FORM 10-Q
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(Mark One)
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
June 30, 2017
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
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Commission file number
001-36
174
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NMI Holdings, Inc.
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(Exact name of registrant as specified in its charter)
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DELAWARE
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45-4914248
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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2100 Powell Street, Emeryville, CA
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94608
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
o
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Accelerated filer
x
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Emerging growth company
x
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Item 1.
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||
Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 6.
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||
•
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changes in the business practices of Fannie Mae and Freddie Mac (collectively, the GSEs), including decisions that have the impact of decreasing or discontinuing the use of mortgage insurance as credit enhancement;
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•
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our ability to remain an eligible mortgage insurer under the private mortgage insurer eligibility requirements (PMIERs) and other requirements imposed by the GSEs, which they may change at any time;
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•
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retention of our existing certificates of authority in each state and the District of Columbia (D.C.) and our ability to remain a mortgage insurer in good standing in each state and D.C.;
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•
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our future profitability, liquidity and capital resources;
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•
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actions of existing competitors, including governmental agencies like the Federal Housing Administration (FHA) and the Veterans Administration (VA), and potential market entry by new competitors or consolidation of existing competitors;
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•
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developments in the world's financial and capital markets and our access to such markets, including reinsurance;
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•
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adoption of new or changes to existing laws and regulations that impact our business or financial condition directly or the mortgage insurance industry generally or their enforcement and implementation by regulators;
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•
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changes to the GSEs' role in the secondary mortgage market or other changes that could affect the residential mortgage industry generally or mortgage insurance in particular;
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•
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potential future lawsuits, investigations or inquiries or resolution of current lawsuits or inquiries;
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•
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changes in general economic, market and political conditions and policies, interest rates, inflation and investment results or other conditions that affect the housing market or the markets for home mortgages or mortgage insurance;
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•
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our ability to successfully execute and implement our capital plans, including our ability to access the reinsurance market and to enter into, and receive approval of, reinsurance arrangements on terms and conditions that are acceptable to us, the GSEs and our regulators;
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•
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our ability to implement our business strategy, including our ability to write mortgage insurance on high quality low down payment residential mortgage loans, implement successfully and on a timely basis, complex infrastructure, systems, procedures, and internal controls to support our business and regulatory and reporting requirements of the insurance industry;
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•
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our ability to attract and retain a diverse customer base, including the largest mortgage originators;
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•
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failure of risk management or pricing or investment strategies;
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•
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emergence of unexpected claim and coverage issues, including claims exceeding our reserves or amounts we had expected to experience;
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•
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the inability of our counter-parties, including third party reinsurers, to meet their obligations to us;
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•
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our ability to utilize our net operating loss carryforwards, which could be limited or eliminated in various ways, including if we experience an ownership change as defined in Section 382 of the Internal Revenue Code;
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•
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failure to maintain, improve and continue to develop necessary information technology (IT) systems or the failure of technology providers to perform; and
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•
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ability to recruit, train and retain key personnel.
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Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016
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Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2017 and 2016
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Condensed Consolidated Statements of Changes in Shareholders' Equity for the six months ended June 30, 2017 and the year ended December 31, 2016
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Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016
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Notes to Condensed Consolidated Financial Statements
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June 30, 2017
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December 31, 2016
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||||
Assets
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(In Thousands, except for share data)
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||||||
Fixed maturities, available-for-sale, at fair value (amortized cost of $669,363 and $630,688 as of June 30, 2017 and December 31, 2016, respectively)
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$
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673,695
|
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$
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628,969
|
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Cash and cash equivalents
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20,035
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|
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47,746
|
|
||
Premiums receivable
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17,795
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|
|
13,728
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|
||
Accrued investment income
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3,867
|
|
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3,421
|
|
||
Prepaid expenses
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2,072
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|
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1,991
|
|
||
Deferred policy acquisition costs, net
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34,206
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30,109
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Software and equipment, net
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21,530
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20,402
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Intangible assets and goodwill
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3,634
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3,634
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Prepaid reinsurance premiums
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38,919
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|
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37,921
|
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Deferred tax asset, net
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45,771
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51,434
|
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Other assets
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1,471
|
|
|
542
|
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Total assets
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$
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862,995
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$
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839,897
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||||
Liabilities
|
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||||
Term loan
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$
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143,990
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$
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144,353
|
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Unearned premiums
|
157,152
|
|
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152,906
|
|
||
Accounts payable and accrued expenses
|
21,349
|
|
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25,297
|
|
||
Reserve for insurance claims and claim expenses
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5,048
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3,001
|
|
||
Reinsurance funds withheld
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32,042
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|
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30,633
|
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||
Deferred ceding commission
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4,830
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4,831
