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| FOR IMMEDIATE RELEASE | | FOR FURTHER INFORMATION CONTACT: |
| | | |
| | | James E. Lauter |
| | | Senior Vice President & |
| | | Chief Financial Officer |
| | | T: +1 345-815-9902 |
| | | E: James.Lauter@hlss.com |
Home Loan Servicing Solutions, Ltd. Reports EPS of $0.69 and Net Income of $49.2 Million in the Third Quarter of 2014 and Declares Monthly Dividend of $0.18 per Share
George Town, Grand Cayman, October 16, 2014 (GLOBE NEWSWIRE) – Home Loan Servicing Solutions, Ltd. ("HLSS," “our,” “we” or the "Company") (NASDAQ: HLSS) today reported net income of $49.2 million, or $0.69 per ordinary share, for the third quarter of 2014. Additionally, the Company’s Board of Directors today declared monthly dividends of $0.18 per ordinary share for October, November and December 2014.
Third quarter business performance highlights:
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| • | Core earnings of $41.5 million, or $0.58 per ordinary share, after adjusting for the increase in the fair value of our MSR assets of $7.7 million, or $0.11 per ordinary share. |
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| • | Acquired re-performing whole loans with an aggregate UPB of $92.9 million from a large bank. The purchase price for these loans was $67.6 million. |
Subsequent to the end of the third quarter of 2014:
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| • | On October 16, 2014, acquired Ginnie Mae early buyout loans with an aggregate UPB of $142.5 million from PennyMac Loan Services, LLC, an indirect subsidiary of PennyMac Financial Services, Inc., who will remain as servicer for these loans. |
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| • | On October 16, 2014, declared monthly dividends of $0.18 per ordinary share for each of the months of October, November and December 2014. |
“HLSS completed another quarter with core results in line with guidance,” said Chairman William Erbey. “These strong results fully supported the recent dividend increase to 18 cents per month, which is a cumulative increase of 80% since the company’s inception in 2012.”
“Our new EBO and RPL assets continued to perform as we expected in the third quarter,” said President and CEO John Van Vlack. “We are pleased to be expanding our investment in FHA-insured Ginnie Mae EBO loans in the fourth quarter and to have started a new servicing relationship with PennyMac.”
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 core 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, asset performance, asset valuation, business strategy, counterparty relationships 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 (the "2013 Form 10-K") as amended by our Amendment No.1 to the 2013 Form 10-K, filed with the SEC on August 18, 2014 (the "Form 10-K/A") and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 (the "Q3 Form 10-Q") filed with the SEC. 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 Form 10-K/A and our Q3 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, Amortization and Change in fair value of Notes receivable – Rights to MSRs 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 September 30, 2014: | | Condensed Consolidated Results (GAAP) | | Adjustments | | Management Reporting (Non-GAAP) |
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| Revenue | | | | | |
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| Servicing fee revenue | | $ | — |
| | $ | 177,113 |
| | $ | 177,113 |
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| Interest income - notes receivable – Rights to MSRs | | 84,850 |
| | (84,850 | ) | | — |
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| Interest income – other | | 12,118 |
| | — |
| | 12,118 |
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| Related party revenue (1) | | 320 |
| | — |
| | 320 |
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| Total revenue | | 97,288 |
| | 92,263 |
| | 189,551 |
|
| | | | | | | |
| Operating expenses | | | | | | |
| Compensation and benefits | | 1,722 |
| | — |
| | 1,722 |
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| Servicing expense | | — |
| | 83,634 |
| | 83,634 |
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| Amortization of Notes receivable – Rights to MSRs (2) | | — |
| | 16,303 |
| | 16,303 |
|
| Change in fair value of Notes receivable – Rights to MSRs (3) | | — |
| | (7,674 | ) | | (7,674 | ) |
| Related party expenses (4) | | 390 |
| | — |
| | 390 |
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| General and administrative expenses | | 1,802 |
| | — |
| | 1,802 |
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| Total operating expenses | | 3,914 |
| | 92,263 |
| | 96,177 |
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| | | | | | | |
| Income from operations | | $ | 93,374 |
| | $ | — |
| | $ | 93,374 |
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| (1) | Revenue earned as part of our Professional Services Agreement with Ocwen Financial Corporation (together with its subsidiaries, collectively "Ocwen"). |
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| (2) | Reduction in the value of the Notes receivable – Rights to MSRs based on the run-off of the portfolio. |
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| (3) | At each reporting date, we determine the fair value of our Notes receivable – Rights to MSRs and adjust the carrying value to this amount. |
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| (4) | Expenses incurred as a 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)
(UNAUDITED)
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| | | | | | | | | | | | | | | | |
