UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
-----------------------------------------------
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 26, 1998
OCWEN ASSET INVESTMENT CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
VIRGINIA 001-14043 65-0736120
(STATE OR OTHER (COMMISSION (I.R.S. EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION)
THE FORUM, SUITE 1000
1675 PALM BEACH LAKES BOULEVARD, WEST PALM BEACH, FLORIDA 33401
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
(561) 682-8000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
N/A
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE>
ITEM 5. OTHER EVENTS
The news release of Ocwen Asset Investment Corp., dated October 26, 1998,
announcing its results for the third quarter of 1998, and certain other
information is attached hereto and filed herewith as Exhibit 99.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements.
Not Applicable.
(b) Pro Forma Financial Information.
Not Applicable
(c) Exhibits
(99) News release of Ocwen Asset Investment Corp. dated October
26, 1998.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, hereunto duly authorized.
OCWEN ASSET INVESTMENT CORP.
(Registrant)
By: /s/ Mark S. Zeidman
------------------------------
Mark S. Zeidman
Senior Vice President and
Chief Financial Officer
Date: October 26, 1998
3
<PAGE>
INDEX TO EXHIBIT
Exhibit No. Description Page
----------- ----------- ----
99 News release of Ocwen Asset Investment Corp dated 5
October 26, 1998, announcing its results for the
third quarter of 1998, and certain other
information.
4
================================================================================
Ocwen Asset Investment Corp.
1675 Palm Beach Lakes Boulevard
West Palm Beach, FL 33401
NYSE Symbol: OAC
================================================================================
NEWS RELEASE: IMMEDIATE OCTOBER 26, 1998
OCWEN ASSET INVESTMENT CORP. REPORTS THIRD QUARTER RESULTS
WEST PALM BEACH, FL - Ocwen Asset Investment Corp. (NYSE: OAC) today reported
Funds From Operations ("FFO") of ($0.37) per share and a net loss of ($0.40) per
diluted share, for the quarter ended September 30, 1998, resulting from a $0.75
per diluted share charge relating primarily to its commercial and residential
mortgage-backed securities.
STATEMENT FROM THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
William C. Erbey, Chairman and Chief Executive Officer, stated, "As you know,
the United States debt and equity markets -- including the financial service,
real estate investment trust and mortgage-backed security sectors -- have
experienced significant volatility, raising the very real possibility of an
economic downturn. As a result, OAC has decided that, for the foreseeable
future, it does not plan to acquire any additional assets or fund any additional
loans (beyond those to which it is currently committed), and it will work to
accelerate the stabilization of its existing assets and increase its overall
liquidity position. OAC views these steps as prudent measures to manage its
current assets and position OAC to take advantage of opportunities in the
future."
Based on the foregoing, OAC has begun to curtail each of its various business
lines, which include the acquisition of subordinate and residual interests in
residential and commercial mortgage-backed securities, underperforming
commercial real property acquisitions and residential and commercial mortgage
loan acquisitions, including construction and renovation loans.
THIRD QUARTER PERFORMANCE
OAC today reported FFO of ($7.1) million, or ($0.37) per diluted share, for the
third quarter of 1998 compared to $4.4 million, or $0.22 per diluted share, for
the same period a year ago. During the third quarter of 1998, OAC recognized a
charge of $15.6 million, or ($0.75) per diluted share after minority interest,
related primarily to its commercial and residential mortgage-backed securities.
FFO for the nine months ended September 30, 1998, was $4.1 million, or $0.21 per
diluted share, as compared to $6.4 million, or $0.33 per diluted share, for the
period May 14, 1997, to September 30, 1997, which began on the date OAC
completed its initial public offering.
OAC reported a net loss of $7.6 million for the quarter ended September 30,
1998, or ($0.40) per diluted share, compared to a gain of $4.4 million, or $0.22
per diluted share, for that same period a year ago. For the nine months ended
September 30, 1998, OAC reported a net loss of ($11.5) million, or ($0.61) per
diluted share.
For the quarter ended September 30, 1998, OAC closed transactions totaling
approximately $114.6 million, all of which were funded. This activity brings
OAC's total closed transactions since its initial public offering, net of
repayments, to $917.1 million as of September 30, 1998. Of this amount, $866.5
million has been funded and the remaining $50.6 million is to be funded over the
construction and renovation periods, which range from two to 18 months.
