Exhibit 99.1
Investment Corporation |
Aames Investment Corporation Reports Second Quarter Results
Core EPS of $0.27, GAAP EPS of $0.11
Retail Production up 22.3% From Year Ago
Net Cost to Originate Ratio of 2.08%
Los Angeles, California, August 9, 2006 – Aames Investment Corporation (NYSE: AIC), a nationwide subprime mortgage lender, today reported core net income of $16.7 million, or $0.27 per diluted share and GAAP net income of $7.2 million, or $0.11 per diluted share for the second quarter of 2006. During the quarter, the Company recorded a mark-to-market derivative loss under FASB 133 of $9.5 million equal to a pretax loss per common share of $0.15.
Second Quarter 2006 Operational Highlights
· Net cost to originate was 2.08%, compared with 2.33% in the second quarter of 2005;
· Weighted average interest rate on loan production was 8.72%, compared with 8.39% for the first quarter of 2006;
· Taxable portfolio net interest margin was 1.17%;
· Retail Channel production increased by 22.3% from the second quarter of 2005 and 2.4% from the first quarter of 2006 and
· Total loan production was $1.2 billion, 25.2% below year-ago volume, reflecting current market conditions and the absorption of Aames wholesale lending operations by Accredited Home Lenders during the quarter.
Mr. A. Jay Meyerson, Chairman and CEO of Aames, said, “We are pleased with our strong second quarter results which clearly demonstrate the strength of our core retail franchise. Our retail production increased 22.3% over last year and accounted for 63.9% of total production during the quarter. Our results were also positively impacted by increased loan coupons that generated higher net gain on sale of loans, as well as lower than expected origination and credit costs.”
On May 25, Aames announced a definitive agreement to be acquired by Accredited Home Lenders Co. (NASDAQ: LEND). The deal is expected to close in October 2006. The Company also completed the sale of its wholesale operation to Accredited in July. The Company and Accredited also announced that their joint proxy statement was mailed to Aames shareholders on August 4th and that Aames has set a shareholder meeting date of September 14th, 2006 to vote on the approval of the merger with Accredited.
1
Financial Disclosure
The Company has included measurements of core financial metrics, including core net interest income, core net income and loss and core diluted earnings and loss per share, which are non-GAAP financial metrics. Core earnings excludes the mark-to-market derivative gain or loss under FASB 133, as well as non-core charges or credits to income. The Company does not account for its derivative financial instruments as cash flow or fair value hedges under the provisions of Statement of Financial Accounting Standards No. 133 (Accounting for Derivative Financial Instruments and Hedging Activities) and, as a result, the unrealized mark-to-market gains or losses on the derivative financial instruments are recorded as income or losses, even though the cash flows will not be received until sometime in the future. By excluding the impact of the mark-to-market gain or loss from the net income or net loss, management believes that core net interest income and core net income or loss can provide a useful measurement of the Company’s operating performance.
Throughout this press release, the Company will provide comparisons between the second quarter of 2006 and the first quarter of 2006 and the second quarter of 2005. Due to certain changes mentioned in our March 17, 2006 earnings announcement, including expansion of corporate cost reductions, a corporate reorganization making Aames Financial, our current TRS, our parent company and a C Corp for tax purposes, management believes that some comparisons to prior periods do not provide the best measurement of the Company’s financial performance.
Core Revenue and Expense
The following table details the components of total and core revenue and expense and core net income or loss for the quarters ended June 30, 2006 and 2005 and March 31, 2006.
|
| Quarter Ended |
| Percentage Change |
| |||||||||
(dollars in thousands) |
| 6/30/2006 |
| 6/30/2005 |
| 3/31/2006 |
| Y-Y |
| Sequential |
| |||
|
|
|
|
|
|
|
|
|
|
|
| |||
Net interest income after provision for loan losses (1) |
| $ | 25,509 |
| $ | 16,632 |
| $ | 26,497 |
| 53.4 | % | -3.7 | % |
Noninterest income |
| 25,075 |
| 6,030 |
| 8,418 |
| 315.8 | % | 197.9 | % | |||
Total revenue |
| 50,584 |
| 22,662 |
| 34,915 |
| 123.2 | % | 44.9 | % | |||
Mark-to-market loss on derivative financial instruments |
| 9,499 |
| 11,495 |
| 5,187 |
| -17.4 | % | 83.1 | % | |||
Total core revenue |
| 60,083 |
| 34,157 |
| 40,102 |
| 75.9 | % | 49.8 | % | |||
|
|
|
|
|
|
|
|
|
|
|
| |||
Noninterest expense |
| 43,370 |
| 44,572 |
| 48,415 |
| -2.7 | % | -10.4 | % | |||
Non core noninterest expense |
| — |
| (3,700 | ) | (2,323 | ) | nm |
| nm |
| |||
Total core expenses |
| 43,370 |
| 40,872 |
| 46,092 |
| 6.1 | % | -5.9 | % | |||
|
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|
|
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|
|
| |||
Core pretax income (loss) |
| 16,713 |
| (6,715 | ) | (5,990 | ) | 348.9 | % | 379.0 | % | |||
Income tax provision |
| 40 |
| 665 |
| 17 |
| -94.0 | % | 135.3 | % | |||
Core net income (loss) |
| 16,673 |
| (7,380 | ) | $ | (6,007 | ) | 325.9 | % | 377.6 | % | ||
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| |||
Core EPS |
| $ | 0.27 |
| $ | (0.12 | ) | $ | (0.10 | ) | 325.0 | % | 370.0 | % |
(1) NII for all periods includes the FASB 133 mark-to-market gain or loss on derivative financial instruments.
