Angel Oak Mortgage (AOMR) 5 Mar 242023 Q4 Earnings call transcript

Good morning, and welcome to the Angel Oak Mortgage Fourth Quarter 2023 Earnings Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note that today's event is being recorded. I would now like to turn the conference over to Randy Chrisman. Please go ahead.

morning. Good joining Full Angel Call. Year for Fourth Mortgage today and Quarter XXXX us you Oak for REIT's Thank Earnings Conference morning, Investors press is a at we these This which results, www.angeloakreit.com. release available on section detailing the our website in filed

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

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

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

measures call, certain and most be discussing the we measures More directly non-GAAP comparable this GAAP information contained filings. will release reconciliations non-GAAP earnings and in our financial to measures. During financial are SEC financial about these

Brandon Executive open Capital's REIT's Prabhu; some morning's call Chief Angel Oak will will Management after This Mortgage prepared your questions. Officer, to and the hosted by make comments, call which Officer, Sreeni conference Namit Sinha. Filson; we Chief up Angel is Financial Co-CIO, Oak

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

over will the Sreeni. I to turn Now call

in for Thank year. This interest carrying was XXXX in with you, our performance established additional margin in quarter and X the and forward the company our earlier continued point joining during of thank XXXX net financial the quarter demonstrated of us everyone, the Randy, today. finished results, another second Angel you, in with improvement momentum expansion. half inflection the by

the last of the result decision-making XX months. a over undertaken was direct This strategic

while earnings balance power continue growth. for our We strengthening sheet increase of our sustainable the portfolio to

and results model which for a of net continued a operating year resilience our growth. expanding risk, by liquidity interest and pivotal improving successfully delivered company positioned XXXX AOMR, year which income, the our balance sheet showcased reducing represented in for we the

made detail these in we some AOMR key creating the progress important for have to deliver that opportunity results. is to It

increasingly challenging decision our you second As in we prudent the portfolio. recall, backdrop, derisk economic XXXX, amid made an the half of to

repositioned Over long-term financing, the elected company strengthened drove strong order some the a liquidity. short-term months, kept keen loan for past costs portfolio, success. portfolio on XX focus our to our pain to better operating base We whole out we've maintaining and and structural endure of its in position

portfolio proven spite returned highest to hiking correct has rate rose position decision the our XXXX we of to rates of operate cycle opportunities over us with the to earnings forward. our be to of afforded lending. with as level through this, the saw to the mortgage power resources the an systematically which half business the AOMR continuation Fed of into the and going In years. This attractive in year while This XX funds the over relationship us Angel back deploy affiliated positioned from Oak attractive providing build to second

lower easing financing the this It second would expect of improved to increase to happens, execution. is the begin earnings we policy. costs anticipated that will Fed If in widely XXXX, due monetary and securitization half

standalone we Angel bring ways of million alongside X markets, to approach reopen reflecting of of in that flexibility showcasing Angel comingled the goal securitization demonstrated in activity accretive to XXXX, one plans. averaging deals executed deals areas amid Oak value which particular, securitizations ecosystem. capital we growth this Oak per over a different market, volatile could Additionally, AOMR's keeping of both our high-quality participated the entities We may in can $XXX In to securitize and to securitization market. be these loans, the quarter. We our stated

acquisition of to income. expanding financing allowed improved company positioning growing deploy net and towards our current power interest originated and loans, income. interest improving costs, securitizations further enabled newly to the these net coupon earnings sheet the Additionally, us our This lower cash both our balance strategically

million coupon a market whole the of alone. weighted on the net quarter fourth coupons In purchased across portfolio second total we our basis loan $XXX income basis and fourth loans. quarter of quarter. nearly XX% XX This XXXX, points to interest The from current XXX points the expansion our the average year drove to unsecuritized increased a in

value of December of share was XX.X% improved increase Our compared as quarter. GAAP book to an previous XXXX. to This per XX, the $XX.XX

of $X,XXX the versus value quarter. Our X.X% economic by previous improved per book share

Credit point industry across the the risk has discussion key a been in recent quarters.

loans to weighted X.X% year quarter. securitized was our home end portfolio at X.X% average delinquency the of XX-plus across of of of the rate as and end the Our day compared as third

perform based XXXX, is Oak and we credit well. In While competitive characteristics. income growth interest this capital risk us net ecosystem, to towards upward, lows movement slightly our to to the further risk the to into believe and key has expect own, back expected, the historic Angel offering the relationship of due expect drive a a to are recent provides sitting continue strength trended momentum our adjust assets. we historical at portfolio redeploy Credit that management choose a our to with which averages retrends in after is comparatively on we desired ability ours years. Credit specific as high-yielding as we we maintain

our all, above of allocated philosophy ROE on management highest that is use. portfolio its best to the and is, and ensure portfolio capital focus to maximizing Our our

allow expected timing to will newly programmatic continue currently coupled a powder that levels dry We securitization execution originated loans on with and purchase us to have basis.

return we I a strategic to evaluate the our possess within ability in by efforts and differentiator As critical opportunities capital credit always, allocate and characteristics. desired our we risk expertise these as are that selection firmly believe discussed supported

and With that, I'll financial in to turn us more it performance walk Brandon, who quarter will the year-end over for the through detail.

