Ocwen Financial Corporation
Apr 30, 2015

Ocwen Financial Announces Preliminary Operating Results for First Quarter 2015

Generated Q1 2015 Net Income of $34 million and Cash Flow From Operating Activities of $323 million

ATLANTA, April 30, 2015 (GLOBE NEWSWIRE) -- Ocwen Financial Corporation, (NYSE:OCN) ("Ocwen" or the "Company"), a leading financial services holding company, today reported preliminary net income of $34.4 million, or $0.27 per share, for the three months ended March 31, 2015 compared to net income of $60.5 million, or $0.43 per share, for the three months ended March 31, 2014. Ocwen generated preliminary revenue of $510.4 million, down 7% compared to the first quarter of the prior year. Preliminary income from operations was $132.1 million for the three months ended March 31, 2015 compared to $202.1 million for the first quarter of 2014. Preliminary Cash Flow from Operating Activities was $323 million for the three months ended March 31, 2015, up 65% over the same period last year.

"I am proud of what we have accomplished as far as managing the business through this difficult transition period. We made great progress on our asset sale strategy, have returned to profitability and continue to generate substantial operating cash flow," commented Ron Faris, President and CEO of Ocwen. "However, I am not satisfied with only making $34 million in the quarter. We intend to do better."

Pre-tax income during the first quarter of 2015 was impacted by the following significant items: a $26.9 million gain from the sale of Freddie Mac performing loan mortgage servicing rights (MSRs) with an unpaid principal balance (UPB) of approximately $9.1 billion, a $12.9 million gain on the sale of certain legacy performing and non-performing whole loans, a $(17.8) million impairment charge due to a decline in the fair value of our government insured MSRs primarily resulting from the Federal Housing Administration (FHA) reducing the mortgage insurance premium rate by 50 bps during the quarter, $(9.0) million of monitor costs, $(8.4) million of strategic advisor expenses and $(8.3) million of fair value related changes. The Lending segment generated $16.0 million of pre-tax income during the quarter.

The Company also announced that it now currently intends to file its 2014 Form 10-K and first quarter 2015 Form 10-Q no later than May 29, 2015.

The financial results and other financial data presented in this press release are preliminary, based upon the Company's estimates and subject to completion of the Company's final financial closing procedures. Moreover, this data has been prepared on the basis of currently available information. The Company's independent auditor has not audited or reviewed, and does not express an opinion with respect to this data. This data does not constitute a comprehensive statement of the Company's financial results for the quarter ended March 31, 2015 or of its financial position for any period, and the Company's final data could differ materially from its preliminary data. The preliminary data presented in this press release incorporates the impact that would result if the Company fully reserved for its deferred tax asset.

Webcast and Conference Call

Ocwen will host a webcast and conference call on Thursday, April 30, 2015, at 5 p.m., Eastern Time, to discuss its preliminary financial results for the first quarter of 2015. The conference call will be webcast live over the internet from the Company's website at www.Ocwen.com, click on the "Shareholder Relations" section. A replay of the conference call will be available via the website approximately two hours after the conclusion of the call and will remain available for approximately 30 days.

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, with offices throughout the United States and support operations in India and the Philippines. Utilizing proprietary technology, global infrastructure and superior training and processes, Ocwen provides solutions that help homeowners and make our clients' loans worth more. Ocwen may post information that is important to investors on its website (www.Ocwen.com).

Forward-Looking Statements

This press 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 by their nature address matters that are, to different degrees, uncertain. Forward-looking statements 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: adverse effects on our business as a result of recent regulatory settlements; reactions to the announcement of such settlements by key counterparties; increased regulatory scrutiny and media attention, due to rumors or otherwise; uncertainty related to claims, litigation and investigations brought by government agencies and private parties regarding our servicing, foreclosure, modification and other practices; any adverse developments in existing legal proceedings or the initiation of new legal proceedings; our ability to effectively manage our regulatory and contractual compliance obligations; our ability to execute on our strategy to reduce the size of our Agency servicing portfolio; the adequacy of our financial resources, including our sources of liquidity and ability to fund and recover advances, repay borrowings and comply with debt covenants; our servicer and credit ratings as well as other actions from various rating agencies, including the impact of recent downgrades of our servicer and credit ratings; volatility in our stock price; the characteristics of our servicing portfolio, including prepayment speeds along with delinquency and advance rates; our ability to contain and reduce our operating costs; our ability to successfully modify delinquent loans, manage foreclosures and sell foreclosed properties; uncertainty related to legislation, regulations, regulatory agency actions, government programs and policies, industry initiatives and evolving best servicing practices; as well as other risks detailed in Ocwen's reports and filings with the Securities and Exchange Commission (SEC), including its annual report on Form 10-K/A for the year ended December 31, 2013 (filed with the SEC on 08/18/14) and its quarterly report on Form 10-Q for the quarter ended September 30, 2014 (filed with the SEC on 10/31/14). Anyone wishing to understand Ocwen's business should review its SEC filings. Ocwen's forward-looking statements speak only as of the date they are made and, except for our ongoing obligations under the U.S. federal securities laws, we undertake no obligation to update or revise forward-looking statements whether as a result of new information, future events or otherwise.

