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): November 9, 2000
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 9
Exhibit Index on Page 4
ITEM 5. OTHER EVENTS
The news release of the Registrant dated November 9, 2000, announcing its 2000
third quarter results and certain other information 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 November 9,
2000.
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: November 9, 2000
3
INDEX TO EXHIBIT
EXHIBIT NO. DESCRIPTION PAGE
99.1 News release of Ocwen Financial 5
Corporation dated November 9, 2000,
announcing its 2000 third quarter
results and certain other information.
4
================================================================================
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
THIRD QUARTER RESULTS
WEST PALM BEACH, FL - (November 9, 2000) Ocwen Financial Corporation (NYSE: OCN)
today reported a net loss for its third quarter ended September 30, 2000 of
$(0.7) million, or $(0.01) per share, compared to net income of $12.8 million or
$0.21 per share for the 1999 third quarter. For the nine months ended September
30, 2000, the Company reported a net loss of $(7.2) million or $(0.11) per share
compared to net income of $18.6 million or $0.31 per share in the same period of
1999.
Chairman and CEO William C. Erbey stated "While third quarter results are
disappointing, our loan and servicing businesses continue to be profitable. Our
ongoing investment in our technology business, OTX, reflects a consistent pace
with the second quarter, and we have begun to see progress in the acceptance of
our REALTrans(SM) platform. We are in the process of completing servicing
acquisitions that would add approximately 45,000 loans or $1.4 billion during
the fourth quarter to our current base of 127,000 loans or $10.7 billion, and we
anticipate a gain from selling our investment in Kensington Group plc. Ocwen
also continued to strengthen its balance sheet during the third quarter through
debt repurchases and repayments and through the sale of our San Francisco
properties. We remain focused on completing our transition plan and are
confident that we have the human and financial resources needed to achieve our
objectives."
The Company's loan and servicing businesses, in the aggregate, reflected
improved results vs. comparable periods in 1999, recording net income of $2.3
million in the 2000 third quarter vs. a net loss of $(4.3) million in the third
quarter of 1999. For the nine months ended September 30, 2000 aggregate results
reflected net income of $17.4 million as compared to $6.7 million in the same
period of 1999, despite the fact that no securitization gains were recorded in
2000. This reflects the Company's decision in the third quarter of 1999 to
discontinue the practice of structuring securitizations as sale transactions,
thus precluding the recognition of gain-on-sale accounting.
Continuing investments in OTX in the third quarter of 2000 resulted in a net
loss of $(5.8) million, compared to $(2.5) million in the 1999 third quarter.
OTX results reflected a loss of $(15.5) million for the nine months ended
September 30, 2000 vs. $(6.5) million for the same period in 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.
The third quarter of 2000 also included net income in the Commercial Real Estate
business of $9.5 million, primarily reflecting pre-tax gains of $16.7 million on
the sales of the Company's commercial properties at 10 United Nations Plaza and
450 Sansome Street in San Francisco.
UK Operations reflected a net loss of $(0.8) million for the third quarter of
2000, and $(3.7) million for the nine month period, compared to net income of
$30.0 million and $39.5 million for the comparable periods in 1999. This change
reflects the sale of the Company's wholly owned subsidiary, Ocwen UK plc for a
pre-tax gain of $50.4 million in the third quarter of 1999. In 2000, UK
operations reflect the results of the Company's equity investment in Kensington
Group plc.
The Company's net interest margin declined to 0.18% for the quarter ended
September 30, 2000 from 3.61% for the quarter ended September 30, 1999, and to
0.67% for the nine months ended September 30, 2000 from 4.26% for the nine
months ended September 30, 1999. A significant factor in this decline is the
growth of the servicing business and the increase in real estate assets
resulting from the acquisition of Ocwen Asset Investment Corp. and other
transactions. These developments have increased the amount of non-interest
earning assets on the balance sheet that are largely funded by interest bearing
liabilities.
5
Ocwen Financial Corporation Third Quarter Results
November 9, 2000
Additionally, net interest margin was reduced due to the Company's decision to
exit its subprime origination businesses in the U.S. and the U.K., both of which
generated a high net interest spread during 1999.
