- Net income of
$30 million and diluted earnings per share of$3.74 ; annualized return on equity of 29% - Adjusted pre-tax income of
$14 million , driven by servicing segment; achieved 13.8% annualized adjusted pre-tax return on equity - Repurchased
$47 million in PHH senior secured notes below par $23 billion in total servicing additions ($19 billion in subservicing additions)- Moody’s Ratings upgraded corporate family rating to B3 in
April 2024
The Company reported GAAP net income of
Messina continued, “We are excited about our previously announced plans to rebrand Ocwen to
Additional First Quarter 2024 Operating and Business Highlights
- Announced plans to rebrand
Ocwen Financial Corporation toOnity Group Inc. and begin trading on the NYSE under the stock symbol “ONIT” in June, subject to shareholder approval - Total ending servicing UPB of
$302 billion and ending subservicing UPB of$169 billion , up 5% and 8%, respectively, compared toDecember 31, 2023 - Total liquidity of
$219 million as ofMarch 31, 2024 - Reduced GAAP operating expenses by
$9.7 million , or 8.5%, from Q1’23 - Increased mix of higher margin products to 41% of owned MSR originations compared to 31% in Q1’23
- Reduced legacy MSR servicing advances by 14% compared to
March 31, 2023 - Book value per share of
$56 as ofMarch 31, 2024
Webcast and Conference Call
Ocwen will hold a conference call on
About
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. These forward-looking statements may be identified by a reference to a future period or by the use of forward-looking terminology. Forward-looking statements are typically identified by words such as “expect”, “believe”, “foresee”, “anticipate”, “intend”, “estimate”, “goal”, “strategy”, “plan” “target” and “project” or conditional verbs such as “will”, “may”, “should”, “could” or “would” or the negative of these terms, although not all forward-looking statements contain these words, and includes statements in this press release regarding our growth opportunities and plans for rebranding. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Readers should bear these factors in mind when considering such statements and should not place undue reliance on such statements.
Forward-looking statements involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially. In the past, actual results have differed from those suggested by forward looking statements and this may happen again. 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 potential for ongoing disruption in the financial markets and in commercial activity generally as a result of geopolitical events, changes in monetary and fiscal policy, and other sources of instability; the impacts of inflation, employment disruption, and other financial difficulties facing our borrowers; the impact of recent failures and re-organization of banking institutions and continued uncertainty in the banking industry; our ability to timely reduce operating costs, or generate offsetting revenue, in proportion to the industry-wide decrease in originations activity; the impact of cost-reduction initiatives on our business and operations; shareholder approval of, and the reactions to, our rebranding initiative; the amount of senior debt or common stock or that we may repurchase under any repurchase programs, the timing of such repurchases, and the long-term impact, if any, of repurchases on the trading price of our securities or our financial condition; breach or failure of Ocwen’s, our contractual counterparties’, or our vendors’ information technology or other security systems or privacy protections, including any failure to protect customers’ data, resulting in disruption to our operations, loss of income, reputational damage, costly litigation and regulatory penalties; our reliance on our technology vendors to adequately maintain and support our systems, including our servicing systems, loan originations and financial reporting systems, and uncertainty relating to our ability to transition to alternative vendors, if necessary, without incurring significant cost or disruption to our operations; our ability to interpret correctly and comply with current or future liquidity, net worth and other financial and other requirements of regulators, the Federal National Mortgage Association (Fannie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac) (together, the GSEs), and the
Note Regarding Non-GAAP Financial Measures
This press release contains references to adjusted pre-tax income (loss), a non-GAAP financial measure.
