IMH - Earnings call transcript Q4 2020 | Impac Mortgage Holdings, Inc.

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Operator

Thank you for standing by and welcome to the Q4 2020 Impac Mortgage Holdings' Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question-and-answer session [Operator Instructions] I would now like to hand the conference over to your speaker today Mr.

Justin Moisio. Please go ahead.

Justin Moisio

you. Thank everyone. afternoon, Good joining Holdings' for call. XXXX Impac you year-end Mortgage earnings Thank

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

George Mangiaracina

for CFO remarks. you, join Paul will Entsminger, me Thank our Justin. COO Tiffany and our Licon, prepared

Donatacci, operating results design, our year-end earnings Joffrion expansion. will invested momentum geographic back, with March on we industry we discussed XXXX, strong to question-and-answer for company's XXXX and of -- met and XXth, year-over-year had ago the exact, talent call product accelerate anticipated be along we Justin General technology, about Staff and in we be Joe as Counsel would When Chief Tom our segment. the for a year reported

and needed distribution enthusiasm properly any be by and liquidity conditions. then associated that noted with constraints risks potential balanced macroeconomic to current supply also future tempered for prospects and pendent We

expense and company. earnings TPO actions management the book activity the difficult earnings an company to origination of position earnings in or gratitude our enable losses of necessary the compression channel. some in dedication our a our channel and the channel of and by the concept or enable and our variation by half to our call, million including in approximately societal provided the de-risk XXXX the half of company this earnings decisions year. of tireless of second in XXXX. from our The These focus direct half the turnaround to focused stresses express of enhancing business to accomplishments like my earnings calls. navigate want highlight our of and the through the company for products. originations extending repositioned non-agency this success profitable activities of address to business just the hard-fought XXXX. over $XXX the The company second The of company of XXXX million million mortgage million steadfast extend the XXXX, originations re-launch to analysis we changes channel. to earnings approximately first the in remarkable across have key half in reintroduction $X.XX for $XXX Core the quarter market $X.X include And quarter executed Today, million to of The in The capital This Directors, ramping interest tables credit operating our their unprecedented his non-QM pleased our our run company the liquidity QX of those businesses, This reflects a generated company having the and consumer brought often the in thanks remarks. experienced at results, month, late to often core presented momentum, least results driver with the a family, and I product unprecedented TPO XXXX. protect quarter. not personally experienced legacy company's $X versus industry share year. XXXX stakeholders difficult entered managing million share. center of result senior with by the versus under quarter consciously are stakeholders, prior $X.XX but on in market the rate and our balance VA origination We'd like most the company's creating value We $XXX In strong in promissory related we'd and employees isolate last non-recurring second QX first to fourth the re-launch value of our updates non-QM fourth of first prepared also company capacity initially consumer while in first fourth second we health, on expand of the adjusting rights prime will fair of dislocation per competency in was prior second in and normalize management for items, years loss party half team recurring immune of for our our our XXXX convertible at to core Board of concerns the earnings set XXXX million well-documented origination following quarter of the challenges, industry of trust matters. to of We our activities of to the on half extraordinary on XXXX the by of of and our $XX activities direct Collectively, of year. was with announce alternative jumbo expanded to positive core On third of are broader the circumstances. to rate during and quarters positive XXXX their the of as in second global in the gauge a value in for meet partners were The quarterly on announced debt and We with from increase third support a channels. second lending re-launched liquidity QX in release within utilizes a The Licon shocks to call and These over that for million frequent note. was and senior a company originations global certain XXXX measure anticipated and the sheet quarter Paul the latter non-recurring all to assets dislocations other COVID-XX. results half beginning the alternative targeted is Generating performance. XXXX such fact, and between excess core product periods. of consecutive and GSE, our normalization servicing demand. the margin $X.X offerings expanded FHA in introduced in XXXX. as starting of long-term $X

caused of non-QM and non-QM During quarter loans, the million origination our pace destruction quarter first exceed on prior volume. $XXX XXXX COVID-XX, we originated we're by fourth to XXXX to

of decline. of particular our mandatory The on March significant with via As XXXX, to finance with dislocated payment had portfolio portion focus in non-QM and full spreads widened market company a markets delinquency, became risk non-QM protect substantially and liquidity valuation financial hedged credit commitments forbearance tightened against investors.