|
|
||
Warrant liability, at fair value
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3,544
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|
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3,367
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|
||
Total liabilities
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367,955
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364,388
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|
||
Commitments and contingencies
|
|
|
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||||
Shareholders' equity
|
|
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||||
Common stock - class A shares, $0.01 par value;
59,858,418 and 59,145,161 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively (250,000,000 shares authorized) |
598
|
|
|
591
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||
Additional paid-in capital
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580,499
|
|
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576,927
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|
||
Accumulated other comprehensive loss, net of tax
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(1,354
|
)
|
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(5,287
|
)
|
||
Accumulated deficit
|
(84,703
|
)
|
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(96,722
|
)
|
||
Total shareholders' equity
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495,040
|
|
|
475,509
|
|
||
Total liabilities and shareholders' equity
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$
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862,995
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$
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839,897
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For the three months ended June 30,
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For the six months ended June 30,
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||||||||||||
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2017
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2016
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2017
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2016
|
||||||||
Revenues
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(In Thousands, except for share data)
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||||||||||||||
Net premiums earned
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$
|
37,917
|
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$
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26,041
|
|
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$
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71,142
|
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$
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45,848
|
|
Net investment income
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3,908
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|
|
3,342
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|
|
7,715
|
|
|
6,573
|
|
||||
Net realized investment gains (losses)
|
188
|
|
|
61
|
|
|
130
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|
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(824
|
)
|
||||
Other revenues
|
185
|
|
|
37
|
|
|
265
|
|
|
69
|
|
||||
Total revenues
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42,198
|
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|
29,481
|
|
|
79,252
|
|
|
51,666
|
|
||||
Expenses
|
|
|
|
|
|
|
|
||||||||
Insurance claims and claims expenses
|
1,373
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|
|
470
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|
|
2,008
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|
|
928
|
|
||||
Underwriting and operating expenses
|
28,048
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|
|
23,234
|
|
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54,037
|
|
|
45,906
|
|
||||
Total expenses
|
29,421
|
|
|
23,704
|
|
|
56,045
|
|
|
46,834
|
|
||||
Other (expense) income
|
|
|
|
|
|
|
|
||||||||
Gain (loss) from change in fair value of warrant liability
|
19
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|
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(59
|
)
|
|
(177
|
)
|
|
611
|
|
||||
Interest expense
|
(3,300
|
)
|
|
(3,707
|
)
|
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(6,794
|
)
|
|
(7,339
|
)
|
||||
Total other expense
|
(3,281
|
)
|
|
(3,766
|
)
|
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(6,971
|
)
|
|
(6,728
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Income (loss) before income taxes
|
9,496
|
|
|
2,011
|
|
|
16,236
|
|
|
(1,896
|
)
|
||||
Income tax expense
|
3,484
|
|
|
—
|
|
|
4,732
|
|
|
—
|
|
||||
Net income (loss)
|
$
|
6,012
|
|
|
$
|
2,011
|
|
|
$
|
11,504
|
|
|
$
|
(1,896
|
)
|
|
|
|
|
|
|
|
|
||||||||
Earnings (loss) per share
|
|
|
|
|
|
|
|
||||||||
Basic
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$
|
0.10
|
|
|
$
|
0.03
|
|
|
$
|
0.19
|
|
|
$
|
(0.03
|
)
|
Diluted
|
$
|
0.10
|
|
|
$
|
0.03
|
|
|
$
|
0.18
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
||||||||
Basic
|
59,823,396
|
|
|
59,105,613
|
|
|
59,576,747
|
|
|
59,005,983
|
|
||||
Diluted
|
63,010,362
|
|
|
59,830,899
|
|
|
62,688,563
|
|
|
59,005,983
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
$
|
6,012
|
|
|
$
|
2,011
|
|
|
$
|
11,504
|
|
|
$
|
(1,896
|
)
|
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
||||||||
Net unrealized gains in accumulated other comprehensive income, net of tax expense of $1,388 and $0 for the three months ended June 30, 2017 and 2016, respectively, and $2,073 and $0 for the six months ended June 30,2017 and 2016
|
2,822
|
|
|
8,670
|
|
|
4,017
|
|
|
17,771
|
|
||||
Reclassification adjustment for losses (gains) included in net income, net of tax expense of $66 and $0 for the three months ended June 30, 2017 and 2016, respectively, and $45 and $0 for the six months ended June 30,2017 and 2016
|
(122
|
)
|
|
(61
|
)
|
|
(84
|
)
|
|
824
|
|
||||
Other comprehensive income, net of tax
|
2,700
|
|
|
8,609
|
|
|
3,933
|
|
|
18,595
|
|
||||
Comprehensive income
|
$
|
8,712
|
|
|
$
|
10,620
|
|
|
$
|
15,437
|
|
|
$
|
16,699
|
|
|
Common Stock - Class A
|
Additional
Paid-in Capital |
Accumulated Other Comprehensive Income (Loss)
|
Accumulated Deficit
|
Total
|
||||||||||||
|
Shares
|
Amount
|
|||||||||||||||
|
(In Thousands)
|
||||||||||||||||
Balances, January 1, 2016
|
58,808
|
|
$
|
588
|
|
$
|
570,340
|
|
$
|
(7,474
|
)
|
$
|
(160,723
|
)
|
$
|
402,731
|
|
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes
|
337
|
|
3
|
|
(227
|
)
|
—
|
|
—
|
|
(224
|
)
|
|||||
Share-based compensation expense
|
—
|
|
—
|
|
6,814
|
|
—
|
|
—
|
|
6,814
|
|
|||||
Change in unrealized investment gains/losses, net of tax expense of $1,178
|
—
|
|
—
|
|
—
|
|
2,187
|
|
—
|
|
2,187
|
|
|||||
Net income
|
—
|
|
—
|
|
—
|
|
—
|
|
64,001
|
|
64,001
|
|
|||||
Balances, December 31, 2016
|
59,145
|
|
$
|
591
|
|
$
|
576,927
|
|
$
|
(5,287
|
)
|
$
|
(96,722
|
)
|
$
|
475,509
|
|
Cumulative effect of change in accounting principle
|
—
|
|
—
|
|
388
|
|
—
|
|
515
|
|
903
|
|
|||||
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes
|
713
|
|
7
|
|
(1,035
|
)
|
—
|
|
—
|
|
(1,028
|
)
|
|||||
Share-based compensation expense
|
—
|
|
—
|
|
4,219
|
|
—
|
|
—
|
|
4,219
|
|
|||||
Change in unrealized investment gains/losses, net of tax expense of $2,118
|
—
|
|
—
|
|
—
|
|
3,933
|
|
—
|
|
3,933
|
|
|||||
Net income
|
—
|
|
—
|
|
—
|
|
—
|
|
11,504
|
|
11,504
|
|
|||||
Balances, June 30, 2017
|
59,858
|
|
$
|
598
|
|
$
|
580,499
|
|
$
|
(1,354
|
)
|
$
|
(84,703
|
)
|
$
|
495,040
|
|
|
For the six months ended June 30,
|
||||||
|
2017
|
|
2016
|
||||
Cash flows from operating activities
|
(In Thousands)
|
||||||
Net income (loss)
|
$
|
11,504
|
|
|
$
|
(1,896
|
)
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
|
|
|
||||
Net realized investment losses
|
(130
|
)
|
|
824
|
|
||
Loss (gain) from change in fair value of warrant liability
|
177
|
|
|
(611
|
)
|
||
Depreciation and amortization
|
3,119
|
|
|
2,295
|
|
||
Net amortization of premium on investment securities
|
772
|
|
|
649
|
|
||
Amortization of debt discount and debt issuance costs
|
757
|
|
|
918
|
|
||
Share-based compensation expense
|
4,219
|
|
|
3,156
|
|
||
Deferred income taxes
|
4,449
|
|
|
—
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accrued investment income
|
(445
|
)
|
|
(195
|
)
|
||
Premiums receivable
|
(4,067
|
)
|
|
(3,725
|
)
|
||
Prepaid expenses
|
(81
|
)
|
|
(382
|
)
|
||
Deferred policy acquisition costs, net
|
(4,097
|
)
|
|
(7,598
|
)
|
||
Other assets
|
(929
|
)
|
|
5
|
|
||
Unearned premiums
|
4,246
|
|
|
41,143
|
|
||
Reserve for insurance claims and claims expenses
|
2,047
|
|
|
796
|
|
||
Reinsurance balances, net
|
409
|
|
|
—
|
|
||
Accounts payable and accrued expenses
|
(7,358
|
)
|
|
(7,817
|
)
|
||
Net cash provided by operating activities
|
14,592
|
|
|
27,562
|
|
||
Cash flows from investing activities
|
|
|
|
||||
Purchase of short-term investments
|
(78,564
|
)
|
|
(80,674
|
)
|
||
Purchase of fixed-maturity investments, available-for-sale
|
(116,991
|
)
|
|
(93,974
|
)
|
||
Proceeds from maturity of short-term investments
|
94,677
|
|
|
56,758
|
|
||
Proceeds from redemptions, maturities and sale of fixed-maturity investments, available-for-sale
|
65,587
|
|
|
86,930
|
|
||
Additions to software and equipment
|
(4,863
|
)
|
|
(6,182
|
)
|
||
Net cash used in by investing activities
|
(40,154
|
)
|
|
(37,142
|
)
|
||
Cash flows from financing activities
|
|
|
|
||||
Proceeds from issuance of common stock related to employee equity plans
|
2,614
|
|
|
504
|
|
||
Taxes paid related to net share settlement of equity awards
|
(3,643
|
)
|
|
(664
|
)
|
||
Repayments of term loan
|
(750
|
)
|
|
(750
|
)
|
||
Payments of debt modification costs
|
(370
|
)
|
|
—
|
|
||
Net cash used in financing activities
|
(2,149
|
)
|
|
(910
|
)
|
||
|
|
|
|
||||
Net decrease in cash and cash equivalents
|
(27,711
|
)
|
|
(10,490
|
)
|
||
Cash and cash equivalents, beginning of period
|
47,746
|
|
|
57,317
|
|
||
Cash and cash equivalents, end of period
|
$
|
20,035
|
|
|
$
|
46,827
|
|
|
|
|
|
||||
Supplemental disclosures of cash flow information
|
|
|
|
||||
Interest paid
|
$
|
7,292
|
|
|
$
|
6,431
|
|
Income taxes paid
|
585
|
|
|
—
|
|
As of and for the full year ended December 31, 2016
|
As previously reported
|
|
As adjusted
|
||||
|
(In thousands)
|
||||||
Income Statement
|
|
|
|
||||
Net income
|
$
|
65,841
|
|
|
$
|
64,001
|
|
Income tax (benefit)
|
(54,389
|
)
|
|
(52,550
|
)
|
||
Basic EPS
|
1.11
|
|
|
1.08
|
|
||
Diluted EPS
|
1.08
|
|
|
1.05
|
|
||
|
|
|
|
||||
Balance Sheet
|
|
|
|
||||
Deferred tax asset, net
|
$
|
53,274
|
|
|
$
|
51,434
|
|
Total assets
|
841,737
|
|
|
839,897
|
|
||
Accumulated deficit
|
(94,882
|
)
|
|
(96,722
|
)
|
||
Total shareholder's equity
|
477,349
|
|
|
475,509
|
|
|
Amortized
Cost |
|
Gross Unrealized
|
|
Fair
Value |
||||||||||
|
|
Gains
|
|
Losses
|
|
||||||||||
As of June 30, 2017
|
(In Thousands)
|
||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies
|
$
|
65,679
|
|
|
$
|
31
|
|
|
$
|
(657
|
)
|
|
$
|
65,053
