencies
3
Walter is driving toward a best-in-class culture of compliance and consumer
experience Efficient servicing provides significant benefits to
homeowners: •
Nearly 123,000 modifications over the last 36 months
•
~14,000 modifications this quarter
•
Originated over 92,000 HARP loans since February 2013
Best-in-class performance will drive shareholder value
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
quarter
ended
June
30,
2014 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures.
Best Practices in
Transfers
Accuracy of
Information
Managed
Counterparty Risk
Strong Portfolio
Performance
Regulators/Agencies
Reduces industry risks
Stability in industry
•
Lowers risk at agencies
•
Maximizes consumer
outcomes
Consumer/
Homeowner
Efficient/positive
experience
Efficient/positive
experience
Stability of servicer
•
Assistance through
HAMP/HARP/similar
programs
•
Consumer stays in home
Servicer
Improves servicing
efficiencies and lowers
reputational risk
Improves servicing
efficiencies and lowers
reputational risk
Prudent financial
management
•
Value-added
performance enhances
client relationships
•
Costs lowered /
shareholder returns
improved
Investor
Reduces expense;
improves portfolio
performance
Reduces expense;
improves portfolio
performance
Stability of servicer
•
Enhances returns
•
Performance
improvement through
HAMP/HARP/similar
programs
Reduces industry risks |
 Q2
2014 Highlights & Recent Developments 4
Financial Highlights
Servicing, ARM &
Originations
Reverse Mortgage
Other
•
GAAP net loss of $12.9 MN, or ($0.34) per diluted share; $1.19 adjusted for charges
related to goodwill impairment
•
AEBITDA
Adjusted Earnings after tax of $1.86 per diluted share
•
$86 MN of AEBITDA; $39 MN of APTE
•Combined AEBITDA margin of 15 bps of Average UPB
Disappearance rate of 13.8% net of recapture
Acquired $3.3 BN of UPB for ARM business with flow agreement
$72 MN of AEBITDA; $71 MN of APTE
Funded $4.4 BN of UPB
Originated more than 16,000 HARP loans; nearly 340,000 “in the
money” HARP eligible accounts in the portfolio
$(3) MN of AEBITDA; $(4) MN of APTE
Issued $359 MN of HECM securitizations, ranking #1 for HMBS issuances
Originated approximately $299 MN of UPB
Blended cash margin of 376 bps, an increase of 13 bps over Q1 spreads
Initial funding of Walter Capital Opportunity and excess spread sale of
approximately $75 MN completed July 1, 2014
Investment Management earned $34 MN of performance fees
•
Strong performance on residual trusts
Insurance
(1)
and fair value markdowns
of $199 MN
•
•
•
•
•
•
•
•
•
•
•
•
(1)
Goodwill impairment charges are not deductible for tax purposes.
(2)
The Company no longer includes changes in valuation inputs as a component of its
Adjusted Pre-tax Earnings (“APTE," formerly known as “Core Earnings") calculation
and has reflected this change in all previously reported periods as disclosed
in this document. Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
quarter
ended
June
30,
2014 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures.
(2) |
 Combined Servicing Margin / Review
(1)
5
YTD margin in line with management expectations
Continue
to
expect
combined
servicing
margins
in
the
14
-
18
bps
range
Decrease in Q1 to Q2 margins driven by:
Positive settlement of servicing fees in Q1
Increase in compensating interest resulting from continued HARP success
Increase of servicing costs due to addition of EverBank platform/employees and
on- boarding of new portfolios
Increased advance provisions
Expect future increases in regulatory and compliance expense to be mitigated by
efficiency gains and margin improvement as portfolios mature
Expect increase in ARM APTE from acquired portfolio ramp
Combined Servicing Margin Summary
(1)
Analysis of performance requires combination of Servicing, ARM and Insurance
for comparability to peers. (2)
Average UPB and AEBITDA for YTD 2014 and 1Q 2014 includes adjustments to reflect
MSR acquisitions closed during the quarter as though they were closed
January 1, 2014 as economics (cash flows) were actually recorded for the full period. Please refer
to the introductory slides of this presentation, as well as additional disclosures in the Appendix and in our Form 10-Q for the quarter ended June 30,
2014 and other filings with the SEC, for important information regarding Forward-Looking Statements
and the use of Non-GAAP Financial Measures.
