Exhibit 99.1
AmNet Mortgage, Inc. Reports Third Quarter Results
SAN DIEGO--(BUSINESS WIRE)--Nov. 12, 2004--AmNet Mortgage, Inc.
(NASDAQ:AMNT), the parent company of American Mortgage Network
(AmNet), a nationwide wholesale mortgage bank, today reported third
quarter results, highlights of which included:
-- Third quarter consolidated loss was $985 thousand or $0.13 per
basic and diluted share;
-- $2.1 billion of mortgage loans were funded;
-- Moved to the NASDAQ National Market System under the symbol
"AMNT";
-- Cash and cash equivalents were $48.2 million as of September
30, 2004; and
-- Book value per outstanding share was $10.54.
Consolidated Results
For the third quarter of 2004, AmNet Mortgage, Inc. reported a
consolidated net loss of $985 thousand or $0.13 per basic and diluted
share, compared to second quarter consolidated net income of $208
thousand or $0.02 per diluted share.
Commenting on third quarter results, John M. Robbins, Chief
Executive Officer, said, "The third quarter was marked by interest
rate volatility and price compression, which had an impact on our
operating margins. With the industry-wide reduction in refinance
volume, pricing competition was severe at the same time that demand
fell. Against this backdrop, we started a new Correspondent channel to
purchase loans from mid-size banks, credit unions and community banks.
We also made investments in a dedicated subprime sales force and
upgraded and expanded our national wholesale sales force to help
achieve greater market penetration."
Mortgage Banking Business - American Mortgage Network (AmNet)
For the third quarter of 2004, AmNet's pre-tax loss was $1.8
million, compared to pre-tax income of $1.4 million in the second
quarter of 2004. AmNet funded $2.1 billion in home loans during the
third quarter of 2004, compared to $2.6 billion in the second quarter
of 2004. AmNet's loan sales in the third quarter of 2004 were $2.2
billion, compared to $2.6 billion in the second quarter.
In the third quarter of 2004, gain on sales of loans, net of
derivative financial instruments and market adjustments, was $12.7
million, or 59 basis points on $2.2 billion of loan sales volume. This
compared to gain on sales of loans, net of derivative financial
instruments and market adjustments, of $17.6 million, or 67 basis
points on $2.6 billion of loan sales volume, in the second quarter of
2004. The decline in the dollar amount of loans sold in the third
quarter was a result of lower loan origination volume, while the
decreased basis point gain reflects increased pricing competition
during the quarter.
Interest revenue on mortgage assets in the third quarter was $8.2
million and was offset by interest expense of $4.3 million, resulting
in a net interest spread of $3.9 million, or 19 basis points on $2.1
billion of loan fundings in the third quarter of 2004. This compared
to interest revenue of $9.0 million which was offset by interest
expense of $4.4 million, resulting in a net interest spread of $4.6
million, or 18 basis points on $2.6 billion of loan fundings in the
second quarter.
Operating expenses, which were total expenses of $22.8 million
less interest expense of $4.3 million, were $18.5 million during the
third quarter, or 89 basis points on loan fundings. These expenses
included an estimated $6.0 million in sales commissions and other
variable expenses, representing approximately 33% of total operating
expenses. Operating expenses in the second quarter of 2004, which were
total expenses of $25.2 million less interest expense of $4.4 million,
were $20.8 million, or 81 basis points on loan fundings. The decline
in operating expenses from the second quarter of 2004 was primarily
the result of cost-cutting measures driving decreased headcount,
professional fees, travel & entertainment, underwriting and equipment
expenses.
Commenting on mortgage operations in the quarter, Robbins said,
"The third quarter was marked by intense competition, and we believe
that our volume suffered as the quarter progressed. While we attempted
to hold our pricing targets, several other competitors appeared to
have substantially dropped their margin requirements to buy market
share. As we have observed in past contracting mortgage cycles, some
regional mortgage banking companies price aggressively for a period in
an attempt to increase share as they try to rationalize their brick
and mortar expense."
Robbins continued, "The majority of our branch network is immature
and we have not yet achieved a full complement of account executives
or scale to cover fixed overhead. However, it is encouraging to note
that we added approximately 60 new commissioned account executives in
the third quarter, and managed out our lowest performing sales
personnel. Our sales force now stands at 156 and recruiting momentum
is strong. We continued to drive AmNet's product mix away from more
competitive agency products toward Alt-A and second mortgage products
where the margins are stronger.
"We launched our new Correspondent channel this month," Robbins
added. "The Correspondent channel provides access to a customer base
not currently covered under traditional broker channels and leverages
the investment in our existing infrastructure and technology. AmNet's
Correspondent centralized operating platform is headquartered in
Columbia, Maryland."
Mortgage Asset Portfolio Business
During the third quarter, our mortgage asset portfolio business
recorded pre-tax income of $163 thousand. Mortgage portfolio assets
declined to $17.2 million at September 30, 2004, and are expected to
have nominal earnings and cash flow impact going forward. During the
quarter, the sale of the majority of the mortgage asset portfolio
business was completed.
