Ocwen Financial Corporation Announces Third Quarter 2004 Net Income


WEST PALM BEACH, Fla., Oct. 21, 2004 (PRIMEZONE) -- Ocwen Financial Corporation (NYSE:OCN) today reported net income for the third quarter of 2004 of $39.3 million or $0.61 per share compared to net income of $4.6 million or $0.07 per share for the third quarter of 2003. For the nine months ended September 30, 2004 the Company reported net income of $55.2 million or $0.83 per share as compared to $0.3 million or $0.005 per share in the same period in 2003. Third quarter 2004 results include a net tax benefit of $31.8 million, primarily reflecting the partial reversal of the deferred tax asset valuation allowance that was established in prior years. Pre-tax income for the third quarter of 2004 was $7.5 million as compared to $4.6 million in the same period last year.

Chairman and CEO William C. Erbey stated, "We are pleased to report $39.3 million of net income for the quarter, inclusive of our realization of significant tax benefits. Among the points to note in this quarter's results are the following:



 -- Our Residential Loan Servicing business continues to be adversely
    impacted by low interest rates and high prepayment speeds. Our
    third quarter pre-tax income in this business is down by $4.8
    million as compared to the third quarter of last year. 
 -- The aggregate pre-tax income of our other core business units
    continues to be strong, increasing $1.0 million in the 2004
    third quarter and $10.9 million year to date as compared to
    the same periods last year. These results reflect improvement
    in Commercial Servicing, which achieved a year to date
    break-even result in the third quarter, and REALServicing(tm),
    which signed its first major commercial client in the second
    quarter of this year. 
 -- Our 2004 pre-tax income also reflects break-even results in our
    aggregate non-core businesses in both the quarter and year to
    date periods.
 -- We are reporting pre-tax income of $3.9 million in our Corporate
    Segment in the third quarter of 2004, primarily due to interest
    of $2.7 million on our federal income tax receivables. In the
    2003 third quarter, we reported a pre-tax loss of $(3.0) million.
 -- Although we did not close sales of non-core assets in the third

    quarter, we did enter into agreements to sell non-core assets
    that have a net book value of approximately $60 million.  While
    these agreements remain subject to due diligence and other
    contingencies, we are optimistic that we can achieve further
    reductions during the fourth quarter of this year." 

The Residential Loan Servicing business reported pre-tax income of $3.4 million in the third quarter of 2004 vs. $8.2 million in the 2003 third quarter. Year to date, pre-tax income was $13.8 million as compared to $25.8 million in the same period of 2003. These results reflect the continuing pressures from low interest rates and rising prepayment speeds in our portfolio. One important measure of the impact of these trends is the expense associated with mortgage servicing rights amortization and compensating interest expense. These combined amounts increased by $6.4 million or 7% for the nine months ended September 30. Operating expenses increased in both the third quarter and year to date periods in 2004 as compared to 2003, reflecting costs associated with our property management contract with the United States Department of Veteran's Affairs and as a result of reassuming, in the fourth quarter of 2003, certain collection activities that had been performed by outside parties. As a result of high prepayment rates, as well as reduced purchases of servicing rights, our servicing portfolio has declined somewhat since the end of 2003. As of September 30, 2004, we were the servicer of approximately 328 thousand loans with an unpaid principal balance (UPB) of $34.4 billion, as compared to approximately 360 thousand loans and $37.7 billion of UPB at December 31, 2003.

Our other core businesses reported aggregate pre-tax income of $0.8 million in the third quarter of 2004 as compared to a loss of $(0.2) million in the third quarter of 2003. For the nine months ended September 30, 2004, these businesses reported aggregate pre-tax income of $7.5 million as compared to a loss of $(3.4) million in the same period of 2003. These improvements primarily reflect the reduction in losses for Commercial Servicing, which achieved break-even results for the nine months ended September 30, 2004.

Our non-core businesses recorded an aggregate pre-tax loss of $(0.6) million for the third quarter as compared to a pre-tax loss of $(0.3) million in 2003. Year to date, these businesses reported aggregate pre-tax income of $0.3 million as compared to a pre-tax loss of $(12.3) million in the same period of 2003.

