Angel Oak Mortgage REIT, Inc. (NASDAQ:AOMR) is a real estate finance company focused on acquiring and investing in first lien non-qualified residential mortgage (non-QM) loans and other mortgage-related assets in the U.S. mortgage market. The company has established itself as a leader in the non-QM loan space, leveraging its strong relationship with its affiliated mortgage origination platform, Angel Oak Mortgage Lending, to source high-quality loans that align with its investment strategy.

Financials

In the fiscal year 2023, Angel Oak Mortgage REIT reported annual net income of $33,714,000, annual revenue of $58,427,000, annual operating cash flow of $42,707,000, and annual free cash flow of $42,707,000. The company has maintained a consistent upward trajectory in its financial performance, with the first quarter of 2024 marking the third consecutive quarter of increased net interest income.

During the first quarter of 2024, the company reported net interest income of $8.6 million, a 26% improvement over the same period in 2023. This growth was driven by the company's continued purchases of high-quality, current market coupon non-QM loans and its effective securitization strategy. The company's GAAP net income for the quarter was $12.9 million, or $0.51 per fully diluted common share, while distributable earnings were $2.8 million, or $0.11 per share.

Liquidity

The company's balance sheet remains strong, with $39.4 million in cash as of March 31, 2024. The company's recourse debt-to-equity ratio was approximately 1.8 times at the end of the quarter, which has since decreased to 0.5 times following the completion of the AOMT 2024-4 securitization. This securitization, which was the company's first stand-alone transaction of the year, removed approximately $236 million of warehouse debt and allowed the company to save approximately 100 basis points on the financing rate of the loans contained within the deal.

The company's GAAP book value per share increased 2.8% to $10.55 as of March 31, 2024, while its economic book value per share, which includes the fair value adjustment for the non-recourse securitization obligation, grew to $13.78, a 1.8% increase over the previous quarter.

Investment Portfolio

Angel Oak Mortgage REIT's investment portfolio as of March 31, 2024, consisted of $1.6 billion in residential mortgage loans, $445 million in RMBS, and $149 million in U.S. Treasury securities. The company's residential whole loan portfolio had a weighted average coupon of 7.11% as of the end of the quarter, representing an increase of 33 basis points since the end of the fourth quarter of 2023.

Credit Performance

The company's credit performance remains strong, with the weighted average 90-plus day delinquency rate across its portfolio of whole loans, securitized loans, and RMBS at 1.8% as of the end of the first quarter of 2024, down from 2.2% at the end of the fourth quarter of 2023. The company attributes this strong credit performance to its relationship with the Angel Oak ecosystem's affiliated mortgage originator, which provides the company with the ability to adjust its credit offerings based on its specific desired characteristics.

Outlook

Looking ahead, the company remains optimistic about its ability to continue its plans for programmatic loan purchases and maintain its disciplined credit selection for the remainder of 2024. The company has indicated that it may consider accessing the capital markets to raise additional debt capital, with the goal of being accretive to its common shareholders.

Geographic Diversification

In terms of geographic diversification, the company's residential mortgage loan portfolio and RMBS holdings are well-diversified across the United States, with no single state representing more than 4% of the underlying collateral. The company's RMBS portfolio is primarily composed of non-agency RMBS issued through the company's AOMT securitization platform, as well as Freddie Mac and Fannie Mae whole pool agency RMBS.

Conclusion

Overall, Angel Oak Mortgage REIT's strong financial performance, effective securitization strategy, and disciplined credit risk management have positioned the company for continued success in the non-QM loan market. The company's relationship with its affiliated mortgage origination platform and its ability to adjust its credit offerings based on market conditions provide it with a competitive advantage in the industry. As the company looks to the future, it remains focused on delivering attractive risk-adjusted returns to its shareholders through its strategic investments and prudent capital management.