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, 1997 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
incorporation or organization) Identification No.)
20371 Irvine Avenue
Santa Ana Heights, California 92707
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (714) 556-0122
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class 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 non-affiliates of
the registrant based upon the closing sales price of its Common Stock on August
11, 1997 on the American Stock Exchange was approximately $249.0 million
million.
The number of shares of Common Stock outstanding as of
August 11, 1997: 10,131,057
Documents incorporated by reference
None
<PAGE>
<TABLE>
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.
1997 FORM 10-Q QUARTERLY REPORT
TABLE OF CONTENTS
<S> <C> <C>
Page #
PART I. CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
ITEM 1. FINANCIAL INFORMATION - IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.
Consolidated Balance Sheets, June 30, 1997 and December 31, 1996........................... 3
Consolidated Statements of Operations, Three- and Six-Months Ended June 30, 1997
and 1996................................................................................... 4
Consolidated Statements of Cash Flows, Six-Months Ended June 30, 1997 and 1996............. 5
Selected Notes to Consolidated Financial Statements........................................ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12
PART II. OTHER INFORMATION
ITEM 3. NOT APPLICABLE 17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 17
ITEM 5. NOT APPLICABLE 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
SIGNATURES 19
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
<CAPTION>
June 30, 1997 December 31, 1996
--------------------- ----------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 10,975 $ 22,610
Investment securities available-for-sale 58,142 63,506
Loan Receivables:
CMO collateral 773,786 501,744
Mortgage loans held for investment 41,896 914
Finance receivables 207,555 362,312
Allowance for loan losses (5,269) (4,384)
--------------------- ----------------------
Net loan receivables 1,017,968 860,586
Investment in ICI Funding Corporation 22,509 9,896
Investment in IMH Commercial Holdings, Inc. 13,822 -
Investment in Imperial Commercial Capital Corporation 243 -
Accrued interest receivable 9,174 7,263
Due from affiliates 8,811 7,709
Other real estate owned 4,015 332
Other assets 1,053 453
--------------------- ----------------------
$ 1,146,712 $ 972,355
===================== ======================
LIABILITIES AND STOCKHOLDERS' EQUITY
CMO Borrowings $ 722,481 $ 474,513
Reverse-repurchase agreements 275,927 357,715
Accrued dividends payable 5,940 5,170
Other liabilities 3,362 5,739
Due to affiliates 28 27
--------------------- ----------------------
Total Liabilities 1,007,738 843,164
--------------------- ----------------------
Stockholders' Equity:
Preferred Stock; $.01 par value; 10 million shares authorized;
none issued or outstanding at June 30, 1997 (unaudited)
and at December 31, 1996 - -
Common Stock; $.01 par value; 50 million shares authorized;
9,899,561 shares issued and outstanding at June 30, 1997
(unaudited) and 9,400,000 shares issued and outstanding
at December 31, 1996 99 94
Additional paid-in-capital 146,933 135,521
Investment securities valuation allowance (3,420) (2,458)
Cumulative dividends declared (26,857) (15,441)
Notes receivable from common stock sales (1,515) (720)
Retained earnings 23,734 12,195
--------------------- ----------------------
Total Stockholders' Equity 138,974 129,191
--------------------- ----------------------
$ 1,146,712 $ 972,355
===================== ======================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share data)
(unaudited)
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------------------------------------------------------
1997 1996 1997 1996
--------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Revenues:
Interest income $ 24,071 $ 13,972 $ 47,151 $ 26,982
Equity in net income of ICI Funding Corporation 2,151 75 3,703 618
Equity in net loss of IMH Commercial Holdings, Inc. (710) - (1,181) -
Gain on sale of securities - - 648 -
Fees and other income 292 155 411 327
--------------- ---------------- ---------------- ---------------
25,804 14,202 50,732 27,927
Expenses:
Interest on CMO borrowings and
reverse-repurchase agreements 17,703 10,443 33,025 19,452
Advisory fee 1,364 745 2,828 1,171
Provision for loan losses 911 485 2,375 2,900
Professional services 52 136 547 180
General and administrative expense 142 209 304 302
Personnel expense 24 49 91 93
(Gain)/loss on sale of other real estate owned (17) - 23 -
--------------- ---------------- ---------------- ---------------
20,179 12,067 39,193 24,098
--------------- ---------------- ---------------- ---------------
Net income $ 5,625 $ 2,135 $ 11,539 $ 3,829
=============== ================ ================ ===============
Net income per common share $ 0.58 $ 0.46 $ 1.20 $ 0.85
=============== ================ ================ ===============
Dividends declared per common share $ 0.60 $ 0.45 $ 1.18 $ 0.84
=============== ================ ================ ===============
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(unaudited)
<CAPTION>
For the Six Months Ended June 30,
1997 1996
---------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 11,539 $ 3,829
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Equity in net income of ICI Funding Corporation (3,703) (618)
Equity in net loss of IMH Commercial Holdings, Inc. 1,181 -
Equity in net loss of Imperial Commercial Capital Corp. 257 -
Provision for loan losses 2,375 2,900
Net change in accrued interest on loans and investments (1,910) (1,268)
Net change in other assets and liabilities (4,076) (3,800)
---------------- ------------------
Net cash provided by operating activities 5,663 1,043
Cash flows from investing activities:
Net change in CMO collateral (272,042) (289,208)
Net change in finance receivables 154,757 292,700
Net change in mortgage loans held for investment, net (40,982) (1,301)
Net change in other real estate owned, net (5,173) -
Purchase of investment securities available-for-sale (7,165) (24,468)
Sale of investment securities available-for-sale 9,637 -
Principal reductions on securities available-for-sale 1,930 164
Net change in lease payment receivables - 8,441
Contributions to ICI Funding Corporation (8,910) (8,128)
Contributions to IMH Commercial Holdings, Inc. (15,003) -
Contributions to Imperial Commercial Capital Corporation (500) -
----------------- ------------------
Net cash used in investing activities (183,451) (21,800)
Cash flows from financing activities:
Net change in reverse-repurchase agreements (81,789) (264,682)
Net change in CMO borrowings 247,967 279,462
Dividends paid (10,647) (1,997)
Proceeds from exercise of stock options 619 -
Proceeds from dividend reinvestment and stock purchase plan 10,798 -
Proceeds from secondary stock offering - 37,034
Advances to purchase common stock, net of principal reductions (795) -
---------------- -----------------
Net cash provided by financing activities 166,153 49,817
Net change in cash and cash equivalents (11,635) 29,060
Cash and cash equivalents at beginning of period 22,610 2,284
---------------- -----------------
Cash and cash equivalents at end of period $ 10,975 $ 31,344
================ ================
Supplementary information:
Interest paid $ 32,871 $ 18,965
================= =================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. and SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
Unless the context otherwise requires, references herein to the "Company"'
refer to Imperial Credit Mortgage Holdings, Inc. ("IMH"), ICI Funding
Corporation ("ICIFC"), ICIFC Secured Assets Corporation ("ICIFC Assets"),
IMH Assets Corporation ("IMH Assets"), and Imperial Warehouse Lending
Group, Inc. ("IWLG"), collectively. References to IMH refer to Imperial
Credit Mortgage Holdings, Inc. as a separate entity from ICIFC, ICIFC
Secured Assets, IMH Assets 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 six-month period ended June
30, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. 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, 1996.
