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): February 12, 2002
OCWEN FINANCIAL CORPORATION
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(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
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(Address of principal executive office)(Zip Code)
Registrant's telephone number, including area code: (561) 682-8000
N/A
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(Former name or former address, if changed since last report)
Page 1 of 10
Exhibit Index on Page 4
Item 5. Other Events
The news release of the Registrant dated February 12, 2002, announcing its 2001
and fourth quarter 2001 results is attached hereto and filed herewith as Exhibit
99.1.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) - (b) Not applicable.
(c) Exhibits
The following exhibits are filed as part of this report:
99.1 Text of a press release by the Registrant dated
February 12, 2002.
2
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: February 12, 2002
3
INDEX TO EXHIBIT
Exhibit No. Description Page
----------- ----------- ----
99.1 News release of Ocwen Financial Corporation dated 5
February 12, 2002, announcing its 2001 and fourth
quarter 2001 results and certain other information.
4
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] Exhibit 99.1
O C W E N
Ocwen Financial Corporation(R)
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION CONTACT:
Robert J. Leist, Jr.
Vice President & Chief Accounting Officer
T: (561) 682-7958
E: rleist@ocwen.com
----------------
OCWEN FINANCIAL CORPORATION ANNOUNCES
FOURTH QUARTER AND 2001 RESULTS
West Palm Beach, FL - (February 12, 2002) Ocwen Financial Corporation (NYSE:
OCN) today reported a pre-tax loss in the fourth quarter of 2001 of $(6.8)
million. This was an improvement from pre-tax losses in the prior quarters of
2001 consisting of $(7.9) million in the third quarter, $(10.9) in the second
quarter and $(19.9) million in the first quarter. The Company reported a net
loss* of $(6.9) million or $(0.10) per share for the fourth quarter of 2001, as
compared to net income of $9.4 million, or $0.14 per share in the 2000 fourth
quarter. For the year ended December 31, 2001, the Company reported a net loss
of $(124.8) million or $(1.86) per share as compared to net income of $2.2
million or $0.03 per share for the year ended December 31, 2000. Full year 2001
results included a non-cash provision to increase the valuation allowance for
the Company's deferred tax asset of $83 million, as compared to $17.5 million in
2000.
Chairman and CEO William C. Erbey stated, "We continue to make progress in the
execution of our strategic plan.
o Our Residential Loan Servicing business doubled and now services over 303
thousand loans with an aggregate unpaid principal balance (UPB) of $21.9
billion at year-end as compared to just over 164 thousand loans and UPB of
$10.5 billion a year ago. Pre-tax income rose by 77% in 2001 to $34.6
million vs. $19.6 million in 2000, and margins improved, as pre-tax income
grew to 34% of revenue in 2001 as compared to 25% in 2000. 2001 also marked
the implementation of our REALServicing residential mortgage servicing
system, a significant factor for our recent growth.
o Primarily as a result of the growth in Servicing and cost reductions in
Ocwen Technology Xchange(R) (OTX), the combined results of our core fee
businesses were profitable for the third consecutive quarter.
o During 2001, we made substantial progress in reducing our exposure to
non-core assets. During the fourth quarter, we reduced our assets remaining
to be sold by $147 million bringing the balance of these assets to $539
million as of December 31, 2001, a reduction of $555 million or 51% from
$1,094 million at December 31, 2000.
o The volume of orders processed on REALTrans, our web-based mortgage
origination transaction system, grew by approximately 30% in the fourth
quarter of 2001 over the third quarter, while total transaction volume in
2001 grew by 89% over annual volume in 2000.
o We also made progress in reducing our operating expenses. Our Servicing
business has achieved a 20% unit cost reduction in the fourth quarter of
2001 as compared to the same period in 2000. In our other operations, after
adjusting for non-cash charges to reserves and certain non-recurring items
in both periods, operating expenses decreased by $17 million, or 13% in the
year 2001 as compared to 2000.
As we have noted in the past, our focus on accelerating the disposition of our
remaining non-core assets means that near term earnings pressures may continue.
We believe that our equity of $379 million and cash and equivalents of $261
million provide us with the requisite financial strength and liquidity to
achieve our objectives."
The Servicing business reported pre-tax income for the fourth quarter of 2001 of
$8.5 million vs. $6 million in the 2000 fourth quarter, an increase of 42%. On a
full year basis, Servicing reported pre-tax income of $34.6 million compared to
$19.6 million in 2000, an increase of 77%. The UPB balance of loans serviced for
others grew to $21.9 billion as of December 31, 2001 compared to $10.5 billion
as of December 31, 2000.
