AmNet Mortgage, Inc. Reports Second Quarter Results; Revises 2004 Guidance.SAN DIEGO San Diego (săn dēā`gō), city (1990 pop. 1,110,549), seat of San Diego co., S Calif., on San Diego Bay; inc. 1850. San Diego includes the unincorporated communities of La Jolla and Spring Valley. Coronado is across the bay. -- AmNet Mortgage, Inc. (formerly American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Residential Investment Trust, Inc.) (Amex:INV INV abbr. in vitro fertilization ), the parent company of American Mortgage Network (AmNet), a wholesale mortgage bank serving mortgage brokers nationwide, today reported second quarter results, highlights of which included:
-- Second quarter consolidated earnings were $208 thousand or
$0.02 cents per diluted share including an after-tax charge of
approximately $519 thousand or $0.07 cents per diluted share,
related to expenses incurred on the sale of the majority of
the mortgage asset portfolio;
-- $1.4 million in pre-tax income was earned by AmNet; and
-- $2.6 billion of mortgage loans were funded in the second
quarter.
Other Company highlights: *T --Completed the sale of the majority of the mortgage asset portfolio with net cash proceeds of $24.9 million; --Repurchased 500,000 shares at $8.80 per share in a privately negotiated transaction; --Cash and cash equivalents were $53.2 million as of June June: see month. 30, 2004; and --Book value per outstanding share increased to $10.63. *T Consolidated Results For the second quarter of 2004, AmNet Mortgage, Inc. reported consolidated net income of $208 thousand, or $0.02 cents per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share including an after-tax charge of approximately $519 thousand or $0.07 cents per diluted share, related to expenses incurred on the sale of the majority of the mortgage asset portfolio. Commenting on results, John M. Robbins Rob·bins , Frederick Chapman 1916-2003. American microbiologist. He shared a 1954 Nobel Prize for work on the cultivation of the polio virus. , Chief Executive Officer, said, "There were a number of significant events during the second quarter. We completed the sale of the majority of the REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). mortgage asset portfolio. The net cash proceeds were $24.9 million and we extinguished ex·tin·guish tr.v. ex·tin·guished, ex·tin·guish·ing, ex·tin·guish·es 1. To put out (a fire, for example); quench. 2. To put an end to (hopes, for example); destroy. See Synonyms at abolish. 3. more than $90 million of bond collateral debt. The Company has cash and cash equivalents of $53.2 million, while our book value per outstanding share was $10.63 at the end of the second quarter. We repurchased 500,000 shares of our common stock at $8.80 per share in a privately negotiated transaction, which was not part of our previously announced stock repurchase plan stock repurchase plan 1. See buyback. 2. See self-tender. ." Robbins continued, "As expected, this quarter was marked by intense competition and price compression Price compression The limitation of the price appreciation potential for a callable bond in a declining interest rate environment, based on the expectation that the bond will be redeemed at the call price. indicative of a mortgage market that has rapidly contracted. We continued to implement new product and marketing programs and opened offices and recruited seasoned managers in Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. , San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden and Salt Lake City. The resources and time required to bring new branches to maturity has been greater than anticipated." The Company reports its results in two segments -- mortgage banking (AmNet) and mortgage asset portfolio investments (AMREIT). Mortgage Banking Business - American Mortgage Network (AmNet) For the second quarter of 2004, AmNet's pre-tax income was $1.4 million, compared to a loss of $5.9 million in the first quarter of 2004. AmNet funded $2.6 billion in home loans during the second quarter of 2004, compared to $1.9 billion in the first quarter of 2004. In the second quarter of 2004, gain on sales of loans, net of derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. financial instruments, was $17.6 million, or 67 basis points on $2.6 billion of loan sales volume. This compared to gain on sales of loans, net of derivative financial instruments, of $8.9 million, or 54 basis points on $1.6 billion of loan sale volume, in the first quarter of 2004. Interest revenue on mortgage assets in the second quarter was $9.0 million and was offset by interest expense of $4.4 million, resulting in a net interest spread of $4.6 million, or 18 basis points on $2.6 billion of loan fundings in the second quarter of 2004. In the first quarter of 2004, interest revenue on mortgage assets was $5.0 million and was offset by interest expense of $2.3 million, resulting in a net interest spread of $2.7 million, or 14 basis points on $1.9 billion of loan fundings. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. , which were total expenses of $25.2 million less interest expense of $4.4 million, were $20.8 million during the second quarter, or 81 basis points on loan fundings. These expenses included an estimated $6.5 million in sales commissions and other variable expenses, representing approximately 31% of total operating expenses. Operating expenses in the first quarter of 2004 were $17.5 million, or 94 basis points on loan fundings. Commenting on mortgage operations, Robbins added, "During the second quarter, the mortgage bank had a pre-tax profit of $1.4 million. We transitioned our loan mix to higher margin products, such as ARMs and Alt-A. In fact, Alt-A loans made up 28% of the total mix in June versus 8% for all of the first quarter. The number of commissioned account executives increased to 126, compared with 108 at the end of the first quarter. Since