<PAGE>
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): May 1, 1997
OCWEN FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Florida 0-21341 65-0039856
(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)
(561) 681-8000
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Page 1 of 13
Exhibit Index on Page 4
<PAGE>
Item 5. Other Events
The news release of Ocwen Financial Corporation dated May 1, 1997, regarding
its financial results for the quarter ended March 31, 1997, including
unaudited consolidated financial statements for the period ended March 31,
1997 are attached and filed herewith as Exhibit 99.
Item 7. Financial Statements and Exhibits
(c) Exhibits
The following exhibit is filed as part of this report:
(99) News release of Ocwen Financial Corporation dated May 1, 1997.
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
OCWEN FINANCIAL CORPORATION
(Registrant)
By: /s/ Christine A. Reich
______________________________________
Christine A. Reich
Managing Director and Chief Financial Officer
Date: May 1, 1997
3
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INDEX TO EXHIBIT
Exhibit No. Description Page
- ----------- ----------- ----
99 News release of Ocwen Financial Corporation dated 5
May 1, 1997 regarding its financial results for
the quarter ended March 31, 1997.
4
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Exhibit 99
_______________________________________________________________________________
Ocwen Financial Corporation
1675 Palm Beach Lakes Blvd.
West Palm Beach, FL 33401
NASDAQ: symbol: OCWN
_______________________________________________________________________________
News release: IMMEDIATE May 1, 1997
Ocwen Financial Corporation reports first quarter results
Ocwen Financial Corporation ("Ocwen" or the "Company") reported net income of
$17.0 million in the first quarter of 1997, 463% higher than in the first
quarter of 1996. Earnings per share for the quarter were $0.63 versus $0.11 a
year ago. The Company's annualized return on average assets and annualized
return on average common equity were 2.61% and 32.05%, respectively, in the
first quarter of 1997 compared with 0.62% and 8.57%, respectively, in the
first quarter 1996.
First quarter results at a glance
- ---------------------------------------------------------------------------
First quarter
- ---------------------------------------------------------------------------
In thousands of dollars, except per share data 1997 1996
- ---------------------------------------------------------------------------
Revenues $ 53,086 $ 23,116
Provision for loan losses (9,742) (9,407)
Operating expenses (22,697) (11,683)
Income taxes (3,606) 1,003
- ---------------------------------------------------------------------------
Net income $ 17,041 $ 3,029
Net income per share $ 0.63 $ 0.11
- ---------------------------------------------------------------------------
Revenues rose $30.0 million or 130% in the first quarter of 1997 from a year
ago.
o Non-interest income increased $18.1 million or 549% to $21.4 million in
the first quarter of 1997. This increase is due primarily to the $16.8
million of gains on sales of interest earning assets in the first
quarter of 1997 which is primarily comprised of a $9.5 million net
gain earned in connection with the securitization of single-family
residential mortgage loans acquired from the Department of Housing and
Urban Development ("HUD") in 1995 and 1996, $3.5 million of gains on
sales of large commercial discount loans and $2.7 million of gains
on sales of single-family loans to non-conforming borrowers. Also
contributing to the increase in non-interest income is a $5.9 million
increase in servicing fees and other charges which reflects a
significant increase in loans serviced for others.
o Equity in earnings of the Company's 50% investment in a joint venture,
which began operations in the second quarter of 1996, amounted to $14.4
million in the first quarter of 1997 and includes a $9.2 million gain
related to the securitization of single-family residential mortgage
loans acquired from HUD in 1996.
o Net interest income declined $2.5 million or 12% in the first quarter
of 1997 as compared with a year earlier.
______________________________________________________________________________
Contact: Christine A. Reich, CFO (561) 681-8569
______________________________________________________________________________
5
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Operating expenses rose $11.0 million or 94% in the first quarter of
1997 as compared to a year ago.
o Compensation and employee benefits increased $8.7 million primarily due to
an increase in the average number of full time equivalent employees for the
quarter from 323 to 629 and a $3.6 million increase in the accrual for
employee profit sharing.
o Occupancy and equipment expense increased $784,000 or 38%.
o Other operating expenses increased $845,000 or 28%.
