________________________________________________________________________________
EXHIBIT 99.1
[GRAPHIC OMITTED]
Ocwen Ocwen Financial Corporation(R)
________________________________________________________________________________
FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION CONTACT:
Xxxxxx X. Xxxxx, Xx.
Senior Vice President &
Principal Financial Officer
T: (000) 000-0000
E: xxxxxx.xxxxx@xxxxx.xxx
----------------------
OCWEN FINANCIAL CORPORATION ANNOUNCES
THIRD QUARTER 2006 NET INCOME
West Palm Beach, FL - (October 26, 2006) Ocwen Financial Corporation (NYSE:OCN)
today reported net income of $17.0 million or $0.27 per share for the third
quarter of 2006. This compares to $7.9 million or $0.13 per share for the third
quarter of 2005. For the nine months ended September 30, 2006, net income was
$192.6 million or $3.06 per share as compared to $13.2 million or $0.21 per
share for the same period in 2005. Pre-tax income in the third quarter of 2006
was $26.4 million as compared to $10.2 million in the third quarter of 2005. For
the nine months ended September 30, 2006, pre-tax income was $65.2 million as
compared to $18.3 million in the comparable period of 2005. Year to date results
in 2006 include a tax benefit of $127.4 million, primarily reflecting the second
quarter reversal of $145.2 million of the valuation allowance that had been
established in prior years.
Chairman and CEO Xxxxxxx X. Xxxxx stated "Our third quarter pre-tax results
reflect progress in achieving our goals of growing revenues while containing
operating costs. Our revenues grew by 13.7% as compared to the third quarter of
last year and 13.3% year to date. At the same time, our operating expenses in
2006 grew by only 1.4% and less than 1% in the third quarter and year to date
periods, respectively. Our pre-tax third quarter results were driven primarily
by the continued strong performance of our Residential Servicing segment which
contributed $23.9 million of pre-tax income to the quarter. Our Residential
Origination Services segment also had a strong quarter, reporting $5.6 million
of pre-tax income, reflecting improved results in a number of our services
units. These gains were partially offset by small losses in our other two
segments and expenses in Corporate.
Our total assets increased by $58.6 million as compared to December 31, 2005.
This increase reflects an increase of $149 million in our deferred tax assets
resulting primarily from the reversal of our valuation allowance in the second
quarter, as well as an increase of $98.1 million in our servicing advances,
largely due to growth in our portfolio during the year. In addition, we reported
increases of $141.8 million in cash and equivalents and $25.2 million in
mortgage servicing rights, as new purchases exceeded amortization. Our other
assets category includes an increase of $45.8 million representing our equity
investment in Bankruptcy Management Solutions, Inc. These increases were
partially offset by a decline of $411.8 million in our loans held for resale,
primarily reflecting the securitization in the first quarter of this year of a
large loan portfolio held for that purpose as of December 31, 2005. Our leverage
has improved in the first half of the year as reflected by an equity to assets
ratio of 28.1% as of September 30, 2006 as compared to 18.7% as of December 31,
2005.
During the third quarter, we merged our Business Process Outsourcing segment
with the Residential Origination Services segment, reflecting our focus on
providing outsourcing services to the residential mortgage loan industry. This
action will enable us to achieve cost reductions."
Residential Servicing
Three months Nine months
---------------------------- ----------------------------
For the periods ended September 30, 2006 2005 2006 2005
----------------------------------- ------------ ------------ ------------ ------------
Revenue .......................... $ 87,455 $ 71,074 $ 250,305 $ 207,980
Operating expenses ............... 56,150 57,557 170,453 179,598
Other income (expense) ........... (7,362) (5,821) (19,969) (15,140)
------------ ------------ ------------ ------------
Pre-tax income (loss) ............ $ 23,943 $ 7,696 $ 59,883 $ 13,242
============ ============ ============ ============
o As of September 30, 2006, we were the servicer of approximately 453
thousand loans with an unpaid principal balance (UPB) of $50.8 billion
as compared to approximately 369 thousand loans and $42.8 billion of
UPB at December 31, 2005.
o Revenue in the 2006 periods reflects increased servicing fees and float
income from a larger servicing portfolio and higher interest rates.
Page 5 of 9
Ocwen Financial Corporation
Third Quarter 2006 Results
October 26, 2006
o The decline in operating expenses in the 2006 periods reflects a
reduction in interest paid to investors related to loan pay-offs and
cost reductions reflecting process improvements and automation.
Partially offsetting these reductions were increases in amortization
expenses due to the increased servicing portfolio and a provision in
the second quarter of 2006 to increase litigation reserves related to
ongoing cases.
