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, 1999
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, 1999, announcing its 1999
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, 1999.
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 12, 1999
3
INDEX TO EXHIBIT
Exhibit No. Description Page
----------- ----------- ----
99.1 News release of the Registrant dated November 9, 5
1999, announcing its 1999 third quarter results and
certain other information.
4
Exhibit 99.1
================================================================================
[GRAPHIC OMITTED]
OCWEN FINANCIAL CORPORATION
================================================================================
FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION, CONTACT:
CHERYL A. GUSTITUS
VP, CORPORATE COMMUNICATIONS
T: (561) 682-8575
E: cgustitus@ocwen.com
OCWEN FINANCIAL CORPORATION ANNOUNCES
1999 THIRD QUARTER RESULTS
WEST PALM BEACH, FL - (November 9, 1999) Ocwen Financial Corporation (NYSE: OCN)
today reported net income for the 1999 third quarter of $12.8 million, or $0.21
per diluted share, compared to net income of $24.9 million, or $0.41 per diluted
share for the 1998 third quarter. For the nine months ended September 30, 1999,
the Company reported net income of $18.6 million, or $0.31 per diluted share,
compared to net income for the nine months ended September 30, 1998 of $9.4
million, or $0.15 per diluted share.
OCN earned a $50.4 million pre-tax gain from the sale of Ocwen UK in the third
quarter 1999, which was partially offset by pretax impairment charges on the
residential mortgage-backed securities portfolio and losses on certain equity
investments of $26.3 million. Exclusive of these items, OCN generated a $3.8
million pre-tax loss from operations for the 1999 third quarter, primarily
reflecting the absence of securitization gains and a low volume of commercial
loan resolutions, which reduced the operating income of the discount loan
business.
KEY STRATEGIC EVENTS
On September 30, OCN sold its wholly-owned UK subsidiary, Ocwen UK plc to
Malvern House Acquisition Limited for $122.1 million in cash. As a result of the
transaction, OCN recorded a pretax gain on sale of $50.4 million. Furthermore,
the sale of Ocwen UK, which included the sale of approximately $110.7 million of
UK subprime securities and residuals, resulted in a near 50% reduction in OCN's
portfolio of securities retained in connection with its previous
securitizations.
OCN has used a portion of the cash proceeds from the sale of Ocwen UK to buy
shares of OCN common stock pursuant to the Company's previously announced stock
repurchase program. As of the date of this release, OCN has repurchased
approximately 1.6 million shares on the open market, representing 27% of the
6,000,000 shares authorized for repurchase by OCN's Board of Directors.
William C. Erbey, Chairman and CEO, commented, "The sale of Ocwen UK and the
closing of OFS demonstrate our commitment to dispose of non-core assets,
simplify our organization and focus our resources on continuing to grow our
fee-based services and developing our technology-related businesses."
As previously reported, the Company did not execute any securitizations in the
third quarter, and it expects the number of securitizations going forward to
decrease significantly as a result of its departure from the subprime
origination business. The Company has also made a strategic decision to
structure future securitizations as financing transactions, which will preclude
the use of gain on sale accounting. This transition will slow income recognition
in the short-term, but will improve the quality of earnings by increasing its
cash component.
5
Ocwen Financial Corporation Third Quarter Results
November 9, 1999
Ocwen's earnings historically have fluctuated based on non-performing commercial
loan resolution volumes. This quarter, a large portion of the Company's
commercial loan portfolio is in performing status, and as a result, fewer
resolutions were completed.
Pre-tax income in Ocwen's Domestic Mortgage Loan Servicing operations for the
just-completed quarter increased to $3.4 million, or 20% over the same period a
year ago. Ocwen's total loan servicing portfolio now tops $11 billion in unpaid
principal balance.
"Ocwen is in the midst of a profound transformation from operating as a
capital-intensive business to being a fee-based provider of high quality
services to the mortgage and real estate markets," stated Erbey. "We made this
long-term strategic decision one year ago and are committed to successfully
completing the transition."
RECENT DEVELOPMENTS
On October 7, 1999, OCN closed its acquisition of Ocwen Asset Investment Corp.
