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8-K - FORM 8-K - DITECH HOLDING Corp | b85469e8vk.htm |
EX-99.2 - EX-99.2 - DITECH HOLDING Corp | b85469exv99w2.htm |
Exhibit 99.1
Press Release
FOR IMMEDIATE RELEASE March 8, 2011 |
Investor and Media Contact: Whitney Finch Director of Investor Relations 813.421.7694 wfinch@walterinvestment.com |
WALTER INVESTMENT MANAGEMENT CORP. ANNOUNCES
FOURTH QUARTER AND FULL YEAR FINANCIAL RESULTS
FOURTH QUARTER AND FULL YEAR FINANCIAL RESULTS
(Tampa, Fla.) Walter Investment Management Corp. (NYSE Amex: WAC) (Walter Investment or
the Company) today announced results for the fourth quarter and full year ended December 31,
2010.
The Company reported income before income taxes for the quarter ended December 31, 2010 of $11.2
million, or $0.42 per diluted share, as compared to income before income taxes for the year ago
period of $8.1 million, or $0.32 per diluted share. Net income for the fourth quarter of 2010 was
$10.7 million, or $0.40 per diluted share, as compared to net income for the fourth quarter 2009 of
$8.5 million, or $0.34 per diluted share. Results for this quarter included a $2.6 million gain
on debt extinguishment associated with temporary investments of excess cash in the Companys
securitization debt.
For the year ended December 31, 2010 the Company reported income before income taxes of $38.3
million, in line with its previously announced guidance. Net income for the year ended December
31, 2010 was $37.1 million, or $1.38 per diluted share. Current year results included one-time
charges associated with management changes in the first quarter of
the year of $2.0 million, Marix related losses of $1.3 million and gains on extinguishment of debt of $4.3 million. Net income for
the year ended December 31, 2009 was $113.8 million or $5.25 per diluted share and included
spin-off related costs of $2.1 million and an income tax benefit of $81.3 million which was the
result of the Companys conversion to a REIT on April 17, 2009.
The dividend yield on the Companys stock for the year ended December 31, 2010, based on the
December 31, 2010 closing price of $17.94, was 11.1 percent. The Company provided a year-to-date
total return of 39.1 percent to its shareholders for the year ended December 31, 2010.
Mark J. OBrien, Walter Investments Chairman and CEO, said, 2010 was a year of continued strong
performance from our legacy portfolio, acceleration in our loan acquisition program and success in
our efforts to raise capital through the securitization of our unencumbered assets. The fourth
quarter was especially critical to our strategic objectives, as we completed the purchase of Marix
Servicing, purchased $32.9 million of residential loans and completed our securitization at
attractive terms for the current market.
Additionally, we achieved notable returns for our shareholders this year, continued Mr. OBrien.
The year-to-date total return to shareholders of
39 percent demonstrates significant enhancement in shareholder value, not
only from the dividend, but also through considerable stock price appreciation.
Fourth Quarter 2010 Operating Highlights
| Reflecting continued strong performance, consolidated delinquencies were 4.68 percent at December 31, 2010, as compared to 4.56 percent at September 30, 2010 and 5.44 percent at December 31, 2009. |
3000 Bayport Drive, Suite 1100, Tampa, Florida 33607
813.421.7600 www.walterinvestment.com
813.421.7600 www.walterinvestment.com
Walter Investments delinquency rates (adjusted to reflect comparable methodologies) remain better than the most recently released Mortgage Bankers Associations subprime industry survey average by more than 42 percent. | |||
| On an annualized basis, the asset yield for the quarter ended December 31, 2010 was 10.14 percent and the Companys interest cost on outstanding debt was 6.52 percent. The net interest margin for the quarter, which is net interest income as a percentage of average earning assets, was 5.21 percent, in-line with the fourth quarter of 2009. | ||
| Loss severities were 14.4 percent in the fourth quarter, as compared to 16.9 percent for the third quarter of 2010 and 12.1 percent in the fourth quarter of 2009. Loss severities are calculated as the loss on sale of REO properties (including all costs through disposition) divided by the carrying value of REO. | ||
| During the fourth quarter of 2010, the Company paid dividends on November 24, 2010 of $12.9 million to its shareholders. On December 10, 2010, the Board of Directors of the Company declared the fourth quarter dividend of $0.50 per share to shareholders of record as of December 23, 2010, which was paid on January 14, 2011. |
Charles E. Cauthen, Walter Investments President and COO, said, The continued diligent efforts of
our field servicing organization contributed strong results from operations this quarter. The
focus on reducing delinquencies yielded a 76 basis point improvement over the prior year in early
delinquencies and a 72 basis point improvement in serious delinquencies. Additionally, we continue
to see solid recovery rates on REO sales with the 2010 year-to-date recovery rate of 85.8 percent
the best weve achieved since 2006.
