Exhibit 99.1
AMERICAN HOME [LOGO] FOR IMMEDIATE RELEASE
American Home Mortgage Announces Fourth
Quarter and Full Year Results
Earnings are $1.21 per diluted share for the fourth
quarter and $4.96 for the full year 2006
Origination volumes are a record $15.5 billion for the fourth quarter and a
record $58.9 billion for the full year 2006
Common stock dividend policy increased to $1.12 per share per quarter, or
$4.48 per share on an annualized basis
2007 earnings guidance is $5.40 to $5.70 per diluted share
Melville, NY (January 25, 2007) - American Home Mortgage Investment Corp.
(NYSE: AHM) announced today results for the quarter and full year ended
December 31, 2006.
FINANCIAL HIGHLIGHTS
Comparison of the Three Months Ended December 31, 2006 and 2005
o Revenue for the fourth quarter of 2006 was $257.7 million, compared to
revenue of $150.5 million for the fourth quarter of 2005, an increase of
71.3%.
o Net earnings for the fourth quarter of 2006 were $64.7 million, compared to
net earnings of $16.7 million for the fourth quarter of 2005, an increase of
287.5%.
o Earnings per diluted share for the fourth quarter of 2006 were $1.21,
compared to earnings per diluted share of $0.27 for the fourth quarter of
2005, an increase of 348.1%.
o Dividends declared per common share for the fourth quarter of 2006 were
$1.06, compared to $0.91 for the fourth quarter of 2005, an increase of
16.5%.
o Book value per common share was $22.64 at December 31, 2006, compared to book
value per common share of $21.62 at December 31, 2005, an increase of 4.7%.
Comparison of the Three Months Ended December 31, 2006 and September 30, 2006
o Revenue for the fourth quarter of 2006 was $257.7 million, compared to
revenue of $258.9 million for the third quarter of 2006, a decrease of 0.5%.
o Net earnings for the fourth quarter of 2006 were $64.7 million, compared to
net earnings of $72.0 million for the third quarter of 2006, a decrease of
10.2%.
o Earnings per diluted share for the fourth quarter of 2006 were $1.21,
compared to earnings per diluted share of $1.36 for the third quarter of
2006, a decrease of 11.0%.
o Dividends declared per common share for the fourth quarter of 2006 were
$1.06, compared to $1.01 for the third quarter of 2006, an increase of 5.0%.
o Book value per common share was $22.64 at December 31, 2006, compared to book
value per common share of $22.52 at September 30, 2006, an increase of 0.5%.
Comparison of the Year Ended December 31, 2006 and 2005
o Revenue for the year ended December 31, 2006 was $1.03 billion, compared to
adjusted revenue of $722.6 million for the year ended December 31, 2005, an
increase of 42.0%. GAAP revenue for the year ended December 31, 2005 was
$793.9 million.
o Net earnings for the year ended December 31, 2006 were $263.5 million
compared to adjusted net earnings of $189.4 million for the year ended
December 31, 2005, an increase of 39.1%. GAAP net earnings for the year ended
December 31, 2005 were $260.8 million.
o Earnings per diluted share for the year ended December 31, 2006 were $4.96
compared to adjusted earnings per diluted share of $3.97 for the year ended
December 31, 2005, an increase of 24.9%. GAAP earnings per diluted share for
the year ended December 31, 2005 were $5.58.
o Dividends per common share for the year ended December 31, 2006 were $3.94,
compared to $3.24 for the year ended December 31, 2005, an increase of 21.6%.
Michael Strauss, American Home's Chief Executive Officer commented, "The fourth
quarter was highly successful for our company with earnings of $1.21 per diluted
share. During the quarter, we added $1.0 billion of recently originated loans to
our portfolio, which are carried at cost. Loan origination volume was a record
$15.5 billion due to our company achieving a record market share of 2.48% of
national originations. Net interest income was stable while our servicing
portfolio produced record revenues. During the quarter, our company did however
experience its highest delinquency related charges to date, which reduced our
quarterly earnings.
The fourth quarter concluded a very successful year for our company, with
earnings per diluted share reaching a record $4.96. By comparison, diluted
earnings per share were $3.97 in 2005, $3.74 in 2004, $4.07 in 2003 and $2.65 in
2002*. A key financial goal for our company in 2007 is to continue our
multi-year growth trend in earnings per share. During 2006, our company's return
on average common equity was 22.7%, which surpassed our target of 20%, and
compares favorably to 2005 when our adjusted return on average common equity was
19.7%. Also during 2006 our company originated $58.9 billion of loans compared
to $45.3 billion in 2005. Finally, during 2006, our company reached a milestone
as, for the first time; its revenues exceeded $1.0 billion.
In this earnings release, our company is providing 2007 earnings guidance of
$5.40 to $5.70 per fully diluted share with the earnings per diluted share for
each quarter in 2007 projected to be approximately 9% to 15% higher than for the
comparable quarter in 2006. Our earnings guidance is based on stable net
interest margins applied to a growing portfolio of loans held for investment,
loan production of $68 billion to $74 billion, and a reduction in gain on sale
margins of approximately 12 basis points. Lower gain on sale margins are
expected in part because delinquency losses on loans held for sale, including
losses due to repurchases, are projected to continue at high levels throughout
2007. Projections for continued high losses are based on our company's view that
while there are signs that housing prices are starting to stabilize, future
abatements in foreclosure activity will lag a recovery in the housing market. As
a result, our 2007 earnings guidance anticipates a highly stressed credit
environment.
Not included in our earnings guidance are potential benefits from new strategies
that offer the possibility of higher portfolio income, increased loan production
and reduced income tax expense. Our company will keep investors apprised if
material benefits from these strategies become likely.
I am very pleased to announce that based on our company's results and prospects,
our Board of Directors has voted to increase our company's dividend policy by
$0.06 to $1.12 per share per quarter or $4.48 per share on an annualized basis.
The new dividend policy is expected to take effect with our April dividend
payment. Please note,
- -------------------------------
* 2004 and 2005 As Adjusted. See the section titled "Adjusted Financial
Measures" on page 5 of this release.
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however, that our company is not obligated to pay dividends until such dividends
are declared by our Board of Directors, and our Board of Directors may change
our company's dividend policy at any time without prior notice."
FOURTH QUARTER RESULTS
During the fourth quarter, the Company's net interest income, plus the positive
carry from interest rate swaps, was $48.9 million compared to $50.5 million in
the third quarter of 2006. Of the $48.9 million, $12.4 million was from
portfolio loans, $14.7 million was from mortgage-backed securities, $6.3 million
was from swaps associated with mortgage-backed securities, $0.6 million was from
Flower Bank, and $26.8 million was from loans in warehouse, reduced by $11.9
million of interest expense on trust preferred securities and the financing of
servicing assets. By comparison, the components of the $50.5 million of net
interest income, plus the positive carry from interest rate swaps, earned in the
third quarter were $11.8 million from portfolio loans, $16.6 million from
mortgage-backed securities, $7.5 million from swaps associated with
mortgage-backed securities and $25.1 million from loans in warehouse, including
loans held for investment pending securitization, reduced by $10.5 million of
interest expense on trust preferred securities and the financing of servicing
assets.
During the fourth quarter, portfolio loans earned a net interest margin of 1.42%
and had an average balance of $3.5 billion, compared to a net interest margin of
1.27% and an average balance of $3.7 billion in the third quarter of 2006.
