AHM AmeriHome Inc

American Home Mortgage Investment Corp. (NYSE: AHM) announced today results for the quarter and full year ended December 31, 2006. FINANCIAL HIGHLIGHTS Comparison of the Three Months Ended December 31, 2006 and 2005 Revenue for the fourth quarter of 2006 was $257.7 million, compared to revenue of $150.5 million for the fourth quarter of 2005, an increase of 71.3%. Net earnings for the fourth quarter of 2006 were $64.7 million, compared to net earnings of $16.7 million for the fourth quarter of 2005, an increase of 287.5%. Earnings per diluted share for the fourth quarter of 2006 were $1.21, compared to earnings per diluted share of $0.27 for the fourth quarter of 2005, an increase of 348.1%. Dividends declared per common share for the fourth quarter of 2006 were $1.06, compared to $0.91 for the fourth quarter of 2005, an increase of 16.5%. Book value per common share was $22.64 at December 31, 2006, compared to book value per common share of $21.62 at December 31, 2005, an increase of 4.7%. Comparison of the Three Months Ended December 31, 2006 and September 30, 2006 Revenue for the fourth quarter of 2006 was $257.7 million, compared to revenue of $258.9 million for the third quarter of 2006, a decrease of 0.5%. Net earnings for the fourth quarter of 2006 were $64.7 million, compared to net earnings of $72.0 million for the third quarter of 2006, a decrease of 10.2%. Earnings per diluted share for the fourth quarter of 2006 were $1.21, compared to earnings per diluted share of $1.36 for the third quarter of 2006, a decrease of 11.0%. Dividends declared per common share for the fourth quarter of 2006 were $1.06, compared to $1.01 for the third quarter of 2006, an increase of 5.0%. Book value per common share was $22.64 at December 31, 2006, compared to book value per common share of $22.52 at September 30, 2006, an increase of 0.5%. Comparison of the Year Ended December 31, 2006 and 2005 Revenue for the year ended December 31, 2006 was $1.03 billion, compared to adjusted revenue of $722.6 million for the year ended December 31, 2005, an increase of 42.0%. GAAP revenue for the year ended December 31, 2005 was $793.9 million. Net earnings for the year ended December 31, 2006 were $263.5 million compared to adjusted net earnings of $189.4 million for the year ended December 31, 2005, an increase of 39.1%. GAAP net earnings for the year ended December 31, 2005 were $260.8 million. Earnings per diluted share for the year ended December 31, 2006 were $4.96 compared to adjusted earnings per diluted share of $3.97 for the year ended December 31, 2005, an increase of 24.9%. GAAP earnings per diluted share for the year ended December 31, 2005 were $5.58. Dividends per common share for the year ended December 31, 2006 were $3.94, compared to $3.24 for the year ended December 31, 2005, an increase of 21.6%. Michael Strauss, American Home�s Chief Executive Officer commented, �The fourth quarter was highly successful for our company with earnings of $1.21 per diluted share. During the quarter, we added $1.0 billion of recently originated loans to our portfolio, which are carried at cost. Loan origination volume was a record $15.5 billion due to our company achieving a record market share of 2.48% of national originations. Net interest income was stable while our servicing portfolio produced record revenues. During the quarter, our company did however experience its highest delinquency related charges to date, which reduced our quarterly earnings. The fourth quarter concluded a very successful year for our company, with earnings per diluted share reaching a record $4.96. By comparison, diluted earnings per share were $3.97 in 2005, $3.74 in 2004, $4.07 in 2003 and $2.65 in 2002*. A key financial goal for our company in 2007 is to continue our multi-year growth trend in earnings per share. During 2006, our company�s return on average common equity was 22.7%, which surpassed our target of 20%, and compares favorably to 2005 when our adjusted return on average common equity was 19.7%. Also during 2006 our company originated $58.9 billion of loans compared to $45.3 billion in 2005. Finally, during 2006, our company reached a milestone as, for the first time; its revenues exceeded $1.0 billion. In this earnings release, our company is providing 2007 earnings guidance of $5.40 to $5.70 per fully diluted share with the earnings per diluted share for each quarter in 2007 projected to be approximately 9% to 15% higher than for the comparable quarter in 2006. Our earnings guidance is based on stable net interest margins applied to a growing portfolio of loans held for investment, loan production of $68 billion to $74 billion, and a reduction in gain on sale margins of approximately 12 basis points. Lower gain on sale margins are expected in part because delinquency losses on loans held for sale, including losses due to repurchases, are projected to continue at high levels throughout 2007. Projections for continued high losses are based on our company�s view that while there are signs that housing prices are starting to stabilize, future abatements in foreclosure activity will lag a recovery in the housing market. As a result, our 2007 earnings guidance anticipates a highly stressed credit environment. Not included in our earnings guidance are potential benefits from new strategies that offer the possibility of higher portfolio income, increased loan production and reduced income tax expense. Our company will keep investors apprised if material benefits from these strategies become likely. I am very pleased to announce that based on our company�s results and prospects, our Board of Directors has voted to increase our company�s dividend policy by $0.06 to $1.12 per share per quarter or $4.48 per share on an annualized basis. The new dividend policy is expected to take effect with our April dividend payment. Please note, however, that our company is not obligated to pay dividends until such dividends are declared by our Board of Directors, and our Board of Directors may change our company�s dividend policy at any time without prior notice.