Walter Investment Management Corp. Announces Fourth Quarter and Full Year Financial Results
- Q4 Income Before Income Taxes Is $8.1 Million
- Income Before Income Taxes and Spin-Off Related Costs Is $39.7 Million for 2009
TAMPA, Fla., Feb. 11 /PRNewswire-FirstCall/ -- Walter Investment Management Corp. (NYSE Amex: WAC) ("Walter Investment" or the "Company") today announced results for the fourth quarter and full year ended December 31, 2009.
The Company reported income before income taxes for the quarter ended December 31, 2009 of $8.1 million, or $0.32 per diluted share as compared to income before income taxes for the third quarter of $9.6 million, or $0.46 per diluted share. Net income for the fourth quarter of 2009 was $8.5 million, or $0.34 per diluted share.
For the year ended December 31, 2009, the Company reported income before income taxes and spin-off related costs of $39.7 million, in line with its previously announced guidance. Net income for the year ended December 31, 2009 was $113.8 million, or $5.25 per diluted share. Current year results included spin-off related costs of $2.1 million and an income tax benefit of $81.3 million which was the result of the Company's conversion to a REIT on April 17, 2009. Net income for the year ended December 31, 2008 was $2.4 million, or $0.12 per diluted share and included a $17.0 million charge incurred related to interest rate hedge ineffectiveness, a $12.3 million goodwill impairment charge and a $3.9 million charge for estimated hurricane liabilities.
Mark J. O'Brien, Walter Investment's Chairman and CEO, said, "This has been an eventful and exciting year for Walter Investment. The Company emerged from a spin-off and merger transaction in April 2009 to become a stand-alone public company, raised $76.8 million of common equity and has established itself as a leader in servicing less-than-prime mortgages. Our accomplishments in this short time frame have been extraordinary considering the challenges presented by economic conditions and the continuing weakness in the financial markets and mortgage industry."
"The year ahead will present new challenges as we strive to grow our business and expand the Walter Investment platform. We believe the continuing strong performance of our core business, despite the difficult economic environment, demonstrates that we are well positioned to take advantage of opportunities available in the market."
Fourth Quarter Dividend Declaration
On December 15, 2009, the Board of Directors of the Company declared a dividend of $0.50 per share to shareholders of record as of December 31, 2009, which was paid on January 20, 2010. Walter Investment has paid a total of $35.6 million, or $1.50 per share in dividends, since its April 2009 spin-off.
Fourth Quarter 2009 Operating Highlights
- Consolidated delinquencies were 5.44 percent at year end, as compared to 5.55 percent at September 30, 2009 and 5.35 percent at December 31, 2008. Walter Investment's delinquency rates (adjusted to reflect comparable methodologies) remain better than the most recently released Mortgage Banker's Association's subprime industry survey average by 54 percent.
- On an annualized basis, the asset yield for the quarter ended December 31, 2009 was 9.98 percent and the Company's cost of funds was 6.80 percent. The net interest margin for the quarter, which is net interest income as a percentage of average earning assets, was 4.79 percent, slightly lower than the fourth quarter of last year, due to lower outstanding balances, lower prepayment speeds and higher 90 day delinquencies.
- Loss severities were 12.1 percent in the fourth quarter, as compared to 16.9 percent for the third quarter of 2009. Severity levels for fixed rate residential loans, which comprise 99 percent of the portfolio, were better than historical averages at 10.7 percent, improving slightly from 12.5 percent in the third quarter of 2009.
- During the fourth quarter of 2009, the Company received net proceeds of $76.8 million from its follow-on common stock offering and paid dividends of $12.8 million to its shareholders.
Charles E. Cauthen, Walter Investment's President and COO, said, "Despite extremely difficult economic conditions, our servicing operations continue to produce industry leading results from our residential loan portfolio. Our challenge for the upcoming year will be to sustain this portfolio performance while leveraging our platform to achieve superior results from the assets we acquire. We believe we can continue to achieve superior results by mitigating risks through the application of our high touch origination and servicing model and our deeply experienced personnel."
Fourth Quarter 2009 Financial Summary
Net interest income for the quarter was $20.1 million as compared to $22.1 million in the year-ago period on lower average outstandings, lower voluntary prepayment speeds and slightly higher delinquencies.
