UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
-----------------------------------------------
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT
(DATE OF EARLIEST EVENT REPORTED): February 7, 2001
OCWEN FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Florida 0-21341 65-0039856
(STATE OR OTHER (COMMISSION (I.R.S. EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION)
THE FORUM, SUITE 1000
1675 PALM BEACH LAKES BOULEVARD, WEST PALM BEACH, FLORIDA 33401
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (561) 682-8000
N/A
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
PAGE 1 OF 10
EXHIBIT INDEX ON PAGE 4
ITEM 5. OTHER EVENTS
The news release of the Registrant dated February 7, 2001 announcing its fourth
quarter 2000 results is attached hereto and filed herewith as Exhibit 99.1.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) - (b) Not applicable.
(c) Exhibits
The following exhibits are filed as part of this report:
99.1 Text of a press release by the Registrant dated February 7,
2001.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, hereunto duly authorized.
OCWEN FINANCIAL CORPORATION
(Registrant)
By: /s/ MARK S. ZEIDMAN
--------------------------------------
Mark S. Zeidman
Senior Vice President and
Chief Financial Officer
Date: February 7, 2001
3
INDEX TO EXHIBIT
EXHIBIT NO. DESCRIPTION PAGE
99.1 News release of Ocwen Financial Corporation dated 5
February 7, 2001, announcing its 2000 fourth quarter
results and certain other information.
4
================================================================================
[GRAPHIC OMITTED] Exhibit 99.1
OCWEN FINANCIAL CORPORATION(R)
================================================================================
FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION, CONTACT:
ROBERT J. LEIST, JR.
VICE PRESIDENT & CHIEF ACCOUNTING OFFICER
T: (561) 682-7958
E: rleist@ocwen.com
OCWEN FINANCIAL CORPORATION ANNOUNCES
2000 AND FOURTH QUARTER RESULTS
WEST PALM BEACH, FL - (February 7, 2001) Ocwen Financial Corporation (NYSE: OCN)
today reported net income for its fourth quarter ended December 31, 2000 of $9.4
million, or $0.14 per share, compared to net income of $1.3 million or $0.02 per
share for the 1999 fourth quarter. For the year ended December 31, 2000, the
Company reported net income of $2.2 million or $0.03 per share compared to net
income of $19.8 million or $0.31 per share in 1999.
Chairman and CEO William C. Erbey stated "We made substantial progress this year
in developing our servicing and technology businesses and exiting our non-core
businesses. During 2000, we reduced the size of our balance sheet by over 30% as
total assets have declined from $3.3 billion at the end of 1999 to $2.2 billion
at the close of 2000. At the same time, we have reduced our exposure to non-core
assets that have generated losses over the past three years. During the fourth
quarter of 2000 and into the first quarter of this year, we have grown and
developed our core servicing business. As of December 31, 2000, we were the
servicer on $11.4 billion of loans vs. $11.1 billion as of year-end 1999. In the
first half of 2001, we will be boarding an additional $4.3 billion of loans
under agreements that have already been concluded, bringing our total servicing
to $15.7 billion. While absorbing this growth, we have maintained the industry
standard of quality and reduced our direct costs per loan. We do not intend to
stop there. With the full implementation of REAL-e(TM), our residential loan
servicing system, we believe that we can make further strides in reducing our
unit costs. The year also ended with several noteworthy accomplishments for OTX,
including the implementation of REAL-e at Ocwen Federal Bank, thus bringing all
three OTX products to a true commercial application level. REALTrans(SM), our
e-commerce product, also achieved a significant milestone, having entered into
an enterprise-wide contract with a "top five" mortgage originator.
Our key objectives in 2001 are to continue to reduce our risk assets and to
enhance our value equation by reducing costs, largely through technology and the
implementation of a Six Sigma quality program throughout the organization. On
the revenue side, we plan to continue to grow our servicing business, to expand
our technology customer base and to continue to create functionality
enhancements in our technology products."
The Company's loan and servicing businesses, in the aggregate, reflected net
income of $8.1 million in the fourth quarter of 2000 vs. $9.2 million for the
1999 fourth quarter. For the year ended December 31, 2000 aggregate results
reflected net income of $25.6 million as compared to $15.8 million for 1999.
Continuing investments in OTX in the fourth quarter of 2000 resulted in a net
loss of $(5.5) million, compared to $(4.9) million in the 1999 fourth quarter.
OTX results reflected a loss of $(21.0) million for the year ended December 31,
2000 vs. $(11.4) million for 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.
5
In the fourth quarter of 2000 the Commercial Real Estate business reflected a
net loss of $(1.9) million vs. $(1.8) million in the 1999 fourth quarter. For
the full year, net income was $10.3 million in 2000 vs. a net loss of $(1.6)
million in 1999.