|
|
Municipal debt securities
|
79,154
|
|
|
839
|
|
|
(371
|
)
|
|
79,622
|
|
||||
Corporate debt securities
|
375,817
|
|
|
4,729
|
|
|
(1,355
|
)
|
|
379,191
|
|
||||
Asset-backed securities
|
103,242
|
|
|
1,147
|
|
|
(141
|
)
|
|
104,248
|
|
||||
Total bonds
|
623,892
|
|
|
6,746
|
|
|
(2,524
|
)
|
|
628,114
|
|
||||
Short-term investments
|
45,471
|
|
|
110
|
|
|
—
|
|
|
45,581
|
|
||||
Total investments
|
$
|
669,363
|
|
|
$
|
6,856
|
|
|
$
|
(2,524
|
)
|
|
$
|
673,695
|
|
|
Amortized
Cost |
|
Gross Unrealized
|
|
Fair
Value |
||||||||||
|
|
Gains
|
|
Losses
|
|
||||||||||
As of December 31, 2016
|
(In Thousands)
|
||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies
|
$
|
64,135
|
|
|
$
|
6
|
|
|
$
|
(962
|
)
|
|
$
|
63,179
|
|
Municipal debt securities
|
40,801
|
|
|
131
|
|
|
(663
|
)
|
|
40,269
|
|
||||
Corporate debt securities
|
349,712
|
|
|
1,722
|
|
|
(2,356
|
)
|
|
349,078
|
|
||||
Asset-backed securities
|
114,456
|
|
|
765
|
|
|
(560
|
)
|
|
114,661
|
|
||||
Total bonds
|
569,104
|
|
|
2,624
|
|
|
(4,541
|
)
|
|
567,187
|
|
||||
Short-term investments
|
61,584
|
|
|
198
|
|
|
—
|
|
|
61,782
|
|
||||
Total investments
|
$
|
630,688
|
|
|
$
|
2,822
|
|
|
$
|
(4,541
|
)
|
|
$
|
628,969
|
|
As of June 30, 2017
|
Amortized
Cost |
|
Fair
Value |
||||
|
(In Thousands)
|
||||||
Due in one year or less
|
$
|
124,108
|
|
|
$
|
124,153
|
|
Due after one through five years
|
134,052
|
|
|
135,215
|
|
||
Due after five through ten years
|
297,453
|
|
|
299,591
|
|
||
Due after ten years
|
10,508
|
|
|
10,488
|
|
||
Asset-backed securities
|
103,242
|
|
|
104,248
|
|
||
Total investments
|
$
|
669,363
|
|
|
$
|
673,695
|
|
As of December 31, 2016
|
Amortized
Cost |
|
Fair
Value |
||||
|
(In Thousands)
|
||||||
Due in one year or less
|
$
|
94,382
|
|
|
$
|
94,584
|
|
Due after one through five years
|
173,296
|
|
|
173,251
|
|
||
Due after five through ten years
|
242,005
|
|
|
240,060
|
|
||
Due after ten years
|
6,549
|
|
|
6,413
|
|
||
Asset-backed securities
|
114,456
|
|
|
114,661
|
|
||
Total investments
|
$
|
630,688
|
|
|
$
|
628,969
|
|
|
Less Than 12 Months
|
|
12 Months or Greater
|
|
Total
|
|||||||||||||||||||||
|
# of Securities
|
Fair Value
|
Unrealized Losses
|
|
# of Securities
|
Fair Value
|
Unrealized Losses
|
|
# of Securities
|
Fair Value
|
Unrealized Losses
|
|||||||||||||||
As of June 30, 2017
|
|
(Dollars in Thousands)
|
||||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies
|
34
|
|
$
|
53,299
|
|
$
|
(645
|
)
|
|
3
|
|
$
|
4,738
|
|
$
|
(12
|
)
|
|
37
|
|
$
|
58,037
|
|
$
|
(657
|
)
|
Municipal debt securities
|
14
|
|
26,390
|
|
(353
|
)
|
|
1
|
|
1,732
|
|
(18
|
)
|
|
15
|
|
28,122
|
|
(371
|
)
|
||||||
Corporate debt securities
|
49
|
|
105,388
|
|
(1,066
|
)
|
|
5
|
|
7,916
|
|
(289
|
)
|
|
54
|
|
113,304
|
|
(1,355
|
)
|
||||||
Asset-backed securities
|
12
|
|
20,319
|
|
(108
|
)
|
|
4
|
|
4,395
|
|
(33
|
)
|
|
16
|
|
24,714
|
|
(141
|
)
|
||||||
Total
|
109
|
|
$
|
205,396
|
|
$
|
(2,172
|
)
|
|
13
|
|
$
|
18,781
|
|
$
|
(352
|
)
|
|
122
|
|
$
|
224,177
|
|
$
|
(2,524
|
)
|
|
Less Than 12 Months
|
|
12 Months or Greater
|
|
Total
|
|||||||||||||||||||||
|
# of Securities
|
Fair Value
|
Unrealized Losses
|
|
# of Securities
|
Fair Value
|
Unrealized Losses
|
|
# of Securities
|
Fair Value
|
Unrealized Losses
|
|||||||||||||||
As of December 31, 2016
|
|
(Dollars in Thousands)
|
||||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies
|
33
|
|
$
|
51,093
|
|
$
|
(962
|
)
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
33
|
|
$
|
51,093
|
|
$
|
(962
|
)
|
Municipal debt securities
|
14
|
|
28,659
|
|
(617
|
)
|
|
1
|
|
1,704
|
|
(46
|
)
|
|
15
|
|
30,363
|
|
(663
|
)
|
||||||
Corporate debt securities
|
77
|
|
135,115
|
|
(1,955
|
)
|
|
8
|
|
13,873
|
|
(401
|
)
|
|
85
|
|
148,988
|
|
(2,356
|
)
|
||||||
Asset-backed securities
|
30
|
|
38,702
|
|
(510
|
)
|
|
6
|
|
2,472
|
|
(50
|
)
|
|
36
|
|
41,174
|
|
(560
|
)
|
||||||
Total
|
154
|
|
$
|
253,569
|
|
$
|
(4,044
|
)
|
|
15
|
|
$
|
18,049
|
|
$
|
(497
|
)
|
|
169
|
|
$
|
271,618
|
|
$
|
(4,541
|
)
|
|
For the three months ended June 30,
|
|
For the six months ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(In Thousands)
|
||||||||||||||
Investment income
|
$
|
4,099
|
|
|
$
|
3,536
|
|
|
$
|
8,092
|
|
|
$
|
6,945
|
|
Investment expenses
|
(191
|
)
|
|
(194
|
)
|
|
(377
|
)
|
|
(372
|
)
|
||||
Net investment income
|
$
|
3,908
|
|
|
$
|
3,342
|
|
|
$
|
7,715
|
|
|
$
|
6,573
|
|
|
For the three months ended June 30,
|
|
For the six months ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(In Thousands)
|
||||||||||||||
Gross realized investment gains
|
$
|
188
|
|
|
$
|
61
|
|
|
$
|
467
|
|
|
$
|
617
|
|
Gross realized investment losses
|
—
|
|
|
—
|
|
|
(337
|
)
|
|
(1,441
|
)
|
||||
Net realized investment gains (losses)
|
$
|
188
|
|
|
$
|
61
|
|
|
$
|
130
|
|
|
$
|
(824
|
)
|
|
Fair Value Measurements Using
|
|
|
||||||||||||
|
Quoted Prices in
Active Markets for Identical Assets (Level 1) |
|
Significant Other
Observable Inputs (Level 2) |
|
Significant
Unobservable Inputs (Level 3) |
|
Fair Value
|
||||||||
As of June 30, 2017
|
(In Thousands)
|
||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies
|
$
|
60,215
|
|
|
$
|
4,838
|
|
|
$
|
—
|
|
|
$
|
65,053
|
|
Municipal debt securities
|
—
|
|
|
79,622
|
|
|
—
|
|
|
79,622
|
|
||||
Corporate debt securities
|
—
|
|
|
379,191
|
|
|
—
|
|
|
379,191
|
|
||||
Asset-backed securities
|
—
|
|
|
104,248
|
|
|
—
|
|
|
104,248
|
|
||||
Cash, cash equivalents and short-term investments
|
65,616
|
|
|
—
|
|
|
—
|
|
|
65,616
|
|
||||
Total assets
|
$
|
125,831
|
|
|
$
|
567,899
|
|
|
$
|
—
|
|
|
$
|
693,730
|
|
|
|
|
|
|
|
|
|
||||||||
Warrant liability
|
—
|
|
|
—
|
|
|
3,544
|
|
|
3,544
|
|
||||
Total liabilities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,544
|
|
|
$
|
3,544
|
|
|
Fair Value Measurements Using
|
|
|
||||||||||||
|
Quoted Prices in
Active Markets for Identical Assets (Level 1) |
|
Significant Other
Observable Inputs (Level 2) |
|
Significant
Unobservable Inputs (Level 3) |
|
Fair Value
|
||||||||
As of December 31, 2016
|
(In Thousands)
|
||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies
|
$
|
50,719
|
|
|
$
|
12,460
|
|
|
$
|
—
|
|
|
$
|
63,179
|
|
Municipal debt securities
|
—
|
|
|
40,269
|
|
|
—
|
|
|
40,269
|
|
||||
Corporate debt securities
|
—
|
|
|
349,078
|
|
|
—
|
|
|
349,078
|
|
||||
Asset-backed securities
|
—
|
|
|
114,661
|
|
|
—
|
|
|
114,661
|
|
||||
Cash, cash equivalents and short-term investments
|
109,528
|
|
|
—
|
|
|
—
|
|
|
109,528
|
|
||||
Total assets
|
$
|
160,247
|
|
|
$
|
516,468
|
|
|
$
|
—
|
|
|
$
|
676,715
|
|
|
|
|
|
|
|
|
|
||||||||
Warrant liability
|
—
|
|
|
—
|
|
|
3,367
|
|
|
3,367
|
|
||||
Total liabilities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,367
|
|
|
$
|
3,367
|
|
|
For the six months ended June 30,
|
||||||
Warrant Liability
|
2017
|
|
2016
|
||||
|
(In Thousands)
|
||||||
Balance, January 1
|
$
|
3,367
|
|
|
$
|
1,467
|
|
Change in fair value of warrant liability included in earnings
|
177
|
|
|
(611
|
)
|
||
Balance, June 30
|
$
|
3,544
|
|
|
$
|
856
|
|
As of June 30, 2017
|
|
Principal
|
||
|
|
(In thousands)
|
||
2017
|
|
$
|
750
|
|
2018
|
|
1,500
|
|
|
2019
|
|
145,125
|
|
|
Total
|
|
$
|
147,375
|
|
|
|
|
|
For the three months ended
|
For the six months ended
|
||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
June 30, 2017
|
|
June 30, 2016
|
||||||||
|
(In Thousands)
|
|||||||||||||
Net premiums written
|
|
|
|
|
|
|
||||||||
Direct
|
$
|
46,672
|
|
|
$
|
48,862
|
|
$
|
85,916
|
|
|
$
|
86,991
|
|
Ceded
(1)
|
(6,886
|
)
|
|
—
|
|
(11,527
|
)
|
|
—
|
|
||||
Net premiums written
|
$
|
39,786
|
|
|
$
|
48,862
|
|
$
|
74,389
|
|
|
$
|
86,991
|
|
|
|
|
|
|
|
|
||||||||
Net premiums earned
|
|
|
|
|
|
|
||||||||
Direct
|
$
|
44,233
|
|
|
$
|
26,041
|
|
$
|
81,671
|
|
|
$
|
45,848
|
|
Ceded
(1)
|
(6,316
|
)
|
|
—
|
|
(10,529
|
)
|
|
—
|
|
||||
Net premiums earned
|
$
|
37,917
|
|
|
$
|
26,041
|
|
$
|
71,142
|
|
|
$
|
45,848
|
|
•
|
100%
of existing risk under our pool agreement with Fannie Mae; and
|
•
|
25%
of risk on eligible policies written from September 1, 2016 through December 31, 2017.
|
|
For the three months ended
|
For the six months ended
|
|
||||
|
June 30, 2017
|
|
|||||
|
(In Thousands)
|
||||||
Ceded risk-in-force
|
$
|
2,403,027
|
|
$
|
2,403,027
|
|
|
Ceded premiums written
|
(12,034
|
)
|
(22,326
|
)
|
|
||
Ceded premiums earned
|
(11,463
|
)
|
(21,328
|
)
|
|
||
Ceded claims and claims expenses
|
342
|
|
610
|
|
|
||
Ceding commission written
|
2,407
|
|
4,465
|
|
|
||
Ceding commission earned
|
2,275
|
|
4,340
|
|
|
||
Profit commission
|
6,536
|
|
12,187
|
|
|
|
For the six months ended June 30,
|
||||||
|
2017
|
|
2016
|
||||
|
(In Thousands)
|
||||||
Beginning balance
|
$
|
3,001
|
|
|
$
|
679
|
|
Less reinsurance recoverables
(1)
|
(297
|
)
|
|
—
|
|
||
Beginning balance, net of reinsurance recoverables
|
2,704
|
|
|
679
|
|
||
|
|
|
|
||||
Add claims incurred:
|
|
|
|
||||
Claims and claim expenses incurred:
|
|
|
|
||||
Current year
(2)
|
2,331
|
|
|
1,113
|
|
||
Prior years
|
(323
|
)
|
|
(185
|
)
|
||
Total claims and claims expenses incurred
|
2,008
|
|
|
928
|
|
||
|
|
|
|
||||
Less claims paid:
|
|
|
|
||||
Claims and claim expenses paid:
|
|
|
|
||||
Current year
(2)
|
—
|
|
|
—
|
|
||
Prior years
(3)
|
563
|
|
|
132
|
|
||
Total claims and claim expenses paid
|
563
|
|
|
132
|
|
||
|
|
|
|
||||
Reserve at end of period, net of reinsurance recoverables
|
4,149
|
|
|
1,475
|
|
||
Add reinsurance recoverables
(1)
|
899
|
|
|
—
|
|
||
Balance, June 30
|
$
|
5,048
|
|
|
$
|
1,475
|
|
|
For the three months ended June 30,
|
|
For the six months ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(In Thousands, except for per share data)
|
||||||||||||||
Net income (loss)
|
$
|
6,012
|
|
|
$
|
2,011
|
|
|
$
|
11,504
|
|
|
$
|
(1,896
|
)
|
|
|
|
|
|
|
|
|
||||||||
Basic earnings (loss) per share
|
$
|
0.10
|
|
|
$
|
0.03
|
|
|
$
|
0.19
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
||||||||
Basic weighted average shares outstanding
|
59,823,396
|
|
|
59,105,613
|
|
|
59,576,747
|
|
|
59,005,983
|
|
||||
Dilutive effect of non-vested shares
|
3,186,966
|
|
|
725,286
|
|
|
3,111,816
|
|
|
—
|
|
||||
Dilutive weighted average shares outstanding
|
63,010,362
|
|
|
59,830,899
|
|
|
62,688,563
|
|
|
59,005,983
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Diluted earnings (loss) per share
|
$
|
0.10
|
|
|
$
|
0.03
|
|
|
$
|
0.18
|
|
|
$
|
(0.03
|
)
|
As of and for the six months and year ended
|
June 30, 2017
|
|
December 31, 2016
|
||||
|
(In Thousands)
|
||||||
Statutory net income (loss)
|
$
|
(21,706
|
)
|
|
$
|
(26,653
|
)
|
Statutory surplus
|
390,938
|
|
|
413,809
|
|
||
Contingency reserve
|
131,314
|
|
|
90,479
|
|
||
Risk-to-Capital
|
9.8:1
|
|
|
11.6:1
|
|
•
|
NIW;
|
•
|
premium rates and premium payment type, which are either single, monthly or annual premiums, as described below;
|
•
|
cancellation rates of our insurance policies, which are impacted by payments or prepayments on mortgages, refinancings (which are affected by mortgage interest rates), levels of claims payments and home prices;
|
•
|
cession of premiums under reinsurance arrangements.