The Corporate Segment reported pre-tax income of $3.9 million in the third quarter of 2004 as compared to a loss of $(3.0) million in the same period last year. Year to date, Corporate generated pre-tax income of $1.8 million as compared to a loss of $(9.5) million in the same period of 2003. Corporate results for 2004 include interest income on federal income tax return claims of $2.7 million and $6.5 million for the quarter and year to date periods, respectively.

Results for the third quarter of 2004 included a net income tax benefit of $31.8 million. This benefit is primarily due to the reversal of $37 million of the valuation allowance on deferred tax assets that had been provided in prior years. This allowance was reduced as a result of refund claims of $37 million filed with the IRS that reduced our deferred tax asset as of September 30, 2004 and increased our receivable balances by the same amount. The tax benefit is net of $5.1 million of tax expense on 2004 earnings, primarily representing the company’s estimated federal effective tax rate of 20%.

In summary, pre-tax income increased by $2.8 million in the third quarter of 2004 and by $22.7 million year to date as compared to the same periods last year. Non-core assets have been reduced by 29% since the end of 2003.

Ocwen Financial Corporation is a diversified financial services holding company with headquarters in West Palm Beach, Florida and operations in Canada, China, Germany, India, Japan and Taiwan. Ocwen Financial Corporation is engaged in a variety of businesses related to residential and commercial mortgage servicing, real estate asset management, asset recovery, business process outsourcing and the marketing and sales of technology solutions to third parties. Ocwen Financial Corporation is a global leader in customer service excellence as a result of our company-wide commitment to quality, integrity and accountability. Additional information about Ocwen Financial Corporation is available at www.ocwen.com.

This news release contains 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, including, but not limited to, interest rates and the impact of changes in interest rates and prepayment speeds on our Residential Loan Servicing business and the outlook on reduction in non-core assets. Forward-looking statements are not guarantees of future performance, and involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially.

Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to, the following: general economic and market conditions, prevailing interest or currency exchange rates, governmental regulations and policies, international political and economic uncertainty, federal income tax rates, recognition of deferred tax credits and real estate market conditions and trends, as well as other risks detailed in OCN's reports and filings with the Securities and Exchange Commission, including its periodic report on Form 10-K for the year ended December 31, 2003 and its reports on Form 10-Q for the periods ended March 31, 2004 and June 30, 2004. The forward-looking statements speak only as of the date they are made and should not be relied upon. OCN undertakes no obligation to update or revise the forward-looking statements.



 OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Dollars in thousands, except share data)

                          Three Months             Nine Months
 For the periods ended
   September 30,       2004         2003         2004         2003

 Revenue
  Servicing and
   related fees   $    34,587  $    35,651  $   115,310  $   101,703
  Vendor manage-
   ment fees           13,614        7,722       40,442       21,721
  Gain (loss) on
   trading and
   match funded
   securities, net       (171)         159        1,688        2,924
  Valuation gains
   (losses) on
   real estate           (165)        (686)      (3,990)      (6,695)
  Gain (loss) on
   sales of real
   estate                 311          316         (149)         408
  Operating income
   (loss) from
   real estate            444        1,269        1,017        3,461
  Gain (loss) on
   debt repurchases        --         (441)          --         (445)
  Other income          4,995        2,852       16,599        5,550
   Non-interest
    revenue            53,615       46,842      170,917      128,627

  Interest income       4,988        4,071       15,555       17,826
  Interest expense      7,141       10,823       22,040       29,554
   Net interest
    income (expense)
    before provision
    for loan losses    (2,153)      (6,752)      (6,485)     (11,728)
  Provision for
   loan losses            (94)         415         (913)      (2,670)
   Net interest
    income (expense)
    after provision
    for loan losses    (2,059)      (7,167)      (5,572)      (9,058)
       Total revenue   51,556       39,675      165,345      119,569

 Non-interest
 expense
  Compensation and
   employee benefits   21,300       17,667       64,229       52,505
  Occupancy and
   equipment            3,981        3,254       11,999        8,769

  Technology and
   communication
   costs                6,190        5,583       19,476       14,577
  Loan expenses         6,885        3,835       22,272       10,836
  Loss (gain) on
   investments in
   affordable
   housing
   properties            (100)           4         (179)         319
  Professional
   services and
   regulatory fees      3,187        2,510       16,328       21,854
  Other operating
   expenses             2,635        2,173        7,890        7,023
    Non-interest
     expense           44,078       35,026      142,015      115,883