References to financial information of IMH for the six-month period ended
June 30, 1997 reflect financial results of IMH's equity interest in net
income in ICIFC, IMH's equity interest in net loss of IMH Commercial
Holdings, Inc.
("ICH"), IMH's equity interest in net loss in Imperial Commercial Capital
Corporation ("ICCC"), and results of operations of IMH, IMH Assets and
IWLG as stand-alone entities, subsequent to the Initial Public Offering
("IPO"). Refer to "The Contribution Transaction" for additional
information. 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".
The results of operations of ICH, of which 49.92% of the economic interest
is owned by IMH, are included in the results of operations for IMH as
"Equity in net loss of IMH Commercial Holdings, Inc." The results of
operations of ICCC, of which 95% of the economic interest is owned by IMH,
are included in the results of operations for IMH as "Equity in net loss
of IMH Commercial Holdings, Inc."
2. Summary of Business and Significant Accounting Policies
The Company is a mortgage Real Estate Investment Trust ("REIT") which
invests primarily in non-conforming, high-yielding mortgages which,
together with its subsidiaries and related companies, operates three
businesses: (1) the Long-Term Investment Operations, (2) the Conduit
Operations, (3) the Warehouse Lending Operations. The Long-Term Investment
Operations invests primarily in non-conforming residential mortgage loans
and securities backed by such loans. The Conduit Operations purchases and
sells or securitizes primarily non-conforming mortgage loans, and the
Warehouse Lending Operations provides warehouse and repurchase financing
to originators of mortgage loans. These latter two businesses include
certain ongoing operations contributed to the Company in 1995 by Imperial
Credit Industries, Inc. (NASDAQ - "ICII"). IMH is organized as a REIT for
federal income tax purposes, which generally allows it to pass through
qualified income to stockholders without federal income tax at the
corporate level.
Long-Term Investment Operations. The Long-Term Investment Operations,
conducted by IMH, 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 mortgage loans are higher
yielding mortgage loans secured by a second lien on the property and made
to borrowers owning single-family homes for the purpose of debt
consolidation, home improvements, education and a variety of other
purposes. At June 30, 1997, IMH's mortgage loan and securities investment
portfolio consisted of $773.8 million of mortgage loans held in trust as
collateral for Collateralized Mortgage Obligations ("CMOs"), $41.9 million
of mortgage loans held for investment, which will be used as CMO
collateral, and $58.1 million of mortgage-backed or other collateralized
securities.
<PAGE>
Conduit Operations. The Conduit Operations, conducted by ICIFC, purchases
primarily 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, enable it to
compete effectively with other non-conforming mortgage loan conduits. In
addition to earnings generated from ongoing securitizations and sales to
third party investors, ICIFC supports the Long-Term Investment Operations
of the Company by supplying IMH with non-conforming mortgage loans and
securities backed by such loans. For the six months ended June 30, 1997
and the year ended December 31, 1996, ICIFC acquired $915.5 million and
$1.5 billion, respectively, of mortgage loans and sold or securitized
$639.5 million and $1.6 billion, respectively, of mortgage loans. During
the first six months of 1997 and the year ended December 31, 1996, the
Long-Term Investment Operations acquired $419.8 million and $591.6
million, respectively, of such loans from ICIFC as well as $426,000 and
$32.5 million, respectively, of securities created by ICIFC. Prior to the
Contribution Transaction, ICIFC was a division or subsidiary of ICII since
1990. IMH owns 99% of the economic interest in ICIFC, while certain
officers of IMH are holders of all the outstanding common voting stock of
ICIFC, representing 1% of the economic interest in ICIFC, as ICII divested
itself of its interest in ICIFC by granting 100% of ICIFC's common stock
to certain officers of the Company.
Warehouse Lending Operations. The Warehouse Lending Operations, conducted
by IWLG, provide warehouse and repurchase financing to ICIFC and to
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,
1997, the Warehouse Lending Operations had $207.6 million in finance
receivables outstanding, of which $166.8 million was outstanding with
ICIFC.
ICH is a recently formed specialty commercial property finance company
which will elect to be taxed at the corporate level as a REIT for federal
income tax purposes. ICH was formed in February 1997 for the purpose of
originating, purchasing, securitizing and selling commercial mortgages and
investing in commercial mortgages and commercial mortgage-backed
securities. In March 1997, the Company capitalized ICH with $15.0 million
in cash for an aggregate of 3,000,000 shares of ICH Preferred Stock (the
"ICH Preferred Stock"). Subsequent to ICH's Initial Public Offering
("IPO") which closed in August 1997, the Company converted the Preferred
Stock into shares of ICH Common Stock and non-voting Class A Common Stock.
As of August 11, 1997, IMH owns 719,789 shares, or 9.8%, of ICH Common
Stock and 674,211 shares, or 100%, of ICH non-voting Class A Stock. ICH
was formed to seek opportunities in the commercial mortgage market.
