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): April 30, 2015
OCWEN FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
| Florida | 1-13219 | 65-0039856 | ||
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
1000 Abernathy Road NE, Suite 210
Atlanta, Georgia 30328
(Address of principal executive offices)
Registrant’s telephone number, including area code: (561) 682-8000
Not applicable.
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02 | Results of Operations and Financial Condition. |
On April 30, 2015, Ocwen Financial Corporation (the "Company") issued a press release announcing its preliminary results for the first quarter ended March 31, 2015. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The information contained under Item 2.02 in this Current Report, including Exhibit 99.1, is being furnished and, as a result, such information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
| Exhibit Number |
Description | |
| 99.1 | Press release of Ocwen Financial Corporation dated April 30, 2015. |
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) | ||
| Date: April 30, 2015 | By: | /s/ Michael R. Bourque, Jr. |
| Michael R. Bourque, Jr. | ||
| Chief Financial Officer | ||
(On behalf of the Registrant and as its principal financial officer) | ||
Exhibit 99.1
 | Ocwen Financial Corporation® |
FOR IMMEDIATE RELEASE
OCWEN FINANCIAL ANNOUNCES PRELIMINARY OPERATING RESULTS
FOR FIRST QUARTER 2015
| · | Generated Q1 2015 Net Income of $34 million and Cash Flow From Operating Activities of $323 million |
Atlanta, GA – (April 30, 2015) Ocwen Financial Corporation, (NYSE:OCN) (“Ocwen” or the “Company”), a leading financial services holding company, today reported preliminary net income of $34.4 million, or $0.27 per share, for the three months ended March 31, 2015 compared to net income of $60.5 million, or $0.43 per share, for the three months ended March 31, 2014. Ocwen generated preliminary revenue of $510.4 million, down 7% compared to the first quarter of the prior year. Preliminary income from operations was $132.1 million for the three months ended March 31, 2015 compared to $202.1 million for the first quarter of 2014. Preliminary Cash Flow from Operating Activities was $323 million for the three months ended March 31, 2015, up 65% over the same period last year.
“I am proud of what we have accomplished as far as managing the business through this difficult transition period. We made great progress on our asset sale strategy, have returned to profitability and continue to generate substantial operating cash flow,” commented Ron Faris, President and CEO of Ocwen. “However, I am not satisfied with only making $34 million in the quarter. We intend to do better.”
Pre-tax income during the first quarter of 2015 was impacted by the following significant items: a $26.9 million gain from the sale of Freddie Mac performing loan mortgage servicing rights (MSRs) with an unpaid principal balance (UPB) of approximately $9.1 billion, a $12.9 million gain on the sale of certain legacy performing and non-performing whole loans, a $(17.8) million impairment charge due to a decline in the fair value of our government insured MSRs primarily resulting from the Federal Housing Administration (FHA) reducing the mortgage insurance premium rate by 50 bps during the quarter, $(9.0) million of monitor costs, $(8.4) million of strategic advisor expenses and $(8.3) million of fair value related changes. The Lending segment generated $16.0 million of pre-tax income during the quarter.
The Company also announced that it now currently intends to file its 2014 Form 10-K and first quarter 2015 Form 10-Q no later than May 29, 2015.
The financial results and other financial data presented in this press release are preliminary, based upon the Company’s estimates and subject to completion of the Company’s final financial closing procedures. Moreover, this data has been prepared on the basis of currently available information. The Company’s independent auditor has not audited or reviewed, and does not express an opinion with respect to, this data. This data does not constitute a comprehensive statement of the Company’s financial results for the quarter ended March 31, 2015 or of its financial position for any period, and the Company’s final data could differ materially from its preliminary data. The preliminary data presented in this press release incorporates the impact that would result if the Company fully reserved for its deferred tax asset.