2
Total core revenue for the June 2006 quarter equaled $ 60.1 million, a 49.8% sequential increase from the March 2006 quarter; this increase resulted from a significantly higher net gain on sale of loans, offset by a slight decrease in net interest income.
Total core expense for the second quarter of 2006 decreased by 5.9% sequentially due to planned cost reductions, primarily in the wholesale loan origination channel.
Net Interest Income
The following table details the components of net interest income before the provision for loan losses for the quarters ended June 30, 2006 and 2005 and March 31, 2006.
|
| Quarter Ended |
| Percentage Change |
| |||||||||
(dollars in thousands) |
| 6/30/2006 |
| 6/30/2005 |
| 3/31/2006 |
| Y-Y |
| Sequential |
| |||
Interest earned on: |
|
|
|
|
|
|
|
|
|
|
| |||
Loans held for investment |
| $ | 63,701 |
| $ | 59,261 |
| $ | 71,178 |
| 7.5 | % | -10.5 | % |
Loans held for sale |
| 19,585 |
| 6,754 |
| 19,926 |
| 190.0 | % | -1.7 | % | |||
Overnight investments |
| 1,301 |
| 520 |
| 1,040 |
| 150.2 | % | 25.1 | % | |||
Income from derivative financial instruments |
| 15,883 |
| 4,629 |
| 13,634 |
| 243.1 | % | 16.5 | % | |||
Amortization of net deferred loan origination costs |
| (1,180 | ) | (1,143 | ) | (1,318 | ) | 3.2 | % | -10.5 | % | |||
Prepayment penalty fees |
| 6,767 |
| 4,856 |
| 7,515 |
| 39.4 | % | -10.0 | % | |||
Other |
| 55 |
| 66 |
| 70 |
| -16.7 | % | -21.4 | % | |||
Total interest income |
| 106,112 |
| 74,943 |
| 112,045 |
| 41.6 | % | -5.3 | % | |||
|
|
|
|
|
|
|
|
|
|
|
| |||
Interest expense |
| 63,826 |
| 32,326 |
| 63,093 |
| 97.4 | % | 24.1 | % | |||
Mark-to-market loss on derivative financial instruments |
| 9,499 |
| 11,495 |
| 5,187 |
| -17.4 | % | 83.1 | % | |||
Amortization of financing costs |
| 4,823 |
| 2,471 |
| 4,547 |
| 95.2 | % | 6.1 | % | |||
Other |
| 119 |
| 154 |
| 120 |
| -22.7 | % | -0.8 | % | |||
Total interest expense |
| 78,267 |
| 46,446 |
| 72,947 |
| 68.5 | % | 7.3 | % | |||
|
|
|
|
|
|
|
|
|
|
|
| |||
Net interest income (1) |
| 27,845 |
| 28,497 |
| 39,098 |
| -2.3 | % | -28.8 | % | |||
Add mark-to-market loss on |
| 9,499 |
| 11,495 |
| 5,187 |
| -17.4 | % | 83.1 | % | |||
Core net interest income (1) |
| $ | 37,344 |
| $ | 39,992 |
| $ | 44,285 |
| -6.6 | % | -15.7 | % |
(1) Before the provision for losses on loans held for investment.
Core net interest income during the June 2006 quarter, which excludes the impact of the mark-to-market loss on derivative instruments, was $37.3 million, compared with $44.3 million during the March 2006 quarter. The decline was due primarily to a lower balance of loans held for investment, higher financing costs and the negative impact of a higher balance of non-accrual loans.
The provision for loan losses for the second quarter totaled $2.3 million, compared to $11.9 million in the prior year period. The decrease reflects both lower balance of loans held for investment as well as lower than anticipated losses in the held for investment portfolio.
During the second quarter of 2006, the average balance of loans held for investment decreased 3.7% from the March 31, 2006 balance, from $4.1 billion to $3.95 billion.
