News Release
NEWPORT BEACH, Calif., Feb 15, 2005 /PRNewswire-FirstCall via COMTEX/ -- Impac Mortgage Holdings, Inc. ("IMH") (NYSE: IMH), a real estate investment trust ("REIT"), today reported net earnings of $257.6 million, or $3.72 per diluted common share, for 2004 as compared to net earnings of $149.0 million, or $2.88 per diluted common share, for 2003. Net earnings may fluctuate significantly when comparing year-over-year financial results as we record the change in the fair value of derivative instruments as an increase or decrease to net earnings. The change in the fair value of derivative instruments is a component of mark-to-market gain (loss)-derivative instruments on our statements of operations and, along with other book to tax adjustments, is reflected in the reconciliation of estimated taxable income available to common stockholders to net earnings that is provided in tabular form in this press release for both IMH and Impac Funding Corporation ("IFC"), our qualified taxable REIT subsidiary. The change in fair value of derivatives was an increase to net earnings of $103.7 million for 2004 as compared to an increase to net earnings of $38.8 million for 2003.
Estimated taxable income available to common stockholders was $202.9 million, or $2.97 per diluted common share for 2004, as compared to actual taxable income of $127.5 million, or $2.46 per diluted common share, for 2003, which represents a per share year-over-year increase of 21%. We paid common stock dividends of $202.7 million, or $2.90 per diluted common share, which was a distribution of substantially all of our estimated taxable income for 2004. As a REIT, we pay dividends to our stockholders based on taxable income which is derived by recognizing the differences between book income, or net earnings as determined by generally accepted accounting principles ("GAAP"), and taxable income as reported upon the filing of our annual federal tax returns. Because a portion of the total common stock dividends paid to our stockholders during 2004 was the result of dividends paid from IFC to IMH, which are qualifying dividends under the Jobs and Growth Tax Relief Reconciliation Act of 2003, 18.3%, or $0.53 per common share of total common stock dividends paid in 2004, will be taxed at the qualifying tax rate (15%) and 81.7%, or $2.37 per common share of total common stock dividends paid in 2004, will be taxed as ordinary income.
Financial Highlights for 2004
* Estimated taxable income per diluted common share increased 21% to
$2.97 compared to actual taxable income per diluted common share of
$2.46 for 2003
* Cash dividends declared increased 41% to $2.90 per common share
compared to $2.05 per common share for 2003
* Total assets increased 125% to $23.8 billion at year-end from
$10.6 billion as of prior year-end
* Book value per common share increased 41% to $11.80 at year-end
compared to $8.39 as of prior year-end primarily as we issued
$383.2 million in new common equity at an average price per share of
$20.78; in addition, we raised gross proceeds of $157.5 million of
preferred equity
* Total market capitalization was $1.7 billion at December 31, 2004
compared to $1.0 billion at prior year-end
* Dividend yield as of December 31, 2004 was 13.23%, based on an
annualized fourth quarter dividend of $0.75 per common share and a
closing stock price of $22.67
* Total return to common stockholders was 40.42% based on common stock
price appreciation of $4.46 per common share and common stock
dividends declared of $2.90 per common share
* IFC, the mortgage operations, acquired and originated $22.2 billion of
primarily non-conforming Alt-A mortgages ("Alt-A mortgages") for 2004
which was a 134% increase over $9.5 billion for 2003
* The long-term investment operations retained $16.9 billion of Alt-A
mortgages and originated $458.5 million of small-balance, multi-family
mortgages ("multi-family mortgages") for 2004 compared to $5.8 billion
and $290.5 million, respectively, for 2003
* The long-term investment operations securitized $17.7 billion of
mortgages as collateralized mortgage obligations ("CMOs") to finance
the acquisition and origination and retention of Alt-A and
multi-family mortgages for long-term investment, which placed us 18th
worldwide in the amount of mortgage-backed securitizations issued.
Another Record Year for Loan Acquisitions and Originations and Portfolio Growth
Joseph R. Tomkinson, Chairman and Chief Executive Officer of Impac Mortgage Holdings, Inc., commented, "We experienced phenomenal growth during 2004 as our balance sheet grew 125% to $23.8 billion, total market capitalization grew by 70% to $1.7 billion and book value per common share rose 41% to $11.80 as of year-end. This growth was primarily fueled by record levels of mortgage production as Alt-A mortgage acquisitions and originations grew 134% to $22.2 billion of which $16.9 billion was retained on our balance sheet for long-term investment in addition to $458.5 million of multi-family mortgages originated and retained. Mortgage acquisitions and originations grew substantially even as nationwide originations of 1-4 family mortgages declined by 26% according to numbers published by the Mortgage Bankers Association. We were able to accomplish record levels of mortgage acquisitions and originations as we focus on purchase money transactions as opposed to refinancing transactions. We continue to work with our correspondent customers to help them expand their Alt-A origination platforms in addition to adding new correspondent clients."
Total acquisitions and originations increased across all loan production channels during 2004. Correspondent flow acquisitions rose 104% to $11.0 billion, correspondent bulk acquisitions rose 286% to $8.5 billion, wholesale and retail originations rose 33% to $2.0 billion and sub-prime originations rose 38% to $684.8 million for 2004. Correspondent bulk acquisitions are mortgages that we acquired from our approved correspondents that are not underwritten specifically to our guidelines but under similar Alt-A loan programs.
