WEST PALM BEACH, Fla. Nov. 9, 2000 (PRIMEZONE) -- Ocwen Financial Corporation (NYSE:OCN) today reported a net loss for its third quarter ended September 30, 2000 of $(0.7) million, or $(0.01) per share, compared to net income of $12.8 million or $0.21 per share for the 1999 third quarter. For the nine months ended September 30, 2000, the Company reported a net loss of $(7.2) million or $(0.11) per share compared to net income of $18.6 million or $0.31 per share in the same period of 1999.
Chairman and CEO William C. Erbey stated "While third quarter results are disappointing, our loan and servicing businesses continue to be profitable. Our ongoing investment in our technology business, OTX, reflects a consistent pace with the second quarter, and we have begun to see progress in the acceptance of our REALTransSM platform. We are in the process of completing servicing acquisitions that would add approximately 45,000 loans or $1.4 billion during the fourth quarter to our current base of 127,000 loans or $10.7 billion, and we anticipate a gain from selling our investment in Kensington Group plc. Ocwen also continued to strengthen its balance sheet during the third quarter through debt repurchases and repayments and through the sale of our San Francisco properties. We remain focused on completing our transition plan and are confident that we have the human and financial resources needed to achieve our objectives."
The Company's loan and servicing businesses, in the aggregate, reflected improved results vs. comparable periods in 1999, recording net income of $2.3 million in the 2000 third quarter vs. a net loss of $(4.3) million in the third quarter of 1999. For the nine months ended September 30, 2000 aggregate results reflected net income of $17.4 million as compared to $6.7 million in the same period of 1999, despite the fact that no securitization gains were recorded in 2000. This reflects the Company's decision in the third quarter of 1999 to discontinue the practice of structuring securitizations as sale transactions, thus precluding the recognition of gain-on-sale accounting.
Continuing investments in OTX in the third quarter of 2000 resulted in a net loss of $(5.8) million, compared to $(2.5) million in the 1999 third quarter. OTX results reflected a loss of $(15.5) million for the nine months ended September 30, 2000 vs. $(6.5) million for the same period in 1999. These results reflect the ongoing effort in OTX to complete the development of its advanced technology products and to broaden its marketing campaigns, the costs of which are reflected in current earnings.
The third quarter of 2000 also included net income in the Commercial Real Estate business of $9.5 million, primarily reflecting pre-tax gains of $16.7 million on the sales of the Company's commercial properties at 10 United Nations Plaza and 450 Sansome Street in San Francisco.
UK Operations reflected a net loss of $(0.8) million for the third quarter of 2000, and $(3.7) million for the nine month period, compared to net income of $30.0 million and $39.5 million for the comparable periods in 1999. This change reflects the sale of the Company's wholly owned subsidiary, Ocwen UK plc for a pre-tax gain of $50.4 million in the third quarter of 1999. In 2000, UK operations reflect the results of the Company's equity investment in Kensington Group plc.
The Company's net interest margin declined to 0.18% for the quarter ended September 30, 2000 from 3.61% for the quarter ended September 30, 1999, and to 0.67% for the nine months ended September 30, 2000 from 4.26% for the nine months ended September 30, 1999. A significant factor in this decline is the growth of the servicing business and the increase in real estate assets resulting from the acquisition of Ocwen Asset Investment Corp. and other transactions. These developments have increased the amount of non-interest earning assets on the balance sheet that are largely funded by interest bearing liabilities. Additionally, net interest margin was reduced due to the Company's decision to exit its subprime origination businesses in the U.S. and the U.K., both of which generated a high net interest spread during 1999.
Third quarter 2000 results included extraordinary gains of $2.6 million (net of tax) related to the repurchase on the open market of $15.1 million face value of the 11.5% senior notes and $2.0 million face value of the 10 7/8% Capital Securities. For the nine months ended September 30, 2000, the Company reported extraordinary gains of $8.7 million. Extraordinary gains of $0.3 million were reported in both the 1999 third quarter and the nine-month period. The Company continues to consider additional debt repurchases.
Notwithstanding the year to date net loss, the Company's financial position has strengthened during 2000 and remains strong. Total assets declined by $466 million, or 14% from December 31, 1999 levels. Equity as a percent of assets increased from 15.4% at December 31, 1999 to 17.4% at September 30, 2000. During the period from December 31, 1999 to September 30, 2000, debt levels excluding deposits have been reduced by $137.9 million, or 25% in the aggregate.
Recent Developments
On November 1, 2000, the Company sold its remaining San Francisco office building (225 Bush Street) for $143.5 million realizing net proceeds of approximately $60.3 million and a gain of $0.1 million.
