IMH - Earnings call transcript Q4 2021 | Impac Mortgage Holdings, Inc.

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Operator

Good day and thank you for standing by. Welcome to the Impac Mortgage Holdings Incorporated Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. now General hand Counsel. would to conference I Joffrion, Joe Instructions] like the to over [Operator Please ahead, go sir.

Joe Joffrion

Good morning year-end call. Holdings joining Impac everyone, and thank XXXX you earnings for Mortgage conference

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

George Mangiaracina

Obi COO; Justin the Tiffany call. Nwokorie, Joe. our question-and-answer of will the me segment our Thank you, our today's be join Jon CAO prepared Gloeckner, will Entsminger, Moisio, our CIO and Treasurer; for remarks available for

$X.X million or share. of per common fourth XXXX, loss $X.XX GAAP $X.XX For income the or of diluted quarter of common reported per the million a share company diluted $X approximately core and net

his GAAP fair of in The and the Gloeckner remarks in call. primarily residual $X.X million increase a of results later the to will million this our a portfolio, reported or the common core $XX.X per of loss ended value discuss or loss diluted $X.XX share Jon prepared in For December core diluted delta the year XXXX, net and company is which XX, $X.XX approximately common attributable per between GAAP share.

as or the origination in rate either broadly As we've of classifies calls, prior its earnings credit. outlined company channel, activities, irrespective

that totaled conditions our the the capacity NonQM have be quarter will run the and to models, compression, our to our credit close accommodative by that industry respect business, while the of NonQM immune stack annualized the of fourth monetary in billion. In our margin originations business experienced and resilience and for rate company further our respect rates quarter quarter of the waves fourth is spend credit business, reduced of continue rate XXXX, approximately evidenced from our that was low anticipate With double franchise. fourth XXXX the market is on the centered volumes headcount around challenging foreseeable positioned the origination NonQM stages $XXX and rates our rate was and in latest This company $X.X marketing accordingly. an Our not volumes our in adjusted future million the driven We business of focused GSE typically at products. to policy. fourth refinance the by were GSE of reflected quarter quarter. XXXX, in our of product, with business to the third for origination

structured of financing extension as in the Expectations million company the the post-COVID swap risk short-term originated For posted the expressed in the quarters three than in four in significant NonQM in expensive full segment to concerns have out fourth of experienced context, in less rates the quarter the interest through quarter XXXX related of Further company rising two close quarter NonQM XXXX. market XXXX of first the conditions resulted into terms. XXXX, year mortgage with of $XXX rates, beginning second million market X.X in further over year XXXX. quarter XXXX. The pressure the deteriorating the of NonQM, and first to times $XX more and

for from a COVID in expand the recalibrated to and in to X% continues disciplined consumer be addition range pipeline of the market levels markets policy low induced rates X%, monetary in hedging approach In target The a XXXX normalize. The coincidentally once company to rate addressable require arduous to measures current of rate to climb XXXX. activities, that a March note the company's NonQM prevalence present the the locked the the this prior with ladder. emergency to note mid-X% of not NonQM market will to average believe reflects

market awareness credit and events. The first increased introduced XXXX of heightened market inflation brought liquidity geopolitical risk on and volatility and quarter of non-transitory by

in bulk business Some in mechanisms advent gain portfolios. assets. of capital the triggered at hedge teeth positions in dislocation. credit-based acute hedge hedge range in on a were the of flight are company in market and which wide cutting mortgage over risks years loan futures times and XXXX, The of last calls NonQM loss to sale markets lieu margin several increased debt Layered October treasury has deliveries faced Especially, on of finance the deployed time aggregating crisis, rally of in back declines their and six and treasury effectively difficult and their US short and the strategies in sell-off forward months market best also agreements effort concurrent on a last our and a with Russian to treasuries subprime that safety experienced delivery sale. for calls liquidity of value the companies warehouse swaps, at over utilization losses us

disciplined remain the to with expand once normalize that for market continue to our benefit and volume belief to margin. will markets addressable our activities and in NonQM in remain markets undeterred will capital respect and our origination We

long-standing Turning now litigation. to deal our preferred

Articles I the call original turn on receive Articles which in not Joe? that and over the of required therefore As place. B Court General court's order, the our now a did more to Preferred for amendment on this that Joe we Joffrion X-K decision our XXXX to the votes the remained Counsel, July will XX, the update lower the matter. ruling, filing XXXX, disclosed Preferred Appeal in affirmed Maryland specifically proposed detailed B

