Accredited Reports $0.85 EPS, Record First Quarter Results; Net Income up 170%; Revenues Rise 111%; Servicing Portfolio Grows 98% Over Q1 2002.Business Editors SAN DIEGO--(BUSINESS WIRE)--April 29, 2003 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 banker Mortgage Banker A company, individual or institution that originates, sells and services mortgage loans. Notes: Don't confuse a mortgage banker with a mortgage broker. specializing in nonprime residential mortgage loans, today announced record first quarter results for the period ended March 31, 2003. The company, founded in 1990, also closed its initial public offering and the related over-allotment option during the first quarter, resulting in net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). to the company of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $39 million. Net income for the quarter ended March 31, 2003 was $14.8 million, or $0.85 diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of , an increase of 170% over net income of $5.5 million for the comparable period in 2002. Total revenues for the quarter increased by 111% to $79.1 million from $37.5 for the comparable period in 2002. 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: "Our record performance in the first quarter reflects a strong mortgage market, attractive net interest margins, and our adherence adherence /ad·her·ence/ (ad-her´ens) the act or condition of sticking to something. immune adherence to our disciplined business model. More importantly, over the past three quarters, we have built a foundation of on-balance sheet 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. financings that will deliver more consistent earnings in the future. We strengthened this foundation by holding almost $243 million of loans through the end of the first quarter for near-term near-term adj. Of, for, or involving a short period of time in the near future. securitization. We believe that this strategy will better diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. Accredited's earnings stream, while enhancing future profitability." First Quarter Operational Highlights -- 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 of $1.5 billion, compared to $732.3 million in 2002, an increase of 99%. Originations in the first quarter were the highest ever in Accredited's 13-year history and increased 3% from the previous record set in the fourth quarter 2002. This is in contrast to the seasonal declines that the company experienced during the previous three years when origination volume declined from 4% to 6% from the fourth to the first quarters. -- Record 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. portfolio of $2.6 billion at March 31, 2003, an increase of $1.3 billion, or 98%, from March 31, 2002, and an increase of $313.2 million, or 14%, from December December: see month. 31, 2002. This was primarily a result of an increase in the owned portfolio that also included loans held for sale of $1.1 billion and loans held for securitization of $242.9 million. -- Whole loan sales of $1.1 billion compared to $652.2 million during the same period in 2002, an increase of 65%. -- Net interest income (interest income less interest expense) of $20.1 million, compared to $4.9 million in the first quarter of 2002, an increase of 314%.
Financial Summary ($000)
Q1 2002 Q1 2003 % Change
Total Revenues $37,484 $79,140 111.1%
Total Expenses 28,347 54,457 92.1%
Income before Taxes 9,137 24,683 170.1%
Income Taxes 3,648 9,873 170.6%
Net Income 5,489 14,810 169.8%
The 111% increase in total revenues from first quarter 2002 to 2003 resulted primarily from increases in the gain on sale of loans and interest income. The gain on sale of loans increased 62% from $26.6 million in 2002 to $43.2 million in 2003 due primarily to higher whole loan sales volume and an increase in the average net whole loan sale premium, net of loss on related derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. , from 3.8% in the first quarter of 2002 to 4.0% in the comparable period of 2003. Interest income increased 277% from $8.6 million in 2002 to $32.3 million in 2003 due primarily to management's strategy to increase the size of the loan portfolio, partially offset by a decrease in the weighted average interest rate. The increase in the size of the loan portfolio was primarily the result of the completion of two securitizations structured as financings in 2002, holding $242.9 million of loans at March 31, 2003 for a subsequent securitization, higher 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, and a longer holding period for loans held for sale. Total expenses increased from $28.3 million in the first quarter of 2002 to $54.5 million in the same period in 2003 due primarily to growth in the size of the loan portfolio, an increase in loan volume, and an increase in the number of employees. Expenses primarily associated with the growth in the loan portfolio represented 44% of the rise in total expenses, while expenses primarily related to operating activities represented 56% of the rise in total expenses. -- Portfolio Growth Related Expenses -- Interest expenses increased from $3.7 million in the first quarter of 2002 to $12.2 million in the same period of 2003 due primarily to an increase in the average outstanding borrowings, partially offset by a decrease in the average borrowing rate. The increase in the average outstanding borrowings is consistent with the growth in the loan portfolio. -- Provision for losses increased from $3.5 million in the first quarter of 2002 to $6.5 million in 2003 due primarily to increases in reserves for losses for the growing portfolio. -- Business Operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets Related Expenses -- Compensation expenses increased from $14.4 million in the first quarter of 2002 to $23.9 million in the first quarter of 2003 due to the growth in the number of employees and increased commission and bonus costs related to higher loan originations and profits. -- General, administrative, and other expenses increased from $6.7 million in the first quarter of 2002 to $11.9 million in the first quarter of 2003 due to increases in loan volume, number of staff and number of locations. -- Net Profit -- Income before taxes increased from $9.1 million in the first quarter of 2002 to $24.7 million in the first quarter of 2003. -- Net Income increased 170% from the comparable period in the prior year to a record $14.8 million for the quarter. Loan Originations The company originated a quarterly record $1.5 billion of mortgage loans for the quarter ended March 31, 2003, compared to $732.3 million of mortgage loan originations in the comparable period for 2002, an increase of 99%. Wholesale and retail originations for the quarter represented 89% and 11%, respectively, of total loan production, virtually unchanged from the same quarter in the prior year. The company's net cost to originate o·rig·i·nate v. 1. To bring into being; create. 