The Company intends to sell its entire minority interest in Kensington Group plc during the fourth quarter. This sale is subject to a number of uncertainties, but it is the Company's expectation that it will realize a gain upon its completion.
Ocwen Technology Xchange, Inc. is achieving growing acceptance of its REALTrans platform in the market place. The number of service requestors has grown to 16, with an additional 14 requestors already committed to begin use of the system shortly. Active service providers have grown from 1,200 as of June 30, 2000 to approximately 3,100.
Ocwen Financial Corporation is a financial services company headquartered in West Palm Beach, Florida. The Company's primary businesses are the servicing and resolution of subperforming and nonperforming residential and commercial mortgage loans, as well as the related development of loan servicing technology and business-to-business e-commerce solutions for the mortgage and real estate industries. Additional information about Ocwen Financial Corporation is available at www.ocwen.com.
REAL-e(tm), REALSynergy(tm) and REALTransSM are the property of Ocwen Financial Corporation. All other product names are the property of their respective owners.
Certain statements contained herein may not be based on historical facts and are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be identified by reference to a future period(s) or by the use of forward-looking terminology such as "anticipate," "pending," "ongoing," "commitment," "continue," "expect," "intend," "plan," "will," future or conditional verb tenses, similar terms, variations on such terms or negatives of such terms. Actual results could differ materially from those indicated in such statements due to risks, uncertainties and changes with respect to a variety of factors, including changes in market conditions as they exist on the date hereof, applicable economic environments, government fiscal and monetary policies, prevailing interest or currency exchange rates, effectiveness of interest rate, currency and other hedging strategies, laws and regulations affecting financial institutions and real estate operations (including regulatory fees, capital requirements, income and property taxation and environmental compliance), uncertainty of foreign laws, competitive products, pricing and conditions, credit, prepayment, basis, default, subordination and asset/liability risks, loan servicing effectiveness, the ability to identify acquisitions and investment opportunities meeting OCN's investment strategy, satisfaction or fulfillment of agreed upon terms and conditions of closing or performance, timing of transaction closings, software integration, development and licensing, effectiveness, damage to the Company's computer equipment and the information stored in its data centers, financial and securities markets, availability of adequate and timely sources of liquidity, dependence on existing sources of funding, ability to repay or refinance indebtedness (at maturity or upon acceleration), availability of discount loans for purchase, size of, nature of and yields available with respect to the secondary market for mortgage loans, financial, securities and securitization markets in general, allowances for loan losses, geographic concentrations of assets, changes in real estate conditions (including valuation, revenues and competing properties), adequacy of insurance coverage in the event of a loss, integration of the business of OAC, the market prices of the common stock of OCN, other factors generally understood to affect the real estate acquisition, mortgage and leasing markets, securities investments and the software and technologies industries, and other risks detailed from time to time in OCN's reports and filings with the Securities and Exchange Commission, including its periodic reports on Forms 8-K, 10-Q and 10-K, including Exhibit 99.1 attached to OCN's Form 10-K for the year ended December 31, 1999.
Ocwen Financial Corporation Third Quarter Results
November 9, 2000
Net (Loss) Income by Business Segment
For the Periods Ended
September 30, Three Months Nine Months
--------------------- ----------------- ---------------
(Dollars in thousands) 2000 1999 2000 1999
---- ---- ---- ----
Single family residential
discount loans $ 4,157 $ (4,154) $11,624 $(9,472)
Commercial loans (3,887) (2,185) (2,437) 8,043
Domestic residential
mortgage loan
servicing 2,008 2,000 8,242 8,091
Investment in low-income
housing tax credits (2,500) 4,163 (1,308) 6,612
OTX (5,756) (2,535) (15,502) (6,479)
Commercial Real Estate 9,489 39 12,199 209
UK operations (1) (798) 30,049 (3,730) 39,005
Domestic subprime single
family residential
lending (4,832) (10,217) (12,740) (11,454)
Unsecured collections 2,235) (1,027) (6,598) (2,492)
Ocwen Realty Advisors (291) --- (2) ---
Corporate items and other 3,965 (3,357) 3,075 (13,503)
------ ------ ------ ------
$ (680) $ 12,776 $(7,177) $18,560
------ ------ ------ ------
------ ------ ------ ------
(1) 1999 includes Ocwen UK, which was sold in September 1999
Asset Acquisition
(Unpaid principal balances)
For the Periods Ended
September 30, 3 Mos. Increase
----------------- --------- --------
(Dollars in thousands) 2000 1999 (Decrease)
---- ---- --------
Discount Loan Acquisitions:
Single family
residential $6,722 $61,725 $(55,003)
Multi-family
residential 28 3,353 (3,325)
Commercial real
estate 1,000 15,514 (14,514)
Other --- 4,274 (4,274)
------ ------ ------
$7,750 $84,866 $(77,116)
------ ------ ------
------ ------ ------
Subprime Loan
Purchases and
Originations:
Domestic $ --- $18,052 $(18,052)
Foreign --- 223,390 (223,390)
------ ------ ------
$ --- $241,442 $(241,442)
------ ------ ------
------ ------ ------
Investments in
Real Estate (1) $ --- $ --- $ ---
------ ------ ------
------ ------ ------
Nine Months Increase
------------- --------
2000 1999 (Decrease)
---- ---- --------
$155,881 $335,808 $(179,927)
21,322 75,312 (53,990)
19,119 147,304 (128,185)
10,030 12,900 (2,870)
------ ------- --------
$206,352 $571,324 $(364,972)
------ ------- --------
------ ------- --------
$ --- $253,869 $(253,869)
--- 516,396 (516,396)
------ -------- --------
$ --- $770,265 $(770,265)
------ -------- --------
------ -------- --------
$147,448 $ --- $147,448
------ -------- --------
------ -------- --------
(1) Represents net book value of commercial loans and related assets
classified as investments in real estate.