We have begun to integrate Marix into our field servicing operations. continued Mr. Cauthen,
During the fourth quarter we instituted a pilot program using Marixs automated dialer to contact
accounts as soon as they become delinquent. While it is too soon to predict how significant of an
impact this process will have on our delinquencies, we believe leveraging the best aspects of the
Walter Mortgage and Marix servicing platforms will allow us to achieve returns that are superior to
those of other servicers.
Fourth Quarter 2010 Financial Summary
Net interest income for the quarter was $21.3 million as compared to $20.1 million in the year-ago
period. The improvement resulted primarily from a decrease in interest expense due to the lower
average balance of mortgage-backed debt.
The provision for loan losses was $2.0 million, compared with $2.1 million in the year ago period.
Non-interest income was $5.9 million in the fourth quarter of 2010 as compared to $2.8 million in
the prior year period primarily due to the addition of subservicing revenues and fees.
Non-interest expenses increased from $12.7 million in the fourth quarter of 2009 to $14.0 million
for the fourth quarter of 2010. The increase is primarily a result of servicing and overhead
costs, as well as acquisition related charges, attributable to Marix coupled with higher salary and
benefit expenses. The 2010 amount includes the benefit of a $2.6 million gain recognized as a
result of the extinguishment of debt associated with the purchase of Mid-State bonds.
Fourth Quarter 2010 Liquidity Summary
At December 31, 2010, the Company had $114.4 million of cash. The Company had no borrowings under
its $15 million revolving credit facility at December 31, 2010.
Purchase of Pools of Loans
During the fourth quarter of 2010, the Company completed the purchase of two pools of primarily
performing, fixed-rate residential loans on single-family, owner occupied residences located within
the Companys existing southern
United States geographic footprint. These purchases utilized $32.9
million of proceeds from the Companys 2009 equity offering and 2010 securitization.
Purchase of Bonds
During the
quarter, the Company invested approximately $16.3 million to purchase a portion of the
Companys mortgage-backed debt from its Mid-State securitizations through brokerage transactions. Walter Investment views these
bond investments as opportunistic
investments which generate superior yields as compared to other short-term investment
opportunities. These investments will either be resold or used as collateral for repurchase
agreements to provide funding for other investment opportunities as they arise.
Conference Call Webcast
Members of the Companys leadership team will discuss Walter Investments fourth quarter results
and other general business matters during a conference call and live webcast to be held on Tuesday,
March 8, 2011, at 10 a.m. Eastern Time. To listen to the event live or in an archive which will be
available for 30 days, visit the Companys website at www.walterinvestment.com.
About Walter Investment Management Corp.
Walter Investment Management Corp. is an asset manager, mortgage servicer and mortgage portfolio
owner specializing in non-conforming, less-than-prime, and other credit-challenged mortgage assets.
Based in Tampa, Fla., the Company currently has $1.8 billion of assets under management and annual
revenues of approximately $180 million. The Company is structured as a real estate investment
trust (REIT) and employs approximately 340 people. For more information about Walter Investment
Management Corp., please visit the Companys website at www.walterinvestment.com.
Safe Harbor Statement
Certain statements in this release and in any of Walter Investment Management Corp.s public
documents referred to herein, contain or incorporate by reference forward-looking statements as
defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Walter Investment Management Corp. is including this cautionary
statement to make applicable and take advantage of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Statements that are not historical fact are
forward-looking statements. Words such as expect, believe, anticipate, project, estimate,
forecast, objective, plan, goal and similar expressions, and the opposites of such words
and expressions are intended to identify forward-looking statements. Forward-looking statements
are based on the Companys current beliefs, intentions and expectations; however, forward-looking
statements involve known and unknown risks, uncertainties and other important factors that could
cause actual results, performance or achievements, to differ materially from those reflected in the
statements made or incorporated in this release. Thus, these forward-looking statements are not
guarantees of future performance and should not be relied upon as predictions of future events.