The provision for losses was $4.0 million, compared with $8.3 million in the year ago period. The decrease from the year earlier period was primarily driven by additions to the allowance for loan losses of $4.0 million and the REO valuation adjustment of $0.6 million in the prior year, coupled with improved loss severities in the current year.
Non-interest income was $2.4 million in the fourth quarter of 2009 as compared to $2.3 million in the prior year period.
Non-interest expenses increased from $9.6 million in the fourth quarter of 2008 to $10.4 million for the fourth quarter of 2009. The increase was primarily attributable to costs associated with being a stand-alone public company, including salaries and benefits, legal, professional, technology and communications costs.
The Company's results for all periods presented include the results of Walter Investment Management, LLC, while the results for Hanover Capital Mortgage Holdings, Inc. are only included for post-merger periods.
Fourth Quarter 2009 Liquidity Summary
At December 31, 2009, the Company had $99.3 million of cash, including $76.8 million of net proceeds from the equity offering. The Company had no borrowings under its $15 million revolving credit facility at December 31, 2009.
Conference Call Webcast
Members of the Company's leadership team will discuss Walter Investment's third quarter results and other general business matters during a conference call and live webcast to be held on Friday, February 12, 2010, at 10 a.m. Eastern Time. To listen to the event live or in an archive which will be available for 30 days, visit the Company's website at www.walterinvestment.com
About Walter Investment Management Corp.
Walter Investment Management Corp. is an asset manager, mortgage servicer and mortgage portfolio owner specializing in subprime, non-conforming and other credit-challenged mortgage assets. Based in Tampa, Fla., the Company currently has $1.9 billion of assets under management and annual revenues of approximately $190 million. The Company is structured as a real estate investment trust ("REIT") and employs approximately 215 people. For more information about Walter Investment Management Corp., please visit the Company's website at www.walterinvestment.com.
Safe Harbor Statement
Certain statements in this release and in our public documents to which we refer, contain or incorporate by reference "forward-looking" statements as defined in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Walter Investment Management Corp. is including this cautionary statement to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical fact are forward-looking statements. Words such as "expect," "believe," "anticipate," "project," "estimate," "forecast," "objective," "plan," "goal" and similar expressions are intended to identify forward looking statements. Forward-looking statements are based on the Company's current belief, intentions and expectations; however, forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results, performance or achievements, to differ materially from those reflected in the statements made or incorporated in this release. Thus, these forward-looking statements are not guarantees of future performance and should not be relied upon as predictions of future events. These risks and uncertainties are contained in Walter Investment Management Corp.'s Registration Statement on Form S-11 dated September 22, 2009, as amended October 8, 2009 and October 16, 2009 and Walter Investment Management Corp.'s other filings with the Securities and Exchange Commission.
In particular (but not by way of limitation), the following important factors and assumptions could affect our future results and could cause actual results to differ materially from those expressed in the forward-looking statements: local, regional, national and global economic trends and developments in general, and local, regional and national real estate and residential mortgage market trends and developments in particular; the availability of suitable qualifying investments for the proceeds of our October 2009 secondary offering and risks associated with any such investments we may pursue; the availability of additional investment capital and suitable qualifying investments, and risks associated with the expansion of our business activities, including risks associated with expanding our business outside of our current geographic footprint and/or expanding the scope of our business to include activities not currently undertaken by our business; limitations imposed on our business due to our real estate investment trust, or REIT, status and our continued qualification as a REIT for federal income tax purposes; financing sources and availability, and future interest expense; fluctuations in interest rates and levels of mortgage prepayments; increases in costs and other general competitive factors; natural disasters and adverse weather conditions, especially to the extent they result in material payouts under insurance policies placed with our captive insurance subsidiary; changes in federal, state and local policies, laws and regulations affecting our business, including, without limitation, mortgage financing or servicing, changes to licensing requirements, and/or the rights and obligations of property owners, mortgagees and tenants; the effectiveness of risk management strategies; unexpected losses resulting from pending, threatened or unforeseen litigation or other third party claims against us; the ability or willingness of Walter Energy, Inc. and other counterparties to satisfy material obligations under agreements with us; our continued listing on the NYSE Amex; uninsured losses or losses in excess of insurance limits and the availability of adequate insurance coverage at reasonable costs; the integration of the former Hanover Capital Mortgage Holdings, Inc. business into that of Walter Investment Management, LLC and its affiliates (the "Merger"), and the realization of anticipated synergies, cost savings and growth opportunities from the Merger; future performance generally; and other presently unidentified factors. In addition, the financial information presented herein is unaudited. Should any of the financial information upon which a forward looking statement is based be changed upon audit, the forward looking statement may also change.
