EDISON, N.J., Aug. 10 /PRNewswire-FirstCall/ -- Hanover Capital Mortgage Holdings, Inc. reported a net loss for the three months ended June 30, 2005 of $(0.2) million, or $(0.02) per share on a fully diluted basis, compared to earnings of $0.6 million, or $0.07 per share on a fully diluted basis, for the same period in 2004. The Board of Directors declared a second quarter dividend of $0.30 per share on August 5, 2005 to be paid on September 2, 2005 to stockholders of record as of August 22, 2005, according to John A. Burchett, President and Chief Executive Officer.
Estimated REIT taxable income, which excludes income (losses) in taxable non-REIT subsidiaries, was $0.61 per share for the six months ended June 30, 2005. The Board of Directors' dividend policy is to annually pay four quarterly dividends based on management's estimate of HCM's GAAP income and REIT taxable income in order to pay annually the greater of GAAP income or 90% of REIT taxable income.
The loss reported for the three months ended June 30, 2005 resulted primarily from three factors. First, personnel expenses were impacted by the payment of $1.35 million representing the final installment of the earn-out under the terms of the 1997 Contribution Agreement relating to the initial public offering of HCM in 1997. This final installment was made under the terms of the Contribution Agreement because the total return to stockholders during the prescribed testing periods from July 1, 2002 to June 30, 2005 exceeded 15% annually.
The second factor was costs associated with the $20 million raised in March 2005 through a private placement of trust preferred securities. The proceeds of this issuance were not fully invested during the second quarter as demonstrated by HCM's cash position as of June 30, 2005 of $39.2 million compared to $20.6 million as of December 31, 2004. In July, HCM successfully invested approximately $20.5 million in subordinate mortgage backed securities.
The third factor was a loss for the quarter posted by HanoverTrade. While interest in and acceptance of the technology offered by HanoverTrade remains high, the lengthy sales cycle of its technology sales and its lower-than- expected Loan Sale Advisory performance continued to have a negative impact on earnings. The Board of Directors is reviewing strategic alternatives for this business unit. "We feel that our shareholders would be best served by evaluating the strategic options for HanoverTrade consistent with our goal of focusing on portfolio growth at HCM," Burchett continued.
In June 2005, HCM closed the collateralized mortgage obligation structure referred to as the 1999-A CMO and retired its financing securities. HCM purchased the $19.5 million of principal amount residential loans underlying this securitization, which substantially increased the Mortgage Loans Available for sale to $25.6 million as of June 30, 2005 compared to $0.2 million as of December 30, 2004.
In June 2005, HCM also obtained a one-year committed line of credit, through a master repurchase agreement, from a major bank for up to $100 million to finance the purchase and holding of mortgage loans. HCM plans to use this line to acquire whole loan pools for investment and possible securitization.
Burchett added, "HCM's taxable subsidiary, Hanover Capital Partners Ltd., continued to have strong growth in revenues, with a total of $6.9 million for the six months ended June 30, 2005 compared to $5.1 million in the same period in 2004."
"The Subordinate MBS portfolio continues to perform well and we have not experienced credit losses in the three months ended June 30, 2005. The overall mortgage market also continues to perform well with respect to our portfolio. We continue to search for good purchase opportunities," Burchett concluded.
HCM will host an investor conference call on Wednesday, August 10, 2005 at 11:00 AM ET. The call will be broadcast on the Internet at http://www.vcall.com/ . To listen to the call, please go to the Web site at least fifteen minutes prior to the call to register, download, and install any necessary audio software. For those not available to listen to the live broadcast, a replay will be available shortly after the call at the vcall website.
Hanover Capital Mortgage Holdings, Inc. is a mortgage REIT with offices throughout the country staffed by seasoned mortgage capital markets professionals. HCM invests in mortgage-backed securities and mortgage loans and engages in non-interest income-generating activities through its subsidiaries, HanoverTrade, Inc. and Hanover Capital Partners Ltd. HanoverTrade provides loan sale advisory and traditional loan brokerage services, technology solutions and valuation services. HanoverTrade also brokers loan pools, mortgage servicing rights and other similar assets through an Internet-based exchange. Hanover Capital Partners provides consulting and outsourcing services for third parties, including loan sale advisory services, loan file due diligence reviews, staffing solutions and mortgage assignment and collateral rectification services. For further information, visit HCM's Web site at http://www.hanovercapitalholdings.com/ .
Certain statements in this press release may constitute "forward-looking" statements as defined in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. HCM is including this cautionary statement to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical fact are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements, to differ materially from future results, performance or achievements. The forward-looking statements are based on HCM's current belief, intentions and expectations. These statements are not guarantees or indicative of future performance. Important assumptions and other important factors that could cause actual results to differ materially from those forward-looking statements include, but are not limited to, those factors, risks and uncertainties that are described in Item 1 of HCM's Annual Report on Form 10-K for the year ended December 31, 2004 and in other securities filings by HCM. HCM's future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The forward-looking statements contained in this press release are made only as of the date hereof and HCM undertakes no obligation to update or revise the information contained in this announcement whether as a result of new information, subsequent events or circumstances or otherwise, unless otherwise required by law.
