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 27, 1998
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 15
EXHIBIT INDEX ON PAGE 4
<PAGE>
ITEM 5. OTHER EVENTS
The news release of Ocwen Financial Corporation dated January 27, 1998,
regarding its financial results for the three months and the year ended December
31, 1997, including consolidated financial statements for the three months and
the year ended December 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 January 27,
1998.
2
<PAGE>
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/ Mark S. Zeidman
---------------------------------------------------
Mark S. Zeidman
Senior Vice President and Chief Financial Officer
Date: January 30, 1998
3
<PAGE>
INDEX TO EXHIBIT
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
99 News release of Ocwen Financial Corporation dated 5
January 27, 1998 regarding its financial results
for the three months and the year ended December
31, 1997.
4
================================================================================
Ocwen Financial Corporation
1675 Palm Beach Lakes Boulevard
West Palm Beach, FL 33401
NYSE Symbol: OCN Exhibit 99
================================================================================
NEWS RELEASE: IMMEDIATE January 27, 1998
OCWEN FINANCIAL CORPORATION REPORTS FOURTH QUARTER AND 1997 RESULTS
Ocwen Financial Corporation ("Ocwen" or the "Company") reported record net
income for the year ended December 31, 1997 of $78.9 million, up 57% from 1996.
Diluted earnings per share were $1.39 for the year ended December 31, 1997
versus $0.94 for 1996. The Company achieved a 2.78% return on assets during
1997, a 9% increase over that of 1996. In addition, the Company generated a
27.22% return on equity for the year ended December 31, 1997, which declined
from the 31.08% return on equity earned during 1996 as a result of the
strengthening of the Company's equity to assets ratio during 1997.
William C. Erbey, Chairman and Chief Executive Officer, said, "1997 was a banner
year for Ocwen, with earnings reaching a record high. We are pleased with our
fourth quarter results, especially in view of the excellent results achieved in
the fourth quarter of last year, and the fact that our earnings have increased
during each quarter of 1997." Net income for the fourth quarter of 1997 was
$22.9 million, 8% lower than the fourth quarter of 1996 and diluted earnings per
share for the quarter were $0.37 versus $0.46 for the same period a year ago.
<TABLE>
<CAPTION>
FOURTH QUARTER AND 1997 RESULTS AT A GLANCE Fourth Quarter Year
- --------------------------------------------------------------------------------------------------------
In thousands of dollars, except per share data 1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues...................................... $ 84,689 $ 60,283 $ 263,798 $ 153,357
Provision for loan losses..................... (10,479) (3,611) (32,218) (22,450)
Expenses...................................... (45,197) (22,520) (132,042) (69,606)
Income tax expense ........................... (6,398) (9,092) (21,309) (11,159)
Minority interest............................. 319 -- 703 --
Net income.................................... 22,934 25,060 78,932 50,142
Earnings per share:
Basic....................................... 0.38 0.47 1.40 0.99
Diluted..................................... 0.37 0.46 1.39 0.94
- --------------------------------------------------------------------------------------------------------
</TABLE>
ALL REFERENCES BELOW REGARDING CHANGES ARE BASED ON COMPARISONS TO THE SAME
PERIOD A YEAR AGO.
Revenues rose $24.4 million or 40% in the fourth quarter of 1997 from a year ago
and were up 72% for 1997.
o Net interest income before provision for loan losses increased $17.0
million or 104% to $33.4 million in the fourth quarter of 1997. The
increase in net interest income during the fourth quarter of 1997 was
largely due to a 40% increase in the average balance of interest-earning
assets, primarily discount loans, and a 162 basis point increase in net
interest margin due largely to additional interest received in connection
with the payoff of loans held in the loan portfolio. In 1997, net interest
income increased $38.5 million or 50% to $116.2 million. The increase in
net interest income during 1997 was due to a 48% increase in the average
balance of interest-earning assets, primarily discount loans.
o Non-interest income increased $33.0 million or 306% to $43.8 million in the
fourth quarter of 1997. This increase is due primarily to a $32.0 million
increase in gains on sales of interest earning assets and a $5.7 million
increase in servicing fees and other charges which reflects a significant
increase in loans serviced for others. In 1997, non-interest income rose
232% to $123.9 million.
- --------------------------------------------------------------------------------
Contact Christine A. Reich (561) 681-8569
- --------------------------------------------------------------------------------
5
<PAGE>
o Equity in earnings of the Company's investment in joint ventures amounted
to $7.5 million in the fourth quarter of 1997 as compared to $33.1 million
in the fourth quarter of 1996, a decline of $25.6 million or 77%. Included
in earnings for the fourth quarter of 1997 is a gain of $5.5 million
resulting from the securitization of $26.6 million of discount loans, as
compared to a gain of $28.5 million related to the securitization of $505.5
million of single-family discount loans in the fourth quarter of 1996.