Webcast and Conference Call
Ocwen will host a webcast and conference call on Thursday, April 30, 2015, at 5 p.m., Eastern Time, to discuss its preliminary financial results for the first quarter of 2015. The conference call will be webcast live over the internet from the Company’s website at www.Ocwen.com, click on the “Shareholder Relations” section. A replay of the conference call will be available via the website approximately two hours after the conclusion of the call and will remain available for approximately 30 days.
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Ocwen Financial Corporation
First Quarter 2015 Preliminary Results
April 30, 2015
About Ocwen Financial Corporation
Ocwen Financial Corporation is a financial services holding company which, through its subsidiaries, is engaged in the servicing and origination of mortgage loans. Ocwen is headquartered in Atlanta, Georgia, with offices throughout the United States and support operations in India and the Philippines. Utilizing proprietary technology, global infrastructure and superior training and processes, Ocwen provides solutions that help homeowners and make our clients’ loans worth more. Ocwen may post information that is important to investors on its website (www.Ocwen.com).
Forward-Looking Statements
This press 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. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Forward-looking statements 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: adverse effects on our business as a result of recent regulatory settlements; reactions to the announcement of such settlements by key counterparties; increased regulatory scrutiny and media attention, due to rumors or otherwise; uncertainty related to claims, litigation and investigations brought by government agencies and private parties regarding our servicing, foreclosure, modification and other practices; any adverse developments in existing legal proceedings or the initiation of new legal proceedings; our ability to effectively manage our regulatory and contractual compliance obligations; our ability to execute on our strategy to reduce the size of our Agency servicing portfolio; the adequacy of our financial resources, including our sources of liquidity and ability to fund and recover advances, repay borrowings and comply with debt covenants; our servicer and credit ratings as well as other actions from various rating agencies, including the impact of recent downgrades of our servicer and credit ratings; volatility in our stock price; the characteristics of our servicing portfolio, including prepayment speeds along with delinquency and advance rates; our ability to contain and reduce our operating costs; our ability to successfully modify delinquent loans, manage foreclosures and sell foreclosed properties; uncertainty related to legislation, regulations, regulatory agency actions, government programs and policies, industry initiatives and evolving best servicing practices; as well as other risks detailed in Ocwen’s reports and filings with the Securities and Exchange Commission (SEC), including its annual report on Form 10-K/A for the year ended December 31, 2013 (filed with the SEC on 08/18/14) and its quarterly report on Form 10-Q for the quarter ended September 30, 2014 (filed with the SEC on 10/31/14). Anyone wishing to understand Ocwen’s business should review its SEC filings. Ocwen’s forward-looking statements speak only as of the date they are made and, except for our ongoing obligations under the U.S. federal securities laws, we undertake no obligation to update or revise forward-looking statements whether as a result of new information, future events or otherwise.
FOR FURTHER INFORMATION CONTACT:
| Investors: | Media: | |
| Stephen Swett | John Lovallo | Dan Rene |
| T: (203) 614-0141 | T: (917) 612-8419 | T: (202) 973 -1325 |
| E: shareholderrelations@ocwen.com | E: jlovallo@levick.com | E:drene@levick.com |
| 2 |
Ocwen Financial Corporation
First Quarter 2015 Preliminary Results
April 30, 2015
| Residential Servicing Statistics | ||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| At or for the Three Months Ended | ||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||
| 2015 | 2014 | 2014 | 2014 | 2014 | ||||||||||||||||
| Total UPB of loans and REO serviced | $ | 382,214,002 | $ | 398,727,727 | $ | 411,279,614 | $ | 435,119,848 | $ | 449,570,596 | ||||||||||
| Non-performing loans and REO serviced as a% of total UPB (1) | 12.5 | % | 13.2 | % | 13.4 | % | 12.9 | % | 13.8 | % | ||||||||||
| Prepayment speed (average CPR)(2) | 13.3 | %(3) | 12.7 | % | 12.8 | % | 12.9 | % | 11.2 | % | ||||||||||
| (1) | Performing loans include those loans that are less than 90 days past due and those loans for which borrowers are making scheduled payments under loan modification, forbearance or bankruptcy plans. We consider all other loans to be non-performing. |
| (2) | Constant Prepayment Rate for the prior three months. |
| (3) | Includes average CPR of 15.8% for prime loans and 9.6% for non-prime loans. |
| Preliminary Segment Results
(Unaudited) (Dollars in thousands) | ||||||||
| For the Three Months Ended March 31, | 2015 | 2014 | ||||||
| Servicing | ||||||||
| Revenue | $ | 471,125 | $ | 520,823 | ||||
| Operating expenses | 337,911 | 307,933 | ||||||
| Income from operations | 133,214 | 212,890 | ||||||
| Other expense, net | (86,492 | ) | (136,267 | ) | ||||
| Income before income taxes | $ | 46,722 | $ | 76,623 | ||||
| Lending | ||||||||
| Revenue | $ | 37,746 | $ | 28,767 | ||||
| Operating expenses | 23,785 | 31,464 | ||||||
| Income (loss) from operations | 13,961 | (2,697 | ) | |||||
| Other income, net | 2,022 | 3,276 | ||||||
| Income before income taxes | $ | 15,983 | $ | 579 | ||||
| Corporate Items and Other | ||||||||
| Revenue | $ | 1,608 | $ | 1,711 | ||||
| Operating expenses | 16,697 | 9,837 | ||||||
| Loss from operations | (15,089 | ) | (8,126 | ) | ||||
| Other income (expense), net | (4,787 | ) | 2,627 | |||||
| Loss before income taxes | $ | (19,876 | ) | $ | (5,499 | ) | ||
| Corporate Eliminations | ||||||||
| Revenue | $ | (35 | ) | $ | (40 | ) | ||
| Operating expenses | (35 | ) | (40 | ) | ||||
| Income (loss) from operations | — | — | ||||||
| Other income (expense), net | — | — | ||||||
| Income (loss) before income taxes | $ | — | $ | — | ||||
| Consolidated income before income taxes | $ | 42,829 | $ | 71,703 | ||||
| 3 |
Ocwen Financial Corporation
First Quarter 2015 Preliminary Results
April 30, 2015
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(UNAUDITED)
| For the Three Months Ended March 31, | 2015 | 2014 | ||||||
| Revenue | ||||||||
| Servicing and subservicing fees | $ | 446,541 | $ | 490,459 | ||||
| Gain on loans held for sale, net | 44,504 | 43,987 | ||||||
| Other revenues | 19,399 | 16,815 | ||||||
| Total revenue | 510,444 | 551,261 | ||||||
| Operating expenses | ||||||||
| Compensation and benefits | 105,144 | 105,637 | ||||||
| Amortization of mortgage servicing rights | 38,494 | 62,094 | ||||||
| Servicing and origination | 101,802 | 43,947 | ||||||
| Technology and communications | 39,351 | 36,976 | ||||||
| Professional services | 56,931 | 21,398 | ||||||
| Occupancy and equipment | 25,714 | 32,051 | ||||||
| Other operating expenses | 10,922 | 47,091 | ||||||
| Total operating expenses | 378,358 | 349,194 | ||||||
| Income from operations | 132,086 | 202,067 | ||||||
| Other income (expense) | ||||||||
