Delta Financial Corporation Reports First Quarter Results.Business Editors WOODBURY, N.Y.--(BUSINESS WIRE)--May 4, 2000 Delta Financial Corporation (NYSE NYSE See: New York Stock Exchange :DFC DFC - A dataflow language. ["Data Flow Language DFC: Design and Implementation", S. Toshio et al, Systems and Computers in Japan, 20(6):1- 10 (Jun 1989)]. ) today announced results for the three months ended March 31, 2000. Delta reported net income of $1.8 million, or $0.11 per share (basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. ) for the quarter ended March 31, 2000. This compares to net income of $5.7 million, or $0.37 per share, reported for the quarter ended March 31, 1999. The decrease in net income and earnings per share for the first quarter of 2000 compared with the first quarter of 1999 was mainly the result of a decrease in originations. Due to the cash intensive nature of correspondent purchases, the Company strategically reduced the purchase of correspondent loans by 54% in the first quarter of 2000 compared to the first quarter of 1999 in favor of broker and retail originations. The weighted average number of common shares outstanding, assuming dilution, was 15.9 million for the three months ended March 31, 2000 compared with 15.4 million shares for the same period in 1999. The increase in the weighted average number of common shares outstanding is mainly the result an additional 525,000 shares issued in the fourth quarter of 1999 as part of the Company's recent settlement with the federal and state regulatory agencies state regulatory agency A state body responsible for establishing professional standards, and for certifying professionals or organizations through appropriate documentation . 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. for the first quarter of 2000 were $287 million, which was relatively flat compared to the fourth quarter of 1999. Traditionally, the first quarter has always been the slowest quarter for originations due to seasonal factors with January and February being the slowest 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 months of the year. While this year was no exception, originations did trend higher each month with March exceeding both January and February's production levels. Broker and retail originations accounted for all of the upward trend in originations for the quarter. The Company's production mix remained consistent with strategic plans. The Company's focus continues to be on broker and retail originations with a strong de-emphasis on the more cash intensive correspondent purchases. For the first quarter of 2000, broker and retail originations and corespondent One of two or more parties against whom a lawsuit is commenced. A person named with others who must answer claims alleged in a bill, petition, or libel in a judicial proceeding. purchases represented 60%, 25% and 15% of total production, respectively. This compares to 58%, 19% and 23%, respectively, for the first quarter of 1999 and 60%, 24% and 16%, respectively, for the fourth quarter of 1999. Hugh Miller Hugh Miller (1802 – 1856) was a self-taught Scottish geologist and writer and an evangelical Christian. Born in Cromarty, he had an ordinary parish school education, but soon showed a remarkable love of reading and power of story-telling. , President and Chief Executive Officer, commented, "We were pleased to continue to see an increase in retail originations, which were higher than the fourth quarter of 1999 despite a seasonally slower first quarter for originations. Moreover, we expect the month-to-month increases that we saw during the quarter in both the broker and retail channels to have a positive effect on originations in the second quarter of 2000. "As we continue to move forward into 2000, we remain strongly committed to growing our retail originations and as such, we recently announced the hiring of a new President and Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. to oversee the strategic direction of our retail operation. We expect retail originations to represent more than 30% of our total production by the fourth quarter of 2000." During the first quarter, Delta successfully executed a $250 million 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. . The Company utilized a senior subordinate structure, which included a surety An individual who undertakes an obligation to pay a sum of money or to perform some duty or promise for another in the event that person fails to act. surety n. wrap credit enhancement Credit Enhancement A method whereby a company attempts to improve its debt or credit worthiness. Notes: Credit enhancements take many different forms. An example of a credit enhancement would be conversion rights added on to a debt instrument in order to lower the issuing on the AAA AAA: see American Automobile Association. (Triple A) A common single-cell battery used in a myriad of electronic devices of all variety. Like its double A (AA) cousin, it provides 1.5 volts of DC power. When used in series, the voltage is multiplied. securities. The Company's 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. portfolio increased to $3.7 billion at March 31, 2000 from $3.6 billion at December 31, 1999. Loans 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. 30 to 59 days decreased to 5.2% of the loan servicing portfolio at March 31, 2000 compared to 5.7% at December 31, 1999. Loans delinquent 60 days or more decreased to 3.5% of the loan servicing portfolio at March 31, 2000 compared to 3.9% at December 31, 1999. All 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. statistics are reported on a purely contractual basis. 