Strategic acquisitions and securitizations strengthen returns and reduce funding costs
Angel Oak Mortgage REIT (AOMR) posted strong third-quarter results for 2024, with returns driven by its investments in non-qualified mortgage (non-QM) loans.
Angel Oak posted a net interest income of $9 million, a 22% rise from $7.4 million in the same period last year. Year-to-date, the company’s net interest income reached $27.1 million, marking a 31% increase compared to 2023.
GAAP net income for the quarter came in at $31.2 million, or $1.29 per diluted share. Angel Oak also reported a GAAP book value of $11.28 per share as of September 30, a 10.3% increase over the previous quarter, and an economic book value of $14.02 per share, up by 6.5%.
Angel Oak’s investments in non-QM loans accelerated in Q3, with $264.8 million in newly originated loans, carrying an average coupon of 7.74%, an LTV of 70%, and a credit score average of 754.
CEO Sreeni Prabhu attributed the gains to a proactive approach, particularly its use of proceeds from a $50 million senior unsecured notes issuance. This influx of funds allowed Angel Oak to strategically expand its portfolio with high-quality, current-market non-QM loans, it was stated.
"Throughout the quarter, we quickly deployed the majority of the net proceeds from our July senior unsecured notes issuance into accretive purchases of newly originated, high-quality non-QM loans,” Prabhu said in a media release. “As of today's date, the earnings from these investments have exceeded the incremental interest expense associated with the notes issuance and are now driving meaningful net interest income expansion, which underscores the efficiency and reliability of AOMR's distinctive operational strategy and approach.”
In October, Angel Oak executed the AOMT 2024-10 securitization, which bundled $316.8 million in non-QM loans with a 7.79% weighted average coupon. This move reduced the company’s warehouse debt by approximately $260 million and lowered funding costs by over 110 basis points, in addition to the 50 basis points in relief from the Federal Reserve’s September rate cut.
“This, in combination with October's securitization and the September rate cut, are expected to drive continued portfolio and earnings growth in the fourth quarter and beyond,” Prabhu added. “We believe a constructive macroeconomic landscape is developing and remain dedicated to capitalizing on emerging strategic opportunities while executing on our repeatable, streamlined, and focused strategy to drive enhanced value for our stakeholders.”
Read next: Non-QM sector thrives as investors seek high-yield alternatives
With a residential mortgage portfolio valued at $428.9 million as of September 30, Angel Oak’s total target assets reached $2.2 billion. The company also adjusted its recourse debt-to-equity ratio, ending the quarter at 1.8x and later reducing it to 0.7x due to recent securitizations and short-term Treasury maturities.
Angel Oak expects this ratio to rise with new loan purchases but plans to keep it below 2.5x to balance growth and debt management.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
