Ocwen Financial Corporation
Oct 28, 2015

Ocwen Financial Announces Operating Results for Third Quarter 2015

WEST PALM BEACH, Fla., Oct. 28, 2015 (GLOBE NEWSWIRE) -- Ocwen Financial Corporation, (NYSE:OCN) ("Ocwen" or the "Company"), a leading financial services holding company, today reported a net loss of $(66.8) million, or $(0.53) per share, for the three months ended September 30, 2015 compared to a net loss of $(75.3) million, or $(0.58) per share, for the three months ended September 30, 2014. Ocwen generated revenue of $405 million, down 21% compared to the third quarter of the prior year.  Cash Flows from Operating Activities were $239 million for the three months ended September 30, 2015, compared to $349 million during the same period last year.

"In the third quarter, we continued to make progress on our strategic and operating initiatives. Our asset sale strategy has succeeded in generating proceeds and gains for the Company, enabling us to reduce leverage and focus on simplifying our operations. Our operating cash flow remained strong, enabling us to end the quarter with more than $731 million in available liquidity, including $459 million of cash on hand. The capital markets also continue to demonstrate strong support for the Company, as we were able to successfully refinance our $1.8 billion OMART servicing advance facility and execute an amendment with our term loan lenders to give us more flexibility moving forward" commented Ron Faris, President and CEO of Ocwen.

Mr. Faris continued, "We are making solid progress in developing our lending capabilities including expansion of our product offerings. Additionally, we are progressing as expected on the cost improvement initiatives that we laid out in the third quarter and anticipate identifying additional opportunities to reduce our operating costs. We remain committed to investing in our risk, compliance and technology infrastructure, and delivering best-in-class service to our customers."

Third Quarter Results

Pre-tax loss for the third quarter of 2015 was $(55.9) million. Pre-tax results were impacted by a number of significant items including but not limited to: $41.2 million of net gains from sales of performing and non-performing agency mortgage servicing rights (MSRs) relating to loans with a total unpaid principal balance (UPB) of $22.0 billion, $(23.4) million of interest rate driven impairment of our GNMA MSRs carried at lower of cost or fair value, $(17.4) million in restructuring costs, including severance and Fiserv platform exit costs, $(12.5) million of monitor costs, $(11.1) million in legacy servicing claim reserves, $(11.0) million in legal and other settlement costs and $(8.2) million of expense incurred pursuant to our agreement with New Residential Investment Corp. in connection with downgrades to our S&P servicer ratings. Servicing recorded a $(12.7) million pre-tax loss inclusive of the gain on sales of MSRs, MSR fair value changes and legacy servicing claim reserves. The Lending segment generated $8.6 million of pre-tax income for the third quarter of 2015.

Additional Business Highlights

Webcast and Conference Call

Ocwen will host a webcast and conference call on Wednesday, October 28, 2015, at 5 p.m., Eastern Time, to discuss its financial results for the third 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 West Palm Beach, Florida, 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).

Note Regarding Available Liquidity

Due to high liquidity levels, Ocwen is currently foregoing borrowings on a number of warehouse and servicing advance facilities and funding a portion of loans and advances with cash. These assets are pledged to our debt facilities as collateral, and we can re‐borrow on the facilities with short notice. Available liquidity of $731 million represents GAAP cash on hand of $459 million plus this available borrowing capacity of $272 million (in each case as of September 30, 2015). Available liquidity is a non-GAAP financial measure. We believe this non-GAAP financial measure provides a useful supplement to discussion and analysis of our liquidity. We believe this non-GAAP financial measure provides an alternative way to view our liquidity that is instructive.  Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, Ocwen's reported results under accounting principles generally accepted in the United States. Other companies may use non-GAAP financial measures with the same or similar titles that are calculated differently than our non-GAAP financial measures. As a result, comparability may be limited.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements may be identified by a reference to a future period or by the use of forward-looking terminology. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Our business has been undergoing substantial change which has magnified such uncertainties. Readers should bear these factors in mind when considering such statements and should not place undue reliance on such statements. Forward-looking statements involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially. In the past, actual results have differed from those suggested by forward looking statements and this may happen again. 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 recent 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; our ability to recognize the benefits of our deferred tax assets; 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 SEC, including its annual report on Form 10-K for the year ended December 31, 2014 (filed with the SEC on May 11, 2015) and its quarterly report on Form 10-Q for the quarter ended June 30, 2015 (filed with the SEC on July 31, 2015). 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 we disclaim any 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 
 September 30,  June 30,  March 31,  December 31,  September 30, 
  2015    2015    2015    2014    2014  
Total unpaid principal balance of loans      
and REO serviced $  288,069,149 $  321,670,579 $  382,214,002 $  398,727,727 $  411,279,614 
      
Non-performing loans and REO serviced      
as a % of total UPB (1)  13.1% 13.0% 12.5% 13.2% 13.4%
      
Prepayment speed (average CPR)(2)(3) 14.7% 15.7% 13.3% 12.7% 12.8%
 
(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) Average Constant Prepayment Rate for the prior three months. 
(3) Average CPR for the three months ended September 30, 2015 includes 17.6% for prime loans and 11.8% for non-prime loans.
  

