Mortgagit (NYSE:MHL)
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NEW YORK, Nov. 7 /PRNewswire-FirstCall/ -- MortgageIT Holdings, Inc. (NYSE:MHL), a residential mortgage company organized as a real estate investment trust ("REIT"), today announced operating and financial results for the three and nine months ended September 30, 2006.
The Company reported GAAP net income for the third quarter of 2006 of $1.4 million, or $0.05 per diluted share. Third quarter earnings included expenses of $2.1 million, or $0.07 per diluted share, related to the proposed acquisition of the Company by Deutsche Bank. For the nine months ended September 30, 2006, GAAP net income was $2.6 million, or $0.09 per diluted share, which included $2.3 million, or $0.08 per diluted share, of acquisition-related expenses. Net income per diluted share is based upon weighted average outstanding shares of 28.8 million and 28.6 million for the third quarter and the nine-month period, respectively. Additional operating information is included in the "Operating Statistics Table" provided later in this press release.
Mortgage Banking and Portfolio Financial and Operating Highlights
-- During the third quarter of 2006, the Company funded $7.49 billion of
mortgage loan originations, a decrease of 19% over the prior year
period. The Company's prime wholesale business funded $6.35 billion of
mortgage loan originations during the third quarter of 2006, which
reflected an increase of 4% over the prior year period. The decline in
total originations primarily resulted from the Company's exit from the
national wholesale sub-prime mortgage loan origination market in the
first quarter of 2006. Also, during the third quarter of 2006, the
Company began to wind down its correspondent lending channel, a process
it expects to complete during the fourth quarter.
-- The Company sold $7.10 billion of loans to third parties during the
third quarter and recognized a gain on sale margin of 100 bps, an
increase of 7 bps from the prior year period.
-- The Company did not complete any loan securitizations during the third
quarter ended September 30, 2006. The Company's 100% self-originated
portfolio totaled approximately $4.6 billion at the end of the third
quarter and included approximately $21.0 million of self-originated
mortgage backed securities that the Company retained as part of a
securitized loan sale.
Pending Acquisition by Deutsche Bank
-- On July 12, 2006, the Company announced that it will be acquired by
Deutsche Bank in an all cash transaction. The acquisition is expected
to close during the first quarter of 2007, subject to various closing
conditions. Regulatory applications and notices have been filed with
various state regulatory authorities and integration plans continue.
Approvals have been received from many of the state regulatory
authorities. The Company expects that all remaining regulatory
approvals will be received by the time the transaction closes.
Dividend Guidance
-- The Company expects to pay a dividend of $0.05 to $0.10 per share for
the fourth quarter of 2006.
-- If, as expected, Deutsche Bank's acquisition of the Company occurs
during the first quarter of 2007, a portion of the expenses incurred by
the Company relating to the acquisition will be allocated to the REIT
portfolio in that quarter. As a result, the Company expects to pay
little or no dividend for the first quarter of 2007.
Adjusted Financial Measures
In previous quarterly announcements of operating and financial results, in addition to reporting financial measures prepared in accordance with GAAP, the Company reported certain non-GAAP financial measures. Management believes non-GAAP measures no longer provide a useful gauge of the Company's operating performance and, therefore, intends to report only financial measures prepared in accordance with GAAP going forward.
Third Quarter 2006 Form 10-Q
The Company will not hold an investor conference call to discuss its third quarter 2006 financial results. For additional details on the Company's third quarter 2006 financial results, please see the Company's Quarterly Report on Form 10-Q, which will be filed with the SEC by November 9, 2006.
About MortgageIT Holdings, Inc.
MortgageIT Holdings, Inc. (NYSE:MHL) is a self-administered mortgage real estate investment trust ("REIT") focused on the residential lending market. The Company self-originates its investment portfolio of high quality adjustable rate mortgage ("ARM") loans through MortgageIT, Inc., its wholly owned residential mortgage banking subsidiary. MortgageIT, Inc. is a full- service residential mortgage banking company that is licensed to originate loans throughout the United States. MortgageIT Holdings is organized and conducts its operations to qualify as a REIT for federal income tax purposes. MortgageIT is organized and operates as MortgageIT Holdings' taxable REIT subsidiary. For more information, please visit http://www.mortgageitholdings.com/.
