Angel Oak Mortgage REIT, Inc.

Greetings. Welcome to Angel Oak Mortgage REIT third quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Randy Chrisman, Chief Marketing Officer. Thank you. You may begin.

Good afternoon. Good afternoon. Thank you for joining us today for Angel Oak Mortgage REIT's third quarter 2021 earnings conference call. This afternoon, we filed our press release detailing our third quarter results, which is available in the investor section on our website at www.angelokereit.com. As a reminder, remarks made on today's conference call may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. We do not undertake any obligation to update our forward-looking statements in light of new information or future events. For a more detailed discussion of the factors that may affect the company's results, please refer to our earnings release for this quarter and to our most recent SEC filings. During this call, we will also be discussing certain non-GAAP financial measures. More information about these non-GAAP financial measures and reconciliations to the most directly comparable GAAP financial measures are contained in our earnings release and SEC filings. This afternoon's conference call is hosted by Angel Oak Mortgage REIT's Chief Executive Officer, Robert Williams, and Chief Financial Officer, Brandon Filson. Management will make some prepared comments after which we will open the call to your questions. I will turn the call over to Robert.

Thank you, Randy, and thank you everyone for joining us today. I'll begin with an overview of our performance and third quarter investment activity, and then I'll turn it over to Brandon to discuss our financial results. After that, we'll open up the call to questions. We continue to see terrific opportunities in the non-QM market, supported by strong, sustained housing fundamentals. While interest rates have risen somewhat, and refinance volumes have pulled back, we're still seeing very robust origination volumes through our proprietary origination channels. Not only are originations strong, but the credit quality remains excellent. As a result, we continue to have very positive portfolio performance, and our securitization strategy continues to provide attractive long-term funding. Beginning with our investment activity, in the third quarter, we purchased $543 million of mortgages and grew our whole loan portfolio to $1 billion as of quarter end. As a reminder, we primarily source our loans through our affiliated mortgage companies. Our affiliates have vast and experienced mortgage retail and wholesale origination networks, which allow us to tailor our targeted asset characteristics as the market evolves, managing our exposure or adjusting to emerging risk as needed. Angel Oak Mortgage Lending's national platform, which has over $10 billion in total non- QM origination allows us to serve customers across America, and as a result, our diversification has typically been superior to other originators in the market. The demand for housing continues to be strong, leading to solid origination volumes. Home price appreciation remains very strong across markets, and forbearance rates continue to decline. On top of that, consumer credit remains very strong, with continuing positive employment trends underlying the credit quality of our portfolio. Furthermore, As the Fed commences to tapering the agency MBS purchases, our target non-agency assets are well positioned to outperform other mortgage-related assets. Beyond these positive entry-wide origination fundamentals, the main reason we choose to focus on non-QM loans is that there is a high barrier of entry. To serve our customer base requires a specialized skill set, which Angel Oak is uniquely suited. We have invested substantial time and capital over many years to develop systems of underwriting and origination, and all loans originated by the Angel Oak franchise are underwritten by the Angel Oak credit team. This allows us to identify and adjust borrow characteristics in order to tailor our portfolio to meet the desired asset profile. Our objective is to minimize interest rate and liquidity risk while driving superior turns, properly underwriting, and properly pricing credit risk. Our business to a large extent is collateralized lending supported by qualified borrowers and quality assets. Our track record prior to becoming a public company serves to illustrate this. During the height of the market and economic disruptions resulting from COVID, the delinquency of our portfolio never rose above 16% and continues to improve to our historical average of 2% to 4%. This performance speaks to our strong underwriting criteria, which includes loans, with mid-70 LTVs, low debt to income, and mid-700 FICO scores. With the level of home price appreciation that has occurred over the last year, our borrowers generally have significantly more equity in their home now, making this very attractive collateralized lending. In addition to our extensive history in underwriting and aggregating non-QM loans, Angel Oak has also completed 27 securitizations. In August, we completed our first non-QM securitization since going public, with a total value of $317 million. Brandon will go into further detail on this securitization and our securitization process, but I want to emphasize that this is a very attractive financing which locks in long-term funding for our company. In addition to loan portfolio growth, another key drive of earnings will be our ability to continue lowering our cost of capital. Last quarter, we expanded our financing lines. adding $450 million of capacity to bring our total to $1.25 billion. Our ability to achieve advantageous financing terms is supported in part by our strong balance sheet. As stated, because non-QM loans carry a meaningful spread to conventional mortgage rates, we can achieve superior returns while using lower leverage than many of our peers. The result of all of this is that we believe we can achieve meaningful portfolio growth over time while continuing to pay attractive dividends. Our dividend yield of 7.8% as of November 5th represents a highly compelling value in today's low interest rate environment, especially we've considered the credit quality and risk protections we have in place. Before I turn it over to Brandon, I'd like to summarize our opportunity with the following points. First, this is a business, not a trade. This is an investment in an operating business that has been built over 11 years and gives shareholders access to scarce proprietary assets. with attractive returns to support a very attractive dividend. Second, we have unparalleled access to this market through Angel Oak Mortgage Lending, which has been the single largest non-bank originator of non-QM loans. We have more than 750 employees in our credit and lending organization, which serves as a reminder that there is a significant barrier of entry to building this credit and origination organization. Third, we have a programmatic access to capital markets through Angel Oak capital securitization platform with a strong investor following and a low cost of funding. These resources are within Angelo Capital, and this functional area has been built over a seven-year period. So to summarize, we believe we have a very unique company that has been built over an 11-year period, and AOMR provides investors access to the best-in-class business model. With that, I'm pleased to turn it over to Brandon.