MHL Mortgageit Hldgs

NEW YORK, Aug. 7 /PRNewswire-FirstCall/ -- MortgageIT Holdings, Inc. (NYSE:MHL), a residential mortgage company organized as a real estate investment trust ("REIT"), today announced operating and financial results for the three and six months ended June 30, 2006. The Company reported GAAP net income for the second quarter of 2006 of $5.8 million, or $0.20 per diluted share. Adjusted net income for the second quarter of 2006 was $6.4 million, or $0.22 per diluted share. For the six months ended June 30, 2006, GAAP net income was $1.1 million, or $0.04 per diluted share, and adjusted net income was $2.4 million, or $0.09 per diluted share. Net income and adjusted net income per diluted share are based upon weighted average outstanding shares of 28.5 million for both the second quarter and the six-month period. Additional operating information is included in the "Operating Statistics Table" provided later in this press release. Mortgage Banking Financial and Operating Highlights -- Second quarter 2006 results include approximately $7.7 million, or $0.27 per diluted share, of after tax losses related to the Company's exit from its national wholesale sub-prime platform, which occurred during the first quarter of 2006, primarily in connection with the repurchase of delinquent sub-prime loans. -- The second quarter 2006 results also include an after tax charge of $0.3 million associated with the settlement of a pending wage and hour legal proceeding. -- During the second quarter of 2006, the Company funded $7.59 billion of mortgage originations, an increase of 19% over the prior year period. -- The Company sold $6.54 billion of loans to third parties during the second quarter and recognized a gain on sale margin of 105 bps. The gain on sale margin increased from 71 bps in the first quarter of 2006. Portfolio Financial and Operating Highlights -- The Company did not complete any loan securitizations during the second quarter ended June 30, 2006. The Company's 100% self-originated portfolio totaled approximately $4.9 billion at the end of the second quarter and included approximately $22.2 million of self-originated mortgage backed securities that the Company retained as part of a securitized loan sale. -- Adjusted net interest margin on the loan portfolio was 84 bps during the second quarter of 2006, down from 89 bps in the first quarter of 2006. Adjusted return on assets ("ROA") on the portfolio was 65 bps in the second quarter, down from 71 bps in the first quarter of 2006. Pending Acquisition by Deutsche Bank -- On July 12, the Company announced that Deutsche Bank will acquire all of the outstanding shares of the Company for $14.75 per share in cash, or approximately $429 million in the aggregate. The transaction is expected to close in the fourth quarter of 2006, pending regulatory approvals, approval by the Company's shareholders and the satisfaction of other customary closing conditions. Regulatory applications and the Company's preliminary proxy statement for filing with the SEC are being prepared and integration plans are under way. Dividend Guidance -- The Company expects to pay a dividend of $0.25 to $0.30 per share for the third quarter of 2006. -- If, as expected, Deutsche Bank's acquisition of the Company occurs in the fourth quarter of 2006, a portion of the expenses incurred by the Company relating to the acquisition will be allocated to the REIT portfolio. As a result, the Company expects to pay little or no dividend for the fourth quarter of 2006. Adjusted Financial Measures Adjusted net income, adjusted net interest margin, adjusted return on assets, and adjusted earnings per share (diluted) are non-GAAP financial measures which are reported by the Company in addition to net income and earnings per share (diluted) as prepared in accordance with GAAP. As indicated in its first quarter 2005 release, during the first quarter of 2005, the Company did not qualify under the Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133") with respect to certain hedging activities. The non-GAAP financial measures reported by the Company are presented as if the Company qualified under FAS 133 in all periods. If the Company qualified under FAS 133, gains and losses on derivative hedges would have been deferred and amortized over the hedge period. Since the Company did not qualify under FAS 133, both realized and unrealized gains and losses were recognized in GAAP earnings in prior periods. Management believes that by adjusting net income in this manner, the non-GAAP measures provide a useful gauge of the Company's operating performance because adjusted net income highlights that portion of the Company's reported earnings that is more likely to be ongoing in nature. Second Quarter 2006 Form 10-Q The Company will not hold an investor conference call to discuss its second quarter 2006 financial results. For