- --------------------------------------------------------------------------------
Contact Christine A. Reich (561) 682-8569
William C. Erbey (561) 682-8520
Mark S. Zeidman (561) 682-8600
- --------------------------------------------------------------------------------
5
<PAGE>
Ocwen Asset Investment Corp. (OAC)
Third Quarter Results
October 26, 1998
<TABLE>
<CAPTION>
Three Months Three Months Nine Months For the Period
Ended Ended Ended May 14, 1997 to
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------- ------------- ------------- ---------------
Dollars in thousands, except per share data
- -------------------------------------------------
SELECTED OPERATING RESULTS:
<S> <C> <C> <C> <C>
Net interest income .......................... $ 9,341 $ 5,512 $ 25,693 $ 7,995
Real estate income, net ...................... 543 65 1,092 65
Operating expenses ........................... 3,212 1,226 6,573 1,649
Loss on securities and derivatives ........... 15,646 -- 32,723 --
Extraordinary gain on repurchase of debt...... 615 -- 615 --
Net income (loss) ............................ (7,639) 4,350 (11,497) 6,410
Funds from operations ........................ (7,094) 4,372 4,068 6,432
Per share data:
Basic (loss) earnings per share .............. $ (0.40) $ 0.23 $ (0.61) $ 0.34
Diluted (loss) earnings per share ............ (0.40) 0.22 (0.61) 0.33
Funds from operations ........................ (0.37) 0.22 0.21 0.33
Dividends .................................... 0.44 0.24 1.10 (1) 0.34
Book value per share ......................... $ 12.81 $ 14.91 $ 12.81 $ 14.91
</TABLE>
(1) Does not include June, 1998 special dividend of $0.08 per share
attributable to OAC's remaining undistributed 1997 taxable income.
<TABLE>
<CAPTION>
SELECTED BALANCE SHEET ITEMS: September 30, 1998 December 31, 1997
------------------ -----------------
<S> <C> <C>
Assets:
Cash and cash equivalents ................................... $ 18,330 $ 48,677
Securities available for sale ............................... 395,495 146,027
Commercial and multifamily loans, net ....................... 55,116 --
Residential loans, net ...................................... 197,495 15,831
Discount loans, net ......................................... 8,589 26,979
Investment in real estate, net .............................. 209,851 45,430
Liabilities:
Securities sold under agreements to repurchase .............. 143,059 --
Obligations outstanding under lines of credit ............... 189,137 --
Obligations outstanding under lines of credit - real estate . 142,445 --
11.5% Senior Notes due 2005 ................................. 143,000 --
Minority interest ........................................... 28,370 2,942
Total shareholders' equity .................................. 242,981 271,258
</TABLE>
SELECTED REVIEW OF OPERATING RESULTS
NET INTEREST INCOME
Net interest income before provision for loan losses increased $4.2 million to
$9.7 million in the third quarter of 1998 versus the same period a year ago.
This increase was largely due to an $11.3 million increase in interest income
from securities available for sale and a $3.9 million increase in interest
income from residential loans, offset by a $2.0 million decrease in interest
income from repurchase agreements and interest bearing deposits and a $10.6
million increase in interest expense. These increases in interest income and
interest expense versus the same period a year ago are largely the result of OAC
being newly formed, only partially invested and not levered in the third quarter
of 1997. Net interest income before provision for loan losses increased $18.3
million to $26.2 million for the nine months ended September 30, 1998, versus
the same period a year ago. The following tables set forth information regarding
the total amount of income from interest-earning assets and the resultant
average yields. Information is based on daily average balances during the
reported periods.
