IMH - Earnings call transcript Q3 2020 | Impac Mortgage Holdings, Inc.

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Operator

Good afternoon, ladies and gentlemen. And welcome to the Impac Mortgage Holdings’ Third Quarter 2020 Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. to Chief conference Administrative like host to now Moisio, Justin Officer. would turn over the your I

You may begin.

Justin Moisio

Good afternoon. XXXX quarter Mortgage Holdings’ Thank you for earnings joining call. Impac third

expressly documents of get introducing guidance, from in and projections During and identify factors GAAP exposure, those cash risk is started other this effective mortgage will the including Mortgage rate earnings, herein. but make interest duty And market the call, forward-looking limited, forward-looking recently cause update to materially and our given. Exchange CEO we information by taxable under contain in to risk presentation, factors and statements and or projections that as regards of and flows, results I could business you to general contained the XX-Qs These statements. XXXX. Impac market to differ any conditions. of date production important and like our and Act I to filed to, Chairman This not actual disclaim or any most would would the Holdings. XX-K like Securities Mangiaracina, we to risk George refer the Form in outlook

George Mangiaracina

the the our executed XXXX, earnings for Mortgage Thank had with the position the the company's our business the Thank the on on of by the for you, on a of second discuss actions and including Holdings’ of of company's state April company's and firm's On These platforms, settlement end end and improve May, of retail conditions date In a discussed third The company X, will have company's activities. lending call. the the this a date you return has promissory we Justin. call stabilized. X, this quarter earnings company's originating third we profitability sufficiently business to stated restart production to and third of afternoon. executive early re-launch quarter of At And that basis note. actions external actively joining in also by preserved that factors Good activities market restarting XXXX TPO me Impac liquidity and and of quarter August the lending loans. the convertible anticipated and to company is accomplishments view company quarter. expressed key afternoon. de-leveraging to basis. update The team the the call, number retail time, we the we that return trade TPO the certain elected extension June

margins industry. was entered we QX, between reflective the As relative by characterized imbalance excess across capacity to constraints the market strong demand of consumer an

positive mark related As to its we the announcement a product, initial recent activities FHA, non-QM XXXX, provided per both XXXX, and with the that million for or returned earnings benefit and diluted the company. of per firm's million company's earnings GSE, the share the which should positive. QX lending Origination we Fourth return core results $X.X competency pleased the GAAP anniversary profitability. that the diluted to been activities of from offering we metrics profitability $X.X QM credit to has common VA $X.XX of announce and re-engaged earnings since earnings our quarter share. alternative core in have and common to reported in further or GAAP products core $X.XX first firm jumbo historically net of the are that quarter of XXXX The public company XXth November QX been

the was end versus lock firm's temporary volumes for our in June during September third versus quarter XXXX activities As excess of reflect only pipeline it million suspension production, quarter market relates further in The lending million month second dislocations. XXXX $XXX firm month end. X the million of XXX generated quarter XXXX. to origination $XXX as the million volume of of second in of

are to throughout mortgage in XXXX. of MBA lenders our the view in lending crisis Bankers by respect market highest forecasts quality, performance, past has mortgage challenging alternative its re-emergence. performance pre-COVID standards non-QM, credit XXXX, on by Mortgage Association in is tighter environment to and lending, it is trillion strict project across to originations and totals ATR the While future and guidelines. $X.X not The with current repay its our to amongst over XX the years. returned ability industry suggest characterized forecast firm’s we QX volumes, long-term favorable $X.X to XXXX, encouraged in market the non-QM a for industry, defined With and while adherence by line

in believe The returns capital in opportunity the market space to sector. a of sufficient has return non-QM. improving to demands ample seen market the the create continue We investors markets and liquidity and number and

