Accredited Announces Q3 2005 Results; Company Sets Quarterly Records for Net Income, Cost to Originate, Loans On-Balance Sheet, and Originations.SAN DIEGO San Diego (săn dēā`gō), city (1990 pop. 1,110,549), seat of San Diego co., S Calif., on San Diego Bay; inc. 1850. San Diego includes the unincorporated communities of La Jolla and Spring Valley. Coronado is across the bay. -- Accredited accredited recognition by an appropriate authority that the performance of a particular institution has satisfied a prestated set of criteria. accredited herds cattle herds which have achieved a low level of reactors to, e.g. Home Lenders Holding Co. (Nasdaq:LEND Lend To provide money temporarily on the condition that it or its equivalent will be returned, often with an interest fee. ), a nationwide mortgage company specializing in non-prime residential mortgage loans, today announced that net income for the quarter ended September September: see month. 30, 2005 was $41.3 million, or $1.87 per share on a fully-diluted basis, an increase of 15.1% compared to net income of $35.9 million, or $1.66 per share, for the comparable period in 2004. Total net revenues for the quarter increased by 19.8% to $151.8 million from $126.6 million for the comparable period in 2004. Net cost to originate o·rig·i·nate v. 1. To bring into being; create. 2. To come into being; start. mortgage loans was 1.57% for the quarter, compared to 1.92% for the third quarter of 2004. Chairman and 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. James James, person in the Bible James, in the Gospel of St. Luke, kinsman of St. Jude. The original does not specify the relationship. James, rivers, United States James. Konrath said, "Accredited continues to realize its profitability targets, despite a challenging environment. These third quarter results demonstrate the effect of our unwavering focus on reducing costs to drive profitability. Our cost to originate reached a record low of 1.57%, while our on-balance sheet portfolio continued to grow." Mr. Konrath added, "Our results reflect a proven business model, built on consistent operating disciplines, excellent business partnerships, and experienced and talented employees. We remain confident in our ability to grow our business for the remainder of 2005 and beyond." Third Quarter Operational Highlights --Cost to originate new loans reached an all-time all-time adj. Exceeding all others up to the present time: an all-time speed skating record. all-time Adjective Informal record low of 1.57% of the loan amount. --Loans on-balance sheet reached a record principal balance of $9.1 billion at September 30, 2005, an increase of $3.1 billion, or 52.8%, from September 30, 2004. --Portfolio income (net interest income after provision) was $60.4 million, compared to $46.0 million in Q3 2004, an increase of 31.4%. As a percentage of total net revenues, portfolio income increased to 39.8% in Q3 2005 from 36.3% in Q3 2004. The company estimates that this ratio is also representative of the portfolio's contribution to profitability. --Record quarterly mortgage 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 totaled $4.5 billion, compared to $3.2 billion in Q3 2004, an increase of 39.7%.
Financial Summary ($000)
% Change % Change
from from
Q3 2005 Q3 04 YTD 2005 YTD 04
Total Net Revenues $151,756 19.8% $418,475 24.9%
Total Expenses 78,453 18.2% 221,623 23.0%
Income before Income Taxes
and Minority Interest $ 73,303 21.6% $196,852 27.1%
Net Income $ 41,291 15.1% $112,151 21.0%
The 19.8% increase in total net revenues from Q3 2004 to Q3 2005 resulted primarily from increases in net interest income after provision and gain on sale of loans. Net interest income after provision increased 31.4% from $46.0 million in Q3 2004 to $60.4 million in Q3 2005, primarily due to the larger loan portfolio, partially offset by a smaller net interest margin percentage. While the weighted average coupon Weighted average Coupon The weighted average of the gross interest rates of mortgages underlying a pool as of the pool issue date; the balance of each mortgage is used as the weighting factor. increased during the quarter, it was more than offset by higher borrowing costs. The increase in the size of the loan portfolio from Q3 2004 resulted from four quarterly securitizations structured as financings and a higher balance of loans held for sale and 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 gain on sale of loans increased 9.8% from $78.0 million in Q3 2004 to $85.6 million in Q3 2005 primarily due to higher volume of whole loan sales for cash, offset in part by lower premiums. The company's average whole loan premiums, net of hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. , decreased from 3.50% in Q3 2004 to 3.07% in Q3 2005. Additional detail on this