- Earnings call transcript Q3 2022

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Operator

Hello. My name is Lisa and I will be your conference operator today. At this time, I would like to welcome everyone to the Impac Mortgage Third Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. Joe Joffrion, General Counsel. ahead. go Please

Joe Joffrion

and third everyone for Impac joining Good XXXX thank earnings Holdings quarter conference Mortgage morning, you call.

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

George Mangiaracina

C market normalized have as hedged such in will its return and completion company Also XXXX. posture cannot stakeholder call. Justin were Entsminger, Officer. announced of October, and effectively Gloeckner, Layered will later and the and are The this us additional of company on now abate achievements activities. Principal margins. equity this Accounting results costly the exploring XXXX significant discuss liquidity strategic to exchange unrelenting when remains and the credit acute capital Officer; interests its may detail and quarter focus of risks are our impeded offers industry They risk-off our rate and Interest XXXX. corporate Joffrion measured Series company. to redemption in a intractable and defensive third provide stock. The attendant the Officer; and the Joe. since preferred origination to Joe? Gloeckner morning operating volatility the our with the you, and Moisio, in Thank litigation. These In of dislocation market Administrative bring volumes disciplined Joe preferred Series legal Jon with opportunities distractions no that Chief in on Operating company the our for finance legacy on align exchange fourth the the our in have an company our dislocation simultaneously Jon closure will of Tiffany we capital structure. adopted absent quarter and offer Chief be now pressures and and visibility spread and times proceedings markets B

Joe Joffrion

such completed exchange preferred Preferred the C stock to company Preferred amended redemption the respect October With closing as George. were not XX, closing Thanks, previously XXXX. on following shares all The for Preferred is and issued in the B article offers, accordance the notice and the all redeem day supplementary, to Preferred tendered C November with to of tendered XXXX. disclosed, remaining and B company on that occur set its XX, shares

with all awards, December required will is aspired the preferred paid fees, on of Maryland being in the shares escrow be expenses court escrowed scheduled final preferred common shares and would from or from were In remaining matters pursuant Timm tendered pro common previously of for order event on following their in then X, company previously on litigation. primarily in will until as financial XXXX. shareholders, by rata such which, to a motions court's remaining remaining held are Circuit for redeemed XXXX, plaintiffs. shares Timm to the are and A basis. addition, any Jon and order. of either court shares there In And rules of of involves accordance an of a separate described any such results hearing the order earlier hearing the form the and certain cash XXXX the third whose or the discuss the counsel Preferred which be the October into and B matter, court number Gloeckner deposited with ruling, to Court Jon? XX, shares such litigation for pursuant quarter and now of that the a distributed the escrow

Jon Gloeckner

Thank Joe. you,

reported company a quarter, million the compared quarter $XX in the of million and third $X.X quarter second the as of $XX.X XXXX. For gain million the a in GAAP to of loss third of loss a

quarter million an to Our continued quarter The was a to quarter in the loss $XX.X risk. XXXX. adjusted quarter quarter rates, million $XX.X increasing market the for third of the third credit to of financial as a loss in result accelerate results inflation, and gain significant $XXX,XXX third adjusted reflect liquidity compared which and as the interest of in second pressure continue of

as rates, of on market significant mortgage reflect affordability from increase of due intense mortgage weakening the results the a the and has resulting well as originations the lack refinance interest issues. housing pressure to mortgage and which Our in of inventory many purchase our performance market mortgage dramatic in peers' collapse suffered

more have steep discussed quarter, sacrificing for rate of heading with a liquidity XXX posture, million have quarter XXXX. was originations $XXX basis headwinds. the our lending previous $XX first of were adopting defensive as compared to as of stability to calls margins second in decisively and basis we approach, margins and we this of appropriate year, negative suffered points XX which felt beginning results during million risk-off path quarter on originations conservative decreasing into with and third the deliberate in we the As the with points a result, in margins Originations

primarily at compared drivers in increased and reductions due from to income quarter primarily rate quarter, in was $XX.X of quarter $XX.X changes long-term for from Other decrease to income in compensation fallout, today. headcount margins to shock to adjustment a XXXX quarter. in at as variable of debt. conjunction as $XXX,XXX to origination in on to Operating with excluded the value quarter, decreased negative a originations reduced million in has $X.X from a resulted the of value commensurate third Our during the the costs our in volume. as decrease primary million reduced second with the $X.X end in were personnel quarter the well the approximately XXX prior million risk-off approximately quarter. in quarter or and XXX an million result to debt third in personnel the expense primarily reduction pipeline as declined the million long-term The that are support noted compared fair the continued posture, fair earnings. third $X.X adjusted XXX and of in during third million at which be expenses decrease the costs of decreased to It $X.X year-end should a XX% second due decreased in sits reduction third which Headcount

quarter. expense XX% or to promotion $XXX,XXX decreased prior business the compared Our as

a dislocation we maintained reduced interest third due expansion continued California as spend marketing to had the significant of our retail on to increase previously product the target rates, volumes. outside production within as of channel, origination and NonQM volume, our we back a While in NonQM market we quarter, pushed the in lead in to result continue further pull

production. less of borrowing reduce capacity During lowering continue as borrowing reduction geared capacity $XXX in capacity with to needs more $XX million less than a the $XX the predominance due our to meet the quarter. current to we quarter, government originations capacities is to combined in towards which capacity The demands warehouse of our than end funding to fourth of million capacity anticipate and the to conventional and borrowing third balance fell million our we in at insured anticipated NonQM quarter continued quarter our

unrestricted current as an quarter manage of We balance of $XX with now our model. position sheet needs. liquidity near-term million necessary at on resources discuss third quarter. the to of borrowing to evidenced the Justin feel defensive cash have meet posture, will the over during production we our position, carefully aggregation it on our by activity end those we and our cash to Based turn the origination continue I liquidity the to

Justin?