3
The table below provides the details of the components of net interest margin on the held for investment portfolio for the June 2006 and March 2006 quarters.
| Quarter Ended |
| |||
|
| 6/30/2006 |
| 3/31/2006 |
|
|
|
|
|
|
|
Gross yield on LHFI |
| 7.00 | % | 7.22 | % |
Prepayment penalty fees |
| 0.74 | % | 0.76 | % |
Amortization of premiums |
| -0.50 | % | -0.53 | % |
Amortization of deferred |
| -0.13 | % | -0.13 | % |
Net yield on LHFI |
| 7.11 | % | 7.32 | % |
|
|
|
|
|
|
Net cost of funding for LHFI |
| 5.11 | % | 4.88 | % |
|
|
|
|
|
|
Net interest margin before servicing |
| 2.00 | % | 2.44 | % |
|
|
|
|
|
|
Servicing costs |
| -0.50 | % | -0.45 | % |
|
|
|
|
|
|
Net interest margin |
| 1.50 | % | 1.99 | % |
|
|
|
|
|
|
Net charge-offs |
| -0.33 | % | -0.27 | % |
|
|
|
|
|
|
REIT taxable income margin |
| 1.17 | % | 1.72 | % |
|
|
|
|
|
|
LHFI = Loans held for investment |
|
|
|
|
|
Noninterest Income
The following table details the components of noninterest income for the quarters ended June 30, 2006 and 2005 and March 31, 2006.
|
| Quarter Ended |
| Percentage Change |
| |||||||||
(dollars in thousands) |
| 6/30/2006 |
| 6/30/2005 |
| 3/31/2006 |
| Y-Y |
| Sequential |
| |||
Noninterest income: |
|
|
|
|
|
|
|
|
|
|
| |||
Gain on sale of loans |
| $ | 22,538 |
| $ | 4,666 |
| $ | 5,995 |
| 383.0 | % | 275.9 | % |
Loan servicing revenue |
| 2,537 |
| 1,364 |
| 2,423 |
| 86.0 | % | 4.7 | % | |||
Total noninterest income |
| $ | 25,075 |
| $ | 6,030 |
| $ | 8,418 |
| 315.8 | % | 197.9 | % |
Total noninterest income for the June 2006 quarter increased by $16.7 million compared to the first quarter of 2006 due primarily to a higher volume of loans sold and higher net gain on sale of loans.
The following table details the components of the gain on sale of loans for the quarters ended June 30, 2006 and 2005 and March 31, 2006.
4
|
| Quarter Ended |
| Percentage Change |
| |||||||||
(dollars in thousands) |
| 6/30/2006 |
| 6/30/2005 |
| 3/31/2006 |
| Y-Y |
| Sequential |
| |||
xGain on sale of loans: |
|
|
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|
|
|
|
|
|
|
| |||
Gain on whole loan sales |
| $ | 24,637 |
| $ | 7,060 |
| $ | 9,861 |
| 249.0 | % | 149.8 | % |
Loan originations fees, net |
| 13,094 |
| 2,617 |
| 7,525 |
| 400.3 | % | 74.0 | % | |||
Provision for secondary market reserves |
| (15,095 | ) | (4,016 | ) | (11,255 | ) | 275.9 | % | 34.1 | % | |||
Miscellaneous costs |
| (98 | ) | (995 | ) | (136 | ) | -90.2 | % | -27.9 | % | |||
Total gain on sale of loans |
| $ | 22,538 |
| $ | 4,666 |
| $ | 5,995 |
| 383.0 | % | 275.9 | % |
|
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| |||
Whole loan market sales |
| $ | 1,488,719 |
| $ | 410,714 |
| $ | 1,494,848 |
|
|
|
|
|
Gross gain on sale rate |
| 1.65 | % | 1.72 | % | 0.66 | % |
|
|
|
| |||
Net gain on sale rate |
| 1.51 | % | 1.14 | % | 0.40 | % |
|
|
|
|
The gross gain on sale of loans for the second quarter of 2006 equaled 1.65% of loans sold, as compared to 0.66% for the first quarter of 2006. The increase resulted from higher sale premiums generated by higher coupons on the loans originated during the quarter, as well as higher value first lien loans accounting for a higher percentage of total loan sales.
The net gain on sale ratio for the first quarter increased to 1.51%, compared with 0.40% for the first quarter of 2006. The higher net gain ratio resulted from higher points and fees earned on retail loans, which accounted for a substantially higher percentage of loans sold during the June 2006 quarter compared to the previous quarter.
Servicing revenue for the June 2006 quarter equaled $2.5 million, compared with $2.4 million in the March 2006 quarter.
Noninterest Expense
The following table details the components of noninterest expense for the quarters ended June 30, 2006 and 2005 and March 31, 2006.
|
| Quarter Ended |
| Percentage Change |
| |||||||||
(dollars in thousands) |
| 6/30/2006 |
| 6/30/2005 |
| 3/31/2006 |
| Y-Y |
| Sequential |
| |||
|
|
|
|
|
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|
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|
| |||
Noninterest expense: |
|
|
|
|
|
|
|
|
|
|
| |||
Personnel |
| $ | 21,570 |
| $ | 20,980 |
| $ | 24,891 |
| 2.8 | % | -13.3 | % |
Production |
| 9,079 |
| 8,577 |
| 9,377 |
| 5.9 | % | -3.2 | % | |||
General and administrative |
| 12,721 |
| 15,015 |
| 14,147 |
| -15.3 | % | -10.1 | % | |||
Total noninterest expense |
| 43,370 |
| 44,572 |
| 48,415 |
| -2.7 | % | -10.4 | % | |||
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| |||
Non-core income (expense) |
| — |
| (3,700 | ) | (2,323 | ) | nm |
| nm |
| |||
Core noninterest expense |
| $ | 43,370 |
| $ | 40,872 |
| $ | 46,092 |
| 6.1 | % | -5.9 | % |
Total core noninterest expense for the second quarter of 2006 decreased by approximately $2.7 million, or 5.9%, compared with the March 2006 quarter, reflecting lower operating expenses due to the previously mentioned expense reduction initiatives.