(OAC), a real estate investment trust. The acquisition was approved by more than
83% of the outstanding OAC shares, of which almost 98% of the votes cast were in
favor of the transaction. As a result of the closing, each share of OAC common
stock (other than those held by OCN or its subsidiaries) was converted into the
right to receive .71 shares of OCN common stock.
The acquisition enables OCN to streamline its organizational structure and gain
value from real estate assets that would not have otherwise been realized by OAC
due to liquidity issues.
Ocwen Financial Corporation is a financial services company headquartered in
West Palm Beach, Florida. The Company's primary businesses are the acquisition,
servicing and resolution of subperforming and nonperforming residential and
commercial mortgage loans. Ocwen also specializes in the related development of
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
"ANTICIPATE," "ESTIMATE," "EXPECT," "MAY," "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 THE KNOWLEDGE OF OCN OR 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), 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, SOFTWARE INTEGRATION,
DEVELOPMENT AND LICENSING, 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), SIZE OF, NATURE OF AND YIELDS AVAILABLE WITH RESPECT TO THE
SECONDARY MARKET FOR MORTGAGE LOANS, 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, YEAR 2000 COMPLIANCE, 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, AND OTHER
RISKS DETAILED FROM TIME TO TIME IN OCN'S REPORTS AND FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION, INCLUDING ITS REGISTRATION STATEMENTS ON
FORMS S-4 AND S-3 AND PERIODIC REPORTS ON FORMS 8-K, 10-Q AND 10-K, INCLUDING
EXHIBIT 99.1 ATTACHED TO OCN'S FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999.
6
Ocwen Financial Corporation Third Quarter Results
November 9, 1999
NET (LOSS) INCOME BY BUSINESS SEGMENT
Three Months Ended September 30, Nine Months Ended September 30,
----------------------------------- ---------------------------------
1999 1998 1999 1998
(Dollars in thousands) ------------- ------------- ------------- -------------
Discount loans:
Single family residential loans............. $ (3,555) $ 7,629 $ (7,904) $ 26,326
Commercial real estate loans................ (371) 14,544 6,417 31,601
------------- ------------- ------------- -------------
(3,926) 22,173 (1,487) 57,927
Domestic mortgage loan servicing .............. 2,124 1,769 8,854 4,129
Investment in low-income housing tax credits... 4,550 2,135 7,570 8,529
Commercial real estate lending................. (1,115) 7,767 4,734 12,836
UK operations.................................. 31,199 (2,667) 40,545 4,782
OTX ........................................... (4,167) (1,826) (11,428) (6,074)
Domestic subprime single family residential
lending...................................... (8,453) (2,826) (11,430) (6,378)
Investment securities.......................... (1,831) (2,992) (3,676) (57,003)
Equity in loss of OAC.......................... (120) -- (3,605) --
Other.......................................... (5,485) 1,398 (11,517) (9,371)
------------- ------------- ------------- -------------
$ 12,776 $ 24,931 $ 18,560 $ 9,377
============= ============= ============= =============
ASSET ACQUISITIONS
For the periods ended September 30, Three Months Nine Months
(Dollars in thousands) --------------------------- Increase ---------------------------- Increase
1999 1998 (Decrease) 1999 1998 (Decrease)
------------ ------------ ----------- ------------ ------------ -------------
Discount Loan Acquisitions:
Single family residential.......... $ 61,725 $ 87,152 $ (25,427) $ 335,808 $ 422,404 $ (86,596)
Multi-family residential........... 3,353 20,632 (17,279) 75,312 169,138 (93,826)
Commercial real estate............. 15,514 60,760 (45,246) 147,304 246,959 (99,655)
Other.............................. 4,274 4,929 (655) 12,900 11,278 1,622
------------ ----------- ---------- ----------- ----------- ----------
$ 84,866 $ 173,473 $ (88,607) $ 571,324 $ 849,779 $ (278,455)
============ =========== ========== =========== =========== ==========
Subprime Loan Purchases and
Originations:
Domestic.......................... $ 18,052 $ 190,378 $ (172,326) $ 253,869 $ 887,419 $ (633,550)
Foreign (Ocwen UK)(1).............. 223,390 88,039 135,351 516,397 553,232 (36,835)
------------ ----------- ---------- ----------- ----------- ----------
$ 241,442 $ 278,417 $ (36,975) $ 770,266 $ 1,440,651 $ (670,385)
============ =========== ========== =========== =========== ==========
(1) Subprime loan purchases and originations for the nine months ended
September 30, 1998 include $419,087 of loans purchased in connection
with the acquisition of the U.K. operations of Cityscape Financial
Corp.
