Impac Mortgage Holdings, Inc. (NYSE MKT: IMH) announces the financial
results for the year ended December 31, 2014. For the year ended 2014,
the Company reported a net loss of $6.3 million or $(0.68) per diluted
common share, as compared to a net loss of $8.2 million or $(0.94) per
diluted common share for the year ended 2013. For the quarter ended
December 31, 2014, the Company reported a net loss of $2.2 million or
$(0.23) per diluted common share, as compared to a net loss of $3.7
million or $(0.42) per diluted common share for the quarter ended
December 31, 2013. See below for a discussion about the acquisition of
CashCall, Inc.’s residential mortgage operations in the first quarter of
2015.
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Results of Operations
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For the Three Months Ended
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For the Year Ended
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(in thousands)
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December 31,
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September 30,
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December 31,
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December 31,
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December 31,
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2014
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2014
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2013
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2014
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2013
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Revenues:
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Gain on sale of loans, net
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$
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9,060
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$
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9,122
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$
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7,908
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$
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29,308
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$
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57,188
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Real estate services fees, net
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3,447
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3,243
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4,855
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14,729
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|
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19,370
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Servicing income, net
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813
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913
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1,311
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4,586
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4,240
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Mark-to-market mortgage servicing rights
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(1,576
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)
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(998
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)
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3,505
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(5,116
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)
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6,567
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Other
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20
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195
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120
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|
|
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1,682
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|
|
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1,004
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Total revenues
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11,764
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12,475
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17,699
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45,189
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88,369
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Expenses:
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Personnel expense
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9,557
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9,062
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12,845
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37,398
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64,769
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General, administrative and other
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4,300
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4,410
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5,893
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18,637
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25,191
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Total expenses
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13,857
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13,472
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18,738
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56,035
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89,960
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Other income (expense):
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Net interest income (expense)
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797
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747
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(121
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)
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1,135
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(86
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)
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Change in fair value of long-term debt
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(3,590
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)
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-
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(235
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)
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(4,014
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)
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(687
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)
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Change in fair value of net trust assets
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3,222
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92
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(1,301
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)
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11,063
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(3,678
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)
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Total other (expense) income
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429
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839
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(1,657
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)
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8,184
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(4,451
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)
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Loss from continuing operations before income taxes
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(1,664
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)
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(158
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)
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(2,696
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)
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(2,662
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)
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(6,042
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)
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Income tax (benefit) expense
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(100
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)
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307
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|
|
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|
34
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|
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|
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1,305
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(1,031
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)
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Net loss from continuing operations
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(1,564
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)
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(465
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)
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(2,730
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)
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(3,967
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)
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(5,011
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)
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Loss from discontinued operations, net of tax
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(673
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)
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(736
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)
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|
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(986
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)
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(2,355
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)
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(3,037
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)
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Net loss
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|
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(2,237
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)
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(1,201
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)
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(3,716
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)
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(6,322
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)
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(8,048
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)
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Net earnings attributable to noncontrolling interest
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-
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-
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-
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-
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(136
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)
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Net loss attributable to common stockholders
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$
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(2,237
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)
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$
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(1,201
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)
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$
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(3,716
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)
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|
|
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$
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(6,322
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)
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|
|
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$
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(8,184
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)
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Diluted loss per share
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$
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(0.23
|
)
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$
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(0.13
|
)
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|
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|
$
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(0.42
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)
|
|
|
|
$
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(0.68
|
)
|
|
|
|
$
|
(0.94
|
)
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For the fourth quarter of 2014, we recorded a net loss of $2.2 million
as compared to a loss of $1.2 million for the third quarter of 2014 and
net loss of $3.7 million for the fourth quarter of 2013. With the
exception of the mark-to-market (MTM) adjustment of the long-term debt,
we continued to see a positive quarterly trend of improving results.
With the anticipated acquisition of CashCall Inc.’s mortgage operations,
we expect to see a continued positive trend of profitably as discussed
further below. As a result of the continued improvements in the real
estate markets and performance of the residual interests in our
long-term mortgage portfolio, we updated the assumptions on the net
trust assets (residuals) resulting in an increase in the fair value of
$3.2 million. In the fourth quarter of 2014, we received cash flows of
$2.3 million from our residual interests as compared to $2.0 million in
the third quarter.