5
Net Cost to Originate
The net cost to originate loans is a non GAAP measurement of the Company’s efficiency trends within the meaning of Regulation G promulgated by the Securities and Exchange Commission. The data represents reported operating expenses, plus the origination costs deferred under SFAS No. 91 (Accounting for Nonrefundable Fees and Costs Associated with Origination or Acquiring Loans and Initial Direct Costs of Leases), less (i) the cost of servicing the Company’s loans held for investment portfolio, (ii) certain corporate overhead costs and (iii) the fees received on originations less points paid on wholesale originations. The Company believes that the non GAAP measurement of the net cost to originate is indicative of its ability to generate profits from the sale of its loans into the secondary markets and an indication of its overall efficiency.
The table below details the components of the net cost to originate loans for the quarters ended June 30, 2006 and 2005 and March 31, 2006.
|
| Quarter Ended |
| Percentage Change |
| |||||||||
(dollars in thousands) |
| 6/30/2006 |
| 6/30/2005 |
| 3/31/2006 |
| Y-Y |
| Sequential |
| |||
|
|
|
|
|
|
|
|
|
|
|
| |||
Total noninterest expense |
| $ | 43,370 |
| $ | 44,572 |
| $ | 48,415 |
| -2.7 | % | -10.4 | % |
Non-core expense |
| — |
| (3,700 | ) | (2,323 | ) | nm |
| nm |
| |||
Deferred loan origination costs |
| 18,600 |
| 19,434 |
| 21,148 |
| -4.3 | % | -12.0 | % | |||
Loan servicing and other costs |
| (2,937 | ) | (2,274 | ) | (3,025 | ) | 29.2 | % | -2.9 | % | |||
Total expenses |
| 59,033 |
| 58,032 |
| 64,215 |
| 1.7 | % | -8.1 | % | |||
|
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| |||
Loan origination fees received |
| (34,221 | ) | (20,901 | ) | (29,696 | ) | 63.7 | % | 15.2 | % | |||
Net cost to originate |
| $ | 24,812 |
| $ | 37,131 |
| $ | 34,519 |
| -33.2 | % | -28.1 | % |
|
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| |||
Total loan originations |
| $ | 1,195,270 |
| $ | 1,597,014 |
| $ | 1,565,524 |
| -25.2 | % | -23.7 | % |
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| |||
Cost Ratios: |
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| |||
Total noninterest expense |
| 3.63 | % | 2.56 | % | 2.94 | % | 41.8 | % | 23.2 | % | |||
Deferred loan origination costs |
| 1.56 | % | 1.22 | % | 1.35 | % | 27.9 | % | 15.2 | % | |||
Loan servicing and other costs |
| -0.25 | % | -0.14 | % | -0.19 | % | 72.6 | % | 27.2 | % | |||
Total expenses |
| 4.94 | % | 3.63 | % | 4.10 | % | 35.9 | % | 20.4 | % | |||
Loan origination fees received |
| -2.86 | % | -1.31 | % | -1.90 | % | 118.8 | % | 50.9 | % | |||
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| |||
Net cost to originate |
| 2.08 | % | 2.33 | % | 2.20 | % | -10.7 | % | -5.9 | % |
The net cost to originate for the June 2006 quarter equaled 2.08% of total loan production, a decrease of 12 basis points from 2.20% in the March 2006 quarter. Both the above mentioned reduction in core operating expenses as well as higher net points and fee earned on a higher volume of retail loans accounted for the decrease in the net cost to originate.
Loan Portfolio
Total loans held for investment as of June 30, 2006 equaled $3.4 billion, compared with $3.7 billion as of March 31, 2006. The Company also held $607.0 million of loans for sale as of June 30, 2006.
At the end of the second quarter of 2006, the Company’s leverage ratio, defined as total loans held for investment divided by total consolidated shareholders’ equity, equaled 12.9 times.
6
Loan Production
The following table details the Company’s loan production for the quarters ended June 2006 and 2005 and March 2006.
|
| Quarter Ended |
| Percentage Change |
| |||||||||
(dollars in thousands) |
| 6/30/2006 |
| 6/30/2005 |
| 3/31/2006 |
| Y-Y |
| Sequential |
| |||
|
|
|
|
|
|
|
|
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|
| |||
Retail |
| $ | 763,979 |
| $ | 624,816 |
| $ | 746,131 |
| 22.3 | % | 2.4 | % |
Wholesale |
| 431,291 |
| 972,198 |
| 819,393 |
| -55.6 | % | -47.4 | % | |||
Total loan production |
| $ | 1,195,270 |
| $ | 1,597,014 |
| $ | 1,565,524 |
| -25.2 | % | -23.7 | % |
Loan production for the June 2006 quarter totaled $1.2 billion, $370.3 million, or 23.7%, lower than the first quarter of 2006. Compared with the prior year quarter, June 2006 production decreased by $401.7 million, or 25.2%.