The Company's efficiency ratio improved to 42.76% for the first quarter of
1997 as compared to 50.54% for the first quarter of 1996.
Ocwen Federal Bank FSB (the "Bank"), the Company's primary subsidiary,
reported net income for the first quarter of 1997 of $18.6 million as
compared to $3.5 million for the same period in 1996. At March 31, 1997 the
Bank's core capital and total risk-based capital ratios were 9.48% and
13.22%, respectively.
Recent developments:
On February 2, 1997, the Company was notified by HUD that it and a
co-investor were the successful bidder to purchase 13,781 single-family
residential loans with an aggregate unpaid principal balance of $855.7
million and purchase price of $757.4 million. Approximately one-half of the
loans have been allocated to each of the Company and its co-investor, each of
which hold their respective loans directly. The Company acts as servicer for
all of the loans and, in this capacity, receives fees from its co-investor.
On February 18, 1997 the Company filed a form S-11 registration statement
with the Securities and Exchange Commission to offer to the public the common
stock of Ocwen Asset Investment Corp. ("OAIC"), a newly organized Virginia
corporation, which will elect to be taxed as a real estate investment trust
under the Internal Revenue Code of 1986. The Company will manage the
day-to-day operations of OAIC. OAIC's investments will include several
categories of real estate and real estate related assets including
subordinated interests in mortgage-backed securities, and distressed
commercial and multi-family real property. The Company will own
approximately 13% of the common stock of OAIC after completion of the
proposed initial public offering.
On March 27, 1997, the Company, BCBF, LLC (the "LLC"), a limited liability
company (in which the Company has a 50% interest) and an unaffiliated entity,
completed the securitization of 2,916 single-family residential mortgage
loans with an unpaid principal balance of $140.7 million and past due
interest of $37.1 million. The loans securitized were all acquired from HUD
in 1995 and 1996. The Company recorded total gains of $18.7 million on the
sale of the senior classes of securities in connection with this transaction,
of which $9.2 million represents Ocwen's pro rata share of the gain recorded
by the LLC and is included in equity in earnings of investment in joint
venture. The Company continues to service the loans for a fee and has
retained an interest in the related subordinate class security.
Based upon recent discussions with the Office of Thrift Supervision ("OTS"),
the Bank has determined to maintain a core capital ratio of at least 9% and a
total risk-based capital ratio of no less than 13%. The Bank also determined
to transfer its single-family residential lending activities to
non-conforming borrowers to a non-bank subsidiary of Ocwen. The Bank believes
at this time that it will continue to be a "well-capitalized institution"
under OTS regulations.
The remainder of this release contains information on specific areas of
results, a financial summary, and the consolidated financial statements.
6
<PAGE>
REVENUES
Net Interest Income
Interest income of $54.5 million for the first quarter of 1997 increased by
$6.6 million or 14% over that of the first quarter of 1996 as a result of a
$544.8 million or 34% increase in the average balance of interest-earning
assets offset in part by a 176 basis point decline in the average yield
earned. The average yield on interest-earning assets was 10.06% in the first
quarter of 1997 as compared to 11.82% in the first quarter of 1996. The
decline in the yield was primarily attributable to a 138% increase in the
average balance of single-family discount loans held as compared to the prior
year coupled with the Company's decision to cease accretion of discount on
such loans effective January 1, 1997. As a result of the Company's decision
to cease accretion of discount, the Company will recognize income on its
nonperforming single-family loans at the time of resolution or loan sale
rather than over the anticipated holding period.
Interest expense of $37.2 million for the first quarter of 1997 increased by
$9.0 million or 32% over the comparable period in the prior year as a result
of a $532.3 million or 31% increase in the average balance of
interest-bearing liabilities and a 6 basis point increase in the average rate
paid.
