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): OCTOBER 26, 1998
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 18
EXHIBIT INDEX ON PAGE 4
ITEM 5. OTHER EVENTS
The news release of Ocwen Financial Corporation, dated October 26, 1998,
announcing its third quarter 1998 results and certain other information, is
attached hereto and filed herewith as Exhibit 99.
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 26,
1998.
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: October 28, 1998
3
INDEX TO EXHIBIT
Exhibit No. Description Page
----------- ----------- ----
99 News release of Ocwen Financial Corporation dated 5
October 26, 1998, announcing its third quarter 1998
results and certain other information.
4
- --------------------------------------------------------------------------------
Ocwen Financial Corporation Exhibit 99
- --------------------------------------------------------------------------------
1675 Palm Beach Lakes Blvd.
West Palm Beach, FL 33401
NYSE symbol: OCN
NEWS RELEASE: IMMEDIATE October 26, 1998
OCWEN FINANCIAL CORPORATION REPORTS THIRD QUARTER RESULTS
WEST PALM BEACH, FL - Ocwen Financial Corporation (NYSE: OCN) today reported net
income of $24.9 million, or $0.41 per diluted share, for the quarter ended
September 30, 1998. Returns on average assets and average equity were 2.74% and
23.58%, respectively, for the third quarter of 1998. This compares to net income
of $20.2 million, or $0.35 per diluted share, and returns on average assets and
average equity of 2.78% and 26.47%, respectively, for the third quarter of 1997.
William C. Erbey, Chairman and Chief Executive Officer said, "We are very
pleased with OCN's results this quarter, particularly in light of existing
market conditions. In fact, this was the most profitable third quarter OCN has
ever had. Our core discount loan businesses and commercial real estate lending
activities were strong contributors to quarterly net income, and our servicing
fees more than doubled over the same quarter last year. The increase in
servicing fees reflects an increase in loans serviced for others, and supports
our growth strategy of increasing fee-based income streams."
Mr. Erbey continued, "As you know, the United States capital markets --
including the financial services and mortgage-backed securities markets -- have
experienced significant volatility, raising the very real possibility that the
United States might be on the verge of an economic downturn. If events continue
on their present course, slowing economic growth would likely result in rising
delinquencies, creating a greater demand for OCN's services. In anticipation of
these events, OCN is taking the following actions:
o Refocusing its resources on its core competencies, namely the acquisition
and management of servicing-intensive assets and the development of
exportable loan servicing technology for the mortgage and real estate
industries.
o OCN has eliminated approximately 200 positions since August 1998,
including the layoff of approximately 150 employees with the objective
of reducing its operating expenses and efficiency ratio. The majority of
these positions related to OCN's discontinuation of its subprime
domestic retail branch network.
o Increasing its liquidity position to maximize OCN's ability to capitalize
upon opportunities that an economic downturn will present.
o Reducing OCN's reliance upon gain on sale accounting. For example, OCN
currently anticipates effecting only one United States subprime and one
United Kingdom ("UK") subprime securitization during the fourth quarter of
1998.
Mr. Erbey continued, "We are very pleased with our investment in Ocwen
Technology Xchange, or OTX, our new technology division, which was formed to
supply software products to the mortgage and real estate industries, making our
advanced mortgage loan servicing, resolution and origination technology
available to third parties through software licenses.
We are very proud to have recently gained endorsements by several servicers and
large mortgage loan originators of our advanced loan servicing technology and
e-commerce system. The marketing of these products has only just begun."
- --------------------------------------------------------------------------------
Contacts Christine A. Reich (561) 682-8569
William C. Erbey (561) 682-8520
Mark S. Zeidman (561) 682-8600
- --------------------------------------------------------------------------------
5
Ocwen Financial Corporation (OCN)
Third Quarter Results
October 26, 1998
THIRD QUARTER AND NINE MONTHS RESULTS AT A GLANCE Third Quarter Nine Months
- ------------------------------------------------- ---------------------------- ----------------------------
In thousands of dollars, except per share data 1998 1997 1998 1997
- ------------------------------------------------- ------------ ------------ ------------ ------------
Revenues ........................................ $ 98,540 $ 63,359 $ 186,197 $ 179,217
Provision for loan losses ....................... (1,806) (4,088) (13,734) (21,739)
Expenses ........................................ (68,914) (33,069) (165,972) (86,953)
Income tax (expense) benefit .................... (2,922) (6,179) 2,888 (14,911)
Minority interest ............................... 33 142 (2) 384
------------ ------------ ------------ ------------
Net income ...................................... $ 24,931 $ 20,165 $ 9,377 $ 55,998
============ ============ ============ ============
Earnings per share:
Basic ........................................ $ 0.41 $ 0.35 $ 0.15 $ 1.02
Diluted ...................................... $ 0.41 $ 0.35 $ 0.15 $ 1.01
Weighted average shares outstanding:
Basic ........................................ 60,785,467 57,004,218 60,716,777 54,734,082
Diluted ...................................... 61,074,499 57,749,958 61,249,163 55,341,404
ALL REFERENCES BELOW REGARDING CHANGES ARE BASED ON COMPARISONS TO THE SAME
PERIOD A YEAR AGO.
Revenues increased $35.2 million or 56% in the third quarter of 1998 and were up
$7.0 million or 4% for the nine months ended September 30, 1998.
o Net interest income before provision for loan losses increased $3.3 million
or 9% to $40.7 million in the third quarter of 1998. In the nine months
ended September 30, 1998, net interest income increased $17.3 million or 21%
to $100.2 million. The increase in net interest income during the third
quarter of 1998 was largely due to a $7.1 million increase in interest
income on loans available for sale and a $7.9 million increase in interest
income on discount loans offset by a $2.7 million decrease in interest
income on the loan portfolio and a $6.7 million increase in interest expense
on obligations outstanding under lines of credit.
o Non-interest income increased $32.4 million or 128% to $57.9 million in the
third quarter of 1998. This increase is due primarily to an $18.2 million
increase in gains on interest earning assets, an $8.0 million increase in
servicing fees and other charges and a $9.8 million increase in other
income. The increase in servicing fees reflects a significant increase in
loans serviced for others, from $5.51 billion at December 31, 1997 and $8.17
billion at June 30 1998 to $9.96 billion at September 30, 1998, resulting
from securitizations by OCN of single family residential discount loans and
subprime loans (which account for $2.91 billion) and agreements to service
mortgage loans for others (which account for $7.05 billion). OCN has also
increasingly entered into special servicing arrangements whereby OCN
services loans that become greater than 60 days past due and receives
incentive fees to the extent certain loss mitigation parameters are
achieved. Through September 30, 1998, OCN has been designated as a special
servicer for pools of loans totaling approximately $9.2 billion in unpaid
principal balance. For the nine months ended September 30, 1998,
non-interest income increased 7% to $86.0 million.