|
Primary and pool IIF and NIW
|
As of and for the three months ended
|
|
For the six months ended
|
||||||||||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||||||||||
|
IIF
|
|
NIW
|
|
IIF
|
|
NIW
|
|
NIW
|
||||||||||||||
|
(In Millions)
|
|
(In Millions)
|
||||||||||||||||||||
Monthly
|
$
|
24,865
|
|
|
$
|
4,099
|
|
|
$
|
12,529
|
|
|
$
|
3,700
|
|
|
$
|
6,991
|
|
|
$
|
6,192
|
|
Single
|
13,764
|
|
|
938
|
|
|
11,095
|
|
|
2,138
|
|
|
1,605
|
|
|
3,900
|
|
||||||
Primary
|
38,629
|
|
|
5,037
|
|
|
23,624
|
|
|
5,838
|
|
|
8,596
|
|
|
10,092
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pool
|
3,447
|
|
|
—
|
|
|
3,999
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
42,076
|
|
|
$
|
5,037
|
|
|
$
|
27,623
|
|
|
$
|
5,838
|
|
|
$
|
8,596
|
|
|
$
|
10,092
|
|
Primary and pool premiums written and earned
|
For the three months ended
|
For the six months ended
|
|||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
June 30, 2017
|
June 30, 2016
|
||||||||
|
(In Thousands)
|
||||||||||||
Net premiums written
(1)
|
$
|
39,786
|
|
|
$
|
48,862
|
|
$
|
74,389
|
|
$
|
86,991
|
|
Net premiums earned
(1)
|
37,917
|
|
|
26,041
|
|
71,142
|
|
45,848
|
|
Primary portfolio trends
|
As of and for the three months ended
|
||||||||||||||||||
|
June 30, 2017
|
|
March 31, 2017
|
|
December 31, 2016
|
|
September 30, 2016
|
|
June 30, 2016
|
||||||||||
|
($ Values In Millions)
|
||||||||||||||||||
New insurance written
|
$
|
5,037
|
|
|
$
|
3,559
|
|
|
$
|
5,240
|
|
|
$
|
5,857
|
|
|
$
|
5,838
|
|
New risk written
|
1,242
|
|
|
868
|
|
|
1,244
|
|
|
1,415
|
|
|
1,411
|
|
|||||
Insurance in force
(1)
|
38,629
|
|
|
34,779
|
|
|
32,168
|
|
|
28,228
|
|
|
23,624
|
|
|||||
Risk in force
(1)
|
9,417
|
|
|
8,444
|
|
|
7,790
|
|
|
6,847
|
|
|
5,721
|
|
|||||
Policies in force (count)
(1)
|
161,195
|
|
|
145,632
|
|
|
134,662
|
|
|
119,002
|
|
|
100,547
|
|
|||||
Weighted-average coverage
(2)
|
24.4
|
%
|
|
24.3
|
%
|
|
24.2
|
%
|
|
24.3
|
%
|
|
24.2
|
%
|
|||||
Loans in default (count)
|
249
|
|
|
207
|
|
|
179
|
|
|
115
|
|
|
79
|
|
|||||
Percentage of loans in default
|
0.2
|
%
|
|
0.1
|
%
|
|
0.1
|
%
|
|
0.1
|
%
|
|
0.1
|
%
|
|||||
Risk in force on defaulted loans
|
$
|
14
|
|
|
$
|
12
|
|
|
$
|
10
|
|
|
$
|
6
|
|
|
$
|
4
|
|
Average premium yield
(3)
|
0.41
|
%
|
|
0.40
|
%
|
|
0.44
|
%
|
|
0.48
|
%
|
|
0.47
|
%
|
|||||
Earnings from cancellations
|
$
|
3.8
|
|
|
$
|
2.5
|
|
|
$
|
5.1
|
|
|
$
|
5.8
|
|
|
$
|
3.5
|
|
Annual persistency
|
83.1
|
%
|
|
81.3
|
%
|
|
80.7
|
%
|
|
81.8
|
%
|
|
83.3
|
%
|
|||||
Quarterly run-off
(4)
|
3.4
|
%
|
|
2.9
|
%
|
|
4.6
|
%
|
|
5.3
|
%
|
|
4.2
|
%
|
(1)
|
Reported as of the end of the period.
|
(2)
|
Calculated as end of period RIF divided by IIF.
|
(3)
|
Calculated as net primary and pool premiums earned, net of reinsurance, divided by average gross IIF for the period, annualized.
|
(4)
|
Defined as the percentage of IIF that is no longer on our books after any three-month period.
|
Primary IIF
|
For the three months ended
|
|
For the six months ended
|
||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||
|
(In Millions)
|
||||||||||||||
IIF, beginning of period
|
$
|
34,779
|
|
|
$
|
18,564
|
|
|
$
|
32,168
|
|
|
$
|
14,824
|
|
NIW
|
5,037
|
|
|
5,838
|
|
|
8,596
|
|
|
10,092
|
|
||||
Cancellations and other reductions
|
(1,187
|
)
|
|
(778
|
)
|
|
(2,135
|
)
|
|
(1,292
|
)
|
||||
IIF, end of period
|
$
|
38,629
|
|
|
$
|
23,624
|
|
|
$
|
38,629
|
|
|
$
|
23,624
|
|
Primary IIF and RIF
|
As of June 30, 2017
|
|
As of June 30, 2016
|
||||||||||||
|
IIF
|
|
RIF
|
|
IIF
|
|
RIF
|
||||||||
|
(In Millions)
|
||||||||||||||
June 30, 2017
|
$
|
8,460
|
|
|
$
|
2,078
|
|
|
$
|
—
|
|
|
$
|
—
|
|
2016
|
19,288
|
|
|
4,650
|
|
|
9,951
|
|
|
2,393
|
|
||||
2015
|
9,243
|
|
|
2,284
|
|
|
11,348
|
|
|
2,762
|
|
||||
2014
|
1,596
|
|
|
395
|
|
|
2,266
|
|
|
552
|
|
||||
2013
|
42
|
|
|
10
|
|
|
59
|
|
|
14
|
|
||||
Total
|
$
|
38,629
|
|
|
$
|
9,417
|
|
|
$
|
23,624
|
|
|
$
|
5,721
|
|
Primary NIW by FICO
|
For the three months ended
|
|
For the six months ended
|
||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||
|
($ In Millions)
|
||||||||||||||
>= 760
|
$
|
2,376
|
|
|
$
|
3,160
|
|
|
$
|
4,059
|
|
|
$
|
5,442
|
|
740-759
|
793
|
|
|
961
|
|
|
1,343
|
|
|
1,672
|
|
||||
720-739
|
626
|
|
|
672
|
|
|
1,082
|
|
|
1,144
|
|
||||
700-719
|
568
|
|
|
541
|
|
|
965
|
|
|
952
|
|
||||
680-699
|
368
|
|
|
308
|
|
|
632
|
|
|
554
|
|
||||
<=679
|
306
|
|
|
196
|
|
|
515
|
|
|
328
|
|
||||
Total
|
$
|
5,037
|
|
|
$
|
5,838
|
|
|
$
|
8,596
|
|
|
$
|
10,092
|
|
Weighted average FICO
|
749
|
|
|
756
|
|
|
749
|
|
|
756
|
|
Primary NIW by LTV
|
For the three months ended
|
For the six months ended
|
||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
June 30, 2017
|
|
June 30, 2016
|
||||||||
|
($ In Millions)
|
|||||||||||||
95.01% and above
|
$
|
474
|
|
|
$
|
362
|
|
$
|
748
|
|
|
$
|
571
|
|
90.01% to 95.00%
|
2,297
|
|
|
2,633
|
|
3,909
|
|
|
4,448
|
|
||||
85.01% to 90.00%
|
1,506
|
|
|
1,732
|
|
2,607
|
|
|
3,153
|
|
||||
85.00% and below
|
760
|
|
|
1,111
|
|
1,332
|
|
|
1,920
|
|
||||
Total
|
$
|
5,037
|
|
|
$
|
5,838
|
|
$
|
8,596
|
|
|
$
|
10,092
|
|
Weighted average LTV
|
92.18
|
%
|
|
91.73
|
%
|
92.11
|
%
|
|
91.65
|
%
|
Primary NIW by purchase/refinance mix
|
For the three months ended
|
|
For the six months ended
|
||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||
|
(In Millions)
|
||||||||||||||
Purchase
|
$
|
4,518
|
|
|
$
|
4,199
|
|
|
$
|
7,502
|
|
|
$
|
7,118
|
|
Refinance
|
519
|
|
|
1,639
|
|
|
1,094
|
|
|
2,974
|
|
||||
Total
|
$
|
5,037
|
|
|
$
|
5,838
|
|
|
$
|
8,596
|
|
|
$
|
10,092
|
|
Primary IIF by FICO
|
As of
|
||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
||||||||||
|
($ Values In Millions)
|
||||||||||||
>= 760
|
$
|
19,224
|
|
|
50
|
%
|
|
$
|
11,929
|
|
|
50
|
%
|
740-759
|
6,269
|
|
|
16
|
|
|
3,876
|
|
|
16
|
|
||
720-739
|
4,927
|
|
|
13
|