Joe Joffrion

Thanks, George.

as discussed, Preferred be the stockholders unpaid XXXX. in of the payees Circuit for the basis to approximately the an certain accrued date. required million will appropriate of previously determines company dividends dividends pay record determined to company a court's amount in Court be was will the back As which $X.X B the result once order, by previously The unpaid

stockholders two on XX, meeting vision however, of of October November court's quorum January sufficient XXXX to B further The Preferred stock, X, we the members the Board special on cumulative. November quorum it for input, dates adjourned at election respect Preferred the payment With of the directors create company the originally dividends their the special for directors. on to to of XX, XXXX of due addition, B election strategic to also the for meeting an required especially special XXXX forward was January due without company. the was XXXX, X, such order are due convened In XXXX, of one the The special achieved of the of B additional election to would the structure new was as concluded meeting the stakeholders Similarly, and a stockholders Preferred the to until are finally, and a lack welcome lack company's future. aligning with future sustainable adjourned XX, was the at of capital to looking of any new And of meeting have lack quorum quorum. directors. meeting meeting, been HoldCo in dividends

long-term payable not intent liquidation the and to is Preferred B company's to dividends. million Preferred by especially the declare unless are that debt declared has insured is capital perpetual in of this time, At line Board. The with any preference dividends no B $XX structure. the in seniority stock, stock they However, with both the respect there its on payment and

Additional, results will company's the for and quarter stockholders of special be B information found Gloeckner court's of in filings. XXXX. fourth on and Preferred structure, Jon XX-Ks, now capital meeting discuss our the X-K can XX-Qs the operating the the order

Jon Gloeckner

Thank Joe. you,

to $X.X a the the reported quarter, XXXX. of fourth of quarter as third GAAP For million quarter, fourth of the compared $X.X million, in $X.X the and loss million company earnings for

of Our XXXX $X.X as to loss million a XXXX. compared was in million net $XX.X loss year-to-date GAAP

earnings For of quarter the fourth $XXX,XXX in $X of to third million of the fourth quarter, $X.X quarter, and earnings core compared as loss the was in XXXX. million

The Our fourth results financial a to of of the XXXX quarter decreased to million market $XX.X quarter, XXXX. reflected the million quarter. loans sales on as $XX.X the net compared compression. year-to-date third of compared million core million during of loss was increased during Gain production, $XX.X in the loan core effect margin as to $XX.X loss

in due The million during NonQM originations quarter increase points of production $XXX in was our were originations as our XXXX, third XXX as of ability to margins with of basis basis $XXX production production quarter. $XXX of to the compared XXX% with which million, quarter XXXX. to fourth $XXX points third the compared increased to grow XXX to quarter-over-quarter the During million our million, margins of in

knew $XX fourth the XX% in channels helped third our in During focus TPO compared decline offset has subsequent was our in both during million from our quarter the XXXX. increase came the and NonQM originations $XXX quarter, retail coming. through of all production we production or shift million channel and The as conventional or to XX% retail to

the during quarter third decreasing XX% to fourth to the With quarter. million conventional by $XXX compared million, originations $XXX as

XXXX, value decrease as our in decrease and During long-term $X.X a other assumptions in assets income on trust, increase in the certain million loss $X.X an trust increase fair assumptions, residual value discount on quarter well million fair net debt. our gains as prepayment result mark-to-market fourth rates, on a as gains of a a in in of increased

primarily compensation fourth the of due The across the increase result increased costs, changes continue remain earnings. expenses George the quarter a compared as the origination third excluded as result in in in to in elevated of during quarter million and from in personnel are million competition industry value costs $XX.X the of volume costs to the to from net to increase million debt assets had $XX.X primarily to $XX.X core $XX.X personnel talent. previously as long-term an increased variable as As indicated, trust third quarter. due quarter which increase fourth for which the personnel in million in the to fair the well Operating was

business expense retail reflects our at of Our to NonQM relatively quarter-over-quarter. push lead our million production previous and outside was flat maintain target This channel, volume. production expand in promotion $X.X California

continue we'll a substantial We currently needs volume. amount previously have maintain demands balance increase million capacity an borrowing in lead funding While to a a prompted spend the goals. marketing of lines of of organic warehouse in company of our lead NonQM combined $XXX has to and the increase competition meet level capacity experienced to flow, production consistent with