6
<PAGE>
Ocwen Asset Investment Corp. (OAC)
Third Quarter Results
October 26, 1998
<TABLE>
<CAPTION>
For the three months ended September 30,
------------------------------ ------------------------------
(Dollars in Thousands) 1998 1997
------------------------------ ------------------------------
Average Annualized Average Annualized
Balance Interest Yield/Rates Balance Interest Yield/Rates
------- -------- ----------- ------- -------- -----------
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C>
Repurchase agreements and interest-bearing deposits . 54,861 714 5.16% 193,385 2,754 5.70%
Securities available for sale ....................... 412,265 13,807 13.29 65,699 2,492 15.17
Commercial and Multifamily loan portfolio, net ...... 50,323 1,512 11.92 -- -- --
Residential loan portfolio, net ..................... 181,545 3,863 8.44 294 6 7.58
Discount loans, net ................................. 8,527 393 18.29 11,480 260 9.08
------- ------- ----- ------- ------- -----
Total interest-earning assets .................. 707,521 20,289 11.38 270,858 5,512 8.14
------- ------- ----- ------- ------- -----
Interest-bearing liabilities:
Securities sold under agreements to repurchase ...... 163,253 3,082 7.49% -- -- --%
Obligations outstanding under lines of credit ....... 189,414 3,828 8.02 -- -- --
11.5% Senior Notes due 2005 ......................... 128,255 3,687 11.50 -- -- --
------- ------- ----- ------- ------- -----
Total interest-bearing liabilities ............. 480,922 10,597 8.74 -- -- --
------- ------- ----- ------- ------- -----
Net interest income/net interest spread................. 9,692 2.64% 5,512 8.14%
Net interest margin..................................... 5.43% 8.14%
For the year to date ended September 30,
------------------------------ ------------------------------
(Dollars in Thousands) 1998 1997
------------------------------ ------------------------------
Average Annualized Average Annualized
Balance Interest Yield/Rates Balance Interest Yield/Rates
------- -------- ----------- ------- -------- -----------
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C>
Repurchase agreements and interest-bearing deposits.. 26,375 1,010 5.12% 203,527 4,151 5.58%
Securities available for trading..................... 28,702 107 0.50 -- -- --
Securities available for sale........................ 285,298 29,990 14.05 61,525 3,497 15.55
Commercial and Multifamily loan portfolio, net....... 38,815 3,786 13.04 -- -- --
Residential loan portfolio, net...................... 108,017 6,476 8.02 201 6 7.58
Discount loans, net.................................. 14,845 1,719 15.48 9,632 341 9.68
------- ------- ----- ------- ------- -----
Total interest-earning assets................... 502,052 43,088 11.47 274,885 7,995 7.96
------- ------- ----- ------- ------- -----
Interest-bearing liabilities:
Securities sold under agreements to repurchase....... 126,071 7,049 7.48% -- -- --%
Obligations outstanding under lines of credit........ 108,514 6,102 7.52 -- -- --
11.5% Senior Notes due 2005.......................... 42,752 3,687 11.50 -- -- --
------- ------- ----- ------- ------- -----
Total interest-bearing liabilities.............. 277,337 16,838 8.12 -- -- --
------- ------- ----- ------- ------- -----
Net interest income/net interest spread................. 26,250 3.35% 7,995 7.96%
Net interest margin..................................... 6.99% 7.96%
</TABLE>
REAL ESTATE INCOME, NET
Real estate income, net increased $479,000 to $543,000 for the three months
ended September 30, 1998, versus the same period a year ago. This increase was
largely due to a $7.9 million increase in rental income offset by a $3.6 million
increase in rental operation expense, a $1.1 million increase in depreciation &
amortization expense and a $2.7 million increase in interest expense. These
increases in real estate operating income and expenses versus the same period a
year ago are largely the result of an increase in OAC's investment in real
estate, net of $209.8 million at September 30, 1998, versus $45.4 million at
September 30, 1997. Real estate income, net increased $1.0 million to $1.1
million for the nine months ended September 30, 1998, versus the same period a
year ago.
7
<PAGE>
Ocwen Asset Investment Corp. (OAC)
Third Quarter Results
October 26, 1998
OTHER EXPENSES
Other expenses increased $2.0 million to $3.2 million for the three months ended
September 30, 1998, versus the same period a year ago. This increase was largely
due to a $0.9 million increase in management fees and a $0.8 million increase in
other expenses (which consisted generally of servicing, legal, and accounting
expenses). These increases in other expenses versus the same period a year ago
are largely the result of OAC becoming fully invested and leveraging its assets
in 1998. Other expenses increased $4.9 million to $6.6 million for the nine
months ended September 30, 1998, versus the same period a year ago. The
management fees payable by OAC to Ocwen Capital Corporation ("OCC"), totaled
$1.6 million for the quarter ended September 30, 1998 and $4.1 million for nine
months ended September 30, 1998. In addition, OAC reimbursed OCC for due
diligence expenses of $568,000 and $936,000 in connection with its asset
acquisitions during the three and nine months ended September 30, 1998 (which
amounts are likely to be substantially reduced or eliminated to the extent OAC
does not review or acquire assets in the future).
LOSSES ON SECURITIES AND DERIVATIVES
Due to accelerated prepayment speeds, widening mortgage spreads, declining
market liquidity, and declining treasury yields, OAC recognized a $15.6 million
charge to earnings during the third quarter of 1998. This charge was comprised
of a $13.6 million writedown of the securities held for sale portfolio (which is
comprised of subordinate and residual mortgage-backed securities) and a $2.0
million charge on futures losses incurred on short positions in U.S. Treasury
futures used to hedge the residential loan portfolio. Total losses on securities
and derivatives for the nine months ended September 30, 1998, were $32.7
million.