� FOURTH QUARTER RESULTS During the fourth quarter, the Company�s net interest income, plus the positive carry from interest rate swaps, was $48.9 million compared to $50.5 million in the third quarter of 2006. Of the $48.9 million, $12.4 million was from portfolio loans, $14.7 million was from mortgage-backed securities, $6.3 million was from swaps associated with mortgage-backed securities, $0.6 million was from Flower Bank, and $26.8 million was from loans in warehouse, reduced by $11.9 million of interest expense on trust preferred securities and the financing of servicing assets. By comparison, the components of the $50.5 million of net interest income, plus the positive carry from interest rate swaps, earned in the third quarter were $11.8 million from portfolio loans, $16.6 million from mortgage-backed securities, $7.5 million from swaps associated with mortgage-backed securities and $25.1 million from loans in warehouse, including loans held for investment pending securitization, reduced by $10.5 million of interest expense on trust preferred securities and the financing of servicing assets. During the fourth quarter, portfolio loans earned a net interest margin of 1.42% and had an average balance of $3.5 billion, compared to a net interest margin of 1.27% and an average balance of $3.7 billion in the third quarter of 2006. During the fourth quarter, mortgage-backed securities had an average balance of $9.2 billion, earned a net interest margin on a stand-alone basis of 0.64%, and earned a net interest margin including income from associated swaps of 0.91%. By comparison, in the third quarter of 2006, mortgage-backed securities had an average balance of $9.3 billion, earned net interest margin on a stand-alone basis of 0.72%, and earned a net interest margin including income from associated swaps of 1.04%. In the fourth quarter, loans in warehouse, including loans held for investment pending securitization, had an average balance of $10.0 billion and earned a net interest margin of 1.08%. By comparison, during the third quarter of 2006 loans in warehouse, including loans held for investment pending securitization, had an average balance of $8.1 billion and earned a net interest margin of 1.24%. Delinquencies and delinquency related charges were up sharply in the fourth quarter and are expected to remain at elevated levels throughout 2007. For the fourth quarter, the Company�s provision expense associated with loans held for investment was $6.7 million, while its quarter-end allowance for loan loss balance was $14.2 million and its non-performing loans held for investment were $82.4 million. By comparison, for the third quarter of 2006, the Company�s provision expense was $5.4 million, while its quarter-end allowance for loan loss balance was $10.9 million and its non-performing loans held for investment were $66.9 million. Additionally, in the fourth quarter, the Company added $14.5 million to its reserves for delinquent loans held for sale which include repurchased loans. These added reserves resulted in a charge to the Company�s gain on sale which reduced its net gain on sale revenue. At quarter-end, reserves associated with delinquent loans held for sale were $22.0 million, while non-performing loans held for sale were $124.3 million. By comparison, in the third quarter, additions to reserves charged to gain on sale were $2.8 million, reserves associated with loans held for sale were $8.7 million, and non-performing loans held for sale were $50.3 million. During the fourth quarter, the value of the Company�s residual assets decreased approximately $12.1 million due to changes in anticipated credit losses, future interest rates and prepayment speeds, and consequently resulted in a write-down that was charged to income. The Company estimates that approximately half of the write-down in the value of residual securities was attributable to delinquencies. During the fourth quarter, the Company completed foreclosures and sold repossessed real estate for loans with an aggregate unpaid principal balance of $43.4 million. Losses on these loans were $7.0 million, net of mortgage insurance, resulting in a severity rate of 16.2%. By comparison, during the third quarter, the Company completed foreclosures and sold repossessed real estate for loans with an aggregate unpaid principal balance of $29.4 million. Losses on those loans were $4.6 million, net of mortgage insurance, resulting in a severity rate of 15.7%. Throughout the fourth quarter, the Company continued to pursue a strategy of matching the duration of its portfolio assets with the duration of its liabilities, net of hedges. At December 31, 2006, the composition of the Company�s loans held for investment and loans underlying its mortgage-backed securities was 45.0% 5/1 ARM loans, 26.0% short reset ARMs, 13.7% fixed rate loans, 8.9% 7/1 ARM loans, 2.0% 3/1 ARM loans, 1.3% HELOC and closed-end seconds, and 3.1% other ARM types. On December 31, 2006, the mortgage-backed securities portfolio�s duration, net of liabilities and hedges, was estimated to be 0.07 years and its projected average life was 2.36 years. The composition of the mortgage-backed securities portfolio by credit quality based on Standard & Poor�s ratings was 93.9% Agency and AAA, 3.8% AA, A, and BBB and 2.3% BB and unrated. During the fourth quarter, the Company�s loan origination business continued to produce strong results. Loan originations reached a record $15.5 billion compared to $15.3 billion in this year�s third quarter. During the fourth quarter, the Company sold $14.3 billion of loans to third parties for a gross gain on sale excluding reserving for delinquencies of $217.4 million equal to a gross gain on sale margin of 1.52%. By comparison, during this year�s third quarter, the Company sold $14.3 billion of loans to third parties for a gross gain on sale of $213.4 million equal to a gain on sale margin of 1.49%. The Company�s gain on sale net of additions to its reserves for delinquent loans held for sale was $202.9 million in the fourth quarter compared to $210.6 million in the third quarter of 2006. During the fourth quarter, the Company�s loan origination expenses were $157.9 million, or 1.11% of loans sold, or 1.02% of loans originated, compared to $152.6 million, or 1.06% of loans sold, or 1.00% of loans originated in the third quarter. The Company estimates that its national market share, based on Freddie Mac�s recent, revised estimate of national market size, was 2.48% in the fourth quarter compared to 2.24% in this year�s third quarter and 1.69% during the fourth quarter of 2005. At the end of the fourth quarter, the Company employed approximately 2,450 loan officers and account executives, including call center representatives, but excluding sales assistants, compared to approximately 2,640 on September 30, 2006. During the fourth quarter, the Company�s servicing income and ancillary fees reached a record $47.3 million gross, and $18.4 million net of $28.9 million of reduction of fair value due to realization of servicing cash flows. By comparison, during the third quarter, servicing income and ancillary fees were $43.4 million gross, and $14.6 million net of $28.8 million reduction of fair value due to realization of servicing cash flows. At the end of the fourth quarter, the principal amount of the loans underlying the Company�s servicing assets was $38.5 billion. By comparison, the amount of loans underlying the Company�s servicing assets at the end of this year�s third quarter was $35.9 billion. The principal amount of the servicing portfolio, including warehouse loans, was $46.3 billion at the end of the fourth quarter and $43.0 billion at the end of this year�s third quarter. The Company�s total revenues in the fourth quarter were $257.7 million. Of these revenues, $42.7 million was from net interest income, $202.9 million was from sales of newly originated mortgage loans including origination fees and net of hedges and additions to loss reserves, $47.3 million was from mortgage servicing fees, $3.9 million was from an increase in the