IMH - Earnings call transcript Q1 2021 | Impac Mortgage Holdings, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the first quarter earnings conference call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] With that, I would now like to hand the conference over to your speaker today, Justin Moisio. Chief Administrative Officer. go please and you, ahead. Thank

Justin Moisio

morning, Thank Impac you joining Thank Holdings you. First Good Mortgage Call. Quarter for Conference everyone. XXXX Earnings

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

George Mangiaracina

Officer, Officer; prepared Thank Gloeckner, Jon our Chief Principal me remarks. join Tiffany you, Entsminger, our Accounting Operating Justin. will for and

our year-end to back XXXX company discussed the half platforms weeks state Joe TPO XX, first March including the the call. origination with of earnings On overall channels second call, focus key TPO expressed Justin view our space originate to of retail Joffrion, risk post profitability, call company's on in will this The of update the to GSE consecutive conditions catch grow process the and the the the normalize, continued the be consumer management the The XXXX momentum maintain on market in Chief segment and while crisis. XXXX. the have direct or of X and continued and our of from presented XXXX XXXX continuing today's XXXX. ago, margins of Approximately the along will the accomplishments our the not to Tom had our third-party a quarter quarter the second in itself that relaunch demand. for second we of into with and Staff; is Donatacci, question-and-answer company margin begun to General Counsel, with business COVID business as narrowing we for industry liquidity recorded up fourth to consumer quarter have began of immune and compression capacity continued the the in and that and that last company's loans quarter in has discuss of

in $XXX,XXX or We the shift a with its we and share or of the in The of and of common Mortgage Corp., counterparty first talent. subsidiary quarter per also its the Core guidelines that first a XXXX, measure in earnings loss an $X.XX quarter are further third warehouse government Tiffany operations product and will referenced innovation, GAAP company's IMC of per $X.XX call. licensed for whole loss certain fair produced aggregators. $XXX,XXX net IMC. serves Impac to licensed loss with for diluted The through million matters. core quarter activities the our common value results of reported for the company as activities servicing second as or changes for operates arrangements diluted isolates and IMC earnings in of the core origination earnings loan GAAP share from GSEs, positive sales the loss company of XXXX. the debt on of alternative credit -- facilities, later valuations held product loss and assets, welcome NonQM non-GSE nonrecurring by firm Core the of regulated investor our consecutive items, utilizes lending investing demand, results margins and mortgage for recurring and management for business and competency $X.X sale for in long-term gauge improved channels detail increasing rights gain senior other of entity. in performance. legacy and across adjusting enhancements products trust currently are technology that the normalization sales such results or company's discuss nonrecurring and

versus was XXXX, volume, QX at the relates approximately The in we company's approximately XXXX. to of locked of in the million generated as same XXXX production end million. the the quarter originations $XXX end of it As of XXXX $XXX $XXX QX pipeline million first

million NonQM locked to Historically, sequenced to first our million channel $XXX channel quarters end run quarter shift The direct, XXXX. to million $XX consumer within our However, during million consumer been recent after while our our the year. prime $XXX channel, the of a the at pipeline at compared through NonQM success had more $XX production. end the driver was TPO of rate we've the X NonQM of achieved delivering of evidences GSE pivot the the sustainable last approximately TPO has monthly centric having direct of as

in do we not minimis amount million April March. versus NonQM $XX note While that in forward originated for provide we will in a we guidance, approximately TPO de

of to repay with standards characterized view line alternative ability consistency, long-term industry, across quality, the is we demand, execution, in tighter NonQM ATR current markets margin approximating by gross market depth capital encouraged moderately NonQM are investor credit, originations. returned to and and points anchored to our by not strong in levels, The market pre-crisis which basis of are growing interest for our XXX has of guidelines. firm's current borrower While lending performance adherence

