Q3 2018 Earnings Conference Call

November 08 2018 | 8:30 AM ET
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Press Release

Sutherland Asset Management Corporation Announces Second Quarter 2018 Results

- Second Quarter Net Income of $0.48 per share of common stock -

- Second Quarter Core Earnings of $0.47 per share of common stock -

- Added $543.5 Million of SBC Loans During Second Quarter 2018 -

- Declared and Paid Second Quarter Dividend of $0.40 Per Share -

Company Release - 8/7/2018 5:36 PM ET

NEW YORK, Aug. 7, 2018 /PRNewswire/ -- Sutherland Asset Management Corporation ("Sutherland" or the "Company") (NYSE: SLD) today reported financial results for the quarter ended June 30, 2018.   

Second Quarter Highlights:

  • Net income of $15.9 million, or $0.48 per share of common stock
  • Core earnings of $15.8 million, or $0.47 per share of common stock
  • Return on Equity of 11.2%
  • Adjusted net book value of $16.95 per share of common stock as of June 30, 2018
  • Originated $352.4 million of small balance commercial ("SBC") loans
  • Originated $48.3 million of loans guaranteed by the U.S. Small Business Administration (the "SBA") under its Section 7(a) loan program
  • Originated $498.6 million of residential mortgage loans
  • Acquired $131.5 million of SBC loans and $11.3 million of SBA loans
  • Completed CLO issuance of $278.3 million of originated transitional loans and sold $217.1 million of senior bonds at a floating rate of LIBOR + 121 basis points

A summary of Sutherland's operating results for the quarter ended June 30, 2018 is presented below. Sutherland reported U.S. GAAP net income for the three months ended June 30, 2018 of $15.9 million, or $0.48 per share of common stock, and Core Earnings (a non-GAAP financial measure) of $15.8 million, or $0.47 per share of common stock.

Thomas Capasse, Chairman and Chief Executive Officer commented, "We are pleased with our financial results. For the second quarter in a row, we achieved our stated goal of an ROE of at least 10%. This reflects continued progress in steadily growing our earnings from our stable small balance commercial origination franchise, combined with alpha from our acquisition business. The results this quarter, in particular, begin to demonstrate the earnings potential of our diversified platform.  Strong loan origination volumes, portfolio performance and favorable pricing on certain investments helped to offset the decline in the joint venture earnings that drove outperformance last quarter.  We believe these results support our strategy of having a multi-pronged platform which provides greater earning diversity compared to single-strategy lenders."

The Company issued a full detailed presentation of its second quarter 2018 results, which can be viewed in the investor relations section at www.sutherlandam.com.

Use of Non-GAAP Financial Information

In addition to the results presented in accordance with U.S. GAAP, this press release includes Core Earnings which is a non-U.S. GAAP financial measure. The Company defines Core Earnings as net income adjusted for unrealized or realized gains (losses) related to certain mortgage backed securities, unrealized gains (losses) related to residential mortgage servicing rights, and one-time non-recurring gains or losses, such as gains or losses on discontinued operations, bargain purchase gains or merger related expenses.

The Company believes that providing investors with this non-U.S. GAAP financial information, in addition to the related U.S. GAAP measures, gives investors greater transparency into the information used by management in its financial and operational decision-making. However, because Core Earnings is an incomplete measure of the Company's financial performance and involves differences from net income computed in accordance with U.S. GAAP, it should be considered along with, but not as an alternative to, the Company's net income computed in accordance with U.S. GAAP as a measure of the Company's financial performance. In addition, because not all companies use identical calculations, the Company's presentation of Core Earnings may not be comparable to other similarly-titled measures of other companies.

