-----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, SfvBRsYMpetE9XXlmYERm8oPq+s2d3gmq3fgXeTdYIVU4iB4yX7d2sV7nJdIzbjc JTtmSnlbboqmY5oS2+7rPA== 0000914121-06-003307.txt : 20061026 0000914121-06-003307.hdr.sgml : 20061026 20061026102234 ACCESSION NUMBER: 0000914121-06-003307 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20061026 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061026 DATE AS OF CHANGE: 20061026 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN HOME MORTGAGE INVESTMENT CORP CENTRAL INDEX KEY: 0001256536 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 200103914 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-31916 FILM NUMBER: 061164551 MAIL ADDRESS: STREET 1: 520 BROADHOLLOW ROAD CITY: MELVILLE STATE: NY ZIP: 11747 8-K 1 am5875823-8k.txt CURRENT REPORT 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 Date of Report (Date of earliest event reported): October 26, 2006 American Home Mortgage Investment Corp. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Maryland 001-31916 20-0103914 - -------------------------------------------------------------------------------- (State or Other Jurisdiction (Commission (I.R.S. Employer of Incorporation) File Number) Identification No.) 538 Broadhollow Road, Melville, New York 11747 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (516) 396-7700 - -------------------------------------------------------------------------------- (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): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| 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 On October 26, 2006, American Home Mortgage Investment Corp. (the "Company") issued a press release reporting financial results for the quarter ended September 30, 2006. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. The information in this Current Report on Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of such Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise expressly stated in such filing. Item 9.01 Financial Statements and Exhibits (d) Exhibits: 99.1 - Press Release, dated October 26, 2006. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: October 26, 2006 AMERICAN HOME MORTGAGE INVESTMENT CORP. By: /s/ Stephen A. Hozie -------------------------------------- Name: Stephen A. Hozie Title: Chief Financial Officer EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION 99.1 Press Release, dated October 26, 2006. EX-99.1 2 am5875823-ex99_1.txt PRESS RELEASE, DATED OCTOBER 26, 2006 Exhibit 99.1 AMERICAN HOME [LOGO] FOR IMMEDIATE RELEASE --------------------- American Home Mortgage Announces Third Quarter Results Earnings are $1.36 per diluted share Quarterly loan production reaches a record $15.3 billion Common stock dividend policy increased to $1.06 per share per quarter, or $4.24 per share on an annualized basis 2006 earnings guidance of $4.85 to $5.15 per share reaffirmed Melville, NY (October 26, 2006) - American Home Mortgage Investment Corp. (NYSE: AHM) announced today results for the quarter ended September 30, 2006. FINANCIAL HIGHLIGHTS - -------------------- Comparison of the Three Months Ended September 30, 2006 and 2005 o Revenue for the third quarter of 2006 was $258.9 million, compared to revenue of $204.8 million for the third quarter of 2005, an increase of 26.4%. o Net earnings for the third quarter of 2006 were $72.0 million, compared to net earnings of $53.2 million for the third quarter of 2005, an increase of 35.4%. o Earnings per diluted share for the third quarter of 2006 were $1.36, compared to earnings per diluted share of $1.09 for the third quarter of 2005, an increase of 24.8%. o Dividends per common share for the third quarter of 2006 were $1.01, compared to $0.86 for the third quarter of 2005, an increase of 17.4%. o Book value per common share was $22.52 at September 30, 2006, compared to book value per common share of $22.81 at September 30, 2005, a decrease of 1.3%. Comparison of the Three Months Ended September 30, 2006 and June 30, 2006 o Revenue for the third quarter of 2006 was $258.9 million, compared to revenue of $276.8 million for the second quarter of 2006, a decrease of 6.4%. o Net earnings for the third quarter of 2006 were $72.0 million, compared to net earnings of $72.4 million for the second quarter of 2006, a decrease of 0.5%. o Earnings per diluted share for the third quarter of 2006 were $1.36, compared to earnings per diluted share of $1.37 for the second quarter of 2006, a decrease of 0.7%. o Dividends per common share for the third quarter of 2006 were $1.01, compared to $0.96 for the second quarter of 2006, an increase of 5.2%. o Book value per common share was $22.52 at September 30, 2006, compared to book value per common share of $22.35 at June 30, 2006, an increase of 0.8%. Comparison of the Nine Months Ended September 30, 2006 and 2005 o Revenue for the nine months ended September 30, 2006 was $768.8 million, compared to adjusted revenue of $572.1 million for the nine months ended September 30, 2005, an increase of 34.4%. GAAP revenue for the nine months ended September 30, 2005 was $643.5 million. o Net earnings for the nine months ended September 30, 2006 were $198.8 million compared to adjusted net earnings of $172.7 million for the nine months ended September 30, 2005, an increase of 15.1%. GAAP net earnings for the nine months ended September 30, 2005 were $244.1 million. o Earnings per diluted share for the nine months ended September 30, 2006 were $3.75 compared to adjusted earnings per diluted share of $3.83 for the nine months ended September 30, 2005, a decrease of 2.1%. GAAP earnings per diluted share for the nine months ended September 30, 2005 were $5.51. o Dividends per common share for the nine months ended September 30, 2006 were $2.88, compared to $2.33 for the nine months ended September 30, 2005, an increase of 23.6%. Michael Strauss, American Home's Chief Executive Officer, commented, "I am pleased by our company's results during the third quarter. In particular, earnings per share were strong at $1.36, while dividends and book value per share continued to advance from second quarter levels. Our company's third quarter results were accomplished during a period that was particularly difficult for our industry; a period that included the adverse impacts of an inverted yield curve, falling national housing prices, reduced national loan originations, and servicing write-downs due to lower interest rates. These difficult conditions are reflected in American Home's third quarter results which include a significant mortgage servicing asset write-down, a lower although still constructive gain-on-sale margin, high credit expense for reserving necessitated by sharply higher delinquencies and loan repurchases, and finally, lower warehouse net interest due to a narrower spread between new loan yields and funding yields. These factors were offset in our company's third quarter results however, by record portfolio net interest income, record loan production and record servicing and ancillary fee income, as well as by lower expenses in our loan production business. In addition, our company did not experience a loss in its mortgage-backed securities portfolio as had been the case in several of the previous quarters, but instead had a net portfolio gain of $3.4 million. I believe our company's strong results in this challenging environment illustrate the underlying earnings power of our businesses. "During the quarter, our company added $906.8 million of newly originated loans to its portfolio of loans held for investment. These loans are carried at their cost, have an unrecognized fair value in excess of cost of $15.5 million, and are projected to yield 7.01% over their estimated life. As investors know, one of our company's core strategies is to grow ongoing portfolio net interest income by increasing our holdings of self-originated loans benefited by a low cost basis. "Based on our third quarter results and our outlook for the fourth quarter, our company is reaffirming its 2006 earnings guidance of $4.85 to $5.15 per share, and its guidance for annual loan originations of $55 billion to $60 billion. "As was previously announced, earlier this month our company completed its purchase of Flower Bank, a federal savings bank located in Chicago, Illinois. This purchase represents an important milestone in our company's development. Although Flower Bank will grow slowly, eventually our strategic plan is to be able to provide additional consumer financial services to our customers and the general public. Through this strategy we expect to increase the return from our customer base and our customer acquisition expenditures as well as to diversify the sources of earnings from our operating subsidiaries. 