-----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, FzCapx0e12Dh0ksEKeJgsPmVpMB2EsXJ8mX5q5uqzFU0aqasP9xe9JIHj7xhR7py hqtpzTGz0A73i9wxCohM9w== 0001157523-05-002319.txt : 20050309 0001157523-05-002319.hdr.sgml : 20050309 20050309103045 ACCESSION NUMBER: 0001157523-05-002319 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050309 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050309 DATE AS OF CHANGE: 20050309 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: 05668325 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 a4839170.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 March 9, 2005 ------------------------------------------------ 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) (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) 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 March 9, 2005, the Company issued a press release which included certain disclosures relating to the Company's financial results for the fiscal quarter and year ended December 31, 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 and year ended December 31, 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. 2 Item 9.01 Financial Statements and Exhibits. (c) Exhibits Exhibit No. Description ----------- ----------- 99.1 March 9, 2005 Press Release by AmNet Mortgage, Inc. 3 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: March 9, 2005 By: /s/ Judith A. Berry ---------------------------- Judith A. Berry Chief Financial Officer EXHIBIT INDEX Exhibit No. Description ----------- ----------- 99.1 March 9, 2005 Press Release by AmNet Mortgage, Inc. EX-99.1 2 a4839170ex991.txt EXHIBIT 99.1 Exhibit 99.1 AmNet Mortgage Inc. Reports Fourth Quarter and 2004 Results SAN DIEGO--(BUSINESS WIRE)--March 9, 2005--AmNet Mortgage Inc. (NASDAQ:AMNT), the parent company of American Mortgage Network (AmNet), a nationwide wholesale mortgage bank, today reported fourth quarter and 2004 results. Results of the fourth quarter include: -- Fourth quarter consolidated net income was $123 thousand, or $0.01 per diluted share, compared to a loss of $406 thousand or $0.05 per diluted share in Q4, 2003; -- Mortgage loans funded through AmNet were $2.5 billion in the fourth quarter of 2004 compared to $1.9 billion in the fourth quarter of 2003; and -- For the fourth quarter of 2004, AmNet's income before income taxes was $1.0 million, compared to a loss before income taxes of $2.9 million in the fourth quarter of 2003. Results for the full year 2004 include: -- Consolidated net loss was $6.3 million, or $0.83 per diluted share, inclusive of $2.9 million, or $0.38 per diluted share related to charges for a valuation adjustment on the sale of the REIT portfolio, compared to net income of $29.0 million, or $3.57 per diluted share, for the year ended December 31, 2003, inclusive of tax benefits; -- Funded $9.0 billion of mortgage loans compared to $10.2 billion for the year ended December 31, 2003; -- AmNet's loss before income taxes was $5.3 million in 2004, compared to income before income taxes of $23.5 million in 2003; -- Established new correspondent and subprime channels; -- Opened seven new loan production offices and expanded the sales force from 89 at year-end 2003 to 171 at year-end 2004; -- Increased cash and cash equivalents to $52.7 million as of December 31, 2004 from $46.5 million at December 31, 2003; -- Sold the majority of its remaining REIT portfolio; and -- Repurchased approximately 605 thousand shares of its common stock, representing 7.7% of the outstanding shares at the beginning of 2004. Consolidated Results AmNet Mortgage Inc. reported consolidated net income of $123 thousand, or $0.01 per diluted share, for the fourth quarter of 2004 compared to a net loss of $406 thousand, or $0.05 per diluted share for the fourth quarter of 2003. The consolidated net loss for 2004 was $6.3 million, or $0.83 per diluted share, inclusive of $2.9 million, or $0.38 per diluted share, related to the reclassification and sale of the majority of its mortgage asset portfolio. Commenting on results for the year, John M. Robbins, Chief Executive Officer, said, "2004 was a challenging operating environment for the mortgage industry, yet it was a year of investment and growth for the Company. We capitalized on a number of opportunities to build shareholder value. From a de novo start in 2001, we have become one of the country's top twenty wholesale lenders. Despite a major market contraction, competitive pressures and margin compression, we expanded our wholesale branch network across the United States and greatly increased the size of our sales force." Robbins continued, "Despite a competitive mortgage market, we launched subprime and correspondent channels to further leverage our infrastructure and operating platform. Because we believe it will benefit the Company over the long term, we made investments of an estimated $6.8 million in the new correspondent and subprime businesses as well as in net costs associated with new branches." Robbins added, "We sold the majority of our remaining REIT portfolio which simplified our balance sheet, improved liquidity and eliminated nearly all future prepayment or credit risk represented by the portfolio. Net cash proceeds from the sale were approximately $26 million. More than $90 million of bond collateral debt was extinguished." The Company repurchased approximately 605 thousand shares of its common stock, representing 7.7% of the outstanding shares at the beginning of 2004. "The Company's book value