AOMR Angel Oak Mortgage REIT Inc

Angel Oak Mortgage REIT, Inc. (NYSE: AOMR) (the “Company,” “we,” and “our”), a leading real estate finance company focused on acquiring and investing in first lien non-QM loans and other mortgage-related assets in the U.S. mortgage market, today reported financial results for the third quarter of 2024.

Third Quarter and Year-to-Date Highlights

• Q3 2024 net interest income of $9.0 million, an increase of 22% versus $7.4 million in Q3 2023.
• Net interest income of $27.1 million in the first nine months of 2024, an increase of 31% versus net interest income of $20.7 million in the first nine months of 2023.
• Q3 2024 GAAP net income of $31.2 million, or $1.29 per diluted share of common stock.
• Q3 2024 Distributable Earnings loss of ($3.4) million, or ($0.14) per diluted share of common stock.
• GAAP book value of $11.28 per share of common stock as of September 30, 2024, up 10.3% from $10.23 per share of common stock as of June 30, 2024.
• Economic book value of $14.02 per share of common stock as of September 30, 2024, up 6.5% from $13.16 per share of common stock as of June 30, 2024.
• Issued $50 million of 9.50% senior unsecured notes due 2029 on July 25, 2024. Deployed majority of the net proceeds for general corporate purposes, including the acquisition of non-QM loans; used the remainder of the net proceeds to repurchase approximately 1.7 million shares of our common stock.

Sreeni Prabhu, Chief Executive Officer and President of Angel Oak Mortgage REIT, Inc., said "Our positive third quarter results reflect the strength of our portfolio's position in what has become a more positive macroeconomic landscape in the second half of the year. 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. 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. 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. 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.”

Portfolio and Investment Activity

• Following quarter end in October 2024, the Company executed the AOMT 2024-10 securitization as the sole contributor of loans. The Company contributed loans with a scheduled unpaid principal balance of approximately $316.8 million and a 7.79% weighted average coupon. This securitization reduced the Company’s whole loan warehouse debt by approximately $260 million and reduced weighted average funding costs for the loans underlying the securitization by over 110 basis points, which is incremental to the 50 basis points of warehouse funding cost relief from the Federal Reserve Bank’s September rate cut.
• During the quarter, we purchased $264.8 million of newly-originated, current market coupon non-QM residential mortgage loans, with a weighted average coupon of 7.74%, weighted average LTV of 70.0% and weighted average credit score of 754.
• As of September 30, 2024, the weighted average coupon of our residential whole loans portfolio increased to 7.73%, relatively flat compared to the second quarter 2024 and 189 basis points higher than at the end of the third quarter of 2023.

Capital Markets Activity

• On July 25, 2024, the Company issued $50 million of senior unsecured notes due 2029 with a coupon of 9.50%. This issuance is expected to be accretive, driving incremental asset expansion and earnings growth. During the third quarter, the Company used the majority of the net proceeds from the offering for general corporate purposes, which included the acquisition of non-QM loans. Additionally, the Company used the net proceeds from the offering to repurchase 1,707,922 shares of the Company's common stock owned by Xylem Finance, LLC, an affiliate of Davidson Kempner Capital Management LP, for an aggregate repurchase price of approximately $20.0 million.
• As of September 30, 2024, the Company was a party to three loan financing lines which permit borrowings in an aggregate amount of up to $1.1 billion, of which approximately $333.0 million is drawn, leaving capacity of approximately $720 million for new loan purchases.

Balance Sheet

• Target assets totaled $2.2 billion as of September 30, 2024.
• The Company held residential mortgage whole loans with fair value of $428.9 million as of September 30, 2024.
• The recourse debt to equity ratio was 1.8x as of September 30, 2024.
  • As of today’s date, our recourse debt to equity ratio is approximately 0.7x. This reflects the impact of the AOMT 2024-10 securitization subsequent to quarter end, as well as the maturity of short-term U.S. Treasuries held at the end of the third quarter.
  • Our recourse debt to equity ratio is expected to increase as current-market coupon loans are purchased, but is expected to remain below 2.5x.

Dividend

On November 6, 2024, the Company declared a dividend of $0.32 per share of common stock, which will be paid on November 27, 2024, to common stockholders of record as of November 19, 2024.

Conference Call and Webcast Information

The Company will host a live conference call and webcast today, November 6, 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

Pass code: 10192449

The playback can be accessed through November 20, 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 the United States of America (“GAAP”), excluding (1) unrealized gains and losses on our aggregate portfolio, (2) impairment losses, (3) extinguishment of debt, (4) non-cash equity compensation expense, (5) the incentive fee earned by Falcons I, LLC, our external manager (our “Manager”), (6) realized gains or losses on swap terminations and (7) certain other nonrecurring gains or losses. We believe that the presentation of Distributable Earnings provides investors with a useful measure to facilitate comparisons of financial performance among our real estate investment trust (“REIT”) peers, but has important limitations. We believe Distributable Earnings 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 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 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 may not be comparable to similar measures presented by other REITs.