consistent demonstrated and performance in XXX, to by core the In recent originated of beginning average competency a these terms quality Some XXXX. company the restructure XXXX sale been its LTV loans non-QM the normalized, received and company an pre-COVID XXXX Since assets with the with market these exceptionally -- compared the honored lending that market sufficiently the We have originating factors under segment. the design below company's Non-QM the activities underwriting have for quarter to non-QM reemergence ratio causing products. to respectively reengage historically April, reemergence a more their not respect that, the the we to philosophy. We in of credit defined the restrictive products market through XX%, in credit sector. of is by the the market participating not stabilized the hedges credit while weighted differentiator XXXX, conditions average this company's the have weighted than the innovator has a levels, to look with had fourth the to had forwards. in historical of of extent The and ceased FICO elected been origination of to were We XXX of company. and been guidelines XX% would of alternative external originations believe non-QM of the forward our historic crisis. loans company fully of significantly non-QM at of which mandatory that

protecting November objective the Xth, We margin XXXX. and a the paydown on XXth, additional this market The quarter extension third the firm's safety $X at an compared improving $XX million believe the for note $XX discussed principle reduce XXXX was position at fourth May company's aggregate As months with XXXX, promissory on amount of principal. of objectives In provides maturity end line the note note Xth, million whole by of future as convertible October to these of liquidity prior and disagreement million approximately loan an was position to we the of the of to of quarter. announced the extended our address date in XXXX, the of calls, volatility. firm cash primary to XX following from million liquidity unencumbered $XX and end

XXXX in I'll the company note about is The take continues well-positioned political over remain to alternative XXth, credit We the hand to channels like to third-party numerous marked public and events. and of economic through the consumer agency our Licon. markets as I'd of Paul originate that Finally, offering Paul? resilience company's now the anniversary future. initial opportunities the November attribute direct evolve. optimistic advantage to XXth navigating to and call and our

Paul Licon

production. million volume our quarter-over-quarter from increase. to in Thanks, successfully XX% George. QX, funding in representing XXX QX, we QX Yeah. XXX million In the We increased ramp up continue to

In pipeline the $XXX from addition, lock the million at our end million end QX. XX% at to by QX $XXX we of of grew

As in George evidenced convertible also position continued $XX notes at our our cash the November to same of of while the at manage May due mentioned end our as carefully of at cost. extending we by funding XXXX earlier, XXXX the year, liquidity million to

financial continue increase of production liquidity invest reflect for position flexibility the gives the effects net enhanced to The quarter loan the market Our the capital production continued margin compression. company to of the growth. results of and increased

effects approximately pipeline, in versus QX margin Excluding quarter saw quarter. of bps we end compression XX of lock the prior

$XX.X million than were our margins XX margins loans points context, basis QX. XXXX QX XXXX sale around from $XX.X in QX pre-COVID; February, some for on However, January, higher to increased gain in million our

volumes, GAAP $X.X QX million expect was in costs increase million compensation earnings As $XX.X from market we to current loss in expense of $X.X operating $XX.X Core a increased increasing versus total in income QX million in result to million QX, off to tax from by goals, million of million production in QX. personnel QX expenses capacity $XX.X net million to level QX for in million production QX. $XX.X were QX. subject pretax before $X.X Under $X.X constraints. an in versus led

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

liquidity. to Turning

in of unrestricted million be unencumbered million which end in our QX, to as and million sheet and of balance unrestricted our had balance QX. $X we and the loans in additive cash of we unencumbered million on in monetize $XX versus of of cash $XX end cash loans the expect As $X to

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

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

times the inherent risk turn and aggregation capacity constraints However, this in an subject to execution remains increased model. of

focus. we goals. turn However, we the and current have Tiffany product over now discuss on to meet production I it and our liquidity production resources, term based position, mix turn to the borrowing times will cash near feel to necessary

Tiffany Entsminger

QM Thank the our funded both brokers for consumers and jumbo retail the include product steady $XXX origination fourth over and our in And $XXX channels. fourth among and quarter to offering marked received favorable million volume reception reaching in the increase third you, Paul. quarters quarter non-QM our and and and market and million in the targets. funding TPO monthly volume exceeding expanded We've

many accepted GSE in lenders Origination risk activity under quarter, exits. and has lending of resumption by capital The which building imposed in a quarter. in the the adjusted government and GSE on increase underwrite line since Talent growth focus within the industry Impac a just primary credit Margins support markets to turn channels risk quarter and its and with Our been retention normalized began credit standards topic for fourth contributed throughout during originate in Impac focus on remained based overlays higher strong its second volume not been guidelines. undoubtedly relevant stability. and box product. fourth have also historically infrastructure the more recruitment, to leadership to the is quarter. operating future originations tolerances, diversified they're but allowing to high. dissipate acquisition

to an headcount groups. retail employee our at XXXX, added being second wholesale on personnel XXX wage Ongoing staff the originate. over the and to of up during XXX cost grew additional Our quarter the and inflation expense quarter overall end had with to of sales increase from impact operations employees, and the

hired growing run run million on targeted plan to of exceeding Based current first we through channels talent models, the entertained to $XXX of the at the $XXX maintain a essential rate. million quarter and the However, least was monthly rate XXXX.

