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Transnational Financial Network Reports $0.11 First Quarter EPS
Transnational Financial Network, Inc. (AMEX: TFN), a wholesale and retail mortgage banking company, reported first fiscal quarter, ending July 31st, Net Income of $714,727, or $0.11 per share, a significant improvement compared to the $294,000, or $0.04 per share, loss reported in the like period a year earlier. Excluding the effect of accounting for derivative financial instruments as required by SFAS 133, which accounting has no effect on TFN's cash flows, earnings per share would have been $0.12 in this fiscal quarter as compared to a loss per share of $0.06 for the same fiscal quarter in the prior year.
Transnational Financial Network Reports $0.11 First Quarter EPS
SAN FRANCISCO, CA (PRWEB) September, 2003 -- Transnational Financial Network, Inc. (AMEX: TFN), a wholesale and retail mortgage banking company, reported first fiscal quarter, ending July 31st, Net Income of $714,727, or $0.11 per share, a significant improvement compared to the $294,000, or $0.04 per share, loss reported in the like period a year earlier. Excluding the effect of accounting for derivative financial instruments as required by SFAS 133, which accounting has no effect on TFN's cash flows, earnings per share would have been $0.12 in this fiscal quarter as compared to a loss per share of $0.06 for the same fiscal quarter in the prior year.
Joseph Kristul, Chairman and CEO, commented: "This last quarter was a period of marked contrasts and changes for both Transnational and the entire mortgage industry and we are adjusting our business strategies accordingly.
"Our origination volumes in this past quarter were at or near record levels for both our wholesale and retail business, reflecting the frenzy in the mortgage markets created by record low loan financing rates. With the material rise in interest rates since mid-June, we saw a crush of applications as consumers attempted to lock in mortgage rates before they increased further. This no doubt contributed to very strong originations for us in the latter part of the quarter.
"Nonetheless, we are now seeing the aftermath of this crush much like a receding wave on the beach, as consumers try to come to grips with the new, higher mortgage rates. We currently have nearly $80 million of approved loans in our pipeline that consumers have not yet locked as they wait and hope for rates to recede. This is having a negative impact on our current mortgage fundings, and I expect that our mortgage originations will be impacted materially in the near-term as a result of this uncertainty. Interest rates are still at historic lows, and the housing market remains strong, but the recent 9-week increase in rates has changed the landscape significantly.
"We are almost 90% complete in fulfilling a forward delivery commitment similar to the one that added $0.06 per share to our earnings in our fourth fiscal quarter last year, earnings that were not present in this first quarter. While I am optimistic that we will be able to receive a bonus on this commitment in the second fiscal quarter, the current mortgage market uncertainty prevents me from predicting with full confidence at this time that we will.
"Anticipating that the markets would turn, as they have, we kept tight control on both our costs and expansion efforts in recent times. With the recent downturn in origination volumes, we began cutting costs sharply in the beginning of August in order to maintain profitability, in particular controlling salaries and benefit expense. We will continue to tighten our spending on general and administrative expenses as well as salaries and benefits going forward.
"Furthermore, while this will be a difficult period for all participants in the mortgage markets, we believe it will give us significant opportunities that were not available to us previously to build market share. First, we expect good people to be freed up as a result of the turmoil in the markets. Notwithstanding our discipline in controlling payroll and salary expense, we are seeking experienced mortgage professionals that directly increase production. We recently hired several additional account representatives on our wholesale side, people that were not available when the markets were so strong. Second, we are already seeing the shakeout of firms that over-extended themselves. This should allow us to capture additional market share in our existing regions and the new markets we are entering, such as the State of Washington.
"With costs under tight control, and cash and receivables that we normally collect in less than 30 days totaling $6 million, or $0.89 per common share at the end of the quarter, I believe we are well-positioned to weather the current difficult environment and turn it to our advantage."
Simultaneous with this Press Release, Transnational Financial is filing its Form 10-QSB with the Securities and Exchange Commission.
Transnational Financial Network, Inc.
Condensed Statements of Operations
and Production
(Unaudited)
For the 3 Months Ended
July 31, July 31, % Change
2003 2002 Increase (Decrease)
Revenue:
Net gain on sale of mortgages $ 2,288,134 $ 701,712 226 %
Production revenue 3,524,214 3,212,897 10%
Other revenue 12,843 21,140 (40)%
Total revenue 5,825,191 3,935,749 48%
Direct expense:
Commission and production incentives 2,165,029 2,025,119 7%
Production expense 458,302 309,039 48%
Pair-off fees (3,677) - nm
Provision for early payoff penalties 40,000 45,000 (11)%
Total direct expense 2,659,654 2,379,158 12%
Net interest income (expense)
Interest income on loans in warehouse 412,073 275,541 50%
Interest expense on loans in warehouse (530,471) (306,387) 73%
Net interest income (expense) (118,398) (30,846) 284%
Gross profit on mortgage activities 3,047,139 1,525,745 100%
Indirect expense
Salaries and benefits 1,249,496 1,061,214 18%
General and administrative 635,943 595,758 7%
Occupancy 179,449 187,575 (4)%
Depreciation 28,420 24,474 16%
Total indirect expense 2,093,308 1,869,021 12%
Operating income (loss) 953,831 (343,276) nm
Non-operating income (expense):
Other interest expense (128,804) (84,608) 52%
Other income (expense), including
SFAS 133 adjustment (68,300) 133,884 nm
Total non-operating income (expense) (197,104) 49,276 nm
Income (loss) before taxes 756,727 (294,000) nm
Provision for income taxes 42,000 - nm
Net income (loss) $ 714,727 $ (294,000) nm
Earnings per Share -- Primary $0.11 ($0.04) nm
Earnings per Share -- Fully Diluted $0.10 ($0.04) nm
Production ($ millions):
Wholesale $ 247 $ 95 160%
Retail 216 205 5%
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Total production $ 463 $ 300 54%
This News Release may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove correct.
SOURCE Transnational Financial Network, Inc.
CONTACT: Joseph Kristul, CEO of Transnational Financial Network, Inc., +1-415-242-8840 URL: http://www.transnational.com
CONTACT: Dawn Van Zant, ECON Investor Relations, Inc., 1-866-730-1152 dvanzant@investorideas.com
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http://www.investorideas.com/Companies/Transnational/NewsReleases.asp
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