Q3 2024 Angel Oak Mortgage REIT Inc Earnings Call
Good day, and welcome to the ancient or mortgage REIT third quarter 2024 earnings conference call.
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Speaker Change: I would now like to turn the conference silver to Mr. Casey Keller please.
Speaker Change: Please go ahead.
Casey Keller: Good morning, Thank you for joining us today for Angel mortgage Reits third quarter 2024 earnings Conference call. This morning, we filed our press release detailing these results which is available in the investors section on our website at Www Dot Angelo Green Dot com.
Casey Keller: As a reminder remarks made on today's conference call May include forward looking statements.
Casey Keller: Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today.
Speaker Change: We do not undertake any obligation to update our forward looking statements in light of new information or future events.
Speaker Change: For a more detailed discussion of the factors that may affect the Companys results. Please refer to our earnings release for this quarter and so our most recent SEC filings.
Speaker Change: During this call we will be discussing certain non-GAAP financial measures more information about these non-GAAP financial measures and reconciliations to the most directly comparable GAAP financial measures are contained in our earnings release and SEC filings.
Speaker Change: This mornings conference call is hosted by Angela mortgage rates, Chief Executive Officer for any <unk>, Chief Financial Officer, Brandon Filson, and Angel Capitals, Chief investment Officer, Thomas and Hot.
Speaker Change: Management will make some prepared comments after which we will open up the call to your questions <unk>.
Speaker Change: Additionally, we recommend reviewing our earnings supplement posted on our website www Dot Angel or Green Dot Com now I will turn the call over to screening.
Speaker Change: Thank you Casey and thank you to everyone on the call for joining us today.
Speaker Change: We were pleased to see the rate environment began to shift in the third quarter.
Speaker Change: As easing inflation and employment stability gave the fed enough confidence to reduce interest rates for the first time since March of 'twenty.
Speaker Change: Hey, Omar it wasn't in a position to capitalize on this shift.
Speaker Change: And began the second half of 2020 for carrying momentum from a productive first half of the year.
Speaker Change: We have achieved all of our near term goals communicated during our Q2 earnings call.
Speaker Change: Regard to July as senior unsecured notes issuance, having fully deployed that capital into newly originated accretive high quality non QM loans.
Speaker Change: These loan purchases combined with our securitization activity currently producing net interest income that exceeds the cost of newly issued debt.
Speaker Change: Making the additional leverage accretive to net interest income.
Speaker Change: In three months office issuance.
Speaker Change: Additionally in early October we completed a securitization.
Speaker Change: Many of those newly originated.
Speaker Change: Originated loans recycling capital into additional loan purchases to drive compounded net interest income.
Speaker Change: Target asset growth.
Speaker Change: This is possible due to our disciplined and focused operational strategy and approach.
Speaker Change: That is designed to deliver consistent and attractive investor returns.
Speaker Change: We operate our business with a focus on sound long term decision, making rather than extending into speculated risks.
Speaker Change: We observed meaningful balance sheet and net income drove in the third quarter.
Speaker Change: Given largely by increased valuations across our portfolio.
Speaker Change: To that end.
Speaker Change: GAAP book value saw an increase of over 10%.
Speaker Change: Economic book value, increasing by over 6%.
Speaker Change: As expected net interest income was down slightly but stayed relatively flat as we deploy fresh capital from July debt issuance throughout the quarter.
Speaker Change: By end of the quarter, our run rate was more than covering the incremental interest expense and.
Speaker Change: And we expect to see meaningful net interest income growth in the coming quarters.
Speaker Change: Additionally September fed funds rate cut and Oh emptied 'twenty 'twenty four destined issuance in October.
Speaker Change: Will both drive expanded margin going forward.
Speaker Change: Yeah.
Speaker Change: Alright, human stem from our proprietary affiliated origination purchase and securitization platform.
Speaker Change: A successful and focused model designed by our management team.
Speaker Change: This approach prioritizes the creation of a sustainable and predictable earnings generation.
Speaker Change: Our business is highly structured and managed by experienced operators and.
Speaker Change: Ensuring that our investment and capital deployment process runs smoothly and efficiently.
Speaker Change: Looking ahead, we believe we are entering a constructive macroeconomic cycle for angel mortgage REIT and the broader mortgage REIT sector historical.
Speaker Change: Historical trends such as those observed in prior economic cycles indicate that.
Speaker Change: That we may see a period of significant growth potential and heightened capital markets activity.
Speaker Change: Investment in non QM has positive momentum, especially as investors gain enthusiasm around private credit opportunities.
Speaker Change: Non QM is essentially a highly collateralized stable private credit investment with proven and standardized underwriting process.
Speaker Change: We are positioning ourselves for those potential opportunities and we'll be ready to execute on accretive capital raises and transactions that can further enhance our balance sheet and drive shareholder value.
