Arlington Asset Investment (NYSE:AIC)
Historical Stock Chart
From Jul 2019 to Jul 2024
![Click Here for more Arlington Asset Investment Charts. Click Here for more Arlington Asset Investment Charts.](/p.php?pid=staticchart&s=NY%5EAIC&p=8&t=15)
Aames Investment Corporation (NYSE: AIC), a mortgage
real estate investment trust today announced financial results for the
second quarter of 2005. Total loans held for investment increased by
35% over the balance at March 31, 2005 to $3.9 billion and mortgage
loan production for the June quarter totaled $1.6 billion, 17% higher
than the first quarter of 2005. The diluted net loss per common share
for the quarter equaled $0.37. During the quarter, the Company
recorded a mark-to-market derivative loss under FASB 133 of $11.5
million, and non-core charges of $3.7 million, equal to a combined
pretax loss per common share of $0.25. Excluding these charges, core
diluted net loss per common share equaled $0.12.
Second Quarter 2005 Highlights
-- Loans held for investment in the REIT portfolio as of June 30,
2005 equaled $3.9 billion, a 35% increase over the balance as
of March 31, 2005;
-- Total loan originations were $1.6 billion, 17% greater than
during the first quarter of 2005;
-- Company declared a $0.34 per common share dividend for the
quarter;
-- Net cost to originate decreased by 20% to 2.33% and
-- Company achieved its targeted leverage ratio of 12 times
equity.
Mr. A. Jay Meyerson, Chairman and CEO of Aames, commented, "During
the quarter we continued to execute our growth strategy as a mortgage
REIT on a number of fronts. Most importantly, we built our REIT
portfolio to $3.9 billion with quality mortgages that met our credit
and return criteria, which positions us to provide our shareholders a
stable dividend from our REIT. Now that we have reached our targeted
leverage ratio, we intend to sell the majority of our production in
the whole loan market, which should generate consistent net income at
our TRS."
Meyerson continued, "We were pleased to report an increase in our
originations for the quarter by 17% over the first quarter of the
year, while maintaining a disciplined credit profile. We also made
progress on our efficiency initiatives and reduced our cost to
originate to 2.33%, 20% lower than the first quarter of the year. We
generated higher loan production with a net reduction in the dollar
level of core expenses compared to the first quarter. Finally, our
retail channel accounted for the majority of the core production
growth in the quarter, and generated substantial fee income, which
contributed to the lower net cost to originate."
Financial Summary
As the Company continued to build its portfolio of loans held for
investment, it retained the majority of its loan production for the
quarter. As a result, gain on sale of loans and total revenue decline
compared to the year ago quarter, while net interest income increased.
These were the primary factors that contributed to a net loss of $22.6
million, or $0.37 per diluted share.
Included in the net loss for the second quarter of 2005 were a
mark-to-market derivative loss under FASB 133 of $11.5 million, a $3.0
million charge for a mediated legal settlement and a $0.7 million
charge for occupancy costs related to the closure of certain branch
locations, all of which totaled $15.2 million, or $0.25 per diluted
share. Excluding these charges, core net loss equaled $7.4 million, or
$0.12 per diluted share.
The core net loss for the March 2005 quarter, which excluded a
mark-to-market derivative gain of $9.0 million, was $10.3 million or
$0.17 per common share.
The Company has included measurements of core financial metrics,
including core net interest income, core net loss and core diluted
loss per common share, which are non-GAAP financial metrics. Core
earnings exclude the mark-to-market derivative gain or loss under FASB
133. 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 gains and losses on the derivative instruments
are recorded as income, even though the cash flows the derivatives are
economically hedging will not be received until sometime in the
future. By excluding the impact of the mark-to-market gain or loss
from net loss, management believes that core net interest income and
core net loss can provide a useful measure of the Company's operating
performance.
Revenue
-0-
*T
Quarter Ended Percentage Change
-------------------------------- -----------------
6/30/2005 6/30/2004 3/31/2005 Y-Y Sequential
---------- ---------- ---------- ------ ----------
Net interest income
after loan
loss provision (1) $16,632 $11,985 $35,236 38.8% -52.8%
Non interest income 6,030 64,789 6,723 -90.7% -10.3%
---------- ---------- ----------
Total revenue 22,662 76,774 41,959 -70.5% -46.0%
Mark-to-maket nm
loss (gain) 11,495 - (9,532) -220.6%
---------- ---------- ----------
Total core revenue $34,157 $76,774 $32,427 -55.5% 5.3%
========== ========== ==========
(1) NII for all periods includes the FAS 133 mark-to-market gain or
loss on derivatives.