All forward looking statements set forth herein are qualified by these cautionary statements and are made only as of February 11, 2010. The Company undertakes no obligation to update or revise the information contained herein, including without limitation any forward-looking statements whether as a result of new information, subsequent events or circumstances, or otherwise, unless otherwise required by law.
Walter Investment Management Corp. and Subsidiaries
Consolidated Statements of Income
(dollars in thousands, except share and per share amounts)
For the Three Months For the Year
Ended December 31, Ended December 31,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
(Unaudited)
Net interest income:
Interest income $41,847 $45,757 $175,372 $191,063
Less: Interest expense 21,754 23,683 89,726 102,115
Less: Interest rate
hedge ineffectiveness - - - 16,981
---------- ---------- ---------- ----------
Total net interest
income 20,093 22,074 85,646 71,967
Less: Provision for loan
losses 3,971 8,322 15,182 20,968
---------- ---------- ---------- ----------
Total net interest
income after
provision for loan
losses 16,122 13,752 70,464 50,999
Non-interest income:
Premium revenue 2,674 3,801 11,465 11,773
Other income, net (269) (1,512) 569 (3,139)
---------- ---------- ---------- ----------
Total non-interest
income 2,405 2,289 12,034 8,634
Non-interest expenses:
Claims expense 723 1,310 4,483 5,180
Salaries and benefits 5,314 3,662 20,568 15,934
Legal and professional 951 394 4,166 1,249
Occupancy 341 341 1,364 1,509
Technology and
communication 744 396 2,980 1,404
Depreciation and
amortization 100 85 436 416
General and
administrative 2,213 2,267 9,537 7,422
Other expense 54 251 493 1,370
Related party -allocated
corporate charges - 866 853 3,469
Goodwill impairment
charges - - - 12,291
Provision for estimated
hurricane insurance
losses - - - 3,853
---------- ---------- ---------- ----------
Total non-interest
expenses 10,440 9,572 44,880 54,097
Income before income
taxes 8,087 6,469 37,618 5,536
Income tax expense
(benefit) (436) (595) (76,161) 3,099
---------- ---------- ---------- ----------
Net income $8,523 $7,064 $113,779 $2,437
========== ========== ========== ==========
Basic earnings per common
and common equivalent
share $0.34 $0.36 $5.26 $0.12
Diluted earnings per common
and common equivalent
share $0.34 $0.36 $5.25 $0.12
Weighted average common
and common equivalent
shares outstanding
-basic 25,074,070 19,871,205 21,496,369 19,871,205
Weighted average common
and common equivalent
shares outstanding
-diluted 25,172,433 19,871,205 21,564,621 19,871,205
Walter Investment Management Corp. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands, except share amounts)
December 31,
----------------------------
2009 2008
---------- ----------
ASSETS
Cash and cash equivalents $99,286 $1,319
Short-term investments, restricted 51,654 49,196
Receivables, net 3,052 5,447
Residential loans, net of allowance for
loan losses of $17,661 and $18,969,
respectively 1,644,346 1,771,675
Subordinate security 1,801 -
Real estate owned 63,124 48,198
Deferred debt issuance costs 18,450 19,745
Other assets 5,961 3,261
---------- ----------
Total assets $1,887,674 $1,898,841
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $797 $2,181
Accrued expenses 28,296 46,367
Deferred income taxes, net 173 55,530
Mortgage-backed debt 1,267,454 1,372,821
Accrued interest 8,755 9,717
Other liabilities 767 748
---------- ----------
Total liabilities 1,306,242 1,487,364
---------- ----------
Stockholders' equity:
Member unit
Issued -0 and 1 member unit at
December 31, 2009 and 2008,
