Impac Mortgage Holdings, Inc. (NYSE American:IMH) announces the
financial results for the quarter ended June 30, 2017.
For the second quarter of 2017, the Company reported GAAP net
earnings of $6.4 million, or $0.32 per diluted common share, and
Adjusted Operating (Loss) Income (as defined below) of $(174)
thousand, or $(0.01) per diluted common share, as compared to GAAP
net earnings of $12.3 million, or $0.92 per diluted common share,
and Adjusted Operating Income of $18.5 million, or $1.33 per
diluted common share for the second quarter of 2016.
Operating income, excluding the changes in contingent
consideration (“Adjusted Operating (Loss) Income”), is considered a
non-GAAP financial measurement; see the discussion and
reconciliation of non-GAAP financial measures below.
Results of
Operations |
|
For the Three Months Ended |
|
For the Six Months Ended |
(in thousands,
except share data) |
|
June 30, |
|
March 31, |
|
June 30, |
|
June 30, |
|
June 30, |
(unaudited) |
|
2017 |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on
sale of loans, net |
|
$ |
36,806 |
|
|
$ |
37,319 |
|
|
$ |
78,822 |
|
|
$ |
74,126 |
|
|
$ |
132,691 |
|
Real
estate services fees, net |
|
|
1,504 |
|
|
|
1,633 |
|
|
|
1,995 |
|
|
|
3,137 |
|
|
|
4,095 |
|
Servicing
fees, net |
|
|
7,764 |
|
|
|
7,320 |
|
|
|
2,803 |
|
|
|
15,083 |
|
|
|
4,891 |
|
Loss on
mortgage servicing rights, net |
|
|
(6,669 |
) |
|
|
(977 |
) |
|
|
(14,482 |
) |
|
|
(7,646 |
) |
|
|
(25,392 |
) |
Other |
|
|
228 |
|
|
|
47 |
|
|
|
75 |
|
|
|
275 |
|
|
|
227 |
|
Total
revenues |
|
|
39,633 |
|
|
|
45,342 |
|
|
|
69,213 |
|
|
|
84,975 |
|
|
|
116,512 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
expense |
|
|
21,373 |
|
|
|
24,919 |
|
|
|
30,592 |
|
|
|
46,291 |
|
|
|
54,557 |
|
Business
promotion |
|
|
10,110 |
|
|
|
10,231 |
|
|
|
11,286 |
|
|
|
20,341 |
|
|
|
20,478 |
|
General,
administrative and other |
|
|
8,324 |
|
|
|
8,023 |
|
|
|
8,842 |
|
|
|
16,348 |
|
|
|
16,004 |
|
Accretion
of contingent consideration |
|
|
707 |
|
|
|
845 |
|
|
|
1,759 |
|
|
|
1,552 |
|
|
|
3,653 |
|
Change in
fair value of contingent consideration |
|
|
(6,793 |
) |
|
|
539 |
|
|
|
8,412 |
|
|
|
(6,254 |
) |
|
|
11,354 |
|
Total
expenses |
|
|
33,721 |
|
|
|
44,557 |
|
|
|
60,891 |
|
|
|
78,278 |
|
|
|
106,046 |
|
Operating
income: |
|
|
5,912 |
|
|
|
785 |
|
|
|
8,322 |
|
|
|
6,697 |
|
|
|
10,466 |
|
Other income
(expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income |
|
|
1,098 |
|
|
|
446 |
|
|
|
833 |
|
|
|
1,543 |
|
|
|
732 |
|
Change in
long-term debt |
|
|
(1,530 |
) |
|
|
(2,497 |
) |
|
|
1,354 |
|
|
|
(4,026 |
) |
|
|
1,354 |
|
Change in
fair value of net trust assets |
|
|
2,005 |
|
|
|
6,319 |
|
|
|
2,165 |
|
|
|
8,324 |
|
|
|
1,538 |
|
Total
other income (expense) |
|
|
1,573 |
|
|
|
4,268 |
|
|
|
4,352 |
|
|
|
5,841 |
|
|
|
3,624 |
|
Net
earnings before income taxes |
|
|
7,485 |
|
|
|
5,053 |
|
|
|
12,674 |
|
|
|
12,538 |
|
|
|
14,090 |
|
Income
tax expense |
|
|
1,045 |
|
|
|
426 |
|
|
|
423 |
|
|
|
1,471 |
|
|
|
858 |
|
Net
earnings |
|
$ |
6,440 |
|
|
$ |
4,627 |
|
|
$ |
12,251 |
|
|
$ |
11,067 |
|
|
$ |
13,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
weighted average common shares |
|
|
21,258 |
|
|
|
17,422 |
|
|
|
13,863 |
|
|
|
19,377 |
|
|
|
13,751 |
|
Diluted
earnings per share |
|
$ |
0.32 |
|
|
$ |
0.29 |
|
|
$ |
0.92 |
|
|
$ |
0.62 |
|
|
$ |
1.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings include certain fair value adjustments, which are
non-cash items and are not related to current operating
results. Although we are required by GAAP to record these
fair value adjustments, management believes Adjusted Operating
(Loss) Income as defined above is more useful to discuss the
