Onity Group Inc. · NYSE:ONIT
Onity — Ocwen Financial — Q4 2019 Earnings Presentation
27 slides from Onity's earnings presentation, Feb 26, 2020
Slide 1: Investor Presentation Fourth Quarter 2019
Investor Presentation Fourth Quarter 2019 February 26, 2020 © 2020 Ocwen Financial Corporation. All rights reserved.
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This presentation 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 fut
Slide 3: Agenda
Agenda 1 Q4 2019 Executive Summary 2 Business Update 3 Financial Updates 4 Wrap Up 5 Appendix Ocwen Financial Corporationâ 3
Slide 4: Strong execution on key initiatives is driving improved business and financial performance
Strong execution on key initiatives is driving improved business and financial performance Q4’19 Financial and Business Highlights Annualized Pre-tax Earnings Excluding Notables(d) • Net income of $35 million ($ millions) Q2'18 Q4'19 • Pre-tax earnings excluding notables of $12 million $49 • Q4 adju
Slide 5: Originations
Built multi-channel platform that can support long-term growth opportunities Product Capability Sales Activity • Forward, Reverse and Small • 175 Prospects in pipeline Balance Commercial • Top 7 subservicing prospects: • GSE, Government, Non-Agency, − $38B total UPB Subservicing, Master Servicing In
Slide 6: Our 2020 key business initiatives are intended to support near-term and longer term financial objectives
Our 2020 key business initiatives are intended to support our near-term and longer term financial objectives Key 2020 Business Initiatives Strategic Benefits of Execution ü Enhanced strategic flexibility Origination More Diversified ü Reduced enterprise risk Growth Servicing Portfolio Achieve Adjust
Slide 7: Multi-channel originations platform is positioned to capitalize on growth opportunities
Multi-channel originations platform is positioned to capitalize on growth opportunities Capital Dependent Volume Sources Owned Servicing • Portfolio Recapture Balance • Reverse Lending Available Subservicing Capitalof $38 Pipeline + Sheet Capital Optimization Partners = 2020 Investment Capacity of a
Slide 8: Disciplined investment of our available capital will create value over the long-term
We believe that disciplined investment of our available capital will result in the best opportunity to create value over the long-term Uses of Available Capital Long-term Objectives 1. Liquidity to support operations • Adequate profitability and cash flow 2. Investment at targeted pre-tax ROEs of 13
Slide 9: Continuous cost re-engineering critical to business transformation and improved financial performance
Continuous cost re-engineering and cost improvement are critical to our business transformation and improved financial performance Continuous Cost Adjusted Annualized Expenses(b) Enablers Re-engineering Objectives ($ millions) $916 ü Additional cost re-engineering(a) • Offshore Capabilities ~ 42% sa
Slide 10: The servicing business covered under the NRZ agreements is unprofitable
The servicing business covered under the NRZ agreements is unprofitable and we do not view it as core to our business model objectives Terminated PHH Portfolio with NRZ Remaining Ocwen Portfolio with NRZ • Q4’19 estimated annualized loss of $12 million(a) • Q4’19 estimated annualized loss of $25-30
Slide 11: Financial Updates
FINANCIAL UPDATES Ocwen Financial Corporationâ 11
Slide 12: Consolidated Financial Results
Consolidated Financial Results ($ millions, except Diluted Loss per Share) Q3’19 Q4’19 VPQ$(a) Key Results Revenues $284 $262 $(22) • Q4’19 net income of $35 included $28 Servicing 250 233 (17) favorable net valuation impacts, $15 expense Originations 30 25 (4) recovery from a mortgage insurer a
Slide 13: Servicing Results
Servicing Results Key Metrics Highlights ($ millions, except UPB) • Recorded $59 pre-tax income 6,200 5,900 - Improved performance driven by $31 $250 $233 favorable MSR valuation changes, net of $59 NRZ financing liability and hedges compared to $(9) unfavorable MSR valuation changes in the third qu
Slide 14: Originations Results
Originations Results(a) Business and Financial Performance Forward ($ millions) Q3’19 Q4’19 VPQ$(a) • Q4’19 pre-tax loss of $(1), in line with prior quarter Recapture 131 167 36 • Revenue of $10 million was $2 million Correspondent 93 398 305 favorable, primarily due to higher volumes and Flow