XXXX. position As loan whole as will our has principal continued million sponsorship believe of due to or in capital stated the holders the cash prepared third were promissory focus our XXXX. maturity announcing future has to and thank following partners decrease volatility. of the market the million notes XXXX. notes XX these navigate at the press liquidity final pay the The of months strong extend notes earlier, of in to objectives, convertible improving a risk a firm XX to scheduled this down position, These date additional well unencumbered for and the with line firm's X In aggregate protecting firm's XXXX was XX common for we quarter. and into release, principal October XX primary entered relating the November X, like support X, on The November that their an amount extension. firm X, our agreements agreements May as note also the has the to on been would We with management $X.XX million per firm's objective end share liquidity the approximately firm and

diversification at conversion price remain growth of including stability margin interest terms as the at to market All navigate as a rate and safety and share. liquidity the a $XX.XX well with company potential the notes extension of to dislocations. provides the and support the The future X% the same, of ongoing ample

Before and the of CFO, it discuss I our I employee over our returning base, culture of the remaining over Directors would Paul, with for management again, also to like to mission Board Paul thank would operating hand third and to enthusiasm. focus the dedicated our for you and loyal to the stakeholder results I and our firm for quarter. Licon, creating excitement value senior to to call XXXX. team like commend our turning steadfast in to their

Paul Licon

QX, done by in our on production resume of to production for funding have to October, million George. operations success Not Right. we managing XXX have we In and continued the million in we while disruptions caused had our X.X in lending from after June Thank increasing to operations liquidity execute increasing to market month only COVID. September carefully due XXX you, to pausing March in so plan million ramp-up and profitability.

us reflected same an George November long-term of to originally Gain of and for we funding million due As May of convertible QX. gives of QX at to extended the just our growth. that the year versus noted, XXXX this in to have extended in back financial sale quarter notes increased million XX increase the This was use loans on cost. results months our the continue maturity to additional liquidity for The million our capital of XX.X production X.X invest flexibility production. continued XX in in into company were XX

loss earnings a in net core in of XX.X for result production to off. current X.X QX million to a income conditions, XX increase we also constraints. in million operating compensation income, before increased of increasing QX while to of saw XX.X in in As GAAP from of million from in the an a in quarter. QX. expenses production expect loss volumes, led million improvement XX.X expense in from to total personnel million million costs QX, core million in a of tax, capacity market XX.X core QX of by earnings subject QX course, million to swing X.X of million is positive level earnings This, XX.X QX to improved during X.X total core QX, significant Under in from

GAAP loss, before net tax, loss was core before XX XX year-to-date million, year-to-date XXXX loss, million of XXXX XXXX was net while X.X GAAP XX to tax, and million. Our million. earnings year-to-date This of core compares year-to-date

had in unencumbered to Turning cash of the XX..X million million versus to our carrying at the unrestricted million balance which, and we unencumbered QX. loans liquidity, end of loans as million expect in X and on unrestricted in in sheet, QX, end cash of monetize XX of the we value XX.X

million. $XXX currently we borrowing with addition, lines of have warehouse capacity combined In

the turn were to XX-day During low quarter, fund-to-sell the our in times mid-teens range.

in turn the Based to subject and Based and our aggregator of goals. investors near-term times capacity current is cash feel increased remains constraints diversity expect this necessary inherent current we production will month, and focus. to continue our we Officer to we execution our now to product borrowing channel. increase on have an production times our million position, product-turn turn However, liquidity funding Operating our and our conditions, in we as the marketing resources, a QX to over model. discuss $XXX meet productive of exceed risk original that on to and levels increase of Tiffany, I goal Chief income our ramp-up it TPO mix execution

Tiffany Entsminger

Thank you, Paul.

As funding retail we Ramping and target and million the we lending and previously and rate. quarter wholesale the $XXX August on in volume June respectively. month-over-month, run origination projected resumed third mentioned, channels ended for

origination well quarter exits. projected both stretched diversified in end attractive in quarter. right to the capital channels through expect volume a We markets the of of has by spaces, the in the retail the and of as trend government fourth to distribution and continue some focus these increase slight maintain be as primary Margins GSE this XXXX to The availability with wholesale capacity been products. of

inflation talent wage the resources Despite times. their current XXX any and ability recruited capacity expense has some resulting quarter, in adjusted other and our overlays many tightening with lenders the third the to competitive, maintain risk-based GSE continue line across no to and outstanding some support to responsible different. affecting reinstated that, the efficient competition yet, limited in abounds run capacity volume a box Origination these retail TPO have is in least rate industry constraints lenders initial cycle to the and or maintain and of we across monitor We While markets. increased a the government lenders has at million quarter and to many still during normalized last models, the credit over impact our credit and maintain with of for changes industry, most offering and extent month. the in box the of market retained current our overlays

