<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------- ---------
Commission File Number: 0-19861
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Maryland 33-0675505
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
20371 Irvine Avenue 92707
Santa Ana Heights, California (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (714) 556-0122
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock $0.01 par value American Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant based upon the closing sales price of its Common Stock on August 8,
1996 on the American Stock Exchange was approximately $105.8 million.
The number of shares of Common Stock outstanding as of August 8, 1996:
6,767,500
DOCUMENTS INCORPORATED BY REFERENCE
None
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<PAGE>
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.
1996 FORM 10-Q QUARTERLY REPORT
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page #
<S> <C>
PART I. CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
ITEM 1. FINANCIAL INFORMATION - IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.
Consolidated Statement of Operations, Three- and Six Months Ended, June 30, 1996 and 1995 3
Consolidated Balance Sheet, June 30, 1996 and December 31, 1995 4
Consolidated Statement of Changes in Stockholders' Equity 5
Consolidated Statement of Cash Flows, Six Months Ended, June 30, 1996 and 1995 6
Selected Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 21
ITEM 2 & 3. NOT APPLICABLE 21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 21
ITEM 5. NOT APPLICABLE 21
ITEM 6. EXHIBIT - STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE 22
SIGNATURES 23
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
As of June 30, 1996 As of December 31, 1995
(unaudited)
------------------- -----------------------
<S> <C> <C>
ASSETS
- ------
Cash and cash equivalents $ 31,344 $ 2,284
Investment securities available-for-sale 40,152 17,378
Loan receivables:
Mortgage loans held for investment 1,301 -
CMO collateral 289,208 -
Finance receivables 290,321 583,021
Allowance for loan losses (3,000) (100)
Lease payment receivables held for sale - 8,441
Accrued interest receivable 2,913 1,645
Due from affiliates 9,629 113
Investment in ICI Funding Corporation 9,612 866
Other assets 161 40
------------------- -----------------------
$671,641 $613,688
=================== =======================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Reverse-repurchase agreements $303,046 $567,727
CMO Borrowings 279,462 -
Due to affiliates 3,513 -
Accrued Interest Expense 1,562 -
Other liabilities 1,485 725
------------------- -----------------------
Total Liabilities 589,068 568,452
------------------- -----------------------
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value; $10 million shares
authorized; none issued or outstanding at June
30, 1996 and at December 31, 1995 - -
Common Stock; $.01 par value; 50 million shares authorized:
6,750,000 and 4,250,000 shares issued and outstanding at
June 30, 1996 and at December 31, 1995, respectively 68 43
Additional paid-in capital 81,980 44,971
Retained earnings 2,147 315
Investment securities valuation allowance (1,622) (93)
------------------- -----------------------
Total Stockholders' Equity 82,573 45,236
------------------- -----------------------
$671,641 $613,688
=================== =======================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except earnings per share figures)
(unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended, June 30, Ended, June 30,
1996 1995 1996 1995
--------------------- -------------------
<S> <C> <C>
Revenues
- --------
Interest income $13,972 $ 211 $26,982 $ 297
Equity in net income of ICI Funding Corporation 75 1,315 618 1,718
Fee income 155 55 327 85
--------------------- -------------------
14,202 1,581 27,927 2,100
--------------------- -------------------
EXPENSES
- --------
Interest on borrowings from reverse-repurchases 10,443 - 19,452 -
Advisory fee 745 - 1,171 -
Provision for loan losses 485 91 2,900 195
Interest on borrowings from SPTL - 129 - 177
General and administrative expense 208 6 299 9
Professional services 136 4 180 9
Personnel expense 49 20 93 39
Telephone and other communications 1 3 3 6
Occupancy expense - 1 - 2
Data processing expense - 1 - 2
--------------------- -------------------
12,067 255 24,098 439
--------------------- -------------------
Income before income tax expense (benefit) 2,135 1,326 3,829 1,661
Income tax expense (benefit) - 5 - (24)
--------------------- -------------------
Net Income $ 2,135 $ 1,321 $ 3,829 $1,685
===================== ===================
Primary and fully diluted income per common share $ 0.46 $ 0.85
========= =========
Dividends declared per common share 0.45 0.84
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLERS' EQUITY
(in thousands, except for number of shares)
<TABLE>
<CAPTION>
Number of Additional Securities
Shares Common Paid-in Contributed Retained Valuation
Outstanding Stock Capital Capital Earnings Allowance Equity
----------- --------- ----------- ------------ -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 - $ - $ - $ 358 $ 6,496 $ - $ 6,854
Contribution Transaction 500,000 5 515 (358) (8,239) - (8,077)
Net proceeds, from intial
public offering 3,750,000 38 44,456 - - - 44,494
Net income, 1995 - - - - 2,058 - 2,058
Securities valuation
allowance - - - - - (93) (93)
----------- --------- ----------- ------------ -------- ---------- -----------
Balance, December 31, 1995 4,250,000 43 44,971 - 315 (93) 45,236
Dividends paid (unaudited) - - - - (1,997) - (1,997)
Net proceeds, from secondary
public offering (unaudited) 2,500,000 25 37,009 - - - 37,034
Net income, six months ended
June 30, 1996 (unaudited) - - - - 3,829 - 3,829
Change in securities valuation
allowance (unaudited) - - - - - (1,529) (1,529)
----------- --------- ----------- ------------ -------- ---------- -----------
Balance, June 30, 1996 6,750,000 $ 68 $81,980 $ - $ 2,147 $ (1,622) $ 82,573
=========== ========= =========== ============ ======== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED, JUNE 30,
1996 1995
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,829 $ 1,685
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in net income of ICI Funding Corporation (618) (1,718)
Provision for loan losses 2,900 100
Net change in accrued interest receivable (1,268) (24)
Net change in accrued interest expense 1,562 -
Net change in other assets and liabilities (5,362) -
---------- ---------
Net cash provided by operating activities 1,043 43
---------- ---------
Cash flows from investing activities:
Net change in mortgage loans held for investment (1,301) -
Net change in mortgage loans held for CMO collateral (289,208)
Net change in finance receivables 292,700 (11,912)
Purchase of investment securities available-for-sale (24,304) -
Net change in lease payment receivables 8,441 -
Contribution to ICI Funding Corporation (8,128) -
---------- ---------
Net cash provided by (used in) investing activities (21,800) (11,912)
---------- ---------
Cash flows from financing activities:
Net change in borrowings from SPTL - 11,869
Net change in reverse-repurchase agreements (264,682) -
Net change in CMO borrowings 279,462
Dividends paid (1,997) -
Proceeds from secondary stock offering 37,034
---------- ---------
Net cash (used in) provided by financing activities 49,817 11,869
---------- ---------
Net change in cash and cash equivalents 29,060 -
Cash and cash equivalents at beginning of period 2,284 -
---------- ---------
Cash and cash equivalents at end of period $ 31,344 $ -
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.
