UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 7, 2013

 

 

NATIONSTAR MORTGAGE HOLDINGS INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-35449   45-2156869

(State of

Incorporation)

 

(Commission

File Number)

  (I.R.S. Employer
Identification Number)

350 Highland Drive

Lewisville, Texas 75067

(Address of principal executive offices)

(469) 549-2000

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 2.02 Results of Operations and Financial Condition.

On March 7, 2013, Nationstar Mortgage Holdings Inc. announced certain information regarding our results of operations and financial condition for the fourth quarter and full year ended December 31, 2012. A copy of this press release is attached to this Form 8-K as Exhibit 99.1 and incorporated herein by reference. This press release contains certain disclosures about Adjusted EBITDA, which is considered a non-GAAP performance measure. Our management believes that the use of Adjusted EBITDA provides a key performance metric useful for evaluating operating performance and assessing the profitability of our core business.

The information furnished pursuant to this Item 2.02 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 7.01 Regulation FD Disclosure.

Nationstar Mortgage Holdings Inc. will host a conference call for investors and analysts at 10:00 a.m. (ET) on March 7, 2013. A copy of the fourth quarter and full year 2012 earnings presentation that will be used during the conference call is attached to this Form 8-K as Exhibit 99.2 and incorporated herein by reference.

The information furnished pursuant to this Item 7.01 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit
Number

  

Description

99.1    Press release of Nationstar Mortgage Holdings Inc., dated March 7, 2013
99.2    Fourth Quarter and Full Year 2012 Earnings Presentation of Nationstar Mortgage Holdings Inc., dated March 7, 2013

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

        Nationstar Mortgage Holdings Inc.
Date: March 7, 2013     By:   /s/ David Hisey
      David Hisey
      Executive Vice President and Chief Financial Officer

EXHIBIT INDEX

 

Exhibit
Number

  

Description

99.1    Press release of Nationstar Mortgage Holdings Inc., dated March 7, 2013
99.2    Fourth Quarter and Full Year 2012 Earnings Presentation of Nationstar Mortgage Holdings Inc., dated March 7, 2013

Exhibit 99.1

 

LOGO   FOR IMMEDIATE RELEASE

Contact: Marshall Murphy

(469) 549-3005

NATIONSTAR MORTGAGE ANNOUNCES FOURTH QUARTER AND FULL YEAR 2012 FINANCIAL RESULTS

HIGHLIGHTS FOR FOURTH QUARTER 2012

 

  •  

Record net income of $64 million, or $0.71 per share

 

  •  

Ending servicing portfolio UPB of $208 billion; Feb’13 UPB over $300 billion

 

  •  

Increased servicing segment profitability

 

  •  

Third consecutive quarter of record originations volume and application pipeline

 

  •  

Solutionstar initiative to expand fee-based services offering

HIGHLIGHTS FOR FULL YEAR 2012

 

  •  

Record net income of $205 million, or $2.40 per share

 

  •  

Servicing portfolio growth of 94%, including Aurora acquisition

 

  •  

Originations of $7.9 billion, growth of 132%

 

  •  

Top 3 performing IPO with 121% increase in shareholder value

 

  •  

Return on equity of 40%

Lewisville, TX (March 7, 2013) – Nationstar Mortgage Holdings Inc. (NYSE:NSM) (“Nationstar”), a leading residential mortgage services company, today reported that quarterly net income grew 16% sequentially to $63.8 million, or $0.71 per share, for the fourth quarter 2012 compared to $55.1 million, or $0.61 per share, in the third quarter 2012 and 328% year-over-year versus $14.9 million in the fourth quarter 2011, or $0.21 per share. Net income for the full year 2012 increased 882% to $205.3 million, or $2.40 per share, from $20.9 million in 2011, or $0.30 per share.

On a Non-GAAP basis, adjusted EBITDA (“AEBITDA”) for operating segments grew 26% to $155.0 million, or $1.72 per share, for the current quarter versus $123.0 million, or $1.37 per share, in the third quarter 2012. Full year 2012 AEBITDA increased 236% to $456.4 million, or $5.34 per share, from $136.0 million, or $1.94 per share, in 2011. In the current quarter AEBITDA margin was 47%.

Nationstar’s revenue grew 17% to $332.6 million in the fourth quarter from $284.9 million in the prior quarter and was up 180% from $118.6 million in the fourth quarter of 2011. Full year 2012 revenue increased 161% to $984.3 million from $377.8 million in 2011. Pre-tax income from operating segments for the fourth quarter increased 17% to a $96.6 million, or $1.07 per share, up from $82.7 million, or $0.92 per share, in the third quarter of 2012 and was up 324% from $22.8 million, or $0.33 per share, in the fourth quarter of 2011. Full year 2012 pre-tax income from operating segments was a $297.1 million, up 549% from $45.8 million in 2011. In the current quarter, pre-tax income margin from operating segments was 30%.

Nationstar’s servicing portfolio, as measured by unpaid principal balance (“UPB”), increased 5% to end the fourth quarter at $208 billion compared to the prior quarter ending balance of $198 billion. 2012 ending UPB was up 94% over 2011 ending balance of $107 billion.

“2012 was a very successful and important year for Nationstar, and we have made great strides in building one of the leading residential mortgage services companies in the United States,” said Jay Bray, Chief Executive Officer of Nationstar. “Each quarter this year, we consistently achieved meaningful sequential growth in revenue and earnings while delivering high returns to our shareholders. We invested in infrastructure and built capacity in preparation for our landmark servicing portfolio acquisitions, Aurora and Bank of America. We continue to organically grow servicing with a continued focus on portfolio recapture and expansion of our builder and other origination channels. Our Solutionstar initiative is expanding our fee-based services offering across the entire mortgage lifecycle. We look forward to further growth in 2013 with a rigorous focus on delivering value to our shareholders. We remain focused on providing homeownership solutions to our customers and best-in-class servicing performance for investors.”

Chief Financial Officer David Hisey said, “Our strong financial results reflect our continued focus on increasing profitably as we capitalize on the many growth opportunities in front of us. Servicing profitability is a high priority for us, as reflected in the increase in servicing profit and margins in the fourth quarter. Origination margins remained near historical highs as we continued to grow volumes in multiple channels. We raised additional capital at lower costs to support our capital-light growth strategy and drive shareholder returns. In 2013 we will continue to focus on profitable growth across all of our business segments. Within servicing, we will look to drive down cost per loan, delinquencies, and advance financing costs as we scale the platform over time. We will also pursue fee-based services acquisitions that meet our return thresholds.”

Business Segments

Servicing

Servicing fee income before fair value adjustments increased 9% to $174.6 million in fourth quarter 2012 compared to $159.9 million in the prior quarter. Servicing fee income before fair value adjustments was $535.8 million in 2012, up 91% compared to 2011. Total servicing fee income of $145.4 million in the fourth quarter was up 2% quarter-over-quarter. Full year total servicing fee income was $462.0 million, up 94% compared to 2011.

Nationstar added over 550,000 new customers in 2012, resulting in over 1.1 million total customers at year-end. The average portfolio UPB for the fourth quarter was $203 billion, a 4% increase over the prior quarter average of $195 billion. The average portfolio for the full year 2012 was $157 billion, up 84% from 2011.