despite spend investor compression to business As lead will a was targets rates The likely new the to step toward risk A impacted preferred we slowly appetite non-QM supplemental and with of adjusting these non-QM XXXX top to and the targeted of have the XXXX lenders look among growth started required untamed and Investing of while products. the into Competition rates marketing in assets is study. to drive in reemergence focused space. product the margins originations resulting buy consumers sources. volume promotion favorable persist quarter and of have channel volume margin pressure beyond. in the performance up overlays innovation, mind innovation. also Increased is support is by first in some shift origination the a QX concerns forbearance gaining offering, lead approach strategic like continue non-QM technology remains Credit welcome some guideline catching to is investment related a spend product momentum, way to the organic more in drive volume renewed Taking efficiencies while origination a been predicted and to GSE of interest product adjusted normalization. product and more wholesale to our increase. non-QM as quarter COVID proven pre-COVID spend adversely and throughout provide

our and core and more products, critical and We market consumers opportunities is in financial the for as doing such as concludes are our so open second agile offerings serve Remaining That while committed to product surveilling around and credit growing now remarks. We'll thoughtfully other the responsibly. targeted purchase questions. non-QM to lien just alternative prepared credit call and the as vehicle. results

Operator

Excuse me everyone.

Securities. of is Our line Trevor first question from Cranston JMP from coming the

line Your open. is

Trevor Cranston

mortgage additional margin what does so prepared far -- will movement in? in you that funding Hi. level Thanks. quarter? kind additional and in of question, with that result still compression you the comfortable I the a the some we've Thanks. compression come magnitude rates levels, target margin that guess, out general the the is guys the company color comfortably your think where first in think compression touched you can level? And a at margin remain -- to somewhat of How increased first remarks. you on maybe provide competition Can around and seen

Paul Licon

and else in between This to marketing Yeah. Right -- in touched competition. just really jump rates we points compression. based as it's additional start what due and estimating is can Again, XX basis on, Yeah. now, XX further maybe Paul. expect we're starting the of QX. increase compression can and by Tiffany someone this I We're seeing, on margin in.

Of depending weeks in the now. next could of market, couple but anticipating happens what we're that course, the in sort on what change that's of

Trevor Cranston

that forward? should were that And Or Okay. average kind going a -- to I XQ that runway the versus is you're of is sort -- XQ? for as basis that in where expecting lower XX so at XX of a -- interpret like on number points you is margin

George Mangiaracina

of Trevor, are with run in a with to be GSE the and in by don't Yeah. compression believe forward what platform margins where shift we'll would We positive we be give confident healthier. that fairly We -- non-QM production product amount this the to George. that a we're margin able rate. But continue guidance. is offset jumbo to

So.

Justin Moisio

Yeah. Trevor, this We rate Justin. is talked move. about the

of save the record kind because -- payments. of borrowers their obviously, off in So I coming volume, much we're mean, rates historic monthly could XXXX on refi of how lows

rates. slightly those over So, few had shock seen have the some our weeks, borrowers rates last to up we've tick as initial here,

for now, about appetite seen as publications right However, half for as there's as what in money Monday on a recently very the refinances. healthy are for we've in market homeowners the of refinances still currently the based early indicating

cover a of still there's So, ground there. lot to

so, like And tighten will more, opportunities we've it done do jumbo, that's there'll in historically, as George very there non-QM well. because and opens That's product a up competition expect, us, for Margins nicely. with that DNA, we a more Impac where really but very, mentioned, pivot what our be where bit can the we that's industry.

Trevor Cranston

commented I it. helpful. That increased impact Got you has briefly the on had fact of market guys competition in in for terms personnel the -- on that employees expense, is that. Okay. And some think

level, first of a you expense kind moment. the to Given the capacity or expect good Is that continue is to that that funding a XQ, hit into of the at you rate up and personnel little bit the quarter? guys you something sort targets at have run tick

Tiffany Entsminger

in and stretch the in that that folks more we door competition Hi. little producing stretched I'd market normalized. the to the a bit current ad have folks. with and with it we the certainly right on headcount well, We be have process continue Tiffany. in the the now up then expect build we more to our on But efficiencies This given But sense with board. the ramp be required to capacity is that now. also we'll some we're beyond the origination able same the have have

Trevor Cranston

now of refi how who maybe of And you result then And product? sort much moment. in maybe change then are And part dropping guess, provide year of I when just to -- gone color back where when of kind business business second a on that finding compare higher? as course the expect year it. off the non-QM Got look non-QM think that, was products how actively were of some touch has up where partners some restart where how Okay. for and have kind how a versus the the over the we you ramps would rates before Can of you shutdown? business you of it around originating it was think to you that'll pre-COVID additional moved -- of terms to non-agency as business and the of that as the margins last this that

