Attached files
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| 8-K - NATIONSTAR MORTGAGE HOLDINGS INC. 8-K - Nationstar Mortgage Holdings Inc. | a51334888.htm |
Exhibit 99.1
Nationstar Reports First Quarter 2016 Financial Results
- Q1’16 Adjusted EPS of 27 cents, GAAP loss of $1.28 per share
- Servicing profitability of 5.0 basis points (bps)
- Originations pretax income of $40 million
- Xome pretax income of $11 million
DALLAS--(BUSINESS WIRE)--May 4, 2016--Nationstar Mortgage Holdings Inc. (NYSE:NSM) reported adjusted earnings results for the first quarter of $28 million or 27 cents per share, bolstered by strong servicing and originations performance and improvement in Xome. First quarter results were largely consistent with the previous quarter when taking into consideration the $8 million positive impact from the repurchase of debt in Q4'15. For GAAP purposes, the Company had a net loss of $132 million, or $(1.28) per share, of which $161 million or $1.56 per share, after tax, was primarily attributable to changes in fair value.
“We posted solid first quarter earnings led by Servicing, which delivered five basis points in profitability,” said Jay Bray, Chief Executive Officer. "In addition, for the second year in a row, our Servicing operations achieved Fannie Mae’s highest level of performance recognition - the Five STAR designation, which reflects the hard work of our employees and the dedication to our customers. In addition, Originations continues to be a solid bottom line contributor by delivering $40 million in pretax income, and we made significant progress with Xome that we believe will drive earnings in future quarters.”
First Quarter Business Highlights
Servicing Segment
The Servicing segment achieved $49 million of adjusted pretax income, or 5.0 bps based on average UPB of $392 billion, for the first quarter (for GAAP pretax income please reference the table below). Given the solid start to the year, we remain committed to previously-stated goals of achieving quality earnings that exceed 5 bps on average for 2016.
| Quarter Ended | ||||||||||||||
| ($ in millions, unless noted) | Q4'15 | Q1'16 | ||||||||||||
| $ | BPS | $ | BPS | |||||||||||
| Adjusted Pretax Income: | ||||||||||||||
| Income (loss) before taxes (GAAP) | $ | 118 | 11.7 | $ | (208 | ) | (21.2 | ) | ||||||
| Other mark-to-market | (67 | ) | (6.7 | ) | 253 | 25.8 | ||||||||
| Non-recurring expenses | — | — | 4 | 0.4 | ||||||||||
| Adjusted pretax income | $ | 51 | 5.1 | $ | 49 | 5.0 | ||||||||
| Adjusted pretax income margin | 15 | % | 15 | % | ||||||||||
| Quarter Ended | ||||||||
| Q4'15 | Q1'16 | |||||||
| Ending UPB ($B) | $ | 398 | $ | 386 | ||||
| Average UPB ($B) | $ | 403 | $ | 392 | ||||
| 60+ day delinquency rate | 6.9 | % | 6.5 | % | ||||
| Annualized CPR | 13.8 | % | 13.5 | % | ||||
| Annualized CPR, net of recapture | 11.5 | % | 10.9 | % | ||||
| Modifications and workouts | 15,292 | 14,716 | ||||||
From a pipeline perspective, we have approximately $57 billion in commitments, which includes the previously announced $55 billion in subservicing expected to board predominantly in the third quarter as well as a small private label security pool. In addition, we have seen an increase in potential subservicing opportunities currently in the market.
Despite continued volatility in interest rates, prepayment speeds improved slightly to 13.5% for the overall platform or 10.9% if the impact of recapture is included. Declining interest rates during the quarter were also the primary cause for the fair value loss on our MSR portfolio which does not consider the value generated by our integrated origination platform.
Non-recurring expense adjustments in Servicing consist of two items. First, $2 million is associated with ramp-up costs for the previously-announced subservicing contract that should board mostly in the third quarter. Second, $2 million is associated with the exercise of a reverse call provision, from which we will sell the associated loans for a significant gain over the next few months.