UK Operations reflected net income of $12.1 million for the fourth quarter of
2000 vs. a net loss of $(2.1) million for the 1999 fourth quarter. Fourth
quarter 2000 results reflect the sale of the Company's minority interest in
Kensington Group plc for a pre-tax gain of $20 million. For the full year
periods, 2000 reflected net income of $8.4 million compared to $36.9 million in
1999. Full year results for 2000 also include the Company's equity interest in
Kensington's results of operations through the sale date. Results for 1999
include the September sale of the Company's wholly owned subsidiary, Ocwen UK
plc, for a pre-tax gain of $50.4 million as well as the results of Ocwen UK
operations through the third quarter.
The low income housing tax credit business posted a net loss of $(11.0) million
in the 2000 fourth quarter, vs. net income of $1.2 million in 1999. A net loss
of $(12.4) million was reported for the full year 2000, vs. net income of $7.8
million in 1999. These results primarily reflect losses recorded in 2000 for two
asset sale transactions (classified as "assets held for sale" at year-end) vs. a
gain on an asset sale in 1999.
The Company's net interest margin declined to 1.36% for the quarter ended
December 31, 2000 from 4.77% for the quarter ended December 31, 1999 and to
0.81% for the year ended December 31, 2000 from 4.42% for the year ended
December 31, 1999. The most significant factors in this decline are reduced
earnings on the Company's portfolio of residual and subordinate securities and
on its portfolios of loans available for sale and discount loans. The decline in
earnings on the loans available for sale portfolio reflects the Company's
decision to exit the subprime origination business in the U.S. and the U.K.,
businesses that had generated a high net interest spread during 1999.
Fourth quarter 2000 results included extraordinary gains of $10.0 million (net
of tax) primarily related to the Ocwen Asset Investment Corp. (OAC) tender
offer, which resulted in the repurchase of $98 million face value of OAC's 11
1/2% Redeemable Notes. For the year ended December 31, 2000 the Company reported
extraordinary gains of $18.7 million. Extraordinary gains of $6.7 million and
$7.0 million were reported in the 1999 fourth quarter and for the year,
respectively. The Company will continue to evaluate additional debt repurchases
during 2001.
Income tax expense for the year 2000 included a non-cash provision for a
valuation allowance on the Company's deferred tax asset of $17.5 million vs. a
provision of $2.5 million in 1999. The Company has established this allowance
based upon its estimate that a portion of the deferred tax asset may not be
realized in the near future.
The Company's financial position strengthened during 2000 and remains strong.
Total assets declined by slightly more than $1 billion, or 31% from December 31,
1999 levels. Equity as a percent of assets increased from 15.5% at December 31,
1999 to 22.4% at December 31, 2000. During the period from December 31, 1999 to
December 31, 2000, debt levels excluding deposits have been reduced by $411.5
million, or 51% in the aggregate.
RECENT DEVELOPMENTS
During the fourth quarter of 2000, OTX entered into a contract with one of the
top five mortgage originators in the United States for the enterprise-wide use
of REALTrans, the Company's e-commerce product supporting the mortgage
origination process. The Company anticipates a significant increase in the
transaction volumes of REALTrans following the implementation period in 2001.
In December 2000 and January 2001, the Company entered into two new servicing
contracts, which will add approximately 79,000 loans, with an unpaid principal
balance of approximately $4.3 billion, to its existing portfolio of 165,000
loans with a total unpaid principal balance of $11.4 billion. These loans, in
accordance with the underlying agreements, will be boarded onto the Company's
REAL-e system during the first half of 2001, although various revenue sharing
arrangements will take effect prior to that time.
6
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) and REALTrans(SM) 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 "will,"
"intend," "continue," "enhance," "reduce," "plan," "expand," "ongoing,"
"develop," "anticipate," 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,
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.
