American Residential Reports First Quarter 2003 Earnings; Books One-Time Tax Benefit and Increases Guidance.Business Editors SAN DIEGO--(BUSINESS WIRE)--May 5, 2003 American Residential Investment Trust, Inc. (AMEX AMEX See: American Stock Exchange (R): INV INV abbr. in vitro fertilization ), the parent company of American Mortgage Network (AmNet), a wholesale mortgage bank serving the mortgage broker channel nationwide, today reported first quarter results and updated 2003 earnings guidance. Highlights include: -- Consolidated first quarter net income was $12.2 million, including a one-time tax benefit of $6.7 million; -- First quarter earnings 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 increased to $1.53, including a one-time tax benefit of $0.84 per share; -- First quarter consolidated pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern earnings were $7.3 million, up 56% over the previous quarter; -- Book value per diluted share was $9.02 at March 31, 2003; -- Funded $2.1 billion in mortgage loans through American Mortgage Network; -- Expanded regional center network into the Mid-Atlantic and Northeast; -- Warehouse funding facilities increased to $960 million and -- Increased 2003 projected net earnings to between $2.50 and $2.75 per share on a consolidated, after tax basis. Consolidated Results American Residential reported consolidated net income of $12.2 million, or $1.53 per diluted share for the first quarter of 2003, inclusive of inclusive of prep. Taking into consideration or account; including. $6.7 million, or $0.84 per diluted share of income associated with one-time tax benefits. On April 9, the Company raised first quarter guidance and stated that its effective combined 2003 federal and state income tax rate would be approximately 25%. The Company recorded a one-time benefit to establish tax assets associated with net operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. carry forwards generated by American Residential Investment Trust, Inc. (AMREIT) in prior periods which now are expected to be utilized to offset taxable earnings generated by AmNet in future periods. John M. Robbins, Jr., Chief Executive Officer, said, "In the first quarter, we officially terminated our status as a real estate investment trust. Our transformation to a mortgage bank is complete. Our achievements in the first quarter attest To solemnly declare verbally or in writing that a particular document or testimony about an event is a true and accurate representation of the facts; to bear witness to. To formally certify by a signature that the signer has been present at the execution of a particular writing so as to the validity of the AmNet business model. We have continued to enter new geographic areas and have leveraged opportunities in established regions. While low interest rates are fueling current 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. activity, we believe in our ability to penetrate new markets and increase market share in existing regions, thus serving us well in a rising interest rate environment." The Company noted that its unrestricted cash and cash equivalents balance was $22.8 million at March 31, 2003, as compared to approximately $13.6 million at December 31, 2002, an increase of 68%. The unrestricted cash and cash equivalents balance totaled approximately $2.87 per diluted share at March 31, 2003. The Company's diluted book value per share was $9.02 at March 31, 2003. The Company reports its results in two segments - mortgage banking (AmNet) and mortgage asset portfolio investments (AMREIT). Mortgage Banking Business - American Mortgage Network (AmNet) AmNet funded $2.1 billion in home loans during the first quarter of 2003, surpassing original estimates of between $1.5 billion to $1.9 billion for the quarter. AmNet operates exclusively in the wholesale channel, 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. and funding loans from strategically placed regional centers. AmNet sells the loans its funds on a servicing-released basis to investors who include major correspondent servicers and Wall Street dealers. AmNet is now approved to do business in 45 states either by license or exemption and has over 400 employees. AmNet Operating Results For the first quarter of 2003, AmNet reported 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. of $6.9 million, compared to $5.1 million in the fourth quarter of 2002, representing an increase of 37%. Gain on the sale of loans and other fee income, net of hedging, totaled $18.0 million, or approximately 87 basis points on $2.1 billion in loan fundings. AmNet utilizes Mortgage Capital Management's advisory services advisory services advisory services provided to the public, in their capacity as owners and managers of animals, are an important part of veterinary science. They may be provided by government bureaux, by commercial companies who deal in pharmaceuticals or animals or animal for loan pipeline exposure analysis as well as daily hedging recommendations. Gross interest income was $5.9 million and was offset by interest expense of $2.7 million, resulting in net interest spread on loans held for sale during the first quarter of $3.2 million, or approximately 