 

Segment Results (Unaudited)            
(Dollars in thousands)             
  Three Months  Nine Months 
For the Periods Ended September 30,  2015    2014    2015    2014  
Servicing    
Revenue $  374,936 $  485,303 $  1,269,269 $  1,526,606 
Expenses    318,439    313,964    940,764    919,998 
Other income (expense), net    (69,239)   (126,821)   (249,947)   (393,939)
Income (loss) before income taxes    (12,742)   44,518    78,558    212,669 
     
Lending    
Revenue   29,662   26,877   106,721   86,811 
Expenses    23,126    22,632    73,497    81,261 
Other income (expense), net    2,052    2,363    5,793    8,692 
Income before income taxes    8,588    6,608    39,017    14,242 
     
Corporate Items and Other    
Revenue   348   1,557   2,709   4,734 
Expenses    46,161    118,482    104,133    148,555 
Other income (expense), net    (5,951)   (6,467)   (16,740)   (6,476)
Loss before income taxes    (51,764)   (123,392)   (118,164)   (150,297)
     
Corporate Eliminations    
Revenue    -   (39)  (58)  (118)
Expenses    -    (39)   (58)   (118)
Other income (expense), net    -    -    -    - 
Income (loss) before income taxes    -    -    -    - 
     
Consolidated income (loss) before income taxes $  (55,918)$  (72,266)$  (589)$  76,614 
             

 

 
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(UNAUDITED)
     
  Three Months Ended September 30,  Nine Months Ended September 30, 
   2015    2014    2015    2014  
Revenue    
Servicing and subservicing fees $  360,017 $  465,964 $  1,203,541 $  1,448,096 
Gain on loans held for sale, net    27,298    27,218    116,934    110,041 
Other revenues    17,631    20,516    58,166    59,896 
Total revenue    404,946    513,698    1,378,641    1,618,033 
     
Expenses    
Compensation and benefits    102,612    99,879    313,599    316,118 
Amortization of mortgage servicing rights    18,108    60,783    88,188    186,075 
Servicing and origination    101,545    49,739    255,905    129,473 
Technology and communications    37,182    44,261    117,793    121,234 
Professional services    62,428    160,704    191,728    212,745 
Occupancy and equipment    31,043    24,697    85,530    82,504 
Other    34,808    14,976    65,593    101,547 
Total expenses    387,726    455,039    1,118,336    1,149,696 
     
Other income (expense)    
Interest income    5,693    6,593    16,306    17,472 
Interest expense    (118,313)   (133,049)   (362,606)   (409,129)
Gain on sale of mortgage servicing rights    41,246    -    97,958    - 
Gain on extinguishment of debt    -    -    -    2,609 
Other, net    (1,764)   (4,469)   (12,552)   (2,675)
Total other expense, net    (73,138)   (130,925)   (260,894)   (391,723)
     
Income (loss) before income taxes    (55,918)   (72,266)   (589)   76,614 
Income tax expense    10,832    2,992    21,866    24,374 
Net income (loss)    (66,750)   (75,258)   (22,455)   52,240 
Net income attributable to non-controlling interests    (119)   (123)   (321)   (165)
Net income (loss) attributable to Ocwen stockholders    (66,869)   (75,381)   (22,776)   52,075 
Preferred stock dividends    -    -    -    (1,163)
Deemed dividend related to beneficial conversion     
feature of preferred stock    -    (808)   -    (1,639)
Net income (loss) attributable to Ocwen common stockholders $  (66,869)$  (76,189)$  (22,776)$  49,273 
  
Earnings per share attributable to Ocwen common stockholders    
Basic $  (0.53)$  (0.58)$  (0.18)$  0.37 
Diluted    (0.53)   (0.58)   (0.18)   0.36 
     
Weighted average common shares outstanding    
Basic    125,383,639    130,551,197    125,322,742    133,318,381 
Diluted    125,383,639    130,551,197    125,322,742    136,881,326 

 

 
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(UNAUDITED)
   