We cash our continue balance on philosophy. to we liquidity capital resources Based aggregation specific production current our Nwokorie meet and liquidity Obi? times of to around the Obi turn commentary position, provide carefully demands borrowing and necessary near-term goals. we manage feel the our have an will markets model. our NonQM

Obi Nwokorie

Thank Jon. you,

the quarter. George in saw pressure fourth a margins mentioned, As has industry the significant on

two-year the rates During with market's three-year basis economy was that to each. inflationary curve to by quarter, rise a in saw over the points pressures Fed's XX by rates expectations we reaction in the the short-term pressure. The swap flattening increasing the yield and of and driven

Investors new currently the widen capital stack at to to Originators interpolated outstripping saw supply the widening the slow continued react points quarter widening markets, moving spreads in with over NonQM fourth in The demand basis with limits, basis to AAA quarter. basis these and issuing risk for to a increased were mortgages. occurred volume the also AAA of a reflection volatility of during investor XXX the to over coupon rated saw points appetite. as XX we began in sell-off over to XX beginning addition this supply/demand imbalance a in spreads spreads credit was of benchmark we are the NonQM extension In on rates. by tranches quarter. also sector changes the across around Credit generally the NonQM spreads rise swaps from the but points lower spreads have of end focus credit on

steps protect margins all result quarter products. pressures, NonQM to the raising As across by take a began the of to these its rates company during

in of gone the We loans the rates allowed fourth has originated sheets X.XXX% X% rate X% X.XXX% low minimum today. these our weighted changes to that start at on rate on high also sheet to mid from the the to began the is effect NonQM of average the raising quarter today. from coupon quarter the newly The to

risk production George activity forward With more the swap others mentioned that credit and and some pipeline rate manage to expanded as the features on We to I'll mortgage risk. exposure to entered over interest introduced NonQM previously rate loan pipeline. to it manage closely our the to into rate also interest We tools interest discuss turn and now our during sales increased the quarter. Tiffany manage new

Tiffany Entsminger

Obi. you, Thank

the environment half rising discussed of to the to with further in second many driver primary for rate call origination suggestive quarter, the during competing the for a GSE GSE fourth volume A originations relatively volume space did as loan with of application GSE lenders originations margins pressure, around we retail challenges lending share. opportunity our XXXX, competitive channel is landscape growth. center. in As XX%. the the ongoing present volume production. consumer And quarter compared conventional direct GSE is and Impac's to growth of third of in the well experience lending constricted Decreased industry-wide noticeable stagnation as combined decrease continue of our as the remained while flat retail for it market GSE

this retail and we direct revenue. to the continue GSE navigate volume quality. origination with discussed retail around will pivot it margin space but Previously credit spend, important we'll to channel margins and diligent call in eye with the GSE minimal marketing NonQM protecting through remain with allowing consumer and within our an We market center, our shrinking offsetting towards volume originate conditions

call marketing within pleased quickly channel. how We and increase line able we've composition compressed we've By in been retail the focus previously, sales up to product the in the successful was and the and this NonQM shift shifting production that time center. with leveraging are expertise product significantly so ramping

call more million million center Our retail XXXX, third the to fourth NonQM than $XXX in the the quarter. in doubling the NonQM funding in funding volume quarter $XX of increased volume

first the and that level NonQM we relatively off, the to growth While of rate do XXXX. quarter NonQM remain will trajectory our expect call into center run flat

business our consumers. Jon As compared We expense to channel the business almost fourth the volume center in touched quarter. and augment increased to in attributed increased NonQM on, promotion third targeted to quarter our call entirely slightly to the maintain our lead promotion focused as marketing retail attract both

corresponding of direct to to direct represent continue With in increase originations the composition. XX% business locked of NonQM shift approximately Currently at last in related pipeline in earnings call aforementioned the approximately XX% NonQM marketing we in pipeline, to promotion November. our the consumer channel, our see a time consumer as compared

several product Additional marketing NonQM to increasing in the growth originations consumers Measuring steadily of in last primary the our to years. deployed the channel. has first call been this the NonQM volume focal in allocations vehicle increased. NonQM origination origination needed point will year, over and production channel expertise continue up educate channel. around leverage successful well as a to as wholesale offering for third-party NonQM promote the around our Wholesale has the driving center around within ramping momentum The further remains quarter industry-wide the volume a traditionally as from be

