In a teleconference held Tuesday, Joseph R. Tomkinson, president and CEO of Impac, cited interest rate cuts by the Federal Reserve Board as a major factor contributing to the REIT's exceeding analysts' expectations for its quarterly earnings.

"The substantial increase in taxable earnings during the second quarter benefited from decreased borrowing costs and wider net interest margins as interest rates on adjustable collateralized mortgage obligation borrowings continued to decline due to short-term interest rate reduction by the Federal Reserve Bank," he said. "However, in anticipation of the likelihood that short-term interest rates may rise some time in the future, the company purchased interest rate sensitive financial instruments during the second quarter to mitigate possible adverse changes in net interest margins."

Other factors contributing to the overall healthy outlook for Impac include management's move to retire outstanding senior subordinated debt in June, three years before the scheduled maturity date. The company also repurchased $10 million of its preferred stock, thereby increasing its liquidity.

Total REIT assets climbed 16% to $2.2 billion during the quarter, and loan acquisitions and originations increased 82% to $776 million compared to $427.3 million for the same period of 2000. Total loan sales for the REIT's Impac Funding Corp. division also increased substantially from the first quarter, with $615.5 million of sales resulting in a gain of $12.9 million during the second quarter compared to $462 million in sales and a $7.6 million gain for the previous quarter.

Last week the IFC purchased the assets and select liabilities of Old Kent Mortgage Corp. based in North San Diego County. The sale is scheduled to close on August 31, 2001.

The REIT's estimated taxable earnings for the first six months of 2001 were $16.7 million or $0.62 per common share. IFC's mortgage servicing portfolio increased 20% to $4.8 billion for the first half of the year, a 60% increase over the same period a year ago.

Impac Mortgage Holdings has a number of divisions under its corporate umbrella including IFC, Impac Lending Group, Impac Warehouse Lending Group, and Impac Mortgage Acceptance Corp., which specializes in the acquisition of residential and commercial loans.

Due to the restructuring of its loan portfolios, and the turnaround in earnings the REIT has made since the liquidity crisis in the fall of 1999, Impac will be distributing dividends to shareholders in the third quarter, six months sooner than management had originally anticipated.

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