Commercial Servicing
Three months Nine months
---------------------------- ----------------------------
For the periods ended September 30, 2006 2005 2006 2005
----------------------------------- ------------ ------------ ------------ ------------
Revenue ........................... $ 2,269 $ 6,262 $ 8,468 $ 15,260
Operating expenses ................ 2,629 3,885 8,263 12,282
Other income (expense) ............ 106 (314) 88 (559)
------------ ------------ ------------ ------------
Pre-tax income (loss) ............. $ (254) $ 2,063 $ 293 $ 2,419
============ ============ ============ ============
o Revenue and expense declines primarily reflect the sale of GSS Japan
and reduced revenue and expenses in GSS Taiwan reflecting reduced
activity at that location.
Ocwen Recovery Group
Three months Nine months
---------------------------- ----------------------------
For the periods ended September 30, 2006 2005 2006 2005
----------------------------------- ------------ ------------ ------------ ------------
Revenue ........................... $ 1,740 $ 2,712 $ 5,797 $ 9,799
Operating expenses ................ 2,163 3,484 6,725 9,938
Other income (expense) ............ 39 122 314 238
------------ ------------ ------------ ------------
Pre-tax income (loss) ............. $ (384) $ (650) $ (614) $ 99
============ ============ ============ ============
o The decline in revenue in the 2006 periods primarily reflects a shift
in revenue from proprietary assets to lower yielding third-party
contracts.
o Operating expenses declined in 2006 as a result of process
improvements, technology enhancements and a greater utilization of
India resources.
Residential Origination Services
Three months Nine months
---------------------------- ----------------------------
For the periods ended September 30, 2006 2005 2006 2005
----------------------------------- ------------ ------------ ------------ ------------
Revenue ........................... $ 20,061 $ 17,423 $ 54,507 $ 48,003
Operating expenses ................ 21,349 17,838 64,331 47,209
Other income (expense) ............ 6,922 715 19,147 4,425
------------ ------------ ------------ ------------
Pre-tax income (loss) ............. $ 5,634 $ 300 $ 9,323 $ 5,219
============ ============ ============ ============
o The improvement in third quarter and year to date 2006 results over the
same periods last year primarily reflects improved operating results in
our settlement services, property valuation and business process
outsourcing operations.
o Third quarter 2006 results also reflect increased earnings from our UK
subprime residual securities over the third quarter of 2005.
Page 6 of 9
Ocwen Financial Corporation
Third Quarter 2006 Results
October 26, 2006
Corporate Items and Other
Three months Nine months
---------------------------- ----------------------------
For the periods ended September 30, 2006 2005 2006 2005
----------------------------------- ------------ ------------ ------------ ------------
Revenue ........................... $ (1,376) $ (561) $ (1,342) $ (629)
Operating expenses ................ 2,837 1,184 7,084 5,659
Other income (expense) ............ 1,647 2,563 4,766 3,646
------------ ------------ ------------ ------------
Pre-tax income (loss) ............. $ (2,566) $ 818 $ (3,660) $ (2,642)
============ ============ ============ ============
o The third quarter of 2005 includes a one time reversal of reserves as
well as gains on debt repurchases that did not occur in 2006.
o In the first six months of 2005, we retained greater interest expense
in Corporate, reflecting the high cash balances we were holding in
preparation for debanking, and also incurred expenses in Corporate
related to that initiative.
Ocwen Financial Corporation is a leading provider of servicing and origination
processing solutions to the loan industry with headquarters in West Palm Beach,
Florida, offices in, Orlando, Florida, Downers Grove, Illinois and Atlanta,
Georgia and global operations in Canada, Germany, India and Taiwan. We make our
clients' loans worth more by leveraging our superior processes, innovative
technology and high-quality, cost-effective global human resources. Additional
information is available at xxx.xxxxx.xxx.
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 the
securitization market and our plans to securitize loans and expectations as to
the impact of rising interest rates 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 OCN's
reports and filings with the Securities and Exchange Commission, including its
periodic report on Form 10-K for the year ended December 31, 2005 and Form 10-Q
for the quarters ended March 31, 2006 and June 30, 2006 and our Forms 8-K filed
during 2006. The forward-looking statements speak only as of the date they are
made and should not be relied upon. OCN undertakes no obligation to update or
revise the forward-looking statements.
