American Home Mortgage Announces Second Quarter Results

MELVILLE, N.Y., July 26 /PRNewswire-FirstCall/ -- American Home Mortgage Investment Corp. announced today results for the quarter ended June 30, 2006.

FINANCIAL HIGHLIGHTS Comparison of the Three Months Ended June 30, 2006 and 2005 -- Revenue for the second quarter of 2006 was $276.8 million, compared to revenue of $203.3 million for the second quarter of 2005, an increase of 36.1%. -- Net earnings for the second quarter of 2006 were $72.4 million, compared to net earnings of $65.5 million for the second quarter of 2005, an increase of 10.5%. -- Earnings per diluted share for the second quarter of 2006 were $1.37, compared to earnings per diluted share of $1.52 for the second quarter of 2005, a decrease of 9.9%. -- Dividends per common share for the second quarter of 2006 were $0.96, compared to $0.76 for the second quarter of 2005, an increase of 26.3%. -- Book value per common share was $22.35 at June 30, 2006, compared to book value per common share of $20.21 at June 30, 2005, an increase of 10.6%. Comparison of the Three Months Ended June 30, 2006 and March 31, 2006 -- Revenue for the second quarter of 2006 was $276.8 million, compared to revenue of $233.1 million for the first quarter of 2006, an increase of 18.7%. -- Net earnings for the second quarter of 2006 were $72.4 million, compared to net earnings of $54.5 million for the first quarter of 2006, an increase of 32.9%. -- Earnings per diluted share for the second quarter of 2006 were $1.37, compared to earnings per diluted share of $1.02 for the first quarter of 2006, an increase of 34.3%. -- Dividends per common share for the second quarter of 2006 were $0.96, compared to $0.91 for the first quarter of 2006, an increase of 5.5%. -- Book value per common share was $22.35 at June 30, 2006, compared to book value per common share of $22.01 at March 31, 2006, an increase of 1.5%. Comparison of the Six Months Ended June 30, 2006 and 2005 -- Revenue for the six months ended June 30, 2006 was $509.9 million, compared to adjusted revenue of $367.3 million for the six months ended June 30, 2005, an increase of 38.8%. GAAP revenue for the six months ended June 30, 2005 was $438.6 million. -- Net earnings for the six months ended June 30, 2006 were $126.8 million compared to adjusted net earnings of $119.5 million for the six months ended June 30, 2005, an increase of 6.1%. GAAP net earnings for the six months ended June 30, 2005 were $190.9 million. -- Earnings per diluted share for the six months ended June 30, 2006 were $2.39 compared to adjusted earnings per diluted share of $2.76 for the six months ended June 30, 2005, a decrease of 13.4%. GAAP earnings per diluted share for the six months ended June 30, 2005 were $4.51. -- Dividends per common share for the six months ended June 30, 2006 were $1.87, compared to $1.47 for the six months ended June 30, 2005, an increase of 27.2%.

Michael Strauss, American Home's Chief Executive Officer, commented, "The second quarter of 2006 was highly successful for our company. During the quarter, our portfolio net interest income reached a record $33.9 million, while our production business experienced record originations, record market share, a strong gain on sale margin and improved warehouse income. During the quarter, we continued to execute our strategy of retaining a portion of our loan production for our investment portfolio, by adding $1.2 billion of loans to our portfolio at quarter-end. These loans are carried at cost, and are expected to enhance our future portfolio earnings. We also continued to adhere to our core risk mitigation strategies including targeting a duration- neutral "matched book," and purchasing mortgage insurance to protect against credit losses. Today approximately half of the loans we hold are insured, either through borrower or lender-paid mortgage insurance. In addition to these core risk mitigation strategies, we recently began hedging the value of our mortgage servicing assets against the possibility of declining interest rates.

"Our company is again reaffirming our annual earnings guidance of $4.85 to $5.15 per diluted share. Our earnings guidance is based on, among other factors, annual loan originations of $55 billion to $60 billion. I am very pleased to report that, based on our company's performance and prospects, the Board of Directors has again voted to increase the dividend policy for our common stockholders. The new policy is $1.01 per share per quarter, or $4.04 per share on an annualized basis. The increased dividend is expected to become effective for the dividend expected to be paid in October 2006."

SECOND QUARTER RESULTS

During the second quarter of 2006, American Home's mortgage loans and mortgage-backed securities ("MBS") in portfolio averaged $12.5 billion, and earned net interest income of $28.1 million equal to a net interest margin of 0.90%. In addition, during the quarter, the Company earned $5.8 million of positive carry on interest rate swaps which economically hedge the trading portion of the Company's portfolio. Under accounting rules these swaps are classified as free standing derivatives and consequently are not included in GAAP net interest income, but are instead included in unrealized gains and losses on mortgage-backed securities and derivatives. For the second quarter, the combined net interest income and positive swap carry was $33.9 million, or 1.09% of average portfolio assets. By comparison, during the first quarter of 2006, the Company's mortgage loans and mortgage-backed securities portfolio averaged $11.1 billion and earned net interest income of $26.4 million equal to a net interest margin of 0.95%. During the first quarter, the Company had $3.9 million of positive carry on the interest rate swaps which economically hedge the trading portion of the Company's portfolio. Consequently, in the first quarter the combined net interest income and positive swap carry was $30.3 million, or 1.09% of average portfolio assets.

At the end of the second quarter, the Company added $1.2 billion of newly originated loans held for investment to its portfolio which are being carried at their cost. These loans had fair value in excess of carrying value of $18.8 million, or 1.49% of principal.

During the second quarter, American Home's inventory of loans averaged $8.8 billion, earned a net interest margin of 1.44% and earned net interest income of $31.6 million. This compares with an average balance of $9.6 billion, a net interest margin of 1.17% and net interest income of $28.0 million in the first quarter of 2006. During the second quarter of 2006, the Company had interest expense on trust preferred borrowings, servicing financing and other obligations of $9.5 million compared to $7.8 million during the first quarter of 2006.