MINORITY INTEREST IN NET LOSS OF CONSOLIDATED SUBSIDIARY
Minority interest in net loss of $721,000 and $399,000 for the three and nine
months ended September 30, 1998, respectively, arose from the investment by an
affiliate of OCC in the operating partnership that conducts the majority of
OAC's business activities. OAC has a 91.3% ownership interest in such operating
partnership
EXTRAORDINARY GAIN ON REPURCHASE OF DEBT
On September 30, 1998, OAC repurchased in the open market $7.0 million of its
$150.0 million outstanding 11 1/2% Senior Notes due 2005 (the "Senior Notes"),
which were issued on July 15, 1998, pursuant to Rule 144A of the Securities Act
of 1933, as amended (the "Securities Act"). This resulted in OAC realizing an
extraordinary gain of $615,000 during the third quarter of 1998. At September
30, 1998, the outstanding balance of the Senior Notes was $143.0 million.
SELECTED REVIEW OF SECURITIES PORTFOLIO
At September 30, 1998, OAC's securities available for sale portfolio was $395.5
million, which consisted of:
o Non-investment grade and unrated subordinate commercial mortgage-backed
securities having a book value of $134.1 million and a market value of
$129.6 million;
o Unrated residential subprime residuals having a book value of $254.7
million and a market value of $245.2 million; and
o Unrated subordinate residential mortgage-backed securities having a book
value of $20.4 million and a market value of $20.7 million.
8
<PAGE>
OAC's unrated subprime residual portfolio of $245.2 million consisted of:
o $112.8 million of seasoned residuals (i.e., securitized between 1994 and
1997) with overcollateralization reserves funded at approximately $125.3
million.
o $132.4 million of unseasoned residuals (i.e., securitized in 1998) with
overcollateralization reserves funded at approximately $23.3 million.
SELECTED REVIEW OF LIQUIDITY POSITION
To date, OAC has been receiving and has been able to manage and meet collateral
calls by its lenders. With respect to continuing to do so in the future, OAC's
cash and cash equivalents were $18.3 million at September 30, 1998. In addition,
OAC had unencumbered assets having a market value totaling $167.6 million at
September 30, 1998 ($61.5 million of single-family residential loans and $106.1
million of subordinate and residual mortgage-backed securities), of which $37.4
million of the securities has subsequently been used as collateral to obtain
additional borrowings and the remainder of which OAC is currently seeking to
leverage or pledge as additional collateral. Also, OAC is seeking to reduce its
obligations outstanding under lines of credit by conducting a securitization of
its single-family residential loan portfolio in the fourth quarter of 1998.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Securities sold under agreements to repurchase were $143.1 million at September
30, 1998, a decrease from $223.8 million at June 30, 1998. These obligations are
secured by certain of OAC's investments in subordinated interests in commercial
mortgage-backed securities and residual interests in subprime residential loan
securitizations. The following table summarizes the maturity dates of OAC's
securities sold under agreements to repurchase and the market value of the
related collateral securities as of September 30, 1998:
<TABLE>
<CAPTION>
Outstanding Commercial Securities Residential Securities
Maturity Date Borrowing Collateral Value Collateral Value
------------- --------- ---------------- ----------------
(Dollars in Millions)
<S> <C> <C> <C> <C>
0-30 days ............ $ 17.8 $ 20.9 $ --
6-12 months .......... 73.9 60.5 58.0
18 months and over ... 51.4 -- 104.7
------- ------- --------
Total ........... $ 143.1 $ 81.4 $ 162.7
======= ======= ========
</TABLE>
Currently, interest payments with respect to these obligations are approximately
$0.6 million per month (which assumes that the repurchase agreements which
mature within 30 days are renewed at approximately the same rate of interest).
Between October 1 and October 26, 1998, OAC closed additional repurchase
agreements totaling $14.4 million, each of which matures within 30 days.
OBLIGATIONS OUTSTANDING UNDER LINES OF CREDIT
Obligations outstanding under lines of credit amounted to $189.1 million at
September 30, 1998, as compared to $154.2 million at June 30, 1998. These
borrowings include:
o $28.9 million pursuant to a three year agreement, which is collateralized
by commercial loans and is described below under "Obligations Outstanding
Under Lines of Credit - Real Estate";
o the U.S. dollar equivalent of $24.2 million pursuant to a three year
agreement, which is denominated in Pounds Sterling and collateralized by
certain U.K. mortgage loan residual securities; and
o $136.0 million pursuant to an agreement which matures in April 1999, and
which is collateralized by single family residential mortgages at a 95
percent advance rate.
