Aames Financial Corporation Announces September 30, 2004 Results; September 2004 Quarter Net Income of $28.4 Million.LOS ANGELES Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. -- September September: see month. 2004 Quarter Loan Production of $1.9 Billion Compared to $1.5 Billion a Year Ago Aames Aames is a surname and may refer to:
This page or section lists people with the surname Aames. Financial Corporation (OTCBB OTCBB See OTC Bulletin Board (OTCBB). :AMSF AMSF Australian Motor Sport Foundation AMSF Area Maintenance and Supply Facility (US Army) AMSF Army Morale Support Fund AMSF Area Maintenance Support Facility AMSF Army Maintenance Supply Facilities AMSF Alkali Metal Storage Facility ), a 50 year old national subprime mortgage lender LENDER, contracts. He from whom a thing is borrowed. 2. The contract of loan confers rights, and imposes duties on the lender. 1. The lender has the right to revoke the loan at his mere pleasure; 9 Cowen, R. 687; 8 Johns. Rep. 432; 1 T. R. 480; 2 Campb. Rep. , today reported net income during the three months ended September 30, 2004 of $28.4 million, compared to net income of $28.7 million during the comparable three month period a year ago. Net income during the three months ended September 30, 2004 and 2003 included income tax benefits of $5.3 million and $18.2 million, respectively. During the three months ended September 30, 2004, basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. net income to common stockholders were $25.5 million and $28.9 million, respectively, resulting in basic and diluted net income per common share of $3.55 and $0.28, respectively. Basic and diluted net income to common stockholders during the three months ended September 30, 2003 were $25.2 million and $29.5 million, respectively, resulting in basic and diluted net income per common share of $3.66 and $0.28, respectively. Summary of Financial Results Net interest income and other income. During the three months ended September 30, 2004, net interest income and other income, which is comprised of gain on sale of loans and 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. income, was $65.8 million, a decrease of $1.5 million, or 2.2%, from $67.3 million reported during the three months ended September 30, 2003. Net interest income. During the three months ended September 30, 2004, net interest income increased $4.8 million, or 51.6%, to $14.1 million over $9.3 million during the three months ended September 30, 2003. Other Income. Other income includes the Company's largest revenue component, gain on sale of loans, and loan servicing income. Gain on sale of loans is impacted by the timing of 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. and sales as net loan origination fees and costs related to mortgage loans originated and held for sale are deferred and recognized in gain on sale of loans at the time the mortgage loans are sold. During the three months ended September 30, 2004, other income decreased $6.3 million, or 10.9%, to $51.7 million from $58.0 million during the three months ended September 30, 2003. The decrease in other income was attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to a decrease of $6.5 million in gain on sale of loans, partially offset by a $0.3 million increase in loan servicing income. The $6.5 million decrease in gain on sale consisted of a $17.9 million increase in gain on sale of loans (due to $778.8 million increase in loans sold) offset by the increase in the deferral deferral - Waiting for quiet on the Ethernet. of $16.5 million of net loan origination fees attributable to loans originated in the current period but not sold and the increase in the recognition of $7.9 million of net deferred loan origination costs attributable to loans originated in prior periods and sold in the quarter ended September 30, 2004. Operating Expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . Similar to the accounting for gain on sale, net loan origination costs related to mortgage loans originated and held for sale are deferred and recognized in gain on sale of loans at the time the mortgage loans are sold. During the three months ended September 30, 2004, operating expenses, which included personnel, production and general and administrative expenses, decreased $14.1 million to $42.7 million from $56.8 million of total operating expenses during the three months ended September 30, 2003. The decrease in operating expenses was attributable to a decrease of $15.4 million in personnel expense partially offset by increases of $1.2 million and $0.1 million in production expense and general and administrative expenses, respectively, from levels reported during the three months ended September 30, 2003. The $15.4 million decrease in personnel expense was due primarily to increases in commissions, salaries and medical and other benefit costs, offset by a $21.8 million increase in the deferral of loan origination compensatory compensatory /com·pen·sa·to·ry/ (kom-pen´sah-tor?e) making good a defect or loss; restoring a lost balance. com·pen·sa·to·ry adj. Relating to or characterized by compensation. costs during the three months ended September 30, 2004. Mortgage loan production During the three months ended September 30, 2004, the Company's total mortgage loan production was $1.9 billion compared to $1.5 billion and $2.0 billion of total mortgage loan production during the three months ended September 30, 2003 and June June: see month. 