Ocwen Financial Announces Preliminary Operating Results for Fiscal Year 2014
14 April 2015 - 9:30PM
Ocwen Financial Corporation, (NYSE:OCN)
("Ocwen" or the "Company"), a leading financial
services holding company, today reported a preliminary net loss of
$(546.0) million, or $(4.18) per share, for the year ended December
31, 2014 compared to net income of $310.4 million, or $2.13 per
share, for the year ended December 31, 2013. Ocwen generated
preliminary revenue of $2.1 billion, up 4% compared to $2.0 billion
in the prior year. Preliminary income from operations was $76.1
million for the year ended December 31, 2014.
Preliminary pre-tax loss for 2014 was $(443.2) million, compared
to $352.5 million pre-tax income in 2013. Preliminary pre-tax
income on a normalized basis for 2014 was $284.9 million, compared
to the $550.4 million normalized pre-tax income in 2013. During
2014, Ocwen incurred a total of $728.1 million in preliminary
normalized expenses. Normalization items in 2014 include $420.2
million of goodwill impairment, $186.1 million of legal and
settlement expenses primarily related to the settlement with the
New York Department of Financial Services, $72.3 million for
MSR-related fair value changes and $49.5 million of transition and
other items. The preliminary normalized results for 2014 were
impacted by and include $127.3 million of servicer expenses and
uncollectible advances along with $39.4 million in regulatory
monitoring costs. In addition, our preliminary net loss results
include a charge to record an approximately $77 million valuation
allowance against our remaining deferred tax asset.
"I am encouraged by the progress Ocwen has made so far in 2015.
We currently expect to be profitable in 2015 and meet all of our
ongoing financial and servicing obligations. In addition to
generating substantial cash flow from pending asset sales that have
already been announced so far this year, we expect our historical
track record of generating substantial cash flow from operations to
continue in 2015 and beyond. To accomplish our objectives we must,
among other things, extend our $1.8 billion advance receivable
facility that begins amortizing in October 2015, continue meeting
our regulatory requirements, execute on our plan to reduce our GSE
servicing exposure, continue to comply with our debt covenants and
maintain our current servicer ratings. We have already
significantly advanced our Agency MSR sale strategy at attractive
prices, entered into an amendment with Home Loan Servicing
Solutions that provides more stability for the Company and reduced
our 2015 refinancing risk," commented Ron Faris, President and
C.E.O. of Ocwen. "We have also continued to make progress and
improvements in our risk and compliance management systems, a
critical focus of our management team and employees. We are
optimistic that the investments we have made and are making in
these areas reduce significantly the substantial risks associated
with non-compliance with laws and regulations and improves our
service to homeowners which will ultimately result in better
overall returns to our shareholders."
The financial results and other financial data presented in this
press release are preliminary, based upon the Company's estimates
and subject to completion of the Company's final financial closing
procedures. Moreover, this data has been prepared on the basis
of currently available information. The Company's independent
auditor has not audited or reviewed, and does not express an
opinion with respect to, this data. This data does not
constitute a comprehensive statement of the Company's financial
results for the year ended December 31, 2014, and the Company's
final results could differ materially from these preliminary
results. In particular, the preliminary financial results
presented in this press release incorporate the impact of the
Company fully reserving for its deferred tax asset in order to
present a conservative view of Ocwen's results and financial
position as the Company continues to prepare and evaluate
information related to its ability to operate as a going concern
and to provide such information to its auditor for the purposes of
its audit of the Company's financial statements for the year ended
December 31, 2014. The Company currently does not have an estimate
of when its 2014 financial statements will be finalized.
About Ocwen Financial Corporation
Ocwen Financial Corporation is a financial services holding
company which, through its subsidiaries, is engaged in the
servicing and origination of mortgage loans. Ocwen is headquartered
in Atlanta, Georgia, with offices throughout the United States and
support operations in India and the Philippines. Utilizing
proprietary technology, global infrastructure and superior training
and processes, Ocwen provides solutions that help homeowners and
make our clients' loans worth more. Ocwen may post information that
is important to investors on its website (www.Ocwen.com).
