Angel Oak Mortgage REIT, Inc. Reports Fourth Quarter and Full Year 2023 Financial Results
- Strong financial performance with a GAAP net income of $28.6 million in Q4 2023.
- Declared dividend of $0.32 per share of common stock.
- Total GAAP net income of $33.7 million for the year ended December 31, 2023.
- Company purchased over $220 million of loans in 2023 and securitized over $660 million.
- Reduced operating costs by approximately 40% versus 2022.
- GAAP book value per share grew by 10.4% in 2023.
- CEO Sreeni Prabhu emphasized the company's growth in net interest margin and operating income.
- None.
Insights
An assessment of Angel Oak Mortgage REIT's financial results reveals a mixed picture, with GAAP net income showing profitability, yet Distributable Earnings reflecting a loss. The discrepancy between these two figures is noteworthy, as it suggests that while the company is profitable on a GAAP basis, adjustments for non-cash items and certain nonrecurring events paint a different picture of its cash-generating ability. This divergence is particularly relevant for investors focused on cash flow as a measure of performance.
The reported increase in the weighted average coupon rate of the residential whole loans portfolio from 4.80% to 6.78% signals a strategic shift towards higher-yielding assets. This could potentially enhance net interest income, assuming that the cost of funds does not rise disproportionately. However, the sustainability of these yields in a fluctuating interest rate environment remains an area for scrutiny.
Furthermore, the conversion of a static pool financing to a revolving facility with reduced borrowing costs is a prudent capital management move, potentially lowering interest expenses and enhancing financial flexibility. However, the reduced borrowing capacity may limit the company's ability to scale rapidly should attractive investment opportunities arise.
The real estate finance sector, particularly non-QM loans, is sensitive to macroeconomic conditions such as interest rates and housing market trends. Angel Oak Mortgage REIT's activities, including securitization of over $660 million in loans and operational cost reductions, indicate a strategic response to such conditions. The company's ability to reduce operating costs by approximately 40% compared to the previous year demonstrates a significant improvement in operational efficiency, which could be a competitive advantage in the industry.
Investors may also find the company's balance sheet growth and the management's confidence in the face of economic volatility to be positive indicators. However, the emphasis on the strength of the operating model and the ecosystem needs to be balanced against the broader market risks, including potential changes in borrower creditworthiness and shifts in investor appetite for mortgage-backed securities.
The company's focus on acquiring higher coupon non-QM loans amidst an environment of rising interest rates is a strategic move likely aimed at capitalizing on wider spreads. However, the risk profile of non-QM loans typically differs from that of standard qualified mortgages, which may affect the company's risk-adjusted returns. Investors should consider the potential for increased defaults and prepayment speeds, which can be influenced by the broader economic climate, employment levels and housing market conditions.
The growth in GAAP and economic book value per share suggests a positive trajectory in terms of asset valuation, yet the reliance on non-GAAP metrics such as Distributable Earnings and Economic book value requires careful consideration. These metrics offer alternative views of performance and financial health but may not be directly comparable to GAAP measures used by other entities. Stakeholders should assess the implications of these adjusted figures in the context of their investment criteria and risk tolerance.
Fourth Quarter Highlights
-
Q4 2023 GAAP net income of
$28.6 million $1.15 -
Q4 2023 Distributable Earnings of
$(6.5) million $(0.26) -
Declared dividend of
$0.32
Full Year 2023 Highlights
-
GAAP book value of
$10.26 -
Economic book value of
$13.54 -
Total GAAP net income of
$33.7 million $1.35 -
Distributable Earnings of
$(28.1) million $(1.14)
Throughout 2023, the Company purchased over
Sreeni Prabhu, Chief Executive Officer and President of Angel Oak Mortgage REIT, said “In the past year, the Company demonstrated the strength of its operating model, its management team, and the foundation of the Angel Oak ecosystem. Against continued volatility in the macroeconomic environment and across our key asset classes, we gained positive momentum, returning to growth after successfully repositioning our portfolio while improving liquidity, strengthening our balance sheet, and lowering operating expenses. As we’ve stated before, AOMR is a business – not a trade. We believe we have proven this with our results amid this historically challenging backdrop.”
