Saxon Capital, Inc. Announces Second Quarter 2006 Operating Results; Net Income of $8.6 Million, up 23%; Servicing Income of $20.4 Million, up 19%; $4.4 Million of One-Time Expense Items.GLEN ALLEN Glen Allen is the name of several places in the United States of America:
Any member of a Germanic people who lived along the Baltic coast in ancient times and later migrated west as far as the British Isles. The Saxons became pirates in the North Sea during the decline of the Roman empire, and in the early 5th century they spread through Capital, Inc. ("Saxon" or the "Company") (NYSE NYSE See: New York Stock Exchange : SAX), a residential mortgage lending and servicing real estate investment trust (REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). ), today reported net income for the second quarter ended June June: see month. 30, 2006 of $8.6 million, up 23% from the second quarter of 2005. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of were $0.17 compared with $0.14 for the second quarter of 2005, and the net mortgage loan portfolio grew to $6.7 billion at June 30, 2006, an increase of 10% from June 30, 2005. The second quarter net income also included $4.4 million of one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. expense items that reduced diluted earnings per share by nine cents. "Despite a consistently competitive operating environment In computing, an operating environment is the environment in which users run programs, whether in a command line interface, such as in MS-DOS or the Unix shell, or in a graphical user interface, such as in the Macintosh operating system. and a number of one-time expense items, we have continued to make great strides in implementing our business plan. The refinement of our origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real platform has resulted in a cost to produce of 1.92%, the lowest in our operating history. And our premier servicing platform continues to provide us with positive short and long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. growth opportunities, which we are intently focused on capturing," said Michael Michael, archangel Michael (mī`kəl) [Heb.,=who is like God?], archangel prominent in Christian, Jewish, and Muslim traditions. In the Bible and early Jewish literature, Michael is one of the angels of God's presence. L. Sawyer, Chief Executive Officer of Saxon. Financial and Operational Highlights: --Second quarter 2006 net income of $8.6 million, or $0.17 per share diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. , compared to $7.0 million, or $0.14 per share diluted, for the second quarter of 2005 and $26.4 million, or $0.52 per share diluted for the first quarter of 2006. Second quarter 2006 net income excluding one-time expense items was $0.26 per share diluted. --Second quarter 2006 included $4.4 million of one time expense items consisting of a $2.5 million write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of deferred tax assets due to a change in certain tax laws in Texas, a $1.4 million reduction in servicing income due to an accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. to reimburse re·im·burse tr.v. re·im·bursed, re·im·burs·ing, re·im·burs·es 1. To repay (money spent); refund. 2. To pay back or compensate (another party) for money spent or losses incurred. a sponsor of a securitized securitized Of, related to, or being debt securities that are secured with assets. For example, mortgage purchase bonds are secured by mortgages that have been purchased with the bond issue's proceeds. mortgage loan pool, and $0.5 million to provide for the settlement of a previously disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). lawsuit lawsuit: see procedure; tort. . --Second quarter 2006 net cost to produce was 1.92%, compared to 2.84% for the second quarter of 2005 and 2.46% for the first quarter of 2006. --The net mortgage loan portfolio at June 30, 2006 was $6.7 billion, an increase of 10% from June 30, 2005 and an increase of 3% from March 31, 2006. --Second quarter 2006 mortgage loan production was $920.0 million, an increase of 17% from the second quarter of 2005 and an increase of 23% from the first quarter of 2006. --Completed first "conduit conduit /con·du·it/ (kon´doo-it) channel. ileal conduit the surgical anastomosis of the ureters to one end of a detached segment of ileum, the other end being used to form a stoma on the " mortgage purchase of $119.4 million. --Second quarter 2006 cost to service was 17 basis points, compared to 17 basis points for both the second quarter of 2005 and the first quarter of 2006. Financial Results This press release reports Saxon's financial results under generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "). Also presented are non-GAAP financial measures within the meaning of Regulation G promulgated prom·ul·gate tr.v. prom·ul·gat·ed, prom·ul·gat·ing, prom·ul·gates 1. To make known (a decree, for example) by public declaration; announce officially. See Synonyms at announce. 2. by the Securities and Exchange Commission that management believes provide useful information to investors regarding Saxon's financial performance. The non-GAAP measures presented include core net interest income and margin, total net cost to produce, cost to service, securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. net losses on liquidated DAMAGES, LIQUIDATED, contracts. When the parties to a contract stipulate for the payment of a certain sum, as a satisfaction fixed and agreed upon by them, for the not doing of certain things particularly mentioned in the agreement, the sum so fixed upon is called liquidated damages. (q.v. loans, and a Company defined working capital calculation. Additional information about each of these non-GAAP financial measures, including a definition and the reason management believes its presentation provides useful information and a reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP measure, is provided in Schedule B of this press release. The presentation of these non-GAAP financial measures is not to be considered in isolation or as a substitute for the Company's financial results prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP. Net Income and Earnings Per Share Saxon reported net income for the second quarter of 2006 of $8.6 million, or $0.17 per share diluted, compared to $7.0 million, or $0.14 per share diluted for the second quarter of 2005, and $26.4 million, or $0.52 per share diluted for the first quarter of 2006. Second quarter 2006 net income excluding one-time items is $0.26 per share diluted. Net Interest Income and Margin Net interest income was $26.5 million for the second quarter of 2006, compared to $49.6 million for the second quarter of 2005 and $35.5 million for the first quarter of 2006. Net interest margin was 1.6% for the second quarter of 2006, compared to 3.3% for the second quarter of 2005 and 2.2% for the first quarter of 2006. Net interest margin is calculated as net interest income divided by average interest-earning assets. Average interest-earning assets are calculated using a daily average balance over the time period indicated. Net interest income declined in the second quarter of 2006 from both the second quarter of 2005 and the first quarter of 2006 due to the continued increase in the Company's cost of funds Cost of Funds The interest rate paid on an outstanding loan. Notes: Money isn't free! Cost of funds is the cost of borrowing money. See also: Interest Rate Cost of funds Interest rate associated with borrowing money. and continued competitive pressures on loan coupons COUPONS. Those parts of a commercial instrument which are. to be cut, and which are evidence of something connected with the contract mentioned in the instrument. They are generally attached to certificates of loan, where the interest is payable at particular periods, and, when the . 