EX-99.1 3 ex99_1.txt EX-99.1 Exhibit 99.1 FOR IMMEDIATE RELEASE American Business Financial Services, Inc. Reports Fiscal Year 2003 Financial Results Philadelphia, PA, September 23, 2003 - American Business Financial Services, Inc. (NASDAQ: ABFI), today announced its financial results for the fiscal year ended June 30, 2003. The Company reported a net loss of $29.9 million, or $10.25 per fully diluted share, with revenues of $241.4 million for fiscal 2003. For the previous fiscal year, revenues were $247.9 million and net income was $7.9 million, or $2.49 per fully diluted share. Albert W. Mandia, Executive Vice President and Chief Financial Officer of American Business Financial Services, stated, "The loss was primarily due to our inability to complete our typical quarterly securitization of loans during the fourth quarter of our fiscal year and to $45.2 million of pre-tax charges for net valuation adjustments on our securitization assets charged to the income statement, compared to $22.1 million of net valuation adjustments in fiscal 2002." During fiscal 2003, the Company charged to the income statement a total of $63.1 million of pre-tax valuation adjustments on its interest-only strips and servicing rights, referred to as securitization assets. The $63.1 million of adjustments primarily reflect the impact of higher than anticipated prepayments on securitized loans due to the low interest rate environment experienced during fiscal 2003. The pre-tax valuation adjustments charged to the income statement were partially offset by $17.9 million as a result of a decrease in the discount rates used to value the Company's securitization assets, resulting in the $45.2 million of pre-tax charges for net valuation adjustments. The Company reduced the discount rates on its interest-only strips and its servicing rights primarily to reflect the impact of the sustained decline in market interest rates. The discount rate on the projected residual cash flows from the interest-only strips was reduced from 13% to 11% at June 30, 2003. The discount rate used to determine the fair value of the overcollateralization portion of the cash flows from our interest-only strips was minimally impacted by the decline in interest rates and remained at 7% on average. As a result, the blended discount rate used to value our interest-only strips, including the overcollateralization cash flows, was 9% at June 30, 2003. The discount rate on the servicing rights was reduced from 11% to 9% at June 30, 2003. The Company intends to file a current report on Form 8-K with the SEC, which includes additional information regarding the Company. The Company also intends to file its Annual Report on Form 10-K in the next week. The Form 10-K will contain additional information regarding the Company's financial results for the fiscal year ended June 30, 2003, including management's discussion and analysis of financial condition and results of operations. Upon filing, a copy of the Company's Form 10-K will be available on the Securities and Exchange Commission's website, http://www.sec.gov. American Business Financial Services, Inc. is a diversified financial services company operating predominantly in the eastern and central portions of the United States. The Company primarily originates, sells and services home equity and business purpose loans through a combination of channels, including a national processing center located at its centralized operating office in Philadelphia, Pennsylvania, and a regional processing center in Roseland, New Jersey. The Company also processes and purchases home equity loans from other financial institutions through its Bank Alliance Services program. For further information, contact Albert W. Mandia, Executive Vice President and Chief Financial Officer, 215-940-4504, or Keith Bratz, VP--Corporate Communications, 215-940-4525. # # # Certain statements contained in this press release, which are not historical fact, may be deemed to be forward-looking statements under federal securities laws. There are many important factors that could cause American Business Financial Services, Inc. and its subsidiaries' actual results to differ materially from those indicated in the forward-looking statements. Such factors include, but are not limited to, general economic conditions, including interest rate risk, future residential real estate values, regulatory changes (legislative or otherwise) affecting the mortgage