AOMR - Earnings call transcript Q4 2021 | Angel Oak Mortgage, Inc.

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Operator

Greetings. Welcome to the Angel Oak Mortgage REIT Fourth Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. the Officer. to turn Chrisman, host, now Marketing Chief will conference your over Randy I you. Thank

may You begin.

Randy Chrisman

earnings afternoon, Good our section today detailing results, Mortgage XXXX which for Thank our website Angel call. afternoon. you full in Oak at REIT’s for fourth quarter is fourth www.angeloakreit.com. year press available filed on our we joining and us conference release This XXXX quarter Investor the

remarks made statements. on today’s may call forward-looking reminder, conference include a As

uncertainties and We that cause Forward-looking any statements information risks are events. from statements today. to to or results discussed obligation forward-looking materially new do may differ light our subject actual undertake of in future to those update not

refer to more this of For detailed to most may our the earnings discussion affect release SEC quarter that for filings. results, and a factors our recent please the Company’s

measures certain During which financial make comparable measures Officer, prepared Oak reconciliations Capital’s this questions. CIO, is Executive to non-GAAP the non-GAAP afternoon’s earnings conference filings. measures, call This more financial contained be we directly financial will Filson; about will REIT’s these release and Sinha. and Chief are call, and most Chief will we Co- SEC the Williams; up call by Angel to in Management Officer, hosted Angel our Financial after discussing Mortgage Oak information comments open Robert Namit Brandon some GAAP your

www.angeloakreit.com. recommend posted reviewing at our we Additionally, our supplement earnings website on

over to the call I’ll Now, turn Robert.

Robert Williams

financing year, our high and model. the were today. closed to loan was securitizations. AOMR. the completing June, AOMR portfolio our After you, our of out we in the and loans, two billion of Randy. quality you for demonstrate gates the $X.X purchased year end able Thank a our foundational business available joining and thank scale for IPO of doubled From XXXX And quickly capacity, we through everyone IPO non-QM us came of strength the

securitization Angel and strong, infrastructure, markets channels capital or refer through rates, price mortgage strategy, our to desired of Angel rising serve The to in by franchise, the thus our Oak have Angel loans and are platform the sustained a loan our has of $XX access origination ecosystem accelerated range targeted average Despite all mortgages founding. is historical it, Mortgage and continue into characteristics. since position rates non-QM across higher our consistent The scale in as the to non-QM to at Lending’s for we proprietary expense expertise growth assets, come quality, years. than enables has ecosystem. DTIs and Oak we LTV leadership far lows. XXXX. prior Angel testament industry scores, quick our current Our delinquency of of lower as Oak its originated volumes non-QM average deployment not growing The interest recently FICO market near at housing. has Home non-QM a supported in and originated a as AOMR provides demand see the appreciation national opportunities, billion investment tailor to vast approximately our Oak

a IPO not which It been June, for assets the As of our positioned. well of the assets MBS effort XXXX would and interest increase months, highlight a Fed since coming our many how mortgage few billion And make cannot am our will of largest agency quickly rates mortgages, was believe non-agency are we our I to our REIT. target grow proceeds culmination team. of purchased billion, accomplishments. we XXXX. prior team. an how pivotal helped in who tapers continues This aggregate target of Oak $X.X completed was demonstrating that completed on purchases can securitizations fivefold We happen. on term we year by our Mortgage scale of overstate IPO, year. without have represented underlying of REIT the possible the XXst, I the for individuals We residential $X.X years in $XXX.X and securitization two life Company. the behalf December Angel Since the financing our IPO over At were in a high-quality, proud I many for the collateral. increase locking favorable the a market, total it million, tremendously and capitalizing non-QM in

reasons. produce strong Looking forward, believe we can we several results to continue for

of replicated. years barrier has XX-plus First, high which cannot to and that Oak develop easily on unique of takes loans invested be over a capabilities the Angel substantial large time to scale underwriting systems and entry. mature. develop non-QM a capital origination to Creating requires and years origination,

Angel reminder, a housing and one continued the demand. non-bank, we significant poised non-QM originator, on is Oak that believe non-QM number based Mortgage fundamentals consumer As is for Lending and growth

characteristics Oak circumstances as a Mortgage to has access with proprietary to as standards loans Second, Oak characteristics. we desired underwriting Lending their ecosystem, ability the Due Angel evolve. can loan purchase to originator the Angel our origination simply our and adjust

management This quickly mortgage adjust changing market to teams credit AOMR to and conditions. allows of discuss meet current to and portfolio daily members Importantly, the pricing metrics.