16 basis points on first quarter loan fundings. AmNet 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. , excluding interest, totaled $14.3 million during the first quarter, or approximately 69 basis points on total loan fundings. These expenses included an estimated $6.0 million in sales commissions and other variable expenses, representing approximately 42% of total operating expenses. Commenting on first quarter mortgage banking results, Robbins said, "Our primary goal this year is to increase 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" while focusing on the operational efficiencies that increase productivity and enhance our relationship with mortgage brokers. We have made considerable investments in technology to support loan volume growth and speed the lending process. During the quarter, the Providence, Rhode Island  “Providence” redirects here. For other uses, see Providence (disambiguation). Providence is the capital and the most populous city of the U.S. regional center began funding loans. We also expanded operations into the Mid-Atlantic region by opening a center in Richmond, Virginia Richmond IPA: [ɹɯʒmɐnɖ] is the capital of the Commonwealth of Virginia, in the United States. to serve the Washington Metroplex A metroplex is large metropolitan area containing several cities and their suburbs.[1] It is also sometimes used as an alternative to metropolis or megalopolis, which is a chain of continuous metropolitan areas. . In May, we will open a center in Chicago, Illinois, strategically growing in key demographic markets and continuing to build future 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." During the first quarter of 2003, AmNet's warehouse loan funding capacity grew from $710 million to $960 million through a $250 million increase in its Countrywide coun·try·wide adv. & adj. Throughout a whole country; nationwide: launched a fundraising campaign countrywide; a countrywide search. Adj. 1. Warehouse Lending credit facility. AmNet also has lending partnerships with UBS UBS Union Bank of Switzerland UBS United Bible Societies UBS United Blood Services UBS United Buying Service UBS Used Bookstore UBS University Business Services UBS Universal Building Society (UK) UBS Ulaanbaatar Broadcasting System Warburg Real Estate Securities Inc. and JPMorgan Chase JPMorgan Chase (NYSE: JPM TYO: 8634 ) is one of the oldest financial services firms in the world. The company, headquartered in New York City, is one of the leaders in investment banking, financial services, asset and wealth management and private equity. With assets of $1. Bank. Mortgage Asset Portfolio Investments (American Residential) The Company's total mortgage assets held for portfolio investment were $239 million at March 31, 2003, compared to $269 million at December 31, 2002. Since 1999, the dollar value of the Company's portfolio of mortgage assets has declined due to the decision to re-deploy capital into the Company's mortgage banking business. In the first quarter of 2003, the Company had income attributable to its mortgage asset portfolio investments of $356 thousand compared to a loss of $395 thousand for the fourth quarter of 2002. In the first quarter of 2003, net interest spread on the mortgage asset portfolio was $2.8 million, or approximately 4.7% of portfolio assets on an annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. basis. Non-cash loan premium amortization expenses totaled $1.0 million for the period. 2003 Guidance 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 of America (MBAA MBAA Master Brewers' Association of the Americas MBAA Mortgage Bankers Association of America MBAA Medical Billing Advocates of America MBAA Melty Blood Actress Again (game) MBAA Mississippi Bail Agents Association ) has increased its estimates for 2003 and now expects 2003 overall market size to be approximately $2.6 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. . However, interest rates are expected to rise and market size is expected to contract during the fourth quarter of 2003. The MBAA also predicts that mortgage refinances are anticipated to represent approximately 60% of overall residential loan activity in 2003, the same level as in 2002. The Company's earnings guidance is based on the MBAA estimates of market size. The Company plans to grow its year-over-year loan production and increase its mix of home purchase loans through strategic organic expansion of existing and new centers, the introduction of new loan products and growth in broker relationships. The Company's pretax income for 2003 is expected to be between $17.5 million and $20.0 million; an increase over previous pretax earnings guidance of $11.5 million to $14.9 million. Due to higher estimated pretax income and one time tax benefits, consolidated net income for 2003 is expected to be between $19.8 million and $21.8 million, or $2.50 to $2.75 per diluted share, an increase over previous guidance of $1.10 to $1.40 per diluted share. The effective combined federal and state income tax rate for the Company for the entire year of 2003 is expected to be approximately 25%. "After a thorough review by tax counsel, we have now concluded that we will be able to utilize