Exhibit 99.1
AmNet Mortgage Inc. Reports Second Quarter Results
SAN DIEGO--(BUSINESS WIRE)--Aug. 15, 2005--AmNet Mortgage, Inc.
(NASDAQ:AMNT), the parent company of American Mortgage Network
(AmNet), a wholesale nationwide mortgage bank, today reported second
quarter results, highlights of which included:
-- Second quarter 2005 consolidated net loss was $1.6 million, or
$0.21 per diluted share, compared to a consolidated net income
of $208 thousand, or $0.02 per diluted share, during the
second quarter of 2004. As discussed in the Company's 10-Q,
timing differences routinely occur between the recognition of
hedge gains and losses and associated changes in the fair
value of loans held for sale. The second quarter was adversely
impacted from both unrecognized declines in fair value from
the first quarter of 2005 and unrecognized increases in value
at the end of the second quarter of 2005. Unrecognized
increases in the fair value of loans held for sale at June 30,
2005 will benefit earnings in the third quarter of 2005;
-- Mortgage loans funded through AmNet were $3.7 billion in the
second quarter of 2005, an increase of 44.1%, compared to $2.6
billion in the second quarter of 2004;
-- Higher margin loans made up 42.4% of the Company's origination
volume as compared to 17.7% in the second quarter of 2004; and
-- Loan funding volume is expected to be in the range of $12 to
$13 billion for 2005.
Consolidated Results
AmNet Mortgage, Inc. reported a consolidated net loss of $1.6
million, or $0.21 per diluted share, for the second quarter of 2005,
compared to consolidated net income of $208 thousand, or $0.02 per
diluted share, in the second quarter of 2004. Because the Company does
not employ hedge accounting under FAS 133, adverse timing differences
between the recognition of hedge gains and losses and associated
declines and increases in the fair value of loans held for sale at the
end of the first and second quarters, respectively, had a significant
adverse impact on reported gain on sale revenue in the second quarter.
Specifically, interest rate increases in March caused the Company
to record hedging gains in the first quarter while offsetting declines
in the fair value of loans held at March 31, 2005, impacting margins
on loan sales, were recognized in the second quarter. Additionally,
declines in interest rates in June caused the Company to recognize
losses on our hedge positions while offsetting increases in the fair
value of loans held for sale at June 30, 2005 were not included in
income for the quarter. The income related to the increases in the
fair value of loans held at June 30, 2005 will be included in third
quarter results.
AmNet funded $3.7 billion in home loans during the second quarter
of 2005, compared to $2.6 billion during the second quarter of 2004,
an increase of 44.1%. AmNet had 196 wholesale account executives and
42 subprime account executives in the second quarter as compared to
159 wholesale account executives and 29 subprime executives in the
first quarter of 2005. In the second quarter of 2005, higher margin
loans, including Alt-A, subprime, HELOC and second mortgages, made up
42.4% of the Company's origination volume as compared to 17.7% in the
second quarter of 2004. Mortgage loans funded through AmNet were $6.4
billion for the first six months of 2005, compared to $4.4 billion for
the first six months of 2004, an increase of 44.4%.
Commenting on second quarter results, John M. Robbins, Chief
Executive Officer, said, "Despite the significant increase in loan
production, we experienced a GAAP loss in the period due to revenue
recognition timing differences that adversely impacted the second
quarter. This situation was exacerbated when the Federal Reserve
discussed interest rate movements on the last day of June. Both loan
production volumes and earnings for the year are ahead of our internal
projections. Loan originations grew as recruitment of account
executives as well as the maturation of our branch network resulted in
continued increases in market penetration. We also experienced
incremental growth in our subprime and correspondent business during
the second quarter. Subprime production was $86 million."
Operational Margins
Gain on sales of loans, net of derivative financial instruments in
the second quarter of 2005 totaled $22.8 million, or 63 basis points
as a percentage of loans sold. On a year-to-date basis, our gain on
sale of loans, net of derivative financial instruments, was $44.2
million, or 72 basis points, which is more reflective of the Company's
gain on sale margins.
Interest revenue on mortgage assets in the second quarter of 2005
was $15.3 million and was offset by interest expense of $11.9 million,
resulting in a net interest spread of $3.4 million, or 9 basis points,
on $3.7 billion of loan fundings. Interest revenue on mortgage assets
in the second quarter of 2004 was $9.6 million and was offset by
interest expense of $4.8 million, resulting in a net interest spread
of $4.8 million, or 19 basis points, on $2.6 billion of loan fundings
during that quarter. The reason for the basis point decline in net
interest spread for 2005 was a flattening of the yield curve and a
higher proportion of adjustable rate loans in our loan inventory.
