Impac Mortgage Holdings' (IMH) CEO Joe Tomkinson on Q4 2015 Results - Earnings Call Transcript

| About: Impac Mortgage (IMH)

Impac Mortgage Holdings, Inc. (NYSEMKT:IMH)

Q4 2015 Results Earnings Conference Call

February 19, 2016 12:00 PM ET

Executives

Justin Moisio - Vice President, IR

Joe Tomkinson - Chairman and CEO

Bill Ashmore - President

Todd Taylor - Chief Financial Officer

Analysts

Trevor Cranston - JMP Securities

Steve DeLaney - JMP Securities

Michael Damani - Morgan Stanley

Walter Keating - UBS financial

Michael Salzhauer - Benjamin Partners

Daniel Baldini - Oberon Management

Jonathan Shafter - Ankarana

Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Impac Mortgage Holdings Year-end 2015 Earnings Call. Through presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions]

As a reminder, today’s call is being recorded Friday, February 19, 2016. Now, I would like to turn the conference over to Justin Moisio, Vice President of Investor Relations. Please go ahead, sir.

Justin Moisio

Good morning, everyone. And thank you for joining Impac Mortgage Holdings year-end 2015 earnings conference call. 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 risk and market risk exposure, mortgage production and general business conditions.

I would like to refer you to the business risk factors in our most recently filed Form 10-K 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 any 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 Joe Tomkinson, Chairman and CEO of Impac Mortgage Holdings.

Joe Tomkinson

Good morning. And again, welcome to our 2015 earnings call. With me is Bill Ashmore, our President; Todd Taylor, our Chief Financial Officer; Ron Morrison, our General Counsel; and George Mangiaracina, our Head of Capital Markets.

Let’s start with a brief review of the results for 2015. The net earnings in 2015 were $80.8 million, this compares to a loss of $6.3 million in 2014. The net earnings in the fourth quarter were $10.7 million, and again, this compares to net earnings of $19.3 million in the third quarter. However, as we have discussed in the earnings release, we believe it is more useful to discuss operating income excluding changes in the contingent consideration to get a better understanding of the operating results.

In 2015, operating income excluding contingent consideration changes increased by $46.7 million to $33.5 million as compared to a net loss of $13.2 million in 2014. In 2015, our newly acquired CashCall Mortgage consumer direct channel contributed to the increase in originations within -- with volumes in 2015 increased to $9.3 billion or 225% as compared to $2.8 billion for 2014.

Additionally, as a result of production with a higher concentration in retail volume from CashCall Mortgage, our gain on sale margins, nearly doubled in 2015 to 183 basis points, which compares to just 99 basis points for 2014. Using the same measurement in the fourth quarter of 2015, we had operational loss of $593,000 and this compares to $8.5 million gain in the third quarter of 2015.

In the fourth quarter of 2015, origination volumes was consistent with our expectations and with the rest of the market. Volumes declined from $2.3 billion in the third quarter to $1.9 billion in the fourth quarter. The decline in volume, which was very seasonal, was due to an increase in mortgage rates and also the implementation of new TRID regulatory requirements.

Beginning in October of 2015, lenders were required to change the origination process to adhere to more specific timeline rules and were required to start using new disclosure forms called the Loan Estimate and Closing Disclosure. This replaced other forms that had been used for decades, but this resulted in significant changes to the mortgage lending process. And the unintended consequences resulted in the backup of our mortgage pipeline and our customers. Although the Company was prepared for the implementation of TRID in its own consumer direct channel, its customers in the wholesale and correspondent channels, experienced longer turn times in closing their loans. And as a result of this, these closing demands from TRID increased operational expenses and delayed everyone’s fundings.

