Aames Financial Corporation Reports Net Income of $1.0 Million for the Three Months Ended December 31, 2000; Securitizes $471.5 Million of Mortgage Loans.Business Editors LOS LOS Length of stay, see there ANGELES--(BUSINESS WIRE)--Feb. 5, 2001 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 reported results of operations for the three and six months ended December December: see month. 31, 2000, announcing net income of $1.0 million and $1.7 million, respectively, compared to a net loss of $47.7 million and $46.9 million, respectively, which included a $35.2 million write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of residual assets Residual assets Assets that remain after sufficient assets are dedicated to meet all senior debtholders' claims in full. 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, during the comparable three and six month periods a year ago. After the required 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 of $3.2 million and $6.4 million during the three and six months ended December 31, 2000, the net loss to common stockholders was $2.2 million and $4.7 million, respectively, which compares to the net loss to common stockholders of $49.7 million and $50.5 million during the three and six months ended December 31, 1999, respectively, after the required accrual for the convertible preferred stock dividend of $2.0 million and $3.6 million, respectively, during the comparable three and six month periods in 1999. Net loss per common share was $0.36 and $0.76 for the three and six months ended December 31, 2000, respectively, compared to a net loss per common share of $8.01 and $8.14 during the comparable three and six month periods in 1999, respectively. In making the announcement, A. Jay Meyerson Meyerson can refer to:
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. plan. The Company's increase in core retail and broker loan production, including 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 production, as well as our continued focus on operating costs operating costs npl → gastos mpl operacionales and credit quality at all levels throughout the organization are contributing to this quarter's improved results. The improvement in the efficiency of the Company's operations, and reduced noninterest expense have contributed to lower 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. costs, which is a critical success factor in the new subprime marketplace." 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 completed a $471.5 million mortgage loan securitization during the December 2000 quarter, its second consecutive quarterly securitization. Meyerson stated, "We are pleased that we achieved improved execution in our securitization and whole loan trades quarter over quarter. The Company has been diligently dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d working to improve the credit quality and value of the loans it produces. We believe that those efforts are now being recognized by our capital markets and whole loan counterparties Counterparties The parties on either side of an interest rate swap or a currency, equity or commodity swap, or to an options or futures position. ." Increased Funding Capacity The Company also reported that it has increased its funding capacity by increasing its revolving warehouse and 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. facilities to $800.0 million and procuring Procuring, in general, is the act of acquiring goods or services, usually by contract. It may refer to:
On January January: see month. 24, 2001, the Company renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. an existing $200.0 million committed revolving warehouse facility to February February: see month. 2002, increasing capacity under the facility to $300.0 million, and added a subline to provide concurrent funding of loan production at closing of up to $40.0 million. During the quarter ended December 31, 2000, the Company renewed another existing $200.0 million committed revolving repurchase facility for a period of six months with a new maturity of May 31, 2001. Mr. Meyerson said, "Our ability to use the concurrent funding facility instead of cash to fund a majority of our loan production at closing will increase our funding capacity." Continued Liquidity Management On January 5, 2001, the Company sold to an affiliate for cash the residual asset created in the December 2000 securitization under its residual forward sale facility. "The sale of the residual interest 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. provides additional liquidity to the Company and eliminates the negative cash flow traditionally experienced by the Company in securitizations," said Meyerson. The Company also sold the servicing rights