2. To come into being; start. mortgage loans was 2.3% for the quarter, compared to 2.5% in the first quarter of 2002 and 2.3% for all of 2002. Loan Dispositions During the first quarter of 2003, Accredited sold $1.1 billion of mortgage loans as whole loan sales for cash, $242.9 million of mortgage loans were held for a second quarter securitization, and $1.1 billion of mortgage loans were held for sale. While more than 55% of Accredited's revenues and cash flows were generated from whole loan sales in the first quarter of 2003, securitizations structured as financings generated approximately 16% of revenues during the same period. The accounting for securitizations structured as financings recognizes income closely with the receipt of cash payments and helps to provide a more consistent source of income in future periods. The company intends to continue using various 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 strategies, including securitizations structured as financings. 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 servicing portfolio totaled $2.6 billion at March 31, 2003. The portfolio has doubled from $1.3 billion at March 31, 2002 and increased $313.2 million, or 14%, from $2.3 billion at December 31, 2002. This was primarily due to an increase in the loans held for sale and 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. loan inventory. 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 2.5% of the serviced portfolio at March 31, 2003, compared to 4.9% at March 31, 2002 and 2.7% at December 31, 2002. The company attributes this improvement in delinquency delinquency Criminal behaviour carried out by a juvenile. Young males make up the bulk of the delinquent population (about 80% in the U.S.) in all countries in which the behaviour is reported. to a combination of rigorous credit standards Credit Standards The guidelines a company follows to determine whether a credit applicant is creditworthy. and prudent collection practices, as well as the recent increase in the size of the servicing portfolio. Liquidity The company had $1.4 billion in warehouse credit capacity at March 31, 2003 and $51.0 million in available cash and additional liquidity from voluntary warehouse line paydowns. The company is negotiating several increases in its existing warehouse facilities, as well as negotiating new facilities, totaling more than $400 million. Leverage The company's debt-to-equity ratio debt-to-equity ratio The relationship between long-term funds provided by creditors and funds provided by owners. A firm's debt-to-equity ratio is calculated by dividing long-term debt by owners' equity. Both items are shown on the balance sheet. (total liabilities divided by 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. ) at March 31, 2003 was 17.2 to 1, compared to 27.6 to 1 at December 31, 2002, due primarily to IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. proceeds. Management intends to continue its practice of issuing securitizations structured as financings in order to build a consistent source of earnings. However, we also intend to continue decreasing the debt-to-equity ratio in future periods. Business Outlook The following statements are forward looking and actual results may differ materially. Please see the 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. Statement section of this news release for a description of certain risk factors and 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. on file with the Securities and Exchange Commission for a more complete description of risks. Earnings Guidance for Second Quarter 2003 The company expects diluted earnings per share for the second quarter to be in a range of $0.80 to $0.90, based on an estimated weighted average of approximately 20.6 million shares outstanding. Originations at Accredited have exceeded recent forecasts and remained robust. Further, net interest margins have remained high and premiums received on whole loan sales have remained attractive. Earnings Guidance for 2003 For the total year 2003, the company anticipates earnings to be in a range of $2.25 to $2.50 per share, based on approximately 20.3 million average shares outstanding. The lower end of the range assumes external economic and political conditions deteriorate de·te·ri·o·rate v. 1. To grow worse in function or condition. 2. To weaken or disintegrate. , negatively impacting our business. Such impacts could include lower volume, higher interest rates and 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. , higher production costs on a percentage basis, as well as a reduction in premiums received on the sale of mortgage loan pools as compared to those achieved in 2002. The higher end Coordinates: For other places with the same name, see Billinge. Higher End or Billinge Higher End is a district of the Metropolitan Borough of Wigan, in Greater Manchester, England. of the earnings range assumes that originations are marginally mar·gin·al adj. 1. Of, relating to, located at, or constituting a margin, a border, or an edge: the marginal strip of beach; a marginal issue that had no bearing on the election results. 2. better than 2002 and that the other factors above do not deteriorate as much as described. Although the political and economic climates remain uncertain, the business climate in 2003 to date has been consistent with, or superior to, the assumptions for the higher end of the range. Conference Call Accredited will host a conference call for analysts and investors on April 30, 2003 at 8 a.m. (Pacific Daylight For other uses, see Daylight (disambiguation). Daylight or the light of day is the combination of all direct and indirect sunlight outdoors during the daytime (and perhaps twilight). Time) to discuss the company's financial results for the first quarter. 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 858.676.2155 to receive details regarding the call. The call is being web cast by CCBN CCBN Central Coast Bancorp CCBN Charles County Business Network and can be accessed live at Accredited's web site -- www.accredhome.com. A replay of the conference will be archived on the web site. About Accredited Accredited Home Lenders Holding Co. is a nationwide mortgage banking company that originates, finances, sells, securitizes and services nonprime mortgage loans secured by single-family sin·gle-fam·i·ly adj. Relating to or being a dwelling designed for one family only: a single-family home; single-family occupancy. residences. The company is headquartered in 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. . Additional information may be found at www.accredhome.com. Safe Harbor Statement Certain matters discussed in this news release may constitute 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. within the meaning of federal securities laws. Forward-looking statements include statements regarding the company's planned revenue generating strategy, anticipated securitizations, expected net earnings for the full year 2003; the company's liquidity; and the company's intended loan disposition 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; general political and economic conditions; the sustainability of loan origination volumes; 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; and other risk factors outlined in Accredited Home Lenders Holding Co.'s Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 28, 2003 and other SEC filings.