|
|
3,082
|
|
|
13
|
|
||
700-719
|
3,973
|
|
|
10
|
|
|
2,341
|
|
|
10
|
|
||
680-699
|
2,615
|
|
|
7
|
|
|
1,561
|
|
|
7
|
|
||
<=679
|
1,621
|
|
|
4
|
|
|
835
|
|
|
4
|
|
||
Total
|
$
|
38,629
|
|
|
100
|
%
|
|
$
|
23,624
|
|
|
100
|
%
|
Primary RIF by FICO
|
As of
|
||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
||||||||||
|
($ Values In Millions)
|
||||||||||||
>= 760
|
$
|
4,720
|
|
|
50
|
%
|
|
$
|
2,895
|
|
|
51
|
%
|
740-759
|
1,535
|
|
|
16
|
|
|
951
|
|
|
17
|
|
||
720-739
|
1,198
|
|
|
13
|
|
|
750
|
|
|
13
|
|
||
700-719
|
960
|
|
|
10
|
|
|
566
|
|
|
10
|
|
||
680-699
|
627
|
|
|
7
|
|
|
369
|
|
|
6
|
|
||
<=679
|
377
|
|
|
4
|
|
|
190
|
|
|
3
|
|
||
Total
|
$
|
9,417
|
|
|
100
|
%
|
|
$
|
5,721
|
|
|
100
|
%
|
Primary IIF by LTV
|
As of
|
||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
||||||||||
|
($ Values In Millions)
|
||||||||||||
95.01% and above
|
$
|
2,367
|
|
|
6
|
%
|
|
$
|
1,049
|
|
|
4
|
%
|
90.01% to 95.00%
|
17,441
|
|
|
46
|
|
|
10,574
|
|
|
45
|
|
||
85.01% to 90.00%
|
12,157
|
|
|
31
|
|
|
7,754
|
|
|
33
|
|
||
85.00% and below
|
6,664
|
|
|
17
|
|
|
4,247
|
|
|
18
|
|
||
Total
|
$
|
38,629
|
|
|
100
|
%
|
|
$
|
23,624
|
|
|
100
|
%
|
Primary RIF by LTV
|
As of
|
||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
||||||||||
|
($ Values In Millions)
|
||||||||||||
95.01% and above
|
$
|
648
|
|
|
7
|
%
|
|
$
|
293
|
|
|
5
|
%
|
90.01% to 95.00%
|
5,120
|
|
|
54
|
|
|
3,116
|
|
|
55
|
|
||
85.01% to 90.00%
|
2,893
|
|
|
31
|
|
|
1,838
|
|
|
32
|
|
||
85.00% and below
|
756
|
|
|
8
|
|
|
474
|
|
|
8
|
|
||
Total
|
$
|
9,417
|
|
|
100
|
%
|
|
$
|
5,721
|
|
|
100
|
%
|
Primary RIF by Loan Type
|
As of
|
||||
|
June 30, 2017
|
|
June 30, 2016
|
||
|
|
|
|
||
Fixed
|
98
|
%
|
|
98
|
%
|
Adjustable rate mortgages:
|
|
|
|
||
Less than five years
|
—
|
|
|
—
|
|
Five years and longer
|
2
|
|
|
2
|
|
Total
|
100
|
%
|
|
100
|
%
|
|
As of June 30, 2017
|
|||||||||||||||||||||||||||
Book year
|
Original Insurance Written
|
|
Remaining Insurance in Force
|
|
% Remaining of Original Insurance
|
|
Policies Ever in Force
|
|
Number of Policies in Force
|
|
Number of Loans in Default
|
|
# of Claims Paid
|
|
Incurred Loss Ratio (Inception to Date)
(1)
|
|
Cumulative default rate
(2)
|
|||||||||||
|
($ Values in Millions)
|
|||||||||||||||||||||||||||
2013
|
$
|
162
|
|
|
$
|
42
|
|
|
26
|
%
|
|
655
|
|
|
212
|
|
|
1
|
|
|
1
|
|
|
0.2
|
%
|
|
0.3
|
%
|
2014
|
3,451
|
|
|
1,596
|
|
|
46
|
%
|
|
14,786
|
|
|
7,963
|
|
|
53
|
|
|
7
|
|
|
3.5
|
%
|
|
0.4
|
%
|
||
2015
|
12,422
|
|
|
9,243
|
|
|
74
|
%
|
|
52,548
|
|
|
41,747
|
|
|
128
|
|
|
13
|
|
|
2.7
|
%
|
|
0.3
|
%
|
||
2016
|
21,187
|
|
|
19,288
|
|
|
91
|
%
|
|
83,626
|
|
|
78,111
|
|
|
67
|
|
|
2
|
|
|
1.3
|
%
|
|
0.1
|
%
|
||
2017
|
8,596
|
|
|
8,460
|
|
|
98
|
%
|
|
33,593
|
|
|
33,162
|
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
—
|
%
|
||
Total
|
$
|
45,818
|
|
|
$
|
38,629
|
|
|
|
|
185,208
|
|
|
161,195
|
|
|
249
|
|
|
23
|
|
|
|
|
|
(1)
|
The ratio of total claims incurred (paid and reserved) divided by cumulative premiums earned, net of reinsurance.
|
(2)
|
The sum of the number of claims paid ever to date and number of loans in default as of the end of the period divided by policies ever in force.
|
Top 10 primary RIF by state
|
As of
|
||||
|
June 30, 2017
|
|
June 30, 2016
|
||
California
|
13.8
|
%
|
|
13.0
|
%
|
Texas
|
7.5
|
|
|
6.8
|
|
Virginia
|
6.0
|
|
|
6.4
|
|
Florida
|
4.4
|
|
|
5.0
|
|
Arizona
|
4.2
|
|
|
3.8
|
|
Colorado
|
3.9
|
|
|
4.1
|
|
Maryland
|
3.7
|
|
|
3.4
|
|
Utah
|
3.7
|
|
|
3.4
|
|
Pennsylvania
|
3.6
|
|
|
3.5
|
|
Michigan
|
3.6
|
|
|
4.1
|
|
Total
|
54.4
|
%
|
|
53.5
|
%
|
|
For the three months ended
|
|
For the six months ended
|
||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||
|
(In Thousands)
|
||||||||||||||
Beginning balance
|
$
|
3,761
|
|
|
$
|
1,137
|
|
|
$
|
3,001
|
|
|
$
|
679
|
|
Less reinsurance recoverables
(1)
|
(564
|
)
|
|
—
|
|
|
(297
|
)
|
|
—
|
|
||||
Beginning balance, net of reinsurance recoverables
|
3,197
|
|
|
1,137
|
|
|
2,704
|
|
|
679
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Add claims incurred:
|
|
|
|
|
|
|
|
||||||||
Claims and claim expenses incurred:
|
|
|
|
|
|
|
|
||||||||
Current year
(2)
|
1,376
|
|
|
560
|
|
|
2,331
|
|
|
1,113
|
|
||||
Prior years
|
(3
|
)
|
|
(90
|
)
|
|
(323
|
)
|
|
(185
|
)
|
||||
Total claims and claims expenses incurred
|
1,373
|
|
|
470
|
|
|
2,008
|
|
|
928
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Less claims paid:
|
|
|
|
|
|
|
|
||||||||
Claims and claim expenses paid:
|
|
|
|
|
|
|
|
||||||||
Current year
(2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Prior years
(3)
|
421
|
|
|
132
|
|
|
563
|
|
|
132
|
|
||||
Total claims and claim expenses paid
|
421
|
|
|
132
|
|
|
563
|
|
|
132
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Reserve at end of period, net of reinsurance recoverables
|
4,149
|
|
|
1,475
|
|
|
4,149
|
|
|
1,475
|
|
||||
Add reinsurance recoverables
(1)
|
899
|
|
|
—
|
|
|
899
|
|
|
—
|
|
||||
Balance, June 30
|
$
|
5,048
|
|
|
$
|
1,475
|
|
|
$
|
5,048
|
|
|
$
|
1,475
|
|
|
Three months ended
|
|
Six months ended
|
||||||||
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||
Beginning default inventory
|
207
|
|
|
55
|
|
|
179
|
|
|
36
|
|
Plus: new defaults
|
147
|
|
|
50
|
|
|
271
|
|
|
89
|
|
Less: cures
|
(97
|
)
|
|
(23
|
)
|
|
(189
|
)
|
|
(43
|
)
|
Less: claims paid
|
(8
|
)
|
|
(3
|
)
|
|
(12
|
)
|
|
(3
|
)
|
Ending default inventory
|
249
|
|
|
79
|
|
|
249
|
|
|
79
|
|
|
For the three months ended
|
|
For the six months ended
|
||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||
|
($ Values In Thousands)
|
||||||||||||||
Number of claims paid
|
8
|
|
|
3
|
|
|
12
|
|
|
3
|
|
||||
Total amount paid for claims
|
$
|
429
|
|
|
$
|
132
|
|
|
$
|
571
|
|
|
$
|
132
|
|
Average amount paid per claim
|
$
|
54
|
|
|
$
|
44
|
|
|
$
|
48
|
|
|
$
|
44
|
|
