Accredited Reports Q1 2006 Results; Net Income up 15% in Q1 2006; Net Cost to Originate down 19%; Loans On-Balance Sheet up 30%; Originations up 11%.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 results for the quarter ended March 31, 2006. Net income for the quarter ended March 31, 2006 was $35.8 million, or $1.61 per share on a fully-diluted basis, an increase of 14.5% over net income of $31.3 million for the comparable period in 2005. Total net revenues for the quarter increased by 15.2% to $141.7 million from $123.0 million for the comparable period in 2005. 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 company delivered another solid quarter of earnings and cost discipline, along with an increase in 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. and portfolio growth. These results were accomplished during a quarter with the anticipated seasonally softer 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 and a number of competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. lowering interest rates to borrowers while the cost of money was increasing. Continued healthy demand for non-prime loans was again evident by our growth in origination volume when measured against the same period in 2005, as well as the strong volume during the last month of the quarter." Mr. Konrath added, "We are also pleased with the growth and performance of our portfolio in the first quarter. Accredited continues to achieve superior executions on its securitizations, including a first quarter transaction with some of the tightest spreads in our history, and portfolio performance results that continue to outpace out·pace tr.v. out·paced, out·pac·ing, out·pac·es To surpass or outdo (another), as in speed, growth, or performance. outpace Verb [-pacing, both the industry and our forecasts. All of this underscores our continued confidence that our profit-based business model, diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. in all facets of our business, and best-in-class See best-of-class. employees will drive profitability for the remainder of 2006 and beyond." First Quarter Operational Highlights --Net cost to originate o·rig·i·nate v. 1. To bring into being; create. 2. To come into being; start. of 1.60% for the quarter, an improvement of 36 basis points from the same period last year. --Loans on-balance sheet reached $9.5 billion at March 31, 2006, an increase of $2.2 billion, or 30.0%, from March 31, 2005. --Net interest income after provision (interest income less interest expense and provision for losses) of $65.8 million, compared to $57.7 million in Q1 2005, an increase of 14.0%. As a percentage of total net revenues, net interest income after provision was 46.4% in Q1 2006. --Mortgage origination volume of $3.6 billion in Q1 2006, compared to $3.2 billion in Q1 2005, an increase of 11.1%.
Financial Summary ($000)
% Change
Q1 2006 from Q1 05
------- ----------
Total Net Revenues $141,695 15.2%
Total Expenses 78,659 15.6%
Income before Income Taxes
and Minority Interest $ 63,035 14.6%
Net Income $ 35,823 14.5%
The 15.2% increase in total net revenues from Q1 2005 to Q1 2006 resulted primarily from an increase in the portfolio and higher whole loan sales. Net interest income after provision increased 14.0% from $57.7 million in Q1 2005 to $65.8 million in Q1 2006, primarily due to the larger loan portfolio, partially offset by a lower 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 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. . The increase in the size of the loan portfolio from Q1 2005 resulted primarily from four quarterly securitizations structured as financings. The gain on sale of loans increased 15.0% from $61.4 million in Q1 2005 to $70.6 million in Q1 2006 primarily due to higher volume of whole loan sales, offset in part by lower premiums. The company's average whole loan premium, 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 3.27% in Q1 2005 to 2.10% in Q1 2006. The premium for Q1 2006 includes discounts from three second-lien loan sales during the quarter that reduced the average whole loan premium percentage by 12 basis points. 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 15.6% from $68.1 million in Q1 2005 to $78.7 million in Q1 2006, due primarily to the costs associated with larger loan originations. Salaries, wages and benefits expense increased by 12.0% from $42.4 million in Q1 2005 to $47.5 million in Q1 2006 primarily because of the recognition of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1 million in stock option expense as a result of SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 123R and the increased staff and volume levels. General, administrative, and other expenses increased by 21.5% from $25.6 million in Q1 2005 to $31.1 million in Q1 2006 due primarily to increases in the number of loans originated and being serviced, and marketing expenses supporting increased production from the retail channel. Loan Originations The company originated $3.6 billion of mortgage loans for the quarter ended March 31, 2006, compared to $3.2 billion of mortgage loan originations in Q1 2005, an increase of 11.1%. Wholesale and retail originations for the quarter represented 87% and 13% of total loan production, respectively, reflecting a higher growth rate in the retail channel during the quarter. The company's net cost to originate mortgage loans was 1.60% for the quarter ended March 31, 2006 compared to 1.96% in Q1 2005. Management believes this measurement is beneficial to investors because it provides a measurement of the efficiency of the loan origination process. Additional detail on the calculation of net cost to originate can be found in the Financial Summary at the end of this release. Loan Dispositions During Q1 2006, $3.0 billion of mortgage loans were sold in whole loan sales for cash, and $1.0 billion of mortgage loans went into a 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. structured as a financing. At the end of the quarter, $867.3 million of mortgage loans were held for additions to the long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. portfolio, and $1.7 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 servicing portfolio, including $81.8 million of liquidating off-balance sheet securitizations, totaled $9.6 billion at March 31, 2006. The serviced portfolio increased 28.5% from $7.5 billion at March 31, 2005. This was primarily due to the company's quarterly securitization program. 