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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.
Senior Vice President & Principal
Financial Officer
T: (561) 682-7958
E: robert.leist@ocwen.com
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OCWEN FINANCIAL CORPORATION ANNOUNCES
THIRD QUARTER NET INCOME
West Palm Beach, FL - (November 1, 2005) Ocwen Financial Corporation (NYSE:OCN)
today reported net income of $7.9 million or $0.13 per share for the third
quarter of 2005 and $13.2 million or $0.21 per share for the nine months ended
September 30, 2005. This compares to net income of $39.3 million or $0.61 per
share for the third quarter of 2004 and $55.2 million or $0.83 per share for the
nine month period in 2004. The third quarter and year to date results for 2004
include a net tax benefit of $31.8 million, primarily reflecting the partial
reversal of the deferred tax asset valuation allowance that was established in
prior years. Results for the three and nine months ended September 30, 2005 are
net of a tax provision of $2.3 million and $5.1 million, respectively.
Chairman and CEO William C. Erbey stated "Our pre-tax income of $10.2 million
reflects a positive trend, exceeding both the $7.5 million achieved in the same
period last year and the $5.2 million reported for the second quarter of this
year, although year to date pre-tax income of $18.3 million remains below the
$23.4 million recorded in the same period last year. Overall, we continued to
grow our non-interest revenue, posting a 14% increase from last quarter and a
27% increase as compared to the same period last year. Non-interest expenses
increased only 3% since last quarter, as we begin to realize the benefits of the
cost reduction measures undertaken earlier this year. We are pleased that both
our Residential and Commercial Servicing segments had increased earnings in the
third quarter. Residential Loan Servicing operations have begun to increase in
profitability as rate increases have improved our float earnings, although we
have not yet experienced a reduction in prepayment speeds that would further
enhance earnings in this segment. Commercial Servicing had an exceptional third
quarter, posting pre-tax income of $2.1 million, primarily reflecting asset
resolution fees earned in our domestic servicing operation and by GSS in Asia..
While not producing positive results in the third quarter, we believe that
Residential Origination Services has significant earnings potential and have
invested in resources during the third quarter with the goal of realizing that
potential in the future.
Having completed our first quarter after de-banking, our balance sheet remains
strong with $188.7 million of cash, $243.0 million of unutilized borrowing
capacity on our existing lines and $345.6 million of equity. We repurchased $9.5
million of our 3.25% convertible notes and $2.3 million of our 10.875% capital
trust securities for a net gain of $0.9 million. Further progress was made in
selling our remaining non-core assets, which were reduced to $5.3 million as of
September 30th as compared to $22.4 million at June 30th. During the third
quarter we also collected $65.3 million of income tax receivables related to
various claims from prior years."
The Residential Servicing segment reported pre-tax income of $7.7 million in the
third quarter of 2005 vs. $2.6 million in the 2004 third quarter. Year to date,
pre-tax income was $13.2 million in 2005 as compared to $15.6 million in the
same period last year. Within this segment, contribution before overhead charges
of the Residential Loan Servicing unit increased in the third quarter of 2005 by
208% as compared to the same period last year, primarily reflecting increased
float earnings and a decline in operating expenses. This improvement was
partially offset by a decline in contribution from the VA servicing contract
which continues to reflect lower transaction volumes in 2005 as compared to
2004. Year to date 2005 results in this segment also reflect the absence of the
one-time fees of $2.9 million recognized in the second quarter of 2004 from a
REALServicing(R) contract. Our servicing portfolio has grown during 2005. As of
September 30, 2005, we were the servicer of approximately 332 thousand loans
with an unpaid principal balance (UPB) of $36.5 billion as compared to
approximately 320 thousand loans and $34.5 billion of UPB at December 31, 2004.
Commercial Servicing reported $2.1 million of pre-tax income in the third
quarter of 2005 as compared to a pre-tax loss of $(0.2) million in the third
quarter of 2004. Year to date pre-tax income was $2.4 million in 2005 as
compared to a pre-tax loss of $(0.7) million in the same period last year. Our
third quarter results primarily reflect asset resolution fees earned in our
domestic servicing operations and in the Asia operations of GSS.
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Ocwen Financial Corporation
Third Quarter Results
November 1, 2005
Residential Origination Services reported a pre-tax loss of $(0.1) million in
the third quarter of 2005 as compared to income of $2.7 million in the same
period last year. Year to date pre-tax income was $4.5 million in 2005 as
compared to $10.0 million in the same period last year. Third quarter results in
this segment were significantly impacted by a decline in cash flows from our
remaining UK based residual securities resulting in reduced interest income and
a decline in the fair value of these trading securities. Additionally, we
incurred an operating loss in our new loan processing operations primarily
reflecting the need to increase processing staff in advance of increased
transaction volume. Offsetting these costs were earnings in Ocwen Realty
Advisors and our refinancing operations as well as a gain from a residual
securities transaction.
