Accredited Reports Record 2002 Annual and Q4 Results; Annual Net Income Up 66%, Revenues Rise 69%; Q4 Net Income Up 184%, Revenues Grow 100%.Business Editors SAN DIEGO--(BUSINESS WIRE)--March 17, 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 annual and fourth quarter results for the period ended Dec. 31, 2002. The company, founded in 1990, closed its initial public offering, and will close the related over-allotment option, during the first quarter of 2003 with a combined sale of 10,557,500 shares of common stock (5,414,485 shares sold by stockholders and 5,143,015 new shares issued by the company) and concurrently con·cur·rent adj. 1. Happening at the same time as something else. See Synonyms at contemporary. 2. Operating or acting in conjunction with another. 3. Meeting or tending to meet at the same point; convergent. completed the private placement of 510,697 common shares, 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. $39.0 million. Net income for the year ended Dec. 31, 2002 was $28.8 million, an increase of 66% over $17.4 million for the year ended Dec. 31, 2001. Total revenues increased 69% to $200.8 million from $119.1 million the prior year. Net income for the quarter ended Dec. 31, 2002 was $5.7 million, an increase of 184% over net income of $2.0 million for the comparable period in 2001. Total revenues for the quarter doubled to $61.0 million from $30.4 for the comparable period in 2001. Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. James James, person in the Bible James, in the Gospel of St. Luke, kinsman of St. Jude. The original does not specify the relationship. James, rivers, United States James. Konrath said, "Accredited's performance is a testament to the company's strategic growth strategy and profit culture, as well as a robust mortgage market. During 2002, the company made the strategic decision to increase the size of its owned portfolio in order to increase interest income and build a more consistent source of earnings in future years. In this regard, the company completed two securitizations structured as financings totaling $749.2 million, of which $541.8 million was completed in the fourth quarter." Konrath added, "While we plan to generate the majority of our revenue from whole loan sales, we also plan to grow our owned portfolio through securitizations structured as financings, which is consistent with our objective of predominately generating cash based earnings rather than non-cash gain on sale revenue." 2002 Operational Highlights -- Record mortgage origination volume of $4.3 billion in 2002, compared to $2.3 billion in 2001, an increase of 85%. -- Record mortgage servicing portfolio of $2.3 billion at year-end, compared to $1.3 billion at year-end 2001, an increase of 74%. This was primarily a result of an increase in the owned portfolio. Contributing to this increase were two securitizations structured as financings totaling $749.2 million and loans held for sale of $972.3 million. -- Record whole loan sales of $3.0 billion in 2002 compared to $1.6 billion in 2001, an increase of 86%. -- Net interest income (Interest Income less Interest Expense) of $40.0 million in 2002, compared to $12.0 million in 2001, an increase of 234%. This was primarily due to the larger loan portfolio. Financial Summary ($000)
FY 2001 FY 2002 Q4 2001 Q4 2002
Total Revenues $119,092 $200,779 $30,429 $60,967
Total Expenses 89,110 152,784 26,989 51,478
------ ------- ------ ------
Income before Taxes 29,982 47,995 3,440 9,489
Income Taxes 12,583 19,198 1,434 3,796
------ ------ ----- -----
Net Income 17,399 28,797 2,006 5,693
The 69% increase in Total Revenues from 2001 to 2002 resulted primarily from increases in the gain on sale of loans and interest income. The gain on sale of loans increased 51% from $81.6 million in 2001 to $122.9 million in 2002 due primarily to higher whole loan sales volume partially offset by a decrease in the average net whole loan sale premium. Interest income increased 145% from $27.7 million in 2001 to $67.9 million in 2002 due primarily to an increase in 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 increased 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 completion of two securitizations structured as financing, and a longer holding period for loans held for sale. Total expenses increased 71% from $89.1 million in 2001 to $152.8 million in 2002 due primarily to growth in loan volume and the size of the loan portfolio. Compensation expenses increased 69% from $44.1 million in 2001 to $74.6 million in 2002 due to the 49% growth in the number of employees and increased commission and bonus costs related to higher loan originations and profits. Interest expenses increased 77% from $15.8 million in 2001 to $27.9 million in 2002 due primarily to an increase in the average outstanding borrowings, partially offset by a decrease in the average borrowing rate. Provision for losses increased 160% from $6.8 million in 2001 to $17.7 million in 2002 due primarily to increases in reserves for losses for the growing portfolio. General, administrative, and other expenses increased 46% from $22.4 million in 2001 to $32.6 million in 2002 due to increases in loan volume, number of staff and number of locations. Loan Originations The company originated a record $4.3 billion of mortgage loans in 2002, compared to $2.3 billion in 2001, an increase of 85%. Mortgage loan originations for the quarter ended Dec. 31, 2002 totaled $1.4 billion, compared to $765.8 million of mortgage loan originations in the comparable period for 2001, also an increase of 85%. Wholesale and retail originations in 2002 represented 91% and 9%, respectively, of total loan production, virtually unchanged from the prior year. For loan production in the fourth quarter of 2002, wholesale and retail channels represented 90% and 10%, respectively. 