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 2.85% of the serviced portfolio at March 31, 2006, compared to 2.47% at December December: see month. 31, 2005 and 1.72% at March 31, 2005. 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. levels remain within management's expectations and continue to be substantially below published industry averages. Liquidity The company had approximately $5.2 billion in warehouse credit capacity at March 31, 2006. At the end of March, the company had used $2.3 billion of this capacity. The company had $301.0 million in available cash and additional liquidity at March 31, 2006. 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 12.9 times at March 31, 2006. 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 for 2006 For the total year 2006, the company reaffirms its previous earnings guidance of $7.70 - $8.00 per share. This forecast for the balance of the year, as well as the second quarter, assumes: --Continued growth in origination volume --Additional reductions in the cost to originate --Improvement in the spread of interest rates to borrowers over the cost of funds from current market place levels --An increase in net premium received in whole loan sales from current market levels Conference Call Accredited will host a conference call for analysts and investors on May 2, 2006 at 11:00 a.m. Eastern (8:00 a.m. Pacific) to discuss the company's financial results for the first quarter of 2006. 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 website - http://investors.accredhome.com. A replay of the conference call will be archived on the website. 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 the second quarter and full year 2006 and its projected growth in loan originations; the company's ability to reduce costs, including costs to originate; the credit quality of the company's loan portfolio; the company's outlook on 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, generally, and the impact that those environments will have on weighted average coupons, margins and whole loan sale premiums; 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, including the mix of loans sold 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. ; and the company's liquidity. 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, the availability of alternative loan products not offered by the company, and the nature and characteristics of the loans originated by the company; 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; 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 31, 2005 and other documents filed with the SEC. About Accredited Accredited Home Lenders Holding Co. is a mortgage company operating 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. and in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of . Accredited 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
Three Months Ended
March 31,
-------------------
2006 2005
--------- ---------
(dollars in thousands)
Income Statement:
Interest income $194,458 $124,893
Interest expense (112,136) (54,327)
--------- ---------
Net Interest income 82,322 70,566
Provision for losses (16,537) (12,848)
--------- ---------
Net interest income after provision 65,785 57,718
Gain on sale of loans 70,552 61,374
Other income 5,357 3,946
--------- ---------
Total net revenues 141,694 123,038
--------- ---------
Salaries, wages and benefits 47,526 42,427
General, administrative, and other expenses 31,133 25,627
--------- ---------
Total operating expenses 78,659 68,054
--------- ---------
Income before income taxes and minority
interest 63,035 54,984
Income tax provision 24,717 21,202
Minority interest - dividends on preferred
stock of subsidiary 2,495 2,495
--------- ---------
Net income $35,823 $31,287
========= =========
Basic earnings per share $1.66 $1.50
========= =========
Diluted earnings per share $1.61 $1.43
========= =========
Weighted average shares outstanding:
Basic 21,553 20,851
========= =========
Diluted 22,279 21,847
========= =========
Three Months Ended
March 31,
-----------------------
2006 2005
----------- -----------
(dollars in thousands)
Other Data:
Originations:
Wholesale $3,134,667 $2,909,831
Retail 452,874 320,043
----------- -----------
Total mortgage loan originations $3,587,541 $3,229,873
Weighted average coupon rate of mortgage loan
originations 8.53% 7.57%
Weighted average credit score (1) 636 638
Loan sales and securitizations:
Whole loan sales $3,040,534 $2,104,967
Mortgage loans securitized 1,003,751 917,229
----------- -----------
Total loan sales and securitizations $4,044,285 $3,022,196
Net profit margin on whole loan sales:
Gain on whole loan sales (2) 1.97% 2.95%
Net gain (loss) on derivatives (2) 0.13% 0.32%
----------- -----------
Net premium received on whole loan sales (2) 2.10% 3.27%
Net origination points and fees 0.76% 0.39%
Loan origination expenses -2.36% -2.35%
----------- -----------
Net cost to originate (3) -1.60% -1.96%
----------- -----------
Net profit margin on whole loan sales 0.50% 1.31%
=========== ===========
Annualized losses on serviced portfolio as a
percentage of average serviced assets 0.25% 0.27%
Net interest margin components (4)
Warehouse
Interest income 8.15% 7.45%
Interest expense -5.34% -4.01%
----------- -----------
Spread 2.81% 3.44%
=========== ===========
Securitizations
Interest income 7.70% 7.55%
Interest expense -4.40% -3.20%
----------- -----------
Spread 3.30% 4.35%
=========== ===========
Net Interest Margin 3.33% 4.24%
At March At At March
31, December 31, 31,
----------- ------------- -----------
2006 2005 2005
----------- ------------- -----------
(dollars in thousands)
Serviced Portfolio:
Loans held for sale $1,734,856 $2,276,875 $1,976,442
Loans held for investment 7,787,418 7,339,097 5,350,527
Loans sold servicing retained
or securitized/off balance
sheet 81,776 90,181 149,132
----------- ------------- -----------
Total serviced portfolio at
period end $9,604,050 $9,706,153 $7,476,101
=========== ============= ===========
Total delinquent at period end
(5) 2.85% 2.47% 1.72%
Total number of employees 2,626 2,762 2,536
(1) Represents borrowers' credit score at origination obtained from
one or more of the three principal credit bureaus. 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.