Provision for loan losses decreased by $2.3 million in the third quarter of 1998
and $8.0 million during the nine months ended September 30, 1998 is primarily
due to a decline in the balance of discount loan and loan portfolios. At
September 30, 1998, OCN had allowances for loan losses of $21.1 million and $4.1
million on its discount loan and loan portfolios, respectively, which amounted
to 1.9% and 1.8% of the respective balances. OCN maintained reserves of 1.6% and
1.4% on its discount loans and loan portfolios, respectively, at December 31,
1997.
Expenses rose $35.8 million or 108% in the third quarter of 1998 as a result of
growth in OCN's core business lines and in the expenses of OTX and Ocwen UK,
which amounted to $6.0 million and $15.4 million, respectively, for the third
quarter of 1998. Details of this growth for the quarter include:
o Compensation and employee benefits increased $12.0 million or 59% primarily
due to an 81% increase in the average number of employees from 944 to 1,704.
o Occupancy and equipment expense increased $4.5 million or 89%.
6
Ocwen Financial Corporation (OCN)
Third Quarter Results
October 26, 1998
o Distributions on capital securities amounted to $3.4 million during the
third quarter of 1998, an increase of $1.5 million.
o Other operating expenses increased by $15.8 million primarily due to a $7.2
million increase in loan related expenses, a $2.5 million increase in
amortization of goodwill, a $2.3 million increase in professional expenses
and a $1.8 million increase in marketing expenses.
Income tax expense was recorded at a rate of 10.5% for the third quarter of 1998
as compared to 23.6% for the third quarter of 1997. OCN estimates that its
effective tax rate for 1998 will approximate 7.9% before the use of a net
operating loss carry forward. Such operating loss carry forward results in a
$3.4 million tax benefit for the nine months ended September 30, 1998.
RECENT DEVELOPMENTS
On September 17, 1998, OCN completed the securitization of 2,706 single family
residential mortgage discount loans with an aggregate unpaid principal balance
of $172.9 million. OCN recorded a net gain of $19.2 million on the sale of the
senior classes of securities in connection with this transaction. OCN continues
to service the loans for a fee and has retained an interest in the related
subordinate security valued at $12.1 million.
On September 29, 1998, OCN completed the securitization of 2,205 subprime single
family residential mortgage loans with an aggregate unpaid principal balance of
$261.6 million. OCN recorded a net gain of $13.3 million on the sale of the
senior classes of securities in connection with this transaction. OCN continues
to service the loans for a fee and has retained an interest in the related
residual security valued at $18.3 million.
On October 7, 1998, OCN announced it's recent filing of a $250.0 million shelf
registration statement with the Securities and Exchange Commission ("SEC") which
allows for the issuance of up to $250.0 million of common and preferred stock,
capital trust securities, senior and subordinated debt and other securities.
Mark S. Zeidman, Chief Financial Officer, stated, "Since OCN's initial public
offering, we have been planning to file a shelf registration statement once OCN
became eligible under the SEC's regulations in order to take advantage of
capital-raising opportunities if and when they arise in the future."
For the nine months ended September 30, 1998, OCN purchased discount loans with
a total unpaid principal balance of approximately $842.2 million. Combined
purchases and originations of subprime single family loans for the same period
amounted to approximately $1.42 billion of unpaid principal balance, which
includes $134.1 million of originations by Ocwen UK, $292.8 million purchased
from the US operations of Cityscape and $421.3 million purchased in connection
with the acquisition of the UK operation of Cityscape during the first and
second quarter of 1998, respectively.
THE REMAINDER OF THIS RELEASE CONTAINS SUMMARY INFORMATION ON OCN'S SEGMENT
PROFITABILITY, SPECIFIC AREAS OF RESULTS, FINANCIAL CONDITION AND AVERAGE
BALANCES AND RATES, AS WELL AS OCN'S INTERIM UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS.
7
Ocwen Financial Corporation (OCN)
Third Quarter Results
October 26, 1998
NET INCOME SUMMARY BY BUSINESS ACTIVITY
Through September 30, 1998, OCN continued to engage in significant discount loan
acquisition and resolution activities and a variety of other mortgage lending
activities, which generally reflect OCN's desire to focus on business lines
which leverage its core competency, the servicing and management of servicing
intensive assets. The following table presents the estimated contribution by
business activity to OCN's net income for the periods indicated.
Three Months Nine Months
----------------------------------------- -----------------------------------
For the periods ended September 30, 1998 1997 1998 1997
------------------- ----------------- ------------------ ------------
(Dollars in thousands) Amount % Amount % Amount % Amount %
- ---------------------------------------------- -------- -------- -------- ------- -------- -------- ------- ---
Discount Loans:
Single family residential loans ............ 6,056 24 (1,537) (8) 28,575 305 10,787 19
Large commercial real estate loans ......... 11,996 48 10,611 53 25,293 270 20,415 36
Small commercial real estate loans ......... 1,651 7 457 2 7,669 82 1,599 3
Investment in low-income housing tax credits . 1,751 7 4,043 20 7,036 75 7,803 14
Commercial real estate lending ............... 6,928 28 4,045 20 12,246 130 6,113 11
Subprime single family residential lending (1) (4,192) (17) (684) (3) (1,828) (19) 60 --
Mortgage loan servicing (2) .................. 1,582 6 1,473 7 5,710 61 2,581 5
Investment securities ........................ 2,394 10 2,207 11 (69,722) (744) 5,612 10
OTX .......................................... (1,826) (7) -- -- (6,076) (65) -- --
Other ........................................ (1,409) (6) (450) (2) 474 5 1,028 2
-------- -------- -------- ------- -------- -------- ------- ---
$ 24,931 100% $ 20,165 100% $ 9,377 100% $55,998 100%
======== ======== ======== ======= ======== ======== ======= ===
(1) Includes net income (loss) from foreign operations derived from Ocwen UK of
($2.9) million and $2.9 million for the three and nine months ended
September 30, 1998, respectively.