Sreeni. you, Thank

in where would results additional and position of headed XXXX. context financial provide current like through we're then talk the First, I our details to our some around and

income fully share. common we quarter $X.XX fourth of of net the per million For had diluted GAAP or XXXX, $XX.X

results had million demonstrate we a share. year, of income common $XX.X execute continue to full our year's last transformation as is we strategy. the $X.XX net GAAP ability growth fully or from per diluted earnings For to significant our This

Distributable $X.XX earnings per million driven by distributable this realization previously a negative losses a when again earnings of negative the AOMT The we like in participate unrealized with share. $X.X December XXXX-X. of comingled were were loss securitization quarter or we in did

XX% million the quarter Interest interest income improvement the quarter million, second $XX.X was income previous net the was an and over marks a which over for XX% $X.X quarter. improvement and

million million. was For income and interest the income year, was $XX.X net $XX interest

interest we quarters securitize coming to loans. mentioned, Sreeni income expand as purchase and the we expect As continue in new net to

expenses fourth Our from quarter. million, $X.X decline operating quarter the for previous the were modest representing a

stock our securitization good exclude costs, that When we we are analyze operations costs find as with it securitization plan. part costs compensation impact most our useful well stock as expenses our expenses, and business are cash compensation parcel and does as to noncash our not

$XX.X expense the For $XX.X reduction of prior and full in year, for operating adjusted $X.X a million the securitization, incurred compensation. $X.X compared to million, also were million demonstrates excluding This in year decrease or expenses stock XXXX. or severance when million expenses nearly XX%

savings going expenses for assessing our maintain structure opportunities. additional and while reduced cost continuously are to continuing forward to plan We look

balance on to sheet. Now the digging

December $XX.X XX, we had of million cash. of As

of our to their or year quarter January end U.S. maturity the expected, X.Xx of X.Xx as versus the reflecting of debt-to-equity Treasury repurchase XX, agreements As recourse prior the assets ratio when on XXXX. corresponding slightly short-term the increased and

into versus capital as the whole loans. higher-yielding The we deploy loan to due increase fourth the third continue was to quarter quarter additional purchases during

warehouse We have which residential of fair majority-owned RMBS, included and million whole residential on $X.X securitization affiliates, million of loans balance loans value other of a of are assets $XXX in mortgage at $XXX debt, million of $XXX investments our with sheet. and billion $XX.X million in financed including trust

million. undrawn We capacity finished of $XXX approximately the year financing with loan

over a of X.XX% a of the delivered We total, both of X comingled we with stand-alone $XXX are loans over course to pleased average million year the have of across In weighted with combination coupon consistent securitizations. deals. and securitized securitizations

which $XXX able expect million be fourth maintain participated to execution contributed loans. securitization in future in to XXXX, improved which million the deals. we'll $XX the far Near AOMT and XXXX-X, in we We we the end in markets strong was year, thus of we securitization that quarter a and observed in

book XX.X% value share as book of September XXXX. XX, $XX.XX which per September XX, per December of of as X.X% as to $XX.XX $X.XX increased $XX.XX per values share from Economic from GAAP all share of XX, December XX, fair obligations, XXXX, up value, was up XXXX, XXXX. as securitization nonrecourse

as of impact portfolio of book recent to we unrealized GAAP end movements, the approximately our February, rate X.X% value of estimate the valuations and dividend book and is value payment. gave some and Given economic that X% impact that February QX's approximately spread is to of gains our inclusive the back

loan average LTV of this purchases weighted million weighted average of weighted of and year a average FICO a XX% coupon $XXX XXX. X.XX% carried and Our of

With subsequent points anticipated the increase coupon end basis end an basis Including X.X% the securitization of as these is and portfolio weighted to our of loans, since XX the XXX of residential of the X.XX%, nearly representing average of the since loan our approximately loan the average of quarter new portfolio of of residential whole year coupon the weighted was points the end third February. year-end, loan XXXX. purchases as whole and end activity of

of discussed, we'll plans the continuing our process continue of will loan course management purchases be to best as purchasing diligent our organic believe action approach forward credit in that year, continuing power look for be philosophy, of securitization to methodical to maintaining with We selection. the this maintain the to and execute Sreeni portfolio. our a programmatic our portfolio growth we earnings and discipline Consistent to

not an in of we quarter, will interest for $X.X which the XXXX embedded held income. yet approximately earnings purchases we that been estimate Additionally, represent have have full a million growth of made

