American Residential Reports Fourth-Quarter and 2003 Results.Business Editors SAN DIEGO--(BUSINESS WIRE)--Feb. 12, 2004 American Residential Investment Trust, Inc. (Amex(R): INV INV abbr. in vitro fertilization ), the parent company of American Mortgage Network (AmNet), a wholesale mortgage bank serving mortgage brokers nationwide, today reported fourth-quarter and 2003 results, highlights of which included: -- Fourth-quarter consolidated net loss was $406,000, or $0.05 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, inclusive of inclusive of prep. Taking into consideration or account; including. $1.0 million, or $0.13 per diluted share related to tax benefits; -- 2003 consolidated net income, however, was a record $29.0 million, or $3.57 per diluted share, inclusive of $10.9 million, or $1.34 per diluted share related to tax benefits; compared to net income of $1.6 million or $0.20 a share for the year ended December 31, 2002; -- Exclusive of tax benefits, 2003 consolidated net income was $18.1 million or $2.23 per diluted share; -- Mortgage loans funded through AmNet were $1.9 billion in the fourth quarter and $10.2 billion for 2003, compared to $1.9 billion in the fourth quarter of 2002 and $4.2 billion for the year ended December 31, 2002; and -- Book value per outstanding share was $11.24 and cash and cash equivalents were $46.5 million as of December 31, 2003, compared to $7.57 and $14.8 million at December 31, 2002. Consolidated Results American Residential reported a consolidated net loss of $406,000, or $0.05 per diluted share, for the fourth quarter of 2003. Consolidated net income for 2003 was $29.0 million, or $3.57 per diluted share, inclusive of $10.9 million, or $1.34 per diluted share, related to tax benefits. Exclusive of tax benefits, 2003 consolidated net income was $18.1 million or $2.23 per diluted share. Consolidated net income in 2002 was $1.6 million, or $0.20 per diluted share. Commenting on results for the fourth quarter and year, 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. , Jr., Chief Executive Officer, said, "While the fourth quarter did not meet expectations, 2003 as a whole was a year of significant achievement for American Mortgage Network. Since its inception two years ago, AmNet has become one of the top 25 wholesale lenders in the country. We strengthened our operating platform, enabling us to expand rapidly, grow market share and create value for stockholders. We aggressively expanded into new geographic areas by opening 12 new regional loan production offices, bringing our total to 21. Our product offerings now cover some 80 programs ranging from conforming to Alt-A loans to serve a wide range of borrower's needs in a purchase market. This growth has been accomplished organically as we simultaneously strengthened our balance sheet and accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. substantial cash reserves Cash reserves See: Cash investments cash reserves Investment funds that are held in short-term assets such as Treasury bills and certificates of deposit until more permanent investment opportunities are available. . Robbins continued, "Loan volume did decline in the fourth quarter and margins on that volume were compressed. During the second and third quarter, we aggressively entered new markets and increased staff to handle volume and to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. this unprecedented market opportunity. However, when fourth-quarter activity abruptly a·brupt adj. 1. Unexpectedly sudden: an abrupt change in the weather. 2. Surprisingly curt; brusque: an abrupt answer made in anger. 3. slowed, the staffing levels we put in place to respond to second and third quarter volumes were no longer necessary, so we have reduced headcount in most branches and eliminated overtime and temporary labor costs. Our ongoing challenge will be to balance future growth opportunities with the reality of today's mortgage market. Consequently, as we enter new markets and add to our sales force, operations in existing branches will continue to be evaluated and rightsized to align align (  līn),v to move the teeth into their proper positions to conform to the line of occlusion. infrastructure costs with volume levels." 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 $1.9 billion in home loans during the fourth quarter, a 39% decrease over the third quarter of 2003. For the year ended December 31, 2003, AmNet funded $10.2 billion in home loans, compared to $4.2 billion in 2002, an increase of 145%. AmNet Operating Results For the fourth quarter of 2003, AmNet's loss before income taxes was $2.9 million, compared to income before income taxes of $5.1 million in the fourth quarter of 2002. Income before income taxes in 2003 was $23.5 million, compared to 2002's loss before income taxes of $7.4 million. The loss in the fourth quarter of 2003 was a result of a sharp decrease in loan volumes and compressed margins on that volume. Gain on the sale of loans and other fee income, net of hedging, totaled $12.9 million or 69 basis points on $1.9 billion of loan fundings, as compared to 81 basis points in the third quarter, reflecting competitive pricing pressure in the fourth quarter. Interest on mortgage assets in the fourth quarter was $6.0 million and was offset by interest expense of $2.8 million, resulting in a net interest spread on loans held for sale of $3.2 million, or 17 basis points on $1.9 billion of loan fundings. AmNet's 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 $19.0 million during the fourth quarter, or 102 basis points on loan fundings. These expenses included an estimated $6.5 million in sales commissions and other variable expenses, representing approximately 34% of total operating expenses. Commenting on mortgage operations in the fourth quarter, Robbins said, "Although we have reduced our administrative infrastructure, we also expanded our sales presence nationally by opening offices in Dallas and Houston, Texas “Houston” redirects here. For other uses, see Houston (disambiguation). Houston (pronounced /'hjuːstən/) is the largest city in the state of Texas and the and recruiting mortgage banking professionals for offices in Florida, New York Florida is the name of some places in the U.S. state of New York:
AmNet's warehouse loan funding capacity totals $1.4 billion at year-end, compared to $750 million at December 31, 2002. AmNet has lending partnerships with Countrywide coun·try·wide adv. & adj. Throughout a whole country; nationwide: launched a fundraising campaign countrywide; a countrywide search. Adj. 1. Warehouse Lending, 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, 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 War·burg , Otto Heinrich 1883-1970. German biochemist. He won a 1931 Nobel Prize for research on the respiration of cells. Real Estate Securities Inc and GMAC GMAC General Motors Acceptance Corporation GMAC Graduate Management Admission Council GMAC Give Me A Call GMAC Genetic Manipulation Advisory Committee GMAC Genetic Modification Advisory Committee (Singapore) GMAC Give Me A Chance Residential Funding. Mortgage Asset Portfolio Investments (AMREIT) The Company's total mortgage assets held for portfolio investment were $161.3 million at December 31, 2003 compared to $267.1 million at December 31, 2002. Since 2000, the dollar value of the Company's portfolio of mortgage assets has declined due to the decision to cease loan portfolio acquisitions, build cash reserves and re-deploy capital into the Company's mortgage banking business. In the fourth quarter of 2003, interest on mortgage assets was $2.1 million and interest expense was $1.0 million, resulting in a net interest spread of approximately $1.1 million, or approximately 2.5% of December 31, 2003 bond collateral and real estate owned Real Estate Owned Property owned by a lender - usually a bank - after an unsuccessful sale at a foreclosure auction. This is common because most of the properties up for sale at these auctions are worth less than the total amount owed to the bank: the minimum bid in most 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 expense totaled $878 thousand for the period. At year-end 2003, remaining unamortized premiums were $3.8 million, down from $7.3 million at December 31, 2002. Liquidity and Book Value Cash and cash equivalents were $ 46.5 million as of December 31, 2003, an increase of 215 % from December 31, 2002, and cash per outstanding share increased from $1.88 at December 31, 2002 to $5.91 at December 31, 2003. The Company's book value per outstanding share was $11.24 at December 31, 2003, compared to $7.57 at December 31, 2002. Strategic Initiatives Robbins added, "Several strategic initiatives are essential to ensure top-line growth and preserve margins. These include: -- Growing our market share through the addition of experienced, commissioned account executives coupled with market penetration of new metropolitan statistical areas (MSAs); -- Expanding our product line to specifically target brokers' needs in a purchase market and deliver loan products that yield higher margins; and -- Leveraging our technology platform to improve efficiencies and increase productivity. We have not let the slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. in the market stop us. Rather, we intend to pursue the plans for growing our sales presence that have been in place for some time, leveraging the infrastructure already in place. Offices in Fort Lauderdale Fort Lauderdale (lô`dərdāl), residential, commercial, and resort city (1990 pop. 149,377), seat of Broward co., SE Fla., on the Atlantic coast; settled around a fort built (c.1837) in the Seminole War, inc. 1911. and Orlando began funding loans in January to extend our presence in Florida. AmNet's loan production office in Long Island, 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 also began funding loans. By the end of 2004, we plan to have 32 loan production offices operational--a key element of our carefully orchestrated or·ches·trate tr.v. or·ches·trat·ed, or·ches·trat·ing, or·ches·trates 1. To compose or arrange (music) for performance by an orchestra. 2. plan to expand the branch network into the other top MSAs. We continue to recruit experienced mortgage banking professionals and have increased the number of commissioned account executives by 65% since June 30, 2003. In January, we reached a critical milestone -- there are nearly 5,000 broker customers approved to do business with us. Robbins continued, "One of our most significant initiatives was the launch of a subprime program led by Laura Swartz, a recognized industry leader. Laura and her team join a group of senior managers at AmNet who have a wealth of experience in the subprime arena. All 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. will be underwritten centrally in our home office, not at the branch offices. Loans will be underwritten to meet the specifications of investors. We have already lined up capital market and investor partners for this program. As with our other loan products, we will sell subprime loans on a servicing released basis to minimize our long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. credit risk to AmNet, as is the case with any other type of loan we originate o·rig·i·nate v. 1. To bring into being; create. 