HANOVER CAPITAL MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share data) June 30, December 31, 2005 2004 (unaudited) Assets Cash and cash equivalents $39,212 $20,604 Accounts receivable 3,151 2,153 Accrued interest receivable 1,054 1,036 Mortgage loans Held for sale 25,555 175 Collateral for CMOs 15,930 40,926 Mortgage securities pledged under repurchase agreements Available for sale 60,217 54,312 Trading 98,015 99,142 Mortgage securities, not pledged Trading - 11,126 Equity investment in unconsolidated affiliates 634 3,067 Other assets 14,054 9,597 $257,822 $242,138 Liabilities Repurchase agreements $146,696 $130,102 Collateralized mortgage obligations (CMOs) 13,142 35,147 Dividends payable - 2,514 Accounts payable, accrued expenses and other liabilities 2,654 3,156 Line of credit 3,706 - Liability to subsidiary trust issuing preferred securities 20,619 - 186,817 170,919 Minority interest in equity of consolidated affiliate 232 - Stockholders' Equity Preferred stock: $0.01 par value, 10 million shares authorized, no shares issued and outstanding - - Common stock: $0.01 par value, 90 million shares authorized, 8,421,940 and 8,381,583 shares issued and outstanding as of June 30, 2005 and December 31, 2004, respectively 84 84 Additional paid-in capital 104,211 103,126 Notes receivable from related parties - (583) Retained earnings (deficit) (32,106) (30,779) Deferred stock-based compensation (208) - Accumulated other comprehensive (loss) income (1,208) (629) 70,773 71,219 $257,822 $242,138 These statements are extracted from the Hanover Capital Mortgage Holdings, Inc. and Subsidiaries (HCM) Quarterly Report on Form 10-Q for the three and six months ended June 30, 2005 and therefore do not contain all the disclosures and information necessary for a complete understanding of the financial position and results of operations of HCM as of and for the three and six months ended June 30, 2005. For more information, the reader should obtain a copy of HCM's Annual Report on Form 10-K for the year ended December 31, 2004 and a copy of HCM's Quarterly Report on Form 10-Q for the three and six months ended June 30, 2005, available at HCM's Web site, http://www.hanovercapitalholdings.com/ . HANOVER CAPITAL MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) (unaudited) Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 Revenues Interest income $3,832 $3,124 $7,664 $6,227 Interest expense 1,986 836 3,558 1,656 Net interest income 1,846 2,288 4,106 4,571 Loan loss provision 14 9 21 20 Net interest income after loan loss provision 1,832 2,279 4,085 4,551 Gain on sale of mortgage assets 1,886 2,114 4,166 5,572 Gain (loss) on mark to market of mortgage assets 1,262 (1,226) (366) (1,283) (Loss) gain on freestanding derivatives (2,044) 717 (1,336) (349) Due diligence fees 2,726 1,729 4,719 3,109 Assignment fees 428 710 977 1,295 Technology 961 238 1,515 626 Loan brokering and advisory services 336 902 848 1,393 Reimbursed out-of-pocket expenses 570 410 1,033 753 Other income 135 96 191 188 Total revenues 8,092 7,969 15,832 15,855 Expenses Personnel 3,556 3,709 5,816 6,014 Subcontractors 1,496 1,128 2,677 2,177 Legal and professional 642 820 1,562 1,407 General and administrative 439 388 827 835 Depreciation and amortization 325 223 606 439 Occupancy 136 126 271 244 Technology 515 141 810 238 Travel and entertainment 94 110 196 250 Out-of-pocket expenses reimbursed 570 410 1,033 753 Other 275 203 574 349 Total expenses 8,048 7,258 14,372 12,706 Operating income 44 711 1,460 3,149 Equity in loss of unconsolidated affiliates (104) (64) (200) (40) Minority interest in loss of consolidated affiliate (14) - (14) - Income before income tax provision (benefit) (46) 647 1,274 3,109 Income tax provision (benefit) 117 34 74 (49) Net Income (Loss) $(163) $613 $1,200 $3,158 Basic Earnings (Loss) Per Share $(0.02) $0.07 $0.14 $0.38 Diluted Earnings (Loss) Per Share $(0.02) $0.07 $0.14 $0.38 These statements are extracted from the Hanover Capital Mortgage Holdings, Inc. and Subsidiaries (HCM) Quarterly Report on Form 10-Q for the three and six months ended June 30, 2005 and therefore do not contain all the disclosures and information necessary for a complete understanding of the financial position and results of operations of HCM as of and for the three and six months ended June 30, 2005. For more information, the reader should obtain a copy of HCM's Annual Report on Form 10-K for the year ended December 31, 2004 and a copy of HCM's Quarterly Report on Form 10-Q for the three and six months ended June 30, 2005, available at HCM's Web site, http://www.hanovercapitalholdings.com/ . For further information, contact: Hanover Capital Mortgage Holdings, Inc. John A. Burchett, CEO, or Irma N. Tavares, COO 732/548-0101
CONTACT: John A. Burchett, CEO, or Irma N. Tavares, COO, +1-732-548-0101, both of Hanover Capital Mortgage Holdings, Inc.
Web site: http://www.hanovercapitalholdings.com/
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