- COMPANY REPORTS Q2 PRE-TAX INCOME OF $8.6 MILLION - ANNOUNCES A
DIVIDEND OF $0.50 PER SHARE TAMPA, Fla., Aug. 5
/PRNewswire-FirstCall/ -- Walter Investment Management Corp. (NYSE
Amex: WAC) ("Walter Investment" or the "Company") today reported
results of operations for the quarter ended June 30, 2009 and the
declaration of a dividend of $0.50 per share, its first since the
spin-off of Walter Investment Management, LLC ("WIM LLC") from its
former parent, Walter Energy, Inc. (NYSE:WLT). The dividend will be
paid on August 31, 2009 to shareholders of record on August 19,
2009. Net income for the quarter was $89.8 million, which included
a non-cash tax benefit of $81.2 million related to WIM LLC's
conversion to a real estate investment trust ("REIT") as part of
its spin-off and merger transactions with Hanover Capital Mortgage
Holdings, Inc. ("Hanover") on April 17, 2009. Also included in
results for the quarter were $1.2 million of costs related to the
spin-off. Excluding these spin-off costs, income before income
taxes for the quarter ended June 30, 2009 was $9.8 million as
compared to $13.1 million during the year-ago period. The
year-over-year decrease reflects higher overhead costs associated
with stand-alone and public company expenses, as well as the
addition of Hanover's operations. Mark J. O'Brien, Walter
Investment's Chairman and CEO, said, "The dividend declared today
by the Board of Directors reflects the Company's strong cash flows
and the stable, consistent operating results from its core
business. These results were driven by solid portfolio performance,
partially offset by expected increases in overhead costs." "The
quarter's strong results in the face of continued weakness in the
mortgage industry also illustrate how uniquely positioned the
Company is for growth. We are well suited to take advantage of the
opportunities presented in the current environment where there are
high levels of distressed assets that we believe could benefit from
our high-touch, field servicing approach," said O'Brien. Second
Quarter 2009 Operating Highlights -- Consolidated delinquencies
were 5.06 percent at the end of June, as compared to 4.59 percent
at March 31, 2009 and 4.09 percent at June 30, 2008. While the
Company has seen a slight uptick, the delinquency rate remains
within the historical five-year range of 4 percent to 6 percent and
is better than the most recently released MBA subprime industry
average by almost 60 percent. Additionally, an increase was not
unexpected, as delinquencies tend to trend up seasonally at this
point in the year. -- On an annualized basis, the asset yield for
the quarter ended June 30, 2009 was 10.45 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 5.17 percent, essentially flat with the second
quarter of last year. -- Loss severities were 19.0 percent in the
second quarter, as compared to 16.8 percent for the first quarter
of 2009. Severity levels for fixed rate residential loans, which
comprise 98 percent of the portfolio, were better than historical
averages at 13.3 percent and improved by 2.2 percent from the first
quarter of 2009. The overall increase in severities was
attributable to the adjustable rate mortgage ("ARM") portfolio,
which comprises just under 2 percent of the Company's total
portfolio. -- Cash increased by $16.1 million during the second
quarter of 2009. Charles E. Cauthen, Walter Investment's President
and COO, said, "Our servicing operations continue to produce solid
performance from the mortgage portfolio in an extremely difficult
economic environment. Challenges, including rising levels of
unemployment and general weakness in the overall economy, are
expected to continue. However, we believe we are positioned to
continue to deliver strong, industry-leading performance despite
these difficult conditions." Second Quarter 2009 Financial Summary
Net interest income for the quarter was $22.2 million as compared
with $23.5 million in the year-ago period on lower average
outstandings and lower voluntary prepayment speeds. The provision
for losses was $3.7 million, compared with $3.1 million a year ago.
The increase was driven by an overall increase in the level of
nonperforming assets and higher loss severities in the ARM
portfolio. Non-interest income rose to $3.6 million from $2.2
million a year earlier. Higher revenues earned by the insurance
operations resulted from increases in premiums charged to
customers. Other revenues also increased with the addition of
Hanover's consulting and advisory services and improved collections
of tax and insurance advances. Non-interest expense increased to
$13.5 million from $9.5 million a year earlier. The increase was
primarily attributable to additional costs associated with
operating as a stand-alone, public company, $1.2 million of
one-time spin-off related costs, and the addition of overhead
associated with Hanover's operations. The income tax benefit of
$81.2 million was attributable to the conversion of WIM LLC to REIT
status which required the recognition of all deferred tax items
associated with our REIT entities as a tax benefit for US GAAP
purposes. The Company's results for all periods presented include
the results of WIM LLC, while the results for Hanover are only
included for post-merger periods. Second Quarter 2009 Liquidity
Summary At June 30, 2009, the Company had $21.6 million of cash.