* Net loss includes an extraordinary loss of $44 thousand on repurchases of debt
which is not included in pre-tax income.
5
Ocwen Financial Corporation
Fourth Quarter Results
February 12, 2002
Pre-tax losses at OTX were $(7.1) million in the 2001 fourth quarter compared to
$(8.9) million in the same period of 2000. The improvement in the fourth quarter
of 2001 is primarily due to cost reduction initiatives undertaken earlier in
2001. For the year ended December 31, 2001, pre-tax losses amounted to $(36.4)
million vs. $(34) million in 2000. The full year increase in losses in 2001
compared to 2000 primarily reflects $4.7 million of pre-tax costs in the first
quarter of 2001 associated with one time events, including a payment related to
the acquisition of an OTX subsidiary in 1998.
The Residential Discount Loan business recorded a pre-tax loss of $(1.5) million
in the 2001 fourth quarter, as compared to income of $2.4 million in the 2000
fourth quarter. The amount of loans and REO remaining on the books at December
31, 2001 totaled $53.8 million, down $221.8 million or 80% from December 31,
2000. Reserve coverage on the remaining balances remain at the highest level
ever recorded by the Company.
Pre-tax losses for the fourth quarter of 2001 in the Commercial Loan business
amounted to $(2.3) million, as compared to pre-tax income of $4.8 million in the
2000 fourth quarter. 2001 results reflect additional loss reserves of $4 million
provided during the fourth quarter. Total commercial loans, investments in real
estate and REO in both the Commercial Loan and Commercial Real Estate businesses
totaled $354 million at December 31, 2001, reduced by $261 million or 42% from
December 31, 2000.
The Unsecured Collections business posted pre-tax income of $ 0.6 million in the
fourth quarter of 2001 vs. a pre-tax loss of $(3.8) million in the 2000 fourth
quarter. For the year 2001, pre-tax losses were $(5) million as compared to
$(14.4) million in 2000. This business has been accounted for on a cost recovery
basis, recording diminishing losses in 2001 as the remaining assets were either
collected or reserved. At December 31, 2001, the net book value of unsecured
collection receivables had been reduced to zero.
The Affordable Housing business posted a pre-tax loss of $(8.6) million in the
2001 fourth quarter compared to a loss of $(8.1) million in the 2000 fourth
quarter. Affordable Housing results in 2001 include additional non-cash reserves
of approximately $4.5 million during the fourth quarter reflecting revisions in
completion cost estimates as well as modifications to projected sales results.
Of the remaining properties of $102.1 million in this business, $54.7 million
are subject to sales contracts although they have not yet satisfied all of the
accounting criteria for sales treatment.
Results in the inactive Subprime Lending business reflected pre-tax income of
$5.1 million for the 2001 fourth quarter, primarily due to trading gains of $5
million on the portfolio of subprime residual trading securities. For the year
2001, the unit reported pre-tax income of $13.5 million compared to a loss of
$(24.5) million in the year 2000. The Company's total portfolio of
non-investment grade securities, which consists largely of subprime residuals,
was reduced to $65 million at December 31, 2001 as compared to $112.6 million at
December 31, 2000.
Fourth quarter 2001 results reflected an extraordinary loss of $(44) thousand
reflecting the repurchase of $8.8 million face value of debt as compared to
extraordinary gains of $10 million in the 2000 fourth quarter. The 2000 fourth
quarter results include the successful tender offer for the 11 1/2% redeemable
notes issued by Ocwen Asset Investment Corp. For the year ended December 31,
2001, the Company reported extraordinary gains on debt repurchases of $2.4
million as compared to $18.7 million in 2000. While the Company has reduced the
volume of these transactions in recent quarters in light of current pricing
levels, it continues to evaluate additional debt repurchases.
The Company did not record income tax expense or benefit in the fourth quarter
of 2001. Income tax expense for the fourth quarter of 2000 included a non-cash
provision of $17.5 million to increase the Company's valuation allowance on its
deferred tax asset. For the year ended December 31, 2001, the company recorded
$83 million of such provisions, as compared to $17.5 million in 2000. The
Company's remaining deferred tax asset has a net book value of $8.4 million.
Ocwen Financial Corporation is a financial services company headquartered in
West Palm Beach, Florida. The Company's primary business is the servicing and
special servicing of nonconforming, subperforming and nonperforming residential
and commercial mortgage loans. Ocwen also specializes in the development of
related loan servicing technology and software for the mortgage and real estate
industries. Additional information about Ocwen Financial Corporation is
available at www.ocwen.com.
