Attached files
| file | filename |
|---|---|
| 8-K - 8-K - HOME LOAN SERVICING SOLUTIONS, LTD. | form8-kjuly172014xmaterial.htm |
| EX-10.1 - AMENDMENT 4 IS 2012 VF1 - HOME LOAN SERVICING SOLUTIONS, LTD. | ex101amendment4is2012-vf1.htm |
| EX-10.2 - AMENDMENT 4 IS 2012 VF2 - HOME LOAN SERVICING SOLUTIONS, LTD. | ex102amendment4is2012-vf2.htm |
| EX-10.3 - AMENDMENT 4 IS 2012 VF3 - HOME LOAN SERVICING SOLUTIONS, LTD. | ex103amendment4is2012-vf3.htm |
FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION CONTACT:
James E. Lauter
Senior Vice President &
Chief Financial Officer
T: +1 345-815-3932
E: James.Lauter@hlss.com
Home Loan Servicing Solutions, Ltd. Reports EPS of $0.76 and Net Income of $54.1 Million in the Second Quarter of 2014 and Declares Monthly Dividend of $0.16 per Share
George Town, Grand Cayman, July 17, 2014 (GLOBE NEWSWIRE) – Home Loan Servicing Solutions, Ltd. ("HLSS", “our”, “we” or the "Company") (NASDAQ: HLSS) today reported net income of $54.1 million, or $0.76 per ordinary share, for the second quarter of 2014. Additionally, the Company’s Board of Directors today declared monthly dividends of $0.16 per ordinary share for July, August and September 2014.
Second quarter business performance highlights:
• | Earned $41.4 million, or $0.58 per ordinary share, after adjusting for the increase in the fair value of our MSR assets of $12.7 million, or $0.18 per ordinary share. The increase in the annualized prepayment speed to 10.9 percent reduced earnings by $0.02 per ordinary share relative to first quarter earnings. |
• | Issued $400 million of unrated four-year term notes secured by servicing advance receivables at a weighted average fixed interest rate of 2.88%. |
• | Acquired re-performing whole loans with an aggregate UPB of $396.9 million from a large bank. The purchase price for these loans was $276.3 million. |
• | Borrowed $219.5 million on a new $290.0 million mortgage loan facility to finance the re-performing loan purchase. |
Subsequent to the end of the second quarter of 2014:
• | On July 16, 2014, entered into agreements to extend the maturity of our variable funding notes with an aggregate borrowing capacity of $2.1 billion to August 28, 2015. |
• | On July 17, 2014, declared monthly dividends of $0.16 per ordinary share for each of the months of July, August and September 2014. |
“After adjusting for the revaluation of our MSR assets, earnings were close to the high-end of our expectations as prepayment speeds increased only modestly from the record low last quarter. This increase was due to the predicted recovery in the rate of liquidations on seriously delinquent loans” said President and CEO John Van Vlack. “Earnings stability will benefit from the issuance of four-year fixed rate term notes and from the reinvestment of cash generated in excess of our dividend in the purchase of re-performing loans.”
“As an asset class, I expect re-performing loans to provide an attractive risk-adjusted yield based on the Company’s experience with modified loans in our existing servicing portfolio” said Chairman William Erbey. “The strategic fit of re-performing loans is enhanced as the income generated from the prepayment of loans purchased at a discount offers a hedge against prepayments in HLSS’ existing non-agency MSRs.”
For more information on prior releases and SEC Filings, please refer to the “Shareholders” section of our website at www.hlss.com.
HLSS is an internally-managed owner of residential mortgage assets with historically stable valuations and cash flows. HLSS’ largest asset is mortgage servicing advances that, along with the related servicing rights, are over-collateralized more than 25 times by the underlying residential real estate. HLSS' objective is to generate stable, recurring fee-based earnings and dividends throughout the economic cycle. For more information, visit www.hlss.com.
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this press release, including, without limitation, statements we make about our business model, dividend, future earnings, financing, market opportunities, asset performance, asset valuation, business strategy and
expectations and objectives for our future performance, are forward-looking statements. These forward-looking statements include declarations regarding our management’s beliefs and current expectations. All forward-looking statements are subject to certain risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results, performance or achievements could differ materially from those expressed in, or implied by, any such forward-looking statements. Important factors that could cause or contribute to such difference include those risks specific to our business detailed within our reports and filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on February 6, 2014 (the "2013 Form 10-K") and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (the “Q2 Form 10-Q”). You should not place undue reliance on such forward-looking statements, which speak only as of their dates. We undertake no obligation to update or revise forward-looking statements¸ whether as a result of new information, future events or otherwise. You should carefully consider the risk factors described under the heading “Risk Factors” within our 2013 Form 10-K and our Q2 Form 10-Q.
The following table presents our consolidated results of operations in accordance with U.S. GAAP (“GAAP”) reconciled to our internally reported financial results. Accordingly, adjustments are made to reflect Servicing fee revenue, Servicing expense and Amortization expense on a gross rather than a net basis.
Our income from operations as presented in our Management Reporting format shown below should be considered in addition to, and not as a substitute for, income from operations determined in accordance with GAAP.
