Exhibit 99.1
AmNet Mortgage, Inc. Reports First Quarter Results;
Planned Portfolio Assets Sale;
Sale Scheduled to Close in Second Quarter 2004
SAN DIEGO--(BUSINESS WIRE)--May 13, 2004--AmNet Mortgage, Inc. (formerly
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 first quarter results, highlights of which
included:
-- First quarter consolidated net loss was $5.7 million, or $0.72 per
basic and diluted share, including an after tax charge of $2.6
million, or $0.33 per basic and diluted share, to reclassify the
majority of its mortgage asset portfolio as "held for sale" as a
result of a pending sale of those assets; and
-- $1.9 billion of mortgage loans were funded in the first quarter.
Other Company highlights include:
-- D3 Family Funds bought 1.1 million shares at a price of $9.50 a share;
and
-- Proceeds from the pending sale of mortgage portfolio assets are
anticipated to be approximately $25 million, after extinguishment of
related long-term debt.
Consolidated Results
For the first quarter of 2004, AmNet Mortgage, Inc. reported a consolidated
net loss of $5.7 million, or $0.72 per basic and diluted share, including an
after-tax charge of $2.6 million or $0.33 per basic and diluted share related to
the majority of its mortgage asset portfolio being reclassified as "held for
sale." Excluding the effects of this charge, consolidated net loss in the first
quarter was $3.1 million or $0.39 per basic and diluted share, compared to a
loss of $406 thousand or $0.05 per basic and diluted share in the fourth quarter
of 2003. In previous guidance, the Company had anticipated a loss in the first
quarter of 2004 related to margin compression and the continued expansion of its
branch network.
Commenting on first quarter results, John M. Robbins, Chief Executive
Officer, said, "As a result of our decision to sell the majority of the
remaining mortgage asset portfolio and focus entirely on our mortgage banking
business, we reclassified certain portfolio assets from 'held for investment' to
'held for sale.' When we made that reclassification, we were obligated to mark
those assets to market and we took a pre-tax valuation adjustment of $4.4
million. This was based on sales agreements for approximately $122 million of
our portfolio assets, which we expect will be substantially complete in the
second quarter. We intend to extinguish approximately $90 million in long-term
debt and expect net proceeds from the sale to be approximately $25 million,
subject to final due diligence. The majority of the net proceeds are anticipated
to be received in the second quarter."
Robbins continued, "The sale of these assets is an excellent example of the
Company's taking advantage of market demand for seasoned non-prime loans, while,
at the same time, divesting this non-strategic business. This opportunistic
transaction has several benefits. The sale will simplify our balance sheet,
virtually double our cash reserves, eliminate nearly all future prepayment or
credit risk represented by the portfolio and unlock the cash equity previously
invested in these assets. We can aggressively capitalize on the industry
consolidation we expect to see in a purchase market. The management team now has
even greater focus on its core business -- mortgage banking."
Commenting on the results of the Company's mortgage banking business,
Robbins noted, "During January and February, continuing market contraction
resulted in margin compression. At the same time, we made significant progress
investing in five new branches since year-end 2003, recruiting 7 experienced
regional managers and 20 account executives, rolling out new products and
launching our Subprime division. In February, the Company launched a subprime
initiative as part of its strategy to grow market share and enhance margins. The
program is being piloted in four regional centers."
In March, the D3 Family Funds bought 1.1 million shares of AmNet Mortgage,
Inc. (formerly American Residential Investment Trust) (INV) from Home Asset
Management Corp., an affiliate of TCW/Crescent Mezzanine, for $9.50 per share, a
premium to the public market price. David Nierenberg, President of Nierenberg
Investment Management Company (manager of D3 Family Funds), was then elected to
the Board of Directors.
The Company reports its results in two segments -- mortgage banking (AmNet)
and mortgage asset portfolio investments (AMREIT).
Mortgage Banking Business -- American Mortgage Network (AmNet)
AmNet funded $1.9 billion in home loans during the first quarter of 2004,
approximately the same funding volume as in the fourth quarter of 2003. However,
loan sales volume declined from $2.0 billion in the fourth quarter of 2003 to
$1.6 billion in the first quarter of 2004. The decline was primarily due to
large funding volumes late in the first quarter that will be sold in the second
quarter of 2004, as compared to a larger proportion of funding volumes occurring
earlier in the fourth quarter of 2003 and thus being sold in the same quarter.