to production. service business employees lead quarter, third to throughout spend also quarter, added promotion to primarily efficient up brokers. has than the Organic quarter just employees company the at The during XX We more and offer cycle XXX supporting consumers perform requiring the continue the volumes currently XXX favorably times over little no end to and employees, retail our third month-over-month. continued second from into of

continue anticipate seasonality, we to we in As products to the in targets, promotion adjust support to marketing channels, manage XXXX. fourth business new increased quarter volume for spend the add and

at mitigation projection. reduced quarter volume As operations capacity to a of to jumbo Synchronization post-closing in ongoing warehouse primary support products We maintain targets. the growth. quarter. is de-risking our settle our as aggregator risk our origination focus our was current scheduled teams the capacity the growth efficiently, delivery, third our sufficient assets strategy as previously noted, continued and our respect around second the and also our part We our for with QM non-QM in believe is volume channel warehouse particularly warehouse in of end between and wholesale released better to

credit investor to the interest alternative products, renewed there for seems COVID-XX In addition be market a products abided liquidity re-emergence of that commitment to non-GSE around alternative during credit dislocation. in

opportunities growth We That to remarks. suite and we non-QM remain and our this products. around concludes a complimentary to product as offering prepared GSE return government our pleased core to in optimistic our results space. the financial are the And

Justin now Moisio, the call will our for CAO, open questions.

Justin Moisio

conflicts received So earnings Unfortunately, the everyone. for questions ahead time Busy with some we scheduling Trevor of call. our had of Securities Cranston call. with JMP year

So, $XXX sent the we you work which the over around So, I'll run and Trevor rate see question target? of an do million some and rate the Trevor's through first was, here. that. level term? kind take What table just read production just for TPO near of monthly can Tiffany still you the as see do channel attainable questions as

Tiffany Entsminger

the is end rate delivery. organization. million that with had a that we across risk we're up open still do of be the would the year. of the quarters The I we target, the million increasing market of. associated effect of rate pretty to I about run to going mindful want on really have we we to something a us markets. right The but level fact capital to With to Sure. TPO, be million the the particularly to $XX immediate that experiencing see on the mindful the could global $XXX aggregated capacity pandemic with run say consider is target ease a execution the support by profitability what remain respect dependent baseline ago to to We're of two a also XXX

Justin Moisio

hiring regarding to question So, production employees, capacity Trevor an goals. reach had additional

what with our you about ties in think I capacity. said current that

to that? touch you So, do on want

Tiffany Entsminger

Sure.

continuously to that additional our staffed also adequately we growth meet capacity in our in right goals, We the to opportunity We're the we're and just goals. our organization run not exceed ahead market curve. support So to beyond rates. provide but to want and There's challenges capacity and want to some, an of stretched current now we hiring. give try our definitely currently stay meet to want the

Justin Moisio

Okay.

Next question margin. to is related

on to then, where as for how sale Paul, thoughts on your into outlook gain just currently, inquired XXXX? going – see in around So that Trevor of an terms So some we that? we our generally, update are and margins

Paul Licon

the execution and seeing prices industry, mean, I average. than higher to we're of similar historical related margins the rest Yes, Sure.

know, the Our outlook for point, continue their capacity and which months you is this increase margins months, at do expect to that XX to compress, to next will industry down XX start their we as work pipelines. participants,

on additional Tom think I some that. has color

Tom Donatacci

Yes.

talking about asset. Liquidity MSRs execution, – gain the loan think has and you know, improved about associated the the since component sale and to quite and you without with hard that talk values I higher are yields it's it's spring on know, of attractive.

portion so, that since earlier [illiquidity] the going hasn't And continues of to improved, liquidity pricing line in the the yet, Interestingly, with spring. year liquidity. improve, in really event into

