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): JANUARY 28, 1999
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)
ITEM 5. OTHER EVENTS
The news release of Ocwen Asset Investment Corp., dated January 28, 1999,
announcing its results for the fourth quarter of 1998, 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 January 28, 1999.
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: February 1, 1999
3
<PAGE>
INDEX TO EXHIBIT
Exhibit No. Description Page
----------- ----------- ----
99 News release of Ocwen Asset Investment Corp. dated 5
January 28, 1999, announcing its results for the
fourth quarter of 1998.
4
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] OCWEN ASSET INVESTMENT CORP.
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION, CONTACT:
A. RICHARD HURWITZ
VP, CORPORATE COMMUNICATIONS & MARKETING
T: (561) 682-8575
F: (561) 682-8177 OR E-MAIL: [email protected]
------------------
West Palm Beach, FL - (January 28, 1999) Ocwen Asset Investment Corp. (NYSE:
OAC) reported 1998 fourth quarter funds from operations ("FFO"), prior to
impairment charges, of $3.1 million, or $0.17 per diluted share, compared to
$5.5 million, or $0.28 per diluted share, for the 1997 fourth quarter. For the
year ended December 31, 1998, FFO, prior to impairment charges, were $22.5
million, or $1.18 per diluted share, compared to $12.0 million, or $0.61 per
diluted share, for the year ended December 31, 1997.
SELECTED OPERATING RESULTS
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
QUARTERLY
--------------------------------------------------------------------------
Three Months Ended Three months ended
December 31, 1998 December 31, 1997
---------------------------------------------- -------------------------
Actual Adjusted (1) Actual
---------------------- -------------------- -------------------------
Amount Per share Amount Per share Amount Per share
------- --------- ------ --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net income .......... $ (46.7) $ (2.46) $ 1.6 $ 0.09 $ 5.4 $ 0.28
FFO ................. $ (45.3) $ (2.39) $ 3.1 $ 0.17 $ 5.5 $ 0.28
</TABLE>
<TABLE>
<CAPTION>
ANNUAL
--------------------------------------------------------------------------
Year Ended Period from May 14, 1997
December 31, 1998 to December 31, 1997
---------------------------------------------- -------------------------
Actual Adjusted (1) Actual
---------------------- -------------------- -------------------------
Amount Per share Amount Per share Amount Per share
------- --------- ------ --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net income .......... $ (58.2) $ (3.07) $ 19.4 $ 1.02 $ 11.8 $ 0.60
FFO ................. $ (41.1) $ (2.17) $ 22.5 $ 1.18 $ 12.0 $ 0.61
</TABLE>
(1) Excludes losses and impairment charges on securities and impairment charges
on real estate, after the effect of minority interest.
5
<PAGE>
Ocwen Asset Investment Corp.
1998 Results Consistent with Pre-Earnings Release
January 28, 1999
LOSSES ON SECURITIES, DERIVATIVES, AND REAL ESTATE
OAC incurred losses of $53.5 million which were comprised primarily of a $49.0
million writedown of its securities available for sale portfolio (subordinate
and residual mortgage-backed securities), a loss of $0.5 on derivatives, and a
$3.9 million charge on its property located in Halifax, Nova Scotia. Total
losses on securities, derivatives, and real estate for the year ended December
31, 1998 were $86.3 million.
The charges on the securities available for sale portfolio were due to
accelerated prepayment speeds, widening mortgage spreads, and declining market
liquidity. For example, OAC values its securities portfolio at fair value each
month. Subordinate and residual securities are not readily marketable, and
therefore, trades may be infrequent, and valuations obtained each month from the
Company's brokers/dealers are subject to pricing volatility.