During the fourth quarter, mortgage-backed securities had an average balance of
$9.2 billion, earned a net interest margin on a stand-alone basis of 0.64%, and
earned a net interest margin including income from associated swaps of 0.91%. By
comparison, in the third quarter of 2006, mortgage-backed securities had an
average balance of $9.3 billion, earned net interest margin on a stand-alone
basis of 0.72%, and earned a net interest margin including income from
associated swaps of 1.04%. In the fourth quarter, loans in warehouse, including
loans held for investment pending securitization, had an average balance of
$10.0 billion and earned a net interest margin of 1.08%. By comparison, during
the third quarter of 2006 loans in warehouse, including loans held for
investment pending securitization, had an average balance of $8.1 billion and
earned a net interest margin of 1.24%.
Delinquencies and delinquency related charges were up sharply in the fourth
quarter and are expected to remain at elevated levels throughout 2007. For the
fourth quarter, the Company's provision expense associated with loans held for
investment was $6.7 million, while its quarter-end allowance for loan loss
balance was $14.2 million and its non-performing loans held for investment were
$82.4 million. By comparison, for the third quarter of 2006, the Company's
provision expense was $5.4 million, while its quarter-end allowance for loan
loss balance was $10.9 million and its non-performing loans held for investment
were $66.9 million. Additionally, in the fourth quarter, the Company added $14.5
million to its reserves for delinquent loans held for sale which include
repurchased loans. These added reserves resulted in a charge to the Company's
gain on sale which reduced its net gain on sale revenue. At quarter-end,
reserves associated with delinquent loans held for sale were $22.0 million,
while non-performing loans held for sale were $124.3 million. By comparison, in
the third quarter, additions to reserves charged to gain on sale were $2.8
million, reserves associated with loans held for sale were $8.7 million, and
non-performing loans held for sale were $50.3 million. During the fourth
quarter, the value of the Company's residual assets decreased approximately
$12.1 million due to changes in anticipated credit losses, future interest rates
and prepayment speeds, and consequently resulted in a write-down that was
charged to income. The Company estimates that approximately half of the
write-down in the value of residual securities was attributable to
delinquencies.
During the fourth quarter, the Company completed foreclosures and sold
repossessed real estate for loans with an aggregate unpaid principal balance of
$43.4 million. Losses on these loans were $7.0 million, net of mortgage
insurance, resulting in a severity rate of 16.2%. By comparison, during the
third quarter, the Company completed foreclosures and sold repossessed real
estate for loans with an aggregate unpaid principal balance of $29.4 million.
Losses on those loans were $4.6 million, net of mortgage insurance, resulting in
a severity rate of 15.7%.
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Throughout the fourth quarter, the Company continued to pursue a strategy of
matching the duration of its portfolio assets with the duration of its
liabilities, net of hedges. At December 31, 2006, the composition of the
Company's loans held for investment and loans underlying its mortgage-backed
securities was 45.0% 5/1 ARM loans, 26.0% short reset ARMs, 13.7% fixed rate
loans, 8.9% 7/1 ARM loans, 2.0% 3/1 ARM loans, 1.3% HELOC and closed-end
seconds, and 3.1% other ARM types. On December 31, 2006, the mortgage-backed
securities portfolio's duration, net of liabilities and hedges, was estimated to
be 0.07 years and its projected average life was 2.36 years. The composition of
the mortgage-backed securities portfolio by credit quality based on Standard &
Poor's ratings was 93.9% Agency and AAA, 3.8% AA, A, and BBB and 2.3% BB and
unrated.
During the fourth quarter, the Company's loan origination business continued to
produce strong results. Loan originations reached a record $15.5 billion
compared to $15.3 billion in this year's third quarter. During the fourth
quarter, the Company sold $14.3 billion of loans to third parties for a gross
gain on sale excluding reserving for delinquencies of $217.4 million equal to a
gross gain on sale margin of 1.52%. By comparison, during this year's third
quarter, the Company sold $14.3 billion of loans to third parties for a gross
gain on sale of $213.4 million equal to a gain on sale margin of 1.49%. The
Company's gain on sale net of additions to its reserves for delinquent loans
held for sale was $202.9 million in the fourth quarter compared to $210.6
million in the third quarter of 2006.
During the fourth quarter, the Company's loan origination expenses were $157.9
million, or 1.11% of loans sold, or 1.02% of loans originated, compared to
$152.6 million, or 1.06% of loans sold, or 1.00% of loans originated in the
third quarter. The Company estimates that its national market share, based on
Freddie Mac's recent, revised estimate of national market size, was 2.48% in the
fourth quarter compared to 2.24% in this year's third quarter and 1.69% during
the fourth quarter of 2005. At the end of the fourth quarter, the Company
employed approximately 2,450 loan officers and account executives, including
call center representatives, but excluding sales assistants, compared to
approximately 2,640 on September 30, 2006.
During the fourth quarter, the Company's servicing income and ancillary fees
reached a record $47.3 million gross, and $18.4 million net of $28.9 million of
reduction of fair value due to realization of servicing cash flows. By
comparison, during the third quarter, servicing income and ancillary fees were
$43.4 million gross, and $14.6 million net of $28.8 million reduction of fair
value due to realization of servicing cash flows. At the end of the fourth
quarter, the principal amount of the loans underlying the Company's servicing
assets was $38.5 billion. By comparison, the amount of loans underlying the
Company's servicing assets at the end of this year's third quarter was $35.9
billion. The principal amount of the servicing portfolio, including warehouse
loans, was $46.3 billion at the end of the fourth quarter and $43.0 billion at
the end of this year's third quarter.
The Company's total revenues in the fourth quarter were $257.7 million. Of these
revenues, $42.7 million was from net interest income, $202.9 million was from
sales of newly originated mortgage loans including origination fees and net of
hedges and additions to loss reserves, $47.3 million was from mortgage servicing
fees, $3.9 million was from an increase in the value of servicing due to changes
in assumptions, net of hedges, $6.3 million was from interest carry on
free-standing swaps and $2.9 million was from other sources. Revenues were
decreased by $28.9 million due to realization of servicing cash flows, $12.7
million due to realized and unrealized losses on mortgage-backed securities
held, net of hedges and $6.7 million due to provisioning for loan losses. During
the fourth quarter, the Company's expenses were $173.4 million, and the
Company's pre-tax income was $84.3 million. Also during the quarter, the
Company's tax expense was $19.6 million. Consequently, net income for the
quarter was $64.7 million while preferred dividends were $3.3 million and net
income available to common stockholders was $61.4 million, resulting in earnings
per diluted share of $1.21. Book value attributable to common stockholders at
December 31, 2006 was $1.14 billion, or $22.64 per common share, compared to
$1.13 billion, or $22.52 per common share, at September 30, 2006.
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EARNINGS GUIDANCE
The Company is providing earnings guidance for 2007 of $5.40 to $5.70 per
diluted share. Quarterly earnings per diluted share are projected to be
approximately 9% to 15% higher for each quarter in 2007 compared to the
comparable quarter in 2006. Key projections underlying the Company's guidance
are that 1) net interest margins will remain stable and the balance of loans
held for investment and carried at cost will continue to grow, 2) that loan
production will range between $68 billion and $74 billion with higher production
in the second and third quarters, and lower production in the first and fourth
quarter, 3) that the Company's gain on sale margin from loans sold will decline
by approximately 12 basis points, in part due to continued high delinquency
charges associated with the Company's loans held for sale, and 4) that the
Company will not experience significant losses net of hedges due to write-downs
of its portfolio assets and / or its servicing assets. It is important to note
that actual results, which are different than any one or more than one of the
key projections, may prevent the Company from achieving its earnings guidance,
and may instead result in losses. In addition, factors other than the key
projections listed herein may cause the Company to fail to achieve its earnings
guidance and may result in losses as more fully described under Risk Factors in
the Company's Annual Report filed on Form 10-K with the Securities and Exchange
Commission.