Forward Looking Statements
This press release contains 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 by their nature address matters
that are, to different degrees, uncertain. Forward-looking
statements involve a number of assumptions, risks and uncertainties
that could cause actual results to differ materially.
Important factors that could cause actual results to differ
materially from those suggested by the forward-looking statements
include, but are not limited to, the following: adverse effects on
our business as a result of recent regulatory settlements;
reactions to the announcement of such settlements by key
counterparties; increased regulatory scrutiny and media attention,
due to rumors or otherwise; uncertainty related to claims,
litigation and investigations brought by government agencies and
private parties regarding our servicing, foreclosure, modification
and other practices; any adverse developments in existing legal
proceedings or the initiation of new legal proceedings; our ability
to effectively manage our regulatory and contractual compliance
obligations; our ability to execute on our strategy to reduce the
size of our Agency servicing portfolio; the adequacy of our
financial resources, including our sources of liquidity and ability
to fund and recover advances, repay borrowings and comply with debt
covenants; our servicer and credit ratings as well as other actions
from various rating agencies, including the impact of recent
downgrades of our servicer and credit ratings; volatility in our
stock price; the characteristics of our servicing portfolio,
including prepayment speeds along with delinquency and advance
rates; our ability to contain and reduce our operating costs; our
ability to successfully modify delinquent loans, manage
foreclosures and sell foreclosed properties; uncertainty related to
legislation, regulations, regulatory agency actions, government
programs and policies, industry initiatives and evolving best
servicing practices; as well as other risks detailed in Ocwen's
reports and filings with the Securities and Exchange Commission
(SEC), including its annual report on Form 10-K/A for the year
ended December 31, 2013 (filed with the SEC on 08/18/14) and its
quarterly report on Form 10-Q for the quarter ended September 30,
2014 (filed with the SEC on 10/31/14). Anyone wishing to understand
Ocwen's business should review its SEC filings. Ocwen's
forward-looking statements speak only as of the date they are made
and, except for our ongoing obligations under the U.S. federal
securities laws, we undertake no obligation to update or revise
forward-looking statements whether as a result of new information,
future events or otherwise.
Non-GAAP Financial Measures
This press release contains certain non-GAAP financial measures,
such as our references to "normalized pre-tax income." We believe
these non-GAAP financial measures provide a useful supplement to
discussions and analysis of our financial condition. We also
believe these non-GAAP financial measures provide an alternative
way to view certain aspects of our business that is instructive.
Non-GAAP financial measures should be viewed in addition to, and
not as an alternative for, Ocwen's reported results under
accounting principles generally accepted in the United States.
Other companies may use non-GAAP financial measures with the same
or similar titles that are calculated differently to our non-GAAP
