Housing Bubble
American Home Mortgage reports fourth quarter results
American Home Mortgage Holdings, Inc., one of the nation's largest independent retail mortgage bankers, today announced fourth quarter earnings rose 41% to $13.5 million from $9.6 million in the fourth quarter of 2001. Earnings-per-share was $0.81 per basic share and $0.80 per fully diluted share. The Company achieved record levels of earnings and loan production.
American Home also announced its Board of Directors voted to increase the regular quarterly dividends to $0.10 per share from its current level of $0.05 per share and declared a dividend of $0.10 payable on April 17, 2003 to shareholders of record on April 3, 2003. This is the third increase in the Company's dividend over the last 12 months.
Financial Highlights:
- Earnings per share on a fully diluted basis for the fourth quarter was $0.80, compared to $0.77 for the same period in 2001.
- Earnings per share on a fully diluted basis for the year was $2.65, compared to $2.14 for 2001, before the cumulative effect of change in accounting principle.
- Revenue rose 104% to $85.0 million for the fourth quarter from $41.7 million for the same period in 2001.
- Revenue rose 82% to $233.1 million for the year from $128.1 million for 2001.
Michael Strauss, chairman and chief executive commented: "2002 was an outstanding year for American Home Mortgage. Not only did the Company achieve record financial results, but we also substantially expanded our franchise and acquired a servicing portfolio that should produce significant revenue and earnings when interest rates rise. During the year we enhanced our senior management team and continued to improve our business processes and efficiencies. We believe we are well-positioned for the future both before and after anticipated increases in interest rates occur."
Fourth Quarter Highlights
The quarter benefited from continued high refinancing activity which more than offset losses from mortgage loan servicing. Refinancing accounted for 72% of loan originations. Total gross revenue from loan production, including warehouse net interest margin, was $91.0 million. Servicing experienced a loss of $7.9 million primarily due to $19.9 million of servicing amortization and servicing impairment.
2003 Outlook
During the first seventeen business days of 2003, American Home continued to receive a high volume of applications. Applications for the seventeen days averaged $88 million per day, which would equate to a run-rate of $5.4 billion of applications for the quarter compared to actual applications of $5.8 billion for the fourth quarter of 2002. However, the Company projects interest rates will rise during 2003, and that when rates rise, applications, and subsequently loan production, will be reduced.
American Home projects its loan production in 2003 will be $11.0 billion to $11.5 billion. This compares to total 2002 production, (including Columbia National's production prior to its merger with the Company) of $13.2 billion. The projection includes an assumption the Company's market share will increase to .55% compared to .52% in 2002, and 2003 mortgage lending nationwide will decline 18%, as predicted by Fannie Mae's forecast, to $2.072 trillion from $2.526 trillion in 2002.
In 2003, the Company will seek to employ three counter-cyclical / diversification strategies to reduce the impact of projected lower loan originations on its earnings.
Given the impact of projected reductions in volume as predicted by FNMA's estimates and the benefits of cost control, but without factoring in the effect of potential acquisitions, the Company projects its 2003 annual earnings will be between $2.40 and $2.50 per share.
