Aames Financial Corp. Reports Year-End Results.LOS LOS Length of stay, see there ANGELES--(BUSINESS WIRE)--Sept. 28, 2000 Enters New Fiscal Year by Completing a Securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. of $460.0 Million of Mortgage Loans in September, Sells Residual Asset to Affiliate Under Residual Forward Sale Facility Aames Financial Corp. (NYSE NYSE See: New York Stock Exchange :AAM n. 1. A Dutch and German measure of liquids, varying in different cities, being at Amsterdam about 41 wine gallons, at Antwerp 36½, at Hamburg 38¼. ), a leader in subprime home equity lending, today reported results of operations for the fiscal year ended June 30, 2000, announcing a net loss of $122.4 million compared to a net loss of $248.0 million a year ago. After the accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. for the convertible preferred stock Convertible Preferred Stock Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". dividend requirement of $8.1 million and $2.0 million for the years ended June 30, 2000, and 1999, respectively, the net loss to common shareholders was $130.5 million and $250.0 million, respectively. Net loss per common share was $21.02 for the year ended June 30, 2000, compared to a net loss per common share of $40.31 a year ago. In making the announcement, A. Jay Meyerson, Aames' chief executive officer, stated: "The primary driver contributing to the fiscal 2000 net loss was the company's previously reported $77.5 million and $5.0 million write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. to the carrying values Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of its residual interests Residual Interest A type of interest payment received by investors in a real estate mortgage investment conduit (REMIC). Notes: Investors receive interest payments after all required regular interest has been paid to investors within higher priority tranches. and mortgage servicing Mortgage servicing The collection of monthly payments and penalties, record keeping, payment of insurance and taxes, and possible settlement of default , involved with a mortgage loan. rights, respectively. "The write-downs to the company's residual interests was made in light of higher-than-expected credit loss experience in the company's securitized securitized Of, related to, or being debt securities that are secured with assets. For example, mortgage purchase bonds are secured by mortgages that have been purchased with the bond issue's proceeds. pools, particularly credit losses on loans acquired in the company's discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: bulk correspondent loan program. The write-down to the carrying value of the company's mortgage servicing rights reflects management's estimate of the effects of increased costs of early intervention ear·ly intervention n. Abbr. EI A process of assessment and therapy provided to children, especially those younger than age 6, to facilitate normal cognitive and emotional development and to prevent developmental disability or delay. efforts on delinquent delinquent 1) adj. not paid in full amount or on time. 2) n. short for an underage violator of the law as in juvenile delinquent. DELINQUENT, civil law. He who has been guilty of some crime, offence or failure of duty. loans in the company's securitized pools. "The operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. during the year was caused by the weakness in the secondary market and the company's limited access to the securitization market during the second half of the fiscal year, which negatively affected revenues. During the second half of fiscal 2000, the company relied solely on whole loan sales as its loan disposition strategy and realized lower-than-historical gains because of lower prices paid for loans in the secondary market. "On the expense side, the 2000 fiscal results do not reflect the positive benefits of expense management initiatives implemented in the later half of the year ended June 30, 2000, which began to be realized in the later part of the year, and which should benefit the company going forward." The company also announced that it completed a $460.0 million mortgage loan securitization in September, its first securitization of mortgage loans since November 1999. In connection with the securitization, the company sold for cash the residual asset created in the securitization for cash under its previously announced residual forward sale facility. "The company achieved more favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. gain on sale in the securitization than realized in recent whole loan sales. In addition, the sale of the residual interest through the residual forward sale facility provides additional liquidity to the company and eliminates the negative cash flow traditionally experienced by the company in securitizations," said Meyerson. "With the residual forward sale facility in place, the company expects to be able to fulfill ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. its strategy of selling loans through both securitizations and whole loan sales in each quarter, balancing the company's liquidity and profitability with the market conditions existing at the time of the sales. "Looking forward, our primary goal is to continue to focus on our core loan origination The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. channels, and closely manage our operating costs operating costs npl → gastos mpl operacionales at all levels throughout the organization," Meyerson added. Summary of Financial Results Total Revenues Total revenue during the year ended June 30, 2000, was $113.8 million, which includes a write-down to the company's residual interests and mortgage servicing rights of $82.5 million. The $77.5 million residual interest write-down during fiscal 2000 resulted primarily from a change in the company's credit loss assumptions, partially offset by a favorable change in the prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. rate assumptions, used by the company in estimating the fair value of