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, AS AMENDED
DATE OF REPORT
(DATE OF EARLIEST EVENT REPORTED): MAY 6, 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 14
EXHIBIT INDEX ON PAGE 4
<PAGE>
ITEM 5. OTHER EVENTS
The news release of Ocwen Financial Corporation (the "Company") dated May 6,
1998, regarding its financial results for the first quarter of 1998, 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 May 6,
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: May 12, 1998
3
<PAGE>
INDEX TO EXHIBIT
Exhibit No. Description Page
----------- ----------- ----
99 News release of Ocwen Financial Corporation 5
(the "Company") dated May 6, 1998, regarding
its financial results for the first quarter of
1998.
4
================================================================================
Ocwen Financial Corporation Exhibit 99
1675 Palm Beach Lakes Blvd.
West Palm Beach, FL 33401
NYSE symbol: OCN
================================================================================
NEWS RELEASE: IMMEDIATE May 6, 1998
OCWEN FINANCIAL CORPORATION REPORTS FIRST QUARTER RESULTS
West Palm Beach, FL - Ocwen Financial Corporation (NYSE: OCN) ("Ocwen" or the
"Company") reported net income of $22.3 million in the first quarter of 1998,
31% higher than the first quarter of 1997. Diluted earnings per share for the
quarter were $0.36 versus $0.31 for the same period a year ago. Returns on
average assets and average equity were 2.88% and 20.75%, respectively, for the
first quarter of 1998 compared with 2.61% and 32.05%, respectively, for the
first quarter of 1997. The decrease in the return on average equity reflects the
strengthening of the Company's equity to assets ratio resulting from the capital
raised in 1997.
William C. Erbey, Chairman and Chief Executive Officer, said, "We are pleased
with the first quarter results. Net income for the first quarter of 1998 of
$22.3 million was the highest ever reported by Ocwen for a first quarter,
reflecting solid performance from our major business lines."
FIRST QUARTER RESULTS AT A GLANCE First Quarter
- ----------------------------------------------- -------------------------------
In thousands of dollars, except per share data 1998 1997
- ----------------------------------------------- ------------- -------------
Revenues ................................... $ 62,591 $ 53,086
Provision for loan losses .................. (2,254) (9,742)
Expenses ................................... (37,451) (22,697)
Income tax expense ......................... (573) (3,606)
Minority interest .......................... 33 --
Net income ................................. 22,346 17,041
Earnings per share:
Basic ................................... 0.37 0.32
Diluted ................................. 0.36 0.31
Weighted average shares outstanding:
Basic ................................... 60,708,735 53,599,006
Diluted ................................. 61,542,122 54,146,732
- --------------------------------------------------------------------------------
ALL REFERENCES BELOW REGARDING CHANGES ARE BASED ON COMPARISONS TO THE SAME
PERIOD A YEAR AGO.
Revenues rose $9.5 million or 18% in the first quarter of 1998 from a year ago.
o Net interest income before provision for loan losses decreased $178,000 or
1% to $17.2 million in the first quarter of 1998. The decrease in net
interest income during the first quarter of 1998 was largely due to a net
$4.0 million charge related to the securities available for sale portfolio
during the first quarter of 1998 due to declining interest rates and the
resulting increase in prepayment speeds offset by a $473.9 million
increase in average interest-earning assets.
o Non-interest income increased $24.1 million or 113% to $45.4 million in
the first quarter of 1998. This increase is due primarily to a $12.0
million increase in gains on sales of interest earning assets, a $4.7
million gain included in other income recognized in connection with the
sale of investments in low-income housing tax credit interests and a $4.5
million increase in servicing fees and other charges. The increase in
servicing fees reflects a significant increase in loans serviced for
others, from $5.51 billion at December 31, 1997 to $6.57 billion at March
31, 1998, primarily as a result of securitizations of single family
residential discount loans and subprime loans held by the Company, and the
acquisition of rights to service single family residential discount loans.
OCN has also placed increased emphasis on entering into Special Servicing
arrangements whereby the Company services loans that become greater than
60 days past due and receives additional fees to the
5
<PAGE>
extent certain loss mitigation parameters are achieved. Through April 30,
1998, the Company has been designated as a special servicer for pools of
loans totaling approximately $3.5 billion in unpaid principal balance.
o On December 12, 1997, BCBF LLC (the "LLC"), a joint venture between the
Company and BlackRock Finance L.P., distributed all of its remaining
assets. Equity in earnings of the Company's investment in joint ventures
amounted to $0 as compared to $14.4 million in the first quarter of 1997.