2 "I am very pleased to announce that based on our company's earnings and prospects, our Board of Directors has again increased our company's quarterly dividend policy on its common stock by $0.05 per share. The new per share common stock dividend policy is $1.06 per quarter, or $4.24 on an annualized basis. The new dividend policy is expected to take effect with our January dividend payment, although our company is not obligated to pay dividends until such dividends are declared by our Board of Directors, and our Board of Directors may change our company's dividend policy at any time without prior notice." THIRD QUARTER RESULTS - --------------------- During the third quarter, net interest income from portfolio loans and mortgage-backed securities including carry from free-standing swaps increased moderately to reach a record $35.9 million compared to $33.9 million during this year's second quarter. The increase was attributable to a $500 million increase in average portfolio assets as well as a slight increase in the portfolio's net interest margin including swap carry to 1.11% compared to 1.09 % in the second quarter. Contributing to the improvement in net interest margin was an increase in the portfolio's proportion of self-originated loans held for investment. During the third quarter, loans and mortgage-backed securities in portfolio averaged $13.0 billion, and earned net interest income of $28.4 million equal to a net interest margin of 0.88%. In addition, during the quarter, the Company earned $7.5 million of positive carry on interest rate swaps which economically hedge the trading portion of the Company's portfolio. Under accounting rules, these swaps are classified as free-standing derivatives and consequently are not included in GAAP net interest income, but are instead included in unrealized gains and losses on mortgage-backed securities and derivatives. For the third quarter, the combined net interest income and positive swap carry was $35.9 million, or 1.11% of average portfolio assets. By comparison, during the second quarter of 2006, the Company's mortgage loans and mortgage-backed securities portfolio averaged $12.5 billion and earned net interest income of $28.1 million equal to a net interest margin of 0.90%. During the second quarter, the Company had $5.8 million of positive carry from interest rate swaps which economically hedge the trading portion of the Company's portfolio. Consequently, in the second quarter the combined net interest income and positive swap carry was $33.9 million, or 1.09% of average portfolio assets. During the third quarter, the Company's overall net interest income fell to $43.0 million compared to $50.2 million in the second quarter. Lower overall net interest income resulted from lower net interest earnings from the Company's inventory of warehoused loans, which more than offset increased net interest earnings from the investment portfolio. During the third quarter, the Company's inventory of warehoused loans averaged $8.1 billion, earned a net interest margin of 1.24% and earned net interest income of $25.1 million. This compares with average warehoused loans of $8.8 billion, a net interest margin of 1.44% and net interest income of $31.6 million in the second quarter of 2006. Lower net interest margin from warehoused loans was a result of ongoing narrowing of the spread between the yield on fixed-rate and hybrid adjustable-rate mortgage ("ARM") loans compared to the yield on the Company's funding sources including commercial paper and warehouse credit facilities. Net interest income from warehoused loans is expected to continue at low levels so long as the yield on short term interest rates exceeds the yield on longer term rates. During the third quarter, the Company had interest expense on trust preferred borrowings, servicing financing and other obligations of $10.5 million compared to $9.5 million during the second quarter of 2006. During the third quarter, the Company continued to experience higher costs for credit provisions and allowances due to sharply higher portfolio delinquencies as well as increased repurchases of delinquent, previously sold loans. Non-performing loans held for investment increased to $66.9 million at the end of the third quarter compared to $33.5 million at the end of the second quarter. Allowances and reserves associated with these loans were $12.5 million at quarter-end compared to $6.9 million at the end of the second quarter, while the Company's provision expense was $5.4 million in the third quarter compared to $4.0 million during the second quarter. During the third 3 quarter, the Company's loss severity as a percent of loan principal on completed foreclosures, net of mortgage insurance recoveries, was 15.7%. The Company purchases mortgage insurance to partially mitigate its credit exposure and 46.3% of the Company's securitized loans held for investment are benefited by mortgage insurance. Delinquencies and related expenses are expected to continue to rise in future quarters primarily due to a weakened national housing market as well as seasoning of the Company's portfolio. Throughout the third quarter, the Company continued to pursue a strategy of matching the duration of its portfolio assets with the duration, net of hedges, of the liabilities used to fund those assets. At September 30, 2006, the composition of the Company's loans held for investment and loans underlying its mortgage-backed securities was 49.1% 5/1 ARM loans, 24.9% short reset ARMs, 14.0% fixed rate loans, 6.5% HELOC and closed-end seconds, 2.5% 3/1 ARMs, and 3.0% other ARM types. On September 30, 2006, the mortgage-backed securities portfolio's duration, net of liabilities and hedges, was estimated to be (0.12) years and its projected average life was 2.57 years. The composition of the mortgage-backed securities portfolio by credit quality based on Standard & Poor's ratings was 93.5% Agency and AAA, 4.0% AA, A, and BBB and 2.5% BB and unrated. During the third quarter, the Company's loan origination business continued to produce strong results. Loan production reached a record $15.3 billion compared to $14.9 billion in this year's second quarter. During the third quarter, the Company sold $14.3 billion of loans to third parties for a gain on sale of $210.6 million equal to a gain on sale margin of 1.47%. By comparison, during this year's second quarter, the Company sold $13.9 billion of loans to third parties for a gain on sale of $224.6 million equal to a gain on sale margin of 1.62%. During the third quarter, the Company's loan production expenses were $152.6 million, or 1.06% of loans sold, or 1.00% of loans originated, compared to $160.2 million, or 1.16% of loans sold, or 1.07% of loans originated in the second quarter. The Company estimates that its national market share, based on Freddie Mac's recent, revised estimate of national market size, was 2.23% in the third quarter compared to 2.04% in this year's second quarter and 1.45% during the third quarter of 2005. At the end of the third quarter, the Company employed approximately 2,640 loan officers and account executives, including call center representatives, but excluding sales assistants, compared to approximately 2,612 on June 30, 2006. In the third quarter, the Company's financial results were affected by several significant changes in the carrying value of its assets and derivatives. During the quarter, the change in the value of the Company's servicing assets due to changes in valuation assumptions declined by $16.8 million, net of hedges, due primarily to lower interest rates. Additionally, during the quarter, the Company had gains excluding positive carry from swaps of $3.4 million in its portfolio of mortgage-backed securities and related hedges. Finally, during the quarter, the Company had other comprehensive loss of $9.6 million. Of this other comprehensive loss, the Company's portfolio of investment securities and related hedges gained $1.7 million. The remaining $11.3 million of other comprehensive loss resulted from a loss in value in the swaps and other derivatives used to hedge the Company's loans held for investment. When interest rates decline, as they did in the third quarter, these derivatives lose value, and the loss is recognized in other comprehensive income. The loans held for investment, however, gained fair value during the quarter in response to lower interest rates. The amount of gain in the fair value of the loans held for investment in the third quarter was $21.5 million. Under GAAP, this gain in the