- Company Reports Q3 Pre-Tax Income of $9.6 Million - Announces
Dividend of $0.50 Per Share TAMPA, Fla., Nov. 5
/PRNewswire-FirstCall/ -- Walter Investment Management Corp. (NYSE
Amex: WAC) ("Walter Investment" or the "Company") today reported
results of operations for the quarter ended September 30, 2009 and
the declaration of a quarterly dividend of $0.50 per share. The
dividend will be paid on November 30, 2009 to shareholders of
record on November 18, 2009. Net income for the third quarter of
2009 was $8.2 million, or $0.40 per diluted share. These quarterly
results included $0.4 million of spin-off related costs and $0.8
million of non-cash income tax expense related to the reversal of
tax benefits previously reflected in accumulated other
comprehensive income. Income before income taxes was $9.6 million,
or $0.46 per diluted share. Income before income taxes excluding
the spin-off related expenses was $10.0 million in the third
quarter as compared to $9.8 million in the second quarter. The
Company had a net loss before income taxes of $6.1 million in the
third quarter of 2008, primarily attributable to a $12.3 million
goodwill impairment charge and a $3.9 million provision for
estimated hurricane losses. Mark J. O'Brien, Walter Investment's
Chairman and CEO, said, "The $0.50 per share dividend declared
today by our Board of Directors is equal to the Company's initial
dividend that was declared and paid in August. This quarter's
results and the payment of the dividend demonstrate the consistent
and stable performance of our portfolio and the cash flow it
produces." "We believe the continuing strong performance from our
core business, despite ongoing weakness in the mortgage industry in
general, confirms that we are well positioned to take advantage of
the opportunities currently available in the distressed asset
market. We anticipate that the acquisitions of residential loans,
additional servicing opportunities, and other investment options
for the proceeds from our recent capital raise, should further
improve the efficiency and effectiveness of our servicing platform
and enhance returns to our shareholders." Third Quarter 2009
Operating Highlights -- Consolidated delinquencies were 5.55
percent at the end of September, as compared to 5.06 percent at
June 30, 2009 and 5.00 percent at September 30, 2008. The uptick
reflected an expected seasonal trend upward in delinquencies.
However our delinquency rates (adjusted to reflect comparable
methodologies) remain better than the most recently released
Mortgage Banker's Association's subprime industry survey average by
53 percent. -- On an annualized basis, the asset yield for the
quarter ended September 30, 2009 was 10.13 percent and the
Company's cost of funds was 6.81 percent. The net interest margin
for the quarter, which is net interest income as a percentage of
average earning assets, was 4.92 percent, slightly lower than the
third quarter of last year, due to lower outstanding balances,
lower prepayment speeds and higher delinquencies. -- Loss
severities were 16.9 percent in the third quarter, as compared to
19.0 percent for the second quarter of 2009. Severity levels for
fixed rate residential loans, which comprise 99 percent of our
portfolio, were better than historical averages at 12.5 percent
improving slightly from 13.3 percent in the second quarter of 2009.