Provision for loan losses decreased by $7.5 million primarily as a result of a
reduction in reserves for discount loans. This reflects a decline in the
discount loan portfolio resulting from the securitization of single-family
residential discount loans during the first quarter of 1998.
Expenses rose $14.8 million or 65% in the first quarter of 1998.
o Compensation and employee benefits increased $6.6 million or 44% primarily
due to an 82% increase in the average number of employees from 629 to
1,147.
o Occupancy and equipment expense increased $3.6 million or 128%.
o Distributions on capital securities amounted to $3.4 million as compared
to $0 in 1997.
RECENT DEVELOPMENTS
On January 30, 1998, the Company was assigned the special servicing rights to a
pool of 6,309 subprime mortgage loans underlying a subordinate security acquired
by Ocwen Asset Investment Corp. (NYSE:OAC), a publicly held real estate
investment trust managed by Ocwen Capital Corporation ("OCC"), a wholly owned
subsidiary of Ocwen. The Company, through its wholly owned subsidiary Ocwen
Federal Bank FSB (the "Bank"), will become the special servicer of any loans
which are 60 days or more delinquent.
On March 13, 1998, DTS Communications, Inc. ("DTS"), a wholly-owned real estate
technology subsidiary of Ocwen, was honored from over 100 nominees as the
recipient of this year's Inman Innovator Award for "Software Applications that
help the Real Estate Industry be more efficient and speed up the Real Estate
Transaction Process." DTS has developed technology tools to automate real estate
transactions over the Internet. DTS Data Trak (TM) software allows real estate
professionals access to ancillary services necessary to close a real estate
transaction or loan. DTS has been recognized by Microsoft Corporation for its
Microsoft(R) component-based architecture to facilitate electronic data
interchange. DTS continues to attract top tier mortgage origination, loss
mitigation, mortgage servicing and real estate brokerage firms seeking to reduce
the time necessary to order, track and process services used to close real
estate transactions. It is anticipated that five of the top mortgage originators
will be on-line by the end of the fourth quarter.
On March 17, 1998, pursuant to a definitive agreement executed by OAC with a
Wall Street firm related to OAC's acquisition of a subordinate security, the
Bank was designated the special servicer for the nonperforming securitized loans
underlying the subordinate security.
On March 18, 1998, the Company completed the securitization of 1,439 subprime
single family residential mortgage loans with an aggregate unpaid principal
balance of $161.4 million. The Company recorded total gains of $7.9 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 March 25, 1998, Standard & Poor's raised its counterparty rating on Ocwen to
"BB-" from "B+". Standard & Poor's also raised the counterparty rating on the
Bank to "BB+" from "BB". The "B-" trust preferred rating of Ocwen Capital Trust
I, a subsidiary of Ocwen, was affirmed.
6
<PAGE>
On March 26, 1998, the Company, as part of a larger transaction involving the
Company, BlackRock Capital Finance L.P. ("BlackRock") and Union Bank of
Switzerland ("UBS"), completed the securitization of 3,777 discount single
family residential mortgage loans with an aggregate unpaid principal balance of
$227.5 million. The Company recorded total gains of $16.7 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 subordinated securities.
On March 31, 1998, the Company completed the sale of its investment in two
low-income housing tax credit projects and realized a gain of $4.7 million on
proceeds of $21.9 million.
On March 31, 1998, the Company purchased 7,518 additional shares of common stock
of Ocwen Financial Services, Inc. ("OFS") for $40.0 million, increasing its
ownership from 93.7% to 97.8%.
On April 28, 1998, the Company and OAC announced 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
operations of Cityscape Financial Corp. As consummated, the Company acquired
Cityscape's mortgage loan portfolio and mortgage loan origination and servicing
businesses for (pound)249.6 million ($415.9 million) and assumed (pound)7.2
million ($12.0 million) of Cityscape's liabilities. OAC acquired Cityscape's
securitized mortgage loan residuals for (pound)33.7 million ($56.2 million). The
amount paid by the Company is subject to adjustment to account for the actual
balances on the closing date of the mortgage loan portfolio and the assumed
liabilities. In addition, the Company and OAC entered into an agreement for the
Bank to service the securitized mortgage loan residuals purchased by OAC in the
transaction.
