WEST PALM BEACH, Fla., April 27, 2006 (PRIMEZONE) -- Ocwen Financial Corporation (NYSE:OCN) today reported net income of $16.5 million or $0.26 per share for the first quarter of 2006. This compares to $2.4 million or $0.04 per share for the first quarter of 2005.
Chairman and CEO William C. Erbey stated "Our first quarter results were driven primarily by the strong performance of our Residential Servicing segment. As compared to the first quarter of last year Residential Servicing reported higher fees and float earnings as well as lower expenses reflecting reduced loan pay-offs along with process improvements and automation intended to reduce costs and enhance the customer experience. The first quarter also benefited from an improved performance in our Residential Origination Services segment, which included approximately $4.4 million of transaction gains associated with our loan sale and securitization activities.
Our balance sheet declined by $297 million, primarily due to the securitization of approximately $470 million of loans during the first quarter, partially offset by the purchase of $260 million of loans which were securitized in April, 2006. Our capital and liquidity position remains strong with cash and investment grade securities of $217 million, a decline in liabilities of $316 million and equity of $366 million at quarter-end."
Residential Servicing
For the three months ended March 31, 2006 2005
------------------------------------ ------------ ------------
Revenue $ 79,941 $ 68,446
Operating expenses 55,630 61,396
Other income (expense) (6,443) (4,103)
------------ ------------
Pre-tax income (loss) $ 17,868 $ 2,947
============ ============
-- As of March 31, 2006, we were the servicer of approximately 378
thousand loans with an unpaid principal balance (UPB) of $42.9
billion as compared to approximately 369 thousand loans and
$42.8 billion of UPB at December 31, 2005.
-- Revenue in the first quarter of 2006 reflects increased servicing
fees from a larger servicing portfolio, as well as higher float
income.
-- The decline in operating expenses reflects a reduction in interest
paid to investors related to loan pay-offs as well as a reduction
in operating expenses reflecting process improvements and
automation undertaken in 2005.
Commercial Servicing
For the three months ended March 31, 2006 2005
------------------------------------ ------------ ------------
Revenue $ 3,115 $ 4,441
Operating expenses 2,849 4,373
Other income (expense) (1) (46)
------------ ------------
Pre-tax income (loss) $ 265 $ 22
============ ============
-- Revenue and expense declines primarily reflect the sale of GSS
Japan and reduced expenses in GSS Taiwan
Ocwen Recovery Group
For the three months ended March 31, 2006 2005
------------------------------------ ------------ ------------
Revenue $ 2,201 $ 3,812
Operating expenses 2,633 3,398
Other income (expense) 82 89
------------ ------------
Pre-tax income (loss) $ (350) $ 503
============ ============
-- The decline in revenue in 2006 primarily reflects a shift in
revenue from proprietary assets to lower yielding third-party
contracts.
-- Operating expenses declined in 2006 as a result of process
improvements, technology enhancements and a greater concentration
of India resources. These initiatives are ongoing and have yet to
reach completion.
Residential Origination Services
For the three months ended March 31, 2006 2005
------------------------------------ ------------ ------------
Revenue $ 14,574 $ 12,267
Operating expenses 21,437 11,081
Other income (expense) 11,886 1,648
------------ ------------
Pre-tax income (loss) $ 5,023 $ 2,834
============ ============
-- First quarter 2006 results include approximately $4.4 million
of transaction gains primarily related to our securitization
and loan sale activities.
-- Pre-tax income in 2006 from our securities portfolio, refinance
and Ocwen Realty Advisors businesses was offset by losses from
both our newer due diligence operations, where we continue to
build capacity and from an entity we began to consolidate as of
year-end 2005.
Business Process Outsourcing
For the three months ended March 31, 2006 2005
------------------------------------ ------------ ------------
Revenue $ 2,723 $ 2,586
Operating expenses 2,725 2,455
Other income (expense) (10) (33)
------------ ------------
Pre-tax income (loss) $ (12) $ 98
============ ============
-- Pre-tax income declined in the first quarter of 2006 primarily
as a result of increased compensation costs as the business
prepares for new sales initiatives.
