Exhibit 99.1
American Residential Reports Record Second Quarter 2003 Earnings
SAN DIEGO--(BUSINESS WIRE)--July 29, 2003--American Residential
Investment Trust, Inc. (AMEX(R): INV), the parent company of American
Mortgage Network (AmNet), a wholesale mortgage bank serving mortgage
brokers nationwide, today reported record second quarter results and
reaffirmed its increased full-year 2003 earnings guidance, highlights
of which included:
-- Second quarter consolidated net income was $9.5 million,
inclusive of a tax benefit of $2.5 million due to the
realization of deferred tax assets associated with net
operating loss carry forwards;
-- Second quarter earnings per diluted share were $1.12,
inclusive of $0.29 per diluted share associated with the tax
benefit;
-- Second quarter consolidated pretax earnings were $10.7
million, up 46% over the previous quarter;
-- Book value per diluted share was $9.58 and cash and cash
equivalents were $29.3 million as of June 30, 2003;
-- Funded $3.2 billion in mortgage loans through American
Mortgage Network;
-- Implemented national expansion strategy in Charlotte, Phoenix
and Houston;
-- Aggregate warehouse funding facilities increased to $1.3
billion; and
-- Reaffirmed recently raised 2003 projected consolidated net
income to the range of $30 to $32 million, or between $3.50
and $3.75 per diluted share, inclusive of tax benefits to be
recorded in the first and second quarters totaling $9.1
million or $1.04 per diluted share; reaffirmed annual 2003
mortgage loan production to be in the range of $11-$12
billion.
Consolidated Results
American Residential reported consolidated net income of $9.5
million, or $1.12 per diluted share for the second quarter of 2003.
This includes a tax benefit of $2.5 million, or $0.29 per diluted
share, due to the realization of additional deferred tax assets
associated with net operating loss carry forwards in American
Residential Investment Trust (AMREIT). The deferred tax asset
realization results from an increase in profitability from the
Company's mortgage banking subsidiary, American Mortgage Network.
After stock option dilution resulting from significant share price
appreciation during the period and a higher effective tax rate,
earnings per diluted share for the six months ended June 30, 2003 were
$2.56, inclusive of the tax benefit totaling $1.08 per diluted share.
John M. Robbins, Jr., Chief Executive Officer, said, "I am pleased
to announce another quarter of record earnings and continued national
expansion of our regional lending centers. We see substantial
opportunities in today's housing market. Interest rates remain low by
historic standards and demand for mortgage products has remained
robust, even though new originations are off the record pace
experienced in June. Our pipeline of newly originated mortgages was
approximately $2.9 billion at June 30, 2003, which helps to insure
strong funding months in July and August."
"Our national expansion strategy into top metropolitan statistical
areas, coupled with our goal to double the number of account
executives over the next year, has prepared us for expected declines
in the refinance market," Robbins added. "We believe mortgage brokers
will continue to dominate originations as the composition of consumer
demand changes over the next year from predominately refinance to
predominately home purchase transactions. Nationally, our market share
for residential loan originations has grown throughout 2003.
Projections for both volume and earnings estimates incorporate
expectations of rising interest rates and market contraction
throughout the remainder of the year."
The Company's cash and cash equivalents balance was $29.3 million
at June 30, 2003, as compared to approximately $24.5 million at March
31, 2003, an increase of approximately 20%. The Company's diluted book
value per share was $9.58 at June 30, 2003. Total assets increased by
approximately $73 million during the second quarter, substantially due
to an increase in mortgage loans held for sale and related
receivables.
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 $3.2 billion in home loans during the second quarter
of 2003 compared to $2.1 billion for the first quarter of the year.
AmNet operates exclusively in the wholesale channel, originating,
underwriting and funding loans from strategically placed regional
centers. AmNet sells the loans it funds on a servicing-released basis
to investors who include major correspondent servicers and Wall Street
dealers. AmNet is now approved to do business in 47 states either by
license or exemption and has over 600 employees.
AmNet Operating Results
For the second quarter of 2003, AmNet reported pre-tax income of
$9.8 million, compared to $6.9 million in the first quarter of 2003,
representing an increase of approximately 40%.