value of servicing due to changes in assumptions, net of hedges, $6.3 million was from interest carry on free-standing swaps and $2.9 million was from other sources. Revenues were decreased by $28.9 million due to realization of servicing cash flows, $12.7 million due to realized and unrealized losses on mortgage-backed securities held, net of hedges and $6.7 million due to provisioning for loan losses. During the fourth quarter, the Company�s expenses were $173.4 million, and the Company�s pre-tax income was $84.3 million. Also during the quarter, the Company�s tax expense was $19.6 million. Consequently, net income for the quarter was $64.7 million while preferred dividends were $3.3 million and net income available to common stockholders was $61.4 million, resulting in earnings per diluted share of $1.21. Book value attributable to common stockholders at December 31, 2006 was $1.14 billion, or $22.64 per common share, compared to $1.13 billion, or $22.52 per common share, at September 30, 2006. EARNINGS GUIDANCE The Company is providing earnings guidance for 2007 of $5.40 to $5.70 per diluted share. Quarterly earnings per diluted share are projected to be approximately 9% to 15% higher for each quarter in 2007 compared to the comparable quarter in 2006. Key projections underlying the Company�s guidance are that 1) net interest margins will remain stable and the balance of loans held for investment and carried at cost will continue to grow, 2) that loan production will range between $68 billion and $74 billion with higher production in the second and third quarters, and lower production in the first and fourth quarter, 3) that the Company�s gain on sale margin from loans sold will decline by approximately 12 basis points, in part due to continued high delinquency charges associated with the Company�s loans held for sale, and 4) that the Company will not experience significant losses net of hedges due to write-downs of its portfolio assets and / or its servicing assets. It is important to note that actual results, which are different than any one or more than one of the key projections, may prevent the Company from achieving its earnings guidance, and may instead result in losses. In addition, factors other than the key projections listed herein may cause the Company to fail to achieve its earnings guidance and may result in losses as more fully described under Risk Factors in the Company�s Annual Report filed on Form 10-K with the Securities and Exchange Commission. DIVIDEND POLICY Based on the Company�s projections for earnings and cash flow, its Board of Directors has raised the Company�s common stock dividend policy to $1.12 per share per quarter, or $4.48 per share on an annualized basis. The Company's dividend policy does not constitute an obligation to pay dividends, which only occurs when its Board of Directors declares a dividend. The dividend policy is subject to ongoing review by the Board of Directors based on, among other things, the Company's business prospects, financial condition, earnings projections and cash flow projections, and the Board may, when it deems doing so is advisable, lower or eliminate the dividend without prior notice. The new dividend policy of $1.12 per share per quarter is expected to commence beginning in April 2007. OTHER HIGHLIGHTS During the fourth quarter, the Company completed its acquisition of Flower Bank, fsb and consequently became a thrift holding company. As a result of its acquisition of Flower, a small portion of the Company�s liabilities are now deposits. The Company expects to grow Flower slowly at first, but over the long term believes Flower will become a significant contributor to the Company�s earnings. In connection with its acquisition of Flower, the Company has hired Lou Dunham to serve as Flower�s President. Mr. Dunham has over thirty-two years of banking experience, most recently as President of Ameribank, a Florida based federal thrift. Previously, Mr. Dunham was the Senior EVP and Chief Risk Officer at Republic Security Bank. The Company also elected Tom Wren to serve as an independent Director of Flower. Mr. Wren was recently the Treasurer of MBNA where he served ten years, and previously was a senior bank regulator in the Office of the Controller of the Currency where he served for eighteen years. ADJUSTED FINANCIAL MEASURES Throughout this news release, the terms adjusted revenues, adjusted net earnings, adjusted earnings per diluted share, adjusted net interest income, adjusted net interest margin and other similar terms are used to identify financial measures that are not prepared in accordance with Generally Accepted Accounting Principles (�GAAP�). The Company has been, and expects to continue to be, managed on the basis of the adjusted financial measures. The adjusted financial measures should be read in conjunction with the Company�s GAAP results. A reconciliation of the adjusted financial measures to financial measures prepared in accordance with GAAP is included on pages A-1 and A-2 of this release. CONFERENCE CALL TODAY American Home will hold an investor conference call today, January 25, 2007, at 10:30 a.m., Eastern Time, to discuss earnings. Interested parties may listen to the live conference call by visiting the investor relations section of American Home�s corporate website, www.americanhm.com. A replay of the online broadcast will be available on the site through February 8, 2007. DIVIDEND REINVESTMENT & DIRECT STOCK PURCHASE AND SALE PLAN American Home Mortgage Investment Corp. has established an Investors Choice Dividend Reinvestment & Direct Stock Purchase and Sale Plan for its shareholders. The plan offers affordable alternatives for buying and selling common stock of American Home Mortgage Investment Corp. Participants in the plan may also reinvest cash dividends and make periodic supplemental cash payments to purchase additional shares of the Company�s common stock. If you have additional questions or would like to enroll in the plan, please contact the plan administrator, American Stock Transfer & Trust Company, at 1-888-777-0319 (toll free) or visit their website at www.amstock.com. ABOUT AMERICAN HOME American Home Mortgage Investment Corp. is a mortgage real estate investment trust (�REIT�) focused on earning net interest income from self-originated loans and mortgage-backed securities, and, through its taxable subsidiaries, from originating and selling mortgage loans and servicing mortgage loans for institutional investors. Mortgages are originated through a network of loan production offices and mortgage brokers as well as purchased from correspondent lenders, and are serviced at the Company�s Irving, Texas servicing center. For additional information, please visit the Company's website at www.americanhm.com. FORWARD-LOOKING STATEMENTS This news release contains �forward-looking statements� that are based upon expectations, estimates, forecasts, projections and assumptions. Any statement in this news release that is not a statement of historical fact, including, but not limited to, earnings guidance and