Aames Financial Corporation Reports First Quarter Net Income and Closure of Rights Offering.LOS LOS Length of stay, see there ANGELES--(BUSINESS WIRE)--Oct. 29, 1999-- Aames Aames is a surname and may refer to:
This page or section lists people with the surname Aames. Financial Corporation (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 announced its results of operations for the three months ended September September: see month. 30, 1999, reporting net income of $791,000 compared to a $(2.2) million net loss in the prior year's quarter. 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 approximately $1.5 million, net loss to the common shareholders was $(750,000), or a net loss per common share of $(0.02) for the three months ended September 30, 1999. At September 30, 1998, there was no convertible preferred stock dividend requirement. The net loss of $(2.2) million resulted in a loss per common share of $(0.07) for the three months ended September 30, 1998 (restated). "This quarter marks Aames' return to operating profitability, which is indicative of the progress of the Company's turnaround Turnaround A situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. . Additionally, the Company successfully completed a series of capital transactions, including an additional $25.0 million dollar investment by Capital Z in August and the recently completed $25.0 million rights offering and related stand-by Stand´-by` n. 1. One who, or that which, stands by one in need; something upon which one relies for constant use or in an emergency. commitment. The Company was also successful in completing a $400.0 million 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. , the Company's first since September 1998, and continued to execute sales in the whole loan market," said Mani Mani (mä`nē): see Manichaeism. Mani or Manes or Manichaeus (born April 14, 216, southern Babylonia—died 274?, Gundeshapur) Persian founder of Manichaeism. A. Sadeghi, an Aames director who served as Aames' interim Chief Executive Officer until the recently announced appointment of A. Jay Meyerson to that position. "The securitization also had the positive effect of increasing the total portfolio of loans serviced to approximately $3.9 billion from $3.8 billion reported at June 30, 1999." Total revenue for the quarter was $60.9 million, up modestly from $57.8 million reported in the comparable quarter in 1998, which included $15.3 million of hedge related charges. Total expenses during the September 1999 quarter were $59.6 million as compared to $61.0 million in the comparable period a year ago. "This decline reflects the early results of the Company's continuing cost reduction efforts," said Mr. Sadeghi. Mr. Sadeghi continued, "Total 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. volume amounted to approximately $523.5 million for the quarter, up $11.4 million, or 2.2%, from the $512.1 million in origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real volume reported for the quarter ended June 30, 1999. While down from $725.1 million in originations during the three months ended September 30, 1998, the current quarter's origination volume reflects management's decision to decrease its reliance on the correspondent market and focus on profitably growing core retail and wholesale operations." Mr. Sadeghi expressed his appreciation for the involvement of those shareholders who participated in the Company's recently completed rights offering. The rights offering, along with the related stand-by commitment, resulted in an additional $25.0 million of equity (prior to expenses) for the Company. Mr. Sadeghi said, "The Company's results demonstrate progress in implementing its turnaround objectives, which have come in spite of in opposition to all efforts of; in defiance or contempt of; notwithstanding. See also: Spite continuing competitive lending markets, unstable unstable, adj 1. not firm or fixed in one place; likely to move. 2. capable of undergoing spontaneous change. A nuclide in an unstable state is called radioactive. An atom in an unstable state is called excited. capital markets and a rising interest rate environment. With the successful conclusion of the rights offering, we now have $169.0 million in total shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. and we believe we are positioned to continue to execute our business plan and meet these external challenges." "Looking forward, the management team at Aames is committed to achieving the Company's strategic objectives of enhancing operating profitability through prudent cost management and being an innovative leader in the subprime home equity industry," said Mr. Meyerson, Aames' new CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , "We will focus on cost-efficient origination of quality loans, efficient servicing, and improved execution in securitization and whole loan markets." Financial Results For the September 1999 quarter, the Company reported net income of $791,000. After the accrual for