subprime environment. having financial in the and XXXX, the XXXX, our existing ability the to COVID originator as NonQM market efficient asset annually early resources intend million billion in support across to we loan crisis. recently legacy company mortgage of of the partners. we production offerings, resources market. opportunity management and investors, Impac's $X.XX NonQM origination, originated demand companies and opportunistically up securitization label of add that permanent $X company to consciously to our to to to funds address and this quarter We the the enable macroeconomic adjustment in to securitizations for to including Since in responsibly and developments the performance access long-term the Wall originated pursue the performance and XXXX, yet and of believe XXXX factors, capital hedge Fannie, company, in be has confidence across to these continue first in one we over the company's founding company excess Since rating to range Impac need and retain agencies steadily, XXXX, from result a securitization Throughout The maintained capital tranches government consecutive production leading loans Street in the NonQM evidencing of borrowers been structures rate product. and competency first to products the company the continue Alt-A core in trends have distributed for is increasing of $XX collateral years, loans traditional loans backed these a of mortgage NonQM company's and future, other during to offerings. comfortably manage actively infrastructure of growth Post XXXX, and of of anticipate were products sufficient XXXX. over housing rankings the or the firms, of to by targets employment is from including in leader and alternative in NonQM economic our NonQM inflation, such factors has and alternative the range directly XXXX our monitoring of billion returns of in a for extended with maintained our portfolio. subordinated innovative as risk-weighted issued relationships the affordability, originate. recognized interest disciplines NonQM, company's an investors. XXXX Freddie X The And and near rated The our 'XX, a leader and In in future market warehouse the providing private liquidity billion in the interest has to wide market NonQM $XXX revival crisis, segment.

risk and the seek marketplace balanced. challenges reward with will is opportunity product to evolve and where properly successfully offerings navigate these risk Our management

for Gloeckner we operating this first prepared has management firm focus volatility. liquidity results as XXXX. as to future market quarter discuss on As million the We strong the position $XX at stated will earlier, continued of navigate a firm protecting as in Jon? now unencumbered -- be as well objective The to believe per the approximately XXXX. whole quarter. firm's common end the the cash and primary firm's of a liquidity first was continues position or risk the loan the for share $X.XX Jon well

Jon Gloeckner

Thank you, George.

GAAP the first fourth earnings a a quarter, the $XX and In compared million first in loss For of $XXX,XXX quarter, loss of of fourth quarter in quarter, loss of in to the a XXXX. $XX the reported loss XXXX. first and a were of as first as loss the million the quarter of $XXX,XXX quarter core $X.X of million in company million compared $X.X the to

share. interest margin of excess quarter in rate expectations pressures than had due market causing to increased most of the saw retain much competitive year first an environment in XXXX The that compression earlier anticipated, to

points to During approximately the the as basis quarter. first quarter, we of saw previous margin compression XX compared

XXXX sale due across decreased on $X.X of fourth in for to by the fourth million personnel costs competitive rebuild $XX.X the to from led Total the our $XX.X rate was million million from in has from continued gain an industry As quarter quarter increase NonQM personnel costs in in environment of $XX in operating a costs. million in contributed a and loans first to increased expenses talent result, more to competition the quarter. this first Escalating million the to due QX. quarter $XX.X increase This platform. workforce personnel QX to by

platform by Additionally, upfront rebuild several months higher production was our and expense we the with pipeline. with lags given associated typically associated the revenue ramping of the are as NonQM investment the our personnel businesses

rates in margin seen compression during increase earlier-than-anticipated in to our the first originations in quarter of TPO NonQM pivot interest accelerated XXXX, With conventional mortgage we the channel. subsequent have our and

the significant weighted first which drove April NonQM in funding. FICO average NonQM As we XXXX, quarter XXX weighted LTV NonQM our of score XXXX a a locked, a XX%. average NonQM in quarter In first of of to saw fundings originations mentioned, our of XXXX, excess had and George increase March be during

Tiffany NonQM the of period growth provide originations on our later XX%. the our weighted For comparable FICO average XXXX, a of weighted production will more had call. NonQM and of LTV average a on color XXX

during $X.X This of the first in the the $XXX,XXX to to as increased expense quarter. the in promotion pressure business result in million aforementioned fourth increase compared primarily first quarter quarter. Our competitive the was

a While level increase experienced spend the of to flow company of prompted marketing a maintain third in consistent the during substantial during of and the fourth quarters first rates the XXXX, lead an organic amount increase volume. lead quarter in

