ATLANTA, Aug. 7 /PRNewswire-FirstCall/ -- HomeBanc Corp. ("HomeBanc" or the "Company"), a real estate investment trust ("REIT"), today reported the Company's consolidated results of operations for the three- and six-month periods ended June 30, 2006.
Financial Highlights
- Estimated REIT taxable income available to holders of common stock of
$15.7 million, or $0.28 per share, for the three months ended June 30,
2006;
- GAAP consolidated net income attributable to holders of common stock of
$1.6 million, or $0.03 per diluted share, for the three months ended
June 30, 2006; the amounts give effect to the distribution of preferred
dividends;
- REIT portfolio assets, comprised of mortgage loans held for investment
(net) and securities held to maturity and available for sale, of $6.1
billion at June 30, 2006, representing a 2% increase over the balance
at March 31, 2006;
- Mortgage loan origination volume of $1.45 billion for the three months
ended June 30, 2006; and
- New loan application volume of $1.62 billion for the three months ended
June 30, 2006.
Patrick S. Flood, HomeBanc Chairman and CEO, said, "During the second quarter, we continued to focus on executing Phase II of our strategy. Our performance during the quarter reflects this focus, as well as the effects of a number of extremely challenging market conditions including a seventeenth consecutive Fed rate increase, industry overcapacity, aggressive pricing and credit practices, and of particular importance to HomeBanc, unusual and unfavorable real estate conditions in Florida. We currently expect that these market conditions will prevail throughout 2006. While these conditions are challenging, we maintain our focus on executing our strategic plan and are hopeful that conditions will improve by mid-2007."
Comparison of the Three Months Ended June 30, 2006 and 2005
- Total consolidated revenues increased $5.3 million, or 19%, to $33.5
million for the second quarter of 2006, compared to $28.2 million for
the same quarter of 2005, due primarily to the growth in net interest
income resulting from our larger portfolio of mortgage loans held for
investment and investment securities;
- Net interest income after provision for loan losses was $19.9 million
for the three months ended June 30, 2006, representing an increase of
$4.3 million from $15.5 million for the same period of 2005;
- Net gain on sale of mortgage loans was $11.2 million during the period,
or 77 basis points ("bps"), compared to $11.9 million, or 160 bps on
loans sold in the same period of 2005;
- Total expenses for the quarter as a percentage of average assets
decreased to .49% for the second quarter of 2006 from .73% for the
second quarter of 2005; and
- Total consolidated GAAP net income available to holders of common stock
was $1.6 million for the quarter ended June 30, 2006, compared to a net
loss of $3.6 million for the same period of 2005.
Comparison of the Six Months Ended June 30, 2006 and 2005
- Total consolidated revenues increased 47%, or $23.0 million, to $71.9
million for the six months ended June 30, 2006, compared to $48.9
million for the same period of 2005, due primarily to the growth in net
interest income resulting from mortgage loans held for investment and
investment securities and the impact of derivative financial
instruments;
- Total expenses for the six months ended June 30, 2006 as a percentage
of average assets decreased to 1.07% from 1.57% for the same period of
2005; and
- Total consolidated GAAP net income available to holders of common stock
was $2.1 million for the six months ended June 30, 2006, compared to a
net loss of $11.2 million for the same period of 2005.
The Company's estimated REIT taxable income available to holders of common stock for the three- and six-month periods ended June 30, 2006 was $15.7 million and $36.1 million, respectively. Estimated REIT taxable income available to holders of common stock, as defined in the following table, is a non-GAAP financial measure. Because of the REIT tax requirements on distributions, management believes that estimated REIT taxable income available to holders of common stock is an additional meaningful measure to evaluate our performance. The most comparable GAAP measure is net income (loss) attributable to holders of common stock which reflects the impact of dividends on preferred stock. Estimated REIT taxable income available to holders of common stock should not be considered as a substitute for any measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other companies. The Company uses estimated REIT taxable income available to holders of common stock as a basis for establishing the amount of dividends payable to holders of its common stock. The principal differences between net income attributable to holders of common stock and estimated REIT taxable income available to holders of common stock in the periods are intercompany gains or losses on the sale of loans from our taxable REIT subsidiary ("TRS") to HomeBanc that are excluded under GAAP in the Company's consolidated financial statements, amortization of those gains or losses and the creation of mortgage servicing rights, which give rise to income under Statement of Financial Accounting Standards ("SFAS") No. 140 but are excluded from income for income tax purposes.
