Ocwen Financial Corporation
Feb 29, 2016

Ocwen Financial Announces Operating Results for Fourth Quarter and Full Year 2015


WEST PALM BEACH, Fla., Feb. 29, 2016 (GLOBE NEWSWIRE) -- Ocwen Financial Corporation, (NYSE:OCN) ("Ocwen" or the "Company"), a leading financial services holding company, today reported a net loss of $(224.3) million, inclusive of a non-cash charge of $(101.9) million to establish a valuation allowance against its deferred tax assets, or $(1.79) per share, for the three months ended December 31, 2015 compared to a net loss of $(521.8) million, or $(4.16) per share, for the three months ended December 31, 2014. Ocwen generated revenue of $362.5 million, down (26.5)% compared to the fourth quarter of the prior year, primarily driven by the impact of sales of agency mortgage servicing rights (MSRs) and portfolio run-off during 2015. Cash Flows used by Operating Activities were $(192.4) million for the three months ended December 31, 2015, compared to $(206.5) million during the same period last year.

The full year net loss for 2015 was $(246.7) million, inclusive of a fourth quarter non-cash charge of $(101.9) million to establish a valuation allowance against its deferred tax assets, or $(1.97) per share, as compared to $(469.6) million, or $(3.60) per share for 2014. Revenue for 2015 declined by (17.5)% to $1.7 billion.  The Company generated $582 million of Cash from Operating Activities in 2015 and ended the year with $331 million of available liquidity which was $202 million higher than the prior year-end.

"We continue to make progress in resolving legacy issues. We also continue to lower our corporate debt, ending the year with a corporate debt to equity ratio of under 0.9 to 1," commented Ron Faris, President and CEO of Ocwen. "We are also focused on continuous improvement in operational and service excellence, employee engagement, diversity and inclusion. We have made good progress on our cost improvement initiative announced last year, and we are committed to making further progress in this area, while continuing to focus on the borrower experience."

Mr. Faris continued, "Moving forward, our vision for Ocwen is to be a world-class asset origination and servicing company. We are very excited about the formal launch of our Automotive Capital Services commercial lending business, and we continue to invest in our other lending businesses, all of which we believe will drive earnings growth in the future. We believe the successful implementation of our strategy and its initiatives can, over time, restore the Company to profitability and earnings growth."

Fourth Quarter 2015 Results

Pre-tax loss for the fourth quarter of 2015 was $(129.3) million. Pre-tax results were impacted by a number of significant items including but not limited to: $(22.1) million of monitor costs, $(14.0) million of net losses from sales of non-performing agency MSRs, $(13.9) million in legal and other settlement costs, $9.7 million of benefit from fair value changes related to GNMA and GSE MSRs (excluding runoff) and $(8.2) million in restructuring costs. Servicing recorded a $(62.6) million pre-tax loss inclusive of the loss on sales of MSRs and MSR fair value changes. The Lending segment incurred a $(5.1) million pre-tax loss for the fourth quarter of 2015 driven by a 35% decline in lock volumes versus the prior quarter due to lower volumes from a network partner as well as lower portfolio refinance activity. For the full year 2015, the Lending business earned $34 million of pre-tax income, an improvement of $60.8 million over 2014. The Company also recorded a non-cash charge of $(101.9) million to establish a valuation allowance against its deferred tax assets in the United States and the United States Virgin Islands.

Additional Business Highlights

Automotive Capital Services

In the fourth quarter Ocwen formally launched a new commercial lending business line called Automotive Capital Services (ACS).  ACS makes short-term inventory-secured loans to independent used car dealers to finance their inventory.  As of February 25, 2016, Automotive Capital Services had entered 8 sales markets in 5 states and executed credit lines with 22 dealers for $19 million of new commitments.  Ocwen believes this business can provide meaningful income diversification and growth as it increases its scale through a national rollout.

Webcast and Conference Call

Ocwen will host a webcast and conference call on Monday, February 29, 2016, at 5 p.m., Eastern Time, to discuss its financial results for the fourth quarter of 2015. The conference call will be webcast live over the internet from the Company's website at www.Ocwen.com, and access can be found in 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, originates and services loans. We are headquartered in West Palm Beach, Florida, with offices throughout the United States and in the U.S. Virgin Islands and operations in India and the Philippines. We have been serving our customers since 1988. We may post information that is important to investors on our website (www.Ocwen.com).

Note Regarding Available Liquidity

To reduce interest expense in light of our liquidity levels, Ocwen has been 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 $331 million represents GAAP cash on hand of $257 million plus this available borrowing capacity of $74 million (in each case as of December 31, 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 of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to our beliefs regarding restoring the Company to profitability and earnings growth and making progress on our cost improvement initiatives. 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 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; 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; the adequacy of our financial resources, including our sources of liquidity and ability to sell, fund and recover advances, repay borrowings and comply with our debt agreements, including the financial and other covenants contained in them; 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, 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, 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.