The risks and uncertainties referred to above include, but are not limited to, the continued
availability of loan portfolios meeting the Companys performance criteria at prices that will
result in desired returns and financing sources to purchase additional portfolios, the completion
of the Marix transaction in accordance with the terms and conditions of the purchase agreement; the
accuracy of managements due diligence on and its assessment of the Marix business; future economic
and business conditions; the loss by Marix of key customers or reduction in the services contracted
for by any such customers; the failure of the market for Marixs services to develop; the
possibility that the Company may not be able to integrate the business, operations and employees of
Marix successfully; the inability to manage growth; the effects of competition from a variety of
local, regional, national and other mortgage servicers and other risks detailed from time to time
in the Companys filings with the Securities and Exchange Commission (the SEC), including its
Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on March 8,
2011.
All forward-looking statements set forth herein are qualified by this cautionary statement and are
made only as of March 8, 2011. The Company undertakes no obligation to update or revise the
information contained herein, including without limitation, any forward-looking statements, whether
as a result of new information, subsequent events or circumstances, or otherwise, unless otherwise
required by law.
Walter Investment Management Corp. and Subsidiaries
Consolidated Statements of Income
Consolidated Statements of Income
(dollars in thousands, except share and per share amounts)
For the Three Months Ended | For the Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net interest income: |
||||||||||||||||
Interest income |
$ | 41,371 | $ | 41,847 | $ | 166,188 | $ | 175,372 | ||||||||
Less: Interest expense |
20,099 | 21,754 | 82,711 | 89,726 | ||||||||||||
Total net interest income |
21,272 | 20,093 | 83,477 | 85,646 | ||||||||||||
Less: Provision for loan losses |
1,985 | 2,140 | 6,526 | 9,441 | ||||||||||||
Total net interest income after provision for loan losses |
19,287 | 17,953 | 76,951 | 76,205 | ||||||||||||
Non-interest income: |
||||||||||||||||
Premium revenue |
2,527 | 1,955 | 9,163 | 10,041 | ||||||||||||
Servicing revenue and fees |
2,267 | | 2,267 | | ||||||||||||
Other income, net |
1,086 | 863 | 3,299 | 2,929 | ||||||||||||
Total non-interest income |
5,880 | 2,818 | 14,729 | 12,970 | ||||||||||||
Non-interest expenses: |
||||||||||||||||
Claims expense |
(420 | ) | 723 | 2,319 | 4,483 | |||||||||||
Salaries and benefits |
8,948 | 5,314 | 27,495 | 20,568 | ||||||||||||
Legal and professional |
981 | 951 | 3,830 | 4,166 | ||||||||||||
Occupancy |
467 | 341 | 1,490 | 1,364 | ||||||||||||
Technology and communication |
873 | 744 | 2,955 | 2,980 | ||||||||||||
Depreciation and amortization |
140 | 100 | 383 | 436 | ||||||||||||
General and administrative |
4,471 | 2,680 | 12,602 | 10,966 | ||||||||||||
Gain on mortgage-backed debt extinguishment |
(2,578 | ) | | (4,258 | ) | | ||||||||||
Real estate owned expenses, net |
1,129 | 1,831 | 6,519 | 5,741 | ||||||||||||
Related party allocated corporate charges |
| | | 853 | ||||||||||||
Total non-interest expenses |
14,011 | 12,684 | 53,335 | 51,557 | ||||||||||||
Income before income taxes |
11,156 | 8,087 | 38,345 | 37,618 | ||||||||||||
Income tax expense (benefit) |
449 | (436 | ) | 1,277 | (76,161 | ) | ||||||||||
