Impac Mortgage Holdings, Inc. Announces Results of First Quarter 2013
Impac Mortgage Holdings, Inc. (NYSE MKT: IMH), today announced results
for the first quarter of 2013 that include an 85% increase in mortgage
lending originations to $673.8 million from $365.1 million in the first
quarter of 2012, and an increase in mortgage lending segment pre-tax
profits to $671 thousand in the first quarter of 2013 from $227 thousand
in the first quarter of 2012. The Company’s continuing operations, which
includes the mortgage lending, real estate services and long-term
mortgage portfolio segments, had net earnings after taxes of $138
thousand in the first quarter of 2013, a $3.7 million improvement over
the loss of $(3.5) million in first quarter of 2012, which resulted in a
$4.0 million improvement in consolidated net earnings in the first
quarter 2013 as compared with the first quarter 2012.
Also, as previously announced, the Company issued $20.0 million in
convertible debt on April 30, 2013. The convertible debt has a coupon of
7.5%, requires quarterly interest only payments, is convertible into
common stock at a strike price of $10.875, and is due by 2018. We expect
to use the proceeds to increase the servicing portfolio by both
retaining a greater portion of our own originations plus purchasing
mortgage servicing rights, to expand the mortgage lending platform to
increase lending volumes and to pursue other strategic opportunities in
the mortgage and lending markets.
As previously discussed in our annual report on Form 10-K, we believe
there are a number of opportunities that exist in today’s mortgage and
lending markets, which include the purchase of mortgage servicing
rights, originating small balance multifamily loans, originating,
pooling and privately securitizing jumbo mortgage loans and offering
warehouse lines to small banks, credit unions and mortgage banking
firms. With a portion of these proceeds, we expect to pursue some of
these opportunities in a manner, and through structures, which we
believe deliver accretive value to our shareholders.
In the first quarter of 2013, as compared to the first quarter of 2012,
we have increased originations by 85% and the servicing portfolio by
197% as indicated below (in millions):
|
|
|
Q1 2013
|
|
|
Q1 2012
|
|
|
$ Increase
|
|
|
% Change
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Originations
|
|
|
$
|
673.8
|
|
|
$
|
365.1
|
|
|
$
|
308.7
|
|
|
85
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%
|
Servicing Portfolio (1)
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|
|
|
1,702.5
|
|
|
|
573.8
|
|
|
|
1,128.7
|
|
|
197
|
%
|
(1) Excluding servicing sold and not transferred, and interim
servicing
|
|
In the first quarter of 2013, as compared to the fourth quarter of 2012,
we increased the servicing portfolio by 14% but originations declined
17% as seen below (in millions):
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Q1 2013
|
|
|
Q4 2012
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|
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$ Increase
|
|
|
% Change
|
Originations
|
|
|
$
|
673.8
|
|
|
$
|
813.2
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|
|
$
|
(139.4
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)
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|
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-17
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%
|
Servicing Portfolio (1)
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|
|
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1,702.5
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|
|
|
1,492.1
|
|
|
|
210.4
|
|
|
|
14
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%
|
(1) Excluding servicing sold and not transferred, and interim
servicing
|
|
The decline in originations was due to an overall decline in
originations in the mortgage lending market in the first quarter of
2013, normal seasonal declines experienced each year in the first
quarter, and some operational inefficiencies impacting turn times
associated with the implementation of our new loan origination system.
In the first quarter of 2013, as compared to the first quarter of 2012,
continuing operations were profitable and improved by 104% due to the
improvement in the results of mortgage lending, the continued
profitability, albeit expectedly lower, of our real estate services
segment and a $2.5 million improvement in the long-term mortgage
portfolio segment. Continuing operations showed net earnings primarily
resulting from a tax benefit recorded in the first quarter of 2013 as a
result of the increase in our ownership of AmeriHome Mortgage
Corporation (AmeriHome) to 80% in 2013. Consolidated net loss declined
to $(738) thousand, or $(0.08) per diluted share as compared to a loss
of $(4.8) million, or $(0.61) per diluted share in the comparable period
in the prior year.