The following table reconciles net income computed in accordance with U.S. GAAP to Core Earnings for the three months ended June 30, 2018:





(In Thousands)



Three Months Ended
June 30, 2018

Net Income


$

15,884

Reconciling items:




Unrealized loss on mortgage-backed securities



86

Unrealized (gain) on mortgage servicing rights



(253)

Total reconciling items


$

(167)

Core earnings before income taxes


$

15,717

      Income tax adjustments



64

Core earnings


$

15,781

Webcast and Earnings Conference Call

Management will host a webcast and conference call on Wednesday, August 8, 2018 at 8:30 am ET to provide a general business update and discuss the financial results for the quarter ended June 30, 2018.  The conference call can be accessed by dialing 877-407-0792 (domestic) or 201-689-8263 (international).

The conference call will also be available in the Investor Relations section of the Company's website at www.sutherlandam.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software.  A replay of the call will also be available on the Company's website approximately two hours after the live call through August 22, 2018.  To access the replay, dial 844-512-2921 (domestic) or 412-317-6671 (international). The replay pin number is 13681630.

Safe Harbor Statement

This press release contains statements that constitute "forward-looking statements," as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbor provided by the same. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements; the Company can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from the Company's expectations include, but are not limited to, applicable regulatory changes; general volatility of the capital markets; changes in the Company's investment objectives and business strategy; the availability of financing on acceptable terms or at all; the availability, terms and deployment of capital; the availability of suitable investment opportunities; changes in the interest rates or the general economy; increased rates of default and/or decreased recovery rates on investments; changes in interest rates, interest rate spreads, the yield curve or prepayment rates; changes in prepayments of Company's assets; the degree and nature of competition, including competition for the Company's target assets; and other factors, including those set forth in the Risk Factors section of the Company's most recent Annual Report on Form 10-K filed with the SEC, and other reports filed by the Company with the SEC, copies of which are available on the SEC's website, www.sec.gov. The Company undertakes no obligation to update these statements for revisions or changes after the date of this release, except as required by law.

Contact
Investor Relations
Sutherland Asset Management Corporation
212-257-4666
SutherlandIR@waterfallam.com

Additional information can be found on the Company's website at www.sutherlandam.com.

 

SUTHERLAND ASSET MANAGEMENT CORPORATION

UNAUDITED CONSOLIDATED BALANCE SHEETS


(In Thousands)


June 30, 2018


December 31, 2017

Assets







Cash and cash equivalents


$

105,833


$

63,425

Restricted cash



15,108



11,666

Loans, net (including $34,354 and $188,150 held at fair value)



1,035,330



1,017,920

Loans, held for sale, at fair value



188,752



216,022

Mortgage backed securities, at fair value



50,070



39,922

Loans eligible for repurchase from Ginnie Mae



79,623



95,158

Investment in unconsolidated joint venture



41,598



55,369

Derivative instruments



4,758



4,725

Servicing rights (including $85,554 and $72,295 held at fair value)



111,274



94,038

Receivable from third parties



980



6,756

Other assets



56,948



56,840

Assets of consolidated VIEs



1,122,706



861,662

Total Assets


$

2,812,980


$

2,523,503

Liabilities







Secured borrowings



678,858



631,286

Promissory note



5,524



6,107

Securitized debt obligations of consolidated VIEs, net



795,503



598,148

Convertible notes, net



109,484



108,991

Senior secured notes, net



178,718



138,078

Corporate debt, net



48,172



Guaranteed loan financing



263,920



293,045

Contingent consideration



1,686



10,016

Liabilities for loans eligible for repurchase from Ginnie Mae



79,623



95,158

Derivative instruments



935



282

Dividends payable



13,340



12,289

Accounts payable and other accrued liabilities



72,659



74,636

Total Liabilities


$

2,248,422


$

1,968,036

Stockholders' Equity







Common stock, $0.0001 par value, 500,000,000 shares authorized, 32,051,989 and 31,996,440
shares issued and outstanding, respectively



3



3

Additional paid-in capital



539,457



539,455

Retained earnings (deficit)



5,870



(3,385)