STATEMENT FROM THE CHAIRMAN AND CEO REGARDING DE-REITING
William C. Erbey, Chairman and Chief Executive Officer, stated, "On December 21,
1998, our Board of Directors approved a proposal to terminate the Company's
status as a real estate investment trust ("REIT") and to change to a taxable
C-corporation. By eliminating the dividend requirement, retained earnings can be
used to enhance liquidity and shareholders' equity, as well as to facilitate the
transition of the Company to a growth strategy. In addition, C-corporation
status offers more strategic flexibility than a REIT structure, particularly in
volatile markets. The Company's proposal to de-REIT will be considered by
shareholders at its Annual Meeting, which is expected to be held in May 1999 at
the Company's headquarters in West Palm Beach, Florida. Consistent with this
proposal, the Board of Directors deferred declaration and payment of OAC's final
1998 dividend, which is expected to range from $14.6 million, or $0.77 per
share, to $16.1 million, or $0.85 per share. Currently, management expects to
recommend the declaration and payment of this dividend in 1999. In conclusion,
we believe that the Board's proposal to relinquish our REIT status is a sound
strategy which will enhance our liquidity, bolster our equity base, and allow
the Company greater flexibility in devising strategies to support and service
existing and future operations and investments."
LIQUIDITY
At December 31, 1998, the Company had cash and cash equivalents of $53.4 million
and a debt to equity ratio of 2.9 to 1. At December 31, 1998, OAC's book value
per share was $11.66, compared to $12.81 at September 30, 1998 and $14.30 at
December 31, 1997. The Company's year-end 1998 book value was $18.2 million in
excess of the highest net worth covenant associated with the Company's debt
agreements.
SELECTED FUNDING REQUIREMENTS THROUGH DECEMBER 31, 1999:
(Dollars in millions)
Maturing repurchase agreements .................... $ 90.8
Construction/ renovation funding commitments ...... 47.7
Less available lines of credit ................ (22.6) 25.1
------- -------
Total funding requirements ........................ 115.9
Less cash and cash equivalents ................ (53.4)
-------
Funding deficit ................................... $ 62.5
=======
Consistent with our announced plans to de-Reit and defer the final 1998
dividend, the Company is pursuing several other strategies to improve liquidity,
including seeking alternate sources of financing. At present, management
believes that the Company will be able to satisfy funding requirements for the
foreseeable future either from existing, replacement, or new funding sources.
6
<PAGE>
Ocwen Asset Investment Corp.
1998 Results Consistent with Pre-Earnings Release
January 28, 1999
<TABLE>
<CAPTION>
For the Period
Three Months Ended Three Months Ended Year Ended May 14, 1997 to
Dollars in thousands, except per share data December 31, 1998 December 31,1997 December 31, 1998 December 31, 1997
- ------------------------------------------- ------------------ ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
SELECTED OPERATING RESULTS:
Net Interest Income ............................ $ 9,096 $ 5,467 $ 34,789 $ 13,462
Real estate income, net ........................ 48 1,427 1,140 1,494
Expenses ....................................... 6,744 1,504 13,317 3,155
Loss on securities, derivatives, and real estate (53,544) -- (86,267) --
Extraordinary gain on repurchase of debt ....... -- -- 615 --
Minority interest in net loss (income) of
Operating partnership ........................ 4,455 (9) 4,855 (9)
Net (loss) income ............................. (46,689) 5,381 (58,186) 11,792
Funds from operations .......................... (45,305) 5,536 (41,122) 11,971
Per share data:
Diluted (loss) earnings per share .............. (2.46) 0.28 (3.07) 0.60
Dividends (1) .................................. -- 0.39 1.10 0.73
Diluted weighted average common shares
outstanding .................................... 18,965,000 19,564,770 18,965,000 19,564,770
</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: December 31,
-----------------------
1998 1997
-------- --------
<S> <C> <C>
Assets:
Cash and cash equivalents ................................... $ 53,365 $ 48,677
Securities available for sale ............................... 351,154 146,027
Commercial and multifamily loans, net ....................... 65,283 9,481
Residential loans, net ...................................... 8,058 6,350
Discount loans, net ......................................... 5,618 26,979
Investment in real estate, net .............................. 208,059 45,430
Liabilities:
Securities sold under agreements to repurchase .............. 138,612 --
Obligations outstanding under lines of credit ............... 34,472 --
Obligations outstanding under lines of credit - real estate . 142,557 --
11.5% Senior Notes due 2005 ................................. 143,000 --
Minority interest ........................................... 23,914 2,942
Total shareholders' equity .................................. 221,176 271,258
Book value per share ........................................ $ 11.66 $ 14.30
</TABLE>
7
<PAGE>
Ocwen Asset Investment Corp.
