Exhibit No. 99.1
ALLSTATE HOME LOANS, INC.
DBA ALLSTATE FUNDING
FINANCIAL STATEMENTS
DECEMBER 31, 2005
REPORT ON AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Independent Auditor's Report
To the Board of Directors And
Stockholders of
Allstate Home Loans, Inc., DBA Allstate Funding Irvine,
CA 92606
We have audited the accompanying balance sheet of Allstate Home Loans, Inc., DBA Allstate Funding, (a Subchapter S Corporation) as of December 31, 2005, and the related statements of income and retained earnings for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards, and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Allstate Home Loans, Inc., DBA Allstate Funding, as of December 31, 2005, and the results of its operations and its (analysis of retained earnings) for the year then ended in conformity with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supporting information included in the report is presented for the purpose of additional analysis and are not a required part of the basic financial statements of Allstate Home Loans, Inc., DBA Allstate Funding. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as whole.
/s/ Lorin Zweig, CPA’s
Lorin Zweig, CPA’s
Irvine, CA 92612
April 20, 2006
ALLSTATE HOME LOANS, INC.
DBA ALLSTATE FUNDING
BALANCE SHEET
DECEMBER 31, 2005
| ASSETS | |
| Current assets: | | | | |
| Cash in bank | | $ | 1,108,212.54 | |
| Investments | | | 122,330.59 | |
| Accounts receivable | | | 413,187.50 | |
| Florida receivables | | | 3,013.35 | |
| Orange receivables | | | 14,781.11 | |
| Newport lending reserves | | | 5,000.00 | |
| Loan receivable - loan sales | | | 2,535,112.68 | |
| Loan receivable - First Collateral | | | 11,739,629.00 | |
| Loan receivable -CWD | | | 1,236,420.00 | |
| Loan receivable - TWG | | | 38,871,783.00 | |
| Loan receivable - IMPAC | | | 74,907,802.00 | |
| Loan receivable - other | | | 364,441.83 | |
| Notes receivable | | | 71,819.77 | |
| Non owner employee advance | | | 428,455.59 | |
| Net branch draw | | | 46,523.07 | |
| Orange advances | | | 210.01 | |
| Due from branches | | | 867,782.42 | |
| Total current assets | | | 132,736,504.46 | |
| | | | | |
| Property, plant & equipment | | | | |
| Autos | | | 148,790.02 | |
| Artwork | | | 1,149.37 | |
| Equipment | | | 231,438.74 | |
| Furniture & fixtures | | | 303,369.17 | |
| Software | | | 95,606.55 | |
| Less accumulated depreciation | | | (253,277.08 | ) |
| Total property & equipment | | | 527,076.77 | |
| | | | | |
| Other assets: | | | | |
| Deposits | | | 160,536.96 | |
| Organization Costs | | | 1,750.00 | |
| Franchise fee | | | 13,995.00 | |
| Master commitment fee | | | 36,063.38 | |
| Less accumulated amortization | | | (14,745.00 | ) |
| Total other assets | | | 197,600.34 | |
| | | | | |
| Total assets | | $ | 133,461,181.57 | |
See Accountant’s Audit Report and Accompanying Notes
ALLSTATE HOME LOANS, INC.
DBA ALLSTATE FUNDING
BALANCE SHEET
DECEMBER 31, 2005
| LIABILITIES & CAPITAL | |
| LIABILITIES | |
| | | | |
| Current liabilities: | | | |
| Accounts payable | | $ | 214,805.75 | |
| Payable: other | | | 249,023.60 | |
| Payable: LOC Orange | | | 74,789.55 | |
| Garnishments | | | 624.28 | |
| Impounds | | | 159,401.39 | |
| Principal reduction | | | 17,182.91 | |
| Notes payable - First Collateral | | | 11,408,625.56 | |
| Notes payable -CWD | | | 1,236,420.00 | |
| Notes payable - TWG | | | 38,871,783.00 | |
| Notes payable - IMPAC | | | 74,770,000.60 | |
| Interest & fess First Collateral | | | 124,154.99 | |
| Deferred federal taxes payable | | | 326,713.00 | |
| Deferred state taxes payable | | | 84,945.00 | |
| Total current liabilities | | | 127,538,469.63 | |
| | | | | |
| Other liabilities | | | | |
| Loan payable Nationwide | | | 500,000.00 | |
| Loan payable other | | | 200,000.00 | |
| Notes payable Shanberg | | | 600,000.00 | |
| Total other liabilities | | | 1,300,000.00 | |
| | | | | |
| Total liabilities | | | 128,838,469.63 | |
| | | | | |
| CAPITAL |
| Common stock | | | 26,000.00 | |
| Additional paid in capital | | | 619,962.78 | |
| Retained earnings | | | 3,939,632.00 | |
| Net income | | | 37,117.16 | |
| Total capital | | | 4,622,711.94 | |
| | | | | |
| Total liabilities & capital | | $ | 133,461,181.57 | |
See Accountant’s Audit Report and Accompanying Notes
ALLSTATE HOME LOANS, INC.
