American Residential Reports Record Fourth Quarter Net Income of $4.7 Million and Earnings of $0.59 Per Share; Issues Revised Earnings Guidance for 2003

Business Wire, Feb 14, 2003

Business Editors

SAN DIEGO--(BUSINESS WIRE)--Feb. 14, 2003

American Residential Investment Trust, Inc. (Amex(R): INV) today reported fourth quarter results and 2003 earnings guidance, which included:

-- Consolidated fourth quarter net income of $4.7 million, or $0.59 per diluted share.

-- Home loan production of $1.9 billion from American Mortgage Network (AmNet), American Residential's mortgage banking subsidiary.

-- Expansion of regional center network on East Coast.

-- Warehouse funding facilities increased to $710 million.

-- Projected net earnings of between $1.10 and $1.40 per share in 2003 on a consolidated, after tax basis.

Consolidated Results

American Residential reported consolidated net income of $4.7 million, or $0.59 per diluted share, for the fourth quarter of 2002, compared to a net loss of $3.5 million, or $ 0.45 per diluted share, for the third quarter of 2002.

Inclusive of start-up costs associated with the formation of its mortgage banking subsidiary, the Company had consolidated net income of $1.6 million, or $0.20 per diluted share, for the year ended December 31, 2002.

John M. Robbins, Jr., Chief Executive Officer, said, "Over the past twelve months, we have fundamentally changed the revenue base of the Company and improved our long-term earnings prospects. 2002 represented a crucial turning point as we transformed our business from a mortgage REIT to a mortgage banking company. AmNet's operational accomplishments during its first year have been truly remarkable. Just ten months after its start-up, AmNet posted four consecutive months of profitability."

The Company's diluted book value per share was $7.49 at December 31, 2002. The Company now reports its results in two segments -- mortgage banking (AmNet) and mortgage asset portfolio investments (AMREIT).

Mortgage Banking Business -- American Mortgage Network (AmNet)

AmNet funded $1.9 billion in home loans during the fourth quarter, a 54% increase over the third quarter of 2002. For the year ended December 31, 2002, AmNet funded $4.2 billion in home loans, compared to $43 million in 2001. AmNet began originating loans in November 2001 and operates exclusively in the wholesale channel, underwriting and funding loans from strategically placed regional centers. AmNet sells the loans it funds on a servicing-released basis to investors who include major correspondent servicers and Wall Street dealers. AmNet is now approved to do business in 45 states either by license or exemption and had over 320 full-time employees at year end.

AmNet Operating Results

For the fourth quarter of 2002, AmNet reported operating net income of $5.1 million. Gain on the sale of loans and other fee income totaled $13.2 million or 68 basis points, net of derivative losses totaling $8.2 million. AmNet continued to utilize Mortgage Capital Management's advisory services for loan pipeline exposure analysis as well as daily hedging recommendations. Despite volatility in the prices of mortgages during the quarter, margins have been maintained.

Gross interest income was $6.9 million and was offset by interest expense of $3.6 million, resulting in net interest spread on loans held for sale during the fourth quarter of $3.3 million.

AmNet operating expenses, excluding interest, totaled $11.5 million during the fourth quarter, or 59 basis points on total loan fundings. These expenses included an estimated $5.2 million in sales commissions and other variable expenses, representing approximately 46% of total operating expenses.

In commenting on fourth quarter mortgage banking results, Robbins said, "AmNet exceeded its strategic targets in 2002 and has established a platform for continued market penetration in 2003. We have extended our presence on the East Coast through a new regional center in Providence, Rhode Island. The Cherry Hill, New Jersey center, which handles mortgage loans from brokers in Delaware, New Jersey and Pennsylvania, began funding loans in November."

During the fourth quarter of 2002, AmNet's warehouse loan funding capacity grew from $660 million to $710 million. AmNet has lending partnerships with Countrywide Warehouse Lending, JPMorgan Chase Bank and UBS Warburg Real Estate Securities Inc.

Mortgage Asset Portfolio Investments (AMREIT)

The Company's total mortgage assets held for portfolio investment were $269 million at December 31, 2002, compared to $461 million at December 31, 2001. During the past three years, the dollar value of the Company's portfolio of mortgage assets has declined due to the decision to cease loan portfolio acquisitions, build cash reserves and re-deploy capital into the Company's mortgage banking business.

In the fourth quarter of 2002, the Company had net losses attributable to its mortgage asset portfolio investments of $0.4 million, or $0.05 per share, compared to a loss of $11.2 million, or $1.41 per share, for the same period in 2001, inclusive of expenses associated with the purchase of its management contract, totaling $10.0 million, or $1.26 per share.