Residential Servicing Statistics          
(Dollars in thousands)          
           
 At or for the Three Months Ended
 March 31,December 31,September 30,June 30,March 31,
 20152014201420142014
Total UPB of loans and REO serviced  $382,214,002 $398,727,727 $411,279,614 $435,119,848 $449,570,596
           
Non-performing loans and REO serviced as a % of total UPB (1) 12.5% 13.2% 13.4% 12.9% 13.8%
           
Prepayment speed (average CPR)(2)  13.3%(3) 12.7% 12.8% 12.9% 11.2%
(1)  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.          
(2)  Constant Prepayment Rate for the prior three months.           
(3)  Includes average CPR of 15.8% for prime loans and 9.6% for non-prime loans.           
Preliminary Segment Results (Unaudited)    
(Dollars in thousands) 
     
For the Three Months Ended March 31,20152014
Servicing    
Revenue  $471,125 $520,823
Operating expenses  337,911 307,933
Income from operations  133,214 212,890
Other expense, net  (86,492) (136,267)
Income before income taxes  $46,722 $76,623
     
Lending    
Revenue  $37,746 $28,767
Operating expenses  23,785 31,464
Income (loss) from operations  13,961 (2,697)
Other income, net  2,022 3,276
Income before income taxes  $15,983 $579
     
Corporate Items and Other    
Revenue  $1,608 $1,711
Operating expenses  16,697 9,837
Loss from operations  (15,089) (8,126)
Other income (expense), net  (4,787) 2,627
Loss before income taxes  $(19,876) $(5,499)
     
Corporate Eliminations    
Revenue  $(35) $(40)
Operating expenses  (35) (40)
Income (loss) from operations 
Other income (expense), net 
Income (loss) before income taxes  $ — $ —
     
Consolidated income before income taxes  $42,829 $71,703
 
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(UNAUDITED)
   
For the Three Months Ended March 31,20152014
Revenue    
Servicing and subservicing fees  $446,541 $490,459
Gain on loans held for sale, net  44,504 43,987
Other revenues  19,399 16,815
Total revenue  510,444 551,261
     
Operating expenses    
Compensation and benefits  105,144 105,637
Amortization of mortgage servicing rights  38,494 62,094
Servicing and origination  101,802 43,947
Technology and communications  39,351 36,976
Professional services  56,931 21,398
Occupancy and equipment  25,714 32,051
Other operating expenses  10,922 47,091
Total operating expenses  378,358 349,194
     
Income from operations 132,086 202,067
     
Other income (expense)    
Interest income  5,575 5,327
Interest expense  (119,396) (139,873)
Gain on sale of mortgage servicing rights  26,406
Gain on extinguishment of debt  2,253
Other, net  (1,842) 1,929
Other expense, net  (89,257) (130,364)
     
Income before income taxes  42,829 71,703
Income tax expense  8,440 11,217
Net income 34,389 60,486
Net income (loss) attributable to non-controlling interests  (34) 15
Net income attributable to Ocwen stockholders 34,355 60,501
Preferred stock dividends  (581)
Deemed dividend related to beneficial conversion feature of preferred stock  (416)
 
Net income attributable to Ocwen common stockholders $34,355 $59,504
     
Earnings per share attributable to Ocwen common stockholders    
Basic  $0.27 $0.44
Diluted  $0.27 $0.43
     
Weighted average common shares outstanding    
Basic  125,272,228 135,227,067
Diluted  126,999,662 141,089,455
     
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
PRELIMINARY CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(UNAUDITED)
 March 31,December 31,
 20152014
Assets    
Cash  $242,332 $129,473
Mortgage servicing rights ($897,797 and $93,901 carried at fair value)  1,820,651 1,913,992
Advances  942,538 893,914
Match funded advances  2,252,967 2,409,442
Loans held for sale ($339,508 and $401,120 carried at fair value)  407,997 488,612
Loans held for investment - reverse mortgages, at fair value  1,808,141 1,550,141
Receivables, net  300,751 270,596
Premises and equipment, net  42,945 43,310
Other assets ($7,701 and $7,335 carried at fair value)  500,659 490,811
Total assets  $8,318,981 $8,190,291
     
