SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
-----------------------------------------------
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 27, 1997
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)
(561) 681-8000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
N/A
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
PAGE 1 OF 14
EXHIBIT INDEX ON PAGE 4
ITEM 5. OTHER EVENTS
The news release of Ocwen Financial Corporation (the "Company") dated October
27, 1997, as amended, regarding its financial results for the three and nine
month periods ended September 30, 1997, including unaudited consolidated
financial statements for the three and nine month periods ended September 30,
1997, are attached and filed herewith as Exhibit 99. The changes herein reflect
the final financial information as determined in connection with the filing by
the Company of its Form 10-Q for the fiscal quarter ended September 30, 1997,
including the retroactive adjustment for the 2-for-1 stock split approved by the
Company's Board of Directors on October 29, 1997.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
The following exhibit is filed as part of this report:
(99) News release of Ocwen Financial Corporation dated October
27, 1997, as amended.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
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 21, 1997
3
INDEX TO EXHIBIT
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
99 News release of Ocwen Financial Corporation dated 5
October 27, 1997, as amended, regarding its
financial results for the three and nine month
periods ended September 30, 1997.
4
Ocwen Financial Corporation Exhibit 99
1675 Palm Beach Lakes Blvd.
West Palm Beach, FL 33401
NYSE: symbol: OCN
- --------------------------------------------------------------------------------
NEWS RELEASE: IMMEDIATE October 27, 1997
OCWEN FINANCIAL CORPORATION REPORTS THIRD QUARTER RESULTS
Ocwen Financial Corporation ("Ocwen" or the "Company") reported net income of
$20.2 million in the third quarter of 1997, 101% higher than the third quarter
of 1996. Earnings per share for the quarter were $0.35 versus $0.19 for the same
period a year ago. The Company's annualized return on average assets and
annualized return on average common equity were 2.78% and 26.47%, respectively,
in the third quarter of 1997 compared with 1.85% and 24.85%, respectively, in
the third quarter of 1996.
Net income for the nine months ended September 30, 1997 totaled $56.0 million,
up 123% from the same period in 1996. Earnings per share were $1.01 for the nine
months ended September 30, 1997 versus $0.47 for the same period in 1996.
THIRD QUARTER AND NINE MONTHS RESULTS AT A GLANCE Third Quarter Nine Months
- --------------------------------------------------------------------------------------------------
In thousands of dollars, except per share data 1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------
Revenues $ 63,359 $ 36,213 $ 179,109 $ 93,073
Provision for loan losses (4,088) (4,469) (21,739) (18,839)
Operating expenses (31,219) (21,531) (84,995) (47,085)
Income tax expense (6,179) (157) (14,911) (2,067)
Net income 20,165 10,056 55,998 25,082
Net income per share 0.35 0.19 1.01 0.47
- --------------------------------------------------------------------------------------------------
ALL REFERENCES BELOW REGARDING CHANGES ARE BASED ON COMPARISONS TO THE SAME
PERIOD A YEAR AGO.
Revenues rose $ 27.1 million or 75% in the third quarter of 1997 from a year ago
and were up 92% for the nine months ended September 30, 1997.
o Net interest income before provision for loan losses increased $20.5
million or 121% to $37.4 million in the third quarter of 1997. The increase
in net interest income during the third quarter of 1997 was largely due to
significant increases in the average balance of interest-earning assets,
primarily discount loans, and an increase in net interest margin due
largely to additional interest received in connection with the payoff of
loans held in the loan portfolio. In the nine months ended September 30,
1997, net interest income increased $21.5 million or 35% to $82.8 million.
The increase in net interest income during the nine months ended September
30, 1997 was due to significant increases in the average balance of
interest-earning assets, primarily discount loans, offset in part by a
decline in net interest margin.
o Non-interest income increased $10.3 million or 68% to $25.4 million in the
third quarter of 1997. This increase is due primarily to a $6.3 million
gain included in other income recognized in connection with the sale of an
investment in a low-income housing tax credit interest and a $6.2 million
increase in servicing fees and other charges which reflects a significant
increase in loans serviced for others, offset in part by a $2.0 million
decline in gains on sales of interest earning assets. In the nine months
ended September 30, 1997, non-interest income rose 202% to $80.1 million.
o Equity in earnings of the Company's investment in joint ventures amounted
to $546,000 in the third quarter of 1997 as compared to $4.1 million in the
third quarter of 1996, a decline of $3.6 million or 87% as a result of the
declining asset base of the joint ventures. Equity in earnings of
investment in joint ventures amounted to $16.2 million for the nine months
ended September 30, 1997 as compared to $5.2 million for the same period in
1996.
