Ocwen Financial Corporation
Aug 1, 2013

Ocwen Financial Announces Operating Results for Second Quarter 2013

Revenue Grows 151% to $530.0 Million

ATLANTA, Aug. 1, 2013 (GLOBE NEWSWIRE) -- Ocwen Financial Corporation, (NYSE:OCN), a leading financial services holding company, today reported Net income of $76.7 million, or $0.53 per share, for the second quarter of 2013 compared to Net income of $44.8 million, or $0.32 per share, for the second quarter of 2012. Ocwen produced record revenue of $530.0 million, up 151% from the second quarter of 2012. Income from operations grew by 24% to $155.2 million for the second quarter of 2013 as compared to $125.5 million for the second quarter of 2012. Ocwen's Net cash provided by operating activity was $475.1 million.

Net income for the six months ended June 30, 2013 is $121.9 million, or $0.84 per share, as compared to $64.2 million, or $0.47 per share, for the same period in 2012. Revenue in the first half of 2013 increased 149% from the first half of 2012 to a total of $934.8 million.

Ocwen's normalized pre-tax earnings for the second quarter of 2013 were $165.9 million, a 130% increase over normalized pre-tax earnings in the second quarter of 2012 and a 64% increase over the first quarter of 2013. Pre-tax earnings on a GAAP basis for the second quarter of 2013 were $87.5 million, a 71% increase over the first quarter of 2013. The largest normalizing item is a net addition to reserves of $52.8 million for an expected contribution to a consumer relief fund pursuant to a possible settlement with state and federal agencies. In addition, Ocwen incurred $26.5 million in transition expenses related to the recent Homeward, ResCap and Ally transactions. Lastly, the normalization reverses $0.9 million of income contribution from sold operations. 

"We are pleased with Ocwen's strong core earnings and cash flow which should continue to grow with the boarding of our new acquisitions," commented Bill Erbey, Ocwen's Chairman. "Ocwen's recently announced acquisition of OneWest Bank's $78 billion servicing portfolio combined with other large bank transfers points toward continued growth as banks strategically reposition their mortgage servicing operations. Our current pipeline of potential new business opportunities on a probability-weighted basis exceeds $400 billion in unpaid principal balance (UPB). Moreover, regulatory and market trends, including greater prospects for GSE legislation and more private capital flowing into mortgage credit, provide excellent long-term prospects for Ocwen. We continue to build capacity in anticipation of further acquisitions to meet our obligations to our clients, borrowers, RMBS investors and shareholders."

Mr. Erbey continued, "We believe that higher interest rates will have little negative impact on earnings, as we have only a modest component of income related to originations, and assets and debt are match funded. Higher employment and an improving housing market, on the other hand, should boost Ocwen's earnings. The majority of Ocwen's earnings come from our non-prime portfolio which produces higher earnings as employment and home price improvement result in lower delinquencies."

Second Quarter 2013 Business Highlights

Subsequent Events

"We are pleased to have made progress toward a possible agreement with state and federal agencies relating to mortgage servicing practices covering Homeward, Litton and Ocwen. We have established a reserve based on our best estimate of the net amount to be contributed by Ocwen to a consumer relief fund." said Ron Faris, President and CEO. "Ocwen completed 28,137 modifications in the quarter, which is an increase of 16.3% over last quarter. Since 2009, Ocwen has helped over 340,000 families stay in their homes through sensible modifications. We are proud to have one of the best modification results of any servicer. Based on data from private-label securities, Ocwen consistently posts the highest rate of modifications and the lowest re-default percentage on modified non-prime loans. These results are possible because of the unique capabilities embedded in our industry leading servicing platform." 

Mr. Faris continued, "Ocwen's integration of the Homeward and ResCap servicing portfolios continues to meet or exceed expectations. The Homeward servicing portfolio transfer was completed in mid-April, and we expect that most of the transition-related expenses for Homeward have now been incurred. The first transfer of loans from the legacy ResCap platform to Ocwen's platform was completed on time in July. We expect to have all the non-prime loans, where most of the efficiency improvements are generated, transferred by early Fall. The success of the Homeward integration is shown in the three percentage point drop in the 90+ delinquency rate for the Homeward portfolio during the quarter. 

About Ocwen Financial Corporation

Ocwen Financial Corporation is a financial services holding company which, through its subsidiaries, is engaged in the servicing and origination of mortgage loans.  Ocwen is headquartered in Atlanta, Georgia, and has additional offices and operations in the District of Columbia, California, Florida, Iowa, New Jersey, Pennsylvania, Texas, the United States Virgin Islands, India, The Philippines and Uruguay. Utilizing proprietary technology, global infrastructure and world-class training and processes, we provide solutions that help homeowners and make our clients' loans worth more. Additional information is available at www.Ocwen.com.