AEBITDA
APTI
AEBITDA
APTI
AEBITDA
APTI
Servicing (MN)
67
$
21
$
113
$
74
$
180
$
95
$
ARM (MN)
6
6
4
4
10
10
Insurance (MN)
13
13
16
16
29
29
86
$
40
$
133
$
94
$
219
$
134
$
Combined servicing
margin (in bps) 15
7
22
16
18
11
Adjusted Average UPB Serviced (BN)
(2)
237
$
237
$
238
$
238
$
238
$
238
$
YTD 2014
Q2 2014
Q1 2014 |
 Non-Recourse Liabilities ($11.4 BN) Comprise 66% of
Total Liabilities
6
$ in thousands
$270.8 MN of residual interest in legacy Walter
Investment portfolio
Net fair value liability of $43.5 MN associated
with mandatory clean-up call obligation in
Non-Residual Trusts
Net fair value liability of $99.1 MN in Reverse
Mortgage is a positive to tangible net worth
over time
$13.0 MN of equity in servicer advance trusts
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
quarter
ended
June
30,
2014 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures.
Assets of $11.5 BN collateralize $11.4 BN of non-recourse liabilities
Reverse Mortgage
Residual Trusts
Non
-Residual Trusts
Servicer and Protective Advance Financing Facilities
Assets
1,430.4
$
Liabilities
1,159.6
$
Equity
270.8
$
Assets
608.3
$
Liabilities
651.8
$
Equity
(43.5)
$
Assets
9,373.6
$
Liabilities
9,472.7
$
Equity
(99.1)
$
Assets
114.4
$
Liabilities
101.4
$
Equity
13.0
$ |
 Strategic Capabilities Position Walter for Continued
Growth
Sector fundamentals still strong
•
Significant
market
-
$3
-
$4
TN
of
credit
sensitive assets
•
Banks focus on core versus non-core
servicing
Improving economy improves credit quality
increasing servicing margin and asset values
Regulatory environment
•
Increased regulation/oversight
•
Creates barriers to entry
•
Scale, track record, and capital drive
success
Diversified methods to grow servicing
portfolio
•
Legacy product/acquisitions
•
Originations
•
Flow
Significant market opportunities tied to continued evolution of
mortgage sector
•
Need for non-prime market
•
Return of private label
•
Core competencies drive value to owners of credit
7
Please refer to the introductory slides of this presentation, as well as additional disclosures in the
Appendix and in our Form 10-Q for the quarter ended June 30, 2014 and other filings with the
SEC, for important information regarding Forward-Looking Statements and the use of Non-GAAP Financial Measures. |
 8
Business Trends
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
quarter
ended
June
30,
2014 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures.
Servicing, ARM &
Insurance
Originations
Reverse Mortgage
Other
•AEBITDA margin of 14 –18 bps of Average UPB on a
combined basis expected for remainder of year
•Value added model continues to improve portfolio performance
•Client dialogue active; markets transaction volume improving
•Active regulatory oversight continues
•Retention business strong as margins remain stable and recently
boarded portfolios are mined for HARP opportunity
•Significant agency support for HARP
•Continued focus on cost reductions
•Cautious build-out of retail channel given environment;
managing correspondent channel for profitability
•Revised strategy and operating model to fit new environment
•Focus on retail originations channels and refinement of servicing
platform •Managing servicing costs as platform is
updated •Mid-to-longer term
outlook remains positive given product enhancement and very strong
demographic trends •Investment Management focused on build out of
portfolio under management •Legacy Walter Investment
residual trusts continue to perform as expected
•Continue to review opportunities to extend core competencies
|
 Key
Investment Highlights Walter Investment is achieving strong execution against
strategic initiatives
Depositories’
focus
on
“core”
clients
drives
movement
of
“non-
core”
assets
Originations business transitioning with retail and correspondent
channel build out and as additional products are explored
Expanding Investment Management business through focus on
portfolio build out
More
change
is
coming
to
the
sector
as
the
“new”
mortgage
market landscape is developed
Walter Investment is uniquely positioned to capitalize on the significant sector
opportunity. 9
1
2
3
4
5
Please refer to the introductory slides of this presentation, as well as additional disclosures in the
Appendix and in our Form 10-Q for the quarter ended June 30, 2014 and other filings with the
SEC, for important information regarding Forward-Looking Statements and the use of Non-GAAP Financial Measures.
