Ocwen Financial Corporation Announces 2000 and Fourth Quarter Results

WEST PALM BEACH, Florida, UNITED STATES


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


        

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