Liquidity and Book Value
Cash and cash equivalents were $48.2 million as of September 30,
2004, compared to $53.2 million at June 30, 2004. The decline in cash
was primarily due to increased investment in loan inventories and
stock repurchases of over 81,000 shares. Cash per outstanding share
was $6.60 at September 30, 2004, compared to $7.20 at June 30, 2004.
Our book value per outstanding share was $10.54 at September 30, 2004,
compared to $10.63 at June 30, 2004.
Guidance for the Fourth Quarter, 2004
The Mortgage Bankers Association (MBA) estimates that fourth
quarter 2004 and first quarter 2005 originations will drop -- some 12%
and 27% respectively -- from the same period last year. The decrease
is attributable to a lower refinance market. In the fourth quarter,
AmNet's loan production is expected to be in the range of $2.0 to $2.3
billion, bringing AmNet's estimated full year 2004 loan funding volume
to approximately $8.5 billion.
Major assumptions that will affect the Company's fourth quarter
earnings include: reduction in overall pricing target as a result of
increased market competition; Correspondent channel start-up costs;
additional investments in our dedicated subprime sales force; and
higher expenses related to recruiting activity and the upgrading of
our sales force.
Commenting on expected results for the fourth quarter of 2004,
Robbins noted, "In October, we reduced our overall pricing target on
key Agency products by approximately 12.5 basis points to recover
market penetration lost in the third quarter. We expect these
competitive pressures to continue through the fourth quarter, and
accordingly, our gross margins are expected to be adversely impacted
until aggressive pricing subsides and more traditional margins return
to the market. We also expect to incur approximately $0.8 million in
net operating expenses associated with the start-up of our new
Correspondent lending channel."
Robbins continued, "Therefore, previous fourth quarter guidance of
a slight profit is revised to reflect a modest operating loss.
Additionally, the convergence of market and economic considerations,
along with our internal initiatives and start-up timelines,
substantially complicates the process of forming firm financial
projections. It is against this backdrop that we have decided to
discontinue providing quarterly or annual financial guidance. We
appreciate that investors need some way to benchmark progress and
believe that certain qualitative factors and operational milestones
are the best indicators of performance and progress. These include
sales force expansion, product mix and gross margins, loan origination
volume and contributions from our newest sales channels."
Robbins concluded, "We anticipate that all three channels will add
significant scale and, thereby, reduce our fixed costs per loan. It is
our goal to maximize performance in the branching system while
continuing to improve technology and product mix, making it easier for
customers to do business with us."
Conference Call and Webcast
Management will host a conference call with a simultaneous webcast
today at 8:30 AM Pacific/11:30 AM Eastern to discuss third 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 November 19,
2004 by dialing 800-642-1687 or 706-645-9291 and entering the pass
code 2009922. 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. is the parent company of American Mortgage
Network, a nationwide wholesale mortgage bank. 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. Through its Correspondent
channel, the Company will purchase loans from small to mid-size
mortgage banks, credit unions and community banks.
AmNet has loan production offices in Arizona, California,
Colorado, Connecticut, Florida, Georgia, Illinois, Kansas, Minnesota,
New Jersey, New York, North Carolina, Oregon, Rhode Island, Texas,
Utah, Virginia and Washington. Its Correspondent channel is located in
Columbia, Maryland. AmNet has a total of $1.4 billion in warehouse
borrowing capacity and is approved to do business in 49 states and the
District of Columbia either by license or exemption. AmNet has 5,000
approved broker customers across the nation. For more information,
please visit www.amnetmortgage.com.
Forward-Looking Statement
Certain matters discussed in this press release may constitute
forward-looking statements within the meaning of federal securities
laws. Forward-looking statements include statements regarding: The
expectation that the Company's mortgage portfolio assets will have
nominal earnings and cash flow impact in the future; the MBA's
estimation that the overall market size for loan originations will
drop over the next two quarters from prior year periods; AmNet's loan
production for the fourth quarter and full year 2004; AmNet's
assumption that certain factors will affect its fourth quarter 2004
earnings; the Company's expectation that competitive pressures will
continue in the fourth quarter of 2004 and will adversely impact gross
margins; the expected operating expenses that will be incurred in the
fourth quarter for the new Correspondent lending channel; an
anticipated fourth quarter operating loss for the Company; and the
anticipation that the Company's three lending channels will add
significant scale and thereby reduce fixed costs per loan. The
Company's ability to meet its operational and financial goals are
subject to risks, including risks related to: The Company's ability to
continue to sell its loans to a competitor who is its largest
purchaser; the Company's ability to maintain and renew its warehouse
lines; the large concentration of the Company's loans in California;
the effectiveness of the Company's hedging strategies; the Company's
ability to increase its loan origination volume in a contracting
market; and the Company's lack of significant experience with subprime
loans and correspondent lending. 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 entire 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 all of the Company's
mortgage loans; the Company's liquidity position; the availability of
qualified mortgage professionals; the ability to attract and retain
qualified mortgage professionals; and other risk factors outlined in
the Company's SEC reports.
