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Impac Mortgage Holdings, Inc. Announces Results Of Second Quarter 2010

Impac Mortgage Holdings, Inc. (NYSE Amex: IMH), a Maryland corporation, or the “Company,” reports second quarter 2010 net earnings of $3.3 million, or $0.39 per diluted common share, as compared to a net loss of $(3.6) million, or $(0.47) per diluted common share for the second quarter of 2009.

Mortgage and real estate services

For the three and six months ended June 30, 2010, mortgage and real estate services fees were $15.7 million and $27.0 million, respectively. The mortgage and real estate services fees of $15.7 million for the three months ended June 30, 2010, was primarily comprised of $7.8 million in monitoring, surveillance and recovery fees, $3.5 million in title and escrow fees, $2.7 million in loan modification fees, and $1.7 million in servicing income. The mortgage and real estate services fees of $27.0 million for the six months ended June 30, 2010, was primarily comprised of $12.8 million in monitoring, surveillance and recovery fees, $6.0 million in title and escrow fees, $5.8 million in loan modification fees, and $2.4 million in servicing income. Although the Company intends to generate more fees by providing these services to third parties in the marketplace, the revenues from these businesses have primarily been generated from the Company’s long-term mortgage portfolio. Furthermore, since these businesses are recently established there remains uncertainty about their future success. During the first quarter of 2010, the Company began to expand the portfolio surveillance and recovery services operations and entered into an agreement with a third party to assist in credit risk management and portfolio surveillance services.

In June 2010, the Company signed a definitive agreement with a regional bank providing the Company with a $10 million warehouse facility. This facility provides the company with a funding source to originate residential conforming loans that are eligible for sale to HUD and other government-sponsored enterprises. As of June 30, 2010, there were no borrowings against this facility. The interest rate on the facility is one month LIBOR plus 4.00%, with a floor no less than 5.00%. The agreement expires June 2011.

         

Results of Operations

Condensed Statement of Operations Data

 
(dollars, except per-share amounts, in thousands) For the Three Months Ended June 30,
            Increase       %
2010 2009 (Decrease) Change
Interest income $ 248,213 $ 454,258 $ (206,045 ) (45 ) %
Interest expense   246,658   451,305     (204,647 ) (45 )
Net interest income 1,555 2,953 (1,398 ) (47 )
Total non-interest income 16,370 21,566 (5,196 ) (24 )
Total non-interest expense 15,398 16,469 (1,071 ) (7 )
Income tax expense   45   20     25   125
Earnings from continuing operations 2,482 8,030 (5,548 ) (69 )
Earnings (loss) from discontinued operations, net   804   (4,195 )   4,999   119
Earnings 3,286 3,835 (549 ) (14 )
Cash dividends on preferred stock   -   (7,443 )   7,443   100

Earnings available to common stockholders before redemption of preferred stock

$ 3,286 $

(3,608

)

$ (549 ) (14 ) %
 

Earnings (loss) per share available to common stockholders before redemption of preferred stock - basic

$ 0.43 $ (0.47 ) $ 0.90   190 %

Earnings (loss) per share available to common stockholders before redemption of preferred stock - diluted

$ 0.39 $ (0.47 ) $ 0.86   182 %
 

Selected Financial Results for the Three Months Ended June 30, 2010:

Continuing Operations

  • Earnings from continuing operations of $2.5 million for the second quarter of 2010, compared to $8.0 million for the comparable 2009 period.
  • Net interest income of $1.6 million for the second quarter of 2010, primarily from our long-term mortgage portfolio, compared to $3.0 million for the comparable 2009 period.
  • Change in fair value of net trust assets of $721 thousand for the second quarter of 2010, compared to $8.2 million for the comparable 2009 period.
  • Mortgage and real estate services fees of $15.7 million for the second quarter of 2010, compared to $13.2 million for the comparable 2009 period.
  • Personnel expense of $10.8 million for the second quarter of 2010, compared to $10.4 million for the comparable 2009 period.

Discontinued Operations

  • Earnings from discontinued operations of $804 thousand for the second quarter of 2010, compared to a loss of $4.2 million for the comparable 2009 period.
  • Repurchase reserve was $7.6 million at June 30, 2010, compared to $11.0 million at December 31, 2009.

Stockholders’ Equity

To understand the financial position of the Company better, we believe it is important to understand the composition of the Company’s stockholders’ equity (deficit) and to which component of the business it relates. At June 30, 2010, the equity (deficit) within our continuing and discontinued operations was comprised of the following significant assets and liabilities:

                               

Condensed Components of Stockholders' Equity (Deficit)

(dollars in thousands)

As of June 30, 2010

Continuing Discontinued
Operations Operations Total
Cash $ 14,912 $ 176 $ 15,088
Residual interests in securitizations 27,253 - 27,253
Note payable (12,518 ) - (12,518 )
Long-term debt ($71,120 par) (11,357 ) - (11,357 )
Repurchase reserve - (7,570 ) (7,570 )
Lease liability (1) - (2,776 ) (2,776 )
Deferred charge 13,144 - 13,144
Net other assets (liabilities)   6,833     (2,852 )   3,981  
Stockholders' equity (deficit) $ 38,267   $ (13,022 ) $ 25,245  
 
(1) Guaranteed by IMH.
 

At June 30, 2010, cash within our continuing operations decreased to $14.9 million from $25.7 million at December 31, 2009. The primary sources of cash for the six months ended June 30, 2010, were $27.0 million in fees generated from the mortgage and real estate fee-based businesses and $7.9 million from residual interests in securitizations. Offsetting the sources of cash were operating expenses totaling $30.0 million and $19.0 million in payments on the note payable.

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