we Third, on aggregating non-QM have and experience securitizations. loans, in unmatched executing

financing including long-term Over an locking completed in net for Oak attractive, margin. the AOMR two years securitizations, Angel and has interest XX XXXX

reduced liquidity risk. our securitizations Additionally,

to we of over a As achieve with declare time, stated, I’m is growth pleased strong to Brandon. per quarter terms that believe can conventional over loans this, share, we’re quarter. a can robust to a The meaningful portfolio of of this spread common peers. over superior all XX% cash that, With flow because the distributable our turn to of we and rates, result earnings, $X.XX achieve than mortgage supporting To increase carry last durable fourth it we leverage lower XXXX non-QM dividends dividends. and a highlight many pleased

Brandon Filson

everyone thanks Robert, us. for and Thanks, joining to

realized on $XX.X XX, distributable XXXX. of XX.X%. was gains or quarter-over-quarter per investment The on quarter portfolio fourth of over business. fourth full over of our the unrealized return loan profitably only Interest XX% QX prior $X.X to underscoring GAAP earnings million not December of during losses scale while average is add-back attributable for maintaining common we common XX%, of on $X.XX year in our quarter. The $X.XX equity increased incurred year, million hedging our earnings the increase interest impact the XXXX, our of the scaled the per share. portfolio For loan had and portfolio income income to distributable net quickly, but on annualized ability distributable strategy as margin the net the or share,

$X.XX QX decrease $XX.XX results, to older common as GAAP higher in model fees on on paid rate XXth. decrease IPO, book impact $XX.XX, XX, by loan our December per per rates have value partially to book share accelerated from from on coupon grown in September our gains prepayment achieved The business per rose was and $X.XX while $XX.XX share book XXXX, a We’re these amid we November, in value in primarily a rising Since dividend hedging from was valuations offset have in due of XXXX, securities. dividends. pleased value strategy. improving the to the distributing headwinds down share environment $XX.XX including our from

we an the response rates purchased. to million XXXX, began coupon we $XXX work to our of XXXX, mortgage quarter, non-agency Beginning rates, the raising million in XX, in These November are $XXX their mortgages. rising we of additional in way During -- the we loans. fourth purchased Also, beginning loans March higher as purchased of into loans portfolio.

Turning our now securitization activity. to

at on execute risen. loans was from the economics tranches. the banks four hold our set coupon with a November, Our cost IPO, second a months where credit have In the value last cost achieve for a to XX.X% This a late not and loans rates It of weighted securitization that average capital purchase Fitch credit of included a weighted in for $XXX XX.X us receiving million was rates since XXX is a XX.X% of XXXX. securitization, of value X,XXX the life changed average senior the as the loan rating. and weighted financing year-end in we placed ratio mass February, The pools with completed have XX.X% this characteristics of retained we with rated loans, our we diverse XXXX we ratio million XX.X%. until ratio of score have to loan been XXX, efficient and we score we even we three increase a post-IPO securitization, a of to critical receiving X.XX% The income transaction increasing the begins placed we to capital rating. recent third an average also credit structure purchase tranche a X.XX%, of as coupon important senior This weighted debt rates structural AAA of strategy into where of the both of to significantly deal XXX, AAA two transaction Fitch average them XX.X. interest-only term with place the have over in by $XXX securitizations, securitizations to an securitizations, in previously securitization, will for as the loan mentioned, our included to loans for of of the securitization loans. of in ratio funding. the We future deal completed And to which starting the end, average on X.XX%, Subsequent lines and that coupon To of funding. at aggregation. rated structure an securitization, with with income allows lock average by tranche above highlight and loan financing debt of X.XX%

up For QX latest XXXX. X.X% of reference, X%, the coupons around are X.XX% from end lot at the to

expenses. Turning to

$X.X incurred were operating is prior expenses loan for fourth to primarily operating on expense the the Our attributable quarter fees The versus quarter purchases. million. increase

