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Ocwen Financial Announces Operating Results for Second Quarter 2015

  • Generated Q2 2015 Net Income of $10 million and Cash From Operating Activities of $210 million
  • Reduced corporate debt by $264 million and ended June with $490 million of liquidity
  • Announces cost improvement initiative

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.comSource:Ocwen Financial Corp.