The fair value of mortgage servicing rights decreased in the current quarter by $25.4 million, or $0.28 per share pre-tax, versus a decrease in value of $22.4 million, or $0.25 per share, in the prior quarter. The current quarter decrease was comprised of $24.3 million in portfolio runoff and $1.2 million in fair-value mark to market adjustments.

Servicing pre-tax income increased 171% to $14.9 million from $5.5 million in the prior quarter and 10% compared to $13.6 million in the year-ago quarter. Servicing pre-tax margin was 9% in the current quarter, and servicing pre-tax income as a percentage of UPB was 3 basis points, an increase from the 1 basis point level in the prior quarter. Full year 2012 servicing pre-tax income was a $35.4 million, up 60% from 2011.

Servicing pre-tax income in the current quarter includes other income of $15.6 million from the Rescap contract termination, mostly offset by $13.2 million in other expense from the loss on an equity method investment (NREIS). Nationstar wrote off its minority investment in NREIS and has made the determination that Solutionstar will be the focus for the build out of settlement, processing, and asset management services.

Servicing AEBITDA increased 59% in the current quarter to $66.9 million compared to $42.1 million in the third quarter 2012 and was up 88% from $35.6 million in the fourth quarter of 2011. Servicing AEBITDA margin was 42% in the current quarter, and servicing AEBITDA as a percentage of UPB was 13 basis points, an increase from the 9 basis point level in the prior quarter. Full year 2012 servicing AEBITDA was $181.2 million, up 69% from 2011.

In December 2012, Nationstar closed on a $13 billion GNMA forward portfolio. Nationstar has executed on flow agreements that are expected to produce $15 billion in annual volume. Nationstar expects flow servicing of $25-50 billion in annual potential as the program grows with additional clients.

 

2

Nationstar’s 60 plus day delinquency rate increased to 15.3% of UPB, up from 15.1% in the third quarter. This slight increase is related to fourth-quarter boardings of higher delinquency portfolios.

The Solutionstar business’ REO unit managed the sale of over 2,600 homes in Q4 2012. Solutionstar plans to significantly expand the REO management business in 2013, as REO properties under management are expected to significantly increase with the closing of the private-label MSR portfolio acquisitions from Bank of America.

Origination

Origination revenue increased 28% to $173.1 million in fourth quarter 2012 on a 72% quarterly increase in origination volume to $3.1 billion in fundings. Full year origination revenue was $486.9 million, up 294% from 2011. This was primarily due to the significant increase in origination volume – up 132% year-over-year – to $7.9 billion in 2012 total fundings. Wide spreads between the primary and secondary markets also supported the increase in revenues over prior periods.

Excluding the newly launched correspondent channel, origination revenue as a percentage of funded volume was 682 basis points, with total origination revenue including correspondent at 562 basis points. Of the $3.1 billion in fundings, 82% were from the consumer direct/builder/wholesale channels, and 18% were from the new correspondent channel.

As a result of the favorable market environment, origination pre-tax income grew 6% to a $81.7 million, versus $77.1 million in the prior quarter and 788% compared to $9.2 million in the year-ago quarter. Origination pre-tax income margin was 47% in the current quarter. Full year 2012 origination pre-tax income was a $261.7 million, up 1,004% from 2011.

Origination AEBITDA was up 9% over the previous quarter and nearly 653% year-over-year to $88.1 million. Origination AEBITDA margin was 51% in the current quarter. Full year 2012 origination AEBITDA was $275.2 million, up 866% from 2011. Expenses were higher in the quarter due to increased staffing and volume-related costs. The total application pipeline grew 20% from the prior quarter to $6.6 billion, and locked applications grew 14% to $5.0 billion.

Subsequent Events

Servicing: In January 2013, Nationstar announced that it had signed a definitive agreement to acquire approximately $215 billion in servicing UPB and certain other assets from Bank of America, resulting in a pro-forma portfolio UPB of $423 billion with over 2.5 million customers when completed. In February 2013, Nationstar announced it had closed the purchase of approximately $97 billion in servicing UPB as a part of the Bank of America transaction, resulting in a servicing portfolio over $300 billion in UPB. Nationstar expects to close on the remaining Bank of America private label securitization UPB and other asset purchases as necessary third-party approvals are received in Q1-Q2 2013. Excluding the remaining Bank of America servicing, Nationstar’s current servicing pipeline is approximately $300 billion.

Solutionstar: In February 2013, Nationstar also announced the acquisition of Equifax Settlement Services (“ESS”), a leading provider of appraisal, title and closing services that serves a broad array of blue chip clients, including the largest financial institutions in the United States. Nationstar is rebranding the acquired entity as “Solutionstar Settlement Services.” ESS had over $65 million in revenue in 2012. In March 2013, Solutionstar is launching the HomeSearch.com platform, providing an online real estate marketplace for home buyers, sellers and investors to connect and conveniently complete sale transactions.

Financing: In January 2013, Nationstar announced the pricing of $300 million in asset-backed term notes with a weighted average fixed interest rate of 1.46% and a weighted average term of 3.0 years. The notes replaced $300 million in existing Agency servicing advance facilities that carried a weighted average floating rate of Libor plus 2.86%, or 3.10% in total, resulting in a reduction in rate of 1.65% as of January 24, 2013. Additionally, the effective advance rate of the new facility is approximately 94%, an increase over the effective advance rate on the facilities being replaced. Nationstar is developing a programmatic Term Asset-Backed Security issuance program which will allow it to efficiently finance current and future acquisitions of Agency and non-Agency servicing advance assets.

In February 2013 Nationstar announced the pricing of $400 million aggregate principal amount of 6.500% Senior Notes due 2021. The 6.500% note rate on the February 2013 issuance is lower than the financing cost of previous senior note pricings of 7.875% in September 2012 and 9.625% in April 2012.

 

3

Adjusted EBITDA (“AEBITDA”)

This disclaimer applies to every usage of “Adjusted EBITDA” or “AEBITDA” in this presentation. Adjusted EBITDA is a key performance metric used by management in evaluating the performance of our segments. Adjusted EBITDA represents our Operating Segments’ income (loss), and excludes income and expenses that relate to the financing of our senior notes, depreciable (or amortizable) asset base of the business, income taxes, and exit costs from our restructuring and certain non-cash items. Adjusted EBITDA also excludes results from our legacy asset portfolio and certain securitization trusts that were consolidated upon adoption of the accounting guidance eliminating the concept of a qualifying special purpose entity (“QSPE”).

Conference Call Webcast and Investor Presentation

Chief Executive Officer, Jay Bray, and Chief Financial Officer, David Hisey, will host a conference call for investors and analysts to discuss Nationstar’s fourth quarter and full year 2012 results and other general business matters at 10:00 a.m. (ET) on Thursday, March 7, 2013. To listen to the event live or in an archive which will be available for 14 days, visit Nationstar’s website at http://investors.nationstarholdings.com . The conference call will also be accessible by dialing 800-320-2978, or 617-614-4923 internationally. Please use the participant passcode 61330875 to access the live conference call. An investor presentation will also be available at http://investors.nationstarholdings.com .