Notes to Consolidated Financial Statements
(unaudited)
Unless the context otherwise requires, references herein to the "Company"
means Imperial Credit Mortgage Holdings, Inc. ("IMH"), ICI Funding
Corporation ("ICIFC"), and Imperial Warehouse Lending Group, Inc. ("IWLG"),
collectively. References to IMH refer to Imperial Credit Mortgage Holdings,
Inc. as a separate entity from ICIFC and IWLG.
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with Generally Accepted Accounting Principals and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
Generally Accepted Accounting Principals for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have
been included. Operating results for the three- and six-month periods ended
June 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996. The accompanying
consolidated financial statements should be read in conjunction with the
consolidated financial statements and related notes included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
References to financial information of IMH for the three- and six- month
periods ended June 30, 1995 reflect the pro forma financial data of IMH's
equity interest in Imperial Credit Industries, Inc. ("ICII") mortgage
conduit operations and Southern Pacific Thrift and Loan ("SPTL") warehouse
lending operations, prior to November 20, 1995 (the "Initial Public
Offering"). References to financial information of IMH for the three- and
six-month periods ended June 30, 1996 and as of December 31, 1995 reflect
financial results of IMH's equity interest in ICIFC and results of
operations of IWLG and IMH as stand-alone entities, subsequent to November
20, 1995. Refer to "The Contribution Transaction" on page 8 for additional
information on this subject.
The results of operations of ICIFC, of which 99% of the economic interest is
owned by IMH, are included in the results of operations for IMH as "Equity
in net income of ICI Funding Corporation." For the three- and six-month
periods ended June 30, 1995, the financial statements included elsewhere
herein reflect management's estimate of the level of previous capital and
the amounts of interest charges and general and administrative expense and
income taxes that ICII's mortgage conduit operations would have incurred had
it operated as an entity separate from ICII.
2. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
IMH is a recently-formed Maryland corporation which elected to be taxed as a
real estate investment trust ("REIT"). The Company operates three
businesses, two of which include certain ongoing operations that were
contributed to the Company on November 20, 1995 by ICII, a leading
diversified financial services company and mortgage bank specialty finance
company, and SPTL.
7
<PAGE>
Long-Term Investment Operations. The long-term investment operations,
invests primarily in non-conforming residential mortgage loans and mortgage-
backed securities secured by or representing interests in such loans and, to
a lesser extent, in second mortgage loans. Non-conforming residential
mortgage loans are residential mortgages that do not qualify for purchase by
government-sponsored agencies such as the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC"). Such loans generally provide higher yields than conforming loans.
The principal differences between conforming loans and non-conforming loans
include the applicable loan-to-value ratios, the credit and income histories
of the mortgagors, the documentation required for approval of the
mortgagors, the type of properties securing the mortgage loans, the loan
sizes, and the mortgagors' occupancy status with respect to the mortgaged
properties. Second, non-conforming mortgage loans are higher yielding than
conforming mortgage loans for the purpose of debt consolidation, home
improvements, education and a variety of other purposes. At June 30, 1996,
the Company's mortgage loan and securities investment portfolio consisted of
$289.2 million of mortgage loans held as collateral for Collateralized
Mortgage Obligations ("CMO"), $40.2 million of mortgage-backed or other
collateralized securities and $1.3 million of non-conforming mortgage loans.
Conduit Operations. The conduit operations, ICIFC, primarily purchases non-
conforming mortgage loans and, to a lesser extent, second mortgage loans
from its network of third party correspondents and subsequently securitizes
or sells such loans to permanent investors including the long-term
investment operations. ICIFC's ability to design non-conforming mortgage
loans, which suit the needs of its correspondent loan originators and their
borrowers, while providing sufficient credit quality to investors, as well
as its efficient loan purchasing process, flexible purchase commitment
options and competitive pricing enables it to compete effectively with other
non-conforming mortgage loan conduits. ICIFC, in addition to its ongoing
securitizations and sales to third party investors, supports the long-term
investment operations of the Company by supplying IMH with non-conforming
mortgage loans and securities backed by non-conforming mortgage loans. For
the three- and six-month periods ended June 30, 1996, ICIFC acquired $362.8
million and $643.3 million, respectively, in mortgage loans and sold $8.5
million and $322.3 million, respectively, of mortgage loans and mortgage
securities to the long-term investment operations.
Warehouse Lending Operations. The warehouse lending operations, IWLG,
provides short-term lines of credit to ICIFC and other approved mortgage
banks, most of which are correspondents of ICIFC, to finance mortgage loans
during the time from the closing of the loans to their sale or other
settlement with pre-approved investors. At June 30, 1996, IWLG had $290.3
million in outstanding finance receivables, of which $243.9 million was
outstanding with ICIFC.
In June 1996, the FASB issued Statement of Financial Accounting Standards
No. 125 (SFAS 125), "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities". SFAS 125 provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities based on consistent application of financial-
components approach that focuses on control. It distinguishes transfers of
financial assets that are sales from transfers that are secured borrowings.