As a result of the above, net interest income before provision for loan
losses of $17.4 million for the first quarter of 1997 declined by $2.5
million or 12% from the first quarter of 1996 and the net interest margin for
the first quarter of 1997 declined to 3.20% from 4.89% for the first quarter
of 1996.
Equity in Earnings of Investment in Joint Ventures
During the first quarter of 1997 the Company recorded $14.4 million of income
related to its 50% investment in the joint venture established in April 1996.
The Company's pro rata share of the income from the joint venture consisted
primarily of $1.7 million of net interest income and $9.2 million of net
gains related to the securitization of single-family residential mortgage
loans purchased from HUD in 1996, as noted above. Additionally, during the
first quarter of 1997 Ocwen recaptured $2.5 million of valuation allowances
established in 1996 on its equity investment in the joint venture as a result
of the resolution and securitization of loans during the first quarter. The
Company continues to act as the servicer for the loans securitized as well as
the remaining loans in the joint venture.
Non-interest Income
Non-interest income of $21.4 million for the first quarter of 1997 increased
by $18.1 million from that of the first quarter of 1996 primarily due to a
$11.8 million increase in gains on sales of interest earning assets and a
$5.9 million increase in servicing fees and other charges. Gains on sales of
interest earning assets for the first quarter of 1997 includes a gain of
$9.5 million recognized during the first quarter of 1997 on the sale of
senior classes of securities resulting from the securitization of
single-family residential mortgage loans acquired from HUD in 1995 and 1996
as described above. The increase in servicing fees and other charges is
primarily due to an increase in loan servicing and related fees as a result
of an increase in loans serviced for others. The average unpaid principal
balance of loans serviced for others amounted to $2.04 billion during the
first quarter of 1997 as compared to $338.9 million during the first quarter
of 1996. Included in servicing fees and other charges for the first quarter
of 1997 is $1.1 million of fees earned in connection with the set up of loans
transferred to the Company for servicing during the quarter.
7
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PROVISION FOR LOAN LOSSES
The Company's provision for loan losses amounted to $9.7 million for the
first quarter of 1997 as compared to $9.4 million for the first quarter of
1996. The amount provided during the first quarter of 1997 includes $2.0
million established on single-family residential loans acquired from HUD in
1995 and 1996 which were not included in the March 1997 securitization
described above. At March 31, 1997 Ocwen had allowances for losses of $16.8
million and $4.8 million on its discount loan and loan portfolios,
respectively, which amounted to 1.3% and 1.1% of the respective balances.
The Company maintained reserves of 1.1% and 0.9% on its discount loans and
loan portfolios, respectively, at December 31, 1996.
OPERATING EXPENSES
Non-interest expense of $22.7 million for the first quarter of 1997 increased
by $11.0 million or 94% as compared to the same period for 1996.
Compensation and employee benefits accounted for $8.7 million of this
increase, as the average number of employees increased to 629 from 323 and
the accrual for employee profit sharing expense increased by $3.6 million
over that of the first quarter of 1996. Occupancy and equipment expense
increased $784,000 primarily due to an increase in data processing costs and
office equipment expenses. Net operating losses on investments in real
estate and certain low-income housing tax credit interests, which includes
hotel operations, increased $632,000 primarily as a result of net operating
losses and depreciation expense on low-income housing tax credit interests
placed in service since the first quarter of 1996. The associated tax
credits on such projects are reported as a reduction of income tax expense as
noted below. Other operating expenses increased $845,000 primarily due to a
$600,000 increase in loan related expenses and a $200,000 increase in
professional fees offset by lower FDIC insurance premium expenses of
$405,000. The Company achieved an efficiency ratio of 42.76% for the first
quarter of 1997 as compared to 50.54% for the first quarter of 1996.
INCOME TAXES
Income tax expense (benefit) amounted to $3.6 million and $(1.0) million
during the three months ended March 31, 1997 and 1996, respectively. The
Company's income tax expense is reported net of tax credits of $3.6 million
and $1.8 million for the first quarter of 1997 and 1996, respectively,
resulting from investments in low-income housing tax credit interests.
