UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
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Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported): August 8, 2001
OCWEN FINANCIAL CORPORATION
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(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
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(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 August 8, 2001 announcing its second
quarter 2001 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
August 8, 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: August 8, 2001
3
INDEX TO EXHIBIT
Exhibit No. Description Page
----------- ----------- ----
99.1 News release of Ocwen Financial Corporation dated 5
August 8, 2001, announcing its 2001 second
quarter results and certain other information.
4
- --------------------------------------------------------------------------------
Exhibit 99.1
[OCWEN LOGO OMITTED]
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
SECOND QUARTER RESULTS
West Palm Beach, FL - (August 8, 2001) Ocwen Financial Corporation (NYSE: OCN)
today reported a net loss for its second quarter ended June 30, 2001 of $(21.4)
million or $(0.32) per share compared to a net loss of $(1.4) million or $(0.02)
per share for the 2000 second quarter. For the six months ended June 30, 2001,
the Company reported a net loss of $(45.0) million vs. a loss of $(6.5) million
for the 2000 six month period.
Chairman and CEO William C. Erbey stated "We are continuing to make steady
progress towards our strategic transformation of Ocwen. There are a number of
key points to emphasize in evaluating our second quarter results:
o For the first time, the combined results of our core fee businesses,
Servicing and OTX, were profitable. At OTX, we have begun to reduce our
costs, reflected by the fact that our net loss was $300 thousand below
first quarter levels after considering several one-time expenses in both
quarters.
o Our capital intensive loan and affordable housing businesses achieved a
break-even result excluding $9.4 million of non-cash charges to increase
loss reserves. As of June 30, 2001 our loss reserves were at an all-time
high level as a percentage of assets.
o We sold $17.3 million of subprime residual securities for a gain of $4.5
million.
o We have continued to reduce our exposure to risk assets. Since December 31,
2000, risk assets, excluding servicing related assets, have declined by
$398 million, or 25%.
o Net loss for the second quarter of 2001 included an additional provision of
$8 million to increase our allowance for deferred tax assets.
While we recognize that near term earnings pressures will continue, we believe
that our equity of $459 million, cash and equivalents of $311 million and our
new servicing advance credit lines provide us with the requisite financial
strength and liquidity to achieve our objectives."
The Servicing business reported net income for the second quarter of 2001 of
$5.3 million vs. $2.7 million in the 2000 second quarter. On a year to date
basis, Servicing reported net income of $10.6 million compared to $6.4 million
in 2000, an increase of 66%. The UPB value of loans serviced for others grew to
$15.4 billion as of June 30, 2001 compared to $10.5 billion as of December 31,
2000. An additional $4.5 billion of UPB had been acquired as of June 30. As of
the date of this release, all of these loans have been boarded.
Net losses at OTX were $(4.8) million in the 2001 second quarter compared to
$(5.3) million in the same period of 2000. For the six months ended June 30, net
losses amounted to $(13.4) million in 2001 vs. $(9.7) million in 2000. The
improvement in the second quarter of 2001 was primarily due to cost reduction
initiatives undertaken at the close of the first quarter. The six month increase
in losses in 2001 compared to the same period in 2000 primarily reflects $4.7
million of pre-tax costs in 2001 associated with one time events, including a
payment related to the acquisition of an OTX subsidiary in 1998.
Losses for the second quarter of 2001 in the Residential, Commercial and
Unsecured discount loan businesses amounted to $(2.8) million, $(2.3) million
and $(1.3) million, respectively. These results primarily reflect increases to
loan loss reserves totaling $6.9 million in these businesses. These increases,
which are largely non-cash charges, were recorded in response to changes in the
credit quality of the assets, or to shortfalls in projected asset recovery rates
in the case of Unsecured. In addition, Residential results for the 2001 second
quarter reflect a whole loan sale of over 700 loans with a book value of
approximately $44.6 million for a gain of $1 million. Commercial assets with a
book value of $56 million were sold during the 2001 second quarter for a net
loss of $(0.7) million.