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
3 Mos. 9 Mos.
--------------- -------------
For the periods ended
September 30, 2000 1999 2000 1999
--------------------- ---- ---- ---- ----
Interest income:
Federal funds sold and
repurchase agreements $ 2,544 $ 958 $ 5,118 $6,412
Securities available
for sale 12,831 15,350 42,508 48,199
Loans available for sale 450 6,233 2,174 25,376
Investment securities
and other 352 502 1,181 1,537
Loan portfolio 4,651 3,941 13,956 18,985
Match funded loans
and securities 2,611 --- 8,874 ---
Discount loan portfolio 21,848 29,035 70,021 84,591
------ ------ ------ ------
45,287 56,019 143,832 185,100
------ ------ ------ ------
Interest expense:
Deposits 25,852 24,779 75,330 75,166
Securities sold under
agreements to repurchase 2,761 2,120 10,685 5,891
Bonds-match funded
agreements 2,948 --- 9,095 ---
Obligations outstanding
under lines of credit 4,371 3,101 11,783 12,219
Notes, debentures and
other interest bearing
obligations 8,501 6,787 26,598 20,147
------ ------ ------ ------
44,433 36,787 133,491 113,423
------ ------ ------ ------
Net interest income
before provision for
loan losses 854 19,232 10,341 71,677
Provision for loan losses 6,861 826 12,604 5,188
------ ------ ------ ------
Net interest (loss) income
after provision for loan
losses (6,007) 18,406 (2,263) 66,489
------ ------ ------ ------
Non-interest income:
Servicing fees and
other charges 22,517 19,584 63,647 56,764
Gain on interest
earning assets, net 1,453 442 17,717 43,585
Unrealized loss on
trading securities (2,406) --- (2,406) ---
Impairment charges on
securities available
for sale --- (19,211) (11,597)(48,080)
(Loss) gain on real
estate owned, net (4,621) (1,508) (14,634) 1,798
Net operating gains
(losses) on investments
in real estate 9,153 (2,169) 22,769 (1,927)
Amortization of excess of
net assets acquired over
purchase 2,995 --- 8,788 ---
Other income 20,445 65,105 33,431 80,731
------ ------ ------ ------
49,536 62,243 117,715 132,871
------ ------ ------ ------
Non-interest expense:
Compensation and employee
benefits 22,134 29,451 61,114 80,991
Occupancy and equipment 3,141 4,331 9,356 15,053
Technology and communication
costs 6,003 4,275 16,698 14,818
Loan expenses 3,583 3,992 10,500 10,773
Net operating losses
on investments in certain
low-income housing tax
credit interests 3,691 1,094 6,030 4,558
Amortization of excess of
purchase price over net
assets acquired 778 284 2,346 771
Other operating expenses 5,370 8,701 18,574 25,312
------ ------ ------ ------
44,700 52,128 124,618 152,276
------ ------ ------ ------
Distributions on Company-obligated,
mandatory redeemable securities
of subsidiary trust holding
solely junior subordinated
debentures 2,730 3,400 8,842 10,196
Equity in losses of investments
in unconsolidated entities 893 4,768 4,965 9,483
------ ------ ----- ------
(Loss) income before income
taxes and extraordinary gain ( 4,794) 20,353 (22,973) 27,405
Income tax benefit (expense) 1,486 (8,199) 7,122 (9,595)
Minority interest in net loss
of consolidated subsidiary --- 369 --- 497
------ ------ ------ ------
(Loss) income before
extraordinary gain (3,308) 12,523 (15,851) 18,307
Extraordinary gain on
repurchase of debt, net
of taxes 2,628 253 8,674 253
------ ------ ------ ------
Net (loss) income $ (680) $ 12,776 $ (7,177)$ 18,560
------ ------ ------ ------
------ ------ ------ ------
(Loss) earnings per share:
Basic:
Net (loss) income before
extraordinary gain $ (0.05) $ 0.21 $ (0.24) $ 0.30
Extraordinary gain 0.04 --- 0.13 0.01
------ ------ ------ ------