Equity in earnings of investment in joint ventures amounted to $23.7
million for 1997 as compared to $38.3 million for 1996.
Provision for loan losses increased by $6.9 million to $10.5 million as a result
of a strengthening in reserves during the fourth quarter of 1997.
Expenses rose $22.7 million or 101% in the fourth quarter of 1997 and $62.4
million or 90% for the year which reflects the growth in the Company. During the
fourth quarter of 1997:
o Compensation and employee benefits increased $6.6 million or 42% primarily
due to a 115% increase in the average number of employees;
o Occupancy and equipment expense increased $3.3 million or 130%; and
o Distributions on capital securities amounted to $3.4 million as compared to
$0 in 1996.
RECENT DEVELOPMENTS
On October 3, 1997 the Company, as part of a larger transaction
involving the Company and BlackRock Capital Finance L.P. ("BlackRock"),
completed the securitization of 302 small commercial mortgage loans with an
aggregate unpaid principal balance of $62.7 million. The Company recorded total
gains of $2.0 million on the sale of the senior classes of securities in
connection with this transaction. The Company has retained an interest in the
related subordinated securities.
On October 24, 1997, Ocwen Federal Bank FSB (the "Bank"), entered into
an agreement to act as a special loan servicer to sub-service approximately
$75.0 million of 90-day-plus delinquent domestic loans for which Cityscape Corp.
("Cityscape") is the servicer under various securitizations. Cityscape
transferred to the Bank the special servicing of approximately 1,200
non-performing loans on January 16, 1998.
On October 29, 1997, the Company's Board of Directors approved a
2-for-1 stock split of its issued and outstanding common stock, par value $.01
per share. The Company effected the stock split through the distribution of
authorized but unissued shares of its common stock on November 20, 1997, to
holders of record of its common stock at the close of business on November 12,
1997. All references herein to the number of shares and per share amounts have
been adjusted retroactively for the stock split.
On November 6, 1997, the Company acquired Amos, Inc., a Connecticut
based company engaged primarily in the development of mortgage loan servicing
software. Amos' products are Microsoft Windows based, client/server architecture
and feature real-time processing, year 2000 compliance, a scaleable database
platform and strong workflow capabilities. The aggregate purchase price was $9.7
million, including $4.9 million which is contingent on Amos, Inc. meeting
certain software development performance criteria.
On December 3, 1997, the Company purchased 2,705 additional shares of
common stock of Ocwen Financial Services, Inc. ("OFS") for $15.0 million,
increasing its ownership from 80.0% to 93.7%. OFS is engaged in sub prime
single-family residential lending which is conducted through offices located in
various cities around the country.
6
<PAGE>
On December 17, 1997, the Company together with BCBF LLC ("LLC"), a
limited liability company formed in March 1996 between the Bank and BlackRock,
and unaffiliated entities completed the securitization of 8,378 single-family
loans with an aggregate unpaid principal balance of $458.4 million. The Bank
contributed 3,631 loans with an aggregate unpaid principal balance of $203.4
million and the LLC contributed 534 loans with an aggregate unpaid principal
balance of $26.6 million. The Company recognized a total gain of $29.9 million
in connection with this transaction, of which $24.4 million is included as gains
on sale of interest earning assets and $5.5 million is included as equity in
earnings in investment in joint venture. The Company has retained an interest in
the related subordinated securities.
In December, 1997 the Company completed the securitization of 1,834
sub-prime single-family residential mortgage loans with an aggregate unpaid
principal balance of $208.8 million. The Company recorded total gains of $9.0
million on the sale of the senior classes of securities in connection with this
transaction. The Company continues to service the loans for a fee and has
retained an interest in the related residual class security.
On January 20, 1998, the Company acquired DTS Communications, Inc.
("DTS"), a real estate technology company located in San Diego, California, for
a purchase price of $13.0 million in cash, common stock of the Company and
repayment of certain indebtedness. DTS has developed technology tools to
automate real estate transactions over the Internet. DTS has been recognized by
Microsoft Corporation for the Microsoft component-based architecture to
facilitate EDI (Electronic Data Interchange). The Company plans to enhance the
DTS products by combining features from its proprietary software systems for
loan default management and loss mitigation with DTS's open standards
architecture and offer the technology to the mortgage industry. The common stock
of the Company issued in the acquisition was acquired from affiliates of the
Company at the same price per share as was used to calculate the number of
shares issued in the acquisition.
