Walter Investment Management Corp. Announces First Quarter 2011 Financial Results

TAMPA, Fla., May 6, 2011 /PRNewswire/ -- Walter Investment Management Corp. (NYSE Amex: WAC) ("Walter Investment" or the "Company") today announced results for the quarter ended March 31, 2011.

The Company reported income before income taxes for the quarter ended March 31, 2011 of $3.6 million, or $0.14 per diluted share as compared to income before income taxes for the first quarter 2010 of $8.2 million, or $0.31 per diluted share.  Income before income taxes as compared to the prior year quarter was negatively impacted by $3.0 million, or $0.11 per diluted share, of transaction costs related to the proposed acquisition of Green Tree and a loss of $0.8 million, or $0.03 per diluted share, due to the inclusion of Marix.  Net income for the first quarter of 2011 was $3.5 million, or $0.13 per diluted share as compared to net income for the first quarter 2010 of $8.1 million, or $0.30 per diluted share.

Mark J. O'Brien, Walter Investment's Chairman and CEO, said, "The first quarter has been a significant one for Walter Investment, as we announced the proposed acquisition of Green Tree and are working diligently to close this transaction.  We look forward, with great enthusiasm, to completing the transaction, which we believe will be a truly transformative event for Walter Investment, allowing us to expand our generation of revenues from recurring, fee-based streams with high operating margins and participate in the significant growth opportunities presenting themselves in the sector."

During the first quarter of 2011, the Company completed the purchase of three pools of primarily performing, fixed-rate residential loans on single-family, owner occupied residences. These purchases utilized $44.8 million of cash.  In positioning the Company for the Green Tree transaction, management has suspended its portfolio acquisition program.

First Quarter 2011 Operating Highlights

• Consolidated delinquencies were 4.73 percent at March 31, 2011, as compared to 4.68 percent at December 31, 2010 and 4.21 percent at March 31, 2010.  These higher delinquency rates reflect acquisitions of delinquent loans.  Excluding loans which were delinquent when acquired, delinquency rates would have been 4.41 percent at March 31, 2011.

• On an annualized basis, the asset yield for the quarter ended March 31, 2011 was 10.01 percent and the Company's interest cost on outstanding debt was 6.42 percent.  The net interest margin for the quarter, which is net interest income as a percentage of average earning assets, was 5.07 percent, in-line with the first quarter of 2010.

• Loss severities were 16.3 percent in the first quarter, as compared to 14.4 percent for the fourth quarter of 2010 and 11.9 percent in the first quarter of 2010.  Loss severities are calculated as the loss on sale of REO properties (including all costs incurred through disposition) divided by the historical cost basis of REO sold.

• During the first quarter of 2011, the Company paid dividends declared on December 10, 2010 of $12.9 million to its shareholders

Charles E. Cauthen, Walter Investment's President and COO, said, "We are pleased with our strong portfolio results in the first quarter.  Our field servicing organization's continued focus on REO inventory levels yielded positive results, decreasing our REO inventory to its lowest level since Q1 2009, while maintaining consistent recovery rates.  Our delinquency rates were in-line with our historical performance.  As our field servicing organization continues to drive high levels of performance from our residential loan portfolio, we look forward to combining our servicing capabilities with those of the Green Tree platform."

First Quarter 2011 Financial Summary

Net interest income for the quarter was $21.0 million as compared to $20.6 million in the year-ago period.  The improvement resulted primarily from a decrease in interest expense on declining debt balances of older trusts with higher interest rates.

The provision for loan losses was $0.6 million, compared with $1.5 million in the year ago period.  The decrease from the year earlier period was primarily driven by improving economic trends, including lower unemployment rates, which supports assumptions for lower default rates.  

Non-interest income was $5.7 million in the first quarter of 2011 as compared to $3.5 million in the prior year period, primarily from additional subservicing revenues and fees related to the Marix acquisition offset by lower premium revenues in the insurance business, lower collections on insurance advances and a decline in advisory revenues.

Non-interest expenses increased from $14.4 million in the first quarter of 2010 to $22.4 million for the first quarter of 2011.  The prior year quarter included a severance charge of $0.7 million associated with certain senior management changes.  The increase in non-interest expense reflects $4.0 million of higher servicing and overhead costs related to the Marix acquisition and the $3.0 million of transaction costs related to the acquisition of Green Tree.  Additionally, the Company recorded a $1.1 million adjustment for a decline in value on its REO properties and had an increase of approximately $0.5 million in tax and escrow advances.  

Other First Quarter Highlights

On March 28, 2011, the Company announced it had entered into a definitive agreement to purchase GTCS Holdings LLC ("Green Tree") in a transaction valued at $1.065 billion.  Green Tree, based in St. Paul, Minnesota, is a leading independent, fee-based business services company which provides high-touch, third-party servicing of credit-sensitive consumer loans.  

At March 31, 2011, the Company had $58.4 million of cash.  The Company had no borrowings under its $15 million revolving credit facility at March 31, 2011.  The credit facility which was scheduled to mature on April 20, 2011 was terminated on April 6, 2011.

Conference Call Webcast

Members of the Company's leadership team will discuss Walter Investment's first quarter results and other general business matters during a conference call and live webcast to be held on Friday, May 6, 2011, 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 non-conforming, less-than-prime, and other credit-challenged mortgage assets. Based in Tampa, Fla., the Company currently has $1.8 billion of assets under management and annual revenues of approximately $180 million.  The Company is structured as a real estate investment trust ("REIT") and employs approximately 340 people.   For more information about Walter Investment Management Corp., please visit the Company's website at www.walterinvestment.com.

About Green Tree

Green Tree is one of the country's leading home loan servicers and a full-service solutions provider which partners with credit-risk owners to help them maximize the performance of their loan portfolios.  Based in St. Paul, Minn., the company services a diverse $37 billion loan portfolio consisting of over 745,000 loans and employs approximately 1,900 people.  For more information, please visit the Green Tree website at www.greentreecreditsolutions.com

Safe Harbor Statement

Certain statements in this release and in any of Walter Investment Management Corp.'s public documents referred to herein, 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, and the opposites of such words and expressions are intended to identify forward-looking statements.  Forward-looking statements are based on the Company's current beliefs, 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.  The risks and uncertainties referred to above include, but are not limited to, the satisfactory completion of all conditions precedent to the closing of the proposed transaction in accordance with the terms and conditions of the purchase agreement, including the receipt of anti-trust and other regulatory and customer approvals;  the negotiation, execution and delivery of definitive financing agreements and the satisfaction of all conditions precedent that will be contained therein; the completion of asset sales contemplated by the purchase agreement; the obligation to pay a termination fee under the purchase agreement in certain circumstances if the closing does not occur; anticipated growth of the specialty servicing sector; future economic and business conditions; the effects of competition from a variety of local, regional, national and other mortgage servicers and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission (the "SEC"), including its Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on March 8, 2011 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 filed with the SEC on May 6, 2011. 

All forward-looking statements set forth herein are qualified by this cautionary statement and are made only as of May 6, 2011. 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.

SOURCE Walter Investment Management Corp.