At June 30, 2006, the composition of the Company's loans held for investment and MBS portfolio by type of loan was 56.7% 5/1 adjustable-rate mortgages ("ARMs"), 26.7% short reset ARMs, 10.8% fixed rate loans, 2.5% 3/1 ARMs, 1.6% HELOC and closed end seconds and 1.7% other ARM types. The composition of the MBS portfolio by credit quality based on Standard & Poor's ratings was 93.8% Agency and AAA, 3.8% AA, A, and BBB and 2.4% BB and unrated. On June 30, 2006, the MBS portfolio's duration, net of liabilities and hedges, was estimated to be 0.10 years and its projected average life was 2.79 years.

During the second quarter of 2006, the Company's loan production was $14.9 billion. Of the $14.9 billion, 49% of loans were to homebuyers while 51% were for refinancing. During the second quarter of 2006, the Company estimates its national market share reached 2.28%, based on Freddie Mac's recent forecast of national market size, compared to 2.11% in the first quarter of 2006 and 1.47% during the second quarter of 2005. At June 30, 2006, the Company employed approximately 2,612 loan officers and account executives, including call center representatives, but excluding sales assistants, compared to approximately 2,680 on March 31, 2006.

During the quarter, the Company sold $13.9 billion of non-securitized loans to third parties for a gain, net of hedges, fees and costs, of $224.6 million.

During the quarter, the Company recognized $17.9 million, net of hedges, of realized and unrealized losses on the value of its securities portfolio, excluding $5.8 million of positive carry on interest rate swaps. Of the $17.9 million, $13.6 million was charged to current period income and $4.3 million was charged to other comprehensive loss.

During the quarter, the Company's servicing assets produced $11.6 million of income, including $30.4 million of servicing fees, $7.5 million of gain in fair value due to higher interest rates slowing projected future runoff, less $26.3 million of reduction in fair value due to loan repayments. At the end of the quarter, the principal amount of the loans being serviced, including loans held for sale and loans held for investment, was $39.1 billion, compared to $34.8 billion at the end of the first quarter.

The Company's total revenues for the quarter were $276.8 million. Of these revenues, $50.2 million was from net interest income, $224.6 million was from sales of newly originated mortgage loans including origination fees and net of hedges, $30.4 million was from mortgage servicing fees, and $2.1 million was from other sources. Revenues were decreased by $7.7 million of realized and unrealized losses on mortgage securities held, net of hedges, $18.8 million of change in fair value of servicing assets and $4.0 million of provision for loan losses. During the quarter, the Company's expenses were $171.2 million, and the Company's pre-tax income was $105.6 million. Also during the quarter, the Company's tax expense was $33.2 million. Consequently, net income for the quarter was $72.4 million while preferred dividends were $3.3 million and net income available to common stockholders was $69.1 million, resulting in earnings per diluted share of $1.37. Book value attributable to common stockholders at June 30, 2006 was $1.12 billion, or $22.35 per common share, compared to $1.10 billion, or $22.01 per common share, at March 31, 2006.

EARNINGS GUIDANCE

American Home is reaffirming its 2006 earnings guidance of $4.85 to $5.15 per diluted share. The Company expects the distribution of 2006 earnings among the year's quarters will be affected by seasonality in the Company's loan origination segment and by progressively increasing net interest income due to the Company's buildup of its investment portfolio.

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 $1.01 per share per quarter, or $4.04 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 $1.01 per share per quarter is expected to commence beginning in October 2006.

OTHER COMPANY HIGHLIGHTS

During the quarter, the Company issued $50 million of trust preferred securities in furtherance of its ongoing effort to increase unsecured borrowings. The Company believes unsecured borrowings enhance its ability to withstand severe disruptions in liquidity markets. The issued trust preferred securities carry a coupon of LIBOR plus 2.55%, have a maturity of 30 years, are callable in five years, and are subordinated to the Company's senior liabilities. The Company's total trust preferred securities outstanding are now $260 million, while its collateralized debt obligations, which are not subject to margin, and which also buffer the Company from liquidity market disruptions are $3.7 billion.

At the Company's 2006 Annual Meeting of Stockholders, held on June 20, 2006, its stockholders elected Kristian R. Salovaara as a new member of the Company's Board of Directors, and re-elected C. Cathleen Raffaeli for an additional term.

Shortly after quarter-end, the Company expanded its Correspondent Lending Division with the addition of several high-level account executives including the appointment of Thomas Adkins, Jr. to Senior Vice President, Correspondent Lending. Mr. Adkins will report to Rick Pishalski, Executive Vice President, Correspondent Lending.

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 tables A-1 and A-2 of this release.

CONFERENCE CALL TODAY

American Home will hold an investor conference call today, July 26, 2006, 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, http://www.americanhm.com/. A replay of the online broadcast will be available on the site through August 9, 2006.

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 http://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 http://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.

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.

AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES OPERATING STATISTICS Three Months Six Months Ended Ended June 30, June 30, June 30, June 30, 2006 2005 2006 2005 (1) As Adjusted Mortgage Holdings Segment: Investment Portfolio Performance (2): Average loans and mortgage-backed securities in portfolio ($ billions) 12.5 6.8 11.8 7.1 Interest income ($ millions) 181.3 77.1 336.2 155.3 Average portfolio yield 5.82% 4.53% 5.71% 4.37% Interest expense ($ millions) 153.2 52.2 281.7 98.9 Average cost of funds and hedges 5.19% 3.29% 5.08% 2.99% Net interest income ($ millions) 28.1 24.9 54.5 56.4 Net interest margin 0.90% 1.48% 0.93% 1.59% Interest carry on free standing derivatives ($ millions) 5.8 -2.7 9.7 -7.7 Net interest income including interest carry on free standing derivatives ($ millions) 33.9 22.2 64.2 48.7 Net interest margin including interest carry on free standing derivatives 1.09% 1.32% 1.09% 1.37% Reconciliation of Changes in Mortgage Holdings (3): Net change in mortgage-backed securities ($ billions) -0.3 -0.7 -1.3 -2.3 Additions to loans in portfolio ($ billions) 1.2 0.1 2.2 0.1 Principal repayments of loans in portfolio ($ billions) 0.2 0.0 0.4 0.0 Net additions to loans in portfolio ($ billions) 1.0 0.1 1.8 0.1 Loans and mortgage-backed securities held - end of period ($ billions) 14.6 7.1 14.6 7.1 Mortgage-backed securities period end duration gap (in years) 0.10 0.08 0.10 0.08 Loan Origination Segment: Loan originations ($ billions) (4) 14.9 10.8 28.1 18.0 Refinance 51% 41% 51% 44% ARM 55% 50% 53% 51% Average mortgage loans, net ($ billions) (3) 8.8 3.9 9.2 3.3 Net interest income excluding trust preferred and other interest expense ($ millions) 31.6 23.0 59.6 41.9 Net interest margin excluding trust preferred and other interest expense 1.44% 3.86% 1.30% 2.54% Trust preferred and other interest expense ($ millions) 5.7 0.8 10.4 1.2 Net interest income ($ millions) 25.9 22.2 49.2 40.7 Loans securitized and held ($ billions) 0.0 0.4 0.0 1.7 Loans securitized and sold ($ billions) 0.0 5.4 0.0 8.9 Loans sold to third parties ($ billions) 13.9 4.5 27.4 7.6 Gain on sales of loans, net of hedge gains ($ millions) (5) 224.6 182.6 396.5 295.5 Excess of fair value over carrying value of loans added to investment portfolio ($ millions) 18.8 1.3 32.8 1.3 Total ($ millions) 243.4 183.9 429.3 296.8 Gain on sales of loans, net of hedge gains (% of principal) (5) 1.62% 1.78% 1.45% 1.72% Excess of fair value over carrying value of loans added to investment portfolio (% of principal) 1.49% 0.95% 1.47% 0.95% Total (% of principal) 1.61% 1.77% 1.45% 1.71% Applications accepted ($ billions) 22.1 17.3 42.9 30.3 Application pipeline ($ billions) 12.1 10.7 12.1 10.7 June 30, June 30, 2006 2005 Loan Servicing Segment: Loan servicing portfolio - total with warehouse ($ billions) 39.1 24.7 Loan servicing portfolio - loans sold or securitized ($ billions) 32.6 22.6 Interest expense ($ millions) 3.8 2.0 Weighted average note rate 6.38% 5.62% Weighted average service fee 0.336% 0.336% Average age (in months) 14 13 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 tables 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 $559 million of loans purchased in the Waterfield acquisition. (5) Prior to the fourth quarter of 2005, includes gain on current period securitizations, net of hedge gains. AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES OPERATING STATISTICS Three Months Ended June 30, March 31, Dec. 31, Sept.30, June 30, 2006 2006 2005 2005 2005 Mortgage Holdings Segment: Investment Portfolio Performance (1): Average loans and mortgage-backed securities in portfolio ($ billions) 12.5 11.1 10.5 7.1 6.8 Interest income ($ millions) 181.3 154.9 138.0 84.5 77.1 Average portfolio yield 5.82% 5.60% 5.27% 4.76% 4.53% Interest expense ($ millions) 153.2 128.5 108.2 62.9 52.2 Average cost of funds and hedges 5.19% 4.96% 4.36% 3.84% 3.29% Net interest income ($ millions) 28.1 26.4 29.8 21.6 24.9 Net interest margin 0.90% 0.95% 1.17% 1.24% 1.48% Interest carry on free standing derivatives ($ millions) 5.8 3.9 1.0 -0.6 -2.7 Net interest income including interest carry on free standing derivatives ($ millions) 33.9 30.3 30.8 21.0 22.2 Net interest margin including interest carry on free standing derivatives 1.09% 1.09% 1.21% 1.21% 1.32% Reconciliation of Changes in Mortgage Holdings (2): Net change in mortgage-backed securities ($ billions) -0.3 -1.0 1.4 1.2 -0.7 Additions to loans in portfolio ($ billions) 1.2 1.0 2.1 1.3 0.1 Principal repayments of loans in portfolio ($ billions) 0.2 0.2 0.0 0.0 0.0 Net additions to loans in portfolio ($ billions) 1.0 0.8 2.1 1.3 0.1 Loans and mortgage-backed securities held - end of period ($ billions) 14.6 13.9 14.1 10.7 7.1 Mortgage-backed securities period end duration gap (in years) 0.10 0.15 -0.03 0.17 0.08 Loan Origination Segment: Loan originations ($ billions) (3) 14.9 13.2 13.6 13.7 10.8 Refinance 51% 51% 51% 46% 41% ARM 55% 51% 50% 48% 50% Average mortgage loans, net ($ billions) (2) 8.8 9.6 8.6 5.7 3.9 Net interest income excluding trust preferred and other interest expense ($ millions) 31.6 28.0 26.4 28.5 23.0 Net interest margin excluding trust preferred and other interest expense 1.44% 1.17% 1.28% 2.12% 3.86% Trust preferred and other interest expense ($ millions) 5.7 4.7 3.3 2.0 0.8 Net interest income ($ millions) 25.9 23.3 23.1 26.5 22.2 Loans securitized and held ($ billions) 0.0 0.0 0.0 1.2 0.4 Loans securitized and sold ($ billions) 0.0 0.0 0.0 1.3 5.4 Loans sold to third parties ($ billions) 13.9 13.5 11.0 9.9 4.5 Gain on sales of loans, net of hedge gains ($ millions) (4) 224.6 171.9 105.4 176.5 182.6 Excess of fair value over carrying value of loans added to investment portfolio ($ millions) 18.8 14.0 30.2 26.5 1.3 Total ($ millions) 243.4 185.9 135.6 203.0 183.9 Gain on sales of loans, net of hedge gains (% of principal) (4) 1.62% 1.27% 0.96% 1.42% 1.78% Excess of fair value over carrying value of loans added to investment portfolio (% of principal) 1.49% 1.44% 1.43% 2.02% 0.95% Total (% of principal) 1.61% 1.28% 1.03% 1.48% 1.77% Applications accepted ($ billions) 22.1 20.8 17.8 19.7 17.3 Application pipeline ($ billions) 12.1 11.8 9.2 11.6 10.7 June 30, March 31, Dec. 31, Sept.30, June 30, 2006 2006 2005 2005 2005 Loan Servicing Segment: Loan servicing portfolio - total with warehouse ($ billions) 39.1 34.8 30.7 27.5 24.7 Loan servicing portfolio - loans sold or securitized ($ billions) 32.6 29.0 25.0 24.2 22.6 Interest expense ($ millions) 3.8 3.1 2.6 1.3 2.0 Weighted average note rate 6.38% 6.09% 5.79% 5.73% 5.62% Weighted average service fee 0.336% 0.329% 0.330% 0.331% 0.336% Average age (in months) 14 14 15 13 13 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. (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) Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2006 2005 2006 2005 (1) As Adjusted Net interest income: Interest income $330,196 $135,318 $630,809 $255,287 Interest expense (279,992) (90,336) (534,027) (161,661) Net interest income 50,204 44,982 96,782 93,626 Provision for loan losses (3,979) - (5,290) - Net interest income after provision for loan losses 46,225 44,982 91,492 93,626 Non-interest income: Gain on sales of mortgage loans 224,594 77,377 396,501 112,630 Gain on sales of current period securitized mortgage loans - 104,377 - 149,038 (Loss) gain on sales of mortgage-backed securities and derivatives (47) 620 (897) 5,352 Unrealized (loss) gain on mortgage-backed securities and derivatives (7,730) (10,292) 1,585 9,944 Loan servicing fees 30,417 16,970 54,750 31,133 Amortization and impairment of mortgage servicing rights - (33,230) - (38,434) Change in fair value of mortgage servicing rights (18,830) - (37,451) - Net loan servicing fees (loss) 11,587 (16,260) 17,299 (7,301) Other non-interest income 2,125 2,543 3,894 4,009 Non-interest income 230,529 158,365 418,382 273,672 Non-interest expenses: Salaries, commissions and benefits, net 103,157 94,859 202,424 163,334 Occupancy and equipment 19,763 14,397 37,733 27,068 Data processing and communications 6,733 5,957 13,859 11,907 Office supplies and expenses 5,145 5,657 9,477 10,086 Marketing and promotion 6,383 5,126 12,183 9,256 Travel and entertainment 7,793 5,427 14,546 9,355 Professional fees 5,013 3,432 10,344 6,902 Other 17,192 6,843 33,074 13,712 Non-interest expenses 171,179 141,698 333,640 251,620 Net income before income tax expense (benefit) 105,575 61,649 176,234 115,678 Income tax expense (benefit) 33,224 (3,851) 49,424 (3,851) Net income $72,351 $65,500 $126,810 $119,529 Dividends on preferred stock 3,304 3,304 6,609 6,609 Net income available to common shareholders $69,047 $62,196 $120,201 $112,920 Per share data: Basic $1.38 $1.54 $2.41 $2.80 Diluted $1.37 $1.52 $2.39 $2.76 Weighted average number of shares - basic 50,056 40,384 49,887 40,346 Weighted average number of shares - diluted 50,487 40,886 50,270 40,849 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 tables 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 June 30, March 31, Dec. 31, Sept. 30, June 30, 2006 2006 2005 2005 2005 Net interest income: Interest income $330,196 $300,613 $265,435 $180,038 $135,318 Interest expense (279,992) (254,035) (215,057) (133,169) (90,336) Net interest income 50,204 46,578 50,378 46,869 44,982 Provision for loan losses (3,979) (1,311) (2,142) - - Net interest income after provision for loan losses 46,225 45,267 48,236 46,869 44,982 Non-interest income: Gain on sales of mortgage loans 224,594 171,907 98,777 123,658 77,377 Gain on sales of current period securitized mortgage loans - - - 19,960 104,377 (Loss) gain on sales of mortgage-backed securities and derivatives (47) (850) 38,068 6,116 620 Unrealized (loss) gain on mortgage-backed securities and derivatives (7,730) 9,315 (44,778) (10,965) (10,292) Loan servicing fees 30,417 24,333 26,715 21,099 16,970 Amortization and impairment of mortgage servicing rights - - (18,745) (3,478) (33,230) Change in fair value of mortgage servicing rights (18,830) (18,621) - - - Net loan servicing fees (loss) 11,587 5,712 7,970 17,621 (16,260) Other non-interest income 2,125 1,769 2,181 1,585 2,543 Non-interest income 230,529 187,853 102,218 157,975 158,365 Non-interest expenses: Salaries, commissions and benefits, net 103,157 99,267 95,237 101,378 94,859 Occupancy and equipment 19,763 17,970 16,459 15,328 14,397 Data processing and communications 6,733 7,126 6,402 6,479 5,957 Office supplies and expenses 5,145 4,332 4,612 5,024 5,657 Marketing and promotion 6,383 5,800 5,951 5,104 5,126 Travel and entertainment 7,793 6,753 6,982 4,670 5,427 Professional fees 5,013 5,331 3,586 3,744 3,432 Other 17,192 15,882 10,946 7,360 6,843 Non-interest expenses 171,179 162,461 150,175 149,087 141,698 Net income before income tax expense (benefit) 105,575 70,659 279 55,757 61,649 Income tax expense (benefit) 33,224 16,200 (16,419) 2,549 (3,851) Net income $72,351 $54,459 $16,698 $53,208 $65,500 Dividends on preferred stock 3,304 3,305 3,304 3,304 3,304 Net income available to common shareholders $69,047 $51,154 $13,394 $49,904 $62,196 Per share data: Basic $1.38 $1.03 $0.27 $1.10 $1.54 Diluted $1.37 $1.02 $0.27 $1.09 $1.52 Weighted average number of shares - basic 50,056 49,715 49,605 45,174 40,384 Weighted average number of shares - diluted 50,487 50,070 49,998 45,669 40,886 AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands) June 30, March 31, December 31, 2006 2006 2005 Assets: Cash and cash equivalents $304,268 $572,591 $575,650 Accounts receivable and servicing advances 342,244 327,586 329,132 Mortgage-backed securities 9,299,224 9,580,963 10,602,104 Mortgage loans held for sale, net 1,243,702 1,589,613 2,208,749 Mortgage loans held for investment, net 5,337,138 4,315,384 3,479,721 Derivative assets 139,397 102,267 44,594 Mortgage servicing rights, net 434,173 371,974 319,671 Premises and equipment, net 80,296 75,594 68,782 Goodwill 110,759 110,330 99,527 Other assets 34,398 30,708 26,815 Total assets $17,325,599 $17,077,010 $17,754,745 Liabilities and Stockholders' Equity: Liabilities: Warehouse lines of credit $1,476,958 $1,754,581 $3,474,191 Drafts payable 12,349 16,377 20,754 Commercial paper 888,476 1,073,630 1,079,179 Reverse repurchase agreements 8,939,786 8,899,050 9,806,144 Collateralized debt obligations 3,724,878 2,905,199 1,057,906 Payable for securities purchased - 215,114 261,539 Derivative liabilities 3,280 7,512 16,773 Trust preferred securities 252,780 204,018 203,688 Accrued expenses and other liabilities 355,009 385,392 277,476 Notes payable 337,700 330,714 319,309 Income taxes payable 80,529 51,016 30,770 Total liabilities 16,071,745 15,842,603 16,547,729 Stockholders' Equity: Preferred stock 134,040 134,040 134,040 Common stock 501 500 496 Additional paid-in capital 960,995 958,175 947,512 Retained earnings 227,450 206,512 203,778 Accumulated other comprehensive loss (69,132) (64,820) (78,810) Total stockholders' equity 1,253,854 1,234,407 1,207,016 Total liabilities and stockholders' equity $17,325,599 $17,077,010 $17,754,745 Number of shares outstanding - preferred 5,600,000 5,600,000 5,600,000 Number of shares outstanding - common 50,107,214 50,004,965 49,639,646 September 30, June 30, 2005 2005 Assets: Cash and cash equivalents $624,424 $197,375 Accounts receivable and servicing advances 335,736 116,835 Mortgage-backed securities 9,208,172 6,917,986 Mortgage loans held for sale, net 1,901,293 1,965,074 Mortgage loans held for investment, net 1,445,429 134,597 Derivative assets 67,185 35,756 Mortgage servicing rights, net 300,659 261,839 Premises and equipment, net 64,174 61,441 Goodwill 99,268 98,826 Other assets 31,697 21,185 Total assets $14,078,037 $9,810,914 Liabilities and Stockholders' Equity: Liabilities: Warehouse lines of credit $2,165,154 $665,697 Drafts payable 18,763 26,538 Commercial paper 1,334,296 1,291,684 Reverse repurchase agreements 8,041,579 6,337,630 Collateralized debt obligations - - Payable for securities purchased 554,717 - Derivative liabilities - 6,195 Trust preferred securities 96,964 48,414 Accrued expenses and other liabilities 239,382 177,761 Notes payable 305,766 256,060 Income taxes payable 56,310 47,753 Total liabilities 12,812,931 8,857,732 Stockholders' Equity: Preferred stock 134,040 134,040 Common stock 496 405 Additional paid-in capital 946,105 638,595 Retained earnings 235,556 224,442 Accumulated other comprehensive loss (51,091) (44,300) Total stockholders' equity 1,265,106 953,182 Total liabilities and stockholders' equity $14,078,037 $9,810,914 Number of shares outstanding - preferred 5,600,000 5,600,000 Number of shares outstanding - common 49,590,821 40,538,479 AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (In thousands) Three Months Ended June 30, Mar. 31, Dec. 31, 2006 2006 2005 Preferred stock Balance at end of period $134,040 $134,040 $134,040 Common stock Balance at beginning of period $500 $496 $496 Issuance of common stock - earnouts - 3 - Issuance of common stock - Omnibus Stock Plan 1 1 - Issuance of common stock - offering - - - Balance at end of period $501 $500 $496 Additional paid-in capital Balance at beginning of period $958,175 $947,512 $946,105 Issuance of common stock - earnouts - 9,555 - Issuance of common stock - Omnibus Stock Plan 1,126 651 857 Issuance of common stock - offering - - - Stock-based employee compensation expense 373 410 - Tax benefit for stock options exercised 1,198 - 434 Restricted shares amortization 123 47 116 Balance at end of period $960,995 $958,175 $947,512 Retained earnings Balance at beginning of period $206,512 $203,778 $235,556 Cumulative-effect adjustment as of beginning of period (1) - (2,917) - Net income 72,351 54,459 16,698 Dividends declared (51,413) (48,808) (48,476) Balance at end of period $227,450 $206,512 $203,778 Other comprehensive loss Balance at beginning of period $(64,820) $(78,810) $(51,091) Unrealized (loss) gain on mortgage- backed securities (44,510) (35,765) (7,730) Gain (loss) on cash flow hedges, net of amortization 40,198 49,755 (19,989) Balance at end of period $(69,132) $(64,820) $(78,810) Total stockholders' equity $1,253,854 $1,234,407 $1,207,016 Six Months Three Months Ended Ended Sept. 30, June 30, June 30, 2005 2005 2006 Preferred stock Balance at end of period $134,040 $134,040 $134,040 Common stock Balance at beginning of period $405 $403 $496 Issuance of common stock - earnouts - 2 3 Issuance of common stock - Omnibus Stock Plan 1 - 2 Issuance of common stock - offering 90 - - Balance at end of period $496 $405 $501 Additional paid-in capital Balance at beginning of period $638,595 $632,828 $947,512 Issuance of common stock - earnouts 139 5,005 9,555 Issuance of common stock - Omnibus Stock Plan 488 588 1,777 Issuance of common stock - offering 304,033 - - Stock-based employee compensation expense - - 783 Tax benefit for stock options exercised 2,638 - 1,198 Restricted shares amortization 212 174 170 Balance at end of period $946,105 $638,595 $960,995 Retained earnings Balance at beginning of period $224,442 $193,064 $203,778 Cumulative-effect adjustment as of beginning of period (1) - - (2,917) Net income 53,208 65,500 126,810 Dividends declared (42,094) (34,122) (100,221) Balance at end of period $235,556 $224,442 $227,450 Other comprehensive loss Balance at beginning of period $(44,300) $(43,378) $(78,810) Unrealized (loss) gain on mortgage- backed securities (15,918) 6,901 (80,275) Gain (loss) on cash flow hedges, net of amortization 9,127 (7,823) 89,953 Balance at end of period $(51,091) $(44,300) $(69,132) Total stockholders' equity $1,265,106 $953,182 $1,253,854 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 June 30, Mar. 31, Dec. 31, 2006 2006 2005 Cash flows from operating activities: Net income $72,351 $54,459 $16,698 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 5,014 3,953 3,454 Provision for loan losses 3,979 1,311 2,142 Change in fair value of mortgage servicing rights 18,830 18,621 - Amortization and impairment of mortgage servicing rights - - 18,745 Accretion and amortization of mortgage-backed securities, net 2,006 2,331 1,509 Deferred cash flow hedge gain (loss), net of amortization 10,509 3,909 (346) Loss on sales of mortgage-backed securities and derivatives - - 876 Unrealized loss (gain) on mortgage- backed securities 14,591 3,090 40,968 Unrealized (gain) loss on free standing derivatives (1,038) (4,765) 6,149 (Decrease) increase in forward delivery contracts (6,036) (24,041) 24,124 Capitalized mortgage servicing rights on securitized loans - - - Capitalized mortgage servicing rights on sold loans (81,029) (69,768) (37,757) (Increase) decrease in interest rate lock commitments (4,447) 7,131 (10,508) (Increase) decrease in mortgage loan basis adjustments (2,156) 4,731 (32,201) Excess tax benefits from share- based payment arrangements (1,198) - - Other (633) (198) (645) (Increase) decrease in operating assets: Accounts receivable (13,506) 6,829 18,156 Servicing advances (1,152) (3,281) (11,552) Income taxes receivable - - - Other assets (3,582) (1,451) 4,882 Increase (decrease) in operating liabilities: Accrued expenses and other liabilities (32,977) 93,876 31,696 Income taxes payable 30,711 16,173 (25,106) Origination of mortgage loans held for sale (14,371,439) (12,203,014) (11,482,292) Principal received from sales of mortgage loans held for sale 14,013,921 13,372,574 11,179,015 Proceeds from securitizations of mortgage loans held for sale - - - 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 20,947 27,353 26,958 Principal repayments of mortgage-backed securities 60,485 93,845 212,927 Net cash (used in) provided by operating activities (166,763) 3,213,464 1,168,414 Cash flows from investing activities: Purchases of premises and equipment (9,716) (10,765) (8,062) Origination of mortgage loans held for investment (560,003) (970,335) (2,084,025) Proceeds from repayments of mortgage loans held for investment 240,403 137,545 75,613 Purchases of mortgage-backed securities (461,125) (1,389,336) (3,298,636) Principal proceeds from sales of purchased mortgage-backed securities - - 24,592 Principal repayments of purchased mortgage-backed securities 501,239 438,297 409,080 Net increase in investment in Federal Home Loan Bank stock, at cost (108) - - Acquisition of business - (550,077) - Net cash used in investing activities (289,310) (2,344,671) (4,881,438) Cash flows from financing activities: (Decrease) increase in warehouse lines of credit, net (277,623) (1,719,610) 1,309,037 Increase (decrease) in reverse repurchase agreements, net 40,736 (907,094) 1,764,565 Increase in collateralized debt obligations 819,679 1,847,293 1,057,906 (Decrease) increase in payable for securities purchased (215,114) (46,425) (293,178) (Decrease) increase in commercial paper, net (185,154) (5,549) (255,117) (Decrease) increase in drafts payable, net (4,028) (4,377) 1,991 Increase in trust preferred securities 48,762 330 106,724 Increase in notes payable, net 6,986 11,405 13,543 Proceeds from issuance of common stock 1,127 652 857 Excess tax benefits from share- based payment arrangements 1,198 - - Dividends paid (48,819) (48,477) (42,078) Net cash provided by (used in) financing activities 187,750 (871,852) 3,664,250 Net (decrease) increase in cash and cash equivalents (268,323) (3,059) (48,774) Cash and cash equivalents, beginning of period 572,591 575,650 624,424 Cash and cash equivalents, end of period $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 $699,519 $- $- Three Months Ended Sept. 30, June 30, 2005 2005 Cash flows from operating activities: Net income $53,208 $65,500 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 3,098 2,739 Provision for loan losses - - Change in fair value of mortgage servicing rights - - Amortization and impairment of mortgage servicing rights 3,478 33,230 Accretion and amortization of mortgage-backed securities, net (2,571) (1,169) Deferred cash flow hedge gain (loss), net of amortization 1,689 1,738 Loss on sales of mortgage-backed securities and derivatives 2,819 447 Unrealized loss (gain) on mortgage- backed securities 74,595 (4,533) Unrealized (gain) loss on free standing derivatives (31,137) 25,903 (Decrease) increase in forward delivery contracts (13,547) 13,930 Capitalized mortgage servicing rights on securitized loans (27,536) (62,629) Capitalized mortgage servicing rights on sold loans (14,762) (4,027) (Increase) decrease in interest rate lock commitments 14,501 (6,264) (Increase) decrease in mortgage loan basis adjustments (12,649) (10,584) Excess tax benefits from share-based payment arrangements - - Other 2,196 (2,155) (Increase) decrease in operating assets: Accounts receivable (218,519) (14,401) Servicing advances (382) 861 Income taxes receivable - 25,797 Other assets (10,512) 2,350 Increase (decrease) in operating liabilities: Accrued expenses and other liabilities 53,657 (1,269) Income taxes payable 8,557 (6,497) Origination of mortgage loans held for sale (12,394,139) (10,647,029) Principal received from sales of mortgage loans held for sale 9,448,293 4,457,519 Proceeds from securitizations of mortgage loans held for sale 2,993,315 5,855,914 Additions to mortgage-backed securities and derivatives (1,191,209) (466,522) Principal proceeds from sales of self-originated mortgage-backed securities - 1,104,227 Cash received from residual assets in securitizations 35,431 23,539 Principal repayments of mortgage- backed securities 274,035 172,172 Net cash (used in) provided by operating activities (948,091) 558,787 Cash flows from investing activities: Purchases of premises and equipment (5,831) (8,194) Origination of mortgage loans held for investment (1,301,364) (133,757) Proceeds from repayments of mortgage loans held for investment 5,108 - Purchases of mortgage-backed securities (2,417,565) (933,929) Principal proceeds from sales of purchased mortgage-backed securities 518,517 20,962 Principal repayments of purchased mortgage-backed securities 414,667 361,049 Net increase in investment in Federal Home Loan Bank stock, at cost - - Acquisition of business - - Net cash used in investing activities (2,786,468) (693,869) Cash flows from financing activities: (Decrease) increase in warehouse lines of credit, net 1,499,457 7,011 Increase (decrease) in reverse repurchase agreements, net 1,703,949 (382,537) Increase in collateralized debt obligations - - (Decrease) increase in payable for securities purchased 554,717 - (Decrease) increase in commercial paper, net 42,612 433,302 (Decrease) increase in drafts payable, net (7,775) (1,853) Increase in trust preferred securities 48,550 48,414 Increase in notes payable, net 49,706 96,721 Proceeds from issuance of common stock 304,522 587 Excess tax benefits from share-based payment arrangements - - Dividends paid (34,130) (31,950) Net cash provided by (used in) financing activities 4,161,608 169,695 Net (decrease) increase in cash and cash equivalents 427,049 34,613 Cash and cash equivalents, beginning of period 197,375 162,762 Cash and cash equivalents, end of period $624,424 $197,375 Supplemental disclosure of non-cash investing activities: Net transfer of loans held for sale to loans held for investment $- $- AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Six Months Ended June 30, 2006 Cash flows from operating activities: Net income $126,810 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,967 Provision for loan losses 5,290 Change in fair value of mortgage servicing rights 37,451 Accretion and amortization of mortgage-backed securities, net 4,337 Deferred cash flow hedge gain, net of amortization 14,418 Unrealized loss on mortgage-backed securities 17,681 Unrealized gain on free standing derivatives (5,803) Decrease in forward delivery contracts (30,077) Capitalized mortgage servicing rights on sold loans (150,797) Decrease in interest rate lock commitments 2,684 Decrease in mortgage loan basis adjustments 2,575 Excess tax benefits from share-based payment arrangements (1,198) Other (831) Increase in operating assets: Accounts receivable (6,677) Servicing advances (4,433) Other assets (5,033) Increase in operating liabilities: Accrued expenses and other liabilities 60,899 Income taxes payable 46,884 Origination of mortgage loans held for sale (26,574,453) Principal received from sales of mortgage loans held for sale 27,386,495 Principal proceeds from sales of self-originated mortgage-backed securities 1,908,882 Cash received from residual assets in securitizations 48,300 Principal repayments of mortgage-backed securities 154,330 Net cash provided by operating activities 3,046,701 Cash flows from investing activities: Purchases of premises and equipment (20,481) Origination of mortgage loans held for investment (1,530,338) Proceeds from repayments of mortgage loans held for investment 377,948 Purchases of mortgage-backed securities (1,850,461) Principal repayments of purchased mortgage-backed securities 939,536 Net increase in investment in Federal Home Loan Bank stock, at cost (108) Acquisition of business (550,077) Net cash used in investing activities (2,633,981) Cash flows from financing activities: Decrease in warehouse lines of credit, net (1,997,233) Decrease in reverse repurchase agreements, net (866,358) Increase in collateralized debt obligations 2,666,972 Decrease in payable for securities purchased (261,539) Decrease in commercial paper, net (190,703) Decrease in drafts payable, net (8,405) Increase in trust preferred securities 49,092 Increase in notes payable, net 18,391 Proceeds from issuance of common stock 1,779 Excess tax benefits from share-based payment arrangements 1,198 Dividends paid (97,296) Net cash used in financing activities (684,102) Net decrease in cash and cash equivalents (271,382) Cash and cash equivalents, beginning of period 575,650 Cash and cash equivalents, end of period $304,268 Supplemental disclosure of non-cash investing activities: Net transfer of loans held for sale to loans held for investment $699,519 AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES FAIR VALUE OF FINANCIAL INSTRUMENTS (Unaudited) (In thousands) June 30, 2006 Fair Value in Excess Carrying of Carrying Value Fair Value Value Assets: Cash and cash equivalents $304,268 $304,268 $- Accounts receivable