fair value of the loans is not recognized in other comprehensive income. The gain is, however, included as a portion of the increase in the positive difference between the fair value of the Company's loans compared to those loans' carrying values, which is shown as a supplemental schedule to the Company's financial tables accompanying this earnings release. During the third quarter, the Company's servicing income and ancillary fees reached a record $43.4 million gross, and $14.6 million net of $28.8 million of realization of servicing cash flow expense. "Realization of servicing cash flows" expense is a classification resulting from the Company's adoption of FAS 156, and is roughly though not fully equivalent in concept to the classification "amortization of servicing rights" that appeared in the Company's financial results for periods prior to its adoption of FAS 156. By comparison, during the second quarter, servicing income and ancillary fees were $30.4 million gross, and $4.1 million net of $26.3 million of realization of servicing 4 cash flows. As noted above, however, during the quarter the Company experienced a net write-down of its mortgage servicing assets of $16.8 million including $23.9 million of gross write-down partially offset by $7.1 million of servicing hedge gains. This compares with a net write-up of $7.5 million during this year's second quarter including $7.5 million of gross write-up and no hedge gains or losses. Prior to the third quarter, the Company did not hedge its servicing assets. As was previously announced, the Company began hedging its servicing assets in July 2006, and continued to build its hedge through the balance of the third quarter, completing the establishment of the hedge earlier this month. During the third quarter, the servicing hedge only partially offset the gross write-down of the servicing assets primarily because the hedge was not fully in place throughout the quarter. The hedge is expected to more closely offset changes in the value of the Company's mortgage servicing assets in future quarters. At the end of the third quarter, the principal amount of the loans underlying the Company's servicing assets was $35.9 billion. By comparison, the amount of loans underlying the Company's servicing assets at the end of this year's second quarter was $32.6 billion. The principal amount of the servicing portfolio, including warehouse loans, was $43.0 billion at the end of the third quarter and $39.1 billion at the end of this year's second quarter. The Company's total revenues in the third quarter were $258.9 million. Of these revenues, $43.0 million was from net interest income, $210.6 million was from sales of newly originated mortgage loans including origination fees and net of hedges, $43.4 million was from mortgage servicing fees, $7.5 million was from interest carry on free-standing swaps, $3.4 million was realized and unrealized gains on mortgage-backed securities held, net of hedges, and $2.0 million was from other sources. Revenues were decreased by $28.8 million due to realization of servicing cash flows, $16.8 million from decline in the value of servicing due to changes in assumptions, net of hedges, and $5.4 million of provision for loan losses. During the quarter, the Company's expenses were $171.3 million, and the Company's pre-tax income was $87.6 million. Also during the quarter, the Company's tax expense was $15.6 million. Consequently, net income for the quarter was $72.0 million while preferred dividends were $3.3 million and net income available to common stockholders was $68.7 million, resulting in earnings per diluted share of $1.36. Book value attributable to common stockholders at September 30, 2006 was $1.13 billion, or $22.52 per common share, compared to $1.12 billion, or $22.35 per common share, at June 30, 2006. EARNINGS GUIDANCE - ----------------- With this earnings announcement, American Home is reaffirming its 2006 earnings guidance of $4.85 to $5.15 per diluted share. The Company's earnings guidance is based on uncertain assumptions about factors that will affect the Company's fourth quarter, 2006 results including: that net interest margins will remain near constant, that gain-on-sale margins will decline slightly, that originations will decline slightly, that expenses as a percentage of loan production will remain constant, that credit loss related expenses will continue to increase and that the Company will not experience significant write-downs or write-ups in the value of its assets due to changing interest rates or credit spreads which are not offset by the Company's hedges. Results differing from the Company's assumptions for these factors as well as many other factors may cause the Company's actual results to differ from its earnings guidance. With this earnings release, the Company is also reaffirming its guidance for 2006 loan production of $55 billion to $60 billion. DIVIDEND POLICY - --------------- Based on the Company's projections for earnings and cash flow, its Board of Directors has raised the Company's common stock dividend policy to $1.06 per share per quarter, or $4.24 per share on an annualized basis. The Company's dividend policy does not constitute an obligation to pay dividends, which only occurs when its Board of Directors declares a dividend. The dividend policy is subject to ongoing review by the Board of Directors based on, among other things, the Company's business prospects, financial condition, earnings projections and cash flow projections, and the Board may, when it deems doing so is advisable, lower or eliminate the dividend without prior 5 notice. The new dividend policy of $1.06 per share per quarter is expected to commence beginning in January 2007. OTHER COMPANY HIGHLIGHTS - ------------------------ On October 19, 2006, the Company acquired Flower Bank, fsb, of Chicago, Illinois. In connection with its acquisition of Flower, the Company recognized goodwill of approximately $17.0 million. In addition, the Company recapitalized Flower through a cash investment in Flower's equity of $50 million. The Company's business plan for Flower includes the Company depositing approximately $350 million of mortgage servicing escrow accounts at Flower. It also includes Flower offering deposit accounts and consumer credit products including real estate loans and credit cards. Flower is expected to invest in the loans it originates as well as in high-grade securities, and, in particular, securities issued by Fannie Mae and Freddie Mac. On August 22, 2006, the Company completed an acquisition of certain loan origination assets of Pacific Crest Savings Bank. The annual loan originations of the acquired Pacific Crest branches are projected to be $200 million to $250 million. The Company acquired three loan origination branches from Pacific Crest, two of which are in the Seattle metropolitan area. In connection with the acquisition, American Home paid approximate net book value for Pacific Crest's nominal fixed assets and hired approximately 23 loan officers into its retail channel. On August 18, 2006, the Company privately issued $30 million of trust preferred securities. The yield on the securities was LIBOR plus 2.40%. The securities are callable in five years at the option of the Company at a price of par, and mature in thirty years. One of the Company's strategies is to increase its unsecured borrowings and reduce its reliance on borrowing facilities that require pledged collateral. Implementation of this strategy to date has primarily been though the issuance of trust preferred securities. On August 10, 2006, the Company increased the facility size of the Company's Bank of America syndicated committed revolving credit facility from $1.0 billion to $1.25 billion and extended the maturity date for an additional one-year term. Additionally, on September 13, 2006, the Company entered into a $350 million mortgage warehouse facility with Credit Suisse First Boston and on September 22, 2006, the Company entered into a $2.0 billion mortgage warehouse facility with subsidiaries of Deutsche Bank. On October 23, 2006, Fitch Ratings upgraded its rating of the Company's servicing operations to 'RPS3+'. The previous rating had been 'RPS3'. ADJUSTED FINANCIAL MEASURES - --------------------------- Throughout this news release, the terms adjusted revenues, adjusted net earnings, adjusted earnings per diluted share, adjusted net interest income, adjusted net interest margin and other similar terms are used to identify financial measures that are not prepared in accordance with Generally Accepted Accounting Principles ("GAAP"). The Company has been, and expects to continue to