The improvement in the fixed rate portion of the portfolio was
partially offset by an increase in severities in the adjustable
rate mortgage portfolio, which comprises approximately 1 percent of
the Company's total portfolio. -- Cash increased $2.3 million
during the third quarter of 2009 after the $10.4 million paid in
dividends to our shareholders. Charles E. Cauthen, Walter
Investment's President and COO, said, "Despite extremely difficult
economic conditions, our servicing operations continue to achieve
solid and consistent results from our existing residential loan
portfolio. While we expect continued weakness in the economy and
for unemployment levels to remain high, we believe we are
well-positioned to produce results superior to those of other
servicers on our existing residential loan portfolio and from any
residential loan portfolios we acquire." Third Quarter 2009
Financial Summary Net interest income for the quarter was $21.0
million as compared $23.4 million in the year-ago period on lower
average outstandings, lower voluntary prepayment speeds and
slightly higher delinquencies. The provision for losses was $3.1
million, compared with $5.3 million in the year ago period. The
decrease from the year earlier period was primarily driven by an
addition to the allowance for loan losses of $2.3 million in the
prior year period, coupled with improved loss severities in the
current quarter. Non-interest income rose to $3.0 million from $1.9
million a year earlier. Other revenues increased primarily as a
result of the sale of the third-party insurance agency portfolio as
well as an increase in advisory services revenues. Non-interest
expense decreased to $11.3 million from $26.1 million a year
earlier. The decrease was primarily attributable to goodwill
impairment charges of $12.3 million and a provision for estimated
hurricane insurance losses of $3.9 million taken during the third
quarter of 2008. 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. Third Quarter 2009 Liquidity
Summary At September 30, 2009, the Company had $23.9 million of
cash. The Company had no borrowings under its $15 million revolving
credit facility at September 30, 2009. Additionally, Walter
Investment has access to a $10 million facility to cover potential
catastrophic hurricane-related losses. On October 21, 2009, the
Company received net proceeds of approximately $76.9 million from
its follow-on common stock offering. We anticipate that the
proceeds will be used to purchase residential loans and for other
investment and general corporate purposes. 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, November 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 $1.8 billion of assets under management
and annualized 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
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-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 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 suitable
qualifying investments for the proceeds of the Company's recent
secondary offering and risks associated with any such investments
that we may pursue; the availability of additional investment
capital and suitable qualifying investments and risks associated
with any future 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,
Inc., the Company's former parent 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
November 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 Consolidated Statements of Income
(Unaudited) (dollars in thousands, except share and per share
amounts) For the Three Months For the Nine Months Ended September
30, Ended September 30, ------------------- -------------------
2009 2008 2009 2008 ---- ---- ---- ---- Net interest income:
Interest income $43,191 $47,649 $133,701 $146,107 Less: Interest
expense 22,229 24,278 67,972 78,432 Less: Interest rate hedge
ineffectiveness - - - 16,981 --- --- --- ------ Total net interest
income 20,962 23,371 65,729 50,694 Less: Provision for loan losses
3,102 5,289 11,211 12,646 ----- ----- ------ ------ Total net
interest income after provision for loan losses 17,860 18,082
54,518 38,048 Non-interest income: Premium revenue 2,581 3,205
9,060 8,264 Other income, net 461 (1,272) 838 (1,627) --- ------
--- ------ Total non-interest income 3,042 1,933 9,898 6,637
Non-interest expenses: Claims expense 1,098 1,400 3,760 3,870
Salaries and benefits 5,441 4,177 15,254 12,272 Legal and
professional 615 273 3,215 855 Occupancy 223 389 1,023 1,168
Technology and communication 687 300 2,236 1,008 Depreciation and
amortization 283 308 893 1,132 General and administrative 2,914
1,924 7,212 5,447 Other expense 53 361 439 1,119 Related party -
allocated corporate charges - 869 853 2,603 Goodwill impairment
charges - 12,291 - 12,291 Provision for estimated hurricane
insurance losses - 3,853 - 3,853 --- ----- --- ----- Total
non-interest expenses 11,314 26,145 34,885 45,618 Income (loss)
before income taxes 9,588 (6,130) 29,531 (933) Income tax expense
1,345 1,767 (75,725) 3,694 ----- ----- ------- ----- Net income
(loss) $8,243 $(7,897) $105,256 $(4,627) ====== ======= ========
======= Basic income (loss) per common and common equivalent share
0.40 $(0.40) $5.16 $(0.23) Diluted income (loss) per common and
common equivalent share $0.40 $(0.40) $5.15 $(0.23) Weighted
average common and common equivalent shares outstanding - basic
20,586,199 19,871,205 20,299,435 19,871,205 Weighted average common
and common equivalent shares outstanding - diluted 20,687,965
19,871,205 20,357,139 19,871,205 Walter Investment Management Corp.