*T
The following chart details the components of revenue for the
quarters ended June and March 2005 and June 2004.
Total core revenue (which includes net interest income after
provision for loan losses and non interest income and before the
impact of mark-to-market loss or gain on derivatives) for the June
2005 quarter increased by $1.7 million, or 5.3% from the first quarter
of 2005 due to higher core net interest income earned from the higher
balance in the Company's REIT portfolio. Core revenue for the June
2005 quarter decreased by $42.6 million from the year ago quarter, due
primarily to a $58.8 million decrease in noninterest income, primarily
from gain on sale of loans, partially offset by $16.1 million increase
in core net interest income after provision.
The decrease in core revenue from the year ago quarter reflects
the Company's continued transition from a mortgage banking model to a
hybrid REIT model, wherein Aames achieves a higher percentage of
revenue and earnings from portfolio generated interest income, and to
a lesser extent from gain on sale revenue from its Taxable REIT
Subsidiary. The Company believes that this combination of earnings
will provide both a stable source of dividends to shareholders along
with mortgage banking income to support future portfolio growth or
enhance the dividend from the REIT.
Net Interest Income
The following chart details the components of net interest income
before the provision for loan losses for the quarters ended June and
March 2005 and June 2004.
-0-
*T
Quarter Ended Percentage Change
-------------------------------- -----------------
6/30/2005 6/30/2004 3/31/2005 Y-Y Sequential
---------- ---------- ---------- ------ ----------
Interest income $66,535 $19,204 $49,671 246.5% 34.0%
Amortization of net
deferred loan
origination costs (1,142) - (673) nm 69.7%
Prepayment fees 4,856 - 1,884 nm 157.7%
Other interest nm
income 4,694 66 2,750 70.7%
---------- ---------- ----------
Total Interest
Income $74,943 $19,270 $53,632 288.9% 39.7%
Interest expense $32,326 $5,889 $19,992 448.9% 61.7%
Mark-to-market nm
(gain) loss 11,495 - (9,532) -220.6%
Amortization of
financing costs 2,087 1,272 1,195 64.1% 74.6%
Other 538 124 261 333.9% 106.1%
---------- ---------- ----------
Total interest
expense $46,446 $7,285 $11,916 537.6% 289.8%
Net interest income $28,497 $11,985 $41,716 137.8% -31.7%
Core net interest
income $39,992 $11,985 $32,184 233.7% 24.3%
*T
Net interest income for the second quarter of 2005 totaled $28.5
million. Excluding the $11.5 million mark-to-market charge to the fair
value of derivative instruments, core net interest income was $40.0
million. The $7.9 million increase in the core net interest income for
the June 2005 quarter compared to the March 2005 quarter, resulted
from the continued growth in the Company's portfolio of loans held for
investment, offset by a higher funding cost on loans added to the
portfolio during the June 2005 quarter. The significant increase in
net interest income for the second quarter 2005 compared to the prior
year period reflects the Company's transition from holding loans for
sale to a loan portfolio driven model.
Management anticipates completing additional securitizations of
approximately $1.2 billion during the third quarter of 2005. Following
these securitizations, the Company expects to utilize a smaller
portion of its loan production to maintain the balance of loans held
for investment and core net interest income levels, while selling the
majority of its loan production in the whole loan market.
During the June 2005 quarter, the net interest margin for the REIT
portfolio, which excludes net interest income on loans held for sale,
interest earned on temporary investments and the FASB 133 mark to
market adjustment was 2.61%, compared to 3.28% during the March 2005
quarter. The decrease in the net interest margin resulted from
increased funding costs on the loans added to the portfolio during the
June 2005 quarter, as well as higher amortization of deferred loan
acquisition premium, and net deferred loan origination costs due to a
higher than anticipated rate of loan repayment in the REIT loan
portfolio, and to a slight decrease in the gross yield on loans held
for investment portfolio.
A summary of the Company's yield on loans held for investment and
funding costs for such loans during the quarters ended June and March
2005 are presented below.
-0-
*T
Quarter Ended
---------------------
6/30/2005 3/31/2005
---------- ----------
Gross yield on LHFI 7.16% 7.26%
Prepayment fees 0.59% 0.33%
Amortization of premiums -0.64% -0.34%
Amortization of deferred loan fees
and costs -0.14% -0.12%
---------- ----------
Net yield on LHFI 6.97% 7.13%
Net cost of funding for LHFI 3.88% 3.42%
---------- ----------
Net interest margin 3.09% 3.71%
Servicing costs -0.48% -0.43%
---------- ----------
REIT Net Interest Margin 2.61% 3.28%
========== ==========
*T
Noninterest income
-0-
*T
Quarter Ended Percentage Change
-------------------------------- -----------------
6/30/2005 6/30/2004 3/31/2005 Y-Y Sequential
---------- ---------- ---------- ------ ----------
Noninterest income
Gain on sale of
loans $4,666 $63,292 $5,683 -92.6% -17.9%
Loan servicing
revenue 1,364 1,497 1,040 -8.9% 31.2%
---------- ---------- ----------
Total noninterest
income $6,030 $64,789 $6,723 -90.7% -10.3%
========== ========== ==========
*T
The following chart details the components of noninterest income
for the quarters ended June and March 2005 and June 2004.
