UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8-K

 

Current Report

Pursuant to Section 13 or 15 (d) of

the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): July 30, 2015

 

 

 

OCWEN FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 

Florida   1-13219   65-0039856
(State or other jurisdiction of incorporation)   (Commission File Number)   (IRS Employer Identification No.)

 

 

 

1000 Abernathy Road NE, Suite 210

Atlanta, Georgia 30328

(Address of principal executive offices)

 

Registrant’s telephone number, including area code: (561) 682-8000

 

Not applicable.

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

  o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
     
  o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
     
  o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
     
  o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
Item 2.02Results of Operations and Financial Condition.

On July 30, 2015, Ocwen Financial Corporation issued a press release announcing its results for the second quarter ended June 30, 2015. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information contained under Item 2.02 in this Current Report, including Exhibit 99.1, is being furnished and, as a result, such information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01Financial Statements and Exhibits.

 

(d)        Exhibits

 

Exhibit
Number
  Description
     
99.1   Press release of Ocwen Financial Corporation dated July 30, 2015.
 
 

 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)

     
Date: July 30, 2015 By:  /s/ Michael R. Bourque, Jr.
    Michael R. Bourque, Jr.
    Chief Financial Officer
   

(On behalf of the Registrant and as its principal financial officer)

 


 

Exhibit 99.1 

 

 

Ocwen Financial Corporation®

 

FOR IMMEDIATE RELEASE

 

OCWEN FINANCIAL ANNOUNCES OPERATING RESULTS

FOR SECOND QUARTER 2015

 

· Generated Q2 2015 Net Income of $10 million and Cash From Operating Activities of $210 million
· Reduced corporate debt by $264 million and ended June with $490 million of liquidity
· Announces cost improvement initiative

Atlanta, GA – (July 30, 2015) Ocwen Financial Corporation, (NYSE:OCN) (“Ocwen” or the “Company”), a leading financial services holding company, today reported net income of $10 million, or $0.08 per share, for the three months ended June 30, 2015 compared to net income of $67 million, or $0.48 per share, for the three months ended June 30, 2014. Ocwen generated revenue of $463 million, down 16% compared to the second quarter of the prior year. Income from operations was $111 million for the three months ended June 30, 2015 compared to $208 million for the second quarter of 2014. Cash from Operating Activities was $210 million for the three months ended June 30, 2015, up $196 million over the same period last year.

 

“The Company made positive strides on many fronts in the second quarter. We continue to work closely with our regulators and monitors, and the environment remains stable. Our efforts to build out a strong ‘bank-like’ risk and compliance infrastructure are taking hold. We were profitable and generated strong operating cash flow. We executed on our asset sale strategy, including the sale of $3 billion of non-performing agency servicing, and we reduced corporate debt by $264 million while ending the quarter with almost half a billion dollars in available liquidity. Additionally, we executed our first servicing advance refinance of 2015 at better than expected rates, receiving strong support from the financing market,” commented Ron Faris, President and CEO of Ocwen.

 

Mr. Faris continued, “We have also launched a cost improvement effort to right size our cost structure in line with the reduction in our assets and revenue. Our aim is to reduce our costs by over $150 million, while continuing to enhance the borrower experience, strengthen our risk and compliance infrastructure and deliver strong loss mitigation results. Similar to our plan to grow our origination capabilities, this cost improvement initiative is aggressive, but it is a critically important step in our transformation and one that is necessary to ensure our long-term success.”

 

Second Quarter Results

 

Pre-tax income for the second quarter of 2015 was impacted by a number of significant items including but not limited to: $30 million of net gains from sales of performing and non-performing agency mortgage servicing rights (MSRs) with a total unpaid principal balance (UPB) of $56.5 billion, $(15) million of strategic advisor expenses and $(6) million of monitor costs. Servicing contributed $45 million of pre-tax income inclusive of the gain on sales of MSRs, and the Lending segment generated $14 million of pre-tax income for the second quarter of 2015.