|
 Supplemental Information & Reconciliations |
 Use of
Non-GAAP Measures and Definitions 11
Generally Accepted Accounting Principles ("GAAP") is the term used to refer to the standard
framework of guidelines for financial accounting. GAAP includes the standards, conventions, and
rules accountants follow in recording and summarizing transactions and in the preparation of financial statements. In addition to reporting financial results in
accordance with GAAP, the Company has provided the following non-GAAP financial measures in this
presentation: Adjusted Pre-tax Earnings, Adjusted EBITDA and Funds Generated in
Period. See the definitions below for a description of how these items are presented and see the Non-GAAP Reconciliations for a reconciliation of these measures to
the most directly comparable GAAP financial measures. Management considers
Adjusted Pre-tax Earnings, Adjusted EBITDA and Funds Generated in Period, each of which is a non-GAAP financial measure, to be important in the
evaluation of our business segments and of the Company as a whole, as well as for allocating capital
resources to our segments. Adjusted Pre-Tax Earnings, Adjusted EBITDA and Funds Generated
in Period are utilized to assess the underlying operational performance of the continuing operations of the business. In addition, analysts, investors, and creditors
may use these measures when analyzing our operating performance. Adjusted Pre-Tax Earnings,
Adjusted EBITDA and Funds Generated in Period are not presentations made in accordance with
GAAP and our use of these terms may vary from other companies in our industry.
These non-GAAP financial measures should not be considered as alternatives to (1) net income
(loss) or any other performance measures determined in accordance with GAAP or (2) operating
cash flows determined in accordance with GAAP. These measures have important limitations as analytical tools, and should not be considered in isolation or as substitutes
for analysis of the Company’s results as reported under GAAP.
is metric that is used by management as a supplemental metric to evaluate
our Company’s underlying key drivers and operating performance of the business. Adjusted
Pre-Tax Earnings is defined as net income (loss) before income taxes plus certain depreciation and amortization costs related to the increased basis in assets,
including servicing and sub-servicing rights, acquired within business combination transactions,
or step-up depreciation and amortization, transaction and integration costs, share-
based compensation expense, non-cash interest expense, the net impact of the Non-Residual
Trusts, fair value to cash adjustments for reverse loans, and certain other cash and non-
cash adjustments, primarily including severance expense and certain other non-recurring
start-up costs. Adjusted Pre-Tax Earnings excludes unrealized changes in fair value of MSRs
that are based on projections of expected future cash flows and prepayments. Adjusted Pre-Tax
Earnings includes both cash and non-cash gains from forward mortgage origination
activities. Non-cash gains are net of non-cash charges or reserves provided. Adjusted
Pre-Tax Earnings includes cash generated from reverse mortgage origination activities. Adjusted
Pre-Tax Earnings may also include other adjustments, as applicable based upon facts and
circumstances, consistent with the intent of providing investors a supplemental means of
eliminates the effects of financing, income taxes and depreciation and amortization. Adjusted EBITDA is defined as net income (loss) before income taxes,
depreciation and amortization, interest expense on corporate debt, transaction and integration
related costs, the net impact of the Non-Residual Trusts and certain other cash and non-
cash adjustments primarily including severance expense, the net provision for the repurchase of loans
sold and certain other non-recurring start-up costs. Adjusted EBITDA includes both cash
and non-cash gains from forward mortgage origination activities. Adjusted EBITDA excludes the impact of fair value option accounting on certain assets and liabilities and
includes cash generated from reverse mortgage origination activities. Adjusted EBITDA may also include
other adjustments, as applicable based upon facts and circumstances,
is calculated as Adjusted EBITDA, as described above,
less capital expenditures, cash paid for corporate debt interest expense and income taxes.
Management believes Funds Generated in Period is useful as a supplemental indicator of the cash
capable of being generated by the business during the relevant period and for that purpose
considers the values of the OMSRs created during the period as equivalent to cash on the assumption that such OMSRs could have been sold during the period for cash
equivalent to their fair value reflected in our books. There can be no assurance that the OMSRs
could have been sold during the period for cash equivalent to their fair value reflected in our
books. Funds Generated in Period does not represent residual cash flow and is not necessarily available for investment, as some or all of it may be required for debt service
Adjusted
Pre-tax Earnings Adjusted EBITDA
Funds Generated in Period
Please refer to the introductory slides of this presentation, as well as additional disclosures in the
Appendix and in our Form 10-Q for the quarter ended June 30, 2014 and other filings
with the SEC, for important information regarding Forward-Looking Statements and the use of Non-GAAP Financial Measures.
