Impac Mortgage Holdings, Inc. (NYSE American:IMH) announces the
financial results for the quarter ended March 31, 2018.
For the first quarter of 2018, the Company reported net earnings
of $3.9 million, or $0.18 per diluted common share, and Adjusted
Operating Income of $4.4 million, or $0.21 per diluted common
share, as compared to net earnings of $4.6 million, or $0.29 per
diluted common share, and Adjusted Operating Income of $2.2 million
or $0.12 per diluted common share, for the first quarter of
2017.
Results of
Operations |
|
For the Three Months Ended |
(in thousands,
except share data) |
|
March 31, |
|
December 31, |
|
March 31, |
(unaudited) |
|
2018 |
|
|
2017 |
|
|
2017 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
Gain on
sale of loans, net |
|
$ |
21,482 |
|
|
$ |
19,545 |
|
|
$ |
37,319 |
|
Servicing
fees, net |
|
|
9,463 |
|
|
|
8,327 |
|
|
|
7,320 |
|
Gain
(loss) on mortgage servicing rights, net |
|
|
7,705 |
|
|
|
(17,721 |
) |
|
|
(977 |
) |
Real
estate services fees, net |
|
|
1,385 |
|
|
|
1,364 |
|
|
|
1,633 |
|
Other |
|
|
90 |
|
|
|
140 |
|
|
|
47 |
|
Total
revenues |
|
|
40,125 |
|
|
|
11,655 |
|
|
|
45,342 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
Personnel
expense |
|
|
17,742 |
|
|
|
20,294 |
|
|
|
24,919 |
|
Business
promotion |
|
|
9,731 |
|
|
|
9,532 |
|
|
|
10,231 |
|
General,
administrative and other |
|
|
8,275 |
|
|
|
12,931 |
|
|
|
8,023 |
|
Accretion
of contingent consideration |
|
|
— |
|
|
|
109 |
|
|
|
845 |
|
Change in
fair value of contingent consideration |
|
|
— |
|
|
|
(2,273 |
) |
|
|
539 |
|
Total
expenses |
|
|
35,748 |
|
|
|
40,593 |
|
|
|
44,557 |
|
Operating
income (loss): |
|
|
4,377 |
|
|
|
(28,938 |
) |
|
|
785 |
|
Other income
(expense): |
|
|
|
|
|
|
|
|
|
Net
interest income |
|
|
1,020 |
|
|
|
1,253 |
|
|
|
446 |
|
Change in
fair value of long-term debt |
|
|
1,224 |
|
|
|
(292 |
) |
|
|
(2,497 |
) |
Change in
fair value of net trust assets |
|
|
(2,138 |
) |
|
|
(365 |
) |
|
|
6,319 |
|
Total
other income |
|
|
106 |
|
|
|
596 |
|
|
|
4,268 |
|
Net
earnings (loss) before income taxes |
|
|
4,483 |
|
|
|
(28,342 |
) |
|
|
5,053 |
|
Income
tax expense |
|
|
610 |
|
|
|
16,563 |
|
|
|
426 |
|
Net
earnings (loss) |
|
$ |
3,873 |
|
|
$ |
(44,905 |
) |
|
$ |
4,627 |
|
Other
comprehensive earnings: |
|
|
|
|
|
|
|
|
|
Change in
fair value of instrument specific credit risk |
|
|
(1,440 |
) |
|
|
— |
|
|
|
— |
|
Total
comprehensive earnings |
|
$ |
2,433 |
|
|
$ |
(44,905 |
) |
|
$ |
4,627 |
|
|
|
|
|
|
|
|
|
|
|
Diluted
weighted average common shares |
|
|
21,102 |
|
|
|
20,949 |
|
|
|
17,422 |
|
Diluted
earnings per share |
|
$ |
0.18 |
|
|
$ |
(2.14 |
) |
|
$ |
0.29 |
|
|
|
|
|
|
|
|
|
|
|
As a result of higher interest rates, there was a $15.8 million
decrease in gain on sale of loans, in the first quarter of 2018 as
compared to the first quarter of 2017. Origination volume
declined 16% in the first quarter of 2018 to $1.3 billion, as
compared to the first quarter of 2017, and gain on sale margins
declined to 163 bps from 236 bps.
The decrease in originations from the first quarter of 2018 was
primarily a result of higher interest rates. From January 2017
through the first quarter of 2018, interest rates have increased
100 bps from the historically low interest rate environment of
previous years, causing a sharp drop in refinance volume.
Partially offsetting the decline in gain on sale revenues was an
increase in servicing fees, net, and a mark-to-market gain on
mortgage servicing rights (“MSRs”), as well as a decrease in
operating expenses.