its residual interests. The $5.0 million write-down to the company's mortgage servicing rights reflects management's assessment of estimated increased costs relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc early intervention efforts on delinquent loans in the company's securitized pools. Excluding the write-down of the residual interest and mortgage servicing rights, total revenue for the year ended June 30, 2000, was $196.3 million, up 10.0% from total revenue of $178.4 million during the year ended June 30, 1999, excluding the $194.6 million write-down of residual interests and mortgage servicing rights in that year. The increase is attributable primarily to increased interest income, composed principally of accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the income on the residual interests, and increased gain on sale during the year ended June 30, 2000, when compared to the year ended June 30, 1999. Total Expenses Total expenses during the year ended June 30, 2000, were $232.8 million compared to $262.0 million of total expenses reported for the year ended June 30, 1999. Excluding the $37.0 million nonrecurring charge Nonrecurring Charge An expense occurring only once on a company's financial statement. Notes: An extraordinary item is an example of a nonrecurring charge. Also known as "nonrecurring item". incurred during the year ended June 30, 1999, total expenses during the year ended June 30, 2000, increased $7.8 million over total expenses a year ago. The increase was attributable to increases of $13.0 million and $8.2 million in compensation and interest expenses, respectively, partially offset by a $13.4 million decline in production expense. Included in the company's total expenses during the year ended June 30, 2000, were approximately $7.0 million of nonrecurring and one-time expenses. Loan Production During the year ended June 30, 2000, the company originated $2.1 billion of mortgage loans, down $114.3 million from the $2.2 billion of mortgage loans originated during the year ended June 30, 1999. The company's core retail and broker production, however, increased to $2.1 billion during the year ended June 30, 2000, from $2.0 billion during the prior year. Commencing December 1999, the company began originating loans on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the , and during the year ended June 30, 2000, Internet loan originations were $6.8 million. Correspondent purchases decreased to $32.7 million during the year ended June 30, 2000, from $241.5 million from a year ago, reflecting the company's previously announced decision to significantly reduce correspondent loan purchases and to focus its production efforts on its core loan origination channels. Loans Securitized and Sold During the year ended June 30, 2000, the company sold and securitized a total of $2.2 billion of mortgage loans, which includes loans pooled and sold in securitizations of $803.6 million and whole loan sales for cash of $1.4 billion. In comparison, during the year ended June 30, 1999, the company securitized and sold an aggregate of $1.9 billion of mortgage loans composed of $650.0 million of securitizations and $1.2 billion of whole loan sales for cash. Loan Servicing Loan servicing is the process by which a mortgage bank or subservicing firm collects the timely payment of interest and principal from borrowers. The level of service varies depending on the type loan and the terms negotiated between the firm and the investor seeking their services. At June 30, 2000, and 1999, the company's servicing portfolio was $3.6 billion and $3.8 billion, respectively, of which $3.3 billion and $3.4 billion, respectively, or 92.6% and 89.2%, respectively, was serviced in-house. Aames Financial Corp. is a leading home equity lender, and at June 30, 2000, operated 100 retail Aames Home Loan offices and seven wholesale loan centers nationwide. From time to time the company may publish forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. relating to such matters as anticipated financial performance, business prospects and similar matters. The Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 provides a safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. for forward-looking statements. In order to comply with the terms of the safe harbor, the company notes that a variety of factors could cause the company's actual results and experience to differ materially from the anticipated results or other expectations expressed in the company's forward-looking statements. The risks and uncertainties that may affect the operations, performance and results of the company's business include the following: negative cash flow and continued access to outside sources of cash to fund operations; dependence on funding sources; third-party rights to terminate mortgage servicing; high delinquencies and losses in the company's securitization trusts; prepayment risk Prepayment Risk The uncertainty related to unscheduled prepayment in excess of scheduled principal repayment. Notes: This risk is generally associated with mortgage securities. ; changes in interest rates; basis risk; prolonged pro·long tr.v. pro·longed, pro·long·ing, pro·longs 1. To lengthen in duration; protract. 2. To lengthen in extent. interruptions or reductions in the secondary market for mortgage loans; timing of loan sales; dependence on broker network; competition; concentration of operations in California and Florida; economic conditions; contingent risks on loans sold; government regulation; changes in federal income tax laws; ability to pay dividends; and the concentrated ownership of the company's controlling stockholder. For a more complete discussion of these risks and uncertainties, see "Item 7. Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Financial Condition and Results of Operations - Risk Factors" in the company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended June 30, 2000, and subsequent filings by the company with the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Securities and Exchange Commission.
