Ocwen Financial Corporation Announces First Quarter Net Income


WEST PALM BEACH, Fla., May 9, 2005 (PRIMEZONE) -- Ocwen Financial Corporation (NYSE:OCN) today reported net income for the first quarter of 2005 of $2.4 million or $0.04 per share compared to net income of $6.8 million or $0.10 per share for the first quarter of 2004. Results for 2005 are net of a tax provision of $0.6 million as compared to $0.01 million in the same period of 2004.

Chairman and CEO William C. Erbey stated "Our first quarter results were impacted by several items that merit noting:



 -- In the aggregate, our core businesses earned pre-tax income of 
    $6.4 million as compared to $10.3 million in the same period
    last year, a difference of $3.9 million. This decline is
    primarily due to three factors:
      -- in the first quarter of 2005 our core businesses absorbed
         approximately $1.2 million more overhead costs than in 2004
         because we no longer allocate such costs to the closed 
         non-core Affordable Housing and Commercial Asset businesses;
      -- Residential Loan Servicing pre-overhead contribution declined
         by $1.3 million and
      -- contribution from our Subprime Finance group declined by
         $1.4 million.

 -- We are encouraged that our Residential Loan Servicing business,
    while still below the earnings of the first quarter of last year,
    has begun to benefit from increased interest rates, achieving
    an increase of $3.5 million or 163% in its pre-overhead
    contribution as compared to the fourth quarter of last year.

 -- Expenses rose in the first quarter of this year as compared to last
    year by approximately $2.1 million or 4%, largely due to 
    investments we are making in staff in the Ocwen Recovery Group and
    Business Process Outsourcing organizations of approximately $1.4 
    million and increased sales and marketing costs of approximately $0.5
    million. 

As we noted in our annual report, we have reorganized our segment reporting this quarter in order to better reflect our focus on providing solutions to our customers. This change entailed changes to three segments



 -- Residential Servicing (including the Residential Loan Servicing, 
    VA servicing and REALServicing(TM) groups)
 -- Residential Origination Services (including our loans for resale 
    and title activities as well as REALTrans(TM), Ocwen Realty Advisors,
    Mortgage Due Diligence Services and Subprime Finance) and
 -- Commercial Servicing, which now includes REALSynergy(TM). 

We continue to report on our other two core businesses -- Ocwen Recovery Group and Business Process Outsourcing. Given the substantial sales of assets during 2004, we have closed the non-core Affordable Housing and Commercial Assets businesses and will now report the results of managing the few remaining non-core assets in our Corporate segment.

As we announced last year, we are continuing the process of debanking. In this regard, we have reduced our deposit liabilities by $106.2 million or 25% since the end of last year and subsequent to March 31st have concluded two additional financing arrangements with a total capacity of $165 million. Our cash and investment grade security balances remain high in anticipation of debanking, and together with our new financing arrangements, provide us with the capital and liquidity required to achieve our 2005 objectives."

The Residential Servicing business reported pre-tax income of $2.9 million in the first quarter of 2005 vs. $5.5 million in the 2004 first quarter. While Residential Loan Servicing results remain below first quarter 2004 levels, they have improved as compared to the fourth quarter of last year, reflecting reduced prepayment speeds and the growing impact of more recently priced portfolios. Our servicing portfolio grew during the first quarter. As of March 31, 2005, we were the servicer of approximately 331 thousand loans with an unpaid principal balance (UPB) of $37.4 billion, as compared to approximately 320 thousand loans and $34.5 billion of UPB at December 31, 2004.

Residential Origination Services reported pre-tax income of $2.8 million in the first quarter of 2005 as compared to $3.0 million in the same period last year. These results reflect improved results in our loan refinancing and resale programs, in settlement and fulfillment services and in REALTrans, offset by a declines in earnings of Ocwen Realty Advisors and Subprime Finance. Our Mortgage Due Diligence Services group, which we initiated at the beginning of the year, generated $1.8 million in revenue and $0.3 million of contribution before overhead in the first quarter.

Our other core businesses reported aggregate pre-tax income of $0.6 million in the first quarter of 2005 as compared to pre-tax income of $1.8 million in the first quarter of 2004. This is primarily due to reduced earnings of $0.9 million in Ocwen Recovery Group, reflecting additional costs associated with investing in the development of our India collection capabilities.

The Corporate Segment reported a pre-tax loss of $(3.5) million in the first quarter of 2005 as compared to income of $0.7 million in the first quarter of last year. Corporate results for 2005 include approximately $1.1 million of costs related to our remaining non-core real estate, loan and affordable housing assets as well as $1.4 million of interest expense related in part to our high cash balances in preparation for debanking. Corporate results also include interest income on federal income tax receivables of $0.4 million and $3.7 million for the first quarter of 2005 and 2004, respectively. We have also reduced our remaining real estate assets during the first quarter, closing on the sale of our Halifax shopping mall, which had a book value of $8.8 million as of December 31, 2004. We have $23.0 million of non-core assets remaining as of March 31, 2005, several of which are subject to sales contracts we expect to close later this year.