DBA ALLSTATE FUNDING
INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2005
| Income | | | |
| Commissions | | $ | 17,337,878.81 | |
| Premium on loans sold | | | 3,892,094.00 | |
| Late fees | | | (569.53 | ) |
| Interest income | | | 2,780,504.68 | |
| Net income | | | 24,009,907.96 | |
| | | | | |
| Cost of loans | | | | |
| Loan fees | | | 63,274.95 | |
| Appraisal fees | | | 55,879.33 | |
| Processing fees | | | 45,188.25 | |
| Other loan fees | | | 238,204.88 | |
| Credit report fees | | | 164,695.06 | |
| Commissions | | | 6,400,654.72 | |
| Loan pair off fees | | | 54,059.55 | |
| Notary fees | | | 545.05 | |
| Interest & fees payable | | | 2,679,887.84 | |
| Total costs of loans | | | 9,702,389.63 | |
| | | | | |
| Gross profit | | | 14,307,518.33 | |
| | | | | |
| General & administrative expense | | | | |
| Auto expense | | | 33,970.11 | |
| Background checks | | | 2,469.88 | |
| Bad debts | | | 8,276.67 | |
| Bank charges | | | 6,270.86 | |
| Computer services & supplies | | | 6,855.96 | |
| Consulting fees | | | 197,749.93 | |
| Donations & charity | | | 16,762.00 | |
| Dues & subscriptions | | | 3,286.97 | |
| Employee benefits | | | 9,765.00 | |
| Entertainment | | | 71,708.05 | |
| Equipment lease | | | 162,783.60 | |
| Gifts to clients & lenders | | | 614.38 | |
| Internet service | | | 38,847.48 | |
| Insurance | | | 121,595.55 | |
| Leased employees | | | 11,295,305.80 | |
| Legal & accounting | | | 204,755.27 | |
| Management fees | | | 177,000.00 | |
| Marketing & advertising | | | 363,333.94 | |
| Messenger fees | | | 138,306.34 | |
| Miscellaneous | | | 1,646.97 | |
| Office supplies | | | 205,524.10 | |
| Officer salaries | | | 100,576.85 | |
| Outside services | | | 1,739.25 | |
| Payroll service | | | 8,531.06 | |
| Postage | | | 10,599.04 | |
| Recruitment expenses | | | 153,830.91 | |
| Referral fees | | | 16,778.00 | |
| Rent | | | 284,532.99 | |
| Repairs & maintenance | | | 10,397.75 | |
| Rural development | | | 106,888.63 | |
| Salaries | | | 173,551.67 | |
See Accountant’s Audit Report and Accompanying Notes
ALLSTATE HOME LOANS, INC.
DBA ALLSTATE FUNDING
INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2005
| Taxes: Payroll | | | 51,505.42 | |
| Taxes: other | | | 57,841.77 | |
| Telephone | | | 101,425.45 | |
| Training | | | 7,165.95 | |
| Travel | | | 110,447.36 | |
| Utilities | | | 6,248.80 | |
| Total expenses | | | 14,268,889.76 | |
| | | | | |
| Earnings from operations | | | 38,628.57 | |
| | | | | |
| Other income | | | | |
| Dividend income | | | 35,835.00 | |
| Interest income | | | 567.15 | |
| Settlement income | | | 47,500.00 | |
| Total other income | | | 83,902.15 | |
| | | | | |
| Other expense | | | | |
| Depreciation expense | | | 41,787.00 | |
| Interest expense | | | 43,581.66 | |
| Loss on investments | | | 45.00 | |
| Total other expense | | | 85,413.56 | |
| | | | | |
| Earnings before taxes | | | 37,117.16 | |
| | | | | |
| Net income | | $ | 37,117.16 | |
See Accountant’s Audit Report and Accompanying Notes
ALLSTATE HOME LOANS, INC.