 

4

NATIONSTAR MORTGAGE HOLDINGS INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(dollars and shares in thousands, except per share data)

 

     Three months ended     Year ended December, 31  
     December 31,
2012 		    September 30,
2012 		    December 31,
2011 		    2012     2011  

Revenues

          

Servicing fee income

   $ 145,496      $ 142,482      $ 67,775      $ 462,495      $ 233,411   

Other fee income

     12,070        3,129        15,205        34,656        35,294   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fee income

     157,566        145,611        82,980        497,151        268,705   

Gain on mortgage loans held for sale

     175,048        139,259        35,576        487,164        109,136   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     332,614        284,870        118,556        984,315        377,841   

Total expenses and impairments

     200,268        154,828        86,466        582,045        306,183   

Other income (expense)

          

Interest income

     30,406        16,564        15,556        71,586        66,802   

Interest expense

     (71,400 )      (65,015 )      (28,446 )      (197,308 )      (105,375 ) 

Loss on interest rate swaps and caps

     708        (1,077 )      298        (994 )      298   

Fair value changes in ABS securitizations

     —          —          (5,470 )      —          (12,389 ) 

Contract termination

     15,600        —          —          15,600        —     

Loss on equity method investment

     (13,244 )      (733 )      864        (14,571 )      (107 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense)

     (37,930 )      (50,261 )      (17,198 )      (125,687 )      (50,771 ) 

Income before taxes

     94,416        79,781        14,892        276,583        20,887   

Income tax expense

     30,657        24,714        —          71,296        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     63,759        55,067        14,892        205,287        20,887   

Other comprehensive income, net of tax

          

Change in value of designated cash flow hedges

     —          —          —          —          —     

Reclassification adjustments for gain (loss)

     —          423        —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 63,759      $ 55,490      $ 14,892      $ 205,287      $ 20,887   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

          

Basic earnings per share

   $ 0.72      $ 0.62      $ 0.21      $ 2.41      $ 0.30   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per share

   $ 0.71      $ 0.61      $ 0.21      $ 2.40      $ 0.30   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares:

          

Basic

     89,173        89,168        70,000        85,328        70,000   

Dilutive effect of stock awards

     711        597        —          196        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     89,884        89,765        70,000        85,524        70,000   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Dividends declared per share

   $ —        $ —        $ —        $ —        $ —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

5

NATIONSTAR MORTGAGE HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

 

     December 31,
2012 		     September 30,
2012 		     December 31,
2011 		 
     (unaudited)      (unaudited)      (audited)  

Assets

        

Cash and cash equivalents

   $ 152,649       $ 430,815       $ 62,445   

Restricted cash

     393,190         258,858         71,499   

Accounts receivable

     3,043,606         2,852,985         562,300   

Mortgage loans held for sale

     1,480,537         703,214         458,626   

Mortgage loans held for investment, subject to nonrecourse debt — Legacy Assets

     238,907         238,178         243,480   

Reverse mortgage interests

     750,273         452,886         —     

Receivables from affiliates

     12,604         13,301         4,609   

Mortgage servicing rights —  fair value

     635,860         592,692         251,050   

Mortgage servicing rights —  amortized cost

     10,973         8,036         —     

Property and equipment, net

     75,026         48,714         24,073   

Real estate owned (REO), net

     10,467         3,193         3,668   

Other assets

     318,705         338,359         106,181   
  

 

 

    

 

 

    

 

 

 

Total assets

   $ 7,122,797       $ 5,941,231       $ 1,787,931   
  

 

 

    

 

 

    

 

 

 

Liabilities and equity

        

Notes payable

   $ 3,601,586       $ 2,532,316       $ 873,179   

Unsecured senior notes

     1,062,635         1,062,423         280,199   

Payables and accrued liabilities

     628,085         762,268         183,789   

Derivative financial instruments

     20,026         37,835         12,370   

Mortgage servicing liabilities

     83,238         82,313         —     

Nonrecourse debt — Legacy Assets

     100,620         101,898         112,490   

Excess spread financing (at fair value)

     288,089         255,484         44,595   

Participating interest financing

     580,836         415,448         —     
  

 

 

    

 

 

    

 

 

 

Total liabilities

     6,365,115         5,249,985         1,506,622   
  

 

 

    

 

 

    

 

 

 

Total equity

     757,682         691,246         281,309   
  

 

 

    

 

 

    

 

 

 

Total liabilities and equity

   $ 7,122,797       $ 5,941,231       $ 1,787,931   
  

 

 

    

 

 

    

 

 

 

 

6

SERVICING SEGMENT — SERVICING FEE INCOME DETAIL

(dollars in thousands)

 

     Three months ended     Year ended December 31,  
     December 31,
2012 		    September 30,
2012 		    December 31,
2011 		    2012     2011  
     (unaudited)     (unaudited)     (unaudited)              

Total servicing fee income before MSR fair value adjustments

   $ 174,645      $ 159,941      $ 80,707      $ 535,807        280,454   

Fair value adjustments on excess spread financing

     (5,633 )      2,213        (3,060 )      (10,684 )      (3,060 ) 

Reverse mortgage servicing amortization/accretion

     1,844        2,652        —          5,120        —     

Fair value adjustments on MSR

          

Due to changes in valuation

     (1,169 )      8,355        1,304        5,500        (14,207 ) 

Other changes in fair value

     (24,263 )      (30,785 )      (9,547 )      (73,742 )      (24,793 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Servicing fee income

     145,424        142,376        69,404        462,001        238,394   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other fee income

     14,078        7,190        9,967        35,133        17,189   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fee income

   $ 159,502      $ 149,566      $ 79,371      $ 497,134      $ 255,583   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

AEBITDA RECONCILIATION

(dollars in thousands)

 

     Three months ended     Year ended December 31,  
       December 31,
2012 		    September 30,
2012 		    December 31,
2011 		    2012     2011  

Net Income/(Loss) from Operating Segments to Adjusted EBITDA Reconciliation

          

Net income

   $ 63,759      $ 55,067      $ 14,892      $ 205,287      $ 20,887   

Plus:

          

Net (income)/loss from Legacy Portfolio and Other

     2,189        2,874        7,912        20,483        24,892   

Income tax expense

     30,657        24,714        —          71,296        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss) from Operating Segments

     96,605        82,655        22,804        297,066        45,779   

Adjust for:

          

Interest expense from unsecured senior notes

     24,165        17,656        7,842        63,879        30,464   

Depreciation and amortization

     3,107        2,772        1,208        8,880        3,395   

Change in fair value of mortgage servicing rights

     25,432        22,430        8,243        68,242        39,000   

Amortization/accretion of reverse mortgage servicing

     (1,844 )      (2,652 )      —          (5,120 )      —     

Restructuring charges

     —          —          1,836        —          1,836   

Share-based compensation

     2,675        2,623        2,612        14,045        14,764   

Fair value changes on excess spread financing

     5,633        (2,213 )      3,060        10,684        3,060   

Fair value changes in derivatives

     (813 )      (236 )      (298 )      (1,237 )      (298 ) 

Ineffective portion of cash flow hedge

     —          —          —          —          (2,032 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 154,960      $ 123,035      $ 47,307      $ 456,439      $ 135,968   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA per share

   $ 1.72      $ 1.37      $ 0.68      $ 5.34      $ 1.94   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share