 September 30,December 31,
   2015    2014  
Assets  
Cash $  458,674 $  129,473 
Mortgage servicing rights ($787,344 and $93,901 carried at fair value)   1,153,295    1,913,992 
Advances    517,378    893,914 
Match funded advances    1,955,618    2,409,442 
Loans held for sale ($235,909 and $401,120 carried at fair value)   526,972    488,612 
Loans held for investment - reverse mortgages, at fair value    2,319,515    1,550,141 
Receivables, net    361,572    270,596 
Deferred tax assets, net    63,866    76,987 
Premises and equipment, net    44,885    43,310 
Other assets ($18,551 and $13,400 carried at fair value)   609,279    490,811 
Total assets $  8,011,054 $  8,267,278 
   
Liabilities and Equity  
Liabilities  
Match funded liabilities $  1,589,846 $  2,090,247 
Financing liabilities ($2,789,663 and $2,058,693 carried at fair value)   2,953,518    2,258,641 
Other secured borrowings    1,001,070    1,733,691 
Senior unsecured notes    350,000    350,000 
Other liabilities    1,036,165    793,534 
Total liabilities    6,930,599    7,226,113 
   
Equity  
Ocwen Financial Corporation (Ocwen) stockholders' equity  
Common stock, $.01 par value; 200,000,000 shares authorized; 125,390,482 and
  125,215,615 shares issued and outstanding at September 30, 2015 and December 31,
  2014, respectively
   1,254    1,252 
Additional paid-in capital    527,622    515,194 
Retained earnings    550,373    530,361 
Accumulated other comprehensive loss, net of income taxes    (1,886)   (8,413)
Total Ocwen stockholders' equity    1,077,363    1,038,394 
Non-controlling interest in subsidiaries    3,092    2,771 
Total equity    1,080,455    1,041,165 
Total liabilities and equity $  8,011,054 $  8,267,278 
       

 

 
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(UNAUDITED)
 
 For the Nine Months Ended 
  September 30, 
   2015    2014  
Cash flows from operating activities  
Net income (loss) $  (22,455)$  52,240 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:      
Amortization of mortgage servicing rights    88,188    186,075 
Loss on valuation of mortgage servicing rights, at fair value    73,257    13,147 
Impairment of mortgage servicing rights    25,052    - 
Gain on sale of mortgage servicing rights    (97,958)   - 
Realized and unrealized losses on derivative financial instruments    8,529    1,955 
Provision for bad debts    25,272    49,583 
Depreciation    13,467    16,601 
Amortization of debt issuance costs    10,385    3,754 
Gain on extinguishment of debt    -    (2,609)
(Gain) loss on sale of fixed assets    (1,095)   2,093 
Decrease in deferred tax assets, net    5,700    35,884 
Equity-based compensation expense    5,130    9,372 
Gain on loans held for sale, net    (116,934)   (110,041)
Origination and purchase of loans held for sale    (3,713,311)   (6,007,152)
Proceeds from sale and collections of loans held for sale    3,935,420    6,013,059 
Changes in assets and liabilities:      
Decrease in advances and match funded advances    491,654    236,688 
Increase in receivables and other assets, net    (1,899)   (11,806)
Increase in other liabilities    30,726    46,243 
Other, net    14,866    23,929 
Net cash provided by operating activities    773,994    559,015 
   
Cash flows from investing activities  
Origination of loans held for investment - reverse mortgages    (781,002)   (565,670)
Principal payments received on loans held for investment - reverse mortgages    105,520    56,193 
Purchase of mortgage servicing rights, net    (10,055)   (19,395)
Proceeds from sale of mortgage servicing rights    598,059    287 
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    285,938    - 
Additions to premises and equipment    (18,335)   (7,716)
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    -    (7,834)
Distributions of capital from unconsolidated entities    -    6,572 
Other    4,082    4,248 
Net cash provided by (used in) investing activities    188,965    (732,368)
   
Cash flows from financing activities  
Repayment of match funded liabilities    (500,401)   (329,175)
Proceeds from other secured borrowings    5,647,016    4,352,495 
Repayments of other secured borrowings    (6,572,601)   (4,532,029)
Proceeds from issuance of senior unsecured notes    -    350,000 
Payment of debt issuance costs    (18,610)   (6,835)
Proceeds from sale of mortgage servicing rights accounted for as a financing    -    123,551 
Proceeds from sale of loans accounted for as a financing    803,924    572,031 
Proceeds from sale of advances accounted for as a financing    -    88,095 
Repurchase of common stock    -    (325,609)
Payment of preferred stock dividends    -    (1,163)
Proceeds from exercise of common stock options    413    1,176 
Other    6,501    1,467 
Net cash (used in) provided by financing activities    (633,758)   294,004 
   
Net increase in cash    329,201    120,651 
Cash at beginning of year    129,473    178,512 
Cash at end of period $  458,674 $  299,163 

 


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