Commercial mortgage assets include mortgage loans on
condominium-conversions, multifamily and cooperative apartment properties
and mortgage loans on commercial properties, such as industrial and
warehouse space, office buildings, retail space and shopping malls, hotels
and motels, nursing homes, hospitals, congregate care facilities and
senior living centers. ICH will also purchase mortgage-backed securities
on commercial properties, such as pass-through certificates, and REMICs.
ICH's Conduit Operations, ICCC, was formed in January 1997 as the Company
purchased all of the non-voting Preferred Stock of ICCC, which represents
95% of the economic interest in ICCC, for $500,000. Subsequent to ICH's
IPO, the Company contributed (the "Contribution") 100% of the outstanding
shares of non-voting Preferred Stock of ICCC in exchange for 95,000 shares
of ICH Common Stock. ICCC operates three divisions: the Condominium
Division, the Retail Division, and the Correspondent and Bulk Purchase
Division. The Condominium Division offers on a retail basis adjustable
rate financing to developers and project owners who have completed the
development of a condominium complex or the conversion of an apartment
complex to a condominium complex on property with a typical loan amount of
$3.0 million to $10.0 million. The Retail Division originates commercial
mortgages for properties including general purpose apartment complexes,
general retail property such as shopping centers, super markets and
department stores, light industrial property, and office buildings with
loan amounts between $500,000 to $1.5 million. The Correspondent and Bulk
Purchase Division originates commercial mortgages on a retail basis and
purchase commercial mortgages on a bulk and flow basis. This division
offers larger principal balance ($1.5 million and $10.0 million) for
commercial projects than those funded by the Retail Division.
<PAGE>
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125 (SFAS 125), "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities," which supersedes SFAS 122. SFAS 125 provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities. These standards are based on consistent
application of a financial components approach that focuses on control.
Under that approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the
liabilities it has incurred, derecognizes financial assets when control
has been surrendered and derecognizes liabilities when extinguished. SFAS
125 provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured
borrowings. SFAS 125 requires that liabilities and derivatives incurred or
obtained by transferors as part of a transfer of financial assets be
initially measured at fair value, if practicable. It also requires that
servicing assets and other retained interests in the transferred assets be
measured by allocating the previous carrying amount between the assets
sold, if any, and retained interest, if any, based on their relative fair
values at the date of the transfers. SFAS 125 includes specific provisions
to deal with servicing assets or liabilities. SFAS 125 will be effective
for transactions occurring after December 31, 1996 except for certain
transactions which according to Statement of Financial Accounting
Standards No. 127, "Deferral of the Effective Date of Certain Provisions
of FASB 125," will be effective if occurring after December 31, 1997. The
Company adopted SFAS 125 on January 1, 1997 with no significant impact on
the Company's financial position or results of operations.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings per Share". SFAS 128 supersedes APB Opinion No. 15 ("APB 15"),
"Earnings per Share and specifies the computation, presentation, and
disclosure requirements for earnings per share (EPS) for entities with
publicly held common stock or potential common stock. SFAS 128 will
replace the presentation of primary EPS with a presentation of basic EPS,
and replace fully diluted EPS with diluted EPS. SFAS 128 will also require
dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS
computation the numerator and denominator of the diluted EPS computation.
This statement is effective for financial statements for both interim and
annual periods ending after December 15, 1997. Earlier application is not
permitted. The Company has determined that this statement will have no
significant impact on the financial position or results of operations.
3. Investment in ICI Funding Corporation
The Company records its investment in ICIFC on the equity method. On March
31, 1997, ownership of all of the common stock of ICIFC was transferred
from ICII to certain officers of IMH who are entitled to 1% of the
earnings or losses of ICIFC. The Company is entitled to 99% of the
earnings or losses of ICIFC through its ownership of all of the non-voting
preferred stock in ICIFC. Gains or losses on the sale of loans or
securities by ICIFC to IMH are deferred and amortized or accreted for gain
or loss on sale over the estimated life of the loans or securities using
the interest method.
<PAGE>
<TABLE>
Summarized financial information for ICIFC (in thousands):
BALANCE SHEETS
(unaudited)
<CAPTION>
June 30, 1997 December 31, 1996
------------------- ---------------------
<S> <C> <C>
ASSETS
Cash $ 6,283 $ 4,395
Residual interests in securitizations 42,032 46,949
Mortgage loans held for sale, net 170,221 334,104
Mortgage servicing rights 14,031 8,785
Servicing advances 942 1,583
Premises and equipment, net 1,090 834
Accrued interest receivable 1,109 1,845
Other assets 2,773 676
------------------ ---------------------
$ 238,481 $ 399,171
================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Borrowings from IWLG $ 166,753 $ 327,422
Due to affiliates 35,017 54,803
Other liabilities 5,836 2,876
Deferred revenue 5,522 1,393
Accrued interest expense 2,617 2,681
----------------- ---------------------
Total liabilities 215,745 389,175
Shareholders' Equity:
Preferred Stock 18,053 9,143
Common Stock 182 92
Retained earnings 4,501 761
------------------ ---------------------
Total shareholders' equity 22,736 9,996
------------------ ---------------------
$ 238,481 $ 399,171
================== =====================
</TABLE>
<TABLE>
STATEMENTS OF OPERATIONS
(unaudited)
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
----------------------------------------------------------------
1997 1996 1997 1996
--------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C>
Revenues
Interest income $ 7,380 $ 6,691 $ 17,164 $ 17,811
Gain on sale of loans 5,175 1,363 9,097 3,962
Loan servicing income 1,299 237 1,937 268
Other income 294 - 294 -
--------------- ---------------- --------------- -------------
14,148 8,291 28,492 22,041
Expenses:
Interest on borrowings from IWLG 6,705 6,258 13,849 17,477
Interest on borrowings from affiliates 745 - 2,185 -
Personnel expense 1,911 1,186 3,781 2,005
Provision for repurchases 129 176 417 576
Amortization of mortgage servicing rights 542 110 949 110
General and administrative expense 357 412 839 792
--------------- ---------------- --------------- -------------
10,389 8,142 22,020 20,960
Income before income taxes 3,759 149 6,472 1,081
Income tax expense 1,586 73 2,732 457
--------------- ---------------- --------------- -------------
Net income $ 2,173 $ 76 $ 3,740 624
=============== ================ =============== =============
</TABLE>
<PAGE>
4. Investment in IMH Commercial Holdings, Inc. (formerly Imperial Credit
Commercial Holdings, Inc.)