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 U.S. mortgage market. The Company’s objective is to generate attractive risk-adjusted returns for its stockholders through cash distributions and capital appreciation across interest rate and credit cycles. The Company is externally managed and advised by an affiliate of Angel Oak Capital Advisors, LLC, which, collectively with its affiliates, is a leading alternative credit manager with market leadership in mortgage credit that includes asset management, lending, and capital markets. Additional information about the Company is available at www.angeloakreit.com

Angel Oak Mortgage REIT, Inc. Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) (in thousands, except for share and per share data)

 

Three Months Ended

 

Nine Months Ended

 

September 30, 2024

 

September 30, 2023

 

September 30, 2024

 

September 30, 2023

INTEREST INCOME, NET

 

 

 

 

 

 

 

Interest income

$

27,444

 

 

$

23,900

 

 

$

78,558

 

 

$

71,403

 

Interest expense

 

18,424

 

 

 

16,490

 

 

 

51,495

 

 

 

50,742

 

NET INTEREST INCOME

$

9,020

 

 

$

7,410

 

 

$

27,063

 

 

$

20,661

 

 

 

 

 

 

 

 

 

REALIZED AND UNREALIZED GAINS (LOSSES), NET

 

 

 

 

 

 

 

Net realized gain (loss) on mortgage loans, derivative contracts, RMBS, and CMBS

$

(6,335

)

 

$

(12,044

)

 

$

(14,527

)

 

$

(27,056

)

Net unrealized gain (loss) on trading securities, mortgage loans, portion of debt at fair value option, and derivative contracts

 

35,172

 

 

 

17,299

 

 

 

48,514

 

 

 

27,868

 

TOTAL REALIZED AND UNREALIZED GAINS (LOSSES), NET

$

28,837

 

 

$

5,255

 

 

$

33,987

 

 

$

812

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

Operating expenses

$

1,287

 

 

$

1,370

 

 

$

4,619

 

 

$

5,788

 

Operating expenses incurred with affiliate

 

472

 

 

 

599

 

 

 

1,444

 

 

 

1,672

 

Due diligence and transaction costs

 

254

 

 

 

115

 

 

 

663

 

 

 

136

 

Stock compensation

 

604

 

 

 

447

 

 

 

1,864

 

 

 

1,195

 

Securitization costs

 

—

 

 

 

416

 

 

 

1,583

 

 

 

2,326

 

Management fee incurred with affiliate

 

1,204

 

 

 

1,445

 

 

 

3,810

 

 

 

4,460

 

Total operating expenses

$

3,821

 

 

$

4,392

 

 

$

13,983

 

 

$

15,577

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE INCOME TAXES

$

34,036

 

 

$

8,273

 

 

$

47,067

 

 

$

5,896

 

Income tax expense

 

2,832

 

 

 

—

 

 

 

3,261

 

 

 

781

 

NET INCOME (LOSS) ALLOCABLE TO COMMON STOCKHOLDERS

$

31,204

 

 

$

8,273

 

 

$

43,806

 

 

$

5,115

 

Other comprehensive income (loss)

 

2,706

 

 

 

(1,607

)

 

 

4,534

 

 

 

12,955

 

TOTAL COMPREHENSIVE INCOME (LOSS)

$

33,910

 

 

$

6,666

 

 

$

48,340

 

 

$

18,070

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share

$

1.31

 

 

$

0.33

 

 

$

1.79

 

 

$

0.20

 

Diluted earnings (loss) per common share

$

1.29

 

 

$

0.33

 

 

$

1.76

 

 

$

0.20

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

Basic

 

23,757,039

 

 

 

24,768,921

 

 

 

24,445,105

 

 

 

24,706,568

 

Diluted

 

24,079,247

 

 

 

24,957,668

 

 

 

24,778,465

 

 

 

24,933,833

 

Angel Oak Mortgage REIT, Inc. Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except for share and per share data)

 

 

As of:

 

September 30, 2024

 

December 31, 2023

ASSETS

 

 

 

Residential mortgage loans - at fair value

$

428,909

 

 

$

380,040

 

Residential mortgage loans in securitization trusts - at fair value

 

1,452,907

 

 

 

1,221,067

 

RMBS - at fair value

 

283,105

 

 

 

472,058

 

U.S. Treasury securities - at fair value

 

49,971

 

 

 

149,927

 

Cash and cash equivalents

 

42,052

 

 

 

41,625

 

Restricted cash

 

2,679

 

 

 

2,871

 

Principal and interest receivable

 

6,630

 

 

 

7,501

 

Unrealized appreciation on TBAs and interest rate futures contracts - at fair value

 

1,651

 

 

 

—

 

Other assets

 

35,962

 

 

 

32,922

 

Total assets

$

2,303,866

 

 

$

2,308,011

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

LIABILITIES

 

