-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vvmesk44HJ9KbTOmcM7nm4ZyXhlEYXFVQSVZPnYxMEUrsWHNS3loziUbqi4441Qz Fg9UBO02hNIpDfAu4zVTpw== 0001157523-04-010619.txt : 20041112 0001157523-04-010619.hdr.sgml : 20041111 20041112083031 ACCESSION NUMBER: 0001157523-04-010619 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20041112 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041112 DATE AS OF CHANGE: 20041112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AmNet Mortgage, Inc. CENTRAL INDEX KEY: 0001035744 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 330741174 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13485 FILM NUMBER: 041135302 BUSINESS ADDRESS: STREET 1: 10421 WATERIDGE CIRCLE CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 858 909 1340 MAIL ADDRESS: STREET 1: 10421 WATERIDGE CIRCLE CITY: SAN DIEGO STATE: CA ZIP: 92121 FORMER COMPANY: FORMER CONFORMED NAME: AmNet Morgage, Inc. DATE OF NAME CHANGE: 20040512 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN RESIDENTIAL INVESTMENT TRUST INC DATE OF NAME CHANGE: 19970808 8-K 1 a4764805.txt AMNET MORTGAGE 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 November 12, 2004 ------------------------------------------------ Date of Report (Date of earliest event reported) AmNet Mortgage, Inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Maryland ---------------------------------------------- (State or other jurisdiction of incorporation) 1-13485 33-0741174 ------------------------ --------------------------------- (Commission File Number) (IRS Employer Identification No.) 10421 Wateridge Circle, Suite 250 San Diego, CA 92121 ------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) 858-909-1200 ---------------------------------------------------- (Registrant's telephone number, including area code) Item 2.02. Results of Operations and Financial Condition The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing with the Securities and Exchange Commission made by AmNet Mortgage, Inc. (the "Company") whether before or after the date hereof, regardless of any general incorporation language in such filing. On November 12, 2004, the Company issued a press release which included certain disclosures relating to the Company's financial results for the fiscal quarter ended September 30, 2004. The full text of the Company's press release is attached hereto as Exhibit 99.1. The main purpose of the press release was to report financial results of the Company for the quarter ended September 30, 2004. The Company's press release contains certain non-GAAP financial measures (as defined under SEC regulations). We earn interest income and incur interest expense in both segments of our operations. In the Mortgage Banking Business, American Mortgage Network ("AmNet") earns interest on a loan from the date the loan is funded until final disposition of the loan sale. Accordingly, interest income is a function of the volume of loans funded, the interest rate on the loans and the length of time the loans are held prior to sale. To the extent AmNet funds loans with borrowings under its warehouse facilities, it records interest expense based on the same factors. Similarly, in the Mortgage Asset Portfolio Business, we generate revenue on the interest we receive on the mortgage loans we hold for investment and we incur interest expense on the borrowings used to fund our loan portfolio. Because the interest income and interest expense in each segment of our business are closely related and dependant on many of the same factors, in particular the volume of loans we originate or hold for investment, management believes that it is helpful in understanding our operations to analyze the impact of interest income and expense together within each segment of our operations. For this reason, the press release text provides information regarding the net interest income (interest income less interest expense) generated by each segment. Management believes that this is consistent with how financial analysts typically consider interest in analyzing mortgage banking operations. For the same reasons, in our discussion of the Mortgage Banking Business, the discussion of expenses includes a discussion of our operating expenses, which excludes interest expense. Because certain other expenses incurred by AmNet in the Mortgage Banking Business, such as commissions and contract labor, also vary with the volume of AmNet's loan originations, management also believes that it is important in understanding this business to consider the variable and the fixed expenses separately. Accordingly, we have included an estimated breakdown of variable amounts for our mortgage banking operating expenses. Management believes that this will enable a better understanding of the Company's results and the likely impact in the future of changes in our origination volumes. Item 9.01. Financial Statements and Exhibits. (c) Exhibits Exhibit No. Description ----------- ----------- 99.1 November 12, 2004 Press Release by AmNet Mortgage, Inc. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. AmNet Mortgage, Inc. Date: November 12, 2004 By: /s/ Judith A. Berry ------------------------- Judith A. Berry Chief Financial Officer EXHIBIT INDEX Exhibit No. Description ----------- ----------- 99.1 November 12, 2004 Press Release by AmNet Mortgage, Inc. EX-99.1 2 a4764805ex991.txt PRESS RELEASE 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. - ---------------------------------------------------------------------- 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 -----END PRIVACY-ENHANCED MESSAGE-----