ICH is a recently formed specialty commercial property finance company
which will elect to be taxed at the corporate level as a REIT for federal
income tax purposes. ICH was incorporated in February 1997 for the purpose
of investing in commercial mortgages and commercial mortgage-backed
securities. The Company records its investment in ICH on the equity
method. As of June 30, 1997, the Company owned 299,000 shares of ICH
common stock and is entitled to 49.92% of the earnings or losses of ICH
while certain officers and directors of the Company own 300,000 shares of
ICH common stock and are entitled to 50.08% of the earnings or losses of
ICH. Subsequent to June 30, 1997, ICH completed an IPO of 6.3 million
shares of common stock at $15.00 per share of which IMH owns 719,789
shares, or 9.8%, of ICH Common Stock in addition to 674,211 shares, or
100%, of ICH non-voting Class A Stock. For additional information
regarding ICH, see Item 2. "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Significant Transactions".
Summarized financial information for ICH (in thousands):
<TABLE>
BALANCE SHEET
<CAPTION>
June 30, 1997
------------------------
<S> <C>
ASSETS
Cash and cash equivalents $ 9,686
Commercial mortgages held for investment, net 17,347
Finance receivables 31,169
Residual interest in securitization 9,999
Other assets 2,093
------------------------
$ 70,294
========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Borrowings from others $ 37,863
Borrowings from IWLG 7,213
Other affiliated borrowings 9,096
Other liabilities 786
------------------------
Total liabilities 54,958
Stockholders' equity:
Preferred Stock 30
Common Stock 6
Additional paid-in-capital 14,970
Contributed capital 2,697
Accumulated deficit (2,367)
-------------------------
Total stockholders' equity 15,336
-------------------------
$ 70,294
=========================
</TABLE>
<TABLE>
STATEMENTS OF OPERATIONS
<CAPTION>
For the period from
January 15, 1997
(commencement of
For the Three Months operations) through
Ended June 30, 1997 June 30, 1997
----------------------- ------------------------
<S> <C> <C>
Revenues
Interest income $ 986 $ 1,353
Expenses:
Interest on borrowings from IWLG 220 340
Interest on other affiliated borrowings 6 91
Interest on other borrowings 297 371
Stock compensation expense - 2,697
General and administrative 124 188
Provision for loan losses 20 33
--------------------- ----------------------
667 3,720
Net loss $ 319 $ (2,367)
===================== ======================
</TABLE>
<PAGE>
5. Investment Securities Available-for-Sale
The Company classifies investment and mortgage-backed securities as
held-to-maturity, available-for-sale, and/or trading securities.
Held-to-maturity investment and mortgage-backed securities are reported at
amortized cost, available-for-sale securities are reported at fair value
with unrealized gains and losses as a separate component of stockholders'
equity, and trading securities are reported at fair value with unrealized
gains and losses reported in income. Discounts obtained on investment
securities are amortized to interest income over the estimated life of the
investment securities using the interest method.
At June 30, 1997, IMH's investment securities available-for-sale included
$52.8 million of subordinated securities collateralized by mortgages and
$5.3 million of subordinated securities collateralized by other loans. In
general, subordinated classes of a particular series of securities bear
all losses prior to the related senior classes.
The Company's investment securities are held as available-for-sale,
reported at fair value with unrealized gains and losses reported as a
separate component of stockholders' equity. As the Company qualifies as a
REIT and no income taxes are paid, the unrealized gains and losses are
reported gross in stockholders' equity.
6. Stockholders' Equity
In January 1997, additional stock options totaling 90,000 were granted to
executive officers of IMH at an exercise price of $23.125 per share. The
90,000 stock options become excercisable on the first anniversary of the
date of grant and expire ten years from the date they were granted.
In March 1997, Director's of Imperial Credit Advisors, Inc. ("ICAI") and
ICII exercised 55,000 shares of common stock at $11.25 per share or
$619,000 in proceeds. In conjunction with the exercise of these shares,
the Company approved loans totaling $827,000 to the Director's of ICAI and
ICII under the terms and conditions of the Company's stock option loan
program. As of June 30, 1997, total notes receivable from common stock
sales was $1.5 million.
During the second quarter of 1997, proceeds of $10.7 million were raised
as common shares totaling 444,561 were purchased through the Company's
dividend reinvestment and stock purchase plan at an average price of
$24.13, net of discounts.
On June 24, 1997 the Board of Directors declared a $0.60 cash dividend
payable on July 17, 1997 to stockholders of record on July 7, 1997.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
References to financial information reflect the financial operations of
IMH and its subsidiaries, IWLG and IMH Assets, and IMH's equity interests
in ICIFC and ICH.
Significant Transactions
In February 1997, certain officers and directors of the Company, as a
group, and ICH purchased 300,000 and 299,000 shares of the Common Stock of
ICH, respectively. In addition, IMH purchased all of the non-voting
preferred stock of Imperial Commercial Capital Corporation ("ICCC"), which
represent 95% of the economic interest in ICCC, for $500,000, and certain
of the Company's officers purchased all of the outstanding shares of
common stock of ICCC, which represent 5% of the economic interest in ICCC.
ICCC brokered ICH's purchase of $7.3 million and $10.2 million of
condominium conversion loans which were financed with $16.6 million in
borrowings under a warehouse lending facility provided by a subsidiary of
IMH, and $900,000 in borrowings from IMH.
