Angel Oak saw its losses decrease in the fourth quarter as it managed liquidity risk
Angel Oak Mortgage saw its losses decrease in the fourth quarter, but ended up in red due to higher liquidity risk towards the end of 2022. This was compared to an $83.3 million loss in the third quarter. The subsidiary of Angel Oak Cos. had made profits of $3 million in its first quarter as a publicly traded entity one year prior. The REIT suffered a loss totaling $187.8million for the entire year. This was due to the decline in new mortgage volumes across the industry. Leadership stated that the company’s efforts in stabilizing its balance sheet in the face contracting business became a key focus in the second half of the year. “We started a strategic plan in quarter four to reduce warehouse financing risk, and increase liquidity. In the company’s earnings call, CEO Sreeniprabhu stated that the company has made great progress over the past few months. Angel Oak also sold residential loans in November to reduce financing risks. Prabhu stated that this was a calculated decision. He also said that the price received was comparable to the liquidity in the securitization market at the time. It still had residential mortgage whole loans worth $771.0 million at the end of December. The REIT also converted approximately $286,000,000 of nonmark-to market financing to mark-tomarket financing for continuously performing loans in December and January. At the beginning of the year, it followed up with a securitization that included $241 million worth residential mortgages. Angel Oak Capital Advisors, an affiliated asset management company, issued the securitization. This included $241 million worth of residential mortgages. Other lenders have made similar moves in recent months to address liquidity risks. Also, other businesses that are not part of the non-QM space have been closed. Angel Oak’s leaders stated that the company will continue to implement its late 2022 strategy as it tries to build its balance sheets and then restart purchases of loans that have been originated. Brandon Filson, Chief Financial Officer, stated that they expect to issue another securitization much like in January. “As we build that balanced sheet, the loan balance should increase some. Prabhu said that we won’t be able to go as high in Q1 of 22.” “We are not in the same situation as last year, when there was absolute liquidity in the system. Prabhu stated that there have not been many new originations. Therefore, if buy-siders want to purchase bonds from non-QM shelves, they need to buy now. Angel Oak ended 2022 with a loan financing capacity of $573million, compared to $695million at the end of third quarter. The figure has grown to $767 million so far this year, largely due to its January securitization.Operating expenses during the fourth quarter totaled $4.3 million, decreasing by $2 million from the previous three months, excluding securitization and severance costs. Despite the loss, investors seemed to be positive about the Angel Oak news on Thursday. It opened at $6.70 and closed at $7.31 at the closing bell. Angel Oak Capital Advisors, Angel Oak Mortgage Solutions, and Angel Oak Home Loans are some of the affiliated businesses that it owns.