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Financial report summary
?Management Discussion
- For the year ended December 31, 2022, net loss was $39.4 million, or $1.65 per diluted common share, as compared to net loss of $3.9 million, or $0.22 per diluted common share in 2021. For the quarter ended December 31, 2022, net loss was $11.8 million, or $0.38 per diluted common share, as compared to net earnings of $3.6 million, or $0.15 per diluted common share in the fourth quarter of 2021, and net loss of $13.0 million, or $0.62 per diluted common share, in the third quarter of 2022.
- Net loss for the year ended December 31, 2022 increased to $39.4 million as compared to $3.9 million for the year ended December 31, 2021. The year over year increase in net loss was primarily due to a $59.0 million decrease in gain on sale of loans, net, coupled with a $2.9 million decrease in other income, which was partially offset by an $25.1 million decrease in operating expenses. The sharp and unexpected decline in gain on sale of loans, net reflects the intense pressure on mortgage originations due to the dramatic collapse of the mortgage refinance market and the weakening mortgage purchase market, which has suffered from a lack of housing inventory and significant increase in mortgage interest rates resulting in customer affordability issues. As previously discussed, the increase in interest rates which began in the fourth quarter of 2021, caused a significant increase in credit spreads, which accelerated through the fourth quarter 2022, resulting in a substantial over supply of low coupon originations causing a severe decline in margins and diminishing capital market distribution exits for originators reliant upon an aggregation execution model. To mitigate the risks associated with reduced distribution exits and extended settlement timelines, we began pulling back on production, significantly increasing the pricing on our loan products as well as completely shifting to best-efforts delivery for non-agency production in the first quarter of 2022. As a result, origination volumes decreased significantly during 2022. For the year ended December 31, 2022, we originated $693.7 million of loans as compared to $2.9 billion of loans originated during the same period in 2021. During the year ended December 31, 2022, margins were 91 bps as compared to 225 bps during the same period in 2021.
- Other income decreased $2.9 million to $8.1 million for the year ended December 31, 2022 primarily due to a $3.6 million reduction in trust gains and net interest (expense) income collectively, which was the result of the sale of the legacy securitization portfolio during the first quarter of 2022, and which was in turn offset by a $659 thousand increase in fair value of our long-term debt. Offsetting the decreases in total revenues and other income was a $25.1 million decrease in operating expenses during 2022 primarily due to a reduction in variable compensation commensurate with reduced originations as well as a reduction in headcount to support reduced volume.