WEST PALM BEACH, Fla., May 6, 2004 (PRIMEZONE) -- Ocwen Financial Corporation (NYSE:OCN) today reported net income for the first quarter of 2004 of $6.8 million or $0.10 per share compared to a net loss of $(8.4) million or $(0.13) per share for the first quarter of 2003.
Chairman and CEO William C. Erbey stated, "Our results reflect improvement across the board in our core, non-core and corporate segments. Core business earnings increased $1.0 million or 14% over the same period last year while non-core losses decreased to $(1.7) million from $(2.2) million in 2003, after adjusting for the arbitration settlement in the first quarter of last year. Corporate Items reflected pre-tax income of $0.5 million as compared to a loss of $(3.2) million in the same period last year.
-- Our Residential Servicing business recorded pre-tax income
of $5.7 million, reflecting the continuing pressures from
prepayments speeds and low interest rates.
-- Our non-core assets were reduced by $33.3 million, primarily
reflecting the sale of our 2nd largest asset, partially offset
by a $15.5 million mezzanine loan we issued as part of
the transaction.
-- Our Commercial Servicing business which includes the results of
our international joint venture, Global Servicing Solutions (GSS),
achieved profitability earlier than we had anticipated reporting
pre-tax income of $0.2 million this quarter.
We are very pleased to announce that on May 4, 2004 we signed a multi-year contract with Aegis Mortgage Corporation to license REALServicing(R) our residential mortgage servicing system. We expect this contract to improve our OTX results in 2004. We are optimistic that we will achieve further reductions in non-core assets during the remainder of this year, and we also believe that we are well positioned for an increase in Servicing results should interest rates increase and prepayment speeds decline."
The Residential Servicing business reported pre-tax income of $5.7 million in the first quarter of 2004 vs. $9.2 million in the 2003 first quarter, reflecting continuing earnings pressure from current low interest rates and rising prepayments in our servicing portfolio. Our first quarter 2004 Servicing results also included increased expenses reflecting costs associated with our property management contract with the United States Department of Veteran’s Affairs and as a result of having reassumed, in the fourth quarter of 2003, certain collection activities that had been performed by outside parties. As of March 31, 2004 we were the servicer of approximately 350 thousand loans with an unpaid principal balance (UPB) of $36.6 billion, as compared to approximately 360 thousand loans and $37.7 billion of UPB at December 31, 2003.
Pre-tax losses at OTX were $(1.8) million in the 2004 first quarter compared to a loss of $(3.3) million in the same period of 2003, an improvement of 45%, reflecting both increased revenues and declining expenses.
Ocwen Realty Advisors (ORA) reported pre-tax income of $2.0 million in the first quarter of 2004 as compared to $1.0 million in the first quarter of 2003.
The Unsecured Collections business reported pre-tax income in the first quarter of 2004 of $1.4 million as compared to $1.3 million in 2003.
In our newest business segments, Business Process Outsourcing reported pre-tax income of $0.4 million in the 2004 first quarter as compared to $0.08 million last year. Our Commercial Servicing segment, which includes both domestic servicing activities as well as the results of GSS, achieved pre-tax income of $0.2 million in the first quarter of 2004. The pre tax loss of $(1.4) million in the 2003 first quarter primarily reflected start-up costs for GSS.
Our non-core businesses recorded a pre-tax loss of $(1.7) million for the first quarter as compared to a loss of $(12.2) million in 2003. Results for 2003 included an arbitration settlement expense of $10 million. The Corporate Segment reported pre-tax income of $0.5 million in the first quarter of 2004 as compared to a loss of $(3.2) million in the same period last year. Results for 2004 include income of $3.7 million representing interest due on an income tax refund claim, largely offset by corporate expenses, primarily legal fees. Interest expense and technology costs in the corporate segment were substantially reduced in 2004 as compared to 2003.