financial measures. As a result, comparability may be limited.
Further information regarding these measures may be found on
Ocwen's website.
Preliminary Residential
Servicing Statistics |
(Dollars in thousands) |
|
|
At or for the
three months ended |
|
December 31, |
September 30, |
June 30, |
March 31, |
December 31, |
|
2014 |
2014 |
2014 |
2014 |
2013 |
Total unpaid principal balance of loans and
REO serviced |
$ 398,727,727 |
$ 411,279,614 |
$ 435,119,848 |
$ 449,570,596 |
$ 464,651,332 |
|
|
|
|
|
|
Non-performing loans and REO serviced as a %
of total UPB (1) |
13.2% |
13.4% |
12.9% |
13.8% |
14.5% |
|
|
|
|
|
|
Prepayment speed (average CPR)(2) |
12.7%(3) |
12.8% |
12.9% |
11.2% |
13.1% |
|
|
|
|
|
|
(1) Performing loans
include those loans that are less than 90 days past due and those
loans for which borrowers are making scheduled payments under loan
modification, forbearance or bankruptcy plans. We consider all
other loans to be non-performing. |
(2) Constant Prepayment
Rate for the prior three months. |
(3) Includes average CPR of
14.6% for prime loans and 10.3% for non-prime loans. |
|
|
|
|
|
|
Preliminary Segment
Results (Unaudited) |
(Dollars in thousands) |
|
|
Three
Months |
Twelve
Months |
For the Periods Ended December
31, |
2014 |
2013 |
2014 |
2013 |
Servicing |
|
|
|
|
Revenue |
$ 458,831 |
$ 514,050 |
$ 1,985,436 |
$ 1,895,921 |
Operating expenses |
723,324 |
300,439 |
1,643,323 |
1,096,084 |
Income (loss) from operations |
(264,493) |
213,611 |
342,113 |
799,837 |
Other expense, net |
(122,264) |
(68,985) |
(516,203) |
(408,170) |
Income (loss) before income
taxes |
$ (386,757) |
$ 144,626 |
$ (174,090) |
$ 391,667 |
|
|
|
|
|
Lending |
|
|
|
|
Revenue |
$ 32,409 |
$ 39,718 |
$ 119,220 |
$ 120,899 |
Operating expenses |
75,011 |
28,650 |
156,272 |
98,194 |
Income (loss) from operations |
(42,602) |
11,068 |
(37,052) |
22,705 |
Other income, net |
1,518 |
3,744 |
10,210 |
12,919 |
Income (loss) before income
taxes |
$ (41,084) |
$ 14,812 |
$ (26,842) |
$ 35,624 |
|
|
|
|
|
Corporate Items and
Other |
|
|
|
|
Revenue |
$ 2,090 |
$ 2,335 |
$ 6,825 |
$ 22,092 |
Operating expenses |
87,215 |
11,828 |
235,769 |
107,188 |
Loss from operations |
(85,125) |
(9,493) |
(228,944) |
(85,096) |
Other income (expense), net |
(6,807) |
3,639 |
(13,283) |
10,284 |
Loss before income taxes |
$ (91,932) |
$ (5,854) |
$ (242,227) |
$ (74,812) |
|
|
|
|
|
Corporate Eliminations |
|
|
|
|
Revenue |
$ (38) |
$ (148) |
$ (156) |
$ (639) |
Operating expenses |
(38) |
(41) |
(156) |
(172) |
Loss from operations |
— |
(107) |
— |
(467) |
Other income, net |
— |
107 |
— |
467 |
Income (loss) before income
taxes |
$ — |
$ — |
$ — |
$ — |
|
|
|
|
|
Consolidated income (loss) before income
taxes |
$ (519,773) |
$ 153,584 |
$ (443,159) |
$ 352,479 |
|
|
|
|
|
OCWEN FINANCIAL
CORPORATION AND SUBSIDIARIES |
PRELIMINARY
CONSOLIDATED STATEMENTS OF OPERATIONS |
(Dollars in thousands,
except share data) |
(UNAUDITED) |
|
|
Three
Months |
Twelve
Months |
For the Periods Ended December
31, |
2014 |
2013 |
2014 |
2013 |
Revenue |
|
|
|
|
Servicing and subservicing
fees |
$ 446,079 |
$ 490,167 |
$ 1,894,175 |
$ 1,823,559 |
Gain on loans held for sale,
net |
24,256 |
48,782 |
134,297 |
121,694 |
Other revenues |
22,957 |
17,006 |
82,853 |
93,020 |
Total revenue |
493,292 |
555,955 |
2,111,325 |
2,038,273 |
|
|
|
|
|
Operating expenses |
|
|
|
|
Compensation and benefits |
99,412 |
112,098 |
415,530 |
442,777 |
Goodwill impairment loss |
420,201 |
— |