As we move forward, we continue to reduce these turn times through automation and the training on the TRID process, not only for our employees but also for our customers, which will expedite the fundings and again bring down expenses. This, combined with expected lower margins in the fourth quarter and increased TRID related expenses, cause a decline in the gain on sale margins, resulting in a decline in the overall revenue for the quarter. Because of the expected volume decline, we reduced our TV and our radio marketing budget by $2.7 million in the fourth quarter. The Company continues to reduce its expenses, not only in the ongoing operations but also in its discontinued operations.

During the fourth quarter of 2015 and the first quarter of this year, the Company reduced our expenses by approximately $5 million or $0.41 per share annually, including debt financing costs. This continues to allow the Company to be more competitive in the mortgage market and strengthen the overall financial condition of the Company. Not only have we reduced overall monthly operating cost in the mortgage division by over $250,000, and again, that’s monthly, we have also completed a modification of our lease of our corporate headquarters facility, reducing the monthly rent payments by approximately $100,000 or an annualized savings of $1.2 million. Also in January of 2016, the Company decided to exercise the option to convert $20 million of debt to common stock, increasing the book value of the Company by $20 million and saving the company $375,000 in quarterly interest payments for an annualize interest expense of $1.5 million. Altogether, the Company expect to realize total annualized expense reductions in savings of about $5 million.

During the first quarter of 2016, we consolidated our wholesale and correspondent channels, which is expected to create better efficiencies by streamlining sales and operations in these channels. By eliminating redundancies that existed between the two channels and creating a more simplified organizational structure, we expect to not only see increased production from our wholesale and correspondent channels but we will also see increased efficiencies.

During 2015, we continued to sell our servicing rights to manage the capital needs and the balance sheet asset concentrations. In the fourth quarter 2015, we sold $4.5 billion in servicing rights for approximately $46 million. Despite these serving sales, at December of 2015, the Company’s mortgage servicing portfolio still increased to $3.6 billion, a 58% increase from December 31, 2014. Retained mortgage servicing rights increased to $36.4 million, as of December 31, 2015 as compared to $24.4 million at December 31, 2014. At year-end, the Company’s cash position improved and had increased cash of $32.4 million; this is up from $10.5 million at the end of the third quarter.

As Impac continues to grow its franchise, we will continue to diversify our products to create additional revenue streams around our core mortgage lending business. By the middle of this year, we will launch a consumer direct unsecured loan origination platform. This will not only leverage off our overall mortgage originations by providing future lead generation possibilities that haven’t been fully monetized to the newly formed consumer direct platform, but we also believe that there is an opportunity to leverage this platform on our mortgage lending leads and our legacy portfolio -- in our legacy portfolio and the Internet offer additional loan products. By doing so, we expect to lower the costs of acquisitions to generate additional revenue streams without materially adding infrastructure cost to our existing platform. We expect this will allow us to better monetize our current mortgage leads by using them to generate these consumer loans without incurring increased lead expenses. Even though we do not expect this new consumer direct channel to be a significant part of 2016, we are laying the foundation for a more diversified revenue stream in 2017 and beyond.

Let’s move on to discussing Impac’s efforts in the NonQM lending space. The NonQM market is expected to be a sizeable segment of the overall mortgage production in coming years. And as such, we are committed to the growth of this portion of our originations. In the latter half of 2015, as a result of the feedback from our borrowers and our business to business partners, we have simplified our NonQM program guidelines and have created a more origination-friendly loan product.

These changes will further provide flexibility to help qualify creditworthy borrowers that are unable to get financing from current traditional mortgage programs. As a result, we have seen a significant increase in our NonQM mortgage originations. And we expect these originations to be a significant percentage of the overall production by the end of 2016. Our viewpoint on this product is not that it is a niche product but will be part of the full spectrum of lending that Impac will offer.

