Accredited Reports Q2 2006 Results; Net Income up 4% in Q2 2006, Net Cost to Originate down 22%, Loans On-Balance Sheet up 16% from 2005.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 NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :LEND Lend To provide money temporarily on the condition that it or its equivalent will be returned, often with an interest fee. ), a mortgage company specializing in non-prime residential mortgage loans, today announced results for the quarter ended June June: see month. 30, 2006. Net income for the quarter ended June 30, 2006 was $41.2 million, or $1.84 per share on a fully-diluted basis, an increase of 4.2% over net income of $39.6 million for the comparable period in 2005. Total net revenues for the quarter increased by 6.6% to $153.2 million from $143.7 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, "We are pleased with profit and cost results in the second quarter and the first half of 2006 that presented some of the most challenging market conditions in recent memory. Our unwavering commitment to originating profitable loans at the lowest cost continues to generate margins that act as a counterweight coun·ter·weight n. 1. A weight used as a counterbalance. 2. A force or influence equally counteracting another. coun to continuing intense price competition, fluctuating fluc·tu·ate v. fluc·tu·at·ed, fluc·tu·at·ing, fluc·tu·ates v.intr. 1. To vary irregularly. See Synonyms at swing. 2. To rise and fall in or as if in waves; undulate. v. secondary market appetites, and higher funding costs." Mr. Konrath added, "During the second quarter, we were also very pleased to announce signing a definitive agreement to acquire Aames Aames is a surname and may refer to:
This page or section lists people with the surname Aames. Investment Corporation, a 52-year old non-prime mortgage company. We anticipate that the combined company will nearly triple Accredited's retail presence, provide significant cost and operational synergies, and improve scale throughout the 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 and servicing operations. Equally important is that the Aames transaction will bring a cadre (company) CADRE - The US software engineering vendor which merged with Bachman Information Systems to form Cayenne Software in July 1996. of experienced non-prime mortgage professionals to join the 2,900 world-class world-class adj. 1. Ranking among the foremost in the world; of an international standard of excellence; of the highest order: a world-class figure skater. 2. employees at Accredited." Second Quarter Operational Highlights --Net cost to originate o·rig·i·nate v. 1. To bring into being; create. 2. To come into being; start. for the quarter was 1.34%, an improvement of 39 basis points from the same period last year and the lowest in the company's history that was previously achieved in the fourth quarter of 2005. --Loans on-balance sheet reached $9.5 billion at June 30, 2006, an increase of $1.3 billion, or 15.6%, from June 30, 2005. --Net interest income after provision (interest income less interest expense and provision for losses) of $65.0 million, compared to $54.9 million in Q2 2005, an increase of 18.4%. As a percentage of total net revenues, net interest income after provision was 42.4% in Q2 2006. --Mortgage origination volume of $4.08 billion in Q2 2006, compared to $4.14 billion in Q2 2005, a decrease of 1.5%. --The company signed a definitive agreement on May 24 to acquire Aames Investment Corporation (NYSE NYSE See: New York Stock Exchange : AIC AIC Association des Infermières Canadiennes. ). On June 23, the company purchased the assets of the wholesale operation of Aames for a cash price of $4 million. The integration of the wholesale platform, which added 65 employees at the end of the second quarter, began on June 26 and was completed on July July: see month. 10 with an additional 94 employees joining Accredited's wholesale operation.
