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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

              Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ý           o   

              At May 8, 2003, Registrant had 6,598,717 shares of common stock outstanding.

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Item 1. Financial Statements

AAMES FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes to condensed consolidated financial statements.

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AAMES FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)

See accompanying notes to condensed consolidated financial statements.

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AAMES FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

See accompanying notes to condensed consolidated financial statements.

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AAMES FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1: Basis of Presentation

           The condensed consolidated financial statements of Aames Financial Corporation, a Delaware corporation, and its subsidiaries (collectively, the “Company”) included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted.

           The condensed consolidated financial statements include the accounts of the Company and all of its subsidiaries after eliminating all significant intercompany transactions and reflect all normal, recurring adjustments which are, in the opinion of management, necessary to present a fair statement of the results of operations of the Company in conformity with accounting principles generally accepted in the United States for the interim periods reported. The results of operations for the Company for the three and nine months ended March 31, 2003 are not necessarily indicative of the results expected for the full fiscal year.

           At March 31, 2003, Specialty Finance Partners (“SFP”), a partnership controlled by Capital Z Financial Services Fund, II, L.P., a Bermuda partnership (together with SFP, “Capital Z”) owned convertible preferred stock representing approximately 90.1% of the Company's combined voting power in the election of directors and approximately 44.8% of the combined voting power in all matters other than the election of directors. Representatives or nominees of Capital Z have five of the nine seats on the Board of Directors, and as current members' terms expire, Capital Z has the continuing right to appoint and elect four directors and nominate one additional director. As a result of its beneficial ownership and Board representation, Capital Z has, and will continue to have, sufficient power to determine the Company's direction and policies.

Note 2: Residual Forward Sale Facility with Related Party

           The Company’s Residual Forward Sale Facility (the “Residual Facility”), as amended with Capital Z Investments, L.P., a Bermuda partnership (“CZI”), an affiliate of Capital Z, the Company's largest shareholder, expired on March 31, 2003.

           During the three months ended March 31, 2003, the Company did not dispose of any of its loans through a securitization nor did the Company use the Residual Facility. During the nine months ended March 31, 2003, the Company securitized $315.0 million of mortgage loans and sold the residual interest created therein to CZI for $8.7 million under the Residual Facility.

           In connection with obtaining the Residual Facility, the Company initially capitalized $3.3 million of costs, of which $3.0 million related to a facility fee paid to CZI. During the three months ended March 31, 2003, the Company wrote off the remaining unamortized Residual Facility costs of $0.2 million by charging gain on sale. During the nine months ended March 31, 2003 and 2002, amortization of total capitalized Residual Facility costs charged to gain on sale of loans was $0.8 million and $0.5 million, respectively.

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Note 3: Subsidiary Guarantors

           In October 1996, the Company completed an offering of its 9.125% Senior Notes due November 2003 which are guaranteed by all of the Company's operating subsidiaries, all of which are wholly-owned. The guarantees are joint and several, full, complete and unconditional. There are no restrictions on the ability of such subsidiaries to transfer funds to the Company in the form of cash dividends, loans or advances. Aames Financial Corporation is a holding company with limited assets or operations other than its investments in its subsidiaries. Separate financial statements of the guarantors are not presented because the aggregate total assets, net earnings and net equity of such subsidiaries are substantially equivalent to the total assets, net earnings and net equity of the Company on a consolidated basis.

           Aames Financial Corporation has guaranteed amounts outstanding under revolving warehouse and repurchase agreements pursuant to which certain of its operating subsidiaries are the contractual borrowers. The guarantees are full, complete and unconditional.

Note 4: Debt Redemption and Debt Extinguishment Income

           On December 13, 2002, the Company consummated its offer to exchange (the “Exchange Offer”) its newly issued 5.5% Convertible Subordinated Debentures due 2012 (the “2012 Debentures”) for its outstanding 5.5% Convertible Subordinated Debentures due 2006 (the “2006 Debentures”). The Company exchanged $49.6 million of the outstanding 2006 Debentures that were tendered and issued an equal amount of 2012 Debentures. On December 23, 2002, the Company redeemed $19.8 million, or 40.0%, of the principal amount outstanding on the 2012 Debentures through a scheduled mandatory sinking fund payment. On December 31, 2002, SFP forgave its remaining $25.0 million principal balance of 2012 Debentures due from the Company. At December 31, 2002, amounts outstanding under the 2006 Debentures and the 2012 Debentures were $64.4 million and $4.8 million, respectively.

           During the three and nine months ended March 31, 2003, the Company redeemed $3.0 million and $22.1 million, respectively, of its 9.125% Senior Notes at a discount from par.

           During the three and nine months ended March 31, 2003, debt extinguishment income was $0.1 million and $27.2 million, respectively. All of the $0.1 million of debt extinguishment income during the three months ended March 31, 2003 related to the redemption of the Company’s 9.125% Senior Notes. Of the $27.2 million of debt extinguishment income during the nine months ended March 31, 2003, $25.0 million and $2.2 million related to the redemption of the 2012 Debentures and 9.125% Senior Notes, respectively.

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Note 5: Per Share Data

           The following table sets forth information regarding basic and diluted net income (loss) per common share for the three and nine months ended March 31, 2003 and 2002 (amounts in thousands, except per share data):