June 30th, we have added 24 new account executives, bringing our current total to 150." Mortgage Asset Portfolio Business During the second quarter, the sale of the majority of the mortgage asset portfolio business was completed. Mortgage portfolio assets declined to $19.3 million at June 30, 2004, and are expected to have nominal earnings and cash flow impact going forward. For the second quarter of 2004, the mortgage asset portfolio business incurred a pre-tax loss of $1.0 million, compared to a pre-tax loss of $3.7 million in the first quarter of 2004. The primary cause for the losses in both periods was related to the mortgage asset portfolio sale. Pre-tax losses on bond collateral held for sale of $880 thousand and $4.4 million were recorded in the second and first quarters, respectively. Commenting on the benefits of the mortgage asset portfolio sale, Judith A. Berry Berry, former province, France Berry (bĕrē`), former province, central France. Bourges, the capital, and Châteauroux are the chief towns. , Executive Vice President and Chief Financial Officer said, "This transaction simplified the Company's balance sheet, reduced our leverage to six to one, increased our cash balances by 79% from the first quarter and eliminated future credit and pre-payment risk associated with the sold portion of the portfolio." Liquidity and Book Value Cash and cash equivalents were $53.2 million as of June 30, 2004, compared to $29.7 million at March 31, 2004. Cash per outstanding share increased from $3.78 at March 31, 2004 to $7.20 at June 30, 2004. The Company's book value per outstanding share increased to $10.63 at June 30, 2004, compared to $10.52 at March 31, 2004, primarily due to share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. during the second quarter. 2004 Guidance The Mortgage Banking Association (MBA MBA abbr. Master of Business Administration Noun 1. MBA - a master's degree in business Master in Business, Master in Business Administration ) estimates that third and fourth quarter 2004 originations will be down significantly--some 14% from their April, 2004 forecast and 54% from the last two quarters of 2003. The decrease is attributable to a lower refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. market. As a result of this overall market contraction contraction, in physics contraction, in physics: see expansion. contraction, in grammar contraction, in writing: see abbreviation. contraction - reduction as well as adjustments in the number and timing of account executives that were expected to join the Company, AmNet's 2004 loan production is expected to be between $8 billion and $9 billion. Earnings for the third and fourth quarter of 2004 are expected to be in line with second quarter results. Reduced earnings guidance is related to a number of factors which include: the 14% market decline from previous MBA estimates for the second half of the year; increased competition with resultant This article is about the resultant of polynomials. For the result of adding two or more vectors, see Parallelogram rule. For the technique in organ building, see Resultant (organ). In mathematics, the resultant of two monic polynomials price compression in certain products such as Alt-A; and a challenging recruiting and retention environment for account executives. Commenting on revised guidance, Robbins noted, "To respond to competitive pressures and slower market share growth, we have initiated a number of cost reduction measures. We are right sizing and workload The term workload can refer to a number of different yet related entities. An amount of labor While a precise definition of a workload is elusive, a commonly accepted definition is the hypothetical relationship between a group or individual human operator and task demands. balancing support staff to align align (  līn),v to move the teeth into their proper positions to conform to the line of occlusion. with lower anticipated volumes. These efforts enhance our ability to utilize our existing infrastructure while continuing to grow our sales presence." Robbins concluded, "The mortgage market is undergoing a period of extreme volatility as measured by the MBA. The MBA forecast predicts that the market will shrink shrink Vox populi noun A psychiatrist 54% from the second quarter of 2004 to the first quarter of 2005. The MBA also expects that originations will decrease from $848 billion to $388 billion over the period. It also anticipates that the market will shrink some 68% from a peak of $1.2 trillion One thousand times one billion, which is 1, followed by 12 zeros, or 10 to the 12th power. See space/time. (mathematics) trillion - In Britain, France, and Germany, 10^18 or a million cubed. In the USA and Canada, 10^12. in the third quarter of 2003 to $388 billion in the first quarter of 2005. Against this backdrop Backdrop may refer to:
Conference Call and Webcast Management will host a conference call with a simultaneous webcast today at 1:30 p.m. Pacific/4:30 p.m. Eastern to discuss second quarter operating performance. The conference call, featuring Chairman and Chief Executive Officer John M. Robbins and Executive Vice President and Chief Financial Officer Judith A. Berry, will be available live via the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the . To listen to the webcast, log on to the Company's web site at www.amnetmortgageinc.com and click on the link that appears on the home page. The webcast will also be available live at www.fulldisclosure.com. An online replay will be available at www.amnetmortgageinc.com for one year. A telephone replay will be available through August 23, 2004 by dialing (800) 642-1687 or (706) 645-9291 and entering the pass code 7316480. Electronic versions of news releases may be accessed via the Company's web site at www.amnetmortgageinc.com. About AmNet Mortgage, Inc. AmNet Mortgage Inc., formerly American Residential