Total non interest income for the June 2005 quarter of $6.0
million decreased by $58.8 million from the prior year period due to a
lower gain on sale of loans. As part of its previously stated strategy
of building its portfolio of loans held for investment, the Company
has retained in portfolio substantially all of its higher value hybrid
ARM loan production, which accounted for a large majority of its loan
production, and sold its lower value fixed rate and second lien loans,
which comprised a smaller percentage of loan production. During the
second quarter of 2005, the Company sold approximately $410.7 million
of loans into the whole loan market, or 25.7% of total originations,
compared to $1.8 billion, or 90% of originations in the June 2004
quarter. Non interest income for the second quarter of 2005 decreased
by 10.3% compared to the first quarter of the year, due to a lower net
gain on sale of loans.
The components of gain on sale of loans for the first two quarters
of 2005 and the second quarter of 2004 are detailed in the following
chart.
-0-
*T
Quarter Ended Percentage Change
-------------------------------- -----------------
6/30/2005 6/30/2004 3/31/2005 Y-Y Sequential
---------- ---------- ---------- ------ ----------
Gain on sale of
loans $7,060 $63,770 $4,583 -88.9% 54.0%
Loan originations
fees and costs,
net 2,617 7,937 2,097 -67.0% 24.8%
Provision for
representation,
warranty and
other losses (4,016) (8,129) (785) -50.6% 411.6%
Miscellaneous costs (995) (286) (212) 247.9% 369.3%
---------- ---------- ----------
Net gain on sale of
loans $4,666 $63,292 $5,683 -92.6% -17.9%
========== ========== ==========
*T
The decrease in the net gain on sale ratio during the June 2005
quarter from the March 2005 quarter resulted primarily from a higher
provision for estimated representation, warranty and other losses on
loans held for sale and recent loan sales. The Company recorded a
provision of approximately $2.0 million for future representation and
warranty contingencies on loans previously sold. In addition, the
Company recorded a provision of approximately $2.0 million for loans
held for sale with collateral or other deficiencies, including
nonperforming loans received in the June 2005 pool call. Excluding the
provision for the called loans, the net gain on sale ratio for the
June 2005 was approximately 1.62%.
Servicing revenue for the first two quarters of 2005 and the
second quarter of 2004 was relatively flat. Servicing income consists
primarily of prepayment fees on loans in off-balance sheet
securitization trusts, late charges and other fees the Company
retained and servicing fees earned on securitized pools, reduced by
sub-servicing costs related to servicing advance arrangements.
Management anticipates that servicing income will continue to decrease
due to the elimination in loans serviced in off-balance sheet
securitizations due to the June 15, 2005 call.
Noninterest Expense
The following chart details the components of noninterest expense
for the quarters ended June and March 2005 and June 2004.
-0-
*T
Quarter Ended Percentage Change
-------------------------------- -----------------
6/30/2005 6/30/2004 3/31/2005 Y-Y Sequential
---------- ---------- ---------- ------ ----------
Noninterest
expense:
Personnel $20,980 $32,600 $22,347 -35.6% -6.1%
Production 8,577 9,005 8,800 -4.8% -2.5%
General and
administrative 15,015 10,793 10,813 39.1% 38.9%
---------- ---------- ----------
Total
noninterest
expense $44,572 $52,398 $41,960 -14.9% 6.2%
Legal settlement
costs (3,000) - -
Office closure
costs (700) - -
---------- ---------- ----------
Core noninterest
expense $40,872 $52,398 $41,960 -22.0% -2.6%
========== ========== ==========
*T
The $7.8 million decrease in total noninterest expense for the
June 2005 quarter from the prior year period resulted primarily from
the decrease in loan production between the periods, as well as lower
expenses due to the Company's cost reduction initiatives. During the
second quarter of 2005, the Company charged income for $3.7 million,
comprised of a $3.0 million charge for a mediated legal settlement on
a previously disclosed case related to over-time payment practices, as
well as a $0.7 million charge for the costs incurred in the closure of
certain production locations. Excluding these charges, total
noninterest expenses during the June 2005 quarter decreased by $11.5
million compared to the year ago quarter. The decrease in core
expenses resulted from both the lower level of loan production in the
2005 quarter, as well as reduced head count and other expense
reduction initiatives.