Personnel expense decreased 29%, or $7.2 million, to $17.7
million for the first quarter of 2018. The decrease is
primarily related to a reduction in commission expense due to a
decrease in loan originations as well as staff reductions made in
late 2017 and early 2018. As we continue to more closely
align operating and staffing levels to origination volumes, we will
continue to right size the organization.
Servicing
Portfolio Data |
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
As of March 31, 2018 |
|
As of December 31, 2017 |
|
% Change |
|
As of March 31, 2017 |
|
% Change |
|
Mortgage Servicing
Portfolio (UPB) |
$16,751.8 |
|
$16,330.1 |
|
3% |
|
$13,241.9 |
|
27% |
|
Mortgage Servicing
Rights |
$174.1 |
|
$154.4 |
|
13% |
|
$141.6 |
|
23% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2018 |
|
Q4 2017 |
|
% Change |
|
Q1 2017 |
|
% Change |
|
Servicing Fees,
Net |
$9.5 |
|
$8.3 |
|
14% |
|
$7.3 |
|
30% |
|
The mortgage servicing portfolio increased to $16.8 billion at
March 31, 2018 as compared to $13.2 billion at March 31, 2017. The
increase was due to a shift in our strategy in 2016 to retain our
mortgage servicing as well as initiating a retention program to
recapture portfolio runoff during the low interest rate
environment. During 2018, we have continued with our strategy of
growing the mortgage servicing portfolio. As a result, the unpaid
principal balance (“UPB”) of our mortgage servicing portfolio
increased 27% to $16.8 billion at March 31, 2018 compared to March
31, 2017. Delinquencies within the servicing portfolio have
decreased slightly and remain low at 0.72% for 60+ days delinquent
as of March 31, 2018 as compared to 0.81% as of December 31,
2017.
The servicing portfolio generated net servicing income of $9.5
million in the first quarter of 2018, a 30% increase over the net
servicing fees of $7.3 million in the first quarter of 2017.
For the quarter, ended March 31, 2018, gain on MSRs was $7.7
million compared to a loss of $977 thousand for the quarter ended
March 31, 2017. The gain on MSRs in the first quarter was
primarily the result of higher interest rates resulting in an
increase in the fair value of MSRs.
Origination
Data |
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
Q1 2018 |
|
Q4 2017 |
|
% Change |
|
Q1 2017 |
|
% Change |
|
Retail
Originations |
$631.1 |
|
$932.3 |
|
-32% |
|
$1,066.2 |
|
-41% |
|
Correspondent
Originations |
$479.6 |
|
$467.0 |
|
3% |
|
$271.2 |
|
77% |
|
Wholesale
Originations |
$209.4 |
|
$254.5 |
|
-18% |
|
$242.6 |
|
-14% |
|
Total Originations |
$1,320.1 |
|
$1,653.8 |
|
-20% |
|
$1,580.0 |
|
-16% |
|
For the quarter ended March 31, 2018, NonQM and
government-insured originations represented approximately 61% of
total originations, as compared to 39% of total originations for
the quarter ended March 31, 2017.
During the first quarter of 2018, the origination volume of
NonQM loans increased 35% to $248.2 million, as compared to $184.3
million for the first quarter of 2017. In the first quarter
of 2018, the retail channel accounted for 23% of NonQM originations
while the wholesale and correspondent channels accounted for 77% of
NonQM production.
In the first quarter of 2018, our NonQM origination volume had
an average FICO of 720 and a weighted average LTV of 66%.
As of December 31, 2017, the CashCall Mortgage earn out
concluded. The Company made its final earn out payment of
approximately $554 thousand in February 2018, and now the Company
retains 100% of the CashCall Mortgage earnings.
Summary Balance
Sheet |
|
|
March 31, |
|
|
December 31, |
(in thousands, except
per share data) |
|
|
2018 |
|
|
2017 |
ASSETS |
|
|
|
|
|
|
Cash |
|
|
$ |
29,485 |
|
|
$ |
33,223 |
Mortgage
loans held-for-sale |
|
|
|
655,506 |
|
|
|
568,781 |
Finance
receivables |
|
|
|
26,989 |
|
|
|
41,777 |
Mortgage
servicing rights |
|
|
|
174,067 |
|
|
|
154,405 |
Securitized mortgage trust assets |
|
|
|
3,524,053 |
|
|
|
3,670,550 |
Goodwill
and intangibles |
|
|
|
125,119 |
|
|
|
126,169 |
Loans
eligible for repurchase from GNMA |
|
|
|
54,632 |
|
|
|
47,697 |
Other
assets |
|
|
|
33,083 |
|
|
|
39,098 |
Total assets |
|
|
$ |
4,622,934 |
|
|
$ |
4,681,700 |
|
|
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Warehouse
borrowings |
|
|
$ |
650,342 |
|
|
$ |
575,363 |
Debt |
|
|
|
115,314 |
|
|
|
105,089 |
Securitized mortgage trust liabilities |
|
|
|
3,508,477 |
|
|
|
3,653,265 |
Loans
eligible for repurchase from GNMA |
|
|
|
54,632 |
|
|
|
47,697 |
Contingent consideration |
|
|
|
- |
|
|
|
554 |
Other
liabilities |
|
|
|
33,970 |
|
|
|
34,585 |
Total liabilities |
|
|
|
4,362,735 |
|
|
|
4,416,553 |
Total equity |
|
|
|
260,199 |
|
|
|
265,147 |
Total liabilities and stockholders’ equity |
|
|
$ |
4,622,934 |
|
|
$ |
4,681,700 |
|
|
|
|
|
|
|
|
|
Book value per share |
|
|
$ |
12.42 |
|
|
$ |
12.66 |
|
|
|
|
|
|
|
Mr. George Mangiaracina, President of Impac Mortgage Holdings,
Inc., stated, “The mortgage origination industry continued to face
strong headwinds in the first quarter of 2018, challenged by a
flattening yield curve and rising rate environment.