and prepayment penalties Prepayment penalty A fee a borrower pays a lender when the borrower repays a loan before its scheduled time of maturity. associated with the loans underlying the securitization. Finally, the Company sold at par and for cash $10.0 million of servicing advances to an investment bank. This transaction continues the Company's previously announced efforts of converting its servicing advance receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed into cash as a means of managing its overall liquidity position. Summary of Financial Results Total revenues Total revenue increased $8.9 million and $7.9 million to $57.0 million and $116.9 million during the three and six months ended December 31, 2000, respectively, from total revenue of $48.1 million and $109.0 million during the three and six months ended December 31, 1999, respectively, excluding the $35.2 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 Company's residual interests and mortgage servicing rights recorded during the three and six months of December 31, 1999. The $8.9 million increase in total revenue during the three months ended December 31, 2000 from the same period a year ago resulted primarily from increases of $9.1 million and $2.0 million in gain on sale of loans and origination fees A charge imposed by a lending institution or a bank for the service of processing a loan. For example, a bank might charge an individual who has applied for a student loan an origination fee of one percent for processing the application and granting the loan. , respectively, partially offset by a $2.1 million decrease in interest income. The $7.9 million increase in total revenue during the six months ended December 31, 2000 from the comparable six month period in 1999 resulted primarily from increases of $7.2 million and $2.9 million in gain on sale of loans and origination fee income, partially offset by a $2.8 million decline in interest income. Total expenses Total expenses declined $3.8 million and $4.1 million to $55.5 million and $114.7 million during the three and six months ended December 31, 2000, respectively, from $59.3 million and $118.8 million during the three and six months ended December 31, 1999, respectively. The $3.8 million decline in total expenses during the three months ended December 31, 2000 from amounts reported during the comparable three month period a year ago was attributable to decreases of $2.4 million and $4.4 million in production and general and administrative expenses, respectively, partially offset by increases of $2.3 million and $0.7 million in compensation and interest expense, respectively. The $4.1 million decline in total expenses during the six months ended December 31, 2000 from the comparable six month period a year ago is primarily due to decreases of $6.5 million and $5.1 million in production and general administrative expenses, respectively, partially offset by increases of $5.3 million and $2.2 million in compensation and interest expense, respectively. Loan production The Company's $597.9 million of core retail and broker loan production volume during the three months ended December 31, 2000 was the Company's highest quarterly core production in its history. During the three months ended December 31, 2000 the Company's total loan production was $600.6 million, an increase of $19.7 million from the $580.9 million of total loan production reported during the comparable three months in 1999. The Company's core retail and broker production increased $29.3 million to $597.9 million during the three months ended December 31, 2000 from $568.6 million during the three months ended December 31, 1999. During the six months ended December 31, 2000, the Company's total loan production increased $14.4 million to $1.12 billion from $1.10 billion during the comparable period a year ago. Core retail and broker production increased by $32.6 million to $1.11 billion during the six months ended December 31, 2000 from $1.08 billion during the comparable six month period in 1999. Included in the Company's core retail and broker production during the three and six months ended December 31, 2000 is $30.2 million and $54.0 million, respectively, of loans originated from the Internet, through affiliations with certain lending sites and from other electronic sources. The Company began originating loans on the Internet commencing in December 1999 and during the three months ended December 31, 1999, loans originated from the Internet, through affiliations with certain lending sites and other electronic sources were $6.1 million. Correspondent purchases decreased $9.6 million and $18.2 million to $2.7 million and $6.8 million during the three and six months ended December 31, 2000, respectively, from $12.3 million and $25.0 million during the comparable three and six month period a year ago, respectively; reflecting the Company's previously announced decision to significantly reduce correspondent loan purchases and to focus its loan production efforts on its core loan origination channels. Loans 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 sold Total loans securitized and sold during the three months ended December 31, 2000 were $621.4 million an increase of $33.3 million from the $588.1 million of loan dispositions during the three months ended December 31, 1999. During the three months ended December 31, 2000, the Company securitized and sold $471.5 million of mortgage loans, an increase of $68.0 million over the $403.5 million of securitizations in the comparable three month period in 1999. Whole loan sales for cash declined by $34.7 million to $149.9 million during the three months ended December 31, 2000 from $184.6 million of whole loan sales for cash during the three months ended December 31, 1999. During the six months ended December 31, 2000, the Company securitized and sold $1.3 billion of mortgage loans consistent with the $1.3 billion of loan dispositions during the comparable period a year ago. During the six months ended December 31, 2000, the Company relied more on loan dispositions through securitization transactions than on whole loan sales for cash when compared to the mix in loan dispositions during the same period a year ago. Loans pooled and sold in securitizations increased $127.9 million to $931.5 million during the six months ended December 31, 2000 from $803.6 million during the same period a year ago, while whole loan sales for cash declined by $119.4 million to $357.8 million during the six months ended December 31, 2000 from $477.2 million during the six months ended December 31, 1999. The residual interests created in both securitizations consummated con·sum·mate tr.v. con·sum·mat·ed, con·sum·mat·ing, con·sum·mates 1. a. To bring to completion or fruition; conclude: consummate a business transaction. b. during the six months ended December 31, 2000 were sold for cash to an affiliate of the Company under its residual forward sale agreement. In addition, the Company sold for cash the mortgage servicing rights and the rights to the prepayment penalties on the underlying mortgage loans in the securitizations to an unrelated, third party mortgage banking company. 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 December 31, 2000, September September: see month. 30, 2000 and June June: see month. 30, 2000 the Company's servicing portfolio was $3.1 billion, $3.4 billion and $3.6 billion, respectively, of which $2.9 billion, $3.2 billion, and $3.3 billion, respectively, or 93.1%, 92.9% and 92.6%, 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's servicing portfolio at December 31, 2000 includes approximately $488.4 million of loans subserviced for others on an interim basis pending transfer to purchasers of loans or their designated servicers. The Company's servicing portfolio was $3.9 billion at December 31, 1999, of which $3.6 billion, or 91.4%, was serviced in-house. Aames Financial Corporation is a leading home equity lender, and at December 31, 2000 operated 100 retail Aames Home Loan offices and 5 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 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 flow and continued access to outside sources of cash to fund operations; dependence on funding sources; third party rights to terminate Terminate (terminat.exe) was a shareware modem terminal and host program for MS-DOS and compatible operating systems developed from the early to the late 1990s by the Dane Bo Bendtsen. The last release (5. 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 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). and Florida Florida, state, United States Florida (flôr`ĭdə, flŏr`–), state in the extreme SE United States. A long, low peninsula between the Atlantic Ocean (E) and the Gulf of Mexico (W), Florida is bordered by Georgia and ; 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 CORPORATION AND SUBSIDIARIES
(In thousands, except per share information)
CONDENSED and CONSOLIDATED
BALANCE SHEETS December 31, June 30,
2000 2000
------------ ---------
(Unaudited) (Audited)
Cash and cash equivalents $ 21,440 $ 10,179
Loans held for sale, at lower of cost or market 231,699 398,921
Accounts receivable 74,476 52,713
Residual interests, at estimated fair value 279,899 290,956
Mortgage servicing rights, net 9,082 12,346
Other assets 23,546 25,249
------------ ---------
Total assets $640,142 $790,364
============ =========
Borrowings $275,465 $275,470
Revolving warehouse and repurchase facilities 209,434 375,015