Under the financial-components approach, after a transfer of financial
assets, an entity recognizes all financial and servicing assets it controls
and liabilities it has incurred and derecognizes financial assets it no
longer controls and liabilities that have been extinguished. The financial-
components approach focuses on the assets and liabilities that exist after
the transfer. Many of these assets and liabilities are components of
financial assets that existed prior to the transfer period. If a transfer
does not meet the criteria for a sale, the transfer is accounted for a
secured borrowing with pledge of collateral. SFAS 125 is effective for
transfers and servicing for financial assets and distinguishments of
liabilities occurring after
8
<PAGE>
December 31, 1996 and should be applied prospectively. Management has not
evaluated the effect, if any, SFAS 125 will have on the Company's financial
condition or operations.
THE CONTRIBUTION TRANSACTION
On November 20, 1995, ICII contributed to ICIFC certain of the operating
assets and certain customer lists of ICII's mortgage conduit operations,
including all of ICII's mortgage conduit operations' commitments to purchase
mortgage loans subject to rate locks from correspondents (having a principal
balance of $44.3 million on November 20, 1995) in exchange for shares
representing 100% of the common stock and 100% of the non-voting preferred
stock of ICIFC. Simultaneously, on November 20, 1995, in exchange for
500,000 shares of Common Stock, (1) ICII contributed to IMH all of the
outstanding non-voting preferred stock of ICIFC, which represents 99% of the
economic interest in ICIFC, (2) SPTL contributed to IMH certain of the
operating assets and certain customer lists of SPTL's warehouse lending
division, and (3) ICII and SPTL executed a Non-Compete Agreement and a Right
of First Refusal Agreement, each having a term of two years from November
20, 1995. Of the 500,000 shares issued pursuant to the Contribution
Transaction, 450,000 shares were issued to ICII and 50,000 shares were
issued to SPTL. All of the outstanding shares of common stock of ICIFC were
retained by ICII. Lastly, IMH contributed to IWLG all of the aforementioned
operating assets of SPTL's warehouse lending operations contributed to it in
exchange for shares representing 100% of the common stock of IWLG thereby
forming it as a wholly-owned subsidiary. On November 20, 1995, the net
tangible book value of the assets contributed pursuant to the Contribution
Transaction was $525,000. ICII and SPTL retained all other assets and
liabilities related to contributed operations which at November 20, 1995
consisted mostly of $ 11.7 million of MSRs, $22.4 million of finance
receivables, and $26.6 million in advances made by ICII and SPTL to fund the
mortgage conduit loan acquisitions and finance receivables, respectively.
9
<PAGE>
3. INVESTMENT IN ICIFC
Summarized financial information for ICIFC (in thousands).
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
------
Cash.................................... $ 659 $ 2,184
Mortgage loans held for sale, net....... 257,122 544,275
Accrued interest receivable............. 1,397 2,985
Due from affiliates..................... - 2,542
Mortgage Servicing Rights............... 4,318 -
Premises and equipment, net............. 498 516
Other assets............................ 773 129
-------- --------
$264,767 $552,631
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Borrowings from IWLG.................... $243,907 $550,291
Due to affiliates....................... 6,261 -
Accrued interest expense................ 2,798 1,348
Other liabilities....................... 2,093 118
-------- --------
Total liabilities.................... 255,059 551,757
-------- --------
Shareholders' equity:
Preferred stock......................... 9,143 1,014
Common stock............................ 92 10
Retained earnings (accumulated
deficit)................................ 473 (150)
-------- --------
Total shareholders' equity 9,708 874
-------- --------
$264,767 $552,631
======== ========
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
For the Three Months Ended, For the Six Months Ended,
June 30, June 30,
1996 1995 1996 1995
--------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues:
Interest income.................... $6,691 $ - $ 17,811 $ -
Gain on sale of loans.............. 1,363 2,504 3,962 3,234
Loan servicing income.............. 237 1,327 268 2,660
Gain on sale of servicing rights... - - - 370
--------------------------------------------------------------------
8,291 3,831 22,041 6,264
--------------------------------------------------------------------
Expenses:
Interest on borrowings from IWLG... 6,258 - 17,477 -
Interest on borrowings from ICII... - 117 - 266
Personnel expense.................. 1,186 315 2,005 833
General and administrative expense. 412 428 792 1,043
Provision for loan losses.......... 176 - 576 -
Amortization of mortgage servicing
rights............................ 110 682 110 1,129
--------------------------------------------------------------------
8,142 1,542 20,960 3,271
--------------------------------------------------------------------
Income before income taxes.............. 149 2,289 1,081 2,993
Income taxes............................ 73 961 457 1,257
--------------------------------------------------------------------
Net income......................... $ 76 $ 1,328 $ 624 $ 1,736
====================================================================
</TABLE>
4. LOAN RECEIVABLES:
MORTGAGE LOANS HELD FOR INVESTMENT
The Company purchases certain non-conforming mortgage loans to be held as
long-term investments. Mortgage loans held for investment are recorded at
cost at the date of purchase. Mortgage loans held for investment include
various types of adjustable-rate loans secured by mortgages on single-family
residential real estate properties and fixed-rate loans secured by second
trust deeds on single-family residential real estate properties. At June 30,
1996 and December 31, 1995, the Company had $1.3 million and no mortgage
loans held for investment, respectively.
Premiums and discounts and related to these loans are amortized over their
estimated lives using the interest method. Loans are continually evaluated
for collectibility and, if appropriate, the loan is placed on non-accrual
status, generally 90 days past due, and previously accrued interest reversed
from income. As of June 30, 1996 and December 31, 1995, there were $215,000
and no loans on non-accrual status, respectively.
The Company maintains an allowance for losses on mortgage loans held for
investment at an amount which it believes is sufficient to provide adequate
protection against future losses in the loan portfolio. The allowance for
losses is determined primarily on the basis of management's judgment of net
loss potential, including specific allowances for known impaired loans and
other factors such as changes in the nature and volume of the portfolio,
value of the collateral, and current economic condition that may affect the
borrowers' ability to pay. A provision is recorded for all accounts or
portions thereof deemed to be uncollectible thereby increasing the allowance
for loan losses.
