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Filed Pursuant to Rule 424(B)(3)
File No. 33-98636
Prospectus Supplement dated February 20, 1997
AMERICAN BUSINESS FINANCIAL SERVICES, INC.
The following data is added to the Notes to Consolidated Financial Statements
contained in the Prospectus dated October 16, 1997 which relates to the offering
of $50.0 million of Subordinated Notes of American Business Financial Services,
Inc.
Note 1 - Summary of Significant Accounting Policies
Mortgage Servicing Rights
Effective July 1, 1995, the Company adopted Financial Accounting
Standards Board Statement No. 122, "Accounting for Mortgage Servicing Rights."
The Statement amends Statement No. 65 to require recognition as a separate asset
the rights to service mortgage loans for others, however those servicing rights
are acquired. The statement requires the assessment of capitalized mortgage
servicing rights for impairment to be based on the current fair value of those
rights. Mortgage servicing rights are amortized in proportion to and over the
period of the estimated net servicing income.
Note 12 - Fair Value of Financial Instruments
Carrying Value Fair Value
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Servicing Rights $1,387,511 $1,387,511
Servicing rights - Fair value is determined using estimated discounted future
cash flows taking into consideration anticipated prepayment rates.
Note 14 - Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Although the Company believes that it has made reasonable estimates of
the excess spread receivables likely to be realized, the rate of prepayment and
the amount of defaults realized by the Company are estimates and actual
experience may vary from its estimates.
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Higher levels of future prepayments, delinquencies and/or liquidations could
result in decreased excess spreads and the write down of the receivable, which
would adversely affect the Company's income in the period of adjustment.
The Company's revenues and net income have fluctuated in the past and
may fluctuate in the future principally as a result of the timing and size of
its securitizations. Since the Company does not recognize gains on the sale of
such loans until it consummates a securitization thereof, the Company's
operating results for a given period can fluctuate significantly as a result of
the timing and level of securitizations.
Note 15 - Recent Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation" ("SFAS No. 123"), establishing financial
accounting and reporting standards for stock-based employee compensation plans.
SFAS No. 123 encourages all entities to adopt a new method of accounting to
measure compensation cost of all employee stock compensation plans based on the
estimated fair value of the award at the date it is granted. Companies are,
however, allowed to continue to measure compensation costs for those plans using
the intrinsic value based method of accounting, which generally does not result
in compensation expense recognition for most plans. The Company expects to
remain with the existing accounting and will disclose in a footnote to the
financial statements pro forma net income and, earnings per share, as if SFAS
No. 123 had been adopted. The accounting requirements of this Statement are
effective for transactions entered into during fiscal years that begin after
December 15, 1995; however, companies are required to disclose information for
awards granted in their first financial year beginning after December 15, 1994.
The Company intends to utilize the intrinsic value method of accounting.
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards (SFAS) No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"
("SFAS No. 125"). Pursuant to SFAS No. 125, after a transfer of financial
assets, an entity would be required to recognize all financial assets and
servicing its controls and liabilities it has incurred and, conversely, would
not be required to recognize financial assets when control has been surrendered
and liabilities when extinguished. SFAS No. 125 provides standards for
distinguishing transfers of financial assets that are sales from transfers that
are secured borrowings. SFAS No. 125 will be effective with respect to the
transfer and servicing of financial assets and the extinguishment of liabilities
occurring after December 31, 1996, with earlier application prohibited.
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CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
American Business Financial Services, Inc.
Bala Cynwyd, Pennsylvania
We hereby consent to the use in this Prospectus Supplement dated February 20,
1997 related to the Registration Statement on Form SB-2 (File No. 33-98636) of
our report dated September 20, 1995, relating to the consolidated financial
statements of American Business Financial Services, Inc. and subsidiaries.
We also consent to the reference to our firm under the caption "Experts" in the
Prospectus.
/s/ FISHBEIN & COMPANY, P.C.
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FISHBEIN & COMPANY, P.C.
Elkins Park, Pennsylvania
February 20, 1997
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CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
American Business Financial Services, Inc.
Bala Cynwyd, Pennsylvania
We hereby consent to the use in this Prospectus Supplement dated February 20,
1997 related to the Registration Statement on Form SB-2 (File No. 33-98636) of
our report dated August 23, 1996, relating to the consolidated financial
statements of American Business Financial Services, Inc. and subsidiaries.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO SEIDMAN, LLP
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BDO SEIDMAN, LLP
Philadelphia, Pennsylvania
February 20, 1997
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Your Money
Can Begin
Earning These High Rates
Term Rate Annual Yield*
3 Months 7.15% 7.41%
6 Months 7.35% 7.62%
12 Months 8.35% 8.70%
18 Months 8.40% 8.76%
24 Months 8.50% 8.87%
30 Months 9.10% 9.52%
36 Months 9.25% 9.69%
48 Months 9.50% 9.96%
60 Months 10.25% 10.79%
7 Years 10.30% 10.84%
10 Years 10.45% 11.01%
For More Information Call
1-800-776-4001
AMERICAN BUSINESS
FINANCIAL SERVICES INC.
An offer can only be made by the Prospectus dated October 16, 1996, delivered in
conjunction with this Rate Supplement dated February 14, 1997. See "Risk
Factors" for a discussion of certain factors which should be considered in
connection with an Investment in the Notes. The Effective Annual Yield assumes
all interest reinvested daily at the stated rate. These rates available through
March 17, 1997.