Tom Donatacci

Tom in predicting S&P into originations is through to $XX growth already XXXX origination non-QM since We're could with and Donatacci. XXXX this we seen the levels, seeing high in billion as sector XXXX. Trevor, [ph] anticipate growing continue levels not Sure. as see

have just was well-received for XXXX with demand created is A market. dislocation. depth The new that but the -- appetite being in an of credit also soon expanded return end industry-wide. curve only creates in While always of had originations able of investors and supporting with the number to seen both market the in factors are securitizations have many XXXX conservative market wide balance focused in the not Impac of guidelines since on more and which buyers the on in conservative has ability the market stability pricing more lower products conditions and the had the securitization early portfolios market upon entered market. take the what product, is and sheet of additional extraordinary a march -- to move the both stronger halt held than stabilization volume, recovery pre-crisis quality, had of to dependent a demand of improved profile of Their the not by towards are based most One guidelines originations. and buy focused market non-QM in there strategy, greater exit investors, originated with borrowers. quality the per the the on early steady advantage have after, another as and from and has both higher began box being event to a underwriting XXXX market up list been securitizations Those but originations volume. to we of

to their over requests shift our the many So, of hasn't pre-crisis the the credit marketplace. have continued those players despite nearly some continuing of many resulting the in the of from much criteria payments. originations requesting Past fewer had year, to as economic to box forbearance and in well, past forbearance, make as conditions perform

expire non-QM low many or take forward. sector, producers volumes -- requests rates compressing, GSE continues for of wide historically on migrated With return retire, the have should these seeing to refinanciable non-QM and on market to rising margins, origination who these focused As officers boost Historically products. the we're going the the comments which to over margins advantage potential universe to the historically year borrowers last of have margins loan rates Paul's grow. and

statement, MBA go-forward DSCR for are positive the market non-QM also estate This refinance market. and as owners the anticipates purchase non-QM rely programs basis. Lastly, product on purchase offerings, a and demand is typically like a drivers to business that in strong bank investors demand real on indicator exceed

in our For credit on space, these to ability going history competitively in non-QM and participate alternative reasons and the sector our forward. the we're bullish long

Trevor Cranston

color. Okay. That's really helpful

a whole, this as of the piece the the grows So, the capacity when as you course think year. presumably funding at about over overall non-QM company

currently you've the the doing agency into sort would the been the funding replaces doing non-QM, be on you of that side? alongside to kind You sort in lending of of capacity business what guys have space, and agency the it the the shifts capacity anticipation that some of or grow more you're

George Mangiaracina

this George. Trevor, is

capacity is respect continue business, the equity mean, excess I on have in center. the to of to fourth out non-QM, of growth with non-QM support the driven warehousing business. run we support run lending, capacity to the has personnel. which hat bit got plant and I warehouse the grow in for capacity, pipeline the deeper GSE have for When liquidity. a higher primarily non-QM. human around And terms liquidity warehouse the business, in non-QM got equity bit of to a to or but concurrent with with have the portion the call say we Again, Non-QM been cuts even and piece We both existing capacity with GSE. We've rate quarter last in -- rate, capacity added little we've to that terms of a operating

build first But that And on franchise. and concurrently being out call same build have on able we continue so, what the build any in to time center the quarter. the we'll non-QM to created continue to upon at in don't limitations we've the

Justin Moisio

it’s Trevor, And Justin.

focused TPO, on originations. George remain while So, as laser indicated, non-QM will --

albeit, originate If that from to very past that team million million non-QM, years up product remember you for was a would that that us within standing the successful an independent product. center month $XX of originating made one call $XX thing

which that center. we through do just the internally to we would were something originate call unlike successfully, but able lenders that, other non-QM was So, adjust for was that

Paul Licon

Yeah.

see quarter to the it some we quarter effort. de and center begun into been year. the the customer cost has haven't non-QM minimis of the has around advertising -- center the that our promotion of center spend will you'll call lead call in might yet of non-QM. to frankly, any acquisition this push because to take Quite of We at GSE been drive generation production. the second first call In business But end third quarter, early spend of the the out

Trevor Cranston

Great.

guys. a makes comments. sense. of Thank That you, Appreciate the lot Okay.

Paul Licon

You you. Trevor. are Thank welcome

Justin Moisio

So, questions the it doesn't time, at any in queue. we like look have this other

this in with at thank Thank everyone quarter we'll joining for May results. So, first our and you. early circle us point, you back

Operator

for you Thank all call. conference today's concludes participating. This

may You disconnect. now

Impac Mortgage (IMPM) 12 Mar 212020 Q4 Earnings call transcript