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): AUGUST 10, 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 August 10, 2000, announcing its 2000
second 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 August 10,
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: August 11, 2000
3
INDEX TO EXHIBIT
EXHIBIT NO. DESCRIPTION PAGE
99.1 News release of Ocwen Financial Corporation 5
dated August 10, 2000, announcing its 2000
second quarter results and certain other
information.
4
================================================================================
Exhibit 99.1
[GRAPHIC LOGO]
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 9, 2000) Ocwen Financial Corporation (NYSE: OCN)
today reported a net loss for its second quarter ended June 30, 2000 of $(1.4)
million, or $(0.02) per share, compared to a net loss of $(3.7) million or
$(0.06) per share for the 1999 second quarter. For the six months ended June 30,
2000, the Company reported a net loss of $(6.5) million or $(0.10) per share
compared to net income of $5.8 million or $0.10 per share in the same period of
1999.
Chairman and CEO William C. Erbey stated "Our second quarter results reflect the
fact that we continue to be a company in transition focused on growing our fee
based businesses. While second quarter results are disappointing, our loan and
servicing businesses continue to be profitable, and in fact reflect improvement
vs. 1999. However, as in the first quarter, these results are more than offset
by our ongoing investment in developing our technology business, OTX, as well as
the costs associated with exiting non-strategic businesses. Looking forward to
the remainder of the year, we continue to believe that Commercial Discount Loan
resolutions through June 30 are not reflective of anticipated full year results.
We also see continuing opportunities for significant growth in our servicing
business, as evidenced by our acquisition of 8,704 loans from First Alliance
Mortgage Co. Ocwen continued to strengthen its balance sheet during the second
quarter through the repurchase of $18.5 million of face value of our debt
securities and successfully closed on the sale of our office building at 690
Market Street in San Francisco. 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 $7.8
million in the 2000 second quarter, vs. a net loss of $(0.5) million in the
second quarter of 1999. For the six months ended June 30, 2000 aggregate results
reflected net income of $15.2 million as compared to $10.9 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. Results in 2000
include pre-tax gains on the sale of whole loans of $5.1 million and $12.6
million in the second quarter and six month periods, respectively, while 1999
results include pre-tax securitization gains of $20.2 million and $36.8 million
for the corresponding periods.
Continuing investments in OTX in the second quarter of 2000 resulted in a net
loss of $(5.3) million, compared to $(2.6) million in the 1999 second quarter.
OTX results reflected a loss of $(9.7) million for the six months ended June 30,
2000 vs. $(4.0) 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 second quarter of 2000 also included net income in the Commercial Real
Estate business of $2.0 million, primarily reflecting a pre-tax gain of $3.9
million on the sale of the Company's commercial property located at 690 Market
Street in San Francisco, vs. $0.1 million in the 1999 second quarter. Second
quarter 2000 results included extraordinary gains of $3.9 million (net of tax)
related to the repurchase on the open market of $9.9 million face value of the
11.5% senior notes and $8.6 face value of the 10.875% capital securities. For
the six months ended June 30, 2000 the Company reported extraordinary gains of
$6.0 million. No such gains were reported in the comparable periods of 1999.
These transactions reflect the Company's ongoing efforts to reduce its leverage
and strengthen its balance sheet.
5
Ocwen Financial Corporation Second Quarter Results
August 10, 2000
RECENT DEVELOPMENTS
The Company has entered into agreements to sell its three remaining office
buildings in San Francisco (225 Bush Street, 450 Sansome Street, and 10 United
Nations Plaza) for aggregate proceeds of approximately $210 million. The
agreements pertaining to 225 Bush Street and 450 Sansome Street are contingent
upon satisfactory completion of the buyers due diligence, while due diligence on
10 United Nations Plaza has been completed. Each of these transactions are also
subject to standard closing deliverables as well as adjustments for (i) closing
costs and (ii) pro rations of certain contractual obligations that survive
closing. All three transactions are expected to close during the third quarter
of 2000.
