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): JULY 28, 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)(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (561) 681-8000
N/A
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
PAGE 1 OF 18
EXHIBIT INDEX ON PAGE 4
<PAGE>
ITEM 5. OTHER EVENTS
The news release of Ocwen Financial Corporation dated July 28, 1998 announcing
the second quarter 1998 results and certain other information, is attached
hereto 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 July 28, 1998.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, hereunto duly authorized.
OCWEN FINANCIAL CORPORATION
(Registrant)
By: /s/ MARK S. ZEIDMAN
-----------------------------
Mark S. Zeidman
Senior Vice President and
Chief Financial Officer
Date: July 30, 1998
3
<PAGE>
INDEX TO EXHIBIT
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
99 News release of Ocwen Financial Corporation dated 5
July 28, 1998, announcing the second quarter 1998
results and certain other information.
4
================================================================================
Ocwen Financial Corporation Exhibit 99
1675 Palm Beach Lakes Blvd.
West Palm Beach, FL 33401
NYSE symbol: OCN
================================================================================
NEWS RELEASE: IMMEDIATE July 28, 1998
OCWEN FINANCIAL CORPORATION REPORTS STRONG CORE SECOND QUARTER RESULTS BEFORE IO
WRITE-DOWN
o Core earnings strong
o Capital up year to date
o Loss on sale of entire AAA-rated agency IO portfolio
o Exploring strategic alliances
WEST PALM BEACH, FL - Ocwen Financial Corporation (NYSE: OCN) ("OCN" or the
"Company") today reported earnings for the second quarter ended June 30, 1998 of
$0.40 per diluted share before the impact of a $1.02 per diluted share charge
against earnings related to the Company's decision to immediately discontinue
its investments in AAA-rated agency interest-only and inverse interest-only
securities (together, "IOs"). Excluding the IO related charge, the Company
reported earnings of $24.5 million for the 1998 second quarter and returns on
average assets and average equity of 2.45% and 22.52%, respectively. Including
the IO related charge, the Company reported a net loss of $37.9 million, or
$(0.62) per diluted share, for the 1998 second quarter. This compares to net
income of $18.8 million for the second quarter of 1997, or $0.35 per diluted
share and returns on average assets and average equity of 2.75% and 32.29%,
respectively.
Excluding the IO related charge, for the first six months of 1998 the Company
reported earnings of $46.8 million or $0.76 per diluted share and returns on
average assets and average equity of 2.58% and 21.75%, respectively. Including
the IO related charge, net loss for the first six months of 1998 totaled $15.6
million, as compared to net income of $35.8 million for the same period in 1997.
Diluted earnings per share were $(0.25) for the six months ended June 30, 1998
versus $0.66 for the same period in 1997.
William C. Erbey, Chairman and Chief Executive Officer, said, "Obviously, the
write-down was very disappointing. However, we are very pleased with the strong
results in our major lines of business, which remain very profitable and ahead
of our 1998 business plan. Very simply, these results clearly demonstrate the
underlying strengths of our core businesses."
Mr. Erbey added, "In addition to our major business lines, OCN has historically
invested in a portfolio of AAA-rated agency IOs. Due to unprecedented levels of
mortgage prepayments and a continued inversion in the shape of the yield curve,
what we until very recently believed to be a sound investment strategy has
become one of increasing volatility and sensitivity to interest rate movements.
Therefore, we have decided to put this behind us and discontinue this investment
activity. To that end, we wrote-down the book value of the IOs by $77.6 million
in the second quarter and on July 27, 1998, we disposed of the entire portfolio
at book value."
Mr. Erbey continued, "Our ability to generate strong earnings in the first half
of 1998 from our core businesses and our high level of liquidity and
capitalization will enable us to focus on and continue to grow these businesses
both domestically and internationally. Since we went public, and looking back
before that time, we have generated an impressive financial record which
reflects our proven ability to successfully manage servicing-intensive assets.
In the last three years, OCN has earned an average 28% return on equity and a
58% growth rate in earnings per share. We believe that OCN's core businesses
will continue to see substantial growth and profitability in the future."
Mr. Erbey further stated, "Today, OCN is the largest purchaser of domestic
distressed residential and commercial real estate loans (based on 1997 and 1996
loan acquisition volumes) and a leading servicer of distressed mortgage loans in
the United States. This leadership position reflects our experience and
expertise in this business and our use
- --------------------------------------------------------------------------------
Contacts Christine A. Reich (561) 682-8569
William C. Erbey (561) 682-8520
Mark S. Zeidman (561) 682-8600
- --------------------------------------------------------------------------------
5
<PAGE>
Ocwen Financial Corporation (OCN)
Second Quarter Results
July 28, 1998
of advanced computer systems and proprietary software. Moreover, we are the
first financial services company designated by rating agencies as a top-ranked
Special Servicer for both commercial and residential assets. Accordingly, as
part of our strategic focus on further development of our core competencies and
fee-based business lines, we have engaged an investment bank to identify
strategic partners who can enable us to expand our franchise both domestically
and internationally. By combining our strengths in systems and technology with
strategic partners who have the ability to finance assets globally and provide
wider brand name recognition, we believe that we will be able to penetrate the
distressed asset marketplace more effectively and add value to our various
constituencies. I am excited about the opportunities that such alliances may
offer in the years to come."
<TABLE>
<CAPTION>
SECOND QUARTER AND SIX MONTHS RESULTS AT A GLANCE Second Quarter Six Months
- ------------------------------------------------- ---------------------------- ----------------------------
In thousands of dollars, except per share data 1998 1997 1998 1997
- ------------------------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues ....................................... $ 102,275 $ 62,664 $ 164,866 $ 115,751
Provision for loan losses ...................... (9,675) (7,909) (11,929) (17,651)
Impairment loss on AAA-rated agency IOs......... (77,645) -- (77,645) --
Expenses ....................................... (59,169) (31,080) (96,621) (53,777)
Income tax benefit (expense) ................... 6,383 (5,126) 5,810 (8,733)
Minority interest .............................. (68) 243 (35) 243
Net (loss) income .............................. (37,899) 18,792 (15,554) 35,833
Earnings per share:
Basic ....................................... (0.62) 0.35 (0.26) 0.67
Diluted ..................................... (0.62) 0.35 (0.25) 0.66
Weighted average shares outstanding:
Basic ....................................... 60,713,593 53,599,022 60,682,432 53,599,014
Diluted ..................................... 61,326,784 54,127,521 61,336,494 54,137,127
</TABLE>
ALL REFERENCES BELOW REGARDING CHANGES ARE BASED ON COMPARISONS TO THE SAME
PERIOD A YEAR AGO.