Originations Segment
The Originations segment generated adjusted pretax income of $40 million in the first quarter, which was in line with our expectations and represents nine consecutive quarters of over $40 million.
| Quarter Ended | ||||||||
| ($ in millions, unless noted) | Q4'15 | Q1'16 | ||||||
| Adjusted Pretax Income: | ||||||||
| Income before taxes (GAAP) | $ | 43 | $ | 40 | ||||
| Non-recurring expenses | — | — | ||||||
| Adjusted pretax income | $ | 43 | $ | 40 | ||||
| Adjusted pretax income margin | 27 | % | 25 | % | ||||
| Funded volume - consumer direct ($B) | $ | 2.4 | $ | 2.9 | ||||
| Funded volume - total ($B) | $ | 4.0 | $ | 4.2 | ||||
| Recapture percentage | 27 | % | 31 | % | ||||
| Purchase volume as a percentage of funded volume | 21 | % | 25 | % | ||||
The originations platform continues to replenish the MSR portfolio at attractive rates of return. Nationstar funded $4.2 billion of volume, or an increase of 5%, during the quarter driven by the consumer direct channel which accounted for over 60% of the volume. In addition, we saw meaningful increases in both the recapture percentage as well as purchase volume percentage which increased to 31% and 25%, respectively.
Xome Segment
Xome delivered $11 million in pretax income in the first quarter. Earnings were higher sequentially primarily due to increased title volumes and lower marketing and technology spend.
| Quarter Ended | ||||||||
| ($ in millions, unless noted) | Q4'15 | Q1'16 | ||||||
| Pretax Income: | ||||||||
| Revenue | $ | 98 | $ | 101 | ||||
| Expenses | 92 | 90 | ||||||
| Total pretax income | $ | 6 | $ | 11 | ||||
| Pretax income margin | 6 | % | 11 | % | ||||
| Quarter Ended | ||||||||
| Q4'15 | Q1'16 | |||||||
| Properties sold | 4,113 | 4,165 | ||||||
| REO Inventory at period end | 8,426 | 7,892 | ||||||
| Xome services completed orders | 148,878 | 161,339 | ||||||
| Percentage of revenue earned from third party customers | 37 | % | 36 | % | ||||
During the quarter, we made significant operational progress with respect to our property disposition and title operations that should generate a solid improvement in margin as we enter the second quarter. The improvements in the property disposition business were driven largely by enhanced workflow management of the pipeline. In our title business, we continue to board new customers and are working with existing customers to improve order timing to reduce costs and increase conversions. Furthermore, third party revenues remain stable at 36% and we continue to see progress in boarding new clients for a variety of services, including our technology offerings.
Capital and Liquidity
The Company is authorized to repurchase up to $250 million of common stock pursuant to the previously-announced stock repurchase program. As of the date of this release, $94 million of common stock has been repurchased under this program. In addition, since October 14, 2015, we have repurchased $125 million of unsecured senior notes due between 2018 and 2022.
Conference Call Webcast and Investor Presentation
The Company will host a conference call on May 4, 2016, at 9:00 A.M. Eastern Time. The conference call may be accessed by dialing 855-874-2685, or 720-634-2923 internationally, five minutes prior to the scheduled start of the call. Please use the participant passcode 88194717 to access the conference call.
A simultaneous audio webcast of the conference call will be available on the Shareholder Relations section of http://www.nationstarmtg.com. Please click on the May 4, 2016, Conference Call link to access the call. A replay will also be available approximately two hours after the conclusion of the conference call by dialing 855-859-2056, or 404-537-3406 internationally. Please use the passcode 88194717 to access the replay. The replay will be accessible through May 18, 2016.
Non-GAAP Financial Measures
This disclaimer applies to every usage of "adjusted pretax income," "adjusted earnings," "adjusted EPS," and "servicing profitability" in this release. Adjusted pretax income is a metric that is used by management to provide a better depiction of the results of servicing operations by excluding changes in fair value of the MSR and non-recurring expenses. Adjusted earnings is a metric used by management to provide an estimate of earnings by excluding mark-to-market ("MTM") adjustments and non-recurring expenses. Adjusted earnings begins with net income and makes adjustments for taxes, the adjustment for fair value of MSRs and non-recurring expenses. Servicing profitability is a metric used by management to estimate earnings from the servicing segment. Servicing profitability begins with adjusted earnings and adjusts for financing structure payments. For additional servicing GAAP reconciliations, please refer to the Appendix section of the Q4'15 and Q1'16 Investor Supplement.
About Nationstar
Based in Dallas, Texas, Nationstar provides servicing, origination and transaction based services related principally to single-family residences throughout the United States. Additional corporate information is available on the Shareholder Relations section of www.nationstarmtg.com.