Speaker Change: As we move forward.
Speaker Change: We remain dedicated to delivering positive outcomes borrowers shareholders.
Speaker Change: Capitalizing on the exciting prospects that lie ahead.
Speaker Change: With that I'll turn it over to Brian who will walk us through.
Speaker Change: Financial performance for the third quarter in greater detail.
Speaker Change: Thank you trainee.
Brian: Our third quarter results were largely in line with expectations from a net interest income and expense perspective, and as <unk> mentioned, we expect to see significant growth in the near term.
Brian: As previously Messaged net interest margin was roughly flat with a slight decrease quarter over quarter as a result of July debt issuance.
Brian: Which added additional interest expense to the income statement.
Brian: This increase was mostly offset during the quarter with the additional investment activity by the company and as <unk> mentioned, we're exceeding the incremental cost of the debt as of today with Q4 expected to show a sizeable increase in net interest income.
Brian: Our concerted efforts to manage our operating cost structure combined with prudent portfolio risk management have delivered sustainably reduced operating expenses, thus far this year.
Speaker Change: These initiatives along with the embedded advantages of the exalt model ecosystem, featuring our leading origination and securitization platforms positioning the company for continued success.
Brian: And the third quarter. The company had GAAP net income of $31 2 million or $1 29 per diluted common share.
Speaker Change: Distributable earnings results were a loss of $3 4 million or <unk> 14 per common share driven by the exclusion of unrealized gains across our portfolio and the inclusion of realized losses on hedges as rates rallied.
Speaker Change: Interest income for the quarter was $27 4 million, an increase of $1 5 million or 6% compared to the prior quarter and a 15% growth compared to the third quarter of 2020 'twenty three.
Speaker Change: This expansion was driven primarily by a rapid deployment of capital into newly originated loan purchases.
Speaker Change: Interest expense was $18 4 million in the third quarter compared to $16 4 million in the prior quarter approximately half. This increase was driven by the interest expense from our July debt issuance with the other half coming from leverage against our new loan purchases as we continue to optimize return on capital.
Speaker Change: Net interest income was $9 million.
Speaker Change: Marking a small decrease relative to the prior quarter and a 22% improvement over the third quarter 2023.
Speaker Change: In coming quarters, we expect meaningful net interest income expansion driven by several factors.
Speaker Change: First we will have a full quarter's worth of earnings for the loans purchased with our debt issuance proceeds during the third quarter.
Speaker Change: Additionally, we will observe funding cost reductions from the federal funds rate cut of 50 basis points. We also achieved an additional 110 basis point cost savings on the loans underlying the <unk> 2020 for Dash 10 securitization and lastly, we are recycling the capital released from <unk> 2002.
Speaker Change: For dash 10 into additional loan purchases.
Speaker Change: During Q3, we purchased $264 $8 million of loan that carried a weighted average coupon of approximately 774% the weighted average LTV of 71.
Speaker Change: And our weighted average credit score of 754.
Speaker Change: Our residential whole loan portfolio carried a weighted average coupon of 773% as of the end of third quarter and nearly 200 basis point increase from the third quarter of 2023 as of today, our unsecured loan balances just over $200 million.
Speaker Change: This should grow and be ready for another securitization by the end of the year or shortly thereafter.
Speaker Change: Currently loan purchases remain over 7% coupon as the rate rally after the fed cut as partially reversed due to volatility uncertainty around further federal fund rate cuts.
Speaker Change: Third quarter total operating expenses were $3 8 million or $3 2 million, excluding securitization expense and noncash stock compensation.
Speaker Change: This compares to the same metric of $3 5 million in the third quarter of 2023, and $3 4 million in the prior quarter, our cost reduction efforts continue to bear positive results.
Speaker Change: Now turning to the balance sheet as of September 30, we had $42 $1 million of cash on hand, our recourse debt to equity ratio was one eight times at quarter end as of today's date, our recourse debt to equity ratio was approximately <unk> seven times, reflecting the impact of the <unk> 2020 for Dash 10 securitization.
Speaker Change: Which replace warehouse financing with nonrecourse term structural leverage as well as the maturity of our short term U S treasury assets held at quarter end.
Speaker Change: Our GAAP book value increased 10, 3% in the third quarter compared to the second quarter of 2024, while economic book value increased six 5% versus the second quarter. This was a result of a sizable valuation gains across our portfolio driven by optimism and the interest rate spread markets.
Speaker Change: This growth also illustrates the convergence between GAAP and economic book value that we anticipate over time, either by a rate decrease our prepayment activity in the 2021 securitization, which drive the difference between GAAP and economic book value.
Speaker Change: Our residential whole loan portfolio stood at a fair value of $428 $9 million as of quarter end financed with $333 million of warehouse debt. We had $1 5 billion of residential mortgage loans in securitization trust and $301 $8 million of RMB.
