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Angel Oak Mortgage, Inc. Reports Second Quarter 2022 Financial Results

Angel Oak Mortgage, 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 quarter and year to date ended June 30, 2022.

Second Quarter Highlights

  • Q2 2022 GAAP net loss of $52.1 million, or $(2.13) per diluted share of common stock.
  • Q2 2022 distributable earnings of $22.8 million, or $0.90 per diluted share of common stock.
  • Declared dividend of $0.45 per share of common stock for the second quarter of 2022, payable on August 31, 2022, to common stockholders of record as of August 22, 2022.
  • GAAP book value of $14.73 per share as of June 30, 2022, down from $16.80 per share as of March 31, 2022.
  • Economic book value of $16.05 per share as of June 30, 2022, down from $17.61 per share as of March 31, 2022.

Robert Williams, President and Chief Executive Officer of the Company, commented, “We continued to experience a challenging economic environment in the second quarter of 2022. Historic inflationary pressures resulted in continued volatility both in nominal interest rates and in the widening of interest rate spreads, driving unrealized losses on our portfolio of target assets. Responding to inflation, the Federal Reserve recently increased interest rates by 75 basis points twice in a row, which increased market volatility. Despite these challenges, we generated distributable earnings of $0.90 per fully diluted share of common stock, continuing to demonstrate the income-generating power of the portfolio. In the coming quarters, we will, when accretive, judiciously use the securitization market to lock in term financing to reduce spread widening and interest rate risk, enabling us to continue to deliver shareholder value.”

Portfolio and Investment Activity

  • Purchased $257.0 million of non-QM residential mortgage loans in the second quarter 2022.
  • Sold $7.0 million in commercial loans after quarter-end, increasing liquidity for further residential loan purchases.

Capital Markets Activity

During the quarter ended June 30, 2022, we added a new warehouse facility with $340.0 million of additional financing capacity. As of June 30, 2022, the Company was party to seven financing lines which permitted borrowings in an aggregate amount of up to $1.64 billion. Subsequent to quarter-end we increased the capacity with the recently added warehouse facility by $260.0 million for a total of $600.0 million availability on that financing line, bringing a maximum availability on all financing lines to $1.9 billion. We intend to continue financing with warehouse facilities of varied maturities, sizes, and counterparty types to manage our exposure to any individual counterparty.

Subsequent to June 30, 2022, we closed our fourth securitization post-IPO, AOMT 2022-4, a $184.7 million securitization backed by a pool of non-qualified residential mortgage loans. The securitization was rated by both Fitch and KBRA with the senior tranche receiving AAA ratings.

Balance Sheet

  • Target assets totaled $3.2 billion as of June 30, 2022.
  • Held residential mortgage whole loans with fair value of $1.3 billion as of June 30, 2022.
  • Unencumbered target assets totaled approximately $160.0 million.
  • Recourse debt to equity ratio was 3.4x as of June 30, 2022.

Dividend

On August 9, 2022, the Company declared a dividend of $0.45 per share of common stock for the second quarter of 2022. The dividend is payable on August 31, 2022 to common stockholders of record as of August 22, 2022.

Conference Call and Webcast Information

The Company will host a live conference call and webcast today, August 9, 2022 at 5:00 p.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: 1-877-407-9716

International: 1-201-493-6779

Conference Call Playback:

Domestic: 1-844-512-2921

International: 1-412-317-6671

Passcode: 13730432

The playback can be accessed through August 23, 2022.

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 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 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 between our 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 common 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 common share 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 and its financing needs and arrangements. 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” and “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, their impact or the actual effect of existing or future plans or strategies is inherently uncertain, in particular due to the uncertainties created by the COVID-19 pandemic, including the projected impact of the COVID-19 pandemic on the Company’s business, financial results and performance. 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, Inc.

Angel Oak Mortgage, 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 a vertically integrated mortgage origination platform. Additional information about the Company is available at www.angeloakreit.com.