calculation can be found in the Financial Summary at the end of this release. Total 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. increased 18.2% from $66.4 million in Q3 2004 to $78.5 million in Q3 2005, due primarily to the costs associated with larger loan volume. Salaries, wages, and benefits expense increased by 13.1% from $42.8 million in Q3 2004 to $48.4 million in Q3 2005 due primarily to the growth in the number of employees and increased commission and bonus costs related to higher loan originations 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. , offset in part by greater efficiency. General, administrative, and other expenses increased by 27.4% from $23.6 million in Q3 2004 to $30.1 million in Q3 2005 due to increases in loan volume, number of staff, and number of locations. Loan Originations The company originated $4.5 billion of mortgage loans for the quarter ended September 30, 2005, compared to $3.2 billion of mortgage loan originations in Q3 2004, an increase of 39.7%. Wholesale and retail originations for the quarter represented 90% and 10%, respectively, of total loan production, generally consistent with prior periods. The company's net cost to originate mortgage loans was 1.57% for the quarter, compared to 1.92% in Q3 2004 and 1.73% in Q2 2005. Management believes this calculation is beneficial to investors because it provides a measurement of the efficiency of the origination process. Additional detail on this calculation can be found in the Financial Summary at the end of this release. Loan Dispositions During Q3 2005, $3.0 billion of mortgage loans were sold in whole loan sales for cash, and $1.1 billion of mortgage loans were 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. . The company's average whole loan premiums, net of hedging, decreased from 3.50% in Q3 2004 to 3.07% in Q3 2005. At the end of the third quarter, $810.8 million of mortgage loans were held for a fourth quarter 2005 securitization, and $2.4 billion of mortgage loans were held for sale. Portfolio Performance 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. The company's total serviced portfolio equaled $9.2 billion at September 30, 2005. The serviced portfolio increased 49.4% from $6.1 billion at September 30, 2004. This was primarily due to the company's quarterly securitization program and an increase in the loans held for sale. Delinquent delinquent 1) adj. not paid in full amount or on time. 2) n. short for an underage violator of the law as in juvenile delinquent. DELINQUENT, civil law. He who has been guilty of some crime, offence or failure of duty. loans (30 or more days past due, including foreclosures and real estate owned Real Estate Owned Property owned by a lender - usually a bank - after an unsuccessful sale at a foreclosure auction. This is common because most of the properties up for sale at these auctions are worth less than the total amount owed to the bank: the minimum bid in most ) were 1.95% of the serviced portfolio at September 30, 2005, and 1.79%, 1.72%, and 1.74% for the three previous quarters. Liquidity The company had $5.1 billion in total warehouse credit capacity at September 30, 2005, including $1.0 billion in its asset-backed commercial paper conduit conduit /con·du·it/ (kon´doo-it) channel. ileal conduit the surgical anastomosis of the ureters to one end of a detached segment of ileum, the other end being used to form a stoma on the , and $316.5 million in available cash and additional liquidity. At the end of September, the company had used $3.1 billion of this capacity. Adjusted Leverage In managing its capital structure, the company adds its REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). subsidiary preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. , which is reflected as a minority interest on the consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. , to stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. to determine an adjusted leverage ratio, which was 14.5 times at September 30, 2005. Additional detail concerning the company's leverage measures can be found in the Financial Summary at the end of this release. Business Outlook The following statements are forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. and actual results may differ materially from those projected or contemplated in this release. For a more complete description of certain risk factors that may impact actual results, please see the 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. section of this news release and the company's periodic reports filed with the Securities and Exchange Commission ("SEC"). Earnings Guidance The increase in the portfolio, the reduction in our cost to originate, and the company's strong results for the first three quarters of 2005 provide the basis for