Further, to better represent the essence of this program, Impac is set to relaunch our NonQM loan program as the intelligent NonQM mortgage engineered with common sense. Therefore 2016 Impac lending product footprint will include unsecured consumer loans, NonQM loans in addition to its agency and government mortgage loan programs. As part of our strategy to strengthen Impac’s ability to grow and exercise more control over the disposition of certain assets it generates, we have formed an external asset manager. The strategy is to raise third-party capital in order to invest in the assets that Impac is originating. Timing to raise capital at the asset manager is always determined by the market, and we expect it to coincide with less volatility in the financial markets.

As part of our efforts to be more competitive in the financial products and services we offer, we will also continue to enhance our technology platform. The first component is our proprietary NonQM system called iDASL, which is Impac’s Direct Access System for Lending. We relaunched iDASL in 2015 as a NonQM prequal engine and we’ll roll out iDASL 2.0 in 2016 by providing a fully automated approval for our NonQM loan products. In addition, we’re in the process of integrating our underwriting system with Fannie Mae’s desktop underwriting. Next will be the build out and the implementation of our consumer direct web portal, an automated risk-based underwriting engine with a launch date set for mid-2016.

The Company is and will be making a commitment to enhance its technology platform to not only increase customer satisfaction but also enhance our efficiencies to reduce the overall cost and time to close and fund loans.

As expected, we have seen a significant increase in our LOC pipeline since the end of the year. At the December last year, our LOC pipeline was $568 million as compared to $678 million in January 2016 and over $815 million and approaching $1 billion to-date. The pipeline growth will translate into increased mortgage origination volume in the subsequent months. In January, origination volume had dipped to approximately $500 million. However, in the month of February, originations should be over $700 million; and in March, we anticipate originations to increase even more.

In closing, we view 2015 as a very successful year with over $80 million of net earnings and over $9 billion in originations, which should make Impac a top-15 mortgage originator in the country. Further, we are very encouraged so early in the year to have our originations growing in at such levels that we haven’t seen since a middle of 2015.

This is the end of my prepared remarks. And I’ll open it up to questions at this time.

Question-and-Answer Session

Operator

Thank you very much. [Operator Instruction] And we will precede with our first question from the line of Trevor Cranston with JMP Securities. Go right ahead.

Trevor Cranston

Hi, thanks. I guess my first question, to follow up on the comments you are making about the expected volumes in February and March. Obviously, we see the decrease in the marketing spend in the fourth quarter. Can you give us a sense, if rates kind of stick around this level or even to rally a little bit further, kind of what the expected increase in the marketing expense would be kind of in the first quarter and into second quarter? Thanks.

Joe Tomkinson

Well, as the pipeline increases, the market expenses go down. So, we do a pretty good job of managing the marketing expense in relationship to our expectations. As I mentioned in my comments, we fully expected a decline in the fourth quarter and as such, we declined our margining expenses because it takes a while for people to get acclimated to the increase in -- increased interest rates. Now, as we continue to move forward and we are seeing a growth in our pipeline, we will adjust our marketing expense, so that we don’t exceed our capacities. Does that make sense?

Trevor Cranston

Yes, it does, and it’s very helpful. The second question I had on the external asset manager that you were speaking about earlier. Does that imply that there has been any sort of change in the existing strategic relationship you guys have with your partner acquiring AltQM loans or this the asset manager going to be sort of a supplementary program that you’ll have the ability to sell AltQM and other products into?

Joe Tomkinson

No, I think there is no change. As a matter of fact, they’ve expressed an interest in being part of the asset manager. But, it’s a way for us to hold on to what we feel are very good assets and also to raise additional capital, just for those assets. And so, we think that that strategy is right in line with what the government will like to see, as far as when and if we get into the securitization market. As you will recall, in our previous life, we had approximately a portfolio of $30 billion in UPD in securities that we held on to many of the residuals. And for the last seven to eight years, we have done a very good job of managing those residuals and receiving income from those residuals. So, we see this as a way to enhance what we are doing and bringing additional income to the shareholders.

