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Ocwen: 1st Qtr. Results & Stock Repurchase
FOR IMMEDIATE RELEASE
FOR FURTHER INFORMATION, CONTACT:
Mark S. Zeidman
Senior Vice President & CFO
T: (561) 682-8600
E: mzeidman@ocwen.com
OCWEN FINANCIAL CORPORATION ANNOUNCES
FIRST QUARTER RESULTS AND A NEW STOCK REPURCHASE PLAN
West Palm Beach, FL - (May 9, 2000) Ocwen Financial Corporation (NYSE: OCN)
today reported a net loss for its first quarter ended March 31, 2000 of
$(5.1) million, or $(0.07) per share, compared to a net income of $9.5
million, or $0.16 per diluted share for the first quarter of 1999.
Chairman and CEO William C. Erbey stated, "While we are disappointed with
the first quarter's results, we are confident that our strategic
repositioning of the Company away from capital intensive businesses and
towards fee based businesses will maximize shareholder value in the long
run. Our core businesses (despite a slow quarter for commercial loan
resolutions) recorded income in the first quarter. However, that income
was more than offset by our continuing technology investments and impairment
charges and other costs associated with our remaining subprime assets. The
Company remains strong from a capital and liquidity point of view and has
the financial and human resources necessary to implement our strategic plan
and achieve our corporate goals."
The Company's core businesses, in the aggregate, recorded net income of
$8.1 million in the 2000 first quarter, vs. $9.2 in the first quarter of
1999. However, impairment charges and other losses associated with its
remaining subprime assets, as well as the unsecured collections business,
aggregated $(8.5) million in the 2000 first quarter, compared to a loss of
$(1.2) million in the same period of 1999. Additionally, first quarter
results reflected losses at Ocwen Technology Xchange ("OTX") of $(4.9)
million, vs. $(2.4) million in 1999, reflecting OCN's ongoing commitment
to the development of this business.
As of March 31, 2000, the Company's portfolio of residual and subordinate
mortgage-backed securities was reduced to $184.7 million, including
securities available for sale and match funded bonds, compared to $299.3
million at October 7, 1999, the date of the acquisition of Ocwen Asset
Investment Corp. ("OAC"). In addition, of the March 31, 2000 balance,
$104.2 million was acquired as a result of the OAC acquisition, and $80.5
million represented the remaining balance of the OCN portfolio. During the
first quarter of 2000, the Company sold a CMBS security, reducing its
securities portfolio by approximately $38.2 million. The March 31, 2000
portfolio, after giving effect to the risk reduction resulting from the
resecuritization during the fourth quarter of 1999, reflects exposure in
this asset class of approximately $146.3 million, a reduction of over 50%
since last October. The Company continues to examine opportunities to
reduce its exposure to this asset class.
Pre-tax earnings in the first quarter of 2000 reflect gains on sales of
interest earning assets of $11.0 million, down from $20.0 million in the
1999 first quarter. The 2000 results included a gain on the sale of whole
loans of $7.8 million, while 1999 results included $16.6 million of
securitization gains. No securitization gains were recorded in the 2000
first quarter, reflecting the Company's decision in the third quarter of
1999 to discontinue the practice of structuring securitizations as sale
transactions, thus precluding recognition of gain-on-sale accounting.
Although first quarter 2000 commercial resolution results were low, the
Company does not believe they are indicative of a full year's results.
From a volume perspective, during the first quarter of 2000, the Company
acquired a portfolio of discount commercial loans and related assets for a
book value of $167.7 million, of which $147.4 million were classified as
investments in real estate. The portfolio includes performing,
sub-performing and non-performing loans.
Despite increased expenses for OTX and Domestic Residential Loan Servicing,
operating expenses in the 2000 first quarter were essentially level with
the same period in 1999, after adjusting for the reversal of $6.0 million
of expense recognized in prior periods in connection with the Company's
Long Term Incentive Plan which was suspended in March 2000 and after
excluding amounts related to Ocwen UK (sold by OCN in September 1999) and
OAC (acquired by OCN in October 1999).
The Company repurchased approximately 1.4 million of its common shares
during the first quarter of 2000 at an average price of $6.48 per share,
completing the stock repurchase program of 6 million shares announced in
April 1999.
Recent Developments
OCN has entered into an agreement to sell its office building located at
690 Market Street in San Francisco for $28.0 million less commissions and
closing costs and as adjusted for pro rations of certain contractual
obligations that survive closing. The buyer has posted a $1.4 million
deposit, and the closing is expected to occur during the second quarter of
2000. Closing is subject to the fulfillment of certain conditions,
including but not limited to delivery of clear title and receipt of
required tenant estoppels.
The Board of Directors approved an additional stock repurchase program to
repurchase up to an additional 6 million shares of issued and outstanding
OCN common stock. As with our original program, any such purchases will be
at times, at prices per share, in amounts, and through solicited or
unsolicited transactions in the open market, on the New York Stock Exchange
or in privately negotiated transactions, in each case as OCN deems
appropriate depending on the availability of excess liquidity, market
conditions, corporate requirements and applicable securities laws. No
limit has been placed on the duration of the stock repurchase program, and
OCN reserves the right to discontinue the repurchase program at any time.
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.
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
Three Months Ended March 31,
(Dollars in thousands) 2000 1999
Single family residential
discount loans $3,472 $4,385
Commercial loans 720 4,952
Domestic residential mortgage
loan servicing 2,804 1,439
Investment in low-income housing
tax credits 1,119 (1,567)
OTX (4,862) (2,384)
Commercial real estate (583) ---
UK operations (1) (1,551) 294
Domestic subprime single family
residential lending (4,691) (563)
Unsecured collections (2,226) (972)
Corporate items and other 700 3,886
$ (5,098) $9,470
(1) 1999 includes Ocwen UK, which was sold in September 1999.