Forward-Looking Statements
Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that relate to future, not past, events. In this context, forward-looking statements often address the Company's expected future business and financial performance, and often contain words such as "expects," "anticipates," "intends," "plans," "believes," "will" or other similar words or expressions. Forward-looking statements, by their nature, address matters that are, to different degrees, uncertain and include, among other things, statements relating to the Company's ability to fund a fully-leveraged, self-originated loan portfolio, its anticipated loan funding volume and the Company's ability to pay dividends. These statements are based on the current economic environment and management's current expectations and beliefs, and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Forward-looking statements are inherently subject to significant economic, competitive, and other contingencies that are beyond the control of management. The Company can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from the Company's expectations include, but are not limited to, MortgageIT, Inc.'s continued ability to originate new loans, including loans that the Company deems suitable for its securitization portfolio; changes in the capital markets, including changes in interest rates and/or credit spreads; and other risks detailed in the Company's Annual Report on Form 10-K that was filed with the Securities and Exchange Commission ("SEC") on March 15, 2006 and from time to time in the Company's other SEC filings. Such forward-looking statements speak only as of the date of this press release. The Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.
MortgageIT Holdings, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
September December
30, 31,
2006 2005
(Unaudited)
ASSETS
Cash and cash equivalents $43,860 $36,757
Restricted cash 2,641 712
Marketable securities held to maturity - 3,675
Portfolio ARM Loans
ARM loans collateralizing debt obligations, net 4,642,282 4,681,554
ARM loans held for securitization, net - 282
Total Portfolio ARM Loans 4,642,282 4,681,836
Mortgage loans held for sale 3,499,918 3,378,197
Mortgage-backed securities - available for sale 20,982 23,357
Hedging instruments 46,639 54,472
Accounts receivable, net of allowance 140,936 146,043
Prepaids and other assets 44,373 31,262
Goodwill 11,639 11,639
Property and equipment, net 16,607 13,941
Total assets $8,469,877 $8,381,891
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Collateralized debt obligations $4,442,590 $4,485,197
Warehouse lines payable 3,318,868 3,177,990
Repurchase agreements 94,692 87,058
Hedging instruments 7,422 8,801
Junior subordinated debentures 128,871 77,324
Notes payable and other debt 15,000 15,000
Accounts payable, accrued expenses and other
liabilities 130,767 176,619
Total liabilities 8,138,210 8,027,989
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value: 125,000,000 shares
authorized; 29,276,384 issued and 29,185,984
outstanding in 2006; 28,889,540 issued and
28,799,140 outstanding in 2005 293 289
Treasury stock (1,178) (1,178)
Additional paid-in capital 395,016 393,304
Unearned compensation - restricted stock (3,174) (5,889)
Accumulated other comprehensive income (loss) 8,189 13,225
Accumulated deficit (67,479) (45,849)
Total stockholders' equity 331,667 353,902
Total liabilities and stockholders' equity $8,469,877 $8,381,891
MortgageIT Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars and shares in thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
Revenues:
Gain on sale of mortgage loans $71,119 $61,612 $185,744 $140,704
Brokerage revenues 4,301 7,506 16,549 20,179
Interest income 114,341 90,384 344,884 212,036
Interest expense (115,530) (75,741)(336,853)(156,482)
Net interest (expense) income (1,189) 14,643 8,031 55,554
Realized and unrealized (loss) gain
on hedging instruments (1,727) - 1,706 9,742
Other 797 209 1,654 715
Total revenues 73,301 83,970 213,684 226,894
Operating expenses:
Compensation and employee benefits 38,742 39,037 111,388 99,051
Processing expenses 16,515 16,014 63,301 40,064
General and administrative expenses 7,130 6,112 22,854 19,117
Rent 2,748 2,700 9,942 7,257
Marketing, loan acquisition and
business development 1,320 1,206 3,864 3,126
Professional fees 4,437 2,411 10,879 7,238
Depreciation and amortization 1,699 984 4,888 2,621
Total operating expenses 72,591 68,464 227,116 178,474
Income (loss) before income taxes 710 15,506 (13,432) 48,420
Income tax (benefit) expense (731) 6,841 (15,989) 15,607
Net income $1,441 $8,665 $2,557 $32,813
Per share data:
Basic $0.05 $0.31 $0.09 $1.47
Diluted $0.05 $0.30 $0.09 $1.44
Weighted average number of shares -
basic 28,491 28,077 28,409 22,381
Weighted average number of shares -
diluted 28,805 28,427 28,626 22,788
Segment Financial Results for the Third Quarter of 2006
($ thousands - except EPS) Mortgage Banking Portfolio Consolidated
Amount EPS Amount EPS Amount EPS
After tax (loss)/earnings
prior to elimination (2,426) (0.08) 2,704 0.09 278 0.01
Elimination (1) 111 0.00 1,052 0.04 1,163 0.04
After tax (loss)/earnings
net of elimination (2,315) (0.08) 3,756 0.13 1,441 0.05
Acquisition related expenses 1,041 0.04 1,105 0.04 2,147 0.07
Earnings excluding
acquisition related
expenses (1,274) (0.04) 4,861 0.17 3,588 0.12
Segment Financial Results for the Nine Months ended September 30th of 2006
($ thousands - except EPS) Mortgage Banking Portfolio Consolidated
Amount EPS Amount EPS Amount EPS
After tax (loss)/earnings
prior to elimination (21,780) (0.76) 19,701 0.69 (2,079) (0.07)
Elimination (1) 298 0.01 4,338 0.15 4,636 0.16
After tax (loss)/earnings
net of elimination (21,482) (0.75) 24,039 0.84 2,557 0.09
Acquisition related expenses 1,159 0.04 1,105 0.04 2,264 0.08
Earnings excluding
acquisition related
expenses (20,323) (0.71) 25,144 0.88 4,821 0.17
(1) Eliminates the economic impact of inter-company loan sales from the
mortgage bank to the portfolio.