reiterating earnings guidance of $7.05 per share for the total year 2005. The forecast for the balance of 2005 assumes: --Origination volume consistent with or slightly higher than the previous two quarters --Whole loan premiums below the third quarter as rate increases have lagged increases in the cost of funds Cost of Funds The interest rate paid on an outstanding loan. Notes: Money isn't free! Cost of funds is the cost of borrowing money. See also: Interest Rate Cost of funds Interest rate associated with borrowing money. in the non-prime mortgage origination market --Continued focus on the cost of origination --Continued portfolio growth Consistent with its practice in prior years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time company plans to issue 2006 guidance before the end of the year; however, management reaffirms its goal of 15% average annual growth in earnings per share. Conference Call Accredited will host a conference call for analysts and investors on November November: see month. 1, 2005 at 11:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy (8:00 a.m. PST PST Paroxysmal supraventricular tachycardia, see there ) to discuss the company's financial results for the third quarter of 2005. Those individuals who would like to participate on the conference call should contact Mitzi Gimenez, investor relations Investor relations The process by which the corporation communicates with its investors. manager, at mgimenez@accredhome.com or 858-676-2155 to receive details regarding the call. The call is being web cast by Thomson/CCBN and can be accessed live at Accredited's website -- www.accredhome.com. A replay of the conference call will be archived on the company's website. In addition, the company maintains a copy of its most recent investor presentation on its website under the section titled "Investors/Shareholders." Forward-Looking Statements Certain matters discussed in this news release constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include statements regarding the company's expected net earnings for 2005; average annual growth in earnings per share; projected growth and expenses, and anticipated securitizations; the company's liquidity; the company's outlook on interest rates and the competitive and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. environments; and the company's intended loan 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 strategy. Actual results and the timing of certain events could differ materially from those projected in or contemplated by these forward-looking statements due to a number of factors, including, but not limited to: interest rate volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the and the level of interest rates generally; the nature and amount of competition and the availability of alternative loan products not offered by the company; general political and economic conditions; the sustainability of loan origination volumes and whole loan premiums; the availability of financing for the origination of mortgage loans; the ability of the company to sell or securitize Securitize The practice of a company selling accounts receivables or other debts owed to it. The third party that buys the debt assumes ownership of it and the responsibility for collecting the debts, and keeps the repayments when made. mortgage loans; the company's ability to grow its portfolio; the ability of the company to manage costs; and other risk factors as outlined in Accredited Home Lenders Holding Co.'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 period ended December December: see month. 31, 2004, its report on Form 10-Q Form 10-Q See 10-Q. for the first and second quarters of 2005, and other documents filed with the SEC. About Accredited Accredited Home Lenders Holding Co. is a nationwide mortgage company that originates, finances, securitizes, services, and sells non-prime mortgage loans secured by residential real estate. Founded in 1990, the company is headquartered in San Diego. Additional information may be found at www.accredhome.com.
Accredited Home Lenders: Financial Summary (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ----------------------
2005 2004 2005 2004
-------- -------- --------- --------
(dollars in thousands)
Income Statement:
Interest income $164,147 $ 97,493 $ 430,194 $242,792
Interest expense (84,571) (37,114) (207,022) (86,137)
-------- -------- --------- --------
Net Interest income 79,576 60,379 223,172 156,655
Provision for losses (19,168) (14,416) (56,465) (39,708)
-------- -------- --------- --------
Net interest income
after provision 60,408 45,963 166,707 116,947
Gain on sale of
loans 85,644 77,993 237,886 210,342
Other income 5,704 2,686 13,881 7,811
-------- -------- --------- --------
Total net revenues 151,756 126,642 418,475 335,100