ongoing and future operations of the Company, shown in the table
below:
Adjusted
Operating (Loss) Income |
|
For the Three Months Ended |
|
For the Six Months Ended |
(in thousands,
except share data) |
|
June 30, |
|
March 31, |
|
June 30, |
|
June 30, |
|
June 30, |
|
|
2017 |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
Net
earnings: |
|
$ |
6,440 |
|
|
$ |
4,627 |
|
|
$ |
12,251 |
|
|
$ |
11,067 |
|
|
$ |
13,232 |
|
Total other (income)
expense |
|
|
(1,573 |
) |
|
|
(4,268 |
) |
|
|
(4,352 |
) |
|
|
(5,841 |
) |
|
|
(3,624 |
) |
Income tax expense |
|
|
1,045 |
|
|
|
426 |
|
|
|
423 |
|
|
|
1,471 |
|
|
|
858 |
|
Operating
income: |
|
$ |
5,912 |
|
|
$ |
785 |
|
|
$ |
8,322 |
|
|
$ |
6,697 |
|
|
$ |
10,466 |
|
Accretion of contingent
consideration |
|
|
707 |
|
|
|
845 |
|
|
|
1,759 |
|
|
|
1,552 |
|
|
|
3,653 |
|
Change in fair value of
contingent consideration |
|
|
(6,793 |
) |
|
|
539 |
|
|
|
8,412 |
|
|
|
(6,254 |
) |
|
|
11,354 |
|
Adjusted
Operating (Loss) Income |
|
$ |
(174 |
) |
|
$ |
2,169 |
|
|
$ |
18,493 |
|
|
$ |
1,995 |
|
|
$ |
25,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average common shares |
|
|
21,258 |
|
|
|
17,422 |
|
|
|
13,863 |
|
|
|
19,377 |
|
|
|
13,751 |
|
Diluted
Adjusted Operating (Loss) Income per share |
|
$ |
(0.01 |
) |
|
$ |
0.12 |
|
|
$ |
1.33 |
|
|
$ |
0.10 |
|
|
$ |
1.85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating (Loss) Income decreased to a loss of $(174)
thousand, or $(0.01) per diluted common share, for the second
quarter of 2017 as compared to $18.5 million, or $1.33 per diluted
common share, in the second quarter of 2016. The decrease in
operating income was primarily due to a decrease in gain on sale of
loans of $42.0 million resulting from a 45% decrease in total
originations volume (as discussed below). Additionally, the
decrease was magnified due to a higher concentration of volume in
the third party origination channel, as well as margin compression
due to increased competition caused by less available volume.
While we have increased the volume of NonQM loans (discussed
below), we have not increased the volume to the level desired,
which also contributed to less than expected margins in the second
quarter. As a result, gain on sale margins decreased by 38
basis points (“bps”) to 205 bps in the second quarter of 2017, as
compared to 243 basis points in the second quarter of
2016.
Servicing
Portfolio Data |
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
As of June 30, 2017 |
|
As of March 31, 2017 |
|
% Change |
|
As of June 30, 2016 |
|
% Change |
|
Mortgage Servicing
Portfolio (UPB) |
$14,667.9 |
|
$13,241.9 |
|
11% |
|
$6,641.5 |
|
121% |
|
Mortgage Servicing
Rights |
$152.3 |
|
$141.6 |
|
8% |
|
$54.7 |
|
178% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Q2 2017 |
|
Q1 2017 |
|
% Change |
|
Q2 2016 |
|
% Change |
|
Servicing Fees,
Net |
$7.8 |
|
$7.3 |
|
6% |
|
$2.8 |
|
177% |
|
As a result of the retention of servicing starting in 2016, the
unpaid principal balance (“UPB”) of the Company’s mortgage
servicing portfolio increased 121% to $14.7 billion as of June 30,
2017 from June 30, 2016. The servicing portfolio generated
net servicing fees of $7.8 million in the second quarter of 2017, a
177% increase over the net servicing fees of $2.8 million in the
second quarter of 2016. Additionally, delinquencies within
the servicing portfolio remain low at 0.34% for 60+ delinquencies
as of June 30, 2017.
The loss on mortgage servicing rights (“MSR”) in the second
quarter was primarily due to mark-to-market (“MTM”) loss and
changes associated with payoffs in the portfolio related to the
decrease in prevailing mortgage rates in the second quarter.