420,201 |
— |
Amortization of mortgage servicing
rights |
64,300 |
85,346 |
250,375 |
282,781 |
Servicing and origination |
73,266 |
22,387 |
202,739 |
112,127 |
Technology and communications |
45,819 |
37,768 |
167,053 |
140,466 |
Professional services |
113,922 |
24,658 |
326,667 |
123,886 |
Occupancy and equipment |
26,675 |
30,513 |
109,179 |
105,145 |
Other operating expenses |
41,917 |
28,106 |
143,464 |
94,112 |
Total operating expenses |
885,512 |
340,876 |
2,035,208 |
1,301,294 |
|
|
|
|
|
Income (loss) from
operations |
(392,220) |
215,079 |
76,117 |
736,979 |
|
|
|
|
|
Other income (expense) |
|
|
|
|
Interest income |
5,519 |
5,025 |
22,991 |
22,355 |
Interest expense |
(132,628) |
(76,022) |
(541,757) |
(395,586) |
Gain (loss) on extinguishment of
debt |
— |
3,875 |
2,609 |
(8,681) |
Other, net |
(444) |
5,627 |
(3,119) |
(2,588) |
Other expense, net |
(127,553) |
(61,495) |
(519,276) |
(384,500) |
|
|
|
|
|
Income (loss) before income taxes |
(519,773) |
153,584 |
(443,159) |
352,479 |
Income tax expense |
78,514 |
18,309 |
102,888 |
42,061 |
Net income (loss) |
(598,287) |
135,275 |
(546,047) |
310,418 |
Net income attributable to non-controlling
interests |
(80) |
— |
(245) |
— |
Net income (loss) attributable to
Ocwen stockholders |
(598,367) |
135,275 |
(546,292) |
310,418 |
Preferred stock dividends |
— |
(581) |
(1,163) |
(5,031) |
Deemed dividend related to beneficial
conversion feature of preferred stock |
— |
(416) |
(1,639) |
(6,989) |
Net income (loss) attributable to
Ocwen common stockholders |
$ (598,367) |
$ 134,278 |
$ (549,094) |
$ 298,398 |
|
|
|
|
|
Earnings (loss) per share
attributable to Ocwen common stockholders |
|
|
|
|
Basic |
$ (4.77) |
$ 0.99 |
$ (4.18) |
$ 2.20 |
Diluted |
$ (4.77) |
$ 0.95 |
$ (4.18) |
$ 2.13 |
|
|
|
|
|
Weighted average common shares
outstanding |
|
|
|
|
Basic |
125,564,301 |
135,191,178 |
131,362,284 |
135,678,088 |
Diluted |
125,564,301 |
139,177,555 |
131,362,284 |
139,800,506 |
|
|
|
|
|
OCWEN FINANCIAL
CORPORATION AND SUBSIDIARIES |
PRELIMINARY
CONSOLIDATED BALANCE SHEETS |
(Dollars in thousands,
except share data) |
(UNAUDITED) |
|
December 31, |
December 31, |
|
2014 |
2013 |
Assets |
|
|
Cash |
$ 129,473 |
$ 178,512 |
Mortgage servicing rights ($93,901 and
$116,029 carried at fair value) |
1,913,992 |
2,069,381 |
Advances |
893,914 |
890,832 |
Match funded advances |
2,409,442 |
2,552,383 |
Loans held for sale ($401,120 and
$503,753 carried at fair value) |
488,612 |
566,660 |
Loans held for investment - reverse
mortgages, at fair value |
1,550,141 |
618,018 |
Goodwill |
— |
420,201 |
Receivables, net |
270,596 |
152,516 |
Deferred tax assets, net |
— |
115,571 |
Premises and equipment, net |
43,310 |
53,786 |
Other assets ($7,335 and $0 carried
at fair value) |
490,811 |
309,143 |
Total assets |
$ 8,190,291 |
$ 7,927,003 |
|
|
|
Liabilities, Mezzanine Equity and
Equity |
|
|
Liabilities |
|
|
Match funded liabilities |
$ 2,090,247 |
$ 2,364,814 |
Financing liabilities ($2,058,693 and
$1,249,380 carried at fair value) |
2,258,641 |
1,266,973 |
Other secured borrowings |
1,733,691 |
1,777,669 |
Senior unsecured notes |
350,000 |
— |
Other liabilities |
793,534 |
644,595 |
Total liabilities |
7,226,113 |
6,054,051 |
|
|
|
Mezzanine Equity |
|
|
Series A Perpetual Convertible Preferred
stock, $.01 par value; 200,000 shares authorized; 62,000 shares
issued and outstanding at December 31, 2013 |
— |
60,361 |
|
|
|
Equity |
|
|