Revenues, excluding the impairment loss, increased $39.6 million or 63% in the
second quarter of 1998 from a year ago and were up $49.1 million or 42% for the
first six months of 1998.
o Net interest income before provision for loan losses increased $6.1 million
or 22% to $34.2 million in the second quarter of 1998. In the first six
months of 1998, net interest income increased $5.9 million or 13% to $51.3
million. The increase in net interest income during the second quarter of
1998 was largely due to a $21.3 million increase in interest income on
loans available for sale offset by a $15.1 million increase in interest
expense on obligations outstanding under lines of credit.
o Non-interest income, excluding the impairment loss, increased $34.8 million
or 105% to $68.1 million in the second quarter of 1998. This increase is
due primarily to a $10.5 million increase in gains on sales of interest
earning assets, an $8.6 million increase in servicing fees and other
charges, a $5.9 million increase in gain on real estate owned and a $9.8
million increase in other income. The increase in servicing fees reflects a
significant increase in loans serviced for others, from $5.51 billion at
December 31, 1997 to $8.17 billion at June 30, 1998, primarily as a result
of securitizations of single family residential discount loans and subprime
loans held by the Company, and agreements to service mortgage loans for
others. OCN has also increasingly entered into special servicing
arrangements whereby the Company services loans that become greater than 60
days past due and receives additional fees to the extent certain loss
mitigation parameters are achieved. Through June 30, 1998, the Company has
been designated as a special servicer for pools of loans totaling
approximately $8.7 billion in unpaid principal balance. In the first six
months of 1998, non-interest income excluding the impairment loss increased
108% to $113.5 million.
o Impairment loss on AAA-rated agency IOs amounted to $77.6 million, or $62.4
million after tax, for the second quarter and first six months of 1998. The
entire AAA-rated agency IO portfolio was sold on July 27, 1998 at book
value.
6
<PAGE>
Ocwen Financial Corporation (OCN)
Second Quarter Results
July 28, 1998
Provision for loan losses increased $1.8 million in the second quarter of 1998
as compared to 1997 due to the establishment of a $2.1 million general reserve
on discount loans. Provision for loan losses decreased by $5.7 million during
the first six months of 1998 primarily as a result of the recapture of
previously established provisions for loan losses in connection with the
securitization of single-family residential discount loans during the first
quarter of 1998 and the inclusion in the provision for loan losses for the first
quarter of 1997 of $2.0 million of additional reserves provided in connection
with the unsecuritized discount loans remaining from the first quarter 1997
securitization.
Expenses rose $28.1 million or 90% in the second quarter of 1998 as a result of
growth in our core business lines and expenses of OTX and Ocwen U.K. which
amounted to $3.5 million and $11.3 million, respectively. Details of this growth
include:
o Compensation and employee benefits increased $10.1 million or 51% primarily
due to an 83% increase in the average number of employees from 823 to
1,510.
o Occupancy and equipment expense increased $4.6 million or 116%.
o Distributions on capital securities amounted to $ 3.4 million during the
second quarter of 1998 as compared to $0 during the same period of 1997.
o Other operating expenses increased by $9.1 million primarily due to a $5.8
million increase in loan related expenses, a $2.2 million increase in
professional expenses and a $1.4 million increase in marketing expenses.
Income tax benefit was recorded at a rate of 14.4% for the second quarter of
1998 as compared to income tax expense of 21.7% for the comparable period in the
prior year. The Company estimates that its effective tax rate for 1998 will
approximate 11.5% before the use of a net operating loss carry-forward which
resulted in a $3.4 million increase in tax benefit for the first half of 1998.
RECENT DEVELOPMENTS
On April 24, 1998, the Company and Ocwen Asset Investment Corp. (NYSE: OAC)
("OAC") completed the joint closing of the transaction previously agreed to by
the Company for the acquisition of substantially all of the assets, and certain
liabilities, of the United Kingdom ("UK") operations of Cityscape Financial Corp
("Cityscape"). As consummated, the Company acquired Cityscape's mortgage loan
portfolio and residential subprime mortgage loan origination and servicing
businesses for (pound)249.6 million ($421.3 million) and assumed (pound)20.3
million ($34.3 million) of Cityscape's liabilities. OAC acquired Cityscape's
securitized mortgage loan residuals for (pound)33.7 million ($56.9 million). In
addition, the Company and OAC entered into an agreement for Ocwen Federal Bank
FSB (the "Bank") to service the securitized mortgage loan residuals purchased by
OAC in the transaction.
On May 12, 1998, the Company established a wholly-owned subsidiary, Ocwen
Technology Xchange, Inc. ("OTX"), to supply its advanced mortgage loan
servicing, resolution and work flow technology to the mortgage and real estate
industries. OTX will also license its DATATrakTM technology. The Company decided
to form OTX in order to leverage the Company's servicing experience and
technology and to benefit from the opportunities presented by current
inefficiencies in the real estate market. The foundation of OTX was strengthened
by the Company's previous acquisition of two software companies: Amos, Inc. a
developer of mortgage loan servicing and origination software and workflow
technology, in October of 1997, and DTS Communications, Inc., a leading real
estate technology company, in January of 1998.
On May 19, 1998, the Company announced the promotion of four key executives. The
promoted executives are Christine A. Reich, who was promoted to the position of
President; John R. Erbey, who was named Senior Managing Director and General
Counsel as well as Chairman and Chief Executive Officer of OTX; and Jordan C.
Paul and Ronald M. Faris, who were promoted to the newly created position of
Executive Vice President.
On June 29, 1998, the Company completed the securitization of 4,522 subprime
single family residential mortgage loans with an aggregate unpaid principal
balance of $382.7 million. The Company recorded a net gain of $9.7 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 security.
7
<PAGE>
Ocwen Financial Corporation (OCN)
Second Quarter Results
July 28, 1998
On June 29, 1998, the Company, as part of a larger transaction involving the
Company, Black Rock Finance LP and Residential Funding Corporation, completed
the securitization of 1,155 single family residential mortgage discount loans
with an aggregate unpaid principal balance of $98.3 million. The Company
recorded a net gain of $12.2 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 subordinate
security.
On June 30, 1998, the Company completed the securitization of 14,179 UK subprime
single family residential mortgage loans with an aggregate unpaid principal
balance of (pound)218.1 million ($363.8 million), the largest such
securitization in the history of the UK. The Company recorded a net gain of
(pound)5.5 million ($9.1 million) on the sale of (pound)222.0 million ($370.3
million) 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 security.
For the six months ended June 30, 1998, the Company purchased discount loans
with a total unpaid principal balance of approximately $673.7 million. Combined
purchases and originations of subprime single family loans for the same period
amounted to approximately $1.13 billion of unpaid principal balance, including
$292.8 million purchased from the US operations of Cityscape and $421.3 million
purchased in connection with the acquisition of the UK operations of Cityscape
as previously announced.
THE REMAINDER OF THIS RELEASE CONTAINS SUMMARY INFORMATION ON THE COMPANY'S
SEGMENT PROFITABILITY, SPECIFIC AREAS OF RESULTS, FINANCIAL CONDITION AND
AVERAGE BALANCES AND RATES, AS WELL AS THE COMPANY'S INTERIM UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS.
NET INCOME SUMMARY BY BUSINESS ACTIVITY
The Company continues to engage in significant discount loan acquisition and
resolution activities and a variety of other mortgage lending activities, which
generally reflect the Company's desire to focus on business lines which leverage
its core competency, the servicing and management of servicing intensive assets.
The following table presents the estimated contribution by business activity to
the Company's net income for the periods indicated.
<TABLE>
<CAPTION>
Three Months Six Months
------------------------------------------ -------------------------------------
For the periods ended June 30, 1998 1997 1998 1997
------------------- ------------------- ------------------ -----------------
(Dollars in thousands) Amount % Amount % Amount % Amount %
- -------------------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Discount Loans:
Single family residential loans .......... $ 5,524 23 $ 5,072 27 $ 22,519 48 $ 12,324 34
Large commercial real estate loans ....... 10,434 43 6,813 36 13,297 29 9,804 27
Small commercial real estate loans ....... 2,649 11 588 3 6,018 13 1,142 3
Investment in low-income housing tax credits 535 2 2,161 12 5,285 11 3,760 11
Commercial real estate lending ............. 5,661 23 1,466 8 5,318 11 2,068 6
Subprime single family residential lending . 1,092 4 (198) (1) 2,364 5 744 2
Mortgage loan servicing .................... 2,600 11 38 -- 4,128 9 1,108 3
Investment securities ...................... (2,044) (8) 1,761 9 (9,748) (21) 3,405 10
OTX ........................................ (3,147) (14) -- -- (4,250) (9) -- --
Other ...................................... 1,165 5 1,091 6 1,883 4 1,478 4
-------- -------- -------- -------- -------- -------- -------- --------
24,469 100% 18,792 100% 46,814 100% 35,833 100%
======== ======== ======== ========
Impairment loss on AAA-rated agency IOs..... (62,368) -- (62,368) --
-------- -------- -------- --------
$(37,899) $ 18,792 $(15,554) $ 35,833
======== ======== ======== ========
</TABLE>
8
<PAGE>
Ocwen Financial Corporation (OCN)
Second Quarter Results
July 28, 1998
REVENUES
NET INTEREST INCOME
Interest income of $87.1 million for the second quarter of 1998 increased by
$20.1 million or 30% over that of the second quarter of 1997. This increase is
the result of a $1.07 billion increase in average interest-earning assets,
offset by a 135 basis point decrease in the average yield earned. The decline in
the average yield earned for the second quarter of 1998 is primarily due to a
decline in the yield on securities available for sale (primarily due to
declining yields on the IO portfolio and a $4.2 million charge on the subprime
residual securities due to accelerated prepayments of mortgage loans) offset in
part by an increase in the yield on the loan portfolio (primarily due to
additional interest received in connection with the payoff of nonresidential
loans.) Of the $1.07 billion net increase in average interest-earning assets,
$281.6 million and $862.5 million related to securities available for sale and
loans available for sale, respectively, offset by $162.0 million decrease
related to the loan portfolio. The $862.5 million increase in loans available
for sale is primarily as a result of $292.8 million purchased from the U.S.
operations of Cityscape and $421.3 million purchased in connection with the
acquisition of the UK operations of Cityscape. The average yield on
interest-earning assets was 10.24% and 11.47% in the second quarter of 1998 and
1997, respectively, and 9.60% and 10.79% in the first six months of 1998 and
1997, respectively. For the first six months of 1998, interest income amounted
to $144.8 million, a $23.3 million or 19% increase over the same period in 1997.
Interest expense of $52.9 million for the second quarter of 1998 increased by
$14.1 million or 36% over the comparable period in the prior year as a result of
a $836.5 million or 36% net increase in the average balance of interest-bearing
liabilities. Of the $836.5 million net increase in the average balance of
interest-bearing liabilities, $924.2 million and $145.1 million related to
increases in borrowings under lines of credit and securities sold under
agreements to repurchase, respectively, offset by a $187.4 million decline in
certificates of deposit. The average rate paid on interest-bearing liabilities
was 6.65% and 6.63% in the second quarter of 1998 and 1997, respectively. For
the first six months of 1998, interest expense amounted to $93.4 million, a
$17.4 million or 23% increase over the same period of the prior year.
As a result of the above, net interest income before provision for loan losses
of $34.2 million for the second quarter of 1998 increased by $6.1 million or 22%
from the second quarter of 1997 and the net interest margin for the second
quarter of 1998 decreased to 4.02% from 4.81% for the second quarter of 1997.
Net interest income of $51.3 million for the first six months of 1998 increased
$5.9 million or 13% over the comparable period of the prior year and the net
interest margin declined 64 basis points to 3.40%.
NON-INTEREST INCOME
Exclusive of the $77.6 million impairment loss on the IO portfolio, non-interest
income for the second quarter of 1998 amounted to $68.1 million, an increase of
$34.8 million or 105% from that of the second quarter of 1997. The increase was
primarily due to a $10.5 million or 45% increase in gains on sales of
interest-earning assets, an $8.6 million or 178% increase in servicing fees and
other charges, a $5.9 million increase in gain on real estate owned, and a $9.8
million increase in other income which includes $2.9 million of gains on sales
of investments in real estate, $2.7 million of brokerage commissions earned in
connection with the UK loan originations, and a $1.1 million increase in
management fees received from OAC. Gains on sales of interest-earning assets for
the second quarter of 1998 of $33.8 million were primarily comprised of a $9.7
million gain recognized in connection with the securitization of 4,522 subprime
single-family residential mortgage loans with an aggregate unpaid principal
balance of $382.7 million, a $12.2 million gain recognized in connection with
the securitization of 1,155 discount single family residential mortgage loans
with an aggregate unpaid principal balance of $98.3 million, a $9.1 million gain
recognized in connection with the securitization of 14,179 UK subprime single
family residential mortgage loans with an aggregate unpaid principal balance of
(pound)218.1 million ($363.8 million) and a $2.8 million gain recognized on the
sale of discount loans. Gains on sales of interest-earning assets for the first
six months of 1998 increased by $22.4 million from the same period in 1997 and
includes $24.6 million in gains earned during the first quarter in connection
with two securitizations of discount and subprime mortgage loans.
9
<PAGE>
Ocwen Financial Corporation (OCN)
Second Quarter Results
July 28, 1998
The increase in servicing fees and other charges reflects an increase in loan
servicing and related fees as a result of an increase in loans serviced for
others. The unpaid principal balance of loans serviced for others averaged $7.12
billion and $2.50 billion during the second quarter of 1998 and 1997,
respectively, and $6.63 billion and $2.27 billion during the first six months of
1998 and 1997, respectively. At June 30, 1998, Ocwen serviced 125,318 loans for
third parties totaling $8.17 billion.
IMPAIRMENT LOSS ON AAA-RATED AGENCY IOS
Impairment loss on AAA-rated agency IOs was $77.6 million, or $62.4 million
after tax, for the second quarter and first six months of 1998. This charge
resulted from the Company's decision to discontinue this activity and write-down
the book value of the IO portfolio. On July 27, 1998 the Company disposed of the
entire IO portfolio at book value.
EQUITY IN EARNINGS OF INVESTMENT IN JOINT VENTURES
On December 12, 1997, BCBF LLC (the "LLC"), a joint venture between the Company
and Black Rock Finance LP, distributed all of its remaining assets to its
partners. As a result, no equity in earnings of investment in joint venture was
recorded during 1998. During the second quarter of 1997, the Company recorded
$1.3 million of income related to its investment in joint ventures consisting
primarily of net interest income. Income from the joint venture amounted to
$15.7 million for the first six months of 1997 and includes $9.2 million of net
gains related to the securitization of single-family residential loans in the
first quarter of 1997.
PROVISION FOR LOAN LOSSES
The Company's provision for loan losses increased $1.8 million in the second
quarter of 1998 as compared to 1997 due to an additional $2.1 million of general
reserve established on discount loans. Provision for loan losses decreased by
$5.7 million during the first six months of 1998 to $11.9 million primarily as a
result of the recapture of previously established provisions in connection with
the securitization of single-family residential discount loans during the first
quarter of 1998 and the inclusion in provision for the first quarter of 1997 of
$2.0 million of additional reserves provided in connection with the
unsecuritized discount loans remaining from the first quarter 1997
securitization. At June 30, 1998, OCN had allowances for losses of $22.9 million
and $4.1 million on its discount loan and loan portfolios, respectively, which
amounted to 1.58% and 1.45% of the respective balances. The Company maintained
reserves of 1.61% and 1.37% on its discount loans and loan portfolios,
respectively, at December 31, 1997.
EXPENSES
NON-INTEREST EXPENSE
Non-interest expense of $55.8 million for the second quarter of 1998, which
includes $3.5 million and $11.3 million related to OTX and Ocwen UK,
respectively, increased by $24.7 million or 79% as compared to the same period
for 1997. Compensation and employee benefits increased by $10.1 million as the
average number of employees increased to 1,510 from 823. Occupancy and equipment
expense increased $4.6 million primarily due to an increase in data processing
costs, general office equipment expenses and rent expense, all largely
attributable to an increase in corporate and loan production office space and
the increase in the number of employees discussed above. Other operating
expenses increased by $9.1 million primarily due to a $5.8 million increase in
loan related expenses, a $2.2 million increase in professional expenses and a
$1.4 million increase in marketing expenses.
10
<PAGE>
Ocwen Financial Corporation (OCN)
Second Quarter Results
July 28, 1998
DISTRIBUTIONS ON COMPANY-OBLIGATED, MANDATORILY REDEEMABLE SECURITIES OF
SUBSIDIARY TRUST HOLDING SOLELY JUNIOR SUBORDINATED DEBENTURES
In August 1997, Ocwen Capital Trust I, a wholly-owned subsidiary of Ocwen,
issued $125.0 million of 10 7/8% Capital Securities. Distributions amounted to
$3.4 million and $6.8 million during the three and six months ended June 30,
1998, respectively, as compared to $0 for the same periods in 1997.
INCOME TAXES
Income tax benefit (expense) amounted to $6.4 million and $(5.1) million during
the second quarter of 1998 and 1997, respectively, and $5.8 million and $(8.7)
million for the first six months of 1998 and 1997, respectively. The Company's
income taxes reflect an expected tax rate of 11.52% for 1998 and a $3.4 million
tax benefit resulting from the use of prior year net operating loss
carryforwards. This compares to an effective tax rate of 21.4% for 1997. The
Company's expected tax rate is less than its statutory tax rate primarily due to
tax credits of $4.3 million and $2.9 million for the second quarter of 1998 and
1997, respectively, and $9.0 million and $6.5 million for the first six months
of 1998 and 1997, respectively, resulting from investments in low-income housing
tax credit interests. No valuation allowance was required at June 30, 1998
because it is expected that losses and tax credits will be utilized to offset
taxable income and tax expense.
ASSETS AND LIABILITIES
At June 30, 1998, the Company had $3.51 billion of total assets as compared to
$3.07 billion at December 31, 1997, an increase of $436.4 million or 14%. The
increase in total assets was primarily due to a $161.3 million increase in loans
available for sale, a $112.5 million increase in securities available for sale,
primarily short duration collateralized mortgage obligations, and a $74.1
million increase in investment securities. OCN acquired discount loans with a
combined total unpaid principal balance of approximately $585.8 million during
the three months ended June 30, 1998 resulting in total acquisitions of $673.7
million for the six months ended June 30, 1998. In addition, OCN purchased and
originated single family residential loans to subprime borrowers with a total
unpaid principal balance of approximately $646.8 million during the second
quarter of 1998, including $421.3 million purchased from the U.K. operations of
Cityscape. At June 30, 1998, the Company had $2.95 billion of total liabilities
as compared to $2.52 billion at December 31, 1997. The increase in total
liabilities was due primarily to a $161.6 million increase in deposits and a
$203.2 million increase in obligations outstanding under lines of credit
(obtained to finance the acquisition and origination of single family
residential subprime loans).
CAPITAL
Stockholders' equity increased $7.6 million or 2% during the first six months of
1998 from $419.7 million at December 31, 1997 to $427.3 million at June 30, 1998
primarily as the result of a $24.4 million increase in net unrealized gains on
securities available for sale, offset by a net loss of $15.6 million. At June
30, 1998, stockholders' equity included $19.4 million of net unrealized gains on
securities available for sale, as compared with $5.0 million of net unrealized
losses at December 31, 1997.
11
<PAGE>
Ocwen Financial Corporation (OCN)
Second Quarter Results
July 28, 1998
FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED HEREIN ARE NOT, AND CERTAIN STATEMENTS CONTAINED IN
FUTURE FILINGS BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION (THE
"SEC"), IN THE COMPANY'S PRESS RELEASES OR IN THE COMPANY'S OTHER PUBLIC OR
SHAREHOLDER COMMUNICATIONS, MAY NOT BE BASED ON HISTORICAL FACTS AND ARE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED. THESE FORWARD-LOOKING STATEMENTS, WHICH ARE BASED ON VARIOUS
ASSUMPTIONS (SOME OF WHICH ARE BEYOND THE COMPANY'S CONTROL), MAY BE IDENTIFIED
BY REFERENCE TO A FUTURE PERIOD(S) OR BY THE USE OF FORWARD-LOOKING TERMINOLOGY,
SUCH AS "ANTICIPATE," "BELIEVE," "COMMITMENT," "CONSIDER," "CONTINUE," "COULD,"
"ENCOURAGE," "ESTIMATE," "EXPECT," "INTEND," "MAY," " PLAN," "PRESENT,"
"PROPOSE," "PROSPECT," "WILL," FUTURE OR CONDITIONAL VERB TENSES, SIMILAR TERMS,
VARIATIONS ON SUCH TERMS OR NEGATIVES OF SUCH TERMS. ALTHOUGH THE COMPANY
BELIEVES THE ANTICIPATED RESULTS OR OTHER EXPECTATIONS REFLECTED IN SUCH
FORWARD-LOOKING STATEMENTS ARE BASED ON REASONABLE ASSUMPTIONS, IT CAN GIVE NO
ASSURANCE THAT THOSE RESULTS OR EXPECTATIONS WILL BE ATTAINED. 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 POLICIES, PREVAILING INTEREST OR
CURRENCY EXCHANGE RATES, GOVERNMENT REGULATIONS AFFECTING FINANCIAL INSTITUTIONS
(INCLUDING REGULATORY FEES AND CAPITAL REQUIREMENTS), COMPETITIVE PRODUCTS AND
PRICING, CREDIT, PREPAYMENT, BASIS AND ASSET/LIABILITY RISKS (INCLUDING INTEREST
AND RELATED PREPAYMENT RISK WITH RESPECT TO RESIDENTIAL AND SUBORDINATE
SECURITIES RELATED BY THE COMPANY FROM ITS SECURITIZATIONS), LOAN SERVICING
EFFECTIVENESS, THE COURSE OF NEGOTIATIONS AND THE ABILITY TO REACH AGREEMENT
WITH RESPECT TO THE MATERIAL TERMS OF ANY PARTICULAR TRANSACTION, SATISFACTORY
DUE DILIGENCE RESULTS, SATISFACTION OR FULFILLMENT OF AGREED UPON TERMS AND
CONDITIONS OF CLOSING OR PERFORMANCE, THE TIMING OF TRANSACTION CLOSINGS,
ACQUISITIONS AND THE INTEGRATION OF ACQUIRED BUSINESSES, SOFTWARE INTEGRATION,
DEVELOPMENT AND LICENSING, THE FINANCIAL AND SECURITIES MARKETS, THE
AVAILABILITY OF AND COSTS ASSOCIATED WITH OBTAINING ADEQUATE AND TIMELY SOURCES
OF LIQUIDITY, DEPENDENCE ON EXISTING SOURCES OF FUNDING, AVAILABILITY OF
DISCOUNT LOANS FOR PURCHASE, SIZE AND NATURE OF THE SECONDARY MARKET FOR
MORTGAGE LOANS AND THE SECURITIZATION MARKET, GEOGRAPHIC CONCENTRATIONS OF
ASSETS, OTHER FACTORS GENERALLY UNDERSTOOD TO AFFECT THE REAL ESTATE
ACQUISITION, MORTGAGE AND LEASING MARKETS AND SECURITIES INVESTMENTS, AND OTHER
RISKS DETAILED FROM TIME TO TIME IN THE COMPANY'S REPORTS AND FILINGS WITH THE
SEC, INCLUDING ITS REGISTRATION STATEMENTS ON FORM S-1 AND PERIODIC REPORTS ON
FORMS 10-Q, 8-K AND 10-K. THE COMPANY DOES NOT UNDERTAKE, AND SPECIFICALLY
DISCLAIMS ANY OBLIGATION, TO PUBLICLY RELEASE THE RESULT(S) 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 FINANCIAL SUMMARY, THE AVERAGE BALANCE AND RATE ANALYSIS TABLES
AND THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS.