1-month LIBOR LIBOR See: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). has increased 201 basis points from June 30, 2005 to June 30, 2006 and 50 basis points from March 31, 2006 to June 30, 2006. Net interest income and margin do not include the effect of Saxon's derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. activity that is designed to hedge its cost of financing. In addition prepayment penalty Prepayment penalty A fee a borrower pays a lender when the borrower repays a loan before its scheduled time of maturity. income increased slightly for the second quarter of 2006 compared to the first quarter of 2006 due to an increase in prepayment speeds Prepayment speed Also called speed, the estimated rate at which mortgagors pay off their loans ahead of schedule, critical in assessing the value of mortgage pass-through securities. and decreased compared to the second quarter of 2005 due to a decline in the number of loans paying off in the portfolio that contain a prepayment penalty feature. Core Net Interest Income and Margin Core net interest income was $33.4 million for the second quarter of 2006, compared to $47.8 million for the second quarter of 2005 and $41.1 million for the first quarter of 2006. Core net interest margin was 2.0% for the second quarter of 2006 compared to 3.2% for the second quarter of 2005 and 2.6% for the first quarter of 2006. Core net interest income is net interest income adjusted to include net cash settlements received or paid on derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. . Core net interest margin is calculated as core net interest income divided by average interest-earning assets. Average interest-earning assets are calculated using a daily average balance over the time period indicated. See Schedule B for a reconciliation of core net interest income to net interest income, and core net interest margin to net interest margin. Core net interest income and margin have been impacted primarily by the competitive environment in the industry which has not increased coupons on new originations while funding costs continue to rise. In addition, core net interest income and margin have been negatively impacted by lower prepayment penalty income. "Our derivative positions increased in value by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $7.8 million during the quarter. While one-month LIBOR increased 50 basis points during the quarter, the two-year swap curve Swap Curve The name given to the swap's equivalent of a yield curve. The swap curve identifies the relationship between swap rates at varying maturities. Notes: Used in similar manner as a bond yield curve, the swap curve helps to identify different characteristics of the increased only 34 basis points. The 2-year swap curve has flattened flat·ten v. flat·tened, flat·ten·ing, flat·tens v.tr. 1. To make flat or flatter. 2. To knock down; lay low: The boxer was flattened with one punch. in relation to 1-month LIBOR, which has led to our funding costs increasing more than the benefit of the fair value increase in our derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. during the second quarter. However, in prior quarters we have received greater impact in our derivative fair values, than funding cost increases, because of a steepening 2-year swap curve in relation to 1-month LIBOR," said Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. B. Eastep, Chief Financial Officer at Saxon. "In addition, competitive industry pressures have not allowed coupons on new originations to increase with the rise in funding costs. Over the past twelve months, we have seen 1-month LIBOR increase 201 basis points; while the weighted average coupon Weighted average Coupon The weighted average of the gross interest rates of mortgages underlying a pool as of the pool issue date; the balance of each mortgage is used as the weighting factor. on our portfolio has increased only 70 basis points." Provision for Mortgage Loan Losses Provision for mortgage loan losses was $13.4 million for the second quarter of 2006, compared to $9.4 million for the second quarter of 2005 and $0.6 million for the first quarter of 2006. The increase in provision for loan losses from the first quarter of 2006 to the second quarter of 2006 was due to the Company experiencing an increase of $130 million in delinquencies in its portfolio. Approximately $97 million of the increase was in the 30 days past due delinquent delinquent 1) adj. not paid in full amount or on time. 2) n. short for an underage violator of the law as in juvenile delinquent. DELINQUENT, civil law. He who has been guilty of some crime, offence or failure of duty. category where there tend to be significant seasonal fluctuations between the first and second quarters of each year. For the six months ended June 30, 2006, the Company has seen total delinquencies decline $2.9 million from December December: see month. 31, 2005. The increase in provision for loan losses from the second quarter of 2005 to the second quarter of 2006 was due to an overall increase in delinquency delinquency Criminal behaviour carried out by a juvenile. Young males make up the bulk of the delinquent population (about 80% in the U.S.) in all countries in which the behaviour is reported. rates and loan loss. This rise in delinquency levels was due primarily to the growth and seasoning of the portfolio. Servicing income, net Servicing income, net of amortization and impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. , was $20.4 million for the second quarter of 2006, compared to $17.2 million for the second quarter of 2005 and $19.6 million for the first quarter of 2006. Servicing income was negatively affected during the second quarter of 2006 as a result of a $1.4 million accrual to reimburse a sponsor of a securitized mortgage loan pool that the Company services in its third-party servicing business for funds representing prepayment penalties that the Company had waived or reimbursed to borrowers. These prepayment penalties related to loans made by a lender LENDER, contracts. He from whom a thing is borrowed. 