<PAGE>
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended March 31, 1999
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
Impac 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.)
1401 Dove Street
Newport Beach, CA 92660
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (949) 475-3600
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 [_]
On May 12, 1999 the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $122.2 million, based on the
closing sales price of the Common Stock on the American Stock Exchange. For
purposes of the calculation only, in addition to affiliated companies, all
directors and executive officers of the registrant have been deemed affiliates.
The number of shares of Common Stock outstanding as of May 12, 1999 was
22,725,770.
Documents incorporated by reference: None
<TABLE>
<CAPTION>
<PAGE>
IMPAC MORTGAGE HOLDINGS, INC.
1999 FORM 10-Q QUARTERLY REPORT
TABLE OF CONTENTS
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS - IMPAC MORTGAGE HOLDINGS, INC. Page #
AND SUBSIDIARIES
Consolidated Balance Sheets, March 31, 1999 and December 31, 1998 3
Consolidated Statements of Operations and Comprehensive Earnings,
For the Three Months Ended March 31, 1999 and 1998 4
Consolidated Statements of Cash Flows, For the Three Months Ended March 31, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 13
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 24
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS 25
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 25
Item 3. DEFAULTS UPON SENIOR SECURITIES 25
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 25
Item 5. OTHER INFORMATION 25
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 25
SIGNATURES 26
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
IMPAC MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
March 31, 1999 December 31, 1998
---------------- -------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................................ $ 15,574 $ 33,876
Investment securities available-for-sale......................................... 104,373 93,486
Loan Receivables:
CMO collateral................................................................ 1,217,289 1,161,220
Finance receivables........................................................... 200,191 311,571
Mortgage loans held-for-investment............................................ 53,030 20,627
Allowance for loan losses..................................................... (5,970) (6,959)
---------------- -------------------
Net loan receivables..................................................... 1,464,540 1,486,459
Investment in Impac Funding Corporation.......................................... 14,336 13,246
Other real estate owned.......................................................... 10,559 8,456
Accrued interest receivable...................................................... 10,521 10,039
Due from affiliates.............................................................. 10,142 17,904
Other assets..................................................................... 1,982 2,038
---------------- -------------------
Total assets................................................................ $ 1,632,027 $ 1,665,504
================ ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CMO borrowings................................................................... $ 1,112,376 $ 1,072,316
Reverse repurchase agreements.................................................... 255,047 323,625
Senior subordinated debentures................................................... 6,448 --
Due to affiliates................................................................ 4,752 2,670
Accrued dividends payable........................................................ 3,156 12,129
Other liabilities................................................................ 2,500 3,158
---------------- -------------------
Total liabilities........................................................... 1,384,279 1,413,898
---------------- -------------------
Stockholders' Equity:
Preferred stock; $.01 par value; 6,300,000 shares authorized; none issued or
outstanding at March 31, 1999 and at December 31, 1998, respectively.......... -- --
Series A junior participating preferred stock, $.01 par value; 2,500,000 shares
authorized; none issued and outstanding at March 31, 1999 and December 31,
1998, respectively............................................................... -- --
Series B 10.5% cumulative convertible preferred stock, $.01 par value;
liquidation
value $30,000; 1,200,000 shares authorized; 1,200,000 issued and outstanding
at March 31, 1999 and December 31, 1998, respectively......................... 12 12
Common stock; $.01 par value; 50,000,000 shares authorized; 22,725,567 and
24,557,657 shares issued and outstanding at March 31, 1999 and at
December 31, 1998, respectively............................................... 227 246
Additional paid-in capital....................................................... 333,388 342,945
Accumulated other comprehensive earnings (loss).................................. 930 (1,736)
Notes receivable from common stock sales......................................... (905) (918)
Accumulated deficit:
Cumulative dividends declared................................................. (82,332) (79,176)
Accumulated deficit........................................................... (3,572) (9,767)
---------------- -------------------
Net accumulated deficit.................................................... (85,904) (88,943)
---------------- -------------------
Total stockholders' equity............................................... 247,748 251,606
---------------- -------------------
Total liabilities and stockholders'equity................................ $ 1,632,027 $ 1,665,504
================ ===================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
IMPAC MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE EARNINGS
(in thousands, except per share data)
For the Three Months
Ended March 31,
---------------------------------
1999 1998
---------------- ---------------
<S> <C> <C>
INTEREST INCOME:
Mortgage assets................................................................... $ 29,687 $ 37,861
Other interest income............................................................. 712 708
---------------- ---------------
Total interest income........................................................... 30,399 38,569
INTEREST EXPENSE:
CMO borrowings.................................................................... 17,081 16,029
Reverse repurchase agreements..................................................... 4,827 12,044
Senior subordinated debentures.................................................... 7 --
Other borrowings.................................................................. 238 728
---------------- ---------------
Total interest expense.......................................................... 22,153 28,803
Net interest income............................................................... 8,246 9,766
Provision for loan losses....................................................... 1,499 1,904
---------------- ---------------
Net interest income after provision for loan losses............................... 6,747 7,862
---------------- ---------------
NON-INTEREST INCOME:
Equity in net earnings of Impac Funding Corporation............................... 1,090 2,156
Equity in net earnings of Impac Commercial Holdings, Inc.......................... -- 378
Servicing fees.................................................................... 466 314
Other income...................................................................... 154 514
---------------- ---------------
Total non-interest income....................................................... 1,710 3,362
---------------- ---------------
NON-INTEREST EXPENSE:
Professional services............................................................. 811 343
(Gain) loss on sale of other real estate owned.................................... 551 (692)
Write-down on investment securities available-for-sale............................ 422 --
General and administrative and other expense...................................... 359 361
Personnel expense................................................................. 119 108
---------------- ---------------
Total non-interest expense...................................................... 2,262 120
---------------- ---------------
Net earnings.................................................................... 6,195 11,104
Less: Cash dividends on Series B 10.5% cumulative convertible preferred stock..... (888) --
---------------- ---------------
Net earnings available to common stockholders................................... 5,307 11,104
Other comprehensive earnings:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during period......................... 2,715 (15)
Reclassification of realized gain (losses) included in earnings................ (49) --
---------------- ---------------
Net unrealized gains (losses) arising during period.......................... 2,666 (15)
---------------- ---------------
Comprehensive earnings.......................................................... $ 4,501 $ 11,089
================ ===============
Net earnings per share--basic................................................... $ 0.22 $ 0.48
Net earnings per share--diluted................................................. $ 0.20 $ 0.48
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
IMPAC MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Three Months
Ended March 31,
--------------------------------
1999 1998
---------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings...........................................................................$ 6,195 $ 11,104
Adjustments to reconcile net earnings to net cash provided by operating activities:
Equity in net earnings of Impac Funding Corporation................................. (1,090) (2,156)
Equity in net earnings of Impac Commercial Holdings, Inc............................ -- (378)
Provision for loan losses........................................................... 1,499 1,904
Depreciation and amortization....................................................... -- 54
Loss (gain) on sale of other real estate owned...................................... 551 (692)
Write-down of investment securities available-for-sale.............................. 422 --
Net change in accrued interest receivable........................................... (482) 1,098
Net change in other assets and liabilities.......................................... 9,079 17,718
---------------- --------------
Net cash provided by operating activities......................................... 16,174 28,652
---------------- --------------
Cash flows from investing activities:
Net change in CMO collateral........................................................... (56,377) (546,076)
Net change in finance receivables...................................................... 111,219 223,092
Net change in mortgage loans held-for-investment....................................... (38,632) 100,156
Proceeds from sale of other real estate owned, net..................................... 1,556 3,058
Purchase of investment securities available-for-sale................................... (9,084) (24,094)
Net principal reductions on investment securities available-for-sale................... 441 1,236
Purchase of premises and equipment..................................................... -- (70)
---------------- --------------
Net cash provided by (used in) investing activities............................... 9,123 (243,390)
---------------- --------------
Cash flows from financing activities:
Net change in reverse repurchase agreements............................................ (68,578) (290,596)
Proceeds from CMO borrowings........................................................... 186,140 582,195
Repayments of CMO borrowings........................................................... (146,080) (78,468)
Dividends paid......................................................................... (12,129) (10,371)
Proceeds from exercise of stock options................................................ -- 80
Repurchase of common stock............................................................. (3,874) --
Proceeds from dividend reinvestment and stock purchase plan........................... 909 16,803
Advances to purchase common stock, net of principal reductions......................... 13 84
---------------- --------------
Net cash provided by (used in) financing activities............................... (43,599) 219,727
---------------- --------------
Net change in cash and cash equivalents.................................................. (18,302) 5,681
Cash and cash equivalents at beginning of period......................................... 33,876 16,214
================ ==============
Cash and cash equivalents at end of period...............................................$ 15,574 $ 21,895
================ ==============
Supplementary information:
Interest paid..........................................................................$ 22,787 $ 30,291
Non-cash transactions:
Exchange of common stock for 11% senior subordinated debentures........................$ 6,448 $ --
Dividends declared and unpaid.......................................................... 3,156 11,332
Increase in accumulated other comprehensive earnings (loss)............................ 2,166 (15)
Loans transferred to other real estate owned........................................... 4,210 1,853
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
IMPAC MORTGAGE HOLDINGS, INC. and SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
Unless the context otherwise requires, references herein to the
"Company"' refer to Impac Mortgage Holdings, Inc. (IMH) and its
subsidiaries, IMH Assets Corporation (IMH Assets), Impac Warehouse Lending
Group, Inc. (IWLG), IMH/ICH Dove St., LLC (Dove), and Impac Funding
Corporation (together with its wholly-owned subsidiary, Impac Secured
Assets Corporation, IFC), collectively. References to IMH refer to Impac
Mortgage Holdings, Inc. as a separate entity from IMH Assets, IWLG, Dove
and IFC.