5
Ocwen Financial Corporation
Second Quarter Results
August 8, 2001
The Affordable Housing business posted a net loss of $(3.6) million in the 2001
second quarter compared to net income of $5 thousand in the 2000 second quarter.
Affordable Housing results include additional reserve provisions of
approximately $2.5 million during the second quarter reflecting revisions in
completion cost estimates as well as modification to projected sales results.
Many of the assets in this business are under sales contracts that have not yet
satisfied all of the accounting criteria for sales treatment.
Ongoing efforts to dispose of the remaining assets in the inactive Subprime
Lending business resulted in net income of $2.4 million for the 2001 second
quarter, primarily due to a pre-tax gain of $4.5 million on the sale of $17.3
million of subprime residual trading securities.
Second quarter 2001 results include an extraordinary gain of $243 thousand
compared to an extraordinary gain of $3.9 million in the same period of 2000.
The extraordinary gain in 2001 resulted from the repurchase at a discount of
$2.5 million par amount of the Company's 10-7/8% Capital Trust Securities. The
Company will continue to evaluate additional debt repurchases during 2001.
Income tax expense for the second quarter of 2001 included a non-cash provision
to increase the Company's valuation allowance on its deferred tax asset by $8
million. In addition, income tax expense includes a charge of $2.8 million
representing the reversal of tax benefits recorded earlier in 2001. The Company
has established its allowance based upon generally accepted accounting
principles that require it to estimate that portion of the deferred tax asset
that may not be realized for financial reporting purposes in the near future.
The Company's ability to utilize the deferred tax asset and its need for the
valuation allowance ultimately depends on future profitability. These same rules
preclude the Company from recognizing a tax benefit on current losses at this
time.
Ocwen Financial Corporation is a financial services company headquartered in
West Palm Beach, Florida. The Company's primary business is the servicing and
special servicing of nonconforming, subperforming and nonperforming residential
and commercial mortgage loans. Ocwen also specializes in the development of
related loan servicing technology and software 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
"continue," "will," "believe," "estimate," "project," "future," "realize,"
"reduce," "ongoing," 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, change or damage to the
Company's computer equipment and the information stored in its data centers,
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 and servicing rights 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, servicing 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, 2000.
6
Ocwen Financial Corporation
Second Quarter Results
August 8, 2001
Interest Income and Expense
Three Months Six Months
-------------------- --------------------
For the periods ended June 30, 2001 2000 2001 2000
- ----------------------------------------------------------- -------- -------- -------- --------
(Dollars in thousands)
Interest income:
Federal funds sold and repurchase agreements ............ $ 2,454 $ 864 $ 4,098 $ 2,573
Trading securities ...................................... 4,173 -- 9,873 --
Securities available for sale ........................... -- 16,808 -- 29,677
Loans available for sale ................................ 143 917 364 1,724
Investment securities and other ......................... 251 502 597 829
Loan portfolio .......................................... 1,619 5,337 3,502 9,305
Match funded loans and securities ....................... 2,737 2,952 5,220 6,263
Discount loan portfolio ................................. 13,841 23,075 26,381 48,174
-------- -------- -------- --------
25,218 50,455 50,035 98,545
-------- -------- -------- --------
Interest expense:
Deposits ................................................ 16,308 24,793 34,379 49,478
Advances from the Federal Home Loan Bank ................ -- -- 4 --
Securities sold under agreements to repurchase .......... -- 5,284 2 7,924
Bonds - match funded agreements ......................... 1,742 2,790 4,708 6,146
Obligations outstanding under lines of credit ........... 1,736 3,942 2,456 7,413
Notes, debentures and other interest bearing obligations. 4,942 8,852 10,059 18,096
-------- -------- -------- --------
24,728 45,661 51,608 89,057
-------- -------- -------- --------
Net interest income (expense) before provision for loan
losses ................................................ $ 490 $ 4,794 $ (1,573) $ 9,488
======== ======== ======== ========
Net (Loss) Income by Business Segment
Three Months Six Months
-------------------- --------------------
For the periods ended June 30, 2001 2000 2001 2000
- ----------------------------------------------------------- -------- -------- -------- --------
(Dollars in thousands)