Consolidated operating expenses, which were total expenses of
$41.2 million less interest expense of $11.9 million, totaled $29.3
million during the second quarter of 2005, or 79 basis points on loan
fundings. These expenses included an estimated $12.2 million in sales
commissions and other variable expenses, representing approximately
42% of total operating expenses. Consolidated operating expenses in
the second quarter of 2005 also included approximately $1.6 million of
net direct investment associated with the growth of the Company's
subprime division and correspondent channel. Because the Company does
not expect to increase its fixed overhead expenses significantly in
the second half of 2005, basis point costs are expected to decline
with higher loan production levels.
Liquidity and Book Value
Cash and cash equivalents were $31.5 million as of June 30, 2005.
Cash and cash equivalents per basic share was $4.24 at June 30, 2005.
Book value per basic share was $10.29 at June 30, 2005. Cash
deployment over the past year is primarily attributable to greater
loan production volume and the associated larger cash investments into
loan inventories, which typically are sold within 30 days of
origination.
2005 Strategic Initiatives
The Mortgage Bankers Association (MBA) is currently forecasting
that total residential 1-4 mortgage originations for 2005 will be $2.7
trillion, one of the four largest mortgage markets in history. This
estimate indicates that the second half of the 2005 mortgage market
will be approximately equal in size to the first half of 2005. The
average 30-year fixed mortgage rate is predicted by the MBA to decline
slightly to 5.7% in the fourth quarter of 2005, from 5.8% in the first
quarter of the year.
The Company continues to focus on specific initiatives targeted at
increasing scale by leveraging its infrastructure across loan
origination channels. These initiatives include:
-- Expanding our sales force through recruitment of top
performing account executives, with a target of just over 300
by year-end 2005, including additions to our subprime division
and correspondent channel. Sales force growth maximizes market
penetration within our current branch network, while
increasing both subprime and correspondent originations;
-- Growing market share in our core wholesale branch network
through our Small Town America initiative, which is aimed at
increasing market penetration outside the major cities where
we now have regional offices. Small Town America is building
volume through our existing network of offices, eliminating
typical brick and mortar expansion expense;
-- Increasing loan production to optimize the potential for large
volumes through our existing operations platform;
-- Implementing specific web-related and broker-focused
technology enhancements that increase functionality for our
broker customers and make it easier for them to do business
with us; and
-- Continuing to develop our correspondent channel as a natural
complement to the core wholesale business. The correspondent
initiative expands AmNet's target market enabling the Company
to include areas where additional market share and incremental
volume can be captured through its specialized operations
platform.
Conference Call and Webcast
Management will host a conference call with a simultaneous webcast
today at 1:30p.m. Pacific/3:30p.m. Central/4:30p.m. Eastern to discuss
second quarter operating performance. The conference call, featuring
Chairman and Chief Executive Officer, John M. Robbins, and Executive
Vice President and Chief Financial Officer, Judith A. Berry, will be
available by telephone and via the Internet.
To participate by telephone, please dial 800-201-1027 at least
five minutes before start time. For international callers, please dial
706-634-0805. A telephone replay will be available through August 22,
2005 by dialing 800-642-1687 or 706-645-9291 and entering the pass
code # 8520335.
To listen to the webcast, log on to
www.amnetmortgageinc.com/webcasts.shtml. The webcast will also be
available live at www.fulldisclosure.com. An online replay will be
available at www.amnetmortgagenc.com/webcasts.shtml for one year.
Electronic versions of the news release may be accessed via the
Company's web site at www.amnetmortgage.com.
About AmNet Mortgage, Inc.
AmNet Mortgage Inc. is the parent company of American Mortgage
Network. For more information, please visit www.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 purchases 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,
Nevada, New Hampshire, New Jersey, New York, North Carolina, Ohio,
Oregon, Rhode Island, Utah, Virginia and Washington. AmNet has a total
of $1.9 billion in warehouse borrowing capacity and is approved to do
business in 50 states and the District of Columbia either by license
or exemption. For more information, please visit
www.amnetmortgage.com.
