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| 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 $0.61 and Net Income of $43.7 Million in the First Quarter of 2014 and Raises Monthly Dividend to $0.16 per Share
George Town, Grand Cayman, April 17, 2014 (GLOBE NEWSWIRE) – Home Loan Servicing Solutions, Ltd. ("HLSS", “our”, “we” or the "Company") (NASDAQ: HLSS) today reported net income of $43.7 million, or $0.61 per ordinary share, for the first quarter of 2014. Additionally, the Company’s Board of Directors today declared monthly dividends of $0.16 per ordinary share for April, May and June 2014.
First quarter business performance highlights:
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| • | Earned a record $43.7 million, or $0.61 per ordinary share. Earnings include a $0.06 per ordinary share benefit as a result of the lower annualized prepayment speed of 9.9 percent this quarter relative to the 12.4 percent annualized prepayment speed in the fourth quarter of 2013. |
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| • | Completed first acquisition of Government National Mortgage Association (“GNMA”) whole loans through the GNMA early buy-out (“EBO”) program. The purchase price for these loans was $556.6 million. |
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| • | Opened a new $600 million mortgage loan facility to finance the GNMA EBO purchase. |
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| • | Completed the issuance of $600 million of one-year term notes and $200 million of three-year term notes secured by servicing advance receivables at a weighted average interest spread over LIBOR of 1.09%. |
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| • | There was no change in servicing asset valuation. |
Subsequent to the end of the first quarter of 2014:
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| • | On April 17, 2014, declared monthly dividends of $0.16 per ordinary share for each of the months of April, May and June 2014. |
“Lower prepayment speeds led to another quarter of record earnings at HLSS” said Chairman William Erbey. “Prepayment speeds declined due to a reduction in the already low refinancing activity and slower liquidations on seriously delinquent loans. While the prepayment speed for this non-agency portfolio may not remain this low forever, I believe that the longer-term trend remains favorable and that the company is very well positioned.”
“Our purchase of Ginnie Mae early buyout loans marks the beginning of our diversification into other asset classes” said President and CEO John Van Vlack. “We are pleased to have added new assets with an attractive risk and return profile that are similar to our existing portfolio and look forward to continuing discussions with servicers beyond Ocwen.”
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 non-agency mortgage servicing assets with historically stable valuations and cash flows. HLSS’ assets are predominately mortgage servicing advances that, along with the related servicing rights, are over-collateralized more than 23 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. Forward-looking statements are not guarantees of future performance, and involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially. Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to, the following: general economic and market conditions, prevailing interest rates, governmental regulations and policies, availability of adequate and timely sources of liquidity, our ability to maintain our PFIC status, real estate market conditions and other risks detailed in HLSS’ reports and filings with the Securities and Exchange Commission. The forward looking statements speak only as of the date they are made and should not be relied upon. HLSS undertakes no obligation to update or revise the forward-looking statements.
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.
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| For the three months ended March 31, 2014: |
Consolidated Results (GAAP) | | Adjustments | | Management Reporting (Non-GAAP) |
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| Revenue | | | | | |
| | | | | | |
| Servicing fee revenue | $ | — |
| | $ | 189,157 |
| | $ | 189,157 |
|
| Interest income - notes receivable – Rights to MSRs | 81,852 |
| | (81,852) |
| | — |
|
| Interest income – other | 2,961 |
| | — |
| | 2,961 |
|
| Related party revenue (1) | 628 |
| | — |
| | 628 |
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| Total revenue | 85,441 |
| | 107,305 |
| | 192,746 |
|
| | | | | | |
| Operating expenses | | | | | |
| Compensation and benefits | 1,599 |
| | — |
| | 1,599 |
|
| Servicing expense | — |
| | 90,644 |
| | 90,644 |
|
| Amortization of MSRs | — |
| | 16,661 |
| | 16,661 |
|
| Related party expenses (2) | 372 |
| | — |
| | 372 |
|
| General and administrative expenses | 2,285 |
| | — |
| | 2,285 |
|
| Total operating expenses | 4,256 |
| | 107,305 |
| | 111,561 |
|
Income from operations | $ | 81,185 |
| | $ | — |
| | $ | 81,185 |
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| | | | | | | | | | | |
| For the three months ended March 31, 2013: | Condensed Consolidated Results (GAAP) | | Adjustments | | Management Reporting (Non-GAAP) |
| | | | | | |
| Revenue | | | | | |
| | | | | | |
| Servicing fee revenue | $ | — |
| | $ | 102,258 |
| | $ | 102,258 |
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| Interest income - notes receivable – Rights to MSRs | 44,570 |
| | (44,570) |
| | — |
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| Interest income – other | 102 |
| | — |
| | 102 |
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| Related party revenue (1) | 407 |
| | — |
| | 407 |
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| Total revenue | 45,079 |
| | 57,688 |
| | 102,767 |
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| | | | | | |
| Operating expenses | | | | | |
| Compensation and benefits | 1,166 |
| | — |
| | 1,166 |
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| Servicing expense | — |
| | 47,052 |
| | 47,052 |
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| Amortization of MSRs | — |
| | 10,636 |
| | 10,636 |
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| Related party expenses (2) | 226 |
| | — |
| | 226 |
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| General and administrative expenses | 645 |
| | — |
| | 645 |
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| Total operating expenses | 2,037 |
| | 57,688 |
| | 59,725 |
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Income from operations | $ | 43,042 |
| | $ | — |
| | $ | 43,042 |
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(1) Revenue earned as part of our Professional Services Agreement with Ocwen.