be, managed on the basis of the adjusted financial measures. The adjusted financial measures should be read in conjunction with the Company's GAAP results. A reconciliation of the adjusted financial measures to financial measures prepared in accordance with GAAP is included on pages A-1 and A-2 of this release. CONFERENCE CALL TODAY - --------------------- 6 American Home will hold an investor conference call today, October 26, 2006, at 10:30 a.m., Eastern Time, to discuss earnings. Interested parties may listen to the live conference call by visiting the investor relations section of American Home's corporate website, www.americanhm.com. A replay of the online broadcast will be available on the site through November 9, 2006. DIVIDEND REINVESTMENT & DIRECT STOCK PURCHASE AND SALE PLAN - ----------------------------------------------------------- American Home Mortgage Investment Corp. has established an Investors Choice Dividend Reinvestment & Direct Stock Purchase and Sale Plan for its shareholders. The plan offers affordable alternatives for buying and selling common stock of American Home Mortgage Investment Corp. Participants in the plan may also reinvest cash dividends and make periodic supplemental cash payments to purchase additional shares of the Company's common stock. If you have additional questions or would like to enroll in the plan, please contact the plan administrator, American Stock Transfer & Trust Company, at 1-888-777-0319 (toll free) or visit their website at www.amstock.com. ABOUT AMERICAN HOME - ------------------- American Home Mortgage Investment Corp. is a mortgage real estate investment trust ("REIT") focused on earning net interest income from self-originated loans and mortgage-backed securities, and, through its taxable subsidiaries, from originating and selling mortgage loans and servicing mortgage loans for institutional investors. Mortgages are originated through a network of loan production offices and mortgage brokers as well as purchased from correspondent lenders, and are serviced at the Company's Irving, Texas servicing center. For additional information, please visit the Company's website at www.americanhm.com. FORWARD-LOOKING STATEMENTS - -------------------------- This news release contains "forward-looking statements" that are based upon expectations, estimates, forecasts, projections and assumptions. Any statement in this news release that is not a statement of historical fact, including, but not limited to, earnings guidance and forecasts, projections of financial results and loan origination volume, expected future financial position, dividend plans or business strategy, and any other statements of plans, expectations, objectives, estimates and beliefs, is a forward looking statement. Words such as "look forward," "will," "anticipate," "may," "expect," "plan," "believe," "intend," "opportunity," "potential," and similar words, or the negatives of those words, are intended to identify forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that are difficult to predict, and are not guarantees of future performance. As a result, actual future events may differ materially from any future results, performance or achievements expressed in or implied by this news release. Specific factors that might cause such a difference include, but are not limited to: American Home's limited operating history with respect to its portfolio strategy; the potential fluctuations in American Home's operating results; American Home's potential need for additional capital; the direction of interest rates and their subsequent effect on the business of American Home and its subsidiaries; risks associated with the use of leverage; changes in federal and state tax laws affecting REITs; federal and state regulation of mortgage banking; and those risks and uncertainties discussed in filings made by American Home with the Securities and Exchange Commission. Such forward-looking statements are inherently uncertain, and stockholders must recognize that actual results may differ from expectations. American Home does not assume any responsibility, and expressly disclaims any responsibility, to issue updates to any forward-looking statements discussed in this news release, whether as a result of new information, future events or otherwise. ### CONTACT: 7 Mary M. Feder Vice President, Investor Relations American Home Mortgage Investment Corp. (631) 622-6469 mary.feder@americanhm.com Financial Table Presentation The following financial tables include GAAP, adjusted and reconciling information for the reasons and purposes described under the heading ADJUSTED FINANCIAL MEASURES herein. Financial Tables to Follow on Next Page 8 AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES OPERATING STATISTICS
Three Months Ended Nine Months Ended ---------------------- ------------------------ Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2006 2005 2006 2005 --------- --------- --------- ----------- (1) As Adjusted --------- --------- --------- ----------- Mortgage Holdings Segment: - -------------------------------------------------------- Investment Portfolio Performance (2): - ------------------------------------- Average loans and mortgage-backed securities in portfolio ($ billions) 13.0 7.1 12.2 7.1 Interest income ($ millions) 195.6 84.5 531.8 239.8 Average portfolio yield 6.03% 4.76% 5.82% 4.50% Interest expense ($ millions) 167.2 62.9 448.9 161.8 Average cost of funds and hedges 5.37% 3.84% 5.18% 3.29% Net interest income ($ millions) 28.4 21.6 82.9 78.0 Net interest margin 0.88% 1.24% 0.91% 1.46% Interest carry on free standing derivatives ($ millions) 7.5 -0.6 17.2 -8.3 Net interest income including interest carry on free standing derivatives ($ millions) 35.9 21.0 100.1 69.7 Net interest margin including interest carry on free standing derivatives 1.11% 1.21% 1.10% 1.31% Reconciliation of Changes in Mortgage Holdings (3): - --------------------------------------------------- Net change in mortgage-backed securities ($ billions) -0.3 1.2 -1.6 -1.1 Additions to loans in portfolio ($ billions) 0.9 1.3 3.1 1.4 Principal repayments and other dispositions of loans in portfolio ($ billions) 0.4 0.0 0.8 0.0 Net additions to loans in portfolio ($ billions) 0.5 1.3 2.3 1.4 Loans and mortgage-backed securities held - end of period ($ billions) 14.8 10.7 14.8 10.7 Mortgage-backed securities period end duration gap (in years) -0.12 0.17 -0.12 0.17 Loan Origination Segment: - -------------------------------------------------------- Loan originations ($ billions) (4) 15.3 13.7 43.4 31.7 Refinance 54% 46% 52% 45% ARM 53% 48% 53% 50% Average mortgage loans, net ($ billions) (3) 8.1 5.7 8.8 4.1 Net interest income excluding trust preferred and other interest expense ($ millions) 25.1 28.5 84.7 70.4 Net interest margin excluding trust preferred and other interest expense 1.24% 2.12% 1.28% 2.32% Trust preferred and other interest expense ($ millions) 6.6 2.0 17.0 3.2 Net interest income ($ millions) 18.5 26.5 67.7 67.2 Loans securitized and held ($ billions) 0.0 1.2 0.0 2.9 Loans securitized and sold ($ billions) 0.0 1.3 0.0 10.3 Loans sold to third parties ($ billions) 14.3 9.9 41.7 17.5 Gain on sales of loans, net of hedge gains ($ millions) (5) 210.6 176.5 607.1 472.0 Excess of fair value over carrying value of loans added to investment portfolio ($ millions) 15.6 26.5 48.4 27.8 --------- --------- --------- ----------- Total ($ millions) 226.2 203.0 655.5 499.8 --------- --------- --------- ----------- Gain on sales of loans, net of hedge gains (% of principal) (5) 1.47% 1.42% 1.46% 1.60% Excess of fair value over carrying value of loans added to investment portfolio (% of principal) 1.71% 2.02% 1.54% 1.92% Total (% of principal) 1.48% 1.48% 1.46% 1.61% Applications accepted ($ billions) 23.4 19.7 66.3 50.0 Application pipeline ($ billions) 12.3 11.6 12.3 11.6 Sept. 30, Sept. 30, 2006 2005 --------- --------- Loan Servicing Segment: - -------------------------------------------------------- Loan servicing portfolio - total with warehouse ($ billions) 43.0 27.5 Loan servicing portfolio - loans sold or securitized ($ billions) 35.9 24.2 Interest expense ($ millions) 3.9 1.3 Weighted average note rate 6.77% 5.73% Weighted average service fee 0.339% 0.331% Average age (in months) 15 13
Notes: (1) Adjusted as if the Company's fourth quarter 2004 securitization had qualified for SFAS 140 sale accounting treatment in the fourth quarter of 2004. Please refer to the detailed reconciliation of the Company's GAAP and as adjusted results on pages A-1 and A-2. (2) Excludes loans held for investment pending securitization. (3) Includes loans held for investment pending securitization. (4) Loan originations of $13.2 billion in the first quarter of 2006 exclude $559 million of loans purchased in the Waterfield acquisition. (5) Prior to the fourth quarter of 2005, includes gain on current period securitizations, net of hedge gains. 9 AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES OPERATING STATISTICS