7
INTEREST INCOME AND EXPENSE
For the periods ended December 31, Three Months Twelve Months
- ---------------------------------------------------------- ---------------------- ----------------------
(Dollars in thousands) 2000 1999 2000 1999
--------- --------- --------- ---------
INTEREST INCOME:
Federal funds sold and repurchase agreements ........... $ 3,582 $ 2,434 $ 8,700 $ 8,847
Trading securities ..................................... 8,200 -- 8,200 --
Securities available for sale .......................... -- 14,500 42,507 62,698
Loans available for sale ............................... 300 348 2,474 25,724
Investment securities and other ........................ 320 644 1,501 2,181
Loan portfolio ......................................... 6,630 9,698 20,586 28,683
Match funded loans and securities ...................... 2,148 3,237 11,022 3,237
Discount loan portfolio ................................ 19,804 37,262 89,826 121,854
--------- --------- --------- ---------
40,984 68,123 184,816 253,224
--------- --------- --------- ---------
INTEREST EXPENSE:
Deposits ............................................... 22,893 23,204 98,224 98,370
Securities sold under agreements to repurchase ......... 43 1,565 10,729 7,456
Bonds - match funded agreements ........................ 2,390 2,101 11,484 2,101
Obligations outstanding under lines of credit .......... 2,098 4,200 13,881 16,318
Notes, debentures and other interest bearing
obligations .......................................... 8,175 11,049 34,772 31,297
--------- --------- --------- ---------
35,599 42,119 169,090 155,542
--------- --------- --------- ---------
Net interest income before provision for loan losses ... $ 5,385 $ 26,004 $ 15,726 $ 97,682
========= ========= ========= =========
NET (LOSS) INCOME BY BUSINESS SEGMENT
For the periods ended December 31, Three Months Twelve Months
- ---------------------------------------------------------- ---------------------- ----------------------
(Dollars in thousands) 2000 1999 2000 1999
--------- --------- --------- ---------
Single family residential discount loans ................ $ 1,454 $ (3,208) $ 13,078 $ (12,680)
Commercial loans ........................................ 3,008 8,385 571 16,428
Domestic residential mortgage loan servicing ............ 3,667 3,976 11,909 12,067
Investment in low-income housing tax credits ............ (11,043) 1,190 (12,351) 7,802
OTX ..................................................... (5,547) (4,893) (21,049) (11,372)
Commercial Real Estate .................................. (1,914) (1,776) 10,285 (1,566)
UK operations (1) ....................................... 12,080 (2,147) 8,350 36,859
Domestic subprime single family residential lending ..... (2,470) (6,571) (15,210) (18,025)
Unsecured collections ................................... (2,328) (1,693) (8,927) (4,185)
Ocwen Realty Advisors ................................... (51) -- (53) --
Corporate items and other ............................... 12,513 8,009 15,589 (5,496)
--------- --------- --------- ---------
$ 9,369 $ 1,272 $ 2,192 $ 19,832
========= ========= ========= =========
(1) 1999 includes Ocwen UK, which was sold in September 1999.
8
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Three Months Twelve Months
---------------------------- ----------------------------
For the periods ended December 31, 2000 1999 2000 1999
- ------------------------------------------------------------------- ------------ ------------ ------------ ------------
INTEREST INCOME ................................................... $ 40,984 $ 68,123 $ 184,816 $ 253,224
INTEREST EXPENSE .................................................. 35,599 42,119 169,090 155,542
------------ ------------ ------------ ------------
Net interest income before provision for loan losses ............ 5,385 26,004 15,726 97,682
Provision for loan losses ....................................... 2,573 1,522 15,177 6,710
------------ ------------ ------------ ------------
Net interest (loss) income after provision for loan losses ...... 2,812 24,482 549 90,972
------------ ------------ ------------ ------------
NON-INTEREST INCOME:
Servicing and other fees ........................................ 25,037 18,965 97,080 76,018
Gain on interest earning assets, net ............................ 863 712 18,580 44,298
Unrealized loss on trading securities, net ...................... (2,520) -- (4,926) --
Impairment charges on securities available for sale ............. -- (10,697) (11,597) (58,777)
Gain (loss) on real estate owned, net ........................... 1,170 (3,858) (13,464) (2,060)
Gain on other non interest earning assets, net .................. 23,653 1,469 45,517 58,693
Net operating gains (losses) on investments in real estate ...... 3,371 850 26,140 (1,077)
Amortization of excess of net assets acquired over
purchase price ................................................ 5,324 3,202 14,112 3,201
Other income .................................................... 2,912 1,128 6,083 24,346
------------ ------------ ------------ ------------
59,810 11,771 177,525 144,642
------------ ------------ ------------ ------------
NON-INTEREST EXPENSE:
Compensation and employee benefits .............................. 21,972 21,182 83,086 102,173
Occupancy and equipment ......................................... 2,649 3,447 12,005 18,501
Technology and communication costs .............................. 5,817 4,829 22,515 19,647
Loan expenses ................................................... 2,551 1,846 13,051 12,618
Net operating losses on investments in certain low-income
housing tax credit interests .................................. 3,901 1,733 9,931 6,291
Amortization of excess of purchase price over
net assets acquired ........................................... 778 3,677 3,124 4,448
Professional services and regulatory fees ....................... 3,908 3,638 13,275 14,205
Other operating expenses ........................................ 3,815 2,437 13,022 17,185
------------ ------------ ------------ ------------
45,391 42,789 170,009 195,068
------------ ------------ ------------ ------------
Distributions on Company-obligated, mandatorily redeemable
securities of subsidiary trust holding solely junior
subordinated debentures of the Company ........................ 2,538 2,915 11,380 13,111
Equity in losses of investments in unconsolidated entities ........ 284 3,134 5,249 12,616
------------ ------------ ------------ ------------