1. Basis of Financial Statement Presentation
The accompanying consolidated financial statements have been prepared
in accordance with generally accepted accounting principles (GAAP) for
interim financial information 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 GAAP 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-month period ended
March 31, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. 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, 1998.
The operations of IMH have been presented in the consolidated financial
statements for the three months ended March 31, 1999 and 1998 and include
the financial results of IMH's equity interest in net earnings of IFC,
IMH's equity interest in net earnings of Impac Commercial Holdings, Inc.
(ICH) and results of operations of IMH, IMH Assets, IWLG and Dove only as
stand-alone entities. Equity interest in net earnings of Impac
Commercial Holdings, Inc. and financial results for Dove are for 1998
only.
The results of operations of IFC, of which 99% of the economic interest
is owned by IMH, are included in the results of operations of the Company
as "Equity in net earnings of Impac Funding Corporation." The results of
operations of ICH, of which 9.8% of ICH's common stock was owned by IMH
prior to the sale of ICH common stock on October 21, 1998, are included in
the results of operations of IMH as "Equity in net earnings of Impac
Commercial Holdings, Inc."
2. Organization
The Company is a mortgage loan finance company which, together with its
subsidiaries and related companies, primarily operates three businesses:
(1) the Long-Term Investment Operations, (2) the Conduit Operations, and
(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. The
Warehouse Lending Operations provides warehouse and repurchase financing
to originators of mortgage loans. IMH is organized as a real estate
investment trust (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, provided that the Company distributes
95% of its taxable income to common stockholders.
Long-Term Investment Operations. The Long-Term Investment Operations,
conducted by IMH and IMH Assets, 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). The principal differences
between conforming loans and non-conforming loans include applicable
loan-to-value ratios, credit and income histories of the mortgagors,
documentation required for approval of the mortgagors, type of properties
securing the mortgage loans, loan sizes, and the mortgagors' occupancy
status with respect to the mortgaged properties. Second mortgage loans are
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.
<PAGE>
Conduit Operations. The Conduit Operations, conducted by IFC, purchases
primarily non-conforming mortgage loans and, to a lesser extent, second
mortgage loans from its network of third party correspondents and other
sellers, IFC subsequently securitizes or sells such loans to permanent
investors, including the Long-Term Investment Operations. IMH owns 99% of
the economic interest in IFC, while Joseph R. Tomkinson, Chairman and
Chief Executive Officer, William S. Ashmore, President and Chief Operating
Officer, and Richard J. Johnson, Executive Vice President and Chief
Financial Officer, are the holders of all the outstanding voting stock of,
and 1% of the economic interest in, IFC.
Warehouse Lending Operations. The Warehouse Lending Operations,
conducted by IWLG, provides warehouse and repurchase financing to
affiliated companies and to approved mortgage banks, most of which are
correspondents of IFC, to finance mortgage loans during the time from the
closing of the loans to their sale or other settlement with pre-approved
investors.
3. Summary of Significant Accounting Policies
Method of Accounting
The consolidated financial statements are prepared on the accrual basis
of accounting in accordance with GAAP. The preparation of financial
statements in conformity with GAAP requires management to make significant
estimates and assumptions that affect the reported amounts of assets,
liabilities and contingent liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ materially from those
estimates.
Reclassifications
Certain amounts in the consolidated financial statements as of and for
the three months ended March 31, 1998 have been reclassified to conform to
the 1999 presentation.
New Accounting Statements
In October 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 134, "Accounting
for Mortgage-Backed Securities Retained after the Securitization of
Mortgage Loans Held-for-sale by a Mortgage Banking Enterprise" (SFAS 134).
SFAS 134 is an amendment to SFAS No. 65, which required that after the
securitization of a mortgage loan held-for-sale, an entity engaged in
mortgage banking activities classify the resulting mortgage-backed
security as a trading security. SFAS 134 further amends SFAS No. 65 and
requires that after the securitization of mortgage loans held-for-sale, an
entity engaged in mortgage banking activities classify the resulting
mortgage-backed securities or other retained interests based on its
ability and intent to sell or to hold those investments. SFAS 134 conforms
the subsequent accounting for securities retained after the securitization
of mortgage loans by a mortgage banking enterprise with the subsequent
accounting for securities retained after the securitization of other types
of assets by non-mortgage banking enterprises. SFAS 134 is effective for
the first fiscal quarter beginning after December 15, 1998. The Company
adopted SFAS 134 and determined it did not have a material impact on the
Company's financial position or results of operations.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133). SFAS 133 establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, (collectively
referred to as derivatives) and for hedging activities. It requires that
an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. If certain conditions are met, a derivative may be specifically
designated as (a) a hedge of the exposure to changes in the fair value of
a recognized asset or liability or an unrecognized firm commitment, (b) a
hedge of the exposure to variable cash flows of a forecasted transaction,
or (c) a hedge of the foreign currency exposure of a net investment in a
foreign operation, an unrecognized firm commitment, an available-for-sale
security, or a foreign-currency-denominated forecasted transaction. This
statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. The Company believes that the adoption of SFAS 133
will not have a material impact on the Company's financial position or
results of operations.
<PAGE>
4. Net Earnings per Share
Basic earnings per share is computed on the basis of the weighted
average number of shares outstanding for the period. Diluted earnings per
share is computed on the basis of the weighted average number of shares
and common equivalent shares outstanding for the period.
The following table represents the computation of basic and diluted
earnings per share for the three months ended March 31, 1999 and 1998 (in
thousands, except per share data):
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
-----------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Numerator:
Numerator for basic earnings per share--
Net earnings $ 6,195 $ 11,104
Less: Dividends paid to preferred stockholders (888) --
============== ==============
Net earnings available to common stockholders $ 5,307 $ 11,104
============== ==============
Denominator:
Denominator for basic earnings per share--
Weighted average number of common shares
outstanding during the period 24,366 22,940
Impact of assumed conversion of convertible preferred stock 6,061 --
Net effect of dilutive stock options 26 197
-------------- --------------
Weighted average common and common equivalent shares 30,453 23,137
============== ==============
Net earnings per share--basic $ 0.22 $ 0.48
============== ==============
Net earnings per share--diluted $ 0.20 $ 0.48
============== ==============
</TABLE>
<PAGE>
5. Mortgage Assets
Mortgage Assets consist of investment securities available-for-sale,
mortgage loans held-for-investment, CMO collateral, finance receivables
and loans held-for-sale. At March 31, 1999 and December 31, 1998, Mortgage
Assets consisted of the following (in thousands):
<TABLE>
March 31, December 31,
1999 1998
---------------- ----------------
<S> <C> <C>
Investment securities available-for-sale:
Subordinated securities collateralized by mortgages $ 92,642 $ 89,825
Subordinated securities collateralized by other loans 10,801 5,397
Net unrealized gains (losses) 930 (1,736)
---------------- ----------------
Carrying value 104,373 93,486
---------------- ----------------
Loan Receivables:
CMO collateral--
CMO collateral, unpaid principal balance 1,165,057 1,109,577
Unamortized net premiums on loans 39,028 39,369
Securitization expenses 13,204 12,274
---------------- ----------------
Carrying value 1,217,289 1,161,220
Finance receivables--
Due from affiliates 138,936 198,104
Due from other mortgage banking companies 61,255 113,467
---------------- ----------------
Carrying value 200,191 311,571
Mortgage loans held-for-investment--
Mortgage loans held-for-investment, unpaid principal balance 52,362 20,145
Unamortized net premiums on loans 668 482
---------------- ----------------
Carrying value 53,030 20,627
Carrying value of Gross Loan Receivables 1,470,510 1,493,418
Allowance for loan losses (5,970) (6,959)
---------------- ----------------
Carrying value of Net Loan Receivables 1,464,540 1,486,459
---------------- ----------------
Total carrying value of Mortgage Assets $ 1,568,913 $ 1,579,945
================ ================
</TABLE>
6. Segment Reporting
The Company's basis for its segments is to divide the entities into (a)
the segments that derive income from long-term assets, (b) the segments
that derive income by providing financing, and (c) the segment that
derives income from the purchase and sale of mortgage loans.