2. To come into being; start. . In addition, we intend to continue to make investments in our technology platform to increase our value proposition to our broker customers, as well as to give us the ability to more effectively align cost structure with current loan demand by maximizing productivity and efficiency, and lowering unit costs." "I am very pleased to announce that two new directors will join the Board. They are Robert T. Barnum, former Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. of American Savings Bank savings bank, financial institution that, until recently, performed only the following functions: receiving savings deposits of individuals, investing them, and providing a modest return to its depositors in the form of interest. , a $20 billion 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). thrift thrift: see leadwort. , and Robert A. Gunst, Chairman of the Board of Directors for Garden Fresh Restaurants Corporation and former President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of The Good Guys, Inc. (Nasdaq: GGUY). Both individuals bring immense knowledge and experience to AmNet and are committed to our growth and profitability." Discussing specific metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. for the year, 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, "While we expect losses in the first quarter, we anticipate that profitability will be restored during the second quarter with profits increasing in the third and fourth quarters of 2004 as quarter-over-quarter volumes increase and the branch network matures. We are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op that a well-executed expansion plan, coupled with the rollout of our subprime initiative, will drive up loan production and help us to expand margins." "We are also looking at a variety of options to enhance stockholder value in 2004," Robbins concluded. At the end of 2003, our cash position exceeded 50% of our stockholders equity balance. Some of our cash will be used to support the anticipated growth in loan funding volume, including investments in the rollout of our subprime business, the expansion of our regional network and marketing support for our broker customers. We continue to evaluate the capital and cash needed for our growth plans as well as other possible uses of cash such as strategic acquisitions. Opportunities occur in a consolidating market and benefit those who have the capital to invest. As growth goals are met, the Board of Directors will continue to consider alternatives which could include dividends and share repurchase 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. ." 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 fourth quarter and full-year 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.amerreit.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.amerreit.com for one year. A telephone replay will be available through February 19, 2004 by dialing (800) 642-1687 or (706) 645-9291 and entering the pass code 5271673. Electronic versions of news releases may be accessed via the Company's web site at www.amerreit.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 American Residential Investment Trust, 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, 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, Minnesota, New Jersey, New York, 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, 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, Virginia 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 nearly 5,000 approved broker customers across the nation. 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. For more information, please visit www.amerreit.com. Forward Looking Statement 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 growth of AmNet's sales presence, the number of operational loan production offices by the end of 2004, 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. locations and specifications for subprime loans, the planned servicing released sales for subprime loans, the Company's intent to continue investing in its technology platform, expected losses for the Company in the first quarter of 2004, profitability being restored and increasing during the second through fourth quarters of 2004, the expectation that the Company's expansion plan and subprime initiative will increase loan production and expand margins, uses of cash in 2004 and the Company's Board of Directors consideration of dividends and share repurchase. 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; 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 availability of financing for the funding of mortgage loans, including subprime loans; the Company's liquidity position; the availability of qualified mortgage professionals and other risk factors outlined in American Residential's SEC reports.