DIVIDEND POLICY
Based on the Company's projections for earnings and cash flow, its Board of
Directors has raised the Company's common stock dividend policy to $1.12 per
share per quarter, or $4.48 per share on an annualized basis. The Company's
dividend policy does not constitute an obligation to pay dividends, which only
occurs when its Board of Directors declares a dividend. The dividend policy is
subject to ongoing review by the Board of Directors based on, among other
things, the Company's business prospects, financial condition, earnings
projections and cash flow projections, and the Board may, when it deems doing so
is advisable, lower or eliminate the dividend without prior notice. The new
dividend policy of $1.12 per share per quarter is expected to commence beginning
in April 2007.
OTHER HIGHLIGHTS
During the fourth quarter, the Company completed its acquisition of Flower Bank,
fsb and consequently became a thrift holding company. As a result of its
acquisition of Flower, a small portion of the Company's liabilities are now
deposits. The Company expects to grow Flower slowly at first, but over the long
term believes Flower will become a significant contributor to the Company's
earnings. In connection with its acquisition of Flower, the Company has hired
Lou Dunham to serve as Flower's President. Mr. Dunham has over thirty-two years
of banking experience, most recently as President of Ameribank, a Florida based
federal thrift. Previously, Mr. Dunham was the Senior EVP and Chief Risk Officer
at Republic Security Bank. The Company also elected Tom Wren to serve as an
independent Director of Flower. Mr. Wren was recently the Treasurer of MBNA
where he served ten years, and previously was a senior bank regulator in the
Office of the Controller of the Currency where he served for eighteen years.
ADJUSTED FINANCIAL MEASURES
Throughout this news release, the terms adjusted revenues, adjusted net
earnings, adjusted earnings per diluted share, adjusted net interest income,
adjusted net interest margin and other similar terms are used to identify
financial measures that are not prepared in accordance with Generally Accepted
Accounting Principles ("GAAP"). The Company has been, and expects to continue to
be, managed on the basis of the adjusted financial measures.
5
The adjusted financial measures should be read in conjunction with the Company's
GAAP results. A reconciliation of the adjusted financial measures to financial
measures prepared in accordance with GAAP is included on pages A-1 and A-2 of
this release.
CONFERENCE CALL TODAY
American Home will hold an investor conference call today, January 25, 2007, at
10:30 a.m., Eastern Time, to discuss earnings. Interested parties may listen to
the live conference call by visiting the investor relations section of American
Home's corporate website, www.americanhm.com. A replay of the online broadcast
will be available on the site through February 8, 2007.
DIVIDEND REINVESTMENT & DIRECT STOCK PURCHASE AND SALE PLAN
American Home Mortgage Investment Corp. has established an Investors Choice
Dividend Reinvestment & Direct Stock Purchase and Sale Plan for its
shareholders. The plan offers affordable alternatives for buying and selling
common stock of American Home Mortgage Investment Corp. Participants in the plan
may also reinvest cash dividends and make periodic supplemental cash payments to
purchase additional shares of the Company's common stock. If you have additional
questions or would like to enroll in the plan, please contact the plan
administrator, American Stock Transfer & Trust Company, at 1-888-777-0319 (toll
free) or visit their website at www.amstock.com.
ABOUT AMERICAN HOME
American Home Mortgage Investment Corp. is a mortgage real estate investment
trust ("REIT") focused on earning net interest income from self-originated loans
and mortgage-backed securities, and, through its taxable subsidiaries, from
originating and selling mortgage loans and servicing mortgage loans for
institutional investors. Mortgages are originated through a network of loan
production offices and mortgage brokers as well as purchased from correspondent
lenders, and are serviced at the Company's Irving, Texas servicing center. For
additional information, please visit the Company's website at
www.americanhm.com.
FORWARD-LOOKING STATEMENTS
This news release contains "forward-looking statements" that are based upon
expectations, estimates, forecasts, projections and assumptions. Any statement
in this news release that is not a statement of historical fact, including, but
not limited to, earnings guidance and forecasts, projections of financial
results and loan origination volume, expected future financial position,
dividend plans or business strategy, and any other statements of plans,
expectations, objectives, estimates and beliefs, is a forward looking statement.
Words such as "look forward," "will," "anticipate," "may," "expect," "plan,"
"believe," "intend," "opportunity," "potential," and similar words, or the
negatives of those words, are intended to identify forward-looking statements.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that are difficult to predict, and are not guarantees of
future performance. As a result, actual future events may differ materially from
any future results, performance or achievements expressed in or implied by this
news release. Specific factors that might cause such a difference include, but
are not limited to: American Home's limited operating history with respect to
its portfolio strategy; the potential fluctuations in American Home's operating
results; American Home's potential need for additional capital; the direction of
interest rates and their subsequent effect on the business of American Home and
its subsidiaries; risks associated with the use of leverage; changes in federal
and state tax laws affecting REITs; federal and state regulation of mortgage
banking; and those risks and uncertainties discussed in filings made by
6
American Home with the Securities and Exchange Commission. Such forward-looking
statements are inherently uncertain, and stockholders must recognize that actual
results may differ from expectations. American Home does not assume any
responsibility, and expressly disclaims any responsibility, to issue updates to
any forward-looking statements discussed in this news release, whether as a
result of new information, future events or otherwise.
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CONTACT:
Mary M. Feder
Vice President, Investor Relations
American Home Mortgage Investment Corp.
(631) 622-6469
mary.feder@americanhm.com
Financial Table Presentation
The following financial tables include GAAP, adjusted and reconciling
information for the reasons and purposes described under the heading ADJUSTED
FINANCIAL MEASURES herein.