Income (loss) before income taxes and extraordinary gain .......... 14,409 (12,585) (8,564) 14,819
Income tax (expense) benefit ...................................... (15,079) 6,986 (7,957) (2,608)
Minority interest in net loss of consolidated subsidiary .......... -- 141 -- 638
------------ ------------ ------------ ------------
(Loss) income before extraordinary gain ........................... (670) (5,458) (16,521) 12,849
Extraordinary gain on repurchase of debt, net of taxes ............ 10,039 6,730 18,713 6,983
------------ ------------ ------------ ------------
Net income ........................................................ $ 9,369 $ 1,272 $ 2,192 $ 19,832
============ ============ ============ ============
(LOSS) EARNINGS PER SHARE:
Basic:
Net (loss) income before extraordinary gain ................... $ (0.01) $ (0.08) $ (0.25) $ 0.20
Extraordinary gain ............................................ 0.15 0.10 0.28 0.11
------------ ------------ ------------ ------------
Net income .................................................... $ 0.14 $ 0.02 $ 0.03 $ 0.31
============ ============ ============ ============
Diluted:
Net (loss) income before extraordinary gain ................... $ (0.01) $ (0.08) $ (0.24) $ 0.20
Extraordinary gain ............................................ 0.15 0.10 0.27 0.11
------------ ------------ ------------ ------------
Net income .................................................... $ 0.14 $ 0.02 $ 0.03 $ 0.31
============ ============ ============ ============
Weighted average common shares outstanding:
Basic ........................................................... 67,152,363 70,245,465 67,427,662 63,051,015
============ ============ ============ ============
Diluted ......................................................... 68,602,539 70,277,966 68,523,169 63,090,282
============ ============ ============ ============
9
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
December 31, 2000 December 31, 1999
----------------- -----------------
ASSETS:
Cash and amounts due from depository institutions ....................................... $ 18,749 $ 125,799
Interest earning deposits ............................................................... 134,987 116,420
Federal funds sold ...................................................................... -- 112,000
Securities available 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) ................................... 277,595 --
Subordinates, residuals and other securities ...................................... 112,647 --
Loans available for sale, at lower of cost or market .................................... 10,610 45,213
Real estate held for sale ............................................................... 22,670 --
Low-income housing tax credit interests held for sale ................................... 87,083 --
Investment securities ................................................................... 13,257 10,965
Loan portfolio, net ..................................................................... 93,414 157,408
Discount loan portfolio, net ............................................................ 536,028 913,229
Match funded loans and securities, net .................................................. 116,987 157,794
Investments in low-income housing tax credit interests .................................. 55,729 150,989
Investments in unconsolidated entities .................................................. 430 37,118
Real estate owned, net .................................................................. 146,419 167,506
Investment in real estate ............................................................... 122,761 268,241
Premises and equipment, net ............................................................. 43,152 49,038
Income taxes receivable ................................................................. 30,261 --
Deferred tax asset, net ................................................................. 95,991 136,920
Escrow advances on loans and loans serviced for others .................................. 227,055 162,548
Mortgage servicing rights ............................................................... 51,426 11,683
Other assets ............................................................................ 52,169 71,285
----------------- -----------------
$ 2,249,420 $ 3,281,674
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits .............................................................................. $ 1,258,360 $ 1,814,647
Securities sold under agreements to repurchase ........................................ -- 47,365
Bonds - match funded agreements ....................................................... 107,050 141,515
Obligations outstanding under lines of credit ......................................... 32,933 187,866
Notes, debentures and other interest bearing obligations .............................. 173,330 317,573
Accrued interest payable .............................................................. 22,096 32,569
Excess of net assets acquired over purchase price ..................................... 36,665 56,841
Income taxes payable .................................................................. -- 6,369
Accrued expenses, payables and other liabilities ...................................... 36,030 57,487
----------------- -----------------
Total liabilities ................................................................. 1,666,464 2,662,232
----------------- -----------------
Company obligated, mandatorily redeemable securities of subsidiary trust
holding solely junior subordinated debentures of the Company ........................ 79,530 110,000
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 December 31, 2000,
and December 31, 1999, respectively ............................................... 672 686
Additional paid-in capital ........................................................... 223,163 232,340
Retained earnings .................................................................... 279,194 277,002
Accumulated other comprehensive income, net of taxes:
Net unrealized gain on securities available for sale .............................. -- 163
Net unrealized foreign currency translation loss .................................. 397 (749)
----------------- -----------------
Total stockholders' equity ........................................................... 503,426 509,442
----------------- -----------------
$ 2,249,420 $ 3,281,674
================= =================
10