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Contact: Christine A. Reich, Managing Director (561) 681-8569
5
Operating expenses rose $9.7 million or 45% in the third quarter of 1997.
o Compensation and employee benefits increased $12.0 million or 143%
primarily due to a 135% increase in the average number of employees and
increased employee profit sharing expense in line with improved earnings.
o Occupancy and equipment expense increased $2.9 million or 134%.
o Operating expenses for the third quarter of 1996 included a $7.1 million
non-recurring expense related to the Federal Deposit Insurance
Corporation's assessment to recapitalize the Savings Association Insurance
Fund ("SAIF").
Operating expenses increased $37.9 million or 81% in the nine months ended
September 30, 1997.
RECENT DEVELOPMENTS
On August 1, 1997 shares of the Company's common stock began trading on the New
York Stock Exchange ("NYSE") under the symbol "OCN". The Company's common stock
had traded on the NASDAQ National Market System under the symbol "OCWN" since
September 1996, when the Company completed its initial public offering. Upon
effectiveness of the NYSE listing, the Company delisted its common stock from
NASDAQ.
On August 6, 1997 the Securities and Exchange Commission ("SEC") declared
effective a Form S-1 registration statement with respect to the offering by the
Company to the public of 3,000,000 shares (plus up to 450,000 shares pursuant to
the underwriters' over-allotment option) of newly-issued common stock. The
offering of such common stock, which closed on August 12, 1997, resulted in
estimated net proceeds to the Company of $123.4 million. Concurrently on August
6, 1997, the SEC declared effective a Form S-1 registration statement with
respect to the offering by Ocwen Capital Trust I, a newly-formed Delaware
business trust and subsidiary of Ocwen, of $125.0 million of 10 7/8% Capital
Securities. The offering of the 10 7/8% Capital Securities, which also closed on
August 12, 1997, resulted in estimated net proceeds to the Company of $120.7
million. On September 4, 1997 the underwriters exercised their over-allotment
option to purchase 450,000 shares of common stock. The exercise of such option,
which closed on September 9, 1997 resulted in net proceeds to the Company of
$18.6 million.
On September 24, 1997 the Company and UBS Mortgage Finance, Inc. ("UBS") were
jointly awarded approximately 11,000 single-family discount loans with an unpaid
principal balance of approximately $700.0 million auctioned by the Department of
Housing and Urban Development. As between the Company and UBS, Ocwen was
allocated 5,461 of those loans with an aggregate principal balance of $346.0
million.
On September, 25 1997 the Company completed the securitization of 910 sub-prime
single-family residential mortgage loans with an aggregate unpaid principal
balance of $102.2 million. The Company recorded total gains of $5.4 million on
the sale of the senior classes of securities in connection with this
transaction. The Company continues to service the loans for a fee and has
retained an interest in the related residual class security.
On September 26, 1997 the Company completed the sale of its investment in a
low-income housing tax credit project and realized a gain of $6.3 million on
proceeds of $22.0 million.
THE REMAINDER OF THIS RELEASE CONTAINS INFORMATION ON SPECIFIC AREAS OF RESULTS,
A FINANCIAL SUMMARY, AND THE CONSOLIDATED FINANCIAL STATEMENTS.
6
REVENUES
NET INTEREST INCOME
Interest income of $77.3 million for the third quarter of 1997 increased by
$33.2 million or 75% over that of the third quarter of 1996 as a result of an
$863.9 million or 55% increase in the average balance of interest-earning
assets, of which $527.7 million is related to discount loans, and a 144 basis
point increase in the average yield earned. The average yield on
interest-earning assets was 12.76% and 11.32% in the third quarter of 1997 and
1996, respectively, and 11.48% and 12.25% in the nine months ended September 30,
1997 and 1996, respectively. The increase in yield for the three months ended
September 30, 1997 is primarily attributable to the loan portfolio which
realized $5.5 million of additional interest received in connection with the
payoff of three loans secured by hotel and office properties. The decline in
yield for the nine months ended September 30, 1997 was primarily attributable to
a $404 million increase in the average balance of single-family discount loans
held coupled with the Company's decision to cease accretion of discount on such
loans effective January 1, 1997. As a result of the Company's decision to cease
accretion of discount, the Company now recognizes income on its nonperforming
single-family loans at the time of payoff or sale rather than over the
anticipated holding period.