11
<PAGE>
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMO")
The Company issues CMO's secured by such loans as a means of financing its
long-term investment operations. For accounting and tax purposes, the
mortgage loans financed through the issuance of CMO's are treated as assets
of the Company and the CMO's are treated as debt of the Company. Each issue
of CMO's is fully payable from the principal and interest payments on the
underlying mortgage loans collateralizing such debt, and any investment
income on such collateral. The long-term investment operations earns the net
interest spread between the interest income on the mortgage loans and the
interest and other expenses associated with the CMO debt. The net interest
spread may be directly impacted by the levels of prepayment of the underlying
mortgage loans and to the extent CMO classes have variable rates of interest,
may be affected by changes in short-term interest rates. As of June 30,
1996, the Company had outstanding CMO debt of $279.5 million and
corresponding mortgage loans held as collateral of $289.2 million.
The Company maintains an allowance for losses on loans collateralized by
CMO's at an amount which it believes is sufficient to provide adequate
protection against losses in the portfolio. The allowance for losses is
determined primarily on the basis of managementOs judgment of net loss
potential, including specific allowances for known impaired loans. All
accounts or portions thereof deemed to be uncollectible are written-off to
the allowance for loan losses.
FINANCE RECEIVABLES
Finance receivables represent transactions with customers, including ICIFC,
involving predominantly residential real estate lending. As a warehouse
lender, the Company is a secured creditor of the mortgage bankers and brokers
to which it extends credit and is subject to the risks inherent in that
status, including the risk of borrower default and bankruptcy. Any claim of
the Company as a secured lender in a bankruptcy proceeding may be subject to
adjustment and delay.
The Company maintains an allowance for losses on financing receivables at an
amount which it believes is sufficient to provide adequate protection against
losses in the portfolio. The allowance for losses is determined primarily on
the basis of managementOs judgment of net loss potential, including specific
allowances for known impaired loans. All accounts or portions thereof deemed
to be uncollectible are written-off to the allowance for loan losses.
Finance receivables are stated at the principal balance outstanding.
Interest income is recorded on the accrual basis in accordance with the terms
of the loans, except that accruals are discontinued when the payment of
interest is 90 or more days past due. Future collections of interest income
are included in interest income or applied to the loan balance based on an
assessment of the likelihood that the loans will be repaid.
The Company earns interest rates at prime on warehouse lines to ICIFC and
prime to prime plus two percent on its warehouse lines to other mortgage
banking companies. These lines have maturities which range from on demand to
one year and are generally collateralized by mortgages on single family
residences.
12
<PAGE>
5. INVESTMENT IN ICIFC
The Company records its investment in ICIFC on the equity method. ICII owns
all of the common stock of ICIFC and is entitled to 1% of the earnings or
losses of ICIFC. The Company is entitled to 99% of the earnings or losses of
ICIFC through it's ownership of all of the non-voting preferred stock in
ICIFC. ICIFC is a mortgage loan conduit organization which purchases mortgage
loans and subsequently securitizes or sells such loans to permanent
investors.
6. REVERSE-REPURCHASE AGREEMENTS
The Company enters into reverse-repurchase agreements with major brokerage
firms for its mortgage warehouse lending operations and to fund the purchase
of mortgage-backed securities.
7. STOCKHOLDERS' EQUITY
IMH intends to distribute 95% or more of its net taxable income (which does
not necessarily equal net income as calculated in accordance with GAAP) to
its common stockholder's each year so as to comply with the REIT provisions
of the Internal Revenue Code ("Code"). Holders of the common stock are
entitled to such dividends as IMH's Board of Directors, in its discretion,
may declare out of funds available. In the event of liquidation of IMH,
holders of common stock are entitled to receive, pro rata, all of the assets
of IMH available for distribution. Holders of the common stock have no
conversion or preemptive or other subscription rights and there are no
redemption or sinking fund provisions applicable to the common stock.
8. COMMITMENTS AND CONTINGENCIES
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business. Such instruments include short-term
commitments to extend credit to borrowers under warehouse lines of credit
which involve elements of credit risk. In addition, the Company is exposed
to credit loss in the event of non-performance by the counterparties to the
various agreements associated with loan purchases. However, the Company does
not anticipate non-performance by such borrowers or counterparties. Unless
noted otherwise, the Company does not require collateral or other security to
support such commitments.
LOAN COMMITMENTS
The Company's warehouse lending program provides secured short-term revolving
financing to small- and medium-size mortgage originators and ICIFC to finance
mortgage loans from the closing of the loans until sold to permanent
investors. As of June 30, 1996, the Company had extended 13 committed lines
of credit in the aggregate principal amount of $ $691.0 million of which
$287.3 million was outstanding. Of the $691.0 million of committed lines of
credit at June 30, 1996, $600.0 million was committed to ICIFC of which
$243.9 million was outstanding.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
References to the pre-contribution transaction period refers to periods prior to
November 20, 1995, the Initial Public Offering. References to the post-
contribution transaction period refers to periods subsequent to November 20,
1995.
References to financial information of IMH for the three- and six-month periods
ended June 30, 1996 and for the year ended December 31, 1995 reflect the
financial operations of IMH, it's subsidiary IWLG, and IMH's equity interest in
ICIFC post-contribution transaction. References to financial information of IMH
for the three- and six-month periods ended June 30, 1995 reflect the pro forma
financial data of IMH's equity interest in ICII's mortgage conduit operations
and SPTL's warehouse lending operations pre-contribution transaction.
GENERAL INFORMATION
The Company's principal sources of net income are (1) net income from its REIT-
qualified, tax-exempt long-term investment operations, (2) net income from IWLG,
the REIT-qualified, tax-exempt warehouse lending operations and (3) equity in
net income from the conduit operations, ICIFC, which is fully subject to federal
and state income taxes. The principal source of income from its long-term
investment operations is net interest income which is the net spread between
interest earned on mortgage loans and securities held for investment and
interest costs associated with borrowings used to finance such loans and
securities, including CMO debt. The principal source of income from IWLG is net
interest income which is the spread between interest earned on warehoused loans
and interest costs associated with borrowings used to finance such loans and fee
income received from borrowers in connection with such loans. The principal
sources of income from ICIFC are gains recognized on the sale of mortgage loans
and securities, net interest income earned on loans purchased by ICIFC pending
their securitization or resale, servicing fees, commitment fees and processing
fee income.