forecasts, projections of financial results and loan origination volume, expected future financial position, dividend plans or business strategy, and any other statements of plans, expectations, objectives, estimates and beliefs, is a forward looking statement. Words such as �look forward,� �will,� �anticipate,� �may,� �expect,� �plan,� �believe,� �intend,� �opportunity,� �potential,� and similar words, or the negatives of those words, are intended to identify forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that are difficult to predict, and are not guarantees of future performance. As a result, actual future events may differ materially from any future results, performance or achievements expressed in or implied by this news release. Specific factors that might cause such a difference include, but are not limited to: American Home�s limited operating history with respect to its portfolio strategy; the potential fluctuations in American Home�s operating results; American Home�s potential need for additional capital; the direction of interest rates and their subsequent effect on the business of American Home and its subsidiaries; risks associated with the use of leverage; changes in federal and state tax laws affecting REITs; federal and state regulation of mortgage banking; and those risks and uncertainties discussed in filings made by American Home with the Securities and Exchange Commission. Such forward-looking statements are inherently uncertain, and stockholders must recognize that actual results may differ from expectations. American Home does not assume any responsibility, and expressly disclaims any responsibility, to issue updates to any forward-looking statements discussed in this news release, whether as a result of new information, future events or otherwise. * 2004 and 2005 As Adjusted. See the section titled �Adjusted Financial Measures� on page 5 of this release. Financial Table Presentation The following financial tables include GAAP, adjusted and reconciling information for the reasons and purposes described under the heading ADJUSTED FINANCIAL MEASURES herein. Financial Tables to Follow on Next Page AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES OPERATING STATISTICS � As of and for the As of and for the Three Months Ended Year Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2006� 2005� 2006� 2005� (1) � � � As Adjusted Mortgage Holdings Segment: Investment Portfolio Performance (2): Average loans and mortgage-backed securities in portfolio ($ billions) 12.7� 10.5� 12.3� 8.0� Interest income ($ millions) 193.7� 138.0� 725.5� 377.8� Average portfolio yield 6.08% 5.27% 5.89% 4.75% � Interest expense ($ millions) 166.6� 108.2� 615.5� 270.0� Average cost of funds and hedges 5.43% 4.36% 5.25% 3.65% � Net interest income ($ millions) 27.1� 29.8� 110.0� 107.8� Net interest margin 0.85% 1.17% 0.89% 1.36% � Interest carry on free standing derivatives ($ millions) 6.3� 1.0� 23.5� -7.3� Net interest income plus interest carry on free standing derivatives ($ millions) 33.4� 30.8� 133.5� 100.5� Net interest margin including interest carry on free standing derivatives 1.05% 1.21% 1.08% 1.26% � Reconciliation of Changes in Mortgage Holdings (3): Net change in mortgage-backed securities ($ billions) 0.3� 1.4� -1.3� 0.3� Additions to loans in portfolio ($ billions) 1.0� 2.1� 4.1� 3.5� Principal repayments and other dispositions of loans in portfolio ($ billions) 0.5� 0.0� 1.3� 0.0� Net additions to loans in portfolio ($ billions) 0.5� 2.1� 2.8� 3.5� Loans and mortgage-backed securities held - end of period ($ billions) 15.6� 14.1� 15.6� 14.1� Mortgage-backed securities period end duration gap (in years) 0.07� -0.03� 0.07� -0.03� � Loan Origination Segment: Loan originations ($ billions) (4) 15.5� 13.6� 58.9� 45.3� Refinance 60% 51% 54% 47% ARM 51% 50% 53% 50% � Average mortgage loans, net ($ billions) (3) 10.0� 8.6� 9.1� 5.2� Net interest income excluding trust preferred and other interest expense ($ millions) 26.8� 26.4� 111.5� 96.8� Net interest margin excluding trust preferred and other interest expense 1.08% 1.28% 1.22% 1.85% Trust preferred and other interest expense ($ millions) 7.4� 3.3� 24.4� 6.5� Net interest income ($ millions) 19.4� 23.1� 87.1� 90.3� Loans securitized and held ($ billions) 0.0� 0.0� 0.0� 2.9� Loans securitized and sold ($ billions) 0.0� 0.0� 0.0� 10.3� Loans sold to third parties ($ billions) 14.3� 11.0� 56.0� 28.5� � Gain on sales of loans, net of hedge gains ($ millions) (5) 202.9� 105.4� 810.0� 577.4� Excess of fair value over carrying value of loans added to investment portfolio ($ millions) 8.7� 30.2� 57.1� 58.0� Total ($ millions) 211.6� 135.6� 867.1� 635.4� � Gain on sales of loans, net of hedge gains (% of principal) (5) 1.42% 0.96% 1.45% 1.42% Excess of fair value over carrying value of loans added to investment portfolio (% of principal) 0.82% 1.43% 1.36% 1.63% Total (% of principal) 1.38% 1.03% 1.44% 1.44% Applications accepted ($ billions) 23.1� 17.8� 89.4� 67.8� Application pipeline ($ billions) 11.3� 9.2� 11.3� 9.2� � Loan Servicing Segment: Loan servicing portfolio - total with warehouse ($ billions) 46.3� 30.7� Loan servicing portfolio - loans sold or securitized ($ billions) 38.5� 25.0� Interest expense ($ millions) 4.5� 2.6� 15.3� 7.3� Weighted average note rate 7.08% 5.79% Weighted average service fee 0.347% 0.330% Average age (in months) 15� 15� � Notes: (1) Adjusted as if the Company's fourth quarter 2004 securitization had qualified for SFAS 140 sale accounting treatment in the fourth quarter of 2004. Please refer to the detailed reconciliation of the Company's GAAP and as adjusted results on pages A-1 and A-2. (2) Excludes loans held for investment pending securitization. (3) Includes loans held for investment pending securitization. (4) Loan originations of $13.2 billion in the first quarter of 2006 exclude $559 million of loans purchased in the Waterfield acquisition. (5) Prior to the fourth quarter of 2005, includes gain on current period securitizations, net of hedge gains. AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES OPERATING STATISTICS � As of and for the Three Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, 2006� 2006� 2006� 2006� 2005� Mortgage Holdings Segment: Investment Portfolio Performance (1): Average loans and mortgage-backed securities in portfolio ($ billions) 12.7� 13.0� 12.5� 11.1� 10.5� Interest income ($ millions) 193.7� 195.6� 181.3� 154.9� 138.0� Average portfolio yield 6.08% 6.03% 5.82% 5.60% 5.27% � Interest expense ($ millions) 166.6� 167.2� 153.2� 128.5� 108.2� Average cost of funds and hedges 5.43% 5.37% 5.19% 4.96% 4.36% � Net interest income ($ millions) 27.1� 28.4� 28.1� 26.4� 29.8� Net interest margin 0.85% 0.88% 0.90% 0.95% 1.17% � Interest carry on free standing derivatives ($ millions) 6.3� 7.5� 5.8� 3.9� 1.0� Net interest income plus interest carry on free standing derivatives ($ millions) 33.4� 35.9� 33.9� 30.3� 30.8� Net interest margin including interest carry on free standing derivatives 1.05% 1.11% 1.09% 1.09% 1.21% � Reconciliation of Changes in Mortgage Holdings (2): Net change in