Financial Summary ($000)
% Change % Change
Q2 2006 from Q2 05 YTD 2006 from YTD 05
-------- ---------- --------- -----------
Total Net Revenues $153,167 6.6% $294,862 10.6%
Total Expenses 81,150 8.0% 159,810 11.6%
--------- ---------
Income before Income Taxes
and Minority Interest $72,017 5.0% $135,052 9.3%
========= =========
Net Income $41,250 4.2% $77,073 8.8%
========= =========
The 6.6% increase in total net revenues from Q2 2005 to Q2 2006 resulted primarily from an increase in the portfolio and higher whole loan sales, which were partially offset by a lower gain on sale of loans. Net interest income after provision increased 18.4% from $54.9 million in Q2 2005 to $65.0 million in Q2 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 Q2 2005 resulted primarily from four large quarterly securitizations structured as financings. Provision for losses decreased 27.8% from Q2 2005 to Q2 2006 due primarily to lower growth in loans held for investment, which was $46.3 million this quarter, compared to $611.9 million for the same period in 2005. However, the reserve balance on loans held for investment increased in dollars and as a percentage of the principal balance outstanding from last year and the last quarter. The reserve rate is now 1.6%, compared to 1.4% at June 30, 2005 and 1.5% at March 31, 2006. The gain on sale of loans decreased 4.6% from $84.5 million in Q2 2005 to $80.7 million in Q2 2006 primarily due to lower premiums, offset in part by higher volume of whole loan sales. 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 3.12% in Q2 2005 to 2.30% in Q2 2006. 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 8.0% from $75.1 million in Q2 2005 to $81.1 million in Q2 2006 primarily to support the increase in the serviced loan portfolio. Salaries, wages and benefits expense decreased by 0.8% from $49.7 million in Q2 2005 to $49.3 million in Q2 2006 due to the decrease in incentive compensation associated with the lower value per loan originated. General, administrative, and other expenses increased by 25.4% from $25.4 million in Q2 2005 to $31.9 million in Q2 2006 because of the increase in the serviced loan portfolio, increased depreciation expense due to additional investment in technology, increased leasing costs associated with expansion of five wholesale origination centers and the San Diego headquarters' office, and higher marketing expenses supporting increased production from the retail channel. 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. The company originated $4.08 billion of mortgage loans for the quarter ended June 30, 2006, compared to $4.14 billion of mortgage loan originations in Q2 2005, a decrease of 1.5%. Volume from the retail channel grew from $363.7 in Q2 2005 million to $518.7 million for the same period in 2006, an increase of 42.6%. 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. The company's net cost to originate mortgage loans was 1.34% for the quarter ended June 30, 2006 compared to 1.73% in Q2 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 Q2 2006, $3.7 billion of mortgage loans were sold in whole loan sales for cash, and the company issued $1.4 billion in asset-backed bonds. Mortgage loans totaling $1.1 billion were delivered into 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. structured as a financing. The $352.3 million difference between the asset-backed bonds issued and the loans delivered through June 30 is reflected as restricted cash. In July, $173.3 million additional collateral collateral (kəlăt`ərəl), something of value given or pledged as security for payment of a loan. Collateral consists usually of financial instruments, such as stocks, bonds, and negotiable paper, rather than physical goods, although in the form of mortgage loans was delivered to the securitization, and the remaining amount to complete the securitization will be delivered in August. At the end of the quarter, $315.7 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 $1.6 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 $73.5 million of liquidating off-balance sheet securitizations, totaled $9.5 billion at June 30, 2006. The serviced portfolio increased 14.9% from $8.3 billion at June 30, 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 3.76% of the serviced portfolio at June 30, 2006, compared to 2.47% at December December: see month. 31, 2005 and 1.79% at June 30, 2005. In spite of in opposition to all efforts of; in defiance or contempt of; notwithstanding. See also: Spite the increase, 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 ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $5.2 billion in warehouse credit capacity at June 30, 2006. At the end of June, the company had used $1.6 billion of the available capacity. The company had $316.4 million in available cash and additional liquidity at June 30, 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 12.2 times at June 30, 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 The company revises its full year 2006 earnings per fully-dilutive share guidance to a range of $4.50 to $5.00. As reported in May 2006, the company anticipates the dilutive impact of the Aames merger on earnings per share in 2006 to be in the range of $1.00 to $1.35, depending on the closing date. The most significant items in further revising the 2006 forecast include:
-- Lower than anticipated origination volume
-- Net gain on whole loan sales below previous expectations
The forecast for the balance of the year assumes:
-- Completion of the Aames acquisition in early October
-- Implementation of more competitive pricing in the company's
wholesale platform resulting in:
-- Lower net gains on whole loan sales
-- Year-over-year volume growth
-- Steady net cost to originate
Conference Call Accredited will host a conference call for analysts and investors on August 9, 2006 at 11:00 a.m. Eastern (8:00 a.m. Pacific) to discuss the company's financial results for the second 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 planned acquisition of Aames Investment Corp. and the separate acquisition of Aames wholesale business in connection therewith there·with adv. 1. With that, this, or it. 2. In addition to that. 3. Archaic Immediately thereafter. Adv. 1. ; the synergies, economies of scale and employee gains resulting from those acquisitions; the expected completion date for the company's merger with Aames; the company's expected net earnings for the full year 2006; the projected dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. resulting from the Aames merger; the company's projected growth in loan originations; the gains the company receives in connection with its whole loan sales; 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. 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: the ability of the company to close its merger with Aames and the timing of the closing, if at all; the ability of the company to achieve synergies, economies of scale, and employee gains following the completion of the merger; 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, its report on Form 10-Q Form 10-Q See 10-Q. for the first quarter of 2006, and other documents filed with the SEC. Additional Information On July 14, 2006, in connection with the pending merger transaction, Accredited Home Lenders Holding Co. ("Accredited") filed with the SEC a Registration Statement on Form S-4 containing a Proxy Statement Proxy Statement A document containing the information that a company is required by the SEC to provide to shareholders so they can make informed decisions about matters that will be brought up at an annual stockholder meeting. / Prospectus A document, notice, circular, advertisement, letter, or communication in written form or by radio or television that offers any security for sale, or confirms the sale of any security. for the stockholders of Aames Investment Corporation ("Aames") and the stockholders of Accredited. Stockholders are urged to read the Registration Statement and the Proxy Statement / Prospectus, as well as all other relevant documents filed or to be filed with the SEC, because they contain important information about Accredited, Aames and the proposed transaction. The Registration Statement was declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. effective by the SEC on July 26, 2006, and the final Proxy Statement / Prospectus has been mailed to stockholders of Aames and stockholders of Accredited. Stockholders are able to obtain the Registration Statement, the Proxy Statement / Prospectus and any other relevant filed documents for free at the SEC's website (www.sec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. ). These documents can also be obtained for free from Accredited by directing a request to Investor Relations, 15090 Avenue of Science, San Diego, CA 92128. Accredited, Aames and their respective directors and officers may be deemed to be participants in the solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual of approvals from Aames stockholders in respect of the proposed transaction. Information regarding the participants of Accredited and Aames is available in the Proxy Statement / Prospectus, which was filed with the SEC. Additional information regarding the interests of such participants was included in the Registration Statement containing the Proxy Statement / Prospectus that was 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 (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
2006 2005 2006 2005
--------- ---------- --------- ---------
(dollars in thousands)
Income Statement:
Interest income $205,050 $141,154 $399,507 $266,047
Interest expense (126,976) (68,124) (239,111) (122,451)
--------- ---------- --------- ---------
Net Interest income 78,074 73,030 160,396 143,596
Provision for losses (13,062) (18,100) (29,599) (30,950)
--------- ---------- --------- ---------
Net interest income
after provision 65,012 54,930 130,797 112,646
Gain on sale of loans 80,673 84,520 151,226 145,895
Other income 7,482 4,232 12,839 8,179
--------- ---------- --------- ---------
Total net revenues 153,167 143,682 294,862 266,720
--------- ---------- --------- ---------
Salaries, wages and
benefits 49,274 49,696 96,800 92,123
General, administrative,
and other expenses 31,876 25,421 63,010 51,048
--------- ---------- --------- ---------
Total operating expenses 81,150 75,117 159,810 143,171
--------- ---------- --------- ---------
Income before income
taxes and minority
interest 72,017 68,565 135,052 123,549
Income tax provision 28,272 26,499 52,990 47,701
Minority interest -
dividends on
preferred stock of
subsidiary 2,495 2,494 4,989 4,989
--------- ---------- --------- ---------
Net income $41,250 $39,572 $77,073 $70,859
========= ========== ========= =========
Basic earnings per share $1.90 $1.89 $3.57 $3.39
========= ========== ========= =========
Diluted earnings per share $1.84 $1.81 $3.45 $3.24
========= ========== ========= =========
Weighted average shares
outstanding:
Basic 21,676 20,982 21,615 20,917
========= ========== ========= =========
Diluted 22,358 21,872 22,336 21,860
========= ========== ========= =========
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ------------------------
2006 2005 2006 2005
----------- ----------- ----------- ------------
(dollars in thousands)
Other Data:
Originations:
Wholesale $3,560,504 $3,775,726 $6,695,171 $6,685,556
Retail 518,691 363,695 971,565 683,738
----------- ----------- ----------- ------------
Total mortgage loan
originations $4,079,195 $4,139,421 $7,666,736 $7,369,294
Weighted average
coupon rate of
mortgage loan
originations 8.47% 7.64% 8.51% 7.61%
Weighted average
credit score (1) 638 638 637 638
Loan sales and
securitizations:
Whole loan sales $3,674,723 $2,831,815 $6,715,256 $4,936,782
Mortgage loans
securitized 1,050,076 1,007,809 2,053,827 1,925,038
----------- ----------- ----------- ------------
Total loan sales and
securitizations $4,724,799 $3,839,624 $8,769,083 $6,861,820
Net profit margin on
whole loan sales:
Gain on whole loan
sales (2) 1.96% 3.16% 1.97% 3.06%
Net gain (loss) on
derivatives (2) 0.34% -0.04% 0.24% 0.12%
----------- ----------- ----------- ------------
Net premium received
on whole loan sales (2) 2.30% 3.12% 2.21% 3.18%
Net origination
points and fees 0.80% 0.34% 0.78% 0.36%
Loan origination
expenses -2.14% -2.07% -2.24% -2.19%
----------- ----------- ----------- ------------
Net cost to
originate (3) -1.34% -1.73% -1.46% -1.83%
----------- ----------- ----------- ------------
Net profit margin on
whole loan sales 0.96% 1.39% 0.75% 1.35%
=========== =========== =========== ============
Annualized losses on
serviced portfolio as a
percentage of average
serviced assets 0.41% 0.26% 0.33% 0.26%
Net interest margin
components (4)
Warehouse
Interest income 8.10% 7.56% 8.15% 7.50%
Interest expense -5.63% -3.98% -5.40% -3.81%
Commitment fees
expense -0.19% -0.30% -0.20% -0.38%
----------- ----------- ----------- ------------
Spread 2.28% 3.28% 2.55% 3.31%
=========== =========== =========== ============
Securitizations
Interest income 7.09% 6.87% 7.02% 6.86%
Prepayment penalty
income and other 0.79% 0.78% 0.76% 0.74%
Interest expense -5.11% -3.65% -4.92% -3.53%
Net hedging gains
and amortization of
bond issue costs 0.41% 0.02% 0.35% 0.11%
----------- ----------- ----------- ------------
Spread 3.18% 4.02% 3.21% 4.18%
=========== =========== =========== ============
Net Interest Margin 3.08% 3.98% 3.19% 4.10%
At June 30, At Dec. 31, At June 30,
----------- ------------- -----------
2006 2005 2005
----------- ------------- -----------
(dollars in thousands)
Serviced Portfolio:
Loans held for sale $1,605,761 $2,276,875 $2,211,246
Loans held for investment 7,847,463 7,339,097 5,963,211
Loans sold servicing retained or
securitized/off balance sheet 73,511 90,181 113,460
----------- ------------- -----------
Total serviced portfolio
at period end $9,526,735 $9,706,153 $8,287,917
=========== ============= ===========
Total delinquent at period end (5) 3.76% 2.47% 1.79%
Total number of employees 2,902 2,762 2,503
(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.
(3) Net cost to originate is defined as total operating expenses,
less loan servicing related costs, plus yield spread premiums
paid, 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).
(6) Total number of employees includes 65 from the purchase of
Aames' wholesale division.
