Impac Mortgage Holdings, Inc. Common Stock

Thank you for standing by and welcome to the Impact Mortgage Holdings second quarter 2022 earnings call. All lines have been placed on mute to prevent any background noise. Should you require assistance, please press star zero on your telephone keypad and an operator will come online to assist you. Thank you. It is now my pleasure to turn the conference over to Joe Jofria, General Counsel, Impact Mortgage. Mr. Jofria, please go ahead. Good morning, everyone.

I'm sorry. Good morning, everyone, and thank you for joining Impact Mortgage Holdings' second quarter 2022 earnings conference call. Important information and where to find it. The company, its directors, and certain of its executive officers are deemed to be participants in the solicitation of proxies for the company's common shareholders in connection with the matters to be considered at the company's special meeting of shareholders relating to the exchange offer, otherwise the special meeting. Information regarding the names of the company's directors and executive officers and their respective interests in the company by security holdings or otherwise can be found in the company's proxy statement for its 2022 Annual Meeting of Shareholders, filed with the U.S. Securities and Exchange Commission, or the SEC, on April 29, 2022. The proxy statement and all other documents filed with the SEC by the company are available free of charge at the SEC's website at www.sec.gov. The company intends to file a definitive proxy statement and proxy card with the SEC in connection with the solicitation of proxies from the company's shareholders in connection with the matters to be considered at the company's special meeting. Additional information regarding the identity of participants and their direct or indirect interest by security holdings or otherwise will be set forth therein. Investors and shareholders are strongly encouraged to read any such proxy statement and the accompanying proxy cards and other documents filed by the company with the SEC carefully and in their entirety as they will contain important information. Shareholders are able to obtain the proxy statement, any amendments or supplements to the proxy statement, and the accompanying proxy card and other documents filed by the company with the SEC for no charge at the SEC's website at www.sec.gov. Copies will also be available at no charge at the investor relations section of the company's corporate website at www.impactcompanies.com or by writing to the company's corporate secretary at Impact Mortgage Holdings, Inc., 1900 Jamboree Road, Irvine, California, 92612. In connection with the exchange offers and consent solicitation, a registration statement on Form S-4, a tender offer statement on Schedule TO, and related documents and amendments thereto relating to the exchange offer and consent solicitation have been initially filed by the company with the Securities and Exchange Commission. The Series B preferred stock and Series C preferred stock may not be exchanged or sold, nor may offers to exchange or buy be accepted prior to the time the registration statement becomes effective. This earnings call shall not constitute an offer to exchange or sell or the solicitation of an offer to exchange or buy, nor shall there be any exchange or sale of such securities in any state in which such offer, exchange, Solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. Holders of the Series B preferred stock and Series C preferred stock are strongly advised to read the registration statement, tender offer statement, and other related documents and amendments thereto as they become available because these documents will contain important information. Such holders are able to obtain copies of exchange offer materials for free from the company at the aforementioned address or at the SEC's website. The company is not making any recommendation to holders of outstanding Series B preferred stock and Series C preferred stock as to whether they should tender their shares pursuant to the exchange offer and consent solicitation. Also, during this call, we will make projections or other forward-looking statements in regards to, but not limited to, GAAP and taxable earnings, cash flows, interest rate, and market risk exposure, mortgage production, and general market conditions. I would like to refer you to the business risk factors in our most recently filed Form 10-K and Form 10-Qs filed under the Securities and Exchange Act of 1934. These documents contain and identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. This presentation, including any outlook and guidance, is effective as of the date given, and we expressly disclaim any duty to update the information herein. I would like to get started by introducing George Mangiaracena, Chairman and CEO of Impact Mortgage Holdings. George.

Thank you, Joe. With me this morning, John Glockner, our Principal Accounting Officer, Justin Mozio, our Chief Administrative Officer, and Tiffany Entsminger, our Chief Operating Officer. For the second quarter of 2022, the company reported a gap in that loss of $13.5 million, or $0.64 per diluted common share. and an adjusted loss of approximately 15.4 million or 71 cents per diluted common share. Company's financial results for the second quarter reflect the adverse effects of historic market dislocation and volatility across the mortgage origination industry that commenced in the fourth quarter of 2021. We continue to navigate this environment by remaining disciplined in our origination approach with respect to rate and credit, and vigilant in our capital markets activities. The company deploys a wide range of capital markets hedge and delivery mechanisms with reliance over the last year on futures on swaps, forward sale agreements, and increasingly best efforts deliveries in lieu of aggregating non-QM to sell in bulk offerings. While layered risks cannot assuredly be hedged in times of acute market dislocation, Since the end of the first quarter of 2022, the company's non-QM pipeline has been fully deliverable into forward best efforts arrangements with a variety of counterparties. Throughout the year, the company has proactively increased the minimum and weighted average note rate on our non-QM offerings to ensure availability of normal course capital market exit and pricing. We have consciously elected to discourage down in coupon non-QM origination volume. As evidence of the climb up the rate ladder, the weighted average note rate on our locked and funded pipeline was approximately 4.5% at year end 2021, 5.5% at the end of the first quarter of 2022, and 7% at the end of the second quarter 2022. In addition to managing our core business, the company has also advanced on solving for circumstances related to our preferred securities. As previously disclosed, in the second quarter of 2022, the company entered into voting agreements with certain holders of its convertible note, preferred stock, and common stock to agree to extend outstanding debt and exchange preferred equity for consideration which would align shareholders' interests that have been inefficient since the company's tender exchange offer for the preferred securities in 2009. Should the exchange offer and redemption transactions take effect, the company believes it should be better positioned to engage in capital raise and corporate finance activities absent the overhang of an intractable legacy capital structure. I'm now going to turn over the discussion to John Glockner. Oh, Joe, back to you. Thank you. You had a lot to say to lead off.