Angel Oak Mortgage REIT eked out a profit within the second quarter however missed Wall Street expectations partially on account of a word providing.
The non-qualified mortgage participant Tuesday reported internet revenue of $767,000 for the interval, properly beneath an S&P Capital IQ consensus imply estimate of $6.34 million. The actual property funding belief’s quarterly outcomes have see-sawed in current quarters, from a $273,000 loss the identical time a yr in the past, to a $20.5 million profit on the finish of March.
Angel Oak’s busy spring included two securitizations and the acquisition of $147 million in loans together with house fairness traces of credit score. The firm in May additionally closed a $42.5 million providing of 9.750% senior notes due 2030, and proceeds coated non-QM acquisitions and normal company functions.
The word providing added to curiosity bills, and largely counterbalanced a 35% year-over-year improve in curiosity revenue to $35 million. The agency’s $9.9 million in internet curiosity revenue was comparatively flat in current quarters.
Executives weigh non-QM exercise
Company leaders in Tuesday morning’s earnings name mentioned securitization markets stay accretive regardless of bigger financial uncertainty. More mortgage REITs are additionally getting into the non-QM area and the competitors is wholesome, CEO Sreeni Prabhu recommended.
“We will not be seeing that a lot creep in credit score requirements from even different guys,” he mentioned. “So that is additionally a great factor, proper, as a result of that is a worrisome pattern.”
Prabhu additionally mulled an analysts’ query on whether or not demand for hybrid adjustable-rate mortgages would emerge to refinance high-coupon debtors, if long-term charges stay elevated.
“I do assume these conversations will occur if the longer charges keep increased and also you begin seeing the entrance finish, as a result of that atmosphere hasn’t occurred in a very long time,” he mentioned. “But as of right this moment, it is not environment friendly.”
Executives additionally weighed the influence of a future fee lower by the Federal Reserve, after the central financial institution stood pat final week. Although Angel Oak famous a slight uptick in prepayment speeds up to now quarter, Treasurer and Chief Financial Officer Brandon Filson mentioned he does not count on a lot motion in his firm’s portfolio.
“So a lot of our portfolio can be nonetheless considerably underwater or out of the cash from a refinance choice on the 5% coupon vary,” he mentioned.
Angel Oak’s second quarter at a look
The REIT reported earnings per share of $0.03 within the second quarter, additionally lacking a consensus estimate of $0.27. In the primary quarter, that mark was $0.87; it was destructive $0.01 the identical time a yr in the past. The firm additionally reported $1.6 million of unrealized loss on its securitized and residential portfolios.
Angel Oak accomplished two securitizations over the spring, which paid down a mixed $315.5 million in money owed and launched a mixed $33.9 million in money to buy new loans.
At the tip of June, the agency had an undrawn mortgage financing capability of $931 million. Its residential mortgage portfolio had a mean weighted coupon of 8.37%, up 82 foundation factors from the primary quarter and up 66 foundation factors from the identical time final yr.
The firm additionally reported a falling delinquency fee, with its whole portfolio weighted common proportion of loans 90 days or extra past-due falling 44 foundation factors from the primary quarter to 2.35%. Most of these enhancements got here from securitizations in 2023 and 2024, which have been poorer performers in earlier quarters.
The firm’s inventory fell 7% Tuesday morning following the earnings releases, and sat round $8.75 a share by noon.