Corporate Items and Other
For the three months ended March 31, 2006 2005
------------------------------------ ------------ ------------
Revenue $ (105) $ (64)
Operating expenses 2,717 1,986
Other income (expense) 1,486 (1,417)
------------ ------------
Pre-tax income (loss) $ (1,336) $ (3,467)
============ ============
-- Results for 2006 include a gain of approximately $0.9 million
representing interest income arising from a cash distribution on
a commercial residual security now approaching the end of its
economic life.
-- In first quarter of 2005 we retained greater interest expense in
Corporate, reflecting the high cash balances we were holding in
preparation for debanking.
Ocwen Financial Corporation is a leading provider of servicing and origination processing solutions to the loan industry with headquarters in West Palm Beach, Florida, offices in Orlando, Florida, Downers Grove, Illinois and Atlanta, Georgia and global operations in Canada, Germany, India and Taiwan. We make our clients' loans worth more by leveraging our superior processes, innovative technology and high-quality, cost-effective global human resources. Additional information 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, the outlook on rate increases and prepayment speeds, the securitization market and our plans to securitize loans. 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, federal income tax rates, real estate market conditions and trends and the outcome of ongoing litigation 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, 2005. 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, 2006 2005
------------------------------------ ---------- ----------
Revenue
Servicing and subservicing fees $ 80,084 $ 72,380
Process management fees 19,312 16,952
Other revenues 3,053 2,156
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Total revenue 102,449 91,488
---------- ----------
Operating expenses
Compensation and benefits 25,701 24,371
Amortization of servicing rights 26,288 25,115
Servicing and origination 13,197 14,033
Technology and communications 6,639 7,399
Professional services 7,779 5,018
Occupancy and equipment 4,976 4,242
Other operating expenses 3,411 4,511
---------- ----------
Total operating expenses 87,991 84,689
---------- ----------
Other income (expense)
Interest income 18,113 6,332
Interest expense (17,254) (8,440)
Loss on trading securities (374) (1,398)
Gain on loan sales 3,105 --
Other, net 3,410 (356)
---------- ----------
Other income (expense), net 7,000 (3,862)
---------- ----------
Income before income taxes 21,458 2,937
Income tax expense 4,925 550
---------- ----------
Net income $ 16,533 $ 2,387
========== ==========
Earnings per share
Basic $ 0.26 $ 0.04
Weighted average common
shares outstanding
Basic 63,247,835 62,743,287
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
March 31, December 31,
2006 2005
----------- -----------
Assets
Cash $ 183,813 $ 269,611
Trading securities, at
fair value
Investment grade 33,215 1,685
Subordinates and residuals 45,992 30,277
Loans held for resale 364,924 624,671
Advances 238,920 219,716
Match funded advances 357,828 377,105
Mortgage servicing rights 146,993 148,663
Receivables 62,025 68,266
Premises and equipment, net 39,947 40,108
Other assets 80,903 74,031
---------- ----------
Total assets $1,554,560 $1,854,133
========== ==========
Liabilities and Stockholders' Equity
Liabilities
Match funded liabilities $ 322,757 $ 339,292
Servicer liabilities 218,088 298,892
Lines of credit and other
secured borrowings 406,381 626,448
Debt securities 150,329 154,329
Other liabilities 88,922 85,912
---------- ----------
Total liabilities 1,186,477 1,504,873
---------- ----------
Minority interest in subsidiaries 1,943 1,853
Stockholders' Equity
Common stock, $.01 par value;
200,000,000 shares authorized;
63,358,780 and 63,133,471
shares issued and outstanding
at March 31, 2006 and
December 31, 2005,
respectively 634 631
Additional paid-in capital 186,095 184,262
Retained earnings 179,731 163,198
Accumulated other com-
prehensive income (loss),
net of taxes (320) (684)
---------- ----------
Total stockholders' equity 366,140 347,407
---------- ----------
Total liabilities and
stockholders' equity $1,554,560 $1,854,133
========== ==========