Financial Stock News Alert: Walter Investment Administration Corp (NYSE:WAC)

On Tuesday, Walter Investment Administration Corp (NYSE:WAC) closed at $1.62 with trading volume of 2.08M shares. The company fell -40.74% with market capitalization of 56.92M. During the year the lowest point at which share traded is $1.50 and hit the highest point at $8.51.

Walter Investment Management Corp. (WAC) today stated a GAAP net loss for the year ended December 31, 2016 of $529.20M, or ($14.71) per share, as contrast to a GAAP net loss of $263.20M, or ($7.00) per share for the year ended December 31, 2015. The 2016 net loss includes goodwill and intangible assets impairment charges of $202.30M after tax, or ($5.62) per share, and non-cash charges of $140.70M after tax, or ($3.91) per share, resulting from fair value changes because of changes in valuation inputs and other assumptions. Adjusted EBITDA (“AEBITDA”) for the year was $322.90M and Adjusted Loss was $81.40M after tax, or ($2.26) per share. The goodwill impairment charges incurred in the current year within the Servicing segment were driven by lower than predictable operating results because of elevated expense levels in Servicing and lack of new business in ARM. The intangible assets impairment occurred in the Reverse Mortgage segment and was driven by the shift in planned direction and reduced profitability expectations for the business.

GAAP net loss for the quarter ended December 31, 2016 was $22.20M, or ($0.61) per share, as contrast to a GAAP net loss of $117.10M, or ($3.16) per share for the quarter ended December 31, 2015. The 2016 net loss includes goodwill impairment charges of $8.20M after tax, or ($0.22) per share, and non-cash benefit of $97.0M after tax, or $2.67 per share, resulting mainly from fair value changes because of changes in valuation inputs and other assumptions. AEBITDA for the current quarter was $43.30M and Adjusted Loss was $40.10M after tax, or ($1.10) per share. Factors contributing to the fourth quarter adjusted loss and AEBITDA include a reduction in servicing revenue and higher G&A expenses offset by lower salaries and benefits costs.

“The performance we saw during fourth quarter 2016 and full-year 2016 is not acceptable to myself, our leadership team, our associates and the Walter Board of Directors. Since joining Walter in September, my focus has been on putting together a plan to reduce our cost structure and improve efficiency, with a strong emphasis on performance administration and controls. We also restructured our leadership team by adding key leaders to drive the way forward. I am excited to be a part of this organization and we are ready to face the challenges ahead, confident that the changes underway will put Walter in the best position to succeed but it will take time to implement and realize the benefits of these changes,” concluded Mr. Renzi.

Full Year and Fourth Quarter 2016 Financial and Operating Overview:

Total revenue for the year ended December 31, 2016 was $1.0B, a decrease of $278.50M as contrast to the year ended December 31, 2015, mainly because of $153.30M lower net servicing revenue and fees, $44.40M lower net gains on sale of loans and $28.70M in lower interest income on loans. The decrease in net servicing revenue resulted from $78.50M higher fair value losses on mortgage servicing rights mainly because of changes in interest rates and forward projections of the interest rate curve during the first half of 2016, $47.40M lower incentive and performance fees driven by lower real estate administration fees and lower HAMP fees and $28.50M lower servicing fees mainly because of a combination of runoff of our third-party servicing portfolio, a shift in the portfolio from servicing to subservicing resulting from the sale of servicing rights to NRM, and an overall increase in delinquencies. Total expenses for the year ended December 31, 2016 were $1.80B, a boost of $80.40M as contrast to the year ended December 31, 2015, reflecting $118.70M of higher goodwill and intangible assets impairment charges in the Servicing and Reverse Mortgage segments and $45.70M in higher general and administrative expenses due in part to additional costs to support efficiency and technology-related programs, higher severance and consulting costs associated with process improvement programs, and elevated advance provisions and other costs resulting from operational challenges within default servicing, partially offset by savings from cost reduction efforts. These higher expenses were also offset in part by $56.50M in lower salaries and benefits mainly because of a decrease in compensation, benefits, commissions and incentives resulting from a lower average headcount driven by site closures and reorganization and lower originations volume, and $17.8 million in lower interest expense. Cash and cash equivalents for the year ended December 31, 2016 was $224.60M, a boost of $21.80M as contrast to the prior year. This increase was mainly driven by the proceeds from the sale of servicing rights, partially offset by lower warehouse borrowing and raised payments for HMBS related obligations.

Total revenue for the fourth quarter of 2016 was $444.10M, a boost of $112.60M as contrast to the prior year quarter, mainly because of $122.0M higher net servicing revenue and fees partially offset by $10.50M lower fair value gains on reverse loans and related HMBS obligations. The increase in net servicing revenue resulted from $168.60M higher fair value gains on mortgage servicing rights mainly because of a boost in interest rates and forward projections of the interest rate curve. Offsetting this increase was $28.10M of lower servicing fees mainly because of a combination of runoff of our third-party servicing portfolio, a shift in the portfolio from servicing to subservicing resulting from the sale of servicing rights to NRM, and an overall increase in delinquencies, and $11.80M lower incentive and performance fees driven by a change in incentive programs that resulted in a one-time incentive payment in the fourth quarter of 2015. Total expenses for the fourth quarter of 2016 were $417.20M, a decrease of $131.0M as contrast to the prior year quarter, mainly resulting from a $137.90M decrease in goodwill impairment charges.

Fourth Quarter 2016 Segment Results:

Servicing

Our partner, Ditech, serviced 1.90M accounts, with a UPB of $225.80B as of December 31, 2016. During the three months ended December 31, 2016, the Company practiced a net disappearance rate of 16.80%, a boost of 3.50% as contrast to the prior year quarter.