For the period January 1, 1998 through May 1, 1998, the Company purchased
discount loans with a total unpaid principal balance of approximately $432.4
million. Combined purchases and originations of subprime single family loans for
the same period amounted to approximately $964.5 million of unpaid principal
balance, including $411.1 million purchased in connection with the acquisition
of the United Kingdom operations of Cityscape Financial Corp.
THE REMAINDER OF THIS RELEASE CONTAINS INFORMATION ON SPECIFIC AREAS OF RESULTS,
A FINANCIAL SUMMARY, AND THE INTERIM UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS.
REVENUES
NET INTEREST INCOME
Interest income of $58.0 million for the first quarter of 1998 increased by $3.5
million or 6% over that of the first quarter of 1997. This increase is the
result of a $473.9 million increase in average interest-earning assets, offset
by a $4.0 million charge net of reserves taken against the securities available
for sale portfolio during the first quarter of 1998, resulting in a 127 basis
point decrease in the average yield earned. Of the $473.9 million net increase
in average interest-earning assets, $260.9 million and $220.7 million related to
discount loans and loans available for sale, respectively. The average yield on
interest-earning assets was 8.79% and 10.06% in the first quarter of 1998 and
1997, respectively.
Interest expense of $40.9 million for the first quarter of 1998 increased by
$3.7 million or 10% over the comparable period in the prior year as a result of
a $200.0 million or 9% net increase in the average balance of interest-bearing
liabilities. Of the $200.0 million net increase in the average balance of
interest-bearing liabilities, $281.2 million and $93.7 million related to
increases in borrowings under lines of credit and securities sold under
agreements to repurchase, respectively, offset by a $173.0 million decline in
certificates of deposit. The average rate paid on interest-bearing liabilities
was 6.64% and 6.58% in the first quarter of 1998 and 1997, respectively.
As a result of the above, net interest income before provision for loan losses
of $17.2 million for the first quarter of 1998 decreased by $178,000 or 1% from
the first quarter of 1997 and the net interest margin for the first quarter of
1998 decreased to 2.60% from 3.20% for the first quarter of 1997.
7
<PAGE>
EQUITY IN EARNINGS OF INVESTMENT IN JOINT VENTURE
On December 12, 1997, the LLC distributed all its remaining assets to its
partners. As a result, no equity in earnings of investment in joint ventures was
recorded during the first quarter of 1998. During the first quarter of 1997, the
Company recorded $14.4 million of income related to its investment in joint
ventures. The Company's pro rata share of the income from the joint ventures in
the first quarter of 1997 consisted primarily of $1.7 million of net interest
income, a $9.2 million net gain related to the securitization of single-family
residential loans in the first quarter and the recapture of $2.5 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.
NON-INTEREST INCOME
Non-interest income of $45.4 million for the first quarter of 1998 increased by
$24.1 million from that of the first quarter of 1997 primarily due to a $12.0
million or 71% increase in gains on sales of interest-earning assets, a $4.5
million or 87% increase in servicing fees and other charges, and a $4.7 million
gain recognized in connection with the sale of investments in low-income housing
tax credit interests and $829,000 in management fees received from OAC included
in other income. Gains on sales of interest-earning assets for the first quarter
of 1998 of $28.7 million were primarily comprised of a $7.9 million gain
recognized in connection with the securitization of 1,439 subprime single-family
residential mortgage loans with an aggregate unpaid principal balance of $161.4
million, a $16.7 million gain recognized in connection with the securitization
of 3,777 discount single family residential mortgage loans with an aggregate
unpaid principal balance of $227.5 million, a $2.0 million gain recognized on
the sale of $12.9 million in unpaid principal balance of small commercial
discount loans, and a $2.3 million gain recognized on the sale of certain REMIC
residual securities.
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 $6.12
billion and $2.04 billion during the first quarter of 1998 and 1997,
respectively, an increase of 200%. At March 31, 1998 Ocwen serviced 79,677 loans
for third parties totaling $6.57 billion.
PROVISION FOR LOAN LOSSES
The Company's provision for loan losses decreased by $7.5 million to $2.3
million primarily as a result of a reduction in reserves for discount loans.