Interest expense of $39.9 million for the third quarter of 1997 increased by
$12.7 million or 47% over the comparable period in the prior year as a result of
a $660.2 million or 39% increase in the average balance of interest-bearing
liabilities, of which $499.2 million is related to certificates of deposits, and
a 36 basis point increase in the average rate paid. For the nine months ended
September 30, 1997, interest expense amounted to $116.0 million, a $33.7 million
or 41% increase over the same period of the prior year. The average rate paid on
interest-bearing liabilities was 6.76% and 6.40% in the third quarter of 1997
and 1996, respectively, and 6.66% and 6.42% in the nine months ended September
30, 1997 and 1996, respectively.
As a result of the above, net interest income before provision for loan losses
of $37.4 million for the third quarter of 1997 increased by $20.5 million or
121% from the third quarter of 1996 and the net interest margin for the third
quarter of 1997 increased to 6.17% from 4.34% for the third quarter of 1996. Net
interest income of $82.8 million for the nine months ended September 30, 1997
increased $21.5 million or 35% over the comparable period of the prior year and
the net interest margin declined 45 basis points to 4.78%.
EQUITY IN EARNINGS OF INVESTMENT IN JOINT VENTURE
During the third quarter of 1997, the Company recorded $546,000 of income
related to its investment in joint ventures as compared to $4.1 million in the
third quarter of 1996. The Company's pro rata share of the income from the joint
ventures in the third quarter of 1997 consisted primarily of net interest
income. Equity in earnings of investment in joint ventures amounted to $16.2
million for the nine months ended September 30, 1997 and includes a $9.2 million
net gain related to the securitization of single-family residential loans in the
first quarter and the recapture of $3.2 million of valuation allowances
established in 1996 by the Company on its equity investment in joint ventures as
a result of the resolution and securitization of loans. The Company acts as the
servicer for the loans previously securitized as well as the remaining loans
held by the joint venture.
NON-INTEREST INCOME
Non-interest income of $25.4 million for the third quarter of 1997 increased by
$10.3 million from that of the third quarter of 1996 primarily due to a $6.2
million increase in servicing fees and other charges and a $6.3 million gain
included in other income recognized in connection with the sale of an investment
in a low-income housing tax credit project, offset in part by a $2.0 million
decrease in gains on sales of interest earning assets. Gains on sales of
interest earning assets for the third quarter of 1997 of $6.0 million is
7
primarily comprised of a $5.4 million gain recognized in connection with the
securitization of 910 sub-prime single-family residential mortgage loans with an
aggregate unpaid principal balance of $102.2 million.
Non-interest income of $80.1 million for the nine months ended September 30,
1997 increased by $53.6 million from the same period in 1996. Gains on sales of
interest-earning assets for the nine months ended September 30, 1997 increased
by $28.6 million from the same period in 1996 and includes gains of $9.5 million
and $16.8 million earned during the first and second quarter, respectively, in
connection with the securitization of discount mortgage loans. Servicing fees
and other charges increased $15.5 million during the nine months ended September
30, 1997 as compared to the same period in 1996. The increases in servicing fees
and other charges reflect an increase in loan servicing and related fees as a
result of an increase in loans serviced for others. The average unpaid principal
balance of loans serviced for others amounted to $3.03 billion and $1.03 billion
during the third quarter of 1997 and 1996, respectively, and $2.52 billion and
$645.1 million during the nine months ended September 30, 1997 and 1996,
respectively. At September 30, 1997 Ocwen serviced loans for third parties
totaling $3.44 billion.
