WEST PALM BEACH, Fla., August 10, 2000 (PRIMEZONE) -- Ocwen Financial Corporation (NYSE:OCN) today reported a net loss for its second quarter ended June 30, 2000 of $(1.4) million, or $(0.02) per share, compared to a net loss of $(3.7) million or $(0.06) per share for the 1999 second quarter. For the six months ended June 30, 2000, the Company reported a net loss of $(6.5) million or $(0.10) per share compared to net income of $5.8 million or $0.10 per share in the same period of 1999.
Chairman and CEO William C. Erbey stated "Our second quarter results reflect the fact that we continue to be a company in transition focused on growing our fee based businesses. While second quarter results are disappointing, our loan and servicing businesses continue to be profitable, and in fact reflect improvement vs. 1999. However, as in the first quarter, these results are more than offset by our ongoing investment in developing our technology business, OTX, as well as the costs associated with exiting non-strategic businesses. Looking forward to the remainder of the year, we continue to believe that Commercial Discount Loan resolutions through June 30 are not reflective of anticipated full year results. We also see continuing opportunities for significant growth in our servicing business, as evidenced by our acquisition of 8,704 loans from First Alliance Mortgage Co. Ocwen continued to strengthen its balance sheet during the second quarter through the repurchase of $18.5 million of face value of our debt securities and successfully closed on the sale of our office building at 690 Market Street in San Francisco. We remain focused on completing our transition plan and are confident that we have the human and financial resources needed to achieve our objectives."
The Company's loan and servicing businesses, in the aggregate, reflected improved results vs. comparable periods in 1999, recording net income of $7.8 million in the 2000 second quarter, vs. a net loss of $(0.5) million in the second quarter of 1999. For the six months ended June 30, 2000 aggregate results reflected net income of $15.2 million as compared to $10.9 million in the same period of 1999, despite the fact that no securitization gains were recorded in 2000. This reflects the Company's decision in the third quarter of 1999 to discontinue the practice of structuring securitizations as sale transactions, thus precluding the recognition of gain-on-sale accounting. Results in 2000 include pre-tax gains on the sale of whole loans of $5.1 million and $12.6 million in the second quarter and six month periods, respectively, while 1999 results include pre-tax securitization gains of $20.2 million and $36.8 million for the corresponding periods.
Continuing investments in OTX in the second quarter of 2000 resulted in a net loss of $(5.3) million, compared to $(2.6) million in the 1999 second quarter. OTX results reflected a loss of $(9.7) million for the six months ended June 30, 2000 vs. $(4.0) million for the same period in 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.
The second quarter of 2000 also included net income in the Commercial Real Estate business of $2.0 million, primarily reflecting a pre-tax gain of $3.9 million on the sale of the Company's commercial property located at 690 Market Street in San Francisco, vs. $0.1 million in the 1999 second quarter.
Second quarter 2000 results included extraordinary gains of $3.9 million (net of tax) related to the repurchase on the open market of $9.9 million face value of the 11.5% senior notes and $8.6 face value of the 10.875% capital securities. For the six months ended June 30, 2000 the Company reported extraordinary gains of $6.0 million. No such gains were reported in the comparable periods of 1999. These transactions reflect the Company's ongoing efforts to reduce its leverage and strengthen its balance sheet.
Recent Developments
The Company has entered into agreements to sell its three remaining office buildings in San Francisco (225 Bush Street, 450 Sansome Street, and 10 United Nations Plaza) for aggregate proceeds of approximately $210 million. The agreements pertaining to 225 Bush Street and 450 Sansome Street are contingent upon satisfactory completion of the buyers due diligence, while due diligence on 10 United Nations Plaza has been completed. Each of these transactions are also subject to standard closing deliverables as well as adjustments for (i) closing costs and (ii) pro rations of certain contractual obligations that survive closing. All three transactions are expected to close during the third quarter of 2000.
As of July 31, 2000, the Company won a competitive bid to the servicing rights for more than $700 million in subprime mortgages from First Alliance Mortgage Co. Terms of the sale were approved by U.S. Bankruptcy Court for the Central District of California in Santa Ana. This transaction will increase the Company's loans serviced by 8,704 loans.
As mentioned earlier, Ocwen continues to make a substantial investment in OTX to complete the development of its advanced technology products - REAL-e(TM), REALSynergy(TM) and REALTrans(SM). The REAL-e(TM) residential mortgage servicing system will be introduced to the marketplace this year. On July 1, 2000 customers began receiving the new 32-bit Microsoft(R) Windows(R) based REALSynergy(TM) commercial mortgage servicing system that replaces the MS-DOS(R) based Amicus(R) product. The REALTrans(SM) platform continues to be a leading Internet vendor management application with approximately 20 customers requesting products from 1,500 potential vendors. Eight of the top 25 mortgage originators have used or are preparing to use the platform. Currently about 10,000 orders are placed on a monthly basis.