Retail loan production increased by 2.4% sequentially and increased by 22.3% year over year. Retail production accounted for 63.9% of total production during the June 2006 quarter, compared with 47.7% for March 2006. Wholesale production accounted for 36.1% of total production for the second quarter of 2006, compared with 52.3% for the first quarter of 2006.
Credit Quality
The allowance for loan losses for the loans held for investment portfolio as of June 30, 2006 equaled $52.2 million, or 1.5%, of gross loans held for investment portfolio. The Company provided $2.3 million for loan losses during the second quarter of 2006, consistent with the Company’s current loan loss allocation model. Net charge-offs for the first half of 2006 have been substantially below the Company’s previous estimate and the Company believes that the current level of allowance and provisioning is sufficient to cover anticipated losses on the current held for investment portfolio.
Total delinquencies in the loans held for investment portfolio equaled 9.9% at the end of the second quarter of 2006, compared with 7.0% at the end of 2005. Net charge-offs for loans held for investments in the June 2006 quarter equaled $3.5 million, or an annualized 0.35% of the average held for investment portfolio.
About Aames Investment Corporation
Aames is a fifty-year old national mortgage banking company that originates subprime residential mortgage loans in 47 states through its retail channel under the name “Aames Home Loan.” To find out more about Aames, please visit www.aames.com.
7
Information Regarding Forward Looking Statements
This press release may contain forward-looking statements under federal securities laws. These statements are based on management’s current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties that may cause the Company’s performance and results to vary include: (i) limited cash flow to fund operations and dependence on short-term financing facilities; (ii) changes in overall economic conditions and interest rates; (iii) increased delinquency rates in the portfolio; (iv) intense competition in the mortgage lending industry; (v) adverse changes in the securitization and whole loan market for mortgage loans; (vi) declines in real estate values; (vii) an inability to originate subprime hybrid/adjustable mortgage loans; (viii) obligations to repurchase mortgage loans and indemnify investors; (ix) concentration of operations in California, Florida, New York and Texas; (x) the occurrence of natural disasters; (xi) extensive government regulation; and (xii) an inability to comply with the federal tax requirements applicable to REITs and effectively operate within limitations imposed on REITs by federal tax rules. For a more complete discussion of these risks and uncertainties and information relating to the Company, see the Form 10-K for the year ended December 31, 2005 and other filings with the SEC made by the Company. Aames Investment expressly disclaims any obligation to update or revise any forward-looking statements in this press release.
Further Information
For more information, contact the Aames Investment’s Investor Relations Department at (323) 210-5311 or at info@aamescorp.com
Financial tables and supplementary information follows.
8
AAMES INVESTMENT CORPORATION and SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
|
| June 30, |
| December 31, |
| ||
|
| 2006 |
| 2005 |
| ||
|
| (unaudited) |
|
|
| ||
Assets |
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| ||
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| ||
Cash and cash equivalents: |
|
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| ||
Unrestricted |
| $ | 50,017 |
| $ | 36,078 |
|
Restricted |
| 67,384 |
| 87,094 |
| ||
Loans held for sale, at lower of cost or market |
| 607,037 |
| 951,177 |
| ||
Loans held for investment, net |
| 3,398,074 |
| 4,085,536 |
| ||
Advances and other receivables |
| 38,377 |
| 39,591 |
| ||
Prepaid expenses and other assets |
| 87,372 |
| 70,012 |
| ||
Derivative financial instruments, at estimated fair value |
