CEO blames red ink on aggressive rate hikes and limited capital market activity
Angel Oak Mortgage, a publicly traded REIT focused on non-QM loans, has released its financial results for the third quarter of 2022.
The company posted an $83.3 million loss ($3.40 per share), with Angel Oak president and chief executive Sreeniwas Prabhu pointing to the Federal Reserve's steep rate hikes and "the continued dislocation of the fixed income market."
Read more: "Non-QM tends to thrive in a counter-cyclical market"
"Third quarter results are demonstrative of the continued dislocation of the fixed income market characterized by historic spread-widening and limited capital market activity coupled with an aggressive Federal Reserve increasing the Fed Funds target rate two times during the quarter," Prabhu said.
"As such, AOMR focused on managing liquidity and protecting its capital structure. Unrealized losses associated with our mark-to-market assets were the key driver of our GAAP net loss and book value decline; however, it is important to note that the credit performance of these assets remains strong, and we believe that they are ultimately expected to pay off at par, offsetting the mark-to-market losses."
During the third quarter, Angel Oak sold $7 million in commercial loans to concentrate on its non-QM strategy. The company then purchased $62.4 million on non-QM residential mortgage loan with a weighted average coupon of 7.1% and securitized $184.7 million in unpaid principal balance.
"In order to preserve additional capital and to right-size our dividend yield at the current book value, we have made the decision to reduce the quarterly dividend to $0.32 per share of common stock," Prabhu said. "Sticking to our core business model, we will remain disciplined while prudently accessing the securitization market to reduce interest rate risk, allowing us to create long-term value for our shareholders."
