AOMR - Earnings call transcript Q1 2022 | Angel Oak Mortgage, Inc.

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Operator

Greetings and welcome to the Angel Oak Mortgage, Inc.

First Quarter 2022 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]. conference recorded. this that note is being Please I'll Randy Angel Chrisman, the conference Oak. our host, over to Chief now turn Marketing Officer with Thank you.

You begin. may

Randy Chrisman

Angel XXXX quarter on www.angeloakreit.com. Thank Mortgage our This Investors press afternoon. you Section our joining our is filed today Good first available detailing quarter the for afternoon we at REIT which earnings XXXX for first release conference results, call. website us Oak in

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

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

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

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

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

over call Robert. the turn to will I Now,

Robert Williams

historically strength and quarter against its you, environment. model thank volatile XXXX, core and Randy, joining a the today. yield backdrop the you, for of of rate the of Thank us In AOMR demonstrated everyone, first business

high increased three quarter proud through in we of of our growth base of the XXXX. end target Closed high billion. including the ecosystem non-premium loan acquisition, $X purchased of have and As capacity over its quickly execution IPO have as our we quarter, remains to securitizations billion anniversary XXX% one of a From $X programmatically near mortgage million our fixed strategic IPO and our loans, cost funding financing of loan the quality, Angel close and strategy. secure the and in first continued this and assets. Oak securitization today, non-QM asset June, our we term lock the are quality structural strategy our those of our to loans we by loans, our reinvestment the $XXX year and targeted, of consistent, as securitize in capital reinvest of deploy capital continues to advantages, demonstrate targeted The leverage in

and I observed mentioned, market extremely we QX. an volatile As in uncertain fixed income

action As target to to mitigate the increasing interest Fed by higher took rates. inflation attempt in March

steady and accompanied to market non-QM mortgage mark-to-market rates, quarter. us strategy, makes the this in course This, tripled by in Brandon increases. remained XXXX. The in swap Over far expect our respectively. customize the we to degree future Fed including markets two withstand said, loan as has strategy of With growth evolve, than adapting interest downward so more our methodical discuss a volatility. pricing desired market we headwind course, non-agency later. and first our assets of interest characteristics Angel higher use and AOMR of further continue And more pressure detail effectively some ecosystem will on the rate near to as our we the positions rates, the will part well and doubled, in as rate which quarter, that believe which enables hedging Oak nearly portfolio asset and The was treasury to strong five-year

to historic proprietary price be lows. slightly driven has rates flatten origination growth and volumes delinquency continued see growing appreciation, while non-QM through near in to continues spite and to origination. of We quality our by appearing remain Home channels. Angel not continue Oak

in of this prior higher accomplishments We As high far At LTVs we million year. and have originated mortgages. and average the of In I'd March few lower our than so XX% DTIs the realized highlight purchased and first recently a increase we XXXX, average $X.X of were assets the XXst, a of loans like over believe total quarter scores years. to non-QM XXXX quality the $XXX AOMR, of reinforced prior FICO strength our the billion, quarter. first quarter

our our include completed for trust, $X.X securities million. and which loans assets, In securitization loans target $XXX.X February, prior whole billion, quarter. and were in commercial over third XX% the residential post-IPO securitization Our a we and increase

of added financing to available Additionally, today. capacity first additional in million the plus committed we XXXX $XX $X.XX April $XXX bringing in of total as million capacity billion to our quarter, an our

Looking we key continue highlight. forward, our on capitalize like we which I'd believe to differentiators, to

high research loans large a requires takes First, refine. application, loan, a and the origination scale non-QM efficient underwriting we thorough years and capital of of for a barrier to data be alone utilize. on must can and which and to has invested verification non-QM of and systems conducted plus develop Angel Extensive unique providing to substantial develop origination, creates entry. and years which XX capabilities, time Oak that amounts over enormous

their the characteristics the adjust Mortgage has as Lending Oak loan circumstances Second, as evolve. ability standards mortgage underwriting origination to Angel and originator

in to our we with ecosystem, ability loans decrease this characteristics. rates, can similarly volatile increase to a Angel interest Due access the proprietary as well Oak our desired As environment. purchase includes mentioned rate the previously, to or

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

recognition Third, securitizations. brand aggregating Angel on executing and and marketplace non-QM Oak loans unmatched in has experience