PROVISION FOR LOAN LOSSES
The Company's provision for loan losses amounted to $4.1 million and $4.5
million for the third quarter of 1997 and 1996, respectively, and $21.7 million
and $18.8 million for the nine months ended September 30, 1997 and 1996,
respectively. At September 30, 1997 Ocwen had allowances for losses of $18.3
million and $5.2 million on its discount loan and loan portfolios, respectively,
which amounted to 1.23% and 1.31% of the respective balances. The Company
maintained reserves of 1.1% and 0.9% on its discount loans and loan portfolios,
respectively, at December 31, 1996.
OPERATING EXPENSES
Non-interest expense of $31.2 million for the third quarter of 1997 increased by
$9.7 million or 45% as compared to the same period for 1996. Compensation and
employee benefits increased by $12.0 million as the average number of employees
increased to 944 from 402 and the accrual for employee profit sharing expense
increased by $4.4 million over that of the third quarter of 1996. Occupancy and
equipment expense increased $2.9 million primarily due to an increase in data
processing costs, general office equipment expenses and rent expense, all
largely attributable to the increase in leased corporate and loan production
office space and the increase in employees discussed above. Other operating
expenses increased $1.1 million primarily due to a $763,000 increase in loan
related expenses. Operating expenses for the third quarter of 1996 includes a
$7.1 million non-recurring assessment to recapitalize the SAIF. Non-interest
expense of $85.0 million for the nine months ended September 30, 1997 increased
$37.9 million or 81% over the comparable period in the prior year, with
compensation and employee benefits accounting for $31.9 million of the increase.
INCOME TAXES
Income tax expense amounted to $6.2 million and $157,000 during the third
quarter of 1997 and 1996, respectively, and $14.9 million and $2.1 million for
the nine months ended September 30, 1997 and 1996, respectively. The Company's
income tax expense is reported net of tax credits of $3.9 million and $2.3
million for the third quarter of 1997 and 1996, respectively, and $10.3 million
and $7.2 million for the nine months ended September 30, 1997 and 1996,
respectively, resulting from investments in low-income housing tax credit
interests. Exclusive of such amounts, the Company's effective tax rate amounted
to 38.3% and 33.4% during the third quarter of 1997 and 1996, respectively, and
35.8% and 34.3% for the nine months ended September 30, 1997 and 1996,
respectively.
8
ASSETS
At September 30, 1997 the Company had $2.96 billion of total assets as compared
to $2.48 billion at December 31, 1996. Ocwen acquired discount loans with a
combined total unpaid principal balance of approximately $446 million and $1.29
billion during the three and nine months ended September 30, 1997, respectively,
as compared to $510 million and $671 million during the three and nine months
ended September 30, 1996, respectively. In addition, Ocwen purchased and
originated single-family residential loans to sub-prime borrowers totaling
approximately $161 million and $348 million during the three and nine months
ended September 30, 1997, respectively.
CAPITAL
Stockholders' equity increased 105% during the nine months ended September 30,
1997 from $203.6 million at December 31, 1996 to $418.0 million at September 30,
1997 primarily attributable to net income of $56.0 million and the proceeds
resulting from the sale of 3,450,000 shares of common stock. At September 30,
1997 stockholders' equity included $4.5 million of net unrealized gains on
securities available for sale, net of related deferred taxes of $2.7 million,
and $13.4 million of net unrealized gains on equity securities, net of related
deferred taxes of $1.8 million, compared with $3.5 million of net unrealized
gains on securities available for sale at December 31, 1996, net of related
deferred taxes of $2.0 million.
Ocwen Federal Bank FSB (the "Bank"), the Company's primary subsidiary, had total
stockholders' equity of $271.6 million and $228.2 million at September 30, 1997
and December 31, 1996, respectively. The Bank's core and tangible capital ratios
were 10.48% and its total risk-based capital ratio was 13.99% at September 30,
1997.
ATTACHED ARE THE FINANCIAL SUMMARY, THE AVERAGE BALANCE AND RATE ANALYSIS TABLES
AND THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS WHICH ARE UNAUDITED.