Net income |
$ | 10,707 | $ | 8,523 | $ | 37,068 | $ | 113,779 | ||||||||
Basic earnings per common and common equivalent share |
$ | 0.40 | $ | 0.34 | $ | 1.38 | $ | 5.26 | ||||||||
Diluted earnings per common and common equivalent share |
$ | 0.40 | $ | 0.34 | $ | 1.38 | $ | 5.25 | ||||||||
Total dividends declared per common and common equivalent shares |
$ | 0.50 | $ | 0.50 | $ | 2.00 | $ | 1.50 | ||||||||
Weighted average common and common equivalent shares outstanding basic |
26,493,676 | 25,074,070 | 26,431,853 | 21,496,369 | ||||||||||||
Weighted average common and common equivalent shares outstanding diluted |
26,611,786 | 25,172,433 | 26,521,311 | 21,564,621 |
Walter Investment Management Corp. and Subsidiaries
Consolidated Balance Sheets
Consolidated Balance Sheets
(dollars in thousands, except share amounts)
December 31, | ||||||||
2010 | 2009 | |||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ | 114,352 | $ | 99,286 | ||||
Restricted cash and cash equivalents |
52,289 | 51,654 | ||||||
Receivables, net |
2,643 | 3,052 | ||||||
Servicing advances and receivables, net |
11,223 | | ||||||
Residential loans, net of allowance for loan losses of
$15,907 and $17,661, respectively |
1,621,485 | 1,644,346 | ||||||
Subordinate security |
1,820 | 1,801 | ||||||
Real estate owned |
67,629 | 63,124 | ||||||
Deferred debt issuance costs |
19,424 | 18,450 | ||||||
Deferred income tax asset, net |
221 | | ||||||
Other assets |
4,404 | 5,961 | ||||||
Total assets |
$ | 1,895,490 | $ | 1,887,674 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Accounts payable and other accrued liabilities |
$ | 33,556 | $ | 29,860 | ||||
Dividend payable |
13,431 | 13,248 | ||||||
Deferred income tax liability, net |
| 173 | ||||||
Mortgage-backed debt |
1,281,555 | 1,267,454 | ||||||
Servicing advance facility |
3,254 | | ||||||
Accrued interest |
8,206 | 8,755 | ||||||
Total liabilities |
1,340,002 | 1,319,490 | ||||||
Stockholders equity: |
||||||||
Preferred stock, $0.01 par value per share: |
||||||||
Authorized 10,000,000 shares |
||||||||
Issued and outstanding 0 shares at December 31, 2010 and 2009, respectively |
| | ||||||
Common stock, $0.01 par value per share: |
||||||||
Authorized 90,000,000 shares |
||||||||
Issued and outstanding 25,785,693 and 25,642,889 shares at December 31,
2010 and 2009, respectively |
258 | 256 | ||||||
Additional paid-in capital |
127,143 | 122,552 | ||||||
Retained earnings |
426,836 | 443,433 | ||||||
Accumulated other comprehensive income |
1,251 | 1,943 | ||||||
Total stockholders equity |
555,488 | 568,184 | ||||||
Total liabilities and stockholders equity |
$ | 1,895,490 | $ | 1,887,674 | ||||
ASSETS OF THE CONSOLIDATED SECURITIZATION TRUSTS THAT CAN ONLY BE USED
TO SETTLE THE OBLIGATIONS OF
THE CONSOLIDATED SECURITIZATION TRUSTS: |
December 31, | ||||||||
2010 | 2009 | |||||||
Restricted cash |
$ | 42,859 | $ | 42,691 | ||||
Residential
loans, net of allowance for loan losses of $15,217 and $14,201,
respectively |
1,527,830 | 1,310,710 | ||||||
Real estate owned |
38,234 | 41,143 | ||||||
Deferred debt issuance costs |
19,424 | 18,450 | ||||||
Total assets |
$ | 1,628,347 | $ | 1,412,994 | ||||
LIABILITIES OF THE CONSOLIDATED SECURITIZATION TRUSTS FOR WHICH CREDITORS OR
BENEFICIAL INTEREST HOLDERS DO
NOT HAVE RECOURSE TO THE
COMPANY: |
||||||||
Accounts payable |
$ | 387 | $ | 556 | ||||
Mortgage-backed debt |
1,281,555 | 1,267,454 | ||||||
Accrued interest |
8,206 | 8,755 | ||||||
Total liabilities and stockholders equity |