operating losses generated by AMREIT in past years, as an offset to taxable earnings from AmNet," said Judith A. Berry, Chief Financial Officer. "Additionally, we will benefit from net operating loss carry forwards from AmNet which were generated in 2001 and 2002 during its start-up phase. Realization of these tax benefits will restore significant book value per share for our stockholders, and will generate substantial cash savings to the Company during 2003 and potentially beyond." The Company expects to fund mortgages in the range of $8.0 billion to $9.0 billion in 2003. April fundings of $1 billion represented a 73% increase over January, 2003 fundings and a 24% average month over month growth rate for the first four months of 2003. "With the mortgage market now predicted to be $2.6 trillion in 2003 and certain tax benefits, we are substantially increasing our 2003 guidance," Robbins stated. "During this time of high loan volume, it is essential that we maintain a balance between growth, leverage, customer service levels and profit margins. Ultimately, we want to take advantage of market opportunities today while positioning AmNet for continued success in 2004. In addition to the Chicago center opening in May, AmNet plans to expand its network during the coming months into Dallas, Houston, Phoenix and Charlotte, areas where there are robust housing markets and mortgage banking professionals with deep industry expertise." "By the end of 2004, our goal is to have 30 branches serving the entire United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. ," Robbins concluded. "This growth, which is being funded internally, will help insure Insure can mean:
Based on 2003 earnings guidance, the Company expects basic book value per share to be between $10.00 and $10.25 at December 31, 2003. Over time, as the overall mortgage market contracts, AmNet's net margins and earnings per share are expected to decline, primarily driven by an increase in costs per loan due to expenses associated with expansion and market share growth. 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 first quarter operating performance and outlook. 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. To listen to the webcast, log on to the Company's web site at www.amerreit.com and click on the link that appears on the home page. An online replay will be available at www.amerreit.com for one year. A telephone replay will be available through May 12, 2003, by dialing (800) 642-1687 or (706) 645-9291 and entering the pass code 67765. Electronic versions of news releases may be accessed via the Company's web site at www.amerreit.com. Click on the newsroom. 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. , American Mortgage Network 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 American Residential Investment Trust, Inc. AmNet originates loans for the national mortgage broker community through its network of regional centers and over the Internet. AmNet has regional centers in Ontario, California Ontario is a city located in San Bernardino County, California, United States. As of the 2000 Census, the city had a total population of 170,373. It is the home of LA/Ontario International Airport and the huge Ontario Mills shopping mall (the largest in Southern California and one ; Sacramento, California “Sacramento” redirects here. For other uses, see Sacramento (disambiguation). Sacramento is the capital of the State of California and the county seat of Sacramento County. ; San Diego, California; Denver, Colorado; New Haven New Haven, city (1990 pop. 130,474), New Haven co., S Conn., a port of entry where the Quinnipiac and other small rivers enter Long Island Sound; inc. 1784. Firearms and ammunition, clocks and watches, tools, rubber and paper products, and textiles are among the many , Connecticut; Atlanta, Georgia; Minneapolis, Minnesota “Minneapolis” redirects here. For other uses, see Minneapolis (disambiguation). Minneapolis (pronounced IPA: /ˌmɪniˈæpəlɪs/) is the largest city in the U.S. ; Cherry Hill Cherry Hill, township (1990 pop. 69,319), Camden co., W central N.J.; name was changed from Delaware township to Cherry Hill in 1961. Largely residential, Cherry Hill has been marked by great development and housing growth, especially since the 1970s. , New Jersey; Portland, Oregon; Providence, Rhode Island and Richmond, Virginia as well as offices in Orange County, California Orange County is a county in Southern California, United States. Its county seat is Santa Ana. According to the 2000 Census, its population was 2,846,289, making it the second most populous county in the state of California, and the fifth most populous in the United States. ; Tampa, Florida “Tampa” redirects here. For other uses, see Tampa (disambiguation). Tampa is a United States city in Hillsborough County, on the west coast of Florida. It serves as the county seat for Hillsborough County.GR6. ; and Bellevue, Washington Bellevue is a rapidly growing city in King County, Washington, U.S., across Lake Washington from Seattle. Long known as a suburb or satellite city of Seattle,[1] it is now categorized as an edge city or a boomburb. . For more information, please visit www.amnetmortgage.com. About