has continued to exceed its stock price trading range, making stock repurchases a prudent utilization of the Company's capital," Robbins stated. "We believe this program is an excellent way to enhance stockholder value." Mortgage Banking Business - American Mortgage Network (AmNet) AmNet funded $2.5 billion in home loans during the fourth quarter, a 34% increase over $1.9 billion funded in the fourth quarter of 2003, reflecting the impact of improved market penetration over the past year. According to the Mortgage Bankers Association (MBA), fourth quarter total mortgage market origination volumes increased approximately 6% from fourth quarter 2003 levels. For the year ended December 31, 2004, AmNet funded $9.0 billion in home loans, a 12% decrease compared to $10.2 billion in 2003. The MBA estimates that 2004 total mortgage market origination volumes declined 25% from 2003. AmNet Operating Results For the fourth quarter of 2004, AmNet's income before income taxes was $1.0 million, compared to a loss before income taxes of $2.9 million in the fourth quarter of 2003. The loss before income taxes in 2004 was $5.3 million, compared to $23.5 million of income before income taxes in 2003. Throughout 2004, profitability was affected by price competition and margin compression as the mortgage market contracted due to the industry-wide reduction in refinancing volume. Although 2004 was often marked by very competitive pricing, AmNet's fourth quarter margins improved due primarily to greater production of higher margin products. Gain on the sale of loans, net of derivative financial instruments in the fourth quarter totaled $19.8 million, or 75 basis points, on $2.6 billion of loan sales volume, as compared to $12.9 million, or 66 basis points, on $1.9 billion of loan sales volume during the fourth quarter of 2003. AmNet increased its volume of higher margin loan products, including Alt-A, seconds/HELOCS and subprime, to 30.9% in the fourth quarter of 2004 from 5.0% in the comparable period in 2003. Interest on mortgage assets in the fourth quarter of 2004 was $10.0 million and was offset by interest expenses of $6.3 million, resulting in a net interest spread of $3.7 million, or 15 basis points, on $2.5 billion of loan fundings. In the fourth quarter of 2003, interest on mortgage assets was $6.0 million and was offset by interest expense of $2.8 million, resulting in a net interest spread of $3.2 million, or 17 basis points on fundings of $1.9 billion. AmNet's operating expenses, which were total expenses of $29.0 million less interest expense $6.3 million, totaled $22.7 million during the fourth quarter of 2004, or 91 basis points, on loan fundings. These expenses included an estimated $8.5 million in sales commissions and other variable expenses, representing approximately 37% of total operating expenses. For the fourth quarter of 2003, AmNet's operating expenses, which were total expenses of $21.8 million less interest expense $2.8 million, totaled $19.0 million, or 102 basis points, on loan fundings. These expenses included an estimated $6.6 million in sales commissions and other variable expenses, representing approximately 35% of total operating expenses. The year-over-year fourth quarter increase in operating expenses is tied mainly to a larger branch system and infrastructure investments in the subprime and correspondent businesses. Commenting on mortgage operations in the fourth quarter, Robbins stated, "There was continuing momentum throughout the quarter as new account executives increased their loan production. With our subprime and home equity offerings now in place, we are confident that our 'one-stop shopping' wholesale model will help to differentiate us from other lenders." Liquidity and Book Value Cash and cash equivalents were $52.7 million as of December 31, 2004, compared to $46.5 million at December 31, 2003. Cash per outstanding share was $7.22 at December 31, 2004, compared to $5.91 at December 31, 2003. Book value per outstanding share was $10.56 at December 31, 2004, compared to $11.24 at December 31, 2003. 2005 Strategic Initiatives The MBA is forecasting that total mortgage originations for 2005 will be $2.6 trillion, one of the five largest mortgage markets in history. The average 30-year fixed mortgage rate is predicted by the MBA to rise to 6.4% in the fourth quarter of 2005, up from 5.7% in the fourth quarter of 2004. AmNet's 2005 strategic initiatives are focused on leveraging its scale across channels and growing production by: -- Expanding our sales force and intensifying recruitment of top performing account executives; -- Continuing to grow market share and sales penetration through our wholesale branch network; -- Increasing production from correspondent and subprime channels as well as through home equity offerings; -- Implementing specific technology platform enhancements that increase functionality for our broker customers and make it easier for them to do business with us; and -- Continuing to improve product mix. Conference Call and Webcast Management will host a conference call with a simultaneous webcast today at 8:30 a.m. Pacific/10:30 a.m. Central/11:30 a.m. Eastern to discuss fourth quarter and year-end 2004 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 March 16, 2005 by dialing (800) 642-1687 or (706) 645-9291 and entering the pass code #3722165. 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.amnetmortgageinc.com/webcasts.shtml for one year. 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. 