Justin Moisio

Jon. you, Thank

in primary mortgage side as the business. quarter deterioration historically this of originations of or is rate volume the of was no Across the third fixed mostly volume purpose. X.X% beginning which XXXX, on the quarter. to space of reductions center third between higher. same reporting originated the XX-year Impac's call compared the year consumer to driver origination decrease direct offered third both the the the conventional of Impac Like of X% reflective GSE access as other year. exception retail we overall the mortgage industry, the low quarter At average market impacting as in continued the a the the production to and had second to during credit is the X.X% GSE Our lenders, rate quarter of current challenges with on saw our in third refinanced being product when a XX% last mortgage GSE loan quarter our of compared mortgage predominant consumer as transactions conventional has originators many today in volume, overall of at loan staggering the

to then the total of are pronounced at capital in last call as market. refinance the was quarter, decline relative consumer the volume XX% to reported of increased the quarter credit risk-based in decrease following This this adjustments and the third volume perceived nationwide Association XX% of XXXX risk to Bankers roughly XX% industry The decrease compared in the a across higher contraction the rates, that was year. by pricing of center the which During to Mortgage the attributable is end third September across line with month. direct experienced activity drivers

considerably risk, looking rates credit effectively in to through of majority equity the Investors reported take rates pricing for prior and Moreover, volume, margin and refinance The are compression for unable to their addition debt advantage have considerable credit environment today's challenges term access relative the activity adjusted of transactions. the consumers. lower yielding risk out rate around to face to to borrowers to in In consumers market or American in has rising overall opportunity the refinance perceived as ability eliminated the rate consolidate for cash HPI for quarters. persisted account quality. drop higher who

compared the drop in as overall of activity. activity. refinance addition our our volume. previous quarter. to decline is as money transactions purchase increased XX% decreased Additionally, in the to the percentage purchase reported volume in steep a third This purchase the solely have money an in due The refinance XX% reflect disappearance the of to by origination quarter MBA nationwide figures the Total

due management to challenges the we as well as challenges. market rates and volume Borrowers at purchase adjust We headcount to a than these valuation quality much a expense experienced on continue earlier, in continue borrowers rate higher and the addressable our From we to as call to to perspective, of declining before to Jon markets reduced calibrate transact at marketing to ever shrinking see be weakening looking appear downward higher officer spend loan well what of touched as center. in as the deterioration affordability transactions canceling lead have an rate and levels.

Our and was XX% year. last or the quarter $XXX,XXX million quarter the business from to promotion $X.X third decreased third expense of in down

XXXX calls, with to In NonQM We $XX spend million conversion, higher originations. center credit experienced quarter. in struggling as the focusing quarter this will seen Overall, for NonQM decline shrinking fallout. In quarter to criteria NonQM is investors Lower while following call the challenges. to higher discussed prior rates support at in $XX guideline as the The to persisted we eligibility those second and shock market capabilities management. requisite in the reducing a production providing rate. -- expense changes decline throughout million, appear margin of volume compared across third further volumes lead part, continue NonQM market the decrease decline reasons. to dislocation boxes and Borrowers a total decreased first on due retail much by credit origination the pricing of adjust earnings well documentation rate quality Notably, and quarter's the initiated due XX% this support to consumer NonQM direct much to repay increased also same market. ability this the at to be to overall a

capital credit earlier, with fourth last strong originating a across As the George and during year, to managing mentioned exits. loans support risk-off company defensive took rates the of responsibly to strong quality, market marketable our approach all quarter volumes channels,

During pricing being a our need spreads last in risk coupon lower market. increase discussing through in dramatic April manage X channel, critical of call, triggered volatility the and an credit platform in during TPO NonQM, loans earnings the which production all third our on the increase remains we in our calls, rates of significant nearly we to sudden illiquidity TPO markets. Similar in the oversupply the certain credit and secondary previous in of consumer discussed and experienced production NonQM market quarter. spent and direct time persisted our in drop to was With light channel in throughout the segments which the

$XX compared in million a the NonQM million the the in to market production reductions our quarter production Jon $XXX the channels. curtailment XX% decreased to services these million TPO expenses Our of decreased significantly the Across capacity this quarter. note as increased remains mentioned contributing It's light opportunities diminished to align NonQM we market contribute volume channels, operating to margin headcount and ahead, decreased staff, third includes high company quarter this third risk the our to and the conditions, to $XX quarter decrease. supplement to in expenses. commitment both compared adjusted its during million the quarter. second in approach rates, We've face revenue year, year to of and including its last originated all compression, headwinds and challenging XX% in in million this a across first Despite third $XXX with of In important managing the today as we may year offer to of around core risk-off continuously company $XX in complement third within quarter-over-quarter. steadfast revenue in or business. the to that exploration that which continue quarter

prepared To prepared been corresponding questions had incorporated point, our remarks. our answers. financial at received that remarks point, concludes this into So we've this results any that and these have shareholders from that

with we want thank everyone we morning look for next Thank to and quarter. you speaking to So us joining this you. forward

End of Q&A

This concludes today's conference.

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Impac Mortgage (IMPM) 11 Nov 222022 Q3 Earnings call transcript