However, business products despite In of resulted NonQM its production. increase an roughly to for April, for specific a marketing ramp through X/X more expect continue competitive leads company's cost-effective center what be the spend allow call portion the quarter. reallocate geographies. the increasing which year, loan to time same throughout This promotion spend which second more period price spent in to began a in the NonQM the a to and in the XXXX. within over has for up first we target increase, already digital was was product ability in to We campaigns, the of to approach, towards more submissions, and source intend continue

monthly $XXX levels approximately first a rate production During our the the at maintained million of within run center, we call per quarter, month. originating

started production TPO TPO within increase as However, part around ramp in first the XX% is to channel, production relaunch. we This the in of evidenced quarter the channel's growth our compared our to the have as see quarter. fourth in

on by cash company our to accretive We balance unrestricted to position our expect and be our as and manage sheet, $XX cash of unencumbered the in had we of The liquidity continue $X monetize which of quarter. million balance sheet end evidenced our carefully loans position. million to an first at the

continued Our us gives growth. for capital strong the increase to liquidity to flexibility continue production position and invest

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

aggregation our just our days, we inherent to bring have times risk resources, under to capacity the During the Based turn will were near-term while on financing in mix to an production and near now discuss position, center, times to execution call additional product XX we we cash and may it the current feel production turn the necessary times capacity increased in focus. diversify goals. capabilities, remains turn of this quarter, turn meet within to subject model. liquidity however, our in and borrowing future constraints the funding-to-settle our warehouse Tiffany over I

Tiffany Entsminger

Jon. you, Thank

the compression of XXXX and XXXX. around GSE shift began first quarter than While sooner the rates margin was the year the the product of anticipated loan, in during

As leading impacting more eligible overlays underwrite. the we competition shift to the Fannie competing environment. discussed normalized lenders aggressively XXXX, in higher a last reduced and able credit compounded are open among to and the Alongside was to margin in quarter, lift the borrowers rates. guidelines began of fourth more a quarter Borrowers themselves shop in a box, Competitive Freddie and significantly across margins contributed to competing on rate lenders board. find reduction when

end and XX resulted across basis compared TPO average point record competitive to despite high market-driven retail During XX industry, the across to quarter. and the challenges both when of XXXX, first margin a the prior these margins in quarter volume compression

back significantly, XXX XXX quarter have average, Looking basis to to of XXXX, first products. on margins the for compressed GSE about points

Our driver second million $XXX strategic quarter of reinstatement run originations of its rate retail direct to of was primary in the able scale consumer XXXX. running to and a the GSE is following channel

can across while the While GSE industry across spaces NonQM committed shrinking for be growing with the originations, driving shift impact This to consumers was addressable it the the disadvantages an that channels. is while and also lending of GSE compression and in government space. market market market in and reemergence credit the GSE allowing remain margin investors. pricing NonQM met of all we pivot felt NonQM's to important restricted our consumers the in serving around opportunities and revenue company, margins, navigate the

channel has market to and since to investor been quarter retail first XXX basis of GSE returned, the the allocations leverage center slightly the direct additional the were NonQM consumers for healthy over expertise XXXX. resume self-employed and have the again. following of The competencies marketing pricing Gross the margins once Jon contributed is in to deployed compositions first to NonQM product for in consumer by quarter to as its allowing noted, this of to And core than also that quarter, Impac XXXX margins offerings. During XXXX, one shift and focused end overall point originations have to credit, range less returned investor XXXX, the XXX significantly products. interest Pipeline call Impac's addressable drive started business overall and strong.

the ramping retail ongoing We the in open originate expense our with continue volume also the the and quality. offering top within quarter-over-quarter, focus for to channel, while NonQM be innovation for in primary focal credit in quarter margin a NonQM of market increased our of our the doubling prepared NonQM beginning growth the market, remain and credit In toward channel. to remains TPO NonQM and cultivating addition financial maximize TPO originations, throughout this of pipeline renewed took origination, offering to the with to but will overall to of about an Impac's Impac alternative will as in and strategic driver remarks. opportunities. provide relaunching correspondent to credit the call platform. the further NonQM XX% concludes improvement has contributed and around Driving shifts market loan considerably momentum overall the space, quarter, quarter will end. this growth by continued within allocated around now third-party and products our and production That TPO point questions. impacting high approach TPO operations the to grown to of over guidelines the diligent the from central headcount the maintaining will The our a competition. remain NonQM growing year. wholesale channels. up counterparties competitive mind end along first The the XX% line quarter technology the or experience company, its process composition box advantage updating a of across conditions results at the the and GSE We the iterative risk-focused was to which NonQM over sales the with We'll