Core noninterest expense during the June 2005 quarter decreased by
$1.1 million, or 2.6%, from the first March 2005 quarter, due to lower
compensation expenses from a headcount reduction, offset by higher
commissions from increased production.
Net Cost to Originate
The net cost to originate loans, 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 net cost to originate improved during the
June 2005 quarter compared to the March 2005, due to the higher level
of loan production, the higher percentage of production from the
retail operations and from the Company's cost reduction initiatives.
The chart below details the components of the net cost to
originate loans for the first two quarter of 2005 and for the second
quarter of 2004.
-0-
*T
Quarter Ended Percentage Change
----------------------------------- -----------------
6/30/2005 6/30/2004 3/31/2005 Y-Y Sequential
----------- ----------- ----------- ------ ----------
Total operating
expense $44,572 $52,398 $41,960 -14.9% 6.2%
Non core items (3,700) - - nm nm
Deferred
origination
costs 19,434 12,764 16,620 52.3% 16.9%
Loan servicing
and other costs (2,274) (2,521) (3,209) -9.8% -29.1%
----------- ----------- -----------
Total G&A
Expenses 58,032 62,641 55,371 -7.4% 4.8%
Fees recieved on
originations (20,901) (16,721) (15,594) 25.0% 34.0%
Total Cost to
Originate $37,131 $45,920 $39,777 -19.1% -6.7%
Total
Originations $1,597,014 $1,965,869 $1,361,616 -18.8% 17.3%
Cost Ratios:
Core
operating
expenses 2.56% 2.67% 3.08% -4.0% -17.0%
Deferred
origination
costs 1.22% 0.65% 1.22% 87.4% -0.3%
Loan
servicing
and other
costs -0.14% -0.13% -0.24% 11.0% -39.6%
----------- ----------- -----------
Total G&A
Expenses 3.63% 3.19% 4.07% 14.0% -10.6%
Fees recieved on
originations -1.31% -0.85% -1.15% 53.9% 14.3%
Net Cost to
Originate 2.33% 2.34% 2.92% -0.5% -20.4%
*T
The net cost to originate ratio for the June 2005 quarter improved
by 20% compared to the March 2005 quarter due to the higher loan
production volume in the June quarter, as well as restrained expense
growth and the higher net fees earned on production due to a higher
percentage of retail loans in the total production volume. The Company
believes that the non GAAP measurement of the net cost to originate is
indicative of its ability to generate profit from the sale of its loan
production and a measurement of the overall efficiency from its
operations. The decrease in the net cost to originate from the second
quarter of 2004 to the second quarter of 2005 resulted primarily from
retail originations accounting for a higher percentage of total
originations, generating higher fees received on loan production.
Management has undertaken a cost containment program designed to lower
the net cost to produce and maximize the net gain on sale of loans
achieved when the Company begins to sell the majority of its
production in the second half of the year.
Loan Portfolio
During the quarter ended June 2005, the Company securitized
approximately $1.1 billion of mortgage loans. Total loans held for
investment as of June 30, 2005 increased to $3.9 billion, compared to
$2.9 billion and $1.7 billion as of March 2005 and December 31, 2004,
respectively. Loans held for investment at June 30, 2005 included
$686.5 million of loans held for investment but not yet securitized.
At June 30, 2005, the Company's leverage ratio, defined as total loans
held for investment divided by total consolidated shareholders'
equity, equaled 12.3 times, which was within management's leverage
ratio target. Management anticipates that future REIT portfolio growth
may be financed primarily from retained earnings generated through the
TRS mortgage banking activities and that the Company will maintain its
leverage ratio within the targeted levels.
During the June 2005 quarter, the Company experienced prepayment
speeds on its loans held for investment higher than in previous
quarters, offsetting the impact of the growth from the second quarter
loan production volume. Total principal payments, including scheduled
principal payments and prepayments, were approximately 37% of the
principal balance of loans held for investment at the beginning of the
quarter. Consistent with the Company's strategy of building and
maintaining a portfolio of loans held for investment, the higher than
anticipated rate of loan repayment has required the use of a higher
portion of the Company's loan production to build and maintain its
REIT loan portfolio, resulting in a lower balance of loans available
for sale into the whole loan markets. In addition, the higher level of
loan repayments accelerated the amortization of deferred loan
acquisition costs and net deferred loan origination costs at the REIT,
reducing the level of taxable income generated by the REIT.