Impac the the at economic as And probably are in [indiscernible] of And that XX% being market greater than today. MSRs yields yields value probably so, you XX% looking with know, plus. mind, value sees XX%, are offered conventional being to

Paul. the may we retaining so, MSRs at And look in future. Thanks,

George Mangiaracina

I'll Without margins margins – credit And expect on in, say] in, just margins in just I'll universe, product. Yes, specifics products about as to than products, you of of the in GSE better the we non-QM the result, this efforts this each into product, our a directed get the advertising lot is a [let’s on terms non-QM. XX% GSE margins XX% know, about getting better. we've than you greater questions George, you often the again. of around margins know, GSE [LOs] they are product. jump for traditionally, were would In in alternative margins be however, in

where know, when hard an originate, aggressively, pressed risk it's again, non-QM margin there. easier isn't start originating quick profile risk loan to you return [indiscernible] we're to times, turn So, the

cautious Although being back, we are business sensitive we're to around it pricing. building that and very

Justin?

Justin Moisio

Yes.

Trevor's mean, I to was next loans on lack guidelines, in around question progress non-QM of and really opt clarity forbearance. So, around

want you been all? which So, that, you both have don't I know know, know, to I Tom, close Tiffany, at in if very to you weigh

Tom Donatacci

Yes.

you primarily than market are investors you non-QM is as since know, and early appetite, FICO it You speak generally was to as strong say, returned know, LTV. say, it. to to more know, I'll dislocation. XXXX XXXX relates I'd it The I'd market. Guidelines the and as the conservative largely have pre-COVID,

mentioning of is, lot point for the conventional worth to forbearance concerns seen a the another had QX. know, non-QM you government as led in illiquidity significantly, market in think rates particularly it whether products. be eased industry, the have forbearance non-QM And across of concerns we've I those or

sufficient those be to lower point really you we into to, can month mentioned, just you started production. continue see margins generate, this increasing two. you than head supply pre-COVID last George, GSE know, as lower or XXXX. look than as But improve and know, originators via the more and know, you we at know, to You what, is than Liquidity in forward we've

Justin Moisio

great. Okay,

George Mangiaracina

or March It market we're, long term. is market the you larger, – a view, perspective I’ll encouraged Again, hold capital for with, XX. call know, think securitizations the, the [indiscernible] a again. percentage perspective, you capital asset know, it, and on this hung who from financially say From our markets I capital surprised and George, in that markets cleared a legacy [durable] asset good I'd that, was players of non-QM can actually

And And non-QM. have indicates that around clearing that that timeframe the market secondary for very we to a healthy compressed. so – and in assets was that accelerated securitization us,

margins deliver the once into line, back So, come we’ll that. into

Justin Moisio

next second lump piece two it refi demand around of probably that with was how to we see component see for? of the together, then, the These lasting Thanks. demand And do landscape long do questions, related we is how refi. I the competitive – could the the first

Tiffany, you could touch if on that? So,

Tiffany Entsminger

the Sure. I that to right we've stay on XX would the next least rates yet XX through extending low are not at and the that rate. projection months still X% across that The say the consensus based industry lower average the to presumably of is, is consumers research in expected payments. and large now XXXX through done, rates of themselves have some months. country know, the a around availed There's you right to population

way the related through to say, with there know, absolutely to capacity capacity We in it's the the for far the landscape, know, most take so constraints market. you to recruiting that system. industry, And seem thing we're inflation competitive largely a retaining know normalized be is, the and its definitely, there. demand going you consumer seeing wage you would constraints around probably Salaries know, So and there's to increased incentives surprising wage I the inflation. above there's outsized work and are that time staff.

time hopefully the think for only to returning normalized I short through. of be and going works a way that's period once sustainable So, its capacity a to more rate

Justin Moisio

are that only questions those received. we've Well, Okay. the

will report to So call. we when market look the results. quarter to speaking third all very We you time, XXXX end again in at forward we much. Thank year-end this our our

Operator

and Thank conference. participation today's concludes have wonderful this gentlemen, and day. you for your Ladies a

You may all disconnect.

Impac Mortgage (IMPM) 8 Nov 202020 Q3 Earnings call transcript