| | | Three months | | Nine months |
| For the periods ended September 30, | | 2014 | | 2013 | | 2014 | | 2013 |
| Revenue | | | | | | | | |
| Interest income – notes receivable – Rights to MSRs | | $ | 84,850 |
| | $ | 78,447 |
| | $ | 273,962 |
| | $ | 192,106 |
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| Interest income – other | | 12,118 |
| | 697 |
| | 22,869 |
| | 896 |
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| Total interest income | | 96,968 |
| | 79,144 |
| | 296,831 |
| | 193,002 |
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| Related party revenue | | 320 |
| | 491 |
| | 1,721 |
| | 1,458 |
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| Total revenue | | 97,288 |
| | 79,635 |
| | 298,552 |
| | 194,460 |
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| Operating expenses | | | | | | | | |
| Compensation and benefits | | 1,722 |
| | 2,109 |
| | 5,146 |
| | 4,877 |
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| Related party expenses | | 390 |
| | 228 |
| | 1,258 |
| | 680 |
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| General and administrative expenses | | 1,802 |
| | 1,275 |
| | 6,242 |
| | 2,654 |
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| Total operating expenses | | 3,914 |
| | 3,612 |
| | 12,646 |
| | 8,211 |
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| | | | | | | | | |
| Income from operations | | 93,374 |
| | 76,023 |
| | 285,906 |
| | 186,249 |
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| | | | | | | | | |
| Other expense | | | | | | | | |
| Interest expense | | 44,146 |
| | 36,080 |
| | 121,658 |
| | 74,356 |
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| Other expense | | 44,146 |
| | 36,080 |
| | 121,658 |
| | 74,356 |
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| | | | | | | | | |
| Income before income taxes | | 49,228 |
| | 39,943 |
| | 164,248 |
| | 111,893 |
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| Income tax expense | | 14 |
| | 777 |
| | 14 |
| | 816 |
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| Net income | | $ | 49,214 |
| | $ | 39,166 |
| | $ | 164,234 |
| | $ | 111,077 |
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| Earnings per share | | | | | | | | |
| Basic | | $ | 0.69 |
| | $ | 0.55 |
| | $ | 2.31 |
| | $ | 1.80 |
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| Diluted | | $ | 0.69 |
| | $ | 0.55 |
| | $ | 2.31 |
| | $ | 1.80 |
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| | | | | | | | | |
| Weighted average ordinary shares outstanding | | | | | | | | |
| Basic | | 71,016,771 |
| | 71,016,771 |
| | 71,016,771 |
| | 61,812,369 |
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| Diluted | | 71,018,542 |
| | 71,016,771 |
| | 71,016,771 |
| | 61,812,369 |
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| �� | | | | | | | | |
| Dividends declared per share | | $ | 0.52 |
| | $ | 0.45 |
| | $ | 1.45 |
| | $ | 1.25 |
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HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(UNAUDITED)
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| | | | | | | | |
| | | September 30, 2014 | | December 31, 2013 |
| Assets | | | | |
| Cash and cash equivalents | | $ | 130,160 |
| | $ | 87,896 |
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| Match funded advances | | 6,100,277 |
| | 6,387,781 |
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| Notes receivable – Rights to MSRs | | 618,962 |
| | 633,769 |
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| Loans held for investment | | 832,413 |
| | — |
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| Related party receivables | | 26,223 |
| | 70,049 |
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| Deferred tax assets | | 1,024 |
| | 1,024 |
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| Other assets | | 243,286 |
| | 130,153 |
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| Total assets | | $ | 7,952,345 |
| | $ | 7,310,672 |
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| | | | | |
| Liabilities and Equity | | | | |
| Liabilities | | | | |
| Match funded liabilities | | $ | 5,545,636 |
| | $ | 5,715,622 |
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| Other borrowings | | 1,093,837 |
| | 343,386 |
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| Dividends payable | | 12,783 |
| | 10,653 |
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| Income taxes payable | | 426 |
| | 682 |
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| Deferred tax liabilities | | 1,189 |
| | 1,266 |
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| Related party payables | | 8,517 |
| | 10,732 |
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| Other liabilities | | 12,685 |
| | 11,884 |
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| Total liabilities | | 6,675,073 |
| | 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 September 30, 2014 and December 31, 2013, respectively | | 710 |
| | 710 |
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| Additional paid-in capital | | 1,210,207 |
| | 1,210,057 |
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| Retained earnings | | 64,773 |
| | 3,513 |
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| Accumulated other comprehensive income, net of tax | | 1,582 |
| | 2,167 |
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| Total equity | | 1,277,272 |
| | 1,216,447 |
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| Total liabilities and equity | | $ | 7,952,345 |
| | $ | 7,310,672 |
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