In March 1997, IMH lent ICH $15.0 million evidenced by a promissory note
convertible into shares of non-voting preferred stock of ICH at the rate
of one share of ICH Preferred Stock for each $5.00 principal amount of
said note (the "Conversion Rate"). IMH converted the aforementioned $15.0
million principal amount promissory note into an aggregate of 3,000,000
shares of ICH Preferred Stock. All ICH Preferred Stock is automatically
convertible upon the closing of ICH's IPO into shares of ICH Common Stock
determined by multiplying the number of shares of ICH Preferred Stock to
be converted by a fraction, the numerator of which is $5.00 and the
denominator of which is the IPO Price. Notwithstanding the foregoing,
consistent with IMH's classification as a REIT, IMH shall not be entitled
to have converted into ICH Common Stock more than that number of shares of
ICH Preferred Stock whereby IMH would own, immediately after such
conversion, greater than 9.8% of ICH's outstanding Common Stock. Any
shares of ICH Preferred Stock not converted into ICH Common Stock upon the
closing of the Offering shall on such date automatically convert into
shares of ICH non-voting Class A Common Stock (the "ICH Class A Stock") at
the same rate as the ICH Preferred Stock converted into Common Stock on
said date. Shares of ICH Class A Stock convert into shares of Common Stock
on a one-for-one basis and each such class of Common Stock is entitled to
cash dividends on a pro rata basis. Upon any subsequent issuances of
Common Stock by ICH or sale of ICH Common Stock held by IMH, shares of ICH
Class A Stock shall automatically convert into additional shares of the
Common Stock of ICH, subject to said 9.8% limitation. In addition, ICH
purchased $10.1 million in mortgage-backed securities from ICIFC which was
financed with a promissory note. The promissory note was repaid with cash
from IMH's above-referenced $15.0 million investment. Concurrently, ICH
repaid the $900,000 owed to IMH in connection with its purchase of
condominium conversion loans.
In April 1997, IMH exchanged the 299,000 shares of ICH Common Stock held
by it for an equivalent number of shares of ICH Class A Stock.
Upon the closing of ICH's IPO in August 1997, IMH contributed to ICH 100%
of the outstanding shares of non-voting preferred stock of ICCC in
exchange for 95,000 shares of ICH Class A Stock. As of August 11, 1997,
IMH owns 719,789 shares, or 9.8%, of ICH Common Stock in addition to
674,211 shares, or 100%, of ICH Class A Stock.
Historical Trends
During the year ended December 31, 1996, ICIFC's mortgage loan
acquisitions increased 35% to $1.5 billion as compared to $1.1 billion for
the same period in 1995. Excluding the acquisition of mortgage loans from
ICII or its affiliated mortgage banking operations, ICIFC's mortgage loan
acquisitions increased 110% to $1.3 billion during 1996 as compared to
$624.5 million during 1995. The increase in mortgage loan acquisitions for
1996 as compared to 1995 was primarily the result of the Company's
increased marketing and sales efforts subsequent to the IPO, increased
concentration on identifying and servicing productive conduit sellers
under master commitment programs and significantly increased sales
activity from two conduit sellers. ICIFC's outstanding master commitment
programs with various sellers to purchase mortgages increased to $826.5
million with 68 sellers at December 31, 1996 as compared to $241.0 million
with 18 sellers at December 31, 1995. Additionally, in September 1996
ICIFC introduced it's Progressive Express loan program which resulted in
ICIFC funding $22.0 million in mortgages during 1996. The benefits of this
program include less paperwork for the borrower, express credit approval
and attractive rates and terms. At December 31, 1996, the Progressive
Express program represented 47% of the $826.5 million in outstanding
master commitments. In conjunction with the increase in flow
(loan-by-loan) acquisitions, as opposed to bulk loan acquisitions,
subsequent to the Contribution Transaction, and the continued growth of
ICIFC, ICIFC added personnel in 1996. At December 31, 1996, ICIFC employed
104 employees, an increase of 189% from 36 employees at December 31, 1995.
<PAGE>
During the six months ended June 30, 1997, ICIFC's mortgage loan
acquisitions increased 42% to $915.5 million as compared to $643.2 million
during the first six months of 1996. Excluding mortgages acquired from
affiliated companies, mortgage acquisitions during the first six months of
1997 increased 93% to $915.5 million as compared to $474.0 million during
the first six months of 1996. The increase in mortgage loan acquisitions
during the first six months of 1997 as compared to the same period of 1996
was the result of mortgages funded under the Progressive Express loan
program, outstanding master commitment programs with various conduit
sellers to purchase mortgage loans and an improved real estate market,
particularly in California where the Company acquired 36% of it's loans
during the first six months of 1997. Under the Progressive Express loan
program, ICIFC funded $321.7 million during the first six months of 1997,
or 35% of total loan acquisitions, as compared to none during the first
six months of 1996 as the program was introduced in September 1996.
Additionally, as of June 30, 1997, ICIFC had outstanding master
commitments with 83 sellers to purchase mortgage loans in the aggregate
principal amount of $977.5 million as compared to 60 sellers to purchase
mortgage loans in the aggregate principal amount of $904.0 million as of
June 30, 1996. Due to the continued growth of ICIFC during the first six
months of 1997, ICIFC added personnel. At June 30, 1997, there were 128
employees with ICIFC, a 23% increase from 104 employees as of December 31,
1996.
Results of Operations
Three Months Ended June 30, 1997 as Compared to Three Months Ended
June 30, 1996
Net income for the second quarter of 1997 increased 163% to $5.6
million, or $0.58 per share, as compared to $2.1 million, or $0.48 per
share, for the second quarter of 1996.
Revenues for the quarter ended June 30, 1997 increased 82% to $25.8
million as compared to $14.2 million for the quarter ended June 30, 1996.
The increase in revenue during the second quarter of 1997 compared to the
second quarter of 1996 was primarily the result of increased interest
income as well as increased earnings from the Company's equity in net
income of ICI Funding Corporation due to increased profitability on the
sale of mortgage loans. Additionally, revenue was negatively impacted by
the Company's equity in net loss of IMH Commercial Holdings, Inc as a
result of a one time charge to earnings for stock compensation expense due
to the issuance of founders stock to certain officers and directors of the
Company upon the formation of ICH.