The pre-tax loss for the first quarter of 2004 in the Commercial Assets business amounted to $(3.2) million as compared to a pre-tax loss of $(2.4) million in the 2003 first quarter. The increased losses in 2004 primarily reflect a valuation allowance on a non-core asset of $1.9 million, as well a loss of $0.6 million on a non-core asset sale, offset by reduced interest expenses of $2.4 million, reflecting the reduced level of assets in 2004. Commercial loans and real estate consisted of 8 assets as of March 31, 2004 with a net book value of $93.5 million as compared to $123.8 million at December 31, 2003, a reduction of $30 million or 24.5%.
The Affordable Housing business reported a pre-tax loss of $(1.0) million in the 2004 first quarter compared to a pre-tax loss of $(2.3) million in the 2003 first quarter. The improvement in 2004 results reflects reduced interest expense due to reduced asset values as well as the absence of loss provisions in 2004, as compared to a provision of $0.4 million in the 2003 first quarter.
Results in the Subprime Finance business reflected pre-tax income of $2.5 million for the 2004 first quarter as compared to a pre-tax loss of $(7.5) million in the 2003 first quarter. Results for the 2003 first quarter include a charge of $10 million related to the conclusion of arbitration. The Company’s total trading portfolio of non-investment grade securities, which consists largely of subprime residuals, amounted to $42.2 million at March 31, 2004 as compared to $42.8 million at December 31, 2003.
The Company's net tax expense in the 2004 first quarter was $11 thousand, representing foreign taxes on GSS operations. For 2003, tax expense was $0.3 million, primarily reflecting a tax payment related to investments in non-economic residual securities with no book value.
Ocwen Financial Corporation is a financial services company headquartered in West Palm Beach, Florida. The Company's primary business is the servicing and special servicing of nonconforming, subperforming and nonperforming residential and commercial mortgage loans. Ocwen also specializes in the development of related loan servicing technology and software for the mortgage and real estate industries. Additional information about Ocwen Financial Corporation 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 progress of reductions in non-core assets, interest rates and the impact of changes in interest rates on the servicing business, and anticipated improvements in results for OTX. 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, uncertainty related to dispute resolution and litigation, federal income tax rates, recognition of deferred tax credits and real estate market conditions and trends, as well as other risks detailed in OCN's reports and filings with the Securities and Exchange Commission, including its periodic reports on Form 10-K for the year ended December 31, 2003. 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.
OCWEN FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except
share data)
For the periods ended March 31, 2004 2003
Revenue
Servicing and related fees $ 42,121 $ 33,781
Vendor management fees 13,173 6,588
Gain (loss) on trading and
match funded securities, net (643) (423)
Valuation gains (losses) on
real estate (1,851) 298
Gain (loss) on sales of
real estate (541) 79
Operating income (losses)
from real estate 8 772
Other income 6,621 1,288
Non-interest revenue 58,888 42,383
Interest income 4,605 6,757
Interest expense 7,802 9,326
Net interest income
(expense) before
provision for loan
losses (3,197) (2,569)
Provision for loan losses (531) 166
Net interest income
(expense) after
provision for loan
losses (2,666) (2,735)
Total Revenue 56,222 39,648
Non-interest expense
Compensation and employee
benefits 22,033 17,708
Occupancy and equipment 3,997 2,830
Technology and communication
costs 6,669 4,497
Loan expenses 7,927 3,535
Loss (gain) on affordable