Severity
(1)
|
86
|
%
|
|
71
|
%
|
|
87
|
%
|
|
71
|
%
|
Average reserve per default:
|
As of June 30, 2017
|
|
As of June 30, 2016
|
||||
|
(In Thousands)
|
||||||
Case
(1)
|
$
|
19
|
|
|
$
|
17
|
|
IBNR
|
1
|
|
|
1
|
|
||
Total
|
$
|
20
|
|
|
$
|
18
|
|
|
As of
|
||||||
|
June 30, 2017
|
|
June 30, 2016
|
||||
|
|
(In thousands)
|
|||||
Available assets
|
$
|
485,019
|
|
|
$
|
432,074
|
|
Risk-based required assets
|
298,091
|
|
|
377,468
|
|
Consolidated statements of operations
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||
Revenues
|
(In Thousands)
|
||||||||||||||
Net premiums earned
|
37,917
|
|
|
$
|
26,041
|
|
|
$
|
71,142
|
|
|
$
|
45,848
|
|
|
Net investment income
|
3,908
|
|
|
3,342
|
|
|
7,715
|
|
|
6,573
|
|
||||
Net realized investment gains (losses)
|
188
|
|
|
61
|
|
|
130
|
|
|
(824
|
)
|
||||
Other revenues
|
185
|
|
|
37
|
|
|
265
|
|
|
69
|
|
||||
Total revenues
|
42,198
|
|
|
29,481
|
|
|
79,252
|
|
|
51,666
|
|
||||
Expenses
|
|
|
|
|
|
|
|
||||||||
Insurance claims and claims expenses
|
1,373
|
|
|
470
|
|
|
2,008
|
|
|
928
|
|
||||
Underwriting and operating expenses
|
28,048
|
|
|
23,234
|
|
|
54,037
|
|
|
45,906
|
|
||||
Total expenses
|
29,421
|
|
|
23,704
|
|
|
56,045
|
|
|
46,834
|
|
||||
Other (expense) income
|
|
|
|
|
|
|
|
||||||||
Gain (loss) from change in fair value of warrant liability
|
19
|
|
|
(59
|
)
|
|
(177
|
)
|
|
611
|
|
||||
Interest expense
|
(3,300
|
)
|
|
(3,707
|
)
|
|
(6,794
|
)
|
|
(7,339
|
)
|
||||
Income (loss) before income taxes
|
9,496
|
|
|
2,011
|
|
|
16,236
|
|
|
(1,896
|
)
|
||||
Income tax expense
|
3,484
|
|
|
—
|
|
|
4,732
|
|
|
—
|
|
||||
Net income (loss)
|
$
|
6,012
|
|
|
$
|
2,011
|
|
|
$
|
11,504
|
|
|
$
|
(1,896
|
)
|
|
|
|
|
|
|
|
|
||||||||
Loss ratio
(1)
|
3.6
|
%
|
|
1.8
|
%
|
|
2.8
|
%
|
|
2.0
|
%
|
||||
Expense ratio
(2)
|
74.0
|
%
|
|
89.2
|
%
|
|
76.0
|
%
|
|
100.1
|
%
|
||||
Combined ratio
|
77.6
|
%
|
|
91.0
|
%
|
|
78.8
|
%
|
|
102.1
|
%
|
Consolidated balance sheets
|
June 30, 2017
|
|
December 31, 2016
(1)
|
||||
|
(In Thousands)
|
||||||
Total investment portfolio
|
$
|
673,695
|
|
|
$
|
628,969
|
|
Cash and cash equivalents
|
20,035
|
|
|
47,746
|
|
||
Premiums receivable
|
17,795
|
|
|
13,728
|
|
||
Deferred policy acquisition costs, net
|
34,206
|
|
|
30,109
|
|
||
Software and equipment, net
|
21,530
|
|
|
20,402
|
|
||
Prepaid reinsurance premiums
|
38,919
|
|
|
37,921
|
|
||
Deferred tax asset, net
|
45,771
|
|
|
51,434
|
|
||
Other assets
|
11,044
|
|
|
9,588
|
|
||
Total assets
|
$
|
862,995
|
|
|
$
|
839,897
|
|
Term loan
|
$
|
143,990
|
|
|
$
|
144,353
|
|
Unearned premiums
|
157,152
|
|
|
152,906
|
|
||
Accounts payable and accrued expenses
|
21,349
|
|
|
25,297
|
|
||
Reserve for insurance claims and claims expenses
|
5,048
|
|
|
3,001
|
|
||
Reinsurance funds withheld
|
32,042
|
|
|
30,633
|
|
||
Deferred ceding commission
|
4,830
|
|
|
4,831
|
|
||
Warrant liability
|
3,544
|
|
|
3,367
|
|
||
Total liabilities
|
367,955
|
|
|
364,388
|
|
||
Total shareholders' equity
|
495,040
|
|
|
475,509
|
|
||
Total liabilities and shareholders' equity
|
$
|
862,995
|
|
|
$
|
839,897
|
|
Consolidated cash flows
|
For the six months ended June 30,
|
||||||
|
2017
|
|
2016
|
||||
Net cash (used in) provided by:
|
(In Thousands)
|
||||||
Operating activities
|
$
|
14,592
|
|
|
$
|
27,562
|
|
Investing activities
|
(40,154
|
)
|
|
(37,142
|
)
|
||
Financing activities
|
(2,149
|
)
|
|
(910
|
)
|
||
Net decrease in cash and cash equivalents
|
$
|
(27,711
|
)
|
|
$
|
(10,490
|
)
|
Percentage of portfolio's fair value
|
June 30, 2017
|
|
December 31, 2016
|
|||
1.
|
Corporate debt securities
|
55
|
%
|
|
52
|
%
|
2.
|
U.S. treasury securities and obligations of U.S. government agencies
|
9
|
|
|
9
|
|
3.
|
Asset-backed securities
|
15
|
|
|
17
|
|
4.
|
Cash, cash equivalents, and short-term investments
|
10
|
|
|
16
|
|
5.
|
Municipal debt securities
|
11
|
|
|
6
|
|
|
Total
|
100
|
%
|
|
100
|
%
|
Investment portfolio ratings at fair value
|
June 30, 2017
|
|
December 31, 2016
|
||
AAA
|
20
|
%
|
|
24
|
%
|
AA
|
22
|
|
|
19
|
|
A
|
43
|
|
|
44
|
|
BBB
|
15
|
|
|
13
|
|
Total
|
100
|
%
|
|
100
|
%
|
•
|
Changes to the level of interest rates
. Increasing interest rates may reduce the value of certain fixed-rate bonds held in the investment portfolio. Higher rates may cause variable rate assets to generate additional income. Decreasing rates will have the reverse impact. Significant changes in interest rates can also affect persistency and claim rates of our insurance portfolio, and as a result we may determine that our investment portfolio needs to be restructured to better align it with future liabilities and claim payments. Such restructuring may cause investments to be liquidated when market conditions are adverse. Additionally, the changes in Eurodollar based interest rates affect the interest expense related to the Company's debt.
|
•
|
Changes to the term structure of interest rates
. Rising or falling rates typically change by different amounts along the yield curve. These changes may have unforeseen impacts on the value of certain assets.
|
•
|
Market volatility/changes in the real or perceived credit quality of investments
. Deterioration in the quality of investments, identified through changes to our own or third party (e.g., rating agency) assessments, will reduce the value and potentially the liquidity of investments.
|
•
|
Concentration Risk
. If the investment portfolio is highly concentrated in one asset, or in multiple assets whose values are highly correlated, the value of the total portfolio may be greatly affected by the change in value of just one asset or a group of highly correlated assets.
|
•
|
Prepayment Risk
. Bonds may have call provisions that permit debtors to repay prior to maturity when it is to their advantage. This typically occurs when rates fall below the interest rate of the debt.
|
|
NMI HOLDINGS, INC.