and other working capital needs.
consistent with the intent of providing investors a supplemental means of evaluating our
operating performance.
evaluating our operating performance. Amounts or metrics
that relate to future earnings projections are forward-looking and subject to significant business, economic, regulatory and competitive uncertainties, many of
which are beyond the control of Walter Investment and its management, and are based upon assumptions
with respect to future decisions, which are subject to change. Actual results will vary and
those variations may be material. Nothing in this presentation should be regarded as a representation by any person that any target will be achieved and the Company
undertakes no duty to update any target. Please refer to the introductory slides of this presentation,
as well as additional disclosures in this Appendix and in our Annual Report on Form 10-K
for the year ended December 31, 2013, our quarterly report on Form 10-Q for the quarter ended June 30, 2014 and our other filings with the SEC, for important information
regarding Forward Looking Statements and the use and limitations of Non-GAAP Financial Measures.
Because we do not predict special items that might occur in the future, and our outlook is
developed at a level of detail different than that used to prepare GAAP financial measures, we are not providing a reconciliation to GAAP of any forward-looking financial
measures presented herein.
|
 GAAP
Financial Results (1)
12
$ in millions except per share amounts
($ in millions)
2Q14
1Q14
2Q13
Income Statement
Total revenues
413.7
$
369.9
$
596.0
$
Total expenses
(467.2)
(338.5)
(359.0)
Other gains (losses)
1.5
(2.5)
1.7
Income tax (expense) benefit
39.0
(11.6)
(95.3)
Net income (loss)
(12.9)
$
17.4
$
143.2
$
Net income (loss) per diluted share
(0.34)
$
0.45
$
3.75
$
As of
06/30/2014
As of
03/31/2014
As of
06/30/2013
Balance Sheet
Total Assets
18,386.0
$
17,484.3
$
16,930.2
$
Total Liabilities
17,200.8
$
16,292.1
$
15,856.2
$
Equity
1,185.2
$
1,192.1
$
1,074.0
$
(1) Note, columns in schedule may not foot due to rounding.
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
quarter
ended
June
30,
2014 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures. |
 Servicing Segment
Servicing Key Metrics
13
(1)
Average UPB and AEBITDA for 1Q 2014 and 4Q 2013 includes adjustments to reflect MSR
acquisitions closed during the quarter as though they were closed January 1, 2014 as
economics (cash flows) were actually recorded for the full period.
(2)
The
disappearance
rate
is
equal
to
the
proportion
of
the
principal
in
the
portfolio
that
is
paid
off
or
charged
off
in
the
period.
Recaptured
accounts
are
netted
in
the
principal
pay
offs to calculate a net disappearance rate.
Disappearance rates do not reflect the impact of assets which were sold by the
owner and transferred to another servicer. The disappearance rate
for 2Q 2013 was adjusted to reflect the timing of third party loans as if they were sent to third party, refinanced and returned to the GT portfolio in the same
month.
$ in millions
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
quarter
ended
June
30,
2014 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures.
2Q14
1Q14
2Q13
Servicing fees
174.9
$
167.4
$
145.4
$
Incentive and performance fees
25.6
29.8
26.3
Ancillary and other fees
19.2
21.6
17.9
Servicing revenue and fees
219.7
$
218.8
$
189.6
$
Amortization of servicing rights
(9.5)
(10.4)
(10.3)
Realization of expected cash flows
(40.2)
(22.0)
(28.2)
Changes in valuation inputs
(43.4)
(25.6)
93.3
Net servicing revenue and fees
126.6
$
160.8
$
244.4
$
AEBITDA/average UPB
11 bps
19 bps
14 bps
Serviced UPB (in billions)
235.2
$
233.8
$
196.8
$
Serviced units (in millions)
2.2
2.2
1.9
Average
serviced
UPB
(in
billions)
(1)
236.7
$
237.6
$
201.6
$
Disappearance rate
(2)
13.8%
13.5%
20.6% |
 Originations Segment
$ in billions
14
Originations Data by Channel
Consumer Lending Origination Economics
Capitalized MSR
(1)
Calculated on pull-through adjusted locked volume.
(2)
Calculated on funded volume.