Ocwen Financial Corporation is a financial services company headquartered in West Palm Beach, Florida. The Company's primary businesses are the acquisition, 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), REALSynergy(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 "anticipate," "commitment," "continue," "expect," "plan," "will," 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, 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, integration of the business of OAC, the market prices of the common stock of OCN, other factors generally understood to affect the real estate acquisition, mortgage and leasing markets and securities investments, 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.
Net (Loss) Income by Business Segment
For the Periods Ended June 30, Three Months Six Months
(Dollars in thousands) 2000 1999 2000 1999
Single family residential
discount loans $ 4,389 $ (9,220) $ 7,467 $(5,336)
Commercial loans 756 5,793 1,450 10,169
Domestic residential mortgage
Loan servicing 2,650 2,910 6,234 6,052
Investment in low-income
housing tax credits 13 1,068 1,192 2,404
OTX (5,251) (2,597) (9,715) (3,980)
Commercial Real Estate 2,011 123 2,710 170
UK operations (1) (1,390) 8,984 (2,932) 9,068
Domestic subprime single
family residential lending (3,346) (1,563) (7,907) (1,128)
Unsecured collections (2,191) (815) (4,364) (1,472)
Ocwen Realty Advisors 147 --- 290 ---
Corporate items and other 813 (8,370) (922) (10,164)
$(1,399) $ (3,687) $ (6,497) $ 5,783
(1) 1999 includes Ocwen UK, which was sold in September 1999
Asset Acquisition
(Unpaid principal balances)
For the Periods
Ended June 30,
(Dollars in Three Months Increase Six Months Increase
thousands) 2000 1999 (Decrease) 2000 1999 (Decrease)
Discount Loan Acquisitions:
Single family
residential $90,222 $233,207 $(142,985) $149,159 $274,083 $(124,924)
Multi-family
residential 5,977 39,275 (33,298) 21,294 71,959 (50,665)
Commercial real
estate 11,332 106,989 (95,657) 18,119 131,790 (113,671)
Other 4,537 2,030 2,507 10,030 8,626 1,404
$112,068 $381,501 $(269,433) $198,602 $486,458 $(287,856)
Subprime Loan Purchases
and Originations:
Domestic $ --- $74,958 $ (74,958) $ --- $235,817 $(235,817)
Foreign
(Ocwen UK) --- 152,965 (152,965) $ --- 293,007 (293,007)
$ --- $227,923 $(227,923) $ --- $528,824 $(528,824)
Investments in Real
Estate (1) $ --- $ --- $ --- $147,448 $--- $ 147,448
(1) Represents net book value of commercial loans and related assets
classified as investments in real estate.
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (LOSS)
(Dollars in Thousands, except share data)
For the periods ended Three Months Six Months
June 30, 2000 1999 2000 1999
Interest income:
Federal funds sold
and repurchase
agreements $ 864 $2,059 $2,573 $5,454
Securities available
for sale 16,808 15,659 29,677 32,848
Loans available for
sale 918 11,014 1,724 19,144
Investment securities
and other 502 384 829 1,035
Loans 5,337 8,878 9,305 15,044
Match funded loans
and securities 2,951 --- 6,263 ---
Discount loans 23,075 25,553 48,174 55,556
50,455 63,547 98,545 129,081
Interest expense:
Deposits 24,793 23,559 49,478 50,387
Securities sold under
agreements to
repurchase 5,284 2,281 7,924 3,772
Bonds-match funded
agreements 2,791 --- 6,146 ---
Obligations outstanding
under lines of
credit 3,941 5,293 7,413 9,017
Notes, debentures and
other interest bearing
obligations 8,853 6,705 18,096 13,460
45,662 37,838 89,057 76,636
Net interest income
before provision for
loan losses 4,793 25,709 9,488 52,445
Provision for loan
losses 3,134 623 5,743 4,362
Net interest income
after provision for
loan losses 1,659 25,086 3,745 48,083
Non-interest income:
Servicing fees and
other charges 20,462 18,929 41,131 37,180
Gain on interest
earning assets, net 5,270 22,918 16,264 43,144
Impairment charges on
securities available
for sale (4,764) (28,785) (11,597) (28,869)
(Loss) gain on real
estate owned, net (3,006) 2,677 (10,013) 3,306
Net operating gains on
investments in real
estate 8,063 225 13,616 242
Amortization of excess
of net assets acquired
over purchase price 2,999 --- 5,792 ---
Other income 8,210 9,073 12,985 15,625