lending and real estate industries, regulatory investigations of lending practices, lending to credit-impaired borrowers, competition, demand for the Company's products, relationships with brokers, ability to obtain financing, loan prepayment rates, delinquency and default rates, access to securitization markets, changes in factors influencing or interruptions in securitization and whole loan sale markets, ability to successfully implement changes in business strategy, amount of debt outstanding, restrictive covenants in debt instruments and other risks identified in American Business Financial Services, Inc.'s Securities and Exchange Commission filings. AMERICAN BUSINESS FINANCIAL SERVICES, CONSOLIDATED STATEMENTS OF INCOME (dollar amounts in thousands, except per share data)
Three Months Ended Twelve Months Ended June 30, June 30, ---------------------- ---------------------- 2003 2002 2003 2002 --------- --------- --------- --------- (Unaudited) (Unaudited) REVENUES Gain on sale of loans: Securitizations $ 556 $ 56,441 $ 170,950 $ 185,580 Whole loan sales 626 74 655 2,448 Interest and fees 6,002 4,505 19,395 18,890 Interest accretion on interest-only strips 12,986 9,466 47,347 35,386 Servicing income 382 1,267 3,049 5,483 Other income 3 7 10 114 --------- --------- --------- --------- Total Revenues 20,555 71,760 241,406 247,901 --------- --------- --------- --------- EXPENSES Interest 17,041 17,216 68,098 68,683 Provision for credit losses 1,861 2,023 6,553 6,457 Employee related costs 11,636 10,360 41,601 36,313 Sales and marketing 7,637 7,021 27,773 25,958 General and administrative 26,329 22,298 101,219 74,887 Securitization assets valuation adjustments 11,879 8,900 45,182 22,053 --------- --------- --------- --------- Total Expenses 76,383 67,818 290,426 234,351 --------- --------- --------- --------- INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (55,828) 3,942 (49,020) 13,550 PROVISION FOR INCOME TAX EXPENSE (BENEFIT) (21,773) 1,656 (19,118) 5,691 --------- --------- --------- --------- NET INCOME (LOSS) $ (34,055) $ 2,286 $ (29,902) $ 7,859 ========= ========= ========= ========= EARNINGS (LOSS) PER COMMON SHARE Basic $ (11.68) $ 0.80 $ (10.25) $ 2.68 ========= ========= ========= ========= Diluted $ (11.68) $ 0.75 $ (10.25) $ 2.49 ========= ========= ========= ========= Average Common Shares (in thousands): Basic 2,944 2,844 2,918 2,934 Diluted 2,944 3,000 2,918 3,155
6 AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
June 30, 2003 2002 -------------------------------- (dollar amounts in thousands) (Unaudited) (Note) Assets Cash and cash equivalents $ 47,475 $ 108,599 Loan and lease receivables, net Available for sale 271,402 57,677 Interest and fees 15,179 12,292 Other 23,761 9,028 Interest-only strips (includes the fair value of overcollateralization related cash flows of $279,245 and $236,629 at June 30, 2003 and 2002) 598,278 512,611 Servicing rights 119,291 125,288 Receivable for sold loans 26,734 - Prepaid expenses 3,477 3,640 Property and equipment, net 23,302 18,446 Other assets 30,452 28,794 -------------------------------- Total assets $ 1,159,351 $ 876,375 ================================ Liabilities Subordinated debt $ 719,540 $ 655,720 Warehouse lines and other notes payable 212,916 8,486 Accrued interest payable 45,448 43,069 Accounts payable and accrued expenses 30,352 13,690 Deferred income taxes 17,036 35,124 Other liabilities 91,990 50,908 -------------------------------- Total liabilities 1,117,282 806,997 -------------------------------- Stockholders' equity Preferred stock, par value $.001, authorized, 3,000,000 shares at June 30, 2003 and 1,000,000 shares at June 30, 2002; Issued and outstanding, none - - Common stock, par value $.001, authorized, 9,000,000 shares, Issued: 3,653,165 shares in 2003 and 3,645,192 shares in 2002 (including Treasury shares of 706,273 in 2003 and 801,823 in 2002) 4 4 Additional paid-in capital 23,985 23,985 Accumulated other comprehensive income 14,540 11,479 Retained earnings 13,104 47,968 Treasury stock, at cost (8,964) (13,458) --------------------------------- 42,669 69,978 Note receivable (600) (600) --------------------------------- Total stockholders' equity 42,069 69,378 --------------------------------- Total liabilities and stockholders' equity $1,159,351 $ 876,375 ================================= Note: The balance sheet at June 30, 2002 has been derived from the audited financial statements at that date.