We believe this non-GAAP financial measure provides a useful supplement to discussions and analysis of our financial condition, because it is a measure that management uses to assess the financial performance of our operations and allocate resources. In addition, management believes that this presentation may assist investors with understanding and evaluating our initiatives to drive improved financial performance. Management believes, specifically, that the removal of fair value changes of our net MSR exposure due to changes in market interest rates and assumptions provides a useful, supplemental financial measure as it enables an assessment of our ability to generate earnings regardless of market conditions and the trends in our underlying businesses by removing the impact of fair value changes due to market interest rates and assumptions, which can vary significantly between periods. However, this measure should not be analyzed in isolation or as a substitute to analysis of our GAAP pre-tax income (loss) nor a substitute for cash flows from operations. There are certain limitations to the analytical usefulness of the adjustments we make to GAAP pre-tax income (loss) and, accordingly, we use these adjustments only for purposes of supplemental analysis. 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
Notables
In the table below, we adjust GAAP pre-tax income (loss) for the following factors: MSR valuation adjustments, expense notables, and other income statement notables. MSR valuation adjustments are comprised of changes to Forward MSR and Reverse mortgage valuations due to rates and assumption changes. Expense notables include significant legal and regulatory settlement expenses, expense recoveries, severance and retention costs, LTIP stock price changes, consolidation of office facilities and other expenses (such as costs associated with strategic transactions). Other income statement notables include non-routine transactions that are not categorized in the above.
(Dollars in millions) | Q1’24 | Q4’23 | Q1’23 | ||||
I | Reported Net Income (Loss) | 30 | (47) | (40) | |||
A | Income Tax Benefit (Expense) | (2) | (2) | (2) | |||
II | Reported Pre-Tax Income (Loss) [I – A] | 32 | (46) | (38) | |||
Forward MSR Valuation Adjustments due to rates and assumption changes, net(a)(b)(c) | 18 | (64) | (46) | ||||
Reverse Mortgage Fair Value Change due to rates and assumption changes(b)(d) | 2 | 13 | 7 | ||||
III | Total MSR Valuation Adjustments due to rates and assumption changes, net | 20 | (51) | (39) | |||
Significant legal and regulatory settlement expenses | (2) | (3) | (2) | ||||
Expense recoveries | - | - | 0 | ||||
Severance and retention(e) | (2) | (2) | (4) | ||||
LTIP stock price changes(f) | 3 | (1) | 2 | ||||
Office facilities consolidation | (0) | 0 | (0) | ||||
Other expense notables(g) | (1) | 1 | 0 | ||||
B | Total Expense Notables | (2) | (5) | (4) | |||
C | Other Income Statement Notables(h) | (0) | (1) | (1) | |||
IV | Total Other Notables [B + C] | (2) | (5) | (5) | |||
V | Total Notables(i)[III + IV] | 18 | (56) | (44) | |||
VI | Adjusted Pre-tax Income (Loss) [II – V] | 14 | 11 | 6 |
(a) MSR Valuation Adjustments that are due to changes in market interest rates, valuation inputs or other assumptions, net of overall fair value gains / (losses) on MSR hedge, including FV changes of Pledged MSR liabilities associated with MSR transferred to MAV, RITM and others and ESS financing liabilities that are due to changes in market interest rates, valuation inputs or other assumptions, a component of MSR valuation adjustment, net; the adjustment does not include valuation gains on MSR purchases of
(b) The changes in fair value due to market interest rates were measured by isolating the impact of market interest rate changes on the valuation model output as provided by our third-party valuation expert
(c) Beginning with the three months ended
(d) FV changes of loans HFI and HMBS related borrowings due to market interest rates and assumptions, a component of gain on reverse loans held for investment and HMBS-related borrowings, net
(e) Severance and retention due to organizational rightsizing or reorganization
