EXHIBIT 99.3
[LETTERHEAD OF IMPAC MORTGAGE HOLDINGS, INC.]
IMPAC MORTGAGE HOLDINGS, INC.
(AMEX:IMH)
NEWS RELEASE
__________For Immediate Release__________
Impac Mortgage Holdings, Inc. Announces a Loss of $20.6 million for the Third
Quarter of 1998 as compared to Earnings of $7.2 million for the Third Quarter of
1997
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Friday, November 6, 1998
Santa Ana Heights, CA. - Impac Mortgage Holdings, Inc. (the "Company" or "IMH":
AMEX-IMH), a real estate investment trust ("REIT"), announces a net loss of
$(20.6) million, or $(0.85) per basic and diluted common share, for the third
quarter of 1998 as compared to net earnings of $7.2 million, or $0.45 per
diluted common share, for the third quarter of 1997. The actual net loss for the
third quarter of 1998 was within the expected range as previously announced in
the Company's press release dated October 8, 1998. The actual net loss for the
third quarter of 1998 was primarily due to non-cash charges that required the
Company and its subsidiaries to make certain write-downs of its mortgage loans,
equity investments and investment securities available-for-sale portfolios.
Excluding these non-cash charges, net earnings were $12.1 million, or $0.49 per
diluted common share, for the third quarter of 1998. Net earnings for the nine
months ended September 30, 1998 was $2.2 million, or $0.09 per basic and diluted
common share, as compared to net earnings of $18.7 million, or $1.25 per
diluted common share, for the same period of 1997. Exclusive of the non-cash
charges recorded in the third quarter of 1998, the Company's net earnings for
the nine months ended September 30, 1998 were $34.9 million, or $1.46 per
diluted common share.
Excluding the non-cash charges, returns on average equity and average assets for
the third quarter of 1998 were 17.45% and 2.09%, respectively, as compared to
19.15% and 1.94%, respectively, for the third quarter of 1997. Excluding the
non-cash charges, returns on average equity and average assets for the first
nine months of 1998 were 15.33% and 1.65%, respectively, as compared to 18.12%
and 2.29%, respectively, for the same period of 1997. After non-cash charges,
the Company's book value per share decreased 10% to $9.43 at September 30, 1998
(25,549,840 common shares outstanding) as compared to book value per share of
$10.43 at June 30, 1998 (24,059,151 common shares outstanding). Total assets
increased 17% to $2.1 billion at September 30, 1998 as compared to $1.8 billion
at December 31, 1997.
The Company's estimated tax basis earnings for the nine months ended September
30, 1998 was approximately $21.2 million, or $0.89 basic and diluted earnings
per common share. Tax basis earnings is calculated by adjusting the Company's
book basis earnings by various differences between book basis earnings and tax
basis earnings. Differences between book basis earnings and tax basis earnings
are estimates that are derived from management's best knowledge as of September
30, 1998. Actual tax basis earnings may differ materially from current
estimates. As of September 30, 1998, the Company declared or paid dividends for
the 1998 tax year totaling $37.9 million. Therefore, total dividends declared or
paid for the 1998 tax year exceed estimated tax basis earnings by $16.7 million,
or $0.70 per basic and diluted common share.
Subsequent to quarter-end, the Company made significant changes in its business
strategy and operations and completed various transactions that provided
positive results in the Company's liquidity position.
Business Strategy.
The Company made changes in its business strategy to more effectively compete in
the current market environment, including:
. Raising interest rates on its loan programs.
. Decreasing the amount of premium paid on its loan acquisitions.
. Reducing staffing levels by approximately 25% to restore profitability of
operations.
Liquidity.
In October 1998, the Company sold $250.4 million of mortgage loans and $8.9
million of mortgage-backed securities in order to generate liquidity and help to
protect the Company against margin calls on warehouse lines and reverse
repurchase facilities. The financial result of the sale of mortgage loans and
mortgage-backed securities was in line with the marked-to-market charge taken in
the third quarter of 1998. These sales generated net cash proceeds of $13.6
million after paying down the related warehouse line and reverse repurchase
balances.
The Company's earnings decreased during the third quarter of 1998 as compared to
the third quarter of 1997 primarily as a result of the aforementioned non-cash
charges which resulted in reductions in equity in net earnings (loss) of Impac
Funding Corporation ("IFC") and equity in net earnings (loss) of Impac
Commercial Holdings, Inc. ("ICH") and impairment charges on its equity
investment in ICH and investment securities available-for-sale. Equity in net
earnings (loss) of IFC decreased to a loss of $(7.9) million for the third
quarter of 1998 as compared to earnings of $2.4 million during the third quarter
of 1997 primarily due to a non-cash charge on loans held-for-sale of $21.0
million. The non-cash charge reflects market bid prices that IFC received in
anticipation of selling mortgage loans in the fourth quarter of 1998 on a whole
loan basis as a result of recent turmoil in the mortgage-backed securitization
market. The sale of mortgage loans will improve the Company's liquidity position
and help provide liquidity to meet any future margin calls on existing warehouse
lines of credit.
Equity in net earnings (loss) of ICH decreased to a loss of $(1.8) million for
the third quarter of 1998 as compared to earnings of $403,000 for the third
quarter of 1997 primarily due to an impairment charge of $1.1 million on its
residual interest in securitization and a decrease in net earnings (loss) of
Impac Commercial Capital Corp. ("ICCC"), the conduit operations of ICH, due to a
non-cash charge of $15.0 million related to a marked-to-market adjustment on
loans held-for-sale. Exclusive of these non-cash charges, the Company's equity
in net earnings (loss) of ICH for the third quarter of 1998 was earnings of
$292,000. The Company recorded equity in net earnings (loss) in ICH through the
Company's ownership of 9.8% of ICH's voting common stock and 100% of class A
non-voting common stock. Subsequently, in October 1998, ICH repurchased
1,394,000 shares of common stock and class A common stock which represented 100%
of ICH common stock that IMH owned.
In addition, earnings were adversely affected by an impairment charge of $9.1
million on the Company's equity investment in ICH, which reflected the price at
which the ICH common stock was sold on October 19, 1998, and an impairment
charge of $11.6 million on the Company's investment securities
available-for-sale.
During the third quarter of 1998, earnings were positively affected by an
increase in the Company's core earnings. Core earnings is defined as net
interest income earned on Mortgage Assets. Mortgage Assets are comprised of
mortgage loans held-for-investment, Collateralized Mortgage Obligation ("CMO")
collateral, finance receivables and investment securities available-for-sale.
Core earnings increased as a result of continued growth by the Company's
Long-Term Investment and Warehouse Lending Operations. During the third quarter
of 1998, average Mortgage Assets increased 57% to $2.2 billion, earning a
weighted average yield of 8.05%, as compared to $1.4 billion, earning a weighted
average yield of 8.39%, during the third quarter of 1997. As a result of the
increase in average Mortgage Assets, net interest income increased 50% to $11.7
million, earning a net interest spread of 1.79%, during the third quarter of
1998 as compared to $7.8 million, earning a net interest spread of 1.93%, during
the third quarter of 1997. Consistent with the Company's business strategy of
realizing earnings from the Long-Term Investment Operations, the Company
acquired $47.7 million in mortgages from IFC during the third quarter of 1998 as
compared to $94.0 million during the third quarter of 1997. For the nine months
ended September 30, 1998, the Long-Term Investment Operations issued $775.1
million of CMOs and acquired $841.6 million in mortgages from IFC as compared to
$348.1 million and $533.4 million, respectively, during the same period in 1997.
The elimination of advisor fees as a result of the termination of the Company's
management agreement with Imperial Credit Advisors, Inc. ("ICAI") in December
1997 continued to have positive effects. As a
result of the buyout of the management agreement with ICAI, there were no
advisor fees paid by IMH during the third quarter of 1998 as compared to $1.5
million in advisor fees paid by IMH during the third quarter of 1997.
The Company's total allowance for loan losses expressed as a percentage of Gross
Loan Receivables which includes loans held-for-investment, CMO collateral and
finance receivables, was 0.29% at September 30, 1998 as compared to 0.32% at
December 31, 1997. The allowance for loan losses as a percentage of Gross Loan
Receivables decreased by accelerated loan charge-offs from the sale of
delinquent loans, resulting in losses of $1.1 million during 1998, which was
charged against the allowance. The Company sold delinquent loans in order to
reduce the Company's overall exposure to delinquent loans and future loan
losses. Excluding the loss on sale of delinquent loans, the allowance for loan
losses as a percentage of Gross Loan Receivables would have been 0.35% at
September 30, 1998. The Company recorded loan loss provisions (recoveries) of
$(292,000) during the third quarter of 1998 as compared to $1.9 million during
the third quarter of 1997. The amount provided for loan losses during the third
quarter of 1998 decreased primarily due to the reduction in exposure to future
losses through the sale of delinquent loans and the transfer of certain loans
from the held-for-investment to the held-for-sale portfolio, which resulted in a
marked-to-market adjustment of $1.2 million. The allowance for loan losses is
determined primarily on the basis of management's judgment of net loss potential
including specific allowances for known impaired loans, changes in the nature
and volume of the portfolio, value of the collateral and current economic
conditions that may affect the borrowers' ability to pay. The Company recorded
losses on the disposition of real estate owned of $610,000 during the third
quarter of 1998 as compared to gains on disposition of real estate owned of
$144,000 during the third quarter of 1997.
As previously stated, equity in net earnings (loss) of IFC decreased to a loss
of $(7.9) million during the third quarter of 1998 as compared to earnings of
$2.4 million during the third quarter of 1997. IFC's earnings during the third
quarter of 1998 decreased primarily due to a non-cash marked-to-market
adjustment of $21.0 million, which represents losses on mortgage loans
held-for-sale. Additionally, IFC's earnings were negatively affected by
increases in personnel expense, amortization of mortgage servicing rights
("MSRs"), and general and administrative expense which was partially offset by
increases in loan servicing income. The overall increase in operating expenses
during the third quarter of 1998 as compared to the third quarter of 1997 was
primarily the result of an increase in staffing and overhead as the Company's
loan origination operations and loan servicing portfolio grew.
Personnel expense increased 73% to $2.6 million during the third quarter of 1998
as compared to $1.5 million during the third quarter of 1997. The increase in
personnel expense was primarily due to an increase in staff and incentive
compensation. IFC increased staff 22% to 174 at September 30, 1998 as compared
to 143 at September 30, 1997. However, subsequent to quarter-end the Company
reduced staffing at IFC approximately 25% to 140 employees.
Amortization of MSRs increased to $1.8 million during the third quarter of 1998
as compared to $947,000 during the third quarter of 1997 due to continued growth
of IFC's servicing portfolio. Since September 30, 1997, the Company has
securitized $1.6 billion in principal balance of mortgage loans and,
accordingly, has capitalized MSRs related to those securitizations which are
amortized over the estimated life of the loans.
Loan servicing income increased as IFC generally retains servicing rights on
mortgages acquired resulting in an increase of 42% in IFC's servicing portfolio
to $3.4 billion at September 30, 1998 as compared to $2.4 billion at September
30, 1997. The loan delinquency rate of mortgages in IFC's servicing portfolio
which were 60 or more days past due, inclusive of foreclosures and delinquent
bankruptcies, was 5.21% at September 30, 1998 as compared to 4.29%, 3.20%, 3.05%
and 4.03% for the last four quarter-end periods. During the third quarter of
1998, 352 loans were removed from 90 days or more delinquent status of which 153
loans, or 43% were reinstated, repurchased or paid-in-full ("cure rate").
IFC continues to support the Long-Term Investment Operations of the Company by
supplying IMH with mortgages for its long-term investment portfolio. In acting
as the mortgage conduit for the Company, IFC acquired $604.7 million of
mortgages during the third quarter of 1998 as compared to
$918.2 million of mortgages acquired during the third quarter of 1997. IFC's
mortgage loan acquisition decreased during the third quarter of 1998 as IFC
acquired no high loan-to-value mortgage loans as compared to $351.8 million of
high loan-to-value loans acquired during the third quarter of 1997. Excluding
the acquisition of high loan-to-value mortgages in the third quarter of 1997,
IFC's loan acquisitions increased 7% to $604.7 million of mortgages acquired in
the third quarter of 1998 as compared to $566.4 million of mortgages acquired in
the third quarter of 1997. In addition, IFC securitized $297.6 million of
mortgages and sold whole loans to third party investors totaling $161.6 million,
resulting in gain on sale of loans of $10.1 million, during the third quarter of
1998. This compares to securitizations and whole loan sales of $481.6 million,
resulting in gain on sale of loans of $5.3 million, during the third quarter of
1997. IFC had deferred revenue of $13.3 million at September 30, 1998 as
compared to $7.0 million at December 31, 1997. The increase in deferred revenue
relates to the sale of $817.9 million of principal balance of mortgages to IMH
during 1998. Gains realized from the sale of loans by IFC to IMH are deferred
and amortized or accreted over the estimated life of the loans.
The Company is a mortgage loan investment company that invests primarily in
non-conforming, high-yielding mortgages which, together with its subsidiaries
and related companies, operates three businesses. The Company's first business
is to act as a long-term investor of primarily non-conforming residential
mortgage loans and mortgage-backed securities secured by or representing
interests in such loans. The second business is IFC, which purchases primarily
non-conforming mortgage loans and to a lessor extent, second mortgages, from a
network of third party correspondent loan originators and subsequently
securitizes or sells such loans to permanent investors. As the Company's third
business, Impac Warehouse Lending Group, a wholly-owned subsidiary of the
Company, focuses on providing warehouse and reverse-repurchase financing to
approved mortgage banks, most of which are correspondents of IFC.
This press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, which can be identified by the
use of forward-looking terminology such as "may", "will", "intend", "should",
"expect", "anticipate", "estimate" or "continue" or the negatives thereof or
other comparable terminology. The Company's actual results could differ
materially from those anticipated in such forward-looking statements as a result
of certain factors. The financial information presented in this release
pertaining to actual results should not be taken to predict future earnings, as
the Company may not experience similar earnings in future periods.
For more information call:
Investor Relations:
Thom Singha
Tania Jernigan
(714) 438-2100
IMPAC MORTGAGE HOLDINGS, INC.
(in thousands, except per share amounts)
(unaudited)
Balance Sheets: September 30, December 31,
- -------------- 1998 1997
------------- ------------
Cash and cash equivalents $ 2,204 $ 16,214
Investment securities available-for-sale 111,082 67,011
Loan receivables:
CMO collateral 1,291,722 794,893
Finance receivables 562,429 533,101
Mortgage loans held-for-investment 24,907 257,717
Mortgage loans held-for-sale 61,181 --
Allowance for loan losses (5,390) (5,129)
Other assets 67,613 89,005
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Total Assets $2,115,748 $1,752,812
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CMO borrowings $1,198,074 $ 741,907
Reverse repurchase agreements and other borrowings 628,953 755,559
Other liabilities 57,306 26,316
Stockholders' Equity 231,415 229,030
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Total Liabilities and Stockholders' Equity $2,115,748 $1,752,812
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Statements of Operations: For the Three Months Ended, For the Nine Months Ended,
- ------------------------ September 30, September 30,
--------------------------- ---------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
Interest income $ 45,916 $29,557 $127,591 $76,709
Equity in net earnings (loss) of
Impac Funding Corporation (7,860) 2,429 (3,912) 6,132
Equity in net earnings (loss) of
Impac Commercial Holdings, Inc. (1,840) 403 (998) (778)
Loss on sale of loans held-for-sale (1,200) -- (1,200) --
Gain on sale of securities available-for-sale -- -- -- 648
Other income 1,366 378 3,225 788
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Total Revenues 36,382 32,767 124,706 83,499
------------ ------------ ------------ ------------
Interest expense on CMO's and reverse
repurchase agreements and other borrowings 34,240 21,790 94,632 54,816
Write-down on securities available-for-sale 11,584 -- 12,825 --
Loss on equity investment 9,076 -- 9,076 --
General and administrative expense 1,641 439 3,415 1,288
(Gain) loss on sale of real estate owned 610 (144) 120 (121)
Personnel expense 139 135 373 227
Advisory fee -- 1,485 -- 4,313
Provision for loan losses (292) 1,868 2,099 4,243
------------ ------------ ------------ ------------
Total Expenses 56,998 25,573 122,540 64,766
------------ ------------ ------------ ------------
Net earnings (loss) $(20,616) $ 7,194 $ 2,166 $18,733
============ ============ ============ ============
Earnings (loss) per basic share $ (0.85) $ 0.46 $ 0.09 $ 1.27
Earnings (loss) per diluted common and
common equivalent share $ (0.85) $ 0.45 $ 0.09 $ 1.25
Dividends declared per common share $ 0.49 $ 0.43 $ 1.46 $ 1.22
Weighted average shares outstanding - diluted 24,351 15,621 23,871 14,739
IMPAC FUNDING CORPORATION
(in thousands)
(unaudited)
Balance Sheets: September 30, December 31,
- -------------- 1998 1997
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Cash $ 1,382 $ 359
Investment securities available-for-sale 7,098 6,083
Investment securities available-for-trading 5,297 --
Mortgage loans held-for-sale 464,921 620,549
Mortgage servicing rights 19,461 15,568
Accrued interest receivable 3,235 4,755
Servicing advances 3,081 1,460
Premises and equipment, net 2,013 1,788
Other assets 38,385 6,382
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Total Assets $544,873 $656,944
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Warehouse facilities $478,523 $607,210
Deferred revenue 13,251 7,048
other liabilities 29,651 15,290
Shareholders' Equity 23,448 27,396
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Total Liabilities and Stockholders' Equity $544,873 $656,944
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Statements of Operations: For the Three Months Ended, For the Nine Months Ended,
- ------------------------ September 30, September 30,
--------------------------- ---------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
Interest income $ 15,673 $14,839 $ 40,330 $32,004
Mark to market loss on mortgage loans (21,041) -- (21,041) --
Gain on sale of mortgage loans held-for-sale 10,061 5,280 18,932 14,378
Loan servicing income 1,815 1,081 4,521 3,018
Other income 63 211 374 505
------------ ------------ ------------ ------------
Total Revenues 6,571 21,411 43,116 49,905
------------ ------------ ------------ ------------
Interest expense on borrowings 14,287 12,502 33,594 28,536
Personnel expense 2,582 1,496 7,363 5,277
Amortization of mortgage servicing rights 1,758 947 4,683 1,896
General and administrative expense 1,658 1,090 3,943 1,930
Provision for repurchases 26 1,131 366 1,548
------------ ------------ ------------ ------------
Total Expenses 20,311 17,166 49,949 39,187
------------ ------------ ------------ ------------
Earnings (loss) before income taxes (13,740) 4,245 (6,833) 10,718
Income taxes (benefit) (5,800) 1,792 (2,885) 4,525
------------ ------------ ------------ ------------
Net earnings (loss) $ (7,940) $ 2,453 $ (3,946) $ 6,193
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