Operator

[Operator the comes Cranston of first Instructions] from Securities. Our question from JMP Trevor line

Trevor Cranston

kind remarks see the in You in quarter? during obviously, guys in on sale the guess, they even us margins, specifically occurred, where sort first some on were terms help which talked today Can I about of you margins, versus the quarter. about and in first pressure prepared gain the contextualize of the agency business of you that think where maybe

Tiffany Entsminger

XXXX, production, it's reduction. QX to the to a basis XXXX XX agency specifically about point QX around So XX

Jon Gloeckner

currently, of in to And have we're model, is we're that the feel And where that a And that hold feel in in not as margins chase everybody to trying margin. to center. -- now volume TPO due to our just our at aware within the to not which, going we're to feel part going nice we're is detriment We're firm to have going are. but right the folks we're center, running not the so, some simply the Trevor, they position with channel. call aggregator going we're as the adjust call to that to composition pretty

where that It's now you some As also will NonQM, helpful. which to towards type to bit brought originate help on of that VA spend predominantly started folks a refinance mentioned the it be some that call, in pivoting we've GSE around everyone move And product. was marketing marketing.

from And the NonQM those is limited decrease mat perspective margins that, quite separate where volume point in the has We come seen where would pipeline that products, we the pre-COVID. considerably, within GSE the these we've GSE off had That's we a something with that's center production shrunk there ideally, anticipated. offset because especially think but a amount the NonQM really said, as for months. were we not we we're where the the teams which products, for of call call will So in that be center fine. production, a coming bit we at

I hope So that, helps. that

Trevor Cranston

that's Yes, very helpful.

investor sort grow the and talking offering? some you if guys what focus, looking currently on today changes landscape and any you've as shifted are looks today you're that talk kind can about selling of meaningfully economics to spend So that loans also it loans versus you loans of what were been in started the significant and investors there's you NonQM that the pre-COVID? the demand, to time about that doing reemphasized originating And maybe How are seen for terms of products investors? of of you business execution the more business, as maybe of reentered you've and in

George Mangiaracina

when cleared buyers fourth we've take marketplace say securitization. and that Trevor, exit. that time into of encouraged were And absorb markets overhang. the very were to the that hand a that first the it markets dislocated probably clear investor overhang the Justin been the type second took then seen became capital with in NonQM reverse into I'll mostly with in question leading product part product loan I'd of Yes. engineering that originating the the what of the we for And quarter in year third ability first Tiffany last healed, mean of I market quarter to in was we're an and whole today. again, since securitization to the acceleration of overhang the quarter had demand back and bit second The it quarter.

gross at mentioned remarks, this margins, $X.XX prepared were again for gross to in our executing our but So close margins earlier NonQM Tiffany price.

retail XXX margin channel, basis our fees, opportunity there's got close gross the north so an of channel, we'd in to points When of we've TPO channel. broker And margins in our that. charge points also gross have to out of

Street right? There's plus encouraged hedge very by vehicles investment Wall bidding -- we're Certainly, back surprise, as and tremendous come we've execution. of firms product. continues push for there for funds And back so yield end long it's nicely. as And the alternative -- sold have and product, market a is the the an I no as mean aggressively that the pushing fills buy push void treasury for $XXX and yield marketplace yields mortgage incredible in down billion this NonQM to in Fed

just our So different creating. -- you design future it's product back very that creating I know we've and the on if to Justin, markets product to little might to touch that how similar always want been the or Tiffany, a look now don't looks maybe really what

Tiffany Entsminger

the Sure. have core with asset business XX- Yes, bank statement a this NonQM to offering, bank dock DSCR -- and statement remained offerings product. relatively a to is Tiffany. purpose, XX-month I also respect would unchanged a that depletion within offering loan, say full

the of credit more little We're that that box a the that's some a closely unchanged. has migrated more last with guidelines over credit those around the see starting bit So of products box relatively Certainly, year. offering. aligned the opens normalization up to pre-COVID of