Loan Production
-0-
*T
Quarter Ended Percentage Change
----------------------------------- -----------------
6/30/2005 6/30/2004 3/31/2005 Y-Y Sequential
----------- ----------- ----------- ------ ----------
Retail $624,816 $645,294 $516,558 -3.2% 21.0%
Wholesale 920,506 1,320,578 845,058 -30.3% 8.9%
Purchased loans 51,692 - - nm nm
----------- ----------- -----------
Total Loan
Production $1,597,014 $1,965,872 $1,361,616 -18.8% 17.3%
=========== =========== ===========
*T
The following chart details the Company's loan originations for
the quarters ended June and March 2005 and June 2004.
Total loan production equaled $1.6 billion in the June 2005
quarter, compared to $2.0 billion during the year ago period and $1.4
billion in the first quarter of 2005. The 17.3% increase in total loan
originations during the second quarter of 2005 over the first quarter
of 2005, resulted from a number of initiatives undertaken by
management. As previously reported, early in the first quarter of
2005, the Company focused on the value of its production and
maintained loan pricing in the face of keen competitive pressure,
which negatively impacted the level of loan production. During the
June 2005 quarter the general level of pricing in the sub-prime
mortgage sector improved as many of the Company's competitors adjusted
their rates to levels at or near those charged by the Company. The
Company also made selected price reductions to certain loan products
and introduced the new 40/30 loan, both of which enhanced loan
production volume.
The decrease in production levels during the second quarter of
2005 compared to the year ago quarter resulted from the Company's
continued caution in originating interest-only loans, which have
become a larger percentage of the overall subprime mortgage market's
production, as well as the negative impact which higher interest rates
have had on overall mortgage production activities. As in previous
quarters, the Company limited interest-only loans to higher credit
categories of borrowers, and maintained rate premiums on all
interest-only loan products. Management believes that these loans
represent a higher risk profile than its traditional hybrid, fully
amortizing mortgages and that the higher pricing is required to
compensate for these additional risks. Many of the Company's peers
price interest-only loans at lower premiums than the Company and as a
result attract a greater volume of these loans.
During the second quarter of 2005 the Company purchased a $51.7
million pool of fixed rate single family loans from a California based
community bank. The pool has an average loan balance of $623,000, FICO
scores in the low to mid 700 range and an average loan to value ratio
of 53%. Due to their credit characteristics and fixed rate terms,
management believes these loans provide an efficient means of adding
an attractive risk-based yield, extend the duration of the Company's
portfolio and adds diversification to the seasoned, higher coupon,
higher LTV, and lower FICO collateral added to the REIT portfolio from
the June 15, 2005 securitized pool call.
During the quarter ended June 30, 2005, wholesale and retail
production accounted for 57.7% and 39.1% of production, respectively,
while purchased loans accounted for 3.2%. In the first quarter of
2005, wholesale and retail production accounted for 62.1% and 37.9% of
production, respectively, with no purchased loans in the quarter.
Management continues to believe that a branch based retail
franchise adds value to the Company in providing direct access to
consumers, which generally results in higher overall value of loans
production. The benefits of growing the retail originations was
demonstrated in the lower net cost to produce achieved in the second
quarter of 2005, which was the result of the higher points and fees
generated through the retail system.
Credit Quality
At June 30, 2005, the allowance for loan losses for the held for
investment portfolio equaled $20.3 million, or 0.52% of gross loans
held for investment. Delinquent loans as a percentage of total loans
held for investment were 1.9% at June 30, 2005. Delinquencies in the
Company's three recent securitizations continue to be below estimated
levels and below the Company's historic trends. During the June 2005
quarter the Company provided $11.9 million for credit losses, compared
to $6.5 for the first quarter of the year. The Company did not
experience any loan charge-offs in its held for investment portfolio
during the June 2005 quarter, due to the early seasoning of its
portfolio. Management expects that as the Company's loans held for
investment portfolio seasons, the level of loan delinquencies and
charge-offs will increase.
Contact Information
For more information contact Steven C. Canup, Senior Vice
President - Corporate Development and Investor Relations, in Aames
Investment's Investor Relations Department at (323) 210-5311 or at
info@aamescorp.com via email.
Additional information may also be obtained by visiting
www.aames.com, Aames Investment's website.
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 our performance and results to vary
include: (i) changes in overall economic conditions and interest
rates; (ii) an inability to originate subprime hybrid/adjustable
mortgage loans; (iii) increased delinquency rates in our portfolio;
(iv) adverse changes in the securitization and whole loan market for
mortgage loans; (v) declines in real estate values; (vi) limited cash
flow to fund operations and dependence on short-term financing
facilities; (vii) concentration of operations in California, Florida,
New York and Texas; (viii) extensive government regulation;(ix)
intense competition in the mortgage lending industry and (x) 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, 2004 and other filings with the
SEC made by the company pursuant to the Securities Exchange Act of
1934. Aames Investment expressly disclaims any obligation to update or
revise any forward-looking statements in this press release.