At June 30, At Dec. 31, At June 30,
------------ ----------- -----------
2006 2005 2005
------------ ----------- -----------
(dollars in thousands)
Balance Sheet Data:
Cash and cash equivalents $457,462 $90,921 $112,159
Accrued interest receivable 45,990 42,878 36,338
Mortgage loans held for sale, net 1,568,985 2,252,252 2,190,054
Mortgage loans held for
investment, net 7,640,643 7,195,872 5,874,220
Derivative assets, including
margin account 107,748 89,409 36,750
Other assets 230,250 181,914 98,165
------------ ----------- -----------
Total Assets $10,051,078 $9,853,246 $8,347,686
============ =========== ===========
Credit facilities $1,557,109 $2,805,119 $2,708,663
Securitization bond financing 7,643,466 6,240,820 5,044,210
Other liabilities 88,348 155,973 54,453
------------ ----------- -----------
Total Liabilities 9,288,923 9,201,912 7,807,326
Minority interest - preferred
securities of subsidiary 97,922 97,922 97,922
Total Stockholders' Equity 664,233 553,412 442,438
------------ ----------- -----------
Total Liabilities and
Stockholders' Equity $10,051,078 $9,853,246 $8,347,686
============ =========== ===========
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. A reconciliation
of how the gain on sale components, net cost to originate and
adjusted leverage are calculated is set forth below.
Regulation G Disclosure related to Gain on Sale
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
(dollars in thousands)
Whole loan sales $3,674,723 $2,831,815 $6,715,256 $4,936,782
Gain on whole loan
sales $72,155 $92,032 $132,051 $154,070
Net gain (Loss) on
derivatives 12,317 (998) 16,321 5,763
----------- ----------- ----------- -----------
Net premium received
on whole loan sales 84,472 91,034 148,372 159,833
Provision for
Reserves (1) (11,764) (2,669) (10,257) (8,810)
Direct loan origination
fees (expenses) 7,965 (3,845) 13,111 (5,127)
----------- ----------- ----------- -----------
Total net gain on
sale of loans per
Financials $80,673 $84,520 $151,226 $145,896
=========== =========== =========== ===========
As % of whole loan sales (2)
Gain on whole loan sales 1.96% 3.16% 1.97% 3.06%
Net gain on derivatives 0.34% -0.04% 0.24% 0.12%
----------- ----------- ----------- -----------
Net premium received on
whole loan sales 2.30% 3.12% 2.21% 3.18%
(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 on
whole loan sales and net gain (loss) in derivatives, respectively,
by whole loan sales.
Regulation G Disclosure related to Net Cost to Originate
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
(dollars in thousands)
Total mortgage loan
originations $4,079,195 $4,139,421 $7,666,736 $7,369,294
----------- ----------- ----------- -----------
Total operating
expenses $81,150 $75,117 $159,810 $143,171
Add deferred direct
loan origination
expenses 14,063 16,536 26,860 29,926
Less servicing and
insurance cost (1) (8,042) (5,664) (14,989) (11,236)
----------- ----------- ----------- -----------
Loan origination
expenses 87,171 85,989 171,681 161,861
as % of volume 2.14% 2.08% 2.24% 2.20%
Less deferred net
origination points and
fees (32,706) (14,328) (59,813) (26,902)
----------- ----------- ----------- -----------
Net cost to originate $54,465 $71,661 $111,868 $134,959
=========== =========== =========== ===========
as % of volume 1.34% 1.73% 1.46% 1.83%
(1) Servicing Cost consists of direct expenses and allocated
corporate overhead included in operating expenses.
Regulation G Disclosure related to Adjusted Leverage
At June 30, At Dec. 30, At June 30,
----------- -------------- -----------
2006 2005 2005
----------- -------------- -----------
(dollars in thousands)
Total Liabilities $9,288,923 $9,201,912 $7,807,326
----------- -------------- -----------
Minority interest - preferred
securities of subsidiary $97,922 $97,922 $97,922
Total Stockholders' Equity 664,233 553,412 442,438
----------- -------------- -----------
Total Minority Interest and
Stockholders' Equity $762,155 $651,334 $540,360
=========== ============== ===========
Ratio of Total Liabilities
divided by Minority Interest +
Stockholders' Equity 12.2 14.1 14.4
Ratio of Total Liabilities
divided by Stockholders' Equity 14.0 16.6 17.6
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