30, 2004, respectively. During the three months ended September 30, 2004, total retail production increased $38.3 million, or 6.6%, to $615.1 million over $576.8 of total retail mortgage loan production during the three months ended September 30, 2003. Total wholesale mortgage loan production increased $342.3 million, or 37.2%, to $1.3 billion during the three months ended September 30, 2004 over $920.6 million of total wholesale mortgage loan production during the comparable three month period a year ago. The Company believes that the $380.6 million, or 25.4%, increase in total mortgage loan origination volume during the three months ended September 30, 2004 over total mortgage loan production reported during the three months ended September 30, 2003 was due to a combination of continued strong demand for subprime products despite a generally increasing mortgage interest rate environment prevailing in the marketplace and improved geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. in the wholesale and retail channels. Total retail mortgage loan production during the three months ended September 30, 2004 decreased $30.2 million, or 4.7%, from the $645.3 million of total retail mortgage loan production during the three months ended June 30, 2004. Total wholesale mortgage loan production during the three months ended September 30, 2004 decreased $57.6 million, or 4.4%, from $1.3 billion of total wholesale mortgage loan production during the three months ended June 30, 2004. The Company believes that the $87.9 million, or 4.5%, decrease in total mortgage loan origination volume during the three months ended September 30, 2004 from the total mortgage loan production reported during the three months ended June 30, 2004 was due primarily to the increase in interest rates charged by the Company in response to a generally increasing mortgage interest rate environment during the September 2004 quarter compared to the generally lower mortgage interest rate environment during the three months ended June 30, 2004. Loan dispositions and loan servicing Loan dispositions. During the three months ended September 30, 2004, the Company sold $2.0 billion of mortgage loans all of which were whole loan sales for cash. Total loan dispositions during the three months ended June 30, 2004 were $1.8 billion and were $1.2 billion during the three months ended September 30, 2003. All of the Company's whole loan sales were done on a servicing released basis. Loan servicing. At September 30, 2004 and June 30, 2004, the Company's total servicing portfolio was $3.0 billion and $2.3 billion, respectively, of which $2.9 billion and $2.2 billion, respectively, or approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 98.4% and 97.7 %, respectively, was serviced in-house In-house In the context of general equities, keeping an activity within the firm. For example, rather than go to the marketplace and sell a security for a client to anyone, an attempt is made to find a buyer to complete the transaction with the firm. . The Company subserviced $144.2 million of mortgage loans for others at September 30, 2004, down $16.1 million due to normal run-off run-off n (in contest, election) → desempate m (= extra race); carrera de desempate run-off n (in contest, election) → from $160.3 million at June 30, 2004. The Company's portfolio of mortgage loans in 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. trusts serviced in-house declined to $204.3 million at September 30, 2004 from $229.3 million at June 30, 2004. In-house servicing at September 30, 2004 and June 30, 2004 includes $2.6 billion and $1.9 billion of loans serviced on an interim basis. Loans serviced on an interim basis include loans held for sale loans and loans sold where servicing has not yet been transferred. At September 30, 2003, the Company's total servicing portfolio was $2.3 billion. Mortgage loans in securitization trusts serviced in-house at September 30, 2003 were $622.0 million. The decline in the Company's portfolio of mortgage loans in securitization trusts serviced in-house at September 30, 2004 from a year ago is due to the Company's call, in its role as servicer, of six securitization trusts, normal amortization and 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. and the disposition Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of of all loans on a servicing released basis. Additional Information