Prabhu continued, “Through the second half of the year, we have steadily expanded net interest margin while maintaining operating expense reductions and growing the balance sheet. To that end, as of December 31, 2023, the weighted average coupon rate of our residential whole loans portfolio was
Fourth Quarter Portfolio and Investment Activity
-
As of December 31, 2023, the weighted average coupon of our residential whole loans portfolio increased to
6.78% , nearly 100 basis points higher than at the end of the third quarter 2023. -
Prior to year-end, in December 2023, the Company participated in AOMT 2023-7 along other Angel Oak entities. The Company contributed loans with a scheduled unpaid principal balance of
$42.0 million 5.30% weighted average coupon.
Full Year Portfolio and Investment Activity
-
Purchased approximately
$222.7 million 8.37% in 2023. -
In 2023, the Company participated in four residential non-QM securitizations, contributing
$662 million -
Portfolio totaled
$2.1 billion -
Improved weighted average coupon of residential whole loans portfolio from
4.80% as of the end December 31, 2022 to6.78% as of December 31, 2023.
Capital Markets Activity
-
As of December 31, 2023, the Company was party to three financing lines which permit borrowings in an aggregate amount of up to
$1.1 billion -
Our total financing capacity as of December 31, 2023 stands at
$1.1 billion $291 million $760 million -
In November 2023 the Company converted its
$286 million $200 million
Balance Sheet
-
The Company pragmatically grew the balance sheet amid an uncertain market while protecting liquidity and managing risk, increasing GAAP book value per share by
10.4% and economic book value per share by2.6% versus the prior quarter. -
Held residential mortgage whole loans with fair value of
$380.0 million -
Recourse debt to equity ratio was 1.9x as of December 31, 2023.
- Recourse debt to equity ratio was 1.3x as of January 16, 2024, which reflects the maturity of short-term US Treasury securities and their corresponding repurchase agreements.
Dividend
On February 7, 2024, the Company declared a dividend of
Conference Call and Webcast Information
The Company will host a live conference call and webcast today, March 5, 2024 at 8:30 a.m. Eastern time. To listen to the live webcast, go to the Investors section of the Company’s website at www.angeloakreit.com at least 15 minutes prior to the scheduled start time in order to register and install any necessary audio software.
To Participate in the Telephone Conference Call:
Dial in at least 15 minutes prior to start time.
Domestic: 1-844-826-3033
International: 1-412-317-5185
Conference Call Playback:
Domestic: 1-844-512-2921
International: 1-412-317-6671
Passcode: 10185779
The playback can be accessed through March 19, 2024.
Non-GAAP Metrics
Distributable Earnings is a non‑GAAP measure and is defined as net income (loss) allocable to common stockholders as calculated in accordance with generally accepted accounting principles in
Distributable Earnings Return on Average Equity is a non-GAAP measure and is defined as annual or annualized Distributable Earnings divided by average total stockholders’ equity. We believe that the presentation of Distributable Earnings Return on Average Equity provides investors with a useful measure to facilitate comparisons of financial performance among our REIT peers, but has important limitations. Additionally, we believe Distributable Earnings Return on Average Equity provides investors with additional detail on the Distributable Earnings generated by our invested equity capital. We believe Distributable Earnings Return on Average Equity as described above helps evaluate our financial performance without the impact of certain transactions but is of limited usefulness as an analytical tool. Therefore, Distributable Earnings Return on Average Equity should not be viewed in isolation and is not a substitute for net income computed in accordance with GAAP. Our methodology for calculating Distributable Earnings Return on Average Equity may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and as a result, our Distributable Earnings Return on Average Equity may not be comparable to similar measures presented by other REITs.
Economic book value is a non-GAAP financial measure of our financial position. To calculate our economic book value, the portions of our non-recourse financing obligation held at amortized cost are adjusted to fair value. These adjustments are also reflected in our end of period total stockholders’ equity. Management considers economic book value to provide investors with a useful supplemental measure to evaluate our financial position as it reflects the impact of fair value changes for our legally held retained bonds, irrespective of the accounting model applied for GAAP reporting purposes. Economic book value does not represent and should not be considered as a substitute for book value per share of common stock or stockholders’ equity, as determined in accordance with GAAP, and our calculation of this measure may not be comparable to similarly titled measures reported by other companies.