9
<PAGE>
Ocwen Asset Investment Corp. (OAC)
Third Quarter Results
October 26, 1998
OBLIGATIONS OUTSTANDING UNDER LINES OF CREDIT - REAL ESTATE
Obligations outstanding under lines of credit secured by real estate amounted to
$142.4 million at September 30, 1998, as compared to $115.2 million at June 30,
1998. These borrowings have a three-year term and an interest rate that floats
in accordance with LIBOR. Set forth below is information regarding OAC's
mortgage indebtedness relating to its investment in real estate at September 30,
1998:
<TABLE>
<CAPTION>
Principal Interest Maturity Annual
Property Amount Rate Date Payments
- -------- ------ ---- ---- --------
(Dollars in Millions)
<S> <C> <C> <C> <C>
Bush Street Property.. $75.0 (1) LIBOR plus 1.75% April 2001 (3) $5.5 (4)
Other................. $67.4 (2) LIBOR plus 1.75% June 2001 (3) $5.0 (4)
</TABLE>
- ---------------
1) Plus up to $5.0 million of additional advances for capital improvements to
the Bush Street Property.
2) Represents the portion of the outstanding balance under a $200 million loan
that is secured by real estate. As of September 30, 1998, OAC's investments
in Cortez Plaza, 450 Sansome Street, 10 U.N. Plaza, Prudential Plaza and
690 Market Street secured this loan, and an additional $28.9 million was
borrowed and secured by commercial mortgage loans under this line of
credit.
3) Subject to certain conditions, OAC may extend the maturity date by one
year.
4) Based on the interest rate in effect as of September 30, 1998.
RECENT DEVELOPMENTS
On July 22, 1998, OAC acquired the Prudential Building, an existing 488,080
square foot, 22-story office building located in the central business district
of Jacksonville, Florida, for $36.0 million in cash plus closing costs. The
purchase price was funded with cash on hand and advances from OAC's line of
credit. Simultaneous with the closing, OAC also leased 97% of the building back
to the Prudential Insurance Co. of America and sold two parcels of adjacent
parking areas to an adjacent hospital for approximately $4.1 million. The
Prudential lease has a term of four years with options to vacate the premises
during the term of the lease as well as three subsequent five year extension
options. OAC also entered into an agreement with the hospital to lease up to
150,000 square feet for a nine-year period should Prudential exercise its
termination option.
On August 28, 1998, OAC purchased for $19.8 million, a single B-rated
subordinate interest collateralized by a pool of ten first lien conduit quality
commercial loans, secured by 108 properties. The purchase price was funded with
cash on hand and a reverse repurchase agreement in the amount of $14.7 million,
which matures in September, 1999. Ocwen Federal Bank, FSB, a wholly-owned
subsidiary of Ocwen Financial Corporation, is the special servicer for these
loans.
On September 22, 1998, OAC declared a cash dividend of $0.44 per share for the
third quarter of 1998, which was payable to shareholders of record on September
30, 1998, and paid on October 15, 1998.
Also on September 22, 1998, OAC announced that its Board of Directors authorized
a program to repurchase up to $10 million of its issued and outstanding shares
of common stock. Any such repurchases will be at times, at prices per share, in
amounts and through solicited or unsolicited transactions in the open market, on
the New York Stock Exchange or in privately negotiated transactions, in each
case as OAC deems appropriate depending on market conditions, corporate
requirements and applicable securities laws. OAC expects to fund any repurchases
from operating cash flows and cash on hand.
On September 23, 1998, OAC filed a registration statement with the Securities
and Exchange Commission (the "SEC") as the first step in effecting its planned
exchange offer for its Senior Notes whereby the holders of the Senior Notes will
receive new Senior Notes which have been registered with the SEC.
On September 30, 1998, OAC filed with the SEC a shelf registration statement
allowing for the issuance of up to $250 million of common and preferred stock,
senior and subordinated debt and other securities. Mark S. Zeidman, Chief
Financial Officer, stated, "Since OAC's initial public offering, we have been
planning to file a shelf registration statement once OAC became eligible under
the SEC's regulations in order to take advantage of capital-raising
opportunities if and when they arise and are needed in the future. In light of
the SEC's new 'Plain English' rules becoming effective on October 1, 1998, we
thought it best to make this filing in September."
10
<PAGE>
Ocwen Asset Investment Corp. (OAC)
Third Quarter Results
October 26, 1998
On October 8, 1998, OAC closed on a commitment to finance a hotel construction
loan in the amount of $17.7 million, of which $1.2 million has been funded.
CURRENT COMMITMENTS
As of October 26, 1998, OAC had one outstanding commitment of $17.8 million for
a commercial real estate construction and renovation loan. All other previously
announced commitments or negotiations have been closed, discontinued or failed
to close. The remaining commitment is subject to various closing conditions,
including, but not limited to, completion of satisfactory due diligence efforts
and conditions the borrowers must satisfy prior to OAC funding the transaction.
This commitment for $17.8 million, the unfunded portion of the $17.7 million
transaction which was closed on October 8, 1998, and the $50.6 million of
unfunded balances on the commercial and multi-family loan portfolio as of
September 30, 1998, are expected to be funded through working capital and the
$200.0 million line of credit discussed above.
OTHER
OAC is a hybrid real estate investment trust (commonly known as a REIT)
headquartered in West Palm Beach, Florida. Since its inception, OAC has invested
in underperforming commercial real estate, subordinate commercial
mortgage-backed securities, subordinate and residual residential mortgage-backed
securities and commercial and residential mortgage loans.
CERTAIN STATEMENTS CONTAINED HEREIN ARE NOT BASED ON HISTORICAL FACTS AND ARE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT AND SECTION 21E OF THE SECURITIES ACT OF 1934, AS AMENDED. THESE
FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY REFERENCE TO A FUTURE PERIOD(S)
OR BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "COMMITMENT," "CONTINUE,"
"EXPECT," "FORESEE," "MAY," "PLAN," "WILL," FUTURE OR CONDITIONAL VERB TENSES,
SIMILAR TERMS, VARIATIONS ON SUCH TERMS OR NEGATIVES OF SUCH TERMS. ALTHOUGH OAC
BELIEVES THE ANTICIPATED RESULTS OR OTHER EXPECTATIONS REFLECTED IN SUCH
FORWARD-LOOKING STATEMENTS ARE BASED ON REASONABLE ASSUMPTIONS, ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THOSE INDICATED IN SUCH STATEMENTS DUE TO RISKS,
UNCERTAINTIES AND CHANGES WITH RESPECT TO A VARIETY OF FACTORS, INCLUDING, BUT
NOT LIMITED TO, INTERNATIONAL, NATIONAL, REGIONAL OR LOCAL ECONOMIC
ENVIRONMENTS, GOVERNMENT FISCAL AND MONETARY, PREVAILING INTEREST OR CURRENCY
EXCHANGE RATES, EFFECTIVENESS OF INTEREST RATE, CURRENCY EXCHANGE RATE AND OTHER
HEDGING STRATEGIES, LAWS AND REGULATIONS AFFECTING REAL ESTATE INVESTMENT
TRUSTS, INVESTMENT COMPANIES AND REAL ESTATE (INCLUDING CAPITAL REQUIREMENTS,
INCOME AND PROPERTY TAXATION, ACCESS FOR DISABLED PERSONS AND ENVIRONMENTAL
COMPLIANCE), UNCERTAINTY OF FOREIGN LAWS, COMPETITIVE PRODUCTS, PRICING AND
CONDITIONS (INCLUDING FROM COMPETITORS THAT HAVE SIGNIFICANTLY GREATER RESOURCES
THAN OAC), CREDIT, PREPAYMENT, BASIS, DEFAULT, SUBORDINATION AND ASSET/LIABILITY
RISKS, LOAN SERVICING EFFECTIVENESS, SATISFACTORY DUE DILIGENCE RESULTS,
SATISFACTION OR FULFILLMENT OF AGREED UPON TERMS AND CONDITIONS OF CLOSING OR
PERFORMANCE, TIMING OF TRANSACTION CLOSINGS, AVAILABILITY OF AND COSTS
ASSOCIATED WITH OBTAINING ADEQUATE AND TIMELY SOURCES OF LIQUIDITY, DEPENDENCE
ON EXISTING SOURCES OF FUNDING, ABILITY TO REPAY OR REFINANCE INDEBTEDNESS (AT
MATURITY OR UPON ACCELERATION), TO MEET COLLATERAL CALLS BY LENDERS (UPON
RE-VALUATION OF THE UNDERLYING ASSETS OR OTHERWISE), TO GENERATE REVENUES
SUFFICIENT TO MEET DEBT SERVICE PAYMENTS AND OTHER OPERATING EXPENSES AND TO
SECURITIZE WHOLE LOANS, TAXABLE INCOME EXCEEDING CASH FLOW, SIZE OF, NATURE OF
AND YIELDS AVAILABLE WITH RESPECT TO THE SECONDARY MARKET FOR MORTGAGE LOANS AND
FINANCIAL, SECURITIES AND SECURITIZATION MARKETS IN GENERAL, ALLOWANCES FOR LOAN
LOSSES, GEOGRAPHIC CONCENTRATIONS OF ASSETS (TEMPORARY OR OTHERWISE), TIMELY
LEASING OF UNOCCUPIED SQUARE FOOTAGE (GENERALLY AND UPON LEASE EXPIRATION),
CHANGES IN REAL ESTATE MARKET CONDITIONS (INCLUDING LIQUIDITY, VALUATION,
REVENUES, RENTAL RATES, OCCUPANCY LEVELS AND COMPETING PROPERTIES), ADEQUACY OF
INSURANCE COVERAGE IN THE EVENT OF A LOSS, KNOWN OR UNKNOWN ENVIRONMENTAL
CONDITIONS, EXTERNAL MANAGEMENT, CONFLICTS OF INTEREST, YEAR 2000 COMPLIANCE,
OTHER FACTORS GENERALLY UNDERSTOOD TO AFFECT THE REAL ESTATE ACQUISITION,
MORTGAGE AND LEASING MARKETS, SECURITIES INVESTMENTS AND RAPID GROWTH COMPANIES,