As of July 31, 2000, the Company won a competitive bid to the servicing rights
for more than $700 million in subprime mortgages from First Alliance Mortgage
Co. Terms of the sale were approved by U.S. Bankruptcy Court for the Central
District of California in Santa Ana. This transaction will increase the
Company's loans serviced by 8,704 loans.
As mentioned earlier, Ocwen continues to make a substantial investment in OTX to
complete the development of its advanced technology products - REAL-e(TM),
REALSynergy(TM) And REALTransSM. The REAL-e(TM) residential mortgage servicing
system will be introduced to tHE marketplace this year. On July 1, 2000
customers began receiving the new 32-bit Microsoft(R) Windows(R) based
REALSynergy(TM) commercial mortgage servicing system that replaces the MS-DOS(R)
based Amicus(R) product. The REALTransSM platform continues to be a leading
Internet vendor management application with approximately 20 customers
requesting products from 1,500 potential vendors. Eight of the top 25 mortgage
originators have used or are preparing to use the platform. Currently about
10,000 orders are placed on a monthly basis.
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, 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 REALTransSM 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," "commitment," "continue," "expect," "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, 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 and securities
investments, 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 Second Quarter Results
August 10, 2000
NET (LOSS) INCOME BY BUSINESS SEGMENT
For the Periods Ended June 30, Three Months Six Months
- ---------------------------------------- -------------------- --------------------
(Dollars in thousands) 2000 1999 2000 1999
-------- -------- -------- --------
Single family residential discount loans. $ 4,389 $ (9,220) $ 7,467 $ (5,336)
Commercial loans ........................ 756 5,793 1,450 10,169
Domestic residential mortgage loan
servicing .............................. 2,650 2,910 6,234 6,052
Investment in low-income housing tax
credits ................................ 13 1,068 1,192 2,404
OTX ..................................... (5,251) (2,597) (9,715) (3,980)
Commercial Real Estate .................. 2,011 123 2,710 170
UK operations (1) ....................... (1,390) 8,984 (2,932) 9,068
Domestic subprime single family
residential lending .................... (3,346) (1,563) (7,907) (1,128)
Unsecured collections ................... (2,191) (815) (4,364) (1,472)
Ocwen Realty Advisors ................... 147 -- 290 --
Corporate items and other ............... 813 (8,370) (922) (10,164)
-------- -------- -------- --------
$ (1,399) $ (3,687) $ (6,497) $ 5,783
======== ======== ======== ========
(1) 1999 includes Ocwen UK, which was sold in September 1999
ASSET ACQUISITION
(Unpaid principal balances)
For the Periods Ended June 30, Three Months Six Months
- ------------------------------- --------------------- Increase --------------------- Increase
(Dollars in thousands) 2000 1999 (Decrease) 2000 1999 (Decrease)
--------- --------- --------- --------- --------- ---------
Discount Loan Acquisitions:
Single family residential.. $ 90,222 $ 233,207 $(142,985) $ 149,159 $ 274,083 $(124,924)
Multi-family residential... 5,977 39,275 (33,298) 21,294 71,959 (50,665)
Commercial real estate .... 11,332 106,989 (95,657) 18,119 131,790 (113,671)
Other ..................... 4,537 2,030 2,507 10,030 8,626 1,404
--------- --------- --------- --------- --------- ---------
$ 112,068 $ 381,501 $(269,433) $ 198,602 $ 486,458 $(287,856)
========= ========= ========= ========= ========= =========
Subprime Loan Purchases
and Originations:
Domestic ............... $ -- $ 74,958 $ (74,958) $ -- $ 235,817 $(235,817)
Foreign (Ocwen UK) ..... -- 152,965 (152,965) -- 293,007 (293,007)
--------- --------- --------- --------- --------- ---------
$ -- $ 227,923 $(227,923) $ -- $ 528,824 $(528,824)
========= ========= ========= ========= ========= =========
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 Second Quarter Results
August 10, 2000
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (LOSS)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Three Months Six Months
---------------------------- ----------------------------
For the periods ended June 30, 2000 1999 2000 1999
- --------------------------------------------------- ------------ ------------ ------------ ------------
INTEREST INCOME:
Federal funds sold and repurchase agreements ..... $ 864 $ 2,059 $ 2,573 $ 5,454
Securities available for sale .................... 16,808 15,659 29,677 32,848
Loans available for sale ......................... 918 11,014 1,724 19,144
Investment securities and other .................. 502 384 829 1,035
Loans ............................................ 5,337 8,878 9,305 15,044
Match funded loans and securities ................ 2,951 -- 6,263 --
Discount loans ................................... 23,075 25,553 48,174 55,556
------------ ------------ ------------ ------------
50,455 63,547 98,545 129,081
------------ ------------ ------------ ------------
INTEREST EXPENSE:
Deposits ......................................... 24,793 23,559 49,478 50,387
Securities sold under agreements to repurchase ... 5,284 2,281 7,924 3,772
Bonds-match funded agreements .................... 2,791 -- 6,146 --
Obligations outstanding under lines of credit .... 3,941 5,293 7,413 9,017
Notes, debentures and other interest bearing
obligations .................................... 8,853 6,705 18,096 13,460
------------ ------------ ------------ ------------
45,662 37,838 89,057 76,636
------------ ------------ ------------ ------------
Net interest income before provision for loan
losses ......................................... 4,793 25,709 9,488 52,445
Provision for loan losses ........................ 3,134 623 5,743 4,362
------------ ------------ ------------ ------------
Net interest income after provision for loan
losses ......................................... 1,659 25,086 3,745 48,083
------------ ------------ ------------ ------------
NON-INTEREST INCOME:
Servicing fees and other charges ................. 20,462 18,929 41,131 37,180
Gain on interest earning assets, net ............. 5,270 22,918 16,264 43,144
Impairment charges on securities available for
sale ........................................... (4,764) (28,785) (11,597) (28,869)
(Loss) gain on real estate owned, net ............ (3,006) 2,677 (10,013) 3,306
Net operating gains on investments in real estate. 8,063 225 13,616 242
Amortization of excess of net assets acquired
over purchase price ............................ 2,999 -- 5,792 --
Other income ..................................... 8,210 9,073 12,985 15,625
------------ ------------ ------------ ------------
37,234 25,037 68,178 70,628
------------ ------------ ------------ ------------
NON-INTEREST EXPENSE:
Compensation and employee benefits ............... 22,398 24,330 38,980 51,541
Occupancy and equipment .......................... 2,953 4,956 6,215 10,722
Technology and communication costs ............... 5,414 4,799 10,695 10,543
Loan expenses .................................... 2,987 2,652 6,917 6,780
Net operating (gains) losses on investments in
certain low-income housing tax credit interests. 839 1,599 2,339 3,463
Amortization of excess of purchase price over net
assets acquired ................................ 794 257 1,568 487
Other operating expenses ......................... 6,459 9,417 13,204 16,614
------------ ------------ ------------ ------------
41,844 48,010 79,918 100,150
------------ ------------ ------------ ------------
Distributions on Company-obligated, mandatory
redeemable securities of subsidiary trust
holding solely junior subordinated debentures .. 2,918 3,398 6,112 6,797
Equity in losses of investments in unconsolidated
entities ....................................... 1,812 3,470 4,072 4,713
------------ ------------ ------------ ------------
(Loss) income before income taxes and
extraordinary gain ............................. (7,681) (4,755) (18,179) 7,051
Income tax benefit (expense) ...................... 2,381 972 5,635 (1,396)
Minority interest in net loss of consolidated
subsidiary ..................................... -- 96 -- 128
------------ ------------ ------------ ------------
(Loss) income before extraordinary gain ........... (5,300) (3,687) (12,544) 5,783
Extraordinary gain on repurchase of debt, net of
taxes .......................................... 3,901 -- 6,047 --
------------ ------------ ------------ ------------
Net (loss) income ................................. $ (1,399) $ (3,687) $ (6,497) $ 5,783
============ ============ ============ ============
(LOSS) EARNINGS PER SHARE:
Basic:
Net (loss) income before extraordinary gain .... $ (0.08) $ (0.06) $ (0.19) $ 0.10
Extraordinary gain ............................. 0.06 -- 0.09 --
------------ ------------ ------------ ------------