Oak margin securitizations Angel AOMR risk. XXXX. for lock and XXXX XX has long over net including three in years, and completed financing These while the liquidity securitizations, our Over term in reducing interest

we over earnings, a cash We As and and achieve typically spread we superior supporting our because confident can leverage durable mortgage non-QM portfolio of a meaningful often dividends. distributable remain stated, lower growth flow achieve returns conventional loans many robust can rates, to carry strong with than peers. time,

As to XXXX. as XXXX, shareholders on such, quarter common XXXX With are Brandon. May record to that, declare XX, $X.XX a pleased share, per turn pleased I'm May dividend of we to XX, to first of over it payable of

Brandon Filson

Robert, you, you, thank joining everyone, for us. and Thank

dividend March as March the $XX.XX decrease $X.X from December billion our quarter-over-quarter increase. GAAP on loan the For driven RMBS mark-to-market fully from quarter million net sheet balance average QX XX, loss was basis of the of of GAAP XXXX, and book on common share. a The had XX. increase was on $X.XX first increase securitizations increase. portfolio quarter-over-quarter of XX.X%. share to in quarter-over-quarter margin was and $X.X impact or losses million $XX.X we diluted return earnings $XX.X per or per equity $XX.XX representing quarter $XX.X distributable common common share annualized XX% XX% growth distributable on Net This is unrealized positive including $X.XX the generating paid on Interest current losses portfolio, or quarter, and In attributable securitized loan XXXX, portfolios. million whole per distributable add-back the per was $XX.X XX.X% a interest income to value a in realized rate for and of mark-to-market $X.XX on saw down portfolios. increase. impact earnings unrealized target loan, XX% we share asset our hedges, of was million, our investment of interest the by slight gains of from income billion, representing our a the and our

During the of mortgages. XX, as April we quarter, mortgages. an purchased additional Also, million million we non-agency have first $XXX non-agency of of purchased XXXX, $XXX

locks of response points we coupon from loans increased purchased a X.X%. had portfolio is a X% are loan latest rate purchases -- given environment our to prior. in which XXXX in typically during weighted so coupon or loan rate origination month late locks loan in portfolio. affiliated and the one average weighted beginning over loan due average two to process, basis Note in are to of coupon, reflect March reflect than Our that loan that loan have mortgage weighted far loans will a on average higher April XXX the that X.X%, purchases approximately accelerated the months QX. The The May is companies coupon higher

In senior XXX securitization now million X.XX% rating. completed coupon we've tranche is was the receiving funding loan our and This capital funding. average to score months. XX.X% a spread AAA to of and of by deal for credit average the an broader included the market debt value X.XX% of XX.X% of IPO ratio securitization XX.X%. income a of cost observed with of also the recent with a to reflective Fitch, the structure securitization our widening weighted of activity. since in cost higher The placed February, securitization we rated The of ratio $XXX we weighted X,XXX average with third where Turning our loans transaction

use to reduce and the methodically forward, market securitization to plan we judiciously Going rate continue to liquidity risk. and interest

uncertainty the the long-term monitor in securitization is diligently do the but interest We shareholders. in will market, to not attempting market of believe that best our securitization time the we

As one of quarter. securitization our per such, we maintain target

the million our our associated of $XX.X $X for expenses, with securitization expenses to including Turning operating were quarter first costs February million, securitization.

current takes recognize the place. to we at regard over a Recognition we non-recourse that fair decreased these Excluding of our to of $XX.X $X.X the obligations. the our is elected cost QX sheet balance period these of securitization Previously which XX, quarter have the equivalents. cash requires and to This attributable expenses costs securitization policy were the when of we million had non-callable compared recognize in million change to accounting operating amortized securitization by the cash securitization XXXX. of the cost, the approximately cost change in value bond. in With being full securitization March

to equity ratio X.Xx. Our recourse was debt

$XXX.X securitizations. and total a in from including retained whole residential have of RMBS, million billion trust AOMT $X.X of securities pre-IPO securitization in and million $XX.X loans We

maturities, of financing We for varied to financing and with exposure had As any QX. counterparty. counterparty individual XX, our to total we capacity loan in our by committed six sizes manage March increased loan banks million facilities $XX types

of $XXX Our to management of total liquidity current end, end a with during March our capacity billion. added this the of as as the Subsequent our sound balance This, increased cash quarter strategy $X.XX a combined commitment credit was to we rates. capacity XX. new facility, million bringing demonstrates to financing undrawn our total million quarter, rising period $XXX of

a the $X.XX declared XX, of This of shareholders payable an or as record we've of on distributable a closing of over $X.XX foundation dividend portfolio May significant XXXX, May on XX, per a implies income-generating price of rate of strong the earnings, to May share XX% XX, dividend Given as XXXX. annualized per common share and XXXX. our yield

