WEST PALM BEACH, Fla. Nov. 9, 2000 (PRIMEZONE) -- Ocwen Financial Corporation (NYSE:OCN) today reported a net loss for its third quarter ended September 30, 2000 of $(0.7) million, or $(0.01) per share, compared to net income of $12.8 million or $0.21 per share for the 1999 third quarter. For the nine months ended September 30, 2000, the Company reported a net loss of $(7.2) million or $(0.11) per share compared to net income of $18.6 million or $0.31 per share in the same period of 1999.
Chairman and CEO William C. Erbey stated "While third quarter results are disappointing, our loan and servicing businesses continue to be profitable. Our ongoing investment in our technology business, OTX, reflects a consistent pace with the second quarter, and we have begun to see progress in the acceptance of our REALTransSM platform. We are in the process of completing servicing acquisitions that would add approximately 45,000 loans or $1.4 billion during the fourth quarter to our current base of 127,000 loans or $10.7 billion, and we anticipate a gain from selling our investment in Kensington Group plc. Ocwen also continued to strengthen its balance sheet during the third quarter through debt repurchases and repayments and through the sale of our San Francisco properties. 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 $2.3 million in the 2000 third quarter vs. a net loss of $(4.3) million in the third quarter of 1999. For the nine months ended September 30, 2000 aggregate results reflected net income of $17.4 million as compared to $6.7 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.
Continuing investments in OTX in the third quarter of 2000 resulted in a net loss of $(5.8) million, compared to $(2.5) million in the 1999 third quarter. OTX results reflected a loss of $(15.5) million for the nine months ended September 30, 2000 vs. $(6.5) 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 third quarter of 2000 also included net income in the Commercial Real Estate business of $9.5 million, primarily reflecting pre-tax gains of $16.7 million on the sales of the Company's commercial properties at 10 United Nations Plaza and 450 Sansome Street in San Francisco.
UK Operations reflected a net loss of $(0.8) million for the third quarter of 2000, and $(3.7) million for the nine month period, compared to net income of $30.0 million and $39.5 million for the comparable periods in 1999. This change reflects the sale of the Company's wholly owned subsidiary, Ocwen UK plc for a pre-tax gain of $50.4 million in the third quarter of 1999. In 2000, UK operations reflect the results of the Company's equity investment in Kensington Group plc.
The Company's net interest margin declined to 0.18% for the quarter ended September 30, 2000 from 3.61% for the quarter ended September 30, 1999, and to 0.67% for the nine months ended September 30, 2000 from 4.26% for the nine months ended September 30, 1999. A significant factor in this decline is the growth of the servicing business and the increase in real estate assets resulting from the acquisition of Ocwen Asset Investment Corp. and other transactions. These developments have increased the amount of non-interest earning assets on the balance sheet that are largely funded by interest bearing liabilities. Additionally, net interest margin was reduced due to the Company's decision to exit its subprime origination businesses in the U.S. and the U.K., both of which generated a high net interest spread during 1999.
Third quarter 2000 results included extraordinary gains of $2.6 million (net of tax) related to the repurchase on the open market of $15.1 million face value of the 11.5% senior notes and $2.0 million face value of the 10 7/8% Capital Securities. For the nine months ended September 30, 2000, the Company reported extraordinary gains of $8.7 million. Extraordinary gains of $0.3 million were reported in both the 1999 third quarter and the nine-month period. The Company continues to consider additional debt repurchases.
Notwithstanding the year to date net loss, the Company's financial position has strengthened during 2000 and remains strong. Total assets declined by $466 million, or 14% from December 31, 1999 levels. Equity as a percent of assets increased from 15.4% at December 31, 1999 to 17.4% at September 30, 2000. During the period from December 31, 1999 to September 30, 2000, debt levels excluding deposits have been reduced by $137.9 million, or 25% in the aggregate.
Recent Developments
On November 1, 2000, the Company sold its remaining San Francisco office building (225 Bush Street) for $143.5 million realizing net proceeds of approximately $60.3 million and a gain of $0.1 million.
The Company intends to sell its entire minority interest in Kensington Group plc during the fourth quarter. This sale is subject to a number of uncertainties, but it is the Company's expectation that it will realize a gain upon its completion.
Ocwen Technology Xchange, Inc. is achieving growing acceptance of its REALTrans platform in the market place. The number of service requestors has grown to 16, with an additional 14 requestors already committed to begin use of the system shortly. Active service providers have grown from 1,200 as of June 30, 2000 to approximately 3,100.
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), REALSynergy(tm) and REALTransSM 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," "pending," "ongoing," "commitment," "continue," "expect," "intend," "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, 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, 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, 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.
