ATLANTA, Nov. 6 /PRNewswire-FirstCall/ -- HomeBanc Corp. (NYSE:HMB)
("HomeBanc" or the "Company"), a real estate investment trust
("REIT"), today reported the Company's consolidated results of
operations for the three- and nine-month periods ended September
30, 2006. Financial Highlights - Estimated REIT taxable income
available to holders of common stock of $14.7 million, or $0.26 per
share, for the three months ended September 30, 2006; - GAAP
consolidated net loss attributable to holders of common stock of
$2.4 million, or $0.04 per diluted share, for the three months
ended September 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 available for sale and held to maturity, of $6.1 billion
at September 30, 2006; - Mortgage loan origination volume of $1.25
billion for the three months ended September 30, 2006; and - New
loan application volume of $1.38 billion for the three months ended
September 30, 2006. Patrick S. Flood, HomeBanc Chairman and CEO,
said, "The Company's third quarter results reflect the continuation
of adverse market conditions in the mortgage industry, specifically
in relation to loan originations. As a result of current
conditions, and our expectation that these conditions will continue
into 2007, we accelerated and intensified our expense reduction
initiatives during the quarter. We expect that these initiatives
will have a significant impact on expenses in 2007." Flood
continued, "With adverse market conditions as a backdrop, we expect
to elect not to operate our public company as a REIT in 2007. This
decision will enable the organization to preserve book value in the
short-term and to retain future earnings to grow book value in the
long-term. In addition, our board of directors continues to
consider and evaluate a wide range of strategic options all geared
toward maximizing shareholder value." Comparison of the Three
Months Ended September 30, 2006 and 2005 - Total consolidated
revenues increased $0.6 million, or 2%, to $32.2 million for the
third quarter of 2006, from $31.6 million for the same quarter of
2005, due primarily to the growth in gain on sale of mortgage loans
and a growth in net interest income on mortgage loans held for
investment and investment securities; - Net interest income after
provision for loan losses was $19.2 million for the three months
ended September 30, 2006, representing an increase of $1.0 million
from $18.2 million for the same period of 2005; - Net gain on sale
of mortgage loans was $14.8 million during the period, or 113 basis
points ("bps"), compared to $9.9 million, or 144 bps, in the same
period of 2005; - Total expenses decreased 4% from $34.9 million
for the quarter ended September 30, 2005 to $33.6 million for the
third quarter of 2006; - Total expenses as a percentage of average
assets decreased to .48% for the third quarter of 2006 from .65%
for the third quarter of 2005; and - Total consolidated GAAP net
loss attributable to holders of common stock was $2.4 million for
the quarter ended September 30, 2006, compared to a net loss of
$0.8 million for the same period of 2005. Comparison of the Nine
Months Ended September 30, 2006 and 2005 - Total consolidated
revenues increased $23.6 million, or 29%, to $104.1 million for the
nine months ended September 30, 2006, compared to $80.5 million for
the same period of 2005, due primarily to the growth in net
interest income resulting from the increase in mortgage loans held
for investment and investment securities; - Total expenses
increased 5% from $100.2 million for the nine months ended
September 30, 2005 to $105.5 million for the same period of 2006; -
Total expenses for the nine months ended September 30, 2006 as a
percentage of average assets decreased to 1.55%, compared to 2.19%
for the same period of 2005; and - Total consolidated GAAP net loss
attributable to holders of common stock was $0.2 million for the
nine months ended September 30, 2006, compared to a net loss of
$12.0 million for the same period of 2005. The Company's estimated
REIT taxable income available to holders of common stock for the
three- and nine-month periods ended September 30, 2006 was $14.7
million and $50.9 million, respectively. Estimated REIT taxable
income available to holders of common stock, as defined in the
following table, is a non-GAAP financial measure. Because of the
REIT tax requirements on distributions, management believes that
estimated REIT taxable income available to holders of common stock
is an additional meaningful measure to evaluate our performance.
The most comparable GAAP measure is net income (loss) attributable
to holders of common stock, which reflects the impact of dividends
on preferred stock. Estimated REIT taxable income available to
holders of common stock should not be considered as a substitute
for any measures derived in accordance with GAAP and may not be
comparable to other similarly titled measures of other companies.