THE REMAINDER OF THIS RELEASE CONTAINS INFORMATION ON SPECIFIC AREAS OF RESULTS,
A FINANCIAL SUMMARY, AND THE CONSOLIDATED FINANCIAL STATEMENTS.
REVENUES
NET INTEREST INCOME
Interest income of $73.7 million for the fourth quarter of 1997 increased by
$23.4 million or 47% over that of the fourth quarter of 1996 as a result of a
$735.9 million or 40% increase in the average balance of interest-earning
assets, of which $579.0 million is related to discount loans, and a 50 basis
point increase in the average yield earned. The average yield on
interest-earning assets was 11.50% and 11.00% in the fourth quarter of 1997 and
1996, respectively, and 11.50% and 12.07% in the twelve months ended December
31, 1997 and 1996, respectively. The increase in yield for the three months
ended December 31, 1997 is primarily attributable to the loan portfolio which
realized $5.9 million of additional interest received in connection with the
payoff of four loans secured by hotel and office properties. The decline in
yield for the twelve months ended December 31, 1997 was primarily attributable
to a $449.3 million increase in the average balance of single-family discount
loans held 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 now recognizes income on its
nonperforming single-family loans at the time of payoff or sale rather than over
the anticipated holding period, which is consistent with its revenue recognition
practices on nonperforming commercial loans.
Interest expense of $40.3 million for the fourth quarter of 1997 increased by
$6.4 million or 19% over the comparable period in the prior year as a result of
a $423.8 million or 22% increase in the average balance of interest-bearing
liabilities, of which $307.6 million is related to certificates of deposit. For
the twelve months ended December 31, 1997, interest expense amounted to $156.3
million, a $40.1 million or 35% increase over the same period of the prior year.
The average rate paid on interest-bearing liabilities was 6.77% and 6.92% in the
fourth quarter of 1997 and 1996, respectively, and 6.69% and 6.61% in the twelve
months ended December 31, 1997 and 1996, respectively.
7
<PAGE>
As a result of the above, net interest income before provision for loan losses
of $33.4 million for the fourth quarter of 1997 increased by $17.0 million or
104% from the fourth quarter of 1996 and the net interest margin for the fourth
quarter of 1997 increased to 5.21% from 3.59% for the fourth quarter of 1996.
Net interest income of $116.2 million for the twelve months ended December 31,
1997 increased $38.5 million or 50% over the comparable period of the prior year
and the net interest margin increased 7 basis points to 4.91%.
EQUITY IN EARNINGS OF INVESTMENT IN JOINT VENTURE
During the fourth quarter of 1997, the Company recorded $7.5 million of income
related to its investment in joint ventures as compared to $33.1 million in the
fourth quarter of 1996. The Company's pro rata share of the income from the
joint ventures in the fourth quarter of 1997 consisted primarily of a $5.5
million net gain related to the securitization of single-family residential
loans. Included in equity in earnings of investment in joint venture for the
fourth quarter of 1996 is a gain of $28.5 million related to the securitization
of $505.5 million of single-family discount loans. Equity in earnings of
investment in joint ventures amounted to $23.7 million for the twelve months
ended December 31, 1997 and includes a $9.2 million net gain related to the
securitization of single-family residential loans in the first quarter and the
recapture of $5.1 million of valuation allowances established in 1996 by the
Company on its equity investment in joint ventures as a result of the resolution
and securitization of loans. The Company acts as the servicer for the loans
previously securitized.
NON-INTEREST INCOME
Non-interest income of $43.8 million for the fourth quarter of 1997 increased by
$33.0 million from that of the fourth quarter of 1996 primarily due to a $32.0
million increase in gains on sales of interest-earning assets and a $5.7 million
increase in servicing fees and other charges offset in part by a $4.0 million
decrease in other income due primarily to a $4.9 million gain during the fourth
quarter of 1996 included in other income recognized in connection with the sale
of an investment in a low-income housing tax credit project. Gains on sales of
interest-earning assets, net, for the fourth quarter of 1997 of $36.1 million is
primarily comprised of a $24.4 million net gain recognized in connection with
the securitization of 3,631 single-family discount loans with an aggregate
unpaid principal balance of $203.4 million, a $9.0 million gain recognized in
connection with the securitization of 1,834 sub-prime single-family residential
mortgage loans with an aggregate unpaid principal balance of $208.8 million and
a $2.0 million net gain recognized in connection with the securitization of 302
small commercial mortgage loans with an aggregate unpaid principal balance of
$62.7 million.