-------- -------- --------- --------
Salaries, wages, and
benefits 48,378 42,772 140,501 117,885
General,
administrative, and
other expenses 30,075 23,599 81,122 62,277
-------- -------- --------- --------
Total operating
expenses 78,453 66,371 221,623 180,162
-------- -------- --------- --------
Income before
income taxes and
minority interest 73,303 60,271 196,852 154,938
Income tax
provision 29,517 23,234 77,217 61,101
Minority
interest -
dividends on
preferred stock
of subsidiary 2,495 1,160 7,484 1,160
-------- -------- --------- --------
Net income $ 41,291 $ 35,877 $ 112,151 $ 92,677
======== ======== ========= ========
Basic earnings per
share $ 1.95 $ 1.75 $ 5.34 $ 4.57
======== ======== ========= ========
Diluted earnings per
share $ 1.87 $ 1.66 $ 5.11 $ 4.31
======== ======== ========= ========
Weighted average shares
outstanding, in
thousands:
Basic 21,217 20,470 21,017 20,287
======== ======== ========= ========
Diluted 22,059 21,580 21,932 21,516
======== ======== ========= ========
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ------------------------
2005 2004 2005 2004
---------- ---------- ----------- ----------
(dollars in thousands)
Other Data:
Originations:
Wholesale $4,035,794 $2,890,791 $10,721,350 $8,111,151
Retail & Other 456,925 326,168 1,140,663 844,684
---------- ---------- ----------- ----------
Total mortgage loan
originations $4,492,719 $3,216,959 $11,862,013 $8,955,835
Weighted average
coupon rate of
mortgage loan
originations 7.70% 7.46% 7.64% 7.29%
Weighted average
credit score(1) 639 639 639 640
Loan sales and
securitizations:
Whole loan sales $2,979,088 $2,300,907 $ 7,915,870 $5,784,663
Mortgage loans
securitized 1,120,042 1,011,032 3,045,080 2,223,157
---------- ---------- ----------- ----------
Total loan sales and
securitizations $4,099,131 $3,311,939 $10,960,951 $8,007,820
Net profit margin on
whole loan sales:
Gain on whole loan
sales(2) 2.81% 3.47% 2.97% 3.78%
Net gain on
derivatives(2) 0.26% 0.04% 0.17% 0.02%
---------- ---------- ----------- ----------
Net premium
received on whole
loan sales(2) 3.07% 3.50% 3.14% 3.81%
Net origination
points and fees 0.43% 0.46% 0.39% 0.44%
Loan origination
expenses -2.00% -2.37% -2.12% -2.38%
---------- ---------- ----------- ----------
Net cost to
originate(3) -1.57% -1.92% -1.73% -1.94%
---------- ---------- ----------- ----------
Net profit margin
on whole loan
sales 1.50% 1.59% 1.41% 1.87%
========== ========== =========== ==========
Annualized losses on
serviced portfolio
as a percentage of
average serviced
assets 0.26% 0.32% 0.26% 0.35%
Net interest margin
components(4)
Warehouse
Interest income 7.51% 7.25% 7.50% 7.21%
Interest expense -4.57% -3.13% -4.33% -2.85%
---------- ---------- ----------- ----------
Spread 2.94% 4.12% 3.17% 4.36%
========== ========== =========== ==========
Securitizations
Interest income 7.85% 7.49% 7.69% 7.42%
Interest expense -3.93% -2.77% -3.63% -2.60%
---------- ---------- ----------- ----------
Spread 3.92% 4.72% 4.06% 4.82%
========== ========== =========== ==========
Net Interest Margin 3.75% 4.57% 3.96% 4.72%
At At At
September December September
30, 31, 30,
----------- ----------- -----------
2005 2004 2004
---------- ---------- ----------
(dollars in thousands)
Serviced Portfolio:
Loans held for sale $2,379,043 $1,811,429 $1,856,053
Loans held for investment 6,696,033 4,749,149 4,083,986
Loans sold servicing retained
or securitized/off balance
sheet 101,157 171,002 200,361
---------- ---------- ----------
Total serviced portfolio at
period end $9,176,234 $6,731,580 $6,140,400
========== ========== ==========
Total delinquent at period
end(5) 1.95% 1.74% 1.47%
Total number of employees 2,639 2,694 2,455
(1) Represents borrowers' credit score at origination obtained from
one or more of the three principal credit bureaus. The nine
months ended September 30, 2004 FICO scores reflect corrected
second quarter FICO scores. Weighted average FICO scores shown do
not include Canada volume.
(2) The percentages are calculated based upon the respective amounts
divided by total whole loans sales. See reconciliation table
below.
(3) Net cost to originate is defined as total operating expenses,
less loan servicing-related costs, plus yield spread premiums,
less points and fees collected, all prior to any deferrals of
origination costs for accounting purposes. See reconciliation
table below.
(4) Interest income and interest expense are shown as annualized
percentages of the average outstanding balances of mortgage loans
and debt, respectively. Net interest margin is interest income
less interest expense, expressed as an annualized percentage of
the outstanding balance of mortgage loans.
(5) Delinquent is defined as loans that are 30 or more days
delinquent, including loans in foreclosure and loans converted
into real estate owned (REO).
