WEST PALM BEACH, Fla., March 12, 2009 (GLOBE NEWSWIRE) -- Ocwen Financial Corporation ("Ocwen" or the "Company") (NYSE:OCN) today reported a net loss of $3.7 million or $0.06 per share for the fourth quarter of 2008 which includes after-tax losses of $14.7 million (pre-tax $23.8 million) primarily driven by fair value adjustments for unrealized losses on trading securities and investments. This compares to a loss of $6.9 million or $0.11 per share for the fourth quarter of 2007. Pre-tax loss from continuing operations was $2.8 million for the fourth quarter of 2008 as compared to $13.1 million for the fourth quarter of 2007. For the year ended December 31, 2008, net income was $17.9 million or $0.29 per diluted share as compared to $38.6 million or $0.58 per diluted share for 2007.
ANNUAL PERFORMANCE HIGHLIGHTS
* Income from operations of $168.8 million represents a 31.1% improvement over 2007 (577.9% over 2004) reflecting an 8% decline in operating expenses despite an $11.6 million increase in professional services expense, primarily relating to the withdrawn going private transaction and the Ocwen Solutions spin-off. * Net income in 2008 of $17.9 million includes an after-tax unrealized loss of $20.8 million (pre-tax $33.8 million) on trading securities, primarily driven by mark-to-market accounting applied to federally guaranteed student loan auction rate securities. * Ocwen significantly increased liquidity, ending 2008 with $201 million in cash and $267 million of unused borrowing capacity. * Ocwen modified 60,873 loans during 2008, helping borrowers to stay in their homes and obtaining a better outcome for investors than the alternative of foreclosure.
Chairman and CEO William Erbey stated, "Our focus on liquidity has resulted in increased cash balances of $201 million and unused borrowing capacity of $267 million at December 31, 2008. Advance financing renewals in December and January of $300 million and $200 million, respectively, demonstrate the banks' confidence in Ocwen. This confidence is based in large part on our ability to control delinquencies and advances. Furthermore, we are currently developing advance financing facilities with new private sector providers and participating in an industry coalition which seeks GSE guarantees of advances and TALF financing.
"In 2008 we generated significant cash earnings from operations and sales of non-core assets enabling us to pay down debt of $76.7 million and increase cash by $86.8 million. This is after absorbing an increase of $276.6 million to purchase federally guaranteed student loan auction rate securities. Other than the auction rate securities (currently valued at $239.3 million), the only other significant non-core asset are Loans held for resale of $49.9 million. We are aggressively pursuing liquidity events for these two assets.
"Our strong operating results in an extremely challenging economic environment demonstrate the earnings stability of our core operations. We are pleased with the Servicing segment's record income from continuing operations of $100.8 million in 2008. We expect the recent government initiatives will have a positive effect on our 2009 results and beyond.
* "Ocwen applauds the strong government actions recently taken, such as the Making Home Affordable Plan announced by President Obama on March 4, 2009. We intend to be an active participant in the loan modification program. * "Ocwen's leadership in loan modifications was recognized on February 3, 2009, when Freddie Mac selected Ocwen as a special servicer for its high risk loan pilot program. We are in active discussions with government agencies and other institutions that will benefit from our high quality servicing platform. * "We are encouraged by the government's announcement on March 3, 2009 that securities backed by servicer advances are under consideration for inclusion in the expanded TALF program. To the extent stable long-term financing for advances becomes available, we will consider acquiring existing servicing platforms where we can leverage our low operating costs and ability to reduce delinquencies.
"Ocwen Solutions has expanded its product suite to take advantage of the current high delinquency loan environment. These products contributed a small, but growing source of revenues in the fourth quarter of 2008, expanding through February 2009.
"We are committed to continuous improvement in all of our operations. During 2009 we initiated our most ambitious corporate-wide program to-date to reduce variability in our operations with the dual objective of enhancing our value equation for the customer and further expanding margins through expense reductions."
Ocwen Asset Management
Annual
During 2008, income from operations increased $51.9 million to $173.0 million at Ocwen Asset Management, an increase of 42.8% from 2007, despite the negative impact of higher delinquencies and lower float balances. Increased income from operations was primarily driven by a decrease in operating expenses in the Servicing segment of $55.0 million, a 25.1% decline from 2007. Income from continuing operations increased $19.4 million, a 34.1% increase over 2007 results, despite significant increased interest expense driven by an increase in the average advance funding balance during 2008.
Fourth Quarter
Ocwen Asset Management generated income from operations of $34.7 million, a 5.1% increase in the fourth quarter of 2008 compared to 2007. Income from continuing operations for the fourth quarter of 2008 improved to $9.6 million from a loss on continuing operations of $17.2 million in the fourth quarter of 2007, reflecting lower losses on loans held for resale.