(2) Expenses incurred as part of our Professional Services Agreement and Administrative Services Agreement with Ocwen and Altisource, respectively.
HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(UNAUDITED)
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| | | | | | | |
| | | | |
| For the three months ended March 31, | 2014 | | 2013 |
| Revenue | | | |
| Interest income – notes receivable – Rights to MSRs | $ | 81,852 |
| | $ | 44,750 |
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| Interest income – other | 2,961 |
| | 102 |
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| Total interest income | 84,813 |
| | 44,672 |
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| Related party revenue | 628 |
| | 407 |
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| Total revenue | 85,441 |
| | 45,079 |
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| | | | |
| Operating expenses | | | |
| Compensation and benefits | 1,599 |
| | 1,166 |
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| Related party expenses | 372 |
| | 226 |
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| General and administrative expenses | 2,285 |
| | 645 |
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| Total operating expenses | 4,256 |
| | 2,037 |
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| | | | |
| Income from operations | 81,185 |
| | 43,042 |
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| | | | |
| Other expense | | | |
| Interest expense | 37,511 |
| | 18,242 |
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| Total other expense | 37,511 |
| | 18,242 |
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| | | | |
| Income before income taxes | 43,674 |
| | 24,800 |
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| Income tax expense | — |
| | 12 |
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| Net income | $ | 43,674 |
| | $ | 24,788 |
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| | | | |
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| Earnings per share | | | |
| Basic | $ | 0.61 |
| | $ | 0.44 |
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| Diluted | $ | 0.61 |
| | $ | 0.44 |
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| | | | |
| Weighted average ordinary shares outstanding | | | |
| Basic | 71,016,771 |
| | 56,628,828 |
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| Diluted | 71,016,771 |
| | 56,628,828 |
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| | | | |
| Dividends declared per share | $ | 0.45 |
| | $ | 0.38 |
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HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(UNAUDITED)
|
| | | | | | | |
| | March 31,
2014 | | December 31,
2013 |
| Assets | | | |
| Cash and cash equivalents | $ | 75,920 |
| | $ | 87,896 |
|
| Match funded advances | 6,343,397 |
| | 6,387,781 |
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| Notes receivable – Rights to MSRs | 634,399 |
| | 651,060 |
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| Loans held for investment | 552,644 |
| | — |
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| Related party receivables | 67,599 |
| | 70,049 |
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| Deferred tax assets | 1,024 |
| | 1,024 |
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| Other assets | 192,769 |
| | 130,153 |
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| Total assets | $ | 7,867,752 |
| | $ | 7,327,963 |
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| | | | |
| Liabilities and Equity | | | |
| Liabilities | | | |
| Match funded liabilities | $ | 5,775,180 |
| | $ | 5,715,622 |
|
| Other borrowings | 815,431 |
| | 343,386 |
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| Dividends payable | 10,653 |
| | 10,653 |
|
| Income taxes payable | 600 |
| | 682 |
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| Deferred tax liabilities | 1,188 |
| | 1,266 |
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| Related party payables | 7,885 |
| | 10,732 |
|
| Other liabilities | 11,510 |
| | 11,884 |
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| Total liabilities | 6,622,447 |
| | 6,094,225 |
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| | | | |
| | | | |
| Equity | | | |
| Equity – Ordinary shares, $.01 par value; 200,000,000 shares authorized; 71,016,771 and 71,016,771 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively | 710 |
| | 710 |
|
| Additional paid-in capital | 1,210,057 |
| | 1,210,057 |
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| Retained earnings | 32,520 |
| | 20,804 |
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| Accumulated other comprehensive income, net of tax | 2,018 |
| | 2,167 |
|
| Total equity | 1,245,305 |
| | 1,233,738 |
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| Total liabilities and equity | $ | 7,867,752 |
| | $ | 7,327,963 |
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