AMNET MORTGAGE, INC.
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Three Three Nine Nine
Months Months Months Months
---------- ---------- ---------- ----------
Ended Ended Ended Ended
---------- ---------- ---------- ----------
9/30/2004 9/30/2003 9/30/2004 9/30/2003
---------- --------------------- ----------
Income Statement
- --------------------------
Mortgage Banking Segment:
Revenues
Gain on sales of loans $24,198 $9,580 $42,037 $62,760
---------- --------------------- ----------
Derivative financial
instruments:
Forward sales of mortgage-
backed securities (MBS)
and options on MBS (7,793) 4,194 (2,423) 1,115
Market adjustment on loan
commitments (3,753) 10,955 (520) 2,539
---------- --------------------- ----------
Total derivative
financial instruments (11,546) 15,149 (2,943) 3,654
---------- --------------------- ----------
Gain on sales of loans,
net of derivative
financial instruments and
market adjustments 12,652 24,729 39,094 66,414
Interest on mortgage
assets 8,201 10,381 22,208 23,843
Other income 157 24 303 76
---------- --------------------- ----------
Total revenue, net of
derivative financial
instruments 21,010 35,134 61,605 90,333
---------- --------------------- ----------
Expenses
Interest expense 4,308 4,535 11,075 10,656
Operating expenses 18,533 20,840 56,840 53,216
---------- --------------------- ----------
Total expenses 22,841 25,375 67,915 63,872
---------- --------------------- ----------
(Loss) income before
income taxes - Mortgage
Banking Segment $(1,831) $9,759 $(6,310) $26,461
Mortgage Asset Portfolio
Segment:
Revenues
Interest on mortgage
assets $26 $2,665 $2,229 $8,841
Other income 124 534 707 945
---------- --------------------- ----------
Total revenue 150 3,199 2,936 9,786
---------- --------------------- ----------
Expenses
Interest expense 112 1,111 1,339 3,800
Provision for loan losses 80 764 208 2,478
Gain on sale of real
estate owned, net (86) (236) (406) (751)
Valuation adjustment
(gain)/loss - bond
collateral sale (437) - 4,872 -
Operating expenses 318 330 1,392 1,733
---------- --------------------- ----------
Total expenses (13) 1,969 7,405 7,260
---------- --------------------- ----------
Income (loss) before
income taxes - Mortgage
Asset Portfolio Segment $163 $1,230 $(4,469) $2,526
Consolidated (Loss) Income
- Combined Segments $(1,668) $10,989 $(10,779) $28,987
Income tax (benefit)
expense provision $(683) 3,945 $(4,328) 9,423
Income tax benefit from
termination of REIT
status - (724) - (9,865)
Consolidated Net (Loss)
Income $(985) $7,768 $(6,451) $29,429
Per Share Data
- --------------------------
Weighted average common
shares outstanding 7,364,244 7,858,733 7,716,079 7,861,665
Consolidated (loss) income
per share - basic $(0.13) $0.99 $(0.84) $3.74
Consolidated (loss) income
per share - diluted $(0.13) $0.91 $(0.84) $3.45
Loan Origination Data
- --------------------------
Total mortgage loans
funded in period
($ millions) $2,076 $3,033 $6,512 $8,319
Number of loans funded 12,167 17,215 37,403 46,763
Balance Sheet Data
- --------------------------
Cash and cash equivalents $46,133 $44,357 $46,133 $44,357
Restricted cash 2,100 2,100 2,100 2,100
Bond collateral mortgage
loans and real estate
owned, net of reserves,
held for investment 17,197 185,931 17,197 185,931
Mortgage loans held for
sale, net 394,368 367,013 394,368 367,013
Total assets 484,451 616,676 484,451 616,676
Short-term debt 380,791 352,778 380,791 352,778
Long-term debt, net 15,869 153,283 15,869 153,283
Total stockholders' equity $77,049 $88,827 $77,049 $88,827
Book value per share -
basic $10.54 $11.30 $10.54 $11.30
Book value per share -
diluted $9.54 $10.42 $9.54 $10.42
Debt to equity ratio 5.1:1 5.7:1 5.1:1 5.7:1
- -------------------------- ---------- --------------------- ----------
($ in thousands, except per share data and as noted)
CONTACT: INVESTOR AND ANALYST RELATIONS CONTACTS
AmNet Mortgage, Inc.
Judith Berry, 858-909-1230
jberry@amnetmortgage.com
or
Clay Strittmatter, 858-909-1340
cstrittmatter@amnetmortgage.com
or
MEDIA RELATIONS CONTACTS
AmNet Mortgage, Inc.
Kasey Emmel, 858-909-1335
kemmel@amnetmortgage.com
or
Forti Communications Inc.
Corinne Forti, 805-498-0113
cforti@amnetmortgage.com
forticomm@aol.com