Financial Tables to Follow on Next Page
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AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES
OPERATING STATISTICS
As of and for the As of and for the
Three Months Ended Year Ended
-------------------------- --------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2006 2005 2006 2005
----------- ----------- ----------- -----------
(1)
As Adjusted
----------- ----------- ----------- -----------
Mortgage Holdings Segment:
- ------------------------------------------------------------
Investment Portfolio Performance (2):
Average loans and mortgage-backed securities in portfolio
($ billions) 12.7 10.5 12.3 8.0
Interest income ($ millions) 193.7 138.0 725.5 377.8
Average portfolio yield 6.08% 5.27% 5.89% 4.75%
Interest expense ($ millions) 166.6 108.2 615.5 270.0
Average cost of funds and hedges 5.43% 4.36% 5.25% 3.65%
Net interest income ($ millions) 27.1 29.8 110.0 107.8
Net interest margin 0.85% 1.17% 0.89% 1.36%
Interest carry on free standing derivatives ($ millions) 6.3 1.0 23.5 -7.3
Net interest income plus interest carry on
free standing derivatives ($ millions) 33.4 30.8 133.5 100.5
Net interest margin including interest carry on free
standing derivatives 1.05% 1.21% 1.08% 1.26%
Reconciliation of Changes in Mortgage Holdings (3):
Net change in mortgage-backed securities ($ billions) 0.3 1.4 -1.3 0.3
Additions to loans in portfolio ($ billions) 1.0 2.1 4.1 3.5
Principal repayments and other dispositions of loans in
portfolio ($ billions) 0.5 0.0 1.3 0.0
Net additions to loans in portfolio ($ billions) 0.5 2.1 2.8 3.5
Loans and mortgage-backed securities held - end of period
($ billions) 15.6 14.1 15.6 14.1
Mortgage-backed securities period end duration gap
(in years) 0.07 -0.03 0.07 -0.03
Loan Origination Segment:
- ------------------------------------------------------------
Loan originations ($ billions) (4) 15.5 13.6 58.9 45.3
Refinance 60% 51% 54% 47%
ARM 51% 50% 53% 50%
Average mortgage loans, net ($ billions) (3) 10.0 8.6 9.1 5.2
Net interest income excluding trust preferred and other
interest expense ($ millions) 26.8 26.4 111.5 96.8
Net interest margin excluding trust preferred and other
interest expense 1.08% 1.28% 1.22% 1.85%
Trust preferred and other interest expense ($ millions) 7.4 3.3 24.4 6.5
Net interest income ($ millions) 19.4 23.1 87.1 90.3
Loans securitized and held ($ billions) 0.0 0.0 0.0 2.9
Loans securitized and sold ($ billions) 0.0 0.0 0.0 10.3
Loans sold to third parties ($ billions) 14.3 11.0 56.0 28.5
Gain on sales of loans, net of hedge gains ($ millions) (5) 202.9 105.4 810.0 577.4
Excess of fair value over carrying value of loans added
to investment portfolio ($ millions) 8.7 30.2 57.1 58.0
----------- ----------- ----------- -----------
Total ($ millions) 211.6 135.6 867.1 635.4
----------- ----------- ----------- -----------
Gain on sales of loans, net of hedge gains (% of
principal) (5) 1.42% 0.96% 1.45% 1.42%
Excess of fair value over carrying value of loans added
to investment portfolio (% of principal) 0.82% 1.43% 1.36% 1.63%
Total (% of principal) 1.38% 1.03% 1.44% 1.44%
Applications accepted ($ billions) 23.1 17.8 89.4 67.8
Application pipeline ($ billions) 11.3 9.2 11.3 9.2
Loan Servicing Segment:
- ------------------------------------------------------------
Loan servicing portfolio - total with warehouse
($ billions) 46.3 30.7
Loan servicing portfolio - loans sold or securitized
($ billions) 38.5 25.0
Interest expense ($ millions) 4.5 2.6 15.3 7.3
Weighted average note rate 7.08% 5.79%
Weighted average service fee 0.347% 0.330%
Average age (in months) 15 15
Notes:
(1) Adjusted as if the Company's fourth quarter 2004 securitization had
qualified for SFAS 140 sale accounting treatment in the fourth quarter of 2004.
Please refer to the detailed reconciliation of the Company's GAAP and as
adjusted results on pages A-1 and A-2.
(2) Excludes loans held for investment pending securitization.
(3) Includes loans held for investment pending securitization.
(4) Loan originations of $13.2 billion in the first quarter of 2006 exclude $559
million of loans purchased in the Waterfield acquisition.
(5) Prior to the fourth quarter of 2005, includes gain on current period
securitizations, net of hedge gains.
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AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES
OPERATING STATISTICS
As of and for the Three Months Ended
-------------------------------------------------------------------
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2006 2006 2006 2006 2005
----------- ----------- ----------- ----------- -----------
Mortgage Holdings Segment:
- ----------------------------------------------
Investment Portfolio Performance (1):
Average loans and mortgage-backed securities
in portfolio ($ billions) 12.7 13.0 12.5 11.1 10.5
Interest income ($ millions) 193.7 195.6 181.3 154.9 138.0
Average portfolio yield 6.08% 6.03% 5.82% 5.60% 5.27%
Interest expense ($ millions) 166.6 167.2 153.2 128.5 108.2
Average cost of funds and hedges 5.43% 5.37% 5.19% 4.96% 4.36%
Net interest income ($ millions) 27.1 28.4 28.1 26.4 29.8
Net interest margin 0.85% 0.88% 0.90% 0.95% 1.17%
Interest carry on free standing derivatives
($ millions) 6.3 7.5 5.8 3.9 1.0
Net interest income plus interest carry on
free standing derivatives ($ millions) 33.4 35.9 33.9 30.3 30.8
Net interest margin including interest carry
on free standing derivatives 1.05% 1.11% 1.09% 1.09% 1.21%
Reconciliation of Changes in Mortgage
Holdings (2):
Net change in mortgage-backed securities
($ billions) 0.3 -0.3 -0.3 -1.0 1.4
Additions to loans in portfolio ($ billions) 1.0 0.9 1.2 1.0 2.1
Principal repayments and other dispositions
of loans in portfolio ($ billions) 0.5 0.4 0.2 0.2 0.0
Net additions to loans in portfolio
($ billions) 0.5 0.5 1.0 0.8 2.1
Loans and mortgage-backed securities held -
end of period ($ billions) 15.6 14.8 14.6 13.9 14.1
Mortgage-backed securities period end
duration gap (in years) 0.07 -0.12 0.10 0.15 -0.03
Loan Origination Segment:
- ----------------------------------------------
Loan originations ($ billions) (3) 15.5 15.3 14.9 13.2 13.6
Refinance 60% 54% 51% 51% 51%
ARM 51% 53% 55% 51% 50%
Average mortgage loans, net ($ billions) (2) 10.0 8.1 8.8 9.6 8.6
Net interest income excluding trust
preferred and other interest expense
($ millions) 26.8 25.1 31.6 28.0 26.4
Net interest margin excluding trust
preferred and other interest expense 1.08% 1.24% 1.44% 1.17% 1.28%
Trust preferred and other interest expense
($ millions) 7.4 6.6 5.7 4.7 3.3
Net interest income ($ millions) 19.4 18.5 25.9 23.3 23.1
Loans securitized and held ($ billions) 0.0 0.0 0.0 0.0 0.0
Loans securitized and sold ($ billions) 0.0 0.0 0.0 0.0 0.0
Loans sold to third parties ($ billions) 14.3 14.3 13.9 13.5 11.0
Gain on sales of loans, net of hedge gains
($ millions) 202.9 210.6 224.6 171.9 105.4
Excess of fair value over carrying value of
loans added
to investment portfolio ($ millions) 8.7 15.6 18.8 14.0 30.2
----------- ----------- ----------- ----------- -----------
Total ($ millions) 211.6 226.2 243.4 185.9 135.6
----------- ----------- ----------- ----------- -----------
Gain on sales of loans, net of hedge gains
(% of principal) 1.42% 1.47% 1.62% 1.27% 0.96%
Excess of fair value over carrying value of
loans added
to investment portfolio (% of principal) 0.82% 1.71% 1.49% 1.44% 1.43%
Total (% of principal) 1.38% 1.48% 1.61% 1.28% 1.03%
Applications accepted ($ billions) 23.1 23.4 22.1 20.8 17.8
Application pipeline ($ billions) 11.3 12.3 12.1 11.8 9.2
Loan Servicing Segment:
- ----------------------------------------------
Loan servicing portfolio - total with
warehouse ($ billions) 46.3 43.0 39.1 34.8 30.7
Loan servicing portfolio - loans sold or
securitized ($ billions) 38.5 35.9 32.6 29.0 25.0
Interest expense ($ millions) 4.5 3.9 3.8 3.1 2.6
Weighted average note rate 7.08% 6.77% 6.38% 6.09% 5.79%
Weighted average service fee 0.347% 0.339% 0.336% 0.329% 0.330%
Average age (in months) 15 15 14 14 15
Notes:
(1) Excludes loans held for investment pending securitization.
(2) Includes loans held for investment pending securitization.
(3) Loan originations of $13.2 billion in the first quarter of 2006 exclude $559
million of loans purchased in the Waterfield acquisition.