7 AMERICAN BUSINESS FINANCIAL SERVICES, INC. Managed Portfolio Quality (for the last three fiscal quarters) The following table provides data concerning delinquency experience, real estate owned and loss experience for the managed loan and lease portfolio. Previously delinquent loans subject to deferment and forbearance arrangements are not included in this table if borrowers are current on principal and interest payments (exclusive of delinquent payments advanced by us to the securitization trust on the borrower's behalf as part of the deferment or forbearance arrangement). (dollars in thousands):
June 30, 2003 March 31, 2003 December 31, 2002 --------------------- ----------------- ------------------- Amount % Amount % Amount % ----------- ------- ---------- ------- ---------- ------ Business Purpose Loans Total managed portfolio............. $ 393,098 $ 392,228 $ 385,139 =========== ========== ========== Period of delinquency: 31-60 days...................... $ 4,849 1.23% $ 5,526 1.41% $ 3,966 1.03% 61-90 days...................... 4,623 1.18 2,718 0.69 4,040 1.05 Over 90 days.................... 38,466 9.79 35,286 9.00 35,708 9.27 ----------- ------ ---------- ------ ---------- ----- Total delinquencies............. $ 47,938 12.20% $ 43,530 11.10% $ 43,714 11.35% =========== ====== ========== ====== ========== ===== REO................................. $ 5,744 $ 4,506 $ 6,021 =========== ========== ========== Home Equity Loans Total managed portfolio............. $ 3,249,501 $3,073,392 $2,933,492 =========== ========== ========== Period of delinquency: 31-60 days...................... $ 48,332 1.49% $ 47,809 1.56% $ 46,746 1.59% 61-90 days...................... 24,158 0.74 23,261 0.76 29,610 1.01 Over 90 days.................... 108,243 3.33 104,939 3.41 100,044 3.41 Total delinquencies............. ----------- ------ ---------- ------ ---------- ----- $ 180,733 5.56% $ 176,009 5.73% $ 176,400 6.01% =========== ====== ========== ====== ========== ===== REO................................. $ 22,256 $ 30,704 $ 28,403 =========== ========== ========== Equipment Leases Total managed portfolio............. $ 8,475 $ 12,185 $ 16,907 =========== ========== ========== Period of delinquency: 31-60 days...................... $ 162 1.91% $ 379 3.11% $ 359 2.12% 61-90 days...................... 83 0.98 89 0.72 46 0.27 Over 90 days.................... 154 1.82 85 0.70 358 2.12 ----------- ------ ---------- ------ ---------- ----- Total delinquencies............. $ 399 4.71% $ 553 4.53% $ 763 4.51% =========== ====== ========== ====== ========== ===== Combined Total managed portfolio............. $ 3,651,074 $3,477,805 $3,335,538 =========== ========== ========== Period of delinquency: 31-60 days...................... $ 53,343 1.46% $ 53,714 1.55% $ 51,071 1.53% 61-90 days...................... 28,864 0.79 26,068 0.75 33,696 1.01 Over 90 days.................... 146,863 4.02 140,310 4.03 136,110 4.08 ----------- ------ ---------- ------ ---------- ----- Total delinquencies............. $ 229,070 6.27% $ 220,092 6.33% $ 220,877 6.62% =========== ====== ========== ====== ========== ===== REO................................. $ 28,000 0.77% $ 35,210 1.01% $ 34,424 1.03% =========== ====== ========== ====== ========== ===== Losses experienced during the three month period(a)(b) : Loans........................... $ 7,390 0.83% $ 8,405 0.99% $ 5,849 0.72% ====== ====== ===== Leases.......................... 55 2.14% 176 4.82% 65 1.33% ----------- ====== ---------- ====== ---------- ===== Total managed portfolio......... $ 7,445 0.84% $ 8,581 1.01% $ 5,914 0.72% =========== ====== ========== ====== ========== =====
Note: See Attachment A for reconciliation of non-GAAP financial measures. (a) Percentage based on annualized losses and average managed portfolio. (b) Losses recorded on our books were $4.2 million ($0.9 million from charge-offs through the provision for loan losses and $3.3 million for write downs of real estate owned) and losses absorbed by loan securitization trusts were $3.3 million for the three months ended June 30, 2003. Losses recorded on our books were $6.1 million ($3.1 million from charge-offs through the provision for loan losses and $3.0 million for write downs of real estate owned) and losses absorbed by loan securitization trusts were $2.5 million for the three months ended March 31, 2003. Losses recorded on our books were $2.4 million($0.9 million from charge-offs through the provision for loan losses and $1.5 million for write downs of real estate owned) and losses absorbed by loan securitization trusts were $3.5 million for the three months ended December 31, 2002. Losses recorded on our books include losses for loans we hold as available for sale or real estate owned and loans repurchased from securitization trusts. 