$X.XX the as March company share declared Finally, yield per on $X.XX annualized dividend a dividend, per This closing an on previously XXXX. implies the price paid February XX% XXXX. X, of communicated, a or as was of rate XX, of which over share common

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

Thank delivered challenges despite AOMR the a strategic marketplace. seen execution the year in you, Brandon. XXXX for across ongoing we of positive increasingly was which results

just gotten proud certainly have in position believe are and started. the we we we have we While that growth we the achieved, are of

with our net grow continue margin of to Our unsecuritized interest the and increased loans. coupons will values

and forward to As our business attractive, our delivering focus on always, look shareholders. our We grow to to and stable returns managing we'll maintain expenses continuing liquidity.

for work I as build do entire long-term to we contributions hard the and seek shareholders. the team Oak value over like their for Angel to our last thank year

we'll open the that, Operator? your questions. up With call to

you. Thank

from comes [Operator time, the question session. now assemble to roster. Doug We monetarily with question-and-answer At UBS. begin Harter today's pause Instructions] And this will will we our first

hoping was by little purchases give clarity I you if new you mean could help what programmatic size you about of more could a loans, that.

Yes.

we it's on think the in I of kind that have XXXX. doing been pace something

$XXX or minus it, so So plus call million XX. or

And of range want then how kind for of thinking the are you to where recourse you leverage, kind operate? about

a had has we excluding the little at the bonds whole Xx look tick be as to purchasing that. expect treasuries that and term, would don't I you any on a loans. long over than going that bit about -- go ticked recourse think debt us been end on short-term that's Xx. any buy to our may of at we if up about But little really quarter, retained ratio, bit to But we've to us reco equity up loan if reco, higher

Chris And our with Oppenheimer. Kotowski comes from today question next

that is cleaned at rising Yes, way it see at a much for looking and X quantify kind the us of there nicely. gauge And But average the mortgages I'm presentation been good it's you Or less? Page have and out or has left? I'm the coupon. below just more market of wondering, to still how of looking to weighted inventory

expect we're Yes, loans as our -- again, kind far the $XXX those million we've those at of left, $XXX we clear of to short got recently. loans, as total here which of the out order looking age million, just over

billion down $X.X to from down year just that over about moved a today. $XXX million ago we've So

Okay.

mean, then, out that could and I conceivably, cleared -- the next So in securitization? be

next but the one not after Probably the be that, securitization, they'll completely gone.

Matt Howlett Securities. from question next comes today Riley B. with Our

normalization, quarter the This Schafer how underwriting talk to how changing during for versus you are fourth about you Matt. in now curious, you thinking portfolio, as of I'm that's of on in is date? said credit third could quarter the the the kind context Michael potentially and

in that last credit wouldn't Yes. from much say we've through fourth up Sreeni Clearly, we It's we here. I generally. have quarter years, as gone in to credit couple that the the went up the gone of quarter. third

in the we have think single-family up rental that is which your But just underwriting. you that I it, statement loans. bank the that fully bank And statement of focus in affect kind -- I on on, also what focused of underwritten boxes loans values we loans can do versus credit, to is think be thinking -- how about more and rental

So very underwrite we cautious homes. we've been on single-family how rental

in have to credit appreciation that protect yourself just other you against home discontinued could gone up We have also and go because the direction. price

that's a last for consistent So the theme been years. probably for us X

different say fourth third on quarter, wouldn't definitely I gone our to So it but from quarter that much has mind. that's

at follow-up next from Harter question Doug a our is And UBS.

purchases what new types continued of the to versus your spreads You improve quarter. into securitization you seeing about just execution? Can loans you're mentioned in prepared markets on talk of first securitization that remarks have

Yes.

purchases are and actually between new X% good. the right securitization loans are So X.X% the markets And pretty of now.

we've beginning securitization XXX point points and maybe but little the tighter and to year, AAAs I'm been the spreads, saying trending at the think more, just XXX. are a from I basis XX XX from new spread between of coupons this

substantially year. late saw tighter So where we last than

the question-and-answer ladies remarks. I'd back closing conference And to to like the any turn session. concludes this team gentlemen, the for over and management

time Thank you look interest Mortgage Angel REIT. forward for quarter. We to your with and connecting you, again everyone, Oak next in

if free out have us. please In reach to Have you questions, the meantime, any great feel day. a to

thank today's today's for you Thank conference attending presentation. you. This We concludes call. all

a now wonderful disconnect and day. lines, have may your You