9
AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share amounts)
Three Months Ended Year Ended
-------------------------- --------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2006 2005 2006 2005
----------- ----------- ----------- -----------
(1)
As
Adjusted
-----------
Net interest income:
Interest income $ 364,810 $ 265,435 $ 1,328,494 $ 700,760
Interest expense (322,134) (215,057) (1,146,039) (509,887)
----------- ----------- ----------- -----------
Net interest income 42,676 50,378 182,455 190,873
----------- ----------- ----------- -----------
Provision for loan losses (6,725) (2,142) (17,380) (2,142)
----------- ----------- ----------- -----------
Net interest income after provision
for loan losses 35,951 48,236 165,075 188,731
----------- ----------- ----------- -----------
Non-interest income:
Gain on sales of mortgage loans 202,884 98,777 810,006 335,065
Gain on sales of current period securitized
mortgage loans - - - 168,998
Gain on sales of mortgage-backed securities
and derivatives 3,305 38,068 12,257 49,536
Unrealized loss on mortgage-backed
securities and derivatives (9,663) (44,778) (7,028) (45,799)
Loan servicing fees 47,300 26,715 145,429 78,947
Amortization and impairment of mortgage
servicing rights - (18,745) - (60,657)
Change in fair value of mortgage servicing
rights:
Due to realization of cash flows (28,940) - (102,820) -
Due to changes in valuation assumptions,
net of hedge gain (loss) 3,920 - (5,289) -
----------- ----------- ----------- -----------
Net loan servicing fees 22,280 7,970 37,320 18,290
----------- ----------- ----------- -----------
Other non-interest income 2,902 2,181 8,814 7,775
----------- ----------- ----------- -----------
Non-interest income 221,708 102,218 861,369 533,865
----------- ----------- ----------- -----------
Non-interest expenses:
Salaries, commissions and benefits, net 105,908 95,237 414,008 359,949
Occupancy and equipment 20,396 16,459 77,357 58,855
Data processing and communications 6,346 6,402 25,905 24,788
Office supplies and expenses 4,324 4,612 19,147 19,722
Marketing and promotion 4,574 5,951 21,625 20,311
Travel and entertainment 8,966 6,982 31,310 21,007
Professional fees 7,902 3,586 24,322 14,232
Other 14,952 10,946 64,614 32,018
----------- ----------- ----------- -----------
Non-interest expenses 173,368 150,175 678,288 550,882
----------- ----------- ----------- -----------
Net income before income tax expense (benefit) 84,291 279 348,156 171,714
Income tax expense (benefit) 19,594 (16,419) 84,629 (17,721)
----------- ----------- ----------- -----------
Net income $ 64,697 $ 16,698 $ 263,527 $ 189,435
=========== =========== =========== ===========
Dividends on preferred stock 3,304 3,304 13,218 13,217
----------- ----------- ----------- -----------
Net income available to common shareholders $ 61,393 $ 13,394 $ 250,309 $ 176,218
=========== =========== =========== ===========
Per share data:
Basic $ 1.22 $ 0.27 $ 5.00 $ 4.01
Diluted $ 1.21 $ 0.27 $ 4.96 $ 3.97
Weighted average number of shares - basic 50,192 49,605 50,030 43,897
Weighted average number of shares - diluted 50,602 49,998 50,421 44,375
Note:
(1) Adjusted as if the Company's fourth quarter 2004 securitization had
qualified for SFAS 140 sale accounting treatment in the fourth quarter of 2004.
Please refer to the detailed reconciliation of the Company's GAAP and as
adjusted results on pages A-1 and A-2.
10
AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share amounts)
Three Months Ended
------------------------------------------------------------------------
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2006 2006 2006 2006 2005
----------- ----------- ----------- ----------- -----------
Net interest income:
Interest income $ 364,810 $ 332,875 $ 330,196 $ 300,613 $ 265,435
Interest expense (322,134) (289,878) (279,992) (254,035) (215,057)
----------- ----------- ----------- ----------- -----------
Net interest income 42,676 42,997 50,204 46,578 50,378
----------- ----------- ----------- ----------- -----------
Provision for loan losses (6,725) (5,365) (3,979) (1,311) (2,142)
----------- ----------- ----------- ----------- -----------
Net interest income after provision for
loan losses 35,951 37,632 46,225 45,267 48,236
----------- ----------- ----------- ----------- -----------
Non-interest income:
Gain on sales of mortgage loans 202,884 210,621 224,594 171,907 98,777
Gain (loss) on sales of mortgage-backed
securities and derivatives 3,305 9,849 (47) (850) 38,068
Unrealized (loss) gain on mortgage-backed
securities and derivatives (9,663) 1,050 (7,730) 9,315 (44,778)
Loan servicing fees 47,300 43,379 30,417 24,333 26,715
Amortization and impairment of mortgage
servicing rights - - - - (18,745)
Change in fair value of mortgage servicing
rights:
Due to realization of cash flows (28,940) (28,839) (26,306) (18,735) -
Due to changes in valuation assumptions,
net of hedge gain (loss) 3,920 (16,799) 7,476 114 -
----------- ----------- ----------- ----------- -----------
Net loan servicing fees (loss) 22,280 (2,259) 11,587 5,712 7,970
----------- ----------- ----------- ----------- -----------
Other non-interest income 2,902 2,018 2,125 1,769 2,181
----------- ----------- ----------- ----------- -----------
Non-interest income 221,708 221,279 230,529 187,853 102,218
----------- ----------- ----------- ----------- -----------
Non-interest expenses:
Salaries, commissions and benefits, net 105,908 105,676 103,157 99,267 95,237
Occupancy and equipment 20,396 19,228 19,763 17,970 16,459
Data processing and communications 6,346 5,700 6,733 7,126 6,402
Office supplies and expenses 4,324 5,346 5,145 4,332 4,612
Marketing and promotion 4,574 4,868 6,383 5,800 5,951
Travel and entertainment 8,966 7,798 7,793 6,753 6,982
Professional fees 7,902 6,076 5,013 5,331 3,586
Other 14,952 16,588 17,192 15,882 10,946
----------- ----------- ----------- ----------- -----------
Non-interest expenses 173,368 171,280 171,179 162,461 150,175
----------- ----------- ----------- ----------- -----------
Net income before income tax expense (benefit) 84,291 87,631 105,575 70,659 279
Income tax expense (benefit) 19,594 15,611 33,224 16,200 (16,419)
----------- ----------- ----------- ----------- -----------
Net income $ 64,697 $ 72,020 $ 72,351 $ 54,459 $ 16,698
=========== =========== =========== =========== ===========