Forward-Looking Statements
This press release contains certain forward-looking statements that are subject to various risks and uncertainties, including, without limitation, statements relating to the performance of the Company’s investments. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,” “believe,” “could,” “project,” “predict,” “continue,” or by the negative of these words and phrases or other similar words or expressions. Forward-looking statements are based on certain assumptions, discuss future expectations, describe existing or future plans and strategies, contain projections of results of operations, liquidity and/or financial condition, or state other forward-looking information. The Company’s ability to predict future events or conditions or their impact or the actual effect of existing or future plans or strategies is inherently uncertain. Although the Company believes that such forward-looking statements are based on reasonable assumptions, actual results and performance in the future could differ materially from those set forth in or implied by such forward-looking statements. You are cautioned not to place undue reliance on these forward‐looking statements, which reflect the Company’s views only as of the date of this press release. Additional information concerning factors that could cause actual results and performance to differ materially from these forward-looking statements is contained from time to time in the Company’s filings with the Securities and Exchange Commission. Except as required by applicable law, neither the Company nor any other person assumes responsibility for the accuracy and completeness of the forward‐looking statements. The Company does not undertake any obligation to update any forward-looking statements contained in this press release as a result of new information, future events or otherwise.
About Angel Oak Mortgage REIT, Inc.
Angel Oak Mortgage REIT, Inc. is a real estate finance company focused on acquiring and investing in first lien non-QM loans and other mortgage-related assets in the
Angel Oak Mortgage REIT, Inc. |
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Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) |
|||||||||||||||
(Unaudited) |
|||||||||||||||
(in thousands, except for share and per share data) |
|||||||||||||||
|
Three Months Ended |
|
Twelve Months Ended |
||||||||||||
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
||||||||
INTEREST INCOME, NET |
|
|
|
|
|
|
|
||||||||
Interest income |
$ |
24,550 |
|
|
$ |
28,585 |
|
|
$ |
95,953 |
|
|
$ |
115,544 |
|
Interest expense |
|
16,310 |
|
|
|
21,175 |
|
|
|
67,052 |
|
|
|
63,024 |
|
NET INTEREST INCOME |
|
8,240 |
|
|
|
7,410 |
|
|
|
28,901 |
|
|
|
52,520 |
|
|
|
|
|
|
|
|
|
||||||||
REALIZED AND UNREALIZED GAINS (LOSSES), NET |
|
|
|
|
|
|
|
||||||||
Net realized gain (loss) on mortgage loans, derivative contracts, RMBS, and CMBS |
|
(10,470 |
) |
|
|
(65,141 |
) |
|
|
(37,526 |
) |
|
|
(8,717 |
) |
Net unrealized gain (loss) on mortgage loans, debt at fair value option, and derivative contracts |
|
35,621 |
|
|
|
53,268 |
|
|
|
63,489 |
|
|
|
(201,753 |
) |
TOTAL REALIZED AND UNREALIZED GAINS (LOSSES), NET |
|
25,151 |
|
|
|
(11,873 |
) |
|
|
25,963 |
|
|
|
(210,470 |
) |
|
|
|
|
|
|
|
|
||||||||
EXPENSES |
|
|
|
|
|
|
|
||||||||
Operating expenses |
|
2,293 |
|
|
|
1,790 |
|
|
|
9,889 |
|
|
|
16,651 |
|
Stock compensation |
|
494 |
|
|
|
574 |
|
|
|
1,689 |
|
|
|
5,753 |
|
Securitization costs |
|
158 |
|
|
|
3 |
|
|
|
2,484 |
|
|
|
3,137 |
|
Management fee incurred with affiliate |
|
1,382 |
|
|
|
1,969 |
|
|
|
5,842 |
|
|
