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Exhibit 99.1
[GRAPHIC OMITTED]
OCWEN Ocwen Financial Corporation(R)
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FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION CONTACT:
Robert J. Leist, Jr.
Vice President & Chief Accounting Officer
T: (561) 682-7958
E: rleist@ocwen.com
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OCWEN FINANCIAL CORPORATION ANNOUNCES
FOURTH QUARTER AND 2004 NET INCOME
West Palm Beach, FL - (January 27, 2005) Ocwen Financial Corporation (NYSE:OCN)
today reported net income for the fourth quarter of 2004 of $4.1 million or
$0.07 per share compared to net income of $4.5 million or $0.07 per share for
the fourth quarter of 2003. For the year ended December 31, 2004 the Company
reported net income of $59.2 million or $0.90 per share as compared to $4.8
million or $0.07 per share in the same period in 2003. Net income for 2004
includes a net tax benefit of $30.8 million, primarily reflecting the partial
reversal of the deferred tax asset valuation allowance that was established in
prior years. Pre-tax income in 2004 was $28.2 million as compared to $5.0
million last year.
Chairman and CEO William C. Erbey stated, "We are pleased to report pre-tax
operating income in 2004 of $28.2 million, a $23.2 million increase over our
results in 2003. Our results are particularly gratifying because we succeeded in
diversifying our sources of income through the growth of our smaller core
businesses, partially offsetting a decrease in earnings from our Residential
Loan Servicing business, which faced substantial challenges from low interest
rates and very high prepayment speeds during 2004. We also achieved pre-tax
income in our non-core and corporate segments as compared to losses in these
segments last year. Among the highlights worthy of note in 2004 are the
following:
o Aggregate pre-tax income in our core businesses was $25.1 million in
2004 as compared to $27.9 million in 2003, a decline of only 10%,
notwithstanding a 49% decline in 2004 pre-tax income in Residential
Loan Servicing.
o Our Commercial Servicing business, which includes of our GSS joint
venture with Merrill Lynch that commenced in 2003, reported pre-tax
income of $0.6 million in 2004 as compared to a loss of $(4.2) million
last year.
o Our non-core businesses reported aggregate pre-tax income of $2.3
million as compared to a loss of $(10.1) million in 2003
o Our Corporate sector reflected pre-tax income of $0.8 million as
compared to a loss of $(12.8) million in 2003.
We continued to reduce our exposure to non-core assets, which stood at $67.7
million as of December 31, 2004 as compared to $182.3 million last year, a
decline of 63%. This reduction includes the sale in the fourth quarter of our
largest commercial asset, which had a book value of $44 million. Of the
remaining balance, $39.5 million or 58% consists of our subprime residual
securities trading portfolio, which continues to generate positive cash flow and
interest earnings.
As we previously announced, we have filed an application with the OTS to turn in
the thrift charter of Ocwen Federal Bank ("OFB"). This change, if approved, will
remove certain limits on our ability to grow our Residential Servicing business.
As an integral part of this change, we are continuing our efforts to secure new
sources of financing to replace the deposits that would be sold in connection
with turning in the thrift charter.
We are also pleased at the progress we are making in expanding the range and
scope of our mortgage origination services. On December 31, 2004, we enhanced
our ability to provide mortgage fulfillment and due diligence services through
the purchase of a due diligence operation, including staff, facilities and
systems, from a major Wall Street mortgage conduit, and simultaneously entered
into a one year renewable contract to provide them these services. We believe
this acquisition, together with our existing origination services capabilities,
will provide meaningful growth opportunities in the future.
Overall we have achieved positive results in 2004 in the face of significant
external challenges, and we believe we are well positioned to benefit from
increases in interest rates, and from an eventual decrease in mortgage
pre-payment speeds."
5
Ocwen Financial Corporation
Fourth Quarter Results
January 27, 2005
The Residential Loan Servicing business reported pre-tax income of $2.1 million
in the fourth quarter of 2004 vs. $5.2 million in the 2003 fourth quarter. For
2004, pre-tax income was $15.8 million as compared to $31.0 million in 2003.
These results reflect the continuing pressures from low interest rates and
rising prepayment speeds in our portfolio. Operating expenses increased in 2004
as compared to 2003, reflecting costs associated with our property management
contract with the United States Department of Veteran's Affairs and as a result
of reassuming, in the fourth quarter of 2003, certain collection activities that
had been performed by outside parties. As a result of high prepayment rates, as
well as reduced purchases of servicing rights, our servicing portfolio has
declined somewhat since the end of 2003. As of December 31, 2004, we were the
servicer of approximately 320 thousand loans with an unpaid principal balance
(UPB) of $34.5 billion, as compared to approximately 360 thousand loans and
$37.7 billion of UPB at December 31, 2003.
Our other core businesses reported aggregate pre-tax income of $1.8 million in
the fourth quarter of 2004 as compared to pre-tax income of $0.3 million in the
fourth quarter of 2003. For the year ended December 31, 2004, these businesses
reported aggregate pre-tax income of $9.3 million as compared to a loss of
$(3.1) million in the same period of 2003. These improvements primarily reflect
improvements in the results of OTX and Commercial Servicing.
