WEST PALM BEACH, Fla., May 9, 2005 (PRIMEZONE) -- Ocwen Financial Corporation (NYSE:OCN) today reported net income for the first quarter of 2005 of $2.4 million or $0.04 per share compared to net income of $6.8 million or $0.10 per share for the first quarter of 2004. Results for 2005 are net of a tax provision of $0.6 million as compared to $0.01 million in the same period of 2004.
Chairman and CEO William C. Erbey stated "Our first quarter results were impacted by several items that merit noting:
-- In the aggregate, our core businesses earned pre-tax income of
$6.4 million as compared to $10.3 million in the same period
last year, a difference of $3.9 million. This decline is
primarily due to three factors:
-- in the first quarter of 2005 our core businesses absorbed
approximately $1.2 million more overhead costs than in 2004
because we no longer allocate such costs to the closed
non-core Affordable Housing and Commercial Asset businesses;
-- Residential Loan Servicing pre-overhead contribution declined
by $1.3 million and
-- contribution from our Subprime Finance group declined by
$1.4 million.
-- We are encouraged that our Residential Loan Servicing business,
while still below the earnings of the first quarter of last year,
has begun to benefit from increased interest rates, achieving
an increase of $3.5 million or 163% in its pre-overhead
contribution as compared to the fourth quarter of last year.
-- Expenses rose in the first quarter of this year as compared to last
year by approximately $2.1 million or 4%, largely due to
investments we are making in staff in the Ocwen Recovery Group and
Business Process Outsourcing organizations of approximately $1.4
million and increased sales and marketing costs of approximately $0.5
million.
As we noted in our annual report, we have reorganized our segment reporting this quarter in order to better reflect our focus on providing solutions to our customers. This change entailed changes to three segments
-- Residential Servicing (including the Residential Loan Servicing,
VA servicing and REALServicing(TM) groups)
-- Residential Origination Services (including our loans for resale
and title activities as well as REALTrans(TM), Ocwen Realty Advisors,
Mortgage Due Diligence Services and Subprime Finance) and
-- Commercial Servicing, which now includes REALSynergy(TM).
We continue to report on our other two core businesses -- Ocwen Recovery Group and Business Process Outsourcing. Given the substantial sales of assets during 2004, we have closed the non-core Affordable Housing and Commercial Assets businesses and will now report the results of managing the few remaining non-core assets in our Corporate segment.
As we announced last year, we are continuing the process of debanking. In this regard, we have reduced our deposit liabilities by $106.2 million or 25% since the end of last year and subsequent to March 31st have concluded two additional financing arrangements with a total capacity of $165 million. Our cash and investment grade security balances remain high in anticipation of debanking, and together with our new financing arrangements, provide us with the capital and liquidity required to achieve our 2005 objectives."
The Residential Servicing business reported pre-tax income of $2.9 million in the first quarter of 2005 vs. $5.5 million in the 2004 first quarter. While Residential Loan Servicing results remain below first quarter 2004 levels, they have improved as compared to the fourth quarter of last year, reflecting reduced prepayment speeds and the growing impact of more recently priced portfolios. Our servicing portfolio grew during the first quarter. As of March 31, 2005, we were the servicer of approximately 331 thousand loans with an unpaid principal balance (UPB) of $37.4 billion, as compared to approximately 320 thousand loans and $34.5 billion of UPB at December 31, 2004.
Residential Origination Services reported pre-tax income of $2.8 million in the first quarter of 2005 as compared to $3.0 million in the same period last year. These results reflect improved results in our loan refinancing and resale programs, in settlement and fulfillment services and in REALTrans, offset by a declines in earnings of Ocwen Realty Advisors and Subprime Finance. Our Mortgage Due Diligence Services group, which we initiated at the beginning of the year, generated $1.8 million in revenue and $0.3 million of contribution before overhead in the first quarter.
Our other core businesses reported aggregate pre-tax income of $0.6 million in the first quarter of 2005 as compared to pre-tax income of $1.8 million in the first quarter of 2004. This is primarily due to reduced earnings of $0.9 million in Ocwen Recovery Group, reflecting additional costs associated with investing in the development of our India collection capabilities.
The Corporate Segment reported a pre-tax loss of $(3.5) million in the first quarter of 2005 as compared to income of $0.7 million in the first quarter of last year. Corporate results for 2005 include approximately $1.1 million of costs related to our remaining non-core real estate, loan and affordable housing assets as well as $1.4 million of interest expense related in part to our high cash balances in preparation for debanking. Corporate results also include interest income on federal income tax receivables of $0.4 million and $3.7 million for the first quarter of 2005 and 2004, respectively. We have also reduced our remaining real estate assets during the first quarter, closing on the sale of our Halifax shopping mall, which had a book value of $8.8 million as of December 31, 2004. We have $23.0 million of non-core assets remaining as of March 31, 2005, several of which are subject to sales contracts we expect to close later this year.