   $ 0.71      $ 0.61      $ 0.21      $ 2.40      $ 0.30   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

7

SEGMENT INCOME STATEMENT & AEBITDA RECONCILIATION

(dollars in thousands)

FOR QUARTER ENDED December 31, 2012

 

     Servicing     Origination     Operating     Legacy     Eliminations     Total  

Revenues

            

Servicing fee income

   $ 145,424      $ —         $ 145,424      $ 502      $ (430 )    $ 145,496   

Other fee income

     14,078        (1,956 )      12,122        (52 )      —           12,070   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fee income

     159,502        (1,956 )      157,546        450        (430 )      157,566   

Gain on mortgage loans held for sale

     —           175,048        175,048        —           —           175,048   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     159,502        173,092        332,594        450        (430 )      332,614   

Total expenses and impairments

     109,975        86,808        196,783        3,485        —           200,268   

Other income (expense)

            

Interest income

     19,983        5,707        25,690        4,286        430        30,406   

Interest expense

     (57,764 )      (10,301 )      (68,065 )      (3,335 )      —           (71,400 ) 

Loss on interest rate swaps and caps

     813        —           813        (105 )      —           708   

Contract termination

     15,600        —           15,600        —           —           15,600   

Loss on equity method investment

     (13,244 )      —           (13,244 )      —           —           (13,244 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense)

     (34,612 )      (4,594 )      (39,206 )      846        430        (37,930 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before taxes

   $ 14,915      $ 81,690      $ 96,605      $ (2,189 )    $ —         $ 94,416   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense on corporate notes

     19,959        4,206        24,165        —          —          24,165   

MSR valuation adjustment

     25,432        —          25,432        —          —          25,432   

Excess spread adjustment

     5,633        —          5,633        —          —          5,633   

Amortization of mortgage servicing obligations

     (1,844 )      —          (1,844 )      —          —          (1,844 ) 

Depreciation & amortization

     2,020        1,087        3,107        155        —          3,262   

Stock-based compensation

     1,576        1,099        2,675        2        —          2,677   

Fair value adjustment for derivatives

     (813 )      —          (813 )      105        —          (708 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 66,878      $ 88,082      $ 154,960      $ (1,927 )    $ —         $ 153,033   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average shares outstanding

     89,884        89,884        89,884        89,884        89,884        89,884   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share — Diluted

             $ 0.71   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pre-Tax Income per share

   $ 0.17      $ 0.91      $ 1.07      $ (0.02 )    $ —         $ 1.05   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

AEBITDA per share

   $ 0.74      $ 0.98      $ 1.72      $ (0.02 )    $ —         $ 1.70   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

8

SEGMENT AEBITDA RECONCILIATION

(dollars in thousands)

FOR QUARTER ENDED September 30, 2012

 

       Servicing     Origination     Operating     Legacy     Total  

Adjusted EBITDA to Net Income/(Loss) Reconciliation

          

Adjusted EBITDA

   $ 42,121      $ 80,914      $ 123,035      $ (1,347 )    $ 121,688   

Interest expense on corporate notes

     (15,707 )      (1,949 )      (17,656 )      —          (17,656 ) 

MSR valuation adjustment

     (22,430 )      —          (22,430 )      —          (22,430 ) 

Excess spread adjustment

     2,213        —          2,213        —          2,213   

Amortization of mortgage servicing obligations

     2,652        —          2,652        —          2,652   

Depreciation & amortization

     (2,006 )      (766 )      (2,772 )      (201 )      (2,973 ) 

Stock-based compensation

     (1,570 )      (1,053 )      (2,623 )      (13 )      (2,636 ) 

Fair value adjustment for derivatives

     236        —          236        (1,313 )      (1,077 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pre-Tax Income/Loss

     5,509        77,146        82,655        (2,874 )      79,781   

Income Tax

             (24,714 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Income/Loss

           $ 55,067   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average shares outstanding

     89,765        89,765        89,765        89,765        89,765   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share—Diluted

           $ 0.61   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pre-Tax Income per share

   $ 0.06      $ 0.86      $ 0.92      $ (0.03 )    $ 0.89   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

AEBITDA per share

   $ 0.47      $ 0.90      $ 1.37      $ (0.02 )    $ 1.36   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

FOR QUARTER ENDED December 31, 2011

 

       Servicing     Origination     Operating     Legacy     Total  

Adjusted EBITDA to Net Income/(Loss) Reconciliation

          

Adjusted EBITDA

   $ 35,594      $ 11,714      $ 47,307      $ (7,609 )    $ 39,698   

Interest expense on corporate notes

     (7,842 )      —          (7,842 )      —          (7,842 ) 

MSR valuation adjustment

     (8,243 )      —          (8,243 )      —          (8,243 ) 

Excess spread adjustment

     (3,060 )      —          (3,060 )      —          (3,060 ) 

Restructuring charges

     —          (1,836 )      (1,836 )      —          (1,836 ) 

Depreciation & amortization

     (796 )      (412 )      (1,208 )      (303 )      (1,511 ) 

Stock-based compensation

     (2,351 )      (261 )      (2,612 )      —          (2,612 ) 

Fair value adjustment for derivatives

     298        —          298        —          298   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pre-Tax Income/Loss

     13,600        9,205        22,804        (7,912 )      14,892   

Income Tax

             —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Income/Loss

           $ 14,892   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average shares outstanding

     70,000        70,000        70,000        70,000        70,000   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share—Diluted

           $ 0.21   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pre-Tax Income per share

   $ 0.19      $ 0.13      $ 0.33      $ (0.11 )    $ 0.21   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

AEBITDA per share

   $ 0.51      $ 0.17      $ 0.68      $ (0.11 )    $ 0.57   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

9

FOR YEAR ENDED December 31, 2012

 

       Servicing     Origination     Operating     Legacy     Total  

Adjusted EBITDA to Net Income/(Loss) Reconciliation

          

Adjusted EBITDA

     181,228        275,212        456,440        (18,215 )      438,225   

Interest expense on corporate notes

     (57,724 )      (6,155 )      (63,879 )      —           (63,879 ) 

MSR valuation adjustment

     (68,242 )      —           (68,242 )      —           (68,242 ) 

Excess spread adjustment

     (10,684 )      —           (10,684 )      —           (10,684 ) 

Amortization of mortgage servicing obligations

     5,120        —           5,120        —           5,120   

Depreciation & amortization

     (6,124 )      (2,756 )      (8,880 )      (740 )      (9,620 ) 

Stock-based compensation

     (9,449 )      (4,597 )      (14,045 )      703        (13,342 ) 

Fair value adjustment for derivatives

     1,237        —           1,237        (2,231 )      (994 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pre-Tax Income/Loss

     35,362        261,704        297,066        (20,483 )      276,583   

Income Tax

             (71,296 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Income/Loss

           $ 205,287   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average shares outstanding

     85,524        85,524        85,524        85,524        85,524   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share—Diluted

           $ 2.40   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pre-Tax Income per share

   $ 0.41      $ 3.06      $ 3.47      $ (0.24 )    $ 3.23   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

AEBITDA per share

   $ 2.12      $ 3.22      $ 5.34      $ (0.22 )    $ 5.12   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

FOR YEAR ENDED December 31, 2011

 