Three Months Ended ----------------------------------------------------------- Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2006 2006 2006 2005 2005 --------- -------- --------- -------- --------- Mortgage Holdings Segment: - -------------------------------------------------------- Investment Portfolio Performance (1): - ------------------------------------- Average loans and mortgage-backed securities in portfolio ($ billions) 13.0 12.5 11.1 10.5 7.1 Interest income ($ millions) 195.6 181.3 154.9 138.0 84.5 Average portfolio yield 6.03% 5.82% 5.60% 5.27% 4.76% Interest expense ($ millions) 167.2 153.2 128.5 108.2 62.9 Average cost of funds and hedges 5.37% 5.19% 4.96% 4.36% 3.84% Net interest income ($ millions) 28.4 28.1 26.4 29.8 21.6 Net interest margin 0.88% 0.90% 0.95% 1.17% 1.24% Interest carry on free standing derivatives ($ millions) 7.5 5.8 3.9 1.0 -0.6 Net interest income including interest carry on free standing derivatives ($ millions) 35.9 33.9 30.3 30.8 21.0 Net interest margin including interest carry on free standing derivatives 1.11% 1.09% 1.09% 1.21% 1.21% Reconciliation of Changes in Mortgage Holdings (2): - -------------------------------------------------------- Net change in mortgage-backed securities ($ billions) -0.3 -0.3 -1.0 1.4 1.2 Additions to loans in portfolio ($ billions) 0.9 1.2 1.0 2.1 1.3 Principal repayments and other dispositions of loans in portfolio ($ billions) 0.4 0.2 0.2 0.0 0.0 Net additions to loans in portfolio ($ billions) 0.5 1.0 0.8 2.1 1.3 Loans and mortgage-backed securities held - end of period ($ billions) 14.8 14.6 13.9 14.1 10.7 Mortgage-backed securities period end duration gap (in years) -0.12 0.10 0.15 -0.03 0.17 Loan Origination Segment: - -------------------------------------------------------- Loan originations ($ billions) (3) 15.3 14.9 13.2 13.6 13.7 Refinance 54% 51% 51% 51% 46% ARM 53% 55% 51% 50% 48% Average mortgage loans, net ($ billions) (2) 8.1 8.8 9.6 8.6 5.7 Net interest income excluding trust preferred and other interest expense ($ millions) 25.1 31.6 28.0 26.4 28.5 Net interest margin excluding trust preferred and other interest expense 1.24% 1.44% 1.17% 1.28% 2.12% Trust preferred and other interest expense ($ millions) 6.6 5.7 4.7 3.3 2.0 Net interest income ($ millions) 18.5 25.9 23.3 23.1 26.5 Loans securitized and held ($ billions) 0.0 0.0 0.0 0.0 1.2 Loans securitized and sold ($ billions) 0.0 0.0 0.0 0.0 1.3 Loans sold to third parties ($ billions) 14.3 13.9 13.5 11.0 9.9 Gain on sales of loans, net of hedge gains ($ millions) (4) 210.6 224.6 171.9 105.4 176.5 Excess of fair value over carrying value of loans added to investment portfolio ($ millions) 15.6 18.8 14.0 30.2 26.5 --------- -------- --------- -------- --------- Total ($ millions) 226.2 243.4 185.9 135.6 203.0 --------- -------- --------- -------- --------- Gain on sales of loans, net of hedge gains (% of principal) (4) 1.47% 1.62% 1.27% 0.96% 1.42% Excess of fair value over carrying value of loans added to investment portfolio (% of principal) 1.71% 1.49% 1.44% 1.43% 2.02% Total (% of principal) 1.48% 1.61% 1.28% 1.03% 1.48% Applications accepted ($ billions) 23.4 22.1 20.8 17.8 19.7 Application pipeline ($ billions) 12.3 12.1 11.8 9.2 11.6 Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2006 2006 2006 2005 2005 --------- -------- --------- -------- --------- Loan Servicing Segment: - -------------------------------------------------------- Loan servicing portfolio - total with warehouse ($ billions) 43.0 39.1 34.8 30.7 27.5 Loan servicing portfolio - loans sold or securitized ($ billions) 35.9 32.6 29.0 25.0 24.2 Interest expense ($ millions) 3.9 3.8 3.1 2.6 1.3 Weighted average note rate 6.77% 6.38% 6.09% 5.79% 5.73% Weighted average service fee 0.339% 0.336% 0.329% 0.330% 0.331% Average age (in months) 15 14 14 15 13
Notes: (1) Excludes loans held for investment pending securitization. (2) Includes loans held for investment pending securitization. (3) Loan originations of $13.2 billion in the first quarter of 2006 exclude $559 million of loans purchased in the Waterfield acquisition. (4) Prior to the fourth quarter of 2005, includes gain on current period securitizations, net of hedge gains. 10 AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts)
Three Months Ended Nine Months Ended ---------------------- ---------------------- Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2006 2005 2006 2005 --------- --------- --------- --------- (1) As Adjusted --------- --------- --------- --------- Net interest income: Interest income $ 332,875 $ 180,038 $ 963,684 $ 435,325 Interest expense (289,878) (133,169) (823,905) (294,830) --------- --------- --------- --------- Net interest income 42,997 46,869 139,779 140,495 --------- --------- --------- --------- Provision for loan losses (5,365) -- (10,655) -- --------- --------- --------- --------- Net interest income after provision for loan losses 37,632 46,869 129,124 140,495 --------- --------- --------- --------- Non-interest income: Gain on sales of mortgage loans 210,621 123,658 607,122 236,288 Gain on sales of current period securitized mortgage loans -- 19,960 -- 168,998 Gain on sales of mortgage-backed securities and derivatives 9,849 6,116 8,952 11,468 Unrealized gain (loss) on mortgage-backed securities and derivatives 1,050 (10,965) 2,635 (1,021) Loan servicing fees 43,379 21,099 98,129 52,232 Amortization and impairment of mortgage servicing rights -- (3,478) -- (41,912) Change in fair value of mortgage servicing rights: Due to realization of cash flows (28,839) -- (73,880) -- Due to changes in valuation assumptions, net of hedge gain (loss) (16,799) -- (9,209) -- --------- --------- --------- --------- Net loan servicing (loss) fees (2,259) 17,621 15,040 10,320 --------- --------- --------- --------- Other non-interest income 2,018 1,585 5,912 5,594 --------- --------- --------- --------- Non-interest income 221,279 157,975 639,661 431,647 --------- --------- --------- --------- Non-interest expenses: Salaries, commissions and benefits, net 105,676 101,378 308,100 264,712 Occupancy and equipment 19,228 15,328 56,961 42,396 Data processing and communications 5,700 6,479 19,559 18,386 Office supplies and expenses 5,346 5,024 14,823 15,110 Marketing and promotion 4,868 5,104 17,051 14,360 Travel and entertainment 7,798 4,670 22,344 14,025 Professional fees 6,076 3,744 16,420 10,646 Other 16,588 7,360 49,662 21,072 --------- --------- --------- --------- Non-interest expenses 171,280 149,087 504,920 400,707 --------- --------- --------- --------- Net income before income tax expense (benefit) 87,631 55,757 263,865 171,435 Income tax expense (benefit) 15,611 2,549 65,035 (1,302) --------- --------- --------- --------- Net income $ 72,020 $ 53,208 $ 198,830 $ 172,737 ========= ========= ========= ========= Dividends on preferred stock 3,305 3,304 9,914 9,913 --------- --------- --------- --------- Net income available to common shareholders $ 68,715 $ 49,904 $ 188,916 $ 162,824 ========= ========= ========= ========= Per share data: Basic $ 1.37 $ 1.10 $ 3.78 $ 3.88 Diluted $ 1.36 $ 1.09 $ 3.75 $ 3.83 Weighted average number of shares - basic 50,148 45,174 49,975 41,973 Weighted average number of shares - diluted 50,553 45,669 50,363 42,471
Note: (1) Adjusted as if the Company's fourth quarter 2004 securitization had qualified for SFAS 140 sale accounting treatment in the fourth quarter of 2004. Please refer to the detailed reconciliation of the Company's GAAP and as adjusted results on pages A-1 and A-2. 11 AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts)
