EX-99.1 2 ex99_1.txt EXHIBIT 99.1 ================================================================================ Exhibit 99.1 [GRAPHIC OMITTED] OCWEN Ocwen Financial Corporation(R) ================================================================================ FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION CONTACT: Robert J. Leist, Jr. Senior Vice President & Principal Financial Officer T: (561) 682-7958 E: robert.leist@ocwen.com OCWEN FINANCIAL CORPORATION ANNOUNCES SECOND QUARTER NET INCOME West Palm Beach, FL - (July 28, 2005) Ocwen Financial Corporation (NYSE:OCN) today reported net income for the second quarter of 2005 of $2.9 million or $0.05 per share compared to net income of $9.1 million or $0.13 per share for the second quarter of 2004. For the six months ended June 30, 2005 net income was $5.3 million or $0.08 per share as compared to $15.9 million or $0.23 per share for the same period in 2004. Results for the second quarter and first six months of 2005 are net of a tax provision of $2.3 million and $2.8 million, respectively as compared to $0.06 million and $0.07 million in the same periods of 2004. Chairman and CEO William C. Erbey stated "While our pre-tax income of $5.2 million is an improvement from the $2.9 million recorded in the first quarter of 2005, our second quarter results remain behind those achieved last year. Several factors contributed to this decline: o Results in Residential Servicing reflect the net impact of an increase in pre-overhead contribution from the Loan Servicing unit of 82%, offset by declines in the results of our servicing for the United States Department of Veteran's Affairs ("VA") due to reduced transaction volumes as well as the absence of one time REALServicing(R) fees of $2.9 million recorded in the second quarter of 2004. o The decline in pre-tax income in Residential Origination Services in the second quarter of 2005 as compared to 2004 primarily reflects a decline in contribution of $1.6 million from our Subprime Finance group primarily due to reduced cash proceeds from our subprime residual trading securities. o Despite growth in revenue during the second quarter of 2005 as compared to 2004, costs in both the Ocwen Recovery Group and Business Process Outsourcing segments increased reflecting increased staffing levels in both groups. o In the aggregate, our core businesses absorbed approximately $1.8 million more overhead expenses in the first half of 2005 than in the same period of 2004 because we no longer allocate these costs to the closed non-core Affordable Housing and Commercial Asset businesses. We are pleased to note that on June 30th we completed our "debanking" initiative as our subsidiary, Ocwen Federal Bank FSB ("OFB"), completed the sale of its deposits and surrendered its thrift charter. The remaining assets and liabilities of OFB have been assumed by Ocwen Loan Servicing LLC ("OLS") a subsidiary which will conduct all of the core business activities formerly conducted by OFB. OLS is licensed in all 50 states and the District of Columbia to conduct our servicing and other business activities." The Residential Servicing business reported pre-tax income of $2.6 million in the second quarter of 2005 vs. $7.4 million in the 2004 second quarter. Year to date, pre-tax income was $5.5 million in 2005 as compared to $12.9 million in the same period last year. Within this segment, contribution before overhead charges of the Residential Loan Servicing unit increased in the second quarter of 2005 by 82% as compared to the same period last year, reflecting increased float earnings and stable operating expenses. However, this improvement was offset by a decline in contribution from the VA servicing contract, reflecting lower transaction volumes in 2005 as compared to 2004. Second quarter 2005 results in this segment also reflect the absence of the one time fees of $2.9 million recognized in the second quarter of 2004 from a REALServicing contract. Our servicing portfolio has grown during the first half of 2005. As of June 30, 2005, we were the servicer of approximately 347 thousand loans with an unpaid principal balance (UPB) of $38.7 billion, as compared to approximately 320 thousand loans and $34.5 billion of UPB at December 31, 2004. Residential Origination Services reported pre-tax income of $1.7 million in the second quarter of 2005 as compared to $4.4 million in the same period last year. Pre-tax income was $4.6 million in the first six months of 2005 as compared to $7.4 in the same period last year. The second quarter results reflect increases in our loan refinancing and resale programs and in REALTrans(R), offset by Page 5 of 9 Ocwen Financial Corporation Second Quarter Results July 28, 2005 increased overhead costs and declines in earnings of Ocwen Realty Advisors and Subprime Finance. Our Mortgage Due Diligence Services group, which we initiated at the beginning of the year, generated $4.0 million in revenue and $0.2 million of contribution before overhead in the first six months of 2005. Our other core businesses reported aggregate pre-tax income of $0.8 million in the second quarter of 2005 as compared to pre-tax income of $1.1 million in the second quarter of 2004. Year to date, these businesses recorded aggregate pre-tax income of $1.5 million in 2005 as compared to $2.8 million in 2004. This is primarily due to reduced earnings in Ocwen Recovery Group and Business Process Outsourcing. Despite revenue