mortgage-backed securities ($ billions) 0.3� -0.3� -0.3� -1.0� 1.4� Additions to loans in portfolio ($ billions) 1.0� 0.9� 1.2� 1.0� 2.1� Principal repayments and other dispositions of loans in portfolio ($ billions) 0.5� 0.4� 0.2� 0.2� 0.0� Net additions to loans in portfolio ($ billions) 0.5� 0.5� 1.0� 0.8� 2.1� Loans and mortgage-backed securities held - end of period ($ billions) 15.6� 14.8� 14.6� 13.9� 14.1� Mortgage-backed securities period end duration gap (in years) 0.07� -0.12� 0.10� 0.15� -0.03� � Loan Origination Segment: Loan originations ($ billions) (3) 15.5� 15.3� 14.9� 13.2� 13.6� Refinance 60% 54% 51% 51% 51% ARM 51% 53% 55% 51% 50% � Average mortgage loans, net ($ billions) (2) 10.0� 8.1� 8.8� 9.6� 8.6� Net interest income excluding trust preferred and other interest expense ($ millions) 26.8� 25.1� 31.6� 28.0� 26.4� Net interest margin excluding trust preferred and other interest expense 1.08% 1.24% 1.44% 1.17% 1.28% Trust preferred and other interest expense ($ millions) 7.4� 6.6� 5.7� 4.7� 3.3� Net interest income ($ millions) 19.4� 18.5� 25.9� 23.3� 23.1� Loans securitized and held ($ billions) 0.0� 0.0� 0.0� 0.0� 0.0� Loans securitized and sold ($ billions) 0.0� 0.0� 0.0� 0.0� 0.0� Loans sold to third parties ($ billions) 14.3� 14.3� 13.9� 13.5� 11.0� � Gain on sales of loans, net of hedge gains ($ millions) 202.9� 210.6� 224.6� 171.9� 105.4� Excess of fair value over carrying value of loans added to investment portfolio ($ millions) 8.7� 15.6� 18.8� 14.0� 30.2� Total ($ millions) 211.6� 226.2� 243.4� 185.9� 135.6� � Gain on sales of loans, net of hedge gains (% of principal) 1.42% 1.47% 1.62% 1.27% 0.96% Excess of fair value over carrying value of loans added to investment portfolio (% of principal) 0.82% 1.71% 1.49% 1.44% 1.43% Total (% of principal) 1.38% 1.48% 1.61% 1.28% 1.03% Applications accepted ($ billions) 23.1� 23.4� 22.1� 20.8� 17.8� Application pipeline ($ billions) 11.3� 12.3� 12.1� 11.8� 9.2� � Loan Servicing Segment: Loan servicing portfolio - total with warehouse ($ billions) 46.3� 43.0� 39.1� 34.8� 30.7� Loan servicing portfolio - loans sold or securitized ($ billions) 38.5� 35.9� 32.6� 29.0� 25.0� Interest expense ($ millions) 4.5� 3.9� 3.8� 3.1� 2.6� Weighted average note rate 7.08% 6.77% 6.38% 6.09% 5.79% Weighted average service fee 0.347% 0.339% 0.336% 0.329% 0.330% Average age (in months) 15� 15� 14� 14� 15� � Notes: (1) Excludes loans held for investment pending securitization. (2) Includes loans held for investment pending securitization. (3) Loan originations of $13.2 billion in the first quarter of 2006 exclude $559 million of loans purchased in the Waterfield acquisition. AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts) � � Three Months Ended Year Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, � 2006� � 2005� � 2006� � 2005� (1) As Adjusted Net interest income: Interest income $ 364,810� $ 265,435� $ 1,328,494� $ 700,760� Interest expense � (322,134) � (215,057) � (1,146,039) � (509,887) Net interest income � 42,676� � 50,378� � 182,455� � 190,873� � Provision for loan losses (6,725) (2,142) (17,380) (2,142) � � � � Net interest income after provision for loan losses � 35,951� � 48,236� � 165,075� � 188,731� � Non-interest income: Gain on sales of mortgage loans 202,884� 98,777� 810,006� 335,065� Gain on sales of current period securitized mortgage loans -� -� -� 168,998� Gain on sales of mortgage-backed securities and derivatives 3,305� 38,068� 12,257� 49,536� Unrealized loss on mortgage-backed securities and derivatives (9,663) (44,778) (7,028) (45,799) � Loan servicing fees 47,300� 26,715� 145,429� 78,947� Amortization and impairment of mortgage servicing rights -� (18,745) -� (60,657) Change in fair value of mortgage servicing rights: Due to realization of cash flows (28,940) -� (102,820) -� Due to changes in valuation assumptions, net of hedge gain (loss) � 3,920� � -� � (5,289) � -� Net loan servicing fees � 22,280� � 7,970� � 37,320� � 18,290� � Other non-interest income � 2,902� � 2,181� � 8,814� � 7,775� Non-interest income � 221,708� � 102,218� � 861,369� � 533,865� � Non-interest expenses: Salaries, commissions and benefits, net 105,908� 95,237� 414,008� 359,949� Occupancy and equipment 20,396� 16,459� 77,357� 58,855� Data processing and communications 6,346� 6,402� 25,905� 24,788� Office supplies and expenses 4,324� 4,612� 19,147� 19,722� Marketing and promotion 4,574� 5,951� 21,625� 20,311� Travel and entertainment 8,966� 6,982� 31,310� 21,007� Professional fees 7,902� 3,586� 24,322� 14,232� Other � 14,952� � 10,946� � 64,614� � 32,018� Non-interest expenses � 173,368� � 150,175� � 678,288� � 550,882� � Net income before income tax expense (benefit) 84,291� 279� 348,156� 171,714� � Income tax expense (benefit) � 19,594� � (16,419) � 84,629� � (17,721) � Net income $ 64,697� $ 16,698� $ 263,527� $ 189,435� � Dividends on preferred stock 3,304� 3,304� 13,218� 13,217� � � � � Net income available to common shareholders $ 61,393� $ 13,394� $ 250,309� $ 176,218� � Per share data: Basic $ 1.22� $ 0.27� $ 5.00� $ 4.01� Diluted $ 1.21� $ 0.27� $ 4.96� $ 3.97� � Weighted average number of shares - basic 50,192� 49,605� 50,030� 43,897� Weighted average number of shares - diluted 50,602� 49,998� 50,421� 44,375� � Note: (1) Adjusted as if the Company's fourth quarter 2004 securitization had qualified for SFAS 140 sale accounting treatment in the fourth quarter of 2004. Please refer to the detailed reconciliation of the Company's GAAP and as adjusted results on pages A-1 and A-2. AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts) � � Three Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, 2006� 2006� 2006� 2006� 2005� Net interest income: Interest income $ 364,810� $ 332,875� $ 330,196� $ 300,613� $ 265,435� Interest expense (322,134) (289,878) (279,992) (254,035) (215,057) Net interest income 42,676� 42,997� 50,204� 46,578� 50,378� � Provision for loan losses (6,725) (5,365) (3,979) (1,311) (2,142) � � � � � Net interest income after provision for loan losses 35,951� 37,632� 46,225� 45,267� 48,236� � Non-interest income: Gain on sales of mortgage loans 202,884� 210,621� 224,594� 171,907� 98,777� Gain (loss) on sales of mortgage-backed securities and derivatives 3,305� 9,849� (47) (850) 38,068� Unrealized (loss) gain on mortgage-backed securities and derivatives (9,663) 1,050� (7,730) 9,315� (44,778) � Loan servicing fees 47,300� 43,379� 30,417� 24,333� 26,715� Amortization and impairment of mortgage servicing rights -� -� -� -� (18,745) Change in fair value of mortgage servicing rights: Due to realization of cash flows (28,940) (28,839) (26,306) (18,735) -� Due to changes in valuation assumptions, net of hedge gain (loss) 3,920� (16,799) 7,476� 114� -� Net loan servicing fees (loss) 22,280� (2,259) 11,587� 5,712� 7,970� � Other non-interest income 2,902� 2,018� 2,125� 1,769� 2,181� Non-interest income 221,708� 221,279� 230,529� 187,853� 102,218� � Non-interest expenses: Salaries, commissions and benefits, net 105,908� 105,676� 103,157� 99,267� 95,237� Occupancy and equipment 20,396� 19,228� 19,763� 17,970� 16,459� Data processing