Origination
Data |
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
Q2 2017 |
|
Q1 2017 |
|
% Change |
|
Q2 2016 |
|
% Change |
|
Retail
Originations |
$1,186.8 |
|
$1,066.2 |
|
11% |
|
$2,493.0 |
|
-52% |
|
Correspondent
Originations |
$305.8 |
|
$271.2 |
|
13% |
|
$419.9 |
|
-27% |
|
Wholesale
Originations |
$301.0 |
|
$242.6 |
|
24% |
|
$334.5 |
|
-10% |
|
Total Originations |
$1,793.6 |
|
$1,580.0 |
|
14% |
|
$3,247.4 |
|
-45% |
|
During the second quarter of 2017, total originations decreased
45% to $1.8 billion as compared to $3.2 billion in the second
quarter of 2016. This decrease was a result of lower
refinance volume, due to a higher interest rate environment, as
compared to the second quarter of 2016.
In the second quarter of 2017, NonQM and government-insured
originations represented approximately 40% of total originations,
as compared to just 16% of total originations in the second quarter
of 2016.
During the second quarter of 2017, the origination volume of
NonQM loans increased to $232.5 million, as compared to $184.3
million in the first quarter of 2017 and $289.6 million of NonQM
production for all of 2016. In the second quarter of 2017,
the retail channel accounted for 36% of NonQM originations while
the wholesale and correspondent channels accounted for 64% of NonQM
production.
Additionally, in the second quarter of 2017, the Company’s
government-insured loan production increased to $481.8 million, as
compared to $448.5 million in the second quarter of 2016.
NonQM and government-insured mortgages are typically a higher
margin product for the Company.
As of June 30, 2017, our locked pipeline, which represents
mortgages we expect to close in the near future, was $643.4
million, as compared to $553.1 million at March 31, 2017. As
of June 30, 2017, our NonQM pipeline had increased to approximately
$260.7 million as compared to $201.8 million at March 31, 2017.
Summary Balance
Sheet |
|
June 30, |
|
December 31, |
(in thousands) |
|
|
2017 |
|
|
2016 |
ASSETS |
|
|
|
|
Cash |
|
$ |
29,652 |
|
$ |
40,096 |
Mortgage
loans held-for-sale |
|
|
591,625 |
|
|
388,422 |
Finance
receivables |
|
|
58,716 |
|
|
62,937 |
Mortgage
servicing rights |
|
|
152,273 |
|
|
131,537 |
Securitized mortgage trust assets |
|
|
3,787,452 |
|
|
4,033,290 |
Goodwill
and intangibles |
|
|
128,618 |
|
|
130,716 |
Deferred
tax asset |
|
|
24,420 |
|
|
24,420 |
Other
assets |
|
|
55,341 |
|
|
52,316 |
Total assets |
|
$ |
4,828,097 |
|
$ |
4,863,734 |
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
Warehouse
borrowings |
|
$ |
612,570 |
|
$ |
420,573 |
Debt |
|
|
79,638 |
|
|
102,082 |
Securitized mortgage trust liabilities |
|
|
3,767,519 |
|
|
4,017,603 |
Contingent consideration |
|
|
14,926 |
|
|
31,072 |
Other
liabilities |
|
|
47,575 |
|
|
61,364 |
Total liabilities |
|
|
4,522,228 |
|
|
4,632,694 |
Total equity |
|
|
305,869 |
|
|
231,040 |
Total liabilities and stockholders’ equity |
|
$ |
4,828,097 |
|
$ |
4,863,734 |
|
|
|
|
|
|
|
Mr. Joseph Tomkinson, Chairman and CEO of Impac Mortgage
Holdings, Inc., commented, “As we continue to grow our NonQM
production, our NonQM pipeline is now trending towards the
origination levels we had hoped for. Additionally, as our
servicing portfolio continues to grow, the servicing fees generated
are finally becoming a significant and consistent revenue
stream. We expect that these servicing fees will only
continue to grow and become even more impactful as our servicing
portfolio grows.”
