8-K: Angel Oak Mortgage REIT Reports Positive Net Interest Income Growth for Q4 and Fiscal Year 2024

Angel Oak Mortgage REIT announces increased net interest income for both the fourth quarter and full year 2024, driven by strategic capital deployment and securitization activities.

Summary

• Angel Oak Mortgage REIT (AOMR) reported its financial results for the quarter and year ended December 31, 2024.
• The company's Q4 2024 net interest income increased by 20% to $9.9 million compared to $8.2 million in Q4 2023.
• However, Q4 2024 GAAP net loss was $(15.1) million, or $(0.65) per diluted share.
• Distributable Earnings for Q4 2024 were $9.9 million, or $0.42 per diluted share.
• A dividend of $0.32 per share was declared and paid on February 28, 2025.
• For the full year 2024, net interest income rose by 28% to $36.9 million from $28.9 million in 2023.
• FY 2024 GAAP net income was $28.8 million, or $1.17 per diluted share.
• FY 2024 Distributable Earnings were $7.0 million, or $0.28 per diluted share.
• The GAAP book value was $10.17 per share as of December 31, 2024, while the economic book value was $13.10 per share.
• In 2024, AOMR participated in five securitization transactions, contributing $855 million in scheduled unpaid principal balance of loans.
• The company purchased $683.7 million of newly-originated non-QM residential mortgage loans in 2024 with a weighted average coupon of 7.64%.
• As of December 31, 2024, the weighted average coupon of the residential whole loans portfolio was 7.39%, a 61 basis point increase year-over-year.
• The company has loan financing lines up to $1.1 billion, with $921 million available for new loan purchases.
• Target assets totaled $2.2 billion as of December 31, 2024.
• The recourse debt to equity ratio was approximately 1.0x as of December 31, 2024 and is expected to remain below 2.5x going forward.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive due to the increase in net interest income and successful securitization activities, but tempered by the GAAP net loss in Q4 and the inherent risks associated with non-QM lending.

Positives

• Net interest income showed significant growth, increasing by 20% in Q4 2024 and 28% for the full year.
• The company successfully executed multiple securitization transactions, contributing a substantial amount of loans.
• AOMR strategically deployed capital into high-quality mortgage loans.
• The weighted average coupon of the loan portfolio increased, enhancing yield.
• Operating expenses decreased by 10% year-over-year when excluding securitization expenses.
• The senior unsecured notes issuance in July 2024 achieved earnings accretion within one quarter of issuance.

Negatives

• The company reported a GAAP net loss of $(15.1) million, or $(0.65) per diluted share, for Q4 2024.
• FY 2024 Distributable Earnings of $7.0 million, or $0.28 per diluted share, is relatively low compared to net income.

Risks

• The company's performance is subject to risks and uncertainties related to the mortgage market and interest rate cycles.
• The forward-looking statements are based on assumptions that may not materialize, leading to materially different results.
• The company's reliance on external management by Angel Oak Capital Advisors, LLC presents a potential conflict of interest.

Future Outlook

The company expects continued growth in net interest margin and maintenance of reduced operating expenses in 2025, supported by opportunistic capital markets participation, and remains committed to creating long-term shareholder value through disciplined risk management, securitization execution, and strategic capital deployment.

Management Comments

• AOMR's growth in 2024 proves the strength and reliability of our distinctive operating model as well as that of the broader Angel Oak ecosystem.
• Net interest income increased consistently throughout the year, driven by efficient capital deployment into high-quality mortgage loans and methodical securitization activity.
• Looking to 2025, we expect continued growth in net interest margin and maintenance of reduced operating expense, supported by opportunistic capital markets participation.
• As always, we will remain committed to creating long-term shareholder value through disciplined risk management, securitization execution, and strategic capital deployment.

Industry Context

As a real estate finance company focused on non-QM loans, Angel Oak Mortgage REIT operates in a niche segment of the mortgage market. The company's performance is influenced by factors such as interest rates, credit spreads, and the overall health of the housing market. Competitors in this space may include other mortgage REITs and specialty finance companies that focus on non-agency mortgage-backed securities and non-QM lending.

Comparison to Industry Standards

• Comparing Angel Oak Mortgage REIT to industry peers like Annaly Capital Management (NLY) or AGNC Investment Corp. (AGNC) is difficult due to their focus on agency mortgage-backed securities, which have different risk and return profiles than non-QM loans.
• A more relevant comparison would be to REITs specializing in credit-sensitive mortgages, such as those focused on commercial real estate or other non-agency assets.
• Given the limited number of publicly traded REITs with a similar focus on non-QM loans, benchmarking against industry averages for mortgage REITs may not provide an accurate assessment of AOMR's performance.

Stakeholder Impact

• Shareholders can expect continued dividend payments and potential capital appreciation.
• Employees may benefit from the company's growth and strategic initiatives.
• Customers (borrowers) will have access to non-QM loan products.
• Suppliers and creditors will continue to engage with AOMR in its business operations.

Next Steps

• The company will continue to focus on strategic capital deployment and securitization activities.
• AOMR plans to maintain reduced operating expenses and pursue opportunistic capital markets participation.
• Management will remain committed to disciplined risk management and creating long-term shareholder value.

Key Dates