the December in loan in of verify For these benefit expenses we cash we our an of loan. a regard line with accelerated to million characteristics each quarter’s from increase first $XXX XXXX. these of XXst, had we key at in beginning Therefore, balance diligence with cash With fee to saw loan performance pay purchase we million in volume $XX.X quarter quarter our purchase, the loans equivalents. and the full sheet, a

recourse Our X times. equity to was debt ratio

types billion. currently manage extended securities banks have counterparty of We of $XXX million year-end, our million, loans, increased bringing including $XXX We sizes million individual lines the billion any financing Subsequent $X.X pre-IPO to to maturities, whole have capacity capacity with residential $XX total by our in borrowing two AOMT with $X.X RMBS, warehouse a and committed loan our six of to counterparty. to in we facilities total varied securitizations. and retained from exposure a our

March with strategy payable of than we assets. $X.XX a less over million as management as of front, leadership. on of significant non-QM This $XXX over loan As most February, non-QM dividend With of securitization earnings market annual the but financing yield and both in at the our of of leverage tighter of quarterly million of had XX% significant portfolio in industry. skilled the set November declared XX, capacity already current our use implies market securitizations origination million Angel purchased unencumbered time undrawn the which a in leadership the of of or and XXXX, The comparable than share, portfolio end coverage, per securitization able unsecuritized and and distributable March evidence time. the $XXX sound XXXX. demonstrates an of year, dividend our $XXX year. liquidity QX market are has we’ve late This the are to from. is were coming the up in XX, all close XX, March our Oak increased come shareholders securitizations closing and This share our record in the $X.XX deals of August same to XXXX, on pipeline rate dividend the position also further for XX% per current We XXXX-X of Due off common in pricing XXXX. we on benefited summer, to securitization price by the tight loan with

at through million one Lastly, year in repurchased the common to plan. through will $X the book to IPO we XXX,XXX value. discount anniversary the if approximately repurchase the trades XXbX buy continue run shares This stock our of plan date will and stock fourth a quarter, for

for website. on additional now the I supplement For earnings financial color review please Robert will the to back it our on available remarks. turn closing results,

Robert Williams

of In benefited Brandon. growth the of you, with very Angel platform. gate out our We and pleased execution. we results, Oak accretive the conclusion, the power Thank driving are came from record strong portfolio securitization secure

summarize, earnings, have distributable look growth we beyond dividend. as XXXX with result, XXXX, excellent I opportunity following and a in the we To As our and want points. to produced cash supporting and the to we results flow strong reemphasize

investment business ecosystem built is trade. First, returns operating access yield. That decade. gives and a is support proprietary dividend This prudent a not that over this high-quality risk-adjusted is shareholders an with been an strong business a an metrics. Oak scarce an a attractive assets pricing has Angel in Investing investment has for to asset credit that in in to

focus primary unique among interest any competitors. Our the risk, and mortgage diversification in on our benefits, residential and less REITs origination XX with less of leverage, non-QM index is REIT than less liquidity offer the rate risk significant

share, of result, raise our we per XX%. were a As annualized XX% $X.XX implies quarterly to by to common yield pleased dividend dividend which an

have is which The and Oak nonbank unparalleled Second, the provides significant Angel quality access originator unique is to largest loans. non-QM competitive single Lending, Mortgage we ecosystem to high Angel have of loans Oak Angel tactics replicate experience Alongside utilize, for entry pioneering significant this many we the proprietary Oak advantages. XX-year-plus the knowledge. reinforcing franchise, barrier of others an the history, and to we to

of resulting cost Capital’s AOMR a underwriting our is loans non-QM Angel Third, a a we fund, a independent investor Mortgage Oak high-quality, in execution loans driven every in-house Angel is by funding. REIT Oak in securitization and process. investment in credit-driven the low strong with have mortgage pipeline following public underwrites to programmatic is platform, AOMR. markets performance sector. unique capital historical Strong for loan Fourth, through of that we of our access focused non-QM

competition, more of rate than interest changes are insulated less growth. a wider loans, mortgage Finally, from our products with agency and the non-QM providing we long spreads believe runway

work drive successes. opportunities call contributions questions. that your to for excited We’re thank Operator? plus and Oak’s ahead all and open hard for XXX up want With Angel to their to we’ll employees the

Operator

conducting Instructions] Don you. we Wells be from first a will question Please your Fandetti [Operator Our At of proceed Thank with Fargo. session. time, question-and-answer is this question.