37,234 25,037 68,178 70,628
Non-interest expense:
Compensation and
employee benefits 22,398 24,330 38,980 51,541
Occupancy and equipment 2,953 4,956 6,215 10,722
Technology and
communication costs 5,414 4,799 10,695 10,543
Loan expenses 2,987 2,652 6,917 6,780
Net operating (gains)
losses on investments
in certain low-income
housing tax credit
interests 839 1,599 2,339 3,463
Amortization of excess
of purchase price over
net assets acquired 794 257 1,568 487
Other operating
expenses 6,459 9,417 13,204 16,614
41,844 48,010 79,918 100,150
Distributions on Company-
obligated, mandatory
redeemable securities of
subsidiary trust holding
solely junior subordinated
debentures 2,918 3,398 6,112 6,797
Equity in losses of
investments in
unconsolidated entities 1,812 3,470 4,072 4,713
(Loss) income before income
taxes and extraordinary
gain (7,681) (4,755) (18,179) 7,051
Income tax benefit
(expense) 2,381 972 5,635 (1,396)
Minority interest in net
loss of consolidated
subsidiary --- 96 --- 128
(Loss) income before
extraordinary gain (5,300) (3,687) (12,544) 5,783
Extraordinary gain on
repurchase of debt, net
of taxes 3,901 --- 6,047 ---
Net (loss) income $(1,399) $(3,687) $(6,497) $5,783
(Loss) earnings per share:
Basic:
Net (loss) income before
extraordinary gain $(0.08) $(0.06) $(0.19) $0.10
Extraordinary gain 0.06 --- 0.09 ---
Net (loss) income $(0.02) $(0.06) $(0.10) $0.10
Diluted:
Net (loss) income
before extraordinary
gain $(0.08) $(0.06) $(0.19) $0.10
Extraordinary gain 0.06 --- 0.09 ---
Net (loss) income $(0.02) $(0.06) $(0.10) $0.10
Weighted average common
shares outstanding:
Basic 67,182,395 60,730,614 67,702,961 60,765,485
Diluted 67,182,395 60,730,614 67,702,961 60,807,036
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
June 30, 2000 December 31, 1999
Assets:
Cash and amounts due from
depository institutions $26,080 $153,459
Interest earning deposits 19,238 116,399
Federal funds sold 173,500 112,000
Securities available for sale,
at fair value:
Collateralized mortgage
obligations (AAA-rated) 670,829 392,387
Subordinates, residuals and
other securities 130,644 195,131
Loans available for sale, at
lower of cost or market 29,319 45,213
Real estate held for sale 195,241 ---
Investment securities 13,257 10,965
Loan portfolio, net 148,490 157,408
Discount loan portfolio, net 803,446 913,229
Match funded loans and
securities, net 131,084 157,794
Investments in low-income housing
tax credit interests 144,858 150,989
Investments in unconsolidated
entities 31,098 37,118
Real estate owned, net 182,676 167,506
Investment in real estate 165,883 268,241
Premises and equipment, net 46,170 49,038
Income taxes receivable 14,000 ---
Deferred tax asset, net 140,219 136,920
Excess of purchase price over
net assets acquired 11,639 13,207
Principal, interest and
dividends receivable 11,492 10,024
Escrow advances on loans and
loans serviced for others 205,266 162,548
Other assets 75,558 59,737
$3,369,987 $3,309,313
Liabilities and Stockholders' Equity
Liabilities:
Deposits $1,642,133 $1,842,286
Securities sold under
agreements to repurchase 421,050 47,365
Bonds-match funded agreements 121,797 141,515
Obligations outstanding under
lines of credit 184,750 187,866
Notes, debentures and other
interest bearing obligations 288,083 317,573
Accrued interest payable 36,344 32,569
Excess of net assets acquired
over purchase price 51,043 56,841
Income taxes payable --- 6,369
Accrued expenses, payables and
other liabilities 30,761 57,487
Total liabilities 2,775,961 2,689,871
Company obligated, mandatorily
redeemable securities of subsidiary
trust holding solely junior
subordinated debentures of the
Company 101,390 110,000
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
June 30, 2000, and December 31,
1999, respectively 672 686
Additional paid-in capital 223,135 232,340
Retained earnings 270,505 277,002
Accumulated other comprehensive
income, net of taxes:
Net unrealized (loss) gain on
securities available for sale (1,295) 163
Net unrealized foreign currency
translation loss (381) (749)
Total stockholders' equity 492,636 509,442
$3,369,987 $3,309,313