SIGNIFICANT TRANSACTIONS
During the second quarter ended June 30, 1996, the Company completed a secondary
stock offering of 2,517,500 shares of common stock, which includes 17,500 shares
exercised as part of the Underwriters over allotment. The transaction priced on
June 18, 1996 netting the Company approximately $37.5 million in proceeds.
These funds will be used to provide funding for the Company's long-term
investment operations and it's warehouse lending operations.
As part of its financing strategies, the Company completed a $296.3 million CMO
financing in April 1996. The CMO was structured as a one month LIBOR "floater"
with interest payable monthly based on one month LIBOR plus 0.50%. The CMO is
guaranteed for the holders thereof by a mortgage insurer giving the CMO the
highest credit rating established by a nationally-recognized rating agency.
HISTORICAL AND CURRENT TRENDS
14
<PAGE>
ICIFC's mortgage loan acquisitions decreased 35% in 1995 to $1.1 billion, which
included $501.4 million of mortgage loans acquired from ICII and its affiliates,
from $1.7 billion in 1994 due to increased interest rates which reduced mortgage
loan originations throughout the mortgage industry (and ICIFC's refocus on the
non-conforming mortgage loan market and increased competition in such non-
conforming market). ICIFC was also adversely affected by the increase in
interest rates during 1994, resulting in a 20% decline in mortgage acquisitions
in 1994 to $1.7 billion from $2.1 billion originated in 1993. The
aforementioned decline in mortgage acquisitions resulted in higher operating
costs as a percentage of acquisitions despite ICIFC's efforts to reduce excess
production capacity through 1994 and 1995. Additionally in 1995, ICIFC
emphasized the acquisition of higher margin non-conforming mortgage loan
products which provided a higher return than conforming mortgage loans.
In an effort to increase profitability, ICIFC reduced operating expenses,
primarily through a reduction in personnel. At December 31, 1995, ICIFC had 36
employees, a 49% decrease from 71 employees at December 31, 1994. At December
31, 1994, the conduit operations of ICII employed 71 employees, a 57% decrease
from 167 employees at December 31, 1993. ICIFC continued to assess its work
force in order to properly match its loan acquisition capacity to current market
demands.
For the three- and six-month periods ended June 30, 1996 and 1995, ICIFC's
mortgage loan acquisitions increased 170% to $362.8 million and 156% to $643.2
million as compared to $134.2 million and $251.6 million for the same periods in
1995, respectively. Excluding the acquisition of mortgage loans from ICII for
the three- and six-month periods ended June 30, 1996, ICIFC's mortgage loan
acquisitions increased 167% to $357.9 million and 88% to $474.0 million as
compared to $134.2 million and $251.6 million for the same periods in 1995,
respectively. The increase in mortgage loan acquisitions for the three- and
six-month periods ended June 30, 1996 as compared to the same periods in 1995
was primarily the result of the Company's increased marketing and sales efforts
subsequent to the Initial Public Offering, increased concentration on
identifying and servicing productive conduit sellers under master commitment
programs, and significantly increased sales activity from two conduit sellers
affiliated with ICII. By the end of the second quarter, the two ICII affiliated
mortgage banking operations divested themselves from ICII; ICIFC expects to
continue to acquire loans from these mortgage banking entities. In conjunction
with the increase in flow (loan-by-loan) acquisitions, as opposed to bulk loan
acquisitions, and subsequent to the Contribution Transaction, the Company has
added additional personnel. At June 30, 1996, ICIFC employed 87 employees, an
increase of 156% from 34 employees at June 30, 1995.
LOAN SERVICING
Mortgage loan servicing consists of collecting payments from borrowers and
remitting such funds to investors, accounting for loan principal and interest
payments, making advances when required, holding escrow funds for the payment of
taxes and insurance, contacting delinquent borrowers, foreclosing in the event
of unremedied defaults and performing other administrative duties. A servicer's
obligation to provide mortgage loan servicing and its right to collect fees are
set forth in a servicing contract. ICIFC's exclusive source of servicing rights
is from mortgage loans acquired and subsequently sold. Subsequent to the
Initial Public Offering, ICIFC sub-contracted its servicing obligations to ICII
at terms that management believed to be comparable to industry standards. In the
first quarter of 1996, ICII contracted to sell substantially all of its mortgage
servicing portfolio and eliminate significantly all of its mortgage servicing
department. In response to ICII's decision to exit
15
<PAGE>
the mortgage servicing business, ICIFC has completed the transfer of all
servicing activities to a new sub-servicer effective June 29, 1996 at terms and
conditions comparable to the agreement with ICII.
ACCOUNTING FOR SERVICING RIGHTS
When ICIFC purchases loans that include the associated servicing rights, the
price paid for the servicing rights, net of amortization based on assumed
prepayment rates, is reflected on its financial statements as Mortgage Servicing
Rights ("MSRs"). During 1995 and 1994, the conduit operations' MSRs decreased
by $11.5 million and increased by $1.9 million, respectively. As part of the
Contribution Transaction, ICII retained all of ICIFC's MSR's in the amount of
$11.7 million, leaving ICIFC with no MSRs at December 31, 1995. However, ICIFC
increased it's MSR's to $4.3 million at June 30, 1996 as a result of loans sold
servicing retained subsequent to the Contribution Transaction.
On May 12, 1995, the Financial Accounting Standards Board issued SFAS No. 122,
"Accounting for Mortgage Servicing Rights," an amendment to SFAS No.65.
ICIFC elected to adopt this standard retroactive to January 1, 1995. SFAS No.
122 prohibits retroactive application to years prior to 1995.
SFAS No. 122 requires that a portion of the cost of acquiring a mortgage loan
be allocated to the mortgage loan servicing rights based on its fair value
relative to the loan as a whole. To determine the fair value of the servicing
rights created, ICIFC used the market prices under comparable servicing sale
contracts, when available, or alternatively used a valuation model that
calculates the present value of future net servicing revenues to determine the
fair value of the servicing rights. In using this valuation method, ICIFC
incorporated assumptions that market participants would use in estimating future
net servicing income which includes estimates of the cost of servicing, a
discount rate, an escrow float value, an inflation rate, an ancillary income per
loan, a prepayment rate, and a default rate.