Correspondent Lending Origination
Economics
$ in thousands
(1)
Calculated on pull-through adjusted locked volume.
(2)
Calculated on funded volume.
bps
2Q14
1Q14
2Q13
Gain on Sale
(1)
30
77
47
Fee Income
(2)
11
13
15
Direct Expenses
(2)
(46)
(74)
(89)
Margin
(5)
16
(27)
bps
2Q14
1Q14
2Q13
Gain on Sale
(1)
531
486
580
Fee Income
(2)
15
16
40
Direct Expenses
(2)
(202)
(225)
(164)
Margin
344
277
456
2Q14
1Q14
2Q13
Recapture Rate
(1)
39%
47%
36%
Applications
2Q14
%
1Q14
%
2Q13
%
Consumer Lending
4.0
$
50%
2.5
$
52%
5.3
$
58%
Correspondent Lending
4.0
50%
2.3
48%
3.8
42%
8.0
$
100%
4.8
$
100%
9.1
$
100%
Pull-Through Adjusted Locked Volume
2Q14
%
1Q14
%
2Q13
%
Consumer Lending
2.6
46%
1.9
$
53%
3.9
$
64%
Correspondent Lending
3.0
54%
1.7
47%
2.2
36%
5.6
$
100%
3.6
$
100%
6.1
$
100%
Funded Volume
2Q14
%
1Q14
%
2Q13
%
Consumer Lending
2.3
52%
1.8
$
51%
3.2
$
68%
Correspondent Lending
2.1
48%
1.7
49%
1.5
32%
4.4
$
100%
3.5
$
100%
4.7
$
100%
Sold Volume
2Q14
%
1Q14
%
2Q13
%
Consumer Lending
2.1
$
54%
2.0
$
51%
2.4
$
71%
Correspondent Lending
1.8
46%
1.9
49%
1.0
29%
3.9
$
100%
3.9
$
100%
3.4
$
100%
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
quarter
ended
June
30,
2014 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures.
2Q14
1Q14
2Q13
Capitalized MSR (MN)
45,553
$
52,614
$
36,305
$
Base MSR (MN)
34,204
41,249
35,802
Excess MSR (MN)
11,349
11,365
503
Base MSR Multiple
3.87
4.23
4.26
Excess MSR Multiple
3.70
3.80
3.11
Loans sold
3,539,814
3,896,016
3,358,643
Loans sold with excess
1,710,760
1,834,547
279,391
(1) Recapture rate represents the percent of the UPB voluntarily paying
off from portfolio that we are able to refinance into new loans. |
 Reverse Mortgage Segment
15
Reverse Mortgage Key Metrics
$ in millions
(1) Representative of servicing fee for on-balance sheet residential loans
serviced. (2) Cash generated by origination, purchase and securitization of
HECM loans. Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
quarter
ended
June
30,
2014 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures. 2Q14
1Q14
2Q13
Interest income
98.3
$
96.9
$
86.5
$
Interest expense
(91.5)
(90.6)
(79.5)
Net interest margin
(1)
6.8
$
6.3
$
7.0
$
Blended cash generated
(2)
14.2
15.6
36.6
Fair value of loans and HMBS securities
5.9
(4.7)
(16.9)
Fair value
26.9
$
17.2
$
26.7
$
Net servicing revenues and fees
8.8
7.6
6.6
Other
3.0
3.1
2.7
Total revenue
38.7
$
27.9
$
36.0
$
Funded volume
$299 MN
$245 MN
$693 MN
Securitized volume
$359 MN
$415 MN
$833 MN
Blended cash margin
376 bps
363 bps
335 bps
Serviced UPB (in billions)
16.9
$
16.3
$
14.4
$
Serviced units
103,544
100,141
86,795
|
 Reconciliation of GAAP Income (Loss) Before Income
Taxes to Non-GAAP Adjusted EBITDA
16
(1)
For the Three Months Ended
For the Six Months Ended
For the Three Months Ended
For the Six Months Ended
June 30, 2014
June 30, 2014
June 30, 2013
June 30, 2013
Income (loss) before income taxes
(51.9)
$
(23.0)
$
238.6
$
285.1
$
Add:
Depreciation and amortization
18.4
37.0
17.6
33.9
Interest expense
38.5
76.0
30.7
56.9
EBITDA
5.0
90.0
286.9
375.9
Add/(Subtract):
Amortization and fair value adjustments of MSRs
93.7
152.5
(53.9)
(21.5)
Non-cash share-based compensation expense
4.8
8.3
3.9
6.5
Transaction and integration costs
3.5
5.1
3.7
15.3
Debt issuance costs not capitalized
-
-
0.3
5.0
Fair value to cash adjustments for reverse loans
(5.9)
(1.2)
16.9
20.4