Page 7 of 9
Ocwen Financial Corporation
Third Quarter 2006 Results
October 26, 2006
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
Three months Nine months
---------------------------- ----------------------------
For the periods ended September 30, 2006 2005 2006 2005
------------------------------------ ------------ ------------ ------------ ------------
Revenue
Servicing and subservicing fees ................... $ 85,580 $ 75,776 $ 248,437 $ 219,807
Process management fees ........................... 21,601 18,701 59,750 53,107
Other revenues .................................... 2,968 2,433 9,548 7,499
------------ ------------ ------------ ------------
Total revenue ................................. 110,149 96,910 317,735 280,413
------------ ------------ ------------ ------------
Operating expenses
Compensation and benefits ......................... 21,331 23,722 69,038 72,449
Amortization of servicing rights .................. 27,082 22,975 81,034 73,020
Servicing and origination ......................... 13,303 15,703 39,207 44,884
Technology and communications ..................... 6,498 7,589 19,171 22,850
Professional services ............................. 6,984 4,692 22,383 15,425
Occupancy and equipment ........................... 4,785 4,517 14,584 13,330
Other operating expenses .......................... 5,145 4,750 11,439 12,728
------------ ------------ ------------ ------------
Total operating expenses ...................... 85,128 83,948 256,856 254,686
------------ ------------ ------------ ------------
Other income (expense)
Interest income ................................... 12,466 3,864 36,877 16,960
Interest expense .................................. (11,558) (8,340) (38,874) (25,852)
Gain (loss) on trading securities ................. 2,156 (742) 3,483 (3,409)
Gain (loss) on loans held for resale, net ......... (85) -- (1,306) --
Gain on debt repurchases .......................... -- 897 25 897
Other, net ........................................ (1,627) 1,586 4,141 4,014
------------ ------------ ------------ ------------
Other income (expense), net ................... 1,352 (2,735) 4,346 (7,390)
------------ ------------ ------------ ------------
Income before income taxes ............................ 26,373 10,227 65,225 18,337
Income tax expense (benefit) .......................... 9,403 2,282 (127,364) 5,097
------------ ------------ ------------ ------------
Net income ........................................ $ 16,970 $ 7,945 $ 192,589 $ 13,240
============ ============ ============ ============
Earnings per share
Basic ............................................... $ 0.27 $ 0.13 $ 3.06 $ 0.21
Diluted ............................................. $ 0.25 $ 0.12 $ 2.71 $ 0.21
Weighted average common shares outstanding
Basic ............................................... 62,505,740 62,975,006 62,855,616 62,843,375
Diluted (1) ......................................... 71,689,432 77,397,469 71,798,615 63,843,041
(1) For purposes of computing diluted earnings per share, the 2006 periods and
the third quarter of 2005 reflect the assumed conversion of our 3.25%
Convertible Notes into 7,962,205 and 13,599,019 shares of common stock,
respectively. Conversion of the Convertible Notes has not been assumed for
the nine months ended September 30, 2005 because the effect would be
anti-dilutive.
Page 8 of 9
Ocwen Financial Corporation
Third Quarter 2006 Results
October 26, 2006
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
September 30, December 31,
2006 2005
------------ ------------
Assets
Cash ....................................................................... $ 192,232 $ 269,611
Trading securities, at fair value
Investment grade ....................................................... 220,833 1,685
Subordinates and residuals ............................................. 46,904 30,277
Loans held for resale ...................................................... 212,895 624,671
Advances ................................................................... 304,374 219,716
Match funded advances ...................................................... 390,575 377,105
Mortgage servicing rights .................................................. 173,911 148,663
Receivables ................................................................ 60,043 68,266
Deferred tax assets, net ................................................... 169,258 20,270
Premises and equipment, net ................................................ 36,347 40,108
Other assets ............................................................... 105,401 53,801
------------ ------------
Total assets ........................................................... $ 1,912,773 $ 1,854,173
============ ============
Liabilities and Stockholders' Equity
Liabilities
Match funded liabilities ............................................... $ 356,179 $ 339,292
Servicer liabilities ................................................... 419,732 298,892
Lines of credit and other secured borrowings ........................... 367,635 626,448
Debt securities ........................................................ 150,329 154,329
Other liabilities ...................................................... 79,805 85,952
------------ ------------
Total liabilities ................................................... 1,373,680 1,504,913
------------ ------------
Minority interest in subsidiary ............................................ 1,905 1,853
Stockholders' Equity
Common stock, $.01 par value; 200,000,000 shares authorized;
62,691,167 and 63,133,471 shares issued and outstanding at
September 30, 2006 and December 31, 2005, respectively .............. 627 631
Additional paid-in capital ............................................. 180,019 184,262
Retained earnings ...................................................... 355,787 163,198
Accumulated other comprehensive income (loss), net of taxes ............ 755 (684)
------------ ------------
Total stockholders' equity ............................................. 537,188 347,407
------------ ------------
Total liabilities and stockholders' equity .......................... $ 1,912,773 $ 1,854,173
============ ============
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