Aames Financial Corporation Reports September 2001 Quarter Results.Business Editors LOS LOS Length of stay, see there ANGELES--(BUSINESS WIRE)--Nov. 9, 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. ): -- Announces net income of $626,000 compared to $693,000 a year ago -- September 2001 quarter loan production of $723.3 million an increase of $39.1 million over June 2001 quarter -- Company completes a $175.0 million securitization in September -- Writes down residual interests by $10.0 million Aames Financial Corporation (NYSE: AAM), a leader in subprime home equity lending, today reported results of operations for the three months ended September September: see month. 30, 2001. The Company reported net income of $626,000 for the three months ended September 30, 2001 compared to net income of $693,000 during the same period a year ago. After 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 accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. of $4.3 million and $3.2 million for the three months ended September 30, 2001 and 2000, respectively, the net loss to common shareholders was $3.7 million and $2.5 million, respectively. The 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 loss per common share was $0.59 for the three months ended September 30, 2001 compared to diluted net loss per common share of $0.40 during the same period a year ago. Results of operations during the three months ended September 30, 2001 include a $10.0 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 Company's 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. . At the close of the September 2001 quarter, the Company changed its credit loss 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. rate assumptions used in valuing its residual interests in light of the recent economic uncertainty resulting from the events of September 11, and recent higher than expected credit losses and prepayment activity 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. trusts. Excluding the write-down, net operating results during the three months ended September 30, 2001 were $10.6 million compared to $0.7 million during the same period a year ago. In making the announcement, A. Jay Meyerson Meyerson can refer to:
The general background within which an economy operates including earnings, sales, wage rates, taxes, and inflation. Improving business fundamentals are generally viewed as bullish for stocks, although stock prices at any given point , and integrating the Residential Money Centers (`RMC') acquisition, which should increase the Company's operating efficiencies and retail 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." "The $10.0 million residual adjustment addresses a recent increase of credit losses due primarily to negative economic factors impacting mortgagors, and increased prepayment speeds Prepayment speed Also called speed, the estimated rate at which mortgagors pay off their loans ahead of schedule, critical in assessing the value of mortgage pass-through securities. resulting from borrowers refinancing Refinancing An extension and/or increase in amount of existing debt. their loans in the lower current mortgage interest rate environment," commented Ronald J. Nicolas, Jr., Chief Financial Officer of Aames. "Worsening wors·en tr. & intr.v. wors·ened, wors·en·ing, wors·ens To make or become worse. Noun 1. worsening - process of changing to an inferior state decline in quality, deterioration, declension economic conditions could lead to greater stress on homeowners' cash flows and, potentially contribute to credit losses in the 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 in excess of management's current assumptions. Additionally, while the current mortgage interest rate environment is favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. to the Company's loan production, continued prepayment activity might also continue to negatively effect the Company's residual interests," continued Nicolas. "The Company will continue to closely monitor the actual performance of its residual assets Residual assets Assets that remain after sufficient assets are dedicated to meet all senior debtholders' claims in full. relative to their underlying valuation assumptions with a goal of keeping pace with economic factors in the marketplace," Nicolas said. Summary of Financial Results for the Three Months Ended September 30, 2001 Total Revenues During the three months ended September 30, 2001 total revenue was $53.1 million, down $6.8 million from $59.9 million of total revenue reported during the comparable period a year ago. Revenues during the three months ended September 30, 2001 include a $10.0 million write-down to the Company's residual interests. Excluding the $10.0 million residual interest write-down during the three months ended September 30, 2001, total revenue was $63.1 million, up $3.2 million, or 5.3% from $59.9 million of total revenue during the three months ended September 30, 2000. The increase is primarily attributable to a $3.9 million increase in gain on sale of loans during the three months ended September 30, 2001 to $23.8 million from the $19.9 million in gain on sale of loans reported during the same period a year ago. To a lesser extent, the increase in total revenues during the three months ended