| Interest income | 5,575 | 5,327 | ||||||
| Interest expense | (119,396 | ) | (139,873 | ) | ||||
| Gain on sale of mortgage servicing rights | 26,406 | — | ||||||
| Gain on extinguishment of debt | — | 2,253 | ||||||
| Other, net | (1,842 | ) | 1,929 | |||||
| Other expense, net | (89,257 | ) | (130,364 | ) | ||||
| Income before income taxes | 42,829 | 71,703 | ||||||
| Income tax expense | 8,440 | 11,217 | ||||||
| Net income | 34,389 | 60,486 | ||||||
| Net income (loss) attributable to non-controlling interests | (34 | ) | 15 | |||||
| Net income attributable to Ocwen stockholders | 34,355 | 60,501 | ||||||
| Preferred stock dividends | — | (581 | ) | |||||
| Deemed dividend related to beneficial conversion feature of preferred stock | — | (416 | ) | |||||
| Net income attributable to Ocwen common stockholders | $ | 34,355 | $ | 59,504 | ||||
| Earnings per share attributable to Ocwen common stockholders | ||||||||
| Basic | $ | 0.27 | $ | 0.44 | ||||
| Diluted | $ | 0.27 | $ | 0.43 | ||||
| Weighted average common shares outstanding | ||||||||
| Basic | 125,272,228 | 135,227,067 | ||||||
| Diluted | 126,999,662 | 141,089,455 | ||||||
| 4 |
Ocwen Financial Corporation
First Quarter 2015 Preliminary Results
April 30, 2015
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
PRELIMINARY CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(UNAUDITED)
| March 31, 2015 | December 31, 2014 | |||||||
| Assets | ||||||||
| Cash | $ | 242,332 | $ | 129,473 | ||||
| Mortgage servicing rights ($897,797 and $93,901 carried at fair value) | 1,820,651 | 1,913,992 | ||||||
| Advances | 942,538 | 893,914 | ||||||
| Match funded advances | 2,252,967 | 2,409,442 | ||||||
| Loans held for sale ($339,508 and $401,120 carried at fair value) | 407,997 | 488,612 | ||||||
| Loans held for investment - reverse mortgages, at fair value | 1,808,141 | 1,550,141 | ||||||
| Receivables, net | 300,751 | 270,596 | ||||||
| Premises and equipment, net | 42,945 | 43,310 | ||||||
| Other assets ($7,701 and $7,335 carried at fair value) | 500,659 | 490,811 | ||||||
| Total assets | $ | 8,318,981 | $ | 8,190,291 | ||||
| Liabilities and Equity | ||||||||
| Liabilities | ||||||||
| Match funded liabilities | $ | 2,000,676 | $ | 2,090,247 | ||||
| Financing liabilities ($2,296,892 and $2,058,693 carried at fair value) | 2,488,607 | 2,258,641 | ||||||
| Other secured borrowings | 1,603,707 | 1,733,691 | ||||||
| Senior unsecured notes | 350,000 | 350,000 | ||||||
| Other liabilities | 822,244 | 793,534 | ||||||
| Total liabilities | 7,265,234 | 7,226,113 | ||||||
| Equity | ||||||||
Ocwen Financial Corporation (Ocwen) stockholders’ equity | ||||||||
| Common stock, $.01 par value; 200,000,000 shares authorized; 125,302,788 and 125,215,615 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively | 1,253 | 1,252 | ||||||
| Additional paid-in capital | 517,915 | 515,194 | ||||||
| Retained earnings | 540,239 | 453,869 | ||||||
| Accumulated other comprehensive loss, net of income taxes | (8,465 | ) | (8,908 | ) | ||||
| Total Ocwen stockholders’ equity | 1,050,942 | 961,407 | ||||||
| Non-controlling interest in subsidiaries | 2,805 | 2,771 | ||||||
| Total equity | 1,053,747 | 964,178 | ||||||
| Total liabilities and equity | $ | 8,318,981 | $ | 8,190,291 | ||||
| 5 |
Ocwen Financial Corporation
First Quarter 2015 Preliminary Results
April 30, 2015
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(UNAUDITED)
| For the Three Months Ended March 31, | ||||||||
| 2015 | 2014 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 34,389 | $ | 60,486 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Amortization of mortgage servicing rights | 38,494 | 62,094 | ||||||