1
 

Ocwen Financial Corporation

Second Quarter, 2015 Results

July 30, 2015

 

Webcast and Conference Call

Ocwen will host a webcast and conference call on Thursday, July 30, 2015, at 5 p.m., Eastern Time, to discuss its financial results for the second quarter of 2015. The conference call will be webcast live over the internet from the Company’s website at www.Ocwen.com, click on the “Shareholder Relations” section. A replay of the conference call will be available via the website approximately two hours after the conclusion of the call and will remain available for approximately 30 days.

 

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: our servicer and credit ratings as well as other actions from various rating agencies, including the impact of downgrades of our servicer and credit ratings; 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 sell, fund and recover advances, repay borrowings and comply with debt covenants; 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, including our ability to successfully execute on our cost improvement initiative; 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 for the year ended December 31, 2014 (filed with the SEC on 5/11/15) and its quarterly report on Form 10-Q for the quarter ended March 31, 2015 (filed with the SEC on 5/18/15). 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.

 

FOR FURTHER INFORMATION CONTACT:

 

Investors:   Media:
Stephen Swett   John Lovallo Dan Rene
T: (203) 614-0141   T: (917) 612-8419 T: (202) 973 -1325
E: shareholderrelations@ocwen.com   E: jlovallo@levick.com

E:drene@levick.com

2
 

Ocwen Financial Corporation

Second Quarter, 2015 Results

July 30, 2015

 

Residential Servicing Statistics

(Dollars in thousands)  

 

   At or for the Three Months Ended 
   June 30,
2015
   March 31,
2015
   December 31,
2014
   September 30,
2014
   June 30,
2014
 
Total unpaid principal balance of loans and REO serviced   $  321,670,579   $  382,214,002   $  398,727,727   $  411,279,614   $  435,119,848 
                          
Non-performing loans and REO serviced as a % of total UPB (1)    13.0%   12.5%   13.2%   13.4%   12.9%
                          
Prepayment speed (average CPR)(2)    15.7%(3)   13.3%   12.7%   12.8%   12.9%
(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 19.0% for prime loans and 11.6% for non-prime loans.

 

Segment Results (Unaudited)

(Dollars in thousands)

 

   Three Months   Six Months 
For the Periods Ended June 30,  2015   2014   2015   2014 
Servicing                    
Revenue   $423,207   $520,480   $894,332   $1,041,302 
Expenses    (284,413)   (298,101)   (622,325)   (606,033)
Other expense, net    (94,215)   (130,851)   (180,707)   (267,118)
Income before income taxes   $44,579   $91,528   $91,300   $168,151 
                     
Lending                    
Revenue   $39,312   $31,166   $77,059   $59,933 
Expenses    (26,586)   (27,164)   (50,372)   (58,629)
Other income, net    1,719    3,051    3,742    6,328 
Income before income taxes   $14,445   $7,053   $30,429   $7,632 
                     
Corporate Items and Other                    
Revenue   $755   $1,467   $2,362   $3,180 
Expenses    (41,276)   (20,237)   (57,971)   (30,075)
Other expense, net    (6,003)   (2,634)   (10,791)   (8)
Loss before income taxes   $(46,524)  $(21,404)  $(66,400)  $(26,903)
                     
Corporate Eliminations                    
Revenue   $(23)  $(39)  $(58)  $(80)
Expenses    23    39    58    80 
Other income (expense), net                 
Income (loss) before income taxes   $   $   $   $ 
Consolidated income before income taxes   $12,500   $77,177   $55,329   $148,880 
3
 

Ocwen Financial Corporation

Second Quarter, 2015 Results

July 30, 2015

OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(UNAUDITED)

 

   Three Months   Six Months 
For the Periods Ended June 30,  2015   2014   2015   2014 
Revenue                    
Servicing and subservicing fees   $396,983   $491,673   $843,524   $982,132 
Gain on loans held for sale, net    45,132    38,836    89,636    82,823 
Other revenues    21,136    22,565    40,535    39,380 
Total revenue    463,251    553,074    973,695    1,104,335 
                     