| 42,927 |
| 58,147 |
| ||
Total assets |
| $ | 4,291,188 |
| $ | 5,327,635 |
|
|
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|
| ||
Liabilities and Stockholders’ Equity |
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| ||
|
|
|
|
|
| ||
Financings on loans held for investment |
| $ | 3,398,459 |
| $ | 3,623,188 |
|
Revolving warehouse and repurchase facilities |
| 578,908 |
| 1,341,683 |
| ||
Other borrowings |
| — |
| 16,487 |
| ||
Other liabilities |
| 50,017 |
| 76,773 |
| ||
Total liabilities |
| 4,027,384 |
| 5,058,131 |
| ||
Stockholders’ equity |
| 263,804 |
| 269,504 |
| ||
Total liabilities and stockholders’ equity |
| $ | 4,291,188 |
| $ | 5,327,635 |
|
|
|
|
|
|
| ||
Shares outstanding |
| 61,965 |
| 61,828 |
|
9
AAMES INVESTMENT CORPORATION and SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
| June 30, |
| June 30, |
| ||||||||
|
| 2006 |
| 2005 |
| 2006 |
| 2005 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Interest income |
| $ | 106,112 |
| $ | 74,943 |
| $ | 218,157 |
| $ | 128,595 |
|
Interest expense |
| 78,267 |
| 46,446 |
| 151,214 |
| 58,362 |
| ||||
Net interest income |
| 27,845 |
| 28,497 |
| 66,943 |
| 70,233 |
| ||||
Provision for losses on loans held for investment |
| 2,336 |
| 11,865 |
| 14,937 |
| 18,365 |
| ||||
Net interest income after provision for loan losses |
| 25,509 |
| 16,632 |
| 52,006 |
| 51,868 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Noninterest income: |
|
|
|
|
|
|
|
|
| ||||
Gain on sale of loans |
| 22,538 |
| 4,666 |
| 28,533 |
| 10,349 |
| ||||
Loan servicing |
| 2,537 |
| 1,364 |
| 4,960 |
| 2,404 |
| ||||
Total noninterest income |
| 25,075 |
| 6,030 |
| 33,493 |
| 12,753 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net interest income after provision for loan losses and noninterest income |
| 50,584 |
| 22,662 |
| 85,499 |
| 64,621 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Noninterest expense: |
|
|
|
|
|
|
|
|
| ||||
Personnel |
| 21,570 |
| 20,980 |
| 46,461 |
| 43,327 |
| ||||
Production |
| 9,079 |
| 8,577 |
| 18,456 |
| 17,377 |
| ||||
General and administrative |
| 12,721 |
| 15,015 |
| 26,868 |
| 25,828 |
| ||||
Total noninterest expense |
| 43,370 |
| 44,572 |
| 91,785 |
| 86,532 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income (loss) before income taxes |
| 7,214 |
| (21,910 | ) | (6,286 | ) | (21,911 | ) | ||||
Income tax provision |
| 40 |
| 665 |
| 57 |
| 1,430 |
| ||||
Net income (loss) |
| $ | 7,174 |
| $ | (22,575 | ) | $ | (6,343 | ) | $ | (23,341 | ) |
|
|
|
|
|
|
|
|
|
| ||||
Net loss per common share: |
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | 0.11 |
| $ | (0.37 | ) | $ | (0.10 | ) | $ | (0.38 | ) |
Diluted |
| $ | 0.11 |
| $ | (0.37 | ) | $ | (0.10 | ) | $ | (0.38 | ) |
|
|
|
|
|
|
|
|
|
| ||||
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
| ||||
Basic |
| 62,560 |
| 61,535 |
| 62,547 |
| 61,478 |
| ||||
Diluted |
| 62,560 |
| 61,535 |
| 62,547 |
| 61,478 |
|
10
AAMES INVESTMENT CORPORATION and SUBSIDIARIES
Other Financial Data
(Unaudited)
(In thousands)
|
| Six Months Ended |
| ||||
|
| June 30, |
| ||||
|
| 2006 |
| 2005 |
| ||
|
|
|
|
|
| ||
Condensed Consolidated Statement of Cash Flows Information |
|
|
|
|
| ||
|
|
|
|
|
| ||
Net cash provided by (used in): |
|
|
|
|
| ||
Operating activities |
| $ | 354,245 |
| $ | 119,705 |
|
Investing activities |
| 670,359 |
| (2,169,162 | ) | ||
Financing activities |
| (1,030,375 | ) | 2,134,829 |
| ||
|
|
|
|
|
| ||
Net increase (decrease) in cash and cash equivalents |
| (5,771 | ) | 85,372 |
| ||
Cash and cash equivalents, beginning of period |
| 123,172 |
| 37,780 |
| ||
Cash and cash equivalents, end of period |
| $ | 117,401 |
| $ | 123,152 |
|
|
| June 30, |
| December 31, |
| ||
|
| 2006 |
| 2005 |
| ||
|
|
|
|
|
| ||
Revolving Warehouse and Repurchase Facilities |
|
|
|
|
| ||
|
|
|
|
|
| ||
Committed facilities |
| $ | 2,500,000 |
| $ | 2,700,000 |
|
Uncommitted facilities |
| 100,000 |
| 100,000 |
| ||
Total warehouse and repurchase facilities |
| $ | 2,600,000 |
| $ | 2,800,000 |
|
|
|
|
|
|
| ||