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, the impact of actions that may result in our no longer being a thrift holding company, the adequacy of our liquidity position 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, availability of adequate and timely sources of liquidity, uncertainty related to dispute resolution and litigation, 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, 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)

  For the three months
    ended March 31,                     2005              2004

  Revenue
     Servicing and
       related fees                $  45,389          $  42,291
     Vendor management fees           10,881             13,003
     Gain (loss) on trading
       securities, net                (1,397)              (643)
     Valuation gains (losses)
       on real estate                     89             (1,851)
     Gain (loss) on sales of
       real estate                        34               (541)
     Operating income (loss)
       from real estate                 (174)                 8
     Other income                      1,884              6,621
          Non-interest revenue        56,706             58,888

     Interest income                   6,332              4,605
     Interest expense                  8,440              7,802
          Net interest income
           (expense) before
           provision for loan
           losses                     (2,108)            (3,197)
     Provision for loan losses             4               (531)
          Net interest income
            (expense) after
            provision for loan
            losses                    (2,112)            (2,666)
               Total revenue          54,594             56,222

  Non-interest expense
     Compensation and employee
       benefits                       24,371             22,033
     Occupancy and equipment           4,242              3,997
     Technology and communication
       costs                           7,399              6,669
      Loan expenses                     5,712              7,927
     Loss (gain) on investments
       in affordable housing
       properties                        642                (38)
     Professional services and
       regulatory fees                 4,721              5,825
     Other operating expenses          4,570              3,036
          Non-interest expense        51,657             49,449

  Income (loss) before
    income taxes                       2,937              6,773
  Income tax expense (benefit)           550                 11
          Net income (loss)        $   2,387          $   6,762

  Earnings (loss) per share
     Basic                             $0.04              $0.10
     Diluted                           $0.04              $0.10

  Weighted average common
    shares outstanding
     Basic                        62,743,287         67,762,414
     Diluted                      64,018,882         69,093,785


  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


  (Dollars in thousands, except share data)

                                   March 31,        December 31,
                                     2005                2004
  Assets

     Cash and amounts due from
       depository institutions    $   107,227       $   168,799
     Interest earning deposits        113,306           119,052
     Trading securities, at
       fair value:
          Investment grade             75,104            86,215
          Subordinates and
            residuals                  37,363            39,527
     Match funded assets
       (including advances on
       loans serviced for others
       of $266,281 and $276,626)      269,959           280,760
     Advances on loans and
       loans serviced for others      232,261           240,430
     Mortgage servicing rights        135,274           131,409
     Receivables                      135,468           126,719
     Real estate                        9,450            18,732
     Affordable housing
       properties                       4,968             5,641
     Loans (net of allowance
       for loan losses of
       $4,350 and $4,546)               8,575             3,792
     Premises and equipment, net       39,066            37,440
     Other assets                      66,568            68,977
          Total assets            $ 1,234,589       $ 1,327,493

  Liabilities and Stockholders'
    Equity
     Liabilities

          Deposits                $   199,530       $   301,299
          Escrow deposits             121,499           125,977
          Match funded liabilities    222,437           244,327
          Lines of credit and
            other secured
            borrowings                 91,089            50,612
          Debt securities             231,249           231,249
          Accrued liabilities          34,278            42,391
          Total liabilities           900,082           995,855

     Minority interest in
       subsidiaries                     1,581             1,530

     Stockholders' Equity
     Common stock, $.01 par
       value; 200,000,000
       shares authorized:
       62,750,904 and 62,739,478
       shares issued and
       outstanding                        628               627
     Additional paid-in capital       181,464           181,336
     Retained earnings                150,520           148,133
     Accumulated other
       comprehensive income
       (loss), net of taxes               314                12
               Total stockholders'
                 equity               332,926           330,108
               Total liabilities
                 and stockholders'
                 equity           $ 1,234,589       $ 1,327,493


  Pre-Tax Income (Loss)
    by Business Segment
  For the three months ended
     March 31,                           2005              2004
  (Dollars in thousands)
  Core businesses
     Residential Servicing           $  2,947          $  5,493
     Residential Origination
       Services                         2,834             3,034
     Ocwen Recovery Group                 503             1,401
     Business Process Outsourcing          98               397
     Commercial Servicing                  21               (42)
                                        6,403            10,283
  Non-core businesses

     Commercial Assets                     --            (3,241)
     Affordable Housing                    --              (973)
                                           --            (4,214)
  Corporate Items and Other            (3,466)              704
  Income (loss) before
    income taxes                     $  2,937          $  6,773


            

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