       Servicing     Origination     Operating     Legacy     Total  

Adjusted EBITDA to Net Income/(Loss) Reconciliation

          

Adjusted EBITDA

   $ 107,491      $ 28,477      $ 135,968      $ (24,175 )    $ 111,793   

Interest expense on corporate notes

     (30,339 )      (125 )      (30,464 )      —           (30,464 ) 

MSR valuation adjustment

     (39,000 )      —           (39,000 )      —           (39,000 ) 

Excess spread adjustment

     (3,060 )      —           (3,060 )      —           (3,060 ) 

Restructuring Charges

     —           (1,836 )      (1,836 )      —           (1,836 ) 

Depreciation & amortization

     (2,089 )      (1,306 )      (3,395 )      (667 )      (4,062 ) 

Stock-based compensation

     (13,249 )      (1,515 )      (14,764 )      (50 )      (14,814 ) 

Hedge ineffectiveness

     2,032        —           2,032        —           2,032   

Fair value adjustment for derivatives

     298        —           298        —           298   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pre-Tax Income/Loss

     22,084        23,695        45,779        (24,892 )      20,887   

Income Tax

             —      
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

           $ 20,887   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average shares outstanding

     70,000        70,000        70,000        70,000        70,000   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share—Diluted

           $ 0.30   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pre-Tax Income per share

   $ 0.32      $ 0.34      $ 0.65      $ (0.35 )    $ 0.30   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

AEBITDA per share

   $ 1.54      $ 0.41      $ 1.94      $ (0.35 )    $ 1.60   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

10

About Nationstar Mortgage Holdings Inc.

Based in Lewisville, Texas, Nationstar offers servicing, origination, and real estate services to financial institutions and consumers. Nationstar is one of the largest servicers in the United States, with a servicing portfolio of over 1.8 million residential mortgages in excess of $300 billion in unpaid principal balance as of February 1, 2013. Nationstar’s integrated loan origination business mitigates servicing portfolio run-off and improves credit performance for loan investors. Our Solutionstar business unit offers asset management, settlement, and processing services. In 2012, Nationstar was a top 3 performing IPO, as measured by share price appreciation, for global IPOs with a deal size of at least $100 million and excluding closed-end funds and SPACs, out of 203 deals total. Nationstar currently employs over 4,900 people. Additional corporate information is available at www.nationstarholdings.com .

Forward Looking Statements

Any statements in this release that are not historical or current facts are forward-looking statements. Forward-looking statements include, without limitation, statements concerning plans, objectives, goals, projections, strategies, future events or performance, and underlying assumptions and other statements, which are not statements of historical facts. Forward-looking statements convey Nationstar’s current expectations or forecasts of future events. When used in this release, the words “anticipate,” “appears,” “believe,” “foresee,” “intend,” “should,” “expect,” “estimate,” “target,” “project,” “plan,” “may,” “could,” “will,” “are likely” and similar expressions are intended to identify forward-looking statements. These statements involve predictions of our future financial condition, performance, plans and strategies, and are thus dependent on a number of factors including, without limitation, assumptions and data that may be imprecise or incorrect. Specific factors that may impact performance or other predictions of future actions have, in many but not all cases, been identified in connection with specific forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Nationstar’s actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Certain of these risks and uncertainties are described in the “Risk Factors” section of Nationstar Mortgage LLC’s Form 10-K for the year ended December 31, 2011, Nationstar’s Form 10-Q for the quarter ended September 30, 2012, and other reports filed with the SEC, which are available at the SEC’s website at http://www.sec.gov . We caution you not to place undue reliance on these forward-looking statements that speak only as of the date they were made. Unless required by law, Nationstar undertakes no obligation to publicly update or revise any forward-looking statements to reflect circumstances or events after the date of this release.

# # #

 

11

Q4 and FY 2012 Earnings Presentation
Three Months and Twelve Months Ended December 31, 2012
March 7, 2013
Exhibit 99.2

Forward Looking Statements
1
Any statements in this presentation that are not historical or current facts are forward-looking statements.  Forward-looking statements include,
without limitation, statements concerning plans, objectives, goals, projections, strategies, future events or performance, and underlying
assumptions and other statements, which are not statements of historical facts. Forward-looking statements convey Nationstar Mortgage
Holdings Inc.’s (“Nationstar”) current expectations or forecasts of future events. When used in this presentation, the words “anticipate,”
“appears,” “believe,” “foresee,” “intend,” “should,” “expect,” “estimate,” “target,” “project,” “plan,” “may,” “could,” “will,” “are likely” and similar
expressions are intended to identify forward-looking statements. These statements involve predictions of our future financial condition,
performance, plans and strategies, and are thus dependent on a number of factors including, without limitation, assumptions and data that may
be imprecise or incorrect. Specific factors that may impact performance or other predictions of future actions have, in many but not all cases,
been identified in connection with specific forward-looking statements. Forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause Nationstar’s actual results, performance or achievements to be materially different from any
future results, performances or achievements expressed or implied by the forward-looking statements. Certain of these risks and uncertainties
are described in the “Risk Factors” section of Nationstar Mortgage LLC’s Form 10-K for the year ended December 31, 2011, Nationstar
Mortgage Holdings Inc.’s Form 10-Q for the quarter ended September 30, 2012, and other reports filed with the SEC, which are available at
the SEC’s website at http://www.sec.gov. We caution you not to place undue reliance on these forward-looking statements that speak only as of
the date they were made. Unless required by law, Nationstar undertakes no obligation to publicly update or revise any forward-looking
statements to reflect circumstances or events after the date of this presentation.

2012:  Transformative Year for Nationstar
2
IPO on March 7, 2012; top 3 ranked IPO
(1)
Record EPS for Q4’12 and FY ’12 of $0.71 and $2.40, respectively
Significant  YoY increases in key metrics
Revenue +161%
Net Income +882%
Servicing portfolio +94% to $208B
Record origination volume +132% to $7.9B
($mm)
Pre-Tax Income Growth
(2)
AEBITDA Growth
(2,3)
($mm)
By share price appreciation; Renaissance Capital  - “Global IPO Market: 2012 Annual Review”; Global statistics include IPOs with a deal size of at least $100 million and exclude closed-end funds and SPACs; 203 deals total
For Operating segments; excludes Legacy segment
Please see Appendix for information on AEBITDA and reconciliations beginning on page 18
1)
2)
3)

1 Year IPO Anniversary:  Significant Value Creation
3
Then (IPO)
Now
$1.3B
$3.7B
52%
80%
$14.00
$41.06
0.6M
1.6M
+185%
+54%
+193%
+167%
Increase
Substantial increase in key metrics
Share price value up more than 2.9x since IPO;  significant value driven by performance and expectations
Diversified shareholder base and improved liquidity
Strong ROE
40%
Market capitalization
(1)
: 
Institutional Ownership
(2)
:
Excludes Fortress
Share price
(1)
: 
Average trading volume (Qtr)
: 
Return on Equity (thru 12/31): 
1)
As of March 6, 2013
2)
As of January 31, 2013