Ocwen Financial Corporation is a diversified financial services holding company with headquarters in West Palm Beach, Florida and operations in Canada, China, Germany, India, Japan and Taiwan. Ocwen Financial Corporation is engaged in a variety of businesses related to residential and commercial mortgage servicing, real estate asset management, asset recovery, business process outsourcing and the marketing and sales of technology solutions to third parties. Ocwen Financial Corporation is a global leader in customer service excellence as a result of our company-wide commitment to quality, integrity and accountability. 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, interest rates and the impact of changes in interest rates and prepayment speeds on our Residential Loan Servicing business, the impact of actions that may result in our no longer being a thrift holding company, the adequacy of our liquidity position and the outlook on reduction in non-core assets. 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 report on Form 10-K for the year ended December 31, 2004. 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 three months
ended March 31, 2005 2004
Revenue
Servicing and
related fees $ 45,389 $ 42,291
Vendor management fees 10,881 13,003
Gain (loss) on trading
securities, net (1,397) (643)
Valuation gains (losses)
on real estate 89 (1,851)
Gain (loss) on sales of
real estate 34 (541)
Operating income (loss)
from real estate (174) 8
Other income 1,884 6,621
Non-interest revenue 56,706 58,888
Interest income 6,332 4,605
Interest expense 8,440 7,802
Net interest income
(expense) before
provision for loan
losses (2,108) (3,197)
Provision for loan losses 4 (531)
Net interest income
(expense) after
provision for loan
losses (2,112) (2,666)
Total revenue 54,594 56,222
Non-interest expense
Compensation and employee
benefits 24,371 22,033
Occupancy and equipment 4,242 3,997
Technology and communication
costs 7,399 6,669
Loan expenses 5,712 7,927
Loss (gain) on investments
in affordable housing
properties 642 (38)
Professional services and
regulatory fees 4,721 5,825
Other operating expenses 4,570 3,036
Non-interest expense 51,657 49,449
Income (loss) before
income taxes 2,937 6,773
Income tax expense (benefit) 550 11
Net income (loss) $ 2,387 $ 6,762
Earnings (loss) per share
Basic $0.04 $0.10
Diluted $0.04 $0.10
Weighted average common
shares outstanding
Basic 62,743,287 67,762,414
Diluted 64,018,882 69,093,785
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except share data)
March 31, December 31,
2005 2004
Assets
Cash and amounts due from
depository institutions $ 107,227 $ 168,799
Interest earning deposits 113,306 119,052
Trading securities, at
fair value:
Investment grade 75,104 86,215
Subordinates and
residuals 37,363 39,527
Match funded assets
(including advances on
loans serviced for others
of $266,281 and $276,626) 269,959 280,760
Advances on loans and
loans serviced for others 232,261 240,430
Mortgage servicing rights 135,274 131,409
Receivables 135,468 126,719
Real estate 9,450 18,732
Affordable housing
properties 4,968 5,641
Loans (net of allowance
for loan losses of
$4,350 and $4,546) 8,575 3,792
Premises and equipment, net 39,066 37,440
Other assets 66,568 68,977
Total assets $ 1,234,589 $ 1,327,493
Liabilities and Stockholders'
Equity
Liabilities
Deposits $ 199,530 $ 301,299
Escrow deposits 121,499 125,977
Match funded liabilities 222,437 244,327
Lines of credit and
other secured
borrowings 91,089 50,612
Debt securities 231,249 231,249
Accrued liabilities 34,278 42,391
Total liabilities 900,082 995,855
Minority interest in
subsidiaries 1,581 1,530
Stockholders' Equity
Common stock, $.01 par
value; 200,000,000
shares authorized:
62,750,904 and 62,739,478
shares issued and
outstanding 628 627
Additional paid-in capital 181,464 181,336
Retained earnings 150,520 148,133
Accumulated other
comprehensive income
(loss), net of taxes 314 12
Total stockholders'
equity 332,926 330,108
Total liabilities
and stockholders'
equity $ 1,234,589 $ 1,327,493
Pre-Tax Income (Loss)
by Business Segment
For the three months ended
March 31, 2005 2004
(Dollars in thousands)
Core businesses
Residential Servicing $ 2,947 $ 5,493
Residential Origination
Services 2,834 3,034
Ocwen Recovery Group 503 1,401
Business Process Outsourcing 98 397
Commercial Servicing 21 (42)
6,403 10,283
Non-core businesses
Commercial Assets -- (3,241)
Affordable Housing -- (973)
-- (4,214)
Corporate Items and Other (3,466) 704
Income (loss) before
income taxes $ 2,937 $ 6,773