Ocwen Financial Corporation (Ocwen)
stockholders' equity |
|
|
Common stock, $.01 par value; 200,000,000
shares authorized; 125,215,615 and 135,176,271 shares issued and
outstanding at December 31, 2014 and 2013, respectively |
1,252 |
1,352 |
Additional paid-in capital |
515,194 |
818,427 |
Retained earnings |
453,869 |
1,002,963 |
Accumulated other comprehensive loss, net
of income taxes |
(8,908) |
(10,151) |
Total Ocwen stockholders'
equity |
961,407 |
1,812,591 |
Non-controlling interest in
subsidiaries |
2,771 |
— |
Total equity |
964,178 |
1,812,591 |
Total liabilities, mezzanine equity and
equity |
$ 8,190,291 |
$ 7,927,003 |
|
|
|
OCWEN FINANCIAL
CORPORATION AND SUBSIDIARIES |
PRELIMINARY
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(Dollars in
thousands) |
(UNAUDITED) |
|
|
For the Years
Ended December 31, |
|
2014 |
2013 |
Cash flows from operating
activities |
|
|
Net income (loss) |
$ (546,047) |
$ 310,418 |
Adjustments to reconcile net income
(loss) to net cash provided by operating activities: |
|
|
Goodwill impairment loss |
420,201 |
— |
Amortization of mortgage servicing
rights |
250,375 |
282,781 |
Amortization of debt issuance costs –
senior secured term loan |
5,139 |
4,395 |
Depreciation |
21,910 |
24,245 |
Provision for bad debts |
84,751 |
34,816 |
Gain on loans held for sale,
net |
(134,297) |
(121,694) |
Realized and unrealized losses on
derivative financial instruments |
2,643 |
14,336 |
(Gain) loss on extinguishment of
debt |
(2,609) |
8,681 |
Loss (gain) on valuation of mortgage
servicing rights, at fair value |
22,068 |
(30,816) |
Decrease (increase) in deferred tax
assets, net |
114,829 |
(21,125) |
Equity-based compensation
expense |
10,729 |
5,648 |
Origination and purchase of loans held
for sale |
(7,430,340) |
(9,678,038) |
Proceeds from sale and collections of
loans held for sale |
7,345,730 |
9,468,627 |
Changes in assets and liabilities: |
|
|
Decrease in advances and match funded
advances |
291,989 |
295,108 |
(Increase) decrease in receivables and
other assets, net |
(37,394) |
224,543 |
(Decrease) increase in other
liabilities |
(94,508) |
70,336 |
Other, net |
27,355 |
(7,842) |
Net cash provided by operating
activities |
352,524 |
884,419 |
|
|
|
OCWEN FINANCIAL
CORPORATION AND SUBSIDIARIES |
PRELIMINARY
CONSOLIDATED STATEMENTS OF CASH FLOWS – (continued) |
(Dollars in
thousands) |
(UNAUDITED) |
|
|
For the Years
Ended December 31, |
|
2014 |
2013 |
Cash flows from investing
activities |
|
|
Cash paid to acquire ResCap Servicing
Operations (a component of Residential Capital, LLC) |
(54,220) |
(2,289,709) |
Net cash paid to acquire controlling
interest in Ocwen Structured Investments, LLC |
(7,833) |
— |
Cash paid to acquire Liberty Home Equity
Solutions, Inc. |
— |
(26,568) |
Net cash acquired in acquisition of
Correspondent One S.A . |
— |
22,108 |
Distributions of capital from
unconsolidated entities |
6,572 |
1,300 |
Purchase of mortgage servicing rights,
net |
(22,488) |
(987,663) |
Acquisition of advances in connection
with the purchase of mortgage servicing rights |
(85,521) |
(2,588,739) |
Acquisition of advances in connection
with the purchase of loans |
(60,482) |
— |
Proceeds from sale of advances and match
funded advances |
1,054 |
3,842,537 |
Net proceeds from sale of diversified
fee-based businesses to Altisource Portfolio Solutions, S.A. |
— |
210,793 |
Proceeds from sale of mortgage servicing
rights |
287 |
34,754 |
Origination of loans held for investment