(2) Includes net income from foreign operations derived from Ocwen UK of
$216,000 and $1.9 million for the three and nine months ended September 30,
1998, respectively.
REVENUES
NET INTEREST INCOME
Interest income of $88.5 million for the third quarter of 1998 increased by
$11.2 million or 15% over that of the third quarter of 1997. This increase is
the result of a $542.3 million increase in average interest-earning assets,
offset by an 82 basis point decrease in the average yield earned. The decline in
the average yield earned for the third quarter of 1998 is primarily due to a
decline in the yield on securities available for sale, offset in part by an
increase in the yield on the loan portfolio (primarily due to additional
interest received in connection with the payoff of commercial loans.) Of the
$542.3 million net increase in average interest-earning assets, $364.3 million,
$295.4 million and $140.7 million related to securities available for sale,
loans available for sale and the discount loan portfolio, respectively, offset
by a $157.4 million decrease related to the loan portfolio and a $156.1 million
decrease in federal funds sold and repurchase agreements. Of the $295.4 million
increase in loans available for sale, $129.6 million related to loans held by
Ocwen UK. The average yield on interest-earning assets was 11.94% and 12.76% in
the third quarter of 1998 and 1997, respectively, and 10.70% and 11.48% for the
nine months ended September 30, 1998 and 1997, respectively. For the nine months
ended September 30, 1998, interest income amounted to $241.5 million, a $42.7
million or 21.5% increase over the same period in 1997.
8
Ocwen Financial Corporation (OCN)
Third Quarter Results
October 26, 1998
Interest expense of $47.9 million for the third quarter of 1998 increased by
$7.9 million or 20% over the comparable period in the prior year as a result of
a $340.0 million or 14% increase in the average balance of interest-bearing
liabilities. Of the $340.0 million increase in the average balance of
interest-bearing liabilities, $337.0 million and $71.4 million related to
increases in borrowings under lines of credit and securities sold under
agreements to repurchase, respectively, offset by a $76.1 million decline in
certificates of deposit. The average rate paid on interest-bearing liabilities
was 7.08% and 6.76% in the third quarter of 1998 and 1997, respectively. For the
nine months ended September 30, 1998, interest expense amounted to $141.3
million, a $25.3 million or 22% increase over the same period of the prior year.
As a result of the above, net interest income before provision for loan losses
of $40.7 million for the third quarter of 1998 increased by $3.3 million or 9%
from the third quarter of 1997 and the net interest margin for the third quarter
of 1998 decreased to 5.49% from 6.17% for the third quarter of 1997. Net
interest income of $100.2 million for the nine months ended September 30, 1998
increased $17.3 million or 21% over the comparable period of the prior year and
the net interest margin declined 34 basis points to 4.44%.
NON-INTEREST INCOME
Non-interest income for the third quarter of 1998 amounted to $57.9 million, an
increase of $32.4 million or 128% from that of the third quarter of 1997. The
increase was primarily due to an $18.2 million increase in gains on interest
earning assets, an $8.0 million increase in servicing fees and other charges and
a $9.8 million increase in other income. Other income of $17.1 million for the
third quarter of 1998 included $5.0 million of gains on sales of investments in
real estate, $3.4 million of income resulting from OCN's equity investment in
Kensington Mortgage Company, $2.9 million of brokerage commissions earned in
connection with Ocwen UK loan originations, a $2.3 million gain recognized in
connection with the sale of investments in three low-income housing tax credit
projects and $1.8 million of management fees earned from OAC. Other income of
$7.3 million for the third quarter of 1997 is primarily comprised of $6.3
million of gains recognized in connection with the sale of investments in
low-income housing tax credit projects. Gains on interest-earning assets for the
third quarter of 1998 amounted to $24.2 million and were primarily comprised of
a $13.3 million gain recognized in connection with the securitization of
subprime single family residential mortgage loans with an aggregate unpaid
principal balance of $261.6 million, and a $19.2 million gain recognized in
connection with the securitization of discount single family residential
mortgage loans with an aggregate unpaid principal balance of $172.9 million,
offset by a $10.8 million charge on certain available for sale securities. Gains
on interest-earning assets for the nine months ended September 30, 1998
decreased by $45.2 million from the same period in 1997 primarily as a result of
the $8.5 million and $77.6 million charge on AAA-rated agency interest-only
securities from the first and second quarter of 1998, respectively, and includes
$55.7 million in gains earned during the first and second quarter of 1998 in
connection with securitizations of discount and subprime mortgage loans.
The increase in servicing fees and other charges reflects an increase in loan
servicing and related fees as a result of an increase in loans serviced for
others. The unpaid principal balance of loans serviced for others averaged $9.13
billion and $3.03 billion during the third quarter of 1998 and 1997,
respectively, and $7.47 billion and $2.52 billion during the nine months ended
September 30, 1998 and 1997, respectively. At September 30, 1998, OCN serviced
142,844 loans for third parties totaling $9.96 billion versus 125,318 loans
totaling $8.17 billion at June 30, 1998, and 70,308 loans totaling $5.51 billion
at December 31, 1997.
EQUITY IN EARNINGS OF INVESTMENT IN JOINT VENTURES
On December 12, 1997, BCBF LLC (the "LLC"), a joint venture between OCN and
Black Rock Finance LP, distributed all of its remaining assets to its partners.
As a result, no equity in earnings of investment in joint venture was recorded
during 1998. During the third quarter of 1997, OCN recorded $546,000 of income
related to its investment in joint ventures, consisting primarily of net
interest income. Income from the joint venture amounted to $16.2 million for the
first nine months of 1997 and includes $9.2 million of net gains related to the
securitization of single-family residential loans in the first quarter of 1997.
PROVISION FOR LOAN LOSSES
Provision for loan losses decreased by $2.3 million in the third quarter of
1998 and $8.0 million during the nine months ended September 30, 1998. The
decline in the provision for loan losses in 1998 as compared to 1997 is
primarily due to a
9
Ocwen Financial Corporation (OCN)
Third Quarter Results
October 26, 1998
decline in the balance of discount loans and loan portfolios. At September 30,
1998, OCN had allowances for losses of $21.1 million and $4.1 million on its
discount loan and loan portfolios, respectively, which amounted to 1.9% and 1.8%
of the respective balances. OCN maintained reserves of 1.6% and 1.4% on its
discount loans and loan portfolios, respectively, at December 31, 1997.
