Aames Financial Corp. initiates plans to go public with 1.45 million shares of stock.

Los Angeles mortgage brokerage giant Aames Financial Corp. last week announced it had filed documents with the Securities & Exchange Commission to go public.

The company, which is one of the first -- if not the first -- independent mortgage brokerages in the state to go public, will offer 1.45 million shares at a price of $12 to $14 per share.

The proceeds to the company, $12 million to $14 million if the offering is fully subscribed, will be used to expand the company's operations, including the funding of mortgage loans for sale in the secondary market, and expansion of its branch network, according to documents filed with the SEC.

An SEC document dated Oct. 9 warns investors that mortgage brokerages are usually negatively affected by recession, with the danger of falling home prices, increased foreclosures and increased lawsuits cutting into companys' profits.

Aames' net income declined from $3.4 million in 1990 to $2.0 million in 1991, largely because of a decrease in loan revenues and an increase in general expenses. Loans made and serviced by Aames have not seen an increased delinquency rate despite of the recession. However, the volume of loans arranged decreased from $101.5 million in 1990 to $96.8 million in 1991. Meanwhile, expenses rose from $13.7 million in 1990 to $16.6 million in 1991.

Another area of uncertainty is the company's plans to begin short-term funding of mortgage loans to be held for sale in the secondary market or to private investors, an activity the company has not engaged in before.

Aames is solely owned by Chief Executive Officer Gary Judis. He would earn between $5.4 million and $6.3 million from the offering and would still retain 53 percent of the outstanding common stock.

Aames Financial, parent of Aames Home Loan, arranges mortgage loans by matching borrowers selling equity in their homes with institutional lenders.

The company, by far the largest mortgage brokerage in the state with net income of $1.9 million on revenues of $17.7 million in the fiscal year 1991 ended June 30, has 18 offices statewide and only arranges loans involving California properties.

The company arranged $96.8 million in loans in 1991, and serviced another $173 million in loans in fiscal 1991. Those figures represented a 30 percent increase in loans arranged and a 55 percent increase in loans served since 1988.

Though the company prospectus said Aames will remain exclusively a California institution for the time being, Judis has previously told the Business Journal that Aames may eventually expand into Washington and Oregon.

The company is known to many for its colorful commercials featuring the "Aames Home Loan to the rescue" slogan and picturing wimpy-looking individuals being rescued from sinking ships and planes.

The offering is being co-managed by Oppenheimer & Co. Inc. and Kemper Securities Group Inc.

Judis founded Capitol Home Loan in 1966, which subsequently merged with Aames Home Loan in 1979.

In recent years the company has expanded into non-brokerage activities such as institutional trust loans, first deed loans, Fannie Mae mortgages and longer term equity loans.

A successful public offering could improve the image of mortgage brokers in the eyes of others in the industry. Mortgage brokers are often referred to disparagingly in the financial services industry as "hard money lenders," who are a last resort for desperate borrowers, and who charge exorbitant interest rates.

The new public company intends to pay quarterly dividends equal to 25 percent of the company's net income.