-0-
*T
AAMES INVESTMENT CORPORATION and SUBSIDIARIES
Condensed financial statements
(In thousands)
CONDENSED BALANCE SHEETS
--------------------------
June 30, December 31,
2005 2004
------------ -------------
(unaudited)
Cash and cash equivalents:
Unrestricted $63,697 $31,641
Restricted 59,455 6,139
Loans held for sale, at lower of cost or
market 380,491 484,963
Loans held for investment, net 3,873,873 1,725,046
Advances and other receivables 23,802 22,740
Residual interests, at estimated fair value - 39,082
Derivative instruments, at estimated fair
value 49,183 31,947
Prepaid and other assets 66,659 59,317
------------ -------------
Total assets $4,517,160 $2,400,875
------------ -------------
Financings on loans held for investment $3,162,354 $1,157,470
Revolving warehouse and repurchase
facilities 967,798 809,213
Other borrowings - 7,680
Other liabilities 71,118 68,886
------------ -------------
4,201,270 2,043,249
Stockholders' equity 315,890 357,626
------------ -------------
Total liabilities and stockholders'
equity $4,517,160 $2,400,875
------------ -------------
Shares outstanding at December 31, 2004 61,645 61,360
------------ -------------
AAMES INVESTMENT CORPORATION and SUBSIDIARIES
Condensed financial statements
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2005 2004 2005 2004
----------- -------- ----------- --------
(Unaudited) (Unaudited)
Interest income $74,943 $19,270 $128,595 $36,947
Interest expense 46,446 7,285 58,362 13,863
----------- -------- ----------- --------
Net interest income 28,497 11,985 70,233 23,084
Provision for losses on
loans held for investment 11,865 - 18,365 -
----------- -------- ----------- --------
Net interest income
after provision for
losses 16,632 11,985 51,868 23,084
Noninterest income:
Gain on sale of loans 4,666 63,292 10,349 117,891
Loan servicing 1,364 1,497 2,404 3,651
----------- -------- ----------- --------
Total noninterest income 6,030 64,789 12,753 121,542
----------- -------- ----------- --------
Net interest income and
noninterest income 22,662 76,774 64,621 144,626
Noninterest expense:
Personnel 20,980 32,600 43,327 57,948
Production 8,577 9,005 17,377 19,339
General and administrative 15,015 10,793 25,828 22,167
----------- -------- ----------- --------
Total noninterest
expense 44,572 52,398 86,532 99,454
----------- -------- ----------- --------
Income (loss) before income
taxes (21,910) 24,376 (21,911) 45,172
Provision (benefit) for
income taxes 665 395 1,430 302
----------- -------- ----------- --------
Net income (loss) $(22,575) $23,981 $(23,341) $44,870
----------- -------- ----------- --------
Net income (loss) to common
stockholders:
Basic $(22,575) $21,112 $(23,341) $39,132
----------- -------- ----------- --------
Diluted $(22,575) $24,503 $(23,341) $45,915
----------- -------- ----------- --------
Net income (loss) per common
share:
Basic $(0.37) $2.94 $(0.38) $5.48
----------- -------- ----------- --------
Diluted $(0.37) $0.24 $(0.38) $0.48
----------- -------- ----------- --------
Dividends per common share -
declared $0.27 $- $0.27 $-
----------- -------- ----------- --------
Weighted average number of
common shares outstanding:
Basic 61,535 7,170 61,478 7,145
----------- -------- ----------- --------
Diluted 61,535 104,071 61,478 96,375
----------- -------- ----------- --------
AAMES Investment Corporation June 30,
(Parent Company) 2004
-----------
Condensed Balance Sheet (Unaudited)
Cash and cash equivalents
Unrestricted $49,200
Restricted 59,455
Loans held for investment - Securitized 3,195,144
Loans held for investment - Not Yet Securitized 686,493
Deferred loan origination fees and costs, net 12,501
Deferred acquisition premium 45,025
Allowance for credit losses (20,265)
-----------
Loans held for investment, net 3,918,898
-----------
Investment in subsidiaries 116,092
Accrued interest and other 43,473
Derivatives 49,183
-----------
$4,236,301
-----------
Financings on loans held for investment $3,162,354
Revolving warehouse and repurchase facilities 684,218
Other liabilities 28,814
-----------
3,875,386
-----------