EXPENSES
NON-INTEREST EXPENSE
Non-interest expense amounted to $65.5 million for the third quarter of 1998 and
includes $6.0 million and $15.4 million related to OTX and Ocwen UK,
respectively, representing an increase of $34.3 million or 110% over the third
quarter of 1997. Compensation and employee benefits increased by $12.0 million
as the average number of employees increased to 1,704 from 944. Occupancy and
equipment expense increased $4.5 million primarily due to an increase in data
processing costs, general office equipment expenses and rent expense. Other
operating expenses increased by $15.8 million primarily due to a $7.2 million
increase in loan related expenses, a $2.5 million increase in amortization of
goodwill, a $2.3 million increase in professional expenses and a $1.8 million
increase in marketing expenses. For the nine months ended September 30, 1998,
non-interest expense amounted to $155.8 million, a $70.7 million or 83.0%
increase over the same period of the prior year.
DISTRIBUTIONS ON COMPANY-OBLIGATED, MANDATORILY REDEEMABLE SECURITIES OF
SUBSIDIARY TRUST HOLDING SOLELY JUNIOR SUBORDINATED DEBENTURES
In August 1997, Ocwen Capital Trust I, a wholly-owned subsidiary of OCN, issued
$125.0 million of 10 7/8% Capital Securities. Distributions amounted to $3.4
million and $10.2 million during the three and nine months ended September 30,
1998, respectively, as compared to $1.9 million for the same periods in 1997.
INCOME TAXES
Income tax (expense) benefit amounted to $(2.9) million and $(6.2) million
during the third quarter of 1998 and 1997, respectively, and $2.9 million and
$(14.9) million for the nine months ended September 30, 1998 and 1997,
respectively. OCN's income taxes reflect an expected tax rate of 7.9% for 1998
before the use of a $3.4 million tax benefit resulting from the use of prior
year net operating loss carryforwards. This compares to an effective tax rate of
21.4% for 1997. OCN's expected tax rate is less than its statutory tax rate
primarily due to tax credits of $4.6 million and $3.8 million for the third
quarter of 1998 and 1997, respectively, and $13.6 million and $10.3 million for
the first nine months of 1998 and 1997, respectively, resulting from investments
in low-income housing tax credit interests. No valuation allowance was required
at September 30, 1998 because it is expected that losses and tax credits will be
utilized to offset future taxable income and tax expense.
ASSETS AND LIABILITIES
At September 30, 1998,OCN had $3.39 billion of total assets as compared to $3.07
billion at December 31, 1997, an increase of $115.0 million or 3% and $321.6
million or 11%, respectively. The increase in total assets was primarily due to
a $236.1 million increase in securities available for sale, primarily short
duration collateralized mortgage obligations, a $160.3 million increase in loans
available for sale, a $105.6 million increase in cash and cash equivalents and a
$75.1 million increase in investment securities, offset by a $339.6 million
decrease in discount loans. OCN acquired discount loans with a combined total
unpaid principal balance of approximately $168.5 million during the three months
ended September 30, 1998, resulting in total acquisitions of $842.2 million for
the nine months ended September 30, 1998. In addition, OCN purchased and
originated single family residential loans to subprime borrowers with a total
unpaid principal balance of approximately $271.9 million during the third
quarter of 1998, of which $88.0 million were originated by Ocwen UK. At
September 30, 1998, OCN had $2.82 billion of total liabilities as compared to
$2.52 billion at December 31, 1997. The increase in total liabilities was due
primarily to a $93.7 million increase in deposits and a $215.5 million increase
in obligations outstanding under lines of credit (obtained primarily to finance
the acquisition and origination of single family residential subprime loans).
10
Ocwen Financial Corporation (OCN)
Third Quarter Results
October 26, 1998
CAPITAL
Stockholders' equity increased $24.4 million or 6% during the nine months ended
September 30, 1998 to $444.1 million from $419.7 million at December 31, 1997.
The increase is primarily the result of net income of $9.4 million and a $16.1
million increase in net unrealized gains on securities available for sale,
offset by a net unrealized foreign currency translation loss of $2.5 million. At
September 30, 1998, stockholders' equity included $11.1 million of net
unrealized gains on securities available for sale (gains of $23.1 million and
losses of $12.0 million) and a net unrealized foreign currency translation loss
of $2.5 million, as compared with $5.0 million of net unrealized losses on
securities available for sale at December 31, 1997.
LIQUIDITY
The primary sources of funds for liquidity consists of deposits, lines of
credit, and maturities and payments of principal and interest on OCN's loans and
securities and proceeds from the sale and securitization thereof, reverse
repurchase agreements and Federal Home Loan Bank advances.
At September 30, 1998, Ocwen Financial Corporation had approximately $34.1
million of debt outstanding secured by discount commercial office loans. This
debt was repaid in full on October 6, 1998 in connection with the sale of the
loans. As of October 26, 1998, Ocwen Financial Corporation has no secured debt
and has unpledged securities with a market value of $18.8 million available to
secure borrowings.
At September 30, 1998, Investors Mortgage Insurance Holding Company ("IMI") had
entered into $19.6 million of reverse repurchase agreements with unrelated
counterparties and had unpledged securities with a market value of $43.3 million
available to secure additional borrowings. Subsequent to September 30, 1998, the
amount outstanding under these reverse repurchase agreements has been reduced to
$13.6 million due to margin calls.
At September 30, 1998, Ocwen Federal Bank ("OFB") had $1.83 billion of
certificates of deposit outstanding. Of this amount, scheduled maturities of
certificates of deposit during the 12 months ending September 30, 1999, 2000 and
thereafter amounted to $989.0 million, $345.4 million, and $502.6 million,
respectively. Additionally, at September 30, 1998, OFB had cash and cash
equivalents in excess of $261.0 million, unencumbered investment grade
mortgage-backed securities of approximately $471.6 million, and unencumbered
non-investment grade securities of approximately $21.5 million, which could be
used to secure additional borrowings. At September 30, 1998, OFB was eligible to
borrow up to an aggregate of $652.5 million from the Federal Home Loan Bank of
New York (subject to the availability of acceptable collateral) and had $58.9
million of assets which could be pledged as security for such advances.
