Hi Bankceo:
I enjoy reading your posts and outlook for AAMES. Here is a press release you will enjoy reading.......Happy Holidays, John
biz.yahoo.com
Monday December 8, 11:39 am Eastern Time
Company Press Release
SOURCE: Fitch IBCA, Inc.
Aames Unsecured Debt Affirmed By Fitch IBCA - Fitch IBCA Financial Wire -
NEW YORK, Dec. 8 /PRNewswire/ -- Aames Financial Corp.'s $173 million 'BB' senior notes and $115 million 'BB-' convertible subordinated notes are affirmed by Fitch IBCA and removed from FitchAlert negative. Aames was placed on FitchAlert negative on Aug. 26, 1997, following the announcement of a $28 million ($16.2 million after tax) write down of its interest-only (IO) strip during the fourth quarter ended June 30, 1997. The revaluation of its IO strip was needed due to prepayments related to correspondent adjustable rate mortgage (ARM) originations that were higher than original securitization assumptions.
The affirmation reflects the company's more conservative securitization assumptions, shift in distribution channels, adequate reserves based on loss experience and the ability to service its entire portfolio, which allows the company to increase cash income and retain customers. Concerns center on increased competition and resultant impact on margins, increased net chargeoffs and rapid expansion.
Following the writedown, Aames has reduced its correspondent/bulk originations and is aggressively building its retail and broker (One Stop) origination platforms. Correspondent originations have declined to 24% of total originations for the three months ended Sept. 30, 1997 from roughly 50% of total originations for fiscal 1997. By reducing correspondent originations, Aames is able to reduce the severity of its negative cash flow position, since the company avoids paying points upfront. By building its retail branch network, Aames is closer to the borrower, thereby improving customer retention.
Overall asset quality remains adequate as delinquencies have continued to trend downward to 14% at Sept. 30, 1997 from 16% at fiscal 1996. However, since the company has shifted its focus to A- and B quality borrowers, net chargeoffs have risen. A shift to a higher credit quality borrower results in lower delinquencies because the borrower has better payment habits relative to lower credit quality risks. However, rising loan to value (LTV) ratios could result in a higher severity of net chargeoffs. Net chargeoffs have risen to 51 basis points (bps) (annualized) for the three months ended Sept. 30, 1997 from 9 bps in fiscal 1996. Nonetheless, Aames is adequately reserved, as evidenced by the 2.9 times (x) reserve to net chargeoff coverage at Sept. 30, 1997. Fitch IBCA believes Aames' securitization assumptions are appropriate, given the increase in ARM prepayment and annual loss assumptions. Additionally, the company does not ramp its prepayment and loss assumptions, thereby building a reserve cushion.
The company has performed well for the first quarter ended Sept. 30, 1997, recording $13 million in net earnings. Aames is focused on increasing cash income via servicing fees, whole loan sales of its 125% LTV and commercial production, as well as fees associated with retail originations. Return on average managed assets has rebounded from 0.65% in fiscal 1996 to 1.37% in the first quarter ended Sept. 30, 1997, although below industry peers.
Aames, founded in 1954, is a specialty finance company that originates, purchases, services and sells home equity loans to those credit-impaired borrowers who have substantial equity in their home but are unable to access financing from more traditional financial institutions. Aames has been growing rapidly since 1994 and is generally recognized as among the leading specialty finance companies in this sector.
SOURCE: Fitch IBCA, Inc |