In the fourth quarter of 2008, income from continuing operations for the Servicing segment increased 44.0%, a $5.4 million increase over the fourth quarter of 2007. Significant factors contributing to the Servicing segment's strong quarterly performance include reductions in operating expenses of 16.1%, or $7.7 million, and a 15.1% decline in other expenses from the fourth quarter of 2007. Unpaid principal balances continued to contract in the fourth quarter of 2008, from the fourth quarter of 2007 and the third quarter of 2008, leading to revenue declines of 6.7% and 12.0%, respectively.
Losses from continuing operations for the Loans and Residuals segment improved 81.8% to a loss of $5.1 million in the fourth quarter of 2008 as compared to the same period in 2007. During the fourth quarter of 2007, we recorded an unrealized loss of $23.6 million to reduce residual securities to estimated market values. These unrealized losses are largely based on negative projected loss assumptions published by rating agencies.
The increased loss from continuing operations for the Asset Management Vehicles segment during the fourth quarter of 2008, was primarily driven by Ocwen recognizing a proportionate share of two unconsolidated subsidiaries' combined losses from continuing operations of $3.1 million for the quarter. In the fourth quarter of 2007, these unconsolidated subsidiaries reported a combined loss from continuing operations of $1.5 million. The results of these unconsolidated subsidiaries are primarily driven by unrealized losses associated with declines in the estimated market value of loans, real estate and residual securities.
Ocwen Solutions
Annual
During 2008, Ocwen Solutions generated $15.9 million income from operations, representing a 45.2% increase over 2007 results. This improvement was primarily driven by higher revenues in Technology Products. Income from continuing operations for 2008 declined to $9.0 million, a 41.8% decline compared to 2007. This decline is due to the variance between a $5.5 million gain in 2007 and a $5.7 million loss in 2008 associated with unrealized changes in the fair value of derivatives at an unconsolidated subsidiary. The investment in this subsidiary has been written down to zero.
Fourth Quarter
In the fourth quarter of 2008, income from operations at Ocwen Solutions increased 81.9%, compared to the fourth quarter of 2007, to $5.1 million, principally due to reductions in operating expenses. Income from continuing operations for the fourth quarter of 2008 declined to $4.8 million, a 15.0% decline compared to the fourth quarter of 2007, due to an unrealized gain of $3.3 million recorded in 2007 at an unconsolidated subsidiary of Technology Products.
In the fourth quarter of 2008, income from continuing operations for the Mortgage Services segment declined $2.1 million compared to the fourth quarter of 2007. This decrease is due to lower order volumes as a result of the continued deterioration of the mortgage origination market partially off-set by an increase in the demand for default services.
The Financial Services segment improved results from continuing operations 45.1% in the fourth quarter of 2008, compared to the same period in 2007. Loss from continuing operations was $1.5 million in the fourth quarter of 2008, compared to a $2.7 million loss in 2007. Revenues for the fourth quarter of 2008 increased 2.2% over the fourth quarter of 2007. During the same period, operating expenses decreased $1.0 million or 5.3%.
During the fourth quarter of 2008, revenues for Technology Products increased 18.4% to $10.7 million, compared to the same period in 2007. Income from operations improved to $3.0 million for the fourth quarter of 2008, compared to a $0.5 million loss from operations in the fourth quarter of 2007. Income from continuing operations remained unchanged in the fourth quarter of 2008, compared to 2007, due to an unrealized gain of $3.3 million on derivative financial instruments at an unconsolidated subsidiary in the fourth quarter of 2007.
Corporate
Loss from continuing operations for the fourth quarter of 2008 was $15.8 million higher than the fourth quarter of 2007 primarily because of $13.2 million of unrealized losses on auction rate securities and a $3.2 million increase in operating expenses that was largely due to professional fees of $1.7 million incurred in preparation for the spin of Ocwen Solutions. The tax-free distribution of Ocwen Solutions to shareholders is expected to take place by midyear 2009.
Ocwen Financial Corporation is a leading asset manager and business process solutions provider specializing in loan servicing, special servicing, and mortgage services. Ocwen is headquartered in West Palm Beach, Florida with offices in Arizona, California, the District of Columbia, Florida, Georgia and New York and global operations in Canada, Germany, India and Uruguay. Utilizing our global infrastructure, state of the art technology, world-class training and six sigma processes, we provide solutions that make our clients' loans worth more. 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 securitization market and our plans to securitize loans and expectations as to the impact of rising interest rates and cost-effective resources in India. 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, 2008 and Form 10-Q for the quarters ended March 31, June 30 and September 30, 2007 and 2008 and our Forms 8-K filed during 2007 and 2008. 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.
