SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 30, 1997
AAMES FINANCIAL CORPORATION
(Exact name of Registrant as Specified in Its Charter)
Delaware 0-19604 95-4340340
State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
3731 Wilshire Boulevard, 10th Floor
Los Angeles, California 90010
(Address of Principal Executive Offices)
(213) 351-6100
(Registrant's Telephone Number, Including Area Code)
No Change
------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 5. OTHER EVENTS
Reference is made to the press releases of Registrant issued on April
30, 1997 and May 8, 1997, which contain information meeting the
requirements of this Item 5 and which are incorporated herein by this
reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
99.1 Press release issued April 30, 1997 regarding third quarter
results.
99.2 Press release issued April 30, 1997 regarding cash dividend.
99.3 Press release issued May 8, 1997 regarding management
succession.
PAGE 2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this Current Report on Form 8-K
to be signed on its behalf by the undersigned hereunto duly authorized.
May 12, 1997 AAMES FINANCIAL CORPORATION
By: /s/ Cary H. Thompson
------------------------
Cary H. Thompson
Chief Executive Officer
PAGE 3
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
99.1 Press release issued April 30, 1997 regarding third quarter
results
99.2 Press release issued April 30, 1997 regarding cash dividend
99.3 Press release issued May 8, 1997 regarding management
succession
PAGE 4
<PAGE>
EXHIBIT 99.1
<PAGE>
CONTACT: Gregory J. Witherspoon
Aames Financial Corporation
(213) 351-6100
Cecilia A. Wilkinson/Roger S. Pondel
Pondel Parsons & Wilkinson
(310) 207-9300
FOR IMMEDIATE RELEASE
AAMES REPORTS CONTINUED STRENGTH IN
THIRD QUARTER REVENUE AND EARNINGS GROWTH
-- EARNINGS PER SHARE RISE 55 PERCENT --
Los Angeles, California -- April 30, 1997 -- Aames Financial
Corporation (NYSE:AAM) today reported that total revenue and net income for
its third fiscal quarter more than doubled over the same period a year ago.
Total revenue for the quarter reached $84.1 million, more than double
the revenue in the third fiscal quarter last year of $40.6 million.
For the three months ended March 31, 1997, Aames said net income rose
to $17.6 million, up from $8.6 million in last year's third quarter. On a
fully diluted basis, with 34 percent more weighted shares outstanding,
earnings per share advanced 55 percent to $0.51 compared with $0.33 a year
ago.
In the third quarter of fiscal 1997, the company adopted Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" (FAS
125). The adoption of FAS 125 did not have a material effect on the
results of operations for the third quarter of fiscal 1997. FAS 125
requires the company to recognize separately from gain on sale of loans a
new revenue item called net unrealized gain on valuation of interest only
strips. The amount recognized was $5.1 million relating to loans sold
during the third quarter and was offset by a corresponding decrease in the
gain on sale of loans. FAS 125 also required certain reclassifications of
the company's financial statements.
Total revenue for the nine-month period ended March 31, 1997 increased
143 percent to $240 million compared with $98.6 million a year earlier.
For the first nine months of the 1997 fiscal year, Aames reported net
income of $31.2 million, including an $18.6 million non-recurring aftertax
charge ($28.1 million on a pretax basis) taken in the first fiscal quarter
that primarily related to its merger with One Stop Mortgage, Inc., acquired
in August 1996. Net income for the first nine months of fiscal 1996
totaled $21.5 million. Prior to non-recurring charges,
<PAGE>
earnings per share for the current nine-month period totaled $1.44. After
giving effect to the charge, earnings per share (on greater weighted
average shares outstanding) rose to $0.93 per share on a fully diluted
basis, up from $0.85 a year ago.
The company recorded a lower gain on sale, resulting from the greater
amount of higher credit grade loans originated during the 1997 quarter and
the lower average interest rate on those loans, which was the primary
reason for a decrease in net income of $700,000 compared to the December
31, 1996 quarter. In addition, loan loss reserves increased because of the
increase in the size of the company's securitizations during the 1997
quarter.
Gary K. Judis, chairman and chief executive officer, said, "Aames'
solid performance this quarter underscores the strength of our core
operations. We continue to recognize the benefits of our acquisition of
One Stop early in the fiscal year, our ongoing nationwide retail expansion
program and the growth of our servicing portfolio. The decline in the
spread from the previous quarter primarily reflects the increase in
production of higher credit quality loans."
In response to the changing environment in the sub-prime mortgage
market and the general uncertainties in the capital markets (in which the
company has historically funded its negative cash flow), the company is
reviewing its pricing levels for all third party originated product.