the convertible preferred stock dividend requirement of approximately $1.5 million, the Company reported a $(0.02) loss per common share compared to a net loss of $(2.2) million, or a $(0.07) loss per common share for the three months ended September 30, 1998 (restated). (Results for the three months ended September 30, 1998 have been restated to reflect the Company's retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a change in measuring and accounting for its interest-only strips Interest-only strip (IO) A security based solely on the interest payments from a pool of mortgages, Treasury bonds, or other bonds. Once the principal on the mortgages or bonds has been repaid, interest payments stop, and the value of the IO falls to zero. adopted in December 1998). Total revenue for the three months ended September 30, 1999 was $60.9 million, as compared to $57.8 million during the three months ended September 30, 1998. Total expenses during the three months ended September 30, 1999 were $59.6 million compared to $61.0 million in the comparable three month period in 1998. During the three months ended September 30, 1999, the Company sold $692.6 million of loans compared to $695.8 million of loans in 1998's comparable quarter. Of the total loans sold during the three months ended September 30, 1999, $400.0 million and $292.6 million were in the form of securitizations and whole loan sales for cash, respectively, compared to $650.0 million and $45.8 million in securitizations and whole loans sales, respectively, in the comparable period a year ago. Gain on sales of loans during the September 1999 quarter was $21.8 million. During the three months ended September 30, 1998, gain on sale was $24.9 million, which included a hedge loss of $15.3 million representing a $10.7 million realized loss Realized Loss A loss recognized when assets are sold for a price lower than the original purchase price. Notes: A portion of the realized loss may be applied against a capital gain or realized profit to reduce taxes. and a $4.6 million valuation charge on open contracts that subsequently expired ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. in December 1998. During the quarter ended September 30, 1999, the Company had no hedge positions in place. "As the Company has previously reported, its loan sale strategies include executing a mix of 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. and whole loan sale transactions. The relative mix in our loan disposition efforts with this quarter's securitization and whole loan sales were very close to this targeted level," said David A. Sklar, Chief Financial Officer. Mr. Sklar went on to say, "Gain on sale for the securitization reflects the Company's more conservative 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. , discount rate and loss assumptions adopted in December 1998." Total loan production for the three months ended September 30, 1999 was $523.5 million, up $11.4 million, or 2.2%, from the $512.1 million reported for the quarter ended June 30, 1999. Loan origination from the Company's core retail and broker channels increased to $510.8 million during the September 1999 quarter, up $12.5 million, or 2.5%, from the $498.3 million reported in the comparable 1998 quarter. Correspondent production during the three months ended September 30, 1999 was approximately $12.8 million as compared to $13.9 million during the quarter ended June 30, 1999. Total origination for the three months ended September 30, 1999 of $523.5 million was down $201.6 million from production levels reported for the three months ended September 30, 1998. Of the $201.6 million decline, $133.3 million resulted from the decrease in correspondent production to $12.8 million during the September 1999 quarter from $146.1 million in the comparable quarter a year ago. This decline reflects the Company's previously reported decision to decrease its reliance on this channel for loan production. The remaining $68.2 million decline in loan production was in the Company's core retail and broker channels which reported loan origination of $510.8 million for the September 1999 quarter compared to $579.0 million in the comparable quarter a year ago. This decline in production volume is due to a number of factors including the closure of unprofitable branches and increased pricing and other underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. changes in response to adverse conditions in the mortgage refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. market. Compensation expense for the three months ended September 30, 1999 decreased 3% to $23.1 million from the levels reported in the three months ended September 30, 1998. Included in compensation expense for the three months ended September 30, 1999 is approximately $1 million of non-recurring contractual severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when costs. Production expense, which is directly related the Company's loan origination levels, was down $2.3 million, or 