housing properties (38) 370
Professional services and
regulatory fees 5,825 15,284
Other operating expenses 3,057 2,297
Non-interest expense 49,470 46,521
Distributions on Company-
obligated, mandatorily
redeemable securities of
subsidiary trust holding
solely junior subordinated
debentures of the Company
(Capital Securities) --- 1,529
Income (loss) before
minority interest and
income taxes 6,752 (8,402)
Minority interest in net income
(loss) of subsidiaries (21) (263)
Income tax expense 11 307
Net income (loss) $ 6,762 $ (8,446)
Earnings (loss) per share
Basic 0.10 (0.13)
Diluted 0.10 (0.13)
Weighted average common
shares outstanding
Basic 67,762,414 67,339,773
Diluted 69,093,785 67,339,773
OCWEN FINANCIAL CORPORATION
AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except
share data)
March 31, December 31,
2004 2003
Assets
Cash and amounts due from
depository institutions $ 314,372 $ 215,764
Interest earning deposits 3,267 324
Trading securities, at
fair value:
Collateralized mortgage
obligations (AAA-rated)
and U.S. Treasury securities 4,020 6,679
Subordinates, residuals and
other securities 42,177 42,841
Real estate 69,464 103,943
Affordable housing properties 8,151 7,410
Loans, net 29,234 28,098
Match funded assets 144,017 130,087
Premises and equipment, net 43,418 41,944
Advances on loans and loans
serviced for others 322,843 374,769
Mortgage servicing rights 152,076 166,495
Receivables 77,002 88,399
Other assets 40,219 33,365
Total assets $ 1,250,260 $ 1,240,118
Liabilities and Stockholders' Equity
Liabilities
Deposits $ 508,238 $ 446,388
Escrow deposits 120,681 116,444
Bonds - match funded
agreements 128,166 115,394
Lines of credit and other
secured borrowings 79,527 150,384
Notes and debentures 56,249 56,249
Accrued interest payable 2,674 4,789
Accrued expenses, payables
and other liabilities 25,098 31,926
Total liabilities 920,633 921,574
Minority interest in subsidiaries 1,392 1,286
Stockholders' equity
Common stock, $.01 par value;
200,000,000 shares authorized:
68,123,558 and 67,467,220 shares
issued and outstanding at
March 31, 2004 and December
31, 2003, respectively 681 675
Additional paid-in capital 229,814 225,559
Retained earnings 97,171 90,409
Accumulated other comprehensive
income (loss), net of taxes:
Net unrealized foreign
currency translation
gain (loss) 569 615
Total stockholders' equity 328,235 317,258
Total liabilities and
stockholders' equity $ 1,250,260 $ 1,240,118
Pre-Tax Income (Loss) by Business Segment
For the periods ended March 31, 2004 2003
(Dollars in thousands)
Core businesses
Residential Loan Servicing $ 5,747 $ 9,248
OTX (1,771) (3,301)
Ocwen Realty Advisors 1,958 1,015
Unsecured Collections 1,401 1,317
Business Process Outsourcing 397 81
Commercial Servicing 224 (1,381)
7,956 6,979
Non-core businesses
Commercial Assets (3,241) (2,428)
Affordable Housing (973) (2,280)
Subprime Finance 2,504 (7,485)
(1,710) (12,193)
Corporate Items and Other 506 (3,188)
Income (loss) before minority
interest and income taxes $ 6,752 $ (8,402)
Non-Core Assets
(Dollars in thousands) March 31, December 31,
2004 2003
Loans, net
Affordable housing $ 3,612 $ 6,545
All other 25,622 21,553
Real estate 69,465 103,943
Subordinates, residuals and
other trading securities 42,177 42,841
Affordable housing properties 8,151 7,410
Total non-core assets $ 149,027 $ 182,292
Interest Income and Expense
For the periods ended March 31, 2004 2003
(Dollars in thousands)
Interest income
Interest earning cash
and other $ 114 $ 50
Federal funds sold and
repurchase agreements 392 318
Trading securities 3,238 4,865
Loans 460 372
Match funded loans
and securities 401 1,152
4,605 6,757
Interest expense
Deposits 4,038 4,865
Securities sold under
agreements to repurchase --- 3
Bonds - match funded agreements 1,027 1,306
Lines of credit and other
secured borrowings 1,208 856
Notes and debentures 1,529 2,296
7,802 9,326
Net interest income
(expense) before provision
for loan losses $ (3,197) $ (2,569)