|
7,799 |
|
Total operating expenses |
|
4,327 |
|
|
|
4,336 |
|
|
|
19,904 |
|
|
|
33,340 |
|
|
|
|
|
|
|
|
|
||||||||
INCOME (LOSS) BEFORE INCOME TAXES |
|
29,064 |
|
|
|
(8,799 |
) |
|
|
34,960 |
|
|
|
(191,290 |
) |
Income tax expense (benefit) |
|
465 |
|
|
|
— |
|
|
|
1,246 |
|
|
|
(3,457 |
) |
NET INCOME (LOSS) |
$ |
28,599 |
|
|
$ |
(8,799 |
) |
|
$ |
33,714 |
|
|
$ |
(187,833 |
) |
Preferred dividends |
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
(14 |
) |
NET INCOME (LOSS) ALLOCABLE TO COMMON STOCKHOLDERS |
$ |
28,599 |
|
|
$ |
(8,801 |
) |
|
$ |
33,714 |
|
|
$ |
(187,847 |
) |
Other comprehensive income (loss) |
|
3,197 |
|
|
|
(12,148 |
) |
|
|
16,152 |
|
|
|
(24,127 |
) |
TOTAL COMPREHENSIVE INCOME (LOSS) |
$ |
31,796 |
|
|
$ |
(20,949 |
) |
|
$ |
49,866 |
|
|
$ |
(211,974 |
) |
|
|
|
|
|
|
|
|
||||||||
Basic earnings (loss) per common share |
$ |
1.15 |
|
|
$ |
(0.36 |
) |
|
$ |
1.36 |
|
|
$ |
(7.65 |
) |
Diluted earnings (loss) per common share |
$ |
1.15 |
|
|
$ |
(0.36 |
) |
|
$ |
1.35 |
|
|
$ |
(7.65 |
) |
|
|
|
|
|
|
|
|
||||||||
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
||||||||
Basic |
|
24,768,921 |
|
|
|
24,586,340 |
|
|
|
24,722,285 |
|
|
|
24,547,916 |
|
Diluted |
|
24,965,271 |
|
|
|
24,586,340 |
|
|
|
24,941,758 |
|
|
|
24,547,916 |
|
|
|||||||
Angel Oak Mortgage REIT, Inc. |
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Condensed Consolidated Balance Sheets |
|||||||
(Unaudited) |
|||||||
(in thousands, except for share and per share data) |
|||||||
|
As of: |
||||||
|
December 31, 2023 |
|
December 31, 2022 |
||||
ASSETS |
|
|
|
||||
Residential mortgage loans - at fair value |
$ |
380,040 |
|
|
$ |
770,982 |
|
Residential mortgage loans in securitization trusts - at fair value |
|
1,221,067 |
|
|
|
1,027,442 |
|
RMBS - at fair value |
|
472,058 |
|
|
|
1,055,338 |
|
|
|
149,927 |
|
|
|
— |
|
Cash and cash equivalents |
|
41,625 |
|
|
|
29,272 |
|
Restricted cash |
|
2,871 |
|
|
|
10,589 |
|
Principal and interest receivable |
|
7,501 |
|
|
|
17,497 |
|
Unrealized appreciation on TBAs and interest rate futures contracts - at fair value |
|
— |
|
|
|
14,756 |
|
Other assets |
|
32,922 |
|
|
|
20,336 |
|
Total assets |
$ |
2,308,011 |
|
|
$ |
2,946,212 |
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
||||
LIABILITIES |
|
|
|
||||
Notes payable |
$ |
290,610 |
|
|
$ |
639,870 |
|
Non-recourse securitization obligations, collateralized by residential mortgage loans in securitization trusts |
|
1,169,154 |
|
|
|
1,003,485 |
|
Securities sold under agreements to repurchase |
|
193,656 |
|
|
|
52,544 |
|
Unrealized depreciation on TBAs and interest rate futures contracts - at fair value |
|
1,334 |
|
|
|
— |
|
Due to broker |
|
391,964 |
|
|
|
1,006,022 |
|
Accrued expenses |
|
985 |
|
|
|
1,288 |
|
Accrued expenses payable to affiliate |
|
748 |
|
|
|
2,006 |
|
Interest payable |
|
820 |
|
|
|
2,551 |
|
Income taxes payable |
|
1,241 |
|
|
|
— |
|
Management fee payable to affiliate |
|
1,393 |
|
|
|
1,967 |
|
Total liabilities |
$ |
2,051,905 |
|
|
$ |
2,709,733 |
|
|
|
|
|
||||
Commitments and contingencies |
|
|
|
||||
|
|
|
|
||||
STOCKHOLDERS’ EQUITY |
|
|
|
||||
Common stock, |
|
249 |
|
|
|
249 |
|
Additional paid-in capital |
|
477,068 |
|
|
|
475,379 |
|
Accumulated other comprehensive income (loss) |
|
(4,975 |
) |
|
|
(21,127 |
) |
Retained (deficit) earnings |
|
(216,236 |
) |
|
|
(218,022 |
) |
Total stockholders’ equity |
$ |
256,106 |
|
|
$ |
236,479 |
|
Total liabilities and stockholders’ equity |
$ |
2,308,011 |
|
|
$ |
2,946,212 |
|
|
|||||||||||||||
Angel Oak Mortgage REIT, Inc. |