Trevor Cranston

Got it, okay. And my last question is also related to the AltQM product. Can you talk about how much competition you see out there in the space for those types of loans right now, among your correspondent and wholesale customers, in particular are you guys seeing many other lenders out there who are offering similar types of products, or could you just give us a sense of kind of how competitive that landscape is right now?

Joe Tomkinson

Yes, more and more are getting into it. You got to remember, it’s not something where you just say, oh, I am going to get into this market and then you dial it up. There is a huge learning curve. We started down this road two years ago, way ahead of our competition. And as such, we’ve been able to, for lack of better word, through trial and error, we know what the market will accept, we know what the secondary market will accept. And so, we have a pretty good foothold on it. Also, there is a lot of folks there they’ve said they’re going to get into the space, either call AltQM or NonQM, whatever you want to call it, but they haven’t really learned how to fund it; and they haven’t funded it. Whereas, we have been one of the very few that when we approve a loan, we’re approving it, funding it with our own capital, and we’re holding on to it. Bill is sitting here; he may have more to add to that.

Bill Ashmore

Well, there are couple regional banks that are in the NonQM, and behind that are some other originators that are backed by some hedge funds. But as Joe said, this is not an easy product to originate. And what we have attempted to do is have rollout of extensive training of not only internal employees but also certain customers and then specifically with CashCall, we have a dedicated unit over there because of the specificity of this particular product, both on the sales side and on the underwriting side. So, it takes a focused effort on the part of an originator, whether it be us retail direct through CashCall, the separate unit or the education and the providing the tools to the customers out there that will be originating the product directly.

If we are viewing it as a part of an overall full spectrum of products that we offer, we don’t believe that this will be evolving into just a niche product that is funding fall off [ph] product that we’re seeing. We’re looking for through CashCall and through our business to business partners to originate into the product guideline as opposed to using it as some sort of a fall off net for their overall lending. And so far that strategy has been working.

Joe Tomkinson

The other thing Jim is with our partner, this is not a -- what’s important is this is very capital intensive, and we have a great partner, as you know in Macquarie. [Ph] And so for both of us, this is a long-term asset and long-term play. It’s not something like regional banks that when their appetite fills up or their capital restraints keep them from originating more, then they turn the business off. And we have a proven track record over time, not only know how to originate it but we know how to securitize it and we know how to manage it. So that’s what we’re in the process of doing.

Operator

Thank you very much. We’ll get to our next question. It’s from the line of Steve DeLaney with JMP Securities. Go right ahead.

Steve DeLaney

I just have a couple of things in addition to what Trevor asked. Joe, you mentioned that operationally, internally, you guys decided to combine the management structure for the correspondent and wholesale channels. I was just curious, going forward, do you still plan to break out your origination activity by all three channels, even though the correspondent and wholesale are under one management team?

Joe Tomkinson

Yes. I mean, the changes that Bill made is more infrastructure and external structure. And it’s already proving to be much more efficient and much of a cost saving.

Steve DeLaney

And then the big jump to non-billion [ph] and originations in 2015, obviously CashCall was a big part of that. But the other two channels respectively were still like 25% and 15%, so 40% combined. If we look to 2016, can you -- do you have any sense for how the correspondent and wholesale on a percentage of total originations, how that might look in 2016?

Bill Ashmore

What we’re attempting to do is build all of the channels, but a good balance would be that we would have at least 50% in the business to business and 50% in the retail direct, which obviously we’ve got a ways to go on the business to business side. But based on the changes that we’ve made in management and the other changes from an operational standpoint, we think that we’ve got our cost structure down to a point to where we can be able to compete much more effectively business-to-business in 2016 than we were in 2015. So basically, if we can get it to 50-50 balance and get that closer to $1 billion per month run rate is what our expectations would be.

Steve DeLaney

And Bill, -- go ahead, Joe. I am sorry. Go ahead.