Forward Looking Statements
Any statements in this release that are not historical or current facts are forward looking statements. These forward looking statements include, but are not limited to, statements regarding: our Servicing segment's profitability and targets and Xome's pipeline and growth. Forward looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward statements. Certain of these risks and uncertainties are described in the "Business" and "Risk Factors" sections of our most recent annual report and other required documents as filed with the SEC which are available at the SEC’s website at http://www.sec.gov. Nationstar undertakes no obligation to publicly update or revise any forward looking statement or any other financial information contained herein, and the statements made in this press release are current as of the date of this release only.
| NATIONSTAR MORTGAGE HOLDINGS INC. AND SUBSIDIARIES | ||||||||
| UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
|
(dollars and shares in thousands, except per share data) |
||||||||
| For the Quarter Ended | ||||||||
| December 31, 2015 | March 31, 2016 | |||||||
| Revenues: | ||||||||
| Service related, excluding MTM | $ | 353,871 | $ | 345,505 | ||||
| Total MTM | 66,732 | (252,852 | ) | |||||
| Net gain on mortgage loans held for sale | 167,123 | 171,116 | ||||||
| Total revenues | 587,726 | 263,769 | ||||||
| Total expenses | 416,530 | 421,477 | ||||||
| Other income (expense): | ||||||||
| Interest income | 107,323 | 102,843 | ||||||
| Interest expense | (165,914 | ) | (160,776 | ) | ||||
| Gain on repurchase of unsecured senior notes | 8,237 | 77 | ||||||
| Gain (loss) on interest rate swaps and caps | (87 | ) | 8 | |||||
| Total other expense, net | (50,441 | ) | (57,848 | ) | ||||
| Income (loss) before income tax expense (benefit) | 120,755 | (215,556 | ) | |||||
| Income tax expense (benefit) | 41,661 | (82,265 | ) | |||||
| Net income (loss) | 79,094 | (133,291 | ) | |||||
| Less: net income (loss) attributable to noncontrolling interests | 217 | (902 | ) | |||||
| Net income (loss) attributable to Nationstar | $ | 78,877 | $ | (132,389 | ) | |||
| Earnings (loss) per share attributable to common stockholders: | ||||||||
| Basic | $ | 0.73 | $ | (1.28 | ) | |||
| Diluted | $ | 0.73 | $ | (1.28 | ) | |||
| Weighted average shares: | ||||||||
| Basic | 107,553 | 103,098 | ||||||
| Dilutive effect of stock awards | 433 | — | ||||||
| Diluted | 107,986 | 103,098 | ||||||
| NATIONSTAR MORTGAGE HOLDINGS INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
|
(dollars in thousands) |
||||||||
| December 31, 2015 | March 31, 2016 | |||||||
|
Assets |
||||||||
| Cash and cash equivalents | $ | 613,241 | $ | 460,951 | ||||
| Restricted cash | 332,105 | 307,564 | ||||||
| Mortgage servicing rights, $3,358,327 and $3,088,123 at fair value, respectively | 3,366,973 | 3,096,084 | ||||||
| Advances, net | 2,223,083 | 2,070,599 | ||||||
| Reverse mortgage interests | 7,514,323 | 7,584,086 | ||||||
| Mortgage loans held for sale | 1,429,691 | 1,880,654 | ||||||
| Mortgage loans held for investment, net of allowance for loan losses of $3,549 and $3,549, respectively | 173,650 | 166,564 | ||||||
| Property and equipment, net of accumulated depreciation of $92,834 and $106,797, respectively | 142,836 | 142,155 | ||||||
| Derivative financial instruments | 99,699 | 109,168 | ||||||
| Other assets | 721,832 | 733,699 | ||||||
| Total assets | $ | 16,617,433 | $ | 16,551,524 | ||||
|
Liabilities and stockholders' equity |
||||||||