Investment Trust, Inc., is the parent company of American Mortgage Network. For more information, please visit amnetmortgageinc.com. About American Mortgage Network Headquartered in San Diego, California “San Diego” redirects here. For other uses, see San Diego (disambiguation). San Diego is a coastal Southern California city located in the southwestern corner of the continental United States. As of 2006, the city has a population of 1,256,951. , AmNet is a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of AmNet Mortgage, Inc. AmNet originates loans for the national mortgage broker community through its network of branches and business-to-business over the Internet. AmNet has loan production offices in Arizona Arizona (âr'əzō`nə), state in the southwestern United States. It is bordered by Utah (N), New Mexico (E), Mexico (S), and, across the Colorado R., Nevada and California (W). , California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). , Colorado, Connecticut Connecticut, state, United States Connecticut (kənĕt`ĭkət), southernmost of the New England states of the NE United States. It is bordered by Massachusetts (N), Rhode Island (E), Long Island Sound (S), and New York (W). , Florida, Georgia Georgia, country, Asia Georgia (jôr`jə), Georgian Sakartvelo, Rus. Gruziya, officially Republic of Georgia, republic (2005 est. pop. 4,677,000), c.26,900 sq mi (69,700 sq km), in W Transcaucasia. , Illinois Illinois, river, United States Illinois, river, 273 mi (439 km) long, formed by the confluence of the Des Plaines and Kankakee rivers, NE Ill., and flowing SW to the Mississippi at Grafton, Ill. It is an important commercial and recreational waterway. , Kansas, Minnesota, New Jersey, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , North Carolina North Carolina, state in the SE United States. It is bordered by the Atlantic Ocean (E), South Carolina and Georgia (S), Tennessee (W), and Virginia (N). Facts and Figures Area, 52,586 sq mi (136,198 sq km). Pop. , Oregon Oregon, city, United States Oregon, city (1990 pop. 18,334), Lucas co., NW Ohio, a suburb adjacent to Toledo, on Lake Erie; inc. 1958. It is a port with railroad-owned and -operated docks. The city has industries producing oil, chemicals, and metal products. , Rhode Island Rhode Island, island, United States Rhode Island, island, 15 mi (24 km) long and 5 mi (8 km) wide, S R.I., at the entrance to Narragansett Bay. It is the largest island in the state, with steep cliffs and excellent beaches. , Texas, Utah, Virginia Virginia, state, United States Virginia, state of the south-central United States. It is bordered by the Atlantic Ocean (E), North Carolina and Tennessee (S), Kentucky and West Virginia (W), and Maryland and the District of Columbia (N and NE). and Washington. AmNet has a total of $1.4 billion in warehouse borrowing capacity and is approved to do business in 49 states and the District of Columbia District of Columbia, federal district (2000 pop. 572,059, a 5.7% decrease in population since the 1990 census), 69 sq mi (179 sq km), on the east bank of the Potomac River, coextensive with the city of Washington, D.C. (the capital of the United States). either by license or exemption. AmNet has 5,000 approved broker customers across the nation. For more information, please visit www.amnetmortgage.com. Forward-Looking Statement forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Certain matters discussed in this press release may constitute forward-looking statements within the meaning of federal securities laws. Forward-looking statements include statements regarding: The expectation that the Company's mortgage portfolio assets will have nominal earnings and cash flow impact in the future; estimates that mortgage originations nationwide will decline in the last half of 2004 as compared to the last half of 2003; AmNet's 2004 loan production; the Company's earnings for the second half of 2004; forecasted declines in the national mortgage market in the periods from 2003 to 2005; the timing of AmNet's nationwide subprime rollout and the expectation that certain investments made in 2004 will result in market share gains. The Company's ability to meet its operational and financial goals are subject to risks including risks related to: The Company's ability to continue to sell its loans to a competitor who is its largest purchaser; the Company's ability to maintain and renew its warehouse lines; the large concentration of the Company's loans in California; the effectiveness of the Company's hedging strategies; the Company's ability to increase its loan origination The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. volume in a contracting market; and the Company's lack of significant experience with subprime loans Subprime Loan A loan that is offered at a rate above prime to individuals who do not qualify for prime rate loans. Notes: Subprime loans tend to have a rate that is 0.1% to 0.6% higher than the prime rate. . Actual results and the timing of certain events could also differ materially from those projected in or contemplated by our forward-looking statements due to a number of other factors, including but not limited to: the level of interest rates generally; economic conditions generally; the size of the national mortgage market, including subprime loans; the stability of the subprime mortgage secondary market; the predictability of the Company's expenses and margins; the future correlation of volatility in forward mortgage sale instruments to the Company's loan lock commitments; interest rate volatility; the ability to retain and renew warehouse lending facilities for the funding of mortgage loans, including subprime loans; the Company's liquidity position; the availability of qualified mortgage professionals; the ability to attract and retain qualified mortgage professionals and other risk factors outlined in the Company's SEC reports.