Three Months Ended ------------------------------------------------------------- Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2006 2006 2006 2005 2005 --------- --------- --------- --------- --------- Net interest income: Interest income $ 332,875 $ 330,196 $ 300,613 $ 265,435 $ 180,038 Interest expense (289,878) (279,992) (254,035) (215,057) (133,169) --------- --------- --------- --------- --------- Net interest income 42,997 50,204 46,578 50,378 46,869 --------- --------- --------- --------- --------- Provision for loan losses (5,365) (3,979) (1,311) (2,142) -- --------- --------- --------- --------- --------- Net interest income after provision for loan losses 37,632 46,225 45,267 48,236 46,869 --------- --------- --------- --------- --------- Non-interest income: Gain on sales of mortgage loans 210,621 224,594 171,907 98,777 123,658 Gain on sales of current period securitized mortgage loans -- -- -- -- 19,960 Gain (loss) on sales of mortgage-backed securities and derivatives 9,849 (47) (850) 38,068 6,116 Unrealized gain (loss) on mortgage-backed securities and derivatives 1,050 (7,730) 9,315 (44,778) (10,965) Loan servicing fees 43,379 30,417 24,333 26,715 21,099 Amortization and impairment of mortgage servicing rights -- -- -- (18,745) (3,478) Change in fair value of mortgage servicing rights: Due to realization of cash flows (28,839) (26,306) (18,735) -- -- Due to changes in valuation assumptions, net of hedge gain (loss) (16,799) 7,476 114 -- -- --------- --------- --------- --------- --------- Net loan servicing (loss) fees (2,259) 11,587 5,712 7,970 17,621 --------- --------- --------- --------- --------- Other non-interest income 2,018 2,125 1,769 2,181 1,585 --------- --------- --------- --------- --------- Non-interest income 221,279 230,529 187,853 102,218 157,975 --------- --------- --------- --------- --------- Non-interest expenses: Salaries, commissions and benefits, net 105,676 103,157 99,267 95,237 101,378 Occupancy and equipment 19,228 19,763 17,970 16,459 15,328 Data processing and communications 5,700 6,733 7,126 6,402 6,479 Office supplies and expenses 5,346 5,145 4,332 4,612 5,024 Marketing and promotion 4,868 6,383 5,800 5,951 5,104 Travel and entertainment 7,798 7,793 6,753 6,982 4,670 Professional fees 6,076 5,013 5,331 3,586 3,744 Other 16,588 17,192 15,882 10,946 7,360 --------- --------- --------- --------- --------- Non-interest expenses 171,280 171,179 162,461 150,175 149,087 --------- --------- --------- --------- --------- Net income before income tax expense (benefit) 87,631 105,575 70,659 279 55,757 Income tax expense (benefit) 15,611 33,224 16,200 (16,419) 2,549 --------- --------- --------- --------- --------- Net income $ 72,020 $ 72,351 $ 54,459 $ 16,698 $ 53,208 ========= ========= ========= ========= ========= Dividends on preferred stock 3,305 3,304 3,305 3,304 3,304 --------- --------- --------- --------- --------- Net income available to common shareholders $ 68,715 $ 69,047 $ 51,154 $ 13,394 $ 49,904 ========= ========= ========= ========= ========= Per share data: Basic $ 1.37 $ 1.38 $ 1.03 $ 0.27 $ 1.10 Diluted $ 1.36 $ 1.37 $ 1.02 $ 0.27 $ 1.09 Weighted average number of shares - basic 50,148 50,056 49,715 49,605 45,174 Weighted average number of shares - diluted 50,553 50,487 50,070 49,998 45,669
12 AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands)
September 30, June 30, March 31, December 31, September 30, 2006 2006 2006 2005 2005 ------------- ------------ ------------ ------------ ------------- Assets: Cash and cash equivalents $ 298,079 $ 304,268 $ 572,591 $ 575,650 $ 624,424 Accounts receivable and servicing advances 350,965 342,244 327,586 329,132 335,736 Mortgage-backed securities 8,957,373 9,299,224 9,580,963 10,602,104 9,208,172 Mortgage loans held for sale, net 1,365,595 1,243,702 1,589,613 2,208,749 1,901,293 Mortgage loans held for investment, net 5,797,801 5,337,138 4,315,384 3,479,721 1,445,429 Derivative assets 26,323 139,397 102,267 44,594 67,185 Mortgage servicing rights, net 460,913 434,173 371,974 319,671 300,659 Premises and equipment, net 82,288 80,296 75,594 68,782 64,174 Goodwill 111,890 110,759 110,330 99,527 99,268 Other assets 53,100 34,398 30,708 26,815 31,697 ------------- ------------ ------------ ------------ ------------- Total assets $ 17,504,327 $ 17,325,599 $ 17,077,010 $ 17,754,745 $ 14,078,037 ============= ============ ============ ============ ============= Liabilities and Stockholders' Equity: Liabilities: Warehouse lines of credit $ 1,890,034 $ 1,476,958 $ 1,754,581 $ 3,474,191 $ 2,165,154 Drafts payable 8,749 12,349 16,377 20,754 18,763 Commercial paper 1,283,858 888,476 1,073,630 1,079,179 1,334,296 Reverse repurchase agreements 7,232,503 8,939,786 8,899,050 9,806,144 8,041,579 Collateralized debt obligations 3,484,873 3,724,878 2,905,199 1,057,906 -- Payable for securities purchased 1,221,105 -- 215,114 261,539 554,717 Derivative liabilities 40,170 3,280 7,512 16,773 -- Trust preferred securities 282,340 252,780 204,018 203,688 96,964 Accrued expenses and other liabilities 383,585 355,009 385,392 277,476 239,382 Notes payable 317,161 337,700 330,714 319,309 305,766 Income taxes payable 95,808 80,529 51,016 30,770 56,310 ------------- ------------ ------------ ------------ ------------- Total liabilities 16,240,186 16,071,745 15,842,603 16,547,729 12,812,931 ------------- ------------ ------------ ------------ ------------- Stockholders' Equity: Preferred stock 134,040 134,040 134,040 134,040 134,040 Common stock 502 501 500 496 496 Additional paid-in capital 962,903 960,995 958,175 947,512 946,105 Retained earnings 245,473 227,450 206,512 203,778 235,556 Accumulated other comprehensive loss (78,777) (69,132) (64,820) (78,810) (51,091) ------------- ------------ ------------ ------------ ------------- Total stockholders' equity 1,264,141 1,253,854 1,234,407 1,207,016 1,265,106 ------------- ------------ ------------ ------------ ------------- Total liabilities and stockholders' equity $ 17,504,327 $ 17,325,599 $ 17,077,010 $ 17,754,745 $ 14,078,037 ============= ============ ============ ============ ============= Number of shares outstanding - preferred 5,600,000 5,600,000 5,600,000 5,600,000 5,600,000 Number of shares outstanding - common 50,182,257 50,107,214 50,004,965 49,639,646 49,590,821
13 AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (In thousands)
Nine Months Three Months Ended Ended ------------------------------------------------------------------- ----------- Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, Sept. 30, 2006 2006 2006 2005 2005 2006 ----------- ----------- ----------- ----------- ----------- ----------- Preferred stock Balance at end of period $ 134,040 $ 134,040 $ 134,040 $ 134,040 $ 134,040 $ 134,040 ----------- ----------- ----------- ----------- ----------- ----------- Common stock Balance at beginning of period $ 501 $ 500 $ 496 $ 496 $ 405 $ 496 Issuance of common stock - earnouts -- -- 3 -- -- 3 Issuance of common stock - Omnibus Stock Plan 1 1 1 -- 1 3 Issuance of common stock - offering -- -- -- -- 90 -- ----------- ----------- ----------- ----------- ----------- ----------- Balance at end of period $ 502 $ 501 $ 500 $ 496 $ 496 $ 502 ----------- ----------- ----------- ----------- ----------- ----------- Additional paid-in capital Balance at beginning of period $ 960,995 $ 958,175 $ 947,512 $ 946,105 $ 638,595 $ 947,512 Issuance of common stock - earnouts 296 -- 9,555 -- 139 9,851 Issuance of common stock - Omnibus Stock Plan 1,067 1,126 651 857 488 2,844 Issuance of common stock - offering -- -- -- -- 304,033 -- Stock-based employee compensation expense 37 373 410 -- -- 820 Tax benefit for stock options exercised 332 1,198 -- 434 2,638 1,530 Restricted shares amortization 176 123 47 116 212 346 ----------- ----------- ----------- ----------- ----------- ----------- Balance at end of period $ 962,903 $ 960,995 $ 958,175 $ 947,512 $ 946,105 $ 962,903 ----------- ----------- ----------- ----------- ----------- ----------- Retained earnings Balance at beginning of period $ 227,450 $ 206,512 $ 203,778 $ 235,556 $ 224,442 $ 203,778 Cumulative-effect adjustment as of beginning of period (1) -- -- (2,917) -- -- (2,917) Net income 72,020 72,351 54,459 16,698 53,208 198,830 Dividends declared (53,997) (51,413) (48,808) (48,476) (42,094) (154,218) ----------- ----------- ----------- ----------- ----------- ----------- Balance at end of period $ 245,473 $ 227,450 $ 206,512 $ 203,778 $ 235,556 $ 245,473 ----------- ----------- ----------- ----------- ----------- ----------- Other comprehensive loss Balance at beginning of period $ (69,132) $ (64,820) $ (78,810) $ (51,091) $ (44,300) $ (78,810) Unrealized gain (loss) on mortgage- backed securities 75,429 (44,510) (35,765) (7,730) (15,918) (4,846) (Loss) gain on cash flow hedges, net of amortization (85,074) 40,198 49,755 (19,989) 9,127 4,879 ----------- ----------- ----------- ----------- ----------- ----------- Balance at end of period $ (78,777) $ (69,132) $ (64,820) $ (78,810) $ (51,091) $ (78,777) ----------- ----------- ----------- ----------- ----------- ----------- Total stockholders' equity $ 1,264,141 $ 1,253,854 $ 1,234,407 $ 1,207,016 $ 1,265,106 $ 1,264,141 =========== =========== =========== =========== =========== ===========