6
Ocwen Financial Corporation
Fourth Quarter Results
February 12, 2002
Certain statements contained herein 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 may be identified by reference to a
future period(s) or by the use of forward-looking terminology such as
"continue," "will," "believe," "estimate," "largely," "further," "near term,"
"achieve," "project," "future," "realize," future or conditional verb tenses,
similar terms, variations on such terms or negatives of such terms. 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
changes in market conditions as they exist on the date hereof, applicable
economic environments, government fiscal and monetary policies, prevailing
interest or currency exchange rates, effectiveness of interest rate, currency
and other hedging strategies, laws and regulations affecting financial
institutions and real estate operations (including regulatory fees, capital
requirements, income and property taxation and environmental compliance),
uncertainty of foreign laws and potential political issues related to operations
outside of the USA, competitive products, pricing and conditions, credit,
prepayment, basis, default, subordination and asset/liability risks, loan
servicing effectiveness, the ability to identify acquisitions and investment
opportunities meeting OCN's investment strategy, satisfaction or fulfillment of
agreed upon terms and conditions of closing or performance, timing of
transaction closings, software integration, development and licensing
effectiveness, change or damage to the Company's computer equipment and the
information stored in its data centers, availability of adequate and timely
sources of liquidity, dependence on existing sources of funding, ability to
repay or refinance indebtedness (at maturity or upon acceleration), availability
of servicing rights for purchase, size of, nature of and yields available with
respect to the secondary market for mortgage loans, financial, securities and
securitization markets in general, allowances for loan losses, geographic
concentrations of assets, changes in real estate conditions (including
valuation, revenues and competing properties), adequacy of insurance coverage in
the event of a loss, the market prices of the common stock of OCN, other factors
generally understood to affect the real estate acquisition, mortgage, servicing
and leasing markets, securities investments and the software and technologies
industries, and other risks detailed from time to time in OCN's reports and
filings with the Securities and Exchange Commission, including its periodic
reports on Forms 8-K, 10-Q and 10-K, including Exhibit 99.1 attached to OCN's
Form 10-K for the year ended December 31, 2000.
7
Ocwen Financial Corporation
Fourth Quarter Results
February 12, 2002
INTEREST INCOME AND EXPENSE
Three Months Twelve Months
---------------------- ----------------------
For the periods ended December 31, 2001 2000 2001 2000
- -------------------------------------------------------------------- --------- --------- --------- ---------
(Dollars in thousands)
INTEREST INCOME:
Federal funds sold and repurchase agreements ..................... $ 1,288 $ 3,582 $ 7,328 $ 8,700
Trading securities ............................................... 4,391 8,199 18,865 8,199
Securities available for sale .................................... -- -- -- 42,508
Loans available for sale ......................................... 87 300 526 2,474
Investment securities and other .................................. 105 320 743 1,501
Loan portfolio ................................................... 1,727 6,631 6,807 20,586
Match funded loans and securities ................................ 2,470 2,148 10,345 11,022
Discount loan portfolio .......................................... 4,674 19,804 38,757 89,826
--------- --------- --------- ---------
14,742 40,984 83,371 184,816
--------- --------- --------- ---------
INTEREST EXPENSE:
Deposits ......................................................... 11,800 22,893 59,967 98,224
Securities sold under agreements to repurchase ................... 283 43 529 10,729
Bonds - match funded agreements .................................. 1,216 2,390 7,315 11,484
Obligations outstanding under lines of credit .................... 1,184 2,098 5,511 13,881
Notes, debentures and other interest bearing obligations ......... 4,931 8,175 20,007 34,772
--------- --------- --------- ---------
19,414 35,599 93,329 169,090
--------- --------- --------- ---------
Net interest income (expense) before provision for loan losses ... $ (4,672) $ 5,385 $ (9,958) $ 15,726
========= ========= ========= =========
PRE-TAX INCOME (LOSS) BY BUSINESS SEGMENT
Three Months Twelve Months
---------------------- ----------------------
For the periods ended December 31, 2001 2000 2001 2000
- -------------------------------------------------------------------- --------- --------- --------- ---------
(Dollars in thousands)
Residential Loan Servicing.......................................... $ 8,518 $ 5,959 $ 34,591 $ 19,609
OTX................................................................. (7,072) (8,947) (36,392) (33,951)
Ocwen Realty Advisors............................................... 516 (82) 944 (86)
Unsecured Collections............................................... 609 (3,755) (5,020) (14,398)
Residential Discount Loans.......................................... (1,503) 2,436 (4,396) 21,154
Commercial Loans.................................................... (2,319) 4,794 (22,236) 648
Affordable Housing.................................................. (8,635) (8,129) (29,917) (23,664)
Commercial Real Estate.............................................. (243) (3,125) 1,222 16,530
Subprime Residential Lending........................................ 5,112 (3,985) 13,549 (24,532)
Corporate Items and Other........................................... (1,832) 29,243 2,098 30,126
--------- --------- --------- ---------
$ (6,849) $ 14,409 $ (45,557) $ (8,564)
========= ========= ========= =========
NON-CORE ASSETS
The following table presents a summary of the Company's non-core assets
that remain to be sold. This table excludes assets subject to completed sale
transactions that have not met accounting criteria for sales treatment.