AMERICAN RESIDENTIAL INVESTMENT TRUST, INC.
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Three Three Twelve Twelve
Months Months Months Months
Ended Ended Ended Ended
--------------------------------------------
12/31/2003 12/31/2002 12/31/2003 12/31/2002
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Income Statement -- -- -- --
-- -- -- --
-- -- -- --
Mortgage Banking Segment:
Revenues
Gain on sales of loans $16,444 $21,413 $79,203 $46,667
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Derivative financial
instruments:
Treasury futures and
options and related
commissions and fees -- (49) -- (18,171)
Forward sales of
mortgage backed
securities (MBS) and
options on MBS 1,067 (6,470) 2,182 (16,262)
Market adjustment on
loan commitment
pipeline (4,644) (1,648) (2,104) 2,663
--------------------------------------------
Total
derivative
financial
instruments (3,577) (8,167) 78 (31,770)
--------------------------------------------
Interest on mortgage
assets 6,032 6,857 29,875 14,908
Other income 18 1 94 10
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Total revenue,
net of
derivative
financial
instruments 18,917 20,104 109,250 29,815
--------------------------------------------
Expenses
Interest expense 2,826 3,557 13,482 7,790
Operating expenses 19,005 11,475 72,220 29,427
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Total expenses 21,831 15,032 85,702 37,217
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Income (loss) before
income taxes - Mortgage
Banking Segment $(2,914) $5,072 $23,548 $(7,402)
Mortgage Asset Portfolio
Segment:
Revenues
Interest on mortgage
assets $2,065 $3,110 $10,906 $16,630
Other income 226 253 1,171 1,326
Litigation Settlement -- -- -- 10,281
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Total revenue 2,291 3,363 12,077 28,237
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Expenses
Interest expense 1,040 1,972 4,840 10,430
Provision for loan losses 964 835 3,441 5,454
(Gain) Loss on sale of
real estate owned, net (170) (31) (921) 121
Operating expenses 610 982 2,345 3,263
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Total expenses 2,444 3,758 9,705 19,268
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Income (loss) before
income taxes - Mortgage
Asset Portfolio Segment $(153) $(395) $2,372 $8,969
Consolidated Income
(loss)- Combined Segments $(3,067) $4,677 $25,920 $1,567
Provision for income tax
expense (benefit) (1,642) -- 7,781 7
Income tax benefit from
termination of REIT
status (1,019) -- (10,884) --
Consolidated Net
Income (loss) $(406) $4,677 $29,023 $1,560
Per Share Data
--------------------------
Weighted average common
shares outstanding 7,862,949 7,862,490 7,861,988 7,884,983
Consolidated income (loss)
per share basic $(0.05) $.59 $3.69 $0.20
Consolidated income (loss)
per share diluted $(0.05) $0.59 $3.57 $0.20
Loan Origination Data
--------------------------
Total mortgage loans
funded in period ($
millions) $1,855 $1,943 $10,173 $4,159
Number of loans funded 11,055 10,968 57,814 23,553
Balance Sheet Data
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Cash and cash equivalents $44,400 $13,647
Restricted cash 2,100 1,125
Bond collateral mortgage
loans and real estate
owned, net of reserves 161,252 267,094
Mortgage loans held for
sale, net 276,781 390,125
Total assets 507,387 685,307
Short-term debt 268,619 378,553
Long-term debt, net 130,295 237,456
Total stockholders' equity $88,486 $59,485
Book value per share basic $11.24 $7.57
Book value per share
diluted $10.86 $7.57
Debt to equity ratio 4.7:1 10.5:1
($ in thousands, except per share data and as noted)
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