Non-interest income of $123.9 million for 1997 increased by $86.6 million as
compared to 1996. Gains on sales of interest-earning assets for 1997 increased
by $60.5 million as compared to 1996 and includes gains of $9.5 million, $16.8
and $24.4 million earned during the first, second and fourth quarters,
respectively, in connection with the securitization of discount mortgage loans.
Servicing fees and other charges increased $21.2 million during 1997 as compared
to 1996. The increases in servicing fees and other charges reflect 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 $4.69 billion and $1.62 billion during the fourth quarter of 1997
and 1996, respectively, and $3.11 billion and $887.9 million during 1997 and
1996, respectively. At December 31, 1997 Ocwen serviced loans for third parties
totaling $5.5 billion.
PROVISION FOR LOAN LOSSES
The Company's provision for loan losses amounted to $10.5 million and $3.6
million for the fourth quarter of 1997 and 1996, respectively, and $32.2 million
and $22.5 million for the twelve months ended December 31, 1997 and 1996,
respectively. At December 31, 1997 Ocwen had allowances for losses of $23.5
million and $3.7 million on its discount loan and loan portfolios, respectively,
which amounted to 1.6% and 1.4% 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.
8
<PAGE>
EXPENSES
NON-INTEREST EXPENSE
Non-interest expense of $41.8 million for the fourth quarter of 1997 increased
by $19.3 million or 86% as compared to the same period for 1996. Compensation
and employee benefits increased by $6.6 million primarily due to a 115% increase
in the average number of employees to 1,104 from 513, offset in part by a $2.6
million decrease in the accrual for employee profit sharing expense. Occupancy
and equipment expense increased $3.3 million primarily due to an increase in
data processing costs, general office equipment expenses and rent expense, all
largely attributable to the increase in leased corporate and loan production
office space and the increase in employees discussed above. Other operating
expenses increased $6.1 million primarily due to a $1.4 million increase in due
diligence costs, a $1.5 million increase in professional fees and a $679,000
increase in loan related expenses.
Non-interest expense of $126.8 million for 1997 increased $57.2 million or 82%
over the comparable period in the prior year, with compensation and employee
benefits accounting for $38.5 million of the increase and occupancy and
equipment accounting for $8.7 million of the increase. Non-interest expenses for
1996 include a $7.1 million assessment in the third quarter to recapitalize the
Savings Association Insurance Fund.
DISTRIBUTIONS ON COMPANY-OBLIGATED, MANDATORILY REDEEMABLE SECURITIES OF
SUBSIDIARY TRUST HOLDING SOLELY JUNIOR SUBORDINATED DEBENTURES OF THE COMPANY
In August 1997, Ocwen Capital Trust I, a wholly owned subsidiary of Ocwen,
issued $125.0 million of 10 7/8% Capital Securities. Distributions on the
Capital Securities accrue from the date of original issuance and are payable
semi-annually in arrears on February 1 and August 1 of each year, commencing on
February 1, 1998, at an annual rate of 10 7/8% of the liquidation amount of
$1,000 per capital security. Distributions accrued amounted to $3.4 million and
$5.2 million during the three and twelve months ended December 31, 1997,
respectively, as compared to $0 for 1996.
INCOME TAXES
Income tax expense amounted to $6.4 million and $9.1 million during the fourth
quarter of 1997 and 1996, respectively, and $21.3 million and $11.2 million for
the twelve months ended December 31, 1997 and 1996, respectively. The Company's
income tax expense is reported net of tax credits of $4.5 million and $2.1
million for the fourth quarter of 1997 and 1996, respectively, and $14.9 million
and $9.3 million for the twelve months ended December 31, 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 37.67% and 32.77% during the fourth quarter of 1997 and 1996, respectively,
and 36.36% and 33.42% for the twelve months ended December 31, 1997 and 1996,
respectively.
ASSETS AND LIABILITIES
At December 31, 1997 the Company had $3.07 billion of total assets as compared
to $2.48 billion at December 31, 1996. Ocwen acquired discount loans with a
combined total unpaid principal balance of approximately $429.1 million and
$1.72 billion during the three and twelve months ended December 31, 1997,
respectively, as compared to $439.3 million and $1.11 billion during the three
and twelve months ended December 31, 1996, respectively. In addition, Ocwen
purchased and originated single-family residential loans to sub-prime borrowers
totaling approximately $210.4 million and $590.2 million during the three and
twelve months ended December 31, 1997, respectively. At December 31, 1997 the
Company had $2.52 billion of total liabilities as compared to $2.28 billion at
December 31, 1996. The increase in total liabilities is due largely to
obligations outstanding under lines of credit which increased to $118.3 million
from $0 at December 31, 1996.