Dividends on preferred stock 3,304 3,305 3,304 3,305 3,304
----------- ----------- ----------- ----------- -----------
Net income available to common shareholders $ 61,393 $ 68,715 $ 69,047 $ 51,154 $ 13,394
=========== =========== =========== =========== ===========
Per share data:
Basic $ 1.22 $ 1.37 $ 1.38 $ 1.03 $ 0.27
Diluted $ 1.21 $ 1.36 $ 1.37 $ 1.02 $ 0.27
Weighted average number of shares - basic 50,192 50,148 50,056 49,715 49,605
Weighted average number of shares - diluted 50,602 50,553 50,487 50,070 49,998
11
AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands)
December 31, September 30, June 30, March 31, December 31,
2006 2006 2006 2006 2005
------------- ------------- ------------- ------------- -------------
Assets:
Cash and cash equivalents $ 398,166 $ 298,079 $ 304,268 $ 572,591 $ 575,650
Accounts receivable and servicing advances 432,418 350,965 342,244 327,586 329,132
Securities 9,308,032 8,957,546 9,299,343 9,580,974 10,602,115
Mortgage loans held for sale, net 1,523,737 1,365,595 1,243,702 1,589,613 2,208,749
Loans held for investment, net 6,329,721 5,797,801 5,337,138 4,315,384 3,479,721
Derivative assets 32,142 26,323 139,397 102,267 44,594
Mortgage servicing rights, net 506,341 460,913 434,173 371,974 319,671
Premises and equipment, net 86,211 82,288 80,296 75,594 68,782
Goodwill 133,128 111,890 110,759 110,330 99,527
Other assets 79,089 52,927 34,279 30,697 26,804
------------- ------------- ------------- ------------- -------------
Total assets $ 18,828,985 $ 17,504,327 $ 17,325,599 $ 17,077,010 $ 17,754,745
============= ============= ============= ============= =============
Liabilities and Stockholders' Equity:
Liabilities:
Warehouse lines of credit $ 1,304,541 $ 1,890,034 $ 1,476,958 $ 1,754,581 $ 3,474,191
Commercial paper 1,273,965 1,283,858 888,476 1,073,630 1,079,179
Reverse repurchase agreements 8,571,459 7,232,503 8,939,786 8,899,050 9,806,144
Deposits 24,016 - - - -
Collateralized debt obligations 4,854,801 3,484,873 3,724,878 2,905,199 1,057,906
Payable for securities purchased 289,716 1,221,105 - 215,114 261,539
Derivative liabilities 12,644 40,170 3,280 7,512 16,773
Trust preferred securities 336,078 282,340 252,780 204,018 203,688
Accrued expenses and other liabilities 361,923 392,334 367,358 401,769 298,230
Notes payable 417,467 317,161 337,700 330,714 319,309
Income taxes payable 112,089 95,808 80,529 51,016 30,770
------------- ------------- ------------- ------------- -------------
Total liabilities 17,558,699 16,240,186 16,071,745 15,842,603 16,547,729
------------- ------------- ------------- ------------- -------------
Stockholders' Equity:
Preferred stock 134,040 134,040 134,040 134,040 134,040
Common stock 502 502 501 500 496
Additional paid-in capital 963,617 962,903 960,995 958,175 947,512
Retained earnings 257,283 245,473 227,450 206,512 203,778
Accumulated other comprehensive loss (85,156) (78,777) (69,132) (64,820) (78,810)
------------- ------------- ------------- ------------- -------------
Total stockholders' equity 1,270,286 1,264,141 1,253,854 1,234,407 1,207,016
------------- ------------- ------------- ------------- -------------
Total liabilities and stockholders' equity $ 18,828,985 $ 17,504,327 $ 17,325,599 $ 17,077,010 $ 17,754,745
============= ============= ============= ============= =============
Number of shares outstanding - preferred 5,600,000 5,600,000 5,600,000 5,600,000 5,600,000
Number of shares outstanding - common 50,195,499 50,182,257 50,107,214 50,004,965 49,639,646
12
AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
(In thousands)
Three Months Ended Year Ended
------------------------------------------------------------------ ----------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, Dec. 31,
2006 2006 2006 2006 2005 2006
---------- ---------- ---------- ---------- ---------- ----------
Preferred stock
Balance at end of period $ 134,040 $ 134,040 $ 134,040 $ 134,040 $ 134,040 $ 134,040
---------- ---------- ---------- ---------- ---------- ----------
Common stock
Balance at beginning of period $ 502 $ 501 $ 500 $ 496 $ 496 $ 496
Issuance of common stock - earnouts -- -- -- 3 -- 3
Issuance of common stock - Omnibus Stock Plan -- 1 1 1 -- 3
---------- ---------- ---------- ---------- ---------- ----------
Balance at end of period $ 502 $ 502 $ 501 $ 500 $ 496 $ 502
---------- ---------- ---------- ---------- ---------- ----------
Additional paid-in capital
Balance at beginning of period $ 962,903 $ 960,995 $ 958,175 $ 947,512 $ 946,105 $ 947,512
Issuance of common stock - earnouts -- 296 -- 9,555 -- 9,851
Issuance of common stock - Omnibus Stock Plan 211 1,067 1,126 651 857 3,055
Stock-based employee compensation expense 241 37 373 410 -- 1,061
Tax benefit for stock options exercised 102 332 1,198 -- 434 1,632
Restricted shares amortization 160 176 123 47 116 506
---------- ---------- ---------- ---------- ---------- ----------
Balance at end of period $ 963,617 $ 962,903 $ 960,995 $ 958,175 $ 947,512 $ 963,617
---------- ---------- ---------- ---------- ---------- ----------
Retained earnings
Balance at beginning of period $ 245,473 $ 227,450 $ 206,512 $ 203,778 $ 235,556 $ 203,778
Cumulative-effect adjustment as of beginning
of period (1) 3,635 -- -- (2,917) -- 718
Net income 64,697 72,020 72,351 54,459 16,698 263,527
Dividends declared (56,522) (53,997) (51,413) (48,808) (48,476) (210,740)
---------- ---------- ---------- ---------- ---------- ----------
Balance at end of period $ 257,283 $ 245,473 $ 227,450 $ 206,512 $ 203,778 $ 257,283
---------- ---------- ---------- ---------- ---------- ----------
Other comprehensive loss
Balance at beginning of period $ (78,777) $ (69,132) $ (64,820) $ (78,810) $ (51,091) $ (78,810)
Unrealized gain (loss) on securities 870 75,535 (44,510) (35,765) (7,730) (3,870)
(Loss) gain on derivatives (7,249) (85,180) 40,198 49,755 (19,989) (2,476)
---------- ---------- ---------- ---------- ---------- ----------
Balance at end of period $ (85,156) $ (78,777) $ (69,132) $ (64,820) $ (78,810) $ (85,156)
---------- ---------- ---------- ---------- ---------- ----------
Total stockholders' equity $1,270,286 $1,264,141 $1,253,854 $1,234,407 $1,207,016 $1,270,286
========== ========== ========== ========== ========== ==========
Note:
(1) Effective January 1, 2006, the Company adopted SFAS 156 and elected the fair
value option to subsequently measure its MSRs.