Webcast and Conference call

The Company will host a webcast and conference call on Thursday, August 1, 2013, at 11 a.m. Eastern Time to discuss its financial results for the second quarter of 2013.

The conference call will be webcast live over the internet from the Company's website at www.Ocwen.com, click on the "Shareholder" section.  A replay of the conference call can also be accessed by dialing 1-203-369-1218 after 12:01 P.M. Eastern Time on Thursday, August 1, 2013, until 6:00 p.m. Eastern Time on August 8, 2013. 

Forward Looking Statements

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of future performance, and involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially.

Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to, the following: the characteristics of our servicing portfolio, including prepayment speeds along with delinquency and advance rates; our ability to grow and adapt our business, including the availability of new loan servicing and other accretive business opportunities; our ability to successfully modify delinquent loans, manage foreclosures and sell foreclosed properties; our ability to effectively manage our exposure to interest rate changes; uncertainty related to general economic and market conditions, delinquency rates, home prices and disposition timelines on foreclosed properties; uncertainty related to acquisitions, including our ability to integrate the systems, procedures and personnel of acquired companies; as well as other risks detailed in Ocwen's reports and filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2012 and on Form 10-Q for the quarter ended March 31, 2013. The forward-looking statements speak only as of the date they are made and should not be relied upon. Ocwen undertakes no obligation to update or revise the forward-looking statements, except as required by law.

Non-GAAP Performance Measures

This news release contains references to "normalized" results and "adjusted cash flow from operations," which are non-GAAP performance measures. We believe these non-GAAP performance measures may provide additional meaningful comparisons between current results and results in prior periods. Non-GAAP performance measures should be viewed in addition to, and not as an alternative for, the Company's reported results under accounting principles generally accepted in the United States. Further information regarding these measures and reconciliation to GAAP may be found on Ocwen's website.   

  
Residential Servicing Statistics (Dollars in thousands)
      
 At or for the three months ended
 June 30,March 31,December 31,September 30,June 30,
 20132013201220122012
Total unpaid principal balance of loans and REO serviced $436,255,383 $ 467,071,661(1) $203,665,716 $127,066,680 $127,873,224
           
Non-performing loans and REO serviced as a % of total UPB (2) 14.4% 15.0% 23.5% 23.6% 24.5%
           
Prepayment speed (average CPR)(3) 20.8%(4) 20.1% 14.9% 14.3% 15.5%
           
(1)  The servicing portfolio UPB at March 31, 2013 is revised from last quarter to exclude $2.4 billion of deferred principal for loans in forbearance. 
 
(2)  Performing loans include those loans that are less than 90 days past due and those loans for which borrowers are making scheduled payments under loan modification, forbearance or bankruptcy plans. We consider all other loans to be non-performing.
 
(3)  Constant Prepayment Rate for the prior three months. 
 
(4)  Includes average CPR of 26.1% for prime loans and 13.4% for non-prime loans
 
Segment Results (Dollars in thousands) (UNAUDITED)     
     
 Three MonthsSix Months
For the Periods Ended June 30,2013201220132012
Servicing        
Revenue  $ 495,033  $ 210,407  $ 869,300  $ 374,586
Operating expenses   282,651   80,936   494,262   163,801
Income from operations  212,382  129,471  375,038  210,785
Other expense, net   (74,665)   (57,069)   (189,900)   (103,906)
Income before income taxes  $ 137,717  $ 72,402  $ 185,138  $ 106,879
         
Lending       
Revenue  $ 33,735  $ —  $ 47,643  $ —
Operating expenses   28,941   —   40,041   —
Income from operations  4,794  —  7,602  —
Other income, net   5,327   —   7,545   —
 Income before income taxes  $ 10,121  $ —  $ 15,147  $ —
         
Corporate Items and Other       
Revenue  $ 1,241  $ 1,204  $ 17,954  $ 1,862
Operating expenses   63,248   5,099   84,216   8,495
Loss from operations  (62,007)  (3,895)  (66,262)  (6,633)
Other income, net   1,679   1,657   4,822   37
Loss before income taxes  $ (60,328)  $ (2,238)  $ (61,440)  $ (6,596)
         
Corporate Eliminations       
Revenue  $ (44)  $ (230)  $ (89)  $ (535)
Operating expenses   (44)   (131)   (89)   (279)
Loss from operations  —  (99)  —  (256)
Other income, net   —   99   —   256
Income (loss) before income taxes  $ —  $ —  $ —  $ —

