Ocwen Financial Corporation Announces First Quarter 2010 Financial Results
WEST PALM BEACH, Fla., May 4, 2010 -- Ocwen Financial Corporation ("Ocwen" or the "Company") (NYSE:OCN) today reported net income of $20.9 million or $0.20 per diluted share for the first quarter of 2010. This compares to net income of $15.1 million or $0.24 per diluted share for the first quarter of 2009. Pre-tax income from continuing operations was $31.4 million for the first quarter of 2010 as compared to pre-tax income of $23.3 million for the first quarter of 2009. The 35% improvement in pre-tax income occurred despite the absence of any revenues associated with the Company's former Ocwen Solutions business due to the August 10, 2009 separation of Altisource Portfolio Solutions S.A.
FIRST QUARTER BUSINESS PERFORMANCE HIGHLIGHTS
- Ocwen entered into agreements to acquire the rights to service $6.9 billion in unpaid principal balance (UPB) on March 29, 2010. The acquisitions were completed on May 3, 2010.
- Completed modifications of 19,612 for the first quarter of 2010 exceeded the top end of our previous guidance of 12,500 to 17,500. This 25% increase over fourth quarter 2009 modifications included 6,312 HAMP modifications.
- Margins on Income from operations and pre-tax income increased to 53% and 42%, respectively, as compared to 50% and 28% for the fourth quarter of 2009.
"The operational and financial success of our first quarter demonstrates our industry leading position as a special servicer.Our pre-tax income grew by 56% over the fourth quarter of 2009," said Ronald Faris, President of Ocwen."At the same time, we produced 19,612 modifications, of which 6,312 were HAMP.In the April Oversight Report published by the Congressional Oversight Panel, Ocwen led the industry in the total dollars of HAMP incentives as of February 2010."
Chairman and CEO William Erbey added, "In the process of raising equity last year, we committed to acquiring new business, increasing loan modifications and issuing TALF financing.With the completion of our recently announced acquisition, we:
- Acquired $23.5 billion of servicing and sub-servicing over the past four quarters, one of the highest twelve-month periods ever;
- Led the industry in HAMP modifications; and
- Issued two TALF securities.
At present, our servicing portfolio is $55.1 billion, an increase of 35% since March 31, 2009."
In comparison to the first quarter of 2009, revenue was constant while operating expenses were 10% favorable as the shift towards sub-servicing reduced amortization expense by 37%. Pre-tax income for Servicing of $32.5 million was 29% higher than the same quarter last year due to decreases in amortization of servicing rights, servicing and origination expense, and interest expense.
Loans and Residuals
Loans and Residuals incurred a loss from continuing operations before taxes of $0.1 million as compared to a loss of $4.1 million in the first quarter of 2009. The change reflects a smaller portfolio and a slower decline in loans and real estate valuations.
Asset Management Vehicles
Income from continuing operations before taxes for Asset Management Vehicles was $0.2 million as compared to a loss of $0.5 million in the first quarter of 2009. This improvement primarily reflects higher gains on loan resolutions.
In the first quarter of 2010, losses from continuing operations before taxes declined by 66% primarily due to the continuing success in cost control initiatives as compared to the first quarter of 2009.
Total consolidated assets increased by 3% to $1,815.5 million for the quarter as the $209.1 million increase in cash and $71.3 million consolidation of loans, net – restricted for securitization investors more than offset the reductions in auction rate securities, advances, match funded advances and receivables. Total liabilities increased by 2% to $924.6 million primarily due to new borrowings under the $200 million TALF note, the financing of $88.2 million par value of auction rate securities with $75 million non-recourse debt, and the $69 million consolidation of secured borrowings – owed to securitization investors, offset in part by the full repayment of the Investment line.
Ocwen Financial Corporation is a leading provider of residential and commercial loan servicing, special servicing and asset management services. Ocwen is headquartered in West Palm Beach, Florida with offices in California, the District of Columbia and Georgia and support operations in India and Uruguay. Utilizing proprietary technology and world-class training and processes, we provide solutions that make our clients' loans worth more. Additional information 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 securitization market and our plans to securitize loans and expectations as to the impact of rising interest rates and cost-effective resources in India. 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, federal income tax rates, real estate market conditions and trends and the outcome of ongoing litigation as well as other risks detailed in Ocwen's reports and filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2009. The forward-looking statements speak only as of the date they are made and should not be relied upon. Ocwen undertakes no obligation to update or revise the forward-looking statements.
