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): May 6, 2004
OCWEN FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Florida 1-13219 65-0039856
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
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 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 May
6, 2004.
Item 12. Disclosure of Results of Operations and Financial Condition
The news release of the Registrant dated May 6, 2004,
announcing its first quarter results is attached hereto and
filed herewith as Exhibit 99.1.
Page 2 of 9
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: May 6, 2004
Page 3 of 9
INDEX TO EXHIBIT
Exhibit No. Description Page
----------- ----------- ----
99.1 News release of Ocwen Financial Corporation, 5
dated May 6, 2004, announcing its first quarter
2004 results and certain other information.
Page 4 of 9
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Exhibit 99.1
[GRAPHIC OMITTED]
OCWEN
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
FIRST QUARTER 2004 NET INCOME
West Palm Beach, FL - (May 6, 2004) Ocwen Financial Corporation (NYSE:OCN) today
reported net income for the first quarter of 2004 of $6.8 million or $0.10 per
share compared to a net loss of $(8.4) million or $(0.13) per share for the
first quarter of 2003.
Chairman and CEO William C. Erbey stated, "Our results reflect improvement
across the board in our core, non-core and corporate segments. Core business
earnings increased $1.0 million or 14% over the same period last year while
non-core losses decreased to $(1.7) million from $(2.2) million in 2003, after
adjusting for the arbitration settlement in the first quarter of last year.
Corporate Items reflected pre-tax income of $0.5 million as compared to a loss
of $(3.2) million in the same period last year.
o Our Residential Servicing business recorded pre-tax income of $5.7
million, reflecting the continuing pressures from prepayments speeds
and low interest rates.
o Our non-core assets were reduced by $33.3 million, primarily
reflecting the sale of our 2nd largest asset, partially offset by a
$15.5 million mezzanine loan we issued as part of the transaction.
o Our Commercial Servicing business which includes the results of our
international joint venture, Global Servicing Solutions (GSS),
achieved profitability earlier than we had anticipated reporting
pre-tax income of $0.2 million this quarter.
We are very pleased to announce that on May 4, 2004 we signed a multi-year
contract with Aegis Mortgage Corporation to license REALServicing(R) our
residential mortgage servicing system. We expect this contract to improve our
OTX results in 2004. We are optimistic that we will achieve further reductions
in non-core assets during the remainder of this year, and we also believe that
we are well positioned for an increase in Servicing results should interest
rates increase and prepayment speeds decline."
The Residential Servicing business reported pre-tax income of $5.7 million in
the first quarter of 2004 vs. $9.2 million in the 2003 first quarter, reflecting
continuing earnings pressure from current low interest rates and rising
prepayments in our servicing portfolio. Our first quarter 2004 Servicing results
also included increased expenses reflecting costs associated with our property
management contract with the United States Department of Veteran's Affairs and
as a result of having reassumed, in the fourth quarter of 2003, certain
collection activities that had been performed by outside parties. As of March
31, 2004 we were the servicer of approximately 350 thousand loans with an unpaid
principal balance (UPB) of $36.6 billion, as compared to approximately 360
thousand loans and $37.7 billion of UPB at December 31, 2003.
Pre-tax losses at OTX were $(1.8) million in the 2004 first quarter compared to
a loss of $(3.3) million in the same period of 2003, an improvement of 45%,
reflecting both increased revenues and declining expenses.
Ocwen Realty Advisors (ORA) reported pre-tax income of $2.0 million in the first
quarter of 2004 as compared to $1.0 million in the first quarter of 2003.
The Unsecured Collections business reported pre-tax income in the first quarter
of 2004 of $1.4 million as compared to $1.3 million in 2003.
In our newest business segments, Business Process Outsourcing reported pre-tax
income of $0.4 million in the 2004 first quarter as compared to $0.08 million
last year. Our Commercial Servicing segment, which includes both domestic
servicing activities as well as the results of GSS, achieved pre-tax income of
$0.2 million in the first quarter of 2004. The pre tax loss of $(1.4) million in
the 2003 first quarter primarily reflected start-up costs for GSS.
Page 5 of 9
Ocwen Financial Corporation
First Quarter Results
May 6, 2004
Our non-core businesses recorded a pre-tax loss of $(1.7) million for the first
quarter as compared to a loss of $(12.2) million in 2003. Results for 2003
included an arbitration settlement expense of $10 million. The Corporate Segment
reported pre-tax income of $0.5 million in the first quarter of 2004 as compared
to a loss of $(3.2) million in the same period last year. Results for 2004
include income of $3.7 million representing interest due on an income tax refund
claim, largely offset by corporate expenses, primarily legal fees. Interest
expense and technology costs in the corporate segment were substantially reduced
in 2004 as compared to 2003.