Liabilities and Equity    
Liabilities    
Match funded liabilities  $2,000,676 $2,090,247
Financing liabilities ($2,296,892 and $2,058,693 carried at fair value)  2,488,607 2,258,641
Other secured borrowings  1,603,707 1,733,691
Senior unsecured notes  350,000 350,000
Other liabilities  822,244 793,534
Total liabilities  7,265,234 7,226,113
     
     
Equity    
Ocwen Financial Corporation (Ocwen) stockholders' equity
Common stock, $.01 par value; 200,000,000 shares authorized; 1,253 1,252
125,302,788 and 125,215,615 shares issued and outstanding at
March 31, 2015 and December 31, 2014, respectively 
Additional paid-in capital  517,915 515,194
Retained earnings  540,239 453,869
Accumulated other comprehensive loss, net of income taxes  (8,465) (8,908)
Total Ocwen stockholders' equity  1,050,942 961,407
Non-controlling interest in subsidiaries  2,805 2,771
Total equity  1,053,747 964,178
Total liabilities and equity  $8,318,981 $8,190,291
     
     
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(UNAUDITED)
     
 For the Three Months Ended March 31,
 20152014
Cash flows from operating activities    
Net income  $34,389 $60,486
Adjustments to reconcile net income to net cash provided by operating activities:    
Amortization of mortgage servicing rights  38,494 62,094
Amortization of debt issuance costs - senior secured term loan  1,552 1,087
Depreciation  4,344 5,540
Provision for bad debts  14,170 31,386
Impairment of mortgage servicing rights  17,769
Gain on sale of mortgage servicing rights  (26,406)
Gain on loans held for sale, net  (44,504) (43,987)
Realized and unrealized losses on derivative financial instruments  1,154 920
Gain on extinguishment of debt  (2,253)
Loss on valuation of mortgage servicing rights, at fair value  33,175 5,148
Increase in deferred tax assets, net  (3,680)
Equity-based compensation expense  2,117 1,427
Origination and purchase of loans held for sale  (1,036,150) (2,378,056)
Proceeds from sale and collections of loans held for sale  1,142,282 2,414,699
Changes in assets and liabilities:    
Decrease in advances and match funded advances  104,258 13,434
Decrease in receivables and other assets, net  518 48,437
Increase (decrease) increase in other liabilities  20,583 (41,170)
Other, net  15,050 20,270
Net cash provided by operating activities  322,795 195,782
     
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)
(Dollars in thousands)
(UNAUDITED)
     
 For the Three Months Ended March 31,
 20152014
Cash flows from investing activities    
Cash paid to acquire ResCap Servicing Operations (a component of Residential Capital, LLC)  (54,220)
Net cash paid to acquire controlling interest in Ocwen Structured Investments, LLC  (7,833)
Purchase of mortgage servicing rights, net  (3,267) (6,698)
Acquisition of advances in connection with the purchase of mortgage servicing rights  (83,942)
Acquisition of advances in connection with the purchase of loans  (60,482)
Proceeds from sale of advances and match funded advances  1,765
Proceeds from sale of mortgage servicing rights  49,465
Origination of loans held for investment - reverse mortgages  (235,271) (176,658)
Principal payments received on loans held for investment - reverse mortgages  26,170 14,030
Additions to premises and equipment  (3,918) (3,308)
Other  301 891
Net cash used in investing activities  (164,755) (378,220)
     
Cash flows from financing activities    
Repayment of match funded liabilities  (89,571) (3,151)
Proceeds from other secured borrowings  1,858,258 1,497,669
Repayments of other secured borrowings  (2,040,746) (1,652,903)
Payment of debt issuance costs  (12,643) (175)
Proceeds from sale of mortgage servicing rights accounted for as a financing  123,551
Proceeds from sale of loans accounted for as a financing  238,615 226,626
Proceeds from sale of advances accounted for as a financing  472 55,702
Repurchase of common stock   — (2,308)
Payment of preferred stock dividends   — (581)
Proceeds from exercise of common stock options  413 1,176
Other  21 706
Net cash (used in) provided by financing activities  (45,181) 246,312
     
Net increase in cash  112,859 63,874
Cash at beginning of year  129,473 178,512
Cash at end of period  $242,332 $242,386
CONTACT: FOR FURTHER INFORMATION CONTACT:

         Investors:

         Stephen Swett

         T: (203) 614-0141

         E: shareholderrelations@ocwen.com

         

         Media:

         John Lovallo

         T: (917) 612-8419

         E: jlovallo@levick.com

         

         Dan Rene

         T: (202) 973 -1325

         E:drene@levick.com