Walter Investment Management Corp

Schedule I

Financial Information

(Parent Company Only)

(in thousands, except share and per share data)


	December 31,
	2013		2012
Balance Sheets
ASSETS
Cash and cash equivalents	$	100,009	$	366,393
Restricted cash and cash equivalents		14,753		14,001
Residential loans at amortized cost, net		6,341		5,086
Receivables, net		51,681		23,094
Premises and equipment, net		277		401
Other assets		65,293		53,643
Due from affiliates, net		711,797		—
Investments in consolidated subsidiaries and variable interest entities		2,621,934		1,456,715

Total assets	$	3,572,085	$	1,919,333

LIABILITIES AND STOCKHOLDERS’ EQUITY
Payables and accrued liabilities	$	57,187	$	48,317
Due to affiliates, net		—		5,893
Debt		2,267,979		886,733
Deferred tax liability, net		79,903		83,462

Total liabilities		2,405,069		1,024,405
Stockholders’ equity:
Preferred stock, $0.01 par value per share:
Authorized — 10,000,000 shares;
Issued and outstanding — 0 shares at December 31, 2013 and 2012		—		—
Common stock , $0.01 par value per share:
Authorized — 90,000,000 shares;
Issued and outstanding — 37,377,274 and 36,687,785 shares at December 31, 2013 and 2012, respectively		374		367
Additional paid-in capital		580,572		561,963
Retained earnings		585,572		332,105
Accumulated other comprehensive income		498		493

Total stockholders’ equity		1,167,016		894,928

Total liabilities and stockholders’ equity	$	3,572,085	$	1,919,333

See accompanying notes to the parent company financial statements.

Walter Investment Management Corp

Schedule I

Financial Information

(Parent Company Only)

(in thousands)


	Years Ended December 31,
	2013			2012			2011
Statements of Comprehensive Income (Loss)
REVENUES
Interest income on loans	$	612		$	328		$	2,603
Intercompany interest income		247			28			—
Other revenues		492			354			4,126

Total revenues		1,351			710			6,729
EXPENSES
Interest expense		123,317			77,124			42,065
Intercompany interest expense		312			521			123
Salaries and benefits		918			2,998			3,478
General and administrative		30,497			8,845			41,280
Depreciation and amortization		124			131			—
Provision for loan losses		77			590			1,218
Other expenses, net		682			760			130

Total expenses		155,927			90,969			88,294
OTHER LOSSES
Losses on extinguishments		(12,489	)		(48,579	)		—
Other net fair value losses		(4,813	)		(1,197	)		(324	)

Total other losses		(17,302	)		(49,776	)		(324	)
Loss before taxes		(171,878	)		(140,035	)		(81,889	)
Income tax expense (benefit)		(55,556	)		(48,808	)		58,098

Loss before equity in earnings of consolidated subsidiaries and variable interest entities		(116,322	)		(91,227	)		(139,987	)
Equity in earnings of consolidated subsidiaries and variable interest entities		369,789			69,093			73,590

Net income (loss)	$	253,467		$	(22,134	)	$	(66,397	)

Comprehensive income (loss)	$	253,472		$	(22,057	)	$	(67,232	)

See accompanying notes to the parent company financial statements.

Walter Investment Management Corp

Schedule I

Financial Information

(Parent Company Only)

(in thousands)


	Years Ended December 31,
	2013			2012			2011
Statements of Cash Flows
Operating activities
Net income (loss)	$	253,467		$	(22,134	)	$	(66,397	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Equity in earnings of consolidated subsidiaries and variable interest entities		(369,789	)		(69,093	)		(73,590	)
Other net fair value losses		4,813			1,197			324
Accretion of residential loan premiums (discounts)		(112	)		67			74
Accretion of discounts on debt and amortization of deferred debt issuance costs		18,822			10,819			4,930
Provision for loan losses		77			590			1,038
Depreciation and amortization of premises and equipment		124			131			—
Losses on extinguishment of debt		12,489			48,579			—
Losses on real estate owned, net		482			570			33
Provision (benefit) for deferred income taxes		(3,868	)		(5,213	)		63,082
Share-based compensation		5,254			7,070			184
Other		260			112			(2,811	)
Changes in assets and liabilities
Decrease (increase) in receivables		(28,587	)		(23,061	)		532
Increase in other assets		(1,547	)		(1,260	)		(1,763	)
Increase (decrease) in payables and accrued liabilities		9,065			(26,993	)		53,636

Cash flows provided by (used in) operating activities		(99,050	)		(78,619	)		(20,728	)

Investing activities
Principal payments received on forward loans		84			148			901
Cash proceeds from sales of real estate owned, net		254			670			—
Purchase of held-to-maturity investments		—			—			(1,338	)
Proceeds from sales of held-for-maturity investments		—			—			123,161
Decrease (increase) in restricted cash and cash equivalents		(752	)		31,175			(44,728	)
Payments for acquisitions of businesses		(477,021	)		(115,000	)		(1,012,640	)
Deposit for business acquisition		—			(15,000	)		—
Returns of capital from subsidiaries		37,796			37,536			261,535
Capital contributions to subsidiaries		(331,107	)		(31,118	)		—
Change in due from affiliates		(688,070	)		12,469			(129,554	)
Other		(15,200	)		—			—