In 2014, we recorded a loss of $6.3 million as compared to a loss of
$8.2 million in 2013. The loss in 2014 was primarily associated with a
MTM loss from mortgage servicing rights (MSRs), due primarily to lower
interest rates, which caused the estimated fair value of MSRs to
decrease, an increase in the estimated fair value of long-term debt
recorded in the fourth quarter of 2014, as a result of our improving
financial conditions, and a loss from discontinued operations. A decline
in mortgage interest rates during 2014 resulted in a $5.1 million MTM
loss from MSRs. Additionally, due to the ongoing improvement of the
Company’s financial condition, we updated the estimated fair value of
long-term debt recording a $4.0 million expense in 2014. Additionally,
with the recent resolution of our legacy repurchase requests from Fannie
Mae disclosed and described in previous findings, we recorded additional
provisions of $1.1 million in 2014 up to the expected liability of the
settlement with Fannie Mae, which is included in discontinued operations
as well as a net loss of $824,000 in previously disclosed legal
settlements, net of recoveries. Gain on sale revenues declined primarily
due to a decrease in margins and the sale of our retail mortgage
origination branches at the end of 2013. Related to these declines was a
significant reduction in operating expenses.
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Selected Operational Data
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(in millions)
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Originations
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Q4 2014
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Q3 2014
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% Change
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Q4 2013
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% Change
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$1,108.9
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$923.6
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20%
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$516.5
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115%
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YE 2014
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YE 2013
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% Change
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$2,848.8
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$2,548.4
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12%
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|
|
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Mortgage Servicing Portfolio
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|
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12/31/2014
|
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|
9/30/2014
|
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% Change
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|
12/31/2013
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% Change
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|
|
|
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$2,267.1
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|
|
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$1,247.7
|
|
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82%
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|
|
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$3,128.6
|
|
|
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-28%
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|
Mortgage Servicing Rights
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|
|
|
|
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12/31/2014
|
|
|
|
9/30/2014
|
|
|
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% Change
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|
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|
12/31/2013
|
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% Change
|
|
|
|
|
$24.4
|
|
|
|
$13.6
|
|
|
|
79%
|
|
|
|
$36.0
|
|
|
|
-32%
|
|
Key Components of Net Results for the Fourth Quarter of 2014
-
Mortgage lending volumes increased in the fourth quarter of 2014 to
$1.1 billion from $923.6 million in the third quarter of 2014 and
$516.5 million in the fourth quarter of 2013, primarily due to the
bulk purchases from CashCall Inc.
-
Gain on sale of loans remained relatively flat in the fourth quarter
of 2014 at $9.2 million as compared to $9.1 million in the third
quarter of 2014, but increased as compared to $7.9 million in the
fourth quarter of 2013.
-
Gain on sale of loans margins decreased in the fourth quarter of 2014
to 83 bps, as compared to 99 bps in the third quarter of 2014, and 153
bps, in the fourth quarter of 2013 primarily associated with the
higher concentration of correspondent mortgage volume, including bulk
purchases of mortgage loans. The decline is also attributed to a
higher concentration of conventional loans which have a slightly lower
margin than government loans.
-
Mortgage servicing rights estimated fair value declined in the fourth
quarter, resulting in a mark-to-market loss of $1.3 million compared
to a $1.2 million loss in the third quarter, due to declining interest
rates throughout the year.
-
Mortgage servicing income decreased in the fourth quarter of 2014 to
$813 thousand from $913 thousand in the third quarter of 2014 and
decreased compared to $1.3 million in the fourth quarter of 2013. The
decline was due to the sale of mortgage servicing rights in the second
and third quarters of 2014. Such sales generated $23.0 million in cash.
-
Mortgage servicing rights decreased to $24.2 million at December 31,
2014 as compared to $36.0 million at December 31, 2013. The decrease
is due to bulk sales of servicing rights totaling $3.3 billion in
unpaid principal balance (UPB).
-
Real estate services revenue increased to $3.4 million in the fourth
quarter of 2014 as compared to $3.2 million in the third quarter of
2014, but decreased as compared to $4.9 million in the fourth quarter
of 2013. The decline in revenue is primarily due to the expected
decline in the outstanding balance of the long-term mortgage portfolio
which generates much of the revenue for our real estate services
division.
-
In our long-term mortgage portfolio, despite the decline in the
outstanding balance of the portfolio, the residuals continue to
generate better than expected cash flows of $2.3 million in the fourth
quarter of 2014 and $9.9 million in 2014, as compared to $2.0 million
in the third quarter of 2014 and $6.8 million in 2013.