respectively - -
Preferred stock, $0.01 par value
per share:
Authorized - 10,000,000 shares
Issued and outstanding -0 shares
at December 31, 2009 and 2008,
respectively - -
Common stock, $0.01 par value per share:
Authorized - 90,000,000 shares
Issued and outstanding -25,642,889
and 0 shares at December 31, 2009
and 2008, respectively 256 -
Additional paid-in capital 122,552 52,293
Retained earnings 456,681 684,127
Accumulated other comprehensive
income 1,943 1,747
---------- ----------
581,432 738,167
Less: Receivable from Walter Energy - (326,690)
---------- ----------
Total stockholders' equity 581,432 411,477
---------- ----------
Total liabilities and
stockholders' equity $1,887,674 $1,898,841
========== ==========
Walter Investment Management Corp. and Subsidiaries
Operating Statistics
(Unaudited)
(dollars in millions, except per share amounts)
2009 2009 2008
Q4 Q3 Q4
-------- -------- --------
30+ Delinquencies (1) 5.44% 5.55% 5.35%
90+ Delinquencies (1) 3.37% 3.24% 3.05%
Provision for Losses $4.0 $3.1 $8.3
Net Charge-offs $4.1 $3.6 $4.3
Charge-off Ratio (2) 0.98% 0.85% 0.95%
Allowance for Losses $17.7 $17.8 $19.0
Allowance for Losses Ratio (3) 1.06% 1.05% 1.06%
30+ Delinquencies (1) $98.7 $102.7 $102.7
REO (Real Estate Owned) 63.1 56.7 48.2
TIO (Taxes, Insurance, Escrow and
Other Advances) 16.3 15.4 15.2
-------- -------- --------
Nonperforming Assets
(Delinquencies + REO + TIO) $178.1 $174.8 $166.1
Nonperforming Assets Ratio (4) 9.40% 9.08% 8.19%
Default Rate (5) 6.15% 5.37% 4.80%
Fixed Rate Mortgages 5.84% 5.20% 4.66%
Adjustable Rate Mortgages 27.55% 14.71% 12.49%
Loss Severity (6) 12.08% 16.90% 21.40%
Fixed Rate Mortgages 10.65% 12.51% 15.50%
Adjustable Rate Mortgages 42.42% 61.75% 47.70%
Number of Accounts Serviced (7) 35,236 35,725 37,591
Total Portfolio (8) $1,895.2 $1,924.7 $2,028.4
ARM Portfolio (9) 26.7 27.3 34.8
Prepayment Rate (Voluntary CPR) 2.95% 3.36% 3.17%
Book Value per Share (10) $22.67 $25.60 NM
Debt to Equity Ratio 2.18:1 2.54:1 NM
(1) Delinquencies are defined as the percentage of principal balances
outstanding which have monthly payments over 30 days past due. The
calculation of delinquencies excludes from delinquent amounts those
accounts that are in bankruptcy proceedings that are paying their
mortgage payments in contractual compliance with bankruptcy court
approved mortgage payment obligations.
(2) The charge-off ratio is calculated as annualized net charge-offs,
divided by average residential loans before the allowance for
losses.
(3) The allowance for losses ratio is calculated as period-end allowance
for losses divided by period-end residential loans before the
allowance for losses.
(4) The nonperforming assets ratio is calculated as period-end
non-performing assets, divided by period-end principal balance of
residential loans plus REO and TIO.
(5) Default rate is calculated as the annualized balance of
repossessions for the quarter divided by the average total balance
of the portfolio for the quarter.
(6) Loss severities are calculated as the loss on sale of REO
properties divided by the carrying value of REO.
(7) Includes REO accounts.
(8) Total portfolio includes the principal balance of residential
loans, REO and TIO.
(9) ARM portfolio includes the principal balance of adjustable rate
residential loans and REO resulting from defaulted adjustable rate
residential loans.
(10) Book Value per share is calculated by dividing the Company's equity
by total shares issued and outstanding of 25,642,889.
NM Not Meaningful
SOURCE Walter Investment Management Corp.
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