| Amortization of debt issuance costs – senior secured term loan | 1,552 | 1,087 | ||||||
| Depreciation | 4,344 | 5,540 | ||||||
| Provision for bad debts | 14,170 | 31,386 | ||||||
| Impairment of mortgage servicing rights | 17,769 | — | ||||||
| Gain on sale of mortgage servicing rights | (26,406 | ) | — | |||||
| Gain on loans held for sale, net | (44,504 | ) | (43,987 | ) | ||||
| Realized and unrealized losses on derivative financial instruments | 1,154 | 920 | ||||||
| Gain on extinguishment of debt | — | (2,253 | ) | |||||
| Loss on valuation of mortgage servicing rights, at fair value | 33,175 | 5,148 | ||||||
| Increase in deferred tax assets, net | — | (3,680 | ) | |||||
| Equity-based compensation expense | 2,117 | 1,427 | ||||||
| Origination and purchase of loans held for sale | (1,036,150 | ) | (2,378,056 | ) | ||||
| Proceeds from sale and collections of loans held for sale | 1,142,282 | 2,414,699 | ||||||
| Changes in assets and liabilities: | ||||||||
| Decrease in advances and match funded advances | 104,258 | 13,434 | ||||||
| Decrease in receivables and other assets, net | 518 | 48,437 | ||||||
| Increase (decrease) increase in other liabilities | 20,583 | (41,170 | ) | |||||
| Other, net | 15,050 | 20,270 | ||||||
| Net cash provided by operating activities | 322,795 | 195,782 | ||||||
| 6 |
Ocwen Financial Corporation
First Quarter 2015 Preliminary Results
April 30, 2015
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS – (continued)
(Dollars in thousands)
(UNAUDITED)
| For the Three Months Ended March 31, | ||||||||
| 2015 | 2014 | |||||||
| Cash flows from investing activities | ||||||||
| Cash paid to acquire ResCap Servicing Operations (a component of Residential Capital, LLC) | — | (54,220 | ) | |||||
| Net cash paid to acquire controlling interest in Ocwen Structured Investments, LLC | — | (7,833 | ) | |||||
| Purchase of mortgage servicing rights, net | (3,267 | ) | (6,698 | ) | ||||
| Acquisition of advances in connection with the purchase of mortgage servicing rights | — | (83,942 | ) | |||||
| Acquisition of advances in connection with the purchase of loans | — | (60,482 | ) | |||||
| Proceeds from sale of advances and match funded advances | 1,765 | — | ||||||
| Proceeds from sale of mortgage servicing rights | 49,465 | — | ||||||
| Origination of loans held for investment - reverse mortgages | (235,271 | ) | (176,658 | ) | ||||
| Principal payments received on loans held for investment - reverse mortgages | 26,170 | 14,030 | ||||||
| Additions to premises and equipment | (3,918 | ) | (3,308 | ) | ||||
| Other | 301 | 891 | ||||||
| Net cash used in investing activities | (164,755 | ) | (378,220 | ) | ||||
| Cash flows from financing activities | ||||||||
| Repayment of match funded liabilities | (89,571 | ) | (3,151 | ) | ||||
| Proceeds from other secured borrowings | 1,858,258 | 1,497,669 | ||||||
| Repayments of other secured borrowings | (2,040,746 | ) | (1,652,903 | ) | ||||
| Payment of debt issuance costs | (12,643 | ) | (175 | ) | ||||
| Proceeds from sale of mortgage servicing rights accounted for as a financing | — | 123,551 | ||||||
| Proceeds from sale of loans accounted for as a financing | 238,615 | 226,626 | ||||||
| Proceeds from sale of advances accounted for as a financing | 472 | 55,702 | ||||||
| Repurchase of common stock | — | (2,308 | ) | |||||
| Payment of preferred stock dividends | — | (581 | ) | |||||
| Proceeds from exercise of common stock options | 413 | 1,176 | ||||||
| Other | 21 | 706 | ||||||
| Net cash (used in) provided by financing activities | (45,181 | ) | 246,312 | |||||
| Net increase in cash | 112,859 | 63,874 | ||||||
| Cash at beginning of year | 129,473 | 178,512 | ||||||
| Cash at end of period | $ | 242,332 | $ | 242,386 | ||||
| 7 |