Interest income increased 72% to $24.1 million during the second quarter
of 1997 as compared to $14.0 million during the second quarter of 1996 as
total average earning assets increased 72% to $1.2 billion as compared to
$697.6 million during the respective quarters. Average earning assets are
comprised of CMO collateral, mortgage loans held for investment, warehouse
financing and securities available-for-sale. Average CMO collateral and
mortgage loans held for investment increased 161% to $805.4 million during
the second quarter of 1997 as compared to $308.1 million during the second
quarter of 1996 as the Company issued CMO's totaling $607.9 million since
the end of the second quarter of 1996. Additionally, interest income was
higher during the second quarter of 1997 as average investment securities
available-for-sale increased 86% to $62.1 million as compared to $33.4
million during the second quarter of 1996 primarily as the Company
purchased mortgage-backed securities from ICIFC's REMIC securitizations.
IMH's equity in net income of ICI Funding Corporation increased to $2.2
million during the second quarter of 1997 as compared to $75,000 for the
second quarter ended 1996. ICIFC's earnings increased as ICIFC securitized
or sold $325.0 million of mortgages during the second quarter of 1997 as
compared to $265.7 million during the second quarter of 1996 resulting in
gains of $5.2 million as compared $1.4 million, respectively. The increase
in gains on sale of loans is the result of increased profits from whole
loan cash sales and the securitization of loans funded under the
Progressive Express program, which was introduced in September 1996.
Progressive Express is a loan program with a one-page loan application
that includes less paperwork for the borrower, express credit approval and
attractive rates and terms. Additionally, revenues from loan servicing
income increased to $1.3 million for the second quarter of 1997 as
compared to $237,000 for the same period in 1996 as ICIFC's loan servicing
portfolio increased to $2.2 billion as of June 30, 1997 as compared to
$858.0 million at June 30, 1996.
<PAGE>
Equity in net loss of IMH Commercial Holdings, Inc. was $(710,000) as
compared to none during the second quarter of 1996. The equity in net loss
of IMH Commercial Holdings, Inc. is primarily the result of a one-time,
non-recurring charge recorded on the books of ICH for stock compensation
expense due to the issuance of founders stock to certain officers and
directors of the Company upon the formation of ICH. This one-time charge
during the second quarter of 1997 was $1.7 million of which 49.92%, or
$859,000, flows to the Company and is reflective of the Company's
ownership in ICH (see Part I, footnote 4. "Investment in IMH Commercial
Holdings, Inc." for additional information).
Expenses for the second quarter of 1997 increased 67% to $20.2 million as
compared to $12.1 million for the second quarter of 1996 primarily as a
result of increased interest expense on CMO borrowings and reverse
repurchase agreements, advisory fees and provision for loan losses.
Interest expense increased 70% to $17.7 million during the second quarter
of 1997 as compared to $10.4 million during the second quarter of 1996 as
average interest bearing liabilities increased 72% to $1.1 billion as
compared to $645.9 million during the respective periods. Average interest
bearing liabilities include CMO financing and reverse repurchase
agreements and provide funding for CMO collateral, mortgage loans held for
investment, warehouse financing and investment securities
available-for-sale which increased during the second quarter of 1997 as
compared to the second quarter of 1996 as discussed above. Advisory fees
increased 83% to $1.4 million during the second quarter of 1997 as
compared to $745,000 during the second quarter of 1996 due to increases in
total mortgage assets and net income during these periods. Provision for
loan losses increased 88% to $911,000 during the second quarter of 1997 as
compared to $485,000 during the second quarter of 1996 as Gross Loan
Receivables increased. Gross Loan Receivables include CMO collateral,
mortgage loans held for sale and warehouse financing. The Company
maintained an allowance for loan losses expressed as a percentage of Gross
Loan Receivables of 0.51% at June 30, 1997 as compared to 0.52% at June
30, 1996.
Other operating expenses which excludes interest expense, advisory fees
and provision for loan losses decreased 49% to $201,000 during the second
quarter of 1997 as compared to $394,000 during the second quarter of 1996.
The primary reason for the decrease in other operating expense was the
reversal of $132,000 of previously accrued legal fees during the second
quarter of 1997 as pending lawsuits warranting the accrual were settled in
March 1997.
Six Months Ended June 30, 1997 as Compared to Six Months
Ended June 30, 1996
Net income for the six months ended June 30, 1997 increased 201% to $11.5
million, or $1.19 per share, as compared to $3.8 million, or $0.87 per
share, for the six months ended June 30, 1996.
Revenues for the first six months of 1997 increased 82% to $50.7 million
as compared to $27.9 million for the same period of the prior year. The
increase in revenue during the first six months of 1997 compared to the
same period of 1996 was primarily the result of increased interest income
as well as increased earnings from the Company's equity in net income of
ICI Funding Corporation. In addition, revenue was negatively impacted by
the Company's equity in net loss of IMH Commercial Holdings, Inc.
Interest income increased 75% to $47.2 million during the first six months
of 1997 as compared to $27.0 million during the first six months of 1996
as total average earning assets increased 77% to $1.2 billion as compared
to $654.9 million during the respective periods. Average CMO collateral
and mortgage loans held for investment increased 363% to $736.8 million
during the first six months of 1997 as compared to $159.2 million during
the same period of the prior year as the Company issued CMO's totaling
$607.9 million since the end of the second quarter of 1996. Additionally,
interest income was higher during the first six months of 1997 as average
securities available-for-sale increased 128% to $62.8 million as compared
to $27.6 million during the same period of 1996 as the Company purchased
mortgage-backed securities from ICIFC's REMIC securitizations. Offsetting
increases in average CMO collateral, mortgage loans held for investment
and securities available-for-sale was a 21% decrease in average finance
receivables to $354.4 million as compared to $446.9 million during the
respective periods primarily due to lower average finance receivables
outstanding to ICIFC from the securitization of adjustable rate loans in a
CMO in May of 1997. Average finance receivables outstanding to ICIFC
decreased 23% to $324.5 million during the first six months of 1997 as
compared to $420.5 million during the first six months of 1996 as ICIFC
sold (at fair market value) adjustable-rate mortgages to the Company for
long-term investment.
