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FLEET MORTGAGE GROUP REPORTS SECOND QUARTER LOSS OF $35.4 MILLION DUE TO PMSR VALUATION ADJUSTMENT

 COLUMBIA, S.C., July 21 /PRNewswire/ -- Fleet Mortgage Group (NYSE: FLG) today reported a net loss of $35.4 million, or 71 cents per share, for the second quarter ended June 30, it was announced by Andrew D. Woodward, Jr., chairman and chief executive officer. This compares to $28.5 million of net income recorded during the second quarter of 1992. Fleet Mortgage Group's earnings prior to certain charges described below and the impact of accelerated amortization of capitalized excess servicing fees were $28.4 million, or $.57 per share.
 Earnings for the period were adversely affected by a write-off of $40 million ($24 million after-tax) related to impairment of the valuation of Purchased Mortgage Servicing Rights (PMSRs) and a $60 million provision ($36 million after-tax) against future impairment in the valuation of PMSRs. This charge results from a higher consensus prediction for loan prepayments and a refinement to a more conservative approach to evaluating PMSRs on a disaggregated basis compared to a total portfolio basis.
 "Mortgage interest rates have fallen to the lowest level in 20 years, significantly affecting loan prepayment estimates. These estimates adversely impact the valuation of our PMSR asset," Woodward said.
 "In addition to the second quarter charges that we are announcing, the company will take added steps to protect against this valuation volatility. While we are already using an accelerated amortization method for this asset, we will be further increasing our amortization in future periods. The company will also evaluate the use of various financial hedge instruments to attempt to offset future impairment adjustments. We believe that we are acting decisively in dealing with the PMSR issue," Woodward said.
 "While the climate of lower interest rates has increased pressure on existing servicing portfolios, it has also provided significant opportunities in new loan production," said
 Net mortgage production revenue was $39.1 million in the second quarter of 1993, nearly double the $20.1 million in the second quarter of 1992. Fleet Mortgage produced $6.0 billion in residential mortgage loans for the second quarter of 1993, compared to $5.0 billion for the same quarter last year, an increase of 20 percent. In addition, Fleet Mortgage also acquired $4.7 billion in mortgage servicing rights during the quarter. The company's pipeline of loans in process stood at $3.9 billion at the end of the second quarter of 1993.
 Net loan servicing revenue decreased from $59.3 million in the second quarter of 1992 to $53.1 million in the second quarter of 1993. Contributing to the quarter-to-quarter decline was a $6.3 million accelerated amortization charge on capitalized excess servicing fees. At June 30, 1993, the company's mortgage servicing portfolio totaled $68.2 billion (including $4.2 billion acquired but not yet transferred to the company), compared to $63.0 billion at Dec. 31, 1992, representing an 8 percent increase for the six months.
 The net loss for the first six months of 1993 was $8.6 million or 17 cents per share, compared to net income of $51.9 million for the comparable prior year period.
 Fleet Mortgage Group, Inc., located in Columbia, S.C., is a leading originator and servicer of mortgage loans. Its subsidiaries, Fleet Mortgage Corp., and Fleet Real Estate Funding Corp., originate mortgage loans through 91 branches in 37 states. The company also acquires new mortgage loans from other lenders through its extensive correspondent network.
 FLEET MORTGAGE GROUP, INC.
 Statements of Earnings
 For the Quarter and Six Months ended June 30
 (in thousands, except per share amounts)
 Second Quarter Six Months
 1993 1992 1993 1992
 Net Loan Servicing
 Revenue $ 53,083 59,312 $112,872 120,439
 Net Mortgage Production
 Revenue 39,109 20,110 70,575 42
 Net Interest Income 11,340 18,719 20,519 31,484
 Gain on Sale of Servicing 9,571 8,485 21,683 8,485
 Other 4,000 3,899 8,419 8,610
 Total Revenue 117,103 110,525 234,068 211,247
 Operating Expenses 46,972 38,846 93,549 76,943
 Amortization of Purchased
 Mortgage Servicing Rights 128,054 24,904 154,569 48,612
 Total Expenses 175,026 63,750 248,118 125,555
 Earnings Before Income Taxes (57,923) 46,775 (14,050) 85,692
 Income Taxes (22,507) 18,279 (5,445) 33,810
 Net Earnings $(35,416) 28,496 $ (8,605) 51,882
 Net Earnings Per Share(A) $ (0.71) $ (0.17)
 Weighted Average Shares
 Outstanding(A) 49,545 49,545
 (A) Fleet Mortgage Group's initial public offering was on Aug. 7, 1992. Accordingly, no per share amount or weighted average shares outstanding are applicable for the quarter ended June 30, 1992, and the six months ended June 30, 1992.
 (B) Certain prior period amounts have been reclassified to conform to the 1993 presentation.
 Financial Highlights
 Second Quarter Six Months
 1993 1992 1993 1992
 Residential Loan
 Activity ($ billions)
 Retail $ 2.8 1.9 4.4 3.6
 Wholesale 3.2 3.1 5.5 5.4
 Total Loan Production 6.0 5.0 9.9 9.0
 Servicing Acquisitions 4.7 -- 5.5 --
 Total Activity $10.7 5.0 15.4 9.0
 June 30,
 1993 1992
 Servicing Portfolio ($ billions)(A) $ 68.2 60.6
 Number of Loans (thousands)(A) 1,085.2 1,019.7
 Delinquency Ratio (30 days and over) 6.8pct. 5.9pct.
 Foreclosure 0.8pct. 0.8pct.
 Total Delinquency Ratio 7.6pct. 6.7pct.
 (A) Includes $4.2 billion of bulk servicing acquisitions not yet
 transferred to the company.
 -0- 7/21/93
 /CONTACT: Charles T. Conway, Jr., Director, Corporate Communications, Fleet Mortgage Group, 803-929-7910/
 (FLG)


CO: Fleet Mortgage Group ST: South Carolina IN: FIN SU: ERN

CM-MM -- CH012 -- 3909 07/21/93 11:40 EDT
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Date:Jul 21, 1993
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