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. remained flat at 5.1% of the loan servicing portfolio at March 31, 2000 compared to December 31, 1999. Annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. charge-offs as a percentage of the average servicing portfolio increased slightly to 0.49% for the quarter ended March 31, 2000 compared to 0.47% for the quarter ended December 31, 1999. "We are very pleased with the continued performance of our servicing portfolio despite further portfolio seasoning," said Mr. Miller. "We reported decreases in all three delinquency categories, flat foreclosures and only a slight increase in losses. We do expect delinquencies to increase in the second quarter since delinquencies have historically been lower in the first quarter due to seasonal factors. "Our servicing portfolio performance demonstrates our continued commitment to credit quality, which we have not sacrificed in our 18 years in business. Our conservative underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. standards, our strict appraisal review process, a highly advanced servicing platform and a focus on loss mitigation MITIGATION. To make less rigorous or penal. 2. Crimes are frequently committed under circumstances which are not justifiable nor excusable, yet they show that the offender has been greatly tempted; as, for example, when a starving man steals bread to satisfy are the key components that have differentiated Delta in this industry." Mr. Miller continued, "In fourth quarter of 1999, we announced several business initiatives for 2000 and one of those initiatives was expense reduction. We are pleased that we have already seen progress in this area as our net cost to originate o·rig·i·nate v. 1. To bring into being; create. 2. To come into being; start. loans fell approximately 14% in the first quarter of 2000 compared to the fourth quarter of 1999. We are working diligently dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d to further reduce expenses in 2000." Founded in 1982, Delta Financial Corporation is a Woodbury, NY-based specialty consumer finance company engaged in originating, acquiring, selling and servicing non-conforming home equity loans. Delta's loans are primarily secured by first mortgages on one- to four-family residential properties. The Company originates home equity loans primarily in 27 states. Loans are originated through a network of approximately 1,500 brokers and the Company's Fidelity Mortgage retail offices. Loans are also purchased through a network of approximately 120 correspondents. Since 1991, Delta Financial has sold approximately $6.0 billion of its mortgages through 25 AAA rated securitizations. As of March 31, 2000, the Company's servicing portfolio was approximately $3.7 billion. "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 under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995: Certain statements contained in this press release, which are not historical fact, may be deemed to be "forward-looking" statements under federal securities laws that involve risk and uncertainties. There are many important factors that could cause Delta Financial Corporation and its subsidiaries' actual results to differ materially from those indicated in 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. . Such factors include, but are not limited to availability of funding, changes in factors influencing the loan securitization market, regulatory changes (legislative or otherwise) affecting mortgage lending activities and the real estate market, competition, loan losses, loan prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. rates, delinquency and default rates, costs of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , general economic conditions, including interest rate risk, future residential real estate values demand for Delta Financial Corporation and its subsidiaries' services, and other risks identified in Delta Financial Corporation's Securities and Exchange Commission filings.
Delta Financial Corporation and Subsidiaries
Consolidated Statements of Income
(unaudited)(dollars in thousands, except per share data)
Three Months Ended
March 31,
------------------
2000 1999
-------- --------
Revenues:
Net gain on sale of mortgage loans $ 14,654 $ 25,103
Interest 10,537 6,433
Servicing fees 4,066 3,613
Origination fees 6,688 7,364
-------- --------
Total revenue 35,945 42,513
Expenses:
Payroll and related cost 15,561 15,842
Interest expense 7,803 6,172
General and administrative 9,456 11,057
-------- --------
Total expenses 32,820 33,071
Income before taxes 3,125 9,442
Provision for income taxes 1,299 3,698
-------- --------
Net income $ 1,826 $ 5,744
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Per share data:
Net income per share - basic and diluted $ 0.11 $ 0.37
======== ========
Weighted-average number of shares
outstanding (thousands) 15,921 15,359
======== ========
Delta Financial Corporation and Subsidiaries
Consolidated and Condensed Balance Sheets
(unaudited) (dollars in thousands)
March 31, December 31,
2000 1999
------------ ------------
Assets:
Cash and interest bearing deposits $ 49,356 $ 55,989
Loans held for sale, net 92,426 89,036
Capitalized mortgage servicing rights 45,144 45,927
Interest-only and residual certificates 233,111 224,659
Other assets 138,437 141,224
------------ ------------
Total assets $ 558,474 $ 556,835
============ ============
Liabilities:
Warehouse financing and other borrowings $ 122,067 $ 109,019
Senior notes 149,498 149,474
Deferred tax liability 9,680 10,411
Other liabilities 128,262 140,790
------------ ------------
Total liabilities 409,507 409,694
------------ ------------
Stockholders' equity: 148,967 147,141
------------ ------------
Total liabilities and stockholders'
equity: $ 558,474 $ 556,835
============ ============
Delta Financial Corporation and Subsidiaries
Servicing Portfolio Information
(unaudited) (dollars in thousands)
March 31, 2000 December 31, 1999
----------------- -----------------
Loans serviced $ 3,732,118 $ 3,631,830
Average loans serviced $ 3,698,545 $ 3,605,675
Loans 30-59 days delinquent 5.2% 5.7%
Loans 60+ days delinquent 3.5% 3.9%
Total delinquencies 8.7% 9.6%
Loans in foreclosure 5.1% 5.1%
Total real estate owned 1.2% 1.0%
Losses as a percentage of
average loans serviced
(annualized) 0.49% 0.47%
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