AmNet Mortgage Inc. Reports First 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 nationwide wholesale mortgage bank, today reported first quarter results, highlights of which included: --First quarter, 2005 consolidated net income was $507 thousand, or $0.06 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 $5.7 million, or $0.72 per diluted share, during the first quarter of 2004; --Mortgage loans funded through AmNet were $2.7 billion in the first quarter of 2005, an increase of 45% compared to $1.9 billion in the first quarter of 2004, while the overall mortgage market declined by an estimated 5% over the same periods; and --Higher margin loans made up 33% 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 6% in the first quarter of 2004. Consolidated Results AmNet Mortgage, Inc. reported consolidated net income of $507 thousand, or $0.06 per diluted share, for the first quarter of 2005, compared to a consolidated net loss of $5.7 million, or $0.72 per diluted share, in the first quarter of 2004. The loss in the first quarter of 2004 included a $4.4 million pre-tax charge related to the majority of the Company's mortgage asset portfolio being reclassified as "held for sale." AmNet funded $2.7 billion in home loans during the first quarter of 2005, compared to $1.9 billion during the first quarter of 2004. AmNet's loan fundings were 45% higher in the quarter, compared to an estimated 5% year-over-year decline in the overall mortgage market. AmNet had 182 total account executives at the end of the first quarter. In its core wholesale business, AmNet has significantly shifted its focus from primarily conforming loans Conforming loans Mortgage loans that meet the qualifications of Freddie Mac or Fannie Mae, which are bought from lenders and issued as pass-through securities. to an array of more than 100 mortgage products that meet changing market demographics The attributes of people in a particular geographic area. Used for marketing purposes, population, ethnic origins, religion, spoken language, income and age range are examples of demographic data. . In the first quarter of 2005, higher margin loans, including Alt-A, subprime, HELOC HELOC Home Equity Line Of Credit and second mortgages, made up 33% of the Company's origination volume as compared to 6% in the first quarter of 2004. Commenting on 2005 first quarter 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, "To drive sustained profitability, our national mortgage origination strategy continues to emphasize the potential for large volumes through a specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. operations platform. AmNet's market share and mortgage loan volumes have increased in most areas of the country. Our core wholesale business is young and has strong potential for further sales force expansion and market share penetration. We continue to take advantage of opportunities in the marketplace as they occur." Robbins continued, "Increasing momentum in market share growth was evident in the first quarter. Our broker-focused model is clearly differentiating us from other wholesale lenders. Mortgage brokers have responded positively to our distinct value proposition which combines a broad product menu, exceptional service and a local presence in the communities where they do business." Robbins added, "In the first quarter, we continued to recruit account executives for our core wholesale business and added 5 net new Subprime account executives, bringing our total dedicated Subprime account executive count to 19 at the end of the first quarter. We introduced new products and expanded our investor outlets. As the marketplace evolves, our goal is to deliver the products, services and technology demanded by broker customers while continually con·tin·u·al adj. 1. Recurring regularly or frequently: the continual need to pay the mortgage. 2. focusing on the efficiencies that increase productivity throughout our production channels." Operational Margins Gain on the sale 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 and market adjustments, in the first quarter of 2005 totaled $21.3 million or 85 basis points, on $2.5 billion of loan sales volume, as compared to $8.9 million, or 52 basis points, on $1.7 billion of loan sales volume during the first quarter of 2004. Higher net gains were largely the result of both higher loan sales volume and better margins, reflecting an improvement in AmNet's loan production mix towards higher margin products. Net interest spread for our mortgage banking operations in the first quarter of 2005, which was interest on mortgage assets of $10.1 million less interest income on the mortgage portfolio of $0.3 million, offset by interest expense of $6.9 million less interest expense on the mortgage portfolio of $0.1 million, totaled $3.1 million. This equated to 11 basis points on $2.7 billion of loan fundings. In the first quarter of 2004, net interest spread for our mortgage banking operations, which was interest on mortgage assets of $6.6 million less interest income on the mortgage portfolio of $1.6 million, offset by interest expense of $3.2 million less interest expense on the mortgage portfolio of $0.9 million, totaled $2.7 million. This equated to 14 basis points on loan fundings of $1.9 billion. Consolidated 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 $30.7 million less interest expense $6.9 million, totaled $23.9 million during the first quarter of 2005, or 88 basis points on loan fundings. These expenses included an estimated $8.8 million in sales commissions and other variable expenses, representing approximately 37% of total operating expenses. Consolidated operating expenses in the first quarter of 2005 also included approximately $1.5 million of direct investment in the subprime division and the correspondent channel. For the first quarter of 2004, consolidated operating expenses, which were total expenses of $25.4 million less interest expense of $3.2 million and a bond valuation adjustment of $4.4 million, totaled $17.7 million, or 95 basis points on loan fundings. Liquidity and Book Value Cash and cash equivalents were $40.1 million as of March 31, 2005, compared to $29.7 million at March 31, 2004 and $52.7 million at December 31, 2004. Cash and cash equivalents per basic share was $5.42 at March 31, 2005. Book value per basic share was $10.51 at March 31, 2005. Cash deployment during the quarter was primarily attributable to greater loan production volume during the first quarter of 2005 and the associated cash investments into loan inventories, which typically are sold within 30 days of origination. 2005 Strategic Initiatives The Mortgage Bankers Mortgage Banker A company, individual or institution that originates, sells and services mortgage loans. Notes: Don't confuse a mortgage banker with a mortgage broker. Association (MBA MBA abbr. Master of Business Administration Noun 1. MBA - a master's degree in business Master in Business, Master in Business Administration ) is forecasting that total residential 1-4 mortgage originations for 2005 will be $2.5 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. , one of the four largest mortgage markets in history. The average 30-year fixed mortgage rate is predicted by the MBA to rise to 6.6% in the fourth quarter of 2005, up from 5.8% in the first quarter of the year. The Company continues to focus on specific initiatives targeted at increasing scale and leveraging its infrastructure across 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. channels. These initiatives include: --Expanding our sales force and intensifying in·ten·si·fy v. in·ten·si·fied, in·ten·si·fy·ing, in·ten·si·fies v.tr. 1. To make intense or more intense: recruitment of top performing account executives, targeting 300 by year-end 2005, including additions to our subprime division and correspondent channel. Sales force growth is intended to maximize market penetration Noun 1. market penetration - the extent to which a product is recognized and bought by customers in a particular market penetration - the act of entering into or through something; "the penetration of upper management by women" within our current branch network, while increasing both subprime and correspondent originations; --Growing market share in our core wholesale branch network through our Small Town America initiative, which is aimed at increasing market penetration outside the major cities where we now have regional offices. Small Town America will build volume through our existing network of offices, eliminating typical brick and mortar See bricks and mortar. expansion expense; --Increasing loan production to optimize optimize - optimisation the potential for large volumes through our existing operations platform; --Implementing specific web-related and broker-focused technology enhancements that increase functionality for our broker customers and make it easier for them to do business with us. A new, more robust automated au·to·mate v. au·to·mat·ed, au·to·mat·ing, au·to·mates v.tr. 1. To convert to automatic operation: automate a factory. 2. underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. engine will generate faster underwriting decisions on a broader range of products; --Continuing to increase and diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. our product mix into higher margin products, including non-conforming loans A non-conforming loan is a loan that fails to meet bank criteria for funding. Reasons include the loan amount is higher than the conforming loan limit (for mortgage loans), lack of sufficient credit, the unorthodox nature of the use of funds, or the collateral backing it. , such as Alt-As, jumbos, HELOCs and seconds as well as home equity and subprime products. ARMs and interest-only products accounted for 63% of mortgage originations in the second half of 2004 according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the MBA and; --Developing our correspondent channel as a natural complement to the core wholesale business. As a new distribution channel, the correspondent initiative expands AmNet's target market to include areas where the Company believes it can quickly and effectively capture additional market share and incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. volume through its specialized operations platform. Conference Call and Webcast Management will host a conference call with a simultaneous webcast today at 10:30a.m. Pacific/12:30p.m. Central/1:30p.m. Eastern to discuss first 