9
OCWEN FINANCIAL CORPORATION
FINANCIAL SUMMARY
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
At or for the Three At or for the Nine
Months ended September 30, Months ended September 30,
------------------------------------------ ------------------------------------------
% %
Increase/ Increase/
1997 1996 (Decrease) 1997 1996 (Decrease)
----------- ----------- ----------- ----------- ----------- -----------
OPERATIONS DATA:
Interest income ............................ $ 77,326 $ 44,145 75% $ 198,795 $ 143,602 38%
Interest expense ........................... 39,944 27,217 47 115,976 82,253 41
----------- ----------- ----------- -----------
Net interest income ........................ 37,382 16,928 121 82,819 61,349 35
Provision for loan losses .................. 4,088 4,469 (9) 21,739 18,839 15
----------- ----------- ----------- -----------
Net interest income after provision for
loan losses ............................. 33,294 12,459 167 61,080 42,510 44
----------- ----------- ----------- -----------
Servicing fees and other charges ........... 7,321 1,158 532 17,402 1,945 795
Gain on sale of interest-earning assets, net 5,999 7,979 (25) 46,142 17,580 162
Other non-interest income .................. 12,111 6,009 102 16,526 6,982 137
----------- ----------- ----------- -----------
Total non-interest income ............... 25,431 15,146 68 80,070 26,507 202
----------- ----------- ----------- -----------
Compensation and employee benefits ......... 20,471 8,431 143 55,069 23,170 138
SAIF recapitalization assessment ........... -- 7,140 (100) -- 7,140 (100)
Other non-interest expense ................. 10,748 5,960 80 29,926 16,775 78
----------- ----------- ----------- -----------
Total non-interest expense .............. 31,219 21,531 45 84,995 47,085 81
----------- ----------- ----------- -----------
Distributions on Company-obligated,
mandatorily redeemable securities of
subsidiary trust holding solely junior
subordinated debentures of the Company .. 1,850 -- -- 1,850 -- --
Equity in earnings of investment in joint
ventures ................................ 546 4,139 (87) 16,220 5,217 211
----------- ----------- ----------- -----------
Income before income taxes .............. 26,202 10,213 157 70,525 27,149 160
Income tax expense ......................... (6,179) (157) 3,836 (14,911) (2,067) 621
Minority interest .......................... 142 -- -- 384 -- --
----------- ----------- ----------- -----------
Net income .............................. $ 20,165 $ 10,056 101 $ 55,998 $ 25,082 123
=========== =========== =========== ===========
Earnings per share ......................... $ 0.35 $ 0.19 84 $ 1.01 $ 0.47 115
=========== =========== =========== ===========
KEY RATIOS:
Net interest spread ........................ 6.00% 4.92% 22% 4.82% 5.83% (17)%
Net interest margin ........................ 6.17% 4.34% 42 4.78% 5.23% (9)
Annualized Return on Average:
Assets (1) ............................. 2.78% 1.85% 50 2.71% 1.54% 76
Equity ................................. 26.47% 24.85% 7 29.86% 22.14% 35
Efficiency Ratio (2) ....................... 49.27% 42.30% 16 47.45% 43.91% 8
AVERAGE BALANCES:
Securities available for sale .............. $ 232,957 $ 256,926 (9)% $ 293,393 $ 286,935 2%
Loan portfolio ............................. 412,520 325,830 27 427,749 305,458 40
Discount loan portfolio .................... 1,216,417 688,756 77 1,228,267 640,585 92
Total interest-earning assets .............. 2,423,833 1,559,942 55 2,308,516 1,563,579 48
Total assets ............................... 2,903,514 1,943,091 49 2,747,893 1,934,074 42
Deposits ................................... 2,000,512 1,514,793 32 2,022,407 1,506,836 34
Total interest-bearing liabilities ......... 2,362,201 1,701,987 39 2,322,348 1,709,455 36
Total liabilities .......................... 2,598,744 1,781,213 46 2,497,816 1,783,018 40
Total stockholders' equity ................. 304,770 161,878 88 250,077 151,056 66
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(1) Includes the Company's pro rata share of average assets held by the joint
venture
(2) Before provision for loan losses and SAIF recapitalization assessment, and
including equity in earnings of investment in joint venture. Inclusive of
the SAIF recapitalization assessment, the efficiency ratios for the three
and nine months ended September 30, 1997 would have been 59.46% and 50.59%,
respectively.