Business Process Outsourcing and Ocwen Recovery Group ("ORG") reported an
aggregate pre-tax loss of $(0.3) million in the third quarter of 2005 as
compared to pre-tax income of $1.4 million in the third quarter of 2004. Year to
date, these businesses recorded aggregate pre-tax income of $0.9 million in 2005
as compared to $4.8 million in 2004. Although revenue in these segments has
increased over the same periods last year, expenses have risen more rapidly. ORG
third quarter 2005 results reflect one-time settlements of contractual disputes
of approximately $0.5 million. Apart from this charge expenses in both units
declined during the third quarter as compared to the second quarter of this year
as cost reduction initiatives implemented some months ago began to yield
results.
The Corporate Segment recorded pre-tax income of $0.8 million in the third
quarter of 2005 as compared to $3.7 million in the third quarter of 2004. Year
to date, Corporate reported a pre-tax loss of $(2.6) million in 2005 as compared
to pre-tax income of $1.7 million in the same period of 2004. Corporate results
for 2005 include a pre-tax gain of $1.8 million in the second quarter from the
sale of our deposits in the debanking transaction, offset primarily by interest
expense retained in Corporate expenses representing the cost associated with
maintaining high cash balances during the second quarter in preparation for
debanking. Corporate results also include interest income on federal income tax
receivables of $0.9 million and $2.7 million for the third quarter of 2005 and
2004, respectively. Year to date, interest on income tax receivables amounted to
$1.9 million and $6.5 million in 2005 and 2004, respectively. These receivables,
in the amount of $65.3 million, were collected during the third quarter.
Our non-core assets were further reduced, declining from $22.4 million as of
June 30th to $5.3 million as of September 30th. During the third quarter, we
sold a portion of a real estate investment, received full payment on a
facilitating loan to the purchaser of an asset sold earlier this year and sold
our remaining affordable housing property. These transactions resulted in a net
gain of approximately $0.6 million. One of the three remaining commercial assets
was sold in October and another is subject to a sales contract that we
anticipate will close in the fourth quarter of 2005.
Income tax expense amounted to $2.3 million in the third quarter of 2005 as
compared to a benefit of $31.8 million in the third quarter of 2004. Year to
date, tax expense amounted to $5.1 million in 2005 as compared to a benefit of
$31.8 million in 2004. Tax expense for 2005 includes a one-time provision of
$1.1 million in the second quarter representing tax liabilities arising from the
recapture of bad debt reserves in connection with the debanking transaction. The
tax benefit for 2004 is primarily due to the reversal of $37 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 million
filed with the IRS that reduced our deferred tax asset as of September 30, 2004
and increased our receivable balances by the same amount. The tax benefit is net
of $5.1 million of tax expense on 2004 earnings primarily representing the
company's estimated federal effective tax rate of 20%.
Ocwen Financial Corporation ("Ocwen") is a leading provider of servicing and
origination processing solutions to the loan industry with headquarters in West
Palm Beach, Florida, offices in Orlando, Florida and Chicago, Illinois and
global operations in Canada, Germany, India, Japan and Taiwan. We make our
clients' loans worth more by leveraging our superior processes, innovative
technology and high-quality, cost-effective global human resources. Additional
information 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, the
outlook on rate increases and prepayment speed reduction, earnings potential of
our origination activities, and expectations as to the sales of commercial
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, federal income tax rates 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, 2004 and Form 10-Q for the quarters ended March
31 and June 30, 2005. 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.