Net impact of Non-Residual Trusts
(0.7)
3.4
-
(0.4)
Non-cash interest income
(3.9)
(7.9)
(4.6)
(9.1)
Provision for loan losses
1.5
0.5
0.1
1.8
Residual Trust cash flows
3.8
5.4
1.1
1.5
Servicing fee economics
-
9.7
-
-
Litigation and regulatory matters
13.2
13.2
-
-
Goodwill impairment
82.3
82.3
-
-
Other
2.1
5.9
7.7
6.7
Sub-total
194.4
277.2
(24.8)
26.2
Adjusted EBITDA
199.4
$
367.2
$
262.1
$
402.1
$
(1)
$ in millions
Please refer to the introductory slides of this presentation, as well as additional disclosures in the
Appendix and in our Form 10-Q for the quarter ended AEBITDA for YTD 2014 includes adjustments to reflect MSR acquisitions closed during the
quarter as though they were closed January 1, 2014 as economics (cash flows) were
actually realized for the full period. June 30, 2014 and other
filings with the SEC, for important information regarding Forward-Looking Statements and the use of Non-GAAP Financial Measures. |
 For the Three Months
Ended
For the Six Months Ended
For the Three Months
Ended
For the Six Months Ended
June 30, 2014
June 30, 2014
June 30, 2013
June 30, 2013
Income (loss) before income taxes
(51.9)
$
(23.0)
$
238.6
$
285.1
$
Add back:
Step-up depreciation and amortization
11.3
23.2
12.8
25.7
Step-up amortization of sub-servicing rights (MSRs)
7.7
16.2
8.1
16.2
Non-cash interest expense
4.0
7.3
2.3
5.3
Non-cash share-based compensation expense
4.8
8.3
3.9
6.5
Transaction and integration costs
3.5
5.1
3.7
15.3
Debt issuance costs not capitalized
-
-
0.3
5.0
Fair value to cash adjustments for reverse loans
(5.9)
(1.2)
16.9
20.4
Fair value changes of MSRs due to changes in
valuation inputs and other assumptions
43.4
69.0
(93.3)
(89.3)
Net impact of Non-Residual Trusts
(0.7)
3.4
-
(0.4)
Litigation and regulatory matters
13.2
13.2
-
-
Goodwill impairment
82.3
82.3
-
-
Other
3.2
6.2
5.9
6.0
Adjusted pre-tax earnings
114.9
$
210.0
$
199.2
$
295.8
$
Adjusted earnings after tax (39%)
70.1
$
128.1
$
121.5
$
180.4
$
Adjusted earnings after tax per diluted common and
common equivalent share.
1.86
$
3.36
$
3.23
$
4.80
$
Reconciliation of GAAP Income (Loss) Before Income
Taxes to Non-GAAP Adjusted Pre-tax Earnings
(1)
($ in millions, except per share amounts)
17
(1)
The Company has elected to exclude changes in valuation inputs as a component of
its Adjusted Pre-Tax Earnings calculation and has reflected this change in all previously
reported periods disclosed in this document.
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
Form
10-Q
for
the
quarter
ended
June 30,
2014 and other filings with the SEC, for important information regarding
Forward-Looking Statements and the use of Non-GAAP Financial Measures. |
 Reconciliation of Funds Generated in Period to Net Increase in Cash
and Cash Equivalents
18
($ in millions)
(1)
Represents originated MSRs that have been capitalized upon transfer of loans.
(2)
Represents
originations
activity
including
purchases
and
originations
of
residential
loans
held
for
sale,
proceeds
from
sale
and
payments
on
residential
loans
held
for
sale,
net
change
in
master
repurchase
agreements
associated
with
residential
loans
held
for
sale
and
total
net
gains
on
sales
of
loans
less
gain
on
capitalized
servicing
rights.
(3)
Represents payments for acquisitions of businesses net of cash acquired,
acquisitions of servicing rights and transaction & integration costs incurred as a result.