8 AMERICAN BUSINESS FINANCIAL SERVICES, INC. Managed Portfolio Quality (for the last three fiscal years) The following table provides data concerning delinquency experience, real estate owned and loss experience for the managed loan and lease portfolio. Previously delinquent loans subject to deferment and forbearance arrangements are not included in this table if borrowers are current on principal and interest payments (exclusive of delinquent payments advanced by us to the securitization trust on the borrower's behalf as part of the deferment or forbearance arrangement). (dollars in thousands):
June 30, 2003 June 30, 2002 June 30, 2001 ---------------------- --------------------- ------------------- Amount % Amount % Amount % ----------- ------- --------- -------- --------- ------ Delinquency by Type Business Purpose Loans Total managed portfolio............. $ 393,098 $ 361,638 $ 300,192 =========== ========== ========== Period of delinquency: 31-60 days...................... $ 4,849 1.23% $ 2,449 0.68% $ 3,460 1.15% 61-90 days...................... 4,623 1.18 1,648 0.46 1,837 0.61 Over 90 days.................... 38,466 9.79 32,699 9.03 22,687 7.56 ----------- ------- ---------- ------- ---------- ---- Total delinquencies............. $ 47,938 12.20% $ 36,796 10.17% $ 27,984 9.32% =========== ======= ========== ======= ========== ==== REO................................. $ 5,744 $ 6,220 $ 4,530 =========== ========== ========== Home Equity Loans Total managed portfolio............. $ 3,249,501 $2,675,559 $2,223,429 =========== ========== ========== Period of delinquency: 31-60 days...................... $ 48,332 1.49% $ 37,213 1.39% $ 16,227 0.73% 61-90 days...................... 24,158 0.74 22,919 0.86 14,329 0.64 Over 90 days.................... 108,243 3.33 72,918 2.72 47,325 2.13 ----------- ------- ---------- ------- ---------- ---- Total delinquencies............. $ 180,733 5.56% $ 133,050 4.97% $ 77,881 3.50% =========== ======= ========== ======= ========== ==== REO................................. $ 22,256 $ 27,825 $ 23,902 =========== ========== ========== Equipment Leases Total managed portfolio............. $ 8,475 $ 28,992 $ 65,774 =========== ========== ========== Period of delinquency: 31-60 days...................... $ 162 1.91% $ 411 1.42% $ 595 0.90% 61-90 days...................... 83 0.98 93 0.32 206 0.31 Over 90 days.................... 154 1.82 423 1.46 347 0.53 Total delinquencies............. ----------- ------- ---------- ------- ---------- ---- $ 399 4.71% $ 927 3.20% $ 1,148 1.74% =========== ======= ========== ======= ========== ==== Combined Total managed portfolio............. $ 3,651,074 $3,066,189 $2,589,395 =========== ========== ========== Period of delinquency: 31-60 days...................... $ 53,343 1.46% $ 40,073 1.31% $ 20,282 0.78% 61-90 days...................... 28,864 0.79 24,660 0.80 16,372 0.63 Over 90 days.................... 146,863 4.02 106,040 3.46 70,359 2.72 ----------- ------- ---------- ------- ---------- ---- Total delinquencies............. $ 229,070 6.27% $ 170,773 5.57% $ 107,013 4.13% =========== ======= ========== ======= ========== ==== REO................................. $ 28,000 0.77% $ 34,045 1.11% $ 28,432 1.10% =========== ======= ========== ======= ========== ==== Losses experienced during the period(a)(b) : Loans........................... $ 29,507 0.89% $ 15,478 0.56% $ 10,886 0.50% ======= ======= ==== Leases.......................... 497 2.82% 1,415 3.20% 1,003 1.20% ----------- ======= ---------- ======= ---------- ==== Total managed portfolio......... $ 30,004 0.90% $ 16,893 0.60% $ 11,889 0.53% =========== ======= ========== ======= ========== ====
