Impac Mortgage Holdings, Inc. (NYSE MKT: IMH) announces financial
results for the quarter and nine months ended September 30, 2013. For
the third quarter of 2013, the Company reported a net loss of $(4.9)
million or $(0.56) per diluted common share, as compared to a net loss
of $(2.3) million or $(0.29) per diluted common share in the third
quarter of 2012. For the nine months ended September 30, 2013, the
Company reported a net loss of $(4.5) million or $(0.52) per diluted
common share, as compared to a net loss of $(2.9) million or $(0.36) per
diluted common share for the nine months ended September 30, 2012.
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Results by Segment
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Q3 2013
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Q2 2013
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Q3 2012
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YTD 2013
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YTD 2012
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(in thousands)
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Net earnings (loss)
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Diluted EPS
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Net earnings (loss)
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Diluted EPS
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Net earnings (loss)
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Diluted EPS
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Net earnings (loss)
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Diluted EPS
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Net earnings (loss)
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Diluted EPS
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Mortgage Lending
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$
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(4,067
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)
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$
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(0.46
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)
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$
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3,426
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$
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0.33
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$
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8,268
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$
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1.05
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$
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29
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$
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0.00
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$
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12,319
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$
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1.57
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Real Estate Services
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3,963
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0.45
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3,355
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0.33
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3,137
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0.40
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9,614
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1.10
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9,495
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1.21
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Long-term Mortgage Portfolio
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(4,576
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(0.52
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(4,563
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)
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(0.42
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(4,655
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(0.59
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(13,125
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)
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(1.50
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(11,225
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)
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(1.43
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Continuing Operations
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$
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(4,680
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$
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(0.53
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)
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$
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2,218
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$
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0.24
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$
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6,750
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$
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0.86
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$
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(3,482
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$
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(0.40
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)
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$
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10,589
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$
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1.35
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Income tax (expense) benefit from continuing operations
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9
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0.00
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(32
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0.00
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(8
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0.00
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1,065
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0.12
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(44
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$
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0.00
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Continuing Operations, net of tax
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$
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(4,671
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)
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$
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(0.53
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$
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2,186
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$
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0.24
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$
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6,742
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$
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0.86
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$
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(2,417
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$
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(0.28
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$
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10,545
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$
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1.35
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Discontinued Operations, net of tax
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(277
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(0.03
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(968
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(0.10
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(9,021
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(1.15
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(2,051
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(0.24
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)
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(13,402
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(1.71
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Net (loss) earnings attributable to IMH
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$
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(4,948
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$
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(0.56
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$
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1,218
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$
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0.14
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$
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(2,279
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$
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(0.29
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)
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$
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(4,468
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$
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(0.52
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$
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(2,857
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$
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(0.36
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)
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The Company’s continuing operations, which include the mortgage lending,
real estate services and long-term mortgage portfolio segments, had a
net loss of $(4.7) million in the third quarter of 2013, as compared to
net earnings of $2.2 million in the second quarter of 2013 and $6.8
million in the third quarter of 2012, primarily due to a loss in
mortgage lending.
With the sudden rise in mortgage loan interest rates starting in May
2013, origination of mortgage loans has declined across the mortgage
lending industry. In addition, during the third quarter, gain on sale
margins continued to compress creating challenges for many lenders in
the market, including Impac Mortgage. As a result, the financial
performance of the mortgage lending segment in the third quarter of 2013
materially declined from the first six months of 2013.
Despite the drop in volumes and margins, we have continued to increase
the mortgage servicing portfolio to $2.7 billion as of September 30,
2013 which generated net servicing fees of $1.0 million in the third
quarter.
In the third quarter of 2013, our warehouse lending business began
operating, offering funding facilities to all lenders, but focusing on
smaller mortgage bankers and credit unions, including some of our
current correspondent customers. We believe offering warehouse lending
provides added value for our correspondent customers and increases the
capture rate from our approved customers which will increase the volumes
in our correspondent channel.
Furthermore, our real estate services segment continues to generate
solid profitability, positing earnings increases over the first and
second quarters of 2013.
Mortgage Lending
In the third quarter of 2013, mortgage lending net earnings decreased by
$7.5 million, to a loss of $(4.1) million, as compared to the second
quarter of 2013 primarily due to a decrease in volume and margins.
Mortgage lending net earnings decreased by $(12.3) million from the
third quarter in the prior year mostly due to a decline in margins.