Joe Tomkinson

What I was going to say is taking on an entity a size of CashCall took a lot of focus and took a lot of energy, as you can imagine. And now, we are able to focus on -- now that we’ve done a pretty good job of integrating CashCall and it is very, very efficient, I personally think that it is one of the most efficient originators in the country. Now, we can bring a lot of what we’ve learned to CashCall to the wholesale and the correspondent division, and we can increase not only the efficiencies -- by increasing the efficiencies, now we will be able to price better to our customers. And by pricing better to our customers, you’re going to see an increase in volume and without sacrificing profitability. But you can’t have one without the other. Does that make sense to you?

Steve DeLaney

Yes, understood, Joe. And I guess the other reason to stay competitive and to build those businesses, the B2B, as Bill referred to it, as I assume, that’s going to keep you plugged in to more purchase money flow as well, correct? And maybe give you a less volatile origination pattern, if you were more dependent on just refi to CashCall. Should we -- or is that am I thinking about it correctly?

Joe Tomkinson

Yes, you’re thinking very exactly. And I don’t know, three years ago, four years ago, our purchase money production was closer to 65%. Was it?

Bill Ashmore

Right.

Joe Tomkinson

65% to 70% because of those channels. So, you are exactly right. But over the next year or so, we’re going to also be working on tapping into the purchase money market using the CashCall platform.

Steve DeLaney

Okay.

Bill Ashmore

In addition to that the fact that when we are dealing with Fannie Mae and Freddie Mac, we, over this last year, have been able to be recognized as a national account for both of those agencies. That really allow us a better communication, not only in terms of pricing but in strategy. And then overall we have regular phone calls with both agencies, strategizing not only on pricing on products but also overall what benefits Impac will obviously benefit the agencies. So, with that stature of not only more volume but also more diversified volume, allows that ability for that from a national status and also allows us better pricing than more competitors.

Steve DeLaney

Okay, great. Just one final thing to close, you guys have been great with your time. TRID was the a big problem obviously. And we know from other lenders and following Ellie Mae that it was just a mess. And I am just -- you guys have got a lot of momentum. Is there anything that we should know about on the regulatory front that could create another speed bump for you like TRID, in 2016, or is it more -- as you see it, is it more clear sailing at this point?

Joe Tomkinson

I think personally, it’s more clear selling. And I am very -- I am pretty well-versed in the CFPB. I don’t see anything on the horizon coming up. I think it’s more continued to learn the process, making sure everyone understands the process and then implementing the process.

Operator

Thank you very much. And we will go to our next question from the line of Michael Damani with Morgan Stanley. Go right ahead.

Michael Damani

Could you touch again please on the sale of servicing, the amount that you did and what it brought in, and how much cash and the reasoning behind it?

Joe Tomkinson

Yes. Michael, I’ll let Bill answer that question. There is a lot of reasons but it’s basically cash management. Go ahead.

Bill Ashmore

Yes. Michael, this is Bill. As part of the Company’s overall business strategy, selling blocks and mortgage servicing rights on a regular basis, as we have over the last year or two, the reason is basically two-pronged: First, regular sales of MSRs allows the Company to better manage its capital position and overall asset allocation; and secondly, with the volatility interest rates, we’ve seen it reduces the overall risk of the Company by being able to manage a smaller book of MSRs. While that being said, the Company is currently, as we have through the end of last year, aggressively trying to structure, and we think we’ve come to a structure that makes sense on a retention program. So, when it sales its MSRs to third parties, it can also have more control on the possible MSR refinancing. We’ll have more updates on that but we think we’d come to a structure that makes sense. So, we can basically be originating the loans, selling them on a regular basis but also being able to participate in the refinancing of MSRs when you’re seeing the interest rates dip down to where they are today.

Michael Damani

And the amount of cash that is generated was how much, from this recent sale?

Joe Tomkinson

Almost $47 million. Yes about $47 million.

Michael Damani

Okay, great. Thank you very much.

Joe Tomkinson

That was just for the fourth quarter. Okay.

