Ocwen Financial Corporation
Jul 30, 2015

Ocwen Financial Announces Operating Results for Second Quarter 2015

ATLANTA, July 30, 2015 (GLOBE NEWSWIRE) -- Ocwen Financial Corporation, (NYSE:OCN) ("Ocwen" or the "Company"), a leading financial services holding company, today reported net income of $10 million, or $0.08 per share, for the three months ended June 30, 2015 compared to net income of $67 million, or $0.48 per share, for the three months ended June 30, 2014. Ocwen generated revenue of $463 million, down 16% compared to the second quarter of the prior year. Income from operations was $111 million for the three months ended June 30, 2015 compared to $208 million for the second quarter of 2014. Cash from Operating Activities was $210 million for the three months ended June 30, 2015, up $196 million over the same period last year.

"The Company made positive strides on many fronts in the second quarter. We continue to work closely with our regulators and monitors, and the environment remains stable. Our efforts to build out a strong 'bank-like' risk and compliance infrastructure are taking hold. We were profitable and generated strong operating cash flow. We executed on our asset sale strategy, including the sale of $3 billion of non-performing agency servicing, and we reduced corporate debt by $264 million while ending the quarter with almost half a billion dollars in available liquidity. Additionally, we executed our first servicing advance refinance of 2015 at better than expected rates, receiving strong support from the financing market," commented Ron Faris, President and CEO of Ocwen.

Mr. Faris continued, "We have also launched a cost improvement effort to right size our cost structure in line with the reduction in our assets and revenue. Our aim is to reduce our costs by over $150 million, while continuing to enhance the borrower experience, strengthen our risk and compliance infrastructure and deliver strong loss mitigation results. Similar to our plan to grow our origination capabilities, this cost improvement initiative is aggressive, but it is a critically important step in our transformation and one that is necessary to ensure our long-term success."

Second Quarter Results

Pre-tax income for the second quarter of 2015 was impacted by a number of significant items including but not limited to: $30 million of net gains from sales of performing and non-performing agency mortgage servicing rights (MSRs) with a total unpaid principal balance (UPB) of $56.5 billion, $(15) million of strategic advisor expenses and $(6) million of monitor costs. Servicing contributed $45 million of pre-tax income inclusive of the gain on sales of MSRs, and the Lending segment generated $14 million of pre-tax income for the second quarter of 2015.

Webcast and Conference Call

Ocwen will host a webcast and conference call on Thursday, July 30, 2015, at 5 p.m., Eastern Time, to discuss its financial results for the second 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: our servicer and credit ratings as well as other actions from various rating agencies, including the impact of downgrades of our servicer and credit ratings; 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 sell, fund and recover advances, repay borrowings and comply with debt covenants; 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, including our ability to successfully execute on our cost improvement initiative; 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 for the year ended December 31, 2014 (filed with the SEC on 5/11/15) and its quarterly report on Form 10-Q for the quarter ended March 31, 2015 (filed with the SEC on 5/18/15). 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 
  June 30,  March 31,  December 31,  September 30,  June 30, 
  2015  2015  2014  2014  2014 
           
Total unpaid principal balance of loans and REO serviced   $ 321,670,579  $ 382,214,002  $ 398,727,727  $ 411,279,614  $ 435,119,848
           
Non-performing loans and REO serviced as a % of total UPB (1) 13.0% 12.5% 13.2% 13.4% 12.9%
           
Prepayment speed (average CPR)(2)  15.7%(3) 13.3% 12.7% 12.8% 12.9%
           
(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 19.0% for prime loans and 11.6% for non-prime loans.    
         
Segment Results (Unaudited)        
(Dollars in thousands) 
  Three Months  Six Months 
For the Periods Ended June 30, 2015  2014  2015  2014 
Servicing        
Revenue   $ 423,207  $ 520,480  $ 894,332  $ 1,041,302
Expenses   (284,413)  (298,101)  (622,325)  (606,033)
Other expense, net   (94,215)  (130,851)  (180,707)  (267,118)
Income before income taxes   $ 44,579  $ 91,528  $ 91,300  $ 168,151
         