The Company uses estimated REIT taxable income available to holders
of common stock as a basis for establishing the amount of dividends
payable to holders of its common stock. The principal differences
between net income (loss) attributable to holders of common stock
and estimated REIT taxable income available to holders of common
stock in the periods are intercompany gains or losses on the sale
of loans from our taxable REIT subsidiary ("TRS") to HomeBanc that
are excluded under GAAP in the Company's consolidated financial
statements, amortization of those gains or losses, and the creation
of mortgage servicing rights, which give rise to income under
Statement of Financial Accounting Standards ("SFAS") No. 140 but
are excluded from income for income tax purposes. The following
table presents a reconciliation of loss before income taxes to net
loss attributable to holders of common stock and to estimated REIT
taxable income available to holders of common stock for the three-
and nine- month periods ended September 30, 2006: Three Months
Ended Nine Months Ended ($ in thousands) September 30, 2006
September 30, 2006 Loss before income taxes $(1,417) $(1,383)
Income tax benefit (283) (4,105) Net (loss) income (1,134) 2,722
Preferred stock dividend (1,250) (3,236) Cumulative effect of
change in accounting principle - 270 Net loss attributable to
holders of common stock (2,384) (244) Taxable loss of REIT
subsidiaries 30,676 76,047 Book/tax differences(1) (13,289)
(20,839) Income tax benefit (283) (4,105) Estimated REIT taxable
income available to holders of common stock(2) $14,720 $50,859 (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 $19.2 million for the
three months ended September 30, 2006, an increase of $1.0 million
from $18.2 million for the same period of 2005. This increase is
primarily due to the growth in mortgage-backed securities ("MBS")
held in our investment portfolio, along with the impact of
derivative financial instruments. The Company's portfolio of loans
held for investment and securities available for sale and held to
maturity increased by 20% to $6.1 billion at September 30, 2006
from $5.1 billion at September 30, 2005 driven by the growth in
MBS. The Company's net gain on sale of mortgage loans for the three
months ended September 30, 2006 was $14.8 million, compared to $9.9
million for the same period of 2005. The Company sold $1.3 billion
of loans during the three months ended September 30, 2006, compared
to $0.7 billion during the corresponding 2005 period. Origination
Volume The Mortgage Bankers Association Long-Term Mortgage Finance
Forecast dated October 24, 2006 (the "MBA Forecast") predicted a
29% decline in total mortgage originations for the third quarter of
2006 as compared to the same period of 2005. Our total mortgage
originations decreased by approximately 31% during the third
quarter of 2006 compared to the third quarter of 2005. The
Company's decline in total originations during the period was
driven primarily by two significant trends: first, significantly
lower refinance activity as evidenced by a 51% decline during the
third quarter of 2006 when compared to the same period of 2005
caused by higher interest rates and second, a significant down turn
in home sales in its Florida market places. The Florida Association
of Realtors' website estimated a 36% decrease in sales of existing
homes during the third quarter of 2006 compared to the same period
in the prior year. According to Mr. Flood, "Our third quarter loan
originations were greatly impacted by significant declines in
refinance activities and by declines in Florida home sales during
the period. While we expect these trends to continue into 2007, we
also expect refinance volumes to grow as rates decline. We also
expect that Florida real estate conditions will improve during
2007." "We also continue our focus on geographic diversification,
expecting to open Nashville, Tennessee in April 2007 and a second
new store outside of our current footprint later in 2007. We expect
these actions, combined with improving market conditions, to
position us for improved loan originations in the second half of
2007 and a return to historical levels of loan origination growth
in 2008," said Flood. Investment Portfolio The average balance of
the total investment portfolio was comprised of average loans of
$5.1 billion and average MBS available for sale and held to
maturity of $1.5 billion for the three months ended September 30,
2006, compared to an average balance of loans of $5.0 billion for
the three months ended September 30, 2005. The net interest margin
was 1.22% for the three months ended September 30, 2006, compared
to 1.48% for the same period of 2005. The decline in net interest
margin is primarily due to the addition of MBS to the investment
portfolio in 2006, which typically generate a lower net interest
margin than mortgage loans held for investment. The duration gap