The pre-tax loss for the first quarter of 2004 in the Commercial Assets business
amounted to $(3.2) million as compared to a pre-tax loss of $(2.4) million in
the 2003 first quarter. The increased losses in 2004 primarily reflect a
valuation allowance on a non-core asset of $1.9 million, as well a loss of $0.6
million on a non-core asset sale, offset by reduced interest expenses of $2.4
million, reflecting the reduced level of assets in 2004. Commercial loans and
real estate consisted of 8 assets as of March 31, 2004 with a net book value of
$93.5 million as compared to $123.8 million at December 31, 2003, a reduction of
$30 million or 24.5%.
The Affordable Housing business reported a pre-tax loss of $(1.0) million in the
2004 first quarter compared to a pre-tax loss of $(2.3) million in the 2003
first quarter. The improvement in 2004 results reflects reduced interest expense
due to reduced asset values as well as the absence of loss provisions in 2004,
as compared to a provision of $0.4 million in the 2003 first quarter.
Results in the Subprime Finance business reflected pre-tax income of $2.5
million for the 2004 first quarter as compared to a pre-tax loss of $(7.5)
million in the 2003 first quarter. Results for the 2003 first quarter include a
charge of $10 million related to the conclusion of arbitration. The Company's
total trading portfolio of non-investment grade securities, which consists
largely of subprime residuals, amounted to $42.2 million at March 31, 2004 as
compared to $42.8 million at December 31, 2003.
The Company's net tax expense in the 2004 first quarter was $11 thousand,
representing foreign taxes on GSS operations. For 2003, tax expense was $0.3
million, primarily reflecting a tax payment related to investments in
non-economic residual securities with no book value.
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.
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
progress of reductions in non-core assets, interest rates and the impact of
changes in interest rates on the servicing business, and anticipated
improvements in results for OTX. 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
reports on Form 10-K for the year ended December 31, 2003. 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.
Page 6 of 9
Ocwen Financial Corporation
First Quarter Results
May 6, 2004
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
For the periods ended March 31, 2004 2003
- ------------------------------------------------------------------------------------------ ------------ ------------
Revenue
Servicing and related fees ............................................................... $ 42,121 $ 33,781
Vendor management fees ................................................................... 13,173 6,588
Gain (loss) on trading and match funded securities, net .................................. (643) (423)
Valuation gains (losses) on real estate .................................................. (1,851) 298
Gain (loss) on sales of real estate ...................................................... (541) 79
Operating income (losses) from real estate ............................................... 8 772
Other income ............................................................................. 6,621 1,288
------------ ------------
Non-interest revenue ................................................................... 58,888 42,383
------------ ------------
Interest income .......................................................................... 4,605 6,757
Interest expense ......................................................................... 7,802 9,326
------------ ------------
Net interest income (expense) before provision for loan losses ......................... (3,197) (2,569)
Provision for loan losses ................................................................ (531) 166
------------ ------------
Net interest income (expense) after provision for loan losses .......................... (2,666) (2,735)
------------ ------------
Total revenue ......................................................................... 56,222 39,648
------------ ------------
Non-interest expense
Compensation and employee benefits ....................................................... 22,033 17,708
Occupancy and equipment .................................................................. 3,997 2,830
Technology and communication costs ....................................................... 6,669 4,497
Loan expenses ............................................................................ 7,927 3,535
Loss (gain) on affordable housing properties ............................................. (38) 370
Professional services and regulatory fees ................................................ 5,825 15,284
Other operating expenses ................................................................. 3,057 2,297
------------ ------------
Non-interest expense ................................................................... 49,470 46,521
------------ ------------
Distributions on Company-obligated, mandatorily redeemable securities of subsidiary trust
holding solely junior subordinated debentures of the Company (Capital Securities) ...... -- 1,529
------------ ------------
Income (loss) before minority interest and income taxes .................................... 6,752 (8,402)
Minority interest in net income (loss) of subsidiaries ..................................... (21) (263)
Income tax expense ......................................................................... 11 307
------------ ------------
Net income (loss) ...................................................................... $ 6,762 $ (8,446)
============ ============
Earnings (loss) per share
Basic .................................................................................... 0.10 (0.13)
Diluted .................................................................................. 0.10 (0.13)
Weighted average common shares outstanding
Basic .................................................................................... 67,762,414 67,339,773
Diluted .................................................................................. 69,093,785 67,339,773
Page 7 of 9
Ocwen Financial Corporation
First Quarter Results
May 6, 2004
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except share data)
March 31, December 31,
2004 2003
------------ ------------
Assets
Cash and amounts due from depository institutions ...................................... $ 314,372 $ 215,764
Interest earning deposits .............................................................. 3,267 324
Trading securities, at fair value:
Collateralized mortgage obligations (AAA-rated) and U.S. Treasury securities ........ 4,020 6,679
Subordinates, residuals and other securities ........................................ 42,177 42,841
Real estate ............................................................................ 69,464 103,943
Affordable housing properties .......................................................... 8,151 7,410
Loans, net ............................................................................. 29,234 28,098
Match funded assets .................................................................... 144,017 130,087
Premises and equipment, net ............................................................ 43,418 41,944
Advances on loans and loans serviced for others ........................................ 322,843 374,769
Mortgage servicing rights .............................................................. 152,076 166,495
Receivables ............................................................................ 77,002 88,399
Other assets ........................................................................... 40,219 33,365
------------ ------------
Total assets ........................................................................ $ 1,250,260 $ 1,240,118
============ ============
Liabilities and Stockholders' Equity
Liabilities
Deposits ............................................................................. $ 508,238 $ 446,388
Escrow deposits ...................................................................... 120,681 116,444
Bonds - match funded agreements ...................................................... 128,166 115,394
Lines of credit and other secured borrowings ......................................... 79,527 150,384
Notes and debentures ................................................................. 56,249 56,249
Accrued interest payable ............................................................. 2,674 4,789
Accrued expenses, payables and other liabilities ..................................... 25,098 31,926
------------ ------------
Total liabilities ................................................................... 920,633 921,574
------------ ------------
Minority interest in subsidiaries ...................................................... 1,392 1,286
Stockholders' equity
Common stock, $.01 par value; 200,000,000 shares authorized: 68,123,558 and
67,467,220 shares issued and outstanding at March 31, 2004 and December 31, 2003,
respectively ....................................................................... 681 675
Additional paid-in capital ............................................................ 229,814 225,559
Retained earnings ..................................................................... 97,171 90,409
Accumulated other comprehensive income (loss), net of taxes:
Net unrealized foreign currency translation gain (loss) ............................. 569 615
------------ ------------
Total stockholders' equity ........................................................ 328,235 317,258
------------ ------------
Total liabilities and stockholders' equity ...................................... $ 1,250,260 $ 1,240,118
============ ============
Page 8 of 9
Ocwen Financial Corporation
First Quarter Results
May 6, 2004
Pre-Tax Income (Loss) by Business Segment
For the periods ended March 31, 2004 2003
----------------------------------------------------------------------------- ------------ ------------
(Dollars in thousands)
Core businesses
Residential Loan Servicing .............................................. $ 5,747 $ 9,248
OTX ..................................................................... (1,771) (3,301)
Ocwen Realty Advisors ................................................... 1,958 1,015
Unsecured Collections ................................................... 1,401 1,317
Business Process Outsourcing ............................................ 397 81
Commercial Servicing .................................................... 224 (1,381)
------------ ------------
7,956 6,979
------------ ------------
Non-core businesses
Commercial Assets ....................................................... (3,241) (2,428)
Affordable Housing ...................................................... (973) (2,280)
Subprime Finance ........................................................ 2,504 (7,485)
------------ ------------
(1,710) (12,193)
------------ ------------
Corporate Items and Other ................................................. 506 (3,188)
------------ ------------
Income (loss) before minority interest and income taxes ................... $ 6,752 $ (8,402)
============ ============
Non-Core Assets
March 31, December 31,
(Dollars in thousands) 2004 2003
------------ ------------
Loans, net
Affordable housing ...................................................... $ 3,612 $ 6,545
All other ............................................................... 25,622 21,553
Real estate ............................................................... 69,464 103,943
Subordinates, residuals and other trading securities ...................... 42,177 42,841
Affordable housing properties ............................................. 8,151 7,410
------------ ------------
Total non-core assets ................................................... $ 149,026 $ 182,292
============ ============
Interest Income and Expense
For the periods ended March 31, 2004 2003
----------------------------------------------------------------------------- ------------ ------------
(Dollars in thousands)
Interest income
Interest earning cash and other ......................................... $ 114 $ 50
Federal funds sold and repurchase agreements ............................ 392 318
Trading securities ...................................................... 3,238 4,865
Loans ................................................................... 460 372
Match funded loans and securities ....................................... 401 1,152
------------ ------------
4,605 6,757
------------ ------------
Interest expense
Deposits ................................................................ 4,038 4,865
Securities sold under agreements to repurchase .......................... -- 3
Bonds - match funded agreements ......................................... 1,027 1,306
Lines of credit and other secured borrowings ............................ 1,208 856
Notes and debentures .................................................... 1,529 2,296
------------ ------------
7,802 9,326
------------ ------------
Net interest income (expense) before provision for loan losses .......... $ (3,197) $ (2,569)
============ ============
Page 9 of 9