1998 Results Consistent with Pre-Earnings Release
January 28, 1999
SELECTED REVIEW OF OPERATING RESULTS
NET INTEREST INCOME
- -------------------
Net interest income before provision for loan losses increased $3.7 million to
$9.2 million during the fourth quarter of 1998, compared to the same period a
year ago. This increase was due to a $14.4 million increase in interest income,
offset by a $10.7 million increase in interest expense. Interest income
increased as a result of a $439.5 million increase in the average balance of
interest-earning assets and a 265 basis point increase in the average yield
earned. The Company's average interest-bearing liabilities increased by $490.3
million with an average cost of funds of 8.72%. These increases in interest
income and interest expense are largely the result of OAC, in the fourth quarter
of 1997, being newly formed, only partially invested, and not being levered (OAC
commenced operations on May 14, 1997). Net interest income before provision for
loan losses increased $22.0 million to $35.4 million for the year ended December
31, 1998, compared to the same period a year ago.
8
<PAGE>
Ocwen Asset Investment Corp.
1998 Results Consistent with Pre-Earnings Release
January 28, 1999
THE FOLLOWING TABLES SET FORTH INFORMATION REGARDING THE TOTAL AMOUNT OF INCOME
FROM INTEREST-EARNING ASSETS AND THE RESULTANT AVERAGE YIELDS, PRIOR TO
IMPAIRMENT CHARGES. THIS INFORMATION IS BASED ON DAILY AVERAGE BALANCES DURING
THE REPORTED PERIODS.
<TABLE>
<CAPTION>
For the three months ended December 31,
------------------------------------------------------------------
(Dollars in Thousands) 1998 1997
--------------------------------- -------------------------------
Average Annualized Average Annualized
Balance Interest Yield/Rates Balance Interest Yield/Rates
------- -------- ----------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Repurchase agreements and interest-bearing deposits . $ 25,716 $ 203 3.16% $101,715 $ 1,388 5.41%
Securities available for sale ....................... 396,965 13,456 13.56 101,047 2,866 11.25
Commercial and Multifamily loan portfolio, net ...... 59,408 1,950 13.13 6,637 245 14.65
Match funded residential loans, net ................. 93,929 1,915 8.16 -- -- --
Residential loan portfolio, net ..................... 95,444 1,949 8.17 3,671 60 6.48
Discount loans, net ................................. 7,752 397 20.49 26,636 908 13.52
-------- -------- ----- -------- -------- -----
Total interest-earning assets ..................... $679,214 $ 19,870 11.70% $239,706 $ 5,467 9.05%
-------- -------- ----- -------- -------- -----
Interest-bearing liabilities:
Securities sold under agreements to repurchase ...... $159,001 $ 3,361 8.46% -- -- --
Obligations outstanding under lines of credit ....... 96,902 1,687 6.96 -- -- --
11.5% Senior Notes due 2005 ......................... 143,000 4,111 11.50 -- -- --
Bonds match funded .................................. 91,372 1,531 6.70 -- -- --
-------- -------- ----- -------- -------- -----
Total interest-bearing liabilities ................ $490,275 $ 10,690 8.72% -- -- --
-------- -------- ----- -------- -------- -----
Net interest income/net interest spread................. $ 9,180 2.98% $5,467 9.05%
======== ======
Net interest margin..................................... 5.41% 9.05%
For the year ended December 31,
------------------------------------------------------------------
(Dollars in Thousands) 1998 1997
--------------------------------- -------------------------------
Average Annualized Average Annualized
Balance Interest Yield/Rates Balance Interest Yield/Rates
------- -------- ----------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Repurchase agreements and interest-bearing deposits . $ 26,209 $ 1,213 4.63% $155,757 $ 5,539 5.72%
Securities available for trading .................... 21,757 107 0.49 -- -- --
Securities available for sale ....................... 312,433 43,446 13.91 76,423 6,363 13.39