Exclusive of such amounts, the Company's effective tax rate amounted to
34.74% and 37.02% during the three months ended March 31, 1997 and 1996,
respectively.
ASSETS
At March 31, 1997 the Company had $2.65 billion of total assets as compared
to $2.48 billion at December 31, 1996, a 7% increase. Ocwen acquired discount
loans with a combined total unpaid principal balance of $442.9 million during
the first quarter of 1997, as compared to $34.9 million for the same period
in 1996. Acquisitions and originations of loans to non-conforming borrowers,
which are classified available for sale, amounted to $64.5 million of unpaid
principal balance during the first quarter of 1997 as compared to $70.2
million during the first quarter of 1996.
The Bank had total assets of $2.57 billion and $2.40 billion at March 31,
1997 and December 31, 1996, respectively.
CAPITAL
Stockholders' equity increased 11% during the first quarter of 1997 from
$203.6 million at December 31, 1996 to $225.2 million at March 31, 1997. At
March 31, 1997 stockholders' equity included $6.6 million of net unrealized
gains on securities available for sale, net of related deferred taxes of $3.8
million compared with $3.5 million of net unrealized gains at December 31,
1996, net of related deferred taxes of $2.0 million.
8
<PAGE>
The Bank had total stockholders' equity of $249.9 and $228.2 at March 31,
1997 and December 31, 1996, respectively.
The Bank's core and tangible capital ratios were 9.48% and its total risk-based
capital ratio was 13.22% at March 31, 1997.
Attached are the financial summary, the average balance and rate analysis
table and the interim consolidated financial statements which are unaudited.
9
<PAGE>
OCWEN FINANCIAL CORPORATION
FINANCIAL SUMMARY
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
FIRST QUARTER
----------------------------------------
%
1997 1996 CHANGE
---------- ---------- ----------
<S> <C> <C> <C>
Operations data:
Interest Income............................... $ 54,527 $ 47,956 14%
Interest expense.............................. 37,164 28,132 32
---------- ----------
Net interest income........................ 17,363 19,824 (12)
Provision for loan losses..................... 9,742 9,407 4
---------- ----------
Net interest income after provision
for loan losses.......................... 7,621 10,417 (27)
---------- ----------
Gain on sale of interest-earning assets, net.. 16,778 5,017 234
Other non-interest income..................... 4,573 (1,725) 365
---------- ----------
Total non-interest income.................. 21,351 3,292 549
---------- ----------
Non-interest expense.......................... 22,697 11,683 94
---------- ----------
Equity in earnings of investment in joint 14,372 -- --
venture.....................................
---------- ----------
Income before income taxes................. 20,647 2,026 919
Income tax expense (benefit).................. 3,606 (1,003) 460
---------- ----------
Net income................................ $ 17,041 $ 3,029 463
---------- ----------
---------- ----------
Earnings per share............................ $ 0.63 $ 0.11 473
---------- ----------
---------- ----------
Key Ratios:
Net interest spread........................... 3.48% 5.30% (34)%
Net interest margin........................... 3.20 4.89 (35)
Annualized Return on Average:
Assets (1)................................. 2.61 0.62 321
Equity..................................... 32.05 8.57 274
Efficiency Ratio (2).......................... 42.76 50.54 (15)
</TABLE>
(1) Includes the Company's pro rata share of average assets held by the joint
venture.
(2) Before provision for loan losses and including equity in earnings of
investment in joint venture.
