Broadmark Realty Capital Inc.

Thank you for standing by. This is the conference operator. Welcome to the Broadmark Realty Capital second quarter 2021 earnings call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Nevin Bhopari, Chief Legal Officer of Broadmark Realty Capital. Please go ahead.

Good afternoon. Thank you for joining us today for Broadmark Realty Capital's second quarter 2021 earnings conference call. In addition to the press release issued this afternoon, we have filed a supplemental package with additional detail on our results, which is available in the investor section on our website. at www.broadmark.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 filing. This afternoon's conference call is hosted by Broadmark's Chief Executive Officer, Jeff Pyatt, and Chief Financial Officer, David Schneider. Management will make some prepared comments, after which we will open up the call to your questions. Now, I'll turn the call over to Jeff.

Thank you, Nevin, and welcome to our second quarter earnings call. This afternoon, I'll begin with a discussion of our quarterly performance and market overview. And then I'll turn the call over to David to provide additional detail on our financial results and loan portfolio. We will then open up the call for your questions. In the second quarter, we generated $212 million of new originations and amendments. This is our largest quarterly origination volume since going public in 2019 and demonstrates the power of our platform and the strength of housing and construction fundamentals in our lending markets. We have expanded our geographic footprint and now operate in 16 states plus Washington, DC. As of June 30th, our portfolio consisted of $1.3 billion of loans secured by high quality real estate with a weighted average loan to value at origination, 59.7%. We are diversified across property types and geographies with a bias towards single family and multifamily housing construction. and states with high population growth. Our typical borrower is a small to mid-sized local market expert who benefits from Broadmark's reliability and speed of execution. We in turn benefit from our borrower's expertise as well as our requirement that they retain a significant equity stake in their projects, which incents them to perform. At quarter end, the average loan size in our portfolio was $6.7 million, with an average term outstanding of 18 months. The short-term and fixed-rate nature of our loans means that we have limited exposure to interest rate fluctuations. It also means that our loan portfolio turns over relatively frequently, providing us with a steady stream of payoffs to fund new projects, as well as allowing us to be nimble and pivot quickly as we allocate capital across our markets. As our portfolio has grown, we have been able to make larger loans while keeping our percentage exposure to individual loans very low. Underwriting larger loans has the benefit of being more efficient from an expense perspective, as well as opening up an additional potential pool of borrowers and projects, while maintaining our underwriting discipline. Having observed the pricing environment and competitive pressures in the market, we have recently made adjustments that should enable us to continue winning a high volume of business without compromising our risk profile. Leveraging our team's expertise, we have implemented a dynamic pricing model that allows us to respond to the level of risk on a potential project more effectively. Under our new pricing model and amid a competitive environment, we do expect that the weighted average all-in yield on our portfolio will be reduced over time from its current level of 16%, which decreased from 16.6% as of March 31, 2020. However, by increasing our loan origination volume but still utilizing our disciplined underwriting approach, we expect to grow the business accretively but at a wider range of risk-adjusted yields. We demonstrated this in the second quarter as this new approach, leveraging our dynamic pricing model, allowed us to further enhance our pool of borrowers with better credit, better collateral. Amid the uncertainty in today's world and new entrants into the construction lending space, I would like to remind borrowers that there is no more stable source of capital than Broadmark. With regard to the macro environment, Demand for new housing continues to far outstrip supply. This is both an immediate opportunity and a long-term one. Single-family housing starts have increased nearly every year since 2010, and yet still remain below levels seen in the 1990s. With a current housing deficit of 3.8 million units, according to a recent Freddie Mac report, it seems clear that we're still in the very early innings of the current housing cycle, with an enormous amount of growth still to come. With low mortgage rates, strong household balance sheets, and a fundamental shift in working arrangements, Americans are free to move, to upsize, or to relocate to the high-growth states where we operate. All of these demographic trends continue to drive new construction, which flows through as demand for our loans. In addition, We operate within this large and highly fragmented lending market where the big banks are not able to compete and where small, typically unsophisticated lenders lack the scale and expertise that Broadmark has built over the past 11 years. Because of our size, we only need to capture a small fraction of that market in order to achieve significant growth. In our conversations with borrowers, we are encouraged by signs of improvement in the cost of building materials. Lumber prices have started to moderate and builders have generally been able to mitigate some of the major supply chain issues to date. That said, the nature of the projects we fund, high costs, supply disruptions, and rising costs of labor can translate into delays requiring us to modify our loans or place them into maturity default. We continue to monitor these conditions and take all the inputs into account during our underwriting process. Looking ahead, we remain excited about our opportunity set and our prospects for growth at Broadmark. With our deep borrower relationships, local market knowledge, decades of combined experience, and the differentiated underwriting process that go into Broadmark's platform, we have created a formidable competitive advantage. Furthermore, we believe we provide the best exposure to the attractive housing and construction markets in high-growth states, with our short-duration loans and low LTVs that provide superior risk protection versus traditional home builders and landlords. As always, we remind you that we are internally managed and fully aligned with our fellow shareholders' interests. With that, I'll turn it over to David to review the financials.