13
AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Three Months Ended
----------------------------------------------------------------------------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
2006 2006 2006 2006 2005
------------ ------------ ------------ ------------ ------------
Cash flows from operating activities:
Net income $ 64,697 $ 72,020 $ 72,351 $ 54,459 $ 16,698
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 5,003 4,275 5,014 3,953 3,454
Provision for loan losses 6,725 5,365 3,979 1,311 2,142
Change in fair value of mortgage servicing rights 28,834 52,753 18,830 18,621 --
Amortization and impairment of mortgage servicing
rights -- -- -- -- 18,745
Accretion and amortization of mortgage-backed
securities, net 4,845 4,696 2,006 2,331 1,509
Deferred cash flow hedge (loss) gain, net of
amortization (14,292) 5,509 10,509 3,909 (346)
(Gain) loss on sales of mortgage-backed
securities and derivatives (930) (4,735) -- -- 876
Unrealized loss (gain) on mortgage-backed
securities 10,890 (1,588) 14,591 3,090 40,968
Unrealized (gain) loss on free standing
derivatives (4,828) 20,629 (1,038) (4,765) 6,149
(Decrease) increase in forward delivery
contracts (35,605) 42,315 (6,036) (24,041) 24,124
Capitalized mortgage servicing rights on
sold loans (73,918) (79,493) (81,029) (69,768) (37,757)
Decrease (increase) in interest rate lock
commitments 12,586 (5,069) (4,447) 7,131 (10,508)
(Increase) decrease in mortgage loan basis
adjustments (4,917) (10,125) (2,156) 4,731 (32,201)
Excess tax benefits from share-based payment
arrangements (102) (332) (1,198) -- --
Other (1,450) (569) (633) (198) (645)
(Increase) decrease in operating assets:
Accounts receivable (58,738) 2,740 (13,506) 6,829 18,156
Servicing advances (22,038) (11,461) (1,152) (3,281) (11,552)
Other assets 8,281 (18,648) (3,582) (1,451) 4,882
Increase (decrease) in operating liabilities:
Accrued expenses and other liabilities (42,808) 25,988 (32,977) 93,876 31,696
Income taxes payable 20,018 15,611 30,711 16,173 (25,106)
Origination of mortgage loans held for sale (15,080,212) (14,664,704) (14,371,439) (12,203,014) (11,482,292)
Principal received from sales of mortgage loans
held for sale 14,371,049 14,241,440 14,013,921 13,372,574 11,179,015
Additions to mortgage-backed securities
and derivatives -- -- -- -- (152,666)
Principal proceeds from sales of self-originated
mortgage-backed securities -- -- 99,086 1,809,796 1,333,188
Cash received from residual assets
in securitizations 14,710 16,785 20,947 27,353 26,958
Principal repayments of mortgage-backed
securities 29,491 35,677 60,485 93,845 212,927
------------ ------------ ------------ ------------ ------------
Net cash (used in) provided by operating
activities (762,709) (250,921) (166,763) 3,213,464 1,168,414
------------ ------------ ------------ ------------ ------------
Cash flows from investing activities:
Purchases of premises and equipment (8,708) (6,267) (9,716) (10,765) (8,062)
Origination of mortgage loans held
for investment (450,263) (599,384) (560,003) (970,335) (2,084,025)
Proceeds from repayments and dispositions
of mortgage loans held for investment 464,332 446,199 240,403 137,545 75,613
Purchases of mortgage-backed securities (1,423,115) (1,666,650) (461,125) (1,389,336) (3,298,636)
Principal proceeds from sales of purchased
mortgage-backed securities 482,336 1,503,760 -- -- 24,592
Principal repayments of purchased mortgage-
backed securities 535,465 529,441 501,239 438,297 409,080
Net increase in investment in Federal Home Loan
Bank stock, at cost -- (54) (108) -- --
Acquisition of business (14,108) -- -- (550,077) --
------------ ------------ ------------ ------------ ------------
Net cash (used in) provided by investing
activities (414,061) 207,045 (289,310) (2,344,671) (4,881,438)
------------ ------------ ------------ ------------ ------------
Cash flows from financing activities:
(Decrease) increase in warehouse lines
of credit, net (585,493) 413,076 (277,623) (1,719,610) 1,309,037
Increase (decrease) in reverse repurchase
agreements, net 1,338,956 (1,707,283) 40,736 (907,094) 1,764,565
Decrease in deposits (6,673) -- -- -- --
Increase (decrease) in collateralized debt
obligations 1,369,928 (240,005) 819,679 1,847,293 1,057,906
(Decrease) increase in payable for securities
purchased (931,389) 1,221,105 (215,114) (46,425) (293,178)
(Decrease) increase in commercial paper, net (9,893) 395,382 (185,154) (5,549) (255,117)
Increase (decrease) in drafts payable, net 4,063 (3,600) (4,028) (4,377) 1,991
Increase in trust preferred securities 53,738 29,560 48,762 330 106,724
Increase (decrease) in notes payable, net 97,306 (20,539) 6,986 11,405 13,543
Proceeds from issuance of common stock 211 1,068 1,127 652 857
Excess tax benefits from share-based payment
arrangements 102 332 1,198 -- --
Dividends paid (53,999) (51,409) (48,819) (48,477) (42,078)
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in) financing
activities 1,276,857 37,687 187,750 (871,852) 3,664,250
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents 100,087 (6,189) (268,323) (3,059) (48,774)
Cash and cash equivalents, beginning of period 298,079 304,268 572,591 575,650 624,424
------------ ------------ ------------ ------------ ------------
Cash and cash equivalents, end of period $ 398,166 $ 298,079 $ 304,268 $ 572,591 $ 575,650
============ ============ ============ ============ ============
Supplemental disclosure of non-cash investing
activities:
Net transfer of loans held for sale to loans
held for investment $ 533,184 $ 307,431 $ 699,519 $ -- $ --
============ ============ ============ ============ ============
14
AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Year Ended
------------
December 31,
2006
------------
Cash flows from operating activities:
Net income $ 263,527
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 18,245
Provision for loan losses 17,380
Change in fair value of mortgage servicing rights 119,038
Accretion and amortization of mortgage-backed securities, net 13,878
Deferred cash flow hedge gain, net of amortization 5,635
Gain on sales of mortgage-backed securities and derivatives (5,665)
Unrealized loss on mortgage-backed securities 26,983
Unrealized loss on free standing derivatives 9,998
Decrease in forward delivery contracts (23,367)
Capitalized mortgage servicing rights on sold loans (304,208)
Decrease in interest rate lock commitments 10,201
Increase in mortgage loan basis adjustments (12,467)
Excess tax benefits from share-based payment arrangements (1,632)
Other (2,850)
Increase in operating assets:
Accounts receivable (62,675)
Servicing advances (37,932)
Other assets (15,400)
Increase in operating liabilities:
Accrued expenses and other liabilities 44,079
Income taxes payable 82,513
Origination of mortgage loans held for sale (56,319,369)
Principal received from sales of mortgage loans held for sale 55,998,984
Principal proceeds from sales of self-originated mortgage-backed securities 1,908,882
Cash received from residual assets in securitizations 79,795
Principal repayments of mortgage-backed securities 219,498
------------
Net cash provided by operating activities 2,033,071
------------
Cash flows from investing activities:
Purchases of premises and equipment (35,456)
Origination of mortgage loans held for investment (2,579,985)
Proceeds from repayments and dispositions of mortgage loans held for investment 1,288,479
Purchases of mortgage-backed securities (4,940,226)
Principal proceeds from sales of purchased mortgage-backed securities 1,986,096
Principal repayments of purchased mortgage-backed securities 2,004,442
Net increase in investment in Federal Home Loan Bank stock, at cost (162)
Acquisition of business (564,185)
------------
Net cash used in investing activities (2,840,997)
------------
Cash flows from financing activities:
Decrease in warehouse lines of credit, net (2,169,650)
Decrease in reverse repurchase agreements, net (1,234,685)
Decrease in deposits (6,673)
Increase in collateralized debt obligations 3,796,895
Increase in payable for securities purchased 28,177
Increase in commercial paper, net 194,786
Decrease in drafts payable, net (7,942)
Increase in trust preferred securities 132,390
Increase in notes payable, net 95,158
Proceeds from issuance of common stock 3,058
Excess tax benefits from share-based payment arrangements 1,632
Dividends paid (202,704)
------------
Net cash provided by financing activities 630,442
------------
Net decrease in cash and cash equivalents (177,484)
Cash and cash equivalents, beginning of period 575,650
------------
Cash and cash equivalents, end of period $ 398,166
============
Supplemental disclosure of non-cash investing activities:
Net transfer of loans held for sale to loans held for investment $ 1,540,134
============
15
AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES
FAIR VALUE OF FINANCIAL INSTRUMENTS (Unaudited)
(In thousands)
December 31, 2006
--------------------------------------------------
Fair Value in Excess
Carrying Value Fair Value of Carrying Value
-------------- ---------- --------------------
Assets:
Cash and cash equivalents $ 398,166 $ 398,166 $ --
Accounts receivable and servicing advances 432,418 432,418 --
Securities 9,308,032 9,308,032 --
Mortgage loans held for sale, net 1,523,737 1,573,564 49,827
Loans held for investment, net 6,329,721 6,461,449 131,728
Mortgage servicing rights, net 506,341 506,341 --
Derivative assets (1) 32,142 130,091 97,949
--------------------
$ 279,504
--------------------
Carrying Value in
Excess of (Lower
Than) Fair Value
--------------------
Liabilities:
Warehouse lines of credit $ 1,304,541 $1,304,541 $ --
Commercial paper 1,273,965 1,273,965 --
Reverse repurchase agreements 8,571,459 8,571,538 (79)
Collateralized debt obligations 4,854,801 4,856,258 (1,457)
Derivative liabilities 12,644 12,644 --
Trust preferred securities 336,078 336,078 --
Notes payable 417,467 417,467 --
--------------------
$ (1,536)
--------------------
Fair Value in Excess
of Carrying Value
--------------------
$ 277,968
====================
Note:
(1) Derivative assets includes interest rate lock commitments ("IRLCs") to fund
mortgage loans. The carrying value excludes the value of the mortgage servicing
rights ("MSRs") attached to the IRLCs in accordance with SEC Staff Accounting
Bulletin No. 105. The fair value includes the value of MSRs.