Single family residential discount loans ................. $ (2,816) $ 4,369 $ (3,905) $ 7,455
Commercial loans ......................................... (2,297) 746 (7,328) 1,440
Domestic residential mortgage loan servicing ............. 5,275 2,701 10,553 6,432
Investment in low-income housing tax credits ............. (3,624) 5 (8,234) 1,222
OTX ...................................................... (4,831) (5,271) (13,366) (9,746)
Commercial Real Estate ................................... 299 2,005 399 2,698
UK operations ............................................ -- (1,390) -- (2,932)
Subprime single family residential lending ............... 2,376 (3,347) 3,442 (7,908)
Unsecured collections .................................... (1,328) (2,191) (2,692) (4,364)
Ocwen Realty Advisors .................................... 128 148 215 290
Corporate items and other ................................ (14,623) 826 (24,041) (1,084)
-------- -------- -------- --------
$(21,441) $ (1,399) $(44,957) $ (6,497)
======== ======== ======== ========
7
Ocwen Financial Corporation
Second Quarter Results
August 8, 2001
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
Three Months Six Months
---------------------------- ----------------------------
For the periods ended June 30, 2001 2000 2001 2000
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------
Net interest income:
Income ............................................................ $ 25,218 $ 50,455 $ 50,035 $ 98,545
Expense ........................................................... 24,728 45,661 51,608 89,057
------------ ------------ ------------ ------------
Net interest income (expense) before provision for loan losses .... 490 4,794 (1,573) 9,488
Provision for loan losses ......................................... 10,297 3,135 18,417 5,743
------------ ------------ ------------ ------------
Net interest (expense) income after provision for loan losses ..... (9,807) 1,659 (19,990) 3,745
------------ ------------ ------------ ------------
Non-interest income:
Servicing and other fees .......................................... 33,740 22,559 64,857 46,725
Gain (loss) on interest earning assets, net ....................... 422 5,270 (1,409) 16,264
Gain on trading and match funded securities, net .................. 4,550 -- 9,739 --
Impairment charges on securities available for sale ............... -- (4,764) -- (11,597)
Loss on real estate owned, net .................................... (1,881) (3,006) (2,865) (10,013)
(Loss) gain on other non interest earning assets, net ............. (975) 5,044 (519) 5,182
Net operating gains on investments in real estate ................. 486 8,063 3,040 13,616
Amortization of excess of net assets acquired over purchase price . 4,583 2,998 9,166 5,792
Other income ...................................................... 2,437 1,070 4,483 2,209
------------ ------------ ------------ ------------
43,362 37,234 86,492 68,178
------------ ------------ ------------ ------------
Non-interest expense:
Compensation and employee benefits ................................ 21,309 22,397 42,244 38,980
Occupancy and equipment ........................................... 3,174 2,952 6,267 6,215
Technology and communication costs ................................ 5,556 5,754 15,704 11,375
Loan expenses ..................................................... 2,835 2,987 7,070 6,917
Net operating losses on investments in certain low-income housing
tax credit interests ............................................ 2,756 840 7,818 2,339
Amortization of excess of purchase price over net assets acquired . 778 795 1,556 1,568
Professional services and regulatory fees ......................... 3,994 2,965 8,020 6,804
Other operating expenses .......................................... 2,454 3,154 5,033 5,720
------------ ------------ ------------ ------------
42,856 41,844 93,712 79,918
------------ ------------ ------------ ------------
Distributions on Company-obligated, mandatorily
redeemable securities of subsidiary trust holding solely
junior subordinated debentures of the Company ................... 1,697 2,918 3,750 6,112
Equity in income (losses) of investments in unconsolidated entities . 139 (1,812) 184 (4,072)
------------ ------------ ------------ ------------
Loss before income taxes and extraordinary gain ..................... (10,859) (7,681) (30,776) (18,179)
Income tax (expense) benefit ........................................ (10,825) 2,380 (16,587) 5,635
------------ ------------ ------------ ------------
Loss before extraordinary gain ...................................... (21,684) (5,301) (47,363) (12,544)
Extraordinary gain on repurchase of debt, net of taxes .............. 243 3,902 2,406 6,047
------------ ------------ ------------ ------------
Net loss ............................................................ $ (21,441) $ (1,399) $ (44,957) $ (6,497)
============ ============ ============ ============
(Loss) earnings per share:
Basic:
Loss before extraordinary gain .................................. $ (0.33) $ (0.08) $ (0.71) $ (0.19)