Net (loss) income $ (0.01) $ 0.21 $ (0.11) $ 0.31
------ ------ ------ ------
------ ------ ------ ------
Diluted:
Net (loss) income before
extraordinary gain $ (0.05) $ 0.21 (0.24) $ 0.30
Extraordinary gain 0.04 --- 0.13 0.01
------ ------ ------ ------
Net (loss) income $ (0.01) $ 0.21 $ (0.11) $ 0.31
------ ------ ------ ------
------ ------ ------ ------
Weighted average common shares outstanding:
Basic 67,152,363 60,427,623 67,519,428 60,652,865
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted 67,152,363 60,460,314 67,519,428 60,691,416
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands,
except per share data) September 30, 2000 December 31, 1999
--------------- ---------------
Assets:
Cash and amounts due from
depository institutions $ 31,055 $ 153,459
Interest earning deposits 16,422 116,399
Federal funds sold 179,000 112,000
Securities for sale, at fair value:
Collateralized mortgage
obligations (AAA-rated) --- 392,387
Subordinates, residuals and
other securities --- 195,131
Trading securities, at fair value:
Collateralized mortgage
obligations (AAA-rated) 372,541 ---
Subordinates, residuals and
other securities 123,754 ---
Loans available for sale, at
lower of cost or market 12,323 45,213
Real estate held for sale 160,589 ---
Low-income housing tax credit
interests held for sale 75,478 ---
Investment securities 13,257 10,965
Loan portfolio, net 115,103 157,408
Discount loan portfolio, net 701,941 913,229
Match funded loans and
securities, net 123,900 157,794
Investments in low-income housing
tax credit interests 68,271 150,989
Investments in unconsolidated
entities 29,803 37,118
Real estate owned, net 169,200 167,506
Investment in real estate 151,242 268,241
Premises and equipment, net 44,922 49,038
Income taxes receivable 22,827 ---
Deferred tax asset, net 131,306 136,920
Excess of purchase price over
net assets acquired 10,861 13,207
Principal, interest and
dividends receivable 9,528 10,024
Escrow advances on loans and
loans serviced for others 211,253 162,548
Other assets 68,607 59,737
--------- ---------
$ 2,843,183 $ 3,309,313
--------- ---------
--------- ---------
Liabilities and Stockholders' Equity
Liabilities:
Deposits $ 1,604,640 $ 1,842,286
Securities sold under
agreements to repurchase 5,692 47,365
Bonds-match funded agreements 114,687 141,515
Obligations outstanding under
lines of credit 135,644 187,866
Notes, debentures and other
interest bearing obligations 273,562 317,573
Accrued interest payable 37,692 32,569
Excess of net assets acquired
over purchase price 47,923 56,841
Income taxes payable --- 6,369
Accrued expenses, payables and
other liabilities 30,193 57,487
--------- ---------
Total liabilities 2,250,033 2,689,871
--------- ---------
Company obligated, mandatorily redeemable securities of subsidiary
trust holding solely junior subordinated debentures of the
Company 99,390 110,000
Stockholders' equity:
Preferred stock, $.01 par value;
20,000,000 shares authorized;
0 shares issued and outstanding --- ---
Common stock, $.01 par value;
200,000,000 shares authorized;
67,152,363 and 68,571,575 shares
issued and outstanding at
September 30, 2000, and
December 31, 1999, respectively 672 686
Additional paid-in capital 223,148 232,340
Retained earnings 269,825 277,002
Accumulated other comprehensive
income, net of taxes:
Net unrealized gain on
securities available
for sale --- 163
Net unrealized foreign currency
translation gain (loss) 115 (749)
--------- ---------
Total stockholders' equity 493,760 509,442
--------- ---------
$ 2,843,183 $ 3,309,313
--------- ---------
--------- ---------