Due to record loan acquisitions and originations and our ability to raise additional capital and increase borrowing limits on available financing arrangements, the long-term investment operations retained $16.9 billion of mortgages from the mortgage operations and originated an additional $458.5 million of multi-family mortgages. As a result, average mortgage assets rose by 110% to $16.6 billion for 2004 as compared to $7.9 billion for 2003.
Trends in Net Interest Margins on Mortgage Assets
Adjusted net interest margins on mortgage assets, which excludes amortization of loan discounts and includes net cash payments on derivative instruments and is further defined and presented in tabular form as yield analysis on mortgage assets, declined by 19 basis points to 1.16% during 2004 as compared to 1.35% during 2003. Adjusted net interest margins on mortgage assets declined during 2004 primarily due to (1) an increase in short-term interest rates, (2) an increase in the amortization of loan premiums, securitization costs and bond discounts as a result of higher than expected mortgage prepayments and, to a lesser extent, (3) higher leverage and lower net interest margins on certain CMOs completed during the second half of 2004.
During 2004, the Federal Reserve Bank raised short-term interest rates, which affect movements in one-month LIBOR, a total of 125 basis points. This caused borrowing costs on adjustable rate CMOs, which are tied to one-month LIBOR and re-price monthly without limitation, to rise at a faster pace than coupons on six-month LIBOR adjustable rate mortgages securing CMOs, which represents approximately 30% of our long-term mortgage portfolio and re-price every six-months with limitation. However, net interest margin compression was partially offset by our interest rate risk management program as interest rate derivative costs declined 6 basis points to 55 basis points of average mortgage assets during 2004 as compared to 61 basis points during 2003. Total net cash outlays on derivative instruments during 2004 were $91.9 million as compared to $47.8 million during 2003. Net cash payments on derivative instruments along with the change in unrealized fair value of derivatives comprise substantially all of the mark-to-market gain (loss)-derivative instruments on our statements of operations.
Along with an increase in short-term interest rates, our expectation, based on past experience, was that a corresponding decline in mortgage prepayment rates would follow. However, mortgage prepayment rates accelerated during the latter part of 2004. There is recent mortgage industry evidence which documents that the substantial increase in home appreciation rates over the last three years was a significant factor affecting Alt-A borrowers refinance decisions during 2004. Borrowers appear willing to use home equity to pay loan prepayment penalties in order obtain lower monthly payments by refinancing into other mortgage products, including interest-only and high loan-to-value mortgage products.
Actual prepayment rates in excess of projected future prepayment rates resulted in a cumulative upward adjustment in both the amortization rate and amortization amount of loan premiums, securitization costs and bond discounts during the fourth quarter of 2004. As such, amortization of loan premiums and securitization expenses increased by 12 basis points to 1.00% of average mortgage assets during 2004 as compared to 0.88% of average mortgage assets during 2003. A substantial portion of our long-term mortgage investment portfolio consists of mortgages with prepayment penalty features that are primarily designed to help minimize the rate of early mortgage prepayments. However, if mortgages do prepay, a prepayment penalty is charged which helps to offset additional amortization of loan premiums and securitization costs. During 2004, prepayment penalties received from borrowers was recorded as interest income and increased the yield on average mortgage assets by 6 basis points. Therefore, prepayment penalty income offset the effect of increased amortization of loan premiums and securitization costs due to higher than expected prepayments by approximately 50%.
Mr. Tomkinson, remarked, "By design, our current interest rate risk management program provides 20% to 25% coverage of the outstanding principal amount of six-month LIBOR ARMs and 75% to 85% coverage of the outstanding principal balance of intermediate, or hybrid, ARMs at the point in time that we securitize the mortgages. Gradual interest rate increases as expected from the Federal Reserve Bank during 2005 may over the short-term continue to adversely affect net interest margins on mortgages securing CMOs until coupons on adjustable rate mortgages become fully adjusted. However, we continue to believe that our interest rate risk management program will help to mitigate the effect of increases in short-term interest rates and will continue to provide more consistent net interest income and net earnings over the course of the year."
Outlook for 2005 -- Fundamentals are Solid with Prospects for the Long-Term Positive
Mr. Tomkinson, said, "We have historically and continue to acquire and originate purchase money transactions as opposed to refinance transactions. This is significant as the overall decline in nationwide 1-4 family originations during 2004 was primarily due to a 50% decline in refinance activity. On the other hand, purchase money transactions rose 23% during 2004. Purchase money transactions continue to remain strong and based on current economic data and Mortgage Bankers Association projections of only a 4% decline in purchase money volumes during 2005, we expect continued strength in the purchase money market during 2005, which should result in a good year of mortgage production.
"In anticipation of a more competitive environment in 2005, during 2004 we focused on providing our correspondents and broker's access to and training on our proprietary web-based underwriting system to allow them to expand their Alt-A mortgage origination platforms, increase their mortgage production levels and in turn deliver a higher level of mortgages to our mortgage operations for acquisition. In addition, in January of 2005, we acquired certain assets and assumed selected liabilities along with the hiring of personnel of a wholesale mortgage banker that specializes in the origination of high quality Alt-A mortgages. This will allow us to expand our mortgage operations into areas of the country where we do not currently have a significant presence. Our strategy for 2005 includes, among other things, additions to sales personnel to increase our correspondent and broker customer base, further penetration into builder business, the continued marketing of new products and services and high customer service levels."