for the portfolio as measured by the net interest reset period was
estimated to be 0.9 months at September 30, 2006, compared to an
estimated (1.7) months at September 30, 2005. During the quarter,
$285 million of loans were repaid, representing an estimated
annualized constant prepayment rate of 26%. The following table
presents the Company's net interest margin for the three-month
periods ended September 30, 2006 and 2005: Estimated Average
Revenue/ Annualized $ in thousands Balance (Expense) Rate/Yield
Three months ended September 30, 2006 Mortgage loans $5,124,058
$77,908 6.10 % Mortgage-backed securities 1,452,443 22,964 6.34
Borrowings to finance mortgage loans 5,152,204 (75,759) (5.82)
Mortgage-backed security repurchase agreements 1,346,480 (19,486)
(5.74) Impact of derivative financial instruments 14,659 0.88 Net
interest margin $20,286 1.22 % Three months ended September 30,
2005 Mortgage loans $5,044,886 $69,328 5.45 % Mortgage-backed
securities ---- ---- ---- Borrowings to finance mortgage loans
4,999,427 (50,790) (4.03) Mortgage-backed security repurchase
agreements ---- ---- ---- Impact of derivative financial
instruments 288 0.02 Net interest margin $18,826 1.48 % During the
quarter, the Company changed its estimation approach for amortizing
into earnings amounts deferred in accumulated other comprehensive
income ("AOCI") related to interest rate swaps that have been
de-designated from cash flow hedging relationships and subsequently
terminated. The total impact of this change in estimate upon net
interest income was an increase of $3.5 million during the third
quarter of 2006, $1.8 million of which would have been recorded
prior to the third quarter of 2006 had this new estimation approach
been previously followed. Separately, $1.3 million related to
previous mark-to-market adjustments on derivative financial
instruments that were intended to hedge certain interest payments
was released from AOCI since these interest payments became
probable to not occur, offsetting interest expense. Loan Servicing
The Company serviced $7.7 billion of unpaid principal balance of
loans, excluding loans held for sale, related to 37,626 mortgage
loans at September 30, 2006, of which 22,999 loans were owned by
the Company and 14,627 loans were serviced for third-party
investors. The loan servicing portfolio carried a weighted average
annual servicing fee of 0.323% at September 30, 2006. The mortgage
loans held for investment by the Company on a unit basis had a
90-day or greater delinquency rate of 0.65%. The mortgage loans
held for investment by the Company on an unpaid principal balance
basis had a 90-day or greater delinquency rate of 0.62%, inclusive
of loans in the foreclosure process and delinquent bankruptcy
loans, at September 30, 2006. Operating Highlights Three Months
Ended ($ in millions) September 30, % Loan Originations: 2006 2005
Change Total originations $1,250 $1,807 (31)% Purchase 1,017 1,330
(24) Refinance 233 477 (51) ARM 744 1,255 (41) Fixed 506 552 (8)
Loans sold to third parties 1,312 690 90 Loan applications 1,378
1,978 (30) Total strategic marketing alliances (SMA) - period end
212 230 (8) Realtors 124 112 11 Builders 88 118 (25) Total SMA
locations - period end 243 278 (13) Realtors 155 160 (3) Builders
88 118 (25) ($ in millions) As of September 30, December 31, Loans
Held for Investment: 2006 2005 Loans held for investment ("LHFI"),
net $4,502 $5,449 Securities available for sale 1,375 111
Securities held to maturity 194 68 Total portfolio $6,071 $5,628
Portfolio composition - LHFI 1-month interest-only ARMs 4.4 % 6.3 %
6-month interest-only ARMs 10.5 14.8 3-year fixed interest-only
ARMs 11.2 11.3 5-year fixed interest-only ARMs 52.1 47.5 7-year
fixed interest-only ARMs 17.1 14.2 10-year fixed interest-only ARMs
0.7 0.0 All other mortgage loans 4.0 5.7 Total 99.9 % 99.8 %
Average decision FICO score 724 723 Average loan to value (LTV)
77.7 % 79.8 % Average combined loan to value (CLTV) 86.2 % 86.3 %
Geographic concentration (total portfolio): Florida 52 % 52 %
Georgia 42 42 North Carolina 5 5 Other 1 1 ($ in millions) As of
September 30, December 31, % Loan Servicing: 2006 2005 Change Total
servicing portfolio (excluding loans held for sale at TRS) $7,732
$6,463 20 % Loans serviced for third parties 3,226 1,010 219 Loans
serviced for REIT 4,506 5,453 (17) Real estate owned (REIT and TRS)
6.2 2.0 Weighted average service fee - securitized 0.373 % 0.294 %
Weighted average service fee - third parties 0.284 0.358 Weighted
average service fee - all loans 0.323 0.305 REIT portfolio
delinquency of 90 days or more - per unit basis 0.65 0.27 REIT
portfolio delinquency of 90 days or more - unpaid principal balance
basis 0.62 not available 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. Conference Call The Company will be hosting a
conference call at 10:30 a.m., Eastern time, on November 7, 2006.