At At At
September December September
30, 31, 30,
----------- ----------- -----------
2005 2004 2004
---------- ---------- ----------
(dollars in thousands)
Balance Sheet Data:
Cash and cash equivalents $ 160,810 $ 39,745 $ 79,159
Mortgage loans held for sale,
net 2,349,385 1,790,134 1,848,376
Mortgage loans held for
investment, net 6,581,439 4,690,758 4,044,820
Other receivables 98,426 57,658 60,571
Other assets 101,589 110,083 103,748
---------- ---------- ----------
Total Assets $9,291,649 $6,688,377 $6,136,674
========== ========== ==========
Warehouse credit facilities $2,074,994 $2,204,860 $2,411,415
Asset backed commercial paper 985,348 - -
Securitization bond financing 5,550,348 3,954,115 3,275,887
Other liabilities 82,196 68,924 50,975
---------- ---------- ----------
Total Liabilities 8,692,886 6,227,900 5,738,277
Minority interest -
preferred securities of
subsidiary 97,922 97,922 84,094
Total Stockholders' Equity 500,841 362,555 314,303
---------- ---------- ----------
Total Liabilities and
Stockholders' Equity $9,291,649 $6,688,377 $6,136,674
========== ========== ==========
Regulation G Disclosures
Information on net premium received on whole loan sales, net cost
to originate, and adjusted leverage appearing elsewhere in this
release may fall under the Securities and Exchange Commission's
definition of "non-GAAP financial measures." Management believes that
these calculations, taken in context with the other information
reported in this release, provide investors with a better
understanding of the efficiency of the company's loan generating
platform and the relevant measurement of the company's debt level. A
reconciliation of how net premium received on whole loan sales, net
cost to originate, and adjusted leverage are calculated is set forth
below.
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
(dollars in thousands)
Whole loan sales $2,979,088 $2,300,907 $7,915,870 $5,784,663
Gross gain on whole
loan sales $ 83,572 $ 79,796 $ 234,995 $ 218,906
Gain on sale of loans
acquired in clean-up
call 526 - 3,172 -
Net gain on
derivatives 7,870 822 13,634 1,254
Provision for premium
recapture (1,462) (1,146) (3,925) (2,699)
Recognized origination
points and fees 7,046 9,938 24,260 25,831
Recognized origination
expenses (11,908) (11,417) (34,249) (32,950)
---------- ---------- ---------- ----------
Total net gain on
sale of loans 85,644 77,993 237,886 210,342
Average whole loan premium
Gross gain on whole
loan sales 83,572 79,796 234,995 218,906
Net gain on
derivatives 7,870 822 13,634 1,254
---------- ---------- ---------- ----------
Net premium
received on whole
loan sales 91,442 80,618 248,629 220,160
As % of whole loan sales(1)
Gross gain on whole
loan sales 2.81% 3.46% 2.97% 3.78%
Net gain on
derivatives 0.26% 0.04% 0.17% 0.02%
---------- ---------- ---------- ----------
Net premium
received on whole
loan sales 3.07% 3.50% 3.14% 3.80%
(1) Reflects the cash premium that we receive on our whole loan sales.
The percentages are determined by dividing the gain by whole loan
sales.
Regulation G Disclosure related to Net Cost to Originate
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ------------------------
2005 2004 2005 2004
---------- ---------- ----------- ----------
(dollars in thousands)
Total mortgage loan
originations $4,492,719 $3,216,959 $11,862,013 $8,955,835
Total operating
expenses $ 78,453 $ 66,371 $ 221,623 $ 180,162
Add deferred direct
loan origination
expenses 17,419 14,210 47,345 42,783
Less servicing
cost(1) (5,971) (4,093) (17,507) (9,989)
---------- ---------- ----------- ----------
Loan origination
expenses 89,901 76,488 251,461 212,956
as % of volume 2.00% 2.38% 2.12% 2.38%
Less deferred net
origination points
and fees 19,230 (14,761) (46,132) (39,356)
---------- ---------- ----------- ----------
Net cost to
originate $ 70,671 $ 61,727 $ 205,329 $ 173,600
========== ========== =========== ==========
as % of volume 1.57% 1.92% 1.73% 1.94%
(1) Servicing cost consists of direct expenses and allocated corporate
overhead included in operating expenses
Regulation G Disclosure related to Adjusted Leverage
At At At
September December September
30, 31, 30,
----------- ----------- -----------
2005 2004 2004
----------- ----------- -----------
(dollars in thousands)
Total Liabilities $8,692,886 $6,227,900 $5,738,277
Minority interest - preferred
securities of subsidiary 97,922 97,922 84,094
Total Stockholders' Equity 500,841 362,555 314,303
----------- ----------- -----------
Total Minority Interest and
Stockholders' Equity $598,763 $460,477 $398,397
Ratio of Total Liabilities divided
by Minority Interest +
Stockholders' Equity 14.5 13.5 14.4
Ratio of Total Liabilities divided
by Stockholders' Equity 17.4 17.2 18.3
|
|
||||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion