Impac Mortgage Holdings, Inc. (NYSEMKT: IMH) announces financial results for the quarter ended March 31, 2014. For the first quarter of 2014, the Company reported a net loss of $(3.0) million or $(0.33) per diluted common share, as compared to a net loss of $(738) thousand or $(0.08) per diluted common share in the first quarter of 2013 and a net loss of $(3.7) million or $(0.42) per diluted common share in the fourth quarter of 2013.
|Results of Operations|
|(in thousands)||For the Three Months Ended|
|March 31, 2014||December 31, 2013||March 31, 2013|
|Gain on sale of loans, net||$||4,375||$||7,601||$||16,692|
|Real estate services fees, net||3,679||4,855||4,428|
|Servicing income, net||1,569||1,311||1,010|
|General, administrative and other||5,372||5,893||6,721|
|Other income (expense):|
|Net interest (expense) income||(313||)||(121||)||444|
|Change in fair value of long-term debt||(650||)||(235||)||(49||)|
|Change in fair value of net trust assets||3,038||(1,301||)||(1,500||)|
|Loss from discontinued operations, net of tax||(112||)||(986||)||(841||)|
|Total other income (expense)||1,963||(2,643||)||(1,946||)|
|Net loss before income taxes||(2,624||)||(3,682||)||(1,826||)|
|Income tax expense (benefit)||342||34||(1,088||)|
|Diluted loss per share||$||(0.33||)||$||(0.42||)||$||(0.08||)|
|Selected Operational Data|
|Q1 2014||Q4 2013||
|Mortgage Servicing Portfolio||$||2,239.6||$||3,128.6||-28||%||$||1,702.5||32||%|
|(Quarter end balance)|
Key Components of Net Earnings
- Mortgage lending volumes declined in the first quarter of 2014 to $353.1 million from $673.8 million in the first quarter of 2013 and as compared to $516.5 million in the fourth quarter of 2013. This was primarily the result of the sale of the ‘brick and mortar’ retail branches at the end of the fourth quarter of 2013.
- Mortgage lending revenues and margins declined in the first quarter of 2014 to $4.4 million, or 131 bps, from $16.7 million, or 267 bps, in the first quarter of 2013 as compared to $7.6 million, or 155 bps, in the fourth quarter of 2013, primarily due to a higher concentration of correspondent originations.
- Mortgage servicing fees increased in the first quarter of 2014 to $1.6 million from $1.0 million in the first quarter of 2013 and as compared to $1.3 million in the fourth quarter of 2013.
- In the first quarter of 2014, we completed the previously discussed sale of AmeriHome Mortgage Corp. (AmeriHome) for a cash price of $10.2 million, resulting in a return on our investment in the entity near 20%.
- We sold mortgage servicing rights in the first quarter at a small premium to book value generating $5.8 million in cash proceeds in the first quarter, with additional proceeds to be received at the time of transfer during the second quarter. The mortgage servicing portfolio declined in the first quarter of 2014 to $2.2 billion at March 31, 2014 from $3.1 billion at December 31, 2013. This decline was due to servicing sale of $522.2 million as well as the sale of AmeriHome and its servicing portfolio of $702.1 million, partially offset by the servicing retained loan sales in the quarter of $374.4 million.
- Real estate services revenue declined to $3.7 million in the first quarter of 2014 as compared to $4.4 million in the first quarter of 2013 and $4.9 million in the fourth quarter of 2013, but reduced expenses in this segment resulted in consistent net results.
- In our long-term mortgage portfolio, based on recent improved performance of the portfolio which was better than expected, we updated certain assumptions in the portfolio at March 31, 2014 resulting in $3.0 million increase in the estimated fair value in the first quarter of 2014.
- Expenses decreased in the first quarter of 2014 to $14.6 million from $23.7 million in the first quarter of 2013 as compared to $18.4 million in the fourth quarter of 2013.
While originations have decreased to $353.1 million, or 48%, from $673.8 million in the first quarter 2013, this decline was expected as $180 million of the decline can be attributed to the sale of our ‘brick and mortar’ retail branches. At the end of 2013, the retail branches, which operated at a loss, were sold. Excluding the production from our retail branches, the decline in our origination volumes appears to be better than the rest of the mortgage market which saw declines of 57% and 23% in the first quarter of 2014 as compared to first quarter of 2013 and fourth quarter of 2013, respectively. Further, purchase money transactions as a percentage of overall originations have increased in the first quarter of 2014 to 42% as compared to 28% in the first quarter of 2013, while there was a slight decline as compared to fourth quarter of 2013. We believe the increase in purchase money transactions in the last two quarters was primarily a result of our recent focus to provide a better customer service experience in our sales and operations.