and Where to Find It In connection with the proposed reorganization The process of carrying out, through agreements and legal proceedings, a business plan for winding up the affairs of, or foreclosing a mortgage upon, the property of a corporation that has become insolvent. , Aames Financial and Aames Investment filed a registration statement on Form S-4, including the proxy See proxy server. (networking) proxy - A process that accepts requests for some service and passes them on to the real server. A proxy may run on dedicated hardware or may be purely software. statement/prospectus constituting a part thereof, with the U.S. Securities and Exchange Commission. STOCKHOLDERS OF AAMES FINANCIAL ARE STRONGLY ENCOURAGED TO READ THE PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED REORGANIZATION, INCLUDING DETAILED RISK FACTORS REGARDING AAMES FINANCIAL AND AAMES INVESTMENT AND THE REORGANIZATION. The proxy statement/prospectus was mailed to stockholders of record on October October: see month. 5, 2004. The proxy statement/prospectus and other documents are available free of charge at the SEC's website (www.sec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. ) and by directing a request to John F. Madden mad·den v. mad·dened, mad·den·ing, mad·dens v.tr. 1. To make angry; irritate. 2. To drive insane. v.intr. To become infuriated. , Jr., Secretary, Aames Financial Corporation, 350 South Grand Avenue, 43rd Floor, Los Angeles, California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). 90071, or emailing Aames Financial's Investor Relations Investor relations The process by which the corporation communicates with its investors. Department at info@aamescorp.com. Participants in Solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual Aames Financial, Aames Investment, their respective directors, and certain of their respective executive officers may be considered participants in the solicitation of proxies in connection with the proposed reorganization. You may find information relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc their interests, including security holdings or otherwise, in the proxy statement/prospectus sent to stockholders in connection with the reorganization. At September 30, 2004, Aames Financial operated 98 retail branches and five regional wholesale operations centers The facility or location on an installation, base, or facility used by the commander to command, control, and coordinate all crisis activities. See also base defense operations center; command center. throughout 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. . For more information, contact either Ronald J. Nicolas, Jr., Executive Vice President and Chief Financial Officer, or Jon JON Jonah JON Jesus of Nazareth JON Job Order Number JON Johnston Island, US, Outlying Islands (Airport Code) D. Van Deuren, Senior Vice President, Finance and Chief Accounting Officer, in Aames Financial's Investor Relations Department at (323) 210-5311 or at info@aamescorp.com via email. Additional information may also be obtained by visiting www.aames.net, Aames Financial's website. 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, Aames Financial and Aames Investment note that a variety of factors could cause their actual results and experiences to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. The risks and uncertainties that may affect the operations, performance and results of Aames Financial's and Aames Investment's business include the following: increases in mortgage lending interest rates; adverse changes in the secondary market for mortgage loans; decline in real estate values; decreases in earnings from the company calling securitization trusts; limited cash flow to fund operations; dependence on short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. financing facilities; obligations to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. mortgage loans and indemnify To compensate for loss or damage; to provide security for financial reimbursement to an individual in case of a specified loss incurred by the person. Insurance companies indemnify their policyholders against damage caused by such things as fire, theft, and flooding, which investors; concentration of operations in California, Florida, New York Florida is the name of some places in the U.S. state of New York:
2. A contract is said to be consummated, when everything to be done in relation to it, has been accomplished. of the reorganization, compliance with the federal tax requirements applicable to REITs or Aames Financial's and Aames Investment's effective operation within limitations imposed on REITs by federal tax rules. 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 Aames Financial's 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, 2004, the proxy statement/prospectus relating to the reorganization and subsequent filings by Aames Financial and Aames Investment with the SEC.