Cash flows provided by (used in) investing activities		(1,474,016	)		(79,120	)		(802,663	)

Financing activities
Proceeds from issuance of debt, net of debt issuance costs		3,106,263			962,524			720,700
Payments on debt		(360,826	)		(65,000	)		(18,750	)
Debt prepayment penalty		—			(29,440	)		—
Other debt issuance costs paid		(1,936	)		(6,179	)		—
Debt extinguishments		(1,405,424	)		(690,000	)		—
Secondary equity offering, net of issuance costs		—			276,013			—
Dividends and dividend equivalents paid		—			—			(14,051	)
Change in due to affiliates		(29,618	)		72,588			27,481
Other		(1,777	)		3,076			181

Cash flows provided by (used in) financing activities		1,306,682			523,582			715,561

Net increase (decrease) in cash and cash equivalents		(266,384	)		365,843			(107,830	)
Cash and cash equivalents at the beginning of the year		366,393			550			108,380

Cash and cash equivalents at the end of the year	$	100,009		$	366,393		$	550

See accompanying notes to the parent company financial statements.

WALTER INVESTMENT MANAGEMENT CORP

SCHEDULE I

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS

1.	Basis of Presentation

The financial information of Walter Investment Management Corp., or the Parent Company or Walter Investment, should be read in conjunction with the consolidated financial statements of Walter Investment Management Corp. and its subsidiaries and the notes thereto, or the Consolidated Financial Statements, included in Item 8 of this report. These Parent Company financial statements reflect the results of operations, financial position and cash flows for the Parent Company and its consolidated subsidiaries and variable interest entities, or VIEs, in which it is the primary beneficiary. These consolidated subsidiaries and VIEs are accounted for using the equity method of accounting.

The accompanying Parent Company financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these Parent Company financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. These Parent Company financial statements include certain intercompany allocations to its subsidiaries that management believes have been made on a reasonable basis. These costs primarily include executive salaries and other centralized business functions. Refer to additional information on intercompany allocations in Note 25 to the Consolidated Financial Statements.

The Parent Company balance sheets at December 31, 2013 and 2012 have been revised to reflect reclassifications between investments in consolidated subsidiaries and variable interest entities and intercompany balances. The Parent Company statements of cash flows for the years ended December 31, 2013, 2012 and 2011 have been revised to present intercompany balances as financing or investing activities, rather than operating activities.

2.	Acquisitions

On December 31, 2012, in connection with the execution of a stock purchase agreement, the Parent Company agreed to acquire all of the outstanding shares of Security One Lending. Refer to Note 3 of the Notes to the Consolidated Financial Statements for further information on this acquisition.

Debt

Debt is comprised of secured term loans, convertible senior subordinated notes, and unsecured senior notes. In addition, the Parent Company has a $125 million senior secured revolving credit facility. Refer to Note 18 of the Notes to the Consolidated Financial Statements for further information on debt.

4.	Supplemental Disclosures of Cash Flow Information

The Company’s supplemental disclosures of cash flow information are summarized as follows (in thousands):


	For the Years Ended December 31,
	2013		2012		2011
Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$	100,464	$	64,603	$	36,744
Cash paid for income taxes		91,646		28,728		14,628
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Real estate owned acquired through foreclosure		657		870		5,172
Residential loans originated to finance the sale of real estate owned		1,962		2,925		14,145
Issuance of common stock for business acquisitions		—		41,346		40,220
Stock dividend		—		—		5,580
Transfer of fixed assets		—		532		—

5.	Guarantees

Reverse Mortgage Solutions, Inc., or RMS, an indirect wholly-owned subsidiary, is required to maintain regulatory compliance with HUD, Ginnie Mae and Fannie Mae program requirements, some of which are financial covenants related to minimum levels of net worth and other financial ratios. Due to the accounting treatment for reverse loans as secured borrowings when transferred, RMS has obtained an indefinite waiver for certain of these requirements from Ginnie Mae and through June 2014 from Fannie Mae. In addition, the Company has provided a guarantee beginning on the date of acquisition, of RMS whereby the Company guarantees its performance and obligations under the Ginnie Mae HMBS Program. In the event that the Company fails to honor this guarantee, Ginnie Mae could terminate RMS’ status as a qualified issuer of HMBS as well as take other actions permitted by law that could impact the operations of RMS, including the termination or suspension of RMS’ servicing rights associated with reverse loans guaranteed by Ginnie Mae HMBS. Ginnie Mae has continued to affirm RMS’ current commitment authority to issue HMBS. In addition the Company has provided a guarantee dated May 31, 2013 whereby the Company guarantees RMS’ performance obligations with Fannie Mae under a mortgage selling and servicing contract between RMS and Fannie Mae. RMS does not currently sell Fannie Mae loans. However, in the event that the Company fails to honor this guarantee, Fannie Mae could disallow the servicing of its loans and participation interests by RMS.

In addition to these guarantees, all obligations of Green Tree Servicing LLC, an indirect wholly-owned subsidiary, and RMS under the master repurchase agreements are guaranteed by Walter Investment.