Other liabilities 69,626 65,401
------------ ---------
Total liabilities 554,525 715,886
------------ ---------
Stockholders' equity 85,617 74,478
------------ ---------
Liabilities and Stockholders' equity $640,142 $790,364
============ =========
CONDENSED and CONSOLIDATED
STATEMENTS of OPERATIONS
Three Months Ended Six Months Ended
December 31, December 31,
--------------------- ---------------------
2000 1999 2000 1999
--------- --------- --------- ---------
(Unaudited)
Revenue:
Gain on sale
of loans $ 18,709 $ 9,553 $ 38,630 $ 31,350
Write-down of
residual interests
and mortgage
servicing rights -- (35,190) -- (35,190)
Origination fees 12,413 10,371 24,745 21,758
Loan servicing 4,210 4,420 8,516 8,175
Interest 21,681 23,762 45,035 47,760
--------- --------- --------- ---------
Total revenue,
including
write-down of
residual
interests
and mortgage
servicing
rights $ 57,013 $ 12,916 $116,926 $ 73,853
--------- --------- --------- ---------
Expenses:
Compensation 24,704 22,370 50,776 45,482
Production 4,554 6,974 9,068 15,615
General and
administrative 12,639 17,031 26,228 31,302
Interest 13,580 12,886 28,589 26,434
--------- --------- --------- ---------
Total expenses 55,477 59,261 114,661 118,833
--------- --------- --------- ---------
Income (loss) before
income taxes 1,536 (46,345) 2,265 (44,980)
Provision for
income taxes 525 1,350 561 1,925
--------- --------- --------- ---------
Net income (loss) $ 1,011 $(47,695) $ 1,704 $(46,905)
========= ========= ========= =========
Net loss per
common share:
Basic $ (0.36) $ (8.01) $ (0.76) $ (8.14)
========= ========= ========= =========
Diluted $ (0.36) $ (8.01) $ (0.76) $ (8.14)
========= ========= ========= =========
Weighted average
number of
common shares:
Basic 6,211 6,205 6,211 6,204
========= ========= ========= =========
Diluted 6,211 6,205 6,211 6,204
========= ========= ========= =========
AAMES FINANCIAL CORPORATION AND SUBSIDIARIES
Supplemental information
(In thousands)
ORIGINATION VOLUMES:
--------------------
Three Months Ended Six Months Ended
December 31, December 31, December 31, December 31,
2000 1999 2000 1999
------------ ------------ ------------ ------------
Broker
network(1) $ 299,136 $ 365,992 $ 580,950 $ 697,538
Retail(2) 298,796 202,574 530,996 381,790
------------ ------------ ------------ ------------
Core retail
and broker 597,932 568,566 1,111,946 1,079,328
Correspondent 2,701 12,286 6,824 25,047
------------ ------------ ------------ ------------
Total $ 600,633 $ 580,852 $1,118,770 $1,104,375
============ ============ ============ ============
(1) Includes loans originated through telemarketing and the Internet,
through an affiliation with certain Internet lending sites, of
$19.8 million and $35.4 million during the three and six months
ended December 31, 2000, respectively. There was no similar
production during the three and six months ended December 31,
1999.
(2) Includes loans originated through the Internet, through an
affiliation with certain Internet lending sites, of $10.4 million
and $18.6 million during the three and six months ended December
31, 2000, respectively, and $6.1 million during the three and six
months ended December 31, 1999.
SECURITIZATIONS AND WHOLE LOAN SALES:
-------------------------------------
Three Months Ended Six Months Ended
December 31, December 31, December 31, December 31,
2000 1999 2000 1999
------------ ------------ ------------ ------------
Loans pooled
and sold
in
securitizations $ 471,455 $ 403,492 $ 931,457 $ 803,557
Whole loan sales 149,903 184,617 357,842 477,218
------------ ------------ ------------ ------------
$ 621,358 $ 588,109 $1,289,299 $1,280,775
============ ============ ============ ============
LOAN SERVICING:
---------------
At December 31, At September 30, At June 30,
------------------------ ---------------- ------------
2000(1) 1999(2) 2000(3) 2000(4)
----------- ----------- ---------------- ------------
Servicing
Portfolio $3,128,000 $3,922,000 $3,399,000 $3,560,000
Serviced
In House $2,912,000 $3,586,000 $3,159,000 $3,296,000
Percentage
serviced
in-house 93.1% 91.4% 92.9% 92.6%
(1) Includes $488.4 million of loans subserviced for others by the
Company on an interim basis and approximately $216.0 million of
loans subserviced by others.
(2) Includes $136.4 million of loans subserviced for others by the
Company on an interim basis and approximately $336.0 million of
loans subserviced by others.
(3) Includes $518.6 million of loans subserviced for others by the
Company on an interim basis and approximately $240.0 million of
loans subserviced by others.
(4) Includes $280.2 million of loans subserviced for others by the
Company on an interim basis and approximately $265.4 million of
loans subserviced by others.
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