For the three months ended June 30, 2014: | Condensed Consolidated Results (GAAP) | Adjustments | Management Reporting (Non-GAAP) | |||||||||
Revenue | ||||||||||||
Servicing fee revenue | $ | — | $ | 185,690 | $ | 185,690 | ||||||
Interest income - notes receivable – Rights to MSRs | 89,969 | (89,969 | ) | — | ||||||||
Interest income – other | 7,790 | — | 7,790 | |||||||||
Related party revenue (1) | 773 | — | 773 | |||||||||
Total revenue | 98,532 | 95,721 | 194,253 | |||||||||
Operating expenses | ||||||||||||
Compensation and benefits | 2,031 | — | 2,031 | |||||||||
Servicing expense | — | 90,901 | 90,901 | |||||||||
Amortization of MSRs | — | 17,535 | 17,535 | |||||||||
Change in fair value of Notes receivable – Rights to MSRs | — | (12,715 | ) | (12,715 | ) | |||||||
Related party expenses (2) | 496 | — | 496 | |||||||||
General and administrative expenses | 1,949 | — | 1,949 | |||||||||
Total operating expenses | 4,476 | 95,721 | 100,197 | |||||||||
Income from operations | $ | 94,056 | $ | — | $ | 94,056 | ||||||
(1) Revenue earned as part of our Professional Services Agreement with Ocwen Financial Corporation (together with its subsidiaries, collectively "Ocwen").
(2) Expenses incurred as part of our Professional Services Agreement and Administrative Services Agreement with Ocwen and Altisource Portfolio Solutions, S.A., respectively.
HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(UNAUDITED)
Three months | Six months | |||||||||||||||
For the periods ended June 30, | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Revenue | ||||||||||||||||
Interest income – notes receivable – Rights to MSRs | $ | 89,969 | $ | 49,852 | $ | 171,821 | $ | 94,422 | ||||||||
Interest income – other | 7,790 | 97 | 10,750 | 199 | ||||||||||||
Total interest income | 97,759 | 49,949 | 182,571 | 94,621 | ||||||||||||
Related party revenue | 773 | 560 | 1,401 | 967 | ||||||||||||
Total revenue | 98,532 | 50,509 | 183,972 | 95,588 | ||||||||||||
Operating expenses | ||||||||||||||||
Compensation and benefits | 2,031 | 1,602 | 3,765 | 2,768 | ||||||||||||
Related party expenses | 496 | 226 | 868 | 452 | ||||||||||||
General and administrative expenses | 1,949 | 734 | 4,098 | 1,379 | ||||||||||||
Total operating expenses | 4,476 | 2,562 | 8,731 | 4,599 | ||||||||||||
Income from operations | 94,056 | 47,947 | 175,241 | 90,989 | ||||||||||||
Other expense | ||||||||||||||||
Interest expense | 40,001 | 20,034 | 77,512 | 38,276 | ||||||||||||
Other expense | 40,001 | 20,034 | 77,512 | 38,276 | ||||||||||||
Income before income taxes | 54,055 | 27,913 | 97,729 | 52,713 | ||||||||||||
Income tax expense | — | 27 | — | 39 | ||||||||||||
Net income | $ | 54,055 | $ | 27,886 | $ | 97,729 | $ | 52,674 | ||||||||
Earnings per share | ||||||||||||||||
Basic | $ | 0.76 | $ | 0.48 | $ | 1.38 | $ | 0.92 | ||||||||
Diluted | $ | 0.76 | $ | 0.48 | $ | 1.38 | $ | 0.92 | ||||||||
Weighted average ordinary shares outstanding | ||||||||||||||||
Basic | 71,016,771 | 57,633,399 | 71,016,771 | 57,133,888 | ||||||||||||
Diluted | 71,016,771 | 57,633,399 | 71,016,771 | 57,133,888 | ||||||||||||
Dividends declared per share | $ | 0.48 | $ | 0.42 | $ | 0.93 | $ | 0.80 | ||||||||
HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(UNAUDITED)
June 30, 2014 | December 31, 2013 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 89,418 | $ | 87,896 | ||||
Match funded advances | 6,133,758 | 6,387,781 | ||||||
Notes receivable – Rights to MSRs | 629,579 | 651,060 | ||||||
Loans held for investment | 802,091 | — | ||||||
Related party receivables | 17,054 | 70,049 | ||||||
Deferred tax assets | 1,024 | 1,024 | ||||||
Other assets | 261,579 | 130,153 | ||||||
Total assets | 7,934,503 | 7,327,963 | ||||||
Liabilities and Equity | ||||||||
Liabilities | ||||||||
Match funded liabilities | 5,593,927 | 5,715,622 | ||||||
Other borrowings | 1,049,728 | 343,386 | ||||||
Dividends payable | 11,363 | 10,653 | ||||||
Income taxes payable | 600 | 682 | ||||||
Deferred tax liabilities | 578 | 1,266 | ||||||
Related party payables | 2,990 | 10,732 | ||||||
Other liabilities | 11,147 | 11,884 | ||||||
Total liabilities | 6,670,333 | 6,094,225 | ||||||
Equity | ||||||||
Equity – Ordinary shares, $.01 par value; 200,000,000 shares authorized; 71,016,771 and 71,016,771 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively | 710 | 710 | ||||||
Additional paid-in capital | 1,210,121 | 1,210,057 | ||||||
Retained earnings | 52,488 | 20,804 | ||||||
Accumulated other comprehensive income, net of tax | 851 | 2,167 | ||||||
Total equity | 1,264,170 | 1,233,738 | ||||||
Total liabilities and equity | $ | 7,934,503 | $ | 7,327,963 | ||||