updated 5/5/2011 7:16:12 AM ET 2011-05-05T11:16:12

ATLANTA, May 5, 2011 (GLOBE NEWSWIRE) -- Ocwen Financial Corporation ("Ocwen" or the "Company") (NYSE:OCN) today reported net income of $22.1 million or $0.21 per share for the first quarter of 2011. This compares with net income of $20.9 million or $0.20 per share for the first quarter of 2010. The Company incurred in the first quarter of 2011 $11.9 million in incremental amortization of up-front fees and original issue discount on its Senior Secured Term Loan (SSTL) related to a partial prepayment of this loan. Normalizing for the SSTL items and a $0.9 million reduction in litigation accruals, net income would have been $29.1 million or $0.27 per share.

Income from operations was $69.8 million for the first quarter of 2011 as compared to $40.4 million for the first quarter of 2010, up 73%. Revenue for the first quarter was $111.0 million, up 47% compared to the first quarter of 2010.

First quarter business performance highlights:

  • Completed 24,502 loan modifications of which 14% were HAMP modifications which exceeded the upper end of guidance of 19,000 to 22,000.
  • Generated cash flow from operations for the first quarter of 2011 of $368.1 million.
  • Made voluntary prepayments of $162.5 million on the SSTL which along with the mandatory repayment reduced the outstanding principal balance to $26.3 million as of March 31, 2011.
  • Reduced servicing advances by $294.2 million, or 14%.

"We are very pleased with our strong operating results for the first quarter," said Ron Faris, President and CEO. "With the up-front costs behind us, the HomEq transaction is a strong contributor to earnings as it continues to meet or exceed expectations. Ocwen's investment in its industry-leading servicing platform has further improved customer satisfaction and increased loan resolutions. We are proud that our efforts have helped keep more families in their homes and reduce losses to investors. Our ongoing improvements helped drive a quarterly record volume of 24,502 modifications, up more than 22% over the fourth quarter of 2010, and a large reduction in non-performing loans. Over the past three months, the percentage of non-performing loans fell 9.5% from 27.3% to 24.7%, excluding GSE special servicing." Faris added that, "because our servicing segment now represents over 99% of Ocwen's revenues, we have consolidated into Corporate Items and Other the Loans and Residuals and Asset Management Vehicles segments."

Chairman Bill Erbey stated that, "Ocwen's robust cash-flow enabled the Company to pay-down debt and positions us well to take advantage of growth opportunities in the marketplace. Ocwen paid-down all but $26.3 million of its $350 million SSTL, keeping the facility open to provide capacity for new business. Ocwen has a solid pipeline of opportunities for both sub-servicing and servicing. Just after the end of the quarter, for example, Ocwen signed a $3.2 billion sub-servicing agreement that closes this month. Our financial capacity, along with our competitive advantages in delinquency management and low operating cost, position us well to source new business."

Servicing

In comparison to the first quarter of 2010, revenue was 47% higher, driven by growth in the portfolio as unpaid principal balance serviced increased from $49.7 billion at March 31, 2010 to $70.5 billion at March 31, 2011. Operating expense increased by $9.0 million or 29%.

Other expense, net increased by $24.1 million due to interest expense on borrowings related to the HomEq acquisition. Normalizing for the $11.9 million of incremental amortization of up-front fees and original issue discount on the SSTL loan, adjusted pre-tax income of the Servicing segment would have been $46.7 million or up 44% over the first quarter of 2010 due to the growth in our servicing portfolio, delinquency management and unit cost reductions.

Corporate Items and Other

In the first quarter of 2011, losses from income before taxes were $0.3 million as compared to $1.1 million in the first quarter of 2010. Because of their minor impact on financial results, Ocwen no longer reports Loans and Residuals and Asset Management Vehicles as separate segments. Rather, these are now consolidated under Corporate Items and Other. Comparisons to prior periods reflect restatement of Corporate Items and Other to include these former segments.

Ocwen Financial Corporation is a leading provider of residential and commercial loan servicing, special servicing and asset management services. Ocwen is headquartered in Atlanta, Georgia with offices in West Palm Beach and Orlando, Florida, and Washington, DC and support operations in India and Uruguay. Utilizing advanced technology and world-class training and processes, we provide solutions that make our clients' loans worth more. Additional information is available at www.ocwen.com .

This news 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, including, but not limited to, successful completion of the HomEq transaction, future liquidity and cost-effective resources in India. Forward-looking statements are not guarantees of future performance, and 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: general economic and market conditions, prevailing interest or currency exchange rates, governmental regulations and policies, international political and economic uncertainty, availability of adequate and timely sources of liquidity, federal income tax rates, real estate market conditions and trends and the outcome of ongoing litigation as well as other risks detailed in Ocwen's reports and filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2010. The forward-looking statements speak only as of the date they are made and should not be relied upon. Ocwen undertakes no obligation to update or revise the forward-looking statements.