Expenses                    
Compensation and benefits    105,843    110,602    210,987    216,239 
Amortization of mortgage servicing rights    31,586    63,198    70,080    125,292 
Servicing and origination    52,558    35,787    154,360    79,734 
Technology and communications    41,260    39,997    80,611    76,973 
Professional services    72,369    30,643    129,300    52,041 
Occupancy and equipment    28,773    25,756    54,487    57,807 
Other operating expenses    19,863    39,480    30,785    86,571 
Total expenses    352,252    345,463    730,610    694,657 
                     
Other income (expense)                    
Interest income    5,038    5,553    10,613    10,879 
Interest expense    (124,897)   (136,207)   (244,293)   (276,080)
Gain on sale of mortgage servicing rights    30,306        56,712     
Gain on extinguishment of debt        356        2,609 
Other, net    (8,946)   (136)   (10,788)   1,794 
Other expense, net    (98,499)   (130,434)   (187,756)   (260,798)
                     
Income before income taxes    12,500    77,177    55,329    148,880 
Income tax expense    2,594    10,165    11,034    21,382 
Net income    9,906    67,012    44,295    127,498 
Net income attributable to non-controlling interests    (168)   (57)   (202)   (42)
Net income attributable to Ocwen stockholders    9,738    66,955    44,093    127,456 
Preferred stock dividends        (582)       (1,163)
Deemed dividend related to beneficial conversion feature of preferred stock        (415)       (831)
Net income (loss) attributable to Ocwen common stockholders   $9,738   $65,958   $44,093   $125,462 
                     
Earnings per share attributable to Ocwen common stockholders                    
Basic   $0.08   $0.49   $0.35   $0.93 
Diluted   $0.08   $0.48   $0.35   $0.91 
                     
Weighted average common shares outstanding                    
Basic    125,311,133    134,221,668    125,291,788    134,724,905 
Diluted    127,152,479    137,705,793    127,076,178    138,423,012 
4
 

Ocwen Financial Corporation

Second Quarter, 2015 Results

July 30, 2015

OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(UNAUDITED)

 

   June 30,
2015
   December 31,
2014
 
Assets        
Cash   $320,080   $129,473 
Mortgage servicing rights ($814,450 and $93,901 carried at fair value)    1,341,067    1,913,992 
Advances    572,942    893,914 
Match funded advances    2,181,493    2,409,442 
Loans held for sale ($276,581 and $401,120 carried at fair value)    352,398    488,612 
Loans held for investment - reverse mortgages, at fair value    2,097,192    1,550,141 
Receivables, net    379,279    270,596 
Deferred tax assets, net    97,209    76,987 
Premises and equipment, net    39,629    43,310 
Other assets  ($8,157 and $7,335 carried at fair value)    623,350    490,811 
Total assets   $8,004,639   $8,267,278 
           
Liabilities and Equity          
Liabilities          
Match funded liabilities   $1,741,122   $2,090,247 
Financing liabilities ($2,569,217 and $2,058,693 carried at fair value)    2,743,670    2,258,641 
Other secured borrowings    1,290,431    1,733,691 
Senior unsecured notes    350,000    350,000 
Other liabilities    734,386    793,534 
Total liabilities    6,859,609    7,226,113 
           

Equity

          
Ocwen Financial Corporation (Ocwen) stockholders’ equity          
Common stock, $.01 par value; 200,000,000 shares authorized; 125,380,118 and 125,215,615 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively    1,254    1,252 
Additional paid-in capital    525,897    515,194 
Retained earnings    617,286    530,361 
Accumulated other comprehensive loss, net of income taxes    (2,380)   (8,413)
Total Ocwen stockholders’ equity    1,142,057    1,038,394 
Non-controlling interest in subsidiaries    2,973    2,771 
Total equity    1,145,030    1,041,165 
Total liabilities and equity   $8,004,639   $8,267,278 
5
 