Third quarter 2000 results included extraordinary gains of $2.6 million (net of
tax) related to the repurchase on the open market of $15.1 million face value of
the 11.5% senior notes and $2.0 million face value of the 10 7/8% Capital
Securities. For the nine months ended September 30, 2000, the Company reported
extraordinary gains of $8.7 million. Extraordinary gains of $0.3 million were
reported in both the 1999 third quarter and the nine-month period. The Company
continues to consider additional debt repurchases.
Notwithstanding the year to date net loss, the Company's financial position has
strengthened during 2000 and remains strong. Total assets declined by $466
million, or 14% from December 31, 1999 levels. Equity as a percent of assets
increased from 15.4% at December 31, 1999 to 17.4% at September 30, 2000. During
the period from December 31, 1999 to September 30, 2000, debt levels excluding
deposits have been reduced by $137.9 million, or 25% in the aggregate.
RECENT DEVELOPMENTS
On November 1, 2000, the Company sold its remaining San Francisco office
building (225 Bush Street) for $143.5 million realizing net proceeds of
approximately $60.3 million and a gain of $0.1 million.
The Company intends to sell its entire minority interest in Kensington Group plc
during the fourth quarter. This sale is subject to a number of uncertainties,
but it is the Company's expectation that it will realize a gain upon its
completion.
Ocwen Technology Xchange, Inc. is achieving growing acceptance of its REALTrans
platform in the market place. The number of service requestors has grown to 16,
with an additional 14 requestors already committed to begin use of the system
shortly. Active service providers have grown from 1,200 as of June 30, 2000 to
approximately 3,100.
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), REALSynergy(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
"anticipate," "pending," "ongoing," "commitment," "continue," "expect,"
"intend," "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, 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,
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, 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.
6
Ocwen Financial Corporation Third Quarter Results
November 9, 2000
NET (LOSS) INCOME BY BUSINESS SEGMENT
For the Periods Ended September 30, Three Months Nine Months
- ----------------------------------- --------------------- -------------------
(Dollars in thousands) 2000 1999 2000 1999
--------- -------- -------- --------
Single family residential discount loans ............. $ 4,157 $ (4,154) $ 11,624 $ (9,472)
Commercial loans ..................................... (3,887) (2,185) (2,437) 8,043
Domestic residential mortgage loan servicing ......... 2,008 2,000 8,242 8,091
Investment in low-income housing tax credits ......... (2,500) 4,163 (1,308) 6,612
OTX .................................................. (5,756) (2,535) (15,502) (6,479)
Commercial Real Estate ............................... 9,489 39 12,199 209
UK operations (1) .................................... (798) 30,049 (3,730) 39,005
Domestic subprime single family residential lending .. (4,832) (10,217) (12,740) (11,454)
Unsecured collections ................................ (2,235) (1,027) (6,598) (2,492)
Ocwen Realty Advisors ................................ (291) -- (2) --
Corporate items and other ............................ 3,965 (3,357) 3,075 (13,503)
-------- -------- -------- --------
$ (680) $ 12,776 $ (7,177) $ 18,560
======== ======== ======== ========
(1) 1999 includes Ocwen UK, which was sold in September 1999
ASSET ACQUISITION
(Unpaid principal balances)
For the Periods Ended September 30, Three Months Nine Months
- ----------------------------------- ----------------------- Increase ----------------------- Increase
(Dollars in thousands) 2000 1999 (Decrease) 2000 1999 (Decrease)
---------- ---------- ---------- ---------- ---------- ----------
Discount Loan Acquisitions:
Single family residential .... $ 6,722 $ 61,725 $ (55,003) $ 155,881 $ 335,808 $ (179,927)
Multi-family residential ..... 28 3,353 (3,325) 21,322 75,312 (53,990)
Commercial real estate ....... 1,000 15,514 (14,514) 19,119 147,304 (128,185)
Other ........................ -- 4,274 (4,274) 10,030 12,900 (2,870)
---------- ---------- ---------- ---------- ---------- ----------
$ 7,750 $ 84,866 $ (77,116) $ 206,352 $ 571,324 $ (364,972)
========== ========== ========== ========== ========== ==========
Subprime Loan Purchases
and Originations:
Domestic ............... $ -- $ 18,052 $ (18,052) $ -- $ 253,869 $ (253,869)
Foreign (Ocwen UK) ..... -- 223,390 (223,390) -- 516,396 (516,396)
---------- ---------- ---------- ---------- ---------- ----------
$ -- $ 241,442 $ (241,442) $ -- $ 770,265 $ (770,265)
========== ========== ========== ========== ========== ==========
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.