 
Residential Servicing Statistics (Dollars in thousands)
  At or for the three months ended
  March 31,

2011
December 31,

2010
September 30,

2010
June 30,

2010
March 31,

2010
Total unpaid principal balance of loans and REO serviced  $ 70,542,961  $ 73,886,391  $ 76,140,022  $ 55,244,576  $ 49,677,999
Non-performing loans and REO serviced as a % of total UPB (1) 24.7% 27.3% 27.2% 26.2% 25.3%
Prepayment speed (average CPR) 13.9% 12.6% 12.6% 13.1% 12.4%

(1)    Non-performing loans exclude those serviced under special servicing agreements where we have no obligation to advance. 

     
Segment Results (Dollars in thousands) (UNAUDITED)    
   
For the three months ended March 31, 2011 2010
Servicing    
 Revenue  $ 110,869  $ 75,453
 Operating expenses   39,783   30,787
 Income from operations  71,086  44,666
 Other expense, net   (36,306)   (12,161)
 Income before income taxes   34,780   32,505
     
Corporate Items and Other    
 Revenue  471  536
 Operating expenses   1,570   4,581
 Loss from operations  (1,099)  (4,045)
 Other income, net   808   2,985
 Loss before income taxes   (291)   (1,060)
     
Corporate Eliminations    
 Revenue  (334)  (403)
 Operating expenses   (154)   (191)
 Loss from operations  (180)  (212)
 Other income, net   180   212
 Income (loss) before income taxes   —   —
Consolidated income before income taxes

 $ 34,489


 $ 31,445
 
 
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except share data)
(UNAUDITED)
   
For the three months ended March 31, 2011 2010
     
Revenue    
 Servicing and subservicing fees  $ 102,505  $ 66,480
 Process management fees  7,796  7,906
 Other revenues   705   1,200
 Total revenue   111,006   75,586
     
Operating expenses    
 Compensation and benefits  14,787  12,777
 Amortization of mortgage servicing rights  8,923  6,375
 Servicing and origination  1,922  591
 Technology and communications  6,872  5,664
 Professional services  2,384  3,255
 Occupancy and equipment  4,130  4,446
 Other operating expenses   2,181   2,069
 Total operating expenses   41,199   35,177
     
Income from operations   69,807   40,409
     
Other income (expense)    
 Interest income  2,169  3,645
 Interest expense  (37,543)  (12,471)
 Gain on trading securities  —  765
 Loss on loans held for resale, net  (904)  (1,038)
 Equity in earnings of unconsolidated entities  130  735
 Other, net   830   (600)
 Other expense, net   (35,318)   (8,964)
     
Income before income taxes  34,489  31,445
Income tax expense   12,425   10,574
 Net income  22,064  20,871
Net loss (income) attributable to non-controlling interest in subsidiaries   10   (11)
 Net income attributable to Ocwen Financial Corporation  $ 22,074  $ 20,860
     
Earnings per share attributable to Ocwen Financial Corporation    
 Basic   $ 0.22  $ 0.21
 Diluted  $ 0.21  $ 0.20
     
Weighted average common shares outstanding    
 Basic  100,762,446  99,975,881
 Diluted  107,777,775  107,324,415
 
 

OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)


(UNAUDITED)
     
  March 31, 2011 December 31, 2010
     
Assets    
Cash  $ 129,087  $ 127,796
Restricted cash – for securitization investors  1,005  727
Loans held for resale, at lower of cost or fair value  25,153  25,803
Advances  174,842  184,833
Match funded advances  1,639,811  1,924,052
Loans, net – restricted for securitization investors  65,112  67,340
Mortgage servicing rights, net  184,571  193,985
Receivables, net  50,279  69,518
Deferred tax assets, net  137,551  138,716
Goodwill  12,810  12,810
Premises and equipment, net  5,110  5,475
Investments in unconsolidated entities  11,588  12,072
Other assets   128,868   158,282
Total assets  $ 2,565,787  $ 2,921,409
     
Liabilities and Equity    
 Liabilities    
Match funded liabilities  $ 1,289,129  $ 1,482,529
Secured borrowings – owed to securitization investors  60,841  62,705
Lines of credit and other secured borrowings  77,710  246,073
Servicer liabilities  2,067  2,492
Debt securities  82,554  82,554
Other liabilities   123,019   140,239
Total liabilities   1,635,320   2,016,592
     
 Equity    
Ocwen Financial Corporation stockholders' equity    
Common stock, $.01 par value; 200,000,000 shares authorized; 100,937,283 and  100,726,947 shares issued and outstanding at March 31, 2011 and December 31, 2010, respectively  1,009  1,007
Additional paid-in capital  468,963  467,500
Retained earnings  467,530  445,456
Accumulated other comprehensive loss, net of income taxes   (7,281)   (9,392)
Total Ocwen Financial Corporation stockholders' equity  930,221  904,571
Non-controlling interest in subsidiaries   246   246
Total equity   930,467   904,817
Total liabilities and equity  $ 2,565,787  $ 2,921,409
CONTACT: John P. Van Vlack
         Executive Vice President, Chief Financial Officer & 
         Chief Accounting Officer
         T: (561) 682-7721
         E: John.VanVlack@Ocwen.com

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