<TABLE>
<S> <C> <C> <C>
Average Balances:
Securities available for sale................. $ 338,956 $ 322,322 5%
Loan portfolio................................ 423,135 298,502 42
Discount loan portfolio....................... 1,118,233 645,482 73
Total interest-earning assets................. 2,167,601 1,622,760 34
Total assets.................................. 2,607,854 1,956,202 33
Deposits...................................... 1,991,339 1,495,335 33
Total interest-bearing liabilities............ 2,259,367 1,727,054 31
Total liabilities............................. 2,395,148 1,814,828 32
Total stockholders' equity.................... 212,706 141,374 50
</TABLE>
10
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OCWEN FINANCIAL CORPORATION
AVERAGE BALANCE / RATE ANALYSIS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------------------------------------------------
1997 1996
-------------------------------------- --------------------------------------
AVERAGE ANNUALIZED AVERAGE ANNUALIZED
BALANCE INTEREST YIELD/RATE BALANCE INTEREST YIELD/RATE
------------ --------- ------------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Average Assets:
Federal funds sold and repurchase agreements... $ 132,337 $ 1,658 5.01% $ 57,191 $ 769 5.38%
Securities available for sale.................. 338,956 8,173 9.64 322,322 7,781 9.66
Securities held for trading.................... 13,179 248 7.53 -- -- --
Loans available for sale....................... 118,729 2,851 9.61 261,351 6,597 10.10
Investment securities and other................ 23,032 681 11.83 37,912 644 6.79
Loan portfolio................................. 423,135 10,692 10.11 298,502 10,010 13.41
Discount loan portfolio........................ 1,118,233 30,224 10.81 645,482 22,155 13.73
------------ --------- ------------ ---------
Total interest-earning assets, interest
income....................................... 2,167,601 54,527 10.06 1,622,760 47,956 11.82
------------ --------- ------------ ---------
Non-interest earning cash...................... 11,350 6,029
Allowance for loan losses...................... (16,515) (2,849)
Investments in low-income housing tax credit
interests.................................... 90,398 85,428
Investment in joint venture.................... 63,637 --
Real estate owned, net......................... 112,227 162,988
Other assets................................... 179,156 81,846
------------ ------------
Total assets................................... $ 2,607,854 $1,956,202
------------ ------------
------------ ------------
Average Liabilities and Stockholders' Equity:
Interest-bearing demand deposits............... $ 24,699 $ 227 3.68 $ 26,302 $ 229 3.48
Savings deposits............................... 2,620 15 2.29 3,446 21 2.44
Certificates of deposit........................ 1,964,020 29,652 6.04 1,465,587 22,751 6.21
------------ --------- ------------ ---------
Total interest-bearing deposits................ 1,991,339 29,984 6.00 1,495,335 23,001 6.15
Notes, debentures and other.................... 225,573 6,715 11.91 116,335 3,439 11.82
Securities sold under agreements to
repurchase................................... 20,934 272 5.20 44,985 653 5.81
Federal Home Loan Bank advances................ 21,521 283 5.26 70,399 1,039 5.90
------------ --------- ------------ ---------
Total interest-bearing liabilities, interest
expense...................................... 2,259,367 37,164 6.58 1,727,054 28,132 6.52
------------ --------- ------------ ---------
Non-interest bearing deposits.................. 15,543 4,323
Escrow deposits................................ 71,713 37,167
Other liabilities.............................. 48,525 46,284
------------ ------------
Total liabilities.............................. 2,395,148 1,814,828
Stockholders' equity........................... 212,706 141,374
------------ ------------
Total liabilities and stockholders' equity..... $ 2,607,854 $ 1,956,202
------------ ------------
------------ ------------
Net interest income before provision for loan
losses....................................... $ 17,363 $ 19,824
--------- ---------
--------- ---------
</TABLE>
11
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OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
(UNAUDITED) (AUDITED)
----------- ------------
<S> <C> <C>
Assets
Cash and amounts due from depository institutions..................... $ 8,966 $ 6,878
Interest bearing deposits............................................. 8,802 13,341
Federal funds sold and repurchase agreements.......................... 99,000 32,000
Securities held for trading........................................... -- 75,606
Securities available for sale, at market value........................ 348,066 354,005
Loans available for sale, at lower of cost or market.................. 88,511 126,366
Investment securities, net............................................ 11,201 8,901
Loan portfolio, net................................................... 422,232 402,582
Discount loan portfolio, net.......................................... 1,280,972 1,060,953
Principal, interest and dividends receivable.......................... 13,566 16,821
Investments in low-income housing tax credit interests................ 99,924 93,309