AMNET MORTGAGE, INC.
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Three Three
Months Months Six Months Six Months
Ended Ended Ended Ended
-------------------- --------------------
6/30/2004 6/30/2003 6/30/2004 6/30/2003
-----------------------------------------
Income Statement
----------------- - - - -
- - - -
Mortgage Banking Segment: - - - -
-------------------- --------------------
Revenues
Gain on sales of loans $2,323 $32,971 $17,839 $53,180
-----------------------------------------
Derivative financial
instruments:
Forward sales of mortgage
backed securities (MBS)
and options on MBS 10,857 (3,027) 5,370 (3,080)
Market adjustment on loan
commitment pipeline 4,390 (6,257) 3,233 (8,415)
-----------------------------------------
Total derivative
financial
instruments 15,247 (9,284) 8,603 (11,495)
-----------------------------------------
Gain on sales of
loans, net of
derivative
financial
instruments 17,570 23,687 26,442 41,685
Interest on mortgage assets 8,994 7,561 14,008 13,462
Other income 66 34 145 52
-----------------------------------------
Total revenue, net
of derivative
financial
instruments 26,630 31,282 40,595 55,199
-----------------------------------------
Expenses
Interest expense 4,422 3,447 6,767 6,121
Operating expenses 20,770 18,080 38,307 32,375
-----------------------------------------
Total expenses 25,192 21,527 45,074 38,496
-----------------------------------------
Income (loss) before income
taxes - Mortgage Banking
Segment $1,438 $9,755 $(4,479) $16,703
Mortgage Asset Portfolio
Segment:
Revenues
Interest on mortgage assets $575 $2,832 $2,203 $6,176
Other income 368 213 584 411
-----------------------------------------
Total revenue 943 3,045 2,787 6,587
-----------------------------------------
Expenses
Interest expense 332 1,151 1,227 2,689
Provision for loan losses - 794 - 1,713
Gain on sale of real estate
owned, net (61) (330) (320) (515)
Valuation adjustment - bond
collateral sale 880 - 5,309 -
Operating expenses 772 491 1,202 1,405
-----------------------------------------
Total expenses 1,923 2,106 7,418 5,292
-----------------------------------------
Income (loss) before income
taxes - Mortgage Asset
Portfolio Segment $(980) $939 $(4,631) $1,295
Consolidated Income (loss)-
Combined Segments $458 $10,694 $(9,110) $17,998
Provision for income tax
expense (benefit) $250 3,652 $(3,645) 5,478
Income tax benefit from
termination of REIT status - (2,463) - (9,141)
Consolidated Net
Income (loss) $208 $9,505 $(5,465) $21,661
Per Share Data
-----------------------------
Weighted average common
shares outstanding 7,838,504 7,863,437 7,856,426 7,863,154
Consolidated income (loss)
per share basic $0.03 $1.21 $(0.70) $2.75
Consolidated income (loss)
per share diluted $0.02 $1.12 $(0.70) $2.56
Loan Origination Data
-----------------------------
Total mortgage loans funded
in period ($ millions) $2,566 $3,212 $4,437 $5,290
Number of loans funded 14,614 17,871 25,243 29,568
Balance Sheet Data
-----------------------------
Cash and cash equivalents $50,944 $27,240 $50,944 $22,786
Restricted cash 2,290 2,100 2,290 1,750
Bond collateral mortgage
loans and real estate owned,
net of reserves, held for
investment 19,257 208,984 19,257 238,777
Mortgage loans (formerly bond
collateral), net, held for
sale (lower of cost or
market) 1,707 - 1,707
Mortgage loans held for sale,
net 466,281 576,297 466,281 488,007
Total assets 560,747 840,264 560,747 767,153
Short-term debt 453,808 560,352 453,808 477,445
Long-term debt, net 18,043 176,977 18,043 206,098
Total stockholders' equity $78,555 $81,149 $78,555 $71,644
Book value per share basic $10.63 $10.32 $10.63 $9.11
Book value per share diluted $9.66 $9.58 $9.66 $9.02
Debt to equity ratio 6.0:1 9.1:1 6.0:1 9.5:1
----------------------------------------------------------------------
($ in thousands, except per share data and as noted)
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