GEORGETOWN, Grand Cayman, Oct. 18, 2012 (GLOBE NEWSWIRE) Home Loan Servicing Solutions, Ltd. (“HLSS” or the “Company”) (Nasdaq:HLSS) today reported net income of $6.6 million, or $0.37 per ordinary share, for the third quarter of 2012.

Third quarter business performance highlights:

• Earned $6.6 million, or $0.37 per ordinary share.
• Declared dividends of $0.10 per share per month totaling $5.9 million for the quarter.
• Received gross proceeds of $249.9 million in connection with the follow-on offering of 16,387,500 shares at $15.25 per ordinary share on September 12, 2012. Proceeds from the offering were used to acquire mortgage servicing assets related to non-agency mortgage loans from Ocwen with an unpaid principle balance (“UPB”) of $27.8 billion in September.
• In addition, completed the flow acquisition of mortgage servicing assets related to non-agency mortgage loans with UPB of $2.1 billion from Ocwen on August 1, 2012 resulting in ending UPB of $46.5 billion.
• In connection with the acquisition of mortgage servicing assets in September, executed swap of variable rate LIBOR for a fixed rate of 52 basis points covering the projected interest exposure for existing and newly acquired assets for a term of 60 months.
• Earnings include a $0.03 per share benefit from reduced amortization due to the deferral of certain modifications as Ocwen tested delinquent loans for HAMP 2 eligibility, and ending the quarter on a Sunday delayed the receipt of certain loan payoffs. These factors combined to reduce the annualized prepayment rate to 12.6% from 15.2% in the second quarter.  There was no change in servicing asset valuations.

Subsequent to the end of the third quarter of 2012:

• On October 1, 2012, the Company’s Board of Directors declared a monthly dividend of $0.11 per ordinary share with respect to each of October, November and December 2012.
• On October 17, 2012, completed the issuance of $250 million of one-year and $450 million of three-year term notes secured by servicing advance receivables at a weighted average interest spread over LIBOR of 1.55%. The proceeds were used to repay $600 million in term notes and to reduce borrowing on variable funding notes with a weighted average interest spread of 2.93%.

“I am pleased with the execution of our first follow-on equity offering and our recently completed term note issuance which confirm our belief that both debt and equity investors appreciate the quality of our assets and the exceptional value that HLSS represents” said Chairman William Erbey.

“We are pleased with our results for the quarter which exceeded our guidance primarily because lower than expected prepayments reduced amortization” said President John Van Vlack. “Following the deferral of modifications due to testing for HAMP 2 eligibility and reduced payoff collections with the quarter ending on a Sunday, we are seeing increased loan modifications and payoff collections in October. Accordingly, we expect to see a rebound in the prepayment rate in the fourth quarter. Our growth outlook remains strong, as Ocwen will have over $120 billion of servicing assets available for purchase once it completes the announced acquisition of Homeward planned for the fourth quarter.”

For more information on prior releases and SEC Filings, please refer to the “Shareholders” section of our website at www.hlss.com.

Home Loan Servicing Solutions (HLSS) is an internally-managed owner of non-agency mortgage servicing assets with historically stable valuations and cash flows.  HLSS’ assets are predominately mortgage servicing advances that, along with the related servicing rights, are over-collateralized 30 times by 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. Forward-looking statements are not guarantees of future performance, and involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially. Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to, the following: general economic and market conditions, prevailing interest rates, governmental regulations and policies, availability of adequate and timely sources of liquidity, our ability to maintain our PFIC status, real estate market conditions and other risks detailed in HLSS’ reports and filings with the Securities and Exchange Commission. The forward looking statements speak only as of the date they are made and should not be relied upon. HLSS’ undertakes no obligation to update or revise the forward-looking statements.

The following table presents our condensed consolidated results of operations in accordance with U.S. 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 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 September 30, 2012:	Condensed Consolidated Results (GAAP)	Adjustments	Management Reporting (Non-GAAP)
Revenue
Servicing fee revenue	$ —	$27,689	$27,689
Interest income – notes receivable – Rights to MSRs	14,017	(14,017)	—
Professional services	669	—	669
Interest income – other	146	—	146
Total revenue	14,832	13,672	28,504
Operating expenses
Compensation and benefits	1,257	—	1,257
Servicing expense	—	10,633	10,633
Amortization of MSRs	—	3,039	3,039
General and administrative expenses	679	—	679
Total operating expenses	1,936	13,672	15,608
Income from operations	$12,896	$ —	$12,896

 

HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(UNAUDITED)
	Three months		Nine months
For the periods ended September 30,	2012	2011	2012	2011
Revenue
Interest income – notes receivable – Rights to MSRs	$14,017	$ —	$27,542	$ —
Interest income – other	146	—	283	—
Total interest income	14,163	—	27,825	—
Other revenue	669	—	1,664	—
Total revenue	14,832	—	29,489	—
Operating expenses
Compensation and benefits	1,257	—	2,682	—
General and administrative expenses	679	38	1,625	82
Total operating expenses	1,936	38	4,307	82
Income (loss) from operations	12,896	(38)	25,182	(82)
Other expense
Interest expense	6,252	—	12,507	—
Other expense	6,252	—	12,507	—
Income (loss) before income taxes	6,644	(38)	12,675	(82)
Income tax expense	72	—	149	—
Net income (loss)	$6,572	$(38)	$12,526	$(82)
Earnings (loss) per share
Basic	$0.37	$(1.90)	$1.04	$(4.08)
Diluted	$0.37	$(1.90)	$1.04	$(4.08)
Weighted average ordinary shares outstanding
Basic	17,581,593	20,000	12,008,394	20,000
Diluted	17,581,593	20,000	12,008,394	20,000
Dividends declared per share	$0.34	$0.00	$0.94	$0.00

 

HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(UNAUDITED)
	September 30,	December 31,
	2012	2011
Assets
Cash	$33,750	$283
Match funded advances	1,446,091	—
Notes receivable – Rights to MSRs	177,730	—
Other assets	45,334	2,860
Total assets	$1,702,905	$3,143
Liabilities and Equity
Liabilities
Match funded liabilities	$1,250,912	$ —
Dividends payable	3,058	—
Other liabilities	30,948	3,134
Total liabilities	1,284,918	3,134
Equity
Equity – Ordinary shares, $.01 par value; 200,000,000 and 5,000,000 shares authorized; 30,584,718 and 20,000 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively	$306	$ —
Additional paid-in capital	415,155	300
Retained earnings (accumulated deficit)	3,889	(291)
Accumulated other comprehensive income (loss)	(1,363)	—
Total equity	417,987	9
Total liabilities and equity	$1,702,905	$3,143

 

CONTACT: James E. Lauter

Senior Vice President &

Chief Financial Officer

T: (561) 682-7561

E: [email protected]