9
<PAGE>
CAPITAL
Stockholders' equity increased $216.1 million or 106% during 1997 from $203.6
million at December 31, 1996 to $419.7 million at December 31, 1997 primarily
due to net income of $78.9 million and $142.0 million of proceeds from the sale
of 3,450,000 shares of common stock. At December 31, 1997 stockholders' equity
included $5.0 million of net unrealized losses on securities available for sale
and equity securities, net of related deferred taxes of $6.7 million, compared
with $3.5 million of net unrealized gains on securities available for sale at
December 31, 1996, net of related deferred taxes of $2.0 million.
ATTACHED ARE THE FINANCIAL SUMMARY, THE AVERAGE BALANCE AND RATE ANALYSIS TABLES
AND THE CONSOLIDATED FINANCIAL STATEMENTS.
10
<PAGE>
OCWEN FINANCIAL CORPORATION
FINANCIAL SUMMARY
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
At or for the Three At or for the Twelve
Months ended December 31, Months ended December 31,
---------------------------------------- ----------------------------------------
% %
Increase/ Increase/
1997 1996 (Decrease) 1997 1996 (Decrease)
----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Interest income ............................ $ 73,736 $ 50,292 47% $ 272,531 $ 193,894 41%
Interest expense ........................... 40,313 33,907 19 156,289 116,160 35
----------- ----------- ----------- -----------
Net interest income ........................ 33,423 16,385 104 116,242 77,734 50
Provision for loan losses .................. 10,479 3,611 190 32,218 22,450 44
----------- ----------- ----------- -----------
Net interest income after provision for
loan losses ............................. 22,944 12,774 80 84,024 55,284 52
----------- ----------- ----------- -----------
Servicing fees and other charges ........... 8,479 2,737 210 25,881 4,682 453
Gain on sale of interest-earning assets, net 36,070 4,102 779 82,212 21,682 279
Other non-interest income .................. (751) 3,956 (119) 15,775 10,939 44
----------- ----------- ----------- -----------
Total non-interest income ............... 43,798 10,795 306 123,868 37,303 232
----------- ----------- ----------- -----------
Compensation and employee benefits ......... 22,504 15,873 42 77,573 39,043 99
Occupancy and equipment .................... 5,839 2,543 130 17,657 8,921 98
SAIF recapitalization assessment ........... -- -- -- -- 7,140 (100)
Other non-interest expense ................. 13,455 4,104 228 31,563 14,502 118
----------- ----------- ----------- -----------
Total non-interest expense .............. 41,798 22,520 86 126,793 69,606 82
----------- ----------- ----------- -----------
Distributions on Company-obligated,
mandatorily redeemable securities of
subsidiary trust holding solely junior
subordinated debentures of the Company .. 3,399 -- -- 5,249 -- --
Equity in earnings of investment in joint
ventures ................................ 7,468 33,103 (77) 23,688 38,320 (38)
----------- ----------- ----------- -----------
Income before income taxes .............. 29,013 34,152 (15) 99,538 61,301 62
Income tax expense ......................... (6,398) (9,092) (30) (21,309) (11,159) 91
Minority interest .......................... 319 -- -- 703 -- --
----------- ----------- ----------- -----------
Net income .............................. $ 22,934 $ 25,060 (8) $ 78,932 $ 50,142 57
=========== =========== =========== ===========
KEY RATIOS:
Net interest spread ........................ 4.73% 4.08% 16 4.81% 5.46% (12)%
Net interest margin ........................ 5.21% 3.59% 45 4.91% 4.84% 1
Annualized Return on Average:
Assets (1)............................... 2.96% 4.27% (31) 2.78% 2.54% 9
Equity .................................. 22.40% 52.80% (58) 27.22% 31.08% (12)
Efficiency Ratio (2) ....................... 49.35% 37.36% 32 48.06% 41.34% 16
AVERAGE BALANCES:
Securities available for sale .............. $ 318,368 $ 304,932 4% $ 299,558 $ 284,433 5%
Loan portfolio ............................. 366,472 388,105 (6) 410,863 328,378 25
Discount loan portfolio .................... 1,452,204 873,178 66 1,283,020 675,345 90
Total interest-earning assets .............. 2,563,977 1,828,115 40 2,369,149 1,605,786 48
Total assets ............................... 3,094,784 2,306,491 34 2,835,514 2,013,283 41
Deposits ................................... 1,924,708 1,619,160 19 1,998,191 1,517,758 32
Total interest-bearing liabilities ......... 2,382,522 1,958,748 22 2,336,895 1,756,842 33
Total liabilities .......................... 2,685,290 2,116,637 27 2,545,484 1,851,951 37
Total stockholders' equity ................. 409,494 189,854 116 290,030 161,332 80
</TABLE>
- -----------------------------------
(1) Includes the Company's pro rata share of average assets held by the joint
venture.
