Total expenses for the six months ended June 30, 2020 and 2019 were $343.2 million and $274.7 million, respectively. The 25% increase in total expenses was primarily driven by an increase in personnel expense of 26% due to increases in (i) salaries and benefits expenses resulting from a rise in average headcount due to the continued growth of our business, (ii) commissions expense resulting from higher loan origination and debt brokerage fees and property sales fees due to growth in debt financing and property sales volumes, and (iii) bonus expense resulting from improved company financial performance year over year. Personnel expenses as a percentage of total revenues remained consistent at 40% year over year despite the increased expenses. Amortization and depreciation costs increased 9% due to an increase in the average balance of MSRs outstanding and an increase in write offs due to prepayments year over year. Provision for credit losses increased substantially year over year. During the first quarter of 2020, the Company recorded a provision expense of $23.6 million as a result of adopting CECL and due to the COVID-19 pandemic and its expected impacts on future losses in the at risk servicing portfolio. During the second quarter of 2020, the Company recorded a provision expense of $4.9 million related only to the increase in the Company at risk servicing portfolio balance. Interest expense on corporate debt decreased 34% as a result of a decrease in short-term interest rates year over year. Other operating expenses decreased 4% primarily due to decreases in travel and entertainment expenses as a direct result of COVID-19 impacts.
Operating margin for the six months ended June 30, 2020 and 2019 was 30% and 29%, respectively. The slight increase in operating margin was due to a 26% increase in total revenues and a 25% increase in total expenses.
Net income for the six months ended June 30, 2020 was $109.9 million compared to net income of $86.4 million for the same period last year, a 27% increase. The increase in net income was the result of a 27% increase in income from operations.
For the six months ended June 30, 2020 and 2019, adjusted EBITDA was $112.5 million and $129.3 million, respectively. The 13% decrease was largely driven by the increase in personnel expense and the decrease in escrow earnings, partially offset by increases in loan origination and debt brokerage fees and servicing fees.
For the six months ended June 30, 2020 and 2019, return on equity was 21% and 19%, respectively.
DIVIDENDS AND SHARE REPURCHASES
On August 4, 2020, our Board of Directors declared a dividend of $0.36 per share for the third quarter of 2020. The dividend will be paid September 8, 2020 to all holders of record of our restricted and unrestricted common stock as of August 21, 2020.
During the first quarter of 2020, the Company’s Board of Directors approved a new stock repurchase program that permits the repurchase of up to $50.0 million of the Company’s common stock over a 12-month period beginning on February 11, 2020. During the second quarter of 2020, the Company did not repurchase any shares. During the first quarter, the Company repurchased 0.2 million shares of its common stock under the share repurchase program at a weighted average price of $63.58 per share and immediately retired the shares, reducing stockholders’ equity by $10.2 million. As of June 30, 2020, the Company had $39.8 million of authorized share repurchase capacity remaining under the 2020 share repurchase program.
Any future purchases made pursuant to the share repurchase program will be made in the open market or in privately negotiated transactions from time to time as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The repurchase program may be suspended or discontinued at any time.
1 Adjusted EBITDA is a non-GAAP financial measure the Company presents to help investors better understand our operating performance. For a reconciliation of adjusted EBITDA to net income, refer to the sections of this press release below titled “Non-GAAP Financial Measures” and “Adjusted Financial Metric Reconciliation to GAAP.”
2 Market share calculated through the first half of 2020 using 50% of the Mortgage Bankers Association forecast volume for 2020.
3 Includes debt financing volumes from our interim loan platform, our interim loan joint venture, and WDIP separate accounts.
4 Excludes the income and debt financing volume from Principal Lending and Investing.
5 The fair value of the expected net cash flows associated with the servicing of the loan, net of any guaranty obligations retained, as a percentage of Agency volume.
6 At risk servicing portfolio is defined as the balance of Fannie Mae DUS loans subject to the risk-sharing formula described below, as well as a small number of Freddie Mac loans on which we share in the risk of loss. Use of the at risk portfolio provides for comparability of the full risk-sharing and modified risk-sharing loans because the provision and allowance for risk-sharing obligations are based on the at risk balances of the associated loans. Accordingly, we have presented the key statistics as a percentage of the at risk portfolio.