The Company internally reviews and analyzes its entities as follows:
(1) the Long-Term Investment Operations, conducted by IMH and IMH Assets,
invests primarily in non-conforming residential mortgage loans and
mortgage-backed securities secured by or representing interests in such
loans and in second mortgage loans, (2) the Warehouse Lending Operations
provides warehouse and repurchase financing to affiliated companies and to
approved mortgage banks, most of which are correspondents of IFC, to
finance mortgage loans, and (3) the Conduit Operations, conducted by IFC,
purchases non-conforming mortgage loans and second mortgage loans from its
network of third party correspondents and other sellers (a).
<PAGE>
<TABLE>
<CAPTION>
The following table separates the Company's reporting segments as of March 31, 1999 and
for the three months ended March 31, 1999 (in thousands):
Long-Term Warehouse
Investment Lending Intercompany
Operations Operations Other (b) Elimination (c) Consolidated
-------------- ---------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Items:
CMO collateral $ 1,217,289 $ -- $ -- $ -- $ 1,217,289
Total assets 1,487,795 273,699 5,442 (134,909) 1,632,027
Total stockholders' equity 291,567 40,486 658 (84,963) 247,748
Income Statement Items:
Interest income $ 24,879 $ 6,343 $ 17 $ (840) $ 30,399
Interest expense 18,493 4,496 4 (840) 22,153
Equity in IFC -- -- -- 1,090 1,090
Net earnings 2,105 1,741 43 2,306 6,195
</TABLE>
<TABLE>
<CAPTION>
The following table separates the Company's reporting segments as of March 31, 1998
and for the three months ended March 31, 1998 (in thousands):
Long-Term Warehouse
Investment Lending Intercompany
Operations Operations Other (b) Elimination (c) Consolidated
-------------- ---------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Items:
CMO collateral $ 1,339,116 $ -- $ -- $ -- $ 1,339,116
Total assets 1,726,985 493,322 6,559 (221,642) 2,005,224
Total stockholders' equity 265,546 28,072 3,877 (51,741) 245,754
Income Statement Items:
Interest income $ 28,934 $ 16,723 $ 53 $ (7,141) $ 38,569
Interest expense 23,626 12,257 61 (7,141) 28,803
Depreciation and amortization 4 -- 50 -- 54
Equity in IFC -- -- -- 2,156 2,156
Net earnings (loss) 4,197 4,385 (12) 2,534 11,104
</TABLE>
(a) The Conduit Operations is accounted for using the equity method and is
an unconsolidated subsidiary of the Company.
(b) Primarily includes the operations of Dove, of which the Company owned
a 50% interest until the Company sold its interest to ICH in 1998, and
account reclassifications.
(c) Elimination of intercompany balance sheet and income statement items.
7. Investment in Impac Funding Corporation
The Company is entitled to 99% of the earnings or losses of IFC through
its ownership of all of the non-voting preferred stock of IFC. As such,
the Company records its investment in IFC using the equity method. Under
this method, original investments are recorded at cost and adjusted by the
Company's share of earnings or losses. Gain or loss on the sale of loans
or securities by IFC to IMH are deferred and amortized or accreted over
the estimated life of the loans or securities using the interest method.
The following is financial information for IFC for the periods
presented (in thousands):
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
March 31, December 31,
1999 1998
--------------- --------------
<S> <C> <C>
ASSETS
Cash $ 9,533 $ 422
Investment securities available-for-sale 635 5,965
Investment securities available-for-trading -- 5,300
Mortgage loans held-for-sale 114,210 252,568
Mortgage servicing rights 10,111 14,062
Due from affiliates 7,596 9,152
Premises and equipment, net 2,066 1,978
Accrued interest receivable 829 1,896
Other assets 13,565 22,529
--------------- --------------
$ 158,545 $ 313,872
============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Borrowings from IWLG $ 109,323 $ 192,900
Other borrowings 649 67,058
Due to affiliates 17,542 24,382
Deferred revenue 11,089 10,605
Other liabilities 5,356 6,064
--------------- --------------
Total liabilities 143,959 301,009
--------------- --------------
Shareholders' Equity:
Preferred stock 18,053 18,053
Common stock 182 182
Retained earnings (3,751) (4,852)
Accumulated other comprehensive earnings (loss) 102 (520)
--------------- --------------
Total shareholders' equity 14,586 12,863
--------------- --------------
Total liabilities and shareholders' equity $ 158,545 $ 313,872
=============== ==============
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the Three Months
Ended March 31,
--------------------------------
1999 1998
--------------- --------------
<S> <C> <C>
Interest income $ 4,833 $ 14,799
Interest expense 4,746 10,783
--------------- --------------
Net interest income 87 4,016
--------------- --------------
Gain on sale of loans 5,007 3,719
Loan servicing income 2,141 1,001
Other non-interest income 339 196
--------------- --------------
Total non-interest income 7,487 4,916
--------------- --------------
Personnel expense 1,790 2,560
Amortization of mortgage servicing rights 1,427 1,392
General and administrative and other expense 1,196 1,042
Loss on sale of mortgage servicing rights 567 --
Write-down on securities available-for-sale 559 --
Provision for repurchases 20 170
--------------- --------------
Total non-interest expense 5,559 5,164
--------------- --------------
Earnings before income taxes 2,015 3,768
Income taxes 914 1,591
--------------- --------------
Net earnings $ 1,101 $ 2,177
=============== ==============
<PAGE>
</TABLE>
8. Investment in Impac Commercial Holdings, Inc.
Subsequent to ICH's initial public offering on August 4, 1997, the
Company was entitled to 17.4% of the earnings or losses of ICH through its
ownership of 1,394,000 shares, or 9.8%, of the combined ICH voting Common
Stock and ICH non-voting Class A Common Stock. The Company recorded its
investment in ICH using the equity method. Under this method, original
investments were recorded at cost and adjusted by the Company's share of
earnings or losses. On October 21, 1998, ICH repurchased from IMH 937,084
shares of Common Stock and 456,916 shares of Class A Common Stock at a
price of $4.375 per share for a total repurchase of $6.1 million,
representing a loss to IMH of $9.1 million. The Company had no investment
in ICH at March 31, 1999 or December 31, 1998.
9. Stockholders' Equity
During the three months ended March 31, 1999, the Company raised
capital of $909,000 from the sale of 209,426 shares of Common Stock issued
through its Dividend Reinvestment and Stock Purchase Plan (DRSPP). The
Company repurchased 684,100 shares of Common Stock for $3.9 million. The
Company exchanged 1,357,416 shares of its Common Stock, at an average
price of $5.70 per share, for 11% senior subordinated debentures due to
mature on February 15, 2004.
On March 31, 1999, the Company declared a first quarter dividend of
$2.3 million, or $0.10 per share. This dividend was paid on April 23,
1999 to common stockholders of record on April 9, 1999.
On March 23, 1999, the Company declared a first quarter dividend of
$888,000 to Series B preferred stockholders. This dividend was paid on
April 27, 1999.
10. Subsequent Events
On May 5, 1999, ICH executed a stock purchase agreement pursuant to
which it issued to Fortress Partners LP ("Fortress") $12.0 million of
Series B Convertible Preferred Stock of ICH. In addition, FIC Management
Inc. ("FIC"), an affiliate of Fortress, entered into a definitive
agreement with RAI Advisors, LLC ("RAI") for the assignment of RAI's
rights and interests in the Management Agreement with ICH. In connection
with these transactions, the submanagement agreement among RAI, IMH and
IFC was terminated and a new submanagement agreement was entered into
among FIC, IMH and IFC and the Right of First Refusal Agreement among RAI,
ICH, ICCC, IMH and IFC was terminated. Under the new submanagement
agreement, IMH and IFC will provide various services including accounting,
data processing and secondary marketing to ICH as Fortress deems necessary
for an annual fee of $250,000.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain information contained in the following Management's Discussion
and Analysis of Financial Condition and Results of Operations constitute
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Exchange Act of
1934, as amended, which can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "intend," "should,"
"anticipate," "estimate," or "believe" or the negatives thereof or other
variations thereon or comparable terminology. The Company's actual results
may differ materially from those contained in the forward-looking
statements. Factors which may cause a difference to occur include the
success of the Company's new divisions, any delays with respect to the
acquisition of the thrift and loan, increased costs and delays related to
Year 2000 compliance, the availability of suitable opportunities for the
acquisition, ownership and disposition of Mortgage Assets (which depend on
the type of Mortgage Asset involved) and yields available from time to
time on such Mortgage Assets, interest rates, changes in estimates of book
basis and tax basis earnings, the availability of suitable financing and
investments, and trends in the economy which affect confidence and demand
on the Company's portfolio of Mortgage Assets.