This reflects a decline in the discount loan portfolio resulting from the
securitization of single-family residential discount loans during the first
quarter of 1998. At March 31, 1998, Ocwen had allowances for losses of $19.5
million and $4.0 million on its discount loan and loan portfolios, respectively,
which amounted to 1.66% and 1.43% of the respective balances. The Company
maintained reserves of 1.64% and 1.39% on its discount loans and loan
portfolios, respectively, at December 31, 1997.
EXPENSES
NON-INTEREST EXPENSE
Non-interest expense of $34.1 million for the first quarter of 1998 increased by
$11.4 million or 50% as compared to the same period for 1997. Compensation and
employee benefits increased by $6.6 million as the average number of employees
increased to 1,147 from 629. Occupancy and equipment expense increased $3.6
million primarily due to an increase in data processing costs, general office
equipment expenses and rent expense, all largely attributable to an increase in
leased corporate and loan production office space and the increase in the number
of employees discussed above.
8
<PAGE>
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
$0 during the three months ended March 31, 1998 and 1997, respectively.
INCOME TAXES
Income tax expense amounted to $573,000 and $3.6 million during the first
quarter of 1998 and 1997, respectively. The Company's income tax expense is
reported net of tax credits of $4.7 million and $3.6 million for the first
quarter of 1998 and 1997, respectively, resulting from investments in low-income
housing tax credit interests. Exclusive of such amounts, the Company's effective
tax rate amounted to 23.0% and 34.7% during the first quarter of 1998 and 1997,
respectively. The decline in the effective tax rate is primarily the result of
the utilization of $8.6 million net operating loss carryforwards by Investor
Mortgage Insurance Holding Company ("IMI"), a wholly-owned subsidiary of Ocwen.
IMI had at March 31, 1998 net operating loss carryforwards of $1.1 million which
can only be used to offset future taxable income of IMI.
ASSETS AND LIABILITIES
At March 31, 1998, the Company had $3.42 billion of total assets as compared to
$3.07 billion at December 31, 1997, an increase of $352.0 million or 11%. Ocwen
acquired discount loans with a combined total unpaid principal balance of
approximately $87.9 million during the three months ended March 31, 1998 (which
amount was $432.4 million as of May 1, 1998), as compared to $442.9 million
during the three months ended March 31, 1997. In addition, Ocwen purchased and
originated single family residential loans to subprime borrowers with a total
unpaid principal balance of approximately $479.8 million during the first
quarter of 1998, including $292.8 million purchased from the U.S. operations of
Cityscape Financial Corp. At March 31, 1998, the Company had $2.85 billion of
total liabilities as compared to $2.52 billion at December 31, 1997. The
increase in total liabilities is due largely to obligations outstanding under
lines of credit (obtained to finance the acquisition and origination of single
family residential subprime loans), which increased $323.4 million to $441.7
million at March 31, 1998 from $118.3 million at December 31, 1997.
CAPITAL
Stockholders' equity increased $27.6 million or 7% during the three months ended
March 31, 1998 from $419.7 million at December 31, 1997 to $447.3 million at
March 31, 1998 primarily attributable to net income of $22.3 million and a $5.2
million decrease in net unrealized losses on securities available for sale. At
March 31, 1998, stockholders' equity included $145,000 of net unrealized gains
on securities available for sale, compared with $5.0 million of net unrealized
losses on securities available for sale at December 31, 1997.
9
<PAGE>
CERTAIN STATEMENTS CONTAINED HEREIN ARE NOT, AND CERTAIN STATEMENTS CONTAINED IN
FUTURE FILINGS BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION, 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.
