Ocwen Financial Corporation NEW

Good morning, ladies and gentlemen, and welcome to the Auckland Financial Corporation third quarter earnings and business update conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, November 7th, 2023. I would now like to turn the conference over to Mr. Deco Axarvillian, Senior Vice President, Corporate Communications. Please go ahead, sir.

Good morning, and thank you for joining us for Aukman's third quarter 2023 earnings call. Please note that our earnings release and slide presentation are available on our website. Speaking on the call will be Aukman's Chair and Chief Executive Officer, Glenn Messina, and Chief Financial Officer, Sean O'Neill. As a reminder, the presentation or comments today may contain forward-looking statements made pursuant to the safe harbor provisions of the federal securities laws. These forward-looking statements may be identified by reference to a future period or by use of forward-looking terminology and address matters that are to different degrees uncertain. You should bear this uncertainty in mind and should not place undue reliance on such statements. Forward-looking statements which speak only as of the date they are made involve assumptions, risks, and uncertainties, including the risks and uncertainties described in our SEC filings. In the past, actual results have differed materially from those suggested by forward-looking statements, and this may happen again. In addition, the presentation or comments contain references to non-GAAP financial measures, such as adjusted pre-tax income, among others. We believe these non-GAAP financial measures provide a useful supplement to discussions and analysis of our financial condition because they are measures that management uses to assess the financial performance of our operations and allocate resources. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the company's reported GAAP results. A reconciliation of the non-GAAP measures used in this presentation to their most directly comparable GAAP measures, as well as management's view on why these measures may be useful to investors, may be found in the press release in the appendix in the investor presentation. Now, I will turn the call over to Glenn Messina.

Thanks, Dico. Good morning, and thanks for joining our call. Today, we'll review a few highlights for the third quarter and take you through our actions to address the market environment and deliver long-term value for our shareholders. Now, please turn to slide three. I'm excited to report our third quarter results, which reflect continued progress against our key initiatives and the benefits of our balanced and diversified business. Adjusted pre-tax income for the third quarter of $10 million was primarily driven by our servicing segment. Both originations and servicing were profitable in the quarter. Adjusted pre-tax income for the quarter has improved materially versus the same quarter last year, and slightly better than the second quarter, excluding the reverse whole loan transaction gain realized during that quarter. Our third quarter results achieved a 9% annualized adjusted pre-tax return on equity. Net income of $8 million, or $1.10 per share, is above consensus, but lower than the second quarter, again, largely driven by the reverse whole loan transaction gain reported in 2Q. Notable items for the quarter were roughly zero, largely resulting from our increased hedge coverage ratio and our market-based MSR evaluation and benchmarking process. In the third quarter, total servicing UPB was up 2% versus the second quarter and up 5% versus the prior year, driven by growth in subservicing UPB. Subservicing UPB with MSR Capital partners and mortgage banking clients increased 6% versus the second quarter and 10% versus prior year. We're pleased to report that we and Oaktree have mutually agreed to extend the commitment period for MAV through May of 2025. In addition, we and Rhythm have mutually agreed to extend our subservicing agreement through December of 2024. We greatly appreciate our relationships with Oak Tree and Rhythm and the confidence they've placed in us. We take their trust seriously and are committed to helping them achieve their objectives. We continue to focus on enterprise-wide cost management. Third quarter annualized operating expenses, excluding expense notables, are materially lower than our second quarter 22 baseline and lower than the second quarter 2023. During the third quarter, we opportunistically repurchased $14 million of our PHH notes at attractive prices and are prioritizing continued corporate debt reduction as excess liquidity is available. Total liquidity of $194 million is down versus prior year end due to the allocation of capital to reduce our corporate debt and the higher liquidity demands of our increased hedge coverage. We're very pleased with our results this quarter. the business is performing in line with our adjusted pre-tax return on equity guidance, we're executing well against our key initiatives, and we believe we're on track to achieve our return objectives for the remainder of 2023 and 2024.