Portfolio Growth, Profitability and Dividends
Mr. Tomkinson, commented, "In 2005, while it appears that the Federal Reserve will continue to raise short term interest rates at a measured pace, we believe that margin compression will begin to stabilize as mortgages held for long-term investment begin to re-price to fully-indexed rates over the course of this year. We believe that prepayments on mortgages held for long-term investment should slow as interest rates continue to rise and home appreciation slows to a more normalized pace. We also expect to follow similar interest rate risk management programs that should protect net interest income and net earnings from dramatic upward spikes in short-term interest rates.
"Furthermore, we expect moderate balance sheet growth as we anticipate annual acquisitions and originations to remain relatively unchanged from 2004 levels in combination with our strategy of selling a greater percentage of acquisitions and originations to third party investors. Moderate balance sheet growth combined with sufficient capital liquidity should reduce our need to raise capital during 2005. Our goal continues to be to provide consistent, reliable dividends to our stockholders."
We currently declare dividends on a quarterly basis and at such time the board of directors will declare the amount, the record date and the payment date. The board of directors has the right to change the dividend schedule at any time and without prior notice. We estimate the following dates of our dividend declaration, record and payment dates for 2005:
Common Stock Dividend
Declaration Date Record Date Pay Date
March 29, 2005 Friday April 8, 2005 Friday April 15, 2005
June 28, 2005 Friday July 8, 2005 Friday July 15, 2005
September 27, 2005 Friday October 7, 2005 Friday October 14, 2005
November 29, 2005 Friday December 9, 2005 Friday December 30, 2005
Preferred Series B and C
Declaration Date Record Date Pay Date
February 2005 Tuesday March 1, 2005 Thursday March 31, 2005
May 2005 Wednesday June 1, 2005 Thursday June 30, 2005
August 2005 Thursday September 1, 2005 Friday September 30, 2005
November 2005 Thursday December 1, 2005 Friday December 30, 2005
Fourth Quarter Results for 2004
For the fourth quarter of 2004, net earnings were $114.4 million, or $1.52 per diluted share, as compared to net earnings of $47.5 million, or $0.86 per diluted share, for the fourth quarter of 2003. Net earnings may fluctuate significantly when comparing quarter-over-quarter financial results as we record the change in the fair value of derivative instruments as an increase or decrease to net earnings. The change in fair value of derivatives for the fourth quarter of 2004 was an increase to net earnings of $76.9 million as compared to an increase in net earnings of $16.9 million for the fourth quarter of 2003.
Estimated taxable income available to common stockholders was $50.2 million, or $0.68 per diluted share, during the fourth quarter of 2004 as compared to estimated taxable income available to common stockholders of $38.2 million, or $0.69 per diluted share, for the fourth quarter of 2003. A reconciliation of estimated taxable income available to common stockholders to net earnings is provided in tabular form in this press release for comparative purposes.
Estimated taxable income available to common stockholders, on a per common share basis, was relatively unchanged for the fourth quarter of 2004 as compared to the fourth quarter of 2003 primarily due to (1) a decline in adjusted net interest margins on mortgage assets, including the effect of an increase in amortization of loan premiums, securitization costs and bond discounts, as earlier described, and (2) an increase in weighted number of average common shares outstanding.
Net interest income increased 60% to $89.7 million during the fourth quarter of 2004 as compared to $55.9 million during the fourth quarter of 2003 as average mortgage assets grew by 144% to $22.0 billion from $9.0 billion, respectively. However, the increase in net interest income generated as a result of the growth of average mortgage assets during the fourth quarter of 2004 was partially offset as adjusted net interest margins on mortgage assets, which is further defined and presented in tabular form as yield analysis on mortgage assets, declined 79 basis points to 0.80% as compared to 1.59% during the fourth quarter of 2003. The decline in net interest margins during the fourth quarter of 2004 was primarily due to the same factors that affected net interest margins during 2004, as earlier described, which were (1) an increase in short-term interest rates, (2) an increase in the amortization of loan premiums, securitization costs and bond discounts due to higher than expected mortgage prepayments and (3) higher leverage and lower net interest margin on certain CMOs completed during the second half of 2004.
The growth in average mortgage assets during the fourth quarter of 2004 as compared to the fourth quarter of 2003 was driven by record mortgage acquisition and originations and retentions by the long-term investment operations. Total acquisitions and originations increased across all loan production channels during the fourth quarter of 2004. Correspondent flow acquisitions rose 88% to $3.2 billion, correspondent bulk acquisitions rose 193% to $2.5 billion, wholesale and retail originations rose 26% to $511.8 million and sub-prime originations rose 2% to $150.0 million for the fourth quarter of 2004.
Delay in Audit of Internal Control over Financial Reporting
We are announcing an update to the timing of our efforts to comply with Section 404 of the Sarbanes-Oxley Act, commonly referred to as "SOX 404." In substance, SOX 404 requires an annual management assessment of the effectiveness of a company's internal control over financial reporting, and an audit by its independent registered public accounting firm on management's assessment on internal control over financial reporting. At this time, we report that despite our plan to comply with SOX 404 in a timely manner, we believe that it is unlikely that we will meet the current SOX 404 requirements by the filing deadline of March 16, 2005. As previously disclosed, in July 2004, as part of our ongoing documentation and evaluation efforts in meeting SOX 404 requirements, we discovered an error in our financial statements. Such error resulted in a restatement of our financial statements for the quarters ended March 31, 2004 and 2003 and for the years ended December 31, 2003, 2002 and 2001. We also restated our financial statements for the quarter ended June 30, 2004 and 2003 as a result of a clerical error. The restatement process and the amended filings of the Form 10-K and Form 10-Qs were finalized in October of 2004. During our initial assessment of internal controls over financial reporting, we identified certain documentation and control deficiencies that may rise to the level of significant deficiencies or material weaknesses, in addition to those previously disclosed as part of the restatement. These have been a focus of our remediation efforts prior to year end. As we complete our process, we will need to evaluate the severity of any remaining deficiencies both individually and in the aggregate in the context of our overall evaluation of internal control over financial reporting. As such, we may not be able to render a conclusion that our internal controls over financial reporting were effective as of December 31, 2004.
Mr. Tomkinson, commented, "While it is unlikely we will be able to complete the SOX 404 requirements on a timely basis, it doesn't come without tremendous effort and costs on the part of our employees. The restatement process of approximately three months demanded a significant amount of time and resources from senior management and personnel from our accounting and finance areas. In the first quarter of 2004, we hired consultants to advise us on our internal control over financial reporting and assist in the documentation and testing of internal controls. Furthermore, in 2004 as part of our ongoing evaluation of internal control as well as improvements relating to such, we hired a director of internal audit. Such action was taken to eliminate the reliance on a previously outsourced internal audit function and to strengthen our ability to monitor the operating effectiveness of our internal control over financial reporting. Even with the assistance of newly hired internal auditors and consultants, such time and resource commitment devoted to the restatement impacted our timetable related to our SOX 404 project plan and our ability to complete the documentation, assessment and evaluation of internal control over financial reporting. Our internal delays have impacted the timing of management's assessment and the audit over internal controls by our external auditors, which are ongoing."
For additional information, questions or comments call or write to the investor relations group and ask for Tania Jernigan at (949) 475-3600 or e-mail Ms. Jernigan at tjernigan@impaccompanies.com. The Company has announced a conference call and live web cast on Tuesday, February 15, 2005 at 9:00 a.m. Pacific Time (12:00 p.m. Eastern Time). Joseph R. Tomkinson, Chairman and Chief Executive Officer, will discuss results of operations for 2004 and provide a general update followed by a question and answer session. If you would like to participate in the conference call, you may listen by dialing (800) 350-9149, conference ID number 3756967, or access the web cast via our web site at http://www.impaccompanies.com. To participate in the conference call, dial in fifteen minutes prior to the scheduled start time. The conference call will be archived on the Company's web site at www.impaccompanies.com and can be accessed by linking to Impac Mortgage Holdings, Inc./Audio Archives. You can subscribe to receive instant notification of conference calls, new releases and the monthly unaudited fact sheet by using our e-mail alert feature located at the web site under Impac Mortgage Holdings, Inc./Investor Relations/Email Alerts.
Our external auditors have not completed their audit of our financial statements for the year ended December 31, 2004, and our auditors have not performed a review under Statement of Auditing Standards No. 100, "Interim Financial Information" of the financial information contained herein. The information contained in this press release may change as a result of the completion of the audit of our financial statements for the year ended December 31, 2004.
Note: Safe Harbor "Statement under the Private Securities Litigation Reform Act of 1995." This release contains forward-looking statements including statements relating to the expected performance of the Company's businesses, operations and dividend and earnings expectations. 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," "will," "believe," "expect," "likely," "should," "anticipate," 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, among other things, failure to achieve projected earnings levels; the ability to generate sufficient liquidity; the ability to access the equity markets; risks of delays in raising, or the inability to raise, additional capital, either through equity offerings, lines of credit or otherwise the ability to generate taxable income and to pay dividends; interest rate fluctuations on our assets that differ from those on our liabilities; interest rate fluctuations; changes in expectations of future interest rates; increase in prepayment rates on our mortgages; the availability of financing and, if available, the terms of any financing; risks related to our ability to maintain an effective system of internal control over financial reporting; changes in markets which the Company serves, including a decrease in the purchase money market; risks relating to our ability to file our annual report on Form 10-K in a timely fashion or to receive from our external auditors an attestation on our internal control over financial reporting; challenges related to the acquisition of a wholesale mortgage broker, acquisition integration risks, the ability to successfully expand our mortgage operations as a result of such acquisition; changes to our dividend declaration, record or payments dates changes in our assumptions, including the need to raise capital, or other general market and economic conditions, other factors described in this press release and our filings with the Securities and Exchange Commission, including "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2004. Caution must be exercised in relying on these and other forward-looking statements. Due to known and unknown risks and other factors not presently identified, the Company's results may differ materially from its expectations and projections. We will revise our estimates based on actual conditions experienced, however, it is not practicable to publish all revisions and as a result, no one should assume that results projected in or contemplated by the forward-looking statements included above may continue to be accurate in the future.
IMPAC MORTGAGE HOLDINGS, INC.
(in thousands, except per share amounts)
(unaudited)
Balance Sheets:
As of December 31,
2004 2003
Cash and cash
equivalents $329,677 $127,381
CMO collateral 21,308,906 8,644,079
Mortgage loans
held-for-
investment 586,686 652,814
Finance
receivables 471,820 630,030
Allowance for
loan losses (63,955) (38,596)
Mortgage loans
held-for-sale 587,745 397,618
Accrued interest
receivable 97,617 39,347
Other assets 497,271 125,284
Total Assets $23,815,767 $10,577,957
CMO borrowings $21,206,373 $8,489,853
Reverse
repurchase
agreements 1,527,558 1,568,807
Other liabilities 37,761 46,510
Stockholders'
equity 1,044,075 472,787
Total
Liabilities
and
Stockholders'
Equity $23,815,767 $10,577,957
Statements of Operations:
For the Three Months Ended, For the Year Ended,
December 31, December 31,
2004 2003 2004 2003
Interest income $250,372 $112,684 $755,616 $385,716
Interest expense 160,683 56,825 412,533 209,009
Net interest
income 89,689 55,859 343,083 176,707
Provision for
loan losses 6,149 3,490 30,927 24,853
Net interest
income after
provision for
loan losses 83,540 52,369 312,156 151,854
Gain on sale
of loans 16,582 13,806 25,134 39,022
Equity in net
earnings of
Impac Funding
Corporation -- -- -- 11,537
Mark-to-market
gain (loss) --
derivative
instruments 47,869 (1,003) 4,694 (16,021)
Other non-interest
income 1,583 2,235 10,947 9,995
Total non-
interest income 66,034 15,038 40,775 44,533
Personnel expense 16,673 13,223 60,420 25,250
General and
administrative
and other
expense 8,986 6,202 28,052 12,656
Professional
services 2,705 2,142 4,374 4,785
Amortization of
deferred charge 1,346 3,799 16,212 5,659
Write-down on
investment
securities
available-for-sale 1,120 118 1,120 298
Provision for
repurchases 777 913 405 1,499
Amortization and
impairment of
mortgage
servicing rights 561 497 2,063 1,290
Loss (gain) on
disposition of
real estate owned (332) (1,556) (3,901) (2,632)
Total non-interest
expense 31,836 25,338 108,745 48,805
Net earnings
before taxes 117,738 42,069 244,186 147,582
Income taxes 3,371 (5,381) (13,450) (1,397)
Net earnings
after taxes 114,367 47,450 257,636 148,979
Cash dividends on
cumulative
convertible
preferred stock (2,135) -- (3,750) --
Net earnings
available to
common
stockholders $112,232 $47,450 $253,886 $148,979
Net earnings
per share:
Basic $1.55 $0.88 $3.79 $2.94
Diluted 1.52 0.86 3.72 2.88
Dividends declared
per common share $0.75 $0.55 $2.90 $2.05
Weighted average
shares outstanding:
Basic 72,432 53,744 66,967 50,732
Diluted 73,765 55,012 68,244 51,779
Common shares
outstanding 75,154 56,368 75,154 56,368
IMPAC MORTGAGE HOLDINGS, INC.
(in thousands, except per share amounts)
(unaudited)
Reconciliation of Estimated Taxable Income Available
to Common Stockholders to Net Earnings (1)
For the Three Months Ended, For the Year Ended,
December 31, December 31,
2004 2003 2004 2003 (5)
Net earnings $114,367 $47,450 $257,637 $148,979
Adjustments to
net earnings:
Loan loss
provision 6,149 3,490 30,927 24,853
Dividends from IFC 13,000 9,000 37,000 31,385
Cash received from
previously
charged-off assets -- (534) -- (5,533)
Tax loss on sale
of investment
securities -- (3,545) -- (4,725)
Tax deduction for
actual loan losses (1,799) (4,016) (16,252) (12,859)
Fair value of
derivatives (2) (76,880) (16,945) (103,724) (38,762)
Dividends on
preferred stock (2,135) -- (3,750) --
Net earnings of
IFC (3) (16,762) (5,401) (42,944) (16,889)
Net adjustments
on intercompany
loan sale
transactions 14,264 8,508 44,048 802
Net miscellaneous
adjustments -- 215 -- 215
Estimated taxable
income available
to common
stockholders (4) $50,204 $38,222 $202,942 $127,466
Estimated taxable
income per diluted
common share $0.68 $0.69 $2.97 $2.46
Diluted weighted
average common
shares outstanding 73,765 55,012 68,244 51,779
(1) Estimated taxable income include estimates of book to tax adjustments
and can differ from actual taxable income as calculated when the
Company files its annual corporate income tax return for 2004. Since
estimated taxable income is a non-GAAP financial measurement, the
reconciliation of estimated taxable income available to common
stockholders to net earnings meets the requirement of Regulation G as
promulgated by the SEC for the presentation of non-GAAP financial
measures.