The following table presents a reconciliation of (loss) income before income taxes to net income attributable to holders of common stock and to estimated REIT taxable income available to holders of common stock for the three- and six-month periods ended June 30, 2006:
Three Months Six Months
Ended Ended
($ in thousands) June 30, 2006 June 30, 2006
(Loss) income before income taxes $(256) $34
Income tax benefit (3,126) (3,822)
Net income (loss) 2,870 3,856
Preferred stock dividend (1,250) (1,986)
Cumulative effect of change in accounting
principle - 270
Net income available to holders of common stock 1,620 2,140
Income tax benefit (3,126) (3,822)
Book/tax differences(1) (9,522) (7,550)
Taxable loss of REIT subsidiaries 26,730 45,371
Estimated REIT taxable income available
to holders of common stock(2) $15,702 $36,139
(1) Consists of various transactions and balances that are treated
differently for GAAP and income tax purposes, including both permanent
and temporary differences. Common differences include intercompany
gains or losses on the sale of loans from our TRS to HomeBanc Corp.,
which are excluded from income under SFAS No. 65, as amended, but are
included in income for income tax purposes; the amortization of these
intercompany gains or losses; and the creation of mortgage servicing
rights, which give rise to income under SFAS No. 140 but are excluded
from income for income tax purposes.
(2) We define estimated REIT taxable income available to holders of common
stock to be estimated REIT taxable income calculated under the
Internal Revenue Code of 1986, as amended, for purposes of the REIT
distribution requirement, less dividends applicable to preferred
stock. A REIT is required to distribute at least 90% of its REIT
taxable income, which, in general, includes all dividends received
from TRSs (generally, calculated without regard to the dividends paid
deduction for distributions paid to REIT shareholders, and earnings
retained by TRSs), plus 90% of net after-tax income from foreclosure
property.
Revenues
Net interest income after provision for loan losses was $19.9 million for the three months ended June 30, 2006, an increase of $4.3 million, from $15.5 million for the same period of 2005. This increase is primarily due to the growth in net interest income resulting from the accumulation of mortgage loans held for investment and the mortgage backed securities ("MBS") investment strategy initiated in the fourth quarter of 2005. The Company's portfolio of loans held for investment and securities held to maturity and available for sale increased 38% to $6.1 billion at June 30, 2006 from $4.4 billion at June 30, 2005. The Company's net gain on sale of mortgage loans for the three months ended June 30, 2006 was $11.2 million. The Company sold $1.5 billion of loans during the period.
Origination Volume
Mr. Flood added, "For the first time in our history, we are experiencing a downturn that is consistent with the downturn in the national market, largely as a result of the unfavorable conditions prevailing in our Florida markets. Accelerated housing appreciation, combined with five recent hurricanes and the subsequent increase in insurance costs and higher interest rates, are all weighing heavily on the Florida market. However, based on long-term demographic trends and a 3.3% unemployment rate, we expect that Florida will recover and again be a positive contributor to our long-term growth plans."
The Mortgage Bankers Association Long-Term Mortgage Finance Forecast dated July 12, 2006 (the "MBA Forecast") predicts an 18% decline in total mortgage originations in 2006 as compared to 2005. Our total mortgage originations decreased by approximately 19% during the second quarter of 2006 compared to the second quarter of 2005.
The Company's decline of total originations in the period was driven by a significant decline in our Florida markets of approximately 28%, which is the Company's largest market, accounting for approximately 48% of total originations for the first six months of 2006. The Florida Association of Realtors' website estimated a 30% decrease in sales of existing homes during the second quarter of 2006 compared to the same period in the prior year. In the Company's two other markets, Georgia experienced a decline of 14% and North Carolina experienced an increase of 28% in the current quarter when compared to the prior-year period.
Loans Held for Investment
Loans held for investment of $4.8 billion at June 30, 2006, together with MBS held to maturity and available for sale of $1.3 billion, were 2% greater than loans held for investment of $5.3 billion and MBS held to maturity and available for sale of $654 million at March 31, 2006. The net interest margin was 1.33% for the three months ended June 30, 2006. The duration gap for the portfolio as measured by the net interest reset period was estimated to be 0.4 months at June 30, 2006. During the quarter, $210 million of loans were transferred to the REIT portfolio and $355 million of loans were repaid, representing an annualized constant prepayment rate of 24%. During the quarter, the Company changed its intent with respect to $357 million of loans held for investment and transferred the loans to mortgage loans held for sale. For consolidated GAAP purposes, no gain on sale is recognized on loans transferred from the TRS to the REIT or vice versa.