Stockholders' equity 360,915
-----------
$4,236,301
-----------
AAMES Investment Corporation
(Parent Company Only) Three Six
Months Months
Condensed Statements of Operations Ended Ended
(in thousands) June 30, June 30,
2005 2005
----------- --------
(Unaudited)
Net interest income $15,493 $47,956
Provision for credit losses (11,865) (18,365)
----------- --------
Net interest income after provision for loan
losses 3,628 29,591
Noninterest expense (2,164) (4,199)
----------- --------
Income before undistributed net loss of
subsidiary 1,464 25,392
Equity in undistributed net loss of subsidiary (10,563) (32,935)
----------- --------
Net loss $(9,099) $(7,543)
----------- --------
GAAP net loss to taxable income reconciliation:
Net loss $(9,099) $(7,543)
Add: Equity in undistributed net loss of
subsidiary 10,563 32,935
----------- --------
1,464 25,392
Add (subtract) GAAP to tax items:
Provision for credit losses 11,865 18,365
Derivative mark to market 6,460 (6,927)
----------- --------
Estimated taxable income $19,789 $36,830
----------- --------
AAMES INVESTMENT CORPORATION and SUBSIDIARIES
Supplemental Information
Three Months Ended Six Months Ended
----------------------------------- ----------------------
June 30, March 31, June 30,
2005 2004 2005 2005 2004
----------- ----------- ----------- ----------- ----------
(Unaudited) (Unaudited)
RETAIL
PRODUCTION
Total
dollar
amount (in
thousands) $624,816 $645,291 $516,558 $1,141,374 $1,231,818
Number of
loans 4,315 5,087 3,718 8,033 9,764
Average
loan
amount $144,801 $126,651 $138,934 $142,086 $126,159
Average
initial
LTV 76.33% 76.92% 75.88% 76.12% 77.36%
Weighted
average
interest
rate 7.37% 7.30% 7.53% 7.44% 7.28%
WHOLESALE
PRODUCTION
Total
dollar
amount (in
thousands) $920,506 $1,320,578 $845,058 $1,765,564 $2,600,279
Number of
loans 6,747 8,947 6,028 12,775 17,577
Average
loan
amount $136,432 $147,600 $140,189 $138,205 $147,936
Average
initial
LTV 81.90% 81.62% 81.25% 81.59% 81.65%
Weighted
average
interest
rate 7.78% 7.30% 7.60% 7.69% 7.24%
PURCHASED
LOANS
Total
dollar
amount (in
thousands) $51,692 $- $- $51,692 $-
Number of
loans 83 - - 83 -
Average
loan
amount $622,800 $- $- $622,800 $-
Average
initial
LTV 53.29% - % - % 53.29% - %
Weighted
average
interest
rate 5.57% - % - % 5.57% - %
TOTAL
PRODUCTION
Total
dollar
amount (in
thousands) $1,597,014 $1,965,869 $1,361,616 $2,958,630 $3,832,097
Number of
loans 11,145 14,034 9,746 20,891 27,341
Average
loan
amount $143,294 $140,079 $139,710 $141,622 $140,159
Average
initial
LTV 78.79% 80.08% 79.21% 78.98% 80.27%
Weighted
average
interest
rate 7.55% 7.30% 7.57% 7.56% 7.25%
AAMES INVESTMENT CORPORATION and SUBSIDIARIES
Supplemental Information
(in thousands)
Three Months Ended
-----------------------------------
June 30, March 31,
2005 2004 2005
----------- ----------- -----------
(Unaudited)
Total production by loan purpose:
---------------------------------
Cash-out refinance $900,379 $1,162,572 $799,368
Purchase money 645,301 717,387 519,628
Rate/term refinance 51,334 85,910 42,620
----------- ----------- -----------
Total $1,597,014 $1,965,869 $1,361,616
----------- ----------- -----------
Total production by property type:
----------------------------------
Single family $1,399,906 $1,711,934 $1,194,927
Multi-family 114,499 137,445 94,399
Condominiums 82,609 116,490 72,290
----------- ----------- -----------
Total $1,597,014 $1,965,869 $1,361,616
----------- ----------- -----------
Total production by state / region produced:
--------------------------------------------
California $439,308 $667,690 $372,922
Florida 372,851 369,802 296,851
New York 94,357 142,981 93,558
Texas 136,411 123,530 111,392
Other Western states 128,581 196,614 139,291
Other Midwestern states 101,325 163,293 95,226
Other Northeastern states 177,435 187,215 145,853
Other Southeastern states 146,746 114,744 106,523
----------- ----------- -----------
Total $1,597,014 $1,965,869 $1,361,616
----------- ----------- -----------
Production by interest rate type:
Three Months Ended
-----------------------------------
June 30, June 30, March 31,