4
The Future of Our Business
Market dislocation as banks
focus on core customers
Bulk and flow servicing sales
Non-branch origination
opportunities
Non-core and default
servicing
Near term
Banks assess capital and
look for process partners
Mortgage services factory
with plug-in capability
Complete outsourcing
Origination/fulfillment
Continued servicing transfers
Intermediate term
Capital returns to the real
estate market
Investors require best-in-
class asset managers 
Agency, non-agency, whole
loan, distressed assets
Credit risk management
essential
Longer term
Market
trends
Services
Well-positioned to capitalize on market trends
Solutionstar

Customer-Centric Model
5
Preserve homeownership and increase mortgage affordability
Loan Modifications & HARP Originations
(units)
Cumulative Total
Performance-driven culture emphasizes customer service and
loan performance
Reduced over 60 days delinquency rate by 28% since ‘09
Single point of contact, a cornerstone of our success for 15
years
Completed 51,000 total workouts in ’12 (+25%)
~29,000 modifications in ‘12
100,000 modifications since ‘10
18,000+ HARP loans in ‘12 (+232%)
Servicing portfolio remains HARP rich
Customers
helped since
2010
45,000
127,000
0
25,000
50,000
75,000
100,000
125,000
150,000
175,000
2010
2011
2012
80,000

6
Focused on growth AND profitability
Landmark BofA
Transaction
Strong Pipeline
(1)
Cost Reduction
Initiatives
Jan/Feb:
Announced acquisition of BofA MSRs
Q1/Q2:
PLS third-party approvals & closing
Bulk pipeline:
$300B
Flow servicing target:
$25-50B annual
Flow agreements in place:
$15B annual
Total transfer potential:
Cost per loan:
Automation and strategic sourcing
Delinquencies:
Reduced Aurora 60+ DQ rate by 250 bps
Advances:
$300MM GSE advance securitization executed in Jan.
Non-agency securitization in Q2
Closed Fannie, Freddie, Ginnie portfolios
$2 trillion+
1)
The identified opportunities referenced above are not currently serviced by the Company and there can be no assurance that these potential servicing transactions will ultimately be consummated, or will
remain the same size. Notwithstanding the above, it is possible that these potential servicing transactions, if consummated, could result in a partial or total loss of any invested capital.
Servicing:  Opportunities in ‘13 and Beyond

Originations:  Organic Growth for Servicing in ’13 and Beyond
7
Profitable:  complements and enhances servicing segment
1)
KB Home FY 2012 10K; Nationstar Mortgage did not originate mortgages for 100% of KB Home’s home sales in 2012
JV with KB Home
KB Home sold $1.5B of homes in
FY ’12
(1)
Improve capture rates;  expense
sharing
Additional ventures with
homebuilders
Source of purchase money volume
Expand volume across channels to
organically grow servicing
Acquire servicing at attractive returns
Source of purchase money volume
Highest margin channel; integrated
with servicing platform
Helps borrowers with lower monthly
payments
Continued focus on HARP &
recapture opportunities to serve
customer 
Recapture
Builder
Wholesale/Correspondent
’13/’14 Objectives:  Increase Capacity, Productivity and Volume

Solutionstar:  Meet Evolving Needs of Mortgage Industry
8
Broad array of services & technology offerings spanning entire mortgage lifecycle
Acquired Equifax Settlement Services on 2/7
Appraisal, title and closing
Large bank clients
Launch HomeSearch.com expected in Q1’13
Real estate marketplace
Accelerates sales and improves pricing
Evaluate strategic acquisitions
Key events in ‘13
Strategy
Support originators and servicers
Improve customer experience with seamless integration
Manage REO property sales
Completed 2,000 REO sales since Jan. 1
Future increase with BofA PLS portfolio
REO Sales
Brokerage
Valuation
Services
Title
Closing
Recovery Services
Bankruptcy Services
Foreclosure
Services
Claims Processing

Doubled size of servicing book
Portfolio of $300B + as of Feb ’ 13, including closing of BofA agency MSRs
Successful integration of Aurora portfolio
Segment pretax income increased 60% YoY to $35MM
Servicing
Results:
Substantial
Growth;
Building
to
Full
Scale
1)
Pro forma balance represents ending Q4’12 UPB balance plus $215B BofA servicing portfolio announced on January 7, 2013.  Balances may change prior to closing due to normal portfolio run-off        
9
($bn of UPB)
Servicing Growth
(1)
As portfolio achieves critical mass, earnings potential realized

Originations Results:  Robust Market Conditions
10
Record
pretax income for Q4’12 and FY’12
Record
Q4 volume of $3.1B; application pipeline growth to $6.6B
Gain on sale margin, ex-correspondent, modest decrease (682 bps in Q4 vs 744 bps in Q3),
remains elevated
Origination Volume
($bn of UPB)
Profitably creating servicing assets as we grow volume and channels
($mm)
Cash –
Points, Fees, Gain on Sale
$102
Pipeline Value
(1)
56
Subtotal Cash / Near Cash Revenue
$158
Servicing Asset
(Cash value realized over time)
21
Other
(6)
Total Originations Revenue
$173
Originations Volume
$3,081
Excluding Correspondent
$2,513
Locked Pipeline
$4,992
Application Pipeline
$6,643
Q4 ‘12 Economics
Cash / near
cash is 91% of
total revenue
1)
Includes mark-to-market on loans held for sale and derivative/hedges
2)
As of December 31, 2012
$1.5
$2.8
$3.4
$7.9
$16.0+
0
2
4
6
8
10
12
14
16
18
2009
2010
2011
2012
2013E
(2)
(2)

Financial Highlights:  Q4 and FY ‘12
11
Annual Revenue and AEBITDA
(1,2)
Quarterly Revenue and AEBITDA
(1,2)
1)
2) Please see Appendix for information on AEBITDA and reconciliations beginning on page 18
Margin (%)
23%
29%
24%
36%
40%
47%
50%
47%
43%
46%
Q4’12
Increase (QoQ)
FY ’12
Increase (YoY)
$456MM
$155MM
$205MM
$2.40
$64MM
$0.71
26%
16%
16%
236%
882%
700%
AEBITDA
(1)
Net Income
EPS
AEBITDA
(1)
Net Income
EPS
($MM)
($MM)
$0
$50
$100
$150
$200
$250
$300
$350
Q4 '11
Q1 '12
Q2 '12
Q3 '12
Q4 '12
AEBITDA
Revenue
$0
$200
$400
$600
$800
$1,000
$1,200
2008
2009
2010
2011
2012
AEBITDA
Revenue
$22
$65
$136
$456
$97
$984
$378
$267
$46
$156
2) For Operating segments; excludes Legacy segment
$47
$77
$101
$123
$155
$119
$164
$203
$285
$333

Q3'12
($ millions except where noted)
Servicing
Originations
Operating
Total
(2)
Total
AEBITDA
(1)
$66.9
$88.1
$155.0
$153.0
$121.7
margin%
42%
51%
47%
Pre-Tax Income
$14.9
$81.7
$96.6
$94.4
$79.8
Income Tax Expense
($30.7)
($24.7)
Net Income - GAAP   
$63.8
$55.1
Per Share Data:
Pre-Tax Income
$1.08
$1.05
$0.89
Net Income - GAAP
$0.71
$0.61
AEBITDA
(1)
$0.74
$0.98
$1.72
$1.70
$1.36
Average shares outstanding (mm)
89.9
       