and Subsidiaries Consolidated Balance Sheets (dollars in thousands,
except share amounts) September 30, December 31, 2009 2008 ----
---- (Unaudited) ASSETS Cash and cash equivalents $23,896 $1,319
Short-term investments, restricted 53,186 49,196 Receivables, net
4,369 5,447 Residential loans, net of allowance for loan losses of
$17,789 and $18,969, respectively 1,673,103 1,767,838 Subordinate
security 1,769 - Real estate owned 56,745 48,198 Unamortized debt
expense 18,822 19,745 Other assets 10,859 7,098 ------ ----- Total
assets $1,842,749 $1,898,841 ========== ========== LIABILITIES AND
STOCKHOLDERS' EQUITY Accounts payable $1,507 $2,181 Accrued
expenses 29,875 46,367 Deferred income taxes, net 208 55,530
Mortgage-backed debt 1,292,242 1,372,821 Accrued interest 8,989
9,717 Other liabilities 742 748 --- --- Total liabilities 1,333,563
1,487,364 --------- --------- Stockholders' equity: Member unit
Issued - 0 member units at September 30, 2009 and 1 member unit at
December 31, 2008 - - Preferred stock, $0.01 par value per share:
Authorized - 10,000,000 shares Issued and outstanding - 0 shares at
September 30, 2009 and December 31, 2008 - - Common stock, $0.01
par value per share: Authorized - 90,000,000 shares Issued and
outstanding - 19,892,887 shares at September 30, 2009 199 -
Additional paid-in capital 45,354 52,293 Retained earnings 461,406
684,127 Accumulated other comprehensive income 2,227 1,747 -----
----- 509,186 738,167 Less: Receivable from Walter Energy -
(326,690) --- -------- Total stockholders' equity 509,186 411,477
------- ------- Total liabilities and stockholders' equity
$1,842,749 $1,898,841 ========== ========== Walter Investment
Management Corp. and Subsidiaries Operating Statistics (Unaudited)
(dollars in millions, except per share amounts) Q3 2009 Q2 2009 Q3
2008 ------- ------- ------- 30+ Delinquencies (1) 5.55% 5.06%
5.00% 90+ Delinquencies (1) 3.24% 2.73% 2.53% Provision for Losses
$3.1 $3.7 $5.3 Net Charge-offs $3.6 $3.9 $4.3 Charge-off Ratio (2)
0.85% 0.90% 0.94% Allowance for Losses $17.8 $18.3 $14.9 Allowance
for Losses Ratio (3) 1.05% 1.06% 0.82% 30+ Delinquencies (1) $102.7
$95.4 $98.0 REO (Real Estate Owned) $56.7 $55.8 $41.3 TIO (Taxes,
Insurance, Escrow and Other Advances) $15.4 $14.8 $13.8 ----- -----
----- Nonperforming Assets (Delinquencies +REO + TIO) $174.8 $166.0
$153.1 Nonperforming Assets Ratio (4) 9.08% 8.48% 7.47% Default
Rate (5) 5.37% 5.51% 3.89% Fixed Rate Mortgages 5.20% 5.37% 3.48%
Adjustable Rate Mortgages 14.71% 14.43% 26.07% Loss Severities (6)
16.90% 19.00% 17.80% Fixed Rate Mortgages 12.51% 13.30% 10.50%
Adjustable Rate Mortgages 61.75% 47.00% 52.00% Number of Accounts
Serviced (7) 35,725 36,320 38,192 Total Portfolio (8) $1,924.7
$1,956.5 $2,050.3 ARM Portfolio (9) $27.3 $29.6 $36.3 Prepayment
Rate (Voluntary CPR) 3.36% 4.06% 4.49% Book Value per Share (10)
$25.60 $25.69 NM Debt to Equity Ratio 2.54:1 2.59:1 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 19,892,887. NM Not Meaningful DATASOURCE: Walter
Investment Management Corp. CONTACT: Investor and Media: Whitney
Finch, Director of Investor Relations, +1-813-421-7694, Web Site:
http://www.walterinvestment.com/
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