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, New Jersey, New York, North Carolina, Ohio, Oregon, Rhode Island, Texas, Utah, Virginia and Washington. AmNet has a total of $1.4 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 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 belief that certain investments made in 2004 will benefit the Company over the long term; the elimination of nearly all future prepayment and credit risk represented by the sale of mortgage portfolio assets; stock repurchase being an excellent way to enhance stockholder value; the MBA's estimates of 2004 mortgage market origination volume; Company differentiation resulting from the addition of subprime and home equity mortgage product offerings; MBA estimates for 2005 total mortgage originations and 30-year fixed mortgage interest rates; and the Company's 2005 strategic initiatives growing loan production. 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. (unaudited) - ---------------------------------------------------------------------- Three Three Twelve Twelve Months Months Months Months ------ ------ ------ ------ Ended Ended Ended Ended ----- ----- ----- ----- 12/31/2004 12/31/2003 12/31/2004 12/31/2003 ---------- ---------- ---------- ---------- Income Statement - ---------------- Mortgage Banking Segment: Revenues Gain on sales of loans $22,582 $16,444 $64,619 $79,203 --------------------------------------------- Derivative financial instruments: Forward sales of mortgage backed securities (MBS) and options on MBS (2,928) 1,067 (5,351) 2,182 Market adjustment on loan commitment pipeline 96 (4,644) (424) (2,104) --------------------------------------------- Total derivative financial instruments (2,832) (3,577) (5,775) 78 --------------------------------------------- Gain on sales of loans, net of derivative financial instruments 19,750 12,867 58,844 79,281 Interest on mortgage assets 10,042 6,032 32,250 29,875 Other income 205 18 508 94 --------------------------------------------- Total revenue, net of derivative financial instruments 29,997 18,917 91,602 109,250 --------------------------------------------- Expenses Interest expense 6,295 2,826 17,370 13,482 Operating expenses 22,691 19,005 79,531 72,220 --------------------------------------------- Total expenses 28,986 21,831 96,901 85,702 --------------------------------------------- Income (loss) before income taxes - Mortgage Banking Segment $1,011 $(2,914) $(5,299) $23,548 Mortgage Asset Portfolio Segment: Revenues Interest on mortgage assets $784 $2,065 $3,013 $10,906 Other income (556) 226 152 1,171 --------------------------------------------- Total revenue 228 2,291 3,165 12,077 --------------------------------------------- Expenses Interest expense 111 1,040 1,451 4,840 Provision for loan losses (1) 964 206 3,442 Gain on sale of real estate owned, net (2) (170) (408) (921) Valuation adjustment (gain)/loss - bond collateral sale (8) - 4,864 - Operating expenses 389 610 1,782 2,344 --------------------------------------------- Total expenses 489 2,444 7,895 9,705 --------------------------------------------- (Loss) income before income taxes - Mortgage Asset Portfolio Segment $(261) $(153) $(4,730) $2,372 Consolidated Income (loss) - Combined Segments $750 $(3,067) $(10,029) $25,920 Provision for income tax expense (benefit) $627 (1,642) $(3,702) 7,781 Income tax (benefit) from termination of REIT status - (1,019) - (10,884) Consolidated Net Income (loss) $123 $(406) $(6,327) $29,023 Per Share Data - -------------- Weighted average common shares outstanding 7,309,079 7,862,949 7,613,773 7,861,988 Consolidated income (loss) per share basic $0.02 $(0.05) $(0.83) $3.69 Consolidated income (loss) per share diluted $0.01 $(0.05) $(0.83) $3.57 Loan Origination and Sale - ------------------------- Data ---- Total mortgage loans funded in period ($ millions) $2,490 $1,855 $9,002 $10,173 Number of loans funded 13,502 11,055 50,902 57,814 Total mortgage loans sold in period ($ millions) $2,640 $1,932 $9,039 $10,277 Percentage of mortgage loans funded in period by type (based on $ funded): Conventional conforming 42.2% 70.4% 50.0% 75.8% Alt-A 26.1% 3.7% 18.6% 2.1% Jumbo/Non conforming 21.4% 12.1% 19.3% 11.2% Government 5.5% 12.5% 8.7% 10.2% Second/HELOC 4.0% 1.3% 3.1% 0.7% Subprime 0.8% 0.0% 0.4% 0.0% 100.0% 100.0% 100.0% 100.0% Balance Sheet Data - ------------------ Cash and cash equivalents $50,600 $44,400 $50,600 $44,400 Restricted cash 2,100 2,100 2,100 2,100 Bond collateral mortgage loans and real estate owned, net of reserves, held for investment 14,988 161,252 14,988 161,252 Mortgage loans held for sale, net 238,440 276,781 238,440 276,781 Total assets 340,479 500,972 340,479 500,972 Short-term debt 232,236 268,619 232,236 268,619 Long-term debt, net 13,500 130,295 13,500 130,295 Total stockholders' equity $77,151 $88,485 $77,151 $88,485 Book value per share basic $10.56 $11.24 $10.56 $11.24 Book value per share diluted $9.58 $10.86 $9.58 $10.86 Debt to equity ratio 3.2:1 4.5:1 3.2:1 4.5:1 - ---------------------------------------------------------------------- ($ in thousands, except per share data and as noted) CONTACT: AmNet Mortgage, Inc. Investor and Analyst Relations Contacts Judith Berry, 858-909-1230 jberry@amnetmortgage.com or Clay Strittmatter, 858-909-1340 cstrittmatter@amnetmortgage.com or Financial Relations Board Deanna Hobson, 310-854-8318 dhobson@financialrelationsboard.com or Media Relations Contacts 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-----