For the first quarter of 2004, AmNet's loss before income taxes was $5.9
million, compared to a loss before income taxes of $2.9 million in the fourth
quarter of 2003. The loss in the first quarter of 2004 was a result of a
decrease in loan sale volume, compressed margins during January and February and
expenses related to the expansion of the branch network.
In the first quarter of 2004, gain on the sale of loans was $15.5 million
and, net of hedging losses and market adjustments of $6.6 million, totaled $8.9
million or 54 basis points on $1.6 billion of loan sales volume. This compared
to gain on sales of $16.5 million, net of hedging losses and market adjustments
of $3.6 million for a total net gain of $12.8 million, or 67 basis points, on
$2.0 billion of loan sale volume in the fourth quarter of 2003.
Interest income in the first quarter 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 in the first
quarter of 2004. Operating expenses, which are total expenses of $19.9 million,
less interest expense of $2.3 million, totaled $17.6 million during the first
quarter, or 94 basis points, on loan fundings. These expenses included an
estimated $5.3 million in sales commissions and other variable expenses,
representing approximately 30% of total operating expenses.
Commenting on mortgage operations in the first quarter, Robbins said, "As
anticipated, overall revenues declined from the fourth quarter to the first
quarter, principally due to a decline in loan sale volume and competitive
pricing pressure in January and February. While loan funding volumes are a key
driver to revenues, the actual timing of revenues is driven by loan sales. Loan
sale volume in the first quarter reflected both a smaller inventory of loans
going into the quarter and higher loan warehouse inventories at the end of the
period. And while we also had a higher level of inventories at quarter end, the
expected gains on these loans will not be recognized until the second quarter of
2004."
Robbins noted, "We continued to expand our network of regional branch
offices and aggressively hired account executives during what is typically the
slowest home buying period of the year. Additionally, we successfully launched
several `new' higher margin products, such as ARMs, Alt-A and jumbo loans as
well as implemented the first phase of our Subprime initiative which, while not
a major component of this year's earnings, is an operational milestone and
should be a significant contributor to income in 2005. At the same time, we
expanded into new geographic markets, including Ft. Lauderdale and Orlando,
Florida; Melville, Long Island, New York; Kansas City, Kansas and Salt Lake
City, Utah."
Mortgage Asset Portfolio Investments
Inclusive of the valuation adjustment on the mortgage portfolio of
approximately $4.4 million pre-tax, the mortgage asset portfolio business
recorded a pre-tax loss of $3.7 million during the first quarter of 2004,
compared to $153 thousand in the fourth quarter of 2003. After the pending
portfolio sale is substantially completed in the second quarter, mortgage
portfolio assets will decline to under $20 million, and are expected to have
nominal earnings and cash flow impact going forward.
Liquidity and Book Value
Cash and cash equivalents were $29.7 million as of March 31, 2004, compared
to $46.5 million at December 31, 2003. Cash per outstanding share declined from
$5.91 at December 31, 2003 to $3.78 at March 31, 2004. The Company's book value
per outstanding share was $10.52 at March 31, 2004, compared to $11.24 at
December 31, 2003. Cash balances decreased primarily due to increased cash
investments in loan inventories associated with higher warehouse volumes,
reduction of liabilities and the aforementioned and anticipated operating
losses.
Robbins noted. "Our loans are funded with warehouse line borrowings and
corporate cash. The 'haircuts' are typically 2% to 4% of the loan balance. Our
cash investments or 'haircuts' are recouped when the loans are sold to
investors. In periods of increasing volumes, we deploy our cash and build our
loan inventories. This occurred in the first quarter when our cash investments
in loan inventories increased by approximately $6.4 million."
2004 Guidance
AmNet's loan production for 2004 is expected to be approximately $11 to $12
billion. The Company is modifying its estimate for 2004 consolidated net income
to a range of $6.4 million to $8.6 million, or $.75 to $1.00 per diluted share.