Note: See Attachment A for reconciliation of non-GAAP financial measures. (a) Percentage based on annualized losses and average managed portfolio. (b) Losses recorded on our books were $16.8 million ($6.8 million from charge-offs through the provision for credit losses and $10.0 million for write downs of real estate owned) for the year ended June 30, 2003. Losses absorbed by loan securitization trusts were $13.2 million for fiscal 2003. Losses recorded on our books were $9.0 million ($4.4 million from charge-offs through the provision for loan losses and $4.6 million for write downs of real estate owned) and losses absorbed by loan securitization trusts were $7.9 million for fiscal 2002. Losses recorded on our books were $7.1 million ($4.0 million from charge-offs through the provision for loan losses and $3.1 million for write downs of real estate owned) and losses absorbed by loan securitization trusts were $4.8 million for fiscal 2001. Losses recorded on our books include losses for loans we hold as available for sale or real estate owned and loans repurchased from securitization trusts. 9 AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES LOAN ORIGINATIONS (in thousands) Three Months Ended Twelve Months Ended June 30, June 30, ------------------- ------------------------ 2003 2002 2003 2002 -------- -------- ---------- ---------- American Business Credit $ 29,620 $ 34,317 $ 122,790 $ 133,352 Upland Mortgage / ABMS 459,560 338,911 1,543,730 1,246,505 -------- -------- ---------- ---------- Total Company $489,180 $373,228 $1,666,520 $1,379,857 ======== ======== ========== ========== 10 Attachment A AMERICAN BUSINESS FINANCIAL SERVICES, INC. Reconciliation of Non-GAAP Financial Measures The earnings release contains non-GAAP financial measures. For purposes of the Securities and Exchange Commission Regulation G, a non-GAAP financial measure is a numerical measure of a registrant's historical or future financial performance, financial position or cash flow that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows (or equivalent statement) of the Company; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. In this regard, GAAP refers to accounting principles generally accepted in the United States of America. Pursuant to the requirements of Regulation G, we have provided in this addendum a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measure. Reconciliation of managed portfolio measures (Dollars in thousands): -------------------------------------------------------------------------------- June 30, 2003: Delinquencies -------------------------------------------------------------------------------- Amount % ----------------- On-balance sheet loan and lease receivables $ 265,764 $ 5,412 2.04% Securitized loan and lease receivables 3,385,310 223,658 6.61% ---------- -------- Managed portfolio $3,651,074 $229,070 6.27% On-balance sheet REO $ 4,776 Securitized REO 23,224 ---------- Managed REO $ 28,000 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- March 31, 2003: Delinquencies -------------------------------------------------------------------------------- Amount % ----------------- On-balance sheet loan and lease receivables $ 51,347 $ 5,992 11.67% Securitized loan and lease receivables 3,426,458 214,100 6.25% ----------- -------- Managed portfolio $ 3,477,805 $220,092 6.33% On-balance sheet REO $ 6,348 Securitized REO 28,862 ----------- Managed REO $ 35,210 -------------------------------------------------------------------------------- 11 Attachment A (continued) -------------------------------------------------------------------------------- December 31, 2002: Delinquencies -------------------------------------------------------------------------------- Amount % ----------------- On-balance sheet loan and lease receivables $ 58,582 $ 9,494 16.21% Securitized loan and lease receivables 3,276,956 211,383 6.45% ----------- -------- Managed portfolio $ 3,335,538 $220,877 6.62% On-balance sheet REO $ 7,215 Securitized REO 27,209 ----------- Managed REO $ 34,424 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- June 30, 2002: Delinquencies -------------------------------------------------------------------------------- Amount % ----------------- On-balance sheet loan and lease receivables $ 56,625 $ 5,918 10.45% Securitized loan and lease receivables 3,009,564 164,855 5.48% ----------- -------- Managed portfolio $ 3,066,189 $170,773 5.57% On-balance sheet REO $ 3,784 Securitized REO 30,261 ----------- Managed REO $ 34,045 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- June 30, 2001: Delinquencies -------------------------------------------------------------------------------- Amount % ----------------- On-balance sheet loan and lease receivables $ 87,899 $ 3,382 3.85% Securitized loan and lease receivables 2,501,496 103,631 4.14% ----------- -------- Managed portfolio $ 2,589,395 $107,013 4.13% n-balance sheet REO $ 2,323 Securitized REO 26,109 ----------- Managed REO $ 28,432 -------------------------------------------------------------------------------- 12