Note: (1) Effective January 1, 2006, the Company adopted SFAS 156 and elected the fair value option to subsequently measure its MSRs. 14 AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Three Months Ended ---------------------------------------------------------------------------- Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, 2006 2006 2006 2005 2005 ------------ ------------ ------------ ------------ ------------ Cash flows from operating activities: Net income $ 72,020 $ 72,351 $ 54,459 $ 16,698 $ 53,208 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 4,275 5,014 3,953 3,454 3,098 Provision for loan losses 5,365 3,979 1,311 2,142 -- Change in fair value of mortgage servicing rights 52,753 18,830 18,621 -- -- Amortization and impairment of mortgage servicing rights -- -- -- 18,745 3,478 Accretion and amortization of mortgage-backed securities, net 4,696 2,006 2,331 1,509 (2,571) Deferred cash flow hedge gain (loss), net of amortization 5,509 10,509 3,909 (346) 1,689 (Gain) loss on sales of mortgage-backed securities and derivatives (4,735) -- -- 876 2,819 Unrealized (gain) loss on mortgage-backed securities (1,588) 14,591 3,090 40,968 74,595 Unrealized loss (gain) on free standing derivatives 20,629 (1,038) (4,765) 6,149 (31,137) Increase (decrease) in forward delivery contracts 42,315 (6,036) (24,041) 24,124 (13,547) Capitalized mortgage servicing rights on securitized loans -- -- -- -- (27,536) Capitalized mortgage servicing rights on sold loans (79,493) (81,029) (69,768) (37,757) (14,762) (Increase) decrease in interest rate lock commitments (5,069) (4,447) 7,131 (10,508) 14,501 (Increase) decrease in mortgage loan basis adjustments (10,125) (2,156) 4,731 (32,201) (12,649) Excess tax benefits from share-based payment arrangements (332) (1,198) -- -- -- Other (569) (633) (198) (645) 2,196 (Increase) decrease in operating assets: Accounts receivable 2,740 (13,506) 6,829 18,156 (218,519) Servicing advances (11,461) (1,152) (3,281) (11,552) (382) Other assets (18,648) (3,582) (1,451) 4,882 (10,512) Increase (decrease) in operating liabilities: Accrued expenses and other liabilities 25,988 (32,977) 93,876 31,696 53,657 Income taxes payable 15,611 30,711 16,173 (25,106) 8,557 Origination of mortgage loans held for sale (14,664,704) (14,371,439) (12,203,014) (11,482,292) (12,394,139) Principal received from sales of mortgage loans held for sale 14,241,440 14,013,921 13,372,574 11,179,015 9,448,293 Proceeds from securitizations of mortgage loans held for sale -- -- -- -- 2,993,315 Additions to mortgage-backed securities and derivatives -- -- -- (152,666) (1,191,209) Principal proceeds from sales of self- originated mortgage-backed securities -- 99,086 1,809,796 1,333,188 -- Cash received from residual assets in securitizations 16,785 20,947 27,353 26,958 35,431 Principal repayments of mortgage-backed securities 35,677 60,485 93,845 212,927 274,035 ------------ ------------ ------------ ------------ ------------ Net cash (used in) provided by operating activities (250,921) (166,763) 3,213,464 1,168,414 (948,091) ------------ ------------ ------------ ------------ ------------ Cash flows from investing activities: Purchases of premises and equipment (6,267) (9,716) (10,765) (8,062) (5,831) Origination of mortgage loans held for investment (599,384) (560,003) (970,335) (2,084,025) (1,301,364) Proceeds from repayments and dispositions of mortgage loans held for investment 446,199 240,403 137,545 75,613 5,108 Purchases of mortgage-backed securities (1,666,650) (461,125) (1,389,336) (3,298,636) (2,417,565) Principal proceeds from sales of purchased mortgage-backed securities 1,503,760 -- -- 24,592 518,517 Principal repayments of purchased mortgage- backed securities 529,441 501,239 438,297 409,080 414,667 Net increase in investment in Federal Home Loan Bank stock, at cost (54) (108) -- -- -- Acquisition of business -- -- (550,077) -- -- ------------ ------------ ------------ ------------ ------------ Net cash provided by (used in) investing activities 207,045 (289,310) (2,344,671) (4,881,438) (2,786,468) ------------ ------------ ------------ ------------ ------------ Cash flows from financing activities: Increase (decrease) in warehouse lines of credit, net 413,076 (277,623) (1,719,610) 1,309,037 1,499,457 (Decrease) increase in reverse repurchase agreements, net (1,707,283) 40,736 (907,094) 1,764,565 1,703,949 (Decrease) increase in collateralized debt obligations (240,005) 819,679 1,847,293 1,057,906 -- Increase (decrease) in payable for securities purchased 1,221,105 (215,114) (46,425) (293,178) 554,717 Increase (decrease) in commercial paper, net 395,382 (185,154) (5,549) (255,117) 42,612 (Decrease) increase in drafts payable, net (3,600) (4,028) (4,377) 1,991 (7,775) Increase in trust preferred securities 29,560 48,762 330 106,724 48,550 (Decrease) increase in notes payable, net (20,539) 6,986 11,405 13,543 49,706 Proceeds from issuance of common stock 1,068 1,127 652 857 304,522 Excess tax benefits from share-based payment arrangements 332 1,198 -- -- -- Dividends paid (51,409) (48,819) (48,477) (42,078) (34,130) ------------ ------------ ------------ ------------ ------------ Net cash provided by (used in) financing activities 37,687 187,750 (871,852) 3,664,250 4,161,608 ------------ ------------ ------------ ------------ ------------ Net (decrease) increase in cash and cash equivalents (6,189) (268,323) (3,059) (48,774) 427,049 Cash and cash equivalents, beginning of period 304,268 572,591 575,650 624,424 197,375 ------------ ------------ ------------ ------------ ------------ Cash and cash equivalents, end of period $ 298,079 $ 304,268 $ 572,591 $ 575,650 $ 624,424 ============ ============ ============ ============ ============ Supplemental disclosure of non-cash investing activities: Net transfer of loans held for sale to loans held for investment $ 307,431 $ 699,519 $ -- $ -- $ -- ============ ============ ============ ============ ============
15 AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Nine Months Ended -------------------------- September 30, 2006 -------------------------- Cash flows from operating activities: Net income $ 198,830 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13,242 Provision for loan losses 10,655 Change in fair value of mortgage servicing rights 90,204 Accretion and amortization of mortgage-backed securities, net 9,033 Deferred cash flow hedge gain, net of amortization 19,927 Gain on sales of mortgage-backed securities and derivatives (4,735) Unrealized loss on mortgage-backed securities 16,093 Unrealized loss on free standing derivatives 14,826 Increase in forward delivery contracts 12,238 Capitalized mortgage servicing rights on sold loans (230,290) Increase in interest rate lock commitments (2,385) Increase in mortgage loan basis adjustments (7,550) Excess tax benefits from share-based payment arrangements (1,530) Other (1,400) Increase in operating assets: Accounts receivable (3,937) Servicing advances (15,894) Other assets (23,681) Increase in operating liabilities: Accrued expenses and other liabilities 86,887 Income taxes payable 62,495 Origination of mortgage loans held for sale (41,239,157) Principal received from sales of mortgage loans held for sale 41,627,935 Principal proceeds from sales of self-originated mortgage-backed securities 1,908,882 Cash received from residual assets in securitizations 65,085 Principal repayments of mortgage-backed securities 190,007 -------------------------- Net cash provided by operating activities 2,795,780 -------------------------- Cash flows from investing activities: Purchases of premises and equipment (26,748) Origination of mortgage loans held for investment (2,129,722) Proceeds from repayments and dispositions of mortgage loans held for investment 824,147 Purchases of mortgage-backed securities (3,517,111) Principal proceeds from sales of purchased mortgage-backed securities 1,503,760 Principal repayments of purchased mortgage-backed securities 1,468,977 Net increase in investment in Federal Home Loan Bank stock, at cost (162) Acquisition of business (550,077) -------------------------- Net cash used in investing activities (2,426,936) -------------------------- Cash flows from financing activities: Decrease in warehouse lines of credit, net (1,584,157) Decrease in reverse repurchase agreements, net (2,573,641) Increase in collateralized debt obligations 2,426,967 Increase in payable for securities purchased 959,566 Increase in commercial paper, net 204,679 Decrease in drafts payable, net (12,005) Increase in trust preferred securities 78,652 Decrease in notes payable, net (2,148) Proceeds from issuance of common stock 2,847 Excess tax benefits from share-based payment arrangements 1,530 Dividends paid (148,705) -------------------------- Net cash used in financing activities (646,415) -------------------------- Net decrease in cash and cash equivalents (277,571) Cash and cash equivalents, beginning of period 575,650 -------------------------- Cash and cash equivalents, end of period $ 298,079 ========================== Supplemental disclosure of non-cash investing activities: Net transfer of loans held for sale to loans held for investment $ 1,006,950 ==========================
