-----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, BILMPnBwONCqKr5JCvMC7Dj5uZJBfk793xPD+QUYZELx9uKSX4vvHcK4DiqmXsFd sYa7icF/BHFSD/cV5b3IrA== 0001157523-05-007492.txt : 20050815 0001157523-05-007492.hdr.sgml : 20050815 20050815170756 ACCESSION NUMBER: 0001157523-05-007492 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050815 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050815 DATE AS OF CHANGE: 20050815 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: 051027764 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 a4953132.txt AMNET MORTGAGE, INC. 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 August 15, 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 August 15, 2005, the Company issued a press release which included certain disclosures relating to the Company's financial results for the fiscal quarter ended June 30, 2005. 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 June 30, 2005. The Company's press release contains certain non-GAAP financial measures (as defined under SEC regulations). We earn both interest income and incur interest expense in our operations. 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, we generate revenue on the interest we receive on the small amount of 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 of our business are closely related and dependant on many of the same factors, in particular the volume of loans we originate, management believes that it is helpful in understanding our operations to analyze the impact of interest income and expense together. For this reason, the press release text provides information regarding the net interest income (interest income less interest expense) generated by the Company's operations. Management believes that this is consistent with how financial analysts typically consider interest in analyzing mortgage banking operations. For the same reasons, our discussion of expenses includes a discussion of our operating expenses, which excludes interest expense. Because certain other expenses incurred by AmNet, 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 our business to consider the variable and the fixed expenses separately. Accordingly, we have included an estimated breakdown of variable amounts for our 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 mortgage loan origination volumes. Item 9.01 Financial Statements and Exhibits. (c) Exhibits Exhibit No. Description ----------- ----------- 99.1 August 15, 2005 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: August 15, 2005 By: /s/ Judith A. Berry ----------------------- Judith A. Berry Chief Financial Officer EXHIBIT INDEX Exhibit No. Description ----------- ----------- 99.1 August 15, 2005 Press Release by AmNet Mortgage, Inc. EX-99.1 2 a4953132ex991.txt AMNET MORTGAGE, INC. EXHIBIT 99.1 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 -----END PRIVACY-ENHANCED MESSAGE-----