Amount utilized on committed |
| $ | 578,908 |
| $ | 1,341,683 |
|
|
|
|
|
|
| ||
Borrowing capacity on committed |
| $ | 1,921,092 |
| $ | 1,358,317 |
|
|
|
|
|
|
| ||
Liquidity |
|
|
|
|
| ||
|
|
|
|
|
| ||
Unrestricted cash |
| $ | 50,017 |
| $ | 36,078 |
|
Plus: Unencumbered loans held for sale |
| 72,231 |
| 87,597 |
| ||
Less: Margin and ineligible mortgage collateral |
| (65,144 | ) | (80,962 | ) | ||
Plus: Short-term collateralized financing facility |
| 1,324 |
| 9,154 |
| ||
Plus: Revolving line of credit facility |
| 25,000 |
| — |
| ||
|
| $ | 83,428 |
| $ | 51,867 |
|
11
AAMES INVESTMENT CORPORATION and SUBSIDIARIES
Loan Production Information
(Unaudited)
|
| Three Months Ended |
| Six Months Ended |
| |||||||||||
|
| June 30, |
| March 31, |
| June 30, |
| |||||||||
Loan Production |
| 2006 |
| 2005 |
| 2006 |
| 2006 |
| 2005 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Retail |
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total dollar amount |
| $ | 763,979 |
| $ | 624,816 |
| $ | 746,131 |
| $ | 1,510,110 |
| $ | 1,141,374 |
|
Number of loans |
| 5,026 |
| 4,315 |
| 4,814 |
| 9,840 |
| 8,033 |
| |||||
Average loan amount |
| $ | 152,005 |
| $ | 144,801 |
| $ | 154,992 |
| $ | 153,466 |
| $ | 142,086 |
|
Average initial LTV |
| 74.78 | % | 76.33 | % | 74.44 | % | 74.61 | % | 76.12 | % | |||||
Weighted average interest rate |
| 8.69 | % | 7.37 | % | 8.13 | % | 8.41 | % | 7.44 | % | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Wholesale |
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total dollar amount |
| $ | 431,291 |
| $ | 972,198 |
| $ | 819,393 |
| $ | 1,250,684 |
| $ | 1,817,256 |
|
Number of loans |
| 3,141 |
| 6,830 |
| 5,702 |
| 8,843 |
| 12,858 |
| |||||
Average loan amount |
| $ | 137,310 |
| $ | 142,342 |
| $ | 143,703 |
| $ | 141,432 |
| $ | 141,333 |
|
Average initial LTV |
| 80.98 | % | 80.38 | % | 82.06 | % | 81.69 | % | 80.79 | % | |||||
Weighted average interest rate |
| 8.77 | % | 7.66 | % | 8.63 | % | 8.68 | % | 7.63 | % | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total |
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total dollar amount |
| $ | 1,195,270 |
| $ | 1,597,014 |
| $ | 1,565,524 |
| $ | 2,760,794 |
| $ | 2,958,630 |
|
Number of loans |
| 8,167 |
| 11,145 |
| 10,516 |
| 18,683 |
| 20,891 |
| |||||
Average loan amount |
| $ | 146,354 |
| $ | 143,294 |
| $ | 148,871 |
| $ | 147,770 |
| $ | 141,622 |
|
Average initial LTV |
| 77.02 | % | 78.79 | % | 78.43 | % | 77.82 | % | 78.98 | % | |||||
Weighted average interest rate |
| 8.72 | % | 7.55 | % | 8.39 | % | 8.53 | % | 7.56 | % |
12
AAMES INVESTMENT CORPORATION and SUBSIDIARIES
Loan Production Information
(Unaudited)
(In thousands)
|
| Three Months Ended |
| Six Months Ended |
| |||||||||||
|
| June 30, |
| March 31, |
| June 30, |
| |||||||||
Loan Production |
| 2006 |
| 2005 |
| 2006 |
| 2006 |
| 2005 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
By Loan Purpose |
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash-out refinance |
| $ | 790,093 |
| $ | 900,379 |
| $ | 950,589 |
| $ | 1,740,682 |
| $ | 1,699,747 |
|
Purchase money |
| 344,458 |
| 645,301 |
| 559,527 |
| 903,985 |
| 1,164,929 |
| |||||
Rate/term refinance |
| 60,719 |
| 51,334 |
| 55,408 |
| 116,127 |
| 93,954 |
| |||||
|
| $ | 1,195,270 |
| $ | 1,597,014 |
| $ | 1,565,524 |
| $ | 2,760,794 |
| $ | 2,958,630 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
By Property Type |
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Single-family |
| $ | 1,064,357 |
| $ | 1,399,906 |
| $ | 1,359,045 |
| $ | 2,423,402 |
| $ | 2,594,833 |
|
Multi-family |
| 64,715 |
| 114,499 |
| 106,542 |
| 171,257 |
| 208,898 |
| |||||
Condominiums |
| 66,198 |
| 82,609 |
| 99,937 |
| 166,135 |
| 154,899 |
| |||||
|
| $ | 1,195,270 |
| $ | 1,597,014 |
| $ | 1,565,524 |
| $ | 2,760,794 |
| $ | 2,958,630 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
By State/Region Produced |
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
California |
| $ | 215,895 |
| $ | 439,308 |
| $ | 322,733 |
| $ | 538,628 |
| $ | 812,230 |
|