10
OCWEN FINANCIAL CORPORATION
AVERAGE BALANCE / RATE ANALYSIS
Three Months Ended September 30,
-------------------------------------------------------------------------
1997 1996
------------------------------------- ----------------------------------
Average Annualized Average Annualized
Balance Interest Yield/Rate Balance Interest Yield/Rate
--------- ----------- ---------- --------- -------- ----------
(Dollars in thousands)
AVERAGE ASSETS:
Federal funds sold and
repurchase agreements ....... $ 341,868 $ 4,844 5.67% $ 126,121 $ 1,742 5.52%
Securities available for sale . 232,957 8,087 13.89 256,926 5,890 9.17
Loans available for sale ...... 172,053 4,267 9.92 116,806 2,685 9.19
Investment securities and
other ....................... 48,018 1,333 11.10 45,503 1,073 9.43
Loan portfolio ................ 412,520 16,425 15.93 325,830 8,961 11.00
Discount loan portfolio ....... 1,216,417 42,370 13.93 688,756 23,794 13.82
----------- ----------- ---------- --------
Total interest-earning
assets, interest income . 2,423,833 77,326 12.76 1,559,942 44,145 11.32
----------- --------
Non-interest earning cash ..... 6,061 6,639
Allowance for loan losses ..... (25,415) (14,048)
Investments in low-income-
housing tax credit interests. 95,399 100,015
Investment in joint ventures .. 25,552 62,192
Real estate owned, net ........ 139,143 126,458
Other assets .................. 238,941 101,893
----------- ----------
Total assets ............. $ 2,903,514 $1,943,091
=========== ==========
AVERAGE LIABILITIES AND
STOCKHOLDERS' EQUITY:
Interest-bearing demand
deposits..................... $ 34,521 $ 282 3.27% $ 46,444 $ 334 2.88%
Savings deposits............... 1,933 11 2.28 3,505 20 2.28
Certificates of deposit........ 1,964,058 30,764 6.27 1,464,844 22,434 6.13
----------- ----------- ---------- --------
Total interest-bearing
deposits................. 2,000,512 31,057 6.21 1,514,793 22,788 6.02
Notes, debentures and other.... 358,058 8,823 9.86 115,696 3,471 12.00
Securities sold under
agreements to repurchase..... 3,075 56 7.28 -- -- --
Federal Home Loan Bank
advances..................... 556 8 5.76 71,498 958 5.36
----------- ----------- ---------- --------
Total interest-bearing
liabilities, interest
expense.................. 2,362,201 39,944 6.76 1,701,987 27,217 6.40
----------- --------
Non-interest bearing deposits 37,269 15,966
Escrow deposits................ 80,840 12,493
Other liabilities.............. 118,434 50,767
----------- ----------
Total liabilities......... 2,598,744 1,781,213
Stockholders' equity........... 304,770 161,878
------------ ----------
Total liabilities and
stockholders' equity.... $ 2,903,514 $1,943,091
============ ==========
Net interest income before
provision for loan losses.... $ 37,382 $ 16,928
=========== ========
Net interest spread............ 6.00% 4.92%
Net interest margin ........... 6.17 4.34
Ratio of interest earning
assets to interest bearing
liabilities ................. 102.6% 91.7%
11
OCWEN FINANCIAL CORPORATION
AVERAGE BALANCE / RATE ANALYSIS
Nine Months Ended September 30,
-----------------------------------------------------------------------
1997 1996
------------------------------------- --------------------------------
Average Annualized Average Annualized
Balance Interest Yield/Rate Balance Interest Yield/Rate
--------- ----------- ---------- -------- --------- ----------
(Dollars in thousands)
AVERAGE ASSETS:
Federal funds sold and
repurchase agreements ........... $ 179,132 $ 7,296 5.43% $ 90,709 $ 3,840 5.64%
Securities available for sale ..... 293,393 22,770 10.35 286,935 19,954 9.27
Securities held for trading ....... 4,393 248 7.53 -- -- --
Loans available for sale .......... 142,194 11,091 10.40 198,941 14,169 9.50
Investment securities and other ... 33,388 2,759 11.02 40,951 3,053 9.94
Loan portfolio .................... 427,749 37,791 11.78 305,458 26,734 11.67
Discount loan portfolio ........... 1,228,267 116,840 12.68 640,585 75,852 15.79
----------- ----------- ---------- --------
Total interest-earning
assets, interest income ..... 2,308,516 198,795 11.48 1,563,579 143,602 12.25
----------- --------
Non-interest earning cash ......... 9,872 6,461
Allowance for loan losses ......... (21,274) (9,554)
Investments in low-income-housing
tax credit interests............. 95,525 92,767
Investment in joint ventures ...... 39,772 39,442
Real estate owned, net ............ 117,966 143,819
Other assets ...................... 197,516 97,560
----------- ----------
Total assets .................. $ 2,747,893 $1,934,074
=========== ==========
AVERAGE LIABILITIES AND
STOCKHOLDERS' EQUITY:
Interest-bearing demand
deposits ........................ $ 33,940 $ 1,005 3.95% $ 48,073 $ 785 2.18%