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 Berry, former province, France Berry (bĕrē`), former province, central France. Bourges, the capital, and Châteauroux are the chief towns. , will be available by telephone and 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 participate by telephone, please dial 800-201-1027 at least five minutes before start time. For international callers, please dial 706-634-0805. A telephone replay will be available through May 24, 2005 by dialing (800) 642-1687 or (706) 645-9291 and entering the pass code #6235681. To listen to the webcast, log on to www.amnetmortgageinc.com/webcasts.shtml. The webcast will also be available live at www.fulldisclosure.com. An online replay will be available at www.amnetmortgageinc.com/webcasts.shtml for one year. Electronic versions of news releases may be accessed via the Company's web site at www.amnetmortgageinc.com/press.shtml. 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. Through its correspondent channel, the Company purchases loans from small to mid-size mortgage banks, credit unions and community banks. 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, Illinois, Kansas, Minnesota, Nevada, 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 $1.4 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. Forward-looking statements include statements regarding the future size of the residential mortgage loan market and the Company's strategic initiatives and their impact on the Company's operations. These may include statements regarding: AmNet's potential for sales force expansion and market share growth; the size of the 2005 residential 1-4 mortgage market; mortgage rates in the fourth quarter of 2005; the number of AmNet account executives at the end of 2005; the ability of the Small Town America initiative to build loan volume through existing branch offices; technology enhancement implementations; increasing and diversifying the amount of higher margin products which AmNet will produce; and the development and expansion of AmNet's correspondent channel. 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 largest concentration of the Company's loans being from California; the effectiveness of the Company's hedging strategies; the Company's ability to increase its loan origination 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. and correspondent lending. 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; 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.
AMNET MORTGAGE, INC.
(unaudited)
Three Three
Months Months
Ended Ended
--------------------
3/31/2005 3/31/2004
--------------------
Income Statement
----------------
Revenues
Gain on sales of loans $18,274 $15,515
--------------------
Derivative financial instruments:
Forward sales of mortgage backed securities
(MBS) and options on MBS 3,055 (5,487)
Market adjustment on loan commitment pipeline 4 (1,157)
--------------------
Total derivative financial instruments 3,059 (6,644)
--------------------
Gain on sales of loans, net of derivative
financial instruments 21,333 8,871
Interest on mortgage assets 10,119 6,641
Other income 202 296
--------------------
Total revenue, net of derivative financial
instruments 31,654 15,808
--------------------
Expenses
Employee compensation and benefits 17,264 11,842
Interest expense 6,861 3,241
Valuation adjustment-bond collateral held for sale - 4,428
Operating expenses 6,624 5,865
--------------------
Total expenses 30,749 25,376
--------------------
Income (loss) before income taxes $905 $(9,568)
Provision for income tax expense (benefit) 398 (3,896)
Consolidated Net Income (loss) $507 $(5,672)
Per Share Data
--------------------------------------------------
Weighted average common shares outstanding 7,361,352 7,874,347
Consolidated income (loss) per share basic $0.07 $(0.72)
Consolidated income (loss) per share diluted $0.06 $(0.72)
Loan Origination and Sale Data
--------------------------------------------------
Total mortgage loans funded in period ($ millions) $2,708 $1,871
Number of loans funded 14,314 10,629
Total mortgage loans sold in period ($ millions) $2,497 $1,642
Percentage of mortgage loans funded in period by
type (based on $ funded):
Conventional conforming 42.1% 59.2%
Alt-A 27.2% 4.0%
Jumbo/Non conforming 21.0% 21.7%
Government 4.0% 13.5%
Second/HELOC 4.8% 1.7%
Subprime 1.0% 0.0%
100.0% 100.0%
Balance Sheet Data
--------------------------------------------------
Cash and cash equivalents $37,286 $27,647
Restricted cash 2,850 2,100
Bond collateral, mortgage loans, net, held for
sale (lower of cost or market) - 116,226
Bond collateral mortgage loans and real estate
owned, net of reserves, held for investment 13,745 21,215
Mortgage loans held for sale, net, pledged (lower
of cost or market) 424,401 510,524
Accounts receivable-mortgage loans sold/funded 17,494 3,182
Total assets 517,414 697,060
Short-term debt 409,803 495,292
Short-term debt related to bond collateral held
for sale - 90,097
Long-term debt, net 12,155 20,078
Total stockholders' equity $77,757 $82,817
Book value per outstanding share basic $10.51 $10.52
Book value per outstanding share diluted $9.48 $9.68
Debt to equity ratio 5.4:1 7.3:1
($ in thousands, except per share data and as noted)
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