(2) The mark-to-market change for the valuation of derivatives is income
or expense for GAAP financial reporting but is not included as an
addition or deduction for taxable income calculations.
(3) The period for the year ended December 31, 2003 represents equity in
net earnings of IFC prior to its consolidation with IMH on July 1,
2003.
(4) Excludes the deduction for dividends paid and the availability of a
deduction attributable to any net operating tax loss carryforwards.
(5) Actual taxable income per corporate income tax return filed in 2003.
IMPAC FUNDING CORPORATION
(in thousands)
(unaudited)
Reconciliation of Federal Estimated Taxable Income to Net Earnings (1)
For the Year
Ended
December 31,
2004
Net earnings $42,944
Tax provision 20,943
Book income before
tax provision 63,887
Permanent book to
tax differences:
Compensation from
exercise of
non-qualified
stock options (2,836)
Other permanent
differences 277
Temporary book to
tax differences:
Prior-year state tax (5,391)
Compensation-
related accruals
and deferrals 4,489
Allowance for
bad debts 1,159
Fair value of
derivative
instruments (2) 9,552
Depreciation
(book to tax
differences) (2,923)
Mortgage servicing
rights (4,964)
Net miscellaneous
adjustments 158
Estimated
taxable income
before adjustments 63,408
Add:
Tax depreciation 5,623
Less:
Federal income
taxes (22,193)
Compensation
from qualified
and incentive
stock options (740)
Other
miscellaneous
adjustments (276)
Estimated taxable
income 45,822
Distributions
paid to
IMH (3) (37,000)
Estimated excess
taxable income (4) $8,822
(1) Federal estimated taxable income include estimates of book to tax
adjustments and can differ from actual taxable income as calculated
when IFC files its annual corporate income tax return for 2004.
(2) The mark-to-market change for the valuation of derivative instruments
is income or expense for GAAP financial reporting but is not included
as an addition or deduction for federal taxable income calculations.
(3) Dividends paid by IFC to IMH are prorated to IMH stockholders based
on total common stock dividends paid by IMH and are taxed at the
qualifying tax rate (15%).
(4) Distributions to IMH represent federal taxable income to IMH as
distributions from IFC were entirely from current federal earnings
and profit.
IMPAC MORTGAGE HOLDINGS, INC.
(dollars in thousands)
(unaudited)
Yield Analysis of Mortgage Assets
For the Three Months Ended, For the Three Months Ended,
December 31, 2004 December 31, 2003
Avg Bal Yield Avg Bal Yield
Investment
securities
available-
for-sale $11,069 12.65% $13,958 26.48%
CMO collateral 19,309,936 4.32% 7,885,792 4.46%
Mortgage loans
held-for-
investment and
held-for-sale 2,282,979 5.91% 1,155,818 5.74%
Finance
receivables 439,090 5.86% 487,678 5.63%
Total Mortgage
Assets $22,043,074 4.52% $9,543,246 4.71%
CMO borrowings $19,009,339 2.93% $7,694,314 2.47%
Reverse
repurchase
agreements 2,603,244 3.26% 1,591,971 2.34%
Total
Borrowings
on Mortgage
Assets $21,612,583 2.97% $9,286,285 2.45%
Net Interest
Spread on
Mortgage Assets 1.55% 2.26%
Net Interest
Margin on
Mortgage Assets 1.61% 2.33%
Adjusted Net
Interest Margin
on Mortgage
Assets (1) 0.80% 1.59%
Effect of
Amortization of
Net Loan Premiums
and Securitiztion
Costs (2) -1.09% -0.85%
Effect of Interest
Rate Derivative
Costs (3) -0.45% -0.48%
(1) Adjusted net interest margin on mortgage assets exclude the accretion
of loan discounts related to the deferral of income from the sale of
mortgage servicing rights from IFC to IMH on mortgages retained by
IMH of $19.8 million and $6.3 million and the inclusion of net cash
payments on derivative instruments of $24.7 million and $11.4 million
for the three months ended December 31, 2004 and 2003, respectively.
The accretion of these loan discounts is an adjustment to yield on
CMO collateral and is included in net interest income on the
consolidated income statement while net cash flows on derivative
instruments, or interest rate derivative costs, are included as a
component of mark-to-market gain (loss) - derivative instruments on
the consolidated income statement. For purposes of reconciling
adjusted net interest margin on mortgage assets, which is a non-GAAP
financial measurement, subtract accretion of loan discounts and net
cash payments on derivative instruments from total net interest
income on mortgage assets of $88.6 million and $55.6 million for the
three months ended December 31, 2004 and 2003, respectively, and
divide by total mortgage assets.
(2) Represents cost of amortization of net loan premiums and
securitization costs relative to average mortgage assets.
Amortization of net loan premiums and securitization costs were $48.2
million and $14.0 million for the fourth quarter of 2004 and 2003,
respectively.
(3) Represents net cash payments on derivative instruments, or interest
rate derivative costs, relative to average mortgage assets. Interest
rate derivative costs were $24.7 million and $11.4 million for the
fourth quarter of 2004 and 2003, respectively.