89.9
             
89.9
         
89.9
     
89.8
     
Q4 '12
Consolidated Performance
1) Please see Appendix for information on AEBITDA and reconciliations beginning on page 18
2) Includes Legacy Segment
12
Strong sequential quarter for Company
Total GAAP Net Income of $64MM 
GAAP EPS of $0.71
Operating Segment AEBITDA of $155MM
(1)

Appendix
13

Focused on Profitable Growth
1)      Revenue, AEBITDA and pre-tax income from operating segments    
2) Please see Appendix for information on AEBITDA and reconciliations beginning on page 18
14
Pre-Tax Income Growth ( $mm )
(1)
UPB Growth ( $bn )
Revenue Growth ( $mm )
(1)
AEBITDA Growth ( $mm )
(1)(2)
Margin (%)
23%
29%
24%
36%
7%
10%
6%
30%
12%
46%

Balance Sheet
Low leverage with Corporate Debt to AEBITA of 1.7x
(1)
; net of cash, 1.5x
Significant capital levers in place for additional investment
Capacity remains for additional corporate debt
1)
Corporate Debt to Q4 run-rate AEBITDA
2)
Includes receivables from affiliates
3)
Includes servicing advance facilities and origination warehouse facilities
4)
Includes
derivative
financial
instruments
and
mortgage
servicing
liabilities
15
$ millions
Q4 '12
Q3 '12
$ millions
Q4 '12
Q3 '12
Assets:
Liabilities:
Cash and cash equivalents
$153
$431
Notes payable
(3)
$3,602
$2,532
Restricted cash
393
259
Senior unsecured notes
1,063
1,062
Accounts
receivable
(2)
3,056
2,866
Payables and accrued liabilities
628
762
Mortgage loans held for sale
1,481
703
Nonrecourse
debt
-
Legacy
assets
101
102
Mortgage
loans
held
for
investment
-
Legacy
239
238
Excess spread financing at fair value
288
255
Mortgage
servicing
rights
-
fair
value
636
593
Participating interest financing
581
415
Participating interest in reverse mortgages
750
453
Other liabilities
(4)
103
120
Mortgage
servicing
rights
-
amortized
cost
11
8
Total Liabilities
$6,365
$5,250
Property and equipment, net
75
49
Other assets
329
341
Shareholders Equity
$758
$691
Total Assets
$7,123
$5,941
Total Liabilities and Shareholders Equity
$7,123
$5,941

($ in millions)
For the three month period ending
Variance
Last twelve months
Q4'12
Q3'12
Q2'12
Q1'12
Q4'11
QoQ
YoY
Q4'12
Q3'12
Fee income
$158
$146
$100
$94
$83
8%
126%
$497
$411
Gain on sale
175
      
139
      
102
      
71
       
36
       
26%
363%
487
     
348
     
Total revenue
$333
$285
$202
$165
$119
17%
204%
$984
$759
Expenses and impairments
(200)
     
(155)
     
(130)
     
(97)
      
(86)
      
29%
87%
(582)
    
(468)
    
Other income (expense)
(38)
      
(50)
      
(23)
      
(15)
      
(18)
      
105%
291%
(126)
    
(94)
      
Pre-tax income
95
       
80
       
49
       
53
       
15
       
18%
NM
277
     
197
     
Income taxes
(31)
      
(25)
      
(13)
      
(3)
        
-
      
(71)
      
(41)
      
Net income
$64
$55
$36
$50
$15
53%
NM
$205
156
     
Adjusted AEBITDA
(1)
$155
$123
$101
$77
$47
26%
284%
$456
$348
EPS
(2)
$0.71
$0.61
$0.41
$0.67
$0.21
17%
NM
$2.40
$1.90
Pro forma EPS
(2,3)
$0.71
$0.64
$0.44
$0.44
$0.21
11%
NM
$2.23
$1.73
AEBITDA per share
(2)
$1.72
$1.37
$1.18
$1.04
$0.67
26%
157%
$5.31
$4.27
Five-Quarter Income Statement Summary
Successfully, consistently scaled the business
Increasing profitability with growth
Sequential improvement in pro forma EPS and AEBITDA per share
1)
Please see page 18 for AEBITDA reconciliations; excludes Legacy segment
2)
Calculated using a fully-diluted average share count for Q4’12  Q3 ’12, Q2 ’12 and Q1’12 of 89.9,  89.8, 89.5 and 89.2 million shares, respectively, and 70.0 million shares for 2011 periods
3)
Please see Appendix for information on pro forma net income and EPS reconciliation
16

Servicing Fee Detail
(1)
17
Fee income before fair value adjustment increased by 9% to $175 million
MSR fair value adjustments include portfolio run-off and mark-to-market adjustments
1)
Servicing segment only
($ in thousands)
Q4 '12
Q3 '12
Q4 '11
Total servicing fee income before MSR fair value adjustments
174,645
$       
159,941
$        
80,707
$       
Fair value adjustments on excess spread financing
(5,633)
2,213
(3,060)
Reverse mortgage servicing liability amortization/accretion
1,844
2,652
-
MSR changes in fair value:
Due to changes in valuation inputs or assumptions
(1,169)
8,355
1,304
Other changes in fair value (portfolio run-off)
(24,263)
(30,785)
(9,547)
Servicing fee income
145,424
142,376
69,404
Other fee income
14,078
7,190
9,967
Total servicing fee income
159,502
$      
149,566
$        
79,371
$      

AEBITDA Reconciliation
18
1)
Calculated using a fully-diluted average share count of 89.9 million shares
For Quarter Ended December 31, 2012
($ in millions)
Servicing
Originations
Operating
Legacy
Total
Adjusted EBITDA
$66.9
$88.1
$155.0
($1.9)
$153.0
Interest expense on corporate notes
(20.0)
   
(4.2)
           
(24.2)
        
-
     
(24.2)
   
MSR valuation adjustment
(25.4)
   
-
           
(25.4)
        
-
     
(25.4)
   
Excess spread adjustment
(5.6)
     
-
           
(5.6)
          
-
     
(5.6)
     
Amortization of mort. serv. obligations
1.8
      
-
           
1.8
           
-
     
1.8
      
Depreciation & amortization
(2.0)
     
(1.1)
           
(3.1)
          
(0.2)
    
(3.3)
     
Stock-based compensation
(1.6)
     
(1.1)
           
(2.7)
          
(0.0)
    
(2.7)
     
Fair value adjustment for derivatives
0.8
      
-
           
0.8
           
(0.1)
    
0.7
      
Pre-Tax Income
$14.9
$81.7
$96.6
($2.2)
$94.4
Income Tax
(30.7)
   
Net Income
$63.8
Earnings per share
(1)
$0.71
AEBITDA per share
(1)
$0.74
$0.98
$1.72
($0.02)
$1.70
Pre-Tax Income per share
(1)
$0.17
$0.91
$1.07
($0.02)
$1.05
Average shares outstanding
89.9
    
89.9
          
89.9
         
89.9
   
89.9
    

AEBITDA Reconciliation
19
1)
Calculated using a fully-diluted average share count of 89.8 million shares
For Quarter Ended September 30, 2012
($ in millions)
Servicing
Originations
Operating
Legacy
Total
Adjusted EBITDA
$42.1
$80.9
$123.0
($1.3)
$121.7
Interest expense on corporate notes
(15.7)
   