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 call ID number is 9041606. You may also listen to
the conference call at http://audioevent.mshow.com/311657/ and
under the investor relations section of the HomeBanc 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 the "Investor Relations - Webcast
Live" link. The Internet broadcast will be archived until November
21, 2006. A digital recording of the conference call will be
available for replay approximately two hours after the call's
completion and will be available for replay through November 14,
2006. To access this recording, dial 800-642-1687 or 706-645-9291
and enter conference call ID 9041606. 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 the year ending December 31, 2006. 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 among others, expectations regarding market
conditions and loan origination trends in 2007 and 2008;
expectations regarding the timing and impact of our expense
reduction initiatives; our expectation to elect not to operate our
public company as a REIT in 2007 and the anticipated benefits of
this change in our operating model; statements regarding evaluation
of strategic alternatives; expectations regarding Florida market
conditions; expectations regarding geographic expansion into new
markets, including the timing of such expansion; expectations for
improved loan originations in 2007 and 2008; our ability to
successfully apply our business strategy, including, without
limitation, our recent changes to that strategy; and our ability to
successfully implement and realize the anticipated benefits from
our expense reduction and origination growth initiatives. 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
related to our present intention to elect not to operate our public
company as a REIT in 2007, including our ability to obtain all
required approvals and consents to implement this change in our
operating model; our ability to achieve the benefits we anticipate
from our election not to operate as a REIT in 2007, our ability to
successfully identify, consummate and realize the anticipated
benefits of one or more strategic transactions or other corporate
changes that we may pursue; risks related to our expense reduction
initiatives, including our ability to realize the anticipated
benefits from such initiatives; 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 our markets for
mortgage loans, or the deterioration of economic and real estate
market conditions in our markets, generally and in particular in
our Florida markets; risks associated with expansion of our
business, including expansion into new geographic markets, and/or
introduction of new mortgage loan products; mortgage loan
prepayment assumptions and estimated lives of loans and the
estimates used to value our mortgage servicing rights; interest
rate risks and credit risks of customers; loan loss experience and
the rate of loan charge- offs; loss experience arising from alleged
breaches of representations and warranties provided to buyers of
mortgage loans sold; 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 and
factors 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 September 30, 2006, which will be filed with
the SEC by November 9, 2006. HomeBanc Corp. and Subsidiaries
Condensed Consolidated Statement of Operations (Unaudited) Three
Months Ended Nine Months Ended September 30, September 30, 2006
2005 2006 2005 (Dollars in thousands, except per share data)
Revenues: Net interest income: Interest income: Mortgage loans,
including fees $77,908 $69,328 $249,939 $168,231 Securities
available for sale 19,759 --- 30,364 --- Securities held to
maturity 3,205 --- 8,730 --- Total interest income 100,872 69,328
289,033 168,231 Interest expense: Short-term borrowings (29,608)
(9,803) (65,184) (30,944) Long-term borrowings (50,978) (40,699)
(153,322) (90,605) Total interest expense (80,586) (50,502)
(218,506) (121,549) Net interest income 20,286 18,826 70,527 46,682
Provision for loan losses 1,124 609 2,666 1,812 Net interest income
