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Delta Financial Corporation Announces Second Quarter Results

WOODBURY, NY--(BUSINESS WIRE)--Aug. 14, 2001-- Delta Financial Corporation (OTCBB: DLTO) today announced results for the second quarter ended June 30, 2001.

As expected, the Company reported a net loss of $16.5 million, or $1.04 per share (basic and diluted), for the quarter ended June 30, 2001, compared to a net loss of $3.5 million, or $0.22 per share (basic and diluted), for the quarter ended June 30, 2000. For the six months ended June 30, 2001, Delta reported a net loss of $50.3 million, or $3.16 per share (basic and diluted). This compares to a net loss of $1.7 million, or $0.11 per share, reported for the six months ended June 30, 2000. The loss for the quarter ended June 30, 2001, resulted primarily from non-recurring charges associated principally with (1) the Company's disposition and transfer of its servicing platform to Ocwen Financial Corporation in May 2001, (2) a change in accounting estimates regarding the life expectancy of the Company's computer-related equipment, and (3) costs associated with our current debt exchange offer. The Company also recorded a fair value adjustment to its non-performing mortgage loans, which were sold in July 2001.

The net charge for non-recurring items for the second quarter of 2001 totaled $15.2 million on an after-tax basis, or $0.96 per share. The charges are primarily related to (1) the costs of maintaining an unprofitable servicing platform until Delta transferred it to Ocwen in May 2001, plus the associated costs of transferring the servicing portfolio, totaling $10.7 million on an after-tax basis, (2) a change in the useful life of computer-related equipment from five years to three years totaling $3.6 million on an after-tax basis, and (3) debt restructuring costs associated with the Company's current debt exchange offer totaling $0.9 million on an after-tax basis. In addition, the Company recorded an $1.5 million charge related to a fair value adjustment to a pool of non-performing loans that the Company sold in July 2001.

``As anticipated, the results for the second quarter of 2001 primarily reflect the charges incurred in connection with our overall corporate restructuring plan announced in March 2001. We hope to complete our corporate restructuring during the third quarter of 2001 if our exchange offer is successful, and expect to record a loss (and commensurate reduction in our net worth) during the quarter,'' said Hugh Miller, President and Chief Executive Officer.

During the second quarter of 2001, the Company completed a $165 million securitization, utilizing a senior-subordinate structure, which included a surety wrap credit enhancement on the AAA rated securities. The Company sold its rights to service the securitization mortgage loan pool to Ocwen for a cash purchase price and also sold an interest-only certificate for cash. In addition, the Company sold $20.7 million of mortgage loans on a servicing-released basis for an aggregate cash premium of 5.24%.

Loan originations for the second quarter of 2001 were $165.1 million compared to $170.7 million reported in the first quarter of 2001 and $263.6 million reported in the second quarter of 2000. The decrease in origination volume was not unexpected, as management continued to spend much of its efforts on the corporate restructuring (i.e., disposition of servicing platform and debt exchange offer). For the second quarter of 2001, broker and retail originations each accounted for 50% of the Company's overall loan production. This compares favorably to last quarter where the broker and retail channels accounted for 62% and 38% of total production, respectively. For the second quarter of 2000, broker and retail originations and correspondent purchases represented 61%, 29% and 10% of total production, respectively. The Company closed its correspondent division in the second quarter of 2000.

As previously reported, on July 23, 2001, the Company launched an exchange offer in which it is offering the holders of its $150 million of 9 1/2% Senior Secured Notes and 9 1/2% Senior Notes due August 2004 (collectively, the ``Notes'') an opportunity to exchange their Notes for shares of the Company's newly issued preferred stock and membership interests in a newly formed LLC, to which the Company will transfer all of the mortgage-related securities currently securing the senior secured notes. Cash generated by the mortgage-related securities will be paid out to the holders of the LLC membership interests. The exchange offer will remain open until August 20, 2001. As part of the exchange offer, all tendering Noteholders will waive their right to receive the August 1st interest coupon. As such, the Company did not make the coupon payment due on August 1, 2001, on the Notes. The exchange offer is conditioned upon the Company receiving the consent of holders of at least 95% of the Notes. If successful, the exchange offer will eliminate substantially all of the Company's long-term debt; if the exchange offer is not consummated, the Company will likely default on its August 1st interest payment.