(4)
Represents proceeds from issuance of debt net of debt issuance costs and payments
made during the period. Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
June
30,
2014
Form
10-Q
and
other filings with the SEC, for important information regarding Forward-Looking
Statements and the use of Non-GAAP Financial Measures. June 30, 2014
June 30, 2013
Adjusted EBITDA
199.4
$
262.1
$
Less:
Cash Interest Expense on Corporate Debt
(46.9)
(29.5)
Cash Taxes/Refund
(6.7)
(54.2)
Capital Expenditures
(8.5)
(12.1)
Funds Generated in Period
137.3
$
166.3
$
Investing and Financing activity and other uses of Funds Generated in Period:
Investment in retained OMSRs
(1)
(45.5)
(36.3)
Net investment in originations activity
(2)
(65.7)
(180.2)
Net activity for servicing advances
5.8
(185.1)
Net investment in reverse mortgage activity
(17.4)
(8.3)
Acquisitions, including related transaction costs
(3)
(306.4)
(234.9)
Net borrowings of corporate debt
(4)
(4.3)
179.1
Other working capital
36.8
207.3
CHANGE IN CASH
(259.4)
$
(92.1)
$
Cash flows provided by (used in) operating activities
(482.6)
(1,844.9)
Cash flows provided by (used in) investing activities
(510.6)
(934.5)
Cash flows provided by (used in) financing activities
733.8
2,687.3
Change in cash
(259.4)
$
(92.1)
$
For the three months ended |
 Reconciliation of Funds Generated in Period to Net Increase in Cash
and Cash Equivalents
19
($ in millions)
Please
refer
to
the
introductory
slides
of
this
presentation,
as
well
as
additional
disclosures
in
the
Appendix
and
in
our
June
30,
2014
Form
10-Q
and
other filings with the SEC, for important information regarding Forward-Looking
Statements and the use of Non-GAAP Financial Measures. For the last
tweleve months
ended
For the six months
ended
For the year ended
For the six months
ended
June 30, 2014
June 30, 2014
December 31, 2013
June 30, 2013
Adjusted EBITDA
656.8
$
367.2
$
691.7
$
402.1
$
Less:
Cash Interest Expense on Corporate Debt
(121.2)
(67.1)
(100.7)
(46.6)
Cash Taxes/Refund
(23.6)
17.8
(96.8)
(55.4)
Capital Expenditures
(34.3)
(13.0)
(38.6)
(17.3)
Funds Generated in Period
477.7
$
304.9
$
455.6
$
282.8
$
Investing
and
Financing
activity
and
other
uses
of
Funds
Generated
in
Period:
Investment in retained OMSRs
(1)
(248.2)
(98.1)
(187.7)
(37.6)
Net investment in originations activity
(2)
102.6
(26.3)
(91.7)
(220.6)
Net activity for servicing advances
(103.3)
10.4
(160.3)
(46.6)
Net investment in reverse mortgage activity
(10.2)
(0.5)
(56.5)
(46.8)
Acquisitions, including related transaction costs
(3)
(618.7)
(341.0)
(1,303.6)
(1,025.9)
Net borrowings of corporate debt
(4)
344.9
(8.9)
1,322.3
968.5
Other working capital
(174.1)
(29.0)
71.7
216.8
Change in Cash
(229.3)
$
(188.5)
$
49.8
$
90.6
$
Cash flows provided by (used in)
operating activities 170.1
(73.8)
(1,810.5)
(2,054.4)
Cash flows provided by (used in) investing activities
(1,805.9)
(712.8)
(3,776.1)
(2,683.0)
Cash flows provided by (used in) financing activities
1,406.5
598.1
5,636.4
4,828.0
Change in cash
(229.3)
$
(188.5)
$
49.8
$
90.6
$
Represents originated MSRs that
have been capitalized upon transfer of loans. Represents
originations
activity
including
purchases
and
originations
of
residential
loans
held
for
sale,
proceeds
from
sale
and
payments
on
residential
loans
held
for
sale,
net
change
in
master
repurchase
agreements
associated
with
residential
loans
held
for
sale
and
total
net
gains
on
sales
of
loans
less
gain
on
capitalized
servicing
rights.
Represents payments for acquisitions of businesses net of cash acquired,
acquisitions of servicing rights and transaction & integration costs incurred as a result.
Represents proceeds from issuance of debt net of debt issuance costs and payments
made during the period. (1)
(2)
(3)
(4) |