16 AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES FAIR VALUE OF FINANCIAL INSTRUMENTS (Unaudited) (In thousands)
September 30, 2006 ----------------------------------------------------- Fair Value in Excess of Carrying Value Fair Value Carrying Value -------------- ---------- ----------------------- Assets: Cash and cash equivalents $ 298,079 $ 298,079 $ -- Accounts receivable and servicing advances 350,965 350,965 -- Mortgage-backed securities 8,957,373 8,957,373 -- Mortgage loans held for sale, net 1,365,595 1,397,843 32,248 Mortgage loans held for investment, net 5,797,801 5,912,358 114,557 Mortgage servicing rights, net 460,913 460,913 -- Derivative assets (1) 26,323 96,686 70,363 ----------------------- $ 217,168 ----------------------- Carrying Value in Excess of (Lower Than) Fair Value ----------------------- Liabilities: Warehouse lines of credit $ 1,890,034 $1,890,034 $ -- Drafts payable 8,749 8,749 -- Commercial paper 1,283,858 1,283,858 -- Reverse repurchase agreements 7,232,503 7,232,534 (31) Collateralized debt obligations 3,484,873 3,486,483 (1,610) Derivative liabilities 40,170 40,170 -- Trust preferred securities 282,340 282,340 -- Notes payable 317,161 317,161 -- ----------------------- $ (1,641) ----------------------- Fair Value in Excess of Carrying Value ----------------------- $ 215,527 =======================
Note: (1) Derivative assets includes interest rate lock commitments ("IRLCs") to fund mortgage loans. The carrying value excludes the value of the mortgage servicing rights ("MSRs") attached to the IRLCs in accordance with SEC Staff Accounting Bulletin No. 105. The fair value includes the value of MSRs. 17 AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES OPERATING STATISTICS
Nine Months Ended ------------------------------------ September 30, 2005 ------------------------------------ (1) GAAP Adjustments As Adjusted ------- ----------- ----------- Mortgage Holdings Segment: - ------------------------------------------------------------------------------------- Investment Portfolio Performance (2): - ------------------------------------- Average loans and mortgage-backed securities in portfolio ($ billions) 6.6 0.5 7.1 Interest income ($ millions) 219.9 19.9 239.8 Average portfolio yield 4.45% 4.50% Interest expense ($ millions) 154.1 7.7 161.8 Average cost of funds and hedges 3.34% 3.29% Net interest income ($ millions) 65.8 12.2 78.0 Net interest margin 1.33% 1.46% Interest carry on free standing derivatives ($ millions) -8.3 -8.3 Net interest income including interest carry on free standing derivatives ($ millions) 57.5 12.2 69.7 Net interest margin including interest carry on free standing derivatives 1.16% 1.31% Reconciliation of Changes in Mortgage Holdings (3): - ------------------------------------------------------------------------------------- Net change in mortgage-backed securities ($ billions) -1.1 -1.1 Additions to loans in portfolio ($ billions) 1.4 1.4 Principal repayments of loans in portfolio ($ billions) 0.0 0.0 Net additions to loans in portfolio ($ billions) 1.4 1.4 Loans and mortgage-backed securities held - end of period ($ billions) 10.7 10.7 Mortgage-backed securities period end duration gap (in years) 0.17 0.17 Loan Origination Segment: - ------------------------------------------------------------------------------------- Loan originations ($ billions) 31.7 31.7 Refinance 45% 45% ARM 50% 50% Average mortgage loans, net ($ billions) (3) 5.3 -1.2 4.1 Net interest income excluding trust preferred and other interest expense ($ millions) 92.8 -22.4 70.4 Net interest margin excluding trust preferred and other interest expense 2.40% 2.32% Trust preferred and other interest expense ($ millions) 3.2 3.2 Net interest income ($ millions) 89.6 -22.4 67.2 Loans securitized and held ($ billions) 4.4 -1.5 2.9 Loans securitized and sold ($ billions) 12.3 -2.0 10.3 Loans sold to third parties ($ billions) 17.5 17.5 Gain on sales of loans, net of hedge gains ($ millions) (4) 515.5 -43.5 472.0 Excess of fair value over carrying value of loans added to investment portfolio ($ millions) 27.8 27.8 ------- ----------- ----------- Total ($ millions) 543.3 -43.5 499.8 ------- ----------- ----------- Gain on sales of loans, net of hedge gains (% of principal) (4) 1.74% 1.60% Excess of fair value over carrying value of loans added to investment portfolio (% of principal) 1.92% 1.92% Total (% of principal) 1.75% 1.61% Applications accepted ($ billions) 50.0 50.0 Application pipeline ($ billions) 11.6 11.6 September 30, 2005 ------------------------------------ Loan Servicing Segment: - ------------------------------------------------------------------------------------- Loan servicing portfolio - total with warehouse ($ billions) 27.5 27.5 Loan servicing portfolio - loans sold or securitized ($ billions) 24.2 24.2 Interest expense ($ millions) 4.7 4.7 Weighted average note rate 5.73% 5.73% Weighted average service fee 0.331% 0.331% Average age (in months) 13 13
Notes: (1) - Adjustments reflect the net effect on the period presented to reconcile the Company's operating statistics, results of operations and financial condition prepared in accordance with GAAP to the amounts adjusted as if the Company's fourth quarter 2004 securitization had qualified for SFAS 140 sale accounting treatment in the fourth quarter of 2004. (2) Excludes loans held for investment pending securitization. (3) Includes loans held for investment pending securitization. (4) Prior to the fourth quarter of 2005, includes gain on current period securitizations, net of hedge gains. A-1 AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts)
Nine Months Ended --------------------------------------- September 30, 2005 --------------------------------------- (1) GAAP Adjustments As Adjusted --------- ----------- ----------- Net interest income: Interest income $ 462,250 $ (26,925) $ 435,325 Interest expense (311,596) 16,766 (294,830) --------- ----------- ----------- Net interest income 150,654 (10,159) 140,495 --------- ----------- ----------- Non-interest income: Gain on sales of mortgage loans 236,288 -- 236,288 Gain on sales of current period securitized mortgage loans 194,256 (25,258) 168,998 Gain on sales of mortgage-backed securities and derivatives 12,868 (1,400) 11,468 Unrealized gain (loss) on mortgage-backed securities and derivatives 36,242 (37,263) (1,021) Loan servicing fees 49,381 2,851 52,232 Amortization and impairment of mortgage servicing rights (41,790) (122) (41,912) Change in fair value of mortgage servicing rights -- -- -- --------- ----------- ----------- Net loan servicing fees 7,591 2,729 10,320 --------- ----------- ----------- Other non-interest income 5,594 -- 5,594 --------- ----------- ----------- Non-interest income 492,839 (61,192) 431,647 --------- ----------- ----------- Non-interest expenses: Salaries, commissions and benefits, net 264,712 -- 264,712 Occupancy and equipment 42,396 -- 42,396 Data processing and communications 18,386 -- 18,386 Office supplies and expenses 15,110 -- 15,110 Marketing and promotion 14,360 -- 14,360 Travel and entertainment 14,025 -- 14,025 Professional fees 10,646 -- 10,646 Other 21,072 -- 21,072 --------- ----------- ----------- Non-interest expenses 400,707 -- 400,707 --------- ----------- ----------- Net income before income tax expense 242,786 (71,351) 171,435 Income tax benefit (1,302) -- (1,302) --------- ----------- ----------- Net income $ 244,088 $ (71,351) $ 172,737 ========= =========== =========== Dividends on preferred stock 9,913 -- 9,913 --------- ----------- ----------- Net income available to common shareholders $ 234,175 $ (71,351) $ 162,824 ========= =========== =========== Per share data: Basic $ 5.58 $ (1.70) $ 3.88 Diluted $ 5.51 $ (1.68) $ 3.83 Weighted average number of shares - basic 41,973 41,973 41,973 Weighted average number of shares - diluted 42,471 42,471 42,471
Note: (1) - Adjustments reflect the net effect on the period presented to reconcile the Company's operating statistics, results of operations and financial condition prepared in accordance with GAAP to the amounts adjusted as if the Company's fourth quarter 2004 securitization had qualified for SFAS 140 sale accounting treatment in the fourth quarter of 2004. A-2 -----END PRIVACY-ENHANCED MESSAGE-----