Operating Statistics Table
Rolling five quarter information
(Quarter ended)
Sep 30, Dec 31, Mar 31, Jun 30, Sep 30,
2005 2005 2006 2006 2006
Mortgage Banking Metrics
Loan volume ($ millions) $9,249 $9,244 $7,195 $7,589 $7,489
% Purchase 48% 47% 44% 48% 45%
% Refinance 52% 53% 56% 52% 55%
% Funded in MortgageIT name
(banked) 95% 96% 95% 95% 93%
Held for sale warehouse balance
(avg) ($ millions) $3,655 $4,828 $4,267 $3,784 $3,612
Warehouse weighted average coupon 5.24% 5.59% 5.60% 5.63% 5.29%
Warehouse borrowing cost 4.36% 4.95% 5.31% 5.86% 5.67%
Warehouse net interest margin 0.88% 0.64% 0.29% -0.22% -0.38%
Number of production branches 58 54 49 47 46
Gain on sale on total loans sold
to third parties (Bps) 93 71 71 105 100
Gain on sale prime loans sold to
third parties (Bps) 80 70 92 107 102
Gain on sale sub-prime loans
sold to third parties (Bps) 175 75 (232) (147) (173)
Gain on sale on loans transferred
to portfolio (Bps) 78 66 NM NM NM
Margin on loans brokered (Bps) 128 122 135 130 129
Loan Portfolio Metrics
Average loan assets in portfolio
($ millions) $4,197 $4,804 $4,939 $5,115 $4,827
Weighted average coupon of loans 5.37% 5.41% 5.48% 5.60% 5.64%
Scheduled loan basis amortization 0.28% 0.26% 0.18% 0.28% 0.17%
Incremental loan basis 0.08% 0.00% 0.00% 0.00% 0.00%
amortization due to higher
prepayment rates
Net weighted average coupon 5.01% 5.15% 5.30% 5.32% 5.47%
Interest expense (net of hedging) 3.93% 4.19% 4.47% 4.52% 5.10%
Net interest margin 1.08% 0.96% 0.83% 0.80% 0.37%
General and administrative
(includes servicing exp) 0.34% 0.07% 0.15% 0.17% 0.15%
Credit provision 0.09% 0.09% 0.03% 0.01% 0.04%
Acquisition related expenses 0.00% 0.00% 0.00% 0.00% 0.09%
Loan portfolio return on assets 0.65% 0.80% 0.65% 0.62% 0.09%
Loan portfolio return on assets 0.73% 0.80% 0.65% 0.62% 0.18%
prior to increased
prepayments and acquisition
related expenses
Credit Reserve for HFI Portfolio
(Based on Average Balance)
Credit reserve balance 0.073% 0.086% 0.090% 0.084% 0.083%
60 to 89 days past due 0.26% 0.26% 0.25% 0.22% 0.20%
Over 90 days past due 0.04% 0.12% 0.03% 0.06% 0.21%
Foreclosure 0.13% 0.09% 0.24% 0.32% 0.41%
Total past due and foreclosure 0.43% 0.47% 0.52% 0.60% 0.81%
DATASOURCE: MortgageIT Holdings, Inc.
CONTACT: Investors: Sean McGrath of MortgageIT Holdings, Inc.,
+1-212-651-4637; or Joe LoBello of Brainerd Communicators, Inc.,
+1-212-986-6667, for MortgageIT Holdings, Inc.
Web site: http://www.mortgageitholdings.com/