The Servicing segment stated $83.50M of pre-tax income for the fourth quarter of 2016 as contrast to a pre-tax loss of $148.60M in the prior year quarter. During the fourth quarter of 2016, the segment generated revenue of $338.50M, a $118.20M increase as contrast to the fourth quarter of 2015. This increase was mainly the result of $168.60M higher fair value gains on our mortgage servicing rights, partially offset by $28.40M lower servicing fees mainly because of a combination of runoff of our third-party servicing portfolio, a shift in the portfolio from servicing to subservicing resulting from the sale of servicing rights to NRM, and an overall increase in delinquencies, and $11.0M lower incentive and performance fees.

Total expenses for the Servicing segment were $254.0M, a decrease of $115.60M as contrast to the prior year quarter, reflecting a $137.90M decline in goodwill impairment charges and a decrease in salaries and benefits of $11.60M resulting mainly from lower average headcount driven by site closures and reorganization. This was partially offset by $27.40M higher G&A expenses driven by $22.10M higher advance loss provision attributable to additional reserves established on contested foreclosure, collectability of certain non-assessed items and additional reserves on rejected and aged items, and $9.50M in costs related to NRM transactions. In addition, there was $17.60M in higher severance and consulting costs associated with process improvement programs. Current quarter expenses also included $15.0M of interest expense and $10.60M of depreciation and amortization.

The segment stated Adjusted Loss of $47.30M and AEBITDA of $23.10M and a decline of $54.80M and $67.30M respectively, as contrast to the prior year quarter. These declines were mainly because of lower servicing fees and incentive and performance fees coupled with higher G&A expenses.

Originations

Ditech generated total pull-through adjusted locked volume for the fourth quarter of $4.90B. Total pull-through adjusted locked volumes declined $0.60B as contrast to the prior year quarter, mainly because of a decline in the correspondent lending channel. Funded loans in the current quarter totaled $5.30B, a decrease of $0.30B from the prior year quarter, driven by declines in the correspondent lending channel. The combined direct margin for the current quarter was 99 bps, consisting of a weighted average of 171 bps direct margins in the consumer lending channel and 42 bps direct margins in the correspondent channel. The increase in combined direct margin of 36 bps from the prior year quarter resulted mainly from a slight shift in mix from lower margin correspondent channel to higher margin consumer channel. The Originations business delivered a recapture rate of 19% for the current quarter.

The Originations segment stated $21.40M of pre-tax income for the three months ended December 31, 2016, a boost of $9.20M over the prior year quarter. The segment generated revenue of $105.50M in the fourth quarter of 2016, a boost of $2.70M over the prior year quarter. Net gains on sales of loans improved $9.0M as contrast to the prior year quarter, mainly because of strong margins driven by a channel mix shift to the higher margin consumer channel, partially offset by $5.50M lower originations fee income resulted from there having been no closing cost incentives offered in the consumer lending channel in the fourth quarter of 2016.

Expenses for the Originations segment of $84.10M declined $6.50M contrast to the prior year quarter, driven by an $8.0M decrease in salaries and benefits resulting from lower average headcount and a $3.50M decrease in advertising expense. Expenses for the quarter also included $9.30M of interest expense and $2.0M of depreciation and amortization.

The segment generated Adjusted Earnings of $32.40M and AEBITDA of $35.50M for the fourth quarter of 2016, a boost of $16.0M and $15.10M, respectively, as contrast to the prior year quarter, driven by lower G&A and salaries and benefits expenses.

Reverse Mortgage

The Reverse Mortgage business grew its servicing portfolio by 3% since December 31, 2015 to $20.70B of UPB at December 31, 2016. During the year, the business securitized $868.0M of HECM loans.

The Reverse Mortgage segment stated $39.60M of pre-tax loss in the current quarter, as contrast to $30.50M of pre-tax loss in the prior year quarter. The segment generated revenue of $8.50M for the quarter, a decline of $9.60M as contrast to the prior year quarter mainly because of $10.50M of lower net fair value gains on reverse loans and related HMBS obligations mostly resulting from higher interest rates in 2016 as contrast to 2015. Current quarter revenues included $10.0M in net servicing revenue and fees, $2.50M in net fair value losses on reverse loans and related HMBS obligations and $1.0M of other revenues. Total expenses for the fourth quarter of $47.50M were consistent with the prior year quarter.

The segment stated an Adjusted Loss of $15.20M and AEBITDA of ($13.4) million for the fourth quarter of 2016, a decline of $3.90M and $4.40M, respectively, as contrast to the prior year period, related to increases in the curtailment liability mainly because of revisions to assumptions for this estimate.

Other Non-Reportable Segment

The Other Non-Reportable segment stated $38.50M of pre-tax loss for the fourth quarter of 2016, an improvement of $2.90M as contrast to the prior year quarter, mainly because of a decline in expenses offset by lower gains in the current quarter. The segment stated nominal revenue in both the current and prior year quarters. Total expenses of $40.50M in the current quarter reduced $9.20M as contrast to the prior year quarter, driven by non-recurring costs incurred during 2015 related to the Investment Administration business and a lower provision for advances related to the Non-Residual Trusts during 2016.

The Other non-reportable segment had an Adjusted Loss of $34.70M and AEBITDA of ($1.9) million for the fourth quarter of 2016 as contrast to an Adjusted Loss of $33.60M and AEBITDA of ($0.7) million in the fourth quarter of 2015.

Technical Analysis:

The Company has price-to-cash ratio of 0.35 and EPS ratio of -17.32. The company net profit margin is -70.70% and gross profit margin is 0.00%. The stock has shown quarterly performance of -61.97% and a half-year performance stands at -20.59%. The stock price is moving down from its 20 days moving average with -52.21% and isolated negatively from 50 days moving average with -56.28%.

Analyst recommendation for this stock stands at 4.00.

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