Angel Oak(US:AOMR)2022-08-14 06:22Financial Data and Key Metrics Changes - For Q2 2022, the company reported a GAAP net loss of $52.1 million or $2.13 per common share, while distributable earnings were $22.8 million or $0.90 per common share, with a Q2 annualized distributable return on average equity of 23.1% [15][16] - The target asset portfolio increased from $2.7 billion to $3.2 billion, representing a 19% increase [15] - Interest income for the quarter was $29.7 million, a 10% quarter-over-quarter increase [15] - GAAP book value per share decreased to $14.73 from $16.80, a 12.3% decline due to unrealized mark-to-market losses [16] - Economic book value was $16.05 per share, down 8.8% from $17.61 [16] Business Line Data and Key Metrics Changes - The weighted average coupon of loans in the portfolio increased from 4.52% to 4.68% from the end of Q1 to the end of Q2, with new loan purchases in June and July showing coupons of 6.46% and 6.93% respectively [17] - The company purchased $257 million of non-agency mortgages during the quarter [17] Market Data and Key Metrics Changes - The company faced a volatile fixed income market with significant downward pricing pressure on mark-to-market assets, partially offset by an interest rate hedging strategy [10] - The securitization market was extremely limited, but the company successfully executed a $185 million securitization in July [18][19] Company Strategy and Development Direction - The company remains aligned with the Angel Oak Ecosystem, focusing on high-quality non-QM mortgage loans and programmatic securitization to lock in fixed funding costs [8][9] - The management emphasized the importance of strong underwriting and sound liquidity management to navigate market volatility [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by rising interest rates and market dislocation but expressed confidence in the company's ability to adapt and capitalize on opportunities [7][11] - The company aims to continue executing at least one securitization per quarter while monitoring market conditions closely [20] Other Important Information - The company declared a second quarter 2022 dividend of $0.45 per common share, payable on August 31, 2022 [14] - The company repurchased approximately 190,000 common shares for about $3 million through its stock repurchase plan [23] Q&A Session Summary Question: How is the company managing its cash position and future securitizations? - Management is closely monitoring cash and unencumbered assets, indicating a balanced approach to liquidity management while preparing for potential securitization opportunities [28][29] Question: What is the rationale behind the recent securitization structure? - The weighted average cost of funding for the recent securitization was 5.8%, with the average coupon on the loan pool at 5.22%, reflecting the pricing dynamics in the current market [33][34] Question: How does the new economic book value measure differ from GAAP book value? - The economic book value accounts for the fair value of securitization obligations, providing a clearer picture of the company's current value in a rising rate environment [36] Question: What is the company's strategy regarding acquisitions in the current market? - The company is looking to capitalize on high-return loans while maintaining discipline in managing existing securitization pipelines, indicating a cautious yet opportunistic approach [46][47] Question: How is the company positioned in the non-QM market amid industry challenges? - Management believes that the current challenges present an opportunity to increase market share, as some competitors are struggling, allowing the company to solidify its leadership position [44]