Accredited Reports Q3 Results.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), a mortgage company specializing in non-prime residential mortgage loans, today announced results for the quarter ended September 30, 2006. Net income for the quarter ended September 30, 2006 was $18.4 million, or $0.83 per share on a fully-diluted basis, down from $41.3 million for the comparable period in 2005. Total net revenue for the quarter was $114.3 million, down from $151.8 million for the comparable period in 2005. Commenting on the third quarter results, Accredited's 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 Konrath said, "As previously reported, our recent performance has been negatively impacted by fierce pricing competition, ongoing product contraction, anticipated higher delinquencies and losses, and activities associated with the acquisition of Aames Investment Corporation that was effective on October 1. Despite these headwinds, Accredited originated loans at a profit, maintained our low cost structure, and closed the acquisition of Aames on schedule. "While we are not satisfied with the third quarter profits and portfolio trends, we remain committed to, and confident in, our prospect for long-term growth and profitability. In this context, the Aames acquisition will help to immediately expand our most profitable origination channel, the retail platform." Operational Highlights * The Company closed the acquisition of Aames Investment Corporation effective October 1, 2006 for a total purchase price of $235 million, which included $77.6 million in cash and issuance of approximately 4.4 million shares of its common stock. * Net cost to originate for the quarter was 1.53%, an improvement of 4 basis points from the same period last year. * Loans on-balance sheet reached $9.3 billion at September 30, 2006, an increase of $254 million, or 2.8%, from September 30, 2005. * Net interest income after provision was $59.5 million, compared to $64.1 million in Q3 2005. * Mortgage origination volume was $4.2 billion in Q3 2006, compared to $4.5 billion in Q3 2005. * On September 14, 2006, the Board of Directors authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: the company to repurchase up to 5 million shares of the company's stock from time-to-time through October 1, 2007. Through November 3, 2006, the company has purchased 750,000 shares of the company common stock under the repurchase program. [TABLE OMITTED] The decrease in total net revenues from Q3 2005 to Q3 2006 is primarily a result of a decrease in gain on sale from $81.9 million in Q3 2005 to $47.3 million in Q3 2006. The decrease in the gain on sale was largely due to lower premiums on loans sold and higher provisions for repurchases and premium recapture. In addition, the provision for market valuation on loans held for sale increased due to higher delinquency. The company's average whole loan premiums, net of hedging, decreased from 3.08% in Q3 2005 to 1.86% in Q3 2006. Additional detail on this calculation can be found in the Financial Summary at the end of this release. Net interest income after provision declined to $59.5 million in Q3 2006 from $64.1 million in Q3 2005 due primarily to lower spreads associated with pricing competition and the flattening
The flattening, ellipticity, or oblateness of an oblate spheroid is the "squashing" of the spheroid's pole, down towards its equator. yield curve. Provision for losses equaled $9.7 million in Q3 2006, compared to $15.4 million in Q3 2005. The decrease in the provision for losses reflects a decrease in the portfolio over the comparable period. The reserve balance on loans held for investment increased as a percentage of the principal balance outstanding to 1.7%, compared to 1.5% at December 31, 2005 and 1.4% at September 30, 2005. 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 12.3% from $78.5 million in Q3 2005 to $88.1 million in Q3 2006. Salaries, wages and benefits expense increased by 12.8% from $48.4 million in Q3 2005 to $54.6 million in Q3 2006 primarily due to growth in staff and related salaries, partially offset by lower bonuses and commissions. General, administrative, and other expenses increased by 11.6% from $30.1 million in Q3 2005 to $33.6 million in Q3 2006 primarily because of the additional investment in technology and infrastructure. 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 $4.2 billion of mortgage loans for the quarter ended Q3 2006, compared to $4.5 billion of mortgage loan originations in Q3 2005, a decrease of 5.9%. For the same time period, volume from the retail channel increased from $456.9 million in Q3 2005 to $501.5 million in Q3 2006, an increase of 9.8%. This volume did not include any retail volume from the Aames acquisition, which occurred on October 1, 2006. Wholesale and retail originations for the quarter represented 88% and 12% of total loan production, respectively, reflecting a higher growth rate in the retail channel. The company's net cost to originate mortgage loans was 1.53% for the quarter ended September 30, 2006 compared to 1.57% in Q3 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 Q3 2006, $3.7 billion of mortgage loans were sold in whole loan sales for cash, and the company completed the funding of the $1.4 billion 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. initiated in Q2 2006 by delivering $350 million in mortgage loans to finalize fi·nal·ize tr.v. fi·nal·ized, fi·nal·iz·ing, fi·nal·iz·es To put into final form; complete or conclude: "They have jointly agreed ... the securitization. At the end of the quarter, $2.0 billion of mortgage loans were held for disposition. 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 $9.4 billion at September 30, 2006. The serviced portfolio increased 2.4% from $9.2 billion at September 30, 2005. This was primarily due to the company's securitization program. Delinquent 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 ) comprised 5.44% of the serviced portfolio at September 30, 2006, compared to 2.47% at December 31, 2005 and 1.95% at September 30, 2005. Liquidity The company had approximately $6.7 billion in credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities at September 30, 2006. At the end of September, the company had used $2.0 billion of the available capacity. The company had $351 million in available cash and additional liquidity at September 30, 2006. Effective November 6, 2006, the company added a $100 million working capital credit facility. Advances on the committed facility Committed Facility A credit facility whereby terms and conditions are clearly defined by the lending institution and imposed upon the borrowing company. Notes: In committed facilities, the borrowing companies must meet specific requirements set forth by the lending are secured by the company's ownership interest in the residual cash flows from the 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. loans held for investment. 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 12.3 times at September 30, 2006. Additional detail concerning the company's leverage measures can be found in the Financial Summary at the end of this release. Conference Call Accredited will host a conference call for analysts and investors on November 6 at 11:00 a.m. Eastern (8:00 a.m. Pacific) to discuss the company's financial results for the third 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 mgimenez@accredhome.com or 858-676-2155 to receive details regarding the call. The call is being web cast 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 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. 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 prospect for long-term growth and profitability; statements concerning the company's loan origination volumes and the impact of market conditions and competition on those volumes; the synergies, economies of scale and employee gains following the company's recently completed acquisition of Aames Investment Corporation; 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 ability to attract and retain qualified personnel; predictions concerning the credit quality of the company's loan portfolio; and the company's anticipated reserve levels, levels of repurchases and premium recapture, and loss experience; the company's outlook on the competitive and regulatory environments, generally, and the impact that those environments will have on weighted average coupons 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. , 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 achieve synergies, economies of scale, and employee gains following the completion of the merger with Aames; interest rate volatility 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 reports on Form 10-Q Form 10-Q See 10-Q. for the first and second quarters of 2006, 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. 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. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] 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. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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