2. The contract of loan confers rights, and imposes duties on the lender. 1. The lender has the right to revoke the loan at his mere pleasure; 9 Cowen, R. 687; 8 Johns. Rep. 432; 1 T. R. 480; 2 Campb. Rep. that claimed to be entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: to federal preemption preemption U.S. policy that allowed the first settlers, or squatters, on public land to buy the land they had improved. Since improved land, coveted by speculators, was often priced too high for squatters to buy at auction, temporary preemptive laws allowed them to acquire of state restrictions on prepayment penalties. Saxon's third party servicing portfolio was $19.7 billion at June 30, 2006, an increase of 5.9% from June 30, 2005, and a decrease of 3% from March 31, 2006. During the second quarter of 2006, the Company purchased mortgage servicing Mortgage servicing The collection of monthly payments and penalties, record keeping, payment of insurance and taxes, and possible settlement of default , involved with a mortgage loan. rights from third parties relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc approximately $2.1 billion in principal balances of mortgage loans, compared to $4.6 billion in principal balances of mortgage loans in the second quarter of 2005 and $3.8 billion in principal balances in the first quarter of 2006. The Company's average purchase price for the mortgage servicing rights purchased in the second quarter of 2006 was 80 basis points, compared to 67 basis points for the second quarter of 2005 and 80 basis points for the first quarter of 2006. Operating Expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. Total operating expenses, which include payroll payroll a list of employees, their salary rates, tax deductions, amounts paid, payroll tax, long service leave entitlements. and related expenses, general and administrative expense, depreciation and other expenses, were $34.9 million for the second quarter of 2006, compared to $33.1 million for the second quarter of 2005 and $34.5 million for the first quarter of 2006. Total operating expenses were relatively flat for the second quarter of 2006 compared to the first quarter of 2006 and increased approximately $1.8 million compared to the second quarter of 2005. Due to the Company's efforts in restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). its loan origination The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. platforms and other expense controls, the Company has maintained relatively flat operating expenses. On June 19, 2006, the parties involved in the Cechini case, previously reported in the Company's annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended December 31, 2005 and quarterly report on Form 10-Q Form 10-Q See 10-Q. for the period ended March 31, 2006 reached a settlement, pending court approval and entry into a mutually acceptable settlement agreement, pursuant to which the Company would pay approximately $0.5 million. The Company accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. $0.5 million in June 2006 based on these developments. Total Net Cost to Produce and Cost to Service Total net cost to produce was 1.92% of total loan production for the second quarter of 2006, compared to 2.84% for the second quarter of 2005 and 2.46% for the first quarter of 2006. Total net cost to produce for the second quarter of 2006 decreased from both the second quarter of 2005 and first quarter of 2006 due to the Company's continued focus on cost management and increases in process efficiency. Cost to service remained flat at 17 basis points for the second quarter of 2006, as compared to 17 basis points for both the second quarter of 2005 and the first quarter of 2006. "We continue to make progress in lowering our total net cost to produce; we are seeing the benefits of our technology investments, improved operational efficiencies and sales force productivity. Our ability to recognize economic efficiencies, while we increase capacity and scalability How much a system can be expanded. See scalable. scalability - How well a solution to some problem will work when the size of the problem increases. For example, a central server of some kind with ten clients may perform adequately but with a thousand clients it within our production platforms, positions us well for the future," said James V James V, king of Scotland James V, 1512–42, king of Scotland (1513–42), son and successor of James IV. His mother, Margaret Tudor, held the regency until her marriage in 1514 to Archibald Douglas, 6th earl of Angus, when she lost it to John . Smith, Executive Vice President of Production at Saxon. Income Tax Expense During the second quarter of 2006, the Company took a non-cash write-off of $2.5 million in deferred tax assets related to its servicing subsidiary due to the enactment of new tax legislation in the state of Texas. This one-time charge, in addition to a higher mix of taxable REIT subsidiary income, resulted in a significantly higher effective tax rate than both the second quarter of 2005 and the first quarter of 2006. Portfolio Performance The following table provides information regarding Saxon's portfolio performance.
June 30, March 31, June 30,
($ in thousands) 2006 2006 2005
------------------------------------
Outstanding principal balance at
period end $6,699,633 $6,496,358 $6,104,889
Portfolio weighted average credit
score 615 615 617
Portfolio weighted average coupon 7.8% 7.6% 7.5%
($ in thousands) June 30, 2006 March 31, 2006 June 30, 2005
--------------- --------------- ---------------
Principal Principal Principal
balance % balance % balance %
--------- ----- --------- ----- --------- -----
30-59 days past due $370,309 5.53% $273,044 4.20% $307,766 5.04%
60-89 days past due $ 92,635 1.38% $ 82,061 1.26% $ 83,148 1.36%
90 days or more past
due $ 72,494 1.08% $ 58,311 0.90% $ 46,542 0.76%
Bankruptcies (1) $121,559 1.81% $128,280 1.97% $126,391 2.07%
Foreclosures $127,185 1.90% $118,140 1.82% $105,782 1.73%
Real estate owned (2) $ 53,234 0.79% $ 50,039 0.77% $ 41,972 0.69%
Seriously delinquent %
(3) $435,268 6.50% $397,474 6.12% $367,013 6.01%
Securitization net
losses on liquidated
loans - quarter
ended $ 11,578 0.69% $ 11,184 0.69% $ 13,074 0.86%
Charge-offs - quarter
ended (4) $ 11,529 0.69% $ 10,282 0.63% $ 8,861 0.58%
(1) Bankruptcies include both non-performing and performing loans in
which the related borrower is in bankruptcy. Amounts included for
contractually current bankruptcies for the owned portfolio are:
$23.8 million as of June 30, 2006, $30.6 million as of March 31,
2006, and $29.7 million as of June 30, 2005.
(2) When a loan is deemed to be uncollectible and the property is
foreclosed, it is transferred to REO at net realizable value and
periodically evaluated for additional impairments. Net realizable
value is defined as the property's fair value less estimated costs
to sell. Costs of holding this real estate and related gains and
losses on disposition are credited or charged to operations as
incurred; and therefore, are not included as part of our allowance
for loan and interest losses.
(3) Seriously delinquent is defined as loans that are 60 or more days
delinquent, foreclosed, REO, or held by a borrower who has
declared bankruptcy and is 60 or more days contractually
delinquent.
(4) Charge-offs represent the losses recognized in our financial
statements in accordance with GAAP. Quarter ended percentages are
annualized. See reconciliation of securitization net losses on
liquidated loans to charge-offs in Schedule B.
Loan Production Mortgage loan production was $920.0 million for the second quarter of 2006, an increase of 17% compared to the second quarter of 2005, and an increase of 23% from the first quarter of 2006. Saxon's wholesale mortgage loan production was $436.9 million during the second quarter of 2006, an increase of 16% from the second quarter of 2005, and an increase of 20% from the first quarter of 2006. Saxon's retail mortgage loan production was $171.8 million during the second quarter of 2006, a decrease of 4% from the second quarter of 2005, and an increase of 24% from the first quarter of 2006. Saxon's correspondent A bank, Securities firm, or other financial institution that regularly renders services for another in an area or market to which the other party lacks direct access. A bank that functions as an agent for another bank and carries a deposit balance for a bank in another city. flow mortgage loan production was $191.9 million during the second quarter of 2006, a decrease of 4% from the second quarter of 2005, and a decrease of 15% from the first quarter of 2006. Saxon had no correspondent bulk mortgage loan production during the second quarter of 2006, compared to $33.2 million during the second quarter of 2005, and $18.1 million during the first quarter of 2006. Beginning in 2006, Saxon launched its conduit bulk purchase process. The conduit bulk purchase process is applied to selected pools of loans based on the Company's assessment of the correspondent seller's financial strength, management, industry experience, and quality of loan underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. and procedures. Generally, pools of loans purchased through the conduit bulk purchase process may be underwritten in accordance with the underwriting guidelines of the seller, not the Company's underwriting guidelines and the pools may be reviewed either by the Company or by third parties hired by the Company on a sample basis to determine that the loans were underwritten in accordance with the applicable underwriting guidelines. The Company funded $119.4 million of mortgage loans in the conduit during the second quarter of 2006 at a net cost to produce of 148 basis points. Liquidity At June 30, 2006, Saxon had revolving warehouse and repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. facilities in the amount of $2.8 billion, of which $1.7 billion and $1.1 billion were committed and uncommitted, respectively, and $225.4 million in working capital, compared to $1.7 billion in committed facilities Committed Facility A credit facility whereby terms and conditions are clearly defined by the lending institution and imposed upon the borrowing company. Notes: In committed facilities, the borrowing companies must meet specific requirements set forth by the lending and $178.6 million in working capital at June 30, 2005. It is common business practice to define working capital as current assets Current Assets Appearing on a company's balance sheet, it represents cash, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that can be converted to cash within one year. less current liabilities Current Liabilities Usually appearing on a company's balance sheet, it represents the amount owed for interest, accounts payable, short-term loans, expenses incurred but unpaid, and other debts due within one year. . However, the Company does not have a classified balance sheet and therefore calculates working capital using an internally defined formula, which is generally calculated as unrestricted cash and investments as well as unencumbered Unencumbered Property that is not subject to any creditor claims or liens. Notes: For example, if a house is owned free and clear (meaning the owner owes no mortgage to anyone), it is unencumbered. assets that can be pledged pledge n. 1. A solemn binding promise to do, give, or refrain from doing something: signed a pledge never to reveal the secret; a pledge of money to a charity. 2. a. against existing committed facilities and converted to cash in five days or less. Management believes that this working capital calculation provides a better indication of the Company's liquidity available to conduct business at the time of calculation. A reconciliation between the Company's working capital calculation and the common definition of working capital is presented in Schedule B. REIT Taxable Income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. The following table is a reconciliation of GAAP net income to estimated REIT taxable income for the three and six months ended June 30, 2006:
For the three For the six
months ended months ended
June 30, June 30,
2006 2006
------------- -------------
($ in thousands)
Consolidated GAAP income before taxes $13,031 $42,342
Estimated tax adjustments:
Plus:
Provision for losses - REIT portfolio 13,410 13,987
Provision for advanced interest - REIT
portfolio 2,618 5,183
Elimination of intercompany pre-tax
net income 575 -
Miscellaneous 562 1,493
Less:
Taxable REIT subsidiary pre-tax net
income 9,931 10,697
Elimination of intercompany pre-tax
net income - 4,333
Hedging income (1) 4,425 7,418
Securitized loan adjustments for tax 5,863 6,850
------------- -------------
Estimated Qualified REIT taxable income $ 9,977 $33,707
============= =============
(1) Although the Company has eliminated the use of hedge accounting
under SFAS No. 133 for financial reporting purposes, it continues
to account for certain of its derivative instruments as hedges for
tax purposes.