Our non-core businesses recorded aggregate pre-tax income of $2.0 million for
the fourth quarter as compared to pre-tax income of $2.2 million in the same
period last year. In 2004, these businesses reported aggregate pre-tax income of
$2.3 million as compared to a pre-tax loss of $(10.1) million in 2003.
The Corporate Segment reported a pre-tax loss of $(1.0) million in the fourth
quarter of 2004 as compared to a loss of $(3.3) million in the same period last
year. For the year, Corporate generated pre-tax income of $0.8 million as
compared to a loss of $(12.8) million last year. Corporate results for 2004
include interest income on federal income tax return claims of $0.4 million and
$6.9 million for the quarter and year to date periods, respectively.
Results for 2004 include a net income tax benefit of $30.8 million. This benefit
is primarily due to the reversal of $37.0 million of the valuation allowance on
deferred tax assets that had been provided in prior years. This allowance was
reduced as a result of refund claims of $37.0 million filed with the IRS that
reduced our deferred tax asset as of December 31, 2004 and increased our
receivable balances by the same amount. The tax benefit is net of $6.2 million
of tax expense; primarily representing estimated federal taxes on 2004 earnings.
In summary, pre-tax income in 2004 increased by $23.2 million as compared to
2003, and non-core assets were reduced by 63% during the year.
Ocwen Financial Corporation is a diversified financial services holding company
with headquarters in West Palm Beach, Florida and operations in Canada, China,
Germany, India, Japan and Taiwan. Ocwen Financial Corporation is engaged in a
variety of businesses related to residential and commercial mortgage servicing,
real estate asset management, asset recovery, business process outsourcing and
the marketing and sales of technology solutions to third parties. Ocwen
Financial Corporation is a global leader in customer service excellence as a
result of our company-wide commitment to quality, integrity and accountability.
Additional information about Ocwen Financial Corporation is available at
www.ocwen.com.
This news 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, but not limited to,
interest rates and the impact of changes in interest rates and prepayment speeds
on our Residential Loan Servicing business, the impact of actions that may
result in our no longer being a thrift holding company, the adequacy of our
liquidity position and the outlook on reduction in non-core assets.
Forward-looking statements are not guarantees of future performance, and 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: general economic and market conditions, prevailing interest
or currency exchange rates, governmental regulations and policies, international
political and economic uncertainty, availability of adequate and timely sources
of liquidity, uncertainty related to dispute resolution and litigation, federal
income tax rates, recognition of deferred tax credits and real estate market
conditions and trends, as well as other risks detailed in OCN's reports and
filings with the Securities and Exchange Commission, including its periodic
report on Form 10-K for the year ended December 31, 2003 and its reports on Form
10-Q for the periods ended March 31, 2004, June 30, 2004 and September 30, 2004.
The forward-looking statements speak only as of the date they are made and
should not be relied upon. OCN undertakes no obligation to update or revise the
forward-looking statements.
6
Ocwen Financial Corporation
Fourth Quarter Results
January 27, 2005
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
Three Months Twelve Months
- ----------------------------------------------------------------- ---------------------------- ----------------------------
For the periods ended December 31, 2004 2003 2004 2003
- ----------------------------------------------------------------- ------------ ------------ ------------ ------------
Revenue
Servicing and related fees ....................................... $ 37,072 $ 38,041 $ 152,382 $ 139,744
Vendor management fees ........................................... 14,225 8,121 54,666 29,842
Gain (loss) on trading and match funded securities, net .......... (2,226) 420 (537) 3,344
Valuation gains (losses) on real estate .......................... (1,120) (734) (5,110) (7,430)
Gain (loss) on sales of real estate .............................. 1,705 57 1,556 466
Operating income (loss) from real estate ......................... (412) 1,666 605 5,128
Gain (loss) on debt repurchases .................................. -- -- -- (445)
Other income ..................................................... 2,865 1,300 19,465 6,848
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Non-interest revenue ........................................... 52,109 48,871 223,027 177,497
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Interest income .................................................. 8,121 6,296 23,676 24,122
Interest expense ................................................. 8,325 9,162 30,364 38,716
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Net interest income (expense) before provision for loan losses . (204) (2,866) (6,688) (14,594)
Provision for loan losses ........................................ (969) (14) (1,881) (2,684)
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Net interest income (expense) after provision for loan losses .. 765 (2,852) (4,807) (11,910)
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Total revenue ................................................. 52,874 46,019 218,220 165,587
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Non-interest expense
Compensation and employee benefits ............................... 23,054 19,716 87,284 72,221
Occupancy and equipment .......................................... 3,934 4,391 15,933 13,159
Technology and communication costs ............................... 6,574 6,544 26,049 21,121
Loan expenses .................................................... 6,739 3,416 27,313 14,252
Loss (gain) on investments in affordable housing properties ...... (76) (34) (255) 285
Professional services and regulatory fees ........................ 5,563 4,200 23,589 26,054
Other operating expenses ......................................... 2,178 3,386 10,069 10,409
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Non-interest expense ........................................... 47,966 41,619 189,982 157,501
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Distributions on Capital Securities ................................ -- -- -- 3,058
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Income (loss) before minority interest and income taxes ............ 4,908 4,400 28,238 5,028
Minority interest in net income (loss) of subsidiaries ............. (112) (184) (162) (492)
Income tax expense (benefit) ....................................... 938 130 (30,841) 748