December 31, December 31,
2001 2000
---------- ----------
(Dollars in thousands)
Total loans ...................................... $ 185,292 $ 640,052
Total investments in real estate ................. 130,314 145,431
Real estate owned, net ........................... 110,465 146,419
Residual and subordinate trading securities ...... 65,058 112,647
Affordable Housing properties .................... 47,381 49,602
---------- ----------
Total non-core assets to be sold ............ $ 538,510 $1,094,151
========== ==========
8
Ocwen Financial Corporation
Fourth Quarter Results
February 12, 2002
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
Three Months Twelve Months
---------------------------- ----------------------------
For the periods ended December 31, 2001 2000 2001 2000
------------ ------------ ------------ ------------
NET INTEREST INCOME:
Income ......................................................... $ 14,742 $ 40,984 $ 83,371 $ 184,816
Expense ........................................................ 19,414 35,599 93,329 169,090
------------ ------------ ------------ ------------
Net interest income (expense) before provision for loan losses.. (4,672) 5,385 (9,958) 15,726
Provision for loan losses ...................................... (2,363) 2,573 15,666 15,177
------------ ------------ ------------ ------------
Net interest income (expense) after provision for loan losses... (2,309) 2,812 (25,624) 549
------------ ------------ ------------ ------------
NON-INTEREST INCOME:
Servicing and other fees ....................................... 33,788 25,037 134,597 97,080
Gain (loss) on interest earning assets, net .................... (689) (92) (3,949) 17,625
Gain (loss) on trading and match funded securities, net ........ 3,197 (1,565) 16,330 (3,971)
Impairment charges on securities available for sale ............ -- -- -- (11,597)
Gain (loss) on real estate owned, net .......................... (5,452) 856 (9,256) (14,904)
Gain (loss) on other non interest earning assets, net .......... (122) 23,653 (1,054) 45,517
Net operating gains (losses) on investments in real estate ..... 3,513 3,685 5,581 27,579
Amortization of excess of net assets acquired over purchase
price ........................................................ 4,583 5,325 18,333 14,112
Other income ................................................... 2,289 2,911 8,759 6,084
------------ ------------ ------------ ------------
41,107 59,810 169,341 177,525
------------ ------------ ------------ ------------
NON-INTEREST EXPENSE:
Compensation and employee benefits ............................. 21,139 21,971 84,914 83,086
Occupancy and equipment ........................................ 2,255 2,649 11,577 12,005
Technology and communication costs ............................. 5,389 6,157 26,768 23,876
Loan expenses .................................................. 4,549 2,550 15,811 13,051
Net operating losses on certain affordable housing properties .. 4,757 3,901 16,580 9,931
Amortization of excess of purchase price over net assets
acquired ..................................................... 778 778 3,112 3,124
Professional services and regulatory fees ...................... 3,118 3,814 14,749 12,829
Other operating expenses ....................................... 2,148 3,571 8,935 12,107
------------ ------------ ------------ ------------
44,133 45,391 182,446 170,009
------------ ------------ ------------ ------------
Distributions on Company-obligated, mandatorily redeemable
securities of subsidiary trust holding solely junior
subordinated debentures of the Company ....................... 1,718 2,538 7,132 11,380
Equity in income (losses) of investments in unconsolidated
entities ..................................................... 204 (284) 304 (5,249)
------------ ------------ ------------ ------------
Income (loss) before income taxes and extraordinary item ......... (6,849) 14,409 (45,557) (8,564)
Income tax expense (benefit) ..................................... -- 15,079 81,587 7,957
------------ ------------ ------------ ------------
Income (loss) before extraordinary item .......................... (6,849) (670) (127,144) (16,521)
Extraordinary gain (loss) on repurchase of debt, net of taxes .... (44) 10,039 2,362 18,713
------------ ------------ ------------ ------------
Net income (loss) ................................................ $ (6,893) $ 9,369 $ (124,782) $ 2,192
============ ============ ============ ============
EARNINGS (LOSS) PER SHARE:
Basic:
Loss before extraordinary gain (loss) ........................ $ (0.10) $ (0.01) $ (1.89) $ (0.25)
Extraordinary gain (loss) .................................... -- 0.15 0.03 0.28
------------ ------------ ------------ ------------
Net income (loss) ............................................ $ (0.10) $ 0.14 $ (1.86) $ 0.03
============ ============ ============ ============
Diluted:
Loss before extraordinary gain (loss) ........................ $ (0.10) $ (0.01) $ (1.89) $ (0.25)
Extraordinary gain (loss) .................................... -- 0.15 0.03 0.28