Revenues also increased as IMH's equity in net income of ICI Funding
Corporation increased to $3.7 million during the first six months of 1997
as compared to $618,000 during the same period of 1996. ICIFC's earnings
increased as ICIFC securitized or sold $639.5 million of mortgages during
the first six months of 1997 as compared to $544.3 million during the same
period of 1996 resulting in gains of $9.1 million as compared $4.0
million, respectively.
<PAGE>
The increase in gains on sale of loans is the
result of increased profits from whole loan cash sales and the
securitization of loans funded under the Progressive Express program.
Additionally, revenues from loan servicing income increased to $1.9
million during the first six months of 1997 as compared to $268,000 for
the same period of 1996 as ICIFC's loan servicing portfolio increased.
Revenues were negatively affected during the first six months of 1997 as
the Company's equity in net loss of IMH Commercial Holdings, Inc. was
$(1.2) million as compared to none during the second quarter of 1996. The
equity in net loss of IMH Commercial Holdings, Inc. is primarily the
result of a one-time, non-recurring charge to ICH for stock compensation
expense due to the issuance of founders stock to officers and directors of
the Company upon the formation of ICH. This one-time charge during the
first six months of 1997 was $2.7 million of which 49.92%, or $1.3
million, flows to the Company which is reflective of the Company's
ownership in ICH (see Part I, footnote 4.
"Investment in IMH Commercial Holdings, Inc." for additional information).
Expenses for the first six months of 1997 increased 63% to $39.2 million
as compared to $24.1 million for same period of the prior year primarily
as a result of increased interest expense on CMO borrowings and reverse
repurchase agreements, advisory fees and other operating expenses.
Interest expense increased 70% to $33.0 million during the first six
months of 1997 as compared to $19.5 million during the same period of the
prior year as average interest bearing liabilities increased 73% to $1.1
billion as compared to $608.5 million during the respective periods.
Advisory fees increased 142% to $2.8 million during the first six months
of 1997 as compared to $1.2 million during the first six months of 1996
due to increases in total mortgage assets and net income during these
periods. Other operating expenses, excluding interest expense, advisory
fees and provision for loan losses, increased 67% to $959,000 during the
first six months of 1997 as compared to $575,000 during the same period of
the prior year. The primary reason for the increase in other operating
expense during the first six months of 1997 was a 204% increase in legal
and professional fees to $547,000 as compared to $180,000 during the same
period of 1996.
Liquidity and Capital Resources
The Company's principal liquidity requirements result from mortgage loans
and mortgage-backed and other collateralized securities acquired by the
Long-Term Investment Operations, the Conduit Operations acquisition of
mortgage loans held for sale and the funding of finance receivables by the
Warehouse Lending Operations. The Long-Term Investment Operations is
funded by CMO financing, reverse repurchase borrowings on securities
available-for-sale and proceeds from the issuance of common stock. The
Warehouse Lending Operations is primarily funded by reverse repurchase
borrowings with major investment banking firms. The Conduit Operations is
primarily funded by the securitization and sale of mortgage loans and
mortgage-backed securities and by reverse repurchase borrowings with the
Warehouse Lending Operations.
During the six months ended June 30, 1997 and 1996 net cash provided by
operating activities was $5.7 million and $1.0 million, respectively. Net
cash flows were positively affected during the first six months of 1997 as
compared to the first six months of 1996 primarily as taxable income
increased to $11.6 million as compared $6.1 million, respectively.
Net cash used in investing activities for the six months ended June 30,
1997 and 1996 was $183.5 million and $21.8 million, respectively. Net cash
flows were negatively affected during the first six months of 1997 as
compared to the first six months of 1996 primarily due to increases in
finance receivables and mortgage loans held for investment and by
contributions to fund ICH. Net cash flows were positively affected during
the first six months of 1997 as compared to the first six months of 1996
as purchases of mortgage-backed securities decreased.
Net cash provided by financing activities for the six months ended June
30, 1997 and 1996 was $166.2 million and $49.8 million, respectively. Net
cash flows were positively affected for the first six months of 1997 as
reverse repurchase borrowings used to fund finance receivables decreased
and proceeds from the Company's dividend reinvestment and stock purchase
plan increased. Net cash flows were negatively affected during the first
six months of 1997 as compared to the first six months of 1996 as proceeds
from stock offerings decreased and dividends paid increased.
<PAGE>
At June 30, 1997, the Company had $722.5 million of CMO borrowings used to
finance $773.8 million of CMO collateral held by the Long-Term Investment
Operations. The Company uses CMO borrowings to finance substantially all
of its mortgage loan investment portfolio as a means of eliminating
certain risks associated with reverse repurchase agreements (such as the
potential need for deposits of additional collateral) that are not present
with CMO borrowings. Terms of the CMO borrowings require that the
mortgages be held by an independent third party custodian, with the
interest rate on the borrowings ranging from 22 basis points to 50 basis
points over one-month LIBOR. Equity in the CMOs is established at the time
the CMOs are issued at levels sufficient to achieve desired credit ratings
on the securities from the rating agencies. Total credit loss exposure to
the Company is limited to the equity invested in the CMOs at any point in
time.
At June 30, 1997, the Company had a $250 million committed financing
facility as well as additional uncommitted facilities to provide financing
for 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 outstanding 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.
On the date of the Contribution Transaction, ICIFC entered into a $600
million reverse repurchase agreement with the Warehouse Lending Operations
for the purpose of providing ICIFC mortgage loan financing during the
period that ICIFC accumulates mortgage loans and when the mortgage loans
are securitized and sold. The margins on the reverse repurchase agreements
are based on the type of collateral used and generally range from 95% to
100% of the fair market value of the collateral. By securitizing and
selling loans on a periodic and consistent basis, the reverse repurchase
facility was sufficient to handle liquidity needs during the first six
months of 1997 and 1996.
On June 24, 1996, the Company contributed $8.9 million in cash to ICIFC to
repay borrowed funds to ICH and to increase liquidity on ICIFC's warehouse
line with IWLG.
