Walter Investment Management Corp. Announces Third Quarter Financial Results

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 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 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