increases in these units, costs have increased reflecting increased staffing in these segments. The Corporate Segment recorded break-even results in the second quarter of 2005 as compared to a pre-tax loss of $(2.7) million in the second quarter of 2004. In the first six months of 2005, Corporate reported a pre-tax loss of $(3.5) million in 2005 as compared to a pre-tax loss of $(2.0) million in the same period of 2004. Corporate results for the second quarter of 2005 include a pre-tax gain of $1.8 million from the sale of our deposits in the debanking transaction, offset primarily by interest expense retained in Corporate expenses because it represented the cost associated with maintaining high cash balances during the second quarter in preparation for debanking. Corporate results also include interest income on federal income tax receivables of $0.6 million and $0.1 million for the second quarter of 2005 and 2004, respectively. We have $22.4 million of non-core assets remaining as of June 30, 2005. In July, we sold a portion of a real estate investment, with a total book value of $5.2 million, for a gain of approximately $1.8 million. Several of the remaining assets are subject to sales contracts we expect to close in the second half of the year. Income tax expense amounted to $2.2 million in the second quarter of 2005 as compared to $0.06 million in the second quarter of 2004. Year to date, tax expense amounted to $2.8 million in 2005 as compared to $0.07 million in the first six months of 2004. Tax expense in the second quarter of 2005 includes a one time provision of $1.1 million representing tax liabilities arising from the recapture of bad debt reserves in connection with the debanking transaction. Ocwen Financial Corporation is a diversified financial services holding company with headquarters in West Palm Beach, Florida and operations in Canada, China, Germany, India, Japan and Taiwan. Ocwen Financial Corporation is principally engaged in servicing and origination processing services for the loan industry. Ocwen Financial Corporation is a global leader in customer service excellence as a result of our company-wide commitment to quality, integrity and accountability. Additional information about Ocwen Financial Corporation 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, the outlook on reduction in non-core assets. 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, uncertainty related to dispute resolution and litigation, federal income tax rates, recognition of deferred tax credits and real estate market conditions and trends, 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, 2004 and Form 10-Q for the quarter ended March 31, 2005. 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. 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Ocwen Financial Corporation Second Quarter Results July 28, 2005 OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except share data) Three Months Six Months --------------------------------------------------------- ---------------------------- ---------------------------- For the periods ended June 30, 2005 2004 2005 2004 --------------------------------------------------------- ------------ ------------ ------------ ------------ Revenue Servicing and related fees ............................ $ 44,296 $ 40,769 $ 89,685 $ 83,060 Vendor management fees ................................ 10,783 11,487 21,665 24,490 Gain (loss) on trading securities, net ................ (1,269) 2,503 (2,667) 1,860 Valuation gains (losses) on real estate ............... 4 (1,974) 93 (3,825) Gain (loss) on sales of real estate ................... 13 81 48 (460) Operating income (loss) from real estate .............. (165) 565 (339) 573 Other income .......................................... 5,881 4,984 7,766 11,604 ------------ ------------ ------------ ------------ Non-interest revenue ................................ 59,543 58,415 116,251 117,302 ------------ ------------ ------------ ------------ Interest income ....................................... 6,764 5,962 13,096 10,567 Interest expense ...................................... 9,072 7,096 17,512 14,898 ------------ ------------ ------------ ------------ Net interest expense before provision for loan losses (2,308) (1,134) (4,416) (4,331) Provision for loan losses ............................. (16) (287) (12) (819) ------------ ------------ ------------ ------------ Net interest expense after provision for loan losses (2,292) (847) (4,404) (3,512) ------------ ------------ ------------ ------------ Total revenue ...................................... 57,251 57,568 111,847 113,790 ------------ ------------ ------------ ------------ Non-interest expense Compensation and employee benefits .................... 24,355 20,897 48,727 42,930 Occupancy and equipment ............................... 4,571 4,021 8,813 8,018 Technology and communication costs .................... 7,862 6,616 15,261 13,285 Loan expenses ......................................... 6,084 6,783 11,796 14,710 Professional services and regulatory fees ............. 5,656 7,994 10,377 13,819 Loss (gain) on investments in affordable housing properties .......................................... (118) (41) 524 (79) Other operating expenses .............................. 3,668 2,151 8,239 5,187 ------------ ------------ ------------ ------------ Non-interest expense ................................ 