Pre-tax earnings for 2004 are anticipated to be in the range of $10.8 million to
$14.5 million. The funding outlook is based on an expectation that interest
rates will continue to rise moderately with refinancing demand declining
significantly from first quarter levels. Revised earnings guidance is primarily
related to the decision to sell the majority of the mortgage portfolio which is
expected to reduce after-tax net income by approximately $0.33 per diluted
share. While the Company realized significant tax benefits in 2003, it is
assuming a full effective combined tax rate of approximately 41% for 2004.
Commenting on revised guidance, Robbins noted, "The mortgage market is
quickly recalibrating and returning to a normal purchase market. It is
anticipated that spring and summer will see increased home purchases. However,
the overall market is contracting due to rising interest rates and lower
refinance demand. We expect to see very competitive pricing and market
contraction throughout 2004 as well as continued consolidation within the
mortgage banking industry."
Robbins added, "We will continue to implement our growth plan this year
which includes:
-- Opening 11 new offices, bringing total branch count to 31.
-- Actively recruiting commissioned account executives; our goal is to
have 200 account executives on board by December, 2004.
-- Rolling out our 'small town America strategy,' i.e. hiring highly
trained professionals to serve the needs of cities with populations of
25,000 to 150,000. These individuals will represent AmNet out of their
homes, using our enhanced Web-based capabilities and new technology
platform. Their loan originations will be underwritten and funded
through established regional centers. Overhead expenses remain fixed
while sales increase.
-- Broadening our product mix, from smaller margin FannieMae, FreddieMac
and GinnieMae agency products, to higher margin products -- Alt-A,
subprime and second mortgages.
-- Utilizing our new technology platform to handle more loan volume as
new branches open and existing locations expand originations as well
as helping mortgage brokers do more business over the Internet."
Robbins said, "Housing will continue to be a growth industry. Today's
mortgage market is being driven by more than rates. The business is being driven
by several fundamental demographic shifts, causing existing housing inventories
to remain at low levels across the nation. Household formation continues to
increase with the improving economy and renewed job growth is an encouraging
sign for the housing industry."
"We anticipate modest profitability in the second quarter with profits
increasing in the third and fourth quarters of 2004 as quarter-over-quarter
volumes increase and our branch network matures," Robbins stated. "In a purchase
market, mortgage brokers value the fact that AmNet does not compete against them
in the retail channel and is dedicated to a single customer base. We are
strategically aligned with the major bank affiliated lenders who expect to grow
their servicing businesses as refinance transactions decline. Our strong cash
position and solid balance sheet enhance the Company's potential in a
consolidating market."
Robbins concluded, "This is a pivotal year for AmNet as we transition to a
normalized, purchase market and leverage the investments we have made in our
branching system during the last two years. As our branches mature, we expect to
achieve key operational milestones that include sustained monthly volume of $1.2
to $1.5 billion by year-end 2004. Only nine of our 26 branches are considered
mature today. We expect that non-agency, higher margin loan products will be 30
percent of our total loan volume by year end. And while subprime loans are not
expected to be a significant portion of our loan mix in 2004, the investments we
make in 2004 will enable this product line to contribute greatly in 2005."
Other Initiatives
Today, the Company announced a stock repurchase program of up to 400,000
shares of its outstanding common stock contingent upon the completion of its
pending mortgage asset portfolio sale and receipt of approximately $25 million.
On May 6, the Company announced its intention to move its common stock
listing from AMEX to the NASDAQ National Market System in June 2004. It is
anticipated that the Company's common stock will begin trading on NASDAQ under
its new symbol, AMNT, sometime in June. INV shares will continue trading on AMEX
until the move is completed.
Recently, the Company changed its corporate name to AmNet Mortgage, Inc.
The new name more closely aligns the parent company with American Mortgage
Network, the company's primary subsidiary and core business.
Conference Call and Webcast
Management will host a conference call with a simultaneous webcast today at
1:30 p.m. Pacific/4:30 p.m. Eastern to discuss first quarter operating
performance. 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 May 20, 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, Minnesota, New Jersey, New York, North
Carolina, Oregon, Rhode Island, Texas, Virginia and Washington.