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 OR PERIODS, OR BY THE USE OF FORWARD-LOOKING TERMINOLOGY, SUCH AS "MAY,"
"WILL," "COULD," "BELIEVE," "EXPECT," "ANTICIPATE," "CONTINUE," "INTENDS,"
"PLANS," "PRESENTS," OR SIMILAR TERMS OR VARIATIONS ON THOSE TERMS, OR BY THE
USE OF THE NEGATIVE OF SUCH TERMINOLOGY. ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE SET FORTH IN FORWARD-LOOKING STATEMENTS DUE TO A VARIETY OF FACTORS,
INCLUDING, BUT NOT LIMITED TO, THOSE RELATED TO THE ECONOMIC ENVIRONMENT,
PARTICULARLY IN THE MARKET AREAS IN WHICH THE COMPANY OPERATES, COMPETITIVE
PRODUCTS AND PRICING, THE GROWTH OR DECLINE OF, AND THE AVAILABILITY OF PRODUCT
TO PURCHASE IN, THE DISCOUNT LOAN INDUSTRY, FISCAL AND MONETARY POLICIES OF THE
U.S. OR U.K. GOVERNMENTS, CHANGES IN GOVERNMENT REGULATIONS AFFECTING FINANCIAL
INSTITUTIONS AND REAL ESTATE INVESTMENT TRUSTS, INCLUDING REGULATORY FEES,
CAPITAL REQUIREMENTS AND TAXATION, CHANGES IN PREVAILING INTEREST AND CURRENCY
EXCHANGE RATES, ACQUISITIONS AND THE INTEGRATION OF ACQUIRED BUSINESSES,
SOFTWARE INTEGRATION, DEVELOPMENT AND LICENSING, CREDIT INTEREST RATE AND
OPERATIONAL RISK MANAGEMENT, ASSET/LIABILITY MANAGEMENT, RECOGNITION AND
EXISTENCE OF CURRENT AND FUTURE RESERVES, THE FINANCIAL AND SECURITIES MARKETS
AND THE AVAILABILITY OF AND COSTS ASSOCIATED WITH SOURCES OF LIQUIDITY. THE
COMPANY DOES NOT UNDERTAKE, AND SPECIFICALLY DISCLAIMS ANY OBLIGATION, TO
PUBLICLY RELEASE THE RESULTS 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.
10
<PAGE>
<TABLE>
<CAPTION>
OCWEN FINANCIAL CORPORATION At of for the Three Months
FINANCIAL SUMMARY ended March 31, %
(DOLLARS IN THOUSANDS, EXPECT SHARE DATA) -------------------------- Increase/
1998 1997 (Decrease)
----------- ----------- ----------
<S> <C> <C> <C>
OPERATIONS DATA:
Interest income .......................................... $ 58,041 $ 54,527 6%
Interest expense ......................................... 40,856 37,164 10
----------- -----------
Net interest income ...................................... 17,185 17,363 (1)
Provision for loan losses ................................ 2,254 9,742 (77)
----------- -----------
Net interest income after provision for loan losses ... 14,931 7,621 96
----------- -----------
Servicing fees and other charges ......................... 9,772 5,236 87
Gain on sale of interest-earning, net .................... 28,737 16,778 71
Other non-interest income ................................ 6,897 (663) 1,140
----------- -----------
Total non-interest income ............................. 45,406 21,351 113
----------- -----------
Compensation and employee benefits ....................... 21,482 14,923 44
Other non-interest expense ............................... 12,571 7,774 62
----------- -----------
Total non-interest expense ............................ 34,053 22,697 50
----------- -----------
Distributions on Company-obligated, mandatorily redeemable
securities of subsidiary trust holding solely junior
subordinated debentures of the Company ................ 3,398 -- --
Equity in earnings of investment in joint ventures ....... -- 14,372 (100)
----------- -----------
Income before income taxes ............................ 22,886 20,647 11
Income tax expense ....................................... 573 3,606 (84)
Minority interest ........................................ 33 -- --
----------- -----------
Net income ............................................ $ 22,346 $ 17,041 31
=========== ===========
Earnings per share:
Basic ................................................. $ 0.37 $ 0.32 16
Diluted ............................................... $ 0.36 $ 0.31 16
KEY RATIOS:
Net interest spread ...................................... 2.15% 3.48% (38)%
Net interest margin ...................................... 2.60% 3.20 (19)
Annualized Return on Average:
Assets (1) ............................................ 2.88 2.61 10
Equity ................................................ 20.75 32.05 (35)
Efficiency Ratio (2) ..................................... 54.41 42.76 27
AVERAGE BALANCES:
Securities available for sale ............................ $ 527,058 $ 338,956 55%
Loan portfolio ........................................... 281,215 423,135 (34)
Discount loan portfolio .................................. 1,379,110 1,118,233 23
Total interest-earning assets ............................ 2,641,517 2,167,601 22
Total assets ............................................. 3,106,489 2,607,854 19
Deposits ................................................. 1,825,615 1,991,339 (8)
Total interest-bearing liabilities ....................... 2,459,400 2,259,367 9
Total liabilities ........................................ 2,675,808 2,395,148 12
Total stockholders' equity ............................... 430,681 212,706 102
</TABLE>
- --------------------------
(1) Includes the Company's pro rata share of average assets held by the joint
venture for the three months ended March 31, 1997.
