Walter Investment’s EPS of $1.53 beats estimates by $0.55

Misses on revenue, but servicing sector sees growth of 35%

Walter Investment Management Corp. (WAC) reported net income of $17.4 million, or $0.45 per diluted share, for the first quarter, compared to net income of $27.7 million, or $0.73 per diluted share, in the first quarter of 2013.

Core earnings for the first quarter were $58.0 million after taxes, or $1.53 per diluted share, compared to the prior year quarter's core earnings of $58.9 million, or $1.57 per diluted share.

Total revenue for the first quarter was $369.9 million, as compared to $314.5 million in the same quarter last year. Revenue missed expectations by $5.98 million.

The year-over-year increase in revenue reflects a $35.8 million increase in net servicing revenue and fees, an increase of $25.6 million in net gain on sales of loans in the originations segment and a $19.6 million decline to the fair value gains on reverse loans and related HMBS obligations.

"First quarter results reflected strong earnings growth in the servicing segment, predominantly driven by the higher volume of units serviced as compared to the prior year period. Servicing results also reflected a decrease in the value of the company's MSRs as noted above. The company's originations segment delivered solid results and margins from its consumer lending channel," the company's earnings press release stated.

The company highlighted the performance of its business segments:

  • The servicing segment generated revenue of $169.4 million in the first quarter, up 35% over the first quarter of 2013, principally reflecting the significant increase in UPB serviced over the past year and a benefit of approximately $13.1 million related to the settlement of amounts associated with a servicing contract.
  • The originations segment generated revenue of $109.2 million in the first quarter, driven primarily by the consumer lending channel, compared to revenue of $135.8 million in the fourth quarter of 2013.
  • The reverse mortgage segment generated revenue of $27.9 million for the quarter. The segment reported core loss before income taxes of $2.8 million as compared to revenues of $50.9 million, expenses of $38.8 million, core earnings before income taxes of $18.4 million and AEBITDA of $19.5 million for the first quarter of 2013. Funded origination volumes in the segment declined 75% as compared to the first quarter of 2013 and 57% as compared to the fourth quarter of 2013 

"The level of regulatory oversight has increased over the past year, impacting the sector as transaction flow has slowed while various regulatory agencies and market participants discuss process, standards and best practices related to the industry," the company said in its release. "We believe this process is necessary and positive for the sector as there is significant alignment and benefit to come from a clear set of standards for transactions and that the implementation of best practices will benefit all participants and the consumer."