The estimated REIT taxable income for the quarter and six months ended June 30, 2006 set forth in the table above is an estimate only and is subject to change until the Company files its 2006 REIT federal tax returns. To maintain its status as a REIT, Saxon is required to distribute at least 90% of its REIT taxable income each year to its shareholders. The calculation of REIT taxable income, under federal tax law, differs in certain respects, from the calculation of consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: net income pursuant to GAAP. Saxon expects that consolidated GAAP net income may differ from REIT taxable income for many reasons, including the following: --the provision for loan loss expense recognized for GAAP purposes is based upon the estimate of probable PROBABLE. That which has the appearance of truth; that which appears to be founded in reason. loan losses inherent in the Company's existing portfolio of loans held for investment, for which the Company has not yet recorded a charge-off Eliminate or write off. The term charge-off is used to describe the process of removing from the records of a company something that was once regarded as an asset but has subsequently become worthless. (tax accounting rules allow a deduction deduction, in logic, form of inference such that the conclusion must be true if the premises are true. For example, if we know that all men have two legs and that John is a man, it is then logical to deduce that John has two legs. for loan losses only in the period when a charge-off occurs); --there are several differences between GAAP and tax methodologies for capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. of mortgage loan origination expenses; --there are differences between GAAP and tax related to the timing of recognition of income (loss) from derivative instruments; and --income of a taxable REIT subsidiary is generally included in the REIT's earnings for consolidated GAAP purposes, but is not recognized in REIT taxable income. Management believes that the presentation of estimated REIT taxable income provides useful information to investors regarding the Company's estimated annual distributions to its investors. The presentation of estimated REIT taxable income is not to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. Recent Developments On July July: see month. 13, 2006, the Company paid its second quarter 2006 cash dividend of $0.50 per share of common stock, which was declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. on June 22, 2006 and payable to shareholders of record on July 3, 2006. During the second quarter of 2006, the Company completed the issuances of SAST SAST South Australia Standard Time (GMT+0930) SAST South African Standard Time SAST Scientific Assessment and Strategy Team (USGS) SAST Systems Administrator Simulation Trainer 2006-1 and SAST 2006-2, totaling $500.0 million and $999.9 million in principal balances, respectively. In addition, the Company announced today that it has reached a definitive agreement with Morgan Stanley  To comply with Wikipedia's , the introduction of this article needs a complete rewrite. , pursuant to which Morgan
Stanley will acquire the Company for approximately $706 million, or
$14.10 per share in cash for common stock. Pending customary regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. and shareholder approvals, the acquisition is expected to be completed by the end of 2006. Conference Call Saxon will host a conference call for analysts and investors at 1 p.m. Eastern Time on Wednesday Wednesday: see week. , August 9, 2006. To participate in the call, contact Ms. Meagan Green at 804-935-5281. About Saxon Saxon is a residential mortgage lender and servicer that manages a portfolio of mortgage assets. Saxon purchases, securitizes, and services real property secured mortgages and elects to be treated as a real estate investment trust (REIT) for federal tax purposes. The Company is headquartered in Glen Allen, Virginia Glen Allen is a census-designated place (CDP) in Henrico County, Virginia, United States. The population was 12,562 at the 2000 census. Geography Glen Allen is located at (37.660094, -77.485634)GR1. and has additional primary facilities in Fort Worth, Texas Fort Worth is the fifth-largest city in the state of Texas, 18th-largest city in the United States[1], and voted one of "America’s Most Livable Communities. and Foothill Ranch ranch, large farm devoted chiefly to raising and breeding cattle, horses, sheep, and goats. The cattle ranch was introduced from Latin America to Texas and the plains of the W United States and Canada. , California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). . Saxon's mortgage loan production subsidiary, Saxon Mortgage, Inc., originates and purchases mortgage loans through indirect and direct lending channels using a network of brokers, correspondents, and its retail lending centers. As of June 30, 2006, Saxon's servicing subsidiary, Saxon Mortgage Services, Inc., serviced a mortgage loan portfolio of $26.4 billion. For more information, visit www.saxonmortgage.com. Information Regarding Forward Looking Statements This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Statements about the expected effects, timing and completion of the proposed transaction and all other statements in this release, other than historical facts, constitute forward-looking statements. You can identify forward-looking statements because they contain words such as "believes," "expects," "may," "will," "would," "should," "seeks," "approximately," "intends," "plans," "estimates," or "anticipates" or similar expressions which concern our strategy, plans or intentions. All forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, actual results may differ materially from what is expected. While we believe that our assumptions and expectations are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect actual results. In particular, we may not be able to complete the proposed transaction on the terms summarized above or other acceptable terms, or at all, due to a number of factors, including the failure to obtain approval of our stockholders, regulatory approvals or to satisfy other customary closing conditions. The factors described in this paragraph and other factors that may affect our business or future financial results generally are discussed in our filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2005, a copy of which may be obtained from us without charge. You should not place undue reliance on our forward-looking statements, which speak only as of the date of this press release. Unless legally required, we assume no obligation to update any written or oral forward-looking statement made by us or on our behalf as a result of new information, future events or otherwise.
Saxon Capital, Inc.