American Residential Investment Trust American Residential Investment Trust, Inc. is the parent company of American Mortgage Network. The Company recently terminated its status as a mortgage REIT Mortgage REIT An REIT that invests in loans secured by real estate which derive income from mortgage interest and fees. mortgage REIT . For more information, please visit www.amerreit.com. Certain matters discussed in this press release may constitute forward-looking statements 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. within the meaning of federal securities laws. Forward-looking statements include statements regarding the MBAA estimates of market size, anticipated loan volumes, mix of home purchase loans, number of broker relationships, increases in market share, after tax and pretax net income and federal and state tax rates, projected amount of net operating loss carry forwards and offsetting income, projected interest rate levels, refinancing Refinancing An extension and/or increase in amount of existing debt. as a percentage of loan originations 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. , future loan products and loan mix, broker relationships, projected margins and earnings per share, achievement of financial targets, including profitability, operational expansion, efficiency and productivity, American Residential continuing to be cash flow positive and anticipated book values per share. Actual results and the timing of certain events could differ materially from those projected in or contemplated by these forward-looking statements due to a number of factors, including but not limited to: the level of interest rates generally, economic conditions generally, uncertainty as to the percentage of the pipeline that will result in mortgage loan fundings; fluctuation Fluctuation A price or interest rate change. in the margins, net of hedging, of loans in the Company's pipeline; the predictability of the Company's expenses; the future correlation of volatility in forward mortgage sale instruments to the Company's loan lock commitments; interest rate volatility; the availability of financing for the funding of mortgage loans; the Company's liquidity position; and other risk factors outlined in American Residential's SEC reports.
AMERICAN RESIDENTIAL INVESTMENT TRUST, INC.
Three Three
Months Months
Ended Ended
--------------------
3/31/2003 3/31/2002
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Income Statement
----------------
Mortgage Banking Segment:
Revenues
Gain on sales of loans $20,209 $1,944
--------------------
Derivative financial instruments:
Treasury futures and options and related
commissions and fees - 648
Forward sales of mortgage backed securities
(MBS) and options on MBS (52) -
Market adjustment on loan commitment pipeline (2,159) (735)
--------------------
Total derivative financial instruments (2,211) (87)
--------------------
Interest on mortgage assets 5,902 1,461
Other income 17 4
--------------------
Total revenue, net of derivative
financial instruments 23,917 3,322
--------------------
Expenses
Interest expense 2,674 695
Operating expenses 14,296 4,606
--------------------
Total expenses 16,970 5,301
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Income (loss) before income taxes - Mortgage
Banking Segment $6,947 $(1,979)
Mortgage Asset Portfolio Segment:
Revenues
Interest on mortgage assets $4,338 $8,560
Other income 198 466
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Total revenue 4,536 9,026
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Expenses
Interest expense 1,539 3,132
Premium amortization 994 3,101
Provision for loan losses 919 2,103
(Gains) Loss on sale of real estate owned, net (184) 85
Operating expenses 912 528
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Total expenses 4,180 8,949
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Income (loss) before income taxes -- Mortgage Asset
Portfolio Segment $356 $77
Consolidated Income (loss) -- Combined Segments $7,303 $(1,902)
Provision for income taxes 1,826 5
Income tax benefit from termination of REIT status (6,679) --
Consolidated Net Income (loss) $12,156 $(1,907)
Per Share Data
--------------
Weighted average common shares outstanding 7,862,869 7,918,805
Consolidated income (loss) per share basic $1.55 $(0.24)
Consolidated income (loss) per share diluted $1.53 $(0.24)
Common dividend declared for the period -- --
Loan Origination Data
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Total mortgage loans funded in period ($ millions) $2,081 $370
Number of loans funded 11,702 2,193
Balance Sheet Data
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Cash and cash equivalents $22,786 $7,943
Restricted cash 1,750 26
Bond collateral mortgage loans and real estate
owned, net of reserves 238,777 406,856
Mortgage loans held for sale, net 488,007 120,991
Total assets 767,153 547,850
Short-term debt 477,445 120,544
Long-term debt, net 206,098 369,101
Total stockholders' equity $71,644 $56,502
Book value per share basic $9.11 $7.14
Book value per share diluted $9.02 $7.14
Debt to equity ratio 9.5:1 8.7:1
($ in thousands, except per share data and as noted)
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