The following table presents the Company's net interest margin for the three- and six-month periods ended June 30, 2006:
Estimated
Average Revenue/ Annualized
Balance (Expense) Rate/Yield
$ in thousands
Three months ended
June 30, 2006
Mortgage loans $5,604,744 $87,004 6.23%
Mortgage-backed securities 836,616 10,771 5.16
Borrowings to finance mortgage
loans 5,544,198 (77,450) (5.60)
Mortgage-backed security
repurchase agreements 743,866 (8,632) (4.65)
Impact of derivative financial
instruments 9,670 0.62
Net interest margin $21,363 1.33%
Six months ended
June 30, 2006
Mortgage loans $5,689,218 $172,031 6.10%
Mortgage-backed securities 611,611 16,130 5.32
Borrowings to finance mortgage
loans 5,591,253 (147,928) (5.34)
Mortgage-backed security
repurchase agreements 559,690 (12,494) (4.50)
Impact of derivative financial
instruments 22,502 0.74
Net interest margin $50,241 1.61%
Loan Servicing
The Company serviced $6.9 billion of unpaid principal balance of loans, excluding loans held for sale, related to 33,636 mortgage loans at June 30, 2006, of which 25,252 loans were owned by the Company and 8,384 loans were serviced for third party investors. The loan servicing portfolio carried a weighted average annual servicing fee of 0.303% at June 30, 2006. The mortgage loans held by the Company on a unit basis had a 90-day or greater delinquency rate of 0.37%. The mortgage loans held by the Company on an unpaid principal balance basis had a 90-day or greater delinquency rate of 0.36%, inclusive of foreclosures and delinquent bankruptcy loans, at June 30, 2006.
Operating Highlights
Three Months Three Months
Ended Ended %
June 30, 2006 June 30, 2005 Change
($ in millions)
Loan Originations:
Total Originations $1,448 $1,793 (19)%
Purchase 1,158 1,357 (15)
Refinance 290 436 (34)
ARM 869 1,321 (34)
Fixed 579 472 23
Loans sold to third parties 1,456 746 95
Loan applications 1,624 2,283 (29)
Total strategic marketing
alliances (SMA) -
at period-end 218 235 (7)%
Realtors 118 108 9
Builders 100 127 (21)
Total SMA locations -
at period-end 250 270 (7)%
Realtors 150 143 5
Builders 100 127 (21)
As of and for the three months ended
June 30, 2006 March 31, 2006
($ in millions)
Loans Held for Investment:
Loans held for investment ("LHFI"),
net $4,789 $5,292
Securities available for sale 1,078 443
Securities held to maturity 201 211
Total portfolio $6,068 $5,946
Portfolio composition (LHFI)
1-month interest-only ARMs 5.0% 5.6%
6-month interest-only ARMs 11.8 13.0
3-year fixed interest-only ARMs 11.1 11.5
5-year fixed interest-only ARMs 50.8 48.3
7-year fixed interest-only ARMs 16.3 16.0
10-year fixed interest-only ARMs 0.7 0.7
All other mortgage loans 4.3 4.9
Total 100.0% 100.0%
Average decision FICO score 724 723
Average loan to value ("LTV") 77.2% 79.9%
Average combined loan to value
("CLTV") 86.3% 85.8%
Geographic concentration
(total portfolio):
Florida 52% 53%
Georgia 42 41
North Carolina 5 5
Other 1 1
As of and for the three months ended %
June 30, 2006 March 31, 2006 Change
($ in millions)
Loan Servicing:
Total servicing portfolio
(excluding loans held for
sale at TRS) $6,904 $6,742 2%
Loans serviced for third parties 2,115 1,450 46
Loans serviced for REIT 4,789 5,292 (9)
Real estate owned (REIT and TRS) 5,803 3,145
Weighted average service fee
- securitized 0.287% 0.289%
Weighted average service fee
- third parties 0.344 0.384
Weighted average service fee
- all loans 0.303 0.307
REIT portfolio delinquency of
90 days or more - per unit basis 0.37 0.32
REIT portfolio delinquency of
90 days or more - unpaid
principal balance basis 0.36 Not reported
Important Note: Certain amounts in this press release have been rounded for presentation purposes. Calculations appearing herein are based on the actual underlying amounts and may vary from the calculations that would result from use of the rounded amounts. Delinquency data is reported using the MBA method.
Dividend Reinvestment and Stock Purchase Plan
The Company offers a Dividend Reinvestment and Stock Purchase Plan (the "Plan"). The Plan offers a convenient and economical way for existing investors to increase their holdings and for new investors to make an initial investment in our common stock. Participants in the Plan may also reinvest cash dividends and make periodic cash payments to purchase additional shares. If you have questions or would like to enroll in the Plan, please contact the Plan administrator, Computershare Trust Company, N.A. ("Computershare") at 800-697-8199 (toll free). You also can enroll through Computershare's website, http://www.computershare.com/.