SIGNIFICANT TRANSACTIONS
Exchange Offering
The Company exchanged 1,357,416 shares of its Common Stock, at an
average price of $5.70 per share, for 11% senior subordinated debentures
due to mature on February 15, 2004. The debentures are unsecured
obligations of the Company subordinated to all indebtedness of the
Company's subsidiaries. The debentures will bear interest at 11% per annum
from their date of issuance, payable quarterly, commencing May 15, 1999,
until the debentures are paid in full. The debentures mature on February
15, 2004, which date may be extended once by the Company to a date not
later than May 15, 2004, provided that the Company satisfies certain
conditions. Commencing on February 15, 2001, the debentures are
redeemable, at the Company's option, in whole at any time or in part from
time to time, at the principal amount to be redeemed plus accrued and
unpaid interest thereon to the redemption date.
Collateralized Mortgage Obligations ("CMO")
The Company completed its first CMO since June of 1998. The CMO was
issued in February of 1999 for $186.1 million and was collateralized by
$124.0 million of adjustable-rate mortgages and $77.8 million of
residential loans secured by second trust deeds.
Definitive Agreement to Acquire a California Thrift and Loan
During the first quarter of 1999, the Company entered into a definitive
agreement to acquire a California thrift and loan. The Company currently
does not anticipate any significant regulatory impediments during the
application process. The thrift and loan will be headquartered at the
Company's new location in Newport Beach, California, where the Company
consolidated its business operations during the first quarter of 1999.
New Divisions at IFC
During the first quarter of 1999, IFC introduced two new divisions. The
new divisions are focused on getting closer to the borrower through a
retail based portfolio retention program, along with interacting directly
with the mortgage broker community.
<PAGE>
BUSINESS OPERATIONS
Long-Term Investment Operations: During the first quarter of 1999, the
Long-Term Investment Operations, conducted by IMH and IMH Assets, acquired
$202.0 million of mortgages from IFC as compared to $677.7 million
acquired during the same period in 1998. Mortgages purchased by the
Long-Term Investment Operations during the first quarter of 1999 consisted
of $343,000 of fixed-rate mortgages ("FRMs") and $122.3 million of
adjustable-rate mortgages ("ARMs") secured by first liens on residential
property and $79.4 million of fixed-rate second trust deeds secured by
residential property. During the first quarter of 1999, IMH Assets issued
CMOs totaling $186.1 million as compared to CMOs totaling $583.0 million
during the same period in 1998. As of March 31, 1999, the Long-Term
Investment Operations portfolio of mortgage loans consisted of $1.2
billion of mortgage loans held in trust as collateral for CMOs and $53.0
million of mortgage loans held-for-investment, of which approximately 46%
were FRMs and 54% were ARMs. The weighted average coupon of the Long-Term
Investment Operations portfolio of mortgage loans was 9.35% at March 31,
1999 with a weighted average margin of 4.43%. The portfolio of mortgage
loans included 65% of "A" credit quality, non-conforming mortgage loans
and 35% of "B" and "C" credit quality, non-conforming mortgage loans, as
defined by the Company. The Long-Term Investment Operations also sold $5.8
million of mortgage loans to IFC during the first quarter of 1999 as
compared to $136.7 million during the same period in 1998. In addition,
during the first quarter of 1999 the Long-Term Investment Operations
acquired $9.1 million of securities from by IFC as compared to $24.1
million during the same period in 1998. These securities were generated
mainly from the periodic issuance of real estate mortgage investment
conduits ("REMICs") As of March 31, 1999, the Long-Term Investment
Operations had $104.4 million of investment securities available-for-sale.
Conduit Operations: The Conduit Operations, conducted by IFC, continues
to support the Long-Term Investment Operations of the Company by supplying
IMH and IMH Assets with mortgages for IMH's long-term investment
portfolio. In acting as the mortgage conduit for the Company, IFC's
mortgage acquisitions decreased 58% to $257.6 million during the first
quarter of 1999 as compared to $608.0 million of mortgages acquired during
the same period in 1998. IFC did not issue any REMICs in the first quarter
of 1999. In addition, IFC sold whole loans to third party investors
totaling $163.0 million, resulting in gain on sale of loans of $5.0
million, during the first quarter of 1999. This compares to
securitizations and whole loan sales to third parties of $367.2 million,
resulting in gain on sale of loans of $3.7 million, during the same period
in 1998. IFC had deferred income of $11.1 million at March 31, 1999 as
compared to $10.6 million at December 31, 1998. The increase in deferred
income relates to the sale of $198.8 million in principal balance of
mortgages to IMH during the first quarter of 1999, which are deferred and
amortized or accreted over the estimated life of the loans. IFC's
servicing portfolio decreased 13% to $2.8 billion at March 31, 1999 as
compared to $3.2 billion at March 31, 1998. The loan delinquency rate of
mortgages in IFC's servicing portfolio which were 60 or more days past
due, inclusive of foreclosures and delinquent bankruptcies, was 5.66% at
March 31, 1999 as compared to 4.82%, 5.21%, 4.29%, and 3.20% for the last
four quarter-end periods.
Warehouse Lending Operations: At March 31, 1999, the Warehouse Lending
Operations, conducted by IWLG, had $860.2 million of warehouse lines of
credit available to 29 borrowers, of which $246.4 million was outstanding
thereunder, including $109.3 million outstanding to IFC, $50.3 million
outstanding to the Long-Term Investment Operations, and $25.5 million
outstanding to Walsh Securities, Inc. ("WSI"). James Walsh, Executive Vice
President of WSI, is also a Director of IMH and ICH.
RESULTS OF OPERATIONS--
IMPAC MORTGAGE HOLDINGS, INC.
For the Three Months Ended March 31, 1999 as compared to the Three Months
Ended March 31, 1998
Results of Operations
The Company recorded net earnings of $6.2 million, or $0.20 per diluted
common share, during the first quarter of 1999 as compared to net earnings
of $11.1 million, or $0.48 per diluted common share, during the first
quarter of 1998. Net earnings decreased primarily due to the following:
(1) a $1.5 million decrease in net interest income as a result of the
Company reducing leverage in its balance sheet and increasing liquidity in
response to the global liquidity crisis, which occurred during the latter
part of 1998, (2) an increase in non-interest expense of $2.1 million
primarily due to losses on REO properties and partially from an increase
in professional services and write-down on investment securities
available-for-sale, and (3) a decrease of $1.1 million in equity in net
earnings of Impac Funding Corporation.
<PAGE>
Net earnings during the first quarter of 1999 decreased as compared to
the first quarter of 1998 as the Company moved towards reducing leverage
in its balance sheet and increasing liquidity during the first quarter of
1999 and the fourth quarter of 1998. In response to the global liquidity
crisis during the latter part of 1998, which resulted in a deterioration
of the mortgage-backed securitization market, the Company sold Mortgage
Assets at significant losses as the Company reduced its market risk
exposure rather than continue to expose its stockholders to further risk.
As a result of the sale of Mortgage Assets, liquidity increased during the
first quarter of 1999 as cash and cash equivalents averaged $21.3 million,
which reflected the payment of the Company's third quarter dividend of
$12.1 million on January 6, 1999, as compared to average cash and cash
equivalents of $8.7 million during the fourth quarter of 1998. Because
liquidity improved during the first quarter of 1999 over the fourth
quarter of 1998 the Company was able to complete its first CMO issuance
since June of 1998. The CMO was issued in February of 1999 for $186.1
million and was collateralized by $124.0 million of adjustable-rate
mortgages and $77.8 million of residential loans secured by second trust
deeds. The issuance of CMOs provides the Company with immediate liquidity,
a locked-in net interest rate spread and eliminates the Company's exposure
to margin calls on such loans. The Company's ratio of debt to equity
decreased to 5.54 at March 31, 1999 as compared to 5.55 at December 31,
1998 and 7.90 at September 30, 1998 due to the sale of Mortgage Assets
during the fourth quarter of 1998, the issuance of 1,200,000 shares of
Series B 10.5% Cumulative Convertible Preferred Stock in December of 1998
and the issuance of the CMO during the first quarter of 1999.