Commercial and Multifamily loan portfolio, net ...... 43,862 5,736 13.08 2,691 245 14.64
Match funded residential loans, net ................. 23,675 1,915 8.09 -- -- --
Residential loan portfolio, net ..................... 104,494 8,424 8.06 1,604 66 6.62
Discount loans, net ................................. 13,802 2,117 15.34 16,453 1,249 12.20
-------- -------- ----- -------- -------- -----
Total interest-earning assets ..................... $546,232 $ 62,958 11.53% $252,928 $ 13,462 8.56%
-------- -------- ----- -------- -------- -----
Interest-bearing liabilities:
Securities sold under agreements to repurchase ...... $146,533 $ 11,683 7.97% -- -- --
Obligations outstanding under lines of credit ....... 93,425 6,516 6.97 -- -- --
11.5% Senior Notes due 2005 ......................... 67,814 7,799 11.50 -- -- --
Bonds match funded .................................. 23,031 1,530 6.65 -- -- --
-------- -------- ----- -------- -------- -----
Total interest-bearing liabilities ................ $330,803 $ 27,528 8.32% -- -- --
-------- -------- ----- -------- -------- -----
Net interest income/net interest spread................. $ 35,430 3.21% $13,462 8.56%
======== =======
Net interest margin..................................... 6.49% 8.56%
</TABLE>
9
<PAGE>
Ocwen Asset Investment Corp.
1998 Results Consistent with Pre-Earnings Release
January 28, 1999
REAL ESTATE INCOME, NET
- -----------------------
Real estate income, net decreased $1.4 million to $0.05 million for the three
months ended December 31, 1998, compared to the same period a year ago. This
decrease was largely due to a $6.9 million increase in rental income, offset by
a $3.4 million increase in rental operation expense, a $1.2 million increase in
depreciation and amortization expense, and a $2.8 million increase in interest
expense. These increases in real estate operating income and expenses, compared
to the same period a year ago, were largely the result of an increase in OAC's
investment in real estate, net of $208.1 million at December 31, 1998, compared
to $45.4 million at December 31, 1997, which were not levered. Real estate
income, net decreased $0.4 million to $1.1 million for the year ended December
31, 1998, compared to the same period a year ago.
OTHER EXPENSES
- --------------
Other expenses increased $5.2 million to $6.7 million for the three months ended
December 31, 1998, compared to the same period a year ago. This increase was
largely due to a $1.0 million increase in management fees, a $3.9 million
increase in other expenses (which consisted generally of servicing, accounting,
audit, legal, excise tax, and bond amortization expenses), and a $0.8 million
increase in due diligence expense. These increases in other expenses were
largely the result of OAC becoming fully invested and leveraging its assets in
1998. Other expenses increased $10.2 million to $13.3 million for the year ended
December 31, 1998, compared to the same period a year ago. The management fees
payable by OAC to Ocwen Capital Corporation ("OCC"), a wholly-owned subsidiary
of Ocwen Financial Corporation (NYSE: OCN), totaled $1.8 million for the quarter
ended December 31, 1998 and $5.9 million for the year ended December 31, 1998.
LOSSES ON SECURITIES, DERIVATIVES, AND REAL ESTATE
- --------------------------------------------------
Due to accelerated prepayment speeds, widening mortgage spreads, and declining
market liquidity, OAC recognized a $53.5 million charge to earnings during the
fourth quarter of 1998. This charge was comprised primarily of a $49.0 million
writedown of the securities available for sale portfolio (subordinate and
residual mortgage-backed securities), a loss of $0.5 on derivatives, and a $3.9
million charge on the property located in Halifax, Nova Scotia. Each security
was written down to the lower of amortized cost or fair value. Total losses on
securities, derivatives, and real estate for the year ended December 31, 1998,
were $86.3 million.