Conference Call
HomeBanc Corp. will host a conference call on Tuesday, August 8, 2006 at 10:30 a.m. Eastern time to discuss second quarter results. The conference call dial-in number is 800-949-8987 in the United States and Canada and 706-634-0965 from international locations. The conference ID number is 2786112. You may also listen to the call under the Investor Relations section of the HomeBanc Corp. website at http://www.homebanc.com/. PowerPoint slides to accompany the conference call will be available on the Company's website under Investor Relations - Financial/Statistical Information and also on the Company's website under Investor Relations - Webcast Live link. The Internet broadcast will be archived on both websites until August 22, 2006. A digital recording of the conference call will be available for replay two hours after the call's completion and will be available through August 15, 2006. To access this recording, dial 800-642-1687 and conference ID 2786112.
About our Company
HomeBanc Corp. is the parent company of HomeBanc Mortgage Corporation, a mortgage banking company that focuses on originating purchase money residential mortgage loans in the southeast United States. HomeBanc Corp. has made an election to be taxed as a REIT for federal income tax purposes. For more information about HomeBanc Corp., HomeBanc Mortgage or the Company's mortgage products, contact HomeBanc at http://www.homebanc.com/.
Cautionary Notice Regarding Forward-Looking Statements
This press release may include forward-looking statements within the meaning and subject to the protection of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward- looking statements include statements regarding the stability of the Company's net interest margin; estimated REIT taxable income available to holders of common stock; statements regarding expectations and guidance of increased mortgage originations for the Company for 2006 and 2007, total industry mortgage originations for 2006, and growth in the Company's portfolio of retained mortgage loans; statements regarding the improvement of prevailing market conditions and mortgage origination volumes in Florida; statements regarding validation of our operating model and the Company's ability to achieve continued success in execution of our strategy.
Such forward-looking statements are based on information presently available to the Company's management and are subject to various risks and uncertainties, including, without limitation, risks of changes in interest rates and the yield curve on our mortgage loan production, our product mix, our interest sensitive assets and liabilities and our net interest margin; unanticipated changes in the Florida market for mortgage loans, or the deterioration of economic and real estate market conditions in Florida, generally; risks associated with expansion of our business, including expansion into new geographic markets, introduction of new mortgage loan products or growth through acquisitions; mortgage loan prepayment assumptions and estimated lives of loans and the estimates used to value our mortgage servicing rights; the risk that loan applications may not be indicative of loan origination volume realized in the future due to fallout from applicants not completing the application process or not closing a loan; interest rate risks and credit risks of customers; loan loss experience and the rate of loan charge-offs; risks inherent in originating mortgage loans; loss experience arising from alleged breaches of representations and warranties provided to buyers of mortgage loans sold; risks related to the Company's execution of its Phase II business strategy and its ability to meet the requirements for operation as a REIT; the failure of assumptions underlying the establishment of reserves for loan and contingency losses and other estimates including estimates about loan prepayment rates and the estimates used to value our mortgage servicing rights, and the estimates and assumptions utilized in our hedging strategy; risks in our ability to retain experienced loan officers; risks inherent in the application of our accounting policies as described in the footnotes to financial statements included in our filings with the SEC; risks of maintaining securities held available for sale whose value must be marked to market in our periodic financial statements; pricing pressure that could negatively impact gain on sale relative to the amount of loans sold; and the other risks described in the Company's SEC reports and filings, including, without limitation, under the captions "Special Cautionary Notice Regarding Forward-Looking Statements" and "Risk Factors."
You should not place undue reliance on forward-looking statements, since the statements speak only as of the date that they are made. The Company has no obligation and does not undertake to publicly update, revise or correct any of the forward-looking statements after the date of this press release, or after the respective dates on which such statements otherwise are made, whether as a result of new information, future events or otherwise. This press release should be read in conjunction with the Company's financial statements and the footnotes thereto filed with the SEC including, without limitation, the financial statements and footnotes set forth in the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2006, which will be filed with the SEC by August 9, 2006.