Investment in joint ventures.......................................... 33,367 67,909
Real estate owned, net................................................ 99,658 103,704
Investment in real estate............................................. 44,940 41,033
Premises and equipment, net........................................... 15,518 14,619
Income taxes receivable............................................... 14,625 15,115
Deferred tax asset.................................................... 3,253 5,860
Other assets.......................................................... 56,870 44,683
---------- ----------
$2,649,471 $2,483,685
---------- ----------
---------- ----------
Liabilities and Stockholders' Equity
Liabilities:
Deposits........................................................... $2,106,829 $1,919,742
Advances from the Federal Home Loan Bank........................... 399 399
Securities sold under agreements to repurchase..................... 39,224 74,546
Notes, debentures and other interest bearing obligations........... 225,573 225,573
Accrued expenses, payables and other liabilities................... 52,290 59,829
---------- ----------
Total liabilities................................................. 2,424,315 2,280,089
---------- ----------
---------- ----------
Stockholder's Equity:
Preferred stock, $.01 par value; 20,000,000 shares authorized;
0 shares issued and outstanding.................................... -- --
Common stock, $.01 par value; 200,000,000 shares authorized;
26,799,511 and 26,744,170 shares issued and outstanding at
March 31, 1997 and December 31, 1996, respectively................. 268 267
Additional paid-in capital.......................................... 23,109 23,258
Retained earnings................................................... 197,458 180,417
Unrealized gain on securities available for sale, net of taxes...... 6,648 3,486
Notes receivable on exercise of common stock options................ (2,327) (3,832)
---------- ----------
Total stockholders' equity............................................ 225,156 203,596
---------- ----------
$2,649,471 $2,483,685
---------- ----------
---------- ----------
</TABLE>
12
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OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, (UNAUDITED) 1997 1996
- ------------------------------------------------------------------ ------------ ------------
<S> <C> <C>
Interest income:
Federal funds sold and repurchase agreements..................... $ 1,658 $ 769
Securities available for sale.................................... 8,173 7,781
Securities held for trading...................................... 248 --
Loans available for sale......................................... 2,851 6,597
Loans............................................................ 10,692 10,010
Discount loans................................................... 30,224 22,155
Investment securities and other.................................. 681 644
------------ ------------
54,527 47,956
------------ ------------
Interest expense:
Deposits......................................................... 29,894 23,001
Securities sold under agreements to repurchase................... 272 653
Advances from the Federal Home Loan Bank......................... 283 1,039
Notes, debentures and other interest bearing obligations......... 6,715 3,439
------------ ------------
37,164 28,132
------------ ------------
Net interest income before provision for loan losses........... 17,363 19,824
------------ ------------
Provision for loan losses......................................... 9,742 9,407
------------ ------------
Net interest income after provision for loan losses............ 7,621 10,417
------------ ------------
Non-interest income:
Servicing fees and other charges................................. 5,236 (681)
Gains on sales of interest earning assets, net................... 16,778 5,017
Loss on real estate owned, net................................... (794) (1,916)
Other income..................................................... 131 872
------------ ------------
21,351 3,292
------------ ------------
Non-interest expense:
Compensation and employee benefits............................... 14,923 6,170
Occupancy and equipment.......................................... 2,829 2,045
Net operating losses on investments in real estate and certain
low-income housing tax credit interests........................ 1,093 461
Other operating expenses......................................... 3,852 3,007
------------ ------------
22,697 11,683
------------ ------------
Equity in earnings of investment in joint venture................. 14,372 --
Income before income taxes....................................... 20,647 2,026
Income tax expense (benefit)...................................... 3,606 (1,003)
------------ ------------
Net income....................................................... $ 17,041 $ 3,029
------------ ------------
------------ ------------
Earnings per share
Net income..................................................... $ 0.63 $ 0.11
------------ ------------
------------ ------------
Weighted average common shares outstanding........................ 27,073,362 26,445,370
------------ ------------
------------ ------------
</TABLE>
13