FOR FURTHER INFORMATION CONTACT:

Investors:Media:
Stephen SwettJohn LovalloDan Rene
T: (203) 614-0141T: (917) 612-8419T: (202) 973 -1325
E: shareholderrelations@ocwen.com   E: jlovallo@levick.com       E: drene@levick.com   


Residential Servicing Statistics
(Dollars in thousands)
 At or for the Three Months Ended
December 31,
2015
September 30,
2015
June 30,
2015
March 31,
2015
December 31,
2014
Total unpaid principal balance of loans and REO serviced$250,966,112 $288,069,149 $321,670,579 $382,214,002 $398,727,727 
      
Non-performing loans and REO serviced as a % of total UPB (1)13.7%13.1%13.0%12.5%13.2%
      
Prepayment speed (average CPR)(2) (3)13.3%14.7%15.7%13.3%12.7%

(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) Average CPR for the three months ended December 31, 2015 includes 16.2% for prime loans and 11.1% for non-prime loans.

Segment Results (Audited)
(Dollars in thousands) 
 For the Three Months Ended December 31, For the Twelve Months Ended December 31,
 2015 2014 2015 2014
Servicing       
Revenue$344,268  $458,831  $1,613,537  $1,985,436 
Expenses281,108  723,324  1,221,879  1,643,323 
Other expense, net(125,785) (122,264) (375,782) (516,203)
Income (loss) before income taxes(62,625) (386,757) 15,876  (174,090)
        
Lending       
Revenue18,003  32,409  124,724  119,220 
Expenses24,202  75,011  97,692  156,272 
Other income, net1,090  1,518  6,933  10,210 
Income (loss) before income taxes(5,109) (41,084) 33,965  (26,842)
        
Corporate Items and Other       
Revenue186  2,090  2,895  6,825 
Expenses54,538  87,215  158,671  235,769 
Other expense, net(7,186) (6,807) (23,926) (13,283)
Loss before income taxes(61,538) (91,932) (179,702) (242,227)
        
Corporate Eliminations       
Revenue  (38) (58) (156)
Expenses  (38) (58) (156)
Other income (expense), net       
Income (loss) before income taxes       
        
Consolidated loss before income taxes$(129,272) $(519,773) $(129,861) $(443,159)


OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS 
(Dollars in thousands, except per share data)
(AUDITED)
 
 For the Three Months Ended
December 31,
 For the Twelve Months Ended
December 31,
 2015 2014 2015 2014
Revenue       
Servicing and subservicing fees$328,256  $446,079  $1,531,797  $1,894,175 
Gain on loans held for sale, net18,035  $24,256  134,969  134,297 
Other revenues16,166  $22,957  74,332  82,853 
Total revenue362,457  493,292  1,741,098  2,111,325 
        
Expenses       
Compensation and benefits101,456  99,412  415,055  415,530 
Goodwill impairment loss  420,201    420,201 
Amortization of mortgage servicing rights11,006  64,300  99,194  250,375 
Servicing and origination88,655  73,266  344,560  202,739 
Technology and communications36,965  45,819  154,758  167,053 
Professional services84,665  113,922  276,393  326,667 
Occupancy and equipment27,334  26,675  112,864  109,179 
Other9,767  41,917  75,360  143,464 
Total expenses359,848  885,512  1,478,184  2,035,208 
        
Other income (expense)       
Interest income2,014  5,519  18,320  22,991 
Interest expense(119,767) (132,628) (482,373) (541,757)
Gain (loss) on sale of mortgage servicing rights, net(14,037)   83,921   
Gain on extinguishment of debt      2,609 
Other, net(91) (444) (12,643) (3,119)
Total other expense, net(131,881) (127,553) (392,775) (519,276)
        
Loss before income taxes(129,272) (519,773) (129,861) (443,159)
Income tax expense94,985  2,022  116,851  26,396 
Net loss(224,257) (521,795) (246,712) (469,555)
Net loss (income) attributable to non-controlling interests16  (80) (305) (245)
Net loss attributable to Ocwen stockholders (224,241) (521,875) (247,017) (469,800)
Preferred stock dividends      (1,163)
Deemed dividend related to beneficial conversion feature of preferred stock      (1,639)
Net loss attributable to Ocwen common stockholders $(224,241) $(521,875) $(247,017) $(472,602)
        
Loss per share attributable to Ocwen common stockholders       
Basic$(1.79) $(4.16) $(1.97) $(3.60)
Diluted(1.79) (4.16) (1.97) (3.60)
        
Weighted average common shares outstanding       
Basic125,295,594  125,564,301  125,315,899  131,362,284 
Diluted125,295,594  125,564,301  125,315,899  131,362,284 


OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS 
(Dollars in thousands, except share data)
(AUDITED)
 