Condensed Consolidated Balance Sheets
(in Thousands, Except Per Share Data)
(Unaudited)
June 30, December 31,
2006 2005
------------- -------------
Assets:
Cash $ 13,344 $ 6,053
Trustee receivable 139,937 135,957
Restricted Cash 6,005 147,473
Accrued interest receivable, net of
allowance of $14,671 and $16,086
respectively 43,055 38,182
Mortgage loan portfolio 6,758,659 6,444,872
Allowance for loan losses (35,412) (36,639)
------------- -------------
Net mortgage loan portfolio 6,723,247 6,408,233
Servicing related advances 220,101 185,297
Mortgage servicing rights, net 145,327 129,742
Real estate owned 41,079 38,933
Derivative assets 40,023 19,954
Deferred tax asset 53,908 53,724
Other assets 70,621 68,530
------------- -------------
Total assets $7,496,647 $7,232,078
============= =============
Liabilities and shareholders' equity:
Liabilities:
Accrued interest payable $ 10,588 $ 8,357
Dividends payable 25,468 32,539
Warehouse financing 245,979 378,144
Securitization financing 6,434,332 6,182,389
Derivative liabilities 21,022 8,589
Senior notes 150,000 -
Other liabilities 29,577 28,925
------------- -------------
Total liabilities 6,916,966 6,638,943
------------- -------------
Commitments and contingencies - -
Shareholders' equity:
Common stock, $0.01 par value per share,
100,000,000 shares authorized; shares
issued and outstanding: 50,080,215 and
50,001,909 as of June 30, 2006 and
December 31, 2005, respectively 501 500
Additional paid-in capital 636,298 634,023
Accumulated other comprehensive loss, net
of income tax of $(12) and $(16),
respectively (277) (355)
Accumulated deficit (56,841) (41,033)
------------- -------------
Total shareholders' equity 579,681 593,135
------------- -------------
Total liabilities and shareholders' equity $7,496,647 $7,232,078
============= =============
Saxon Capital, Inc.
Consolidated Statements of Operations
(in Thousands, Except Per Share Data)
(Unaudited)
Three months ended
-----------------------------
June 30, March 31, June 30,
2006 2006 2005
--------- --------- ---------
Revenues:
Interest income $124,114 $121,280 $111,077
Interest expense (97,568) (85,767) (61,487)
--------- --------- ---------
Net interest income 26,546 35,513 49,590
Provision for mortgage loan losses (13,410) (577) (9,428)
--------- --------- ---------
Net interest income after
provision for mortgage loan
losses 13,136 34,936 40,162
Servicing income, net of amortization
and impairment 20,430 19,640 17,224
Derivative gains (losses) 14,732 10,639 (15,084)
(Loss) gain on sale of assets (346) (1,422) 706
--------- --------- ---------
Total net revenues and gains 47,952 63,793 43,008
Expenses:
Payroll and related expenses 17,578 17,749 16,255
General and administrative expenses 14,566 13,426 15,339
Depreciation 1,761 1,767 1,336
Other expense, net 1,016 1,540 137
--------- --------- ---------
Total operating expenses 34,921 34,482 33,067
Income before taxes 13,031 29,311 9,941
Income tax expense 4,385 2,912 2,944
Income before cumulative effect of
change in accounting principle 8,646 26,399 6,997
Cumulative effect of change in
accounting principle - - 31
--------- --------- ---------
Net income $ 8,646 $ 26,399 $ 7,028
========= ========= =========
Earnings per common share:
Average common shares - basic 50,055 50,015 49,884
Average common shares - diluted 51,045 51,227 50,848
Basic earnings per common share $ 0.17 $ 0.53 $ 0.14
Diluted earnings per common share $ 0.17 $ 0.52 $ 0.14
Saxon Capital, Inc.
Schedule A - Supplemental Data
(Unaudited)
Second Quarter First Quarter Second Quarter
($ in thousands) 2006 2006 2005
----------------------------------------------
Production Statistics
Wholesale $ 436,932 $ 363,632 $ 376,784
Retail 171,777 138,523 178,391
Correspondent flow 191,936 226,023 199,461
Correspondent bulk - 18,122 33,195
Conduit 119,397 - -
----------------------------------------------
Total $ 920,042 $ 746,300 $ 787,831
==============================================
NOTE: The following production data excludes loans produced through
the conduit bulk process.
Number of loans produced 4,501 4,238 4,761
Average loan-to-value 78.8% 78.9% 79.5%
Credit Score 608 608 618
Fixed weighted average
coupon 8.3% 8.3% 7.7%
ARM weighted average
coupon 8.5% 8.4% 7.2%
Total weighted average
coupon 8.4% 8.4% 7.3%
Summary of Product Type
ARM - Interest Only 19.33% 22.56% 40.66%
ARM - 2/3/5 yr hybrid 28.01% 32.38% 38.21%
ARM - Floating - 0.08% 0.11%
ARM - 40/30 & 50/30 22.30% 18.36% -
Fixed - Interest Only 0.79% 0.31% 0.76%
Fixed - 15/30 year 22.05% 19.55% 15.89%
Fixed - 40/30 & 50/30 4.38% 3.27% -
Fixed - Balloons / Other 3.14% 3.49% 4.37%
Summary by Documentation
Full documentation 65.58% 63.75% 74.76%
Stated documentation 27.37% 27.41% 22.82%
Limited documentation 2.08% 3.05% 2.42%
12 month bank statement 4.97% 5.78% -
Summary by Purpose
Cash out refinance 79.40% 78.70% 73.01%
Purchase 16.41% 16.49% 21.73%
Rate or term refinance 4.19% 4.81% 5.26%
Key Ratios
Average assets (1) $7,373,693 $7,241,408 $6,783,871
Average equity (1) $ 587,475 $ 594,202 $ 632,430
Return on average assets
(2) 0.5% 1.5% 0.4%
Return on average equity
(2) 5.9% 17.8% 4.4%
Average equity/average
assets 8.0% 8.2% 9.3%
Debt to equity 11.9 11.2 10.1
Book value per share $ 11.58 $ 11.89 $ 12.48
Operating expenses/
servicing portfolio (2) 0.5% 0.5% 0.5%
Operating expenses/
average assets (1) 1.9% 1.9% 1.9%
(1) Average assets are calculated by adding current quarter and prior
quarter total assets and dividing by 2. Average equity is
calculated by adding current quarter and prior quarter total
equity and dividing by 2.
(2) Ratios are annualized.
Saxon Capital, Inc.