12
<PAGE>
Ocwen Financial Corporation (OCN)
Second Quarter Results
July 28, 1998
<TABLE>
<CAPTION>
OCWEN FINANCIAL CORPORATION At or for the Three At or for the Six
FINANCIAL SUMMARY Months ended June 30, Months ended June 30,
---------------------------------------- ----------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) 1998 1997 Change % 1998 1997 Change %
- -------------------------------------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Interest income ............................ $ 87,082 $ 66,942 30 $ 144,769 $ 121,469 19
Interest expense ........................... 52,930 38,868 36 93,432 76,032 23
----------- ----------- ----------- -----------
Net interest income ........................ 34,152 28,074 22 51,337 45,437 13
Provision for loan losses .................. 9,675 7,909 22 11,929 17,651 (32)
----------- ----------- ----------- -----------
Net interest income after provision for
loan losses ........................... 24,477 20,165 21 39,408 27,786 42
----------- ----------- ----------- -----------
Servicing fees and other charges ........... 13,488 4,845 178 23,260 10,081 131
Gain on sale of interest-earning assets, net 33,828 23,365 45 62,565 40,143 56
Impairment loss on AAA-rated agency IOs .... (77,645) -- -- (77,645) -- --
Other non-interest income .................. 20,807 5,079 310 27,704 4,416 527
----------- ----------- ----------- -----------
Total non-interest income ................ (9,522) 33,289 (129) 35,884 54,640 (34)
----------- ----------- ----------- -----------
Compensation and employee benefits ......... 29,766 19,676 51 51,247 34,599 48
Other non-interest expense ................. 26,005 11,404 128 38,577 19,178 101
----------- ----------- ----------- -----------
Total non-interest expense ............... 55,771 31,080 79 89,824 53,777 67
Distributions on Company-obligated,
mandatorily redeemable securities of
subsidiary trust holding solely junior
subordinated debentures .................. 3,398 -- 6,797 -- --
Equity in earnings of investment in joint
ventures ................................. -- 1,301 (100) -- 15,674 (100)
----------- ----------- ----------- -----------
(Loss) income before income taxes ........ (44,214) 23,675 (287) (21,329) 44,323 (148)
----------- ----------- ----------- -----------
Income tax benefit (expense) ............... 6,383 (5,126) 225 5,810 (8,733) 167
Minority interest .......................... (68) 243 (128) (35) 243 (114)
----------- ----------- ----------- -----------
Net (loss) income ........................ $ (37,899) $ 18,792 (302) $ (15,554) $ 35,833 (143)
=========== =========== =========== ===========
Earnings per share:
Basic .................................... $ (0.62) $ 0.35 (277) $ (0.26) $ 0.67 (139)
Diluted .................................. $ (0.62) $ 0.35 (277) $ (0.25) $ 0.66 (138)
KEY RATIOS:
Net interest spread ........................ 3.59% 4.84% (26) 2.91% 4.18% (30)
Net interest margin ........................ 4.02% 4.81% (16) 3.40% 4.04% (16)
Annualized Return on Average:
Assets (1) (2) ........................... (3.80)% 2.75% (238) (0.86)% 2.68% (132)
Equity (2) ............................... (34.88)% 32.29% (208) (7.23)% 32.23% (122)
Efficiency Ratio (3) ....................... 226.44% 49.60% 357 102.98% 46.46% 122
AVERAGE BALANCES:
Securities available for sale .............. $ 589,879 $ 308,267 91 $ 559,602 $ 323,640 73
Loan portfolio ............................. 285,609 447,591 (36) 283,412 435,642 (35)
Discount loan portfolio .................... 1,307,021 1,350,151 (3) 1,343,067 1,234,186 9
Total interest-earning assets .............. 3,401,335 2,334,115 46 3,015,879 2,251,951 34
Total assets ............................... 3,992,902 2,732,315 46 3,623,476 2,671,306 36
Deposits ................................... 1,871,984 2,075,371 (10) 1,827,846 2,032,980 (10)
Total interest-earning liabilities ......... 3,181,946 2,345,476 36 2,793,556 2,302,046 21
Total liabilities .......................... 3,558,304 2,499,557 42 3,192,932 2,448,920 30
Total stockholders' equity ................. 434,598 232,758 87 430,544 222,386 94
</TABLE>
13
<PAGE>
Ocwen Financial Corporation (OCN)
Second Quarter Results
July 28, 1998
- -------------------------
(1) Includes the Company's pro rata share of average assets held by the joint
venture for the three and six months ended June 30, 1997.
(2) Exclusive of the impairment loss of $77,645 ($62,368 after tax), the
annualized return on average assets would have been 2.45% and 2.58% for the
three and six months ended June 30, 1998, respectively, and the annualized
return on average equity would have been 22.52% and 21.75% for the three
and six months ended June 30, 1998, respectively.
(3) Before provision for loan losses, and including equity in earnings of
investment in joint venture for the three and six months ended June 30,
1997. Exclusive of the pre-tax impairment loss of $77,645, the efficiency
ratio would have been 54.53% and 54.48% for the three and six months ended
June 30, 1998, respectively.
14
<PAGE>
Ocwen Financial Corporation (OCN)
Second Quarter Results
July 28, 1998
OCWEN FINANCIAL CORPORATION
AVERAGE BALANCE/RATE ANALYSIS
<TABLE>
<CAPTION>
Three months ended June 30,
-------------------------------------------------------------------------
1998 1997
------------------------------------ ------------------------------------
Average Annualized Average Annualized
Balance Interest Yield/Rate Balance Interest Yield/Rate
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
AVERAGE ASSETS: (Dollars in thousands)
Federal funds sold and repurchase
agreements ....................... $ 127,444 $ 1,758 5.52% $ 63,192 $ 795 5.03%
Securities available for sale ...... 589,879 4,565 3.10 308,267 6,509 8.45
Loans available for sale ........... 998,282 25,291 10.13 135,801 3,973 11.70
Investment securities and other .... 93,100 1,532 6.58 29,113 745 10.24
Loan portfolio ..................... 285,609 11,655 16.32 447,591 10,674 9.54
Discount loan portfolio ............ 1,307,021 42,281 12.94 1,350,151 44,246 13.11
---------- ---------- ---------- ----------
Total interest-earning assets,
interest income .................. 3,401,335 87,082 10.24 2,334,115 66,942 11.47
---------- ----------
Non-interest earning cash .......... 25,264 12,204
Allowance for loan losses........... (24,143) (21,441)
Investments in low-income housing
tax credit interests ............. 113,851 100,779
Investment in joint ventures........ 1,056 30,128
Real estate owned, net.............. 176,613 102,527
Other assets........................ 298,926 174,003
---------- ----------
Total assets...................... $3,992,902 $2,732,315
========== ==========
AVERAGE LIABILITIES AND
STOCKHOLDERS' EQUITY:
Interest-bearing demand deposits ... $ 26,884 $ 257 3.82 $ 42,600 $ 496 4.66
Savings deposits ................... 1,743 10 2.29 2,037 12 2.36
Certificates of deposit ............ 1,843,357 28,410 6.16 2,030,734 30,863 6.08
---------- ---------- ---------- ----------
Total interest-bearing deposits... 1,871,984 28,677 6.13 2,075,371 31,371 6.05
Notes, debentures and other ........ 226,373 6,734 11.90 245,523 7,148 11.65
Obligations outstanding under
lines of credit .................. 924,218 15,103 6.54 -- -- --
Securities sold under agreements
to repurchase .................... 159,371 2,416 6.06 14,272 204 5.72
Federal Home Loan Bank advances .... -- -- -- 10,310 145 5.63
---------- ---------- ---------- ----------
Total interest-bearing
liabilities, interest expense .. 3,181,946 52,930 6.65 2,345,476 38,868 6.63
---------- ----------
Non-interest bearing deposits ...... 19,440 28,147
Escrow deposits..................... 142,986 72,006
Other liabilities................... 213,932 53,928
---------- ----------
Total liabilities................. 3,558,304 2,499,557
Stockholders' equity................ 434,598 232,758
---------- ----------
Total liabilities and
stockholders' equity ........... $3,992,902 $2,732,315
========== ==========
Net interest income before provision
for loan losses .................. $ 34,152 $ 28,074
========== ==========
Net interest rate spread............ 3.59% 4.84%
Net interest margin................. 4.02% 4.81%
Ratio of interest-earning assets to
interest-bearing liabilities...... 107% 100%
</TABLE>
15
<PAGE>
Ocwen Financial Corporation (OCN)
Second Quarter Results
July 28, 1998
<TABLE>
<CAPTION>
OCWEN FINANCIAL CORPORATION
AVERAGE BALANCE/RATE ANALYSIS
Six months ended June 30,
-----------------------------------------------------------------------
1998 1997
---------------------------------- ------------------------------------
Average Annualized Average Annualized
Balance Interest Yield/Rate Balance Interest Yield/Rate
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
AVERAGE ASSETS: (Dollars in thousands)
Federal funds sold and repurchase
agreements .................... $ 102,164 $ 2,437 4.77% $ 97,765 $ 2,453 5.02%
Securities available for trading . -- -- -- 6,589 248 7.53
Securities available for sale .... 559,602 8,526 3.05 323,640 14,682 9.07
Loans available for sale ......... 668,838 34,794 10.40 127,823 6,824 10.68
Investment securities and other .. 58,796 2,017 6.86 26,306 1,426 10.84
Loan portfolio ................... 283,412 17,917 12.64 435,642 21,366 9.81
Discount loan portfolio .......... 1,343,067 79,078 11.78 1,234,186 74,470 12.07
---------- ---------- ---------- ----------
Total interest-earning assets,
interest income ............... 3,015,879 144,769 9.60 2,251,951 121,469 10.79
---------- ----------
Non-interest earning cash......... 22,744 11,781
Allowance for loan losses......... (25,026) (18,897)
Investments in low-income
housing tax credit interests .. 122,775 95,588
Investment in joint ventures...... 1,056 46,882
Real estate owned, net............ 174,283 107,377
Other assets...................... 311,765 176,624
----------- ----------
Total assets................... $ 3,623,476 $2,671,306
=========== ==========
AVERAGE LIABILITIES AND
STOCKHOLDERS' EQUITY:
Interest-bearing demand deposits . $ 22,018 $ 613 5.57 $ 33,275 $ 723 4.35
Savings deposits ................. 1,739 20 2.30 2,328 27 2.32
Certificates of deposit .......... 1,804,089 55,889 6.20 1,997,377 60,514 6.06
---------- ---------- ---------- ----------
Total interest-bearing deposits 1,827,846 56,522 6.18 2,032,980 61,264 6.03
Notes, debentures and other ...... 226,626 13,486 11.90 235,547 13,863 11.77
Obligations outstanding under
lines of credit ............... 604,214 19,623 6.50 -- -- --
Securities sold under agreements
to repurchase ................. 131,130 3,701 5.64 17,603 477 5.42
Federal Home Loan Bank advances .. 3,740 100 5.35 15,916 428 5.38
---------- ---------- ---------- ----------
Total interest-bearing
liabilities, interest expense.... 2,793,556 93,432 6.69 2,302,046 76,032 6.61
---------- ----------
Non-interest bearing deposits..... 21,022 20,765
Escrow deposits................... 126,283 71,860
Other liabilities................. 252,071 54,249
---------- ----------
Total liabilities.............. 3,192,932 2,448,920
Stockholders' equity.............. 430,544 222,386
---------- ----------
Total liabilities and
stockholders' equity......... 3,623,476 2,671,306
========== ==========
Net interest income before
provision for loan losses...... $ 51,337 $ 45,437
========== ==========
Net interest rate spread.......... 2.91% 4.18%
Net interest margin............... 3.40% 4.04%
Ratio of interest-earning
assets to interest-bearing
liabilities.................... 108% 98%
</TABLE>
16
<PAGE>
Ocwen Financial Corporation (OCN)
Second Quarter Results
July 28, 1998
<TABLE>
<CAPTION>
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES June 30, December 31,
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION 1998 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (Unaudited) (Audited)
----------- -----------
ASSETS
<S> <C> <C>
Cash and amounts due from depository institutions ......................... $ 16,160 $ 12,243
Interest bearing deposits ................................................. 19,870 140,001
Federal funds sold and repurchase agreements .............................. 138,000 --
Securities available for sale, at market value ............................ 589,283 476,796
Loans available for sale, at lower of cost or market ...................... 338,359 177,041
Investment securities, net ................................................ 87,378 13,295
Loan portfolio, net ....................................................... 280,951 266,299
Discount loan portfolio, net .............................................. 1,421,506 1,434,176
Investments in low income housing tax credit interests .................... 132,983 128,614
Investment in joint ventures .............................................. 1,056 1,056
Real estate owned, net .................................................... 151,607 167,265
Investment in real estate ................................................. 22,453 65,972
Premises and equipment, net ............................................... 38,207 21,542
Income taxes receivable ................................................... 10,607 --
Deferred tax asset ........................................................ 61,505 45,148
Excess of purchase price over net assets acquired ......................... 36,372 15,560
Principal, interest and dividends receivable .............................. 23,329 17,284
Escrow advances on loans .................................................. 58,041 47,888
Other assets .............................................................. 77,912 38,985
----------- -----------
$ 3,505,579 $ 3,069,165
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits ............................................................... $ 2,144,377 $ 1,982,822
Securities sold under agreements to repurchase ......................... 133,970 108,250
Obligations outstanding under lines of credit .......................... 321,457 118,304
Notes, debentures and other interest bearing obligations ............... 225,469 226,975
Accrued interest payable ............................................... 32,640 32,238
Income taxes payable ................................................... -- 3,132
Accrued expenses, payables and other liabilities ....................... 94,233 51,709
----------- -----------
Total liabilities .................................................... 2,952,146 2,523,430
----------- -----------
Company-obligated, mandatorily redeemable securities of subsidiary trust
holding solely junior subordinated debentures of the Company ........... 125,000 125,000
Minority interest ......................................................... 1,134 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; 60,771,897
and 60,565,835 shares issued and outstanding at June 30, 1998 and
December 31, 1997, respectively ...................................... 608 606
Additional paid-in capital ............................................. 165,992 164,751
Retained earnings ...................................................... 243,795 259,349
Unrealized gain (loss) on securities available for sale, net of taxes .. 19,377 (5,014)
Foreign currency translation adjustment, net ........................... (2,473) --
----------- -----------
Total stockholders' equity ........................................... 427,299 419,692
----------- -----------
$ 3,505,579 $ 3,069,165
=========== ===========
</TABLE>
17
<PAGE>
Ocwen Financial Corporation (OCN)
Second Quarter Results
July 28, 1998
OCWEN FINANCIAL CORPORATION AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Three months Six months
- -------------------------------------------------- ---------------------------- ----------------------------
For the periods ended June 30, 1998 1997 1998 1997
- -------------------------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income:
Federal funds sold and repurchase agreements .. $ 1,758 $ 795 $ 2,437 $ 2,453
Securities available for sale ................. 4,565 6,509 8,526 14,682
Securities held for trading ................... -- -- -- 248
Loans available for sale ...................... 25,291 3,973 34,794 6,824
Loans ......................................... 11,655 10,674 17,917 21,366
Discount loans ................................ 42,281 44,246 79,078 74,470
Investment securities and other ............... 1,532 745 2,017 1,426
------------ ------------ ------------ ------------
87,082 66,942 144,769 121,469
------------ ------------ ------------ ------------
Interest expense:
Deposits ...................................... 28,677 31,371 56,522 61,264
Securities sold under agreements to repurchase 2,416 204 3,701 477
Advances from the Federal Home Loan Bank ...... -- 145 100 428
Obligations outstanding under lines of credit . 15,103 -- 19,623 --
Notes, debentures and other interest bearing
obligations ................................. 6,734 7,148 13,486 13,863
------------ ------------ ------------ ------------
52,930 38,868 93,432 76,032
------------ ------------ ------------ ------------
Net interest income before provision for loan
losses ...................................... 34,152 28,074 51,337 45,437
Provision for loan losses ........................ 9,675 7,909 11,929 17,651
------------ ------------ ------------ ------------
Net interest income after provision for loan
losses ...................................... 24,477 20,165 39,408 27,786
------------ ------------ ------------ ------------
Non-interest income:
Servicing fees and other charges .............. 13,488 4,845 23,260 10,081
Gains on sales of interest earning assets, net 33,828 23,365 62,565 40,143
Impairment loss on AAA-rated agency IOs ....... (77,645) -- (77,645) --
Gain on real estate owned, net ................ 10,521 4,629 11,547 3,835
Other income .................................. 10,286 450 16,157 581
------------ ------------ ------------ ------------
(9,522) 33,289 35,884 54,640
------------ ------------ ------------ ------------
Non-interest expense:
Compensation and employee benefits ............ 29,766 19,676 51,247 34,599
Occupancy and equipment ....................... 8,553 3,960 15,010 6,789
Net operating loss on investments in real
estate and certain low income housing
interests tax credit ........................ 1,046 104 2,292 1,197
Other operating expenses ...................... 16,406 7,340 21,275 11,192
------------ ------------ ------------ ------------
55,771 31,080 89,824 53,777
------------ ------------ ------------ ------------
Distributions on Company-obligated, mandatorily
redeemable securities of subsidiary trust
holding solely junior subordinated debentures . 3,398 -- 6,797 --
Equity in earnings of investment in joint ventures -- 1,301 -- 15,674
------------ ------------ ------------ ------------
(Loss) income before income taxes ............. (44,214) 23,675 (21,329) 44,323
Income tax benefit (expense) .................... 6,383 (5,126) 5,810 (8,733)
Minority interest in net (income) loss of
consolidated subsidiary ........................ (68) 243 (35) 243
------------ ------------ ------------ ------------
Net (loss) income ............................. $ (37,899) $ 18,792 $ (15,554) $ 35,833
============ ============ ============ ============
(Loss) income per share:
Basic ......................................... $ (0.62) $ 0.35 $ (0.26) $ 0.67
============ ============ ============ ============
Diluted ....................................... $ (0.62) $ 0.35 $ (0.25) $ 0.66
============ ============ ============ ============
Weighted average common shares outstanding:
Basic ......................................... 60,713,593 53,599,022 60,682,432 53,599,014
============ ============ ============ ============
Diluted ....................................... 61,326,784 54,127,521 61,336,494 54,137,127
============ ============ ============ ============
</TABLE>
18