Originators have experienced reduced origination volume at
compressed gain-on-sale margins, as capacity exceeded demand.
Our origination business is not immune to these market conditions,
however, our mortgage servicing portfolio served as a counter
cyclical balance to our first quarter results. The mortgage
servicing portfolio provided the Company with liquidity and GAAP
earnings from the income and mark-to-market gain.” Non-GAAP
Financial Measures
Net earnings include certain fair value adjustments, which are
non-cash items and are not related to current operating
results. 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. 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 Income (Loss) |
|
For the Three Months Ended |
(in thousands,
except share data) |
|
March 31, |
|
December 31, |
|
March 31, |
|
|
2018 |
|
2017 |
|
2017 |
Net earnings
(loss): |
|
$ |
3,873 |
|
|
$ |
(44,905 |
) |
|
$ |
4,627 |
|
Total
other (income) expense |
|
|
(106 |
) |
|
|
(596 |
) |
|
|
(4,268 |
) |
Income
tax expense |
|
|
610 |
|
|
|
16,563 |
|
|
|
426 |
|
Operating
income (loss): |
|
$ |
4,377 |
|
|
$ |
(28,938 |
) |
|
$ |
785 |
|
Accretion
of contingent consideration |
|
|
— |
|
|
|
109 |
|
|
|
845 |
|
Change in
fair value of contingent consideration |
|
|
— |
|
|
|
(2,273 |
) |
|
|
539 |
|
Adjusted
operating income (loss) |
|
$ |
4,377 |
|
|
$ |
(31,102 |
) |
|
$ |
2,169 |
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average common shares |
|
|
21,102 |
|
|
|
20,949 |
|
|
|
17,422 |
|
Diluted
adjusted operating income (loss) per share |
|
$ |
0.21 |
|
|
$ |
(1.48 |
) |
|
$ |
0.12 |
|
|
|
|
|
|
|
|
|
|
|
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 earnings per share (EPS) prepared in accordance
with GAAP. The table below shows operating income per share
excluding these items:
|
|
For the Three Months Ended |
|
|
March 31, |
|
December 31, |
|
March 31, |
|
|
2018 |
|
2017 |
|
2017 |
Diluted
earnings (loss) per share |
|
$ |
0.18 |
|
|
$ |
(2.14 |
) |
|
$ |
0.29 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Total
other (income) expense (1) |
|
|
(0.01 |
) |
|
|
(0.03 |
) |
|
|
(0.27 |
) |
Income
tax expense |
|
|
0.04 |
|
|
|
0.79 |
|
|
|
0.02 |
|
Accretion
of contingent consideration |
|
|
— |
|
|
|
0.01 |
|
|
|
0.05 |
|
Change in
fair value of contingent consideration |
|
|
— |
|
|
|
(0.11 |
) |
|
|
0.03 |
|
Diluted
adjusted operating income (loss) per share |
|
$ |
0.21 |
|
|
$ |
(1.48 |
) |
|
$ |
0.12 |
|
|
|
|
|
|
|
|
|
|
|
(1) Except for when anti-dilutive, convertible debt interest
expense, net of tax is included for calculating diluted EPS and is
excluded for purposes of reconciling GAAP diluted EPS to non-GAAP
diluted adjusted operating (loss) income per share.
Conference Call
The Company will hold a conference call on May 10, 2018, 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
1262749, 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 increase origination
volume in each of our origination channels and ability to
successfully leverage our 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; inability to successfully reduce
prepayments on our mortgage loans; ability to successfully
diversify our mortgage products; ability to continue to grow the
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; 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, SVP Business Development & Investor Relations at
(949) 475-3988 or email Justin.Moisio@ImpacMail.com. Web site:
http://ir.impaccompanies.com or www.impaccompanies.com
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