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

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

Robert Williams

Brandon. may Clearly, current you. challenges has Thank continue. mortgage the this rates and environment to presented

several Fortunately are for we we Angel differentiated ways. Oak, believe in

as are we the originators part ecosystem, aligned and of and the flow non-QM Angel investments. seasoned mortgages, to experienced unique steady Oak with a managers First, access of most of providing

debt superior sheet fixed Second, third, credit execute with ample our our And our underwriting. with is we have a on liquidity to strong balance balance sheet. rate, largely

strategy, note our As losses interest spreads. And of that due I was sheet. to mark-to-market do of quarter a balance by would like big Brandon a impacted widening changes. unrealized our part rate as credit were first hedge significant against said, to that we results on

not spread changes. we However, hedge credit against do

our credit focused always Oak than to and better strong. that fundamentally are been core remains change. performance. will We summary, And portfolio remain Angel In not metrics has credit on This ever.

confident we operate environment, on We liquidity. strong and underwriting this can are in focusing sound complex

in dividend, north the at price distributable yield reflects share are Our quarterly XX%. well a excess which earnings today's dividend $X.XX of of

to like successes. open for hard Angel thank and up your team Operator? contributions Oak would entire that, work I With our the to the always, to we'll questions. As their call

Operator

conducting gentlemen, ladies at be [Operator we'll And time, a session. Instructions]. and you. question-and-answer this Thank

question first Fandetti Fargo. ahead. Don Wells with Our Please from comes go

Don Fandetti

book think you where is currently? about talk value you Can Hi.

Robert Williams

Yes.

interest the value that so April. book moves I probably in QX. down, is believe percentages rate far continued think I through low-single-digit

Don Fandetti

next on is Okay. plan? -- seven you today month coupons? Is think the in sort that And that the are of plus costs to plan your where or saying or are you do you do securitizations relative yields And two? what to asset a securitization

Namit Sinha

the March side the supply/demand came not extent, seen more what in supply stabilized robust coming in what Yes, shown there coming this into down to plan demand the is, were structure. AAA credit challenges extent. that technical treasuries. parts capital we We gone what rate of has coming-- are to give around to around at securitization course certain are right Namit also were spreads the Sinha. AAA done first that resilience. is And And side around See supply/demand the deals to we volatility do interest equilibrium, on more has some the market of was month a is is XXX spreads is we and To over April then in so. abated that the also And there but the quoting in the securitization as weeks, the senior lot on four is that obviously the three has context, spread market. choppy a and versus subsided you have in more But quarter, bring was seeing a seeing the somewhat, very or have that resulted a on demand seems some XXX to that XXX have in more to the next more swaps and level. and somewhat

take do that. of market, the we we the do are -- market. expect should the So to it And that current securitization should the it under context confident to

Operator

Thank you.

next your comes Please from question B. state Howlett Matthew with Our Riley. question.

Matthew Howlett

Hey, guys. my question. Thanks taking for

of Just at over over $XXX first million the about I did decrease any that have level of the mean, $XXX that Will go in seeing trajectory purchases, X%. in demand up? million coupon? quarter, in you just that. you you April, now are But losses on the

Namit Sinha

Yes.

mid-first least we are seen have at market what is the the speed on be unsettle are X.X% still with what agency the rates loans is obviously resetting rates intact. and little quickly to with the points compared rates. which agency pegged often, rate jump XXX a from loan used happened non-QM very closer the More bit. as coupon to long-term to market these So a XXX story basis today. the And things to in But

So happening to And and that you because doubling is XXXX in to cycle much are, kind that in believe that is of where every the rates X.XX% what lot lending. which mortgage toward It helps volumes when if it the context, agency the re-fi very already helps in think in industry, across of way at us. our a a the of a I business focus look of evaporates, long-term generally the non-QM it X%, we agency do rates year happened is hiking line. And where turns non-agency almost face in the rising sector and were XXXX of rate environment. big

experienced, to So on volume in upswing things versus going a settle, that's But year compared we That volumes And where that not been back. at decline across even a our -- choppiness pretty industry. the either. just to a healthy we somewhat forward. across to the immune the it the said, still least expectation we at with are do running that is an clip, believe are as were that has and be have that we going of