For 2006, the gain and net premium received on whole loan sales
percentages also include discounts from three second-lien loan sales
during the quarter that reduced the percentages by 12 basis points.
(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 March At December At March
31, 31, 31,
----------- ----------- -----------
2006 2005 2005
----------- ----------- -----------
(dollars in thousands)
Balance Sheet Data:
Cash and restricted cash $119,992 $90,921 $68,889
Accrued interest receivable 44,996 42,878 31,963
Mortgage loans held for sale, net 1,706,822 2,252,252 1,947,326
Mortgage loans held for
investment, net 7,615,849 7,195,872 5,277,564
Derivative assets, including
margin account 105,301 89,409 26,676
Other assets 194,305 181,914 100,831
----------- ----------- -----------
Total Assets $9,787,265 $9,853,246 $7,453,249
=========== =========== ===========
Credit facilities $2,272,657 $2,805,119 $2,391,848
Securitization bond financing 6,707,456 6,240,820 4,504,863
Other liabilities 103,458 155,973 48,575
----------- ----------- -----------
Total Liabilities 9,083,571 9,201,912 6,945,286
Minority interest - preferred
securities of subsidiary 97,922 97,922 97,922
Total Stockholders' Equity 605,772 553,412 410,041
----------- ----------- -----------
Total Liabilities and
Stockholders' Equity $9,787,265 $9,853,246 $7,453,249
=========== =========== ===========
Regulation G Disclosures Information on the gain on sale components, 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. Reconciliations of how the gain on sale components, net cost to originate and adjusted leverage are calculated are set forth below.
Regulation G Disclosure related to Gain on Sale
Three Months Ended
March 31,
-----------------------
2006 2005
----------- -----------
(dollars in thousands)
Whole loan sales $3,040,534 $2,104,967
Gain on whole loan sales $59,894 $62,037
Net gain on derivatives 4,004 6,762
----------- -----------
Net premium received on whole loan sales 63,898 68,799
Provision for Reserves (1) 1,507 (6,142)
Direct loan origination fees (expenses) 5,147 (1,283)
----------- -----------
Total net gain on sale of loans per
Financials $70,552 $61,374
=========== ===========
As % of whole loan sales (2)
Gain on whole loan sales 1.97% 2.95%
Net gain on derivatives 0.13% 0.32%
----------- -----------
Net premium received on whole loan sales 2.10% 3.27%
(1) Previously issued amounts have been reclassified to conform to
current presentation. Includes LOCOM, Repurchase and Premium
Recapture reserves.
(2) Reflects the cash premium that we receive on our whole loan
sales. The percentages are determined by dividing the gain by whole
loan sales. For 2006, the gain and net premium received on whole loan
sales percentages also include discounts from three second-lien loan
sales during the quarter that reduced the percentages by 12 basis
points.
Regulation G Disclosure related to Net Cost to Originate
Three Months Ended
March 31,
-----------------------
2006 2005
----------- -----------
(dollars in thousands)
Total mortgage loan originations $3,587,541 $3,229,873
Total operating expenses $78,659 $68,054
Add deferred direct loan origination expenses 12,798 13,390
Less servicing cost (1) (6,947) (5,572)
----------- -----------
Loan origination expenses 84,510 75,872
as % of volume 2.36% 2.35%
Less deferred net origination points and fees (27,219) (12,574)
----------- -----------
Net cost to originate $57,291 $63,298
=========== ===========
as % of volume 1.60% 1.96%
(1) Servicing cost consists of direct expenses and allocated corporate
overhead included in operating expenses
Regulation G Disclosure related to Adjusted Leverage
At March At At March
31, December 31, 31,
----------- -------------- -----------
2006 2005 2005
----------- -------------- -----------
(dollars in thousands)
Total Liabilities $9,083,571 $9,201,912 $6,945,286
Minority interest - preferred
securities of subsidiary $97,922 $97,922 $97,922
Total Stockholders' Equity 605,772 553,412 410,041
----------- -------------- -----------
Total Minority Interest and
Stockholders' Equity $703,694 $651,334 $507,963
=========== ============== ===========
Ratio of Total Liabilities
divided by Minority
Interest + Stockholders'
Equity 12.9 14.1 13.7
Ratio of Total Liabilities
divided by
Stockholders' Equity 15.0 16.6 16.9
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