(2) Before provision for loan losses, and including equity in earnings of
investment in joint venture for the three months ended March 31, 1997.
11
<PAGE>
OCWEN FINANCIAL CORPORATION
AVERAGE BALANCE/RATE ANALYSIS
<TABLE>
<CAPTION>
Three months ended March 31,
---------------------------------------------------------------------------------
1998 1997
------------------------------------- ---------------------------------------
Average Annualized Average Annualized
Balance Interest Yield/Rate Balance Interest Yield/Rate
---------- ---------- ----------- ---------- ---------- -----------
AVERAGE ASSETS: (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold and repurchase
agreements...................... $ 79,885 $ 1,032 5.17% $ 132,337 $ 1,658 5.01%
Securities available for trading.. -- -- -- 13,179 248 7.53
Securities available for sale..... 527,058 3,962 3.01 338,956 8,173 9.64
Loans available for sale ......... 339,394 9,503 11.20 118,729 2,851 9.61
Investment securities and other... 34,855 485 5.57 23,032 681 11.83
Loan portfolio.................... 281,215 6,262 8.91 423,135 10,692 10.11
Discount loan portfolio........... 1,379,110 36,797 10.67 1,118,233 30,224 10.81
---------- ---------- ---------- ----------
Total interest-earning assets,
interest income ................ 2,641,517 58,041 8.79 2,167,601 54,527 10.06
---------- ----------
Non-interest earning cash......... 38,524 11,350
Allowance for loan losses......... (25,889) (16,515)
Investments in low-income
housing tax credit interests ... 131,699 90,398
Investment in joint ventures...... 1,056 63,637
Real estate owned, net............ 171,952 112,227
Other assets...................... 147,630 179,156
---------- ----------
Total assets.................... $ 3,106,489 $ 2,607,854
========== ===========
AVERAGE LIABILITIES AND
STOCKHOLDERS' EQUITY:
Interest-bearing demand deposits.. $ 32,907 $ 356 4.33 $ 24,699 $ 227 3.68
Savings deposits.................. 1,735 10 2.31 2,620 15 2.29
Certificates of deposit........... 1,790,973 27,479 6.14 1,964,020 29,652 6.04
---------- ---------- ----------- ----------
Total interest-bearing
deposits ..................... 1,825,615 27,845 6.10 1,991,339 29,894 6.00
Notes, debentures and other....... 230,453 6,752 11.72 225,573 6,715 11.91
Obligations outstanding under
lines of credit................. 281,218 4,520 6.43 -- -- --
Securities sold under agreements..
to repurchase .................. 114,633 1,639 5.72 20,934 272 5.20
Federal Home Loan Bank advances... 7,481 100 5.35 21,521 283 5.26
---------- ---------- ----------- ----------
Total interest-bearing
liabilities, interest expense..... 2,459,400 40,856 6.64 2,259,367 37,164 6.58
---------- ----------
Non-interest bearing deposits..... 23,536 15,543
Escrow deposits................... 111,094 71,713
Other liabilities................. 81,778 48,525
---------- -----------
Total liabilities............... 2,675,808 2,395,148
Stockholders' equity.............. 430,681 212,706
---------- -----------
Total liabilities and
stockholders' equity ......... 3,106,489 $ 2,607,854
========== ===========
Net interest income before
provision for loan losses ...... $ 17,185 $ 17,363
========== ==========
Net interest rate spread.......... 2.15% 3.48%
Net interest margin............... 2.60% 3.20%
Ratio of interest-earning
assets to interest-bearing
liabilities..................... 107% 96%
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES March 31, December 31,
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION 1998 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (Unaudited) (Audited)
----------- -----------
<S> <C> <C>
ASSETS
Cash and amounts due from depository institutions ......................... $ 17,830 $ 12,243
Interest bearing deposits ................................................. 31,269 140,001
Federal funds sold and repurchase agreements .............................. 104,000 --
Securities available for sale, at market value ............................ 650,200 476,796
Loans available for sale, at lower of cost or market ...................... 493,106 177,041
Investment securities, net ................................................ 61,314 13,295
Loan portfolio, net ....................................................... 280,518 266,299
Discount loan portfolio, net .............................................. 1,171,623 1,434,176
Investments in low income housing tax credit interests .................... 118,964 128,614
Investment in joint ventures .............................................. 1,056 1,056
Real estate owned, net .................................................... 172,693 167,265
Investment in real estate ................................................. 60,946 65,972
Premises and equipment, net ............................................... 22,568 21,542
Income taxes receivable ................................................... 19,422 --
Deferred tax asset ........................................................ 48,261 45,148
Excess of purchase price over net assets acquired ......................... 23,403 15,560
Principal, interest and dividends receivable .............................. 23,076 17,284
Escrow advances on loans .................................................. 48,214 47,888