7
Ocwen Financial Corporation Third Quarter Results
November 9, 2000
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Three Months Nine Months
---------------------------- ----------------------------
For the periods ended September 30, 2000 1999 2000 1999
- ------------------------------------------------------------ ------------ ------------ ------------ ------------
INTEREST INCOME:
Federal funds sold and repurchase agreements ............. $ 2,544 $ 958 $ 5,118 $ 6,412
Securities available for sale ............................ 12,831 15,350 42,508 48,199
Loans available for sale ................................. 450 6,233 2,174 25,376
Investment securities and other .......................... 352 502 1,181 1,537
Loan portfolio ........................................... 4,651 3,941 13,956 18,985
Match funded loans and securities ........................ 2,611 -- 8,874 --
Discount loan portfolio .................................. 21,848 29,035 70,021 84,591
------------ ------------ ------------ ------------
45,287 56,019 143,832 185,100
------------ ------------ ------------ ------------
INTEREST EXPENSE:
Deposits ................................................. 25,852 24,779 75,330 75,166
Securities sold under agreements to repurchase ........... 2,761 2,120 10,685 5,891
Bonds-match funded agreements ............................ 2,948 -- 9,095 --
Obligations outstanding under lines of credit ............ 4,371 3,101 11,783 12,219
Notes, debentures and other interest bearing
obligations ........................................... 8,501 6,787 26,598 20,147
------------ ------------ ------------ ------------
44,433 36,787 133,491 113,423
------------ ------------ ------------ ------------
Net interest income before provision for loan
losses ................................................ 854 19,232 10,341 71,677
Provision for loan losses ................................ 6,861 826 12,604 5,188
------------ ------------ ------------ ------------
Net interest (loss) income after provision for
loan losses ........................................... (6,007) 18,406 (2,263) 66,489
------------ ------------ ------------ ------------
NON-INTEREST INCOME:
Servicing fees and other charges ......................... 22,517 19,584 63,647 56,764
Gain on interest earning assets, net ..................... 1,453 442 17,717 43,585
Unrealized loss on trading securities .................... (2,406) -- (2,406) --
Impairment charges on securities available
for sale .............................................. -- (19,211) (11,597) (48,080)
(Loss) gain on real estate owned, net .................... (4,621) (1,508) (14,634) 1,798
Net operating gains (losses) on investments
in real estate ........................................ 9,153 (2,169) 22,769 (1,927)
Amortization of excess of net assets acquired
over purchase price ................................... 2,995 -- 8,788 --
Other income ............................................. 20,445 65,105 33,431 80,731
------------ ------------ ------------ ------------
49,536 62,243 117,715 132,871
------------ ------------ ------------ ------------
NON-INTEREST EXPENSE:
Compensation and employee benefits ....................... 22,134 29,451 61,114 80,991
Occupancy and equipment .................................. 3,141 4,331 9,356 15,053
Technology and communication costs ....................... 6,003 4,275 16,698 14,818
Loan expenses ............................................ 3,583 3,992 10,500 10,773
Net operating losses on investments in certain
low-income housing tax credit interests ............... 3,691 1,094 6,030 4,558
Amortization of excess of purchase price over
net assets acquired ................................... 778 284 2,346 771
Other operating expenses ................................. 5,370 8,701 18,574 25,312
------------ ------------ ------------ ------------
44,700 52,128 124,618 152,276
------------ ------------ ------------ ------------
Distributions on Company-obligated, mandatory
redeemable securities of subsidiary
trust holding solely junior subordinated debentures ... 2,730 3,400 8,842 10,196
Equity in losses of investments in unconsolidated entities . 893 4,768 4,965 9,483
------------ ------------ ------------ ------------
(Loss) income before income taxes and extraordinary gain ... (4,794) 20,353 (22,973) 27,405
Income tax benefit (expense) ............................... 1,486 (8,199) 7,122 (9,595)
Minority interest in net loss of consolidated subsidiary ... -- 369 -- 497
------------ ------------ ------------ ------------
(Loss) income before extraordinary gain .................... (3,308) 12,523 (15,851) 18,307
Extraordinary gain on repurchase of debt, net of taxes ..... 2,628 253 8,674 253
------------ ------------ ------------ ------------
Net (loss) income .......................................... $ (680) $ 12,776 $ (7,177) $ 18,560
============ ============ ============ ============
(LOSS) EARNINGS PER SHARE:
Basic:
Net (loss) income before extraordinary gain ........... $ (0.05) $ 0.21 $ (0.24) $ 0.30
Extraordinary gain .................................... 0.04 -- 0.13 0.01
------------ ------------ ------------ ------------
Net (loss) income ..................................... $ (0.01) $ 0.21 $ (0.11) $ 0.31
============ ============ ============ ============
Diluted:
Net (loss) income before extraordinary gain ........... $ (0.05) $ 0.21 $ (0.24) $ 0.30
Extraordinary gain .................................... 0.04 -- 0.13 0.01
------------ ------------ ------------ ------------
Net (loss) income ..................................... $ (0.01) $ 0.21 $ (0.11) $ 0.31
============ ============ ============ ============
Weighted average common shares outstanding:
Basic .................................................... 67,152,363 60,427,623 67,519,428 60,652,865
============ ============ ============ ============
Diluted .................................................. 67,152,363 60,460,314 67,519,428 60,691,416
============ ============ ============ ============
8
Ocwen Financial Corporation Third Quarter Results
November 9, 2000
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except share data)
September 30, 2000 December 31, 1999
------------------ -----------------
ASSETS:
Cash and amounts due from depository institutions ............. $ 31,055 $ 153,459
Interest earning deposits ..................................... 16,422 116,399
Federal funds sold ............................................ 179,000 112,000
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) ......... 372,541 --
Subordinates, residuals and other securities ............ 123,754 --
Loans available for sale, at lower of cost or market .......... 12,323 45,213
Real estate held for sale ..................................... 160,589 --
Low-income housing tax credit interests held for sale ......... 75,478 --
Investment securities ......................................... 13,257 10,965
Loan portfolio, net ........................................... 115,103 157,408
Discount loan portfolio, net .................................. 701,941 913,229
Match funded loans and securities, net ........................ 123,900 157,794
Investments in low-income housing tax credit interests ........ 68,271 150,989
Investments in unconsolidated entities ........................ 29,803 37,118
Real estate owned, net ........................................ 169,200 167,506
Investment in real estate ..................................... 151,242 268,241
Premises and equipment, net ................................... 44,922 49,038
Income taxes receivable ....................................... 22,827 --
Deferred tax asset, net ....................................... 131,306 136,920
Excess of purchase price over net assets acquired ............. 10,861 13,207
Principal, interest and dividends receivable .................. 9,528 10,024
Escrow advances on loans and loans serviced for others ........ 211,253 162,548
Other assets .................................................. 68,607 59,737
------------------ -----------------
$ 2,843,183 $ 3,309,313
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES:
Deposits .................................................... $ 1,604,640 $ 1,842,286
Securities sold under agreements to repurchase .............. 5,692 47,365
Bonds-match funded agreements ............................... 114,687 141,515
Obligations outstanding under lines of credit ............... 135,644 187,866
Notes, debentures and other interest bearing
obligations ............................................. 273,562 317,573
Accrued interest payable .................................... 37,692 32,569
Excess of net assets acquired over purchase price ........... 47,923 56,841
Income taxes payable ........................................ -- 6,369
Accrued expenses, payables and other liabilities ............ 30,193 57,487
------------------ -----------------
Total liabilities ....................................... 2,250,033 2,689,871
------------------ -----------------
Company obligated, mandatorily redeemable securities of
subsidiary trust holding solely junior subordinated
debentures of the Company ............................... 99,390 110,000
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 September 30, 2000,
and December 31, 1999, respectively ..................... 672 686
Additional paid-in capital ................................. 223,148 232,340
Retained earnings .......................................... 269,825 277,002
Accumulated other comprehensive income, net of taxes:
Net unrealized gain on securities available for sale .... -- 163
Net unrealized foreign currency translation gain (loss) . 115 (749)
------------------ -----------------
Total stockholders' equity ................................. 493,760 509,442
------------------ -----------------
$ 2,843,183 $ 3,309,313
================== =================
9