additional details on the Company's second quarter 2006 financial results, please see the Company's Quarterly Report on Form 10-Q, which will be filed with the SEC by August 9, 2006. About MortgageIT Holdings, Inc. MortgageIT Holdings, Inc. (NYSE:MHL) is a self-administered mortgage real estate investment trust ("REIT") focused on the residential lending market. The Company self-originates its investment portfolio of high quality adjustable rate mortgage ("ARM") loans through MortgageIT, Inc., its wholly owned residential mortgage banking subsidiary. MortgageIT, Inc. is a full-service residential mortgage banking company that is licensed to originate loans throughout the United States. MortgageIT Holdings is organized and conducts its operations to qualify as a REIT for federal income tax purposes. MortgageIT is organized and operates as MortgageIT Holdings' taxable REIT subsidiary. For more information, please visit http://www.mortgageitholdings.com/. Forward-Looking Statements Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that relate to future, not past, events. In this context, forward-looking statements often address the Company's expected future business and financial performance, and often contain words such as "expects," "anticipates," "intends," "plans," "believes," "will" or other similar words or expressions. Forward-looking statements, by their nature, address matters that are, to different degrees, uncertain and include, among other things, statements relating to the Company's ability to fund a fully-leveraged, self-originated loan portfolio, its anticipated loan funding volume and the Company's ability to pay dividends. These statements are based on the current economic environment and management's current expectations and beliefs, and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Forward-looking statements are inherently subject to significant economic, competitive, and other contingencies that are beyond the control of management. The Company can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from the Company's expectations include, but are not limited to, MortgageIT, Inc.'s continued ability to originate new loans, including loans that the Company deems suitable for its securitization portfolio; changes in the capital markets, including changes in interest rates and/or credit spreads; and other risks detailed in the Company's Annual Report on Form 10-K that was filed with the Securities and Exchange Commission ("SEC") on March 15, 2006 and from time to time in the Company's other SEC filings. Such forward-looking statements speak only as of the date of this press release. The Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or change in events, conditions or circumstances on which any statement is based. MortgageIT Holdings, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (Dollars in thousands) June 30, December 31, 2006 2005 (Unaudited) ASSETS Cash and cash equivalents $55,928 $36,757 Restricted cash 2,666 712 Marketable securities held to maturity 3,677 3,675 Portfolio ARM Loans ARM loans collateralizing debt obligations, net 4,923,027 4,681,554 ARM loans held for securitization, net -- 282 Total Portfolio ARM Loans 4,923,027 4,681,836 Mortgage loans held for sale 3,426,886 3,378,197 Mortgage-backed securities - available for sale 22,178 23,357 Hedging instruments 84,390 54,472 Accounts receivable, net of allowance 104,753 146,043 Prepaids and other assets 54,485 31,262 Goodwill 11,639 11,639 Property and equipment, net 15,282 13,941 Total assets $8,704,911 $8,381,891 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Collateralized debt obligations $4,713,147 $4,485,197 Warehouse lines payable 3,227,072 3,177,990 Repurchase agreements 100,300 87,058 Hedging instruments 187 8,801 Junior subordinated debentures 128,871 77,324 Notes payable and other debt 30,000 15,000 Accounts payable, accrued expenses and other liabilities 136,862 176,619 Total liabilities 8,336,439 8,027,989 STOCKHOLDERS' EQUITY: Common stock, $.01 par value: 125,000,000 shares authorized; 29,189,124 issued and 29,098,724 outstanding in 2006; 28,889,540 issued and 28,799,140 outstanding in 2005 292 289 Treasury stock (1,178) (1,178) Additional paid-in capital 393,551 393,304 Unearned compensation - restricted stock (4,097) (5,889) Accumulated other comprehensive income (loss) 40,242 13,225 Accumulated deficit (60,338) (45,849) Total stockholders' equity 368,472 353,902 Total liabilities and stockholders' equity $8,704,911 $8,381,891 MortgageIT Holdings, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars and shares in thousands, except per share data) Three months ended Six months ended June 30, June 30, 2006 2005 2006 2005 Revenues: Gain on sale of mortgage loans $68,873 $46,985 $114,625 $79,092 Brokerage revenues 5,810 6,275 12,248 12,673 Interest income 116,635 67,900 230,543 121,652 Interest expense (116,342) (49,255) (221,323) (80,741) Net interest income 293 18,645 9,220 40,911 Realized and unrealized gain on hedging instruments 3,013 820 3,433 9,742 Other 619 243 857 506 Total revenues 78,608 72,968 140,383 142,924 Operating expenses: Compensation and employee benefits 35,404 32,225 72,646 60,014 Processing expenses 22,868 13,687 46,786 24,050 General and administrative expenses 8,144 6,187 15,724 13,005 Rent 3,506 2,282 7,194 4,557 Marketing, loan acquisition and business development 1,274 1,025 2,544 1,920 Professional fees 3,845 2,517 6,442 4,827 Depreciation and amortization 1,642 841 3,189 1,637 Total operating expenses 76,683 58,764 154,525 110,010 Income (loss) before income taxes 1,925 14,204 (14,142) 32,914 Income tax (benefit) expense (3,918) 5,784 (15,258) 8,766 Net income $5,843 $8,420 $1,116 $24,148 Per share data: Basic $0.21 $0.43 $0.04 $1.24 Diluted $0.20 $0.42 $0.04 $1.21 Weighted average number of shares - basic 28,375 19,486 28,364 19,446 Weighted average number of shares - diluted 28,532 19,905 28,522 19,900 Segment Financial Results for the Second Quarter of 2006 Mortgage ($ thousands - except EPS) Banking Portfolio Consolidated Amount EPS Amount EPS Amount EPS After tax (loss)/earnings prior to elimination (4,368) (0.15) 8,095 0.28 3,727 0.13 Elimination (1) 167 0.00 1,949 0.07 2,116 0.07 After tax (loss)/earnings net of elimination (4,201) (0.15) 10,044 0.35 5,843 0.20 Adjustment for after tax impact relating to FAS133 (2) 0 0.00 574 0.02 574 0.02 Adjusted (Loss)/Earnings (4,201) (0.15) 10,618 0.37 6,417 0.22 Segment Financial Results for the Six Months ended June 30th of 2006 Mortgage ($ thousands - except EPS) Banking Portfolio Consolidated Amount EPS Amount EPS Amount EPS After tax (loss)/earnings prior to elimination (19,354) (0.68) 16,997 0.60 (2,357) (0.08) Elimination (1) 187 0.01 3,286 0.11 3,473 0.12 After tax (loss)/earnings net of elimination (19,167) (0.67) 20,283 0.71 1,116 0.04 Adjustment for after tax impact relating to FAS133 (2) 0 0.00 1,316 0.05 1,316 0.05 Adjusted (Loss)/Earnings (19,167) (0.67) 21,599 0.76 2,432 0.09 (1) Eliminates the economic impact of inter-company loan sales from the mortgage bank to the portfolio. (2) Adjusts previous gains and losses on derivative hedges reported by the Company (as a result of not qualifying under FAS 133) and the corresponding amortization associated with those gains and losses. Operating Statistics Table Rolling five quarter information (Quarter ended) Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, 2005 2005 2005 2006 2006 Mortgage Banking Metrics Loan volume ($ millions) $6,389 $9,249 $9,244 $7,195 $7,589 % Purchase 56% 48% 47% 44% 48% % Refinance 44% 52% 53% 56% 52% % Funded in MortgageIT name (banked) 93% 95% 96% 95% 95% Held for sale warehouse balance (avg) ($ millions) $2,139 $3,655 $4,828 $4,267 $3,784 Warehouse weighted average coupon 5.87% 5.24% 5.59% 5.60% 5.63% Warehouse borrowing cost 3.74% 4.36% 4.95% 5.31% 5.86% Warehouse net interest margin 2.13% 0.88% 0.64% 0.29% -0.22% Number of production branches 53 58 54 49 47 Gain on sale on total loans sold to third parties (Bps) 114 93 71 71 105 Gain on sale prime loans sold to third parties (Bps) 93 80 70 92 107 Gain on sale sub-prime loans sold to third parties (Bps) 227 175 75 (232) (147) Gain on sale on loans transferred to portfolio (Bps) 70 78 66 NM NM Margin on loans brokered (Bps) 116 128 122 135 130 Loan Portfolio Metrics Average loan assets in portfolio ($ millions) $3,404 $4,197 $4,804 $4,939 $5,115 Weighted average coupon of loans 5.17% 5.37% 5.41% 5.48% 5.60% Scheduled loan basis amortization 0.22% 0.28% 0.26% 0.18% 0.28% Incremental loan basis amortization due to higher prepayment rates 0.05% 0.08% 0.00% 0.00% 0.00% Net weighted average coupon 4.90% 5.01% 5.15% 5.30% 5.32% Interest expense (net of hedging) 3.62% 3.93% 4.19% 4.47% 4.52% FAS133 adjustment -0.17% -0.14% -0.10% -0.06% -0.04% Adjusted net interest margin 1.45% 1.22% 1.05% 0.89% 0.84% General and administrative (includes servicing exp) 0.44% 0.34% 0.07% 0.15% 0.17% Credit provision 0.09% 0.09% 0.09% 0.03% 0.01% Adjusted loan portfolio return on assets 0.92% 0.79% 0.90% 0.71% 0.65% Adjusted loan portfolio return on assets prior to increased prepayments 0.97% 0.87% 0.90% 0.71% 0.65% Credit Reserve for HFI Portfolio (Based on Average Balance) Credit reserve balance 0.062% 0.073% 0.086% 0.090% 0.084% 60 to 89 days past due 0.11% 0.26% 0.26% 0.25% 0.22% Over 90 days past due - - % 0.04% 0.12% 0.03% 0.06% Foreclosure 0.17% 0.13% 0.09% 0.24% 0.32% Total past due and foreclosure 0.28% 0.43% 0.47% 0.52% 0.60% DATASOURCE: MortgageIT Holdings, Inc. CONTACT: Investors, Sean McGrath, MortgageIT Holdings, Inc., +1-646-346-8700; Joe LoBello, Brainerd Communicators, Inc., +1-212-986-6667, for MortgageIT Holdings, Inc. Web site: http://www.mortgageitholdings.com/

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