(2) Before provision for loan losses and SAIF recapitalization assessment, and
including equity in earnings of investment in joint venture. Inclusive of
the SAIF recapitalization assessment, the efficiency ratio for the 1996
would have been 45.39%.
11
<PAGE>
<TABLE>
<CAPTION>
OCWEN FINANCIAL CORPORATION
AVERAGE BALANCE / RATE ANALYSIS
Three Months Ended December 31,
------------------------------------------------------------------------------
1997 1996
------------------------------------- -----------------------------------
Average Annualized Average Annualized
Balance Interest Yield/Rate Balance Interest Yield/Rate
-------- --------- ---------- ------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
AVERAGE ASSETS:
Federal funds sold and
repurchase agreements........ $ 121,190 $ 1,663 5.49% $ 67,805 $ 842 4.96%
Securities available for sale.. 318,368 5,775 7.26 304,932 6,978 9.15
Securities held for trading.... -- -- -- 63,164 1,216 7.70
Loans available for sale ...... 257,730 7,277 11.29 103,488 2,923 11.30
Loan portfolio................. 366,472 16,910 18.46 388,105 10,084 10.39
Discount loan portfolio........ 1,452,204 40,809 11.24 873,178 27,313 12.51
Investment securities and
other........................ 48,013 1,302 10.85 27,443 936 13.66
---------- ------- ----- ---------- ------- -----
Total interest-earning
assets, interest income.... 2,563,977 73,736 11.50 1,828,115 50,292 11.00
------- -------
Non-interest earning cash..... 23,153 5,601
Allowance for loan losses...... (24,672) (16,343)
Investments in
low-income housing tax
credit interests............. 94,241 110,124
Investment in joint ventures... 19,790 66,448
Real estate owned, net......... 170,132 116,133
Other assets................... 248,163 196,413
---------- ----------
Total assets................. $3,094,784 $2,306,491
========== ==========
AVERAGE LIABILITIES AND
STOCKHOLDERS' EQUITY:
Interest-bearing demand
deposits..................... $ 25,734 $ 215 3.34% $ 26,505 $ 263 3.97%
Savings deposits............... 1,915 11 2.30 3,205 18 2.25
Certificates of deposit........ 1,897,059 29,523 6.23 1,589,450 25,258 6.36
---------- ------- ---------- -------
Total interest-bearing
deposits................... 1,924,708 29,749 6.18 1,619,160 25,539 6.31
Securities sold under
agreements to repurchase..... 26,854 467 6.96 30,738 415 5.41
Federal Home Loan Bank
advances..................... 5,543 82 5.92 72,589 1,064 5.86
Obligations outstanding
under lines of credit........ 198,414 3,267 6.59 -- -- --
Notes, debentures and other
interest bearing
obligations.................. 227,003 6,748 11.89 236,261 6,889 11.66
---------- ------- ---------- -------
Total interest-bearing lia-
bilities, interest expense. 2,382,522 40,313 6.77 1,958,748 33,907 6.92
------- -------
Non-interest bearing
deposits..................... 23,345 27,295
Escrow deposits................ 90,587 43,982
Other liabilities.............. 188,836 86,612
---------- ----------
Total liabilities............ 2,685,290 2,116,637
Stockholders' equity........... 409,494 189,854
---------- ----------
Total liabilities and
stockholders' equity....... $3,094,784 $2,306,491
========== ==========
Net interest income before
provision for loan losses.... $33,423 $16,385
======= =======
Net interest spread............ 4.73% 4.08%
Net interest margin............ 5.21% 3.59%
Ratio of interest earning
assets to interest bearing
liabilities.................. 108% 93%
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
OCWEN FINANCIAL CORPORATION
AVERAGE BALANCE / RATE ANALYSIS
Twelve Months Ended December 31,
---------------------------------- ---------------------------------
1997 1996
---------------------------------- ---------------------------------
Average Annualized Average Annualized
Balance Interest Yield/rate Balance Interest Yield/rate
-------- --------- ---------- ------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
AVERAGE ASSETS:
Federal funds sold and
repurchase agreements........ $163,671 $ 8,959 5.47% $ 84,997 $ 4,681 5.51%
Securities available for sale.. 299,558 28,545 9.53 284,433 26,932 9.47
Securities held for trading.... 3,295 248 7.53 21,291 1,216 5.71
Loans available for sale ...... 171,837 18,368 10.69 175,078 17,092 9.76
Loan portfolio................. 410,863 54,701 13.31 328,378 36,818 11.21
Discount loan portfolio........ 1,283,020 157,649 12.29 675,345 103,165 15.28
Investment securities and other 36,905 4,061 11.00 36,264 3,990 11.00
--------- ------- --------- ---------
Total interest-earning
assets, interest income... 2,369,149 $272,531 11.50 1,605,786 193,894 12.07
-------- ---------
Non-interest earning cash...... 14,843 6,372
Allowance for loan losses...... (22,001) (11,250)
Investments in
low-income housing tax
credit interests............. 96,096 83,110
Investment in joint ventures... 34,777 46,193
Real estate owned, net......... 131,007 137,250
Other assets................... 211,643 145,822
---------- ----------
Total assets.............. $2,835,514 $2,013,283
========== ==========
AVERAGE LIABILITIES AND
STOCKHOLDERS' EQUITY:
Interest-bearing demand
deposits..................... $ 31,719 $ 1,220 3.85% $ 33,167 $ 620 1.87%