Beginning January 1, 1995 (post-implementation SFAS 122), ICIFC determined
servicing value impairment by disaggregating its mortgage conduit operations'
servicing portfolio into its predominant risk characteristics. ICIFC determined
those risk characteristics to be loan program type and interest rate. These
segments of the portfolio were then evaluated, using market prices under
comparable servicing sale contracts, when available, or alternatively using the
same model as was used to originally determine the fair value at acquisition,
using current assumptions at the end of the quarter. The calculated value was
then compared to the capitalized book value of each loan type and interest rate
pool to determine if a valuation allowance is required. At December 31, 1995,
ICIFC had no MSRs since ICII retained these assets as part of the contribution
transaction. However, as ICIFC rebuilds its mortgage loan servicing portfolio,
ICIFC will continue to use the same valuation and impairment criteria that was
used pre-contribution transaction.
MSRs are subject to some degree of volatility in the event of unanticipated
prepayments or defaults. Prepayments in excess of those anticipated at the time
MSRs are recorded result in accelerated amortization rates and increased future
amortization expense. The rate of prepayment of loans is affected by a variety
of economic and other factors, including prevailing interest rates and the
availability of alternative financing. The effect of those factors on loan
prepayment rates may vary depending on the particular type of loan. Estimates
of prepayment rates are made based on management's expectations of future
prepayment rates, which are based, in part, on the historical rate of prepayment
of ICIFC's loans, and other considerations. There can be no assurance of the
16
<PAGE>
accuracy of management's prepayments estimates. If actual prepayment with
respect to loans serviced occur more quickly than were projected at the time
such loans were sold, the carrying value of the MSRs may have to be written down
through a charge to earnings in the period of adjustment. If actual prepayments
with respect to loans occur more slowly than estimated, the carrying value of
MSRs would not increase, although total income would exceed previously estimated
amounts.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 AS COMPARED TO THE THREE MONTHS ENDED
JUNE 30,1995
---------------------------------------------------------------------
Net income for the quarter ended June 30, 1996 increased by 61% to $2.1 million
as compared to $1.3 million for the same period of the prior year. Net income
per share for the quarter was $0.46. There were no shares outstanding for the
same period of the prior year.
The Company's revenues during the second quarter 1996 increased to $14.2 million
from $1.6 million for the second quarter of 1995. Revenues increased as a
result of increases in interest income from the Company's outstanding finance
receivables and from interest income earned on the Company's investment
portfolio. The Company's investment portfolio consists of Investment Securities
available for sale, Mortgage Loans held for investment and CMO Collateral.
Interest income for the second quarter of 1996 increased to $14.0 million from
$211,000 for the second quarter of 1995 as a result of an increase in total
average outstanding finance receivables. Average outstanding finance
receivables for the second quarter of 1996 were $333.5 million as compared to
$8.5 million for the second quarter of 1995. The increase in finance
receivables was primarily the result of the Company providing warehouse
financing to ICIFC, post-contribution transaction, which accounted for 91% or
$303.5 million of the total average outstanding finance receivables for the
second quarter of 1996. Interest income also increased from interest earned on
the Company's investment portfolio. For the second quarter of 1996, average
earning assets from the investment portfolio were $364.1 million as compared to
none for the second quarter of 1995. As a result of the Company's Initial
Public Offering and secondary stock offering, the Company used the proceeds of
these offerings to leverage up the balance sheet by purchasing earning assets,
resulting in total average earning assets increasing to $697.6 million during
the second quarter of 1996 as compared to $8.5 million, pre-contribution
transaction, for the second quarter of 1995. At June 30, 1996, total investment
securities available-for-sale and cash equivalents were $71.5 million and loan
receivables were $580.8 million as compared to none and $12.3 million,
respectively, at June 30, 1995.
Expenses for the second quarter of 1996 increased to $12.1 million as compared
to $255,000 during the second quarter of 1995. Total interest expense represents
87% of the total increase in the Company's expenses for the second quarter of
1996 as compared to the same period of the prior year. This increase was due to
several factors: (1) higher daily average borrowings under reverse-repurchase
agreements and CMO debt, (2) advisory fees based on the advisory agreement
executed on the date of the Initial Public Offering, and (3) loan loss reserves
due to the investment portfolio. Interest expense for the second quarter of
1996 increased to $10.4 million as compared to $129,000 in the second quarter
of the prior year. The Company's increased borrowings on reverse-repurchase
lines was due primarily to increased outstanding finance receivable balances to
ICIFC, as previously discussed, and increased borrowings from CMO debt on the
Company's investment portfolio that did not exist in the prior year. The
average outstanding borrowings on reverse-repurchase agreements and CMO debt was
$433.8 million and $287.9 million, respectively, for the second quarter of 1996
as compared to $9.8 million and none, for the second quarter of 1995
respectively.
17
<PAGE>
Second quarter 1996 advisory fees was $745,000 as compared to no advisory fee in
the second quarter of the prior year as the management agreement with the
advisor, Imperial Credit Advisors, Inc. ("ICAI"), was not effective until
November 20, 1995, the Initial Public Offering date. Provision for loan losses
increased to $485,000 or 438% as compared to $91,000 for the second quarter of
the prior year. The increase in the provision for loan losses was the result of
the Company's effort to increase the overall investment portfolio's in 1996 as
compared to 1995. Other expenses increased to $394,000 during the second quarter
of 1996 as compared to $35,000 during the second quarter of 1995. General and
administrative costs increased to $208,000 in the second quarter of 1996 from
$6,000 in the same period of the prior year as operations and costs to support
the new public entity and the Company's expanding infrastructure increased as
compared to the second quarter of 1995. Professional services expense, including
legal fees, increased to $136,000 during the second quarter of 1996 from $4,000
during the second quarter of 1995 due to general legal work, accounting fees and
custodial fees. Personnel costs increased to $49,000 in the second quarter of
1996 from $20,000 in the second quarter of 1995 as personnel in the warehouse
lending group increased to 6 employees from 3 employees to accommodate the
increase in business.