|
August 1, 2017
|
By: /s/ Adam Pollitzer
|
|
Name: Adam Pollitzer
Title: Chief Financial Officer and Duly Authorized Signatory
|
Exhibit Number
|
|
Description
|
|
|
|
2.1
|
|
Stock Purchase Agreement, dated November 30, 2011, between NMI Holdings, Inc. and MAC Financial Ltd. (incorporated herein by reference to Exhibit 2.1 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
2.2
|
|
Amendment to Stock Purchase Agreement, dated April 6, 2012, between NMI Holdings, Inc. and MAC Financial Ltd. (incorporated herein by reference to Exhibit 2.2 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
3.1
|
|
Second Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
3.2
|
|
Third Amended and Restated By-Laws (incorporated herein by reference to Exhibit 3.1 to our Form 8-K, filed on December 9, 2014)
|
4.1
|
|
Specimen Class A common stock certificate (incorporated herein by reference to Exhibit 4.1 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
4.2
|
|
Registration Rights Agreement between NMI Holdings, Inc. and FBR Capital Markets & Co., dated April 24, 2012 (incorporated herein by reference to Exhibit 4.2 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
4.3
|
|
Registration Rights Agreement by and between MAC Financial Ltd. and NMI Holdings, Inc., dated April 24, 2012 (incorporated herein by reference to Exhibit 4.3 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
4.4
|
|
Registration Rights Agreement between FBR & Co., FBR Capital Markets LT, Inc., FBR Capital Markets & Co., FBR Capital Markets PT, Inc. and NMI Holdings, Inc., dated April 24, 2012 (incorporated herein by reference to Exhibit 4.4 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
4.5
|
|
Warrant No. 1 to Purchase Common Stock of NMI Holdings, Inc. issued to FBR Capital Markets & Co., dated June 13, 2013 (incorporated herein by reference to Exhibit 4.5 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
4.6
|
|
Form of Warrant to Purchase Common Stock of NMI Holdings, Inc. issued to former stockholders of MAC Financial Ltd.(incorporated herein by reference to Exhibit 4.6 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
10.1 ~
|
|
NMI Holdings Inc. 2012 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.1 to our Form S-1 Registration Statement (registration No. 333-191635), filed on October 9, 2013)
|
10.2 ~
|
|
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Restricted Stock Unit Award Agreement for Chief Executive Officer and Chief Financial Officer (incorporated herein by reference to Exhibit 10.2 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
10.3 ~
|
|
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Restricted Stock Unit Award Agreement for Management (incorporated herein by reference to Exhibit 10.3 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
10.4 ~
|
|
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Restricted Stock Unit Award Agreement for Directors (incorporated herein by reference to Exhibit 10.4 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
10.5 ~
|
|
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Award Agreement for Chief Executive Officer and Chief Financial Officer (incorporated herein by reference to Exhibit 10.5 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
10.6 ~
|
|
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Award Agreement for Management (incorporated herein by reference to Exhibit 10.6 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
10.7 ~
|
|
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Award Agreement for Directors (incorporated herein by reference to Exhibit 10.7 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
10.8 ~
|
|
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Award Agreement for Chief Executive Officer and Chief Financial Officer (incorporated herein by reference to Exhibit 10.8 to our Form 10-K, filed on February 17, 2017)
|
10.9 ~
|
|
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Award Agreement for Employees (incorporated herein by reference to Exhibit 10.9 to our Form 10-K, filed on February 17, 2017)
|
10.10 ~
|
|
Amended and Restated Employment Agreement by and between NMI Holdings, Inc. and Bradley M. Shuster, dated December 23, 2015 (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on December 29, 2015)
|
10.11 ~
|
|
Offer Letter by and between NMI Holdings, Inc. and Glenn Farrell, effective December 4, 2014 (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on December 9, 2014)
|
10.12 ~
|
|
Offer Letter by and between NMI Holdings, Inc. and William Leatherberry, dated July 11, 2014 (incorporated herein by reference to Exhibit 10.10 to our Form 10-Q, filed on April 28, 2016)
|
10.13~
|
|
Offer Letter by and between NMI Holdings, Inc. and Adam Pollitzer, dated February 1, 2017 (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on February 3, 2017)
|
10.14 ~
|
|
Form of Indemnification Agreement between NMI Holdings, Inc. and its directors and certain executive officers (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on November 25, 2014)
|
10.15 +
|
|
Commitment Letter dated July 12, 2013 for Bulk Fannie Mae-Paid Loss-on-Sale Mortgage Insurance on the Portfolio of approximately $5.46 billion Purchased by Fannie Mae and Identified by Fannie Mae as Deal No. 2013 MIRT 01 and by the Company as Policy No. P-0001-01 (incorporated herein by reference to Exhibit 10.14 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
10.16
|
|
Credit Agreement, dated November 10, 2015, between NMI Holdings, Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated herein by reference to Exhibit 4.1 to our Form 8-K, filed on November 10, 2015)
|
10.17
|
|
Amendment No. 1, dated February 10, 2017, to the Credit Agreement dated November 10, 2015, between NMI Holdings, Inc., the lender parties thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on February 10, 2017)
|
10.18 ~
|
|
NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan (incorporated herein by reference to Appendix A to our 2017 Annual Proxy Statement, filed on March 30, 2017)
|
10.19 ~
|
|
Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement for Chief Executive Officer
|
10.20 ~
|
|
Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement for Executive Officers
|
10.21 ~
|
|
Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement for Employees
|
10.22~
|
|
Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement for Independent Directors
|
10.23 ~
|
|
Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Nonqualified Stock Option Award Agreement for Chief Executive Officer
|
10.24 ~
|
|
Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Nonqualified Stock Option Award Agreement for Executive Officers and Employees
|
10.25 ~
|
|
Form of NMI Holdings, Inc. 2014 Omnibus Incentive Plan Phantom Unit Award Agreement for Independent Directors (incorporated herein by reference to Exhibit 10.21 to our Form 10-Q, filed on August 5, 2015)
|
10.26 ~
|
|
Form of NMI Holdings, Inc. 2014 Omnibus Incentive Plan Performance Based Restricted Stock Unit Award Agreement for Chief Executive Officer (incorporated herein by reference to Exhibit 10.26 to our Form 10-K, filed on February 17, 2017)
|
10.27 ~
|
|
NMI Holdings, Inc. Severance Benefit Plan (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on February 17, 2016)
|
10.28~
|
|
Change in Control Severance Benefit Plan (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on February 23, 2017)
|
10.29~
|
|
Clawback Policy (incorporated herein by reference to Exhibit 10.2 to our Form 8-K, filed on February 23, 2017)
|
10.30~
|
|
Separation Agreement between NMI Holdings, Inc. and Glenn Farrell effective July 31, 2017 (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on August 1, 2017)
|
21.1
|
|
Subsidiaries of NMI Holdings, Inc. (incorporated herein by reference to Exhibit 21.1 to our Form 10-Q, filed on October 30, 2015)
|
31.1
|
|
Principal Executive Officer's Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
31.2
|
|
Principal Financial Officer's Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
32.1 #
|
|
Certifications of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
101 *
|
|
The following financial information from NMI Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 formatted in XBRL (eXtensible Business Reporting Language):
(i) Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016 (ii) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2017 and 2016
(iii) Condensed Consolidated Statements of Changes in Shareholders' Equity for the six months ended June 30, 2017 and the year ended December 31, 2016
(iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016, and (v) Notes to Condensed Consolidated Financial Statements. |
~
|
Indicates a management contract or compensatory plan or contract.
|
+
|
Confidential treatment granted as to certain portions, which portions have been filed separately with the SEC.
|
#
|
In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibit 32 hereto are deemed to accompany this Form 10-Q and will not be deemed "filed" for purposes of Section 18 of the Exchange Act or deemed to be incorporated by reference into any filing under the Exchange Act or the Securities Act except to the extent that the registrant specifically incorporates it by reference.
|
*
|
In accordance with Rule 406T of Regulation S-T, the information furnished in these exhibits will not be deemed "filed" for purposes of Section 18 of the Exchange Act. Such exhibits will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act except to the extent that the registrant specifically incorporates it by reference.
|
1.
|
Grant of Restricted Stock Unit Award
.
|
(a)
|
Grant
. The Company hereby grants to Participant an award of restricted stock units with respect to [•] Shares (the “
RSUs
”) on the terms and conditions set forth in this Agreement and as otherwise provided in the Plan.
|
(b)
|
Incorporation by Reference, Etc.
The provisions of the Plan are hereby incorporated herein by reference. Except as otherwise expressly set forth herein, this Agreement shall be construed in accordance with the provisions of the Plan and any capitalized terms not otherwise defined in this Agreement shall have the definitions set forth in the Plan.
|
2.
|
Vesting
.
|
(a)
|
Except as may otherwise be provided herein, (i) one-third of the RSUs (rounded down to the nearest whole Share) shall become vested on the first anniversary of the Grant Date, (ii) one-third of the RSUs (rounded down to the nearest whole Share) shall become vested on the second anniversary of the Grant Date and (iii) the remainder of the RSUs shall become vested on the third anniversary of the Grant Date, in the case of each of clauses (i), (ii) and (iii), subject to Participant not having incurred a Termination of Employment prior to the applicable vesting date.
|
(b)
|
Except as provided in the immediately following sentence, in the event that Participant incurs a Termination of Employment, unvested RSUs shall be forfeited by Participant without consideration therefor. Notwithstanding the foregoing, in the event that Participant incurs a Termination of Employment (i) as a result of termination by the Company or its Affiliate without “Cause” (as defined in Participant’s employment agreement with the Company dated as of December 23, 2015 without regard to the earlier expiration of such agreement (the “
Employment Agreement
”)) or for “Good Reason” (as defined in the Employment Agreement), subject to Participant having served as an employee of the Company or its Affiliate for at least one year, any unvested RSUs shall immediately vest in full as of the date of Participant’s Termination of Employment and be settled in accordance with Section 3 of this Agreement, or (ii) due to Participant’s death or “Disability” (as defined in the Employment Agreement), any unvested RSUs that are outstanding immediately prior to such Termination of Employment and that would have vested on the next vesting date shall vest pro-rata as of the date of Participant’s Termination of Employment, with the number of RSUs vesting to be determined by multiplying the number of RSUs that would have vested on the next vesting date by a fraction, the numerator of which is the number of days between the prior vesting date (or Grant Date if no vesting date occurred prior to Participant’s Termination of Employment) and the date of Participant’s Termination of Employment and the denominator of which is 365.
|
3.
|
Settlement
. As soon as practicable after any RSUs have vested (and in any event, no later than fifteen business days immediately following the date of such vesting), such RSUs shall be settled. Subject to Section 4 (pertaining
|
4.
|
Tax Withholding
. As a condition to delivery of the Shares in respect of vested RSUs, Section 15(d) of the Plan requires Participant to make provisions satisfactory to the Company for payment of, any federal, state or local taxes and other statutory obligations (including, but not limited to, Participant’s FICA and SDI obligations) in respect of the transfer of Shares in settlement of the RSUs. The Company shall have the power and the right to (i) deduct or withhold from all amounts payable to Participant pursuant to the RSUs or otherwise, or (ii) require Participant to remit to the Company, an amount sufficient to satisfy any applicable taxes of any kind or other statutory obligations (including, but not limited to, Participant’s FICA and SDI obligations) which the Company, in its sole discretion, deems necessary to be withheld or remitted to comply with the Code and/or any other applicable law, rule or regulation with respect to the RSUs and, if Participant fails to do so, the Company may otherwise refuse to issue or transfer any Shares otherwise required to be issued pursuant to this Agreement. The Company may permit or require any such statutorily required minimum withholding obligation with regard to Participant to be satisfied by reducing the amount of Shares otherwise deliverable to Participant hereunder.
|
5.
|
No Rights as Stockholder
. Until such time as the RSUs have been settled and the underlying Shares have been delivered to Participant and Participant has become the holder of record of such Shares, Participant shall have no rights as a stockholder, including, without limitation, the right to dividends and the right to vote.
|
6.
|
Transferability
. The RSUs may not, at any time prior to becoming vested, be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by Participant other than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company, its Subsidiary or Affiliate;
provided
that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.
|
7.
|
Adjustment
. Upon any event described in Section 3(d) of the Plan occurring after the Grant Date, the adjustment provisions as provided for under Section 3(d) of the Plan shall apply to the RSUs.
|
8.