Savings deposits............... 2,121 49 2.31 3,394 78 2.30
Certificates of deposit........ 1,964,351 120,801 6.15 1,481,197 93,075 6.28
--------- -------- --------- ---------
Total interest-bearing
deposits................ 1,998,191 122,070 6.11 1,517,758 93,773 6.18
Securities sold under
agreements to repurchase..... 16,717 1,000 5.98 19,581 1,101 5.62
Federal Home Loan Bank advances 9,482 518 5.46 71,221 4,053 5.69
Obligations outstanding under
lines of credit.............. 84,272 5,578 6.62 -- -- --
Notes, debentures and other
interest bearing obligations. 228,233 27,123 11.88 148,282 17,233 11.62
--------- -------- --------- ---------
Total interest-bearing
liabilities, interest expense 2,336,895 156,289 6.69 1,756,842 116,160 6.61
-------- ---------
Non-interest bearing deposits.. 23,224 10,938
Escrow deposits................ 78,986 41,306
Other liabilities.............. 106,379 42,865
---------- ----------
Total liabilities......... 2,545,484 1,851,951
Stockholders' equity........... 290,030 161,332
---------- ----------
Total liabilities and
stockholders' equity.... $2,835,514 $2,013,283
========== ==========
Net interest income before
provision for loan losses.... $116,242 $ 77,734
======== =========
Net interest spread ........... 4.81% 5.46%
Net interest margin ........... 4.91% 4.84%
Ratio of interest earning
assets to interest bearing
liabilities ................... 101% 91%
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION December 31,
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) --------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Cash and amounts due from depository institutions ............................... $ 12,243 $ 6,878
Interest bearing deposits ....................................................... 140,001 13,341
Federal funds sold and repurchase agreements .................................... -- 32,000
Securities held for trading ..................................................... -- 75,606
Securities available for sale, at market value .................................. 430,524 354,005
Loans available for sale, at lower of cost or market ............................ 177,041 126,366
Investment securities, net ...................................................... 59,567 8,901
Loan portfolio, net ............................................................. 266,299 402,582
Discount loan portfolio, net .................................................... 1,434,176 1,060,953
Investments in low- income housing tax credit interests ......................... 128,614 93,309
Investment in joint ventures .................................................... 1,056 67,909
Real estate owned, net .......................................................... 167,265 103,704
Investment in real estate ....................................................... 65,972 41,033
Premises and equipment, net ..................................................... 21,542 14,619
Income taxes receivable ......................................................... -- 15,115
Deferred tax asset .............................................................. 45,148 5,860
Excess of purchase price over net assets acquired ............................... 15,560 --
Principal, interest and dividends receivable .................................... 17,284 16,821
Escrow advances on loans ........................................................ 47,888 27,409
Other assets .................................................................... 38,985 17,274
----------- -----------
$ 3,069,165 $ 2,483,685
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits ..................................................................... $ 1,982,822 $ 1,919,742
Advances from the Federal Home Loan Bank ..................................... -- 399
Securities sold under agreements to repurchase ............................... 108,250 74,546
Notes, debentures and other interest bearing obligations ..................... 226,975 225,573
Obligations outstanding under lines of credit ................................ 118,304 --
Accrued interest payable ..................................................... 32,238 24,843
Income taxes payable ......................................................... 3,132 --
Accrued expenses, payables and other liabilities ............................. 51,709 34,986
----------- -----------
Total liabilities .......................................................... 2,523,430 2,280,089
----------- -----------
Company-obligated, mandatorily redeemable securities of subsidiary trust holding
solely junior subordinated debentures of the Company ......................... 125,000 --
Minority interest ............................................................... 1,043 --
STOCKHOLDERS' 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; 60,565,835 and
53,488,340 shares issued and outstanding at December 31, 1997 and 1996,
respectively ............................................................... 606 535
Additional paid-in capital ................................................... 164,751 22,990