16
AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES
OPERATING STATISTICS
As of and for the Year Ended
---------------------------------------
December 31, 2005
---------------------------------------
(1)
GAAP Adjustments As Adjusted
-------- ------------ ------------
Mortgage Holdings Segment:
- -------------------------------------------------------------------------------------
Investment Portfolio Performance (2):
- -------------------------------------
Average loans and mortgage-backed securities in portfolio ($ billions) 7.6 0.4 8.0
Interest income ($ millions) 357.9 19.9 377.8
Average portfolio yield 4.73% 4.75%
Interest expense ($ millions) 262.3 7.7 270.0
Average cost of funds and hedges 3.71% 3.65%
Net interest income ($ millions) 95.6 12.2 107.8
Net interest margin 1.26% 1.36%
Interest carry on free standing derivatives ($ millions) -7.3 -7.3
Net interest income plus interest carry on
free standing derivatives ($ millions) 88.3 12.2 100.5
Net interest margin including interest carry on free standing derivatives 1.17% 1.26%
Reconciliation of Changes in Mortgage Holdings (3):
- ---------------------------------------------------
Net change in mortgage-backed securities ($ billions) 0.3 0.3
Additions to loans in portfolio ($ billions) 3.5 3.5
Principal repayments of loans in portfolio ($ billions) 0.0 0.0
Net additions to loans in portfolio ($ billions) 3.5 3.5
Loans and mortgage-backed securities held - end of period ($ billions) 14.1 14.1
Mortgage-backed securities period end duration gap (in years) -0.03 -0.03
Loan Origination Segment:
- -------------------------------------------------------------------------------------
Loan originations ($ billions) 45.3 45.3
Refinance 47% 47%
ARM 50% 50%
Average mortgage loans, net ($ billions) (3) 6.1 -0.9 5.2
Net interest income excluding trust preferred and other interest expense ($ millions) 119.2 -22.4 96.8
Net interest margin excluding trust preferred and other interest expense 1.96% 1.85%
Trust preferred and other interest expense ($ millions) 6.5 6.5
Net interest income ($ millions) 112.7 -22.4 90.3
Loans securitized and held ($ billions) 4.4 -1.5 2.9
Loans securitized and sold ($ billions) 12.3 -2.0 10.3
Loans sold to third parties ($ billions) 28.5 28.5
Gain on sales of loans, net of hedge gains ($ millions) (4) 620.9 -43.5 577.4
Excess of fair value over carrying value of loans added
to investment portfolio ($ millions) 58.0 58.0
-------- ------------ ------------
Total ($ millions) 678.9 -43.5 635.4
-------- ------------ ------------
Gain on sales of loans, net of hedge gains (% of principal) (4) 1.53% 1.42%
Excess of fair value over carrying value of loans added
to investment portfolio (% of principal) 1.63% 1.63%
Total (% of principal) 1.54% 1.44%
Applications accepted ($ billions) 67.8 67.8
Application pipeline ($ billions) 9.2 9.2
Loan Servicing Segment:
- -------------------------------------------------------------------------------------
Loan servicing portfolio - total with warehouse ($ billions) 30.7 30.7
Loan servicing portfolio - loans sold or securitized ($ billions) 25.0 25.0
Interest expense ($ millions) 7.3 7.3
Weighted average note rate 5.79% 5.79%
Weighted average service fee 0.330% 0.330%
Average age (in months) 15 15
Notes:
(1) Adjustments reflect the net effect on the period presented to reconcile
the Company's operating statistics, results of operations and financial
condition prepared in accordance with GAAP to the amounts adjusted as if the
Company's fourth quarter 2004 securitization had qualified for SFAS 140 sale
accounting treatment in the fourth quarter of 2004.
(2) Excludes loans held for investment pending securitization.
(3) Includes loans held for investment pending securitization.
(4) Prior to the fourth quarter of 2005, includes gain on current period
securitizations, net of hedge gains.
A-1
AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share amounts)
Year Ended
--------------------------------------------
December 31, 2005
--------------------------------------------
(1)
GAAP Adjustments As Adjusted
------------ ------------ ------------
Net interest income:
Interest income $ 727,685 $ (26,925) $ 700,760
Interest expense (526,653) 16,766 (509,887)
------------ ------------ ------------
Net interest income 201,032 (10,159) 190,873
------------ ------------ ------------
Provision for loan losses (2,142) -- (2,142)
------------ ------------ ------------
Net interest income after provision for loan losses 198,890 (10,159) 188,731
------------ ------------ ------------
Non-interest income:
Gain on sales of mortgage loans 335,065 -- 335,065
Gain on sales of current period securitized mortgage loans 194,256 (25,258) 168,998
Gain on sales of mortgage-backed securities and derivatives 50,936 (1,400) 49,536
Unrealized loss on mortgage-backed securities and derivatives (8,536) (37,263) (45,799)
Loan servicing fees 76,096 2,851 78,947
Amortization and impairment of mortgage servicing rights (60,535) (122) (60,657)
Change in fair value of mortgage servicing rights -- -- --
------------ ------------ ------------
Net loan servicing fees 15,561 2,729 18,290
------------ ------------ ------------
Other non-interest income 7,775 -- 7,775
------------ ------------ ------------
Non-interest income 595,057 (61,192) 533,865
------------ ------------ ------------
Non-interest expenses:
Salaries, commissions and benefits, net 359,949 -- 359,949
Occupancy and equipment 58,855 -- 58,855
Data processing and communications 24,788 -- 24,788
Office supplies and expenses 19,722 -- 19,722
Marketing and promotion 20,311 -- 20,311
Travel and entertainment 21,007 -- 21,007
Professional fees 14,232 -- 14,232
Other 32,018 -- 32,018
------------ ------------ ------------
Non-interest expenses 550,882 -- 550,882
------------ ------------ ------------
Net income before income tax expense 243,065 (71,351) 171,714
Income tax benefit (17,721) -- (17,721)
------------ ------------ ------------
Net income $ 260,786 $ (71,351) $ 189,435
============ ============ ============
Dividends on preferred stock 13,217 -- 13,217
------------ ------------ ------------
Net income available to common shareholders $ 247,569 $ (71,351) $ 176,218
============ ============ ============
Per share data:
Basic $ 5.64 $ (1.63) $ 4.01
Diluted $ 5.58 $ (1.61) $ 3.97
Weighted average number of shares - basic 43,897 43,897 43,897
Weighted average number of shares - diluted 44,375 44,375 44,375
Note:
(1) Adjustments reflect the net effect on the period presented to reconcile
the Company's operating statistics, results of operations and financial
condition prepared in accordance with GAAP to the amounts adjusted as if the
Company's fourth quarter 2004 securitization had qualified for SFAS 140 sale
accounting treatment in the fourth quarter of 2004.
A-2