Residential Servicing Statistics (Dollars in thousands)
-------------------------------------------------------
At or for the three months ended
-----------------------------------------------------------
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2008 2008 2008 2008 2007
----------- ----------- ----------- ----------- -----------
Total
unpaid
principal
balance
of loans
and REO
serviced
(1) $40,171,532 $41,754,368 $44,831,875 $49,319,762 $52,747,836
Non-
performing
loans and
REO
serviced
as a
percent of
total(2) 24.3% 22.7% 22.4% 21.8% 19.6%
Prepayment
speed
(average
CPR) 25% 26% 26% 23% 21%
(1) Excluding REO serviced pursuant to our contract with the U.S.
Department of Veterans Affairs, which we elected not to renew in
July 2008. Transition of the remaining properties to the new
service provider was completed in October.
(2) Loans for which borrowers are making scheduled payments under
forbearance or bankruptcy plans are considered performing loans.
Segment Results (In thousands)
Three months Twelve months
For the periods ended ------------------ ------------------
December 31, 2008 2007 2008 2007
--------------------- -------- -------- -------- --------
Ocwen Asset Management
Servicing
Revenue $ 75,740 $ 81,171 $340,725 $343,648
Operating expenses 40,060 47,756 164,292 219,322
-------- -------- -------- --------
Income from operations 35,680 33,415 176,433 124,326
Other expense, net (17,886) (21,062) (75,663) (58,977)
-------- -------- -------- --------
Income from continuing
operations before income
taxes 17,794 12,353 100,770 65,349
-------- -------- -------- --------
Loans and Residuals
Revenue -- -- -- 352
Operating expenses 800 936 3,025 4,190
-------- -------- -------- --------
Loss from operations (800) (936) (3,025) (3,838)
Other expense, net (4,315) (27,164) (11,652) (4,484)
-------- -------- -------- --------
Loss from continuing
operations before income
taxes (5,115) (28,100) (14,677) (8,322)
-------- -------- -------- --------
Asset Management
Revenue 667 1,090 3,664 1,444
Operating expenses 896 595 4,113 829
-------- -------- -------- --------
Income (loss) from
operations (229) 495 (449) 615
Other expense, net (2,822) (1,994) (9,364) (774)
-------- -------- -------- --------
Loss from continuing
operations before income
taxes (3,051) (1,499) (9,813) (159)
-------- -------- -------- --------
Income (loss) from
continuing operations
before income taxes 9,628 (17,246) 76,280 56,868
-------- -------- -------- --------
Ocwen Solutions
Mortgage Services
Revenue 15,153 21,380 58,733 73,852
Operating expenses 12,162 15,788 46,299 59,603
-------- -------- -------- --------
Income from operations 2,991 5,592 12,434 14,249
Other (income) expense, net 365 (160) 864 (665)
-------- -------- -------- --------
Income from continuing
operations before income
taxes 3,356 5,432 13,298 13,584
-------- -------- -------- --------
Financial Services
Revenue 16,653 16,290 73,835 41,292
Operating expenses 17,617 18,599 79,757 47,110
-------- -------- -------- --------
Loss from operations (964) (2,309) (5,922) (5,818)
Other expense, net (524) (403) (1,953) (1,269)
-------- -------- -------- --------
Loss from continuing
operations before income
taxes (1,488) (2,712) (7,875) (7,087)
-------- -------- -------- --------
Technology Products
Revenue 10,717 9,052 45,283 36,235
Operating expenses 7,685 9,554 35,895 33,714
-------- -------- -------- --------
Income (loss) from
operations 3,032 (502) 9,388 2,521
Other income (expense), net (87) 3,441 (5,808) 6,447
-------- -------- -------- --------
Income from continuing
operations before income
taxes 2,945 2,939 3,580 8,968
-------- -------- -------- --------
Income from continuing
operations before income
taxes 4,813 5,659 9,003 15,465
-------- -------- -------- --------
Corporate Items and Other
Revenue 2 2 156 1,162
Operating expenses 4,537 1,364 18,743 5,776
-------- -------- -------- --------
Loss from operations (4,535) (1,362) (18,587) (4,614)
Other expense, net (12,744) (152) (28,241) (9,340)
-------- -------- -------- --------
Loss from continuing
operations before income
taxes (17,279) (1,514) (46,828) (13,954)
-------- -------- -------- --------
Consolidated income (loss)
from continuing operations
before income taxes $ (2,838) $(13,101) $ 38,455 $ 58,379
======== ======== ======== ========
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
Three months Twelve months
For the periods ended ---------------------- ----------------------
December 31, 2008 2007 2008 2007