7
Ocwen Financial Corporation Third Quarter Results
November 9, 1999
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
Three Months Nine Months
---------------------------- ----------------------------
For the periods ended September 30, 1999 1998 1999 1998
------------ ------------ ------------ ------------
Interest income:
Federal funds sold and repurchase agreements ...................... $ 958 $ 2,508 $ 6,412 $ 4,944
Securities available for sale ..................................... 15,350 8,982 48,199 25,654
Loans available for sale .......................................... 6,233 11,391 25,376 46,185
Loans ............................................................. 3,941 13,771 18,985 31,688
Discount loans .................................................... 29,035 50,274 84,591 129,352
Investment securities and other ................................... 502 1,616 1,537 3,634
------------ ------------ ------------ ------------
56,019 88,542 185,100 241,457
------------ ------------ ------------ ------------
Interest expense:
Deposits .......................................................... 24,779 31,146 75,166 87,668
Securities sold under agreements to repurchase .................... 2,120 1,168 5,891 4,869
Obligations outstanding under lines of credit ..................... 3,164 8,777 12,219 28,496
Notes, debentures and other interest bearing obligations .......... 6,724 6,767 20,147 20,258
------------ ------------ ------------ ------------
36,787 47,858 113,423 141,291
------------ ------------ ------------ ------------
Net interest income before provision for loan losses .............. 19,232 40,684 71,677 100,166
Provision for loan losses ......................................... 826 1,806 5,188 13,734
------------ ------------ ------------ ------------
Net interest income after provision for loan losses ............... 18,406 38,878 66,489 86,432
------------ ------------ ------------ ------------
Non-interest income (loss):
Servicing fees and other charges .................................. 19,584 15,348 56,764 39,044
(Loss) gain on interest earning assets, net ....................... (21,075) 24,170 (6,800) 909
(Loss) gain on real estate owned, net ............................. (1,508) 1,216 1,798 12,763
Other income ...................................................... 65,105 14,209 80,731 29,857
------------ ------------ ------------ ------------
62,106 54,943 132,493 82,573
------------ ------------ ------------ ------------
Non-interest expense:
Compensation and employee benefits ................................ 29,451 32,474 80,991 83,721
Occupancy and equipment ........................................... 8,447 9,464 27,816 24,388
Loan expenses ..................................................... 3,992 9,131 10,773 18,826
Net operating loss on investments in real estate and
certain low-income housing tax credit interests ................ 958 2,695 4,179 4,988
Amortization of excess of purchase price over net assets acquired . 284 2,670 771 3,604
Other operating expenses .......................................... 8,859 9,082 27,368 20,250
------------ ------------ ------------ ------------
51,991 65,516 151,898 155,777
------------ ------------ ------------ ------------
Distributions on Company-obligated, mandatorily redeemable
securities of subsidiary trust holding solely junior
subordinated debentures............................................ 3,400 3,400 10,196 10,196
Equity in (losses) earnings of investment in unconsolidated entities (4,768) 2,915 (9,483) 3,459
------------ ------------ ------------ ------------
Income before income taxes .......................................... 20,353 27,820 27,405 6,491
Income tax (expense) benefit ........................................ (8,199) (2,922) (9,595) 2,888
Minority interest in net loss (income) of consolidated subsidiary ... 369 33 497 (2)
------------ ------------ ------------ ------------
Income before extraordinary item .................................... 12,523 24,931 18,307 9,377
Extraordinary gain on repurchase of subordinated
debentures, net of tax ........................................... 253 -- 253 --
------------ ------------ ------------ ------------
Net income ........................................................ $ 12,776 $ 24,931 $ 18,560 $ 9,377
============ ============ ============ ============
Income per share:
Basic:
Net income before extraordinary item ........................... $ 0.21 $ 0.41 $ 0.30 $ 0.15
Extraordinary gain ............................................. $ -- $ -- $ 0.01 $ --
------------ ------------ ------------ ------------
Net income ..................................................... $ 0.21 $ 0.41 $ 0.31 $ 0.15
============ ============ ============ ============
Diluted:
Net income before extraordinary item ........................... $ 0.21 $ 0.41 $ 0.30 $ 0.15
Extraordinary gain ............................................. $ -- $ -- $ 0.01 $ --
------------ ------------ ------------ ------------
Net income...................................................... 0.21 0.41 0.31 0.15
============ ============ ============ ============
Weighted average common shares outstanding:
Basic ............................................................. 60,427,623 60,785,467 60,652,865 60,176,777
============ ============ ============ ============
Diluted ........................................................... 60,460,314 61,074,499 60,691,416 61,249,163
============ ============ ============ ============
8
Ocwen Financial Corporation Third Quarter Results
November 9, 1999
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION September 30, December 31,
(Dollars in thousands, except per share data) 1999 1998
----------- -----------
Assets
Cash and amounts due from depository institutions ............................... $ 94,517 $ 120,805
Interest earning deposits ....................................................... 161,991 49,374
Federal funds sold .............................................................. -- 275,000
Securities available for sale, at fair value .................................... 545,798 593,347
Loans available for sale, at lower of cost or market ............................ 66,829 177,847
Investment in capital stock of Federal Home Loan Bank, at cost .................. 10,825 10,825
Loan portfolio, net ............................................................. 127,026 230,312
Discount loan portfolio, net .................................................... 974,472 1,026,511
Investments in low-income housing tax credit interests .......................... 161,776 144,164
Investment in unconsolidated entities ........................................... 76,407 86,893
Real estate owned, net .......................................................... 178,349 201,551
Investment in real estate ....................................................... 15,165 36,860
Premises and equipment, net ..................................................... 49,083 33,823
Income taxes receivable ......................................................... 14,213 34,333
Deferred tax asset .............................................................. 98,548 66,975
Excess of purchase price over net assets acquired ............................... 16,746 12,706
Principal, interest and dividends receivable .................................... 9,555 18,993
Escrow advances on loans ........................................................ 127,225 88,277
Other assets .................................................................... 72,916 99,483
----------- -----------
$ 2,801,441 $ 3,308,079
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Deposits ..................................................................... $ 1,776,646 $ 2,175,016
Securities sold under agreements to repurchase ............................... 109,383 72,051
Obligations outstanding under lines of credit ................................ 49,849 179,285
Notes, debentures and other interest bearing obligations ..................... 221,956 225,000
Accrued interest payable ..................................................... 36,924 33,706
Accrued expenses, payables and other liabilities ............................. 44,203 61,053
----------- -----------
Total liabilities .......................................................... 2,238,961 2,746,111
----------- -----------
Company-obligated, mandatory redeemable securities of subsidiary trust holding
solely junior subordinated debentures of the Company ...................... 125,000 125,000
Minority interest ............................................................... 86 592
Commitments and contingencies
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; 60,115,656 and 60,800,357 shares issued and
outstanding at September 30, 1999, and December 31, 1998, respectively..... 608 608
Treasury stock, 690,800 shares at September 30, 1999 ......................... (5,302) --
Additional paid-in capital ................................................... 166,276 166,234
Retained earnings ............................................................ 275,730 257,170
Accumulated other comprehensive income, net of taxes:
Net unrealized gain on securities available for sale ...................... 966 14,057
Net unrealized foreign currency translation loss .......................... (884) (1,693)
----------- -----------
Total stockholders' equity ................................................. 437,394 436,376
----------- -----------
$ 2,801,441 $ 3,308,079
=========== ===========
9