Schedule B - Non-GAAP Financial Measures
and Regulation G Reconciliations
Core net interest income and margin, securitization net losses on
liquidated loans, Company defined working capital, total net cost to
produce, and cost to service are non-GAAP financial measures of
Saxon's earnings within the meaning of Regulation G promulgated by the
Securities and Exchange Commission.
Core net interest income is net interest income adjusted to
include net cash settlements received or paid on derivative
instruments.
Core net interest income margin is core net interest income
divided by average interest earning assets. Average interest
earning assets are calculated using a daily average balance
over the time period indicated.
Securitization net losses on liquidated loans are losses
recorded by the securitization trust at the time a REO loan is
sold. GAAP requires losses to be recognized immediately upon a
loan being transferred to REO.
Company Defined Working Capital is generally calculated as
unrestricted cash and investments as well as unencumbered
assets that can be pledged against existing committed
facilities and converted to cash in five days or less.
Total net cost to produce is total production expenses, which
include payroll and related expense and general and
administrative expense attributable to our production segment,
plus deferred capitalized costs and premiums paid, net of fees
collected, divided by loan production. Capitalized expenses
are origination expenses that are capitalized pursuant to FASB
91. Fees collected and premium are capitalized and recorded on
balance sheet as components of net mortgage loan portfolio.
Cost to service is total servicing related expenses, which
include payroll and related expenses and general and
administrative expenses, divided by the daily weighted average
of the total servicing portfolio.
Management believes the core financial measures are useful because
they include the current period effects of Saxon's economic hedging
program but exclude the mark to market derivative value changes. Saxon
uses interest rate swaps, caps, futures and option agreements to
create economic hedges of the variable rate debt it issues to finance
its mortgage loan portfolio. Changes in the fair value of these
derivatives, which reflect the potential future cash settlements over
the remaining lives of the agreements according to the market's
changing projections of interest rates, are recognized in the line
item "Derivative gains (losses)" on the consolidated statements of
operations. This single line item includes both the actual cash
settlements related to the derivatives that occurred during the period
and recognition of the changes in the fair value of the agreements
over the period. The actual cash settlements include regular monthly
payments or receipts under the terms of the agreements and amounts
paid or received to terminate the agreements prior to maturity.
The amounts of net cash settlements and changes in derivative
value that were included in the line item "Derivative gains (losses)"
were:
Three Months Ended
---------------------------------------------
($ in thousands) June 30, 2006 March 31, 2006 June 30, 2005
---------------------------------------------
Fair value gain (loss) $ 7,839 $ 5,003 $(13,288)
Net cash settlements 6,893 5,636 (1,796)
---------------------------------------------
Derivative gains 14,732 10,639 (15,084)
=============================================
As required by Regulation G, a reconciliation of each of these
non-GAAP financial measures to the most directly comparable measure
under GAAP is provided below.
Regulation G Reconciliation - Core Net Interest Income
& Core Interest Margin Analysis
Three Months Ended
----------------------------------
June 30, March 31, June 30,
($ in thousands) 2006 2006 2005
----------------------------------
Core Net Interest Income
Reconciliation
Interest income $ 124,114 $ 121,280 $ 111,077
Interest expense (97,568) (85,767) (61,487)
Plus: Net cash settlements 6,893 5,636 (1,796)
----------------------------------
Core interest expense (90,675) (80,131) (63,283)
----------------------------------
Core net interest income 33,439 41,149 47,794
Provision for loan losses (13,410) (577) (9,428)
----------------------------------
Core net interest income loans
after provision for loan losses $ 20,029 $ 40,572 $ 38,366
==================================
Net Interest Margin and Core Net
Interest Margin Analysis:
Average Balance Data
----------------------------------
Average interest earning assets 6,537,554 6,439,732 6,051,182
Average interest earning
liabilities 6,761,545 6,601,800 6,124,203
Interest margin on loans 7.59% 7.53% 7.34%
Cost of financing for loans (5.77)% (5.20)% (4.02)%
----------------------------------
Net interest margin (1) 1.62% 2.21% 3.28%
Provision for mortgage loan losses (0.82)% (0.04)% (0.62)%
----------------------------------
Net interest margin after provision
for loan losses 0.80% 2.17% 2.66%
==================================
Net interest margin 1.62% 2.21% 3.28%
Plus: Net cash settlements 0.42% 0.35% (0.12)%
----------------------------------
Core net interest margin 2.04% 2.56% 3.16%
Provision for mortgage loan losses (0.82)% (0.04)% (0.62)%
----------------------------------
Core net interest margin after
provision for loan losses 1.22% 2.52% 2.54%
==================================
(1) Net interest margin does not equal the arithmetic difference
between interest margin on loans and cost of financing for loans
due to the difference between the principal balance of mortgage
loans and the principal balance of the debt financing those loans.
Regulation G Reconciliation -
Securitization Net Losses on Liquidated Loans
Management believes that it is meaningful to show securitization
net losses on liquidated loans and charge-offs as measures of losses
since it is a widely accepted industry practice to evaluate
securitization net losses on liquidated loans and the information is
provided on a monthly basis to the investors in each securitization.
GAAP requires losses to be recognized immediately upon a loan being
transferred to REO, whereas securitization net losses on liquidated
loans do not recognize a loss on REO until the loan is sold. This
causes a timing difference between charge-offs and securitization net
losses on liquidated loans. In addition, securitization net losses on
liquidated loans exclude losses resulting from delinquent loan sales.