(1.9)
           
(17.7)
        
-
     
(17.7)
   
MSR valuation adjustment
(22.4)
   
-
           
(22.4)
        
-
     
(22.4)
   
Excess spread adjustment
2.2
      
-
           
2.2
           
-
     
2.2
      
Amortization of mort. serv. obligations
2.7
      
-
           
2.7
           
-
     
2.7
      
Depreciation & amortization
(2.0)
     
(0.8)
           
(2.8)
          
(0.2)
    
(3.0)
     
Stock-based compensation
(1.6)
     
(1.1)
           
(2.6)
          
0.0
     
(2.6)
     
Fair value adjustment for derivatives
0.2
      
-
           
0.2
           
(1.3)
    
(1.1)
     
Pre-Tax Income
$5.5
$77.1
$82.7
($2.9)
$79.8
Income Tax
(24.7)
   
Net Income
$55.1
Earnings per share
(1)
$0.61
AEBITDA per share
(1)
$0.47
$0.90
$1.37
($0.02)
$1.36
Pre-Tax Income per share
(1)
$0.06
$0.86
$0.92
($0.03)
$0.89
(continued)

AEBITDA Reconciliation
(continued)
20
1)
Calculated using a fully-diluted average share count of 70.0 million shares
For Quarter Ended December 31, 2011
($ in millions)
Servicing
Originations
Operating
Legacy
Total
Adjusted EBITDA
$35.6
$11.7
$47.3
($7.6)
$39.7
Interest expense on corporate notes
(7.8)
     
-
           
(7.8)
          
-
     
(7.8)
     
MSR valuation adjustment
(8.2)
     
-
           
(8.2)
          
-
     
(8.2)
     
Excess spread adjustment
(3.1)
     
-
           
(3.1)
          
-
     
(3.1)
     
Amortization of mort. serv. obligations
-
      
(1.8)
           
(1.8)
          
-
     
(1.8)
     
Depreciation & amortization
(0.8)
     
(0.4)
           
(1.2)
          
(0.3)
    
(1.5)
     
Stock-based compensation
(2.4)
     
(0.3)
           
(2.6)
          
-
     
(2.6)
     
Fair value adjustment for derivatives
0.3
      
-
           
0.3
           
-
     
0.3
      
Pre-Tax Income
$13.6
$9.2
$22.8
($7.9)
$14.9
Income Tax
-
     
Net Income
$14.9
Earnings per share
(1)
$0.21
AEBITDA per share
(1)
$0.51
$0.17
$0.68
($0.11)
$0.57
Pre-Tax Income per share
(1)
$0.19
$0.13
$0.33
($0.11)
$0.21

AEBITDA Reconciliations
21
($ in thousands)
Net Income (loss)
$      (157,610)
$        (80,877)
$          (9,914)
$          20,887
$          63,759
$         205,287
Adjust for:
Net loss from Legacy Portfolio and Other
164,738
97,263
24,806
24,892
2,189
20,483
Interest expense from unsecured senior notes
-
-
24,628
30,464
24,165
63,879
Depreciation and amortization
1,172
1,542
1,873
3,395
3,107
8,880
Change in fair value of MSRs
11,701
27,915
6,043
39,000
25,432
68,242
Amortization of mortgage servicing obligations
-
-
-
-
(1,844) 
(5,120) 
Fair value changes on excess spread financing
-
-
-
3,060
5,633
10,684
Share-based compensation
1,633
579
8,999
14,764
2,675
14,045
Exit costs
-
-
-
1,836
-
-
Fair value changes on interest rate swaps
-
-
9,801
(298)
(813)
(1,237)
Ineffective portion of cash flow hedge
-
-
(930)
(2,032)
-
-
Income tax expense
-
-
-
-
30,657        
71,296        
Adjusted EBITDA
(1)
$          21,634
$          46,422
$          65,306
$        135,968
$        154,960
$        456,439
For Operating Segments; calculated using a fully-diluted average share count of 70.0 million shares for FY 2008 – 2011, 74.6 million shares in Q1 ‘12, 89.5 million shares in Q2 ’12, 89.8 million shares in Q3 ’12, 89.9
million shares in Q4’12
1)
FY 2008
FY 2009
FY 2010
FY 2011
Q4 ’12
FY 2012

Pro Forma Per Share Reconciliations
22
For Quarters Ending September 30, June 30 and March 31, 2012
($ in millions)
Q3 '12
Q2 '12
Net Income
$55.1
$36.3
$50.2
Income Tax
24.7
12.8
3.1
Pre-Tax Income
79.8
49.1
53.3
ResCap and transaction-related expenses
3.9
4.1
-
Pro-forma Pre-Tax Income
$83.7
$53.2
$53.3
Income Tax -
Q3 & Q2 '12 Rate
(25.9)
(13.9)
(13.9)
Pro-Forma Income
$57.8
$39.3
$39.4
Pro-forma Per Share:
$0.64
$0.44
$0.44
Average shares outstanding
89.8
89.5
89.5
Q1 '12

Endnotes
Pro-forma
Earnings
Per
Share
(“Pro-forma
EPS”)
This
disclaimer
applies
to
every
usage
of
pro-forma
EPS
in
this
presentation.
Pro-forma
EPS
is
a
metric
that
is
used
by
management to exclude certain non-recurring items in an attempt to provide a better earnings per share comparison to prior periods.  Pro-forma Q3 ‘12 EPS excludes certain expenses
related
to
ResCap
and
other
transactions.
These
expenses
include
the
advance
hiring
of
servicing
staff,
recruiting
expenses
and
travel
and
licensing
expenses.
Pro-forma
Q2
‘12
EPS
excluded certain expenses incurred in advance of the closing of the Aurora transaction.
Pro-forma
AEBITDA
Per
Share
This
disclaimer
applies
to
every
usage
of
pro-forma
AEBITDA
per
share
in
this
presentation. Pro-forma
AEBITDA
per
share
is
a
metric
that
is
used
by management to exclude certain non-recurring items in an attempt to provide a better earnings per share comparison to prior periods.  Pro-forma Q3 ‘12 AEBITDA per share
excludes certain expenses related to ResCap and other transactions.  These expenses include the advance hiring of servicing staff, recruiting expenses and travel and licensing expenses.
Pro-forma Q2 ‘12 AEBITDA per share excluded certain expenses incurred in advance of the closing of the Aurora transaction.
Adjusted
EBITDA
(“AEBITDA”)
This
disclaimer
applies
to
every
usage
of
“Adjusted
EBITDA”
or
“AEBITDA”
in
this
presentation.
Adjusted
EBITDA
is
a
key
performance
metric
used
by management in evaluating the performance of our segments.  Adjusted EBITDA represents our Operating Segments' income (loss), and excludes income and expenses that relate to
the financing of our senior notes, depreciable (or amortizable) asset base of the business, income taxes (if any), exit costs from our restructuring and certain non-cash items. Adjusted
EBITDA
also
excludes
results
from
our
legacy
asset
portfolio
and
certain
securitization
trusts
that
were
consolidated
upon
adoption
of
the
accounting
guidance
eliminating
the
concept
of a qualifying special purpose entity ("QSPE“).
23