Non-GAAP Financial Measures
This release contains operating income excluding changes in
contingent consideration (“Adjusted Operating (Loss) Income”) and
per share as performance measures, which are considered non-GAAP
financial measures, to further aid our investors in understanding
and analyzing our core operating results and comparing them among
periods. Adjusted Operating (Loss) Income and Adjusted
Operating (Loss) Income per share exclude certain items that we do
not consider part of our core operating results. These non-GAAP
financial measures are not intended to be considered in isolation
or as a substitute for net earnings before income taxes, net
earnings or diluted EPS prepared in accordance with GAAP. The
table below shows operating income per share excluding these
items:
|
|
For the Three Months Ended |
|
For the Six Months Ended |
|
|
June 30, |
|
March 31, |
|
June 30, |
|
June 30, |
|
June 30, |
|
|
2017 |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
Diluted
earnings per share |
|
$ |
0.32 |
|
|
$ |
0.29 |
|
|
$ |
0.92 |
|
|
$ |
0.62 |
|
|
$ |
1.08 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other (expense)
income (1) |
|
|
(0.09 |
) |
|
|
(0.27 |
) |
|
|
(0.36 |
) |
|
|
(0.36 |
) |
|
|
(0.39 |
) |
Income tax expense |
|
|
0.05 |
|
|
|
0.02 |
|
|
|
0.03 |
|
|
|
0.08 |
|
|
|
0.06 |
|
Accretion of contingent
consideration |
|
|
0.03 |
|
|
|
0.05 |
|
|
|
0.13 |
|
|
|
0.08 |
|
|
|
0.27 |
|
Change in fair value of
contingent consideration |
|
|
(0.32 |
) |
|
|
0.03 |
|
|
|
0.61 |
|
|
|
(0.32 |
) |
|
|
0.83 |
|
Diluted
Adjusted Operating (Loss) Income per share |
|
$ |
(0.01 |
) |
|
$ |
0.12 |
|
|
$ |
1.33 |
|
|
$ |
0.10 |
|
|
$ |
1.85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes the add back of interest expense on the convertible
notes, net of tax used to calculate diluted earnings using the
if-converted method.
Conference Call
The Company will hold a conference call on August 9, 2017, at
9:00 a.m. Pacific Time (12:00 p.m. Eastern Time) to discuss the
Company’s financial results and business outlook and to answer
investor questions. After the Company’s prepared remarks,
management will host a live Q&A session. To submit
questions via email, please email your questions to
Justin.Moisio@ImpacMail.com. Investors may participate in the
conference call by dialing (844) 265-1560 conference ID number
66004157, or access the web cast via our web site at
http://ir.impaccompanies.com. To participate in the conference
call, dial in 15 minutes prior to the scheduled start time. The
conference call will be archived on the Company's web site at
http://ir.impaccompanies.com.
Forward-Looking Statements
This press release contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements, some of which are based on various assumptions and
events that are beyond our control, may be identified by reference
to a future period or periods or by the use of forward looking
terminology, such as “may,” “capable,” “will,” “intends,”
“believe,” “expect,” “likely,” “potentially” ”appear,” “should,”
“could,” “seem to,” “anticipate,” “expectations,” “plan,” “ensure,”
“desire,” or similar terms or variations on those terms or the
negative of those terms. The forward-looking statements are based
on current management expectations. Actual results may differ
materially as a result of several factors, including, but not
limited to the following: failure to achieve the benefits
expected from the acquisition of the CCM operations, including an
increase in origination volume generally, increase in each of our
origination channels and ability to successfully use the marketing
platform to expand volumes of our other loan products; successful
development, marketing, sale and financing of new and existing
financial products, including expansion of NonQM loan originations
and conventional and government-insured loan programs; ability to
successfully diversify our mortgage products; ability to continue
to grow servicing portfolio; volatility in the mortgage industry;
unexpected interest rate fluctuations and margin compression; our
ability to manage personnel expenses in relation to mortgage
production levels; our ability to successfully use warehousing
capacity; increased competition in the mortgage lending industry by
larger or more efficient companies; issues and system risks related
to our technology; ability to successfully create cost and product
efficiencies through new technology; more than expected increases
in default rates or loss severities and mortgage related losses;
ability to obtain additional financing through lending and
repurchase facilities, debt or equity funding, strategic
relationships or otherwise; the terms of any financing,
whether debt or equity, that we do obtain and our expected use of
proceeds from any financing; increase in loan repurchase requests
and ability to adequately settle repurchase obligations; failure to
create brand awareness; the outcome, including any settlements, of
litigation or regulatory actions pending against us or other legal
contingencies; and our compliance with applicable local, state and
federal laws and regulations and other general market and economic
conditions.
For a discussion of these and other risks and uncertainties that
could cause actual results to differ from those contained in the
forward-looking statements, see the annual and quarterly reports we
file with the Securities and Exchange Commission. This document
speaks only as of its date and we do not undertake, and
specifically disclaim any obligation, to release publicly the
results of any revisions that may be made to any forward-looking
statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such
statements.
About the Company
Impac Mortgage Holdings, Inc. (IMH or Impac) provides innovative
mortgage lending and warehouse lending solutions, as well as real
estate solutions that address the challenges of today’s economic
environment. Impac’s operations include mortgage and
warehouse lending, servicing, portfolio loss mitigation and real
estate services as well as the management of the securitized
long-term mortgage portfolio, which includes the residual interests
in securitizations.
For additional information, questions or comments, please call
Justin Moisio, VP Business Development & Investor Relations at
(949) 475-3988 or email Justin.Moisio@ImpacMail.com. Web site:
http://ir.impaccompanies.com or www.impaccompanies.com