For the Year Ended, For the Year Ended,
December 31, 2004 December 31, 2003
Avg Bal Yield Avg Bal Yield
Investment
securities
available-for-
sale $12,131 27.38% $20,404 17.23%
CMO collateral 14,283,347 4.33% 6,620,328 4.79%
Mortgage loans
held-for-
investment and
held-for-sale 1,837,347 5.76% 632,538 5.47%
Finance
receivables 510,899 4.90% 604,087 4.80%
Total Mortgage
Assets $16,643,724 4.52% $7,877,357 4.88%
CMO borrowings $14,072,852 2.52% $6,474,391 2.69%
Reverse
repurchase
agreements 2,175,728 2.66% 1,374,884 2.36%
Borrowings
secured by
investment
securities -- -- 2,709 85.46%
Total
Borrowings
on Mortgage
Assets $16,248,580 2.54% $7,851,984 2.66%
Net Interest
Spread on
Mortgage Assets 1.98% 2.22%
Net Interest
Margin on
Mortgage Assets 2.05% 2.23%
Adjusted Net
Interest Margin
on Mortgage
Assets (4) 1.16% 1.35%
Effect of
Amortization of
Net Loan Premiums
and Securitiztion
Costs (5) -1.00% -0.88%
Effect of Interest
Rate Derivative
Costs (6) -0.55% -0.61%
(4) Adjusted net interest margin on mortgage assets exclude the accretion
of loan discounts related to the deferral of income from the sale of
mortgage servicing rights from IFC to IMH on mortgages retained by
IMH of $54.9 million and $21.1 million and the inclusion of net cash
payments on derivative instruments of $91.9 million and $47.8 million
for the year ended December 31, 2004 and 2003, respectively. The
accretion of these loan discounts is an adjustment to yield on CMO
collateral and is included in net interest income on the consolidated
income statement while net cash flows on derivative instruments, or
interest rate derivative costs, are included in mark-to-market gain
(loss) -- derivative instruments on the consolidated income
statement. For purposes of reconciling adjusted net interest margin
on mortgage assets, which is a non-GAAP financial measurement,
subtract accretion of loan discounts and net cash payments on
derivative instruments from total net interest income on mortgage
assets of $340.5 million and $175.6 million for the year ended
December 31, 2004 and 2003, respectively, and divide by total
mortgage assets.
(5) Represents cost of amortization of net loan premiums and
securitization costs relative to average mortgage assets.
Amortization of net loan premiums and securitization costs were
$130.9 million and $44.5 million for 2004 and 2003, respectively.
(6) Represents net cash payments on derivative instruments, or interest
rate derivative costs, relative to average mortgage assets. Interest
rate derivative costs were $91.9 million and $47.8 million for 2004
and 2003, respectively.
IMPAC MORTGAGE HOLDINGS, INC.
(in thousands)
(unaudited)
Mortgage Acquisition and Origination Summary
For the Three Months Ended,
December 31,
2004 2003
Volume % Volume %
Mortgages by Type:
Fixed rate first
trust deeds $361,898 6 $682,886 22
Fixed rate second
trust deeds 276,398 4 81,950 3
Adjustable rate:
Six month
LIBOR ARMs 852,264 13 475,607 15
Six month
LIBOR
hybrids (1) 4,870,905 77 1,876,470 60
Total adjustable
rate 5,723,169 90 2,352,077 75
Total mortgage
acquisitions and
originations $6,361,465 100 $3,116,913 100
Mortgages by Channel:
Correspondent
acquisitions:
Flow
acquisitions $3,160,346 50 $1,710,972 55
Bulk
acquisitions 2,539,381 40 852,334 27
Total
correspondent
acquisitions 5,699,727 90 2,563,306 82
Wholesale and
retail
originations 511,785 8 406,626 13
Novelle Financial
Services, Inc. 149,953 2 146,981 5
Total mortgage
acquisitions and
originations $6,361,465 100 $3,116,913 100
Mortgages by Credit
Quality:
Alt-A loans $6,175,604 97 $2,956,705 95
B/C loans 185,861 3 160,208 5
Total mortgage
acquisitions and
originations $6,361,465 100 $3,116,913 100
Mortgages by Purpose:
Purchase $3,754,628 59 $1,796,163 58
Refinance 2,606,837 41 1,320,750 42
Total mortgage
acquisitions and
originations $6,361,465 100 $3,116,913 100
Mortgages by
Prepayment Penalty:
With prepayment
penalty $4,628,521 73 $2,268,440 73
Without prepayment
penalty 1,732,944 27 848,473 27
Total mortgage
acquisitions and
originations $6,361,465 100 $3,116,913 100
(1) Mortgages are fixed rate for initial two to ten year periods which
subsequently adjust to indicated index plus a margin.
(2) Mortgages are retained for long-term investment which are initially
financed with reverse repurchase agreements and subsequently financed
primarily with CMO borrowings.
IMPAC MORTGAGE HOLDINGS, INC.