|||||||||||||||
Reconciliation of Net Income (Loss) to Distributable Earnings |
|||||||||||||||
and Distributable Earnings Return on Average Equity |
|||||||||||||||
(Unaudited) |
|||||||||||||||
|
Three Months Ended |
|
Twelve Months Ended |
||||||||||||
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
||||||||
|
(in thousands) |
||||||||||||||
Net income (loss) allocable to common stockholders |
$ |
28,599 |
|
|
$ |
(8,801 |
) |
|
$ |
33,714 |
|
|
$ |
(187,847 |
) |
Adjustments: |
|
|
|
|
|
|
|
||||||||
Net unrealized (gains) losses on trading securities |
|
(7,618 |
) |
|
|
— |
|
|
|
(484 |
) |
|
|
— |
|
Net unrealized (gains) losses on derivatives |
|
9,191 |
|
|
|
(11,484 |
) |
|
|
16,985 |
|
|
|
(13,054 |
) |
Net unrealized (gains) losses on residential loans in securitization trusts and non-recourse securitization obligation |
|
(21,674 |
) |
|
|
(11,896 |
) |
|
|
(15,890 |
) |
|
|
67,401 |
|
Net unrealized (gains) losses on residential loans |
|
(15,511 |
) |
|
|
(29,973 |
) |
|
|
(64,009 |
) |
|
|
146,347 |
|
Net unrealized (gains) losses on commercial loans |
|
(8 |
) |
|
|
85 |
|
|
|
(91 |
) |
|
|
844 |
|
Non-cash equity compensation expense |
|
494 |
|
|
|
573 |
|
|
|
1,689 |
|
|
|
5,753 |
|
Distributable Earnings |
$ |
(6,527 |
) |
|
$ |
(61,496 |
) |
|
$ |
(28,086 |
) |
|
$ |
19,444 |
|
|
Three Months Ended |
|
Twelve Months Ended |
||||||||
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
||||
|
($ in thousands) |
||||||||||
Annualized Distributable Earnings |
$ |
(26,108) |
|
$ |
(245,984) |
|
$ |
(28,086) |
|
$ |
19,444 |
Average total stockholders’ equity |
$ |
243,794 |
|
$ |
249,954 |
|
$ |
240,524 |
|
$ |
355,944 |
Distributable Earnings Return on Average Equity |
|
( |
|
|
( |
|
|
(11.68)% |
|
|
|
Angel Oak Mortgage REIT, Inc. |
|||||||||||||||
Reconciliation of Stockholders’ Equity to Stockholders’ Equity Including Economic Book Value Adjustments |
|||||||||||||||
and Economic Book Value per Common Share |
|||||||||||||||
(Unaudited) |
|||||||||||||||
|
December 31,
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
||||||
|
(in thousands, except for share and per share data) |
||||||||||||||
GAAP total stockholders’ equity |
$ |
256,106 |
$ |
231,802 |
$ |
232,676 |
$ |
244,378 |
$ |
236,479 |
|||||
Adjustments: |
|
|
|
|
|
||||||||||
Fair value adjustment for securitized debt held at amortized cost |
|
81,942 |
|
97,592 |
|
95,326 |
|
89,284 |
|
90,348 |
|||||
Stockholders’ equity including economic book value adjustments |
$ |
338,048 |
$ |
329,394 |
$ |
328,002 |
$ |
333,662 |
$ |
326,827 |
|||||
|
|
|
|
|
|
||||||||||
Number of shares of common stock outstanding at period end |
|
24,965,274 |
|
24,955,566 |
|
24,924,886 |
|
24,925,357 |
|
24,925,357 |
|||||
Book value per share of common stock |
$ |
10.26 |
$ |
9.29 |
$ |
9.34 |
$ |
9.80 |
$ |
9.49 |
|||||
Economic book value per share of common stock |
$ |
13.54 |
$ |
13.20 |
$ |
13.16 |
$ |
13.39 |
$ |
13.11 |
|||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20240305782780/en/
Investors:
investorrelations@angeloakreit.com
855-502-3920
IR Agency Contact:
Nick Teves or Joseph Caminiti, Alpha IR Group
312-445-2870
AOMR@alpha-ir.com
Company Contact:
KC Kelleher, Head of Corporate Finance & Investor Relations
404-528-2684
kc.kelleher@angeloakcapital.com
Source: Angel Oak Mortgage REIT, Inc.
FAQ
What was Angel Oak Mortgage REIT's GAAP net income in Q4 2023?
What was the declared dividend per share of common stock?
How much did the company purchase in loans in 2023?
What was the percentage growth in GAAP book value per share in 2023?
Who is the CEO of Angel Oak Mortgage REIT?