Savings deposits .................. 2,197 38 2.31 3,458 60 2.31
Certificates of deposit ........... 1,986,270 91,278 6.13 1,455,305 67,389 6.17
----------- ----------- ---------- --------
Total interest-bearing
deposits .................... 2,022,407 92,321 6.09 1,506,836 68,234 6.04
Notes, debentures and other ....... 276,385 22,686 10.94 115,992 10,344 11.89
Securities sold under
agreements to repurchase ........ 12,760 533 5.57 15,862 685 5.76
Federal Home Loan Bank advances ... 10,796 436 5.38 70,765 2,990 5.63
----------- ----------- ---------- --------
Total interest-bearing
liabilities, interest expense 2,322,348 115,976 6.66 1,709,455 82,253 6.42
----------- --------
Non-interest bearing deposits ..... 26,986 9,352
Escrow deposits ................... 74,853 11,452
Other liabilities ................. 73,629 52,759
----------- ----------
Total liabilities ............. 2,497,816 1,783,018
Stockholders' equity .............. 250,077 151,056
----------- ----------
Total liabilities and
stockholders' equity ....... $ 2,747,893 $1,934,074
=========== ==========
Net interest income before
provision for loan losses ....... $ 82,819 $ 61,349
=========== ========
Net interest spread ............... 4.82% 5.83%
Net interest margin ............... 4.78 5.23
Ratio of interest earning
assets to interest bearing
liabilities ..................... 99.4% 91.5%
12
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
- -----------------------------------------------------------------------------------------------------------------
September 30, December 31,
1997 1996
------------- ------------
(Unaudited) (Audited)
ASSETS
Cash and amounts due from depository institutions ............................... $ 15,641 $ 6,878
Interest bearing deposits ....................................................... 7,469 13,341
Federal funds sold and repurchase agreements .................................... 82,844 32,000
Securities held for trading ..................................................... -- 75,606
Securities available for sale, at market value .................................. 264,723 354,005
Loans available for sale, at lower of cost or market ............................ 190,012 126,366
Investment securities, net ...................................................... 54,042 8,901
Loan portfolio, net ............................................................. 392,523 402,582
Discount loan portfolio, net .................................................... 1,471,251 1,060,953
Principal, interest and dividends receivable .................................... 15,133 16,821
Investments in low income housing tax credit interests .......................... 92,329 93,309
Investment in joint ventures .................................................... 23,931 67,909
Real estate owned, net .......................................................... 149,357 103,704
Investment in real estate ....................................................... 57,244 41,033
Premises and equipment, net ..................................................... 19,710 14,619
Income taxes receivable ......................................................... 20,876 15,115
Deferred tax asset .............................................................. 14,649 5,860
Excess of purchase price over net assets acquired ............................... 10,854 --
Other assets .................................................................... 73,712 44,683
----------- -----------
$ 2,956,300 $ 2,483,685
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits ..................................................................... $ 1,970,952 $ 1,919,742
Advances from the Federal Home Loan Bank ..................................... -- 399
Securities sold under agreements to repurchase ............................... 3,075 74,546
Notes, debentures and other interest bearing obligations ..................... 368,287 225,573
Accrued expenses, payables and other liabilities ............................. 69,556 59,829
----------- -----------
Total liabilities .......................................................... 2,411,870 2,280,089
----------- -----------
Company-obligated, mandatorily redeemable securities of subsidiary trust holding
solely junior subordinated debentures of the Company ......................... 125,000 --
Minority interest ............................................................... 1,386 --
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; 60,505,220 and
53,488,340 shares issued and outstanding at September 30, 1997 and December
31, 1996, respectively ..................................................... 605 535