 

 

Notes payable

$

333,042

 

 

$

290,610

 

Non-recourse securitization obligation, collateralized by residential mortgage loans in securitization trusts

 

1,353,758

 

 

 

1,169,154

 

Securities sold under agreements to repurchase

 

102,876

 

 

 

193,656

 

Senior unsecured notes

 

47,616

 

 

 

—

 

Unrealized depreciation on TBAs and interest rate futures contracts - at fair value

 

—

 

 

 

1,334

 

Due to broker

 

194,697

 

 

 

391,964

 

Accrued expenses

 

2,000

 

 

 

985

 

Accrued expenses payable to affiliate

 

657

 

 

 

748

 

Interest payable

 

1,312

 

 

 

820

 

Income taxes payable

 

2,785

 

 

 

1,241

 

Management fee payable to affiliate

 

25

 

 

 

1,393

 

Total liabilities

$

2,038,768

 

 

$

2,051,905

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

Common stock, $0.01 par value. As of September 30, 2024: 350,000,000 shares authorized, 23,511,272 shares issued and outstanding. As of December 31, 2023: 350,000,000 shares authorized, 24,965,274 shares issued and outstanding.

$

234

 

 

$

249

 

Additional paid-in capital

 

461,249

 

 

 

477,068

 

Accumulated other comprehensive income (loss)

 

(441

)

 

 

(4,975

)

Retained earnings (deficit)

 

(195,944

)

 

 

(216,236

)

Total stockholders’ equity

$

265,098

 

 

$

256,106

 

Total liabilities and stockholders’ equity

$

2,303,866

 

 

$

2,308,011

 

Angel Oak Mortgage REIT, Inc. Reconciliation of Net Income (Loss) to Distributable Earnings and Distributable Earnings Return on Average Equity (Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30, 2024

 

September 30, 2023

 

September 30, 2024

 

September 30, 2023

 

(in thousands)

 

 

 

 

Net income (loss) allocable to common stockholders

$

31,204

 

 

$

8,273

 

 

$

43,806

 

 

$

5,115

 

Adjustments:

 

 

 

 

 

 

 

Net unrealized (gains) losses on trading securities

 

(984

)

 

 

4,857

 

 

 

829

 

 

 

7,134

 

Net unrealized (gains) losses on derivatives

 

51

 

 

 

(4,563

)

 

 

(2,985

)

 

 

7,794

 

Net unrealized (gains) losses on residential loans in securitization trusts and non-recourse securitization obligation

 

(26,305

)

 

 

(5,319

)

 

 

(28,872

)

 

 

5,784

 

Net unrealized (gains) losses on residential loans

 

(7,935

)

 

 

(12,338

)

 

 

(17,438

)

 

 

(48,497

)

Net unrealized (gains) losses on commercial loans

 

—

 

 

 

64

 

 

 

(49

)

 

 

(83

)

Non-cash equity compensation expense

 

604

 

 

 

447

 

 

 

1,864

 

 

 

1,195

 

Distributable Earnings

$

(3,365

)

 

$

(8,579

)

 

$

(2,845

)

 

$

(21,558

)

 

Three Months Ended

 

Nine Months Ended

 

September 30, 2024

 

September 30, 2023

 

September 30, 2024

 

September 30, 2023

 

($ in thousands)

 

 

 

 

Annualized Distributable Earnings

$

(13,460

)

 

$

(34,315

)

 

$

(3,793

)

 

$

(28,747

)

Average total stockholders’ equity

$

260,452

 

 

$

232,575

 

 

$

260,083

 

 

$

236,629

 

Distributable Earnings Return on Average Equity

 

(5.2

)%

 

 

(14.8

)%

 

 

(1.5

)%

 

 

(12.1

)%

Angel Oak Mortgage REIT, Inc. Reconciliation of Stockholders’ Equity to Stockholders’ Equity Including Economic Book Value Adjustments and Economic Book Value per Share of Common Stock (Unaudited)

 

 

September 30, 2024

June 30, 2024

March 31, 2024

December 31, 2023

September 30, 2023

 

(in thousands, except for share and per share data)

GAAP total stockholders’ equity

$

265,098

$

255,806

$

263,324

$

256,106

$

231,802

Adjustments:

 

 

 

 

 

Fair value adjustment for securitized debt held at amortized cost

 

64,522

 

73,053

 

80,599

 

81,942

 

97,592

Stockholders’ equity including economic book value adjustments

$

329,620

$

328,859

$

343,923

$

338,048

$

329,394

 

 

 

 

 

 

Number of shares of common stock outstanding at period end

 

23,511,272

 

24,998,549

 

24,965,274

 

24,965,274

 

24,955,566

Book value per share of common stock

$

11.28

$

10.23

$

10.55

$

10.26

$

9.29

Economic book value per share of common stock

$

14.02

$

13.16

$

13.78

$

13.54

$

13.20

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241106319474/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