Retained earnings ............................................................ 259,349 180,417
Unrealized (loss) gain on securities available for sale and equity securities,
net of taxes................................................................ (5,014) 3,486
Notes receivable on exercise of common stock options ......................... -- (3,832)
----------- -----------
Total stockholders' equity ................................................. 419,692 203,596
----------- -----------
$ 3,069,165 $ 2,483,685
=========== ===========
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
- ----------------------------------------------------------------------------------------------------------------------------
Three Months Twelve Months
----------------------------- -----------------------------
For the periods ended December 31, 1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Interest income:
Federal funds sold and repurchase agreements ............. $ 1,663 $ 842 $ 8,959 $ 4,681
Securities available for sale ............................ 5,775 6,978 28,545 26,932
Securities held for trading .............................. -- 1,216 248 1,216
Loans available for sale ................................. 7,277 2,923 18,368 17,092
Loans .................................................... 16,910 10,084 54,701 36,818
Discount loans ........................................... 40,809 27,313 157,649 103,165
Investment securities and other .......................... 1,302 936 4,061 3,990
------------ ------------ ------------ ------------
73,736 50,292 272,531 193,894
------------ ------------ ------------ ------------
Interest expense:
Deposits ................................................. 29,749 25,539 122,070 93,773
Securities sold under agreements to repurchase ........... 467 415 1,000 1,101
Advances from the Federal Home Loan Bank ................. 82 1,064 518 4,053
Obligations outstanding under lines of credit ............ 3,267 -- 5,578 --
Notes, debentures and other interest bearing obligations . 6,748 6,889 27,123 17,233
------------ ------------ ------------ ------------
40,313 33,907 156,289 116,160
------------ ------------ ------------ ------------
Net interest income before provision for loan losses .. 33,423 16,385 116,242 77,734
Provision for loan losses ................................... 10,479 3,611 32,218 22,450
------------ ------------ ------------ ------------
Net interest income after provision for loan losses ... 22,944 12,774 84,024 55,284
------------ ------------ ------------ ------------
Non-interest income:
Servicing fees and other charges .......................... 8,479 2,737 25,881 4,682
Gains on sales of interest earning assets, net ............ 36,070 4,102 82,212 21,682
Income (loss) on real estate owned, net .................. (1,351) (640) 7,277 3,827
Other income .............................................. 600 4,596 8,498 7,112
------------ ------------ ------------ ------------
43,798 10,795 123,868 37,303
------------ ------------ ------------ ------------
Non-interest expense:
Compensation and employee benefits ........................ 22,504 15,873 77,573 39,043
Occupancy and equipment ................................... 5,839 2,543 17,657 8,921
Net operating loss (income) on investments in real estate
and certain low-income housing tax credit interests ..... 2,973 (326) 4,792 (425)
Savings Association Insurance Fund recapitalization
assessment ............................................... -- -- -- 7,140
Other operating expenses .................................. 10,482 4,430 26,771 14,927
------------ ------------ ------------ ------------
41,798 22,520 126,793 69,606
------------ ------------ ------------ ------------
Distributions on Company-obligated, mandatorily redeemable
securities of subsidiary trust holding solely junior
subordinated debentures of the Company .................... 3,399 -- 5,249 --
Equity in earnings of investment in joint ventures .......... 7,468 33,103 23,688 38,320
------------ ------------ ------------ ------------
Income before income taxes ............................. 29,013 34,152 99,538 61,301
Income tax expense .......................................... (6,398) (9,092) (21,309) (11,159)
Minority interest in net loss of consolidated subsidiary .... 319 -- 703 --
------------ ------------ ------------ ------------
Net income.............................................. $ 22,934 $ 25,060 $ 78,932 $ 50,142
============ ============ ============ ============
Earnings per share:
Basic................................................... $ 0.38 $ 0.47 $ 1.40 $ 0.99
============ ============ ============ ============
Diluted.... ............................................ $ 0.37 $ 0.46 $ 1.39 $ 0.94
============ ============ ============ ============
Weighted average common shares outstanding:
Basic................................................... 60,541,578 53,488,340 56,185,956 50,556,572
============ ============ ============ ============
Diluted................................................. 61,321,725 53,932,118 56,836,484 53,378,882
============ ============ ============ ============
</TABLE>
15