Three Months Ended
---------------------------------
June 30, March 31, June 30,
($ in thousands) 2006 2006 2005
---------------------------------
Securitization net losses on
liquidated loans $ 11,578 $ 11,184 $ 13,074
Loan transfers to real estate owned 9,696 8,359 8,432
Realized losses on real estate owned (8,932) (8,742) (10,581)
Timing differences between
liquidation and claims processing (262) (563) (338)
Interest not advanced on warehouse
loans (68) (8) (220)
Other (483) 52 (1,506)
---------------------------------
Charge-offs (1) $ 11,529 $ 10,282 $ 8,861
=================================
(1) Charge-offs represent the losses recognized in the financial
statements in accordance with GAAP.
Regulation G Reconciliation - Working Capital
Management uses its internally derived working capital measure
because the Company does not have a classified balance sheet.
Management believes that this working capital calculation provides a
better indication of the Company's liquidity available to conduct
business at the time of calculation.
June 30, 2006
Saxon Defined Commonly Defined
($ in thousands) Working Capital Working Capital
------------------------------------
Unrestricted cash $ 13,344 $ 13,344
Borrowing Availability
Trustee receivable - 139,937
Accrued interest receivable - 43,055
Current tax payable - 10,419
Accrued interest payable - (10,588)
Other current liabilities - (28,047)
Unsecuritized mortgage loans,
MSR's, and mortgage bonds -
payments less than one year 323,919 463,972
Warehouse financing - payments
less than one year (111,832) (111,832)
Repurchase financing - payments
less than one year - (134,147)
Servicing advances - 220,101
Financed advances - payments
less than one year - (137,579)
Securitized loans - payments
less than one year - 2,572,989
Securitized financing - payments
less than one year - (2,534,651)
------------------------------------
Total $ 225,431 $ 506,973
====================================
June 30, 2005
Saxon Defined Commonly Defined
($ in thousands) Working Capital Working Capital
------------------------------------
Unrestricted cash $ 10,950 $ 10,950
Borrowing Availability 72,264 -
Trustee receivable - 135,424
Accrued interest receivable - 38,253
Current tax payable 5,452
Accrued interest payable - (6,909)
Other current liabilities (17,596)
Unsecuritized mortgage loans,
MSR's, and mortgage bonds -
payments less than one year 350,093 355,652
Warehouse financing - payments
less than one year (254,695) (254,695)
Repurchase financing - payments
less than one year - (6,410)
Servicing advances - 133,787
Financed advances - payments
less than one year - (48,272)
Securitized loans - payments
less than one year - 1,990,419
Securitized financing - payments
less than one year - (2,022,869)
------------------------------------
Total $ 178,612 $ 313,186
====================================
Regulation G Reconciliation - Total Net Cost to Produce
Management believes net cost to produce is beneficial to investors
because it provides a measurement of efficiency in the origination
process.
($ in thousands) Three Months Ended
------------------------------
June 30, March 31, June 30,
Total Operating Expenses 2006 2006 2005
------------------------------
Wholesale G&A $ 7,734 $ 6,890 $ 7,348
Retail G&A 8,201 7,451 10,379
Correspondent G&A 1,777 2,181 2,015
Conduit G&A 216 - -
------------------------------
Total Production Expenses $ 17,928 $ 16,522 $ 19,742
Servicing G&A 11,102 11,029 10,349
Administrative G&A 10,521 10,479 10,459
Other (income)/expenses 1,016 1,540 137
------------------------------
Gross Operating Expenses $ 40,567 $ 39,570 $ 40,687
Capitalized expenses (5,646) (5,088) (7,620)
------------------------------
Total Operating Expenses $ 34,921 $ 34,482 $ 33,067
Fees Collected
Wholesale fees collected $ 1,471 $ 1,037 $ 1,139
Retail fees collected 5,268 4,064 4,816
Correspondent fees collected 381 330 208
------------------------------
Total fees collected $ 7,120 $ 5,431 $ 6,163
Premium Paid
Wholesale premium $ 1,859 $ 2,188 $ 3,364
Correspondent premium 3,431 5,063 5,456
Conduit premium 1,546 - -
------------------------------
Total premium $ 6,836 $ 7,251 $ 8,820
Net Cost to Produce - dollars
Wholesale $ 8,122 $ 8,041 $ 9,573
Retail 2,933 3,387 5,563
Correspondent 4,827 6,914 7,263
Conduit 1,762 - -
------------------------------
Total $ 17,644 $ 18,342 $ 22,399
Volume
Wholesale $436,932 $363,632 $376,784
Retail 171,777 138,523 178,391
Correspondent flow 191,936 226,023 232,656
Correspondent bulk - 18,122 -
Conduit 119,397 - -
------------------------------
Total $920,042 $746,300 $787,831
Net Cost to Produce -basis pts
Wholesale 1.86% 2.21% 2.54%
Retail 1.71% 2.45% 3.12%
Correspondent 2.51% 2.83% 3.12%
Conduit 1.48% - -
------------------------------
Total Production Net Cost to Produce 1.92% 2.46% 2.84%
Regulation G Reconciliation - Cost to Service
Management believes that cost to service is beneficial to
investors because it provides a measurement of efficiency in the
servicing channel.
Three Months Ended
-----------------------------------------------
($ in thousands) June 30, 2006 March 31, 2006 June 30, 2005
-----------------------------------------------
Servicing G&A (1) $ 11,102 $ 11,029 $ 10,349
Average total
portfolio balance (2) 25,930,642 26,305,271 24,183,187
-----------------------------------------------
Cost to service
(annualized) 0.17% 0.17% 0.17%
===============================================
(1) Servicing G&A is a component of total operating expenses on the
consolidated statement of operations and is reconciled to total
operating expenses in the Total Net Cost to Produce reconciliation
table above.
(2) Average total portfolio balance is a daily weighted average of the
total servicing portfolio.
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