AND OTHER RISKS DETAILED FROM TIME TO TIME IN OAC'S REPORTS AND FILINGS WITH THE
SEC, INCLUDING ITS REGISTRATION STATEMENTS ON FORMS S-3, S-4 AND S-11 AND ITS
PERIODIC REPORTS ON FORMS 10-Q, 8-K AND 10-K. GIVEN THESE UNCERTAINTIES, READERS
ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH STATEMENTS, AND OAC DOES NOT
UNDERTAKE TO REVISE, AND SPECIFICALLY DISCLAIMS ANY OBLIGATION, TO PUBLICLY
RELEASE THE RESULT OF ANY REVISIONS WHICH MAY BE MADE TO, ANY FORWARD-LOOKING
STATEMENTS TO REFLECT THE OCCURRENCE OF ANTICIPATED OR UNANTICIPATED EVENTS OR
CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS
ATTACHED ARE THE CONSOLIDATED FINANCIAL STATEMENTS.
11
<PAGE>
Ocwen Asset Investment Corp. (OAC)
Third Quarter Results
October 26, 1998
OCWEN ASSET INVESTMENT CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
(Unaudited) (Audited)
------------- -------------
<S> <C> <C>
ASSETS
Cash and amounts due from depository institutions ........................ $ 3,135,888 $ 331,047
Interest bearing deposits ................................................ 15,193,815 48,346,076
Securities available for sale, at market value ........................... 395,495,423 146,026,907
Commercial and multifamily loan portfolio, net ........................... 55,116,284 --
Residential loan portfolio, net .......................................... 197,495,230 15,831,479
Discount loan portfolio, net ............................................. 8,589,370 26,978,888
Investment in real estate, net ........................................... 209,851,125 45,430,039
Principal and interest receivable ........................................ 5,967,421 2,518,272
Deposits on pending asset acquisitions ................................... -- 1,000,000
Other assets ............................................................. 19,553,108 1,540,633
------------- -------------
Total assets .......................................... $ 910,397,664 $ 288,003,341
============= =============
LIABILITIES:
Securities sold under agreements to repurchase ....................... $ 143,058,656 $ --
Obligations outstanding under lines of credit ........................ 189,136,665 --
Obligations outstanding under lines of credit - secured by real estate 142,444,500 --
11.5% Senior Notes due 2005 .......................................... 143,000,000 --
Dividends and distributions payable .................................. 9,140,443 7,458,750
Accrued expenses, payables and other liabilities ..................... 12,267,243 6,344,783
------------- -------------
Total liabilities ..................................... 639,047,507 13,803,533
------------- -------------
Minority interest ........................................................ 28,369,583 2,941,541
------------- -------------
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value; 25,000,000 shares authorized;
0 shares issued and outstanding ................................... -- --
Common Stock, $.01 par value; 200,000,000 shares authorized;
18,965,000 shares issued and outstanding .......................... 189,650 189,650
Additional paid-in capital ........................................... 294,461,433 280,503,838
Distributions in excess of earnings .................................. (35,982,904) (2,107,331)
Unrealized loss on securities available for sale ..................... (13,719,114) (7,327,890)
Accumulative translation adjustments ................................. (1,968,491) --
------------- -------------
Total shareholders' equity ................................ 242,980,574 271,258,267
------------- -------------
Total liabilities and shareholders' equity ................ $ 910,397,664 $ 288,003,341
============= =============
</TABLE>
12
<PAGE>
Ocwen Asset Investment Corp. (OAC)
Third Quarter Results
October 26, 1998
<TABLE>
<CAPTION>
OCWEN ASSET INVESTMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three For the Three For the Nine For the Period
Months Ended Months Ended Months Ended May 14, 1997 to
September 30, 1998 September 30, 1997 September 30, 1998 September 30, 1997
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Interest income:
Repurchase agreements and interest bearing deposits .. $ 713,966 $ 2,753,729 $ 1,009,614 $ 4,150,857