Asset Acquisition
(Uunpaid principal balances)
For the periods ended March 31,
Three Months Increase
(Dollars in thousands) 2000 1999 (Decrease)
Discount Loan Acquisitions:
Single family residential $58,937 $40,876 $18,061
Multi-family residential 15,317 32,684 (17,367)
Commercial real estate 6,787 24,801 (18,014)
Other 5,493 6,596 (1,103)
$86,534 $104,957 $(18,423)
Subprime Loan Purchases
and Originations:
Domestic $ --- $160,859 $(160,859)
Foreign (Ocwen UK) --- 140,042 (140,042)
$ --- $300,901 $(300,901)
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
(Dollars in Thousands, except share data)
For the three months ended
March 31,
2000 1999
Interest income:
Federal funds sold and repurchase
agreements $1,709 $3,396
Securities available for sale 12,869 17,189
Loans available for sale 807 8,130
Investment securities and other 327 651
Loans 3,968 6,165
Match funded loans and securities 3,311 ---
Discount loans 25,099 30,003
48,090 65,534
Interest expense:
Deposits 24,685 26,828
Securities sold under agreements to
repurchase 2,640 1,491
Obligations outstanding under lines
of credit 3,471 3,724
Bonds-match funded agreements 3,356 ---
Notes, debentures and other interest
bearing obligations 9,244 6,755
43,396 38,798
Net interest income before provision
for loan losses 4,694 26,736
Provision for loan losses 2,608 3,739
Net interest income after provision
for loan losses 2,086 22,997
Non-interest income:
Servicing fees and other charges 19,427 18,251
Gain on interest earning assets, net 10,994 20,225
Impairment charges on securities
available for sale (6,833) (83)
(Loss) gain on real estate owned, net (7,007) 629
Amortization of excess of net assets
acquired over purchase price 2,794 ---
Other income 4,775 6,553
24,150 45,575
Non-interest expense:
Compensation and employee benefits 16,583 27,211
Occupancy and equipment 3,263 5,766
Technology and communication costs 5,281 5,744
Loan expenses 3,930 4,128
Net operating (gains) losses on
investments in real estate and certain
low-income housing tax credit interests (4,054) 1,848
Amortization and write-off of excess of
purchase price over net assets acquired 773 230
Other operating expenses 6,745 7,196
32,521 52,123
Distributions on Company-obligated,
mandatory redeemable securities of
subsidiary trust holding solely junior
subordinated debentures 3,194 3,399
Equity in losses of investments in
unconsolidated entities 2,260 1,245
(Loss) income before income taxes and
extraordinary gain (10,498) 11,805
Income tax benefit (expense) 3,255 (2,368)
Minority interest in net loss of
consolidated subsidiary --- 33
(Loss) income before extraordinary gain (7,243) 9,470
Extraordinary gain on repurchase of debt,
net of taxes 2,145 ---
Net (loss) income $(5,098) $9,470
(Loss) earnings per share:
Basic:
Net (loss) income before extraordinary
gain $(0.10) $0.16
Extraordinary gain 0.03 ---
Net (loss) income $(0.07) $0.16
Diluted:
Net (loss) income before extraordinary
gain $(0.10) $0.16
Extraordinary gain 0.03 ---
Net (loss) income $(0.07) $0.16
Weighted average common shares outstanding:
Basic 68,222,987 60,800,357
Diluted 68,222,987 60,843,572
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
March 31, December 31,
2000 1999
Assets:
Cash and amounts due from depository
institutions $68,016 $153,459
Interest earning deposits 23,024 116,399
Federal funds sold 96,000 112,000
Securities available for sale,
at fair value 838,446 587,518
Loans available for sale, at lower
of cost or market 36,843 45,213
Investment securities 13,256 10,965
Loan portfolio, net 156,119 157,408
Match funded loans and securities, net 145,964 157,794
Discount loan portfolio, net 842,178 913,229
Investments in low-income housing
tax credit interests 138,778 150,989
Investments in unconsolidated entities 33,998 37,118
Real estate owned, net 185,498 167,506
Investment in real estate 238,247 268,241
Investment in real estate available for sale 188,808 ---
Premises and equipment, net 47,344 49,038
Income taxes receivable 13,198 ---
Deferred tax asset, net 140,550 136,920
Excess of purchase price over net
assets acquired 12,433 13,207
Principal, interest and dividends
receivable 10,978 10,024
Escrow advances on loans and loans
serviced for others 172,986 162,548
Other assets 76,827 59,737
$3,479,491 $3,309,313
Liabilities and Stockholders' Equity
Liabilities:
Deposits $1,767,602 $1,842,286
Securities sold under agreements
to repurchase 376,454 47,365
Bonds-match funded agreements 130,429 141,515
Obligations outstanding under lines
of credit 174,059 187,866
Notes, debentures and other interest
bearing obligations 298,023 317,573
Accrued interest payable 39,681 32,569
Excess of net assets acquired over
purchase price 54,041 56,841
Income taxes payable --- 6,369
Accrued expenses, payables and other
liabilities 36,766 57,487
Total liabilities 2,877,055 2,689,871
Company obligated, mandatorily redeemable
securities of subsidiary trust holding
solely junior subordinated debentures
of the Company 110,000 110,000
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;
67,183,275 and 68,571,575 shares
issued and outstanding at March 31,
2000, and December 31, 1999, respectively 672 686
Additional paid-in capital 223,372 232,340
Retained earnings 271,904 277,002
Accumulated other comprehensive income,
net of taxes:
Net unrealized (loss) gain on
securities available for sale (2,924) 163
Net unrealized foreign currency
translation loss (588) (749)
Total stockholders' equity 492,436 509,442
$3,479,491 $3,309,313
End.