Net (loss) income .............................. $ (0.02) $ (0.06) $ (0.10) $ 0.10
============ ============ ============ ============
Diluted:
Net (loss) income before extraordinary gain .... $ (0.08) $ (0.06) $ (0.19) $ 0.10
Extraordinary gain ............................. 0.06 -- 0.09 --
------------ ------------ ------------ ------------
Net (loss) income .............................. $ (0.02) $ (0.06) $ (0.10) $ 0.10
============ ============ ============ ============
Weighted average common shares outstanding:
Basic ............................................ 67,182,395 60,730,614 67,702,961 60,765,485
============ ============ ============ ============
Diluted .......................................... 67,182,395 60,730,614 67,702,961 60,807,036
============ ============ ============ ============
8
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data) June 30, 2000 December 31, 1999
------------- -----------------
ASSETS:
Cash and amounts due from depository institutions .............. $ 26,080 $ 153,459
Interest earning deposits ...................................... 19,238 116,399
Federal funds sold ............................................. 173,500 112,000
Securities available for sale, at fair value:
Collateralized mortgage obligations (AAA-rated) ............ 670,829 392,387
Subordinates, residuals and other securities ............... 130,644 195,131
Loans available for sale, at lower of cost or market ........... 29,319 45,213
Real estate held for sale ...................................... 195,241 --
Investment securities .......................................... 13,257 10,965
Loan portfolio, net ............................................ 148,490 157,408
Discount loan portfolio, net ................................... 803,446 913,229
Match funded loans and securities, net ......................... 131,084 157,794
Investments in low-income housing tax credit interests ......... 144,858 150,989
Investments in unconsolidated entities ......................... 31,098 37,118
Real estate owned, net ......................................... 182,676 167,506
Investment in real estate ...................................... 165,883 268,241
Premises and equipment, net .................................... 46,170 49,038
Income taxes receivable ........................................ 14,000 --
Deferred tax asset, net ........................................ 140,219 136,920
Excess of purchase price over net assets acquired .............. 11,639 13,207
Principal, interest and dividends receivable ................... 11,492 10,024
Escrow advances on loans and loans serviced for others ......... 205,266 162,548
Other assets ................................................... 75,558 59,737
------------- -------------
$ 3,369,987 $ 3,309,313
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits ...................................................... $ 1,642,133 $ 1,842,286
Securities sold under agreements to repurchase ................ 421,050 47,365
Bonds-match funded agreements ................................. 121,797 141,515
Obligations outstanding under lines of credit ................. 184,750 187,866
Notes, debentures and other interest bearing obligations ...... 288,083 317,573
Accrued interest payable ...................................... 36,344 32,569
Excess of net assets acquired over purchase price ............. 51,043 56,841
Income taxes payable .......................................... -- 6,369
Accrued expenses, payables and other liabilities .............. 30,761 57,487
------------- -------------
Total liabilities .......................................... 2,775,961 2,689,871
------------- -------------
Company obligated, mandatorily redeemable securities of
subsidiary trust holding solely junior subordinated
debentures of the Company .................................... 101,390 110,000
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 June 30, 2000, and December 31, 1999, respectively ...... 672 686
Additional paid-in capital ................................... 223,135 232,340
Retained earnings ............................................ 270,505 277,002
Accumulated other comprehensive income, net of taxes:
Net unrealized (loss) gain on securities available for sale. (1,295) 163
Net unrealized foreign currency translation loss ........... (381) (749)
------------- -------------
Total stockholders' equity ................................... 492,636 509,442
------------- -------------
$ 3,369,987 $ 3,309,313
============= =============
9