 Distributions on
  Capital Securities       --           --           --        3,058
 Income (loss)
  before minority
  interest and
  income taxes          7,478        4,649       23,330          628
 Minority interest
  in net income
  (loss) of
  subsidiaries             18           28          (50)        (308)
 Income tax
  expense (benefit)   (31,845)           6      (31,779)         618
      Net income
       (loss)     $    39,305  $     4,615  $    55,159  $       318

 Earnings (loss)
  per share
   Basic          $      0.61  $      0.07  $      0.83  $     0.005
   Diluted        $      0.60  $      0.07  $      0.81  $     0.005
 Weighted average
  common shares
  outstanding
   Basic           64,637,454   66,865,412   66,853,296   67,148,447
   Diluted         65,813,457   67,880,310   68,146,822   67,864,096


 OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 (Dollars in thousands, except share data)

                                          September 30,  December 31,
                                             2004            2003
 Assets
    Cash and amounts due from
      depository institutions            $   189,446      $  215,764
    Interest earning deposits                 52,541             324
    Trading securities, at fair value:
        U.S. government and sponsored
          enterprise securities               98,179           6,679
        Subordinates and residuals            40,310          42,841
    Real estate                               68,480         103,943
    Affordable housing properties              8,356           7,410
    Loans, net                                11,459          28,098
    Match funded assets                      108,328         130,087
    Premises and equipment, net               39,000          41,944
    Advances on loans and loans
      serviced for others                    345,945         374,769
    Mortgage servicing rights                135,319         166,495
    Receivables                              114,500          88,157
    Other assets                              73,623          33,607
         Total assets                    $ 1,285,486     $ 1,240,118

 Liabilities and Stockholders' Equity
    Liabilities
         Deposits                         $  412,117      $  446,388
         Escrow deposits                     146,074         116,444
         Bonds - match funded agreements      97,712         115,394
         Lines of credit and other
           secured borrowings                 35,502         150,384
         Notes and debentures                231,249          56,249
         Accrued interest payable              3,083           4,789
         Accrued expenses, payables
           and other liabilities              31,529          31,926
         Total liabilities                   957,266         921,574

    Minority interest in subsidiaries          1,296           1,286

    Stockholders' equity
    Common stock, $.01 par value;
      200,000,000 shares authorized:
      62,719,552 and 67,467,220
      shares issued and outstanding
      at September 30, 2004 and
      December 31, 2003, respectively            627             675
    Additional paid-in capital               181,071         225,559
    Retained earnings                        145,568          90,409
    Accumulated other comprehensive

      income (loss), net of taxes               (342)            615
         Total stockholders' equity          326,924         317,258
         Total liabilities and
           stockholders' equity          $ 1,285,486     $ 1,240,118


 Pre-Tax Income (Loss) by
   Business Segment
                                Three Months            Nine Months
 For the periods ended
   September 30,               2004       2003        2004     2003
 (Dollars in thousands)
 Core businesses 
    Residential Loan
      Servicing             $ 3,380    $ 8,159     $13,763  $ 25,808
    OTX                      (2,133)    (2,353)     (2,370)   (8,327)
    Ocwen Realty Advisors     1,478      1,156       5,013     3,766
    Ocwen Recovery Group        708      1,140       2,998     3,422
    Business Process
      Outsourcing               687      1,004       1,791     1,007
    Commercial Servicing         63     (1,111)         60    (3,276)
                              4,183      7,995      21,255    22,400
 Non-core businesses
    Commercial Assets        (1,845)    (2,025)     (4,895)   (8,692)
    Affordable Housing         (888)        (3)     (3,047)   (3,608)
    Subprime Finance          2,116      1,720       8,243        20
                               (617)      (308)        301   (12,280)
 Corporate Items and Other    3,912     (3,038)      1,774    (9,492)
 Income (loss) before
  minority interest and
  income taxes              $ 7,478    $ 4,649     $23,330  $    628


 Non-Core Assets
 (Dollars in thousands)
                                      September 30,     December 31,
                                           2004              2003
   Loans, net
      Affordable housing             $    3,664         $    6,545
      All other                           7,795             21,553
   Real estate                           68,480            103,943
   Subordinates, residuals and
     other trading securities            40,310             42,841
   Affordable housing properties          8,356              7,410
        Total non-core assets        $  128,605         $  182,292


            

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