(f) Long-term incentive program (LTIP) compensation expense changes attributable to stock price changes during the period
(g) Includes costs associated with but not limited to rebranding and other strategic initiatives
(h) Contains non-routine transactions including but not limited to gain on debt extinguishment and fair value assumption changes on other investments recorded in other income/expense
(i) Certain previously presented notable categories with nil numbers for each period shown have been omitted
Adjusted Pre-Tax Income (Loss) ROE Calculation
(Dollars in millions) | Q1’24 | Q4’23 | Q1’23 | |||
I | Reported Net Income (Loss) | 30 | (47) | (40) | ||
II | Notables Items | 18 | (56) | (44) | ||
III | Income Tax Benefit (Expense) | (2) | (2) | (2) | ||
IV | Adjusted Pre-tax Income (Loss) [I – II – III] | 14 | 11 | 6 | ||
V | Annualized Adjusted Pre-tax Income (Loss) [IV * 4] | 56 | 43 | 23 | ||
Equity | ||||||
A Beginning Period Equity | 402 | 445 | 457 | |||
C Ending Period Equity | 432 | 402 | 416 | |||
D Equity Impact of Notables | (18) | 56 | 44 | |||
B Adjusted Ending Period Equity[C + D] | 414 | 458 | 460 | |||
VI | Average Adjusted Equity [(A + B) / 2] | 408 | 452 | 459 | ||
VII | Adjusted Pre-tax Income (Loss) [V / VI] | 13.8% | 9.4% | 5.0% |
Condensed Consolidated Balance Sheets
Assets ($ in millions) | ||||||||
Cash and cash equivalents | ||||||||
Restricted cash | 66.1 | 53.5 | 39.3 | |||||
Mortgage servicing rights (MSRs), at fair value | 2,374.7 | 2,272.2 | 2,580.6 | |||||
Advances, net | 602.7 | 678.8 | 656.9 | |||||
Loans held for sale | 1,028.9 | 677.3 | 849.4 | |||||
Loans held for investment, at fair value | 8,130.5 | 7,975.5 | 7,669.0 | |||||
Receivables, net | 152.1 | 154.8 | 200.2 | |||||
Investment in equity method investee | 37.6 | 37.8 | 36.8 | |||||
Premises and equipment, net | 11.8 | 13.1 | 18.9 | |||||
Other assets | 500.6 | 449.2 | 359.3 | |||||
Total Assets | $13,090.1 | $12,513.7 | $12,627.0 |
Liabilities & Stockholders’ Equity ($ in millions) | ||||||||
Other financing liabilities, at fair value | 906.8 | 900.0 | 1,152.5 | |||||
Advance match funded liabilities | 440.2 | 499.7 | 469.9 | |||||
Mortgage loan financing facilities, net | 1,108.9 | 710.6 | 948.3 | |||||
MSR financing facilities, net | 964.1 | 916.2 | 914.6 | |||||
Senior notes, net | 552.0 | 595.8 | 602.3 | |||||
Other liabilities | 741.0 | 692.3 | 652.5 | |||||
Total Liabilities | $12,658.0 | $12,111.9 | $12,210.7 | |||||
Total Stockholders’ Equity | $432.1 | $401.8 | $416.3 | |||||
Total Liabilities and Stockholders’ Equity | $13,090.1 | $12,513.7 | $12,627.0 |
Condensed Consolidated Statements of Operations
For the Three Months Ended | For the Three Months Ended | ||||||||
($ in millions) | |||||||||
Revenue | |||||||||
Servicing and subservicing fees | |||||||||
Gain on reverse loans held for investment and HMBS-related borrowings, net | 15.4 | 21.2 | |||||||
Gain on loans held for sale, net | 10.9 | 2.8 | |||||||
Other revenue, net | 8.3 | 5.6 | |||||||
Total Revenue | 239.1 | 261.8 | |||||||
MSR Valuation Adjustments, net | (11.6 | ) | (69.0 | ) | |||||
Operating Expenses | |||||||||
Compensation and benefits | 53.6 | 58.0 | |||||||
Servicing and origination | 15.0 | 15.7 | |||||||
Technology and communications | 12.7 | 13.4 | |||||||
Professional services | 12.0 | 13.3 | |||||||
Occupancy, equipment and mailing | 7.7 | 8.8 | |||||||
Other expenses | 3.4 | 4.9 | |||||||
Total Operating Expenses | 104.4 | 114.1 | |||||||
Other Income (Expense) | |||||||||
Interest income | 17.5 | 14.1 | |||||||
Interest expense | (67.4 | ) | (62.3 | ) | |||||
Pledged MSR liability expense | (44.9 | ) | (70.3 | ) | |||||
Earnings of equity method investee | 2.7 | 0.3 | |||||||
Gain on extinguishment of debt | 1.4 | - | |||||||
Other, net | (0.6 | ) | 1.2 | ||||||
Total Other Income (Expense), net | (91.3 | ) | (117.0 | ) | |||||
Income (loss) before income taxes | 31.8 | (38.3 | ) | ||||||
Income tax expense | 1.7 | 1.9 | |||||||
Net Income (loss) | $30.1 | $(40.2 | ) | ||||||
Basic EPS | $(5.34 | ) | |||||||
Diluted EPS | $(5.34 | ) |
For Further Information Contact:
(856) 917-0066
mediarelations@ocwen.com
Source:
2024 GlobeNewswire, Inc., source