|Residential Servicing Statistics (Dollars in thousands)|
|At or for the three months ended|
|Total unpaid principal balance of loans and REO serviced||$49,677,999||$49,980,077||$40,293,698||$38,406,007||$40,789,135|
|Non-performing loans and REO serviced as a % of total UPB (1)||25.3%||
|Prepayment speed (average CPR)||12%||19%||20%||22%||21%|
|(1)Loans for which borrowers are making scheduled payments under modification, forbearance or bankruptcy plans are considered performing loans. Non-performing loans exclude those serviced under special servicing agreements where we have no obligation to advance.|
|Segment Results (Dollars in thousands) (UNAUDITED)|
|For the three months ended March 31,||2010||2009|
|Ocwen Asset Management|
|Income from operations||44,666||40,476|
|Other expense, net||(12,161)||(15,280)|
|Income from continuing operations before taxes||32,505||25,196|
|Loans and Residuals|
|Loss from operations||(1,191)||(561)|
|Other income (expense), net||1,066||(3,577)|
|Loss from continuing operations before taxes||(125)||(4,138)|
|Loss from operations||(279)||(225)|
|Other income (expense), net||523||(302)|
|Income (loss) from continuing operations before taxes||244||(527)|
|Income from continuing operations before income taxes||32,624||20,531|
|Income from operations||—||
|Other income, net||—||23|
|Income from continuing operations before taxes||—||5,148|
|Loss from operations||—||(833)|
|Other expense, net||—||(468)|
|Loss from continuing operations before taxes||—||(1,301)|
|Income from operations||—||2,400|
|Other expense, net||—||(76)|
|Income from continuing operations before taxes||—||2,324|
|Income from continuing operations before income taxes||—||6,171|
|Corporate Items and Other|
|Loss from operations||(2,575)||(3,729)|
|Other income, net||1,396||291|
|Loss from continuing operations before taxes||(1,179)||(3,438)|
|Loss from operations||(212)||(329)|
|Other income, net||212||329|
|Income from continuing operations before taxes||—||—|
|Consolidated income from continuing operations
before income taxes
|OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES|
|CONSOLIDATED STATEMENTS OF OPERATIONS|
|(Dollars in thousands, except share data)|
|For the three months ended March 31,||2010||2009|
|Servicing and subservicing fees||$66,480||$78,810|
|Process management fees||7,906||33,692|
|Compensation and benefits||12,777||28,545|
|Amortization of mortgage servicing rights||6,375||10,041|
|Servicing and origination||591||12,638|
|Technology and communications||5,664||4,808|
|Occupancy and equipment||4,446||6,046|
|Other operating expenses||2,069||3,002|
|Total operating expenses||35,177||72,266|
|Income from operations||40,409||42,324|
|Other income (expense)|
|Gain (loss) on trading securities||765||(380)|
|Loss on loans held for resale, net||(1,038)||(4,554)|
|Equity in earnings of unconsolidated entities||735||27|
|Other expense, net||(8,964)||(19,060)|
|Income from continuing operations before income taxes||31,445||23,264|
|Income tax expense||10,574||8,037|
|Income from continuing operations||20,871||15,227|
|Loss from discontinued operations, net of income taxes||—||(188)|
|Net loss (income) attributable to non-controlling interests||(11)||70|
|Net income attributable to Ocwen Financial
|Basic earnings per share|
|Income from continuing operations||$0.21||$0.24|
|Loss from discontinued operations||
|Net income attributable to OCN||$0.21||$0.24|
|Diluted earnings per share|
|Income from continuing operations||$0.20||$0.24|
Loss from discontinued operations
|Net income attributable to OCN||$0.20||$0.24|
|Weighted average common shares outstanding|
|OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES|
|CONSOLIDATED BALANCE SHEETS|
|(Dollars in thousands, except share data)
|March 31, 2010
|Restricted cash – for securitization investors||1,378|
|Trading securities, at fair value|
|Subordinates and residuals||59||3,692|
|Loans held for resale, at lower of cost or fair value||32,934||33,197|
|Match funded advances||757,111||822,615|
|Loans, net – restricted for securitization investors||71,336||—|
|Mortgage servicing rights||111,721||117,802|
|Deferred tax assets, net||115,142||132,683|
|Premises and equipment, net||3,385||3,325|
|Investments in unconsolidated entities||14,329||15,008|
|Liabilities and Equity|
|Match funded liabilities||$556,485||$465,691|
|Secured borrowings – owed to securitization investors||
|Lines of credit and other secured borrowings||118,509||55,810|
|Ocwen Financial Corporation stockholders' equity|
|Common stock, $.01 par value; 200,000,000 shares authorized;100,164,608 and 99,956,833 shares issued and outstanding at
March 31, 2010 and December 31, 2009, respectively
|Additional paid-in capital||461,449||459,542|
|Accumulated other comprehensive loss, net of income taxes||(180)||(129)|
|Total Ocwen Financial Corporation stockholders' equity||890,603||865,611|
|Non-controlling interest in subsidiaries||244||252|
|Total liabilities and equity||$1,815,459||
CONTACT: Ocwen Financial Corp. David J. Gunter, Executive Vice President, Chief Financial Officer & Chief Accounting Officer (561) 682-8367 David.Gunter@Ocwen.com