Ocwen Financial Corporation Third Quarter Results November 9, 2000 Net (Loss) Income by Business Segment For the Periods Ended September 30, Three Months Nine Months --------------------- ----------------- --------------- (Dollars in thousands) 2000 1999 2000 1999 ---- ---- ---- ---- Single family residential discount loans $ 4,157 $ (4,154) $11,624 $(9,472) Commercial loans (3,887) (2,185) (2,437) 8,043 Domestic residential mortgage loan servicing 2,008 2,000 8,242 8,091 Investment in low-income housing tax credits (2,500) 4,163 (1,308) 6,612 OTX (5,756) (2,535) (15,502) (6,479) Commercial Real Estate 9,489 39 12,199 209 UK operations (1) (798) 30,049 (3,730) 39,005 Domestic subprime single family residential lending (4,832) (10,217) (12,740) (11,454) Unsecured collections 2,235) (1,027) (6,598) (2,492) Ocwen Realty Advisors (291) --- (2) --- Corporate items and other 3,965 (3,357) 3,075 (13,503) ------ ------ ------ ------ $ (680) $ 12,776 $(7,177) $18,560 ------ ------ ------ ------ ------ ------ ------ ------ (1) 1999 includes Ocwen UK, which was sold in September 1999 Asset Acquisition (Unpaid principal balances) For the Periods Ended September 30, 3 Mos. Increase ----------------- --------- -------- (Dollars in thousands) 2000 1999 (Decrease) ---- ---- -------- Discount Loan Acquisitions: Single family residential $6,722 $61,725 $(55,003) Multi-family residential 28 3,353 (3,325) Commercial real estate 1,000 15,514 (14,514) Other --- 4,274 (4,274) ------ ------ ------ $7,750 $84,866 $(77,116) ------ ------ ------ ------ ------ ------ Subprime Loan Purchases and Originations: Domestic $ --- $18,052 $(18,052) Foreign --- 223,390 (223,390) ------ ------ ------ $ --- $241,442 $(241,442) ------ ------ ------ ------ ------ ------ Investments in Real Estate (1) $ --- $ --- $ --- ------ ------ ------ ------ ------ ------ Nine Months Increase ------------- -------- 2000 1999 (Decrease) ---- ---- -------- $155,881 $335,808 $(179,927) 21,322 75,312 (53,990) 19,119 147,304 (128,185) 10,030 12,900 (2,870) ------ ------- -------- $206,352 $571,324 $(364,972) ------ ------- -------- ------ ------- -------- $ --- $253,869 $(253,869) --- 516,396 (516,396) ------ -------- -------- $ --- $770,265 $(770,265) ------ -------- -------- ------ -------- -------- $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 (Dollars in thousands, except share data) 3 Mos. 9 Mos. --------------- ------------- For the periods ended September 30, 2000 1999 2000 1999 --------------------- ---- ---- ---- ---- Interest income: Federal funds sold and repurchase agreements $ 2,544 $ 958 $ 5,118 $6,412 Securities available for sale 12,831 15,350 42,508 48,199 Loans available for sale 450 6,233 2,174 25,376 Investment securities and other 352 502 1,181 1,537 Loan portfolio 4,651 3,941 13,956 18,985 Match funded loans and securities 2,611 --- 8,874 --- Discount loan portfolio 21,848 29,035 70,021 84,591 ------ ------ ------ ------ 45,287 56,019 143,832 185,100 ------ ------ ------ ------ Interest expense: Deposits 25,852 24,779 75,330 75,166 Securities sold under agreements to repurchase 2,761 2,120 10,685 5,891 Bonds-match funded agreements 2,948 --- 9,095 --- Obligations outstanding under lines of credit 4,371 3,101 11,783 12,219 Notes, debentures and other interest bearing obligations 8,501 6,787 26,598 20,147 ------ ------ ------ ------ 44,433 36,787 133,491 113,423 ------ ------ ------ ------ Net interest income before provision for loan losses 854 19,232 10,341 71,677 Provision for loan losses 6,861 826 12,604 5,188 ------ ------ ------ ------ Net interest (loss) income after provision for loan losses (6,007) 18,406 (2,263) 66,489 ------ ------ ------ ------ Non-interest income: Servicing fees and other charges 22,517 19,584 63,647 56,764 Gain on interest earning assets, net 1,453 442 17,717 43,585 Unrealized loss on trading securities (2,406) --- (2,406) --- Impairment charges on securities available for sale --- (19,211) (11,597)(48,080) (Loss) gain on real estate owned, net (4,621) (1,508) (14,634) 1,798 Net operating gains (losses) on investments in real estate 9,153 (2,169) 22,769 (1,927) Amortization of excess of net assets acquired over purchase 2,995 --- 8,788 --- Other income 20,445 65,105 33,431 80,731 ------ ------ ------ ------ 49,536 62,243 117,715 132,871 ------ ------ ------ ------ Non-interest expense: Compensation and employee benefits 22,134 29,451 61,114 80,991 Occupancy and equipment 3,141 4,331 9,356 15,053 Technology and communication costs 6,003 4,275 16,698 14,818 Loan expenses 3,583 3,992 10,500 