               Delta Financial Corporation and Subsidiaries

                   Consolidated Statements of Operations

          (unaudited)(dollars in thousands, except per share data)

                              Three Months Ended   Six Months Ended

                                   June 30,            June 30,


Revenues:                      2001        2000      2001      2000

                               ----        ----      ----      ----

 Net gain on sale

  of mortgage loans          $ 14,320     11,274    19,697    25,928

 Interest                       5,243      7,567    (9,546)   18,104

 Servicing fees                   770      3,738     2,983     7,804

 Origination fees               4,732      6,365     8,894    13,053

                             --------   --------   -------  --------

    Total revenue              25,065     28,944    22,028    64,889


 Payroll and related cost      11,959     15,699    23,283    31,260

 Interest expense               5,992      8,528    11,821    16,331

 General and administrative    23,562     10,750    35,393    20,206

 Restructuring and other

  special charges                 (13)         -     1,246         -

                             --------   --------   -------  --------

    Total expenses             41,500     34,977    71,743    67,797

                             --------   --------   -------  --------

(Loss) income before tax

  (benefits) expense          (16,435)    (6,033)  (49,715)   (2,908)

Income taxes (benefits)            93     (2,506)      565    (1,207)

                             --------   --------   -------  --------

Net loss                     $(16,528)    (3,527)  (50,280)   (1,701)

                             ========   ========   =======  ========

Per share data:

Net loss per share -

 basic and diluted           $  (1.04)     (0.22)    (3.16)    (0.11)

                             ========   ========   =======  ========

Weighted-average number

 of shares outstanding

 (thousands)                   15,902     15,921    15,912    15,921

                             ========   ========   =======  ========

             Delta Financial Corporation and Subsidiaries

               Consolidated and Condensed Balance Sheets

                  (unaudited) (dollars in thousands)

                                       June 30,       December 31,

                                         2001             2000

                                       -------        ------------


Cash and interest-bearing deposits   $   4,230           62,270

Loans held for sale, net                79,686           82,698

Interest-only and residual

 certificates, net                     186,475          216,907

Other assets                            22,536           89,370

                                     ---------        ---------

    Total assets                     $ 292,927          451,245

                                     =========        =========


Warehouse financing and other

 borrowings                          $  65,210           88,632

Senior notes                           149,622          149,571

Other liabilities                       30,651          115,318

                                     ---------        ---------

    Total liabilities                  245,483          353,521

                                     ---------        ---------

Stockholders' equity:                   47,444           97,724

                                     ---------        ---------

Total liabilities and

 stockholders' equity:               $ 292,927          451,245

                                     =========        =========
Founded in 1982, Delta Financial Corporation is a Woodbury, New York-based specialty consumer finance company engaged in originating, securitizing and selling (and until May 2001, servicing) non-conforming home equity loans. Delta's loans are primarily secured by first mortgages on one- to four-family residential properties. Delta originates home equity loans primarily in 20 states. Loans are originated through a network of approximately 1,500 brokers and the Company's retail offices. Prior to July 1, 2000, loans were also purchased through a network of approximately 120 correspondents. Since 1991, Delta has sold approximately $6.7 billion of its mortgages through 29 AAA rated securitizations.

``Safe Harbor'' Statement under the Private Securities Litigation Reform Act of 1995: Certain statements contained in this press release, which are not historical fact, may be deemed to be ``forward-looking'' statements under federal securities laws that involve risk and uncertainties. There are many important factors that could cause Delta Financial Corporation and its subsidiaries' actual results to differ materially from those indicated in the forward-looking statements. Such factors include, but are not limited to the Company's ability or inability to consummate all facets of its debt restructuring, including without limitation, the exchange offer; the availability of funding at favorable terms and conditions, including without limitation, warehouse, residual and other credit facilities; the Company's ability or inability to continue to access the securitization and whole loan markets at favorable terms and conditions; costs associated with litigation, the Company's regulatory settlements with state and federal agencies and other regulatory compliance matters and changes (legislative or otherwise) affecting mortgage lending activities and the real estate market; competition, loan losses, loan prepayment rates, delinquency and default rates, general economic conditions, including interest rate risk, future residential real estate values, demand for Delta Financial Corporation and its subsidiaries' services, and other risks identified in Delta Financial Corporation's Securities and Exchange Commission filings.

Delta Financial Corporation, Woodbury
Richard Blass

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