Additional paid-in capital ................................................... 164,790 22,990
Retained earnings ............................................................ 236,415 180,417
Unrealized gain on securities available for sale and equity securities, net of
taxes ...................................................................... 17,933 3,486
Notes receivable on exercise of common stock options ......................... (1,699) (3,832)
----------- -----------
Total stockholders' equity ................................................. 418,044 203,596
----------- -----------
$ 2,956,300 $ 2,483,685
=========== ===========
13
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
Three Months Nine months
---------------------------- ----------------------------
For the periods ended September 30, 1997 1996 1997 1996
- ------------------------------------------------------------- ------------ ------------ ------------ ------------
Interest income:
Federal funds sold and repurchase agreements ............. $ 4,844 $ 1,742 $ 7,296 $ 3,840
Securities available for sale ............................ 8,087 5,890 22,770 19,954
Securities held for trading .............................. -- -- 248 --
Loans available for sale ................................. 4,267 2,685 11,091 14,169
Loans .................................................... 16,425 8,961 37,791 26,734
Discount loans ........................................... 42,370 23,794 116,840 75,852
Investment securities and other .......................... 1,333 1,073 2,759 3,053
------------ ------------ ------------ ------------
77,326 44,145 198,795 143,602
------------ ------------ ------------ ------------
Interest expense:
Deposits ................................................. 31,057 22,788 92,321 68,234
Securities sold under agreements to repurchase ........... 56 -- 533 685
Advances from the Federal Home Loan Bank ................. 8 958 436 2,990
Notes, debentures and other interest bearing obligations . 8,823 3,471 22,686 10,344
------------ ------------ ------------ ------------
39,944 27,217 115,976 82,253
------------ ------------ ------------ ------------
Net interest income before provision for loan losses .. 37,382 16,928 82,819 61,349
Provision for loan losses ................................... 4,088 4,469 21,739 18,839
------------ ------------ ------------ ------------
Net interest income after provision for loan losses ... 33,294 12,459 61,080 42,510
------------ ------------ ------------ ------------
Non-interest income:
Servicing fees and other charges .......................... 7,321 1,158 17,402 1,945
Gains on sales of interest earning assets, net ............ 5,999 7,979 46,142 17,580
Gain on real estate owned, net ............................ 4,793 5,495 8,628 4,467
Other income .............................................. 7,318 514 7,898 2,515
------------ ------------ ------------ ------------
25,431 15,146 80,070 26,507
------------ ------------ ------------ ------------
Non-interest expense:
Compensation and employee benefits ........................ 20,471 8,431 55,069 23,170
Occupancy and equipment ................................... 5,029 2,151 11,818 6,378
Net operating loss (income) on investments in real estate
and certain low-income housing tax credit interests .... 622 (161) 1,819 (99)
Savings Association Insurance Fund
recapitalization assessment ............................ -- 7,140 -- 7,140
Other operating expenses .................................. 5,097 3,970 16,289 10,496
------------ ------------ ------------ ------------
31,219 21,531 84,995 47,085
------------ ------------ ------------ ------------
Distributions on Company-obligated, mandatorily redeemable
securities of subsidiary trust holding solely junior
subordinated debentures of the Company ................... 1,850 -- 1,850 --
Equity in earnings of investment in joint ventures .......... 546 4,139 16,220 5,217
Income before income taxes ............................. 26,202 10,213 70,525 27,149
Income tax expense .......................................... (6,179) (157) (14,911) (2,067)
Minority interest in net loss of consolidated subsidiary .... 142 -- 384 --
------------ ------------ ------------ ------------
Net income ............................................. $ 20,165 $ 10,056 $ 55,998 $ 25,082
============ ============ ============ ============
Earnings per share:
Net income ............................................. $ 0.35 $ 0.19 $ 1.01 $ 0.47
============ ============ ============ ============
Weighted average common shares outstanding .................. 57,749,958 53,890,606 55,341,404 53,192,424
============ ============ ============ ============
14