Because of reduced leverage, the Company's net interest income
decreased, (as discussed below) however, the Company experienced no margin
calls on its reverse repurchase agreements during the first quarter of
1999. As the mortgage sector stabilized and recovered from the volatility
that occurred during the latter part of 1998, the Company returned to
profitability on the sale of its mortgage loans. In addition to the
Company's success in raising cash, the Company was successful in
increasing the Company's book value per common share, which increased to
$9.58 per common share at March 31, 1999 as compared to $9.02 per common
share at December 31, 1998. The Company's book value per common share
increased, in part, due to the retention of $3.0 million of earnings in
excess of the first quarter dividend distribution to common and preferred
stockholders. The Company expects that the retention of earnings in excess
of dividend distributions for the remainder of 1999 will continue to
improve the Company's book value per common share. The Company's current
common stock dividend policy is to base quarterly dividends per common
share upon the Company's best estimate of taxable earnings for the year
ending December 31, 1999. However, the Board of Directors reserves the
right to make adjustments to this policy as actual results may differ from
earnings projections. The most significant adjustments to taxable earnings
during the first quarter of 1999 were the amortization of the termination
of the Company's management agreement with Imperial Credit Advisors, Inc.
in December of 1997, which resulted in quarterly amortization of
approximately $2.7 million, and the exclusion of $1.1 million of equity in
net earnings of Impac Funding Corporation.
Net Interest Income
Net interest income decreased $1.6 million, or 16%, to $8.2 million
during the first quarter of 1999 as compared to $9.8 million during the
first quarter of 1998 due to a decrease in average Mortgage Assets.
Interest income is primarily interest earned on Mortgage Assets and
includes interest earned on cash and cash equivalents and due from
affiliates. Interest expense is primarily interest paid on borrowings on
Mortgage Assets and includes interest paid on due to affiliates and senior
subordinated debentures. Average Mortgage Assets decreased 16% to $1.6
billion during the first quarter of 1999 as compared to $1.9 billion
during the first quarter of 1998 due to the following: (1) the sale of
Mortgage Assets during the fourth quarter of 1998, (2) a reduction in
mortgage loan production at IFC, which decreased average outstanding
finance receivables, and (3) the Company's concentration on strengthening
book value and conserving capital by reducing the Company's leverage. Net
interest income also decreased as the Company's net interest spread on
Mortgage Assets decreased to 1.16% during the first quarter of 1999 as
compared to 1.42% during the first quarter of 1998. The net interest
spread on Mortgage Assets decreased primarily as the Company sold or
securitized high-yielding residential loans secured by second trust deeds
during 1998. As a result, the weighted average yield on mortgage loans
held-for-investment decreased to 6.01% during the first quarter of 1999 as
compared to 10.30% during the first quarter of 1998.
<PAGE>
The following table summarizes average balance, interest and weighted
average yield on Mortgage Assets and borrowings on Mortgage Assets for the
three months ended March 31, 1999 and 1998 and includes interest income on
Mortgage Assets and interest expense related to borrowings on Mortgage
Assets only (dollars in thousands):
<TABLE>
<CAPTION>
For the Three Months For the Three Months
Ended March 31, 1999 Ended March 31, 1998
---------------------------------------- --------------------------------------
Average Weighted Average Weighted
Balance Interest Avg Yield Balance Interest Avg Yield
------------- ------------ ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
MORTGAGE ASSETS
Investment securities available-for-sale:
Sub-securities collateralized by mortgages $ 92,576 $ 3,102 13.40 % $ 66,505 $ 1,814 10.91 %
Sub-securities collateralized by other loans 7,911 223 11.28 5,319 231 17.37
------------- ----------- ------------ -------------
Total investment securities available-for-sale 100,487 3,325 13.24 71,824 2,045 11.39
------------- ----------- ------------ -------------
Loan receivables:
CMO collateral 1,176,853 20,009 6.80 1,049,111 17,750 6.77
Mortgage loans held-for-investment 53,376 802 6.01 328,318 8,453 10.30
Finance receivables:
Affiliated 183,941 3,984 8.66 379,756 8,151 8.59
Non-affiliated 69,495 1,567 9.02 63,727 1,462 9.18
------------- ----------- ------------ -------------
Total finance receivables 253,436 5,551 8.76 443,483 9,613 8.67
------------ ------------ ------------ -------------
Total Loan Receivables 1,483,665 26,362 7.11 1,820,912 35,816 7.87
------------- ---------- ------------ -------------
Total Mortgage Assets $ 1,584,152 $ 29,687 7.50 % $ 1,892,736 $ 37,861 8.00 %
============= ========== ============ =============
BORROWINGS
CMO borrowings $ 1,078,797 $ 17,081 6.33 % $ 974,106 $ 16,029 6.58 %
Reverse repurchase agreements - mortgages 281,471 4,447 6.32 716,903 11,811 6.59
Reverse repurchase agreements - securities 22,992 380 6.61 15,106 233 6.17
------------- ---------- ------------ -------------
Total borrowings on Mortgage Assets $ 1,383,260 $ 21,908 6.34 % $ 1,706,115 $ 28,073 6.58 %
============= ========== ============ =============
Net Interest Spread 1.16 % 1.42 %
Net Interest Margin 1.96 % 2.07 %
</TABLE>
Interest Income on Mortgage Assets: Interest income on CMO collateral
increased 12% to $20.0 million during the first quarter of 1999 as
compared to $17.8 million during the first quarter of 1998 as average CMO
collateral increased 20% to $1.2 billion as compared to $1.0 billion,
respectively. Average CMO collateral increased as the Long-Term Investment
Operations issued CMOs totaling $371.1 million, which were collateralized
by $391.0 million of mortgage loans held by the Long-Term Investment
Operations since the end of the first quarter of 1998. The weighted
average yield on CMO collateral increased to 6.80% during the first
quarter of 1999 as compared to 6.77% during the first quarter of 1998. The
net interest spread between CMO collateral and borrowings increased to
0.47% during the first quarter of 1999 as compared to 0.19% during the
first quarter of 1998.
Interest income on mortgage loans held-for-investment decreased 91% to
$802,000 during the first quarter of 1999 as compared to $8.5 million
during the first quarter of 1998 as average mortgage loans
held-for-investment decreased 84% to $53.4 million as compared to $328.3
million, respectively. Average mortgage loans held-for-investment
decreased due to decreased loan acquisitions by IMH, which were $202.0
million during the first quarter of 1999 as compared to $677.7 million
during the first quarter of 1998. The weighted average yield on mortgage
loans held-for-investment decreased to 6.01%, during the first quarter of
1999, as compared to 10.30% during the first quarter of 1998. The decrease
in the weighted average yield was primarily due to the sale of
high-yielding second trust deeds throughout 1998 and the securitization of
high yielding second trust deeds during the first quarter of 1999.
Interest income on finance receivables decreased 42% to $5.6 million
during the first quarter of 1999 as compared to $9.6 million during the
first quarter of 1998 as average finance receivables decreased 43% to
$253.4 million as compared to $443.5 million, respectively. The decrease
in interest income on finance receivables was primarily the result of a
decrease of 52% in average finance receivables to affiliated companies to
$183.9 million, during the first quarter of 1999, as compared to $380.0
million, during the first quarter of 1998, as IFC's mortgage loan
acquisitions decreased to $257.6 million as compared to $608.0 million,
respectively. Interest income on finance receivables to affiliates
<PAGE>
decreased 51% to $4.0 million during the first quarter of 1999 as compared
to $8.2 during the first quarter of 1998. The weighted average yield on
affiliated finance receivables increased to 8.66% during the first quarter
of 1999 as compared to 8.59% during the first quarter of 1998. Interest
income on finance receivables to non-affiliated mortgage banking companies
increased 7% to $1.6 million, during the first quarter of 1999, as
compared to $1.5 million, during the first quarter of 1998, as average
finance receivables outstanding to non-affiliated mortgage banking
companies increased 9% to $69.5 million as compared to $63.7 million,
respectively. The weighted average yield on non-affiliated finance
receivables decreased to 9.02% during the first quarter of 1999 as
compared to 9.18% during the first quarter of 1998. The overall weighted
average yield on finance receivables increased to 8.76% during the first
quarter of 1999 as compared to 8.67% during the first quarter of 1998.
Interest income on investment securities available-for-sale increased
65% to $3.3 million during the first quarter of 1999 as compared to $2.0
million during the first quarter of 1998 as average investment securities
available-for-sale, net of securities valuation allowance, increased 40%
to $100.5 million as compared to $71.8 million. The increase in average
securities available-for-sale was the result of the Long-Term Investment
Operations purchasing and retaining mortgage-backed securities of $59.1
million, which were issued by IFC as REMICs, since the end of the first
quarter of 1998. The weighted average yield on investment securities
available-for-sale increased to 13.24% during the first quarter of 1999 as
compared to 11.39 % during the first quarter of 1998.
