Impac Mortgage Holdings, Inc. (NYSE American: IMH) (the
“Company”) announces its financial results for the quarter and year
ended December 31, 2021.
For the fourth quarter of 2021, the Company reported net
earnings of $3.6 million, or $0.15 per diluted common share, and
core earnings (loss) of $(5.0) million, or $(0.23) per diluted
common share, as compared to a net (loss) of $(2.2) million, or
$(0.10) per diluted common share, and core earnings of $3.3
million, or $0.16 per diluted common share, for the fourth quarter
of 2020.
For the year ended December 31, 2021, the Company reported a net
(loss) of $(3.9) million, or $(0.22) per diluted common share, and
core earnings (loss) of $(12.4) million, or $(0.58) per diluted
common share, as compared to a net (loss) of $(88.2) million, or
$(4.15) per diluted common share, and core earnings (loss) of
$(58.7) million, or $(2.76) per diluted common share, for the year
ended December 31, 2020.
Core earnings (loss) is not considered an accounting principle
generally accepted in the United States of America (“non-GAAP”).
Core earnings (loss) is a financial measurement calculated by
adjusting GAAP earnings before tax to exclude certain non-cash
items, such as fair value adjustments and mark-to-market of
mortgage servicing rights (MSRs), and legacy non-recurring
expenses. The Company believes core earnings (loss) more accurately
reflects the Company’s current business operations of mortgage
originations. Core earnings (loss) adjusts GAAP operating income by
excluding non-cash items that fluctuate due to market rates, inputs
or assumptions rather than management’s determination of
fundamental operating income (loss) that reflects the Company’s
current business operations. See the discussion and reconciliation
of non-GAAP core earnings (loss) further below under “Non-GAAP
Financial Measures.”
Results of Operations For the Three Months Ended
For the Year Ended (in thousands, except share data)
December 31, September 30, December 31,
December 31, December 31, (unaudited)
2021
2021
2020
2021
2020
Revenues: Gain on sale of loans, net $
14,861
$
19,608
$
21,455
$
65,294
$
14,004
Servicing (expense) fees, net
(39
)
(124
)
(131
)
(432
)
3,603
(Loss) gain on mortgage servicing rights, net
(68
)
101
(1,624
)
34
(28,509
)
Real estate services fees, net
212
244
294
1,144
1,312
Other
(29
)
(11
)
3
279
1,498
Total revenues, net
14,937
19,818
19,997
66,319
(8,092
)
Expenses: Personnel expense
13,204
12,685
13,255
52,778
52,880
Business promotion
2,249
2,185
552
7,395
3,859
General, administrative and other
5,040
4,927
6,116
21,031
24,534
Total expenses
20,493
19,797
19,923
81,204
81,273
Operating (loss) earnings:
(5,556
)
21
74
(14,885
)
(89,365
)
Other income (expense): Net interest income
403
777
708
2,398
5,137
Change in fair value of long-term debt
1,459
(1,803
)
(1,802
)
2,098
1,899
Change in fair value of net trust assets
7,284
3,112
(1,092
)
6,582
(5,688
)
Total other income (expense)
9,146
2,086
(2,186
)
11,078
1,348
Earnings (loss) before income taxes
3,590
2,107
(2,112
)
(3,807
)
(88,017
)
Income tax expense
8
21
78
71
133
Net earnings (loss) $
3,582
$
2,086
$
(2,190
)
$
(3,878
)
$
(88,150
)
Other comprehensive earnings (loss): Change in fair value of
instrument specific credit risk
(1,148
)
631
505
(2,722
)
(20
)
Total comprehensive earnings (loss) $
2,434
$
2,717
$
(1,685
)
$
(6,600
)
$
(88,170
)
Diluted weighted average common shares
21,359
21,345
21,255
21,332
21,251
Diluted earnings (loss) per share $
0.15
$
0.08
$
(0.10
)
$
(0.22
)
$
(4.15
)
Net (loss) for the year ended December 31, 2021 decreased to
$(3.9) million as compared to $(88.2) million for the year ended
December 31, 2020. The year over year decrease in net loss was
primarily due to a $51.3 million increase in gain on sale of loans,
net, a $28.5 million decrease in loss on sale of mortgage servicing
rights, net, as well as a $9.7 million increase in other income.