September 30, 2001 over those reported a year ago resulted from a $1.5 million increase in 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. which rose to $13.8 million from $12.3 million during the three months ended September 30, 2000. This increase is attributable to increases in retail production during the September 2001 quarter over a year ago. Partially offsetting these increases were declines in 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. and interest income of $1.2 million and $1.0 million, to $3.1 million and $22.4 million, respectively, from $4.3 million and $23.4 million, respectively, reported during the three months ended September 30, 2000. Total Expenses Total expenses during the three months ended September 30, 2001 declined $7.2 million, or 12.2%, to $52.0 million from $59.2 million of total expenses reported for the three months ended September 30, 2000. The decrease in total expenses was largely attributable to declines of $2.9 million and $3.9 million in general and administrative and interest expense, respectively, from amounts reported during the same period a year ago. Loan Production Total Production During the three months ended September 30, 2001, the Company originated a total of $723.3 million of mortgage loans an increase of $39.1 million, or 5.7%, over the $684.2 million of total loan production reported during the three months ended June 30, 2001, and an increase of $205.2 million, or 39.6%, over the $518.1 million of total mortgage loans originated during the three months ended September 30, 2000. Retail Production During the three months ended September 30, 2001, 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. through the Company's retail branch network increased $6.9 million, or 2.4%, to $299.3 million from the $292.4 million reported during the three months ended June 30, 2001, and increased $88.3 million, or 41.8%, from the $211.0 million of retail branch production reported during the September 2000 quarter. Meyerson noted, "Retail production in the later half of the month of September was negatively impacted by the tragic events of September 11, 2001. However, we anticipate stronger growth in our retail production in the current quarter." Broker Production The Company's total broker loan production during the three months ended September 30, 2001 was $369.3 million, an increase of $24.5 million, or 7.1%, over the $344.8 million of total broker production reported during the June 2001 quarter, and an increase of $83.4 million, or 29.2%, from the $285.9 million of total broker production reported during the three months ended September 30, 2000. Of the total broker loan production during the three months ended September 30, 2001, mortgage loan origination through the Company's traditional broker network was $345.7 million, an increase of $14.3 million, or 4.3%, over the $331.4 million of traditional broker production during the June 2001 quarter, and an increase of $74.0 million, or 27.2% from the $271.7 million of mortgage loans produced through the traditional broker network during the September 2000 quarter. Broker loan production originated through telemarketing telemarketing, the practice of selling goods or services to customers by means of the telephone or of surveying consumer preferences in telephone conversations. and the Internet was $23.6 million during the three months ended September 30, 2001 compared to $13.4 million during the June 2001 quarter and $14.2 million during the three months ended September 30, 2000. Meyerson stated, "The Company is pleased by the continued improvement in broker production through both our traditional broker channel, as well as through telemarketing and the Internet." National Loan Center Loan production through the Company's National Loan Center, which originates mortgage loans primarily through affiliations with certain Internet sites, increased $7.7 million, or 16.4%, to $54.7 million during the three months ended September 30, 2001 from $47.0 million reported during the three months ended June 30, 2001, and increased $33.5 million over the $21.2 million of production reported during the three months ended September 30, 2000. Meyerson stated, "As the Company previously reported, we acquired certain assets and operations of RMC RMC Royal Military College RMC Radio Monte Carlo RMC Randolph-Macon College (Ashland, Virginia) RMC Regional Medical Center RMC Robert Morris College (Illinois) RMC Rocky Mountain College , an affiliate of GMAC-RFC, effective November 1, 2001, including their retail Internet 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 platform. With this acquisition, we expect Internet lending to increase further in the current quarter." Loan dispositions and loan servicing Loan dispositions During the three months ended September 30, 2001, the Company securitized and sold a total of $745.7 million of mortgage loans which included loans pooled and sold in securitizations of $175.0 million and whole loan sales for cash of $570.7 million. In comparison, during the June 2001 quarter, the Company securitized and sold $533.4 million of loans, of which $150.0 million and $383.4 million were sold in securitizations and whole loan sales for cash, respectively. During the three months ended September 30, 2000, the Company