Operator

Thank you. We will get to our next question. It’s from the line of Walter Keating with UBS financial. Go right ahead.

Walter Keating

2015 was a pretty darn good year; fourth quarter obviously was a little disappointing. Talking about TRID, do you feel confident that the wholesale and correspondent division, participants on that side are now up and ready to operate with the new roles?

Joe Tomkinson

I feel confident about our processes. We don’t have any control over our customers’ processes. Now, what we do is we offer training and we help them and we’ve been pretty good at that. But if you -- if we were to bring on a lot of new customers and they didn’t have -- let me back up. I don’t think that we would be bringing on customers that work in compliance with TRID. So, I have to answer the question that I don’t really see any TRID related real problems. Does that help you?

Walter Keating

Yes, absolutely. How many states is CashCall currently approved in?

Joe Tomkinson

Roughly 44 states.

Walter Keating

44. When you first bought CashCall, back in January, were they only approved in 17 states, as I recall?

Joe Tomkinson

8 states.

Walter Keating

Okay. The last question, you talked somewhat about the new business, getting more involved in or using iDASL to look at other things. Is CashCall now qualifying people for these other types of loans?

Joe Tomkinson

Matter of fact, I think the volume in that will double next month. Yes.

Walter Keating

That’s great. And on the financial structure that we talked about the partnership, is there way, can you expand anymore on that? I am trying to understand it…

Joe Tomkinson

No, I really can’t.

Walter Keating

Okay. Thank you very much.

Operator

Thank you very much. And we’ll go to our next question from line of Michael Salzhauer of Benjamin Partners. Go right ahead.

Michael Salzhauer

When you talk about consumer loans, what kind of loans are you talking about; are they HELOC loans or unsecured loans?

Joe Tomkinson

They’re unsecured loans. Bill, do you want to elaborate a little bit?

Bill Ashmore

Yes. The initial foray into the unsecured is going to be loans that are like 5,000 to 65,000, average balances 15,000 to 20,000, will be possibly as low as 660 FICO, average FICO probably be low 700s; interest rates on average will be in the low teens; APRs, we’re looking at the APRs to be under or no more initially than 36% and we are looking to do that nationwide. But these are unsecured loans.

Michael Salzhauer

And the reason that you think you have expertise in this is because of knowledge of the people’s credit histories?

Joe Tomkinson

Not only the credit histories but also of our association with the CashCall operation. You’ve got to remember, we also have about -- which is virtually untapped, I mentioned this very briefly. The legacy portfolio is -- it was 30 billion, now it’s down to roughly 6 billion. And we’ve managed that credit score for about 10 years. But there just an untapped gold mine of prospects in that portfolio.

Michael Salzhauer

That’s kind of what I meant. These are people that you -- they’re in house already.

Joe Tomkinson

That’s correct.

Bill Ashmore

Yes.

Michael Salzhauer

Okay. And with respect to the Company’s DTA, what is the process for recognizing more of it and coming on to the balance sheet?

Todd Taylor

This is Todd Taylor. The process is -- we go to the quarterly evaluation to understand where our projected taxable income will be. So, every quarter we look at it. And so since the beginning of the first quarter or beginning of the year in the first quarter when we recognized 24 million, we have not had enough confidence to recognize more, not that we don’t think there is taxable income in the future, we do but you have a flat [ph] confidence level. So, there is a couple of different steps you have to…

Joe Tomkinson

That’s a really bad word, confidence level. That’s not. It’s

Todd Taylor

What do you mean that’s a bad word?

Joe Tomkinson

Well, you’re saying well, we don’t have enough confidence…

Todd Taylor

No. Not confidence in the business, the confidence relative to…

Joe Tomkinson

To the accounts.

Todd Taylor

…the ability to realize it. So, yes, it’s a GAAP concept more than anything else.

Michael Salzhauer

So, this happens prospectively or retrospectively, or the combination?