- reverse mortgages |
(816,881) |
(609,555) |
Principal payments received on loans held
for investment - reverse mortgages |
86,234 |
5,886 |
Additions to premises and
equipment |
(11,430) |
(28,915) |
Other |
6,461 |
(1,207) |
Net cash used in investing
activities |
(958,247) |
(2,414,978) |
|
|
|
Cash flows from financing
activities |
|
|
Repayment of match funded
liabilities |
(274,567) |
(167,931) |
Proceeds from other secured
borrowings |
5,677,291 |
9,633,914 |
Repayments of other secured
borrowings |
(5,809,239) |
(8,804,558) |
Proceeds from issuance of senior
unsecured notes |
350,000 |
— |
Payment of debt issuance costs |
(6,835) |
(25,758) |
Proceeds from sale of mortgage servicing
rights accounted for as a financing |
123,551 |
447,755 |
Proceeds from sale of loans accounted for
as a financing |
783,009 |
604,991 |
Proceeds from sale of advances accounted
for as a financing |
88,981 |
— |
Repurchase of common stock |
(382,487) |
(217,903) |
Payment of preferred stock
dividends |
(1,163) |
(5,115) |
Proceeds from exercise of common stock
options |
1,840 |
2,302 |
Other |
6,303 |
21,244 |
Net cash provided by financing
activities |
556,684 |
1,488,941 |
|
|
|
Net decrease in cash |
(49,039) |
(41,618) |
Cash at beginning of year |
178,512 |
220,130 |
Cash at end of year |
$ 129,473 |
$ 178,512 |
|
|
|
OCWEN FINANCIAL
CORPORATION AND SUBSIDIARIES |
PRELIMINARY
CONSOLIDATED STATEMENTS OF CASH FLOWS – (continued) |
(Dollars in
thousands) |
(UNAUDITED) |
|
|
For the Years
Ended December 31, |
|
2014 |
2013 |
Supplemental cash flow
information |
|
|
Interest paid |
$ 560,208 |
$ 395,758 |
Income tax payments, net |
38,293 |
14,747 |
|
|
|
Supplemental non-cash investing and
financing activities |
|
|
Transfers of loans held for sale to loans
held for investment |
$ 110,874 |
$ — |
Transfers of loans held for sale to real
estate owned |
8,808 |
4,775 |
Conversion of Series A preferred stock to
common stock |
62,000 |
100,000 |
|
|
|
Supplemental business acquisition
information |
|
|
Fair value of assets acquired: |
|
|
Advances |
$ — |
$ (1,786,409) |
Mortgage servicing rights |
— |
(401,314) |
Premises and equipment |
— |
(16,423) |
Goodwill |
— |
(211,419) |
Receivables and other assets |
— |
(2,989) |
|
— |
(2,418,554) |
Fair value of liabilities assumed: |
|
|
Accrued expenses and other
liabilities |
— |
74,625 |
Total consideration |
— |
(2,343,929) |
Amount due to seller for purchase price
adjustments |
— |
54,220 |
Cash paid |
— |
(2,289,709) |
Less cash acquired |
— |
— |
Net cash paid |
$ — |
$ (2,289,709) |
|
|
|
Preliminary Normalized
Pre-Tax Income Summary (Dollars in Millions) |
|
For the Years
Ended December 31, |
|
2014 |
2013 |
GAAP Income before income
taxes |
$ (443.2) |
$ 352.5 |
Transition and transaction related
expenses |
42.3 |
157.3 |
Legal/Settlement expense |
186.1 |
60.4 |
Goodwill Impairment |
420.2 |
— |
Discontinued/Sold Operations |
— |
(6.7) |
Funding related expenses |
0.5 |
35.0 |
MSR-Related Fair Value Change |
72.3 |
(48.1) |
Other |
6.6 |
— |
Normalized income before income
taxes |
$ 284.9 |
$ 550.4 |
CONTACT: FOR FURTHER INFORMATION CONTACT:
Investors:
Stephen Swett
T: (203) 614-0141
E: shareholderrelations@ocwen.com
Media:
John Lovallo
T: (917) 612-8419
E: jlovallo@levick.com
Dan Rene
T: (202) 973-1325
E: drene@levick.com
Ocwen Financial (NYSE:OCN)
Historical Stock Chart
From Apr 2024 to May 2024
Ocwen Financial (NYSE:OCN)
Historical Stock Chart
From May 2023 to May 2024