Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fourth consecutive quarter of net interest income growth.
- Successful $300 million securitization deal reducing funding costs.
- Issued $50 million in senior unsecured notes to fund future growth.
- Maintained low operating costs through diligent management.
- Strong credit performance with a low 90-day delinquency rate of 1.7%.
Negative Points
- GAAP book value decreased by 3% in the second quarter.
- Economic book value decreased by 4.5% versus the first quarter.
- Reported a GAAP net loss of $0.3 million for the quarter.
- Distributable earnings showed a loss of $2.3 million.
- Potential economic downturn could heighten credit risk.
Q & A Highlights
Angel Oak Mortgage REIT Inc (AOMR, Financial) Q2 2024 Earnings Call Highlights
Q: With NII increasing, do you feel like you're in a position to maintain the current dividend level?
A: Yes, absolutely. We've been increasing NII for four quarters. We improved coverage by about 20% this quarter to 80% coverage of the dividend. We expect further expansion in Q4, effectively covering the dividend. - Brandon Pedersen, CFO
Q: What is your economic book value in July and August?
A: We haven't put a pen to paper yet due to the dramatic rate move. However, any decreases as of June 30 would now be at least flat, if not up. - Brandon Pedersen, CFO
Q: How much growth do you think the unsecured issuance can provide net of the repurchase?
A: The $30 million net proceeds will provide runway for the next three to four quarters of consistent loan acquisition, supporting around $1 billion in residential loan purchases over the next several quarters. - Srini Prabhu, CEO
Q: How do you think about the ability to issue additional unsecureds as you look to scale up the business?
A: We will consider it, but we want to grow at the right time. We have about $200 million in committed loan purchases coming in soon. The balance sheet could hold more, but we want to ensure it's done at the right time. - Brandon Pedersen, CFO
Q: Are you expecting a pickup in prepayment activity as a result of recent interest rate moves?
A: We've already seen a slight increase in prepayment activity. We expect a return to historical levels of 25-30 CPR over the next several quarters. - Brandon Pedersen, CFO
Q: What are the expected ROEs on retained interest from securitizations going forward?
A: We expect mid to high 10s to low 20% ROE long-term. There could be a period where the next few securitizations have higher return hurdles if economic conditions allow. - Brandon Pedersen, CFO
Q: Are you seeing any competition in the non-QM space?
A: We consider ourselves leaders in the space. We see some competition from insurance companies, but they are selective. We don't feel constrained or stretched in our current operations. - Srini Prabhu, CEO
Q: Can you summarize your growth plans with the new capital raised in July?
A: We plan to acquire about $1 billion in loans over the next few quarters, supported by the new capital and senior unsecured notes. This will significantly impact our NII and support dividend coverage. - Brandon Pedersen, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