DBA ALLSTATE FUNDING
COMPUTATION OF ADJUSTED NET WORTH
DECEMBER 31, 2005
| TOTAL NET WORTH AT JANUARY 1, 2005 | | $ | 4,585,594.78 | |
| | | | | |
| ADD: NET INCOME FOR 2005 | | | 37,117.16 | |
| | | | | |
| LESS: SHAREHOLDER DISTRIBUTION | | | -- | |
| | | | | |
| ADD: PAID IN CAPITAL | | | -- | |
| | | | | |
| TOTAL ADJUSTED NET WORTH PER FINANCIAL STATEMENTS | | $ | 4,622,711.94 | |
See Accountant’s Audit Report and Accompanying Notes
ALLSTATE HOME LOANS, INC.
DBA ALLSTATE FUNDING
STATEMENT OF CASH FLOWS
FOR THE TWELVE MONTHS ENDING DECEMBER 31, 2005
Increase (Decrease) in Cash and Cash equivalents
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income (loss) | | $ | 36,591 | |
| Adjustmnents to reconcile net income to net cash provided by operating activities: | | | | |
| Depreciation | | | 41,787 | |
| Changes in: | | | | |
| Increase in warehouse line receivable | | | (57,308,413 | ) |
| Decrease in accounts receivable | | | 203,852 | |
| Increase in loans & notes receivable | | | (935,588 | ) |
| Increase in investments | | | (17,591 | ) |
| Increase in advances | | | (834,656 | ) |
| Increases in notes-payable warehouse | | | 59,308,870 | |
| Decrease in notes payable | | | (404,703 | ) |
| Decrease in accounts payable & expenses | | | (879,395 | ) |
| | | | | |
| NET CASH (USED BY) OPERATING ACTIVITIES | | | (789,246 | ) |
| | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | |
| Purchase of property & equipment | | | (272,726 | ) |
| Increase in deposits & fees | | | (140,389 | ) |
| NET CASH (USED BY) INVESTING ACTIVITIES | | | (413,115 | ) |
| | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | |
| Increase in notes payable | | | 1,300,000 | |
| NET CASH PROVIDED BY FINANCING ACTIVITIES | | | 1,300,000 | |
| | | | | |
| NET INCREASE IN CASH | | | 97,639 | |
| | | | | |
| CASH AT BEGINNING OF PERIOD | | | 1,010,574 | |
| | | | | |
| CASH AT END OF PERIOD | | $ | 1,108,213 | |
See Accountant’s Audit Report and Accompanying Notes
ALLSTATE HOME LOANS, INC.
DBA ALLSTATE FUNDING
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Allstate Home Loans, Inc., DBA Allstate Funding, operates as a mortgage broker company for residential loans. The company was incorporated and commenced on September 11, 1990.
Loan Receivable
The Loan Receivable-Loan Sales consists of loans approved and awaiting funding as of December 31, 2005, was $2,535,113. The Loan Receivables for the Warehouse lines are as follows:
| First Collateral | | $ | 11,739,629 | |
| Countrywide | | $ | 1,236,420 | |
| The Winter Group | | $ | 38,871,783 | |
| IMPAC | | $ | 74,907,802 | |
Notes Receivable
The company has notes receivable listed on the Current Assets section for varying rates and years.
Property and Equipment
Property and equipment are recorded at cost. Depreciation of property and equipment and amortization of franchise fee and organization costs are provided over the estimated useful lives of the assets, between 5 and 7 years, using both the straight line and double declining balance methods. Depreciation and amortization for the year totals: $41,787.
Income Taxes
The Company, elected to be taxed as a "C" corporation effective January 1, 2004. A provision and liability for Federal income tax has been included in these financial statements; the minimum corporate income tax imposed by the state of California had been provided for.
Investments
The company has an investment accounts with the brokerage firms of Merrill Lynch, Schwab, TVIDX, and Amalgamated Bank. The lower of cost or market method is being used for financial statements purposes.
Note Payable - First Collateral Services
The Company established a "Master Mortgage Loan Purchasing" Agreement with First Collateral Services. This loan is in the form of a line of credit.
ALLSTATE HOME LOANS, INC.
DBA ALLSTATE FUNDING
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
The terms of the agreement are as follows:
| | A. | Collateral includes F.R.A, V.A. and conventional conforming residential mortgage |
| | B. | The "Warehouse" period of ownership of the collateralized loans may not exceed 45 days. |
| | C. | The Fees include an interest rate of 1.75% over the prevailing banks prime rate. |
| | D. | The loan value is 98% of the collateral, stated above, not to exceed the unpaid principal amount of such residential mortgage loan. |
Note Payable - Countrywide/The Winter Group/IMP AC
The Company established an agreement with the above banks with the same terms as above.
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