Florida |
| 313,855 |
| 372,851 |
| 424,039 |
| 737,894 |
| 669,702 |
| |||||
New York |
| 109,071 |
| 94,357 |
| 121,819 |
| 230,890 |
| 187,915 |
| |||||
Texas |
| 120,378 |
| 136,411 |
| 130,170 |
| 250,548 |
| 247,803 |
| |||||
Other Western states |
| 113,108 |
| 128,581 |
| 133,245 |
| 246,353 |
| 267,872 |
| |||||
Other Midwestern states |
| 65,684 |
| 101,325 |
| 84,691 |
| 150,375 |
| 196,551 |
| |||||
Other Northeastern states |
| 164,407 |
| 177,435 |
| 199,534 |
| 363,941 |
| 323,288 |
| |||||
Other Southeastern states |
| 92,872 |
| 146,746 |
| 149,293 |
| 242,165 |
| 253,269 |
| |||||
|
| $ | 1,195,270 |
| $ | 1,597,014 |
| $ | 1,565,524 |
| $ | 2,760,794 |
| $ | 2,958,630 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
By Loan Product |
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Hybrid: |
|
|
|
|
|
|
|
|
|
|
| |||||
Traditional |
| $ | 459,747 |
| $ | 976,427 |
| $ | 688,062 |
| $ | 1,147,809 |
| $ | 1,923,946 |
|
Interest Only |
| 11,947 |
| 190,110 |
| 30,131 |
| 42,078 |
| 338,918 |
| |||||
40/30 |
| 489,974 |
| 38,190 |
| 540,549 |
| 1,030,523 |
| 38,190 |
| |||||
|
| 961,668 |
| 1,204,727 |
| 1,258,742 |
| 2,220,410 |
| 2,301,054 |
| |||||
Fixed Rate: |
|
|
|
|
|
|
|
|
|
|
| |||||
Traditional |
| 216,924 |
| 392,287 |
| 279,316 |
| 496,240 |
| 657,576 |
| |||||
40/30 |
| 16,678 |
| — |
| 27,466 |
| 44,144 |
| — |
| |||||
|
| 233,602 |
| 392,287 |
| 306,782 |
| 540,384 |
| 657,576 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| $ | 1,195,270 |
| $ | 1,597,014 |
| $ | 1,565,524 |
| $ | 2,760,794 |
| $ | 2,958,630 |
|
13
AAMES INVESTMENT CORPORATION and SUBSIDIARIES
Loan Servicing Information
(Unaudited)
(Dollars in thousands)
|
| June 30, |
| December 31, |
|
|
| 2006 |
| 2005 |
|
|
|
|
|
|
|
Servicing Portfolio |
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans serviced: |
|
|
|
|
|
Loans held for investment |
| $3,425,581 |
| $4,077,448 |
|
Loans serviced on an interim basis |
| 1,433,887 |
| 1,926,876 |
|
Loan subserviced for others on a long-term basis |
| 79,094 |
| 92,213 |
|
Total serviced in-house |
| 4,938,562 |
| 6,096,537 |
|
|
|
|
|
|
|
Loans held for investment subserviced by others |
| 48,151 |
| 50,202 |
|
Total servicing portfolio |
| $4,986,713 |
| $6,146,739 |
|
|
|
|
|
|
|
Percentage serviced in-house |
| 99.0 | % | 99.2 | % |
|
|
|
|
|
|
Loan Delinquencies |
|
|
|
|
|
|
|
|
|
|
|
Percentage of dollar amount of delinquent loans serviced (period end): |
|
|
|
|
|
One month |
| 2.8 | % | 1.9 | % |
Two months |
| 0.8 | % | 0.9 | % |
Three or more months: |
|
|
|
|
|
Not foreclosed |
| 4.0 | % | 2.5 | % |
Foreclosed |
| 0.6 | % | 0.1 | % |
|
| 8.2 | % | 5.4 | % |
|
|
|
|
|
|
Percentage of dollar amount of delinquent loans in: |
|
|
|
|
|
Loans held for investment |
| 9.9 | % | 7.0 | % |
Loans serviced on an interim basis |
| 4.5 | % | 2.0 | % |
Loans subserviced for others on a long-term basis |
| 8.7 | % | 8.9 | % |
14
AAMES INVESTMENT CORPORATION and SUBSIDIARIES
Loan Servicing Information
(Unaudited)
(Dollars in thousands)
|
| Six Months Ended |
| ||||
|
| June 30, |
| ||||
|
| 2006 |
| 2005 |
| ||
|
|
|
|
|
| ||
Loan Foreclosures |
|
|
|
|
| ||
|
|
|
|
|
| ||
Percentage of dollar amount of loans foreclosed during the period to servicing portfolio (period end) |
|
|
|
|
| ||
Number of loans foreclosed during the period |
| 214 |
| 83 |
| ||
Principal amount of loans foreclosed during the period |
| $ | 30,064 |
| $ | 6,284 |
|
Number of loans liquidated during the period |
| 156 |
| 151 |
| ||
|
|
|
|
|
| ||
Net losses on liquidations during the period from: |
|
|
|
|
| ||
Loans held for investment |
| $ | 3,028 |
| $ | 42 |
|
Loans serviced on an interim basis |
| 2,737 |
| 2,646 |
| ||
Loans subserviced for others on a long-term basis |
| — |
| 19 |
| ||
Loans in off-balance sheet securitization trusts serviced in-house |
| — |
| 2,850 |
| ||
|
| $ | 5,765 |
| $ | 5,557 |
|
|
|
|
|
|
| ||
Percentage of annualized losses to |
|
|
|
|
| ||
servicing portfolio |
| 0.2 | % | 0.2 | % | ||
Servicing portfolio at period end |
| $ | 4,987,000 |
| $ | 4,482,000 |
|
15