|
Change in Control
. In the event of a Change in Control of the Company occurring after the Grant Date, all outstanding unvested RSUs shall become fully vested upon the occurrence of such Change in Control. Any RSUs that vest in connection with this Section 8 shall be settled in a manner consistent with Section 3 of this Agreement.
|
9.
|
Miscellaneous
.
|
(a)
|
Waiver and Amendment
. The Committee may waive any conditions or rights under, or amend any terms of, this Agreement and the RSUs granted thereunder;
provided
that any such waiver or amendment that would materially impair the rights of any Participant or any holder or beneficiary of any RSUs granted hereunder shall not to that extent be effective without the consent of Participant. No waiver of any right hereunder by any party shall operate as a waiver of any other right, or as a waiver of the same right with respect to any subsequent occasion for its exercise, or as a waiver of any right to damages. No waiver by any party of any breach of this Agreement shall be held to constitute a waiver of any other breach or a waiver of the continuation of the same breach.
|
(b)
|
Unsecured Obligation
. This Award is unfunded, and even as to any RSUs which vest, Participant shall be considered an unsecured creditor of the Company with respect to the Company’s obligations, if any, to issue Shares pursuant to this Agreement. Nothing contained in this Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between Participant and the Company or any other person.
|
(c)
|
Notices
. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first-class mail, return receipt requested, facsimile, courier service or personal delivery:
|
(d)
|
Severability
. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.
|
(e)
|
No Rights to Service
. Nothing contained in this Agreement shall be construed as giving Participant any right to be retained, in any position, as an employee, consultant or director of the Company or its Affiliates or shall interfere with or restrict in any way the right of the Company or its Affiliates, which is hereby expressly reserved, to remove, terminate or discharge Participant at any time for any reason whatsoever.
|
(f)
|
Beneficiary
. Participant may file with the Company a written designation of a beneficiary on such form as may be prescribed by the Committee and may, from time to time, change or revoke such designation by filing a new designation with the Company. The last such designation received by the Company shall be controlling;
provided
,
however
, that no designation, or change or revocation thereof, shall be effective unless received by the Company prior to Participant’s death, and in no event shall it be effective as of a date prior to such receipt. If no beneficiary designation is filed by Participant, the beneficiary shall be deemed to be his spouse or, if Participant is unmarried at the time of death, his estate.
|
(g)
|
Successors
. The terms of this Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, and of Participant and the beneficiaries, executors, administrators, heirs and successors of Participant.
|
(h)
|
Entire Agreement
. This Agreement and the Plan contain the entire agreement and understanding of the parties hereto with respect to the subject matter contained herein and supersede all prior communications, representations and negotiations with respect thereto.
|
(i)
|
Bound by the Plan
. By signing this Agreement, Participant acknowledges that he has received a copy of the Plan and has had an opportunity to review the Plan and agrees to be bound by all the terms and provisions of the Plan.
|
(j)
|
Section 409A.
It is intended that the Awards granted pursuant to this Agreement and the provisions of this Agreement be exempt from or be designed such that the taxes and/or penalties under Section 409A of the Code are not imposed, and all provisions of this Agreement shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A of the Code.
|
(k)
|
Governing Law
. This Agreement shall be construed and interpreted in accordance with the internal laws of the State of Delaware without regard to principles of conflicts of law thereof, or principles of conflicts of laws of any other jurisdiction that could cause the application of the laws of any jurisdiction other than the State of Delaware.
|
(l)
|
Headings
. The headings of the Sections hereof are provided for convenience only and are not to serve as a basis for interpretation or construction, and shall not constitute a part, of this Agreement.
|
(m)
|
Signature in Counterparts
. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
|
10.
|
Compliance with Legal Requirements
. The grant of the RSUs and the delivery of the Shares in settlement thereof, and any other obligations of the Company under this Agreement shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any regulatory or governmental agency as may be required. Subject to Section 9(k) of this Agreement, the Committee, in its sole discretion, may postpone the issuance or delivery of Shares as the Committee may consider appropriate and may require Participant to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of the Shares in compliance with applicable laws, rules and regulations.
|
(a)
|
Grant
. The Company hereby grants to Participant a nonqualified stock option (the “
Stock Option
” and any portion thereof, the “
Stock Options
”) to purchase [•] shares of Common Stock (such shares of Common Stock, the “
Shares
”), on the terms and conditions set forth in this Agreement and as otherwise provided in the Plan. The Stock Option is not intended to qualify as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code (the “
Code
”).
|
(b)
|
Incorporation by Reference, Etc
. The provisions of the Plan are hereby incorporated herein by reference. Except as otherwise expressly set forth herein, this Agreement shall be construed in accordance with the provisions of the Plan and any capitalized terms not otherwise defined in this Agreement shall have the definitions set forth in the Plan.
|
(a)
|
Exercise Price
. The exercise price, being the price at which Participant shall be entitled to purchase the Shares upon the exercise of all or any of the Stock Options, shall be $[•] per Share (the “
Exercise Price
”).
|
(b)
|
Payment of the Exercise Price
. The Stock Option may be exercised only by written notice, substantially in the form provided by the Company, delivered in person or by mail in accordance with Section 10(c) hereof and accompanied by payment of the Exercise Price. The Exercise Price shall be payable in cash, or, to the extent approved by the Committee, by any of the other methods permitted under Section 5(g) of the Plan.
|
(a)
|
General Vesting
. (i) One-third of the Stock Options (rounded down to the nearest whole Share) shall become Vested Options and shall become exercisable on the first anniversary of the Grant Date, (ii) one-third of the Stock Options (rounded down to the nearest whole Share) shall become Vested Options and shall become exercisable on the second anniversary of the Grant Date and (iii) the remainder of the Stock Options shall become Vested Options and shall become exercisable on the third anniversary of the Grant Date, in the case of each of clauses (i), (ii) and (iii), subject to Participant not having incurred a Termination of Employment prior to the applicable vesting date.
|
(b)
|
Termination of Employment
. Except as provided in the immediately following sentence, in the event that Participant incurs a Termination of Employment, any Stock Options that
|
4.
|
Termination
.
|
(a)
|
The Stock Option shall automatically terminate and shall become null and void, be unexercisable and be of no further force and effect upon the earliest of:
|
(b)
|
Notwithstanding the provisions of Section 4(a) to the contrary, in the event of Participant’s Termination of Employment for any reason (other than due to a Termination of Employment for Cause) during the two-year period following a Change in Control, the Stock Option shall remain outstanding and exercisable until the earlier of (i) the tenth anniversary of the Grant Date and (ii) the fifth anniversary of such Termination of Employment.
|
(c)
|
Except as otherwise provided in the Plan and Section 3(b) of this Agreement, upon a Termination of Employment for any reason, any Unvested Options shall immediately terminate and be forfeited on the date the Termination of Employment occurs.
|
(a)
|
Waiver and Amendment
. The Committee may waive any conditions or rights under, or amend any terms of, this Agreement and the Stock Option granted thereunder;
provided
that any such waiver or amendment that would materially impair the rights of any Participant or any holder or beneficiary of any Stock Option granted hereunder shall not to that extent be effective without the consent of Participant. No waiver of any right hereunder by any party shall operate as a waiver of any other right, or as a waiver of the same right with respect to any subsequent occasion for its exercise, or as a waiver of any right to damages. No waiver by any party of any breach of this Agreement shall be held to constitute a waiver of any other breach or a waiver of the continuation of the same breach.
|
(b)
|
Notices
. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first-class mail, return receipt requested, facsimile, courier service or personal delivery:
|
(c)
|
Severability
. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.
|
(d)
|
No Rights to Service
. Nothing contained in this Agreement shall be construed as giving Participant any right to be retained, in any position, as an employee, consultant or director of the Company or its Affiliates or shall interfere with or restrict in any way the right of the Company or its Affiliates, which is hereby expressly reserved, to remove, terminate or discharge Participant at any time for any reason whatsoever.
|
(e)
|
Beneficiary
. Participant may file with the Company a written designation of a beneficiary on such form as may be prescribed by the Committee and may, from time to time, change or revoke such designation by filing a new designation with the Company. The last such designation received by the Company shall be controlling;
provided
,
however
, that no designation, or change or revocation thereof, shall be effective unless received by the Company prior to Participant’s death, and in no event shall it be effective as of a date prior
|
(f)
|
Successors
. The terms of this Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, and of Participant and the beneficiaries, executors, administrators, heirs and successors of Participant.
|
(g)
|
Entire Agreement
. This Agreement and the Plan contain the entire agreement and understanding of the parties hereto with respect to the subject matter contained herein and supersede all prior communications, representations and negotiations with respect thereto.
|
(h)
|
Bound by the Plan
. By signing this Agreement, Participant acknowledges that he has received a copy of the Plan and has had an opportunity to review the Plan and agrees to be bound by all the terms and provisions of the Plan.
|
(i)
|
Governing Law
. This Agreement shall be construed and interpreted in accordance with the internal laws of the State of Delaware without regard to principles of conflicts of law thereof, or principles of conflicts of laws of any other jurisdiction that could cause the application of the laws of any jurisdiction other than the State of Delaware.
|
(j)
|
Headings
. The headings of the Sections hereof are provided for convenience only and are not to serve as a basis for interpretation or construction and shall not constitute a part of this Agreement.
|
(k)
|
Signature in Counterparts
. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
|
4.
|
Termination
.
|
August 1, 2017
|
By:
/s/ Bradley M. Shuster
|
|
Name:Bradley M. Shuster
|
|
Title:Chairman and Chief Executive Officer
|
|
(Principal Executive Officer)
|
Date:
August 1, 2017
|
|
|
|
|
By:
/s/ Adam Pollitzer
|
|
Name:Adam S. Pollitzer
|
|
Title:Chief Financial Officer
|
|
(Principal Financial Officer)
|
Date:
August 1, 2017
|
|
|
|
|
By:
/s/ Bradley M. Shuster
|
|
Name:Bradley M. Shuster
|
|
Title:Chairman and Chief Executive Officer
|
|
(Principal Executive Officer)
|
Date:
August 1, 2017
|
|
|
|
|
By:
/s/ Adam S. Pollitzer
|
|
Name:Adam S. Pollitzer
|
|
Title:Chief Financial Officer
|
|
(Principal Financial Officer)
|