Securities held for trading .......................... -- -- 106,892 --
Securities available for sale ........................ 13,806,940 2,492,172 29,990,157 3,497,356
Commercial and Multifamily loans ..................... 1,512,508 -- 3,786,210 --
Residential loans .................................... 3,862,725 5,565 6,475,756 5,565
Discount loans ....................................... 393,132 260,471 1,719,330 340,966
------------ ------------ ------------ ------------
20,289,271 5,511,937 43,087,959 7,994,744
------------ ------------ ------------ ------------
Interest expense:
Securities sold under agreements to repurchase ....... 3,082,025 -- 7,048,840 --
Obligations outstanding under lines of credit ........ 3,828,297 -- 6,102,066 --
11.5% Senior Notes due 2005 .......................... 3,687,347 -- 3,687,347 --
------------ ------------ ------------ ------------
10,597,669 -- 16,838,253 --
------------ ------------ ------------ ------------
Net interest income before provision for loan losses . 9,691,602 5,511,937 26,249,706 7,994,744
Provision for loan losses ............................ 350,682 -- 556,731 --
------------ ------------ ------------ ------------
Net interest income after provision for loan losses .. 9,340,920 5,511,937 25,692,975 7,994,744
------------ ------------ ------------ ------------
Real estate-Operating income:
Rental income ........................................ 8,035,170 107,668 14,584,661 107,668
Other ................................................ 1,508 7,298 28,343 7,298
------------ ------------ ------------ ------------
8,036,678 114,966 14,613,004 114,966
------------ ------------ ------------ ------------
Real estate-Operating expenses:
Rental operation ..................................... 3,626,054 29,039 6,901,905 29,039
Depreciation & amortization .......................... 1,159,652 21,386 2,222,573 21,386
Interest ............................................. 2,707,478 -- 4,396,581 --
------------ ------------ ------------ ------------
7,493,184 50,425 13,521,059 50,425
------------ ------------ ------------ ------------
Real estate income, net ................................ 543,494 64,541 1,091,945 64,541
------------ ------------ ------------ ------------
Other expenses:
Management fees ...................................... 1,576,379 719,914 4,110,011 1,060,914
Due diligence expenses ............................... 567,981 237,891 935,625 285,812
Foreign currency gain ................................ -- (2,497) (116,953) (2,497)
Other ................................................ 1,067,996 270,898 1,644,090 304,562
------------ ------------ ------------ ------------
3,212,356 1,226,206 6,572,773 1,648,791
------------ ------------ ------------ ------------
Losses on securities and derivatives ................... 15,646,384 -- 32,723,429 --
------------ ------------ ------------ ------------
(Loss) income before minority interest ............... (8,974,326) 4,350,272 (12,511,282) 6,410,494
Minority interest in net loss of consolidated subsidiary 720,513 -- 399,359 --
------------ ------------ ------------ ------------
Net (loss) income before extraordinary items ......... (8,253,813) 4,350,272 (12,111,923) 6,410,494
Extraordinary gain on repurchase of debt ............... 615,047 -- 615,047 --
------------ ------------ ------------ ------------
Net (loss) income ................................. $ (7,638,766) $ 4,350,272 $(11,496,876) $ 6,410,494
============ ============ ============ ============
(Loss) earnings per share:
Basic ............................................. $ (0.40) $ 0.23 $ (0.61) $ 0.34
============ ============ ============ ============
Diluted ........................................... $ (0.40) $ 0.22 $ (0.61) $ 0.33
============ ============ ============ ============
Weighted average shares outstanding:
Basic ............................................. 18,965,000 19,125,000 18,965,000 19,125,000
============ ============ ============ ============
Diluted ........................................... 18,965,000 19,715,712 18,965,000 19,620,046
============ ============ ============ ============
</TABLE>
13