Interest expense on borrowings: Interest expense on CMO borrowings
increased 7% to $17.1 million during the first quarter of 1998 as compared
to $16.0 million during the first quarter of 1997 as average borrowings on
CMO collateral increased 13% to $1.1 billion as compared to $974.0
million, respectively. Average CMO borrowings increased as the Long-Term
Investment Operations issued CMOs totaling $371.1 million since the end of
the first quarter of 1998. The weighted average yield of CMO borrowings
decreased to 6.33% during the first quarter of 1999 as compared to 6.58%
during the first quarter of 1998.
Interest expense on reverse repurchase borrowings used to fund the
acquisition of mortgage loans and finance receivables decreased 63% to
$4.4 million during the first quarter of 1999 as compared to $11.8 million
during the first quarter of 1998. The average balance of these reverse
repurchase agreements decreased 61% to $281.5 million during the first
quarter of 1999 as compared to $716.9 million during the first quarter of
1998. This decrease was primarily related to a decrease in finance
receivables made to IFC as IFC's acquisition of mortgage loans were lower
during the first quarter of 1999 as compared to the first quarter of 1998.
The weighted average yield of these reverse repurchase agreements
decreased to 6.32% during the first quarter of 1999 as compared 6.59%
during the first quarter of 1998.
The Company also uses mortgage-backed securities as collateral to
borrow under reverse repurchase agreements to fund the purchase of
mortgage-backed securities and to act as an additional source of liquidity
for the Company's operations. Interest expense on these reverse repurchase
agreements increased 63% to $380,000 during the first quarter of 1999 as
compared to $233,000 during the first quarter of 1998. The average balance
on these reverse repurchase agreements increased 52% to $23.0 million
during the first quarter of 1999 as compared to $15.1 million during the
first quarter of 1998. The weighted average yield of these reverse
repurchase agreements increased to 6.61% during the first quarter of 1999
as compared 6.17% during the first quarter of 1998.
Provision for Loan Losses
The Company recorded loan loss provisions of $1.5 million during the
first quarter of 1999 as compared to $1.9 million during the first quarter
of 1998. The amount provided for loan losses during the first quarter of
1999 decreased primarily due lower levels of mortgage loan acquisitions as
compared to the first quarter of 1998. IMH acquired $202.0 million of
mortgage loans during the first quarter of 1999 as compared to loan
acquisitions of $677.7 million during the first quarter of 1998.
Non-Interest Income
<PAGE>
Equity in Net Earnings of IFC
During the first quarter of 1999, equity in net earnings of IFC
decreased to $1.1 million as compared to $2.2 million during the first
quarter of 1998. Equity in net earnings of IFC decreased during the first
quarter of 1999 primarily due to a decrease of $3.9 million in IFC's net
interest income to $87,000, as compared to $4.0 million during the first
quarter of 1998. The decrease in IFC's net interest income was partially
offset by increases of $1.3 million in gain on sale of loans and $1.1
million in loan servicing income.
IFC's net interest income decreased as average mortgage loans
held-for-sale decreased 60% to $209.6 million during the first quarter of
1999 as compared to $527.7 million during the first quarter of 1998.
Average mortgage loans held-for-sale decreased as mortgage loan
acquisitions decreased 58% to $257.6 million during the first quarter of
1999 as compared to mortgage loan acquisitions of $608.0 million during
the first quarter of 1998. Mortgage loan acquisitions decreased as bulk
loan acquisitions decreased to $13.7 million during the first quarter of
1999 as compared to bulk loan acquisitions of $231.4 million during the
first quarter of 1998. Mortgage loan acquisitions also decreased during
the first quarter of 1999 as IFC continues to recover from the
deterioration of the mortgage-backed securitization market which occurred
in 1998. In response to the deterioration of the mortgage market, IFC
raised interest rates on its loan programs and decreased the amount of
premiums paid on its loan acquisitions. As a result of this strategy, IFC
experienced lower loan acquisition levels during the first quarter of 1999
and the fourth quarter of 1998. During the first quarter of 1999, IFC
continued to rebuild its mortgage loan acquisitions to previous levels by
offering its sellers competitive and flexible mortgage products in
addition to the introduction of two new divisions. The new divisions are
focused on getting closer to the borrower through a retail based portfolio
retention program, along with interacting directly with the mortgage
broker community. IFC expects to increase loan origination levels through
the introduction of these new divisions, which will be built on the
current centralized Conduit Operations' and will employ significant
electronic technologies to further increase operational efficiencies.
IFC's net interest income also decreased during the first quarter of
1999 as the weighted average yield on mortgage loans held-for-sale
decreased to 8.72% as compared to a weighted average yield of 10.75%
during the first quarter of 1998. The weighted average yield decreased as
IFC sold or securitized high-yielding second trust deeds it acquired
during the latter half of 1997. IFC acquired $576.1 million of
high-yielding second trust deeds from Preferred Credit Corporation, which
were sold or securitized during 1998.
IFC's gain on sale of loans increased to $5.0 million during the first
quarter of 1999 as compared to $3.7 million during the first quarter of
1998. IFC returned to profitability on the sale of its mortgage loans
during the first quarter of 1999 as compared to the fourth quarter of 1998
as the mortgage-backed securitization market recovered from the volatility
that occurred during 1998. In line with the Company's overall strategy to
improve liquidity, IFC sold mortgage loans on a whole loan basis for cash,
as opposed to sales through asset-backed securitizations for non-cash
gains. The sale of these loans on a servicing released basis reduced IFC's
exposure to further prepayment risk. The sale of delinquent loans reduced
IFC's and the Company's exposure to future losses. IFC sold mortgages
totaling $163.0 million to third party investors, during the first quarter
of 1999, as compared to loan sales of $100.3 million during the first
quarter of 1998. IFC also sold $198.8 million in principal balance of
mortgages to IMH during the first quarter of 1999 as compared to $658.7
million during the first quarter of 1998. The sale of loans to IMH during
the first quarter of 1999 increased IFC's deferred income to $11.1 million
at March 31, 1999 as compared to $10.6 million at December 31, 1998.
The Company records 99% of the earnings or losses from IFC as the
Company owns 100% of IFC's preferred stock, which represents 99% of the
economic interest in IFC.
Equity in Net Earnings of ICH
During the first quarter of 1999, equity in net earnings of ICH
decreased to none as compared to $378,000 during the first quarter of
1998. Equity in net earnings of ICH decreased during the first quarter of
1999 as the Company sold its investment in ICH during the fourth quarter
of 1998. As such, the Company no longer records earnings or losses of ICH.
<PAGE>
Non-Interest Expense
During the first quarter of 1999, net earnings were adversely affected
by an increase in non-interest expense to $2.3 million as compared to
$120,000 during the first quarter of 1998. The increase was primarily due
to increases of $1.2 million in (gain) loss on disposition of real estate
owned ("REO"), $497,000 in professional services and $422,000 on the
write-down of investment securities available-for-sale.
During the first quarter of 1999, (gain) loss on disposition of REO was
$551,000 as compared to $(692,000) during the first quarter of 1998.
Professional services increased to $811,000 during the first quarter of
1999 as compared to $343,000 during the first quarter of 1998 primarily
due to legal, tax, printing and accounting services performed for the
Company.
The write-down on investment securities available-for-sale increased to
$422,000, during the first quarter of 1999, as compared to none, during
the first quarter of 1998, as an investment security available-for-sale
was deemed to be other than temporarily impaired.
Credit Exposures
The Company's total allowance for loan losses expressed as a percentage
of Gross Loan Receivables which includes loans held-for-investment, CMO
collateral and finance receivables was 0.41% at March 31, 1999 as compared
to 0.47% at December 31, 1998. The allowance for loan losses was
determined primarily on the basis of management's judgment of net loss
potential, including specific allowances for any known impaired loans,
changes in the nature and volume of the loan portfolio, the value of the
collateral, and current economic conditions that may affect the borrowers'
ability to pay.