and servicing advances 342,244 342,244 - Mortgage-backed securities 9,299,224 9,299,224 - Mortgage loans held for sale, net 1,243,702 1,252,099 8,397 Mortgage loans held for investment, net 5,337,138 5,414,804 77,666 Mortgage servicing rights, net 434,173 434,173 - Derivative assets (1) 139,397 192,948 53,551 $139,614 Carrying Value in Excess of (Lower Than) Fair Value Liabilities: Warehouse lines of credit $1,476,958 $1,476,958 $- Drafts payable 12,349 12,349 - Commercial paper 888,476 888,476 - Reverse repurchase agreements 8,939,786 8,938,826 960 Collateralized debt obligations 3,724,878 3,725,364 (486) Derivative liabilities 3,280 3,280 - Trust preferred securities 252,780 252,780 - Notes payable 337,700 337,700 - $474 Fair Value in Excess of Carrying Value $140,088 Note: (1) Derivative assets includes interest rate lock commitments ("IRLCs") to fund mortgage loans. The carrying value excludes the value of the mortgage servicing rights ("MSRs") attached to the IRLCs in accordance with SEC Staff Accounting Bulletin No. 105. The fair value includes the value of MSRs. TABLE A-1 AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES OPERATING STATISTICS Six Months Ended June 30, 2005 (1) GAAP Adjustments As Adjusted Mortgage Holdings Segment: Investment Portfolio Performance (2): Average loans and mortgage-backed securities in portfolio ($ billions) 6.3 0.8 7.1 Interest income ($ millions) 135.4 19.9 155.3 Average portfolio yield 4.28% 4.37% Interest expense ($ millions) 91.2 7.7 98.9 Average cost of funds and hedges 3.05% 2.99% Net interest income ($ millions) 44.2 12.2 56.4 Net interest margin 1.39% 1.59% Interest carry on free standing derivatives ($ millions) -7.7 -7.7 Net interest income including interest carry on free standing derivatives ($ millions) 36.5 12.2 48.7 Net interest margin including interest carry on free standing derivatives 1.15% 1.37% Reconciliation of Changes in Mortgage Holdings (3): Net change in mortgage-backed securities ($ billions) -2.3 -2.3 Additions to loans in portfolio ($ billions) 0.1 0.1 Principal repayments of loans in portfolio ($ billions) 0.0 0.0 Net additions to loans in portfolio ($ billions) 0.1 0.1 Loans and mortgage-backed securities held - end of period ($ billions) 7.1 7.1 Mortgage-backed securities period end duration gap (in years) 0.08 0.08 Loan Origination Segment: Loan originations ($ billions) 18.0 18.0 Refinance 44% 44% ARM 51% 51% Average mortgage loans, net ($ billions) (3) 5.0 -1.7 3.3 Net interest income excluding trust preferred and other interest expense ($ millions) 64.3 -22.4 41.9 Net interest margin excluding trust preferred and other interest expense 2.57% 2.54% Trust preferred and other interest expense ($ millions) 1.2 1.2 Net interest income ($ millions) 63.1 -22.4 40.7 Loans securitized and held ($ billions) 3.2 -1.5 1.7 Loans securitized and sold ($ billions) 10.9 -2.0 8.9 Loans sold to third parties ($ billions) 7.6 7.6 Gain on sales of loans, net of hedge gains ($ millions) (4) 339.0 -43.5 295.5 Excess of fair value over carrying value of loans added to investment portfolio ($ millions) 1.3 1.3 Total ($ millions) 340.3 -43.5 296.8 Gain on sales of loans, net of hedge gains (% of principal) (4) 1.97% 1.72% Excess of fair value over carrying value of loans added to investment portfolio (% of principal) 0.95% 0.95% Total (% of principal) 1.97% 1.71% Applications accepted ($ billions) 30.3 30.3 Application pipeline ($ billions) 10.7 10.7 June 30, 2005 Loan Servicing Segment: Loan servicing portfolio - total with warehouse ($ billions) 24.7 24.7 Loan servicing portfolio - loans sold or securitized ($ billions) 22.6 22.6 Interest expense ($ millions) 3.4 3.4 Weighted average note rate 5.62% 5.62% Weighted average service fee 0.336% 0.336% Average age (in months) 13 13 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. TABLE A-2 AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts) Six Months Ended June 30, 2005 (1) GAAP Adjustments As Adjusted Net interest income: Interest income $282,212 $(26,925) $255,287 Interest expense (178,427) 16,766 (161,661) Net interest income 103,785 (10,159) 93,626 Non-interest income: Gain on sales of mortgage loans 112,630 - 112,630 Gain on sales of current period securitized mortgage loans 174,296 (25,258) 149,038 Gain on sales of mortgage-backed securities and derivatives 6,752 (1,400) 5,352 Unrealized gain on mortgage-backed securities and derivatives 47,207 (37,263) 9,944 Loan servicing fees 28,282 2,851 31,133 Amortization and impairment of mortgage servicing rights (38,312) (122) (38,434) Change in fair value of mortgage servicing rights - - - Net loan servicing loss (10,030) 2,729 (7,301) Other non-interest income 4,009 - 4,009 Non-interest income 334,864 (61,192) 273,672 Non-interest expenses: Salaries, commissions and benefits, net 163,334 - 163,334 Occupancy and equipment 27,068 - 27,068 Data processing and communications 11,907 - 11,907 Office supplies and expenses 10,086 - 10,086 Marketing and promotion 9,256 - 9,256 Travel and entertainment 9,355 - 9,355 Professional fees 6,902 - 6,902 Other 13,712 - 13,712 Non-interest expenses 251,620 - 251,620 Net income before income tax expense 187,029 (71,351) 115,678 Income tax expense (3,851) - (3,851) Net income $190,880 $(71,351) $119,529 Dividends on preferred stock 6,609 - 6,609 Net income available to common shareholders $184,271 $(71,351) $112,920 Per share data: Basic $4.57 $(1.77) $2.80 Diluted $4.51 $(1.75) $2.76 Weighted average number of shares - basic 40,346 40,346 40,346 Weighted average number of shares - diluted 40,849 40,849 40,849 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.