10,773 Net operating losses on investments in certain low-income housing tax credit interests 3,691 1,094 6,030 4,558 Amortization of excess of purchase price over net assets acquired 778 284 2,346 771 Other operating expenses 5,370 8,701 18,574 25,312 ------ ------ ------ ------ 44,700 52,128 124,618 152,276 ------ ------ ------ ------ Distributions on Company-obligated, mandatory redeemable securities of subsidiary trust holding solely junior subordinated debentures 2,730 3,400 8,842 10,196 Equity in losses of investments in unconsolidated entities 893 4,768 4,965 9,483 ------ ------ ----- ------ (Loss) income before income taxes and extraordinary gain ( 4,794) 20,353 (22,973) 27,405 Income tax benefit (expense) 1,486 (8,199) 7,122 (9,595) Minority interest in net loss of consolidated subsidiary --- 369 --- 497 ------ ------ ------ ------ (Loss) income before extraordinary gain (3,308) 12,523 (15,851) 18,307 Extraordinary gain on repurchase of debt, net of taxes 2,628 253 8,674 253 ------ ------ ------ ------ Net (loss) income $ (680) $ 12,776 $ (7,177)$ 18,560 ------ ------ ------ ------ ------ ------ ------ ------ (Loss) earnings per share: Basic: Net (loss) income before extraordinary gain $ (0.05) $ 0.21 $ (0.24) $ 0.30 Extraordinary gain 0.04 --- 0.13 0.01 ------ ------ ------ ------ Net (loss) income $ (0.01) $ 0.21 $ (0.11) $ 0.31 ------ ------ ------ ------ ------ ------ ------ ------ Diluted: Net (loss) income before extraordinary gain $ (0.05) $ 0.21 (0.24) $ 0.30 Extraordinary gain 0.04 --- 0.13 0.01 ------ ------ ------ ------ Net (loss) income $ (0.01) $ 0.21 $ (0.11) $ 0.31 ------ ------ ------ ------ ------ ------ ------ ------ Weighted average common shares outstanding: Basic 67,152,363 60,427,623 67,519,428 60,652,865 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Diluted 67,152,363 60,460,314 67,519,428 60,691,416 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollars in thousands, except per share data) September 30, 2000 December 31, 1999 --------------- --------------- Assets: Cash and amounts due from depository institutions $ 31,055 $ 153,459 Interest earning deposits 16,422 116,399 Federal funds sold 179,000 112,000 Securities 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-rated) 372,541 --- Subordinates, residuals and other securities 123,754 --- Loans available for sale, at lower of cost or market 12,323 45,213 Real estate held for sale 160,589 --- Low-income housing tax credit interests held for sale 75,478 --- Investment securities 13,257 10,965 Loan portfolio, net 115,103 157,408 Discount loan portfolio, net 701,941 913,229 Match funded loans and securities, net 123,900 157,794 Investments in low-income housing tax credit interests 68,271 150,989 Investments in unconsolidated entities 29,803 37,118 Real estate owned, net 169,200 167,506 Investment in real estate 151,242 268,241 Premises and equipment, net 44,922 49,038 Income taxes receivable 22,827 --- Deferred tax asset, net 131,306 136,920 Excess of purchase price over net assets acquired 10,861 13,207 Principal, interest and dividends receivable 9,528 10,024 Escrow advances on loans and loans serviced for others 211,253 162,548 Other assets 68,607 59,737 --------- --------- $ 2,843,183 $ 3,309,313 --------- --------- --------- --------- Liabilities and Stockholders' Equity Liabilities: Deposits $ 1,604,640 $ 1,842,286 Securities sold under agreements to repurchase 5,692 47,365 Bonds-match funded agreements 114,687 141,515 Obligations outstanding under lines of credit 135,644 187,866 Notes, debentures and other interest bearing obligations 273,562 317,573 Accrued interest payable 37,692 32,569 Excess of net assets acquired over purchase price 47,923 56,841 Income taxes payable --- 6,369 Accrued expenses, payables and other liabilities 30,193 57,487 --------- --------- Total liabilities 2,250,033 2,689,871 --------- --------- Company obligated, mandatorily redeemable securities of subsidiary trust holding solely junior subordinated debentures of the Company 99,390 110,000 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 September 30, 2000, and December 31, 1999, respectively 672 686 Additional paid-in capital 223,148 232,340 Retained earnings 269,825 277,002 Accumulated other comprehensive income, net of taxes: Net unrealized gain on securities available for sale --- 163 Net unrealized foreign currency translation gain (loss) 115 (749) --------- --------- Total stockholders' equity 493,760 509,442 --------- --------- $ 2,843,183 $ 3,309,313 --------- --------- --------- ---------