LIQUIDITY AND CAPITAL RESOURCES
Overview. The Company's business operations are primarily funded from
monthly interest and principal payments from its mortgage loan and
investment securities portfolios, reverse repurchase agreements secured by
mortgage loans and mortgage-backed securities, adjustable- and fixed-rate
CMO financing, proceeds from the sale of mortgage loans and the issuance
of REMICs, and proceeds from the issuance of Common Stock through
secondary stock offerings, DRSSP, and its structured equity shelf. The
acquisition of mortgage loans and mortgage-backed securities by the
Long-Term Investment Operations are primarily funded from monthly
principal and interest payments, reverse repurchase agreements, CMO
financing, and proceeds from the sale of Common Stock. The acquisition of
mortgage loans by the Conduit Operations are funded from reverse
repurchase agreements, the sale of mortgage loans and mortgage-backed
securities, and the issuance of REMICs. Short-term financing (finance
receivables) provided by the Warehouse Lending Operations are funded from
reverse repurchase agreements and proceeds from the sale of Common Stock.
The Company's ability to meet its long-term liquidity requirements is
subject to the renewal of its credit and repurchase facilities and/or
obtaining other sources of financing, including additional debt or equity
from time to time. Any decision by the Company's lenders and/or investors
to make additional funds available to the Company in the future will
depend upon a number of factors, such as the Company's compliance with the
terms of its existing credit arrangements, the Company's financial
performance, industry and market trends in the Company's various
businesses, the general availability of and rates applicable to financing
and investments, such lenders' and/or investors' own resources and
policies concerning loans and investments, and the relative attractiveness
of alternative investment or lending opportunities.
During the latter half of 1998, a global liquidity crisis resulted in a
deterioration of the mortgage-backed securitization market and created
liquidity problems for the Company as the Company's lenders made margin
calls on their warehouse and reverse repurchase lines. Margin calls result
from the Company's lenders evaluating the market value of underlying
collateral securing the borrowings and requiring additional equity or
collateral. The Company sold Mortgage Assets at significant losses during
the fourth quarter of 1998 to meet the margin calls. The sale of Mortgage
Assets and the issuance of Series B 10.5% Cumulative Convertible Preferred
Stock provided much needed cash. As a result, the Company had no margin
calls on its reverse repurchase agreements during the first quarter of
<PAGE>
1999. The Company's ratio of debt to equity decreased to 5.54 at March 31,
1999 as compared to 7.90 at September 30, 1998. Average cash and cash
equivalents were $21.3 million during the first quarter of 1999 as
compared to $8.7 million during the fourth quarter of 1998. The Company
paid its third quarter dividend, which had been previously delayed, on
January 6, 1999.
Further, the mortgage-backed securitization market stabilized and
recovered during the first quarter of 1999 allowing the Company to close
its first CMO since June of 1998. The issuance of the CMO provides the
Company with immediate liquidity, a locked-in interest rate spread and
eliminates the Company's exposure to margin calls on such loans. The
reduction of staff at IFC during the fourth quarter of 1998 and a decrease
in loan acquisitions during the fourth quarter of 1998 and the first
quarter of 1999 along with a return to profitability has provided
additional liquidity from operating activities. However, the Company
expects loan acquisitions and originations will increase during 1999 along
with an increase in staff which will require cash.
The Company does not believe its current operating cash flows are
sufficient to fund the growth of its mortgage loan and investment
securities portfolios, lending activities, payment of cash dividends due
to exposure to margin calls on its reverse repurchase agreements. The
Company continues to explore alternatives for increasing liquidity through
additional asset sales and capital raising efforts. However, no assurances
can be given that such alternatives will be available, or if available,
under comparable rates and terms as currently exist. As such, during the
first quarter of 1999, the Company entered into a definitive agreement to
acquire a California thrift and loan. The Company currently does not
anticipate any significant regulatory impediments during the application
process. The acquisition of the thrift and loan could reduce the Company's
reliance on outside reverse repurchase facilities with commercial and
investment banks. In addition, the thrift and loan could give IFC access
to lower cost of funds and borrowings from the Federal Home Loan Bank.
Long-Term Investment Operations
Source of funds
The Long-Term Investment Operations uses CMO borrowings to finance
substantially all of its mortgage loan portfolio. Terms of the CMO
borrowings require that an independent third party custodian hold the
mortgages. The maturity of each class is directly affected by the rate of
principal prepayments on the related collateral. 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 rating agencies. The
amount of equity invested in CMOs by the Long-Term Investment Operations
is also determined by the Company based upon the anticipated return on
equity as compared to the estimated proceeds from additional debt
issuance. Total credit loss exposure is limited to the equity invested in
the CMOs at any point in time. The Company issued a CMO in February of
1999 for $186.1 million which was collateralized by $124.0 million of
adjustable-rate mortgages and $77.8 million of residential loans secured
by second trust deeds. At March 31, 1999, the Long-Term Investment
Operations had $1.1 billion of CMO borrowings used to finance $1.2 billion
of CMO collateral.
The Long-Term Investment Operations may pledge mortgage-backed
securities as collateral to borrow funds under reverse repurchase
agreements. The terms under these reverse repurchase agreements are
generally for 30 days with interest rates ranging from the one-month
London Interbank Offered Rate ("LIBOR") plus 0.45% to 2.00% depending on
the type of collateral provided. As of March 31, 1999, the Long-Term
Investment Operations had $21.9 million outstanding under these reverse
repurchase agreements which were secured by $73.1 million in fair market
value of mortgage-backed securities.
During the first quarter of 1999, the Company raised capital of
$909,000 from the sale of 209,426 shares of Common Stock issued through
its DRSPP.
Use of funds
IMH has a reverse repurchase arrangement with a commercial bank, which
is an affiliate of ICII, whereby IMH borrowed $10.0 million for general
working capital needs. The reverse repurchase arrangement expires on
December 31, 1999. The interest rate on the reverse repurchase arrangement
is LIBOR plus 2.0%. Additional funds cannot be advanced under the reverse
repurchase arrangement and terms require that principal payments of
$833,000 be paid monthly. As of March 31, 1999, IMH's outstanding
borrowings under the reverse repurchase arrangement was $7.5 million.
<PAGE>
IMH purchased $202.0 million of mortgage loans from IFC during the
first quarter of 1999.
The Company repurchased 684,100 shares of Common Stock for $3.9
million.
Warehouse Lending Operations
Source of funds
The Warehouse Lending Operations finances the acquisition of mortgage
loans by the Long-Term Investment Operations and Conduit Operations
primarily through borrowings on reverse repurchase agreements with third
party lenders. IWLG has obtained reverse repurchase facilities from major
investment banks to provide financing as needed. Terms of the reverse
repurchase agreements require that the mortgages be held by an independent
third party custodian giving the Warehouse Lending Operations the ability
to borrow against the collateral as a percentage of the outstanding
principal balance. The borrowing rates vary from 85 basis points to 200
basis points over one-month LIBOR, depending on the type of collateral
provided. The margins on the reverse repurchase agreements are based on
the type of mortgage collateral used and generally range from 75% to 101%
of the fair market value of the collateral.
The following table presents information on available reverse
repurchase agreements as of March 31, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
Borrowing Amount
Limit Outstanding Interest rate
--------------- -------------- -----------------------
<S> <C> <C> <C>
Lender A (1)............................................ $ 210,014 $ 210,014 Libor + 0.85% to 2.00%
Lender B (1)............................................ 23,119 23,119 Libor + 1.00%
--------------- --------------
Total $ 231,133 $ 231,133
=============== ===============
</TABLE>
(1) Uncommitted reverse repurchase facility.
Conduit Operations
Source of funds
The Conduit Operations has entered into reverse repurchase agreements
to obtain financing of up to $600.0 million from the Warehouse Lending
Operations to provide IFC mortgage loan financing during the period that
IFC accumulates mortgage loans and until the mortgage loans are
securitized and sold. The margins on the reverse repurchase agreements are
based on the type of collateral provided and generally range from 95% to
100% of the fair market value of the collateral. The interest rates on the
borrowings are indexed to Prime, which was 7.75% at March 31, 1999. At
March 31, 1999, the Conduit Operations had $109.3 million outstanding
under the reverse repurchase agreement.
During the first quarter of 1999, the Conduit Operations sold $163.0
million in principal balance of mortgage loans to third-party investors on
a servicing released basis. In addition, IFC sold $198.8 million in
principal balance of mortgage loans to the Long-Term Investment Operations
during the first quarter of 1999. By securitizing and selling loans on a
periodic and consistent basis the reverse repurchase agreements were
sufficient to handle IFC's liquidity needs during the first quarter of
1999.
<PAGE>
Cash Flows
Operating Activities - During the first quarter of 1999 net cash
provided by operating activities was $16.2 million. Cash provided by
operating activities was primarily due to an increase in other assets and
liabilities of $9.1 million, which was primarily the result of a $7.8
million decrease in due from affiliates, and net earnings of $6.2 million.
