WEST PALM BEACH, Fla., Feb. 7, 2001 (PRIMEZONE) -- Ocwen Financial Corporation (NYSE:OCN) today reported net income for its fourth quarter ended December 31, 2000 of $9.4 million, or $0.14 per share, compared to net income of $1.3 million or $0.02 per share for the 1999 fourth quarter. For the year ended December 31, 2000, the Company reported net income of $2.2 million or $0.03 per share compared to net income of $19.8 million or $0.31 per share in 1999.
Chairman and CEO William C. Erbey stated "We made substantial progress this year in developing our servicing and technology businesses and exiting our non-core businesses. During 2000, we reduced the size of our balance sheet by over 30% as total assets have declined from $3.3 billion at the end of 1999 to $2.2 billion at the close of 2000. At the same time, we have reduced our exposure to non-core assets that have generated losses over the past three years. During the fourth quarter of 2000 and into the first quarter of this year, we have grown and developed our core servicing business. As of December 31, 2000, we were the servicer on $11.4 billion of loans vs. $11.1 billion as of year-end 1999. In the first half of 2001, we will be boarding an additional $4.3 billion of loans under agreements that have already been concluded, bringing our total servicing to $15.7 billion. While absorbing this growth, we have maintained the industry standard of quality and reduced our direct costs per loan. We do not intend to stop there. With the full implementation of REAL-e(TM), our residential loan servicing system, we believe that we can make further strides in reducing our unit costs. The year also ended with several noteworthy accomplishments for OTX, including the implementation of REAL-e at Ocwen Federal Bank, thus bringing all three OTX products to a true commercial application level. REALTrans(SM), our e-commerce product, also achieved a significant milestone, having entered into an enterprise-wide contract with a "top five" mortgage originator.
Our key objectives in 2001 are to continue to reduce our risk assets and to enhance our value equation by reducing costs, largely through technology and the implementation of a Six Sigma quality program throughout the organization. On the revenue side, we plan to continue to grow our servicing business, to expand our technology customer base and to continue to create functionality enhancements in our technology products."
The Company's loan and servicing businesses, in the aggregate, reflected net income of $8.1 million in the fourth quarter of 2000 vs. $9.2 million for the 1999 fourth quarter. For the year ended December 31, 2000 aggregate results reflected net income of $25.6 million as compared to $15.8 million for 1999.
Continuing investments in OTX in the fourth quarter of 2000 resulted in a net loss of $(5.5) million, compared to $(4.9) million in the 1999 fourth quarter. OTX results reflected a loss of $(21.0) million for the year ended December 31, 2000 vs. $(11.4) million for 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.
In the fourth quarter of 2000 the Commercial Real Estate business reflected a net loss of $(1.9) million vs. $(1.8) million in the 1999 fourth quarter For the full year, net income was $10.3 million in 2000 vs. a net loss of $(1.6) million in 1999.
UK Operations reflected net income of $12.1 million for the fourth quarter of 2000 vs. a net loss of $(2.1) million for the 1999 fourth quarter. Fourth quarter 2000 results reflect the sale of the Company's minority interest in Kensington Group plc for a pre-tax gain of $20 million. For the full year periods, 2000 reflected net income of $8.4 million compared to $36.9 million in 1999. Full year results for 2000 also include the Company's equity interest in Kensington's results of operations through the sale date. Results for 1999 include the September sale of the Company's wholly owned subsidiary, Ocwen UK plc, for a pre-tax gain of $50.4 million as well as the results of Ocwen UK operations through the third quarter.
The low income housing tax credit business posted a net loss of $(11.0) million in the 2000 fourth quarter, vs. net income of $1.2 million in 1999. A net loss of $(12.4) million was reported for the full year 2000, vs. net income of $7.8 million in 1999. These results primarily reflect losses recorded in 2000 for two asset sale transactions (classified as "assets held for sale" at year-end) vs. a gain on an asset sale in 1999.
The Company's net interest margin declined to 1.36% for the quarter ended December 31, 2000 from 4.77% for the quarter ended December 31, 1999 and to 0.81% for the year ended December 31, 2000 from 4.42% for the year ended December 31, 1999. The most significant factors in this decline are reduced earnings on the Company's portfolio of residual and subordinate securities and on its portfolios of loans available for sale and discount loans. The decline in earnings on the loans available for sale portfolio reflects the Company's decision to exit the subprime origination business in the U.S. and the U.K., businesses that had generated a high net interest spread during 1999.
Fourth quarter 2000 results included extraordinary gains of $10.0 million (net of tax) primarily related to the Ocwen Asset Investment Corp. (OAC) tender offer, which resulted in the repurchase of $98 million face value of OAC's 11 1/2% Redeemable Notes. For the year ended December 31, 2000 the Company reported extraordinary gains of $18.7 million. Extraordinary gains of $6.7 million and $7.0 million were reported in the 1999 fourth quarter and for the year, respectively. The Company will continue to evaluate additional debt repurchases during 2001.