The increase in gain on sale of loans, net for 2021 was due to
origination volumes increasing to $2.9 billion, with margins of 225
basis points (bps), as compared to $2.7 billion in originations in
2020, with margins of approximately 51 bps. Margins increased year
over year primarily due to the temporary suspension of lending in
2020, as well as an increase in NonQM production. The decrease in
loss on sale of mortgage servicing rights, net was due to a $28.5
million reduction as a result of the sale of $4.2 billion in unpaid
principal balance (UPB) of Freddie Mac and GNMA MSRs in the second
and third quarters of 2020 resulting in losses of $6.5 million, as
well as losses of $22.0 million resulting from changes in fair
value of MSRs as a result of prepayments and prepayment assumptions
during 2020. Additionally, other income increased $9.7 million year
over year primarily due to a decrease in residual discount rates on
the long-term mortgage portfolio.
Total expenses decreased slightly to $81.2 million for the year
ended December 31, 2021 compared to $81.3 million for the
comparable period 2020. Personnel expense decreased $102 thousand
to $52.8 million for the year ended December 31, 2021 as compared
to the same period in 2020. We continue to expand our NonQM
platform as well as balance the industry wide escalation in cost of
production and operational talent as we manage our headcount,
pipeline and capacity to balance the risks inherent in an
aggregation execution model. As a result, average headcount
increased 1% for the year ended December 31, 2021 as compared to
the same period in 2020. Personnel expense decreased to 182 bps of
fundings during the year ended December 31, 2021 as compared to 193
bps for the comparable 2020 period.
Business promotion increased $3.5 million to $7.4 million for
the year ended December 31, 2021 compared to $3.9 million for the
comparable period in 2020. Business promotion had remained low as a
result of the interest rate environment which required
significantly less business promotion to source leads. Beginning in
second quarter of 2021, we began to increase our marketing
expenditures in an effort to target NonQM production in the retail
channel, continue to expand production outside of California and
maintain our lead volume as competition increased. Although we
continue to source leads through digital campaigns, which allows
for a more cost effective approach, the competitiveness within the
California market has driven up advertising costs.
General, administrative and other expenses decreased to $21.0
million for the year ended December 31, 2021 compared to $24.5
million for the same period in 2020. The decrease in general,
administrative and other expenses was primarily due to a $1.4
million decrease in premiums associated with the corporate-owned
life insurance trusts liability, a $1.0 million decrease in other
various general and administrative expenses, an $889 thousand
decrease in legal and professional fees, a $724 thousand decrease
in occupancy expense partially due to right of use (ROU) asset
impairment during the first quarter of 2020 and a reduction in
occupancy expense associated with the vacated space. Partially
offsetting these decreases in general, administrative and other
expenses was a $499 thousand increase in insurance expense.
Origination Data (in millions)
Total
Originations Q4 2021 Q3 2021 % Q4
2020 % Retail
$497.3
$533.7
-7%
$753.3
-34%
Wholesale
$262.1
$148.9
76%
$56.7
362%
Total Originations
$759.4
$682.6
11%
$810.0
-6%
Total Originations YE 2021 YE 2020
%
Retail
$2,318.3
$2,477.5
-6%
Wholesale
$585.1
$215.0
172%
Correspondent
-
$54.4
-100%
Total Originations
$2,903.4
$2,746.9
6%
NonQM Originations Q4 2021 Q3 2021
%
Retail
$129.1
$53.5
141%
Wholesale
$253.0
$132.7
91%
NonQM Originations
$382.1
$186.2
105%
During the year ended 2021, total originations increased 6% to
$2.9 billion as compared to $2.7 billion in 2020. Retail
originations represented the largest channel of originations with
80%, or $2.3 billion, of total originations in 2021, which was down
from 90% of total originations, or $2.5 billion, in 2020. The
reduction in retail originations was due to our pivot, during the
first quarter of 2021 to shift our focus on NonQM originations in
both our retail and third-party originator (TPO) channels. For the
fourth quarter of 2021, our total originations decreased to $759.4
million, a 6% decrease, as compared to $810.0 million for the
fourth quarter of 2020. The increase in total originations in 2021
as compared to 2020, was the result of our temporary suspension of
lending activities during 2020 due to uncertainty caused by the
COVID-19 pandemic. We continue to manage our headcount, pipeline
and capacity to balance the risks inherent in an aggregation
execution model.