securitized and sold of an aggregate of $667.9 million of mortgage loans comprised of $460.0 million of mortgage loans pooled and sold securitized and $207.9 million of whole loan sales for cash. During the three months ended September 30, 2001, the Company sold for cash the residual interest created in its securitization to an affiliate, and the servicing rights in its securitizations to an unaffiliated loan servicing company. "In order to maximize our cash flow, during the September quarter we sold most of our adjustable rate mortgage This article is about the US mortgage type. For an international perspective, see Variable rate mortgage. An adjustable rate mortgage (ARM) is a mortgage loan where the interest rate on the note is periodically adjusted based on an index. loans in whole loan sales and most of our fixed rate mortgage loans in the securitization completed during the quarter, and sold the residual interest and the servicing rights in the securitization for cash," said Meyerson. Loan servicing At September 30, 2001, June 30, 2001 and September 30, 2000, the Company's servicing portfolio was $2.7 billion, $2.7 billion and $3.4 billion, respectively, of which $2.6 billion, $2.5 billion and $3.2 billion, respectively, or 93.8%, 93.2% and 92.9%, 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 decline in the Company's servicing portfolio from a year ago is due to run off, and the disposition of all loans on a servicing released basis since January 1, 2000. Included in the servicing portfolio at September 30, 2001 is $543.0 million of mortgage loans that were sold by the Company but were being serviced for others on an interim basis. Such loans have either since been transferred or will be subsequently transferred to new servicers as directed by the purchasers of the underlying loans. Aames Financial Corporation is a leading home equity lender, and at September 30, 2001 operated 100 retail Aames Home Loan branches, five wholesale loan centers and one National Loan 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. . 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 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. ; 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; 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, 2001 and subsequent filings by the Company with the United States Securities and Exchange Commission. Financial Tables and Supplementary Information Follow
AAMES FINANCIAL CORPORATION and SUBSIDIARIES
Financial tables
(In thousands, except per share data)
September 30, June 30,
2001 2001
(Unaudited) (Audited)
CONDENSED CONSOLIDATED BALANCE SHEETS
Cash and cash equivalents $ 13,746 $ 27,583
Loans held for sale, at lower of cost
or market 395,355 417,164
Accounts receivable 76,015 71,052
Residual interests, at estimated fair value 224,152 237,838
Mortgage servicing rights, net 5,479 6,545
Other assets 25,058 25,215
Total assets $ 739,805 $ 785,397
Borrowings $ 269,720 $ 269,720
Revolving warehouse and repurchase
facilities 342,213 393,301
Accrued dividend on convertible preferred
stock 28,299 23,975
Other liabilities 57,386 52,516
697,618 739,512
Stockholders' equity 42,187 45,885
Total liabilities and stockholders'
equity $ 739,805 $ 785,397
Three Months Ended
September 30,
2001 2000
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Revenue:
Gain on sale of loans $ 23,824 $ 19,921
Write-down of residual interests (10,000) --
Origination fees 13,835 12,332
Loan servicing 3,072 4,306
Interest 22,393 23,354
Total revenue, including write-down of
residual interests 53,124 59,913
Expenses:
Personnel 25,900 26,072
Production 4,325 4,514
General and administrative 10,697 13,589
Interest 11,050 15,009
Total expenses 51,972 59,184
Income before income taxes 1,152 729
Provision for income taxes 526 36
Net income $ 626 $ 693
Net loss to common shareholders $ (3,698) $ (2,470)
Net loss per common share:
Basic $ (0.59) $ (0.40)
Diluted $ (0.59) $ (0.40)
Weighted average number of common shares:
Basic 6,265 6,211
Diluted 6,265 6,211
AAMES FINANCIAL CORPORATION and SUBSIDIARIES
Supplemental Information
(In thousands)
MORTGAGE LOAN ORIGINATION VOLUMES:
Three Months Ended Three Months
September 30, Ended
2001 2000 June 30, 2001
Broker $ 369,270 $ 285,937 $ 344,833
Retail 299,293 210,975 292,368
National Loan Center 54,735 21,226 47,009
Total $ 723,298 $ 518,138 $ 684,210
SECURITIZATIONS AND WHOLE LOAN SALES:
Three Months Ended Three Months
September 30, Ended
2001 2000 June 30, 2001
Loan securitizations $ 175,008 $ 207,939 $ 150,007
Whole loan sales 570,644 460,002 383,415
Total $ 745,652 $ 667,941 $ 533,422
LOAN SERVICING:
September 30, June 30,
2001 (1) 2000 (2) 2001 (3)
Servicing portfolio $2,724,000 $3,399,000 $ 2,717,000
Serviced in-house 2,555,000 3,159,000 2,533,000
Percentage serviced in-house 93.8% 92.9% 93.2%
(1) Includes $543.0 million of loans subserviced for others by the
Company on an interim basis, and $169.1 million of loans
subserviced by others.
(2) Includes $518.6 million of loans subserviced for others by the
Company on an interim basis, and $240.0 million of loans
subserviced by others.
(3) Includes $334.5 million of loans subserviced for others by the
Company on an interim basis, and $184.0 million of loans
subserviced by others.
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