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

Impac Mortgage Holdings, Inc. (NYSE Amex: IMH), a Maryland corporation, or the “Company,” reports third quarter 2010 net earnings of $974 thousand, or $0.12 per diluted common share, as compared to a net earnings of $3.0 million, or $0.38 per diluted common share for the third quarter of 2009.

Mortgage and Real Estate Services

For the three and six months ended September 30, 2010, mortgage and real estate services fees were $15.5 million and $42.5 million, respectively. The mortgage and real estate services fees of $15.5 million for the three months ended September 30, 2010, was primarily comprised of $7.3 million in monitoring, surveillance and recovery fees, $4.5 million in title and escrow fees, $1.9 million in servicing income, and $1.8 million in loan modification fees. The mortgage and real estate services fees of $42.5 million for the nine months ended September 30, 2010, was primarily comprised of $20.1 million in monitoring, surveillance and recovery fees, $10.5 million in title and escrow fees, $7.7 million in loan modification fees, and $4.2 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. Despite our efforts to expand these services, we have encountered challenges in selling these services to third-parties. Furthermore, since these businesses are recently established there remains uncertainty about their future success.

In October 2010, the Company completed the acquisition of 51% of AmeriHome Mortgage Corporation (AmeriHome) for $1.8 million, whereby the Company made a $950 thousand capital contribution to AmeriHome, paid $150 thousand to the founder of AmeriHome, and entered into a note payable requiring $20 thousand monthly payments for three years. As part of the transaction, the Company has an option to purchase an additional 39% ownership interest beginning January 1, 2011 for 1.5 times of 39% of the book value of AmeriHome plus $550,000 in cash. In addition, the founder has an option to sell his 49%, ownership beginning January 1, 2014, to the Company for 49% of book value. The book value of AmeriHome was approximately $2.8 million at the time of the Company’s purchase of 51% ownership interest.

Results of Operations

Condensed Statement of Operations Data

           
 
(dollars, except per-share amounts, in thousands) For the Three Months Ended September 30,
Increase %
2010 2009 (Decrease) Change
Interest income $ 230,927 $ 341,323 $ (110,396 ) (32 ) %
Interest expense   229,256   339,417   (110,161 ) (32 )
Net interest income 1,671 1,906 (235 ) (12 )
Total non-interest income 16,154 16,913 (759 ) (4 )
Total non-interest expense 15,552 14,016 1,536 11
Income tax expense   14   -   14 n/a
Earnings from continuing operations 2,259 4,803 (2,544 ) (53 )
Loss from discontinued operations, net   (1,285 )   (1,776 )   491 28

Earnings available to common stockholders before

redemption of preferred stock

$ 974 $ 3,027 $ (2,053 ) (68 ) %
 

Earnings per share available to common stockholders

before redemption of preferred stock - basic

$ 0.13 $ 0.40 $ (0.27 ) (68 ) %

Earnings per share available to common stockholders

before redemption of preferred stock - diluted

$ 0.12 $ 0.38 $ (0.26 ) (69 ) %
 
 

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

Continuing Operations

  • Earnings from continuing operations of $2.3 million for the third quarter of 2010, compared to $4.8 million for the comparable 2009 period.
  • Net interest income of $1.7 million for the third quarter of 2010, primarily from our long-term mortgage portfolio, compared to $1.9 million for the comparable 2009 period.
  • Non-interest (loss) income - net trust assets of $(574) thousand for the third quarter of 2010, compared to $3.2 million for the comparable 2009 period.
  • Mortgage and real estate services fees of $15.5 million for the third quarter of 2010, compared to $13.5 million for the comparable 2009 period.
  • Personnel expense of $10.7 million for the third quarter of 2010, compared to $9.4 million for the comparable 2009 period.

Discontinued Operations

  • Loss from discontinued operations of $1.3 million for the third quarter of 2010, compared to a loss of $1.8 million for the comparable 2009 period.
  • Repurchase reserve was $8.7 million at September 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 September 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 September 30, 2010

Continuing Discontinued
Operations Operations Total
Cash $ 10,601 $ 72 $ 10,673
Residual interests in securitizations 27,884 - 27,884
Note payable (8,125 ) - (8,125 )
Long-term debt ($71,120 par) (10,822 ) - (10,822 )
Repurchase reserve (25 ) (8,707 ) (8,732 )
Lease liability (1) - (2,353 ) (2,353 )
Deferred charge 13,144 - 13,144
Net other assets (liabilities)   7,029   (2,465 )   4,564
Stockholders' equity (deficit) $ 39,686 $ (13,453 ) $ 26,233
 
(1) Guaranteed by IMH.
 

At September 30, 2010, cash within our continuing operations decreased to $10.6 million from $25.7 million at December 31, 2009. The primary sources of cash between periods were $42.5 million in fees generated from the mortgage and real estate fee-based businesses and $9.9 million from residual interests in securitizations. Offsetting the sources of cash were operating expenses totaling $45.4 million and $23.5 million in payments on the note payable.

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