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Ocwen Financial Corporation
Third Quarter Results
November 1, 2005
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
Three Months Nine Months
- ------------------------------------------------------------------ ---------------------------- ----------------------------
For the periods ended September 30, 2005 2004 2005 2004
- ------------------------------------------------------------------ ------------ ------------ ------------ ------------
Revenue
Servicing and related fees ....................................... $ 50,886 $ 35,767 $ 139,433 $ 116,549
Vendor management fees ........................................... 11,600 11,342 33,264 35,832
Gain (loss) on trading securities, net ........................... (743) (171) (3,409) 1,688
Valuation gains (losses) on real estate .......................... 13 (165) 106 (3,990)
Gain (loss) on sales of real estate .............................. 1,862 311 1,909 (149)
Operating income (loss) from real estate ......................... (296) 444 (635) 1,017
Gain (loss) on debt repurchases .................................. 897 -- 897 --
Other income ..................................................... 3,944 6,087 12,847 19,970
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Non-interest revenue ........................................... 68,163 53,615 184,412 170,917
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Interest income .................................................. 3,864 4,988 16,960 15,555
Interest expense ................................................. 8,340 7,141 25,852 22,040
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Net interest expense before provision for loan losses .......... (4,476) (2,153) (8,892) (6,485)
Provision for loan losses ........................................ (18) (94) (30) (913)
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Net interest income (expense) after provision for loan losses .. (4,458) (2,059) (8,862) (5,572)
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Total revenue ................................................. 63,705 51,556 175,550 165,345
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Non-interest expense
Compensation and employee benefits ............................... 23,723 21,300 72,449 64,229
Occupancy and equipment .......................................... 4,517 3,981 13,330 11,999
Technology and communication costs ............................... 7,589 6,190 22,850 19,476
Loan expenses .................................................... 6,875 5,864 18,671 20,573
Professional services and regulatory fees ........................ 4,586 4,208 14,963 18,026
Loss (gain) on investments in affordable housing
properties ..................................................... 1,193 (100) 1,717 (179)
Other operating expenses ......................................... 4,995 2,653 13,233 7,841
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Non-interest expense ........................................... 53,478 44,096 157,213 141,965
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Income (loss) before income taxes .................................. 10,227 7,460 18,337 23,380
Income tax expense (benefit) ....................................... 2,282 (31,845) 5,097 (31,779)
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Net income (loss) .............................................. $ 7,945 $ 39,305 $ 13,240 $ 55,159
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Earnings (loss) per share
Basic ............................................................ $ 0.13 $ 0.61 $ 0.21 $ 0.83
Diluted .......................................................... $ 0.12 $ 0.53 $ 0.21 $ 0.78
Weighted average common shares outstanding
Basic ............................................................ 62,975,006 64,637,454 62,843,375 66,853,296
Diluted .......................................................... 77,397,469 75,816,676 63,843,042 71,505,567
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Ocwen Financial Corporation
Third Quarter Results
November 1, 2005
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
September 30, December 31,
2005 2004
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Assets
Cash ..................................................................................... $ 188,673 $ 542,891
Trading securities, at fair value:
Investment grade ...................................................................... 41,717 86,215
Subordinates and residuals ............................................................ 30,078 39,527
Loans held for resale .................................................................... 163,003 8,437
Match funded assets (including advances on loans serviced for others of $315,694 and
$276,626) ............................................................................. 317,680 280,760
Advances on loans and loans serviced for others .......................................... 285,903 240,430
Mortgage servicing rights ................................................................ 115,097 131,409
Receivables .............................................................................. 53,139 126,719
Real estate .............................................................................. 4,779 18,732
Loans (net of allowance for loan losses of $47 and $4,546) ............................... 505 3,792
Premises and equipment, net .............................................................. 39,562 37,440
Other assets ............................................................................. 71,811 66,180
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Total assets .......................................................................... $ 1,311,947 $ 1,582,532
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Liabilities and Stockholders' Equity
Liabilities
Match funded liabilities ............................................................... $ 290,476 $ 244,327
Servicer liabilities ................................................................... 285,349 291,265
Lines of credit and other secured borrowings ........................................... 98,267 50,612
Debt securities ........................................................................ 219,429 231,249
Other liabilities ...................................................................... 71,306 56,850
Deposits ............................................................................... -- 290,507
Escrow deposits ........................................................................ -- 86,084
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Total liabilities ..................................................................... 964,827 1,250,894
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Minority interest in subsidiary .......................................................... 1,508 1,530
Stockholders' Equity
Common stock, $.01 par value; 200,000,000 shares authorized: 63,099,987 and 62,739,478
shares issued and outstanding ......................................................... 631 627
Additional paid-in capital .............................................................. 184,054 181,336
Retained earnings ....................................................................... 161,373 148,133
Accumulated other comprehensive income (loss), net of taxes ............................. (446) 12
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Total stockholders' equity .......................................................... 345,612 330,108
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Total liabilities and stockholders' equity ........................................ $ 1,311,947 $ 1,582,532
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Ocwen Financial Corporation
Third Quarter Results
November 1, 2005
Pre-Tax Income (Loss) by Business Segment
Three Months Nine Months
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For the periods ended September 30, 2005 2004 2005 2004
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(Dollars in thousands)
Core businesses
Residential Servicing ................. $ 7,695 $ 2,621 $ 13,241 $ 15,554
Commercial Servicing .................. 2,062 (180) 2,419 (736)
Ocwen Recovery Group .................. (649) 708 99 2,998
Residential Origination Services ...... (95) 2,651 4,464 10,042
Business Process Outsourcing .......... 392 686 754 1,792
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9,405 6,486 20,977 29,650
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Non-core businesses
Commercial Assets ..................... -- (1,845) -- (4,895)
Affordable Housing .................... -- (888) -- (3,046)
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-- (2,733) -- (7,941)
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Corporate Items and Other ............... 822 3,707 (2,640) 1,671
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Income (loss) before income taxes ....... $ 10,227 $ 7,460 $ 18,337 $ 23,380
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