Angel Oak Mortgage REIT Inc. reported $8.3 million in net income in the third quarter; however, the distributable earnings stood at a negative $8.6 million or $0.35 per diluted share. Despite the discrepancy between general acceptable accounting practices (GAAP) net income and distributable earnings, the company's GAAP book value was $9.29 per share, with an economic book value of $13.20 per share as of Sept. 30, 2023.
Angel Oak Mortgage REIT also declared a dividend of $0.32 per share, payable at the end of November to shareholders on record by late November.
Sreeni Prabhu, CEO and president, expressed pride in the company's quarterly performance, attributing the success to a growth strategy that included purchasing newly-originated loans, active securitization, and optimized debt facilities. The company's net interest margin grew by 14.8% from the previous quarter, showcasing the effectiveness of this strategy.
"While the market and rate volatility is likely, not completely in the rearview mirror, the current composition of our portfolio has a strong foundation with flexibility to respond as market conditions evolve," Prabhu said. "Credit risk remains on the radar for the industry. However, we feel that credit risk management is one of our key competitive strengths."
Chief Financial Officer Brandon Filson said they had $59.1 million in cash, an increase of $30 million from Q4 2022.
"Our strong cash position in the trailing six months showcases our focus on maintaining healthy liquidity level," Filson said. "This additional liquidity provides us with the dry powder for sustained loan purchases that will grow net interest income, improve cash flows, and support securitization execution."
Angel Oak Mortgage REIT also reported a reduction in operating expenses, excluding securitization costs, by 12.5% from the second quarter, reflecting efficiency gains in its operations. Moving forward, the company plans to continue acquiring high-quality loans and engaging in strategic securitizations to bolster earnings power and maintain strong liquidity.
The portfolio and investment activities for the quarter were good. The weighted average coupon rate of the company's whole loan portfolio saw a significant improvement, reaching 5.83% as of Sept. 30, 2023, and an even higher rate of 6.37% by Nov. 6, 2023.
The company participated in the AOMT 2023-5 securitization in the capital markets, contributing loans with a significant unpaid principal balance. The firm's financing lines allowed for borrowings of up to $859 million, with a substantial portion of this capacity still available for new loan purchases.
The balance sheet remained strong, with target assets totaling $2.1 billion and residential mortgage whole loans valued at $284.4 million.