Recent Developments
In January 2015, the Company, and its wholly-owned subsidiary, Impac
Mortgage Corp. (IMC), entered into an Asset Purchase Agreement with
CashCall, Inc. (CashCall) pursuant to which IMC agreed to purchase
certain assets of CashCall’s residential mortgage operations. A
substantial portion of the purchase price for the CashCall mortgage
operations will be based upon an earn-out from the division’s future net
earnings. CashCall’s residential mortgage operation, which includes the
complete origination platform, systems and personnel, will operate as a
separate division of IMC under the name CashCall Mortgage (CCM). This
division will operate as a centralized call center that utilizes a
marketing platform to generate customer leads through the internet and
call center loan agents. With the addition of CCM we will have a
scalable retail platform able to expand quickly and efficiently. By
using its marketing to generate internal leads, we expect CCM to be able
to compete with some of the largest internet lenders across the nation.
In addition, we intend to leverage this same marketing platform to
expand volumes of our new AltQM products, as well as FHA and VA
products, and CCM will be able to leverage our state licenses to expand
its national lending footprint.
Prior to 2015, CashCall was a correspondent seller from whom we
purchased closed loans on a bulk basis. In 2013, CashCall’s mortgage
division was ranked by the Mortgage Bankers Association as the 31st
largest residential mortgage originator with approximately $6.5 billion
in total originations. In the fourth quarter of 2014, CashCall’s
mortgage division volume was approximately $800 million, most of which
was sold to the Company as a correspondent seller. As a centralized
retail call center, loan applications are received and taken by loan
agents directly from consumers and through the internet. After the
acquisition of CCM, we expect our correspondent volume to initially
decline but then steadily continue to grow month over month. Our direct
retail volume will increase significantly since CashCall will no longer
be a correspondent seller as its mortgage operations will be part of the
Impac Mortgage Corp. platform after the closing.
As expected, during the first quarter of this year we have seen a
substantial increase in our mortgage origination volume. We expect to
fund over $2 billion in total originations during the first quarter of
2015, nearly doubling the $1.1 billion in originations for the fourth
quarter of 2014. This increase in volume was attributed to the
additional volume from CCM and lower mortgage rates in the first quarter
of 2015. With the increased origination volume, we anticipate first
quarter of 2015 pre-tax profitability to improve significantly over the
fourth quarter of 2014.
We have significant NOL carry forwards from prior years. At December 31,
2014 and 2013, we have recognized a full valuation allowance against
these NOL carry-forwards in our consolidated balance sheets. However, as
a result of the announced acquisition of the CashCall mortgage
operations in the first quarter of 2015, we will reevaluate our ability
to recognize a deferred tax asset which is expected to result in future
tax benefits.
Mr. Joseph Tomkinson, Chairman and CEO of Impac Mortgage Holdings, Inc.,
commented, “The Company is excited about its acquisition of CashCall
Inc.’s mortgage lending division. This acquisition provides the Company
a highly profitable retail lending platform capable of originating $500
million monthly. With first quarter total Company originations projected
to be over $2 billion, we believe we have taken a major step towards
becoming a leading mortgage originator, once again. Additionally, in the
first quarter, we expect to realize tax benefits from our substantial
NOL carry-forwards, which could result in first quarter earnings
potentially making up for the entire loss in 2014.”
Conference Call
The Company will hold a conference call on April 1st, at 9:00 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 (800)
406-5162, conference ID number 21765714, 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,” “capable,”
“will,” “intends,” “believe,” “expect,” “likely,” “potentially”
”appear,” “should,” “could,” “seem to,” “anticipate,” “expectations,”
“plan,” “ensure,” 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: legal or regulatory proceedings or other matters that affect
the timing or ability to complete the CashCall acquisition contemplated;
the possibility that the CashCall acquisition does not close; adverse
effects on the Company’s stock price resulting from the completion of
the acquisition; failure to achieve the benefits expected from the
acquisition of CashCall’s mortgage lending operations, including an
increase in origination volume generally and increase in the direct
retail origination channel and costs and difficulties related to the
integration of the business and operations with the Company’s
operations; whether the completion of the transaction will have a
positive effect on the Company’s profitability or the accretive effect
on the Company’s earnings that it expects; unexpected costs,
liabilities, charges or expenses resulting from the transaction,
successful development, marketing, sale and financing of new mortgage
products, including the non-Qualified Mortgage and conventional and
government loan programs; ability to increase our market share in the
various residential mortgage businesses; 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 use warehousing capacity;
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 through
lending and repurchase facilities, strategic relationships or otherwise;
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 innovative
mortgage lending and warehouse lending solutions, as well as real estate
solutions that address the challenges of today’s economic environment.
Impac’s operations include mortgage and warehouse lending, servicing,
portfolio loss mitigation and real estate services as well as the
management of the securitized long-term mortgage portfolio, which
includes the residual interests in securitizations.
Copyright Business Wire 2015