Forward-Looking Statements
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 AmNet's
expected loan funding volume in 2005, the expectation that fixed
overhead expenses will not significantly increase in the second half
of 2005 so basis point expense measures will decline, the size of the
residential mortgage loan market for 2005, 30-year fixed rate mortgage
interest rates and the Company's strategic initiatives and their
impact on the Company's operations. These may include statements
regarding: AmNet's potential for sales force expansion and market
share growth; the number of AmNet account executives at the end of
2005; the ability of the Small Town America initiative to build loan
volume through existing branch offices; technology enhancement
implementations; and the further development and expansion of AmNet's
subprime and correspondent loan originations. 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 largest
concentration of the Company's loans being from 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; the stability of the entire mortgage
secondary market; 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 Company's ability to attract and retain
qualified mortgage professionals; and other risk factors outlined in
the Company's SEC reports.
AMNET MORTGAGE, INC.
(unaudited)
- ------------------------------------------------- --------------------
Three Three Six Six
Months Months Months Months
-----------------------------------------
Ended Ended Ended Ended
-------------------- --------------------
6/30/2005 6/30/2004 6/30/2005 6/30/2004
-------------------- --------------------
Income Statement
- ----------------
Revenues
Gain on sales of loans $32,635 $2,323 $50,908 $17,839
-------------------- --------------------
Derivative financial
instruments:
Forward sales of mortgage
backed securities (MBS)
and options on MBS (11,421) 10,857 (8,366) 5,370
Market adjustment on loan
commitment pipeline 1,635 4,390 1,639 3,233
-------------------- --------------------
Total derivative
financial
instruments (9,786) 15,247 (6,727) 8,603
-------------------- --------------------
Gain on sales of
loans, net of
derivative
financial
instruments 22,849 17,570 44,181 26,442
Interest on mortgage assets 15,321 9,569 25,440 16,211
Other income 182 434 384 729
-------------------- --------------------
Total revenue, net
of derivative
financial
instruments 38,352 27,573 70,005 43,382
-------------------- --------------------
Expenses
Employee compensation and
benefits 21,266 14,399 38,531 26,242
Interest expense 11,886 4,754 18,747 7,994
Valuation adjustment-bond
collateral held for sale - 880 - 5,309
Operating expenses 8,079 7,082 14,702 12,947
-------------------- --------------------
Total expenses 41,231 27,115 71,980 52,492
-------------------- --------------------
(Loss) income before income
taxes $(2,879) $458 $(1,975) $(9,110)
Provision for income tax
(benefit) expense (1,307) 250 (910) (3,646)
Consolidated net
(loss) income $(1,572) $208 $(1,065) $(5,464)
Per Share Data
- --------------
Weighted average common
shares outstanding 7,431,581 7,838,504 7,396,661 7,856,426
Consolidated (loss) income
per share basic $(0.21) $0.03 $(0.14) $(0.70)
Consolidated (loss) income
per share diluted $(0.21) $0.02 $(0.14) $(0.70)
Loan Origination and Sale Data
- ------------------------------
Total mortgage loans funded
in period ($ millions) $3,697 $2,566 $6,404 $4,436
Number of loans funded 19,274 14,607 33,588 25,236
Total mortgage loans sold in
period ($ millions) $3,606 $2,611 $6,133 $4,252
Percentage of mortgage loans funded in
period by type (based on $ funded):
Conventional conforming 32.5% 54.2% 36.6% 56.3%
Alt-A 34.3% 15.1% 31.3% 10.4%
Jumbo/Non conforming 20.8% 18.2% 20.9% 19.7%
Government 4.3% 9.9% 4.1% 11.4%
Second/HELOC 5.8% 2.5% 5.4% 2.1%
Subprime 2.3% 0.1% 1.7% 0.1%
100.0% 100.0% 100.0% 100.0%
Balance Sheet Data
- ------------------
Cash and cash equivalents $28,636 $50,944 $28,636 $50,944
Restricted cash 2,850 2,290 2,850 2,290
Bond collateral mortgage
loans and real estate owned,
net of reserves, held for
investment 11,635 19,257 11,635 19,257
Mortgage loans held for sale,
net, pledged (lower of cost
or market) - 466,281 - 466,281
Accounts receivable-mortgage
loans sold/funded 36,092 5,558 36,092 5,558
Total assets 610,570 560,747 610,570 560,747
Short-term debt 500,786 453,808 500,786 453,808
Long-term debt, net 10,057 18,043 10,057 18,043
Total stockholders' equity $76,462 $78,555 $76,462 $78,555
Book value per outstanding
share basic $10.29 $10.63 $10.29 $10.63
Book value per outstanding
share diluted $9.23 $9.66 $9.23 $9.66
Debt to equity ratio 6.7:1 6.0:1 6.7:1 6.0:1
($ in thousands, except per share data and as noted)
--30--SW/la*
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
Financial Relations Board
Moira Conlon, 310-854-8311
mconlon@financialrelationsboard.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