and communications 6,346� 5,700� 6,733� 7,126� 6,402� Office supplies and expenses 4,324� 5,346� 5,145� 4,332� 4,612� Marketing and promotion 4,574� 4,868� 6,383� 5,800� 5,951� Travel and entertainment 8,966� 7,798� 7,793� 6,753� 6,982� Professional fees 7,902� 6,076� 5,013� 5,331� 3,586� Other 14,952� 16,588� 17,192� 15,882� 10,946� Non-interest expenses 173,368� 171,280� 171,179� 162,461� 150,175� � Net income before income tax expense (benefit) 84,291� 87,631� 105,575� 70,659� 279� � Income tax expense (benefit) 19,594� 15,611� 33,224� 16,200� (16,419) � Net income $ 64,697� $ 72,020� $ 72,351� $ 54,459� $ 16,698� � Dividends on preferred stock 3,304� 3,305� 3,304� 3,305� 3,304� � � � � � Net income available to common shareholders $ 61,393� $ 68,715� $ 69,047� $ 51,154� $ 13,394� � Per share data: Basic $ 1.22� $ 1.37� $ 1.38� $ 1.03� $ 0.27� Diluted $ 1.21� $ 1.36� $ 1.37� $ 1.02� $ 0.27� � Weighted average number of shares - basic 50,192� 50,148� 50,056� 49,715� 49,605� Weighted average number of shares - diluted 50,602� 50,553� 50,487� 50,070� 49,998� AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands) � � December 31, September 30, June 30, March 31, December 31, 2006� 2006� 2006� 2006� 2005� Assets: Cash and cash equivalents $ 398,166� $ 298,079� $ 304,268� $ 572,591� $ 575,650� Accounts receivable and servicing advances 432,418� 350,965� 342,244� 327,586� 329,132� Securities 9,308,032� 8,957,546� 9,299,343� 9,580,974� 10,602,115� Mortgage loans held for sale, net 1,523,737� 1,365,595� 1,243,702� 1,589,613� 2,208,749� Loans held for investment, net 6,329,721� 5,797,801� 5,337,138� 4,315,384� 3,479,721� Derivative assets 32,142� 26,323� 139,397� 102,267� 44,594� Mortgage servicing rights, net 506,341� 460,913� 434,173� 371,974� 319,671� Premises and equipment, net 86,211� 82,288� 80,296� 75,594� 68,782� Goodwill 133,128� 111,890� 110,759� 110,330� 99,527� Other assets 79,089� 52,927� 34,279� 30,697� 26,804� Total assets $ 18,828,985� $ 17,504,327� $ 17,325,599� $ 17,077,010� $ 17,754,745� � Liabilities and Stockholders' Equity: Liabilities: Warehouse lines of credit $ 1,304,541� $ 1,890,034� $ 1,476,958� $ 1,754,581� $ 3,474,191� Commercial paper 1,273,965� 1,283,858� 888,476� 1,073,630� 1,079,179� Reverse repurchase agreements 8,571,459� 7,232,503� 8,939,786� 8,899,050� 9,806,144� Deposits 24,016� -� -� -� -� Collateralized debt obligations 4,854,801� 3,484,873� 3,724,878� 2,905,199� 1,057,906� Payable for securities purchased 289,716� 1,221,105� -� 215,114� 261,539� Derivative liabilities 12,644� 40,170� 3,280� 7,512� 16,773� Trust preferred securities 336,078� 282,340� 252,780� 204,018� 203,688� Accrued expenses and other liabilities 361,923� 392,334� 367,358� 401,769� 298,230� Notes payable 417,467� 317,161� 337,700� 330,714� 319,309� Income taxes payable 112,089� 95,808� 80,529� 51,016� 30,770� Total liabilities 17,558,699� 16,240,186� 16,071,745� 15,842,603� 16,547,729� � Stockholders' Equity: � Preferred stock 134,040� 134,040� 134,040� 134,040� 134,040� Common stock 502� 502� 501� 500� 496� Additional paid-in capital 963,617� 962,903� 960,995� 958,175� 947,512� Retained earnings 257,283� 245,473� 227,450� 206,512� 203,778� Accumulated other comprehensive loss (85,156) (78,777) (69,132) (64,820) (78,810) Total stockholders� equity 1,270,286� 1,264,141� 1,253,854� 1,234,407� 1,207,016� � Total liabilities and stockholders' equity $ 18,828,985� $ 17,504,327� $ 17,325,599� $ 17,077,010� $ 17,754,745� � Number of shares outstanding - preferred 5,600,000� 5,600,000� 5,600,000� 5,600,000� 5,600,000� Number of shares outstanding - common 50,195,499� 50,182,257� 50,107,214� 50,004,965� 49,639,646� AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS� EQUITY (Unaudited) (In thousands) � � Three Months Ended Year Ended Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, Dec. 31, 2006� 2006� 2006� 2006� 2005� 2006� � Preferred stock Balance at end of period $ 134,040� $ 134,040� $ 134,040� $ 134,040� $ 134,040� $ 134,040� � Common stock Balance at beginning of period $ 502� $ 501� $ 500� $ 496� $ 496� $ 496� Issuance of common stock - earnouts -� -� -� 3� -� 3� Issuance of common stock - Omnibus Stock Plan -� 1� 1� 1� -� 3� Balance at end of period $ 502� $ 502� $ 501� $ 500� $ 496� $ 502� � Additional paid-in capital Balance at beginning of period $ 962,903� $ 960,995� $ 958,175� $ 947,512� $ 946,105� $ 947,512� Issuance of common stock - earnouts -� 296� -� 9,555� -� 9,851� Issuance of common stock - Omnibus Stock Plan 211� 1,067� 1,126� 651� 857� 3,055� Stock-based employee compensation expense 241� 37� 373� 410� -� 1,061� Tax benefit for stock options exercised 102� 332� 1,198� -� 434� 1,632� Restricted shares amortization 160� 176� 123� 47� 116� 506� Balance at end of period $ 963,617� $ 962,903� $ 960,995� $ 958,175� $ 947,512� $ 963,617� � Retained earnings Balance at beginning of period $ 245,473� $ 227,450� $ 206,512� $ 203,778� $ 235,556� $ 203,778� Cumulative-effect adjustment as of beginning of period (1) 3,635� -� -� (2,917) -� 718� Net income 64,697� 72,020� 72,351� 54,459� 16,698� 263,527� Dividends declared (56,522) (53,997) (51,413) (48,808) (48,476) (210,740) Balance at end of period $ 257,283� $ 245,473� $ 227,450� $ 206,512� $ 203,778� $ 257,283� � Other comprehensive loss Balance at beginning of period $ (78,777) $ (69,132) $ (64,820) $ (78,810) $ (51,091) $ (78,810) Unrealized gain (loss) on securities 870� 75,535� (44,510) (35,765) (7,730) (3,870) (Loss) gain on derivatives (7,249) (85,180) 40,198� 49,755� (19,989) (2,476) Balance at end of period $ (85,156) $ (78,777) $ (69,132) $ (64,820) $ (78,810) $ (85,156) � Total stockholders' equity $ 1,270,286� $ 1,264,141� $ 1,253,854� $ 1,234,407� $ 1,207,016� $ 1,270,286� � Note: (1) Effective January 1, 2006, the Company adopted SFAS 156 and elected the fair value option to subsequently measure its MSRs. AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) � Three Months Ended Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, 2006� 2006� 2006� 2006� 2005� Cash flows from operating activities: Net income $ 64,697� $ 72,020� $ 72,351� $ 54,459� $ 16,698� Adjustments to reconcile net income to net cash (used in) provided by operating activities: � Depreciation and amortization 5,003� 4,275� 5,014� 3,953� 3,454� Provision for loan losses 6,725� 5,365� 3,979� 1,311� 2,142� Change in fair value of mortgage servicing rights 28,834� 52,753� 18,830� 18,621� -� Amortization and impairment of mortgage servicing rights -� -� -� -� 18,745� Accretion and amortization of mortgage-backed securities, net 4,845� 4,696� 2,006� 2,331� 1,509� Deferred cash flow hedge (loss) gain, net of amortization (14,292) 5,509� 10,509� 3,909� (346) (Gain) loss on sales of mortgage-backed securities and derivatives (930) (4,735) -� -� 876� Unrealized loss (gain) on mortgage-backed securities 10,890� (1,588) 14,591� 3,090� 40,968� Unrealized (gain) loss on free standing derivatives (4,828) 20,629� (1,038) (4,765) 6,149� (Decrease) increase in forward delivery contracts (35,605) 42,315� (6,036) (24,041) 24,124� Capitalized mortgage servicing