Although, as previously disclosed, this change may have an adverse impact
on earnings, it will strengthen the company in the long run by improving
the company's cash flow and overall financial position. This change also
highlights the value of the company's core operations -- its retail and
broker production channels and its loan servicing capability. Retail
originations increased 152 percent and 112 percent while One Stop's
originations increased 50 percent and 153 percent for the quarter and nine
months, respectively.
"This company has enjoyed a tradition of responding prudently, but
decisively to changes in market conditions," Judis said. "This company
intends to continue to be an industry leader and will make the operational
changes necessary to maintain that leadership position."
During the third quarter, Aames completed the securitization and sale
of $633 million of home equity mortgage loans through an owner trust
secured by $418 million of adjustable rate mortgage loans and a REMIC trust
backed by $215 million of fixed rate mortgages.
Loan origination volume in the quarter totaled $597 million, a 77
percent increase over $337 million a year ago. The current third quarter's
volume represented a slight decline from origination volume of $616 million
in the immediately preceding quarter due to what management believes are
seasonal variations in loan production. Correspondent volume represented
$298 million in the third fiscal quarter. One Stop contributed $177
million to third quarter volume, and retail volume represented $122 million
of the quarter's total.
<PAGE>
At March 31, 1997, Aames' loan servicing portfolio totaled $2.8
billion, a 160 percent increase from $1.1 billion at March 31, 1996.
From time to time, the company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects and similar matters. The Private Securities Litigation Reform
Act of 1995 provides a safe harbor for forward-looking statements. In
order to comply with the terms of the safe harbor, the company notes that a
variety of factors could cause the company's actual results and experience
to differ materially from the anticipated results or other expectations
expressed in the company's forward-looking statements. The risks and
uncertainties that may affect the operations, performance and results of
the company's business include the following: negative cash flows and
capital needs, delinquencies, risks of contracted servicing, dependence on
funding sources, capitalized excess servicing receivable, recent addition
of wholesale correspondent program, recent acquisition of One Stop,
concentration of wholesale correspondent program, competition,
concentration of operations, timing of loan sales, economic conditions,
contingent risks, and government regulation. For a more complete
discussion of these risks and uncertainties, see "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Risk Factors" in the company's form 10-K for the fiscal year ended June 30,
1996.
Aames Financial Corporation is a leading home equity lender and
currently operates 51 Aames Home Loan offices in 23 states throughout the
United States. Its wholly owned subsidiary, One Stop Mortgage, Inc.,
operates in 31 states out of 35 offices.
# # #
<PAGE>
<TABLE>
AAMES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands except per share data)
<CAPTION>
Three Months Ended, Nine Months Ended,
March 31, March 31,
--------------------- ------------------------
1997 1996 1997 1996
--------------------- ------------------------
<S) <C> <C> <C> <C>
Revenue:
Gain on sale of loans 1 $53,052 $26,589 $166,212 $60,528
Net unrealized gain on
valuation of interest only strip 1 5,103 -- 5,103 --
Commissions 7,586 4,939 23,173 15,668
Loan service 8,769 5,372 18,831 13,172
Fees and other 9,570 3,703 26,430 9,234
-------- -------- -------- --------
Total Revenue 110,005 54,617 239,749 136,676
-------- -------- -------- --------
Expenses:
Compensation and related
expenses 22,250 10,676 61,283 27,254
Sales and advertising costs 6,566 5,171 20,800 12,789
General and administrative
expenses 8,082 4,778 22,799 10,532
Interest expense 8,364 3,014 23,551 6,298
Provision for loan losses 8,509 2,141 25,441 4,959
Nonrecurring charges -- -- 28,108 --
-------- -------- -------- --------
Total expenses 53,771 25,780 181,982 61,832
-------- -------- -------- --------
Income before income taxes 30,309 14,823 57,767 36,770
Provision for income taxes 12,734 6,259 26,542 15,259
-------- -------- -------- --------
Net Income $17,575 $8,564 $31,225 $21,511
======== ======== ======== ========
Net income per share
Primary $ 0.58 $ 0.34 $ 1.03 $ 0.86
======== ======== ======== ========
Fully Diluted $ 0.51 $ 0.33 $ 0.93 $ 0.85
======== ======== ======== ========
Prior to nonrecurring charges $ 1.44
========
Dividends $ 0.03 $ 0.03 $ 0.10 $ 0.10
======== ======== ======== ========
Weighted average number
of shares outstanding
Primary 30,337,000 25,108,000 30,405,000 24,962,000
========== ========== ========== ==========
Fully diluted 36,498,000 27,162,000 36,565,000 25,648,000
========== ========== ========== ==========
<FN>
1 Reflects implementation of FAS 125.
</FN>
</TABLE>
<PAGE>
<TABLE>
AAMES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
<CAPTION>
March 31, June 30,
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Cash and cash equivalents $150,151 $ 23,941
Loans held for sale, at cost which approximates market 106,846 186,189
Interest only strip, at fair market value 1 281,965 129,113
Accounts receivable, less allowance for doubtful
accounts of $664,000 and $473,000 38,219 9,685
Mortgage servicing rights 19,559 10,902
Residual assets 93,140 44,676
Equipment and improvements, net 10,673 6,674
Prepaid and other 19,063 10,295
--------- ---------
Total assets $719,616 $421,475
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Borrowings $288,000 $138,045
Revolving warehouse facility 75,000 112,363
Accounts payable and accrued expenses 22,518 11,380
Accrued compensation and related expenses 6,793 4,427
Income taxes payable 45,180 21,831
--------- ---------
Total liabilities 437,491 $288,046
========= =========
Stockholders' equity:
Preferred stock, par value $.001 per share,
1,000,000 shares authorized; none outstanding
Common stock, par value $.001 per share,
50,000,000 shares authorized; 27,677,300
and 23,845,300 shares outstanding 28 24
Additional paid-in capital 208,107 88,134
Retained earnings 73,990 45,271
--------- ---------
Total stockholders' equity 282,125 133,429
--------- ---------
Total liabilities and stockholders' equity $719,616 $421,4751
========= =========
<FN>
Reflects implementation of FAS 125.
</FN>
</TABLE>
<PAGE>
<TABLE>
AAMES FINANCIAL CORPORATION
QUARTERLY FINANCIAL STATISTICS
(In thousands except percentages)
<CAPTION>
Three Months Ended, Nine Months Ended,
March 1997 March 1996 March 1997 March 1996
---------- ---------- ---------- ----------
<S) <C> <C> <C> <C>
ORIGINATION VOLUME
Wholesale correspondent $ 297,640 $ 170,664 $ 885,863 $ 388,267
Broker network 177,587 118,333 508,189 201,061
Retail 121,594 48,339 315,235 148,641
---------- ---------- ---------- ---------
Total 596,821 337,336 1,709,287 737,969
========== ========== ========== =========
Retail weighted average commission rate 4.46% 7.06% 5.02% 8.27%
SERVICING PORTFOLIO 2,762,411 1,060,532
POOL SALES
Loans sold 633,146 319,771 1,762,674 688,660
Servicing spread on securitizations 3.91% 5.08% 4.23% 4.91%
EXPENSES AS PERCENTAGE OF REVENUE
Compensation 26% 26% 26% 28%
Sales and advertising 8% 13% 9% 13%
General and administrative 10% 12% 10% 11%
Interest 10% 7% 10% 6%
COMPONENTS OF REVENUE
Gain on sale of loans 1 $53,052 $26,589 $166,212 60,528
Net unrealized gain on valuation
of interest only strip, at fair market value 1 5,103 -- 5,103 --
Commissions:
Retail 5,760 3,481 16,419 12,236
Broker network 1,145 725 4,387 1,238
Other 681 733 2,367 2,194
Loan Service
Servicing spread 5,898 3,959 12,445 9,382
Prepayment fees 1,678 798 3,898 2,138
Late charges and other service fees 1,193 615 2,488 1,652
Fees and other:
Closing 613 516 2,149 1,733
Appraisal 477 274 1,406 791
Underwriting 211 308 1,159 1,120
Interest income 8,105 2,443 21,149 4,993
Other 164 162 567 597
---------- ---------- ---------- ---------
Total Revenue $84,080 $40,603 $239,749 $ 98,602
========== ========== ========== =========
<FN>
1 Reflects implementation of FAS 125.
</FN>
</TABLE>
EXHIBIT 99.2
CONTACT: Gregory J. Witherspoon
Aames Financial Corporation
213/ 351-6100
Cecilia A. Wilkinson/Roger S. Pondel
Pondel Parsons & Wilkinson
310/ 207-9300
FOR IMMEDIATE RELEASE
AAMES CORRECTS RECORD AND PAYMENT DATES FOR
REGULAR QUARTERLY CASH DIVIDEND
Los Angeles, California -- May 1, 1997 -- The board of directors of
Aames Financial Corporation (NYSE:AAM) today corrected the record and
payment dates for the regular quarterly cash dividend of $0.033 per share
announced yesterday. The new record date is May 8, 1997 and the new
payment date is May 16, 1997.
Aames Financial Corporation is a leading home equity lender and
currently operates 51 Aames Home Loan offices in 23 states throughout the
United States. Its wholly owned subsidiary, One Stop Mortgage, Inc.,
operates in 31 states out of 35 offices.