52,078 48,421 103,737 97,870 ------------ ------------ ------------ ------------ Income (loss) before income taxes ....................... 5,173 9,147 8,110 15,920 Income tax expense ...................................... 2,265 55 2,815 66 ------------ ------------ ------------ ------------ Net income (loss) ................................... $ 2,908 $ 9,092 $ 5,295 $ 15,854 ============ ============ ============ ============ Earnings (loss) per share Basic ................................................. $ 0.05 $ 0.13 $ 0.08 $ 0.23 Diluted ............................................... $ 0.05 $ 0.13 $ 0.08 $ 0.23 Weighted average common shares outstanding Basic ................................................. 62,809,286 68,160,020 62,776,469 67,961,217 Diluted ............................................... 63,709,246 69,534,999 63,864,247 69,314,392

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Ocwen Financial Corporation Second Quarter Results July 28, 2005 OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share data) June 30, December 31, 2005 2004 ------------ ------------ Assets Cash .................................................................. $ 310,233 $ 542,891 Trading securities, at fair value: Investment grade ................................................... 2,942 86,215 Subordinates and residuals ......................................... 45,343 39,527 Match funded assets (including advances on loans serviced for others of $331,337 and $276,626) ............................................. 334,689 280,760 Advances on loans and loans serviced for others ....................... 187,423 240,430 Mortgage servicing rights ............................................. 132,333 131,409 Receivables ........................................................... 119,943 126,719 Real estate ........................................................... 9,314 18,732 Affordable housing properties ......................................... 4,406 5,641 Loans (net of allowance for loan losses of $4,334 and $4,546) ......... 8,725 3,792 Premises and equipment, net ........................................... 41,115 37,440 Other assets .......................................................... 76,184 68,976 ------------ ------------ Total assets ....................................................... $ 1,272,650 $ 1,582,532 ============ ============ Liabilities and Stockholders' Equity Liabilities Match funded liabilities ............................................ $ 274,825 $ 244,327 Servicer liabilities ................................................ 310,369 258,826 Lines of credit and other secured borrowings ........................ 52,525 50,612 Debt securities ..................................................... 231,249 231,249 Other liabilities ................................................... 65,856 56,849 Deposits ............................................................ -- 290,507 Escrow deposits ..................................................... -- 118,524 ------------ ------------ Total liabilities .................................................. 934,824 1,250,894 ------------ ------------ Minority interest in subsidiary ....................................... 1,742 1,530 Stockholders' Equity Common stock, $.01 par value; 200,000,000 shares authorized: 62,934,102 and 62,739,478 shares issued and outstanding ............ 629 627 Additional paid-in capital ........................................... 182,254 181,336 Retained earnings .................................................... 153,428 148,133 Accumulated other comprehensive income (loss), net of taxes .......... (227) 12 ------------ ------------ Total stockholders' equity ......................................... 336,084 330,108 ------------ ------------ Total liabilities and stockholders' equity ....................... $ 1,272,650 $ 1,582,532 ============ ============

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Ocwen Financial Corporation Second Quarter Results July 28, 2005 Pre-Tax Income (Loss) by Business Segment Three Months Six Months -------------------------------------------------- --------------------------- --------------------------- For the periods ended June 30, 2005 2004 2005 2004 -------------------------------------------------- ------------ ------------ ------------ ------------ (Dollars in thousands) Core businesses Residential Servicing .......................... $ 2,599 $ 7,440 $ 5,547 $ 12,933 Residential Origination Services ............... 1,725 4,357 4,558 7,391 Commercial Servicing ........................... 335 (511) 357 (553) Business Process Outsourcing ................... 264 708 361 1,103 Ocwen Recovery Group ........................... 244 889 749 2,290 ------------ ------------ ------------ ------------ 5,167 12,883 11,572 23,164 ------------ ------------ ------------ ------------ Non-core businesses Commercial Assets .............................. -- 190 -- (3,050) Affordable Housing ............................. -- (1,187) -- (2,159) ------------ ------------ ------------ ------------ -- (997) -- (5,209) ------------ ------------ ------------ ------------ Corporate Items and Other ........................ 6 (2,739) (3,462) (2,035) ------------ ------------ ------------ ------------ Income (loss) before income taxes ................ $ 5,173 $ 9,147 $ 8,110 $ 15,920 ============ ============ ============ ============

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