MINORITY INTEREST IN NET LOSS OF CONSOLIDATED SUBSIDIARY
- --------------------------------------------------------
Minority interest in net loss of consolidated subsidiary increased $4.5 million
and $4.9 million for the three and twelve months ended December 31, 1998,
respectively, which represents the portion of the operating partnership's loss
attributed to the limited partnership interest owned by an affiliate of OCC. OAC
has a 91.3% ownership interest in such operating partnership.
SELECTED REVIEW OF SECURITIES PORTFOLIO
At December 31, 1998, OAC's securities available for sale portfolio was $351.2
million and consisted of:
o Non-investment grade and unrated subordinate commercial mortgage-backed
securities having an amortized cost of $115.7 million and a fair value of
$117.1 million,
o Unrated residential subprime residuals having an amortized cost of $209.0
million and a fair value of $218.7 million, and
o Unrated subordinate residential mortgage-backed securities having an
amortized cost of $15.4 million and a fair value of $15.4 million.
OAC's unrated subprime residual portfolio of $218.7 million consisted of:
o $110.0 million of seasoned residuals (securitized between 1994 and 1997)
with overcollateralization reserves funded at approximately $122.5 million,
and
o $108.7 million of unseasoned residuals (securitized in 1998) with
overcollateralization reserves funded at approximately $26.6 million.
10
<PAGE>
Ocwen Asset Investment Corp.
1998 Results Consistent with Pre-Earnings Release
January 28, 1999
SELECTED REVIEW OF LIQUIDITY POSITION
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
- ----------------------------------------------
Securities sold under agreements to repurchase were $138.6 million at December
31, 1998, a decrease from $143.1 million at September 30, 1998. These
obligations were secured by certain of OAC's investments in subordinated
interests in commercial mortgage-backed securities, residual interests in
subprime residential loan securitizations, and U.K. mortgage loan residual
securities. The following table summarizes the maturity dates of OAC's
securities sold under agreements to repurchase and the fair value of the related
collateral securities as of December 31, 1998:
<TABLE>
<CAPTION>
Outstanding Commercial Securities Residential Securities
Maturity Date Borrowing Fair Value Fair Value
------------- --------- --------------------- ----------------------
(Dollars in Millions)
<S> <C> <C> <C>
0-30 days .......... $ 27.8 $ 34.1 $ 14.4
90-120 days ........ 49.7 39.9 45.9
6-12 months ........ 13.3 17.6 --
15 months and over . 47.8 -- 138.3
------- ---------- ---------
Total ............ $ 138.6 $ 91.6 $ 198.6
======= ========== =========
</TABLE>
Currently, interest payments with respect to all of these obligations were
approximately $1.0 million per month (which assumes that the repurchase
agreements, which mature within 30 days, are renewed at approximately the same
rate of interest).
OBLIGATIONS OUTSTANDING UNDER LINES OF CREDIT
- ---------------------------------------------
Obligations outstanding under lines of credit amounted to $34.5 million at
December 31, 1998, compared to $189.1 million at September 30, 1998. This
decrease is due to the repayment of the $136.0 million warehouse line secured by
residential loans as a result of the securitization and a reclassification of UK
mortgage loan residuals of $19.5 million. The borrowings were comprised of $34.5
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". The securitization resulted in the Company
retaining $163.4 million of match funded debt.
OBLIGATIONS OUTSTANDING UNDER LINES OF CREDIT - REAL ESTATE
- -----------------------------------------------------------
Obligations outstanding under lines of credit secured by real estate amounted to
$142.6 million at December 31, 1998, compared to $142.4 million at September 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 December 31,
1998:
<TABLE>
<CAPTION>
Principal Interest Maturity Annual
Property Amount Rate Date Payment
- ------------------------------------- -------------- ---------------- ------------- ---------
(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............................... $67.6 (2) LIBOR plus 1.75% June 2001 (3) $4.9 (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 December 31, 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 $34.5 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 December 31, 1998.