# # #
EXHIBIT 99.3
FOR IMMEDIATE RELEASE
Contact: Jeff Lloyd, Investor Relations
(213) 351-6100, ext. 2323
AAMES FINANCIAL CORPORATION ANNOUNCES MANAGEMENT SUCCESSION
CARY H. THOMPSON APPOINTED CHIEF EXECUTIVE OFFICER;
NEIL B. KORNSWIET NAMED PRESIDENT;
GARY K. JUDIS TO CONTINUE AS CHAIRMAN
LOS ANGELES, CALIF. -- MAY 8, 1997 -- AAMES FINANCIAL CORPORATION
(NYSE: AAM), today announced that, as part of the management succession
process initiated last year under the direction of Gary K. Judis, the
company's chairman and chief executive officer, Cary H. Thompson, who
currently serves as chief operating officer, has been appointed chief
executive officer, succeeding Judis, and Neil B. Kornswiet, vice chairman
of the board and the president and chief executive officer of its wholly
owned subsidiary, One Stop Mortgage, Inc., has been named president of
Aames. Judis continues as chairman.
Judis said, "This change allows me to focus my attention on the
broader strategic issues which confront our company. Today's announcement
highlights the depth of management talent that I have been fortunate enough
to attract and develop at Aames. I believe that Cary Thompson and Neil
Kornswiet, working in partnership, provide Aames with a senior management
team that is second to none in our industry and one that is more than
capable of solidifying our position as the premier subprime credit home
equity lender."
Thompson said, "I am appreciative of the confidence placed in me and
look forward to taking on the additional challenges of chief executive
officer. I am especially pleased that I will continue to work alongside
Gary Judis, who is one of the true visionaries in this industry, and look
forward to working in partnership with Neil Kornswiet, who has a wealth of
mortgage banking experience and has built One Stop into such a successful
organization."
Kornswiet said, "Since the time of Aames' acquisition of One Stop nine
months ago, I continue to be impressed by the superb quality of the
management team assembled by Gary Judis. I have long admired Aames'
success under Gary's leadership, and look forward with great pleasure and
anticipation at the opportunity to work closely with both Gary and Cary
Thompson in this exciting venture."
<PAGE>
Judis, 58, who has held the position of chairman, chief executive
officer and president of Aames since 1982, oversaw the company's growth as
it filled a neglected consumer need by providing loans to credit-impaired
homeowners. Under his leadership, Aames pioneered the idea of home-equity
lending, as well as packaging those loans into pools for sale to
institutional investors. Judis is chairman of the Home Equity Lenders
Leadership Organization.
Thompson, 40, was named chief operating officer in March, 1996, after
a longstanding investment banking relationship with Aames as managing
director and head of the United States Financial Institutions Group of
NatWest Markets, the investment banking arm of NatWest Group. Thompson has
been a director of Aames since January 1992, and was instrumental in
structuring the company's public financing transactions. Before that, he
was senior vice president and head of the West Coast Financial Institutions
Group for Oppenheimer & Co. Thompson is also on the board of directors of
Fidelity National Financial, Inc., a title insurance company.
Kornswiet, 40, is vice chairman of the board and president and chief
executive officer of Aames' wholly owned subsidiary, One Stop Mortgage,
Inc. Kornswiet has more than 14 years experience as either an executive of
or an advisor to mortgage banking companies. Prior to forming One Stop,
Kornswiet was president of Quality Mortgage USA, Inc., a nationwide
subprime lender. During his career as a lawyer, he was a partner in the
McKenna, Conner & Cuneo law firm, where his practice consisted of advising
many of the nation's largest banks, savings and loan associations and
mortgage banking companies with respect to credit compliance issues,
operational and efficiency issues, and securitization issues. In addition,
he has an accounting background and previously worked for Arthur Andersen &
Co.
Aames Financial Corporation is a leading home equity lender and
currently operates 51 Aames Home Loan offices in 23 states throughout the
United States. Its wholly owned subsidiary, One Stop Mortgage, Inc.
operates in 31 states out of 35 offices.
From time to time the company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects and similar matters. The Private Securities Litigation Reform
Act of 1995 provides a safe harbor for forward-looking statements. In order
to comply with the terms of the safe harbor, the company notes that a
variety of factors could cause the company's actual results and experience
to differ materially from the anticipated results or other expectations
expressed in the company's forward-looking statements. The risks and
uncertainties that may affect the operations, performance and results of
the company's business include the following: negative cash flows and
capital needs, delinquencies, risks of contracted servicing, dependence on
funding sources, capitalized excess servicing receivables, recent addition
of wholesale correspondent program, recent acquisition of One Stop,
concentration of wholesale correspondent program, competition,
concentration of operations, timing of loan sales, economic conditions,
contingent risks and government regulation. For a more complete discussion
of these risks and uncertainties, see "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Risk Factors"
in the company's form 10-K for the fiscal year ended June 30, 1996.
# # #