| Unsecured senior notes, net of unamortized debt issuance costs $22,940 and $21,535, respectively | $ | 2,025,754 | $ | 2,025,265 | ||||
| Advance facilities, net of unamortized debt issuance costs $6,433 and $3,409, respectively | 1,639,690 | 1,563,750 | ||||||
| Warehouse facilities, net of unamortized debt issuance costs $3,206 and $2,171, respectively | 1,890,320 | 2,414,495 | ||||||
| Payables and accrued liabilities | 1,296,387 | 1,139,400 | ||||||
| MSR related liabilities - nonrecourse | 1,300,782 | 1,242,999 | ||||||
| Derivative financial instruments | 25,260 | 18,065 | ||||||
| Mortgage servicing liabilities | 5,823 | 20,835 | ||||||
| Other nonrecourse debt, net of unamortized debt issuance costs $4,558 and $5,758, respectively | 6,666,040 | 6,545,196 | ||||||
| Total liabilities | $ | 14,850,056 | $ | 14,970,005 | ||||
| Treasury shares at cost; 989 and 7,036 shares, respectively | $ | (29,780 | ) | $ | (86,395 | ) | ||
| Total stockholders' equity | 1,767,377 | 1,581,519 | ||||||
| Total liabilities and stockholders' equity | $ | 16,617,433 | $ | 16,551,524 | ||||
|
SERVICING SEGMENT INCOME (LOSS) BEFORE TAXES |
||||||||||||||
|
(dollars in millions, except where noted) |
||||||||||||||
| Quarter Ended | ||||||||||||||
| ($ in millions, unless noted) | Q4'15 | Q1'16 | ||||||||||||
| $ | BPS | $ | BPS | |||||||||||
| Operational | $ | 337 | 33.4 | $ | 317 | 32.4 | ||||||||
| Amortization | (73 | ) | (7.2 | ) | (65 | ) | (6.6 | ) | ||||||
| Other mark-to-market | 67 | 6.7 | (253 | ) | (25.8 | ) | ||||||||
| Total revenue | 332 | 32.9 | (1 | ) | (0.1 | ) | ||||||||
| Expenses | 188 | 18.7 | 184 | 18.8 | ||||||||||
| Total other income (expense), net | (26 | ) | (2.6 | ) | (22 | ) | 2.2 | |||||||
| Income (loss) before taxes | $ | 118 | 11.7 | $ | (208 | ) | (21.1 | ) | ||||||
|
SERVICING SEGMENT: GAAP REVENUE RECONCILIATION |
||||||||
|
(dollars in millions) |
||||||||
| Quarter Ended | ||||||||
| Q4'15 | Q1'16 | |||||||
| Operating revenue | $ | 414 | $ | 391 | ||||
| Less: MSR financing liability | (28 | ) | (27 | ) | ||||
| Less: Excess spread - principal | (48 | ) | (47 | ) | ||||
| Less: Amortization | (73 | ) | (65 | ) | ||||
| MTM adjustments | 67 | (253 | ) | |||||
| GAAP revenue | $ | 332 | $ | (1 | ) | |||
|
SERVICING SEGMENT: GAAP OTHER INCOME / (EXPENSE) RECONCILIATION |
||||||||
|
(dollars in millions) |
||||||||
| Quarter Ended | ||||||||
| Q4'15 | Q1'16 | |||||||
| Other income / (expense) | $ | (3 | ) | $ | — | |||
| Plus: Excess spread - interest | (23 | ) | (22 | ) | ||||
| GAAP other income / (expense) | $ | (26 | ) | $ | (22 | ) | ||
|
SEGMENT STATEMENT OF OPERATIONS & EARNINGS RECONCILIATION |
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|
(dollars in thousands, except per share data) |
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| For the quarter ended December 31, 2015 | |||||||||||||||||||||||
| Servicing | Originations | Xome | Corporate and Other | Elim. | Consolidated | ||||||||||||||||||
| REVENUES: | |||||||||||||||||||||||
| Service related | $ | 309,418 | $ | 13,245 | $ | 97,741 | $ | 199 | $ | — | $ | 420,603 | |||||||||||
| Net gain on mortgage loans held for sale | 22,451 | 144,672 | — | — | — | 167,123 | |||||||||||||||||
| Total revenues | 331,869 | 157,917 | 97,741 | 199 | — | 587,726 | |||||||||||||||||
| Total expenses | 187,644 | 120,384 | 92,068 | 16,434 | — | 416,530 | |||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest income | 86,881 | 16,668 | 31 | 3,743 | — | 107,323 | |||||||||||||||||