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 decreased to 2.3% in 2002, compared to 2.7% in 2001. For the quarter ended Dec. 31, 2002, the company's net cost to originate mortgage loans decreased to 2.1% compared to 2.5% for the comparable period in 2001. Loan Dispositions During 2002, the company sold or 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. a total of $3.9 billion in mortgage loans, which includes whole loan sales for cash of $3.0 billion, loans sold with retained interest Retained interest (also colloquially known as a payout penalty) is future, currently unpaid, interest that some lenders add to the remaining principal of a loan to determine a payout figure in the event that the loan is terminated before the completion of the original term. of $75.8 million, and loans pooled and sold in securitizations structured as financings of $749.2 million. In 2001, Accredited sold a total of $1.9 billion in mortgage loans, which included $1.6 billion in whole loan sales for cash and $299.8 million of loans sold with retained interest. While the company continues to generate the majority of its earnings and cash flows from whole loan sales, Accredited also intends to engage periodically in securitizations as a 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. During the third and fourth quarters of 2002, the company completed two securitizations structured as financings totaling $749.2 million. 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 years. The company intends to continue using a combination of various loan disposition strategies. 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 $2.3 billion at year end 2002, compared to $1.3 billion at year end 2001, an increase of 74%. This was primarily due to an increase in the loans held for sale and securitized 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) were 2.7% of the serviced portfolio at year end 2002, compared to 5.5% at year end 2001. 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 collection practices, as well as the increase in the servicing portfolio in the latter half of 2002. Liquidity Accredited maintains ample balance sheet liquidity. The company had $1.2 billion in warehouse credit capacity at year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2002 and $21.1 million in available cash. 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 S-1 on file with the Securities and Exchange Committee for a more complete description of risks. Earnings Guidance for First Quarter 2003 The company expects 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 for the first quarter to be in a range of $0.80 to $0.85, based on an estimated weighted average of 17.4 million shares outstanding. Originations at Accredited have remained robust despite a forecast of a general decline in the total mortgage market. 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 $1.75 to $2.00 per share, based on an estimated weighted average of 20 million 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 generally consistent with 2002 and that the other factors above are slightly more favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. than described. Although the political and economic climates remain turbulent, the first quarter 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 March 18, 2003 at 11 a.m. (Pacific Time) to discuss the company's financial results for the 2002 fourth quarter and full year. 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 webcast 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 first quarter and 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 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 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 amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. S-1 Registration Statement filed with the Securities and Exchange Commission ("SEC") on Feb. 14, 2003 and other SEC filings. Accredited Home Lenders: Financial Summary
Year Ended Three Months Ended
December 31, December 31,
---------------------- --------------------
2001 2002 2001 2002
---------------------- --------------------
(dollars in thousands)
Operating Data:
Gain on sale of loans $81,621 $122,877 $20,479 $32,051
Interest Income 27,714 67,861 9,506 26,529
Loan servicing income 6,308 8,371 2,102 2,185
Net gain (loss) on
mortgage-related
securities and
derivatives 3,433 1,154 (1,675) 162
Other income 16 516 17 40
---------------------- --------------------
Total revenues 119,092 200,779 30,429 60,967