11
<PAGE>
Ocwen Asset Investment Corp.
1998 Results Consistent with Pre-Earnings Release
January 28, 1999
OTHER
Ocwen Asset Investment Corp., a real estate investment trust ("REIT")
headquartered in West Palm Beach, Florida, 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. Additional information about Ocwen Asset
Investment Corp. is available at www.ocwen.com - OAC.
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.
12
<PAGE>
Ocwen Asset Investment Corp.
1998 Results Consistent with Pre-Earnings Release
January 28, 1999
<TABLE>
<CAPTION>
OCWEN ASSET INVESTMENT CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, December 31,
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Cash and amounts due from depository institutions .................... $ 3,484,929 $ 331,047
Interest bearing deposits ............................................ 49,880,276 48,346,076
Securities available for sale, at fair value ......................... 351,153,971 146,026,907
Commercial and multifamily loan portfolio, net ....................... 65,282,965 9,481,436
Residential loan portfolio, net ...................................... 8,058,445 6,350,043
Match funded residential loans, net .................................. 173,609,873 --
Discount loan portfolio, net ......................................... 5,618,022 26,978,888
Investment in real estate, net ....................................... 208,058,721 45,430,039
Principal and interest receivable .................................... 7,475,795 2,518,272
Deposits on pending asset acquisitions ............................... -- 1,000,000
Other assets ......................................................... 15,702,816 1,540,633
------------- -------------
Total assets ...................................................... $ 888,325,813 $ 288,003,341
============= =============
LIABILITIES:
Securities sold under agreements to repurchase ....................... $ 138,611,824 $ --
Obligations outstanding under lines of credit ........................ 34,472,404 --
Obligations outstanding under lines of credit - secured by real estate 142,556,880 --
11.5% Senior Notes due 2005 ......................................... 143,000,000 --
Bonds - match funded loan agreement ................................. 163,403,966 --
Dividends and distributions payable .................................. -- 7,458,750
Accrued expenses, payables and other liabilities ..................... 21,190,288 6,344,783
------------- -------------
Total liabilities ................................................. 643,235,362 13,803,533
------------- -------------
Minority interest ........................................................ 23,914,058 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 ........................................... 294,492,203 280,503,838
Cumulative dividends declared ........................................ (36,277,546) (13,898,849)
Retained earnings (deficit) .......................................... (46,444,996) 11,791,518
Accumulative other comprehensive income:
Unrealized gain (loss) on securities available for sale ........... 11,038,151 (7,327,890)
Cumulative translation adjustment ................................. (1,821,069) --
------------- -------------
Total other comprehensive (loss) income ......................... 9,217,082 (7,327,890)
------------- -------------
Total shareholders' equity ...................................... 221,176,393 271,258,267
------------- -------------
$ 888,325,813 $ 288,003,341
============= =============
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Ocwen Asset Investment Corp.