 
 

Angel Oak Mortgage, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

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

 

Three Months Ended

Six Months Ended

 

June 30, 2022

 

June 30, 2021

 

June 30, 2022

 

June 30, 2021

INTEREST INCOME, NET

 

 

 

 

 

 

 

Interest income

$

29,702

 

 

$

12,143

 

 

$

56,811

 

 

$

22,177

 

Interest expense

 

13,271

 

 

 

1,846

 

 

 

23,441

 

 

 

2,678

 

NET INTEREST INCOME

 

16,431

 

 

 

10,297

 

 

 

33,370

 

 

 

19,499

 

   

REALIZED AND UNREALIZED GAINS (LOSSES), NET

 

 

 

 

 

 

 

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

  

 12,718

 

 

 

 (10,224

)

  

 39,133

 

 

  

 (12,512

)

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

 (73,985

)

 

 

4,813

 

 (154,166

)

 

9,330

 

TOTAL REALIZED AND UNREALIZED GAINS (LOSSES), NET

(61,267

)

(5,411

)

(115,033

)

 

 

(3,182

)

   

EXPENSES

 

 

 

 

 

 

 

Operating expenses

 

2,977

 

 

 

609

 

 

 

6,723

 

 

 

1,130

 

Operating expenses incurred with affiliate

 

838

 

 

 

533

 

 

 

1,838

 

 

 

972

 

Due diligence and transaction costs

 

519

 

 

 

177

 

 

 

1,182

 

 

 

242

 

Stock compensation

 

968

 

 

 

90

 

 

 

1,839

 

 

 

90

 

Securitization costs

 

 

 

 

 

 

 

2,019

 

 

 

 

Management fee incurred with affiliate

 

2,006

 

 

 

1,250

 

 

 

3,879

 

 

 

2,169

 

Total operating expenses

 

7,308

 

 

 

2,659

 

 

 

17,480

 

 

 

4,603

 

 

INCOME BEFORE INCOME TAXES

 

 

 

(52,144

 

)

 

 

 

 

2,227

 

 

 

 

 

 

(99,143

 

)

 

 

 

 

11,714

 

 

Income tax benefit

 

 

 

 

 

 

 

(3,457

)

 

 

 

NET INCOME (LOSS)

$

(52,144

)

 

$

2,227

 

 

$

(95,686

)

 

$

11,714

 

Preferred dividends

 

(4

)

 

 

(4

)

 

 

(8

)

 

 

(8

)

NET INCOME (LOSS) ALLOCABLE TO COMMON STOCKHOLDER(S)

 

$

 

(52,148

 

)

 

 

$

 

2,223

 

 

 

 

$

 

(95,694

 

)

 

 

$

 

11,706

 

 

Other comprehensive income (loss)

 

11,235

 

 

 

3,085

 

 

 

(1,752

)

 

 

3,615

 

TOTAL COMPREHENSIVE INCOME (LOSS)

$

(40,913

)

 

$

5,308

 

 

$

(97,446

)

 

$

15,321

 

 

Basic earnings (loss) per common share

 

$

 

(2.13

 

)

 

 

$

 

0.13

 

 

 

 

$

 

(3.90

 

)

 

 

$

 

0.72

 

 

Diluted earnings (loss) per common share

$

(2.13

)

 

$

0.13

 

 

$

(3.90

)

 

$

0.72

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

Basic

 

24,458,015

 

 

 

16,746,606

 

 

 

24,549,977

 

 

 

16,238,153

 

Diluted

24,458,015

16,798,660

24,549,977

 

16,264,323 

 
 

Angel Oak Mortgage, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except for share data)

 

 As of:

June 30, 2022

 

December 31, 2021

ASSETS

 

Residential mortgage loans - at fair value

$

1,279,341

 

$

1,061,912

Residential mortgage loans in securitization trusts - at fair value

 

982,579

 

 

667,365

Commercial mortgage loans - at fair value

 

20,196

 

 

18,664

RMBS - at fair value

 

922,859

 

 

485,634

CMBS - at fair value

 

8,982

 

 

10,756

U.S. Treasury securities - at fair value

 

 

 

249,999

Cash and cash equivalents

 

16,100

 

 

40,801

Restricted cash

 

5,776

 

 

11,508

Principal and interest receivable

 

43,030

 

 

25,984

Deferred tax asset

 

3,457

 

 

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

 

594

 

 

2,428

Other assets

 

1,732

 

 

2,878

Total assets

$

3,284,646

 

$

2,577,929

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES

 

 

 

Notes payable

$

1,102,101

 

$

853,408

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

 949,442

 616,557

Securities sold under agreements to repurchase

 

128,365

 

 

609,251

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

 

8,258

 

 

728

Due to broker

 

720,405

 

 

Accrued expenses

 

2,584

 

 

442

Accrued expenses payable to affiliate

 

1,539

 

 