Lending        
Revenue   $ 39,312  $ 31,166  $ 77,059  $ 59,933
Expenses   (26,586)  (27,164)  (50,372)  (58,629)
Other income, net   1,719  3,051  3,742  6,328
Income before income taxes   $ 14,445  $ 7,053  $ 30,429  $ 7,632
         
Corporate Items and Other        
Revenue   $ 755  $ 1,467  $ 2,362  $ 3,180
Expenses   (41,276)  (20,237)  (57,971)  (30,075)
Other expense, net   (6,003)  (2,634)  (10,791)  (8)
Loss before income taxes   $ (46,524)  $ (21,404)  $ (66,400)  $ (26,903)
         
Corporate Eliminations        
Revenue   $ (23)  $ (39)  $ (58)  $ (80)
Expenses   23  39  58  80
Other income (expense), net   --  --  --  --
Income (loss) before income taxes   $ --  $ --  $ --  $ --
         
Consolidated income before income taxes   $ 12,500  $ 77,177  $ 55,329  $ 148,880
 
 
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(UNAUDITED)
  Three Months  Six Months 
For the Periods Ended June 30, 2015  2014  2015  2014 
Revenue        
Servicing and subservicing fees   $ 396,983  $ 491,673  $ 843,524  $ 982,132
Gain on loans held for sale, net   45,132  38,836  89,636  82,823
Other revenues   21,136  22,565  40,535  39,380
Total revenue   463,251  553,074  973,695  1,104,335
         
Expenses        
Compensation and benefits   105,843  110,602  210,987  216,239
Amortization of mortgage servicing rights   31,586  63,198  70,080  125,292
Servicing and origination   52,558  35,787  154,360  79,734
Technology and communications   41,260  39,997  80,611  76,973
Professional services   72,369  30,643  129,300  52,041
Occupancy and equipment   28,773  25,756  54,487  57,807
Other operating expenses   19,863  39,480  30,785  86,571
Total expenses   352,252  345,463  730,610  694,657
         
Other income (expense)        
Interest income   5,038  5,553  10,613  10,879
Interest expense   (124,897)  (136,207)  (244,293)  (276,080)
Gain on sale of mortgage servicing rights   30,306  --  56,712  --
Gain on extinguishment of debt   --  356  --  2,609
Other, net   (8,946)  (136)  (10,788)  1,794
Other expense, net   (98,499)  (130,434)  (187,756)  (260,798)
         
Income before income taxes   12,500  77,177  55,329  148,880
Income tax expense   2,594  10,165  11,034  21,382
Net income  9,906  67,012  44,295  127,498
Net income attributable to non-controlling interests   (168)  (57)  (202)  (42)
Net income attributable to Ocwen stockholders  9,738  66,955  44,093  127,456
Preferred stock dividends   --  (582)  --  (1,163)
Deemed dividend related to beneficial conversion feature of preferred stock   --  (415)  --  (831)
Net income (loss) attributable to Ocwen common stockholders  $ 9,738  $ 65,958  $ 44,093  $ 125,462
         
Earnings per share attributable to Ocwen common stockholders        
Basic   $ 0.08  $ 0.49  $ 0.35  $ 0.93
Diluted   $ 0.08  $ 0.48  $ 0.35  $ 0.91
         
Weighted average common shares outstanding        
Basic   125,311,133  134,221,668  125,291,788  134,724,905
Diluted   127,152,479  137,705,793  127,076,178  138,423,012
 
 
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(UNAUDITED)
 June 30,December 31,
  2015  2014 
Assets    
Cash   $ 320,080  $ 129,473
Mortgage servicing rights ($814,450 and $93,901 carried at fair value)   1,341,067  1,913,992
Advances   572,942  893,914
Match funded advances   2,181,493  2,409,442
Loans held for sale ($276,581 and $401,120 carried at fair value)   352,398  488,612
Loans held for investment - reverse mortgages, at fair value   2,097,192  1,550,141
Receivables, net   379,279  270,596
Deferred tax assets, net   97,209  76,987
Premises and equipment, net   39,629  43,310
Other assets ($8,157 and $7,335 carried at fair value)   623,350  490,811
Total assets   $ 8,004,639  $ 8,267,278
     