Todd Taylor

No, predominantly it’s prospectively is the analysis.

Michael Salzhauer

So, that would be the reason that you didn’t recognize anything this quarter?

Todd Taylor

Yes, when we went to the analysis this quarter; that’s right. That’s exactly right.

Michael Salzhauer

Because you’ve already put that on expecting a quarter like this quarter?

Todd Taylor

We already put on 24 million previously in the year. There wasn’t enough evidence to indicate that we would recognize more in this quarter.

Michael Salzhauer

Okay.

Joe Tomkinson

Is it fair to say that we wouldn’t recognize more?

Todd Taylor

We may in the future, absolutely.

Joe Tomkinson

Yes, there you go.

Michael Salzhauer

That 24 was what we earned this -- from what earned really this year?

Todd Taylor

No. Actually, it had to do with future years. So, yes, piece of it but it predominantly was future years, mean ‘16 and ‘17.

Michael Salzhauer

I am oversimplifying and that’s my specialty. Could you describe the difference between CashCall’s process and Quicken’s Rocket loan, which is getting a lot of press?

Joe Tomkinson

I personally called their line, I didn’t see much difference, to be honest with you. I am not prepared to really -- I don’t know much about it. But, you give it a call and you’re still dealing with a loan officer. You have the ability to enter information. But I think that in the future, I don’t think it’s here yet, because most people still want to deal with a loan officer. My son however would be more than happy in the future to do everything over the Internet. But I still think it’s probably a little bit premature.

Michael Salzhauer

Okay.

Bill Ashmore

Let me add to that. Really what a borrower wants, he wants an ease of transaction; he wants best rate available and he wants it done very quickly. And what CashCall has to offer and we refer to them as a wholesale retail lender, so they have -- at any one time, they will have probably the absolute best rate available for that borrower and they do predominantly low cost refinances, so the financing cost are borne within the loan itself. And add to that the fact that when they are doing their loans on average, they are doing it from open to close in 15 days or less. So, from the standpoint of offering the best rate and the fastest close, as Joe mentioned earlier, CashCall is a premier lender there that they are able to -- the two main things that consumer wants, which is I want the best rate, ease of transaction and close it quickly.

Joe Tomkinson

And one last thing, and this is -- we have a lot of experience with automation. In 2000 -- I think it was 2000, we came out with our automated underwriting system and become so successful that we eventually licensed it to a lot of our customers. And we’ve relaunched that. And I think the appropriate way to do this, because the automation, is you got to get the architecture right. And you know the old saying, the leading edge can be the bleeding edge. You know how to do automated underlining, we’ve done it in the past. In past, we were doing little over $2 billion a month in automated underwritings. And as Bill said, customer really wants an ease of a transaction. We are moving in that direction. CashCall, as Bill said, I think it’s the premier lender in its space to what it does. And now that we are adding the AltQM or the NonQM product to it, coupled with our automated underwriting, it’s going to even make it more efficient and even faster. And over time, we will go ahead and implement different automations to different segments of the business, as long as we see that the architecture will be there for the future and that it makes sense, not only economically but also that it makes sense for the borrower to use, because that’s where everybody wants to go. Right?

Michael Salzhauer

I think so. I’ve a really just one more question. I think you had a great year and a good quarter and the stock is down 16.5%. Part of the problem is that nobody’s heard of this Company. Is there any thought about trying to get coverage of the Company and doing some road shows to tell the story of the Company?

Joe Tomkinson

What’s that? Everybody is flashing signs, it’s like sitting around this table is like speaking in sign language.

Michael Salzhauer

Especially the lawyer, right?

Joe Tomkinson

Nobody wants to give you an answer because, I guess certain legal concerns. But let me -- yes, we expect that we’ll initiate coverage I think this month or next month.

Michael Salzhauer

I think that’d be very helpful.