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Q1 2013
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Q1 2012
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|
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Net earnings
(loss)
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Diluted EPS
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Net earnings
(loss)
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Diluted EPS
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Mortgage Lending
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$
|
671
|
|
|
|
$
|
0.08
|
|
|
|
$
|
227
|
|
|
|
$
|
0.03
|
|
Real Estate Services
|
|
|
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2,295
|
|
|
|
|
0.27
|
|
|
|
|
2,726
|
|
|
|
|
0.35
|
|
Long-term Mortgage Portfolio
|
|
|
|
(3,916
|
)
|
|
|
|
(0.46
|
)
|
|
|
|
(6,445
|
)
|
|
|
|
(0.83
|
)
|
Continuing Operations
|
|
|
$
|
(950
|
)
|
|
|
$
|
(0.11
|
)
|
|
|
$
|
(3,492
|
)
|
|
|
$
|
(0.45
|
)
|
Income tax benefit (expense) from continuing operations
|
|
|
|
1,088
|
|
|
|
|
0.13
|
|
|
|
|
(30
|
)
|
|
|
|
(0.00
|
)
|
Continuing operations, net of tax
|
|
|
$
|
138
|
|
|
|
$
|
0.02
|
|
|
|
$
|
(3,522
|
)
|
|
|
$
|
(0.45
|
)
|
Discontinued Operations, net of tax
|
|
|
|
(876
|
)
|
|
|
|
(0.10
|
)
|
|
|
|
(1,268
|
)
|
|
|
|
(0.16
|
)
|
Net loss attributable to IMH
|
|
|
$
|
(738
|
)
|
|
|
$
|
(0.08
|
)
|
|
|
$
|
(4,790
|
)
|
|
|
$
|
(0.61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Mortgage Lending
In the first quarter of 2013, mortgage lending net earnings before taxes
improved slightly over the same period in the prior year. However, net
earnings before taxes declined as compared to the fourth quarter of
2012. The decline in the first quarter of 2013 as compared to fourth
quarter of 2012 was primarily due to margin compression, an increase in
lending operations personnel costs and a non-operational, non-recurring
cost of $700 thousand recorded in the first quarter of 2013 to settle a
claim for unpaid licensing fees from a former technology vendor
associated with a system that was not installed.
Margin compression that began in the fourth quarter of 2012 continued in
the first quarter of 2013 reducing our net margins by approximately 20
basis points, although it now appears that margins have stabilized in
the latter part of the first quarter of 2013. Our origination volumes
were lower in the first quarter of 2013 as compared to $813.2 million in
the fourth quarter of 2012. With the decline in originations across the
industry, mortgage lenders reduced pricing to capture or maintain
volumes. We did the same to stay competitive in maintaining volume,
resulting in reduced pricing and margin compression on lower volumes. In
addition, our operating costs were higher with the over-capacity in
operations expecting higher volume than experienced in the first
quarter. Also, the implementation of our new loan origination system has
been more challenging than anticipated. Upon implementation, we expect
this new system will result in better operational efficiencies to
support a larger amount of production in the future. With this not yet
occurring, our operating expenses were higher than expected. The Company
has however hired a seasoned mortgage banking executive to manage the
mortgage operations of the Company, complete the installation of this
new system, reduce operational costs and improve our turn time
efficiencies.
During the first part of the second quarter of 2013, we have seen
improved turn times with increased funding volumes. Furthermore, we saw
a significant increase in the pipeline in April 2013, expected to result
in higher origination volumes in the second quarter as compared to the
first quarter.
In the first quarter of 2013, the Company’s mortgage lending channels
continued to experience a more balanced production mix. This was a
result of the continued growth in the retail channel, conducted by our
branch offices, and correspondent channel, which acquires closed loans
from our correspondent sellers. For the first quarter of 2013, our
retail channel production contributed 31% of originations while our
correspondent channel contributed 23%, with the remaining 46% coming
from the wholesale channel.
In the first quarter of 2013, the mix of purchase money transactions, as
compared to refinance transactions, remained consistent with the first
quarter of 2012 and the fourth quarter of 2012. We continue to devote
efforts towards capturing additional purchase money transactions as the
real estate market continues to improve and the home refinance market
continues to contract. We have been able to increase the number of
relationships we have with real estate professionals to 1,266 as of
March 31, 2013, as compared with 1,173 as of December 31, 2012.
Our mortgage servicing portfolio increased to $1.7 billion as of March
31, 2013, from $1.5 billion at December 31, 2012. At March 31, 2013, the
loans that were originated after 2010 totaled $1.6 billion with a
minimal number of loans 60 or more days delinquent. The remaining $107
million balance of the servicing portfolio consists of loans originated
or acquired by AmeriHome, primarily prior to 2009 and which was acquired
in our 2010 purchase of our interest in AmeriHome. These legacy
AmeriHome loans continue to have higher delinquencies.
Real Estate Services
Net earnings before taxes from our real estate services segment
decreased to $2.3 million in the first quarter of 2013, as compared with
$ $2.7 million in the first quarter of 2012 and $3.1 million in the
fourth quarter of 2012. The real estate services segment continues to
provide net operating margin, but its revenue continues to gradually
decline as we expected. The decrease was primarily due to a continued
and expected decline in the long-term mortgage portfolio resulting from
collections and liquidation of defaulted loans.
Long-term Mortgage Portfolio
Net loss before taxes from our long-term mortgage portfolio was $(3.9)
million for the first quarter of 2013 compared to a net loss of $(6.4)
million in the first quarter of 2012 primarily due to the change in the
estimated fair value of the portfolio. The estimated fair value of the
net trust assets continues to decline in 2013 primarily as a result of
the expected and ongoing decline in securitized mortgage collateral due
to principal collections and liquidation of defaulted loans.
