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 Condensed Management June 30, 2014: Consolidated Adjustments Reporting Results (GAAP) (Non-GAAP) Revenue Servicing fee revenue $— $185,690 $185,690 Interest income - notes 89,969 (89,969) — receivable – Rights to MSRs 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 — (12,715) (12,715) receivable – Rights to MSRs Related party expenses (2) 496 — 496 General and administrative 1,949 — 1,949 expenses 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) (UNAUDITED) Three months Six months For the periods ended June 30, 2014 2013 2014 2013 Revenue Interest income – notes $89,969 $49,852 $171,821 $94,422 receivable – Rights to MSRs 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 1,949 734 4,098 1,379 expenses 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 710 710 71,016,771 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively Additional paid-in capital 1,210,121 1,210,057 Retained earnings 52,488 20,804 Accumulated other comprehensive income, net of 851 2,167 tax Total equity 1,264,170 1,233,738 Total liabilities and equity $7,934,503 $7,327,963 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. Logo
Home Loan Servicing Solutions, Ltd. Reports EPS of $0.76 and Net Income of $54.1 Million in the Second Quarter of 2014 and
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