OFB's ability to make capital distributions as a Tier 1 association pursuant to
the Office of Thrift Supervision ("OTS") capital distribution regulation are
limited by the regulatory capital levels which it has committed to the OTS it
would maintain, commencing on June 30, 1997. As a result of a verbal agreement
between OFB and the OTS to dividend subordinate and residual mortgage-related
securities resulting from securitization activities conducted by OFB, which had
an aggregate carrying value of $20.8 million at September 30, 1998, OFB may be
limited in its ability to pay cash dividends to OCN. OFB recently received
approval from the OTS to pay a $30.0 million cash dividend to OCN in the fourth
quarter of 1998. Future cash dividends depend on the future operating results of
OFB.
The liquidity of OCN includes lines of credit obtained by Ocwen Financial
Services ("OFS"), as follows: (i) a $200 million secured line of credit, of
which $100 million was committed, (ii) a $50 million secured line of credit,
(iii) a $200 million secured line of credit of which $100 million was committed,
and (iv) a $200 million secured line of credit, of which $100 million was
committed. The lines of credit mature between March 1999 and July 2001. An
aggregate of $144.1 million was outstanding under these lines of credit at
September 30, 1998. Additionally, at September 30, 1998 OFS had entered into
$27.0 million of reverse repurchase agreements and residual financing
collateralized by subprime residuals with a number of counterparties in order to
finance residual securities retained in connection with its securitization of
subprime residential mortgage loans. Of this amount, $16.8 million is scheduled
to mature in July 2001, with the balance subject to monthly renewal.
Additionally, OFS had unpledged securities with a market value of $19.0 million
available to secure additional borrowings.
11
Ocwen Financial Corporation (OCN)
Third Quarter Results
October 26, 1998
Further, Ocwen UK has entered into a term loan and a revolving warehouse line of
credit which is available to finance Ocwen UK's originations and purchases of
subprime mortgage loans. At September 30, 1998, the term loan, which matures in
January 1999, was for $37.4 million ((pound)22.0 million), against which $29.6
million ((pound)17.4 million) had been borrowed, and the warehouse facility,
which matures in April 1999, was for $169.9 million ((pound)100.0 million
reduced for the amount borrowed under the term loan), against which $115.8
million ((pound)68.2 million) had been borrowed. Additionally, at September 30,
1998 Ocwen UK had entered into an $18.7 million reverse repurchase agreement,
which matures in July 2001, with Greenwich International Ltd. to finance a
residual security retained in connection with Ocwen UK's securitization of
subprime residential mortgage loans.
FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED HEREIN ARE NOT 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 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," "BELIEVE," "COMMITMENT," "CONTINUE," "COULD," "ESTIMATE," "MAY,"
"PRESENT," "WILL," FUTURE OR CONDITIONAL VERB TENSES, SIMILAR TERMS, VARIATIONS
ON SUCH TERMS OR NEGATIVES OF SUCH TERMS. ALTHOUGH OCN BELIEVES THE ANTICIPATED
RESULTS OR OTHER EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE
BASED ON REASONABLE ASSUMPTIONS, ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE INDICATED DUE TO RISKS, UNCERTAINTIES AND CHANGES WITH RESPECT TO A
VARIETY OF FACTORS, INCLUDING, BUT NOT LIMITED TO, INTERNATIONAL, NATIONAL,
REGIONAL OR LOCAL 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, REAL ESTATE INVESTMENT TRUSTS AND REAL ESTATE
(INCLUDING REGULATORY FEES, CAPITAL REQUIREMENTS AND INCOME AND PROPERTY
TAXATION), UNCERTAINTY OF FOREIGN LAWS, COMPETITIVE PRODUCTS, PRICING AND
CONDITIONS (INCLUDING FROM COMPETITORS THAT HAVE SIGNIFICANTLY GREATER RESOURCES
THAN OCN), CREDIT, PREPAYMENT, BASIS, DEFAULT, SUBORDINATION AND ASSET/LIABILITY
RISKS, LOAN SERVICING EFFECTIVENESS, ABILITY TO IDENTIFY ACQUISITIONS AND
INVESTMENT OPPORTUNITIES MEETING OCN'S INVESTMENT STRATEGY, COURSE OF
NEGOTIATIONS AND ABILITY TO REACH AGREEMENT WITH RESPECT TO MATERIAL TERMS OF
ANY PARTICULAR TRANSACTION, SATISFACTORY DUE DILIGENCE RESULTS, SATISFACTION OR
FULFILLMENT OF AGREED UPON TERMS AND CONDITIONS OF CLOSING OR PERFORMANCE,
TIMING OF TRANSACTION CLOSINGS, ACQUISITIONS AND INTEGRATION OF ACQUIRED
BUSINESSES, SOFTWARE INTEGRATION, DEVELOPMENT AND LICENSING, AVAILABILITY OF AND
COSTS ASSOCIATED WITH OBTAINING ADEQUATE AND TIMELY SOURCES OF LIQUIDITY,
DEPENDENCE ON EXISTING SOURCES OF FUNDING, ABILITY TO REPAY OR REFINANCE
INDEBTEDNESS (AT MATURITY OR UPON ACCELERATION), TO MEET COLLATERAL CALLS BY
LENDERS (UPON RE-VALUATION OF THE UNDERLYING ASSETS OR OTHERWISE), TO GENERATE
REVENUES SUFFICIENT TO MEET DEBT SERVICE PAYMENTS AND OTHER OPERATING EXPENSES
AND TO SECURITIZE WHOLE LOANS, 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 (TEMPORARY OR
OTHERWISE), TIMELY LEASING OF UNOCCUPIED SQUARE FOOTAGE (GENERALLY AND UPON
LEASE EXPIRATION), CHANGES IN REAL ESTATE CONDITIONS (INCLUDING LIQUIDITY,
VALUATION, REVENUES, RENTAL RATES, OCCUPANCY LEVELS AND COMPETING PROPERTIES),
ADEQUACY OF INSURANCE COVERAGE IN THE EVENT OF LOSS, KNOWN OR UNKNOWN
ENVIRONMENTAL CONDITIONS, YEAR 2000 COMPLIANCE, OTHER FACTORS GENERALLY
UNDERSTOOD TO AFFECT THE REAL ESTATE ACQUISITION, MORTGAGE AND LEASING MARKETS,
SECURITIES INVESTMENTS AND RAPID GROWTH COMPANIES, AND OTHER RISKS DETAILED FROM
TIME TO TIME IN OCN'S REPORTS AND FILINGS WITH THE SEC, INCLUDING ITS
REGISTRATION STATEMENTS ON FORMS S-1 AND S-3 AND PERIODIC REPORTS ON FORMS 10-Q,
8-K AND 10-K.