SIX MONTHS ENDED JUNE 30, 1996 AS COMPARED TO THE SIX MONTHS ENDED
JUNE 30, 1995
-------------------------------------------------------------------
Net income for the six months ended June 30, 1996 increased 127% to $3.8 million
as compared to $1.7 million for the same period of the prior year. Net income
per share for the six months ended June 30, 1996 was $0.85 and dividends
declared per share for the same period were $0.84. There were no shares
outstanding for the same period of the prior year.
The Company's revenue for the first six months of 1996 increased to $27.9
million from $2.1 million for the first six months of the prior year. Revenues
increased primarily as a result of increases in interest income from the
Company's outstanding finance receivables and from interest income earned on the
investment portfolio. Interest income for the six months ended June 30, 1996
increased to $27.0 million from $297,000 for the same period of the prior year.
The increase in interest income is the result of total average outstanding
finance receivables increased to $446.9 million from $5.9 million for the
respective periods and an increase in the Company's investment portfolio. The
increase in finance receivables is principally the result of the Company
providing warehouse financing to ICIFC, post-contribution transaction, which
accounted for 94% or $420.5 million of the total average outstanding finance
receivables for the first six months of 1996. Interest income from the
Company's investment portfolio also provided increased revenue. For the first
six months of 1996, the investment portfolio's average earning assets were
$234.1 million as compared to none for the first six months of 1995.
Expense for the first six months of 1996 increased to $24.1 million as compared
to $439,000 during the first six months of 1995. This increase primarily due to
several factors: (1) interest expense on higher daily average borrowings under
reverse-repurchase agreements and CMO, (2) increased advisory fees, and (3)
increased provision for loan losses.
Interest expense for the first six months of 1996 increased to $19.5 million as
compared to $177,000 for the first six months of the prior year. The Company's
increased borrowings on reverse-repurchase agreements was due to increased
outstanding finance receivable balances to ICIFC, as discussed previously, and
increased borrowings from CMO debt on the Company's investment portfolio that
did not exist in the prior year. The average outstanding borrowings on reverse-
repurchase agreements and CMO debt was $502.4 million and $106.0 million,
respectively, for the first six months of 1996 as compared to $8.3 million and
none, respectively, for the same period of the prior year. Advisory fees for
the first six months of 1996 were to $1.2 million over
18
<PAGE>
the first six months as compared to no advisor fees during the same period of
the prior year as the management agreement with the advisor, Imperial Credit
Advisors, Inc. ("ICAI"), was not effective until November 20, 1995, the Initial
Public Offering date. Provision for loan losses during the first six months of
1996 increased to $2.9 million from $195,000 over the same period of the prior
year. The increase in the provisions for loan losses were the result of an
increase in the overall investment portfolio and finance receivables at June 30,
1996 compared to June 30, 1995. All other expenses increased to $575,000 for the
first six months of 1996 as compared to $67,000 for the first six months of
1995. General and administrative costs increased to $299,000 for the first six
months of 1996 from $9,000 in the same period of the prior year as operations
and costs to support the new public entity and the Company's expanding
infrastructure increased over the first six months of 1996 as compared to the
same period in 1995. Professional services expense, including legal fees,
increased to $180,000 for the first six months of 1996 from $9,000 for the same
period of 1995 due to general legal work, accounting fees, and custodial fees.
Personnel costs increased to $93,000 for the first six months of 1996 from
$39,000 for the first six months of 1995 as personnel in the warehouse lending
group increased to 6 employees from 3 employees to accommodate the increase in
business.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal liquidity requirements result from the need to fund the
acquisition of loan receivables and the investment portfolio. Prior to November
20, 1995, ICIFC was funded by ICII through committed reverse-repurchase
agreements and capital contributions. Historically, SPTL's warehouse lending
operations were funded by SPTL through deposits, other borrowings and equity.
However, post-contribution transaction, the long-term investment operations, the
conduit operations and the warehouse lending operations are funded by reverse-
repurchase agreements, proceeds from the issuance of common stock from the
initial public offering and the secondary offering; which was completed in
June 1996, sale of loan receivables and issuance of CMO debt.
During the six months ended June 30, 1996 and 1995, net cash provided by
operating activities was $1.0 million and $ 43,000 respectively. Net cash during
the six months ended June 30, 1996 and 1995 was negatively affected by "Equity
interest in net income of ICI Funding Corporation" which was accounted for under
the equity method. During the six months ended June 30, 1996, the Company was
positively affected by an increase in accrued interest expense on loans
associated with the increase in the Company's loan receivable portfolio and an
increase in the provision for loan losses which was principally offset by an
increase in other assets.
Net cash (used in) used in investing activities for the six months ended
June 30, 1996 and 1995 was $(21.8) million and $(12.0) million, respectively.
During the six months ended June 30, 1996, prepayment rates of finance
receivables exceeded fundings of such finance receivables primarily due to
greater mortgage loan sales volumes by ICIFC (after the large bulk purchase in
December of 1995) which had a negative effect on net cash. For the six months
ended June 30, 1996, net cash was negatively affected by an increase in CMO
collateral held by the Company to build up its investment portfolio.
During the six months ended June 30, 1996 and 1995, net cash provided by
financing activities was $49.8 million and $11.9 million, respectively. These
net cash figures were affected by factors similar to those affecting net cash
used in investing activities described above. As a result of such factors,
borrowings to fund mortgage loan acquisitions fluctuated accordingly. Post-
contribution transaction, such borrowings consisted of reverse-repurchase
agreements. Pre-contribution transaction, such borrowings consisted of
borrowings from SPTL.