Extraordinary gain .............................................. 0.01 0.06 0.04 0.09
------------ ------------ ------------ ------------
Net loss ........................................................ $ (0.32) $ (0.02) $ (0.67) $ (0.10)
============ ============ ============ ============
Diluted:
Loss before extraordinary gain .................................. $ (0.33) $ (0.08) $ (0.71) $ (0.19)
Extraordinary gain .............................................. 0.01 0.06 0.04 0.09
------------ ------------ ------------ ------------
Net loss ........................................................ $ (0.32) $ (0.02) $ (0.67) $ (0.10)
============ ============ ============ ============
Weighted average common shares outstanding:
Basic ............................................................. 67,198,359 67,182,395 67,175,361 67,702,961
============ ============ ============ ============
Diluted ........................................................... 67,198,359 67,182,395 67,175,361 67,702,961
============ ============ ============ ============
8
Ocwen Financial Corporation
Second Quarter Results
August 8, 2001
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except share data)
June 30, 2001 December 31, 2000
------------- -----------------
Assets:
Cash and amounts due from depository institutions ........................ $ 52,381 $ 18,749
Interest earning deposits ................................................ 9,517 134,987
Federal funds sold and repurchase agreements ............................. 249,000 --
Trading securities, at fair value:
Collateralized mortgage obligations (AAA-rated) ........................ 62,080 277,595
Subordinates, residuals and other securities ........................... 88,050 112,647
Loans available for sale, at lower of cost or market ..................... 4,450 10,610
Real estate held for sale ................................................ 20,165 22,670
Low-income housing tax credit interests held for sale .................... 31,789 87,083
Investment in real estate ................................................ 115,661 122,761
Investments in low-income housing tax credit interests ................... 85,893 55,729
Investment securities, at cost ........................................... 13,257 13,257
Loan portfolio, net ...................................................... 77,105 93,414
Discount loan portfolio, net ............................................. 306,942 536,028
Match funded loans and securities, net ................................... 91,462 116,987
Investments in unconsolidated entities ................................... 821 430
Real estate owned, net ................................................... 129,042 146,419
Premises and equipment, net .............................................. 41,982 43,152
Income taxes receivable .................................................. 28,412 30,261
Deferred tax asset, net .................................................. 77,991 95,991
Advances on loans and loans serviced for others .......................... 349,912 227,055
Mortgage servicing rights ................................................ 82,928 51,426
Other assets ............................................................. 78,385 52,169
----------- -----------
$ 1,997,225 $ 2,249,420
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Deposits ............................................................... $ 1,044,363 $ 1,258,360
Bonds - match funded agreements ........................................ 80,821 107,050
Obligations outstanding under lines of credit .......................... 104,545 32,933
Notes, debentures and other interest bearing obligations ............... 169,130 173,330
Accrued interest payable ............................................... 19,714 22,096
Excess of net assets acquired over purchase price ...................... 27,499 36,665
Accrued expenses, payables and other liabilities ....................... 31,299 36,030
----------- -----------
Total liabilities ................................................... 1,477,371 1,666,464
----------- -----------
Company obligated, mandatorily redeemable securities of
subsidiary trust holding solely junior subordinated
debentures of the Company ............................................ 61,159 79,530
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;
67,259,927 and 67,152,363 shares issued and outstanding
at June 30, 2001, and December 31, 2000, respectively ............... 673 672
Additional paid-in capital ............................................ 223,896 223,163
Retained earnings ..................................................... 234,237 279,194
Accumulated other comprehensive income, net of taxes:
Net unrealized foreign currency translation (loss) gain ............. (111) 397
----------- -----------
Total stockholders' equity ............................................ 458,695 503,426
----------- -----------
$ 1,997,225 $ 2,249,420
=========== ===========
9