12
Ocwen Financial Corporation (OCN)
Third Quarter Results
October 26, 1998
ATTACHED ARE THE FINANCIAL SUMMARY, THE AVERAGE BALANCE AND RATE ANALYSIS TABLES
AND THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS.
OCWEN FINANCIAL CORPORATION At or for the Three At or for the Nine
FINANCIAL SUMMARY Months ended September 30, Months ended September 30,
-------------------------------------- ---------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) 1998 1997 Change % 1998 1997 Change %
- ------------------------------------------------ ----------- ----------- -------- ----------- ----------- --------
OPERATIONS DATA:
Interest income ................................ $ 88,542 $ 77,326 15 $ 241,457 $ 198,795 21
Interest expense ............................... 47,859 39,944 20 141,291 115,976 22
----------- ----------- ----------- -----------
Net interest income ............................ 40,683 37,382 9 100,166 82,819 21
Provision for loan losses ...................... 1,806 4,088 (56) 13,734 21,739 (37)
----------- ----------- ----------- -----------
Net interest income after provision for
loan losses ............................... 38,877 33,294 17 86,432 61,080 42
----------- ----------- ----------- -----------
Servicing fees and other charges ............... 15,348 7,321 110 39,044 17,510 123
Gain on interest-earning assets, net ........... 24,170 5,999 303 908 46,142 (98)
Other non-interest income ...................... 18,339 12,111 51 46,079 16,526 179
----------- ----------- ----------- -----------
Total non-interest income ................... 57,857 25,431 128 86,031 80,178 7
----------- ----------- ----------- -----------
Compensation and employee benefits ............. 32,474 20,471 59 83,721 55,069 52
Other non-interest expense ..................... 33,042 10,748 207 72,056 30,034 140
----------- ----------- ----------- -----------
Total non-interest expense .................. 65,516 31,219 110 155,777 85,103 83
Capital Trust Securities ....................... 3,398 1,850 84 10,195 1,850 451
Equity in earnings of investment in joint
ventures ..................................... -- 546 (100) -- 16,220 (100)
----------- ----------- ----------- -----------
Income before income taxes .................. 27,820 26,202 6 6,491 70,525 (91)
----------- ----------- ----------- -----------
Income tax (expense) benefit ................... (2,922) (6,179) (53) 2,888 (14,911) 119
Minority interest .............................. 33 142 (77) (2) 384 (101)
----------- ----------- ----------- -----------
Net income .................................. $ 24,931 $ 20,165 24 $ 9,377 $ 55,998 (83)
=========== =========== =========== ===========
Earnings per share:
Basic ....................................... $ 0.41 $ 0.35 17 $ 0.15 $ 1.02 (85)
Diluted ..................................... $ 0.41 $ 0.35 17 $ 0.15 $ 1.01 (85)
KEY RATIOS:
Net interest spread ............................ 4.86% 6.00% (19) 3.93% 4.82% (18)
Net interest margin ............................ 5.49% 6.17% (11) 4.44% 4.78% (7)
Annualized Return on Average:
Assets (1) (2) .............................. 2.74% 2.78% (1) 0.34% 2.72% (88)
Equity (2) .................................. 23.58% 26.47% (11) 2.92% 29.86% (90)
Efficiency Ratio (3) ........................... 66.49% 49.27% (35) 83.66% 47.49% 76
AVERAGE BALANCES:
Securities available for sale .................. $ 597,261 $ 232,957 156 $ 571,862 $ 293,393 95
Loan portfolio ................................. 255,113 412,520 (38) 273,979 427,749 (36)
Discount loan portfolio ........................ 1,357,124 1,216,417 12 1,347,753 1,228,267 10
Total interest-earning assets .................. 2,966,091 2,423,833 22 3,008,093 2,308,516 30
Total assets ................................... 3,644,135 2,903,514 26 3,628,944 2,747,893 32
Deposits ....................................... 1,940,487 2,000,512 (3) 1,879,363 2,022,407 (7)
Total interest-earning liabilities ............. 2,702,114 2,362,201 14 2,780,923 2,322,348 20
Total liabilities .............................. 3,221,237 2,598,744 24 3,201,134 2,497,816 28
Total stockholders' equity ..................... 422,898 304,770 39 427,810 250,077 71
- --------------------------------------------------------------------------------------------------------------------------------
13
Ocwen Financial Corporation (OCN)
Third Quarter Results
October 26, 1998
(1) Includes OCN's pro rata share of average assets held by the joint venture
for the three and nine months ended September 30, 1997.
(2) Exclusive of the charge of $77,645 ($62,368 after tax) in the second quarter
of 1998 associated with OCN's interest only portfolio, the annualized return
on average assets would have been 3.20% for the nine months ended September
30, 1998 and the annualized return on average equity would have been 27.12%
for the nine months ended September 30, 1998.
(3) Before provision for loan losses, and including equity in earnings of
investment in joint venture for the three and nine months ended September
30, 1997. Exclusive of the $77,645 charge in the second quarter of 1998, the
efficiency ratio would have been 59.04% for the nine months ended September
30, 1998.