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Selected Financial Data
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(in millions)
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Q3 2013
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Q2 2013
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% Change
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Q3 2012
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% Change
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Originations
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$576.2
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$780.1
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-26%
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$709.3
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-19%
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While originations have decreased to $576.2 million, a 26% decrease over
the second quarter 2013, and a 19% decrease over the third quarter 2012,
the origination volumes by channels have continued to experience a more
balanced mix across the channels. In the third quarter of 2013, our
correspondent channel contributed 37% of originations, the retail
channel contributed 29% of originations, with the remaining 34% coming
from the wholesale channel. As compared to 19%, 29%, and 52%,
respectively, in the third quarter of 2012. Also, the percentage of
purchase money transactions, as compared to refinance transactions,
increased to almost 55% of overall originations, as compared to 40% in
the second quarter of 2013 and just 27% in the third quarter of 2012.
The loss in the mortgage lending segment was primarily due to lower
origination volumes and lower margins. And, although lending operating
expenses decreased to $16.1 million from $19.2 million in the second
quarter of 2013, they did not decrease as much as the origination volume
declined. We had maintained excess lending operating capacity for
expected increased volumes, but with the unexpected sudden decline in
volume as well as increased compliance costs due to new mortgage lending
requirements our operating costs exacerbated the loss in the quarter. In
the third and fourth quarters, we have taken steps to not only reduce
operational staffing levels and other operating costs, but also
consolidate certain branch locations. We also have taken steps to
streamline operations as we have been implementing our new LOS system.
Even though the downturn in mortgage volumes industry wide has affected
our mortgage lending earnings, it has created significant opportunities
to expand our market share nationally.
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Selected Financial Data
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(in millions)
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September 30, 2013
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June 30, 2013
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% Change
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September 30, 2012
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% Change
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Mortgage Servicing Portfolio
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$2,689.2
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$2,110.2
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27%
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$1,221.5
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120%
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We have increased the servicing portfolio to $2.7 billion at September
30, 2013, a 27% increase from June 30, 2013, and a 120% over third
quarter 2012. The servicing portfolio is comprised of high credit
quality agency loans and has a weighted average coupon of approximately
4%. Currently the portfolio has a 60-day delinquency in terms of unpaid
principal balance of less than 1% of the portfolio. Net servicing fees
in the third quarter of 2013 increased by 9% and 242% to $1.0 million in
the third quarter of 2013 over the second quarter of 2013 and third
quarter of 2012, respectively. We expect this trend to continue in the
future as the mortgage lending segment builds its mortgage origination
volumes throughout 2014.
Real Estate Services
The real estate services segment continues to earn steady level of
revenues and consistent quarterly profits, increasing net earnings from
real estate services segment to $4.0 million in the third quarter of
2013, an 18% increase over second quarter of 2013 and a 26% increase
over the third quarter of 2012. While we are focusing on the mortgage
lending segment, we continue to benefit from strong and consistent
profits in this segment.
In a continuing effort to leverage our platform beyond mortgage lending,
our real estate services segment has expanded by offering its loss
mitigation services beyond the Company’s legacy portfolio, including
establishing relationships with third parties to perform mortgage
insurance recoveries and title remediation services.
Long-Term Mortgage Portfolio
The estimated fair value of the net trust assets continues to decline in
2013 primarily as a result of residual interest cash received and the
expected ongoing decline in securitized mortgage collateral due to
principal collections and liquidation of defaulted loans. At September
30, 2013, our residual interest in securitizations (represented by the
difference between total trust assets and total trust liabilities)
decreased to $12.6 million, compared to $13.4 million at June 30, 2013
and $15.9 million at December 31, 2012.
Outlook
Mr. Joseph Tomkinson, Chairman and CEO of Impac Mortgage Holdings, Inc.,
commented, “As we discussed on our last conference call, the third
quarter saw an unexpected drop in volumes along with secondary market
margin compression leading to reduced lending revenues. However, as our
operating efficiencies continue to improve and our expanding sales team
gets traction, we expect to see improvements in mortgage lending results
in the fourth quarter along with expected continued growth of our net
servicing fees. Further, we are pleased to establish the warehouse
lending business, which will ultimately not only contribute to net
earnings, but also enhance our ability to expand our correspondent
lending channel. Lastly, it is noteworthy to highlight the continued
success of our real estate services segment, which had an outstanding
quarter and is expected to continue to deliver positive net earnings in
the future.”
Conference Call
The Company will hold a conference call tomorrow morning, November 7,
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 Justin.Moisio@ImpacMail.com.
Investors may participate in the conference call by dialing (866)
573-1930, conference ID number 21686133, 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; our
ability to manage personnel expenses in relation to mortgage production
levels; our ability to successfully re-enter the warehouse lending
business; 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 Justin.Moisio@ImpacMail.com.
Web site: http://ir.impaccompanies.com
or www.impaccompanies.com
Copyright Business Wire 2013