after provision for loan losses 19,162 18,217 67,861 44,870 Net
gain on sale of mortgage loans 14,777 9,910 32,994 30,445 Mortgage
servicing income, net (2,760) 185 (493) (321) Other revenue 982
3,248 3,729 5,472 Total revenues 32,161 31,560 104,091 80,466
Expenses: Salaries and associate benefits, net 16,162 15,791 50,002
46,249 Marketing and promotions 5,032 6,999 17,967 19,865 Occupancy
and equipment expense 4,011 3,907 12,152 11,232 Depreciation and
amortization 2,172 2,185 6,454 6,008 Minority interest 49 72 143
197 Other operating expense 6,152 5,940 18,756 16,621 Total
expenses 33,578 34,894 105,474 100,172 Loss before income taxes
(1,417) (3,334) (1,383) (19,706) Income tax benefit (283) (2,551)
(4,105) (7,723) (Loss) income before cumulative effect of change in
accounting principle (1,134) (783) 2,722 (11,983) Cumulative effect
of change in accounting principle, net of taxes of $171 --- --- 270
--- Net (loss) income $(1,134) $(783) $ 2,992 $(11,983) Net (loss)
attributable to holders of common stock $(2,384) $(783) $(244)
$(11,983) Loss per share of common stock outstanding: Loss before
cumulative effect of change in accounting principle Basic $(0.04)
$(0.01) $(0.01) $(0.22) Diluted $(0.04) $(0.01) $(0.01) $(0.22)
Cumulative effect of change in accounting principle Basic $ --- $
--- $0.00 $ --- Diluted $ --- $ --- $0.00 $ --- Net loss Basic
$(0.04) $(0.01) $(0.00) $(0.22) Diluted $(0.04) $(0.01) $(0.00)
$(0.22) Dividends declared per share of common stock outstanding $
0.26 $0.23 $0.52 $0.42 Weighted average shares of common stock
outstanding: Basic 56,515,805 56,576,611 56,439,002 54,917,937
Diluted 56,515,805 56,576,611 56,439,002 54,917,937 HomeBanc Corp.
and Subsidiaries Condensed Consolidated Balance Sheet (Unaudited)
September 30, December 31, 2006 2005 Assets (Dollars in thousands,
except per share data) Cash $20,279 $41,505 Restricted cash 123,541
15,744 Mortgage loans held for sale, net 345,788 195,231 Mortgage
loans held for investment, net of allowance of $4,917 and $3,691,
respectively 4,501,546 5,449,376 Mortgage servicing rights, net
38,286 10,088 Receivable from custodian 85,361 128,641 Trading
securities 4,777 - Securities available for sale 1,375,356 111,256
Securities held to maturity (fair value of $193,402 and $68,628,
respectively) 194,412 68,425 Accrued interest receivable 23,356
18,284 Premises and equipment, net 45,402 41,672 Goodwill, net
39,995 39,995 Deferred tax asset, net 27,664 23,762 Other assets
76,372 108,733 Total assets $6,902,135 $6,252,712 Liabilities and
shareholders' equity Warehouse lines of credit $282,050 $344,269
Aggregation credit facilities 320,599 118,685 Repurchase agreements
1,535,104 215,927 Loan funding payable 85,150 69,405 Accrued
interest payable 10,951 6,039 Other liabilities 89,692 103,479
Collateralized debt obligations 4,087,227 5,026,598 Junior
subordinated debentures representing obligations for trust
preferred securities 175,260 51,547 Total liabilities 6,586,033
5,935,949 Minority interest 98 62 Shareholders' equity: Preferred
stock - par value $.01; 25,000,000 shares authorized; 2,000,000 and
0 shares issued and outstanding at September 30, 2006 and December
31, 2005, respectively 47,992 - Common stock - par value $.01;
150,000,000 shares authorized; 56,832,847 and 56,628,969 shares
issued and outstanding at September 30, 2006 and December 31, 2005,
respectively 568 566 Additional paid-in capital 303,895 336,225
Accumulated deficit (54,593) (57,585) Treasury stock, at cost
(43,840 and 6,647 shares at September 30, 2006 and December 31,
2005, respectively) (352) (69) Unearned compensation - (1,546)
Accumulated other comprehensive income 18,494 39,110 Total
shareholders' equity 316,004 316,701 Total liabilities and
shareholders' equity $6,902,135 $6,252,712 DATASOURCE: HomeBanc
Corp. CONTACT: Media, Mark Scott, +1-404-459-7452, or , or
Investors, Carol Knies, +1-404-459-7653, or , both of HomeBanc
Corp. Web site: http://www.homebanc.com/
http://audioevent.mshow.com/311657
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