Positive momentum builds at Angel Oak after profitable quarter

Favorable market conditions and a summer note issuance helped propel Angel Oak Mortgage REIT to a quarterly profit, as the company said it also expects to pursue more securitizations.

The Atlanta-based real estate investment trust posted net income of $31.2 million in the third quarter, a 277% increase from $8.3 million one year prior. The latest profit comes off a $273,000 loss in the second quarter. 

A cut in the federal funds rate helped drive business that led to loan purchases during the quarter. 

The company "was in a position to capitalize on this shift and began the second half of 2024 carrying momentum from our productive first half of the year," said CEO Sreeni Prabhu in its earnings call. 

"We have achieved all our near-term goals, communicated during our Q2 earnings call, with regard to July senior unsecured note issuances, having fully deployed that capital into newly originated accretive, high quality non-QM loans," he added. 

The note issuance, alongside securitizations, produced net interest income exceeding the cost of the debt, the company said. 

Net interest income came in at just over $9 million, compared to $9.5 million three months earlier and $7.4 million a year ago.

While the company issued no new securitizations during the quarter, they continue to be a part of Angel Oak's ongoing strategy, Chief Financial Officer Brandon Filson. The company began the fourth quarter with a securitization transaction totaling $316.8 million in unpaid principal balance.

"We kind of target one securitization a quarter. Obviously, last quarter, we took a pause in Q3, but now we're expecting two in Q4, so that's probably a good proxy for what we do," Filson said. 

Recent numbers mark a turn in fortune from 2022 and 2023 when Angel Oak faced elevated liquidity risk. Prabhu touted the success of its securitization strategy despite the industry headwinds and competition. 

"This is as good as it gets, relative to 2021," Prabhu said. "There are more competitors. But again, at the end of the day, this business is about consistency."

The REIT currently holds $42.1 million of cash on hand, just off from $44 million at the end of the second quarter.

Angel Oak, which specializes in the non-QM segment, sees a promising market ahead for the space. "Investment in non QM has positive momentum, especially as investors gain enthusiasm around private credit opportunities," noted Prabhu. 

Regarding the overall market, "we believe we are entering a constructive macroeconomic cycle for Angel Oak Mortgage REIT and the broader mortgage REIT sector," he added.