Income tax expense for the year 2000 included a non-cash provision for a valuation allowance on the Company's deferred tax asset of $17.5 million vs. a provision of $2.5 million in 1999. The Company has established this allowance based upon its estimate that a portion of the deferred tax asset may not be realized in the near future.
The Company's financial position strengthened during 2000 and remains strong. Total assets declined by slightly more than $1 billion, or 31% from December 31, 1999 levels. Equity as a percent of assets increased from 15.5% at December 31, 1999 to 22.4% at December 31, 2000. During the period from December 31, 1999 to December 31, 2000, debt levels excluding deposits have been reduced by $411.5 million, or 51% in the aggregate.
Recent Developments
During the fourth quarter of 2000, OTX entered into a contract with one of the top five mortgage originators in the United States for the enterprise-wide use of REALTrans, the Company's e-commerce product supporting the mortgage origination process. The Company anticipates a significant increase in the transaction volumes of REALTrans following the implementation period in 2001.
In December 2000 and January 2001, the Company entered into two new servicing contracts, which will add approximately 79,000 loans, with an unpaid principal balance of approximately $4.3 billion, to its existing portfolio of 165,000 loans with a total unpaid principal balance of $11.4 billion. These loans, in accordance with the underlying agreements, will be boarded onto the Company's REAL-e system during the first half of 2001, although various revenue sharing arrangements will take effect prior to that time.
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) and REALTrans(SM) 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 "will," "intend," "continue," "enhance," "reduce," "plan," "expand," "ongoing," "develop," "anticipate," 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, 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.
Interest Income and Expense For the periods ended December 31, Three Months Twelve Months (Dollars in thousands) 2000 1999 2000 1999 Interest income: Federal funds sold and repurchase agreements $ 3,582 $ 2,434 $ 8,700 $8,847 Trading securities 8,200 --- 8,200 --- Securities available for sale --- 14,500 42,507 62,698 Loans available for sale 300 348 2,474 25,724 Investment securities and other 320 644 1,501 2,181 Loan portfolio 6,630 9,698 20,586 28,683 Match funded loans and securities 2,148 3,237 11,022 3,237 Discount loan portfolio 19,804 37,262 89,826 121,854 40,984 68,123 184,816 253,224 Interest expense: Deposits 22,893 23,204 98,224 98,370 Securities sold under agreements to repurchase 43 1,565 10,729 7,456 Bonds - match funded Agreements 2,390 2,101 11,484 2,101 Obligations outstanding under lines of credit 2,098 4,200 13,881 16,318 Notes, debentures and other interest bearing obligations 8,175 11,049 34,772 31,297 35,599 42,119 169,090 155,542 Net interest income before provision for loan losses $ 5,385 $26,004 $15,726 $97,682 Net (Loss) Income by Business Segment For the periods ended December 31, Three Months Twelve Months (Dollars in thousands) 2000 1999 2000 1999 Single family residential discount loans $1,454 $ (3,208) $13,078 $(12,680) Commercial loans 3,008 8,385 571 16,428 Domestic residential mortgage loan servicing 3,667 3,976 11,909 12,067 Investment in low-income housing tax credits (11,043) 1,190 (12,351) 7,802 OTX (5,547) (4,893) (21,049) (11,372) Commercial Real Estate (1,914) (1,776) 10,285 (1,566) UK operations (1) 12,080 (2,147) 8,350 36,859 Domestic subprime single family residential lending (2,470) (6,571) (15,210) (18,025) Unsecured collections (2,328) (1,693) (8,927) (4,185) Ocwen Realty Advisors (51) --- (53) --- Corporate items and other 12,513 8,009 15,589 (5,496) $ 9,369 $ 1,272 $ 2,192 $ 19,832 (1) 1999 includes Ocwen UK, which was sold in September 1999 OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except share data) For the periods ended December 31, Three Months Twelve Months 2000 1999 2000 1999 Interest income $ 40,984 $ 68,123 $184,816 $253,224 Interest expense 35,599 42,119 169,090 155,542 Net interest income before provision for loan losses 5,385 26,004 15,726 97,682 Provision for loan losses 2,573 1,522 15,177 6,710 Net interest (loss) income after provision for loan losses 2,812 24,482 549 90,972 Non-interest income: Servicing and other fees 25,037 18,965 97,080 76,018 Gain on interest earning assets, net 863 712 18,580 44,298 Unrealized loss on trading securities, net (2,520) --- (4,926) --- Impairment