Slide 15: Liquidity and Leverage Update
Liquidity and Leverage Update Cash and Equivalents Corporate Debt(a) ($ millions, except where otherwise noted) $428 $645 $639 $345 Q3'19 Q4'19 Q3'19 Q4'19 1.6x Corp Debt/Equity(a) • $172 cash from new MSR facilities offset by $25 • $618 SSTL and Senior Secured Notes combined repayment of debt inclu
Slide 16: We are executing actions to evolve into a diversified independent mortgage servicer and originator
We are executing actions we believe are necessary to evolve into a diversified independent mortgage servicer and originator that can perform through the business cycle and maintain strategic flexibility • Generated 4Q’19 GAAP pre-tax income of $37 million; achieved pre-tax earnings before income Ret
Slide 17: Shareholder Relations Information
Shareholder Relations Information About Ocwen Ocwen Financial Corporation (NYSE: OCN) is a leading non-bank mortgage Exchange: New York Stock Exchange (NYSE) servicer and originator providing solutions through its primary brands, PHH Ticker: OCN Mortgage Corporation and Liberty Home Equity Solutions
Slide 18: Appendix
APPENDIX Ocwen Financial Corporationâ 18
Slide 19: Appendix: Q4 2019 Financials
Appendix: Q4 2019 Financials • Expenses excluding MSR Valuation Adjustments, net and Expense Notables • Income Statement Notables • Total Other (Income) Expense, Net • Servicing Product Overview • MSR Valuation Assumptions • P&L Impact of Fair Value Changes • Debt Facilities Overview Ocwen Financial
Slide 20: Note Regarding Adjustments to GAAP Expenses and Pre-tax Income (Loss)
Note Regarding Adjustments to GAAP Expenses and Pre-tax Income (Loss) In the following slides, we present supplemental information (including reconciliations) relating to certain illustrative adjustments to GAAP expenses, and pre-tax income (loss). We believe this information is instructive as an al
Slide 21: Expenses excluding MSR Valuation Adjustments, net and Expense Notables
Expenses excluding MSR Valuation Adjustments, net and Expense Notables ($ millions) Q2'18 Q4'19 OCN + PHH OCN OCN (Annualized) (Annualized) I Expenses - as reported in Q2'18(a) 1,107 II Reclassifications (b) 5 III Deduction of MSR valuation adjustments, net (132) IV Operating Expenses (Expenses excl
Slide 22: Income Statement Notables
Income Statement Notables ($ millions) Q2'18 Q4'19 OCN + PHH OCN OCN (Annualized) (Annualized) I Reported Pre-Tax Income / (Loss)(a) (253) 37 149 Adjustments for Notables Expenses Notables (from prior slide) 7 Non-Agency MSR FV Change(b) (0) Agency MSR FV Change, net of macro hedge(b) (61) NRZ MSR L
Slide 23: Total Other (Income) Expense, Net
Total Other (Income) Expense, Net ($ millions) Q3’19 Q4’19 VPQ$ Comments Interest Income $(4.1) $(4.6) $(0.5) Pledged MSR Liability Expense 256.4 68.8 (187.6) - NRZ Servicing Fees 111.1 102.9 (8.2) - MSR Liability(a) runoff and other (27.1) (32.3) (5.2) - MSR Liability FV Change 198.5 28.0 (170.5) V
Slide 24: Servicing Product Overview
Servicing Product Overview ($ millions, except UPB) UPB by Source(a) Retained Servicing Revenue Q4’19(b) % of Total $251 $229 $217 $212 Servicing $57 45 $126 Subservicing 4 3 $122 $117 $119 NRZ Retained Fees 31 25 $50 $27 $23 Total Retained Servicing and $17 Subservicing Fees $92 72% $75 $80 $
Slide 25: MSR Valuation Assumptions
MSR Valuation Assumptions ($ in millions) Retained NRZ Sold FNMA / Non- Total FNMA / (d) FHA / VA Non-GSE Total NRZ FHLMC Agency Retained FHLMC UPB 29,561 14,351 25,454 69,366 35,727 72,953 108,680 Loan Count (000s) 202 110 152 464 282 546 828 Fair Value 307 99 165 571 314 601 915 Fair Value (% of U
Slide 26: P&L Impact of Fair Value Changes
P&L Impact of Fair Value Changes ($ in millions) Q3'19 Q4'19 VPQ$ Non-Agency MSR Fair Value Change 0 - Portfolio change (Run-off and collateral) $ (17.8) $ (26.3) $ (8.5) 1 - Other Assumption Changes 252.3 0.1 (252.2) 2 Total Non-Agency MSR Fair Value Change 234.5 (26.2) (260.6) Agency MSR Fair Valu
Slide 27: Debt Facilities Overview
Debt Facilities Overview ($ in millions, as of December 31, 2019) Debt Facility Available (e) Interest Rate Maturity Balance Cap Credit Advance Facilities OMART - VFN 191 200 CoF + 1.36% 12/11/2020 OMART - 2020 Term Notes 185 185 2.62% 8/17/2020 OMART - 2021 Term Notes 285 285 2.53% 8/16/2021 OFAF 1