Gain on the sale of loans and other fee income, net of hedging,
totaled $23.7 million, or approximately 74 basis points on $3.2
billion in loan fundings, as compared to 87 basis points on $2.1
billion in fundings in the first quarter of 2003. The decrease in
basis points was principally due to higher hedging costs associated
with lower closing ratios (the percentage of loan applications which
become funded loans) during April, May and June due to a decline in
mortgage interest rates over that period. Typically with the mortgage
industry, a smaller percentage of the pipeline (loans in process) will
close as interest rates fall, because borrowers move loans to other
lenders at new lower rates. Conversely, a larger percentage of the
pipeline should close as interest rates rise, because the borrower's
rate is guaranteed at a more favorable price than the current market.
AmNet continued to utilize Mortgage Capital Management's advisory
services for loan pipeline exposure analysis as well as daily hedging
recommendations.
Gross interest income was $7.6 million and was offset by interest
expense of $3.4 million, resulting in net interest spread on loans
held for sale during the first quarter of $4.1 million, or
approximately 13 basis points on second quarter loan fundings of $3.2
billion.
AmNet operating expenses, excluding interest, totaled $18.1
million during the second quarter, or approximately 56 basis points on
total loan fundings. These expenses included an estimated $9.0 million
in sales commissions and other variable expenses, representing
approximately 50% of total operating expenses. On a per loan basis,
AmNet's expenses declined 17% from the first quarter of 2003.
Commenting on the Company's mortgage banking operations, Robbins
said, "We are on track to open a minimum of 30 regional offices by the
end of 2004. AmNet has a significant opportunity to grow market share
with our expansion into America's largest housing markets. We have
more than 3,000 broker customers across the country and are
substantially increasing this customer base. It will take several more
years for AmNet to realize its full growth potential."
During the second quarter of 2003, AmNet's warehouse loan funding
capacity grew from $960 million to $1.3 billion. AmNet has lending
partnerships with Countrywide Warehouse Lending, UBS Warburg Real
Estate Securities Inc., and JPMorgan Chase Bank.
Mortgage Asset Portfolio Investments (American Residential)
The Company's total mortgage assets held for portfolio investment
were approximately $209 million at June 30, 2003, compared to $239
million at March 31, 2003. Since 1999, the dollar value of the
Company's portfolio of mortgage assets has declined due to the
decision to re-deploy capital into AmNet, the Company's mortgage
banking subsidiary. In the second quarter of 2003, the Company had
income before tax attributable to its mortgage asset portfolio
investments of $939 thousand compared to $356 thousand for the first
quarter of 2003.
In the second quarter of 2003, net interest spread on the mortgage
asset portfolio was $1.7 million, or approximately 3.2% of portfolio
assets on an annualized basis, compared to $1.8 million in the first
quarter, 2003. Non-cash loan premium amortization expenses in the
quarter ended June 30, 2003 totaled approximately $843 thousand.
2003 Guidance
The Mortgage Bankers Association of America (MBAA) has increased
its estimates and expects 2003 overall market size to be approximately
$3.3 trillion. Based on the MBAA estimates, AmNet expects to fund $11
to $12 billion in 2003.
As revised in mid-July, the Company's net income for 2003 is
expected to be between $30 million and $32 million, or between $3.50
and $3.75 per diluted share, an increase over previous 2003 net income
estimations of $19.8 million to $21.8 million, or between $2.50 and
$2.75 per diluted share. The increased 2003 guidance is based on
additional tax benefits realized in the second quarter, and an
increase of total loan fundings and profitability, which is offset by
a higher assumed combined federal and state tax rate of approximately
31% and higher than anticipated stock option dilution, now estimated
to be approximately 11% by the end of 2003.
"The Company's consolidated pre-tax income for 2003 is expected to
be in the range of $30 to $33 million, substantially due to the
successful implementation of our mortgage banking strategy." said
Judith Berry, Chief Financial Officer. "Additionally, tax benefits
have enabled us to shelter this profit from taxation and restore
significant book value to our stockholders."
Based on 2003 earnings guidance, the Company expects basic book
value per share to be between $11.00 and $11.50 at December 31, 2003.