TPO our George mentioned, NonQM entirely XX% NonQM the originated of in quarter quarter fourth XXXX As overall the NonQM million was million third the Roughly to doubling pipeline our compared $XXX third of company the channel, from almost composition our through quarter. the $XXX NonQM over volume the to production product. generated as TPO production of in fourth production with

the on successful business credit TPO progress we've a rebuilding platform. of half the In focus the has in Over indicative course our channel is XXXX, made of second the alternative clear of the in funding our wholesale funded NonQM million impressive a NonQM $XX team. channel numbers month largest historical compared December, the for as equaling production to since our NonQM XXXX, volume wholesale very milestone

division. relaunched of and and growth in relaunch produced results, our not TPO quarter the to XXXX still channel following the dramatic future. channel of relationships share business fully has in drive the correspondent through has correspondent its opportunity non-delegated capture the While volume positive market wholesale additional the delegated There's third

raising protect our over remained changes $XXX as our NonQM a across changes, million rising recalibrate by broker to mentioned, all at these in been adjustment environment. rate rate Despite all across and products. rates NonQM This during they we've quarter. partners margins pricing has channels for run Obi borrower taken an first As per month steps to has the

have the for now will continue remarks. session. XXXX. teams and products, our over and and to Moisio prepared We in we build offer responsible same to I'll to concludes way with our financial the turn And Justin NonQM the credit both alternative That the channels since call thoughtful question-and-answer results

Justin Moisio

Tiffany. Thanks,

So questions the of ahead Cranston, Trevor we from received call. a list of

so do is, team them right questions go the And now and I'll what those have I'll directly. through answer

understanding widening of Trevor at it's the his had So the valuation the the securitizations. NonQM NonQM impact spreads to of quarter within item first mentioned was, had that, end with do that the fourth

So do with given recent even first quarter margins we has happened that further. rate the movement, see the with in what said, tightening

maybe you Obi, that on So briefly? can touch

Obi Nwokorie

Justin. sure Yes,

So, I see the compression quarter first this year. margin to of mean, yeah, continued we've into

over. As we're the spreads with quarter seeing basis remarks, in market NonQM in fourth swaps. the ended XXX at mentioned those between XX at XXX the a the prepared few points spread to Today, somewhere over deals interpolated AAA basis roughly points

time. that seen probably another, rates XX to AAA the obviously credit XX that it had rates in margins. mentioned XX points to points around increased that, I call impact during And So quarter. continued basis We've to basis also another has XX increase rates the fourth level. seen earlier points XX at in spreads since We've basis sell-off

see think average to margins. I have where arrest than combination of sheets. that rate do and is again I ourselves given the responded to the pressure probably some that think and rates originators that basis this offering have XXX included on in of is attempt we things an did back on begin higher was all So points increased then, to these continued And coupon compression. it put weighted of two margin

Justin Moisio

kind follow-up Okay. Thank there. a of you. is The item next

there So that to just that we within expect the adjusted NonQM And one. to a that specifically the I dip Then NonQM higher space our the volume? rates? be and in after consumers expect we the do increase has do can market in brokers So stabilize? take to

different on a us to what of events already was changes, volatile the touched the the the significant forward we to places was put combined had recalibrate And pushed which to the very pressure market remarks, we that outlined they couple a as obviously geopolitical So in prepared of with pricing rest and in on significant brokers, previously. consumers and and industry.