charges on securities available for sale --- (10,697) (11,597) (58,777) Gain (loss) on real estate owned, net 1,170 (3,858) (13,464) (2,060) Gain on other non interest earning assets, net 23,653 1,469 45,517 58,693 Net operating gains (losses) on investments in real estate 3,371 850 26,140 (1,077) Amortization of excess of net assets acquired over purchase price 5,324 3,202 14,112 3,201 Other income 2,912 1,128 6,083 24,346 59,810 11,771 177,525 144,642 Non-interest expense: Compensation and employee benefits 21,972 21,182 83,086 102,173 Occupancy and equipment 2,649 3,447 12,005 18,501 Technology and communication costs 5,817 4,829 22,515 19,647 Loan expenses 2,551 1,846 13,051 12,618 Net operating losses on investments in certain low- income housing tax credit interests 3,901 1,733 9,931 6,291 Amortization of excess of purchase price over net assets acquired 778 3,677 3,124 4,448 Professional services and Regulatory fees 3,908 3,638 13,275 14,205 Other operating expenses 3,815 2,437 13,022 17,185 45,391 42,789 170,009 195,068 Distributions on Company- obligated, mandatorily redeemable securities of subsidiary trust holding solely junior subordinated debentures of the Company 2,538 2,915 11,380 13,111 Equity in losses of investments in unconsolidated entities 284 3,134 5,249 12,616 Income (loss) before income taxes and extraordinary gain 14,409 (12,585) (8,564) 14,819 Income tax (expense) benefit (15,079) 6,986 (7,957) (2,608) Minority interest in net loss of consolidated subsidiary --- 141 --- 638 (Loss) income before extraordinary gain (670) (5,458) (16,521) 12,849 Extraordinary gain on repurchase of debt, net of taxes 10,039 6,730 18,713 6,983 Net income $ 9,369 $ 1,272 $ 2,192 $19,832 (Loss) earnings per share: Basic: Net (loss) income before extraordinary gain $ (0.01) $ (0.08) $ (0.25) $ 0.20 Extraordinary gain 0.15 0.10 0.28 0.11 Net income $ 0.14 $ 0.02 $ 0.03 $ 0.31 Diluted: Net (loss) income before extraordinary gain $ (0.01) $ (0.08) $ (0.24) $ 0.20 Extraordinary gain 0.15 0.10 0.27 0.11 Net income $ 0.14 $ 0.02 $ 0.03 $ 0.31 Weighted average common shares outstanding: Basic 67,152,363 70,245,465 67,427,662 63,051,015 Diluted 68,602,539 70,277,966 68,523,169 63,090,282 OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollars in Thousands, except share data) December 31, 2000 December 31,1999 Assets: Cash and amounts due from depository institutions $ 18,749 $ 125,799 Interest earning deposits 134,987 116,420 Federal funds sold --- 112,000 Securities available 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- 277,595 --- Subordinates, residuals and other securities 112,647 --- Loans available for sale, at lower of cost or market 10,610 45,213 Real estate held for sale 22,670 --- Low-income housing tax credit interests held for sale 87,083 --- Investment securities 13,257 10,965 Loan portfolio, net 93,414 157,408 Discount loan portfolio, net 536,028 913,229 Match funded loans and securities, net 116,987 157,794 Investments in low-income housing tax credit interests 55,729 150,989 Investments in unconsolidated entities 430 37,118 Real estate owned, net 146,419 167,506 Investment in real estate 122,761 268,241 Premises and equipment, net 43,152 49,038 Income taxes receivable 30,261 --- Deferred tax asset, net 95,991 136,920 Escrow advances on loans and loans serviced for others 227,055 162,548 Mortgage servicing rights 51,426 11,683 Other assets 52,169 71,285 $ 2,249,420 $ 3,281,674 Liabilities and Stockholders' Equity Liabilities: Deposits $ 1,258,360 $ 1,814,647 Securities sold under agreements to repurchase --- 47,365 Bonds - match funded agreements 107,050 141,515 Obligations outstanding under lines of credit 32,933 187,866 Notes, debentures and other interest bearing obligations 173,330 317,573 Accrued interest payable 22,096 32,569 Excess of net assets acquired over purchase price 36,665 56,841 Income taxes payable --- 6,369 Accrued expenses, payables and other liabilities 36,030 57,487 Total liabilities 1,666,464 2,662,232 Company obligated, mandatorily redeemable securities of subsidiary trust holding solely junior subordinated debentures of the Company 79,530 110,000 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 December 31, 2000, and December 31,1999, respectively 672 686 Additional paid-in capital 223,163 232,340 Retained earnings 279,194 277,002 Accumulated other comprehensive income, net of taxes: Net unrealized gain on securities available for sale --- 163 Net unrealized foreign currency translation loss 397 (749) Total stockholders' equity 503,426 509,442 $ 2,249,420 $ 3,281,674