rights on sold loans (73,918) (79,493) (81,029) (69,768) (37,757) Decrease (increase) in interest rate lock commitments 12,586� (5,069) (4,447) 7,131� (10,508) (Increase) decrease in mortgage loan basis adjustments (4,917) (10,125) (2,156) 4,731� (32,201) Excess tax benefits from share-based payment arrangements (102) (332) (1,198) -� -� Other (1,450) (569) (633) (198) (645) (Increase) decrease in operating assets: Accounts receivable (58,738) 2,740� (13,506) 6,829� 18,156� Servicing advances (22,038) (11,461) (1,152) (3,281) (11,552) Other assets 8,281� (18,648) (3,582) (1,451) 4,882� Increase (decrease) in operating liabilities: Accrued expenses and other liabilities (42,808) 25,988� (32,977) 93,876� 31,696� Income taxes payable 20,018� 15,611� 30,711� 16,173� (25,106) � Origination of mortgage loans held for sale (15,080,212) (14,664,704) (14,371,439) (12,203,014) (11,482,292) Principal received from sales of mortgage loans held for sale 14,371,049� 14,241,440� 14,013,921� 13,372,574� 11,179,015� Additions to mortgage-backed securities and derivatives -� -� -� -� (152,666) Principal proceeds from sales of self-originated mortgage-backed securities -� -� 99,086� 1,809,796� 1,333,188� Cash received from residual assets in securitizations 14,710� 16,785� 20,947� 27,353� 26,958� Principal repayments of mortgage-backed securities 29,491� 35,677� 60,485� 93,845� 212,927� Net cash (used in) provided by operating activities (762,709) (250,921) (166,763) 3,213,464� 1,168,414� � Cash flows from investing activities: Purchases of premises and equipment (8,708) (6,267) (9,716) (10,765) (8,062) Origination of mortgage loans held for investment (450,263) (599,384) (560,003) (970,335) (2,084,025) Proceeds from repayments and dispositions of mortgage loans held for investment 464,332� 446,199� 240,403� 137,545� 75,613� Purchases of mortgage-backed securities (1,423,115) (1,666,650) (461,125) (1,389,336) (3,298,636) Principal proceeds from sales of purchased mortgage-backed securities 482,336� 1,503,760� -� -� 24,592� Principal repayments of purchased mortgage-backed securities 535,465� 529,441� 501,239� 438,297� 409,080� Net increase in investment in Federal Home Loan Bank stock, at cost -� (54) (108) -� -� Acquisition of business (14,108) -� -� (550,077) -� Net cash (used in) provided by investing activities (414,061) 207,045� (289,310) (2,344,671) (4,881,438) � Cash flows from financing activities: (Decrease) increase in warehouse lines of credit, net (585,493) 413,076� (277,623) (1,719,610) 1,309,037� Increase (decrease) in reverse repurchase agreements, net 1,338,956� (1,707,283) 40,736� (907,094) 1,764,565� Decrease in deposits (6,673) -� -� -� -� Increase (decrease) in collateralized debt obligations 1,369,928� (240,005) 819,679� 1,847,293� 1,057,906� (Decrease) increase in payable for securities purchased (931,389) 1,221,105� (215,114) (46,425) (293,178) (Decrease) increase in commercial paper, net (9,893) 395,382� (185,154) (5,549) (255,117) Increase (decrease) in drafts payable, net 4,063� (3,600) (4,028) (4,377) 1,991� Increase in trust preferred securities 53,738� 29,560� 48,762� 330� 106,724� Increase (decrease) in notes payable, net 97,306� (20,539) 6,986� 11,405� 13,543� Proceeds from issuance of common stock 211� 1,068� 1,127� 652� 857� Excess tax benefits from share-based payment arrangements 102� 332� 1,198� -� -� Dividends paid (53,999) (51,409) (48,819) (48,477) (42,078) Net cash provided by (used in) financing activities 1,276,857� 37,687� 187,750� (871,852) 3,664,250� � Net increase (decrease) in cash and cash equivalents 100,087� (6,189) (268,323) (3,059) (48,774) Cash and cash equivalents, beginning of period 298,079� 304,268� 572,591� 575,650� 624,424� Cash and cash equivalents, end of period $ 398,166� $ 298,079� $ 304,268� $ 572,591� $ 575,650� � Supplemental disclosure of non-cash investing activities: Net transfer of loans held for sale to loans held for investment $ 533,184� $ 307,431� $ 699,519� $ -� $ -� AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) � Year Ended December 31, � 2006� Cash flows from operating activities: Net income $ 263,527� Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 18,245� Provision for loan losses 17,380� Change in fair value of mortgage servicing rights 119,038� Accretion and amortization of mortgage-backed securities, net 13,878� Deferred cash flow hedge gain, net of amortization 5,635� Gain on sales of mortgage-backed securities and derivatives (5,665) Unrealized loss on mortgage-backed securities 26,983� Unrealized loss on free standing derivatives 9,998� Decrease in forward delivery contracts (23,367) Capitalized mortgage servicing rights on sold loans (304,208) Decrease in interest rate lock commitments 10,201� Increase in mortgage loan basis adjustments (12,467) Excess tax benefits from share-based payment arrangements (1,632) Other (2,850) Increase in operating assets: Accounts receivable (62,675) Servicing advances (37,932) Other assets (15,400) Increase in operating liabilities: Accrued expenses and other liabilities 44,079� Income taxes payable 82,513� � Origination of mortgage loans held for sale (56,319,369) Principal received from sales of mortgage loans held for sale 55,998,984� Principal proceeds from sales of self-originated mortgage-backed securities 1,908,882� Cash received from residual assets in securitizations 79,795� Principal repayments of mortgage-backed securities � 219,498� Net cash provided by operating activities � 2,033,071� � Cash flows from investing activities: Purchases of premises and equipment (35,456) Origination of mortgage loans held for investment (2,579,985) Proceeds from repayments and dispositions of mortgage loans held for investment 1,288,479� Purchases of mortgage-backed securities (4,940,226) Principal proceeds from sales of purchased mortgage-backed securities 1,986,096� Principal repayments of purchased mortgage-backed securities 2,004,442� Net increase in investment in Federal Home Loan Bank stock, at cost (162) Acquisition of business � (564,185) Net cash used in investing activities � (2,840,997) � Cash flows from financing activities: Decrease in warehouse lines of credit, net (2,169,650) Decrease in reverse repurchase agreements, net (1,234,685) Decrease in deposits (6,673) Increase in collateralized debt obligations 3,796,895� Increase in payable for securities purchased 28,177� Increase in commercial paper, net 194,786� Decrease in drafts payable, net (7,942) Increase in trust preferred securities 132,390� Increase in notes payable, net 95,158� Proceeds from issuance of common stock 3,058� Excess tax benefits from share-based payment arrangements 1,632� Dividends paid � (202,704) Net cash provided by financing activities � 630,442� � Net decrease in cash and cash equivalents (177,484) Cash and cash equivalents, beginning of period � 575,650� Cash and cash equivalents, end of period $ 398,166� � Supplemental disclosure of non-cash investing activities: Net transfer of loans held for sale to loans held for investment $ 1,540,134� AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES FAIR VALUE