Total Sutherland Asset Management Corporation equity



545,330



536,073

Non-controlling interests



19,228



19,394

Total Stockholders' Equity


$

564,558


$

555,467

Total Liabilities and Stockholders' Equity


$

2,812,980


$

2,523,503

 

 


SUTHERLAND ASSET MANAGEMENT CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME




Three Months Ended June 30, 


Six Months Ended June 30, 


(In Thousands, except share data)


2018


2017


2018


2017


Interest income


$

41,858


$

33,248


$

79,007


$

67,130


Interest expense



(26,407)



(17,230)



(49,071)



(33,673)


Net interest income before provision for loan losses


$

15,451


$

16,018


$

29,936


$

33,457


Provision for loan losses



397



(159)



229



(1,391)


Net interest income after provision for loan losses


$

15,848


$

15,859


$

30,165


$

32,066


Non-interest income














Gains on residential mortgage banking activities, net of variable loan expenses



9,762



10,985



21,496



21,495


Other income



1,826



1,588



3,160



2,429


Income on unconsolidated joint venture



1,503





7,243




Servicing income, net of amortization and impairment of $1,229 and $2,580 
for the three and six months ended June 30, 2018, and $1,511 and $4,276 for
the three and six months ended June 30, 2017, respectively



6,627



5,631



13,037



10,074


  Total non-interest income


$

19,718


$

18,204



44,936



33,998


Non-interest expense














Employee compensation and benefits



(14,272)



(13,451)



(29,592)



(26,915)


Allocated employee compensation and benefits from related party



(1,200)



(1,008)



(2,400)



(2,020)


Professional fees



(2,401)



(2,023)



(5,049)



(4,182)


Management fees – related party



(2,036)



(2,007)



(4,049)



(3,984)


Incentive fees – related party



(269)





(676)




Loan servicing expense



(3,000)



(2,611)



(7,093)



(4,126)


Other operating expenses



(8,916)



(6,206)



(16,927)



(11,736)


  Total non-interest expense


$

(32,094)


$

(27,306)


$

(65,786)


$

(52,963)


Net realized gain on financial instruments



8,620



4,491



20,851



7,456


Net unrealized gain on financial instruments



4,457



974



7,464



2,257


Income before provision for income taxes


$

16,549


$

12,222


$

37,630


$

22,814


Provision for income taxes



(665)



(1,069)



(3,228)



(2,104)


Net income


$

15,884


$

11,153


$

34,402


$

20,710


Less: Net income attributable to non-controlling interest



588



657



1,252



1,358


Net income attributable to Sutherland Asset Management Corporation


$

15,296


$

10,496


$

33,150


$

19,352
















Earnings per common share - basic


$

0.48


$

0.34


$

1.03


$

0.63


Earnings per common share - diluted


$

0.48


$

0.34


$

1.03


$

0.63
















Weighted-average shares outstanding














Basic



32,073,717



30,768,900



32,055,110



30,659,958


Diluted



32,092,750



30,769,332



32,069,499



30,660,175
















Dividends declared per share of common stock


$

0.40


$

0.37


$

0.77


$

0.74


 

 

SUTHERLAND ASSET MANAGEMENT CORPORATION

UNAUDITED SEGMENT REPORTING

FOR THE THREE MONTHS ENDED JUNE 30, 2018








SBA Originations,


Residential







Loan


SBC


Acquisitions,


Mortgage


Corporate-



(In Thousands)


Acquisitions


Originations


and Servicing


Banking


Other


Consolidated

Interest income


$

12,970


$

18,891


$

8,998


$

999


$


$

41,858

Interest expense



(6,277)



(15,320)



(3,972)



(838)





(26,407)

Net interest income before provision for loan losses


$

6,693


$

3,571


$

5,026


$

161


$


$

15,451

Provision for loan losses



80



73



244







397

Net interest income after provision for loan losses


$

6,773


$

3,644


$

5,270


$

161


$


$

15,848

Non-interest income (expense)



