Matthew Howlett

And then, to do, a I it. can securitization mean, Got you capital, ahead? able just do would the in looking fourth on you quarter third just be

Namit Sinha

Yes.

prevailing to a warehousing. much the And that release standpoint interest as us cash because helps as securitizations a more -- whole advantage buy securitization us cash, are So obviously quarter. to higher the And presumably we about at But same we that also release from at use than to loans return we the well. would do sitting usually rate one loans, rate. help allows securitization finance that would loans term would of And every securitization to are to us higher today. the look of

Matthew Howlett

And that high the case? a return to mid still that's teens the still target retainer on

Namit Sinha

that The target. always Yes. current coupon is the

too. Now, can sheet, around as around, are we But can and rate are rate loans spreads those credit teens. we mid-to-high target that most the earlier, terms we coupon do of as mentioned had usually to rates when eventually through doing when capture move current become loans can volatile Robert we And again, change hope things. But move and those underwrite interest variation That when today's to they hedges. vary. securitized,

Operator

Thank you. [Operator instructions].

Chris question & Please comes go next with from Kotowski Oppenheimer Company. Our ahead.

Chris Kotowski

non-QM your we've of or of Yes. have purchases originations been I of securitizations seen. level mean running the loans obviously, ahead

of so, may with this the you And that you've now And And pools or originated what and again, them those originated -- off there have six long presumably and extent, to be pull loans not are mix recently. reduce mortgages in to market? had of that do been being -- those And that exposure ago were -- there's you've were mortgages you able off success quarter therefore to market. more wondering nine had may then to are you that months ago market. some kind originated able in some loans nine the and, overall months coupon your, higher can at six first or of that I'm

Namit Sinha

Sure.

to I determination, So, the buys the time today in potentially on except it's timeframe that locked was close week the get two. itself, the days. by or spot nine that six back it, mean, loans in the that And usually I will fund days, like XX loans months another you're XX mean,

And securitization another they the just so it's when lag. hit

the -- were in loans rate in loans still the were at the The which are your later that the first bought X%. the we market how the exactly will mortgage coupons we about companies of loans up But that high show are think rest are things. in are a pipeline by conclusions speaking, time. being quarter locked to high -- locked that sixes today at the have were that generally mid in So time, mid at which

three funds question, year. Oak our is, So to all, first family Angel answer this what securitizations we across do got your of have we of

have And discount was in more to getting market of the terms But of context high securitizations. one the two of coupons. these to had we out deals consider the success of the we done fours the of these good AOMR. a closed today had of et of current just a success them have coupons deals in you bond out. lot had And deals be in have which placements, cetera. And very would all mid One

that and process continues, that's coupon given high both. Oak today the of loans absolutely market these Angel confident coupon these point, us local partner to leads if coupon to somewhat last these how us. we eventually to context I that things leads are, over at more this to to we, that we look continuing current with or outside be cash create loans loans very months we are and sellers and housing the the execute that loans, So current so securitized, to a the higher your even of from we are next buying securitization that to leads pool And and the easier around securitizations them from mixing -- mixing can for of mean make XX the buy six securitizing

Chris Kotowski

it to -- to much balance us guess for put are six how much, gauge, way been loans in your whole nine that Is sheet months? have how I than of a way. for are let more saved, me another there there what the portion

Namit Sinha

substantial in what exact between months like the three assume for that are seasoned if there prepared that terms loans percentage not bucket. the And There do portfolio be of a of et as of would seasoned, but securitizations, we and there sits chunk probably we in number six loans follow-up will are exact seasoned cetera. can that be, be definitely would that a

Chris Kotowski

those sheet into trusts are sits of that but in way it months and so, is loans have residential been last think currently moved loans -- is originated really months. six on stuff that securitization the balance I than the what your whole should about as So that that six the more more to old, the most three seasoned

Namit Sinha

would shift. a Yes, -- that be that would paradigm be

Operator

call I management to for now period. concludes back turn the Thanks. And closing that will remarks. Q&A our

Randy Chrisman

if interest Thank us to In and next for with connecting and questions, the any you reach out a meantime, please evening. have free everybody great you to AOMR. look in you to your feel We time everyone quarter. forward your have again

Operator

concludes This disconnect. may parties you. Thank conference. a today's All evening. Have good

Angel Oak Mortgage (AOMR) 13 May 222022 Q1 Earnings call transcript