Commenting on expectations for the second half of 2003, Robbins
noted, "There is guarded optimism that the economy will begin to grow
more quickly in the second half of this year and into 2004. This news
has caused 10 year bond yields to rise dramatically, pushing long-term
mortgage rates higher. The contract rate for 30 year fixed rate
residential mortgages was approximately 5.94% as of July 24, 2003, in
line with the July 2003 MBAA forecast. Rates are still low by historic
standards. The MBAA predicts that the market in 2004 will decline to
approximately $1.9 trillion, which would represent one of the five
largest markets in the history of the mortgage industry. Today there
are a number of emerging trends which experts believe will positively
affect this market:
-- The MBAA expects mortgage interest rates in the 5.5 to 5.8%
range for next five quarters and rates below 6.1% into 2005;
-- Financial experts have noted that real estate has become an
essential element of an individual's investment strategy;
-- The National Association of Realtors expects record home sales
in 2003, a third consecutive year for record home sales. Home
sales are expected to decline only modestly in 2004 and 2005;
and
-- The National Association of Realtors' interpretation of US
Census data reported that the number of homeowners under age
25 doubled between 1993 and 2003. Younger buyers, who would
normally be renters, have now entered the market.
Robbins concluded "We continue to take steps to fortify and grow
our lending platform, such that our market share growth should
accelerate as the overall size of the mortgage market declines. Very
importantly, we are strategically aligned with the major bank
affiliated lenders who expect to grow their servicing businesses as
refinance transactions decline. AmNet monetizes the value of the loans
it sells to mega-servicers such as Countrywide Financial and Wells
Fargo. While a number of lenders may exit the mortgage market when the
refinancing wave ends, this represents a substantial opportunity for
hybrid mortgage bankers, such as AmNet, to continue to grow. Borrowers
will likely find that the increased competition among fewer lenders
will offer more benefits for them, including more personal service and
a greater array of loan products. Importantly, mortgage brokers value
the fact that AmNet does not compete against them and is dedicated to
this single customer base."
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 and outlook. The conference call, featuring
Chairman and Chief Executive Officer John M. Robbins and Executive
Vice President and Chief Financial Officer Judith A. Berry, will be
available live via the Internet. To listen to the webcast, log on to
www.companyboardroom.com or the Company's web site at www.amerreit.com
and click on the link that appears on the home page.
An online replay will be available at www.amerreit.com for one
year. A telephone replay will be available through August 5, 2003, by
dialing (800) 642-1687 or (706) 645-9291 and entering the pass code
1843988. 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, American Mortgage Network
is a wholly owned subsidiary of American Residential Investment Trust,
Inc. AmNet originates loans for the national mortgage broker community
through its network of regional centers and business-to-business over
the Internet. AmNet has loan production offices in Orange County,
Ontario, California; Sacramento, California; San Diego, California;
Denver, Colorado; New Haven, Connecticut; Tampa, Florida; Atlanta,
Georgia; Chicago, Illinois; Minneapolis, Minnesota; Cherry Hill, New
Jersey; Charlotte, North Carolina; Portland, Oregon; Providence, Rhode
Island and Richmond, Virginia and Bellevue, Washington. 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 within the meaning of federal securities
laws. Forward-looking statements include statements regarding 2003
projected net income and mortgage loan production, the strength of
loan fundings in July and August 2003, expected declines in the
refinance market, mortgage broker continued dominance in loan
originations, the change over the next year in consumer demand to
purchase transactions, loan closing percentages as interest rates
rise, the number of regional offices by the end of 2004, AmNet's
growth opportunities, the amount of time necessary for AmNet to
realize its growth potential, economic growth levels in the second
half of 2003 and 2004, the amount of home sales in 2003, 2004 and
2005, the Company's market share growth and rate of growth, lenders'
expectations of growing their servicing businesses, the potential for
lenders to leave the mortgage business, opportunities for remaining
mortgage bankers and potential benefits to borrowers from increased
competition among mortgage lenders, the MBAA estimates of market size,
expected book value per share at December 31, 2003, number of broker
relationships and projected interest rate levels. Actual results and
the timing of certain events could differ materially from those
projected in or contemplated by these forward-looking statements due
to a number of factors, including but not limited to: the level of
interest rates generally, economic conditions generally, uncertainty
as to the percentage of the pipeline that will result in mortgage loan
fundings; fluctuation in the margins, net of hedging, of loans in the
Company's pipeline; the predictability of the Company's expenses; the
future correlation of volatility in forward mortgage sale instruments
to the Company's loan lock commitments; interest rate volatility; the
availability of financing for the funding of mortgage loans; the
Company's liquidity position; and other risk factors outlined in
American Residential's SEC reports.