19
<PAGE>
At June 30, 1996, the Company had reverse-repurchase facilities to provide up to
$623.0 million of non-committed reverse-repurchase facilities to finance the
Company's three businesses. Terms of the reverse repurchase agreements require
that the mortgages be held by an independent third party custodian, which gives
the Company the ability to borrow against the collateral as a percentage of the
original principal balance. The borrowing rates quoted vary from 65 basis
points to 100 basis points over one-month LIBOR, depending on the type of
collateral provided by the Company. The margins on the reverse repurchase
agreements are based on the type of mortgage collateral used and generally range
from 90% to 98% of the fair market value of the collateral. Subsequent to June
30, 1996, the Company obtained a $250.0 million committed reverse-repurchase
facility for a period of one year with one lender. The terms of the committed
facility are similar in nature to the uncommitted facilities as mentioned above.
Management is currently in negotiations with one additional lender to provide
similar committed facilities. Management believes that cash flow from
operations and the aforementioned potential financing arrangements is sufficient
to meet the current liquidity needs of the three businesses.
INFLATION
The consolidated Financial Statements and Notes thereto presented herein have
been prepared in accordance with GAAP, which require the measurement of
financial position and operating results in terms of historical dollars without
considering the changes in the relative purchasing power of money over time due
to inflation. The impact of inflation is reflected in the increased costs of the
Company's operations. Unlike industrial companies, nearly all of the assets and
liabilities of the Company's operations are monetary in nature. As a result,
interest rates have a greater impact on the Company's performance than do the
effects of general levels of inflation. Inflation affects the Company's
operations primarily through its effect on interest rates, since interest rates
normally increase during periods of high inflation and decrease during periods
of low inflation. During periods of increasing interest rates, demand for
mortgage loans and a borrower's ability to qualify for mortgage financing in a
purchase transaction may be adversely affected. However, as interest rates
increase, and loan prepayments decline, the value and earnings from the
servicing portfolio increases.
20
<PAGE>
PART II. OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Item 1. of the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996.
ITEM 2- ITEM 3: NOT APPLICABLE
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 25,1996, the Company held it's first annual meeting of stockholders. Of
the total number of shares eligible to vote (4,250,000), 3,713,093 votes were
returned, or 87%, formulating a quorum. At the stockholders meeting, the
following matters were submitted to stockholders for vote: PROPOSAL I -
Election of Directors, PROPOSAL II - Approve Amendment of Company's 1995 Stock
Option Plan increasing number of shares available in plan to 800,000 shares, and
(3) PROPOSAL III - Ratify appointment of Company's independent auditors, KPMG
Peat Marwick.
The results of voting on these proposals are as follows:
PROPOSAL I - ELECTION OF DIRECTORS
- ----------------------------------
<TABLE>
<CAPTION>
DIRECTOR FOR AGAINST ELECTED
- ------------------- --------- ------- -------
<S> <C> <C> <C>
H. Wayne Snavely 3,698,018 15,075 Yes
Joseph R. Tomkinson 3,696,643 16,450 Yes
James Walsh 3,687,143 25,950 Yes
Frank P. Filipps 3,683,767 29,326 Yes
Stephen R. Peers 3,681,143 31,950 Yes
</TABLE>
All directors are elected annually at the Company's annual stockholders meeting.
PROPOSAL II - AMEND 1995 STOCK OPTION PLAN
- ------------------------------------------
Proposal II was approved with 3,713,093 shares voted (of which included
1,872,936 of non-voting shares), 289,454 voted against, and 52,805 abstained
from voting. As directed by the proxy statement, the 1,872,936 non-voting
shares represent votes approving the proposed amendment to the 1995 Stock Option
Plan thereby approving the proposal with the majority of voting stockholders.
Proposal III - APPOINTMENT OF INDEPENDENT AUDITORS
- --------------------------------------------------
Proposal III was unanimously approved with 3,677,343 shares voted for, 17,890
voted against, and 17,860 abstained from voting thereby ratifying the
appointment of KPMG Peat Marwick as the Company's independent auditors.
ITEM 5: NOT APPLICABLE
21
<PAGE>
ITEM 6. EXHIBIT
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended, June 30, 1996 Ended, June 30, 1995
-------------------- --------------------
<S> <C> <C>
Primary earnings per share:
Net income $2,135,190 $3,828,829
==================== ====================
Avg. number of shares outstanding 4,579,670 4,415,746
Net effect of dilutive stock options-
Based on treasury stock method using
average market price 79,622 69,288
-------------------- --------------------
Total average shares 4,659,292 4,485,034
==================== ====================
Primary earnings per share (a) $ 0.46 $ 0.85
==================== ====================
</TABLE>
(a) Fully diluted earnings per share
were not materially different
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.
By: /s/ Richard J. Johnson
---------------------------
Richard J. Johnson
Senior Vice President
and Chief Financial Officer
Date: August 14, 1996
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
BALANCE SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> JUN-30-1996 JUN-30-1995
<CASH> 31,344 2,284
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 40,152 17,378
<INVESTMENTS-CARRYING> 289,208 0
<INVESTMENTS-MARKET> 0 0
<LOANS> 290,321 583,021
<ALLOWANCE> 3,000 100
<TOTAL-ASSETS> 671,641 613,688
<DEPOSITS> 0 0
<SHORT-TERM> 303,046 567,727
<LIABILITIES-OTHER> 6,560 725
<LONG-TERM> 279,462 0
0 0
0 0
<COMMON> 68 43
<OTHER-SE> 82,505 45,193
<TOTAL-LIABILITIES-AND-EQUITY> 671,641 613,688
<INTEREST-LOAN> 0 0
<INTEREST-INVEST> 27,927 2,100
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 27,927 2,100
<INTEREST-DEPOSIT> 0 0
<INTEREST-EXPENSE> 19,452 177
<INTEREST-INCOME-NET> 8,475 1,923
<LOAN-LOSSES> 2,900 195
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 1,746 67
<INCOME-PRETAX> 3,829 1,661
<INCOME-PRE-EXTRAORDINARY> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,829 1,685
<EPS-PRIMARY> .85 0
<EPS-DILUTED> .85 0
<YIELD-ACTUAL> 0 0
<LOANS-NON> 215 164
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 0 0
<CHARGE-OFFS> 0 0
<RECOVERIES> 0 0
<ALLOWANCE-CLOSE> 0 0
<ALLOWANCE-DOMESTIC> 0 0
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