We re-engaged lending in the NonQM market during the fourth
quarter of 2020, and have continued throughout 2021 rebuilding our
TPO NonQM origination team in anticipation of increasing mortgage
interest rates and declining conventional margins. With the
increase in mortgage interest rates and margin compression seen in
conventional originations in the first quarter of 2021, we
accelerated our pivot to NonQM in both our TPO and Retail channels.
During the year ended December 31, 2021, NonQM originations
increased to $683.6 million, or 24% of total originations, as
compared to $264.0 million, or 10% of total originations, for the
year ended December 31, 2020.
During the three months ended December 31, 2021, NonQM
originations increased to $382.1 million, as compared to $186.2
million for the three months ended September 30, 2021. In the
fourth quarter of 2021, our NonQM originations exceeded
conventional originations for the first time since the first
quarter of 2019. We expect this trend to continue for the
foreseeable future.
In 2021, our NonQM originations had a weighted average Fair
Isaac Company credit score (FICO) of 747 and a weighted average LTV
ratio of 65%. In 2020, our NonQM originations had a weighted
average FICO of 730 and a weighted average LTV ratio of 68%. In
2021, the retail channel accounted for 28% of NonQM originations
while the TPO channels accounted for 72% of NonQM production. In
2020, the retail channel accounted for 22% of NonQM originations
while the TPO channels accounted for 78% of NonQM production.
We believe the quality, consistency and performance of our NonQM
originations has been demonstrated through the previous issuance of
21 securitizations since 2018, whereby our originations were
represented as the largest originator in over half of the deals and
represented no less than the third largest originator in the other
deals. Four of the 21 securitizations were 100% backed by Impac
NonQM collateral with the senior tranches receiving AAA
ratings.
At December 31 2021, the mortgage servicing portfolio increased
to $71.8 million as compared to $30.5 million at December 31, 2020.
We continue to sell whole loans on a servicing released basis to
investors and selectively retain GNMA mortgage servicing.
The servicing portfolio incurred net servicing expense of $(0.4)
thousand for the year ended December 31, 2021, as compared to net
servicing fees of $3.6 million for the year ended December 31,
2020, as a result of the previous servicing sales in the second and
third quarters of 2020 as well as portfolio runoff caused by the
decrease in mortgage interest rates. Despite the increase in UPB of
the servicing portfolio during 2021, we continue to recognize a
servicing expense related to interim subservicing and other
servicing costs due to the small UPB of our servicing
portfolio.
At December 31, 2021, cash decreased to $29.6 million from $54.2
million at December 31, 2020. Cash balances decreased primarily due
to payment of operating expenses as well as an increase in
warehouse line haircuts as a result of an increase in warehouse
borrowings.
Summary Balance Sheet December 31, December
31, (in thousands, except per share data)
2021
2020
ASSETS Cash
$
29,555
$
54,150
Mortgage loans held-for-sale
308,477
164,422
Mortgage servicing rights
749
339
Securitized mortgage trust assets
1,642,730
2,103,269
Other assets
41,260
47,126
Total assets
$
2,022,771
$
2,369,306
LIABILITIES & STOCKHOLDERS' EQUITY Warehouse
borrowings
$
285,539
$
151,932
Debt
66,536
64,413
Securitized mortgage trust liabilities
1,614,862
2,086,557
Other liabilities
45,898
50,753
Total liabilities
2,012,835
2,353,655
Total equity
9,936
15,651
Total liabilities and stockholders’ equity
$
2,022,771
$
2,369,306
Book value per share $
0.47
$
0.74
Tangible Book value per share $
0.47
$
0.74
As previously disclosed by the Company in connection with the
Timm, et al v Impac Mortgage Holdings, Inc. litigation, the Company
conducted a special meeting of Preferred B shareholders in order to
allow the Preferred B shareholders to elect 2 new directors to the
Company’s Board pursuant to the Circuit Court’s order. The special
meeting was held on three separate dates. Because a quorum of
Preferred B shareholders was never reached, the Preferred B
shareholders have not yet elected any directors. The remaining
outstanding items still to be finalized in the litigation,
including the payment of three quarters of dividends on the
Preferred B stock under the 2004 Preferred B Articles Supplementary
(approximately $1.2 million, which had been previously accrued
for), are being addressed at the Circuit Court by the parties. A
hearing was held by the Circuit Court on February 18, 2022, at
which time the court heard arguments on a variety of matters,
including who the defined class is, as well as who will be the lead
class representative and class counsel. Those matters are now under
consideration by the judge and we are awaiting his ruling. As of
December 31, 2021, we had cumulative undeclared dividends in
arrears of approximately $19.1 million, or approximately $28.71 per
outstanding share of Series B Preferred Stock. Additionally, every
quarter the cumulative undeclared dividends in arrears increases by
$0.5859 per Preferred B share, or approximately $390 thousand
dollars.
Mr. George A. Mangiaracina, Chairman and CEO of Impac Mortgage
Holdings, Inc., commented, “While we are pleased with the Company’s
fourth quarter GAAP income of approximately $4 million, we are
disappointed with the delta to the Company’s core earnings results.
That disappointment is tempered by the Company’s resiliency
evidenced by our NonQM franchise. Our NonQM originations in the
fourth quarter doubled over the third quarter, and positioned the
Company for an annualized run rate of approximately $1.5 billion.
The Company continues to navigate the market deterioration that
commenced in the fourth quarter of 2021. Expectations related to
forward short-term interest rates ushered in increasingly expensive
structured financing terms, which necessitated the recalibration of
NonQM note rates from the approximately 4% rate prevalent in 2021
to a desired target rate of 5.5% to 6%. The Company’s current
locked pipeline reflects the climb up the rate ladder.” Mr.
Mangiaracina, further commented, “The first quarter of 2022
introduced increased volatility and heightened market awareness of
non-transitory inflation, and credit and liquidity risk brought on
by geopolitical events. These layered risks cannot be effectively
hedged in times of acute market dislocation. We will continue to be
disciplined in our origination and capital markets activities and
remain undeterred in our belief that the addressable market for
NonQM will expand to our benefit once markets normalize with
respect to volumes and margins.”
Non-GAAP Financial Measures
This release contains core earnings (loss) 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. Core earnings (loss) and core earnings (loss) 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.
Net earnings (loss) includes certain fair value adjustments and
mark-to-market of MSRs, which are non-cash items, and non-recurring
expense that are not related to current operating results. Core
earnings (loss), is considered a non-GAAP financial measurement.