 December 31,
 2015
 December 31,
 2014
Assets   
Cash$257,272  $129,473 
Mortgage servicing rights ($761,190 and $93,901 carried at fair value)1,138,569  1,913,992 
Advances, net444,298  893,914 
Match funded advances1,706,768  2,409,442 
Loans held for sale ($309,054 and $401,120 carried at fair value)414,046  488,612 
Loans held for investment - reverse mortgages, at fair value2,488,253  1,550,141 
Receivables, net286,981  270,596 
Deferred tax assets, net  76,987 
Premises and equipment, net57,626  43,310 
Other assets ($14,352 and $7,335 carried at fair value)610,996  490,811 
Total assets$7,404,809  $8,267,278 
    
Liabilities and Equity   
Liabilities   
Match funded liabilities$1,584,049  $2,090,247 
Financing liabilities ($2,933,066 and $2,058,693 carried at fair value)3,089,255  2,258,641 
Other secured borrowings782,423  1,733,691 
Senior unsecured notes350,000  350,000 
Other liabilities744,444  793,534 
Total liabilities6,550,171  7,226,113 
    
Equity   
Ocwen Financial Corporation (Ocwen) stockholders' equity   
Common stock, $.01 par value; 200,000,000 shares authorized; 124,774,516 and 125,215,615 shares issued and outstanding at December 31, 2015 and 2014, respectively1,248  1,252 
Additional paid-in capital526,148  515,194 
Retained earnings325,929  530,361 
Accumulated other comprehensive loss, net of income taxes(1,763) (8,413)
Total Ocwen stockholders' equity851,562  1,038,394 
Non-controlling interest in subsidiaries3,076  2,771 
Total equity854,638  1,041,165 
Total liabilities and equity$7,404,809  $8,267,278 


OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS 
(Dollars in thousands)
(AUDITED)
 
 For the Years Ended
December 31,
 2015 2014
Cash flows from operating activities   
Net loss$(246,712) $(469,555)
Adjustments to reconcile net loss to net cash provided by operating activities:   
Goodwill impairment loss  420,201 
Amortization of mortgage servicing rights99,194  250,375 
Loss on valuation of mortgage servicing rights, at fair value98,173  22,068 
Impairment of mortgage servicing rights17,341   
Gain on sale of mortgage servicing rights, net(83,921)  
Realized and unrealized losses on derivative financial instruments8,419  2,643 
Provision for bad debts101,226  84,751 
Depreciation19,159  21,910 
Amortization of debt issuance costs22,664  5,139 
Gain on extinguishment of debt  (2,609)
Provision for valuation allowance on deferred tax assets97,069  3,601 
(Increase) decrease in deferred tax assets other than provision for valuation allowance(28,136) 34,241 
Equity-based compensation expense7,291  10,729 
Gain on loans held for sale, net(134,969) (134,297)
Origination and purchase of loans held for sale(5,000,681) (7,430,340)
Proceeds from sale and collections of loans held for sale5,125,203  7,345,730 
Changes in assets and liabilities:   
Decrease in advances and match funded advances531,313  291,989 
Decrease (increase) in receivables and other assets, net46,463  (37,394)
Decrease in other liabilities(109,511) (94,508)
Other, net11,994  27,850 
Net cash provided by operating activities581,579  352,524 
    
Cash flows from investing activities   
Origination of loans held for investment - reverse mortgages(1,008,065) (816,881)
Principal payments received on loans held for investment - reverse mortgages151,107  86,234 
Purchase of mortgage servicing rights, net(12,355) (22,488)
Proceeds from sale of mortgage servicing rights686,838  287 
Acquisition of advances in connection with the purchase of mortgage servicing rights  (85,521)
Acquisition of advances in connection with the purchase of loans  (60,482)
Proceeds from sale of advances and match funded advances486,311  1,054 
Additions to premises and equipment(37,487) (11,430)
Proceeds from sale of premises and equipment4,758  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 
Other9,263  6,439 
Net cash provided by (used in) investing activities280,370  (958,247)
    
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS — (continued)
(Dollars in thousands)
(AUDITED)
 
 For the Years Ended
December 31,
 2015 2014
Cash flows from financing activities   
Repayment of match funded liabilities(506,198) (274,567)
Proceeds from other secured borrowings7,170,831  5,677,291 
Repayments of other secured borrowings(8,402,758) (5,809,239)
Proceeds from issuance of senior unsecured notes  350,000 
Payment of debt issuance costs(23,480) (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 financing1,024,361  783,009 
Proceeds from sale of advances accounted for as a financing  88,981 
Repurchase of common stock(4,142) (382,487)
Payment of preferred stock dividends  (1,163)
Proceeds from exercise of common stock options412  1,840 
Other6,824  6,303 
Net cash (used in) provided by financing activities(734,150) 556,684 
    
Net increase (decrease) in cash127,799  (49,039)
Cash at beginning of year129,473  178,512 
Cash at end of year$257,272  $129,473