Gains on residential mortgage banking activities, net of
variable loan expenses


$


$


$


$

9,762


$


$

9,762

Other income (loss)



111



1,356



291



68





1,826

Income from unconsolidated joint venture



1,503











1,503

Servicing income



5



330



1,464



4,828





6,627

  Total non-interest income


$

1,619


$

1,686


$

1,755


$

14,658


$


$

19,718

Employee compensation and benefits



(141)



(2,285)



(3,138)



(8,535)



(173)



(14,272)

Allocated employee compensation and benefits from
related party



(120)









(1,080)



(1,200)

Professional fees



(150)



(325)



(524)



(115)



(1,287)



(2,401)

Management fees – related party











(2,036)



(2,036)

Incentive fees – related party











(269)



(269)

Loan servicing expense



(764)



(886)



211



(1,561)





(3,000)

Other operating expenses



(1,998)



(3,287)



(970)



(1,981)



(680)



(8,916)

  Total non-interest income (expense)


$

(3,173)


$

(6,783)


$

(4,421)


$

(12,192)


$

(5,525)


$

(32,094)

Net realized (loss) gain on financial instruments



(52)



3,532



5,140







8,620

Net unrealized gain (loss) on financial instruments



848



4,130



(819)



298





4,457

Net income (loss) before provision for income taxes


$

6,015


$

6,209


$

6,925


$

2,925


$

(5,525)


$

16,549

Total Assets


$

707,943


$

1,296,872


$

489,938


$

298,027


$

20,200


$

2,812,980

 

 

SUTHERLAND ASSET MANAGEMENT CORPORATION

UNAUDITED SEGMENT REPORTING

FOR THE SIX MONTHS ENDED JUNE 30, 2018








SBA Originations,


Residential







Loan


SBC


Acquisitions,


Mortgage


Corporate-



(In Thousands)


Acquisitions


Originations


and Servicing


Banking


Other


Consolidated

Interest income


$

22,655


$

36,751


$

17,713


$

1,888


$


$

79,007

Interest expense



(12,106)



(27,790)



(7,592)



(1,583)





(49,071)

Net interest income before provision for loan losses


$

10,549


$

8,961


$

10,121


$

305


$


$

29,936

Provision for loan losses



(192)



109



312







229

Net interest income after provision for loan losses


$

10,357


$

9,070


$

10,433


$

305


$


$

30,165

Non-interest income



















Gains on residential mortgage banking activities, net of
variable loan expenses


$


$


$


$

21,496


$


$

21,496

Other income



268



2,615



168



109





3,160

Income from unconsolidated joint venture



7,243











7,243

Servicing income



10



582



2,716



9,729





13,037

  Total non-interest income


$

7,521


$

3,197


$

2,884


$

31,334


$


$

44,936

Non-interest expense



















Employee compensation and benefits



(313)



(4,922)



(6,393)



(17,650)



(314)



(29,592)

Allocated employee compensation and benefits from
related party



(240)









(2,160)



(2,400)

Professional fees



(467)



(714)



(1,003)



(224)



(2,641)



(5,049)

Management fees – related party











(4,049)



(4,049)

Incentive fees – related party











(676)



(676)

Loan servicing expense



(1,565)



(1,525)



287



(4,290)





(7,093)

Other operating expenses



(2,816)



(5,967)



(2,080)



(4,681)



(1,383)



(16,927)

  Total non-interest expense


$

(5,401)


$

(13,128)


$

(9,189)


$

(26,845)


$

(11,223)


$

(65,786)

Net realized gain on financial instruments



94



12,231



8,526







20,851

Net unrealized gain (loss) on financial instruments



801



1,763



(286)



5,186





7,464

Income before provision for income taxes


$

13,372


$

13,133


$

12,368


$

9,980


$

(11,223)


$

37,630

Total Assets


$

707,943


$

1,296,872


$

489,938


$

298,027


$

20,200


$

2,812,980

 

 

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SOURCE Sutherland Asset Management Corporation