AmNet Mortgage, Inc. Reports Third Quarter Results.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. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :AMNT), the parent company of American Mortgage Network (AmNet), a wholesale nationwide mortgage bank, today reported third quarter results, highlights of which included: --Third quarter 2005 consolidated net income was $1.9 million, or $0.23 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, compared to a consolidated net loss of $985 thousand, or $0.13 per diluted share, during the third quarter of 2004. --The Company reported total revenue, 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, of $56.0 million for the third quarter of 2005. As discussed in the Company's third quarter 10-Q filed yesterday and second quarter earnings press release, timing differences routinely occur between the recognition of hedge gains and losses and associated changes in the fair value of loans held for sale. The third quarter was impacted by increases in fair value that were not recognized in the second quarter of 2005 of approximately $2.3 million on a pre-tax basis; --Mortgage loans funded through AmNet were $4.5 billion in the third quarter of 2005, an increase of 119%, compared to $2.1 billion in the third quarter of 2004; and --Higher margin loans made up 41% of the Company's origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real volume as compared to 32% in the third quarter of 2004. Consolidated Results AmNet Mortgage, Inc. reported consolidated pretax income pretax income Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. was $3.3 million and consolidated net income of $1.9 million, or $0.23 per diluted share, for the third quarter of 2005, compared to a consolidated pretax loss pretax loss A loss reported before tax benefits are considered. of $1.7 million and a consolidated net loss of $985 thousand, or $0.13 per diluted share, in the third quarter of 2004. Consolidated net income for the nine months ended September 30, 2005 was $785 thousand or $0.10 per diluted share compared to a consolidated net loss of $6.5 million or $0.84 per diluted share in 2004. Because the Company does not employ hedge accounting Why is hedge accounting necessary? Many financial institutions and corporate businesses (entities) use derivative financial instruments to hedge their exposure to different risks (eg interest rate risk, foreign exchange risk, commodity risk, etc). under FAS 133, positive timing differences between the recognition of hedge gains and losses and associated increases in the fair value of loans held for sale at the end of the second quarter had a positive impact on reported gain on sale revenues in the third quarter. The positive impact on the third quarter amounted to approximately $2.3 million on a pre-tax basis. AmNet funded $4.5 billion in home loans during the third quarter of 2005, compared to $2.1 billion during the third quarter of 2004, an increase of 119%. In the third quarter of 2005, higher margin loans, including Alt-A, subprime, HELOC HELOC Home Equity Line Of Credit and second mortgages, made up 41% of the Company's origination volume as compared to 32% in the third quarter of 2004. Mortgage loans funded through AmNet were $10.9 billion for the first nine months of 2005, compared to $6.5 billion for the first nine months of 2004, an increase of 68%. Proposed Merger with Wachovia Bank, N. A. Also, during the third quarter, a definitive agreement was signed on September 13, 2005 under which Wachovia Bank, National Association, a national banking association organized under the laws of the United States of America UNITED STATES OF AMERICA. The name of this country. The United States, now thirty-one in number, are Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Hampshire, ("Wachovia") will acquire AmNet Mortgage, Inc. ("AmNet") for a purchase price of $10.30 per share in cash. The approximate total value of the transaction (on a fully diluted basis) is $83 million. AmNet's Board of Directors, with the unanimous recommendation of a special committee comprised of independent directors, has approved the proposed merger and is recommending that the Company's stockholders vote to approve it. The merger is conditioned on stockholder approval and other customary conditions described in the definitive proxy statement Proxy Statement A document containing the information that a company is required by the SEC to provide to shareholders so they can make informed decisions about matters that will be brought up at an annual stockholder meeting. dated November 7, 2005 related to the special stockholder meeting scheduled for December 8, 2005. About AmNet Mortgage, Inc. AmNet Mortgage Inc. is the parent company of American Mortgage Network. For more information, please visit www.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 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 . 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, Kansas, Minnesota, Nevada, New Hampshire New Hampshire, one of the New England states of the NE United States. It is bordered by Massachusetts (S), Vermont, with the Connecticut R. forming the boundary (W), the Canadian province of Quebec (NW), and Maine and a short strip of the Atlantic Ocean (E). , 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. , Ohio, Oregon, 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. , Utah, Virginia and Washington. AmNet has a total of $2.2 billion in warehouse borrowing capacity and is approved to do business in 50 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. 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. Actual results and the timing of certain events could differ materially from those projected in or contemplated by any 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; the stability of the entire mortgage secondary market; 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 all of the Company's mortgage loans; the Company's liquidity position; the availability of qualified mortgage professionals; the Company's ability to attract and retain qualified mortgage professionals; and other risk factors outlined in the Company's SEC reports. Caution Required by Certain Securities and Exchange Commission Rules Securities and Exchange Commission Rules Rules enacted by the SEC to assist in the regulation of US financial markets. In connection with the proposed merger, AmNet Mortgage, Inc. has filed a definitive proxy statement and other relevant documents concerning the transaction with the Securities and Exchange Commission. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Investors and security holders can obtain a free copy of the definitive proxy statement and other documents filed by AmNet Mortgage, Inc. with the Securities and Exchange Commission at the Securities and Exchange Commission's web site at http://www.sec.gov. Free copies of the definitive proxy statement and other documents filed by AmNet Mortgage, Inc. with the Securities and Exchange Commission may also be obtained from AmNet Mortgage, Inc. by directing a request to Investor Relations Investor relations The process by which the corporation communicates with its investors. , AmNet Mortgage 10421 Wateridge Circle, Suite 250 San Diego, CA, 92121. (email address See Internet address. : IR@amnetmortgageinc.com). AmNet Mortgage, Inc. and its directors and its executive officers may be deemed, under Securities and Exchange Commission rules, to be soliciting proxies from AmNet Mortgage, Inc.'s stockholders in favor of upon the side of; favorable to; for the advantage of. See also: favor the proposed merger. Information regarding the identity of these persons is set forth in a Schedule 14A filed by AmNet Mortgage with the Securities and Exchange Commission on July 6, 2005 relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc AmNet Mortgage, Inc.'s 2005 annual meeting of stockholders and a Form 10-K/A filed by AmNet Mortgage, Inc. with the Securities and Exchange Commission on July 6, 2005 both of which are available free of charge from the Securities and Exchange Commission or from AmNet Mortgage, Inc. as indicated above. Information regarding the interests of these persons in the solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual is specifically set forth in the proxy statement concerning the proposed merger that has been filed by AmNet Mortgage, Inc. with the Securities and Exchange Commission, which is available, free of charge from the Securities and Exchange Commission or from AmNet Mortgage, Inc. as indicated above.