The Company had no borrowings under its $15 million revolving
credit facility at June 30, 2009. Additionally, Walter Investment
has access to a $10 million facility to cover potential
catastrophic hurricane-related losses. Conference Call Webcast
Members of the Company's leadership team will discuss Walter
Investment's second quarter results and other general business
matters during a conference call and live webcast to be held on
Thursday, August 6, 2009, 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 http://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 pro-forma annual revenues of approximately $200 million. The
Company is structured as a real estate investment trust ("REIT")
and employs approximately 225 people. For more information about
Walter Investment Management Corp., please visit the Company's
website at http://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-4 dated February 17, 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 the Company's 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 new investment
capital and suitable qualifying investments, and risks associated
with the expansion of our business activities; limitations imposed
on the Company's business due to its REIT status and the Company's
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,
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 the Company; the
ability or willingness of Walter Energy and other counterparties to
satisfy its/their material obligations under its/their agreements
with the Company; the Company's 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. All forward looking statements set forth herein are
qualified by these cautionary statements and are made only as of
August 5, 2009. 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 Condensed Consolidated Income Statements
(Unaudited) (dollars in thousands, except share amounts) For the
Three Months For the Six Months Ended June 30, Ended June 30,
-------------- -------------- 2009 2008 2009 2008 ---- ---- ----
---- Net interest income: Interest income $44,857 $49,302 $90,510
$98,458 Interest expense 22,654 25,846 45,743 54,154 Interest rate
hedge ineffectiveness - - - 16,981 --- --- --- ------ Total net
interest income 22,203 23,456 44,767 27,323 Provision for loan
losses 3,733 3,116 8,109 7,357 ----- ----- ----- ----- Total net
interest income after provision for loan losses 18,470 20,340
36,658 19,966 Non-interest income: Premium revenue 3,335 2,897
6,479 5,059 Other revenue, net 255 (649) 377 (355) --- ---- ---
---- Total non-interest income 3,590 2,248 6,856 4,704 Non-interest
expenses: Claims expense 1,373 1,174 2,662 2,470 Salaries and
benefits 5,528 3,902 9,813 8,095 Legal and professional 1,896 279
2,600 582 Occupancy 465 397 800 779 Technology and communication
731 274 1,549 708 Depreciation and amortization 329 396 610 824
General and administrative 3,103 1,831 4,298 3,523 Other expense 49
371 386 758 Related party - allocated corporate charges - 868 853
1,734 --- --- --- ----- Total costs and expenses 13,474 9,492
23,571 19,473 Income before income taxes 8,586 13,096 19,943 5,197
Income tax expense (benefit) (81,225) 4,851 (77,070) 1,927 -------
----- ------- ----- Net income $89,811 $8,245 $97,013 $3,270
======= ====== ======= ====== Basic income per common and common
equivalent share $4.33 $0.41 $4.68 $0.16 Diluted income per common
and common equivalent share $4.30 $0.41 $4.64 $0.16 Weighted
average common and common equivalent shares outstanding - basic
20,750,501 19,871,205 20,750,501 19,871,205 Weighted average common
and common equivalent shares outstanding - diluted 20,910,099
19,871,205 20,910,099 19,871,205 Walter Investment Management Corp.
and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited)
(dollars in thousands, except share amounts) June 30, December 31,
2009 2008 ---- ---- ASSETS Cash and cash equivalents $21,605 $1,319
Short-term investments, restricted 55,755 49,196 Receivables, net
3,538 5,447 Residential loans, net of allowance of $18,307 and
$18,969, respectively 1,701,388 1,767,838 Other subordinate
security, available for sale 1,607 - Real estate owned 55,846
48,198 Unamortized debt expense 19,212 19,745 Other assets 11,594
7,098 ------ ----- Total assets $1,870,545 $1,898,841 ==========
========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable
$1,942 $2,181 Accrued expenses 28,418 46,367 Deferred income taxes,
net 259 55,530 Asset-backed debt 1,319,695 1,372,821 Accrued
interest 9,233 9,717 Other liabilities 511 748 --- --- Total
liabilities 1,360,058 1,487,364 --------- --------- Total
stockholders' equity 510,487 411,477 ------- ------- Total
liabilities and stockholders' equity $1,870,545 $1,898,841
========== ========== Walter Investment Management Corp. and
Subsidiaries Operating Statistics (Unaudited) (dollars in millions,
except per share amounts) Q2 2009 Q1 2009 Q2 2008 ------- -------
------- 30+ Delinquencies(1) 5.06% 4.59% 4.09% 90+ Delinquencies(1)
2.73% 3.02% 2.04% Provision for Losses $3.7 $4.4 $3.1 Net
Charge-offs $3.9 $4.9 $3.2 Charge-off Ratio(2) 0.90% 1.10% 0.69%
Allowance for Losses $18.3 $18.5 $13.9 Allowance for Losses
Ratio(3) 1.06% 1.06% 0.76% 30+ Delinquencies(1) $95.4 $86.2 $80.7
REO (Real Estate Owned) $55.8 $50.9 $42.6 TIO (Taxes, Insurance,
Escrow and Other Advances) $14.8 $15.0 $12.7 ----- ----- -----
Nonperforming Assets (Delinquencies +REO +TIO) $166.0 $152.1 $136.0
Nonperforming Assets Ratio (4) 8.5% 7.6% 6.6% Default Rate (5)
5.51% 5.06% 3.96% Fixed Rate Mortgages 5.37% 4.58% 3.32% Adjustable
Rate Mortgages 14.43% 33.96% 34.49% Loss Severities (6) 19.0% 16.8%
10.1% Fixed Rate Mortgages 13.3% 15.5% 8.8% Adjustable Rate
Mortgages 47.0% 40.3% 48.2% Number of Accounts Serviced 36,320
36,946 38,771 Total Portfolio (7) $1,956.5 $1,993.6 $2,062.7 ARM
Portfolio (8) $29.6 $31.8 $41.9 Prepayment Rate (Voluntary CPR)
4.06% 3.56% 6.02% Book Value per Share (9) $25.69 NM NM Debt to
Equity Ratio 2.59 :1 NM 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 net proceeds received on resales
of REO divided by the accounting basis prior to any write-down to
market value at the time of repossession for REOs sold. (7) Total
portfolio includes the principal balance of residential loans, REO
and TIO. (8) ARM portfolio includes the principal balance of
adjustable rate residential loans and REO resulting from defaulted
adjustable rate residential loans. (9) Book Value per share is
calculated by dividing the Company's equity by total shares issued
and outstanding of 19,871,205. NM Not Meaningful DATASOURCE: Walter
Investment Management Corp. CONTACT: Investors and Media: Whitney
Finch, Director of Investor Relations, +1-813-421-7694, Web Site:
http://www.walterind.com/
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