$ | 1,290,148 | $ | 1,276,765 | ||||
Walter Investment Management Corp. and Subsidiaries
Operating Statistics
Operating Statistics
(dollars in millions, except per share amounts)
2010 | 2010 | 2009 | ||||||||||
Q4 | Q3 | Q4 | ||||||||||
30+ Delinquencies (1) |
4.68 | % | 4.56 | % | 5.44 | % | ||||||
90+ Delinquencies (1) |
2.65 | % | 2.57 | % | 3.37 | % | ||||||
Provision for Losses |
$ | 2.0 | $ | 1.4 | $ | 2.1 | ||||||
Real Estate Owned Expenses, Net |
1.1 | 1.9 | 1.8 | |||||||||
Total Portfolio Losses |
3.1 | 3.3 | 3.9 | |||||||||
Net Charge-offs |
$ | 2.4 | $ | 1.8 | $ | 2.3 | ||||||
Charge-off Ratio (2) |
0.87 | % | 0.92 | % | 0.86 | % | ||||||
Allowance for Losses |
$ | 15.9 | $ | 16.3 | $ | 17.7 | ||||||
Allowance for Losses Ratio (3) |
0.97 | % | 1.00 | % | 1.06 | % | ||||||
30+ Delinquencies (1) |
$ | 84.2 | $ | 80.8 | $ | 98.7 | ||||||
REO (Real Estate Owned) |
67.7 | 64.2 | 63.1 | |||||||||
TIO (Taxes, Insurance, Escrow and Other Advances) |
18.3 | 17.2 | 16.3 | |||||||||
Nonperforming Assets (Delinquencies + REO + TIO) |
$ | 170.2 | $ | 162.2 | $ | 178.1 | ||||||
Nonperforming Assets Ratio (4) |
9.11 | % | 8.75 | % | 9.40 | % | ||||||
Default Rate (5) |
5.63 | % | 5.15 | % | 6.15 | % | ||||||
Fixed Rate Mortgages |
5.55 | % | 5.10 | % | 5.84 | % | ||||||
Adjustable Rate Mortgages |
9.62 | % | 9.34 | % | 27.55 | % | ||||||
Loss Severity (6) |
14.42 | % | 16.86 | % | 12.08 | % | ||||||
Fixed Rate Mortgages |
13.58 | % | 12.15 | % | 10.65 | % | ||||||
Adjustable Rate Mortgages |
43.52 | % | 64.99 | % | 42.42 | % | ||||||
Number of Accounts Serviced (7) |
34,842 | 34,520 | 35,236 | |||||||||
Total Portfolio (8) |
$ | 1,867.7 | $ | 1,853.8 | $ | 1,895.2 | ||||||
ARM Portfolio (9) |
$ | 37.9 | $ | 28.0 | $ | 26.7 | ||||||
Prepayment Rate (Voluntary CPR) |
1.96 | % | 2.63 | % | 2.95 | % | ||||||
Book Value per Share (10) |
$ | 21.54 | $ | 22.15 | $ | 22.16 | ||||||
Debt to Equity Ratio |
2.31:1 | 2.07:1 | 2.23:1 |
(1) | Delinquencies are defined as the percentage of principal balances outstanding which have monthly payments over 30 days past due. The calculation of delinquencies excludes from delinquent amounts those accounts that are in bankruptcy proceedings that are paying their mortgage payments in contractual compliance with bankruptcy court approved mortgage payment obligations. | |
(2) | The charge-off ratio is calculated as annualized net charge-offs, divided by average residential loans before the allowance for losses. | |
(3) | The allowance for losses ratio is calculated as period-end allowance for losses divided by period-end residential loans before the allowance for losses. | |
(4) | The nonperforming assets ratio is calculated as period-end non-performing assets, divided by period-end principal balance of residential loans plus REO and TIO. | |
(5) | Default rate is calculated as the annualized balance of repossessions for the quarter divided by the average total balance of the portfolio for the quarter. | |
(6) | Loss severities are calculated as the loss on sale of REO properties divided by the carrying value of REO. | |
(7) | Includes REO accounts. | |
(8) | Total portfolio includes the principal balance of residential loans, REO and TIO. | |
(9) | ARM portfolio includes the principal balance of adjustable rate residential loans and REO resulting from defaulted adjustable rate residential loans. | |
(10) | Book Value per share is calculated by dividing the Companys equity by total shares issued and outstanding of 25,785,693. | |
NM | Not Meaningful |