Non-QM lender posts net loss and portfolio contraction
Angel Oak Mortgage REIT reported a loss of $273,000 in the second quarter of 2024, reversing a profit of $12.9 million from the first quarter.
The REIT’s portfolio contracted during the quarter, with whole loan warehouse debt decreasing to $158.9 million by the end of the second quarter, down from $368.0 million at the end of the first quarter.
While net interest income increased to $9.5 million, up from $8.5 million in Q1, this was insufficient to offset losses in other areas of the business. Angel Oak attributed its losses primarily to “mortgage loans, derivative contracts, residential mortgage-backed securities and commercial MBS.”
AOMR’s focus on non-qualified mortgages (non-QMs) has exposed it to market volatility. As interest rates have fluctuated, the value of the REIT’s mortgage-backed securities has experienced fluctuations, impacting its bottom line.
In July, the company issued $50 million in senior unsecured notes, planning to use the proceeds to acquire newly originated non-QM loans.
AOMR president and CEO Sreeni Prabhu said they expect the $50 million proceeds to “catalyze the next phase of growth for AOMR.”
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“With this additional capital, we intend to deliver further net interest income and earnings accretion, enabled by the purchase of additional newly-originated loans and the subsequent execution of profitable securitizations while maintaining our vigilant and methodical capital allocation and liquidity management strategy.”
According to the company’s financial report, GAAP book value per share decreased to $10.23 as of June 30, down from $10.55 at the end of March. Economic book value per share also fell to $13.16 from $13.78 over the same period.
Angel Oak Mortgage REIT declared a dividend of $0.32 per share of common stock, to be paid on August 30, to stockholders of record as of August 22.
The company remains active in securitizations, having executed the AOMT 2024-4 securitization as the sole contributor of loans with a scheduled unpaid principal balance of approximately $299.8 million and a 7.4% weighted average coupon. This move reduced the company’s whole loan warehouse debt by $235.9 million and lowered financing costs by about 100 basis points.
As of June 30, Angel Oak Mortgage REIT had access to three loan financing lines permitting borrowings of up to $1.1 billion, with approximately $101 million drawn, leaving $950 million in capacity for new loan purchases.
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