Consolidated income before income taxes

 $ 87,510

 $ 70,164

 $ 138,845

 $ 100,283
 
 
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data) 
 (UNAUDITED)
 
 Three MonthsSix Months
For the Periods Ended June 30,2013201220132012
Revenue        
Servicing and subservicing fees  $ 482,632  $ 200,335  $ 850,125  $ 355,424
Gain on loans held for sale, net   21,631  —  28,380  —
Other revenues   25,702   11,046   56,303   20,489
Total revenue   529,965   211,381   934,808   375,913
         
Operating expenses        
Compensation and benefits  117,999  30,004  212,625  60,787
Amortization of mortgage servicing rights  70,369  19,097  118,252  33,411
Servicing and origination  11,747  5,877  34,423  9,150
Technology and communications  33,877  11,042  63,889  20,391
Professional services  66,652  5,943  80,138  14,502
Occupancy and equipment  25,596  10,280  43,845  25,585
Other operating expenses   48,556   3,661   65,258   8,191
Total operating expenses   374,796   85,904   618,430   172,017
         
Income from operations   155,169   125,477   316,378   203,896
         
Other income (expense)        
Interest income  9,114  2,038  16,223  4,350
Interest expense  (99,868)  (58,319)  (193,284)  (105,243)
Gain (loss) on debt redemption   3,192  —  (13,838)  —
Other, net   19,903   968   13,366   (2,720)
Other expense, net   (67,659)   (55,313)   (177,533)   (103,613)
         
Income before income taxes  87,510  70,164  138,845  100,283
Income tax expense   10,789   25,331   16,977   36,101
Net income  76,721  44,833  121,868  64,182
Preferred stock dividend  (1,519)  —  (3,004)  —
Deemed dividend related to beneficial conversion feature of convertible preferred stock   (1,086)   —   (2,172)   —
Net income attributable to Ocwen common stockholders $ 74,116  $ 44,833  $ 116,692  $ 64,182
         
Earnings per share attributable to Ocwen common stockholders        
Basic  $ 0.55  $ 0.33  $ 0.86  $ 0.48
Diluted  $ 0.53  $ 0.32  $ 0.84  $ 0.47
         
Weighted average common shares outstanding        
Basic 135,690,264 134,856,101 135,664,242 132,752,848
Diluted 144,721,047 138,155,373 139,591,958 138,100,822
 
 
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(UNAUDITED)
 
June 30,
2013
December 31,
2012
Assets    
Cash  $ 439,747  $ 220,130
Loans held for sale, at fair value  361,144  426,480
Advances  445,471  184,463
Match funded advances  2,960,324  3,049,244
Mortgage servicing rights, at amortized cost  1,688,038  678,937
Mortgage servicing rights, at fair value  97,163  85,213
Receivables, net  225,011  167,459
Deferred tax assets, net  96,353  92,136
Goodwill  390,640  381,560
Premises and equipment, net  62,917  37,536
Debt service accounts  84,248  88,748
Other assets   231,224   273,578
Total assets  $ 7,082,280  $ 5,685,484
     
Liabilities, Mezzanine Equity and Stockholders' Equity    
Liabilities    
Match funded liabilities  $ 2,391,832  $ 2,532,745
Other borrowings  2,172,078  1,096,679
Other liabilities   636,628   291,266
Total liabilities   5,200,538   3,920,690
     
Mezzanine Equity    
Series A Perpetual Convertible Preferred stock, $01 par value; 200,000 shares authorized; 162,000 shares issued and outstanding at June 30, 2013 and December 31, 2012; redemption value $162,000 plus accrued and unpaid dividends   155,544   153,372
     
 Stockholders' Equity    
Common stock, $.01 par value; 200,000,000 shares authorized; 135,754,992 and 135,637,932 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively  1,358  1,356
Additional paid-in capital  915,397  911,942
Retained earnings  821,257  704,565
Accumulated other comprehensive loss, net of income taxes   (11,814)   (6,441)
Total stockholders' equity   1,726,198   1,611,422
Total liabilities, mezzanine equity and stockholders' equity  $ 7,082,280  $ 5,685,484
CONTACT: Stephen Swett or Brad Cohen

         T: (203) 682-8200

         E: shareholderrelations@ocwen.com

         or

         John V. Britti

         Executive Vice President & Chief Financial Officer

         T: (561) 682-7535

         E: John.Britti@Ocwen.com