Consolidated Operations
In the first quarter of 2013, the Company reported a consolidated net
loss of $(738) thousand or $(0.08) per diluted share, as compared to a
net loss of $(4.8) million in the first quarter of 2012 or $(0.61)
diluted per share, primarily due to a $2.5 million improvement in the
long-term mortgage portfolio and a tax benefit of $1.1 million due to
the Company’s increase in its AmeriHome ownership to 80% which allows
the Company to include AmeriHome on its consolidated tax return and to
reduce income taxes as AmeriHome will now be able to utilize IMH’s
taxable net operating loss.
Despite earnings from the mortgage lending segment staying relatively
flat, when comparing the first quarter of 2013 with the first quarter
2012, we still believe that the continued driver of growth in net
earnings from continuing operations for 2013 will be mortgage lending.
Total origination volume fell in the first quarter of 2013 as compared
to the fourth quarter of 2012; however we continue to increase
production substantially on a year over year basis. The decrease in
production from the fourth quarter of 2012, combined with increased
margin compression and higher personnel costs, limited the mortgage
lending segment’s profitability in the first quarter of 2013.
Mr. Joseph Tomkinson, Chairman and CEO of Impac Mortgage Holdings, Inc.,
commented, “Even though the first quarter saw margin compression and
reduced origination volumes from the end of last year, our second
quarter is shaping up nicely with April recording our largest amount of
loan locks since 2010, and a total pipeline in excess of $800 million.
As of April 30, 2013, our jumbo product had a pipeline of $25 million
with a continued roll out of the program in wholesale and correspondent
expected during the second quarter. Further, we believe raising capital
at such favorable rates and terms earlier this week shows a tremendous
vote of confidence in the Company. The additional capital allows us much
greater flexibility in the overall execution of our business plan.”
Conference Call
The Company will hold a conference call tomorrow morning, May 9, 2013,
at 9 a.m. Pacific Time (12:00 p.m. Eastern Time), to discuss the
Company’s financial results and business outlook and to answer investor
questions,. After the Company’s prepared remarks, management will host a
live Q&A session, to answer questions submitted via email. Please email
your questions to jmoisio@impacmail.com.
Investors may participate in the conference call by dialing (866)
573-1930, conference ID number 21657481, or access the web cast via our
web site at http://ir.impaccompanies.com.
To participate in the conference call, dial in 15 minutes prior to the
scheduled start time. The conference call will be archived on the
Company's web site at http://ir.impaccompanies.com.
Forward-Looking Statements
This press release contains certain 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. Forward looking statements, some
of which are based on various assumptions and events that are beyond our
control, may be identified by reference to a future period or periods or
by the use of forward looking terminology, such as “may,” “will,”
“intends,” “believe,” “expect,” “likely,” ”appear,” “should,” “could,”
“seem to,” “anticipate,” “expectations,” “plan,” or similar terms or
variations on those terms or the negative of those terms. The forward
looking statements are based on current management expectations. Actual
results may differ materially as a result of several factors, including,
but not limited to the following: our ability to manage effectively our
mortgage lending operations and continue to expand the Company’s growing
mortgage lending activities; volatility in the mortgage industry;
unexpected interest rate fluctuations and margin compression; decrease
in purchase money transactions; inability to hire qualified retail loan
officers or transact with qualified correspondents; failure to
successfully launch or continue to market new loan products; increased
competition in the mortgage lending industry by larger or more efficient
companies; issues and system risks related to our technology; more than
expected increases in default rates or loss severities and mortgage
related losses; ability to obtain additional financing, the terms of any
financing that we do obtain and our expected use of proceeds from any
financing; increase in loan repurchase requests and ability to
adequately settle repurchase obligations; failure to create brand
awareness; the outcome, including any settlements, of litigation or
regulatory actions pending against us or other legal contingencies and
our compliance with applicable local, state and federal laws and
regulations and other general market and economic conditions.
For a discussion of these and other risks and uncertainties that could
cause actual results to differ from those contained in the forward
looking statements, see the annual and quarterly reports we file with
the Securities and Exchange Commission. This document speaks only as of
its date and we do not undertake, and specifically disclaim any
obligation, to release publicly the results of any revisions that may be
made to any forward looking statements to reflect the occurrence of
anticipated or unanticipated events or circumstances after the date of
such statements.
About the Company
Impac Mortgage Holdings, Inc. (IMH or Impac) provides mortgage and real
estate solutions that address the challenges of today’s economic
environment. Impac’s operations include mortgage lending and servicing,
portfolio loss mitigation and real estate services as well as the
management of the securitized long-term mortgage portfolio which
includes the residual interest in securitizations.
For additional information, questions or comments, please call Justin
Moisio in Investor Relations at (949) 475-3988 or email jmoisio@impacmail.com.
Web site: http://ir.impaccompanies.com
or www.impaccompanies.com