14
Ocwen Financial Corporation (OCN)
Third Quarter Results
October 26, 1998
OCWEN FINANCIAL CORPORATION
AVERAGE BALANCE/RATE ANALYSIS
Three months ended September 30,
----------------------------------------------------------------------------
1998 1997
------------------------------------- ------------------------------------
Average Annualized Average Annualized
Balance Interest Yield/Rate Balance Interest Yield/Rate
---------- --------- ---------- ---------- ---------- ----------
AVERAGE ASSETS:
Federal funds sold and repurchase
agreements......................... $ 185,765 $ 2,508 5.40% $ 341,868 $ 4,844 5.67%
Securities available for sale........ 597,261 8,982 6.02 232,957 8,725 14.98
Loans available for sale............. 467,449 11,390 9.75 172,053 4,267 9.92
Investment securities and other...... 103,379 1,617 6.26 48,018 695 5.79
Loan portfolio....................... 255,113 13,771 21.59 412,520 16,425 15.93
Discount loan portfolio.............. 1,357,124 50,274 14.82 1,216,417 42,370 13.93
---------- --------- ---------- ----------
Total interest-earning assets,
interest income.................... 2,966,091 88,542 11.94 $2,423,833 77,326 12.76
---------- --------- ---------- ----------
Non-interest earning cash............ 53,347 6,061
Allowance for loan losses............ (26,844) (25,866)
Investments in low-income housing
tax credit interests............... 138,716 95,399
Investment in joint ventures....... 1,132 25,552
Real estate owned, net............... 153,474 139,143
Investment in real estate............ 22,615 54,181
Other assets......................... 335,604 185,211
---------- ----------
Total assets......................... $3,644,135 $2,903,514
========== ==========
AVERAGE LIABILITIES AND STOCKHOLDERS'
EQUITY:
Interest-bearing demand deposits..... $ 50,912 $ 552 4.34% $ 34,521 $ 282 3.27%
Savings deposits..................... 1,606 9 2.24 1,933 11 2.28
Certificates of deposit.............. 1,887,969 30,585 6.48 1,964,058 30,764 6.27
---------- --------- ---------- ----------
Total interest-bearing deposits...... 1,940,487 31,146 6.42 2,000,512 31,057 6.21
Notes, debentures and other.......... 225,397 6,772 12.02 233,717 6,798 11.63
Obligations outstanding under lines
of credit.......................... 461,316 8,767 7.60 124,341 2,025 6.51
Securities sold under agreements to
repurchase......................... 74,495 1,168 6.27 3,075 56 7.28
Federal Home Loan Bank advances...... 419 6 5.73 556 8 5.76
---------- --------- ---------- ----------
Total interest-bearing liabilities,
interest expense................... 2,702,114 47,859 7.08 2,362,201 39,944 6.76
Non-interest bearing deposits........ 951 37,269
Escrow deposits...................... 201,221 80,840
Capital Trust Securities............. 125,000 68,548
Other liabilities.................... 191,951 49,886
---------- ----------
Total liabilities.................... 3,221,237 2,598,744
Stockholders' equity................. 422,898 304,770
---------- ----------
Total liabilities and stockholders'
equity............................. $3,644,135 $2,903,514
========== ==========
Net interest income before provision
for loan losses.................... $ 40,683 $ 37,382
========= ==========
Net interest rate spread........... 4.86% 6.00%
Net interest margin.................. 5.49% 6.17%
Ratio of interest-earning assets to
interest-bearing liabilities....... 110% 103%
15
Ocwen Financial Corporation (OCN)
Third Quarter Results
October 26, 1998
Nine months ended September 30,
--------------------------------------------------------------------------
1998 1997
------------------------------------- ------------------------------------
Average Annualized Average Annualized
Balance Interest Yield/Rate Balance Interest Yield/Rate
---------- --------- ---------- ---------- ---------- ----------
AVERAGE ASSETS: (Dollars in thousands)
Federal funds sold and repurchase agreements $ 130,421 $ 4,944 5.05% $ 179,132 $ 7,296 5.43%
Securities available for trading............ -- -- -- 4,393 248 7.53
Securities available for sale............... 571,862 25,655 5.98 293,393 23,407 10.64
Loans available for sale.................... 601,708 46,185 10.23 142,194 11,091 10.40
Investment securities and other............. 82,370 3,633 5.88 33,388 2,122 8.47
Loan portfolio.............................. 273,979 31,688 15.42 427,749 37,791 11.78
Discount loan portfolio..................... 1,347,753 129,352 12.80 1,228,267 116,840 12.68
---------- -------- ---------- ----------
Total interest-earning assets, interest
income................................... 3,008,093 241,457 10.70 2,308,516 198,795 11.48
-------- ----------
Non-interest earning cash................... 31,826 9,872
Allowance for loan losses................... (25,632) (21,274)
Investments in low-income housing tax
credit interests......................... 128,089 95,525
Investment in joint ventures................ 1,081 39,772
Real estate owned, net...................... 167,346 117,966
Investment in real estate................... 46,521 18,060
Other assets................................ 271,620 179,456
---------- ----------
Total assets.............................. 3,628,944 $2,747,893
========== ==========
AVERAGE LIABILITIES AND STOCKHOLDERS'
EQUITY:
Interest-bearing demand deposits............ $ 36,901 $ 1,165 4.21% $ 33,940 $ 1,005 3.95%
Savings deposits............................ 1,695 29 2.28 2,197 38 2.31
Certificates of deposit..................... 1,840,767 86,474 6.26 1,986,270 91,278 6.13
---------- -------- ---------- ----------
Total interest-bearing deposits........... 1,879,363 87,668 6.22 2,022,407 92,321 6.09
Notes, debentures and other................. 225,790 20,258 11.96 230,160 20,388 11.81
Obligations outstanding under lines of 556,581 28,390 6.80 46,225 2,298 6.63
credit...................................
Securities sold under agreements to 116,556 4,869 5.57 12,760 533 5.57
repurchase...............................