Joe Tomkinson

Yes. No, I agree with you 100%. It’s little frustrating for us. We used to have seven, eight years ago every analyst in the world was covering us. Now, no one covers us. But we are going to change that.

Michael Salzhauer

It’s my opportunity, but it’s getting old. Thank you all very much.

Operator

Thank you very much. We will get to our next question from the line of Daniel Baldini with Oberon Management. Go right ahead.

Daniel Baldini

Listen, I don’t really have a question, I have a comment and that would -- well, first of all, I note that the financial information in this press release is more detailed than in previous ones, and I find that quite helpful. But, if you could further expand on that by including a balance sheet in future press releases that would at least make it easier for me to ask intelligent questions. So, that’s just simply a comment.

Joe Tomkinson

Okay. It’s noted. But, since I have to read these things, and I don’t like to read balance sheet, so probably won’t get in there. But, I am being a bit -- we will take that advise. Can we -- I think it’s pretty hard to put a balance sheet in the…

Bill Ashmore

Maybe we can put a summary balance sheet in there.

Joe Tomkinson

Yes, we will do that.

Bill Ashmore

We will look to do something like that.

Daniel Baldini

Many thanks.

Operator

Thank you very much. And we’ll get to our next question from the line of Jonathan Shafter, Ankarana. Go right ahead.

Jonathan Shafter

Just a few things. First, you provided some good volume color on the year to date. Any comment you can make on gain on sale margin trends, so far what we’ve being seeing in 2016; given all the volatility in capital markets, have those been consistent?

Bill Ashmore

I think we’re going to see during the first quarter some stronger gain on sale margins than we have seen. There was the margin compression, as volumes declined in the fourth quarter. But now that you’ve seen increase in volumes, you’re seeing some of those margins expanding outside. I believe you will see better margins in this first quarter.

Jonathan Shafter

Second, you guys put in place an at the money share issuance program but again going back to the last question, there was no balance sheet on the release. Can you tell us, has that program been active or any shares issued under that program, so far?

Joe Tomkinson

The program is been activated but we haven’t released any shares. We’re very judicious about when we issue shares and when we take down capital. When we have the need -- and the purpose for this is when we have the need for capital, and we can deploy the capital, and it’s not necessarily dilutive to our existing shareholders, then we take down capital.

Jonathan Shafter

So, can you draw a line in the sand for us and tell us -- since it sounds like you don’t need the capital, at what point you will not issue shares?

Joe Tomkinson

I -- that would be like betting against myself and this isn’t Vegas, and I am not going to -- that would be -- no, we don’t do that. And that’s the whole purpose of an ATM is you take down shares as you needed and as you can use it for operational purposes. And usually for us, it’s always, we take capital down when we know we can deploy it and we can grow the Company.

Jonathan Shafter

No, you mentioned that it’s not dilutive, I didn’t know if there was a place at which you consider it non-dilutive that below that level you won’t issue shares?

Joe Tomkinson

I am sorry. It was very hard. Did you understand the question?

Bill Ashmore

Yes. He was referencing at what point do you think you’re talking about the non-dilutive. And I think that that is a determination we will make, relative to how we’re going to issue the shares and at what price.

Jonathan Shafter

And then, in the last quarter, I think you guys were not in compliance with some covenants and the warehouse; has that all been restored at this point?

Joe Tomkinson

You’re coming across garble. But yes….

Bill Ashmore

Yes. When you said last quarter, you’re referring to the third quarter, so in the fourth quarter they’ve all been geared.

Operator

Thank you very much. And that’s all the time we have for questions for today. Mr. Tomkinson, I will turn it back to you for any closing remarks.

Joe Tomkinson

I don’t have any more remarks. I just want to thank everyone that participated. Thank you for joining us and thanks for the good questions. With that we’ll sign off.

Operator

Thank you very much. And ladies and gentlemen, that does conclude the conference call for today. We thank you for participation and ask that disconnect your lines. Have a good day everyone.

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