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Net income (loss) .............................................. $ 4,082 $ 4,454 $ 59,241 $ 4,772
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Earnings (loss) per share
Basic ............................................................ $ 0.07 $ 0.07 $ 0.90 $ 0.07
Diluted .......................................................... $ 0.06 $ 0.07 $ 0.84 $ 0.07
Weighted average common shares outstanding
Basic ............................................................ 62,733,630 67,222,211 65,811,697 67,166,888
Diluted .......................................................... 63,879,194 68,446,366 73,197,255 68,063,873
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Ocwen Financial Corporation
Fourth Quarter Results
January 27, 2005
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except share data)
December 31, December 31,
2004 2003
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Assets
Cash and amounts due from depository institutions ..................................... $ 171,645 $ 229,606
Interest earning deposits ............................................................. 116,206 324
Trading securities, at fair value:
Investment grade ................................................................... 86,215 6,679
Subordinates and residuals ......................................................... 39,527 42,841
Real estate ........................................................................... 18,732 103,943
Affordable housing properties ......................................................... 5,641 7,410
Loans, net ............................................................................ 3,792 28,098
Match funded assets ................................................................... 280,760 130,087
Premises and equipment, net ........................................................... 37,440 41,943
Advances on loans and loans serviced for others ....................................... 240,430 374,769
Mortgage servicing rights ............................................................. 131,409 166,495
Receivables ........................................................................... 122,069 74,315
Other assets .......................................................................... 72,144 33,608
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Total assets ....................................................................... $ 1,326,010 $ 1,240,118
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Liabilities and Stockholders' Equity
Liabilities
Deposits ............................................................................ $ 301,299 $ 446,388
Escrow deposits ..................................................................... 125,977 116,444
Match funded liabilities ............................................................ 244,327 115,394
Lines of credit and other secured borrowings ........................................ 50,612 150,384
Debt securities ..................................................................... 231,249 56,249
Accrued interest payable ............................................................ 6,173 4,789
Accrued expenses, payables and other liabilities .................................... 33,218 31,926
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Total liabilities .................................................................. 992,855 921,574
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Minority interest in subsidiaries ..................................................... 1,530 1,286
Stockholders' Equity
Common stock, $.01 par value; 200,000,000 shares authorized: 62,739,478 and
67,467,220 shares issued and outstanding at December 31, 2004 and December 31, 2003,
respectively ...................................................................... 627 675
Additional paid-in capital ........................................................... 181,336 225,559
Retained earnings .................................................................... 149,650 90,409
Accumulated other comprehensive income (loss), net of taxes .......................... 12 615
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Total stockholders' equity ....................................................... 331,625 317,258
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Total liabilities and stockholders' equity ..................................... $ 1,326,010 $ 1,240,118
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8
Ocwen Financial Corporation
Fourth Quarter Results
January 27, 2005
Pre-Tax Income (Loss) by Business Segment
Three Months Twelve Months
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For the periods ended December 31, 2004 2003 2004 2003
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(Dollars in thousands)
Core businesses
Residential Loan Servicing ............................ $ 2,050 $ 5,235 $ 15,814 $ 31,043
OTX ................................................... (1,492) (3,195) (3,862) (11,520)
Ocwen Realty Advisors ................................. 1,454 1,666 6,466 5,432
Ocwen Recovery Group .................................. 918 1,878 3,916 5,300
Business Process Outsourcing .......................... 414 886 2,205 1,893
Commercial Servicing .................................. 512 (928) 573 (4,204)
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3,856 5,542 25,112 27,944
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Non-core businesses
Commercial Assets ..................................... (112) (707) (5,008) (9,399)
Affordable Housing .................................... (209) (1,280) (3,256) (4,888)
Subprime Finance ...................................... 2,325 4,168 10,568 4,188
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2,004 2,181 2,304 (10,099)
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Corporate Items and Other ............................... (952) (3,323) 822 (12,817)
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Income (loss) before minority interest and income taxes.. $ 4,908 $ 4,400 $ 28,238 $ 5,028
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Non-Core Assets
December 31, December 31,
(Dollars in thousands) 2004 2003
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Loans, net
Affordable housing ............................................................. $ 3,198 $ 6,545
All other ...................................................................... 594 21,553
Real estate ....................................................................... 18,732 103,943
Subordinates, residuals and other trading securities............................... 39,527 42,841
Affordable housing properties ..................................................... 5,641 7,410
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Total non-core assets .......................................................... $ 67,692 $ 182,292
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