Don Fandetti

increase. One, in a currently? the Good us dividend A couple you questions. QX. Hi. of value book quick give where tracking, on see to Can spreads widened sense is

Brandon Filson

Yes.

quarter nothing like we strategy after down considering that have QX. value, hedging a happened I in value slightly, is book in we’ll QX will too mean, end, much in So, drastic, go have I our think what what book but place,

Don Fandetti

items Okay. got some similar where kind And income, some and the think offset realized? are terms kind we by of negative, impact of quarter, on distributable as income about a and their it sort in would loan widening hedges, next have then, of other of you’ve look on because of not the those line it’s because you mark, all of the

Brandon Filson

the other their goes that when hedging IO there equation side is our decrease bonds I paying go portfolio. -- partially as the through And by line strategy. gains well. big mentioned, think, down the losses right that driver on other things is of like the line, are unrealized mostly you income in loan then, is the or the notional on and now offset That that that legacy --

there world, notion I the just a a what perfectly off just the bleed perfect you’ll with see again, see -- in you of world, would hedged is bonds. IO think, So of

Don Fandetti

interest you’re Okay. hedging just But, given widening, rate risk. spread obviously your

So, impact, mark-to-market? there be in QX imagine would would I some from negative

Brandon Filson

Yes.

Don Fandetti

You kind expense what’s guess, I that. there? the quarter, some was of the clarified there tax also in story

Brandon Filson

benefit what hedging is the call success -- that it of That’s strategy. our Yes. of our, is, I’ll

gains REIT for realized in expense and of amount representing subsidiary, the that’s tax large a had we QX, in So, our taxable that.

Don Fandetti

what it? Okay. if that that? that had good you were is good I hedge, to on why pay mean, taxes you It’s but is

Brandon Filson

and... we be the we in if made tax, have unhedged have I’m didn’t Well, because TRS wouldn’t saying because we’d the income

Don Fandetti

Got it.

mark-to-market if right? clarify, I know if this. loans they’re correct? on think Is to that loans, regardless. matter marked answer. the securitization, the securitization The doesn’t waiting But, I in loans asked they’re it or me someone Just are The

Brandon Filson

financials. Yes. There’s no difference the in

Don Fandetti

then, And since just parts. great. a of last Okay, one, moving lot there one just are

or February, did there? securitization You deal to your loans you that because the risk I still wait though are things to growth slow loan do you of going but market, going out what’s you are good because fair a mean, wiped had just on? are you have amount production have Are you in even out down on not securitized, QX. of going

Brandon Filson

Yes.

it I’m to with us the as room turn question, who’s Sinha, over that in our going For Namit to co-CIO well.

Namit Sinha

Yes. Hi.

in loan the we’ve not we that which securitization mentioned, earlier. a were Brandon to at choosing from somewhat. securitize prudent market taking reflect up to to and risk way, build definitely right critical The believe programmatic we as where standpoint, the of where So, and generally in a in financing sort mass is raised also had then spread it But picking so managing and coupons we to effectively loan wide are widening. portfolio now the be to securitization

So, starting by rates mitigated away cycle, going XX over that effect a within going that days. see to to the kind higher be we’re loan you’re produce, to XX

Don Fandetti

when But, bank, you’re slow some decision are now? careful little have -- where less a they right be down happens don’t market, making you a it’s securitization a you going you a certain to Are little deposits. more not to because conscious this companies,

Namit Sinha

I is potentially to to the the think securities what go release, line. utilize the and -- down down effectively cash to we’ll or might loans higher yielding What do choose market. in is out we invest the deeper structure do post-securitization capital the to securitization sell still we’ll in

Don Fandetti

Got it.

Okay. Thanks.

Operator

time. no for back There the are at session. This questions our over remarks. completes turn closing I And to now [Operator call management this question-and-answer more Instructions] will

Robert Williams

REIT. in want Oak time I interest Mortgage is your This to Angel Robert. for and thank everyone

the you with us, As a the evening. out you have look have please reach great of any opportunities front In excited about forward we if you in the We can to next we everyone have connecting are meantime, and questions, tell, quarter. to us.

Operator

conference. concludes This today’s

time. lines this you disconnect your and for Thank have may at a great day. participation, your You

Angel Oak Mortgage (AOMR) 15 Mar 222021 Q4 Earnings call transcript