1998 Results Consistent with Pre-Earnings Release
January 28, 1999
OCWEN ASSET INVESTMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three For the Three For the Period
Months Ended Months Ended For the Year Ended May 14, 1997 to
December 31, 1998 December 31, 1997 December 31, 1998 December 31, 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
INTEREST INCOME:
Repurchase agreements and interest bearing
deposits ....................................... $ 202,903 $ 1,388,089 $ 1,212,517 $ 5,538,946
Securities held for trading ...................... -- -- 106,892 --
Securities available for sale .................... 13,456,266 2,865,553 43,446,423 6,362,909
Commercial and Multifamily loans ................. 1,950,004 245,147 5,736,214 245,147
Match funded residential loans ................... 1,915,071 -- 1,915,071 --
Residential loans ................................ 1,948,569 60,445 8,424,325 66,010
Discount loans ................................... 397,234 907,737 2,116,564 1,248,703
Other ............................................ -- -- -- --
------------ ------------ ------------ ------------
19,870,047 5,466,971 62,958,006 13,461,715
------------ ------------ ------------ ------------
INTEREST EXPENSE:
Securities sold under agreements to repurchase ... 3,361,011 -- 11,682,824 --
Obligations outstanding under lines of credit .... 1,686,832 -- 6,515,925 --
11.5% Senior Notes due 2005 ...................... 4,111,250 -- 7,798,597 --
Bonds-match funded loan agreements .............. 1,530,467 -- 1,530,467 --
Other ............................................ -- -- -- --
------------ ------------ ------------ ------------
10,689,560 -- 27,527,813 --
------------ ------------ ------------ ------------
NET INTEREST INCOME BEFORE PROVISION FOR LOAN
LOSSES ......................................... 9,180,487 5,466,971 35,430,193 13,461,715
Provision for loan losses ........................ 84,946 -- 641,677 --
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES ......................................... 9,095,541 5,466,971 34,788,516 13,461,715
------------ ------------ ------------ ------------
REAL ESTATE-OPERATING INCOME:
Rental income .................................... 8,117,135 1,212,422 22,701,796 1,320,090
Other ............................................ 9,458 892,870 37,801 902,665
------------ ------------ ------------ ------------
8,126,593 2,105,292 22,739,597 2,222,755
------------ ------------ ------------ ------------
REAL ESTATE-OPERATING EXPENSES:
Rental operation ................................. 3,901,248 520,330 10,803,153 549,369
Depreciation & amortization ...................... 1,383,917 157,702 3,606,490 179,088
Interest ......................................... 2,793,421 -- 7,190,002 --
------------ ------------ ------------ ------------
8,078,586 678,032 21,599,645 728,457
------------ ------------ ------------ ------------
REAL ESTATE INCOME, NET ............................ 48,007 1,427,260 1,139,952 1,494,298
------------ ------------ ------------ ------------
OTHER EXPENSES:
Management fees .................................. 1,782,457 735,397 5,892,468 1,796,311
Due diligence expenses ........................... 882,299 40,213 1,817,924 326,025
Foreign currency (gain) loss ..................... -- 568,565 (116,953) 568,565
Other ............................................ 4,079,360 159,604 5,723,450 464,164
------------ ------------ ------------ ------------
6,744,116 1,503,779 13,316,889 3,155,065
------------ ------------ ------------ ------------
LOSSES ON SECURITIES, DERIVATIVES, AND REAL ESTATE . (53,544,000) -- (86,267,429) --
------------ ------------ ------------ ------------
(LOSS) INCOME BEFORE MINORITY INTEREST ............. (51,144,568) 5,390,452 (63,655,850) 11,800,948
Minority interest in net loss (income) of
consolidated subsidiary ............................ 4,455,525 (9,430) 4,854,884 (9,430)
------------ ------------ ------------ ------------
NET (LOSS) INCOME BEFORE EXTRAORDINARY ITEMS ..... (46,689,043) 5,381,022 (58,800,966) 11,791,518
Extraordinary gain on repurchase of debt ........... -- -- 615,047 --
------------ ------------ ------------ ------------
NET (LOSS) INCOME ................................ $(46,689,043) $ 5,381,022 $(58,185,919) $ 11,791,518
============ ============ ============ ============
(LOSS) EARNINGS PER SHARE:
Basic ............................................ $ (2.46) $ 0.28 $ (3.07) $ 0.62
============ ============ ============ ============
Diluted .......................................... $ (2.46) $ 0.28 $ (3.07) $ 0.60
============ ============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic ............................................ 18,965,000 19,108,789 18,965,000 19,108,789
============ ============ ============ ============
Diluted .......................................... 18,965,000 19,564,770 18,965,000 19,564,770
============ ============ ============ ============
</TABLE>
14