OF FINANCIAL INSTRUMENTS (Unaudited) (In thousands) � December 31, 2006 Carrying Value Fair Value Fair Value in Excess of Carrying Value Assets: Cash and cash equivalents $ 398,166� $ 398,166� $ -� Accounts receivable and servicing advances 432,418� 432,418� -� Securities 9,308,032� 9,308,032� -� Mortgage loans held for sale, net 1,523,737� 1,573,564� 49,827� Loans held for investment, net 6,329,721� 6,461,449� 131,728� Mortgage servicing rights, net 506,341� 506,341� -� Derivative assets (1) 32,142� 130,091� 97,949� $ 279,504� � � Carrying Value in Excess of (Lower Than) Fair Value Liabilities: Warehouse lines of credit $ 1,304,541� $ 1,304,541� $ -� Commercial paper 1,273,965� 1,273,965� -� Reverse repurchase agreements 8,571,459� 8,571,538� (79) Collateralized debt obligations 4,854,801� 4,856,258� (1,457) Derivative liabilities 12,644� 12,644� -� Trust preferred securities 336,078� 336,078� -� Notes payable 417,467� 417,467� -� $ (1,536) � Fair Value in Excess of Carrying Value $ 277,968� � Note: (1) Derivative assets includes interest rate lock commitments ("IRLCs") to fund mortgage loans. The carrying value excludes the value of the mortgage servicing rights ("MSRs") attached to the IRLCs in accordance with SEC Staff Accounting Bulletin No. 105. The fair value includes the value of MSRs. AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES OPERATING STATISTICS � As of and for the Year Ended December 31, 2005 (1) GAAP Adjustments As Adjusted Mortgage Holdings Segment: Investment Portfolio Performance (2): Average loans and mortgage-backed securities in portfolio ($ billions) 7.6� 0.4� 8.0� Interest income ($ millions) 357.9� 19.9� 377.8� Average portfolio yield 4.73% 4.75% � Interest expense ($ millions) 262.3� 7.7� 270.0� Average cost of funds and hedges 3.71% 3.65% � Net interest income ($ millions) 95.6� 12.2� 107.8� Net interest margin 1.26% 1.36% � Interest carry on free standing derivatives ($ millions) -7.3� -7.3� Net interest income plus interest carry on free standing derivatives ($ millions) 88.3� 12.2� 100.5� Net interest margin including interest carry on free standing derivatives 1.17% 1.26% � Reconciliation of Changes in Mortgage Holdings (3): Net change in mortgage-backed securities ($ billions) 0.3� 0.3� Additions to loans in portfolio ($ billions) 3.5� 3.5� Principal repayments of loans in portfolio ($ billions) 0.0� 0.0� Net additions to loans in portfolio ($ billions) 3.5� 3.5� Loans and mortgage-backed securities held - end of period ($ billions) 14.1� 14.1� Mortgage-backed securities period end duration gap (in years) -0.03� -0.03� � Loan Origination Segment: Loan originations ($ billions) 45.3� 45.3� Refinance 47% 47% ARM 50% 50% � Average mortgage loans, net ($ billions) (3) 6.1� -0.9� 5.2� Net interest income excluding trust preferred and other interest expense ($ millions) 119.2� -22.4� 96.8� Net interest margin excluding trust preferred and other interest expense 1.96% 1.85% Trust preferred and other interest expense ($ millions) 6.5� 6.5� Net interest income ($ millions) 112.7� -22.4� 90.3� Loans securitized and held ($ billions) 4.4� -1.5� 2.9� Loans securitized and sold ($ billions) 12.3� -2.0� 10.3� Loans sold to third parties ($ billions) 28.5� 28.5� � Gain on sales of loans, net of hedge gains ($ millions) (4) 620.9� -43.5� 577.4� Excess of fair value over carrying value of loans added to investment portfolio ($ millions) 58.0� � 58.0� Total ($ millions) 678.9� -43.5� 635.4� � Gain on sales of loans, net of hedge gains (% of principal) (4) 1.53% 1.42% Excess of fair value over carrying value of loans added to investment portfolio (% of principal) 1.63% 1.63% Total (% of principal) 1.54% 1.44% Applications accepted ($ billions) 67.8� 67.8� Application pipeline ($ billions) 9.2� 9.2� � � Loan Servicing Segment: Loan servicing portfolio - total with warehouse ($ billions) 30.7� 30.7� Loan servicing portfolio - loans sold or securitized ($ billions) 25.0� 25.0� Interest expense ($ millions) 7.3� 7.3� Weighted average note rate 5.79% 5.79% Weighted average service fee 0.330% 0.330% Average age (in months) 15� 15� � Notes: (1) - Adjustments reflect the net effect on the period presented to reconcile the Company's operating statistics, results of operations and financial condition prepared in accordance with GAAP to the amounts adjusted as if the Company's fourth quarter 2004 securitization had qualified for SFAS 140 sale accounting treatment in the fourth quarter of 2004. (2) Excludes loans held for investment pending securitization. (3) Includes loans held for investment pending securitization. (4) Prior to the fourth quarter of 2005, includes gain on current period securitizations, net of hedge gains. AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts) � � Year Ended December 31, 2005 (1) GAAP � Adjustments � As Adjusted Net interest income: Interest income $ 727,685� $ (26,925) $ 700,760� Interest expense (526,653) � 16,766� � (509,887) Net interest income 201,032� � (10,159) � 190,873� � Provision for loan losses (2,142) � -� � (2,142) � Net interest income after provision for loan losses 198,890� � (10,159) � 188,731� � Non-interest income: Gain on sales of mortgage loans 335,065� -� 335,065� Gain on sales of current period securitized mortgage loans 194,256� (25,258) 168,998� Gain on sales of mortgage-backed securities and derivatives 50,936� (1,400) 49,536� Unrealized loss on mortgage-backed securities and derivatives (8,536) (37,263) (45,799) � Loan servicing fees 76,096� 2,851� 78,947� Amortization and impairment of mortgage servicing rights (60,535) (122) (60,657) Change in fair value of mortgage servicing rights -� � -� � -� Net loan servicing fees 15,561� � 2,729� � 18,290� � Other non-interest income 7,775� � -� � 7,775� Non-interest income 595,057� � (61,192) � 533,865� � Non-interest expenses: Salaries, commissions and benefits, net 359,949� -� 359,949� Occupancy and equipment 58,855� -� 58,855� Data processing and communications 24,788� -� 24,788� Office supplies and expenses 19,722� -� 19,722� Marketing and promotion 20,311� -� 20,311� Travel and entertainment 21,007� -� 21,007� Professional fees 14,232� -� 14,232� Other 32,018� � -� � 32,018� Non-interest expenses 550,882� � -� � 550,882� � Net income before income tax expense 243,065� (71,351) 171,714� � Income tax benefit (17,721) � -� � (17,721) � Net income $ 260,786� � $ (71,351) � $ 189,435� � Dividends on preferred stock 13,217� -� 13,217� � Net income available to common shareholders $ 247,569� � $ (71,351) � $ 176,218� � Per share data: Basic $ 5.64� $ (1.63) $ 4.01� Diluted $ 5.58� $ (1.61) $ 3.97� � Weighted average number of shares - basic 43,897� 43,897� 43,897� Weighted average number of shares - diluted 44,375� 44,375� 44,375� � Note: (1) - Adjustments reflect the net effect on the period presented to reconcile the Company's operating statistics, results of operations and financial condition prepared in accordance with GAAP to the amounts adjusted as if the Company's fourth quarter 2004 securitization had qualified for SFAS 140 sale accounting treatment in the fourth quarter of 2004.