| Interest expense | (113,010 | ) | (11,650 | ) | (22 | ) | (41,232 | ) | — | (165,914 | ) | ||||||||||||
| Gain on repurchase of unsecured senior notes | — | — | — | 8,237 | — | 8,237 | |||||||||||||||||
| Gain (loss) on interest rate swaps and caps | (92 | ) | — | — | 5 | — | (87 | ) | |||||||||||||||
| Total other income (expense) | (26,221 | ) | 5,018 | 9 | (29,247 | ) | — | (50,441 | ) | ||||||||||||||
| Pretax income (loss) | $ | 118,004 | $ | 42,551 | $ | 5,682 | $ | (45,482 | ) | $ | — | 120,755 | |||||||||||
| Income tax expense (benefit) | 41,661 | ||||||||||||||||||||||
| Net income attributable to Nationstar | $ | 79,094 | |||||||||||||||||||||
| Earnings per share - diluted | $ | 0.73 | |||||||||||||||||||||
| Adjusted Earnings: | |||||||||||||||||||||||
| Pretax income (loss) | $ | 118,004 | $ | 42,551 | $ | 5,682 | $ | (45,482 | ) | — | $ | 120,755 | |||||||||||
| MTM | (66,732 | ) | — | — | — | — | (66,732 | ) | |||||||||||||||
| Non-recurring expenses | — | — | — | — | — | — | |||||||||||||||||
| Adjusted pretax income | $ | 51,272 | $ | 42,551 | $ | 5,682 | $ | (45,482 | ) | $ | — | 54,023 | |||||||||||
| Taxes | (19,718 | ) | |||||||||||||||||||||
| Adjusted earnings | $ | 34,305 | |||||||||||||||||||||
| Adjusted EPS | $ | 0.32 | |||||||||||||||||||||
|
SEGMENT STATEMENT OF OPERATIONS & EARNINGS RECONCILIATION |
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|
(dollars in thousands, except per share data) |
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| For the quarter ended March 31, 2016 | |||||||||||||||||||||||
|
Servicing |
Originations | Xome | Corporate and Other | Elim. | Consolidated | ||||||||||||||||||
| REVENUES: | |||||||||||||||||||||||
| Service related | $ | (24,351 | ) | $ | 15,267 | $ | 101,433 | $ | 304 | $ | — | $ | 92,653 | ||||||||||
| Net gain on mortgage loans held for sale | 23,161 | 147,943 | — | 12 | — | 171,116 | |||||||||||||||||
| Total revenues | (1,190 | ) | 163,210 | 101,433 | 316 | — | 263,769 | ||||||||||||||||
| Total expenses | 184,356 | 124,838 | 89,994 | 22,289 | — | 421,477 | |||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest income | 84,633 | 14,561 | 3 | 3,646 | — | 102,843 | |||||||||||||||||
| Interest expense | (106,841 | ) | (13,142 | ) | (25 | ) | (40,768 | ) | — | (160,776 | ) | ||||||||||||
| Gain on repurchase of unsecured senior notes | — | — | — | 77 | — | 77 | |||||||||||||||||
| Gain (loss) on interest rate swaps and caps | (7 | ) | — | — | 15 | — | 8 | ||||||||||||||||
| Total other income (expense) | (22,215 | ) | 1,419 | (22 | ) | (37,030 | ) | — | (57,848 | ) | |||||||||||||
| Pretax income (loss) | $ | (207,761 | ) | $ | 39,791 | $ | 11,417 | $ | (59,003 | ) | $ | — | (215,556 | ) | |||||||||
| Income tax expense (benefit) | (82,265 | ) | |||||||||||||||||||||
| Net income attributable to Nationstar | $ | (132,389 | ) | ||||||||||||||||||||
| Earnings per share - diluted | $ | (1.28 | ) | ||||||||||||||||||||
| Adjusted Earnings: | |||||||||||||||||||||||
| Pretax income (loss) | $ | (207,761 | ) | $ | 39,791 | $ | 11,417 | $ | (59,003 | ) | $ | — | $ | (215,556 | ) | ||||||||
| MTM | 252,852 | — | — | — | — | 252,852 | |||||||||||||||||
| Non-recurring expenses | 4,170 | — | — | 2,056 | — | 6,226 | |||||||||||||||||
| Adjusted pretax income | $ | 49,261 | $ | 39,791 | $ | 11,408 | $ | (56,860 | ) | $ | — | 43,521 | |||||||||||
| Taxes | (15,885 | ) | |||||||||||||||||||||
| Adjusted earnings | $ | 27,636 | |||||||||||||||||||||
| Adjusted EPS | $ | 0.27 | |||||||||||||||||||||
CONTACT:
Nationstar Mortgage Holdings Inc.
Robert Stiles,
972-316-5383