Ocwen Financial Corporation

Second Quarter, 2015 Results

July 30, 2015

OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

(UNAUDITED)

 

   For the Six Months Ended June 30, 
   2015   2014 
Cash flows from operating activities        
Net income   $44,295   $127,498 
Adjustments to reconcile net income to net cash provided by operating activities:          
Amortization of mortgage servicing rights    70,080    125,292 
Loss on valuation of mortgage servicing rights, at fair value    48,480    11,809 
Impairment of mortgage servicing rights    1,608     
Gain on sale of mortgage servicing rights    (56,712)    
Realized and unrealized losses on derivative financial instruments    7,268    1,539 
Provision for bad debts    24,686    52,564 
Depreciation    8,420    10,846 
Amortization of debt issuance costs    7,311    2,297 
Gain on extinguishment of debt        (2,609)
(Gain) loss on sale of fixed assets    (1,095)   165 
Decrease in deferred tax assets, net    (18,909)   16,547 
Equity-based compensation expense    3,581    7,784 
Gain on loans held for sale, net    (89,636)   (82,823)
Origination and purchase of loans held for sale    (2,314,488)   (4,501,731)
Proceeds from sale and collections of loans held for sale    2,517,096    4,422,560 
Changes in assets and liabilities:          
Decrease in advances and match funded advances    383,028    123,299 
Increase in receivables and other assets, net    (29,957)   (1,022)
Decrease in other liabilities    (84,690)   (116,971)
Other, net    14,599    12,979 
Net cash provided by operating activities    534,965    210,023 
6
 

Ocwen Financial Corporation

Second Quarter, 2015 Results

July 30, 2015

OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS – (continued)
(Dollars in thousands)
(UNAUDITED)

 

   For the Six Months Ended June 30, 
   2015   2014 
Cash flows from investing activities          
Origination of loans held for investment - reverse mortgages    (530,402)   (357,104)
Principal payments received on loans held for investment - reverse mortgages    63,942    28,601 
Purchase of mortgage servicing rights, net    (6,252)   (9,749)
Proceeds from sale of mortgage servicing rights    388,938     
Acquisition of advances in connection with the purchase of mortgage servicing rights        (84,373)
Acquisition of advances in connection with the purchase of loans        (60,482)
Proceeds from sale of advances and match funded advances    128,821     
Additions to premises and equipment    (8,038)   (5,092)
Proceeds from sale of premises and equipment    4,758    22 
Cash paid to acquire ResCap Servicing Operations (a component of Residential Capital, LLC)        (54,220)
Net cash paid to acquire controlling interest in Ocwen Structured Investments, LLC        (7,833)
Distributions of capital from unconsolidated entities        6,572 
Other    2,158    1,459 
Net cash provided by (used in) investing activities    43,925    (542,199)
           
Cash flows from financing activities          
Repayment of match funded liabilities    (349,125)   (292,297)
Proceeds from other secured borrowings    3,895,539    3,007,709 
Repayments of other secured borrowings    (4,455,813)   (3,139,093)
Proceeds from issuance of senior unsecured notes        350,000 
Payment of debt issuance costs    (18,610)   (6,417)
Proceeds from sale of mortgage servicing rights accounted for as a financing        123,551 
Proceeds from sale of loans accounted for as a financing    532,856    381,579 
Proceeds from sale of advances accounted for as a financing        81,828 
Repurchase of common stock        (94,607)
Payment of preferred stock dividends        (1,163)
Proceeds from exercise of common stock options    413    1,176 
Other    6,457    869 
Net cash (used in) provided by financing activities    (388,283)   413,135 
           
Net increase in cash    190,607    80,959 
Cash at beginning of year    129,473    178,512 
Cash at end of period   $320,080   $259,471 
7
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