Other assets .............................................................. 72,679 38,985
----------- -----------
$ 3,421,142 $ 3,069,165
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits ............................................................... $ 1,933,594 $ 1,982,822
Securities sold under agreements to repurchase ......................... 168,419 108,250
Obligations outstanding under lines of credit .......................... 441,671 118,304
Notes, debentures and other interest bearing obligations ............... 226,812 226,975
Accrued interest payable ............................................... 42,258 32,238
Income taxes payable ................................................... -- 3,132
Accrued expenses, payables and other liabilities ....................... 34,695 51,709
----------- -----------
Total liabilities .................................................... 2,847,449 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 ......................................................... 1,381 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; 60,708,735
and 60,565,835 shares issued and outstanding at March 31, 1998 and
December 31, 1997, respectively ...................................... 607 606
Additional paid-in capital ............................................. 164,865 164,751
Retained earnings ...................................................... 281,695 259,349
Unrealized gain (loss) on securities available for sale, net of taxes .. 145 (5,014)
----------- -----------
Total stockholders' equity ........................................... 447,312 419,692
----------- -----------
$ 3,421,142 $ 3,069,165
=========== ===========
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
- ----------------------------------------------------------------------------------------------
For the three months ended March 31, 1998 1997
- ---------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Interest income:
Federal funds sold and repurchase agreements ............... $ 1,032 $ 1,658
Securities available for sale .............................. 3,962 8,173
Securities held for trading ................................ -- 248
Loans available for sale ................................... 9,503 2,851
Loans ...................................................... 6,262 10,692
Discount loans ............................................. 36,797 30,224
Investment securities and other ............................ 485 681
------------ ------------
58,041 54,527
------------ ------------
Interest expense:
Deposits ................................................... 27,845 29,894
Securities sold under agreements to repurchase ............. 1,639 272
Advances from the Federal Home Loan Bank ................... 100 283
Obligations outstanding under lines of credit .............. 4,520 --
Notes, debentures and other interest bearing obligations ... 6,752 6,715
------------ ------------
40,856 37,164
------------ ------------
Net interest income before provision for loan losses ....... 17,185 17,363
Provision for loan losses ..................................... 2,254 9,742
------------ ------------
Net interest income after provision for loan losses ........ 14,931 7,621
------------ ------------
Non-interest income:
Servicing fees and other charges ........................... 9,772 5,236
Gains on sales of interest earning assets, net ............. 28,737 16,778
Gain (loss) on real estate owned, net ...................... 1,026 (794)
Other income ............................................... 5,871 131
------------ ------------
45,406 21,351
------------ ------------
Non-interest expense:
Compensation and employee benefits ......................... 21,482 14,923
Occupancy and equipment .................................... 6,457 2,829
Net operating loss on investments in real estate and certain
low-income housing tax credit interests .................. 1,246 1,093
Other operating expenses ................................... 4,868 3,852
------------ ------------
34,053 22,697
------------ ------------
Distributions on Company-obligated, mandatorily
redeemable securities of subsidiary trust holding solely
junior subordinated debentures of the Company ............... 3,398 --
Equity in earnings of investment in joint ventures ............ -- 14,372
------------ ------------
Income before income taxes ................................. 22,886 20,647
Income tax expense ............................................ (573) (3,606)
Minority interest in net loss of consolidated subsidiary ...... 33 --
------------ ------------
Net income ................................................. $ 22,346 $ 17,041
============ ============
Earnings per share:
Basic ...................................................... $ 0.37 $ 0.32
============ ============
Diluted .................................................... $ 0.36 $ 0.31
============ ============
Weighted average common shares outstanding:
Basic ...................................................... 60,708,735 53,599,006
============ ============
Diluted .................................................... 61,542,122 54,146,732
============ ============
</TABLE>
14