21%, from the $10.9 million reported a year ago. This decline is primarily attributable to decreased marketing costs due to the Company's retail channel's focus on larger market areas and, to a lesser extent, a decline in the number of branch offices. General and administrative expenses increased $700,000 to $14.3 million during the September 1999 quarter from $13.6 million reported for the three months ended September 30, 1998. The increase is attributable to the Company's previously reported decision to use outside advisors on specific technical projects which is expected to decline in the future. Aames Financial Corporation is a leading subprime home equity lender that currently operates 102 retail branches and 35 broker offices serving customers across the country. 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 relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc 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 flows and capital needs; delinquencies and losses in securitization trusts; negative impact on cash flow, right to terminate 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. ; changes in interest rate environment; year 2000 compliance and technological enhancement; 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. ; basis risk; credit risk; risk of adverse changes in the secondary market for mortgage loans; dependence on funding sources; dependence on broker network; risks involved in commercial mortgage lending; strategic alternatives; competition; concentration of operations in 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). ; timing of loan sales; economic conditions; contingent risks; and government regulation. 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 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 fiscal year ended June 30, 1999. -0-
AAMES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, June 30,
1999 1999
(Unaudited) (Audited)
ASSETS
Cash and cash equivalents $5,194,000 20,764,000
Loans held for sale,
at lower of cost or market 384,207,000 559,869,000
Accounts receivable 76,022,000 56,964,000
Interest-only strips,
at estimated fair market value 357,636,000 332,327,000
Mortgage servicing rights, net 22,237,000 20,928,000
Equipment and improvements, net 12,297,000 13,495,000
Prepaid and other 12,347,000 15,013,000
Income tax refund receivable -- 1,737,000
Total assets 869,940,000 1,021,097,000
LIABILITIES AND STOCKHOLDERS'
EQUITY
Borrowings $281,220,000 281,220,000
Revolving warehouse facilities
and repurchase facilities 359,767,000 535,997,000
Accounts payable and accrued
expenses 50,742,000 50,505,000
Income taxes payable 9,411,000 7,819,000
Total liabilities 701,140,000 875,541,000
Commitments and Contingencies -- --
Stockholders' equity:
Series A Preferred Stock, par value
$.001 per share; 500,000 shares
authorized; none outstanding -- --
Series B Convertible preferred Stock,
par value $1.00 per share;
100,000 shares authorized;
26,704,000 shares outstanding 26,704,000 26,704,000
Series C Convertible Preferred Stock,
par value $1.00 per share;
107,123,000 shares authorized;
101,106,000 and 75,046,000 shares
outstanding (includes
26,060,000 shares issued
October 1999) 89,475,000 65,475,000
Common Stock, par value $0.001 per
share; 400,000,000 shares
authorized; 31,016,964 shares
outstanding 31,000 31,000
Additional paid-in capital 250,118,000 250,116,000
Retained deficit (197,528,000) (196,770,000)
Total stockholders' equity 168,800,000 145,556,000
Total liabilities and
stockholders' equity $869,940,000 1,021,097,000
AAMES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
1999 1998
(Restated)
Revenue:
Gain on sale of loans $21,797,000 24,872,000
Commissions 10,316,000 9,988,000
Loan service 3,755,000 6,269,000
Interest income and fees 25,070,000 16,632,000
Total revenue 60,938,000 57,761,000
Expenses:
Compensation 23,112,000 23,794,000
Production 8,641,000 10,930,000
General and administrative 14,271,000 13,588,000
Interest 13,548,000 12,682,000
Total expenses 59,572,000 60,994,000
Income (loss) before income taxes 1,366,000 (3,233,000)
Provision(benefit) for income taxes 575,000 (1,077,000)
Net income (loss) $791,000 (2,156,000)
Net income(loss) per share
Basic $(0.02) (0.07)
Diluted $(0.02) (0.07)
Dividends per share $--- 0.03
Weighted average number of
shares outstanding
Basic 31,009,000 30,977,000
Diluted 31,191,000 31,265,000
Aames Financial Corporation
Quarterly Statistics
Quarter Ended
September
1999 1998
Origination volume:
Broker Network $331,546,000 350,801,000
Retail(a) 179,216,000 228,177,000
Correspondent 12,762,000 146,079,000
$523,524,000 725,057,000
Servicing Portfolio(b) $3,869,471,000 4,440,573,000
Serviced In House $3,495,103,000 4,387,016,000
Loan Sales:
Whole Loan Sales $292,601,000 45,766,000
Securitizations 400,065,000 649,999,000
$692,666,000 695,765,000
Notes:
(a) 1998 includes 125 product, private investor purchases and
brokered loans.
(b) Includes loans serviced for others on an interim basis.
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