AAMES FINANCIAL CORPORATION and SUBSIDIARIES
Condensed consolidated financial statements
(In thousands, except per share data)
CONDENSED CONSOLIDATED BALANCE SHEETS September June 30,
30, 2004 2004
----------- -----------
(Unaudited (Audited)
Cash and cash equivalents $21,475 $22,867
Loans held for sale, at lower of cost or
market 936,089 1,012,165
Advances and other receivables 29,624 23,767
Residual interests, at estimated fair value 41,995 44,120
Deferred income taxes 27,906 21,885
Other assets 24,930 26,368
----------- -----------
Total assets $1,082,019 $1,151,172
----------- -----------
Borrowings $75,024 $78,283
Revolving warehouse and repurchase
facilities 785,095 886,433
Accrued expenses and accounts payable 63,393 54,038
Income taxes payable 2,233 1,807
----------- -----------
925,745 1,020,561
Stockholders' equity 156,274 130,611
----------- -----------
Total liabilities and stockholders'
equity $1,082,019 $1,151,172
----------- -----------
CONDENSED CONSOLIDATED INCOME STATEMENTS
(Unaudited)
Three Months Ended
September 30,
-----------------------
2004 2003
----------- -----------
Net interest income $14,111 $9,336
Total other income 51,708 57,961
----------- -----------
Net interest income and other income 65,819 67,297
Operating expenses 42,675 56,827
----------- -----------
Income before income taxes 23,144 10,470
Provision (benefit) for income taxes (5,273) (18,193)
----------- -----------
Net income $28,417 $28,663
----------- -----------
Net income to common shareholders
Basic $25,547 $25,185
----------- -----------
Diluted $28,939 $29,548
----------- -----------
Net income per common share:
Basic $3.55 $3.66
----------- -----------
Diluted $0.28 $0.28
----------- -----------
Weighted average number of common shares
outstanding
Basic 7,192 6,877
----------- -----------
Diluted 103,656 103,274
----------- -----------
AAMES FINANCIAL CORPORATION and SUBSIDIARIES
Supplemental Information
(Unaudited)
The following table sets forth information regarding
basic and diluted net income per common share for the
three months ended September 30, 2004 and 2003
(amounts in thousands, except per share data):
Three Months Ended
September 30,
-----------------
2004 2003
-------- --------
Basic net income per common share:
Net income $28,417 $28,663
Less: Accrued dividends on Series B, C and D
Convertible Preferred Stock (2,870) (3,478)
-------- --------
Basic net income to common stockholders $25,547 $25,185
-------- --------
Basic weighted average number of common shares
outstanding 7,192 6,877
-------- --------
Basic net income per common share $3.55 $3.66
-------- --------
Diluted net income per common share:
Basic net income to common stockholders $25,547 $25,185
Plus: Accrued dividends on Series B, C and D
Convertible Preferred Stock 2,870 3,478
Interest on 5,5% Convertible Subordinated
Debentures 522 885
-------- --------
Diluted net income to common stockholders $28,939 $29,548
-------- --------
Basic weighted average number of common shares
outstanding 7,192 6,877
Plus incremental shares from:
Assumed conversions of:
Series B, C and D Convertible Preferred
Stock 85,049 85,439
5.5% Convertible Subordinated Debentures 824 824
Assumed exercise of:
Warrants 3,410 3,178
Stock options 7,181 7,406
-------- --------
Diluted weighted average number of common
shares outstanding 103,656 103,724
-------- --------
Diluted net income per common share $0.28 $0.28
-------- --------
AAMES FINANCIAL CORPORATION and SUBSIDIARIES
Supplemental Information
MORTGAGE LOAN PRODUCTION: Three Months Ended
------------------------------- -----------------------------------
(In thousands) September 30, June 30,
2004 2003 2004
----------- ----------- -----------
(Unaudited) (Audited)
Wholesale (1) $1,262,930 $920,595 $1,320,578
Retail 615,082 576,814 645,291
----------- ----------- -----------
Total mortgage loan
production $1,878,012 $1,497,409 $1,965,869
----------- ----------- -----------
(1) Includes the purchase of closed loans on a flow basis from
correspondents of $3.9 million during the three months ended
September 30, 2003. There were no purchases of closed loans on a
flow basis from correspondents during the three months ended
September 30, 2004 and June 30, 2004.
SECURITIZATIONS AND WHOLE LOAN SALES:
-------------------------------------
(In thousands) Three Months Ended
-----------------------------------
September 30, June 30,
2004 2003 2004
----------- ----------- -----------
(Unaudited)
Loan securitizations $- $- $-
Whole loan sales 1,964,934 1,186,157 1,769,638
----------- ----------- -----------
$1,964,934 $1,186,157 $1,769,638
----------- ----------- -----------
LOAN SERVICING: September 30, June 30,
---------------
(Dollars in thousands) 2004 2003 2004
----------- ----------- -----------
(Unaudited) (Audited)
Servicing portfolio of mortgage
loans:
Serviced on an interim basis $2,608.2 $1,641.0 $1,897.5
Subserviced for others on a
long-term basis 144.2 - 160.3
In securitization trusts 204.3 622.0 229.3
----------- ----------- -----------
Serviced in-house 2,956.7 2,263.0 2,287.1
In securitization trusts
serviced by others 48.6 79.0 53.9
----------- ----------- -----------
Total servicing portfolio $3,005.3 $2,342.0 $2,341.0
----------- ----------- -----------
Percentage serviced in-house 98.4% 96.6% 97.7%
----------- ----------- -----------
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