AAMES FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(AUDITED)
ASSETS
June 30, June 30,
2000 1999
Cash and cash equivalents $ 10,179,000 $ 20,764,000
Loans held for sale,
at lower of cost or market 398,921,000 559,869,000
Accounts receivable 52,713,000 56,964,000
Residual interests,
at estimated fair value 290,956,000 332,327,000
Mortgage servicing rights, net 12,346,000 20,928,000
Equipment and improvements, net 10,522,000 13,495,000
Prepaid and other 14,727,000 15,013,000
Income tax refund receivable -- 1,737,000
Total assets $ 790,364,000 $ 1,021,097,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Borrowings $ 275,470,000 $ 281,220,000
Revolving warehouse and
repurchase facilities 375,015,000 535,997,000
Accounts payable and
accrued expenses 56,985,000 50,505,000
Income taxes payable 8,416,000 7,819,000
Total liabilities 715,886,000 875,541,000
Stockholders' equity:
Series A Preferred Stock,
par value $0.001 per share;
500,000 shares authorized;
none outstanding -- --
Series B Convertible Preferred
Stock, par value $0.001 per share;
26,704,000 and 100,000,000 shares
authorized; 26,704,000 shares
outstanding 27,000 27,000
Series C Convertible Preferred
Stock, par value $0.001 per share;
107,105,000 and 100,000,000 shares
authorized; 60,977,000 and
15,009,000 shares outstanding 61,000 15,000
Common Stock, par value $0.001 per
share; 400,000,000 shares
authorized; 6,235,000 and
6,203,000 shares outstanding 6,000 6,000
Additional paid-in capital 401,652,000 342,278,000
Retained deficit (327,268,000) (196,770,000)
Total stockholders' equity 74,478,000 145,556,000
Total liabilities and
stockholders' equity $ 790,364,000 $ 1,021,097,000
AAMES FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(AUDITED)
Three Months Ended Twelve Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
Revenue:
Gain on sale
of loans $ 7,695,000 $ 8,190,000 $ 48,098,000 $ 44,855,000
Write-down
of residual
interests
and
mortgage
servicing
rights -- -- (82,490,000) (194,551,000)
Origination
fees 8,522,000 7,622,000 37,951,000 39,689,000
Loan
servicing 3,521,000 3,281,000 15,654,000 23,329,000
Interest
income 22,181,000 24,602,000 94,569,000 70,525,000
Total
revenue
including
write-
down 41,919,000 43,695,000 113,782,000 (16,153,000)
Expenses:
Compensation 21,835,000 14,707,000 93,239,000 80,167,000
Production 5,298,000 9,182,000 26,718,000 40,061,000
General and
adminis-
trative 14,983,000 22,163,000 60,489,000 60,635,000
Interest 12,895,000 12,330,000 52,339,000 44,089,000
Nonrecurring
charges -- -- -- 37,044,000
Total
expenses 55,011,000 58,382,000 232,785,000 261,996,000
(Loss) before
income
taxes (13,092,000) (14,687,000) (119,003,000) (278,149,000)
Provision
(benefit)
for income
taxes 911,000 (600,000) 3,369,000 (30,182,000)
Net (loss) $(14,003,000) $(14,087,000) $(122,372,000) $(247,967,000)
Net (loss)
per common
share:
Basic $ (2.64) $ (2.47) $ (21.02) $ (40.31)
Diluted $ (2.64) $ (2.47) $ (21.02) $ (40.31)
Dividends
per common
share $ -- $ -- $ -- $ 0.17
Weighted
average
number of
shares
outstanding:
Basic 6,210,000 6,201,000 6,209,000 6,200,000
Diluted 6,210,000 6,201,000 6,209,000 6,200,000
AAMES FINANCIAL CORP. AND SUBSIDIARIES
Three- and Twelve-Month Statistics
Three Months Ended Twelve Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
(In thousands)
Origination Volume:
Broker network $ 303,500 $ 315,400 $ 1,262,900 $ 1,182,100
Retail 222,200 187,900 783,700 770,000
Correspondent 2,500 13,300 32,700 241,500
Total $ 528,200 $ 516,600 $ 2,079,300 $ 2,193,600
Servicing Portfolio $ 3,560,000 $ 3,841,000
Serviced In-House $ 3,296,000 $ 3,428,000
Loan Sales:
Loans pooled and
sold in
securitizations $ -- $ -- $ 803,600 $ 650,000
Whole loan sales 507,100 295,000 1,419,200 1,236,100
$ 507,100 $ 295,000 $ 2,222,800 $ 1,886,100
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