AMERICAN RESIDENTIAL INVESTMENT TRUST, INC.
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
-------------------- --------------------
6/30/2003 6/30/2002 6/30/2003 6/30/2002
-------------------- --------------------
Income Statement
- ----------------
Mortgage Banking Segment:
Revenues
Gain on sales of loans $32,971 $4,503 $53,180 $6,446
-------------------- --------------------
Derivative financial
instruments:
Treasury futures and
options and related
commissions and fees - (10,771) - (10,123)
Forward sales of mortgage
backed securities (MBS)
and options on MBS (3,027) (123) (3,080) (124)
Market adjustment on loan
commitment pipeline (6,257) 2,579 (8,415) 1,844
-------------------- --------------------
Total derivative
financial
instruments (9,284) (8,315) (11,495) (8,403)
-------------------- --------------------
Interest on mortgage assets 7,561 2,432 13,462 3,893
Other income 34 3 52 7
-------------------- --------------------
Total revenue, net
of derivative
financial
instruments 31,282 (1,377) 55,199 1,943
-------------------- --------------------
Expenses
Interest expense 3,447 1,129 6,121 1,825
Operating expenses 18,080 5,638 32,375 10,241
-------------------- --------------------
Total expenses 21,527 6,767 38,496 12,066
-------------------- --------------------
Income (loss) before income
taxes - Mortgage Banking
Segment $9,755 $(8,144) $16,703 $(10,123)
Mortgage Asset Portfolio
Segment:
Revenues
Interest on mortgage assets $2,832 $5,137 $6,176 $10,522
Other income 213 363 411 829
Litigation Settlement - 10,281 - 10,281
-------------------- --------------------
Total revenue 3,045 15,781 6,587 21,632
-------------------- --------------------
Expenses
Interest expense 1,151 2,942 2,689 6,075
Provision for loan losses 794 1,024 1,713 3,127
(Gains) Loss on sale of real
estate owned, net (330) 347 (515) 432
Operating expenses 491 909 1,405 1,438
-------------------- --------------------
Total expenses 2,106 5,222 5,292 11,072
-------------------- --------------------
Income before income taxes -
Mortgage Asset Portfolio
Segment $939 $10,559 $1,295 $10,560
Consolidated Income -
Combined Segments $10,694 $2,415 $17,998 $437
Provision for income taxes 3,652 (58) 5,478 7
Income tax benefit from
termination of REIT status (2,463) - (9,141) -
Consolidated Net
Income $9,505 $2,473 $21,661 $430
Per Share Data
- --------------
Weighted average common
shares outstanding 7,863,437 7,880,090 7,863,154 7,899,340
Consolidated income per share
basic $1.21 $0.31 $2.75 $0.05
Consolidated income per share
diluted $1.12 $0.31 $2.56 $0.05
Loan Origination Data
- ---------------------
Total mortgage loans funded
in period ($ millions) $3,212 $584 $5,290 $954
Number of loans funded 17,871 3,387 29,568 5,580
Balance Sheet Data
- ------------------
Cash and cash equivalents $27,240 $10,827
Restricted cash 2,100 -
Bond collateral mortgage
loans and real estate owned,
net of reserves 208,984 348,247
Mortgage loans held for sale,
net 576,297 210,031
Total assets 840,264 578,872
Short-term debt 560,352 205,554
Long-term debt, net 176,977 312,925
Total stockholders' equity $81,149 $58,423
Book value per share basic $10.32 $7.41
Book value per share diluted $9.58 $7.34
Debt to equity ratio 9.1:1 8.9:1
($ in thousands, except per share data and as noted)
CONTACT: American Residential Investment Trust, Inc.
Judith Berry (Investor and Analysts)
Executive Vice President and Chief Financial Officer
858-909-1230
jberry@amnetmortgage.com
or
Clay Strittmatter (Investor and Analysts)
Senior Vice President, Finance
858-909-1340
cstrittmatter@amnetmortgage.com
or
Kasey Emmel (Media Relations)
Vice President, Marketing & Communications
858-909-1335
kemmel@amnetmortgage.com
or
FRB - Weber Shandwick (Investor and Analysts)
Rose Tucker, 310-407-6522
rtucker@webershandwick.com
or
Forti Communications Inc. (Media Relations)
Corinne Forti, 805-498-0113
President
cforti@amnetmortgage.com
forticomm@aol.com