2005 2004 2005
----------- ----------- -----------
Hybrid:
Traditional $1,014,616 $1,388,226 $947,520
Interest only 190,111 93,310 148,807
Fixed rate 392,287 484,333 265,289
----------- ----------- -----------
$1,597,014 $1,965,869 $1,361,616
----------- ----------- -----------
Six Months Ended
-----------------------
June 30,
2005 2004
----------- -----------
(Unaudited)
Total production by loan purpose:
---------------------------------
Cash-out refinance $1,699,747 $2,314,465
Purchase money 1,164,929 1,325,596
Rate/term refinance 93,954 192,036
----------- -----------
Total $2,958,630 $3,832,097
----------- -----------
Total production by property type:
----------------------------------
Single family $2,594,833 $3,342,176
Multi-family 208,898 273,656
Condominiums 154,899 216,265
----------- -----------
Total $2,958,630 $3,832,097
----------- -----------
Total production by state / region produced:
--------------------------------------------
California $812,230 $1,284,899
Florida 669,702 733,934
New York 187,915 294,561
Texas 247,803 242,649
Other Western states 267,872 390,047
Other Midwestern states 196,551 331,418
Other Northeastern states 323,288 327,085
Other Southeastern states 253,269 227,504
----------- -----------
Total $2,958,630 $3,832,097
----------- -----------
Production by interest rate type:
Six Months Ended
-----------------------
June 30, June 30,
2005 2004
----------- -----------
Hybrid:
Traditional $1,962,136 $2,784,338
Interest only 338,918 93,310
Fixed rate 657,576 954,449
----------- -----------
$2,958,630 $3,832,097
----------- -----------
AAMES INVESTMENT CORPORATION and SUBSIDIARIES
Supplemental Information
LOAN SERVICING
(Dollars in thousands) June 30, December 31,
2005 2004 2004
------------ ----------- -----------
(Unaudited)
Mortgage loans serviced:
Loans held for investment $3,830,109 $- $1,718,696
Loans serviced on an interim
basis 491,464 1,897,464 771,830
Loan subserviced for others on
a long-term basis 108,672 160,371 129,016
Loans in securitization trusts - 229,308 224,345
------------ ----------- -----------
Serviced in-house 4,430,245 2,287,143 2,843,887
Loans held for investment
subserviced
by others 51,676 - -
Loan in off-balance sheet
securitization trusts
subserviced by others - 53,885 -
Loans serviced by others -
------------ ----------- -----------
Total servicing portfolio $4,481,921 $2,341,028 $2,843,887
------------ ----------- -----------
Percentage serviced in-house 98.8% 97.7% 100.0%
------------ ----------- -----------
At or During the Six
Months Ended
------------------------
June 30, December
31,
---------------
2005 2004 2004
------- ------- --------
(Unaudited)
Percentage of dollar amount of delinquent
loans
serviced (period end):
One month 0.9% 0.3% 0.3%
Two months 0.4% 0.2% 0.2%
Three or more months:
Not foreclosed 1.3% 2.4% 1.8%
Foreclosed 0.1% 0.3% 0.2%
------- ------- --------
Total 2.7% 3.2% 2.5%
------- ------- --------
Percentage of dollar amount of delinquent
loans in:
Loans held for investment serviced:
In-house 1.9% N/A 0.2%
By others 0.0% N/A 0.0%
Loans serviced on an interim basis 7.7% 0.6% 1.5%
Loans subserviced for others on a long-term
basis 6.1% 2.7% 4.8%
Loans in off-balance sheet securitization
trusts serviced:
In-house N/A 13.0% 22.5%
By others N/A 7.7% 0.0%
Percentage of dollar amount of loans
foreclosed during the period to
servicing portfolio 0.1% 0.3% 0.1%
Number of loans foreclosed during the period 83 120 68
Principal amount of foreclosed loans during
the period $6,284 $7,343 $3,585
Number of loans liquidated during the period 151 234 163
Net losses on liquidations during the period
from:
Loans held for investment serviced:
In-house $42 $- $-
By others - - -
Loans serviced on an interim basis 2,646 1,737 1,224
Loans serviced for others on a long-term
basis 19 -
Loans in off-balance sheet ssecuritization
trusts serviced:
In-house 2,850 4,599 5,554
By others - 1,856 -
------- ------- --------
$5,557 $8,192 $6,778
------- ------- --------
Percentage of annualized losses to servicing
portfolio 0.2% 0.7% 0.5%
*T