HomeBanc Corp. and Subsidiaries
Condensed Consolidated Statement of Operations (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
(Dollars in thousands,
except per share data)
Revenues:
Net interest income:
Interest income:
Mortgage loans,
including
fees $87,004 $56,852 $172,031 $98,903
Securities
available
for sale 7,793 - 10,605 -
Securities
held to
maturity 2,978 - 5,525 -
Total interest
income 97,775 56,852 188,161 98,903
Interest expense:
Short-term
borrowings (22,536) (9,363) (35,576) (21,141)
Long-term
borrowings (53,876) (31,268) (102,344) (49,906)
Total
interest
expense (76,412) (40,631) (137,920) (71,047)
Net interest
income 21,363 16,221 50,241 27,856
Provision for
loan losses 1,503 675 1,542 1,203
Net interest income
after provision for
loan losses 19,860 15,546 48,699 26,653
Net gain on sale of
mortgage loans 11,166 11,952 18,217 20,535
Other revenue 2,432 654 5,014 1,718
Total revenues 33,458 28,152 71,930 48,906
Expenses:
Salaries and associate
benefits, net 15,017 15,402 33,840 30,458
Marketing and promotions 6,333 6,512 12,935 12,866
Occupancy and
equipment expense 3,994 3,520 8,141 7,325
Depreciation and
amortization 2,049 1,949 4,282 3,823
Minority interest 42 101 94 125
Other operating expense 6,279 5,974 12,604 10,681
Total expenses 33,714 33,458 71,896 65,278
Income (loss) before
income taxes (256) (5,306) 34 (16,372)
Income tax benefit (3,126) (1,664) (3,822) (5,172)
Income (loss) before
cumulative effect of change
in accounting principle $2,870 $(3,642) $3,856 $(11,200)
Cumulative effect of
change in accounting
principle, net of taxes
of $171 - - 270 -
Net income (loss) $2,870 $(3,642) $4,126 $(11,200)
Net income (loss)
attributable to common
shareholders $1,620 $(3,642) $2,140 $(11,200)
Earnings (loss) per share of
common stock outstanding:
Income (loss) before
cumulative effect of
change in accounting
principle
Basic $0.03 $(0.06) $0.03 $(0.21)
Diluted $0.03 $(0.06) $0.03 $(0.21)
Cumulative effect of
change in accounting
principle
Basic $ - $ - $0.00 $ -
Diluted $ - $ - $0.00 $ -
Net income (loss)
Basic $0.03 $(0.06) $0.04 $(0.21)
Diluted $0.03 $(0.06) $0.04 $(0.21)
Dividends declared per
share of common stock
outstanding $0.26 $0.19 $0.26 $0.19
Weighted average shares of
common stock outstanding:
Basic 56,358,255 56,431,573 56,389,449 54,074,854
Diluted 57,895,364 56,431,573 57,700,391 54,074,854
HomeBanc Corp. and Subsidiaries
Condensed Consolidated Statement of Operations (Unaudited)
June 30, December 31,
2006 2005
(Dollars in thousands,
except per share data)
Assets
Cash $22,924 $41,505
Restricted cash 113,767 15,744
Mortgage loans held for sale, net 414,941 195,231
Mortgage loans held for
investment, net of allowance of
$4,269 and $3,691, respectively 4,789,037 5,449,376
Mortgage servicing rights, net 25,590 10,088
Receivable from custodian 107,807 128,641
Trading securities 4,669 -
Securities available for sale 1,077,522 111,256
Securities held to maturity (fair
value of $197,756 and $68,628,
respectively) 201,294 68,425
Accrued interest receivable 21,986 18,284
Premises and equipment, net 45,107 41,672
Goodwill, net 39,995 39,995
Deferred tax asset, net 27,380 23,762
Other assets 123,580 108,733
Total assets $7,015,599 $6,252,712
Liabilities and shareholders' equity
Warehouse lines of credit $354,603 $344,269
Aggregation credit facilities 305,132 118,685
Repurchase agreements 1,149,303 215,927
Loan funding payable 105,413 69,405
Accrued interest payable 9,587 6,039
Other liabilities 182,923 103,479
Collateralized debt obligations 4,381,808 5,026,598
Junior subordinated debentures
representing obligations for
trust preferred securities 134,022 51,547
Total liabilities 6,622,791 5,935,949
Minority interest 38 62
Commitments and contingencies - -
Shareholders' equity:
Preferred stock - par value
$.01 per share; 25,000,000
shares authorized; 2,000,000
and 0 shares issued and
outstanding at June 30, 2006
and December 31, 2005,
respectively 47,992 -
Common stock - par value $.01
per share; 150,000,000 shares
authorized; 56,642,413 and
56,628,969 shares issued and
outstanding at June 30, 2006
and December 31, 2005,
respectively 566 566
Additional paid-in capital 319,259 336,225
Accumulated deficit (53,459) (57,585)
Treasury stock, at cost (19,482
and 6,647 shares at June 30,
2006 and December 31, 2005,
respectively) (156) (69)
Unearned compensation - (1,546)
Accumulated other comprehensive income 78,568 39,110
Total shareholders' equity 392,770 316,701
Total liabilities and
shareholders' equity $7,015,599 $6,252,712