reason, unlocked we loans felt to pipeline, that did get to not their for was within move. have yet expected were large to there fall locked So going rates were then considerably they see they that that just specifically that some lower there, the the folks those which and yet, out that was when going be so be

some was there fallout there. So

shapes QX. down to be So depending as most for compared March will NonQM likely on how out QX

quarter? the is maybe that? margins do Or these that then, got a sale Obi, and do gain of market just mentioned coupon target from gets Tiffany expect at difficult to the we want rates expect gross that perspective. subs currently, had on where there question and asked with However, levels? month this, thoughts we a give we're But levels locks do And we on our realistic in ever a ball million to next one more a margin to going as stabilize. remaining are the Trevor to with you your The was, NonQM forward. And enjoy return $XXX increase higher production. crystal That's that NonQM third to comfortable still

Obi Nwokorie

margins run question the it to in returns obviously thing a QX profitable to really a And I And really, Yes. same loans answer, the point. does, locked find sure. are the not you that would will business a levels But we're to us it's changing given volatility that to borrower. rates that of normalize dynamics will market when The one are by lag and XXXX with once seeing. [indiscernible] in when do saw level rate say, the pipeline investors originators at the investors. Yes the [indiscernible] allows think the the or a difficult by shown purchase in some if market some between of manner. the we business

us continued progression to at to point XX% I that to back some [indiscernible] type margin. some but rate come there, there's here we think allow originators So, and stabilize do those get that

Justin Moisio

Thanks. Okay.

intense Next going could to fall space? Do four the months expect question, around the that it volatility is been we or that of new competitors. we as the three question of some So competition within due has the I that's remain do as last the out all entrants staying our to power NonQM some believe mean -- on?

So that I'll as one take well.

So third seen new I expected. one since lot late quarter, money, really been step that think can be help to. GSE offset a outside move of which this It's the the production. folks will loss purchase the before the into faces there's of to of anticipated of really lot We've a pivot NonQM space,

to lenders new some their while it's would to too say Yeah, to other NonQM that So this credit the from larger to some built for could these there. alternative extent ourselves tell, was out infrastructure that the similar table to the volatility out they stomach. proper NonQM at and point, them too entrants back much the hadn't they of early conceivably away extent the I still

margin, we really to names that compete on However, share. have We'll its tied the are believe inception. since to market do continue larger been that self-included NonQM aggressively

focused you but from Trevor that the big space. away center will the had see a standpoint, call last off back the in at GSE newer I So competition don't from entrants it. on And that think space the of in the some could fall the all, picture question

as is to in I'll hold GSE And Where this see same some production, one So, on the that regarding we center call do the NonQM assumption center? appropriately? Have as the just pain our well. other we GSE call adjusted experienced shops. has

of George of it remarks the volumes on prepared couple talked around last we we the not reduced to mentioned about So origination this respect and margin his a this production. are progression call certainly immune with GSE bit business, even in -- calls, rate and in from terms

relatively while in compared quarter GSE So into this decrease not We the remained the there, our experience a account fourth when that of surprise to volume center spend. that terms you do chasing the total the as to in especially we of flat and our Not call Jon in We've pivoted take within mentioned going expect in third, NonQM. production almost retail originations. XX% of call did increased decrease to a business continue We're further. marketing center marketing spend. with currently promotion all about

the so, can we'll center NonQM capture prepared and call we're chase right to get that as that GSE that to And fourth but we the doubled is We within organic continue our of in it that's on now compared coming volume comes in, purely her much Tiffany that the to going touched And at in the these remarks. production margin third. in quarter levels. not

credit GSE and of something there. that cross-trained that from here that's of know years the and products publications is in that then, finding that. originate larger from time of is alternative the but doing continues immune And not how So, institutions read out headcount reduction terms either, all on to topic success made a great some clearly point we're come we're our that you up so. to we've difference a at being that trade of of folks And the emphasis

as market that to But changes continue we much do. the that our respond appropriately, always and conditions So as makes market we'll to staff rightsizing current easier. thoughtfully capacity

Justin Moisio

terms we questions concludes So today. of what in that have

to for So results thank we'll first the joining quarter. in for speak of months the you. with market a all you us, and here that, few the Thank

Operator

this and call. concludes today's Ladies conference gentlemen,

day. You wonderful may have Everyone disconnect. now a

Impac Mortgage (IMPM) 11 Mar 222021 Q4 Earnings call transcript