Federal Home Loan Bank advances............. 2,633 106 5.37 10,796 436 5.38
---------- -------- ---------- ----------
Total interest-bearing liabilities,
interest expense......................... 2,780,923 141,291 6.77 2,322,348 115,976 6.66
-------- ----------
Non-interest bearing deposits............... 14,546 26,986
Escrow deposits............................. 151,749 74,853
Capital Trust Securities.................... 125,000 22,849
Other liabilities........................... 128,916 50,780
---------- ----------
Total liabilities......................... 3,201,134 2,497,816
Stockholders' equity........................ 427,810 250,077
---------- ----------
Total liabilities and stockholders' equity $3,628,944 $2,747,893
========== ==========
Net interest income before provision for
loan losses.............................. $100,166 $ 82,819
======== ==========
Net interest rate spread.................... 3.93% 4.82%
Net interest margin......................... 4.44% 4.78%
Ratio of interest-earning assets to
interest-bearing liabilities............. 108% 99%
16
Ocwen Financial Corporation (OCN)
Third Quarter Results
October 26, 1998
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES September 30, December 31,
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION 1998 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (Unaudited) (Audited)
----------- -----------
Assets
Cash and amounts due from depository institutions ............................... $ 22,374 $ 12,243
Interest earning deposits ....................................................... 22,489 140,001
Federal funds sold and repurchase agreements .................................... 213,000 --
Securities available for sale, at market value .................................. 712,850 476,796
Loans available for sale, at lower of cost or market ............................ 337,336 177,041
Investment securities, net ...................................................... 88,430 13,295
Loan portfolio, net ............................................................. 224,741 266,299
Discount loan portfolio, net .................................................... 1,094,590 1,434,176
Investments in low-income housing tax credit interests .......................... 133,682 128,614
Investment in joint ventures .................................................... 1,206 1,056
Real estate owned, net .......................................................... 169,720 167,265
Investment in real estate ....................................................... 17,271 65,972
Premises and equipment, net ..................................................... 41,636 21,542
Income taxes receivable ......................................................... 34,701 --
Deferred tax asset .............................................................. 42,581 45,148
Excess of purchase price over net assets acquired ............................... 34,430 15,560
Principal, interest and dividends receivable .................................... 18,395 17,284
Escrow advances on loans ........................................................ 53,280 47,888
Other assets .................................................................... 128,016 38,985
----------- -----------
$ 3,390,728 $ 3,069,165
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Deposits ..................................................................... $ 2,076,537 $ 1,982,822
Securities sold under agreements to repurchase ............................... 60,798 108,250
Obligations outstanding under lines of credit ................................ 333,803 118,304
Notes, debentures and other interest bearing obligations ..................... 225,317 226,975
Accrued interest payable ..................................................... 43,887 32,238
Income taxes payable ......................................................... -- 3,132
Accrued expenses, payables and other liabilities ............................. 80,159 51,709
----------- -----------
Total liabilities .......................................................... 2,820,501 2,523,430
----------- -----------
Company-obligated, mandatorily redeemable securities of
subsidiary trust holding solely junior subordinated
debentures of the Company ................................................ 125,000 125,000
Minority interest ............................................................... 1,136 1,043
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; 60,794,193 and
60,565,835 shares issued and outstanding at September 30, 1998 and December 31,
1997, respectively .............................................................. 608 606
Additional paid-in capital ................................................... 166,193 164,751
Retained earnings ............................................................ 268,726 259,349
Net unrealized gain (loss) on securities available for sale, net of taxes .... 11,073 (5,014)
Net unrealized foreign currency translation loss, net of taxes ............... (2,509) --
----------- -----------
Total stockholders' equity ................................................. 444,091 419,692
----------- -----------
$ 3,390,728 $ 3,069,165
=========== ===========
17
Ocwen Financial Corporation (OCN)
Third Quarter Results
October 26, 1998
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Nine Months
---------------------------- ----------------------------
For the periods ended September 30, 1998 1997 1998 1997
------------ ------------ ------------ ------------
Interest income:
Federal funds sold and repurchase agreements ........ $ 2,508 $ 4,844 $ 4,944 $ 7,296
Securities available for sale ....................... 8,982 8,725 25,655 23,407
Securities held for trading ......................... -- -- -- 248
Loans available for sale ............................ 11,390 4,267 46,185 11,091
Loans ............................................... 13,771 16,425 31,688 37,791
Discount loans ...................................... 50,274 42,370 129,352 116,840
Investment securities and other ..................... 1,617 695 3,633 2,122
------------ ------------ ------------ ------------
88,542 77,326 241,457 198,795
------------ ------------ ------------ ------------
Interest expense:
Deposits ............................................ 31,146 31,057 87,668 92,321
Securities sold under agreements to repurchase ...... 1,168 56 4,869 533
Advances from the Federal Home Loan Bank ............ 6 8 106 436
Obligations outstanding under lines of credit ....... 8,767 2,025 28,390 2,298
Notes, debentures and other interest bearing
obligations ......................................... 6,772 6,798 20,258 20,388
------------ ------------ ------------ ------------
47,859 39,944 141,291 115,976
------------ ------------ ------------ ------------
Net interest income before provision for loan losses 40,683 37,382 100,166 82,819
Provision for loan losses ............................. 1,806 4,088 13,734 21,739
------------ ------------ ------------ ------------
Net interest income after provision for loan losses . 38,877 33,294 86,432 61,080
------------ ------------ ------------ ------------
Non-interest income:
Servicing fees and other charges .................... 15,348 7,321 39,044 17,510
Gains on interest earning ........................... 24,170 5,999 908 46,142
Gain on real estate owned, net ...................... 1,216 4,793 12,763 8,628
Other income ........................................ 17,123 7,318 33,316 7,898
------------ ------------ ------------ ------------
57,857 25,431 86,031 80,178
------------ ------------ ------------ ------------
Non-interest expense:
Compensation and employee benefits .................. 32,474 20,471 83,721 55,069
Occupancy and equipment ............................. 9,485 5,029 24,495 11,818
Net operating loss on investments in real estate and
certain low-income housing tax credit interests ... 2,696 622 4,988 1,819
Other operating expenses ............................ 20,861 5,097 42,573 16,397
------------ ------------ ------------ ------------
65,516 31,219 155,777 85,103
------------ ------------ ------------ ------------
Distributions on Company-obligated, mandatorily
redeemable securities of subsidiary trust holding
solely junior subordinated debentures ............... 3,398 1,850 10,195 1,850
Equity in earnings of investment in joint ventures .... -- 546 -- 16,220
------------ ------------ ------------ ------------
Income before income taxes .......................... 27,820 26,202 6,491 70,525
Income tax (expense) benefit .......................... (2,922) (6,179) 2,888 (14,911)
Minority interest in net (income) loss of consolidated
subsidiary .......................................... 33 142 (2) 384
------------ ------------ ------------ ------------
Net income .......................................... $ 24,931 $ 20,165 $ 9,377 $ 55,998
============ ============ ============ ============
Income per share:
Basic ............................................... $ 0.41 $ 0.35 $ 0.15 $ 1.02
============ ============ ============ ============
$ 0.41 $ 0.35 $ 0.15 $ 1.01
============ ============ ============ ============
Weighted average common shares outstanding:
Basic ............................................... 60,785,467 57,004,218 60,716,777 54,734,082
============ ============ ============ ============
Diluted ............................................. 61,074,499 57,749,958 61,249,163 55,341,404
============ ============ ============ ============
18