Investing Activities - During the first quarter of 1999 net cash
provided by investing activities was $9.1 million. Cash provided by
investing activities was primarily due to a decrease in finance
receivables of $111.2 million as loan acquisitions at IFC decreased during
the first quarter of 1999. The increase in cash from a reduction in
finance receivables was partially offset by an increase of $56.4 million
in CMO collateral and $38.6 million in mortgage loans held-for-investment
as IMH acquired $202.0 million of mortgage loans from IFC during the first
quarter of 1999.
Financing Activities - During the first quarter of 1999 net cash used
in financing activities was $43.6 million. Cash used in financing
activities was primarily due to a decrease of $68.6 million in reverse
repurchase agreements, a $12.1 million payment for the Company's third
quarter stock dividend and the repurchase of the Company's Common Stock
for $3.9 million. CMO borrowings used to fund the acquisition of mortgage
loans partially offset cash used in financing activities by $186.1
million.
Inflation
The 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 operations' 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. During periods of
decreasing interest rates, borrowers may prepay their mortgages, which in
turn may adversely affect the Company's yield and subsequently the value
of its portfolio of Mortgage Assets.
Year 2000 Compliance
Project Status
The Company's Year 2000 project was approximately 85% complete as of
the end of April 1999. The Company contracted with an outside vendor to
provide coordination, support, testing and implementation in regards to
Year 2000 compliance of hardware and software systems, both on an
information technology ("IT") and non-IT level.
The Company also has its own in-house IT department that is currently
assisting the outside vendor. The Company's primary IT systems include
loan servicing, which is contracted to an outside vendor, loan tracking,
master servicing and accounting and reporting. The Company has obtained
information and the published plan in regards of Year 2000 compliance from
the loan servicing systems' outside vendor. The Company's IT department
will continue to monitor the vendor's progress on Year 2000 compliance.
The loan tracking system is currently in compliance with Year 2000. The
master servicing system is currently being tested and the Company expects
that this system will be Year 2000 compliant in the second quarter of
1999. The accounting and reporting system is currently Year 2000
compliant. The Company's non-IT systems include its file servers, network
systems, workstations and communication systems. As of March 31, 1999, the
upgrade of the Company's communication systems has been completed, which
regardless of the Year 2000 issue, required an upgrade to comply with
terms of the service agreement. Testing on all other in-house hardware has
been completed as of March 31, 1999.
The Year 2000 project is divided into two primary phases, as follows:
(1) define scope of project and identify all IT and non-IT systems, and
(2) testing of existing systems and implementation of new systems, if
required. The outside contractor on the Year 2000 project submits monthly
status reports to the Company's IT manager and communicates with the IT
department on a daily basis. The Company's executive committee which
includes the CEO and Chairman, President, and Chief Financial Officer
review the progress of the Company's Year 2000 project through monthly
status reports and reviews with the Company's IT manager.
<PAGE>
Phase I - Define Scope of Project
This phase primarily included the inventorying of Year 2000 items,
contacting outside vendors, including reviewing contractual terms and
conditions, reviewing internal software for compliance and determining
costs to complete the project. As of the end of October 1998, Phase I of
the project had been completed. Phase I of the project also included the
testing and implementation or upgrade of non-IT systems.
Phase II - Testing of Systems
This phase of the Year 2000 project can be divided into four separate
processes, as follows: (1) Compliance Questionnaires, (2) Hardware
Certification Information, (3) Software/Data Testing, and (4) Hardware
Testing.
Compliance Questionnaires and Hardware Certification Information.
As of April 30, 1999, these portions of Phase II were complete.
Software/Data Testing. As of April 30, 1999, this portion of Phase II
was approximately 80% complete. The remaining tasks within this process
include analyzing list of software being used, testing all software
programs, testing all data from incoming sources, testing all outgoing
data processes and reporting. The Company expects that this process will
be complete by June 30, 1999.
Hardware Testing. As of April 30, 1999, this portion of Phase II had
not been started. The Company has completed all testing and is compliant
with all internal Year 2000 hardware issues.
Costs
The total cost associated with required modifications or installations
to become Year 2000 compliant is not expected to be material to the
Company's financial condition. The estimated cost of the project is
expected to be approximately $500,000, of which approximately $108,000 of
the cost will be paid by ICH. The total estimate of the project includes
the cost to upgrade the Company's communications system, which was
$140,000. As of April 30, 1999, the Company had paid $268,000 to the
outside vendor for completed work on the project. The majority of the
Company's estimated cost for the Year 2000 compliance has been or will be
spent on software upgrades and writing new program code on existing
proprietary software. Since most of the Company's hardware has been
purchased within the last two years, the cost of replacing hardware will be
minimal.
Risks
The Company does not anticipate any material disruption of its
operations as a result of any failure by the Company to be compliant.
However, there can be no assurance that there will not be a delay in, or
increased costs associated with, the need to address the Year 2000 issue.
The Company also relies, directly and indirectly, on other businesses such
as third party service providers, creditors and financial organizations
and governmental entities. Even if the Company's computer systems are not
materially adversely affected by the Year 2000 issue, the Company's
business and operations could be materially adversely affected by
disruptions in the operations of the enterprises with which the Company
interacts.
Contingency Plans
The Company believes its Year 2000 compliance process should enable it
to be successful in modifying its computer systems to be Year 2000
compliant. As previously stated, acceptance testing and sign-off has begun
with respect to the Company's in-house systems. In addition to Year 2000
compliance system modification plans the Company has also developed
contingency plans for all other systems classified as critical and high
risk. These contingency plans provide timetables to pursue various
alternatives based upon the failure of a system to be adequately modified
and/or sufficiently tested and validated to ensure Year 2000 compliance.
However, there can be no assurance that either the compliance process or
contingency plans will avoid partial or total system interruptions or the
costs necessary to update hardware and software would not have a material
adverse effect upon the Company's financial condition, results of
operation, business or business prospects.
<PAGE>
Transactions with Related Parties
In January 1999, IWLG extended a $50.0 million warehouse line to WSI,
which James Walsh, a Director of the Company, is Executive Vice President.
Advances under the warehouse line bear interest at a rate of Prime + .50%.
As of March 31, 1999, there was $25.2 million outstanding under the
warehouse line agreement.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Securitizations/Sales - Hedging Interest Rate Risk. The most
significant variable in the determination of gain on sale in a
securitization is the spread between the weighted average coupon on the
securitized loans and the pass-through interest rate. In the interim
period between loan origination or purchase and securitization or sale of
such loans, the Company is exposed to interest rate risk. The majority of
loans are securitized or sold within 90 days of origination of purchase.
However, a portion of the loans are held-for-sale or securitization for as
long as 12 months (or longer, in very limited circumstances) prior to
securitization or sale. If interest rates rise during the period that the
mortgage loans are held, in the case of a securitization, the spread
between the weighted average interest rate on the loans to be securitized
and the pass-through interest rates on the securities to be sold (the
latter having increased as a result of market rate movements) would
narrow. Upon securitization or sale, this would result in a reduction of
the Company's related gain or loss on sale.
Interest- and Principal-Only Strips. The Company had interest- and
principal-only strips of $41.2 million and $43.1 million outstanding at
March 31, 1999 and December 31, 1998, respectively. These instruments are
carried at market value at March 31, 1999 and December 31, 1998. The
Company values these assets based on the present value of future cash flow
streams net of expenses using various assumptions.
These assets are subject to risk of accelerated mortgage prepayment or
losses in excess of assumptions used in valuation. Ultimate cash flows
realized from these assets would be reduced should prepayments or losses
exceed assumptions used in the valuation. Conversely, cash flows realized
would be greater should prepayments or losses be below expectations.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
Not applicable.
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the first
quarter of 1999.
ITEM 5: OTHER INFORMATION
On March 1, 1999, H, Wayne Snavely resigned as a director from IMH's Board
of Directors.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule.
(b) Reports on Form 8-K:
A current report on Form 8-K was filed on February 19, 1999 reporting
Items 5 and 7
<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.
IMPAC MORTGAGE HOLDINGS, INC.
By: /s/ Richard J. Johnson
Richard J. Johnson
Executive Vice President
and Chief Financial Officer
Date: May 13, 1999
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 15,574
<SECURITIES> 104,373
<RECEIVABLES> 1,458,570
<ALLOWANCES> (5,970)
<INVENTORY> 0
<CURRENT-ASSETS> 236,428
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,632,027
<CURRENT-LIABILITIES> 262,955
<BONDS> 0
0
12
<COMMON> 227
<OTHER-SE> 247,509
<TOTAL-LIABILITY-AND-EQUITY> 1,632,027
<SALES> 30,399
<TOTAL-REVENUES> 32,109
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,262
<LOSS-PROVISION> 1,499
<INTEREST-EXPENSE> 22,153
<INCOME-PRETAX> 6,195
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,195
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,195
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.20
</TABLE>