AMNET MORTGAGE, INC. - 8-K - 20040816 - SIGNATURES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AmNet Mortgage, Inc.
Date: August 16, 2004 By: /s/ Judith A. Berry
------------------------
Judith A. Berry
Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
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99.1 August 16, 2004 Press Release by AmNet Mortgage, Inc.
Exhibit 99.1
AmNet Mortgage, Inc. Reports Second Quarter Results; Revises 2004 Guidance
SAN DIEGO--(BUSINESS WIRE)--Aug. 16, 2004--AmNet Mortgage, Inc.
(formerly American Residential Investment Trust, Inc.) (Amex:INV), 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:
-- 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 30,
2004; and
-- Book value per outstanding share increased to $10.63.
Consolidated Results
For the second quarter of 2004, AmNet Mortgage, Inc. reported
consolidated net income of $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.
Commenting on results, John M. Robbins, 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 mortgage
asset portfolio. The net cash proceeds were $24.9 million and we
extinguished 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."
Robbins continued, "As expected, this quarter was marked by
intense competition and price compression 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, San Francisco 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 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, 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, 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 during the second quarter.
2004 Guidance
The Mortgage Banking Association (MBA) 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 market. As a
result of this overall market contraction 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 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 balancing support staff to align 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 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 in the third quarter of 2003 to $388 billion in the first
quarter of 2005. Against this backdrop of both recent and anticipated
market contraction, the Company has added significantly to both the
number of account executives and loan production offices. Our subprime
product line will roll out across the country during the next month
and we have hired an industry leader in wholesale subprime to drive
sales nationwide. While we anticipate modest profits for the remainder
of the year, we expect to reap the future benefits of our investments
in the branch network, the recruitment of account executives, the
migration to higher margin products and enhanced technology to gain
market share."
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. 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, AmNet is a wholly owned
subsidiary 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, California, Colorado, Connecticut, Florida,
Georgia, Illinois, Kansas, Minnesota, New Jersey, New York, North
Carolina, Oregon, Rhode Island, Texas, Utah, 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 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
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 volume in a
contracting market; and the Company's lack of significant experience
with subprime loans. 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
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Income Statement
----------------- - - - -
- - - -
Mortgage Banking Segment: - - - -
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Revenues
Gain on sales of loans $2,323 $32,971 $17,839 $53,180
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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
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Expenses
Interest expense 4,422 3,447 6,767 6,121
Operating expenses 20,770 18,080 38,307 32,375
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Total expenses 25,192 21,527 45,074 38,496
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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
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Total revenue 943 3,045 2,787 6,587
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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
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Total expenses 1,923 2,106 7,418 5,292
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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
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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 $9.02
Debt to equity ratio 6.0:1 9.1:1 6.0:1 9.5:1
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($ in thousands, except per share data and as noted)
CONTACT: AmNet Mortgage, Inc.
Investor and Analyst Relations:
Executive Vice President and Chief Financial Officer
Judith Berry, 858-909-1230
jberry@amnetmortgage.com
or
Senior Vice President, Finance
Clay Strittmatter, 858-909-1340
cstrittmatter@amnetmortgage.com
or
Media Relations:
Vice President, Marketing & Communications
Kasey Emmel, 858-909-1335
kemmel@amnetmortgage.com
or
Forti Communications Inc.
Corinne Forti, President
805-498-0113
cforti@amnetmortgage.com
forticomm@aol.com
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