Accredited Home Lenders: Financial Summary
Three Months Ended
March 31,
--------------------
2002 2003
--------------------
(dollars in
thousands)
Operating Data:
Gain on sale of loans $26,643 $43,171
Interest Income 8,559 32,297
Loan servicing income 1,992 1,882
Net gain on mortgage-related securities and
derivatives 199 1,399
Other income 91 391
--------------------
Total revenues 37,484 79,140
--------------------
Salaries, wages and benefits 14,421 23,868
General, administrative, and other expenses 6,740 11,914
--------------------
Total operating expenses 21,161 35,782
--------------------
Interest Expense 3,700 12,167
Provision for losses 3,486 6,508
--------------------
Total expenses 28,347 54,457
--------------------
Income before income taxes 9,137 24,683
Income taxes 3,648 9,873
--------------------
Net income $5,489 $14,810
====================
Basic earnings per share $0.96 $1.19
====================
Diluted earnings per share $0.39 $0.85
====================
Three Months Ended
March 31,
--------------------
2002 2003
--------------------
(dollars in
thousands)
Other Data:
Originations:
Wholesale $665,701 $1,302,809
Retail $66,555 $157,642
Total mortgage loan originations $732,256 $1,460,551
Net cost to originate:
Wholesale channel(1) 2.5% 2.4%
Retail channel(1) 3.0% 1.9%
--------------------
Total net cost to originate(1) 2.5% 2.3%
Weighted average coupon rate of mortgage loan
originations 8.9% 7.9%
Weighted average credit score(2) 623 630
Loan sales and securitizations:
Whole loan sales $652,190 $1,073,353
Loans sold with retained interests $75,839 $-
--------------------
Total loan sales and securitizations $728,029 $1,073,353
Three Months Ended
March 31,
----------------------
2002 2003
----------------------
(dollars in thousands)
Net premium received on whole loan
sales(3) 3.8% 4.0%
Annualized losses on serviced
portfolio as a percentage
of average serviced assets 1.2% 0.7%
At March At December At March
31, 31 31,
---------------------------------
2002 2002 2003
---------------------------------
(dollars in thousands)
Serviced Portfolio:
Loans held for disposition and
real estate owned $542,597 $982,737 $1,369,086
Securitized/on balance sheet $- $742,848 $725,586
Sold servicing retained or
securitized/off balance sheet $763,231 $542,913 $487,045
---------------------------------
Total serviced portfolio at period
end $1,305,828 $2,268,498 $2,581,717
=================================
Total delinquent at period end(4) 4.9% 2.7% 2.5%
Total number of leased locations at
period end 28 31 35
Total number of employees 963 1,294 1,471
(1) Net cost to originate is defined as total operating expenses,
prior to deferred origination costs, plus yield spread premiums paid,
less points and fees collected, less loan servicing related costs.
(2) Represents borrowers' average credit score at origination
obtained from one or more of the three principal credit bureaus.
(3) The net premium received on whole loan sales is computed based
on the cash premiums received on whole loan sales, net of loss on
related derivatives.
(4) 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 March At December At March
31, 31, 31,
---------------------------------
2002 2002 2003
---------------------------------
Balance Sheet Data:
Mortgage loans held for sale, net $535,299 $972,349 $1,116,593
Mortgage loans held for
securitization - - 242,922
Securitized loans, net - 743,375 725,632
Mortgage-related securities, at fair
value 16,737 8,356 6,702
Mortgage servicing rights, net 4,939 3,116 2,551
Other Assets 56,734 80,134 86,099
---------------------------------
Total Assets $613,709 $1,807,330 $2,180,499
=================================
Total warehouse and residual interest
financing 555,200 962,285 1,304,343
Securitization bond financing 0 737,548 712,761
Convertible debt 3,000 3,000 -
Other Liabilities 15,928 41,375 43,508
---------------------------------
Total Liabilities 574,128 1,744,208 2,060,612
Redeemable, convertible preferred
stock 5,113 5,113 -
Total stockholders' equity 34,468 58,009 119,887
---------------------------------
Total Liabilities and
Stockholders' Equity $613,709 $1,807,330 $2,180,499
=================================
Book value per diluted share $2.80 $4.30 $5.86
Debt-to-equity ratio 14.5 27.6 17.2
=================================
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