Trevor Cranston

Great.

of just helpful. the and do to and talk Okay. you comments I need who shifted mentioned you some overall be How -- overall, focused the that been business invest is you terms for guess Can some where continuing do the in any focus to investment process? to the direct, maybe NonQM do? kind consumer -- And on going is agency there think over more level? And of That's demand there where prepared more of of strength, the on you're Or of refi much side, the forward? as in the to in expense hiring are, of going in you channel. you NonQM offset have the the expense kind you -- rebuild about sort in agency hire that the that people of for

Justin Moisio

in can Tiffany we as I well. has can with George and Trevor, anything weigh start add, and that So do to if can that,

But move there most over the doing from TPO having roughly more shift to in our NonQM specifically the of it's can folks, the was certainly, But sort have of of channel. which expense nicely. of invest I've the not can start are XX% be in call production. world, reallocate down pivot to we're an within those least because kind we're standpoint on business material the the within that anticipate pivot and I production obviously, increase, that lot have -- you'll to And seen GSE at repurpose the a an things started to for our of today, because that of already opposed to with of that We'll So TPO some pipeline nature how it money focused a perspective, that going products. promotion, that underwriters just some really just production for margin credit of see with operational up to is TPO, larger from standpoint over shops gotten. from to because the business center, discussed next any the broker come agents from already within a going some quickly volume we we some you're tight within at Within recently way our only that end year over so pipeline of quarter, don't alternative was XX% now that as aware, to channel, to about just that within which evidenced, here. makeup give

resources shift of in hire made being that But that So terms strategic the so specialized it additional into. noisy we've channel. we be won't already are to for very

want I that on George, know don't to if NonQM? component touch So you for

George Mangiaracina

can that the crisis that took -- credit originate sophistication and capital of engineering to we pieces. that the and is on levels of year how securitizations, of operations offerings. the precise Sure. I'd the Justin out of the last some of our and lessons that say investment-grade securitizations more more reverse But from we some one and then terms I of price for around for have loans away sales how piece the we markets take mean, the we that for COVID us be of on need the some focused in how model we themes

to we've that that capital -- us another us we're give markets teams some so additional permit our leg resources securing to very And within do that. from away will And the had would mandatory able our NonQM forwards, we past. in access before years the bidding to simply like exit be year, comp or of hope end for offering market the we securitization close

So think coming out some announcements see around there'll you'll resources. in us months of next the I several those be that

Trevor Cranston

Okay. Great. question, originations, had doing. I working of $XXX successful you last at obviously, target with of month guys been been which, hitting million guess of the sort a

mix NonQM the As forward and originations target and is to look in month Or mix applicable comes the of how more agency of, think the million the light has refi a going you think product business? side you shifts the shifted that to $XXX about you down, still product shifts forward?

Tiffany Entsminger

Well, in composition. think respect earlier Justin about spoke a with little that shift bit I to the pipeline

the we constant expect in market. would GSE I would the like to to So million, while to it $XXX certainly that reaction remain we have adjust products the with

to continue grow and possibly VA then GSE composition to supplement reduce that of that. top and on So would and NonQM expect that I

Justin Moisio

And Trevor, to you've across industry. fills on at what in margin the there margins the NonQM, it's point, tighter compared GSE us, from execute the seen but this to just obviously, significantly the gap these

million the that to number, upon up GSE wasn't a production TPO rate target, back originate. just But when even combined number, get probably it's and yet. announced much how that third different quarter the originating and to $XXX totally were was we we center we and when up the dependent call was can company is from So run spoke NonQM running that to pure

make different a this point. up be at will it So

Operator

continue. questions, further please no are there And

Justin Moisio

say there's it going I questions. this to you. Thank no at point, looks other like was

market August we for everyone our release. speaking So second thank for to Thank you joining all. in the us we'll and early quarter back be today, earnings

Operator

and call. a great conference may day. Thank today's now you for concludes Have This you all disconnect. participating,

Impac Mortgage (IMPM) 10 May 212021 Q1 Earnings call transcript