(in thousands)
(unaudited)
Mortgage Acquisition and Origination Summary
For the Year Ended,
December 31,
2004 2003
Volume % Volume %
Mortgages by Type:
Fixed rate first
trust deeds $1,968,502 9 $3,812,952 40
Fixed rate second
trust deeds 755,913 3 181,173 2
Adjustable rate:
Six month
LIBOR ARMs 3,382,978 15 1,611,392 17
Six month
LIBOR
hybrids (1) 16,105,711 73 3,919,604 41
Total adjustable
rate 19,488,689 88 5,530,996 58
Total mortgage
acquisitions and
originations $22,213,104 100 $9,525,121 100
Mortgages by Channel:
Correspondent
acquisitions:
Flow
acquisitions $10,996,260 50 $5,399,428 57
Bulk
acquisitions 8,537,504 38 2,159,116 23
Total
correspondent
acquisitions 19,533,764 88 7,558,544 80
Wholesale and
retail
originations 1,994,569 9 1,468,697 15
Novelle Financial
Services, Inc. 684,771 3 497,880 5
Total mortgage
acquisitions and
originations $22,213,104 100 $9,525,121 100
Mortgages by Credit
Quality:
Alt-A loans $21,453,383 97 $8,988,018 94
B/C loans 759,721 3 537,103 6
Total mortgage
acquisitions and
originations $22,213,104 100 $9,525,121 100
Mortgages by Purpose:
Purchase $13,373,840 60 $4,683,202 49
Refinance 8,839,264 40 4,841,919 51
Total mortgage
acquisitions and
originations $22,213,104 100 $9,525,121 100
Mortgages by
Prepayment Penalty:
With prepayment
penalty $15,965,959 72 $7,165,949 75
Without prepayment
penalty 6,247,145 28 2,359,172 25
Total mortgage
acquisitions and
originations $22,213,104 100 $9,525,121 100
(1) Mortgages are fixed rate for initial two to ten year periods which
subsequently adjust to indicated index plus a margin.
(2) Mortgages are retained for long-term investment which are initially
financed with reverse repurchase agreements and subsequently financed
primarily with CMO borrowings.
Mortgages Retained for Long-Term Investment Summary (2)
For the Three Months Ended,
December 31,
2004 2003
Volume % Volume %
Mortgages by Type:
Fixed rate first
trust deeds $421,471 9 $32,436 2
Fixed rate second
trust deeds 94,865 2 -- 0
Adjustable rate:
Six month
LIBOR ARMs 566,832 11 466,565 20
Six month
LIBOR
hybrids (1) 3,860,688 78 1,787,328 78
Total adjustable
rate 4,427,520 90 2,253,893 98
Total mortgages
retained $4,943,856 100 $2,286,329 100
Mortgages by
Credit Quality:
Alt-A loans $4,788,346 97 $2,192,625 96
Multifamily
mortgages 123,421 2 84,327 4
B/C loans 32,089 1 9,377 0
Total mortgages
retained $4,943,856 100 $2,286,329 100
Mortgages by Purpose:
Purchase $2,872,237 58 $1,422,432 62
Refinance 2,071,619 42 863,897 38
Total mortgages
retained $4,943,856 100 $2,286,329 100
Mortgages by
Prepayment Penalty:
With prepayment
penalty $3,598,947 73 $1,748,980 76
Without prepayment
penalty 1,344,909 27 537,349 24
Total mortgages
retained $4,943,856 100 $2,286,329 100
(1) Mortgages are fixed rate for initial two to ten year periods which
subsequently adjust to indicated index plus a margin.
(2) Mortgages are retained for long-term investment which are initially
financed with reverse repurchase agreements and subsequently financed
primarily with CMO borrowings.
Mortgages Retained for Long-Term Investment Summary (2)
For the Year Ended,
December 31,
2004 2003
Volume % Volume %
Mortgages by Type:
Fixed rate first
trust deeds $1,195,200 7 $706,227 12
Fixed rate second
trust deeds 244,491 1 6,744 0
Adjustable rate:
Six month
LIBOR ARMs 2,754,757 16 1,670,720 27
Six month
LIBOR
hybrids (1) 13,173,928 76 3,694,687 61
Total adjustable
rate 15,928,685 92 5,365,407 88
Total mortgages
retained $17,368,376 100 $6,078,378 100
Mortgages by
Credit Quality:
Alt-A loans $16,846,781 97 $5,760,779 95
Multifamily
mortgages 458,532 3 290,527 5
B/C loans 63,063 0 27,072 0
Total mortgages
retained $17,368,376 100 $6,078,378 100
Mortgages by Purpose:
Purchase $10,516,622 61 $3,408,584 56
Refinance 6,851,754 39 2,669,794 44
Total mortgages
retained $17,368,376 100 $6,078,378 100
Mortgages by
Prepayment Penalty:
With prepayment
penalty $12,657,395 73 $4,823,027 79
Without prepayment
penalty 4,710,981 27 1,255,351 21
Total mortgages
retained $17,368,376 100 $6,078,378 100
(1) Mortgages are fixed rate for initial two to ten year periods which
subsequently adjust to indicated index plus a margin.
(2) Mortgages are retained for long-term investment which are initially
financed with reverse repurchase agreements and subsequently financed
primarily with CMO borrowings.
SOURCE Impac Mortgage Holdings, Inc.
investors, Tania Jernigan of Impac Mortgage Holdings, Inc., +1-949-475-3600, tjernigan@impaccompanies.com
http://www.prnewswire.com
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