Magazine article American Banker

Impac Profits, Margins Drop

Magazine article American Banker

Impac Profits, Margins Drop

Article excerpt

Impac Mortgage Holdings Inc. reported late Tuesday that fourth-quarter earnings plunged 78% from a year earlier, to $25.3 million, mostly because of a swing in the fair value of derivatives.

However, even excluding the mark-to-market derivative change, the Newport Beach, Calif., real estate investment trust's net income fell 48%, to $21.9 million.

Loan purchases and originations at Impac's mortgage unit, Impac Funding Corp., fell 6%, to $6 billion; 95% of those loans were alternative-A, while the rest were "B" and "C" credits.

To maintain liquidity, the unit sold $3.6 billion of whole loans. However, the profitability of those sales was hit hard by the widening of credit and bond spreads.

Because of the weak return on loan sales, IFC did not pay a dividend to its parent. Last month, in part because of that lack of dividend, Impac said it would cut its fourth-quarter dividend by 55% from the third quarter, to 20 cents a share. Adjusted net interest margins on mortgage assets fell 45 basis from a year earlier, to just 0.35%, because of competition and rate fluctuations.

The lack of a dividend from IFC and the margin drop helped drive down estimated taxable income available to common stockholders by 71% from a year earlier, to $14.7 million, or 17 cents a share.

Impac's assets rose 16%, to $27.7 billion at yearend.

Nonperforming assets, which consist of mortgages that are delinquent by 90 days or more, increased 64 basis points, to 1.73% as of yearend. …

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