Urban Has “Nice” Impact on Knight Q1 Earnings

The performance of Urban Financial Group had a nice impact on Knight Captial Group’s profitability during the first quarter according to company executives of the Wall Street firm that acquired Urban last year.

Tom Joyce, CEO of Knight Capital and Steve Bisgay, Knight senior managing director and CFO outlined the company gains, which amounted to $30.5 million or $0.33 per diluted share, including those attributable to Urban, in its quarterly earnings call last week. In addition to company performance, Joyce publicly announced Urban’s Ginnie Mae issuance approval under the Home Equity Conversion Mortgage-backed Securities Program. With approval, he said, Urban began securitizing reverse mortgages in late March.

The issuance leads Knight to expect that its balance sheet will continue to grow as a result.

“For this quarter our loans, or total inventory, was about $200 million of loans,” said Steve Bisgay, Knight Capital senior managing director and CFO. “With that said, 90% of those loans were sold in the forward market, so predominantly sold in advance, but there was some balance sheet increase overall. And I would expect it will continue to have some balance sheet growth in that regard as well.”

With regard to the Ginnie Mae issuance, Bigsay said he expects securitizations will happen at least once a month. “As far as this quarter was concerned, we did one towards, or two small securitizations towards the latter part of March. [It] did have some financial benefit of course, and we would expect that we would see a similar size of an impact going forward, perhaps a little bit bigger.”

Getting the Ginnie Mae approval provides “an opportunity to capture more of the spread overall,” said Joyce.  As far as moving into any other areas of the mortgage market, it doesn’t look like it will happen in the near future.

“We definitely have lots of eggs in the reverse basket, and not in other parts of the mortgage securitization market at this point,” said Joyce.

Urban was the sixth largest reverse mortgage lender in 2010 and has become one of the top five lenders in 2011 according to Reverse Market Insight data.

Written by Elizabeth Ecker

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