--------------------- ---------- ---------- ---------- ----------
Revenue
Servicing and
subservicing fees $ 77,826 $ 95,563 $ 368,026 $ 379,277
Process management
fees 31,450 24,059 113,244 87,767
Other revenues 2,115 3,780 10,858 13,617
---------- ---------- ---------- ----------
Total revenue 111,391 123,402 492,128 480,661
---------- ---------- ---------- ----------
Operating expenses
Compensation and
benefits 28,982 33,050 125,549 108,870
Amortization of
servicing rights 11,749 18,140 52,461 99,950
Servicing and
origination 15,362 17,272 52,951 62,938
Technology and
communications 4,614 6,356 22,327 22,514
Professional services 7,557 4,254 34,615 22,972
Occupancy and
equipment 5,507 6,457 22,978 24,466
Other operating
expenses 2,785 3,237 12,474 10,156
---------- ---------- ---------- ----------
Total operating
expenses 76,556 88,766 323,355 351,866
---------- ---------- ---------- ----------
Income from operations 34,835 34,636 168,773 128,795
---------- ---------- ---------- ----------
Other income (expense)
Interest income 3,204 5,359 14,696 29,651
Interest expense (19,126) (24,926) (82,824) (72,670)
Loss on trading
securities (13,114) (24,335) (35,480) (6,663)
Gain (loss) on debt
repurchases -- -- 3,595 (3)
Loss on loans held for
resale, net (5,984) (5,295) (17,096) (16,671)
Equity in earnings
(losses) of
unconsolidated
entities (2,482) 1,304 (13,110) 4,663
Other, net (171) 156 (99) (8,723)
---------- ---------- ---------- ----------
Other expense, net (37,673) (47,737) (130,318) (70,416)
---------- ---------- ---------- ----------
Income (loss) from
continuing operations
before income taxes (2,838) (13,101) 38,455 58,379
Income tax expense
(benefit) 652 (8,405) 14,771 16,610
---------- ---------- ---------- ----------
Income (loss) from
continuing operations (3,490) (4,696) 23,684 41,769
Loss from discontinued
operations, net of
income taxes (195) (2,229) (5,767) (3,172)
---------- ---------- ---------- ----------
Net income (loss) $ (3,685) $ (6,925) $ 17,917 $ 38,597
========== ========== ========== ==========
Basic earnings per
share
Income (loss) from
continuing
operations $ (0.06) $ (0.08) $ 0.38 $ 0.67
Loss from discontinued
operations -- (0.03) (0.09) (0.05)
---------- ---------- ---------- ----------
Net income (loss) $ (0.06) $ (0.11) $ 0.29 $ 0.62
========== ========== ========== ==========
Diluted earnings per
share
Income (loss) from
continuing
operations $ (0.06) $ (0.08) $ 0.38 $ 0.62
Loss from discontinued
operations -- (0.03) (0.09) (0.04)
---------- ---------- ---------- ----------
Net income (loss) $ (0.06) $ (0.11) $ 0.29 $ 0.58
========== ========== ========== ==========
Weighted average common
shares outstanding
Basic 62,716,530 62,527,360 62,670,957 62,712,076
Diluted 62,716,530 62,527,360 62,935,314 71,458,544
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
December 31, December 31,
2008 2007
------------ ------------
Assets
Cash $ 201,025 $ 114,243
Trading securities, at fair value
Auction rate 239,301 --
Other investment grade -- 34,876
Subordinates and residuals 4,369 7,362
Loans held for resale, at lower of cost
or market 49,918 75,240
Advances 102,085 292,887
Match funded advances 1,100,555 1,126,097
Mortgage servicing rights 139,500 197,295
Receivables 42,798 79,394
Deferred tax assets, net 175,963 178,178
Intangibles, including goodwill of $9,836
and $17,615 46,227 58,301
Premises and equipment, net 12,926 35,572
Investment in unconsolidated entities 25,663 76,465
Other assets 97,682 118,786
------------ ------------
Total assets $ 2,238,012 $ 2,394,696
============ ============
Liabilities and Stockholders' Equity
Liabilities
Match funded liabilities $ 961,939 $ 1,001,403
Lines of credit and other secured
borrowings 116,870 339,976
Investment line 200,719 --
Servicer liabilities 135,751 204,484
Debt securities 135,734 150,279
Other liabilities 78,813 110,429
------------ ------------
Total liabilities 1,629,826 1,806,571
------------ ------------
Minority interest in subsidiaries 406 1,979
Stockholders' Equity
Common stock, $.01 par value; 200,000,000
shares authorized; 62,716,530 and
62,527,360 shares issued and outstanding
at December 31, 2008 and December 31,
2007, respectively 627 625
Additional paid-in capital 180,538 177,407
Retained earnings 424,739 406,822
Accumulated other comprehensive income,
net of taxes 1,876 1,292
------------ ------------
Total stockholders' equity 607,780 586,146
------------ ------------
Total liabilities and stockholders'
equity $ 2,238,012 $ 2,394,696
============ ============