AMNET MORTGAGE, INC.
(unaudited)
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
9/30/2005 9/30/2004 9/30/2005 9/30/2004
Income Statement --------- --------- --------- ---------
----------------
Revenues
Gain on sales of
loans $ 30,070 $ 24,198 $ 80,978 $ 42,037
---------- ---------- ---------- ----------
Derivative financial
instruments:
Forward sales of
mortgage backed
securities (MBS)
and options on MBS 9,610 (7,793) 1,245 (2,423)
Market adjustment
on loan commitment
pipeline (6,197) (3,753) (4,558) (520)
---------- ---------- ---------- ----------
Total derivative
financial
instruments 3,413 (11,546) (3,313) (2,943)
---------- ---------- ---------- ----------
Gain on sales of
loans, net of
derivative
financial
instruments 33,483 12,652 77,665 39,094
Interest on mortgage
assets 22,397 8,227 47,837 24,437
Other income 147 281 599 1,010
---------- ---------- ---------- ----------
Total revenue,
net of
derivative
financial
instruments 56,027 21,160 126,101 64,541
---------- ---------- ---------- ----------
Expenses
Employee compensation
and benefits 24,387 12,752 62,917 38,994
Interest expense 18,702 4,420 37,450 12,414
Valuation
adjustment-bond
collateral held for
sale - (437) - (406)
Operating expenses 9,637 6,093 24,339 24,318
---------- ---------- ---------- ----------
Total expenses 52,726 22,828 124,706 75,320
---------- ---------- ---------- ----------
Income (loss) before
income taxes $ 3,301 $ (1,668) $ 1,395 $ (10,779)
Provision for income
tax expense (benefit) 1,451 (683) 610 (4,328)
Consolidated
Net Income
(loss) $ 1,850 $ (985) $ 785 $ (6,451)
Per Share Data
--------------
Weighted average
common shares
outstanding 7,209,984 7,364,244 7,334,206 7,716,079
Consolidated income
(loss) per share
basic $ 0.26 $ (0.13) $ 0.11 $ (0.84)
Consolidated income
(loss) per share
diluted $ 0.23 $ (0.13) $ 0.10 $ (0.84)
Loan Origination and
Sale Data
--------------------
Total mortgage loans
funded in period ($
millions) $ 4,542 $ 2,075 $ 10,944 $ 6,512
Number of loans funded 23,227 12,164 56,802 37,400
Total mortgage loans
sold in period ($
millions) $ 4,154 $ 2,147 $ 10,282 $ 6,399
Percentage of mortgage
loans funded in
period by type
(based on $ funded):
Conventional
conforming 36.8% 45.7% 36.6% 52.9%
Alt-A 32.0% 27.4% 31.6% 15.8%
Jumbo/Non conforming 19.5% 15.5% 20.3% 18.3%
Government 2.9% 6.9% 3.6% 10.0%
Second/HELOC 5.6% 4.0% 5.5% 2.7%
Subprime 3.2% 0.5% 2.4% 0.2%
100.0% 100.0% 100.0% 100.0%
Balance Sheet Data
------------------
Cash and cash
equivalents $ 21,663 $ 46,133 $ 21,663 $ 46,133
Restricted cash 3,100 2,100 3,100 2,100
Bond collateral,
mortgage loans, net,
held for sale (lower
of cost or market) - - - -
Bond collateral
mortgage loans and
real estate owned,
net of reserves, held
for investment 11,105 17,197 11,105 17,197
Mortgage loans held
for sale, net,
pledged (lower of
cost or market) - 394,368 - 394,368
Accounts receivable-
mortgage loans
sold/funded 30,369 8,855 30,369 8,855
Total assets 822,141 484,451 822,141 484,451
Short-term debt 710,951 380,751 710,951 380,751
Short-term debt
related to bond
collateral held for
sale - - - -
Long-term debt, net 9,317 15,869 9,317 15,869
Total stockholders'
equity $ 78,631 $ 77,049 $ 78,631 $ 77,049
Book value per
outstanding share
basic $ 10.51 $ 10.54 $ 10.51 $ 10.54
Book value per
outstanding share
diluted $ 9.35 $ 9.61 $ 9.35 $ 9.61
Debt to equity ratio 9.2:1 5.1:1 9.2:1 5.1:1
($ in thousands, except per share data and as noted)
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