Liabilities and Equity    
Liabilities    
Match funded liabilities   $ 1,741,122  $ 2,090,247
Financing liabilities ($2,569,217 and $2,058,693 carried at fair value)   2,743,670  2,258,641
Other secured borrowings   1,290,431  1,733,691
Senior unsecured notes   350,000  350,000
Other liabilities   734,386  793,534
Total liabilities   6,859,609  7,226,113
     
     
Equity    
Ocwen Financial Corporation (Ocwen) stockholders' equity    
Common stock, $.01 par value; 200,000,000 shares authorized; 125,380,118 and 125,215,615 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively   1,254  1,252
Additional paid-in capital   525,897  515,194
Retained earnings   617,286  530,361
Accumulated other comprehensive loss, net of income taxes   (2,380)  (8,413)
Total Ocwen stockholders' equity   1,142,057  1,038,394
Non-controlling interest in subsidiaries   2,973  2,771
Total equity   1,145,030  1,041,165
Total liabilities and equity   $ 8,004,639  $ 8,267,278
 
 
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(UNAUDITED)
 
 For the Six Months Ended June 30, 
  2015  2014 
Cash flows from operating activities    
Net income   $ 44,295  $ 127,498
Adjustments to reconcile net income to net cash provided by operating activities:        
Amortization of mortgage servicing rights   70,080  125,292
Loss on valuation of mortgage servicing rights, at fair value  48,480  11,809
Impairment of mortgage servicing rights  1,608  --
Gain on sale of mortgage servicing rights   (56,712)  --
Realized and unrealized losses on derivative financial instruments   7,268  1,539
Provision for bad debts   24,686  52,564
Depreciation   8,420  10,846
Amortization of debt issuance costs   7,311  2,297
Gain on extinguishment of debt   --  (2,609)
(Gain) loss on sale of fixed assets   (1,095)  165
(Increase) decrease in deferred tax assets, net   (18,909)  16,547
Equity-based compensation expense   3,581  7,784
Gain on loans held for sale, net   (89,636)  (82,823)
Origination and purchase of loans held for sale   (2,314,488)  (4,501,731)
Proceeds from sale and collections of loans held for sale   2,517,096  4,422,560
Changes in assets and liabilities:        
Decrease in advances and match funded advances   383,028  123,299
Increase in receivables and other assets, net   (29,957)  (1,022)
Decrease in other liabilities   (84,690)  (116,971)
Other, net   14,599  12,979
Net cash provided by operating activities   534,965  210,023
     
 
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)
(Dollars in thousands)
(UNAUDITED)
 
  For the Six Months Ended June 30, 
  2015  2014 
Cash flows from investing activities    
Origination of loans held for investment - reverse mortgages   (530,402)  (357,104)
Principal payments received on loans held for investment - reverse mortgages   63,942  28,601
Purchase of mortgage servicing rights, net   (6,252)  (9,749)
Proceeds from sale of mortgage servicing rights   388,938  --
Acquisition of advances in connection with the purchase of mortgage servicing rights   --  (84,373)
Acquisition of advances in connection with the purchase of loans   --  (60,482)
Proceeds from sale of advances and match funded advances   128,821  --
Additions to premises and equipment   (8,038)  (5,092)
Proceeds from sale of premises and equipment   4,758  22
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)
Distributions of capital from unconsolidated entities   --  6,572
Other   2,158  1,459
Net cash provided by (used in) investing activities  43,925  (542,199)
     
Cash flows from financing activities    
Repayment of match funded liabilities   (349,125)  (292,297)
Proceeds from other secured borrowings   3,895,539  3,007,709
Repayments of other secured borrowings   (4,455,813)  (3,139,093)
Proceeds from issuance of senior unsecured notes   --  350,000
Payment of debt issuance costs   (18,610)  (6,417)
Proceeds from sale of mortgage servicing rights accounted for as a financing   --  123,551
Proceeds from sale of loans accounted for as a financing   532,856  381,579
Proceeds from sale of advances accounted for as a financing   --  81,828
Repurchase of common stock   --  (94,607)
Payment of preferred stock dividends   --  (1,163)
Proceeds from exercise of common stock options   413  1,176
Other   6,457  869
Net cash (used in) provided by financing activities   (388,283)  413,135
     
Net increase in cash   190,607  80,959
Cash at beginning of year   129,473  178,512
Cash at end of period   $ 320,080  $ 259,471
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