On December 31, 1996, ICIFC purchased residual interests in
securitizations from ICII. At June 30, 1997, the residual interests in
securitizations total $42.0 million and are financed by a promissory note
with ICII at an annual interest rate of 10%. The promissory note requires
six monthly interest only payments of $246,180 beginning on July 1, 1997,
and continuing on the same day of each succeeding month thereafter;
followed by one hundred and eleven monthly installments of $408,974 each.
As of June 30, 1997, the current principal balance of the promissory note
is $29.1 million.
ICH's principal liquidity requirements result from the need to fund the
origination or purchase of Commercial Mortgages held for sale by ICCC, and
the investment in commercial mortgages and commercial mortgage-backed
securities by ICH. Prior to March 31, 1997, ICH was funded by a $25.0
million warehouse facility with IWLG and $15.0 million in investments and
$900,000 in borrowings by IMH. In April 1997, ICH entered into a warehouse
line agreement to provide a $200 million uncommitted financing facility to
finance ICH's businesses. Terms of the warehouse line of credit require
that the commercial mortgages be held by an independent third party
custodian, which gives ICH the ability to borrow against the collateral as
a percentage of the fair market value of the commercial mortgages. The
borrowing rates are expressed in basis points over one-month LIBOR,
depending on the type of collateral provided by ICH. The margins on the
warehouse line agreement are based on the type of mortgage collateral used
and generally range from 85% to 88% of the fair market value of the
collateral.
On March 31, 1997, ICH purchased residual interests in securitizations
from ICII. At June 30, 1997, the residual interests in securitizations
total $10.0 million and are financed by a promissory note with ICII at an
annual interest rate of 10%. The promissory note requires 117 monthly
interest only payments of $107,030 beginning on July 1, 1997, and
continuing on the same day of each succeeding month thereafter. As of June
30, 1997, the current principal balance of the promissory note is $7.8
million.
<PAGE>
PART II. OTHER INFORMATION
ITEM 3: Not applicable
ITEM 4: Submission of matters to a vote of security holders
On July 22,1997, the Company held it's annual meeting of stockholders. Of
the total number of shares eligible to vote (9,735,777), 8,983,361 votes
were returned, or 92%, formulating a quorum. At the stockholders meeting,
the following matters were submitted to stockholders for vote: Proposal I
- Election of Directors, Proposal II 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 8,927,522 48,839 Yes
Joseph R. Tomkinson 8,927,547 48,814 Yes
William S. Ashmore 8,926,560 49,801 Yes
James Walsh 8,930,785 45,576 Yes
Frank P. Filipps 8,931,185 45,176 Yes
Stephen R. Peers 8,930,985 45,376 Yes
</TABLE>
All directors are elected annually at the Company's annual stockholders
meeting.
Proposal II - Appointment of independent auditors
Proposal II was approved with 8,887,815 shares voted for, 38,424 voted
against, and 48,122 abstained from voting thereby ratifying the
appointment of KPMG Peat Marwick as the Company's independent auditors.
ITEM 5: Not applicable
<PAGE>
ITEM 6.
(a) Exhibits
<TABLE>
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.
Statement Regarding Computation of Earnings per share
(dollars in thousands, except per share data)
<S> <C> <C>
For the Three Months For the Three Months
Ended June 30, 1997 Ended June 30, 1996
------------------------ ---------------------
Net income $ 5,625 $ 2,135
------------------------ ---------------------
Average number of shares outstanding 9,621 4,580
Net effect of dilutive stock options-
Based on treasury stock method using
Average market price 149 83
------------------------ ---------------------
Total average shares 9,770 4,663
======================== =====================
Net income per share $ 0.58 $ 0.46
======================== =====================
For the Six Months For the Six Months
Ended June 30, 1997 Ended June 30, 1996
------------------------- ---------------------
Net income $ 11,539 $ 3,829
------------------------- ---------------------
Average number of shares outstanding 9,514 4,416
Net effect of dilutive stock options-
Based on treasury stock method using
Average market price 162 83
------------------------- --------------------
Total average shares 9,676 4,499
========================= ====================
Net income per share $ 1.20 $ 0.85
========================= ====================
</TABLE>
27 Financial Data Schedule
(b) Reports on Form 8-K:
None.
<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, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> JUN-30-1997 JUN-30-1996
<CASH> 10,975 31,344
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 0 0
<INVESTMENTS-CARRYING> 0 0
<INVESTMENTS-MARKET> 58,142 40,152
<LOANS> 1,023,237 580,830
<ALLOWANCE> (5,269) (3,000)
<TOTAL-ASSETS> 1,146,712 671,641
<DEPOSITS> 0 0
<SHORT-TERM> 275,927 303,046
<LIABILITIES-OTHER> 3,390 6,560
<LONG-TERM> 722,481 279,462
0 0
0 0
<COMMON> 99 68
<OTHER-SE> 138,875 82,505
<TOTAL-LIABILITIES-AND-EQUITY> 1,146,712 671,641
<INTEREST-LOAN> 47,151 26,982
<INTEREST-INVEST> 0 0
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 0 0
<INTEREST-DEPOSIT> 0 0
<INTEREST-EXPENSE> 33,025 19,452
<INTEREST-INCOME-NET> 14,126 7,530
<LOAN-LOSSES> 2,375 2,900
<SECURITIES-GAINS> 648 0
<EXPENSE-OTHER> 3,793 1,746
<INCOME-PRETAX> 11,539 3,829
<INCOME-PRE-EXTRAORDINARY> 11,539 3,829
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 11,539 3,829
<EPS-PRIMARY> 1.20 0.85
<EPS-DILUTED> 1.20 0.85
<YIELD-ACTUAL> 0 0
<LOANS-NON> 41,664 8,082
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 6,846 100
<CHARGE-OFFS> 1,577 0
<RECOVERIES> 0 0
<ALLOWANCE-CLOSE> 5,269 3,000
<ALLOWANCE-DOMESTIC> 5,269 3,000
<ALLOWANCE-UNALLOCATED> 0 0
<ALLOWANCE-FOREIGN> 0 0
</TABLE>