1,425

Interest payable

 

2,663

 

 

1,283

Income taxes payable

 

 

 

1,600

Management fee payable to affiliate

 

2,005

 

 

1,845

Total liabilities

$

2,917,362

 

$

2,086,539

 

Commitments and contingencies

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

Series A preferred stock, $0.01 par value, 12% cumulative, non-voting, 125 shares issued and outstanding as of June 30, 2022 and December 31, 2021

 

 101

 

 101

Common stock, $0.01 par value. As of June 30, 2022: 350,000,000 shares authorized, 24,925,930 shares issued and outstanding. As of December 31, 2021: 350,000,000 shares authorized, 25,227,328 shares issued and outstanding.

 

 

 

249

 

 

 

 

252

Additional paid-in capital

 

472,356

 

 

476,510

Accumulated other comprehensive income

 

1,248

 

 

3,000

Retained (deficit) earnings

 

(106,670)

 

 

11,527

Total stockholders’ equity

$

367,284

 

$

491,390

Total liabilities and stockholders’ equity

$

3,284,646

 

$

2,577,929 

 
 

Angel Oak Mortgage, Inc.

Reconciliation of Net Income (Loss) to Distributable Earnings

and Distributable Earnings Return on Average Equity

(Unaudited)

 

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

(in thousands)

Net income (loss) allocable to common stockholders

$

(52,148

)

 

$

2,223

 

 

$

(95,694

)

 

$

11,706

 

Adjustments:

 

 

 

 

 

 

 

Net other-than-temporary credit impairment losses

 

 

 

 

 

 

 

 

 

 

 

Net unrealized (gains) losses on derivatives

 

24,692

 

 

 

3,903

 

 

 

9,366

 

 

 

2,294

 

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

10,266

40,476

Net unrealized (gains) losses on residential loans

 

38,538

 

 

 

(4,062

)

 

 

103,125

 

 

 

(6,954

)

Net unrealized (gains) losses on commercial loans

 

489

 

 

 

(123

)

 

 

985

 

 

 

(265

)

Net unrealized (gains) losses on financial instruments at fair value

 

 

 

 

 

 

 

 

 

 

 

(Gains) losses on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

Non-cash equity compensation expense

 

968

 

 

 

90

 

 

 

1,839

 

 

 

90

 

Incentive fee earned by the Manager

 

 

 

 

 

 

 

 

 

 

 

Realized gains (losses) on terminations of interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

Total other non-recurring (gains) losses

 

 

 

 

 

 

 

 

 

 

 

Distributable Earnings

$

22,805

 

 

$

2,031

 

 

$

60,097

 

 

$

6,871

 
 

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

($ in thousands)

Annualized Distributable Earnings

 

$

91,220

 

 

$

8,124

 

 

$

120,194

 

 

$

13,742

 

Average total stockholders’ equity

 

$

394,362

 

 

$

334,503

 

 

$

426,703

 

 

$

289,130

 

Distributable Earnings Return on Average Equity

 

23.13

%

2.43

%

28.17

%

4.75 

%

 
 

Angel Oak Mortgage, Inc.

Reconciliation of Stockholders’ Equity to Stockholders’ Equity Including Economic Book Value Adjustments and Economic Book Value per Common Share

(Unaudited)

(in thousands except for share and per share amounts presented)

 

June 30, 2022

March 31, 2022

December 31, 2021

GAAP total stockholders’ equity

$

367,284

 

 

$

421,436

 

 

$

491,390

 

Preferred stock

 

(101

)

 

 

(101

)

 

 

(101

)

GAAP total common stockholders’ equity for book value per share of common stock

 

$

 

367,183

 

 

 

 

$

 

421,335

 

 

 

 

$

 

491,289

 

 

Adjustments:

 

 

 

 

 

 

 

 

Fair value adjustment for securitized debt held at amortized cost

 

32,863

 

 

 

20,443

 

 

 

1,079

 

Stockholders’ equity including economic book value adjustments

$

400,046

 

 

$

441,778

 

 

$

492,368

 

 

Number of shares of common stock outstanding at period end

 

 

24,925,930

 

 

 

 

 

25,085,796

 

 

 

 

 

25,227,328

 

 

Book value per share of common stock

$

14.73

 

 

$

16.80

 

 

$

19.47

 

Economic book value per share of common stock

$

16.05

 

 

$

17.61

 

 

$

19.52

 

 

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