---------------------- --------------------
Salaries, wages and
benefits 44,139 74,576 13,243 22,782
General, administrative,
and other expenses 22,423 32,648 6,146 10,195
---------------------- --------------------
Total operating expenses 66,562 107,224 19,389 32,977
---------------------- --------------------
Interest Expense 15,761 27,891 3,669 11,133
Provision for losses 6,787 17,669 3,931 7,368
---------------------- --------------------
Total expenses 89,110 152,784 26,989 51,478
---------------------- --------------------
Income before income taxes 29,982 47,995 3,440 9,489
Income taxes 12,583 19,198 1,434 3,796
---------------------- --------------------
Net income $17,399 $28,797 $2,006 $5,693
====================== ====================
Basic earnings per share $3.36 $4.99 $0.35 $0.98
====================== ====================
Diluted earnings per share $1.32 $1.98 $0.15 $0.39
====================== ====================
Pro forma basic earnings
per share (1) $1.37 $2.16 $0.15 $0.43
====================== ====================
Pro forma diluted earnings
per share (1) $1.29 $1.98 $0.14 $0.39
====================== ====================
Year Ended Three Months Ended
December 31, December 31,
---------------------- --------------------
2001 2002 2001 2002
---------------------- --------------------
(dollars in thousands)
Other Data:
Wholesale originations $2,117,250 $3,900,186 $698,498 $1,275,073
Retail originations $207,033 $401,162 $67,347 $142,802
---------------------- --------------------
Total mortgage loan
originations $2,324,398 $4,302,891 $765,845 $1,418,271
Wholesale channel (2) 2.7% 2.3% 2.5% 2.2%
Retail channel (2) 3.0% 2.1% 2.4% 1.7%
---------------------- --------------------
Net cost to originate (2) 2.7% 2.3% 2.5% 2.1%
Weighted average coupon
rate of mortgage loan
originations 9.3% 8.4% 8.8% 7.9%
Weighted average credit
score (3) 619 630 624 635
Whole loan sales $1,640,129 $3,044,890 $420,308 $763,386
Loans sold with retained
interests $299,821 $75,839 $44,710 $-
Mortgage loans
securitized / On
balance sheet $- $749,215 $- $541,824
---------------------- --------------------
Total loan sales and
securitizations $1,939,950 $3,869,944 $465,018 $1,305,210
Net premium received on
whole loan sales (4) 4.4% 4.1% 4.7% 4.3%
Loans held for
disposition $535,430 $977,508 $535,430 $977,508
Securitized/on balance
sheet $- $742,848 $- $742,848
Sold servicing retained
or securitized/off
balance sheet $762,620 $542,913 $762,620 $542,913
---------------------- ----------------------
Total serviced loans at
period end $1,298,050 $2,263,269 $1,298,050 $2,263,269
Total number of leased
locations at period end 27 31 27 31
Total number of employees 866 1,294 866 1,294
Asset Quality Data
(Serviced Portfolio):
Total delinquent at
period end (5) 5.5% 2.7% 5.5% 2.7%
Annual losses on serviced
portfolio as a
percentage of average
serviced assets 0.9% 0.9% 1.4% 0.9%
(1) The pro forma earnings pro forma earnings Income not necessarily calculated in accordance with generally accepted accounting principles. For example, a company might report pro forma earnings that exclude depreciation expense and nonrecurring expenses such as restructuring costs. per share data has been presented to show the effects of the conversion of our outstanding 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. , warrants and convertible debt had they been converted to common stock as of the beginning of the period (does not include new 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. shares) (2) Net cost to originate is defined as 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. , prior to deferred origination costs, plus yield spread premiums paid, less points and fees collected, less loan servicing related costs. (3) Represents borrowers' average credit score at origination obtained from one or more of the three principal credit bureaus. (4) 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 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. . (5) Delinquent is defined as loans that are 30 or more days delinquent, including loans in foreclosure foreclosure Legal proceeding by which a borrower's rights to a mortgaged property may be extinguished if the borrower fails to live up to the obligations agreed to in the loan contract. and loans converted into 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 (REO reo Noun NZ a language [Maori] ).
December 31,
----------------------
2001 2002
----------------------
Balance Sheet Data:
Mortgage loans held for
sale, net $531,698 $972,349
Securitized loans, net - 743,375
Mortgage-related
securities, at fair
value 22,290 8,356
Mortgage servicing
rights, net 4,826 3,116
Other Assets 44,224 80,134
----------------------
Total Assets 603,038 1,807,330
Total warehouse and
residual interest
financing 547,063 962,285
Securitization bond
financing - 737,548
Convertible debt 3,000 3,000
Other Liabilities 18,971 41,375
----------------------
Total Liabilities 569,034 1,744,208
Redeemable, convertible
preferred stock 5,113 5,113
Total stockholders'
equity 28,891 58,009
----------------------
Total Liabilities and
Stockholders' Equity 603,038 1,807,330
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