------------ ------------ ------------ ------------
Net income (loss) ............................................ $ (0.10) $ 0.14 $ (1.86) $ 0.03
============ ============ ============ ============
Weighted average common shares outstanding:
Basic .......................................................... 67,288,168 67,152,363 67,227,058 67,427,662
============ ============ ============ ============
Diluted ........................................................ 67,288,168 67,183,316 67,227,058 67,464,043
============ ============ ============ ============
9
Ocwen Financial Corporation
Fourth Quarter Results
February 12, 2002
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except share data)
December 31, 2001 December 31, 2000
----------------- -----------------
ASSETS
Cash and amounts due from depository institutions ................................... $ 23,076 $ 18,749
Interest earning deposits ........................................................... 111,579 134,987
Federal funds sold and repurchase agreements ........................................ 126,000 --
Trading securities, at fair value:
Collateralized mortgage obligations (AAA-rated) ................................... 161,191 277,595
Subordinates, residuals and other securities ...................................... 65,058 112,647
Loans available for sale, at lower of cost or market ................................ 1,040 10,610
Real estate held for sale ........................................................... 13,418 22,670
Investment in real estate ........................................................... 116,896 122,761
Affordable housing properties ....................................................... 102,069 142,812
Investment securities, at cost ...................................................... 4,659 13,257
Loan portfolio, net ................................................................. 64,925 93,414
Discount loan portfolio, net ........................................................ 119,327 536,028
Match funded assets ................................................................. 174,351 116,987
Investments in unconsolidated entities .............................................. 1,067 430
Real estate owned, net .............................................................. 110,465 146,419
Premises and equipment, net ......................................................... 44,589 43,152
Income taxes receivable ............................................................. 20,842 30,261
Deferred tax asset, net ............................................................. 8,411 95,991
Advances on loans and loans serviced for others ..................................... 283,183 227,055
Mortgage servicing rights ........................................................... 101,107 51,426
Other assets ........................................................................ 57,897 52,169
----------- -----------
$ 1,711,150 $ 2,249,420
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits .......................................................................... $ 656,878 $ 1,202,044
Escrow deposits on loans and loans serviced for others ............................ 73,565 56,316
Securities sold under agreements to repurchase .................................... 79,405 --
Bonds - match funded agreements ................................................... 156,908 107,050
Obligations outstanding under lines of credit ..................................... 84,304 32,933
Notes, debentures and other interest bearing obligations .......................... 160,305 173,330
Accrued interest payable .......................................................... 12,836 22,096
Excess of net assets acquired over purchase price ................................. 18,333 36,665
Accrued expenses, payables and other liabilities .................................. 28,351 36,030
----------- -----------
Total liabilities .............................................................. 1,270,885 1,666,464
----------- -----------
Company-obligated, mandatorily redeemable securities of subsidiary trust holding
solely junior subordinated debentures of the Company ........................... 61,159 79,530
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; 67,289,313 and
67,152,363 shares issued and outstanding at December 31, 2001, and December
31, 2000, respectively ......................................................... 673 672
Additional paid-in capital ....................................................... 224,142 223,163
Retained earnings ................................................................ 154,413 279,194
Accumulated other comprehensive (loss) income, net of taxes:
Net unrealized foreign currency translation (loss) gain ........................ (122) 397
----------- -----------
Total stockholders' equity ....................................................... 379,106 503,426
----------- -----------
$ 1,711,150 $ 2,249,420
=========== ===========
10