AmNet has a total of $1.4 billion in warehouse borrowing capacity and is
approved to do business in 49 states and the District of Columbia 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 timing and financial and operational impact of the pending sale of a
majority of the Company's mortgage asset portfolio; the Company's anticipated
timing for recognizing gains on loan sales; the Company's 2004 guidance
(including guidance and anticipated results for the remaining quarters) and the
anticipated market and operational factors and milestones contributing thereto;
the contribution of the Company's subprime loan operations in 2005;
implementation of the Company's stock repurchase program and the timing of the
Company's move to NASDAQ. 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; the completion of the Company's
pending sale of mortgage portfolio assets; 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 and other risk factors outlined in the Company's SEC reports.
AMNET MORTGAGE, INC.
Three Three
Months Months
Ended Ended
-------------------------------
3/31/2004 3/31/2003
-------------------------------
Income Statement
- ---------------------------------------
Mortgage Banking Segment:
Revenues
Gain on sales of loans $15,515 $20,209
-------------------------------
Derivative financial instruments:
Forward sales of mortgage backed
securities (MBS) and options on MBS (5,487) (52)
Market adjustment on loan commitment
pipeline (1,157) (2,159)
-------------------------------
Total derivative financial
instruments (6,644) (2,211)
-------------------------------
Gain on sales of loans, net
of derivative financial
instruments 8,871 17,998
Interest on mortgage assets 5,013 5,902
Other income 80 17
-------------------------------
Total revenue, net of
derivative financial
instruments 13,964 23,917
-------------------------------
Expenses
Interest expense 2,346 2,674
Operating expenses 17,536 14,296
-------------------------------
Total expenses 19,882 16,970
-------------------------------
(Loss) income before income taxes --
Mortgage Banking Segment $(5,918) $6,947
Mortgage Asset Portfolio Segment:
Revenues
Interest on mortgage assets, net of
premium amortization $1,628 $3,344
Other income 216 198
-------------------------------
Total revenue 1,844 3,542
-------------------------------
Expenses
Interest expense 895 1,539
Provision for loan losses -- 919
Gain on sale of real estate owned, net (259) (184)
Valuation adjustment -- bond collateral 4,428 --
Operating expenses 430 912
-------------------------------
Total expenses 5,494 3,186
-------------------------------
(Loss) income before income taxes --
Mortgage Asset Portfolio Segment $(3,650) $356
Consolidated (loss) income -- Combined
Segments $(9,568) $7,303
Income tax (benefit) expense $(3,896) 1,826
Income tax benefit from termination of
REIT status -- 6,679
Consolidated Net (loss)
income $(5,672) $12,156
Per Share Data
- ---------------------------------------
Weighted average common shares
outstanding 7,874,347 7,862,869
Consolidated (loss) income per share
basic $(0.72) $1.55
Consolidated (loss) income per share
diluted $(0.72) $1.53
Loan Origination and Sale Data
- ---------------------------------------
Total mortgage loans funded in period
($ millions) $1,871 $2,078
Number of loans funded 10,633 11,697
Total mortgage loans sold in period
($ millions) $1,642 $1,982
Balance Sheet Data
- ---------------------------------------
Cash and cash equivalents $27,647 $22,786
Restricted cash 2,100 1,750
Bond collateral mortgage loans and real
estate owned, net of reserves, held
for investment 21,215 236,765
Bond collateral mortgage loans and real
estate owned, net of reserves, held
for sale 116,225
Mortgage loans held for sale, net 510,524 488,007
Total assets 697,060 767,153
Short-term debt 585,389 477,445
Long-term debt, net 20,078 206,098
Total stockholders' equity $82,817 $71,644
Book value per share basic $10.52 $9.11
Book value per share diluted $9.68 $9.02
Debt to equity ratio 7.3:1 9.5:1
($ in thousands, except per share data and as noted)
CONTACT: AmNet Mortgage, Inc., San Diego
Investor and Analyst Relations:
Judith Berry, Executive Vice President and Chief
Financial Officer, 858-909-1230
jberry@amnetmortgage.com
or
Clay Strittmatter, Senior Vice President, Finance
858-909-1340
cstrittmatter@amnetmortgage.com
or
FRB
Rose Tucker, 310-407-6522
rtucker@financialrelationsboard.com
or
AmNet Mortgage, Inc.
Media Relations:
Kasey Emmel, Vice President, Marketing & Communications
858-909-1335
kemmel@amnetmortgage.com
or
Forti Communications Inc.
Corinne Forti, President, 805-498-0113
cforti@amnetmortgage.com
forticomm@aol.com