Although we are required by GAAP to record these fair value
adjustments and mark-to-market values, management believes core
earnings (loss) is more useful to discuss the ongoing and future
operations of the Company because by excluding non-cash items that
fluctuate due to market rates, inputs or assumptions, this
financial metric reflects the Company’s current business operations
of mortgage originations. The tables below provide a reconciliation
of non-GAAP core earnings (loss) and per share non-GAAP core
earnings (loss) to GAAP net earnings (loss):
For the Three Months Ended For the Year Ended Core
Earnings (Loss) December 31, September 30,
December 31, December 31, December 31, (in
thousands, except per share data)
2021
2021
2020
2021
2020
Net earnings (loss) before tax: $
3,590
$
2,107
$
(2,112
)
$
(3,807
)
$
(88,017
)
Change in fair value of mortgage servicing rights
(32
)
(150
)
1,621
(221
)
24,229
Change in fair value of long-term debt
(1,459
)
1,803
1,802
(2,098
)
(1,899
)
Change in fair value of net trust assets, including trust REO gains
(7,284
)
(3,112
)
1,092
(6,582
)
5,688
Legal settlements and professional fees, for legacy matters (1)
—
—
750
—
750
Legacy corporate-owned life insurance (2)
166
162
150
330
577
Core (loss) earnings before tax $
(5,019
)
$
810
$
3,303
$
(12,378
)
$
(58,672
)
Diluted weighted average common shares
21,359
21,345
21,255
21,332
21,251
Diluted core (loss) earnings per common share before tax $
(0.23
)
$
0.04
$
0.16
$
(0.58
)
$
(2.76
)
For the Three Months Ended For the Year Ended
December 31, September 30, December 31,
December 31, December 31, (in thousands, except
per share data)
2021
2021
2020
2021
2020
Diluted earnings (loss) per common share $
0.15
$
0.08
$
(0.10
)
$
(0.22
)
$
(4.15
)
Adjustments: Income tax benefit
—
—
—
—
0.01
Cumulative non-declared dividends on preferred stock
0.02
0.02
—
0.04
—
Change in fair value of mortgage servicing rights
—
(0.01
)
0.08
(0.01
)
1.14
Change in fair value of long-term debt
(0.07
)
0.08
0.08
(0.10
)
(0.09
)
Change in fair value of net trust assets, including trust REO gains
(0.34
)
(0.14
)
0.05
(0.31
)
0.26
Legal settlements and professional fees, for legacy matters
—
—
0.04
—
0.04
Legacy corporate-owned life insurance
0.01
0.01
0.01
0.02
0.03
Diluted core (loss) earnings per common share before tax $
(0.23
)
$
0.04
$
0.16
$
(0.58
)
$
(2.76
)
Conference Call
The Company will hold a conference call on March 11, 2021, at
6:00 a.m. Pacific Time (9:00 a.m. Eastern Time) to discuss the
Company’s financial results and business outlook and answer
investor questions. After the Company’s prepared remarks,
management will host a 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 3849832 or accessing the webcast via
our website at http://ir.impaccompanies.com. Dial-in 15 minutes
prior to the scheduled start time to participate in the conference
call. The conference call will be archived on the Company's website
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: impact on the U.S. economy and financial
markets due to the outbreak and continued effect of the COVID-19
pandemic, and any adverse impact or disruption to the Company’s
operations; successful development, marketing, sale and financing
of new and existing financial products, including NonQM products;
ability to successfully re-engage in lending activities, recruit
and hire talent to rebuild our TPO NonQM origination team, and
increase NonQM originations; ability to successfully sell loans to
third-party investors; volatility in the mortgage industry;
unexpected interest rate fluctuations and margin compression;
performance of third-party sub-servicers; our ability to manage
personnel expenses in relation to mortgage production levels; our
ability to successfully use warehousing capacity and satisfy
financial covenants; 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 including
cyber risk and data security risk; 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 of any claims we are subject
to, 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; the
effects of any acquisitions or dispositions of assets we may make;
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 our latest Annual Report on Form
10-K and Quarterly Reports on Form 10-Q we file with the Securities
and Exchange Commission and in particular the discussion of “Risk
Factors” therein. This document speaks only as of its date and we
do not undertake, and expressly 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 except as required by law.
About the Company
Impac Mortgage Holdings, Inc. (IMH or Impac) provides innovative
mortgage lending and real estate solutions that address the
challenges of today’s economic environment. Impac’s operations
include mortgage lending, servicing, portfolio loss mitigation,
real estate services, and 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, Chief Administrative Officer at (949) 475-3988 or
email Justin.Moisio@ImpacMail.com. Website:
http://ir.impaccompanies.com or www.impaccompanies.com
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220310005878/en/
Justin Moisio, Chief Administrative Officer (949) 475-3988
Justin.Moisio@ImpacMail.com
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