Speaker Change: Including $18 $7 million of investments in majority owned affiliates, which are included in other assets on our balance sheet.
Speaker Change: Recently, we closed <unk> 2020 for Dash 10, which was our second standalone securitization transaction of the year to which we contributed 661 non QM loans with the scheduled principal balance of $317 million.
Speaker Change: The weighted average coupon of seven 8%.
Speaker Change: The deal lowers the weighted average coupon funding costs for the loans underlying the securitization by over 110 basis points with the securitization, we reduced our whole loan warehouse debt by $260 million and released nearly $40 million of capital that is currently being recycled back into newly originated accretive high quality loan production.
Speaker Change: <unk> and we will fill our portfolio for the next few securitizations.
Speaker Change: We will continue to pursue high quality loan acquisitions and are dedicated to practicing disciplined daily capital management is a core aspect of our operational approach as always we will be deliberate and leveraging our assets with a focus in mind to ensure that we maximize our return on equity, while maintaining sufficient liquidity and managing risk.
Speaker Change: <unk>.
Speaker Change: Turning to credit delinquencies remain muted with the total weight portfolio weighted average percentage of loans 90 days delinquent at 195%. This metric has hovered around 2% correctly six consecutive quarters back to the second quarter of 2023 potentially.
Speaker Change: Potentially reflecting some stabilization around that rate as we've indicated in prior quarters, we believe that slight increases such as what we've observed this quarter compared to the second quarter are indicative of a return to historically normal levels as opposed to a harbinger for large scale credit deterioration.
Speaker Change: We believe that a credit becomes an issue a robust underwriting standards and portfolio wide low ltvs will mitigate losses throughout the cycle.
Speaker Change: Three months prepay speed for a securitization loved and trusted RMB S portfolios were approximately eight 1% as of the end of the third quarter, which is flat compared to the second quarter in a declining rate environment. We would expect prepay rates to increase so we would expect this to have a comparatively subdued effect on our portfolio for a couple of reasons.
Speaker Change: <unk>.
Speaker Change: First our securitized loan in our MBS portfolios are weighted towards loans that are still well below current rates, reducing or eliminating our homeowners incentive to refinance.
Speaker Change: Non QM has historically prepaid and approximately 25 to 30 CPR, meaning we have room for prepayment speeds to increase and still meet our expected modeled returns if rates continue to fall. We will also have an opportunity to use capital to re lever and re securitize season, Securitizations, which will increase the <unk>.
Speaker Change: <unk> yield on the investment portfolio.
Speaker Change: Due to rate volatility after quarter end, we expect the mark to market valuations of our portfolio to have decreased since the end of the third quarter. However, mark to Mark valuations are currently still well above their second quarter levels, and we expect stable valuations on new loan purchases as well.
Speaker Change: Incremental interest income to partially offset this negative impact.
Speaker Change: Finally, the company has declared a <unk> 32 cent per share common dividend, which will be paid on November 27, 2020 for stockholders of record as of November 19 2024.
Speaker Change: For additional information on our financial results. Please review the earnings supplement available on our website I will now turn the call back over to screening for closing remarks.
Speaker Change: Thank you Brandon to summarize the commentary the <unk> model is working.
Speaker Change: Disciplined and holistic approach.
Speaker Change: Investor focused management philosophy.
Speaker Change: And our ability at origination purchase and securitization platforms are working.
Speaker Change: As I mentioned earlier, we believe we are entering a favorable environment for our business and we intend to position ourselves to capitalize on new opportunities.
Speaker Change: And deliver strong returns to our shareholders in the fourth quarter and beyond.
Speaker Change: With that I'll now open the floor to your questions operator.
Speaker Change: Thank you very much.
Speaker Change: We will now begin the question and answer session.
Speaker Change: Can I ask a question you May press Star then one on your Touchtone telephone.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed and he would like to withdraw your question.
Speaker Change: Please press Star then two.
Speaker Change: At this time, we would pause momentarily to assemble our roster.
Speaker Change: The first question comes from Don <unk> with Wells Fargo. Please go ahead.
Don: Brendan can you talk a little bit about new investment volume expectation for the next few quarters.
Speaker Change: Yeah, I think what we'll see the next few quarters is kind of what we saw this quarter.
Speaker Change: The 200 million or so $200 million.
Speaker Change: Origination of purchases.
Don: Okay and can you just clarify on the book value comment are you, saying that.
Speaker Change: You'd give back a good bit of the increase this quarter or part of it.
Speaker Change: Yes, it's just about half of that increase has been given back as of today.
Speaker Change: Okay got it.
Speaker Change: And I assume that you sure you still feel like you can.
Speaker Change: Maintain the dividend at this level.
Speaker Change: Yes, absolutely we should again as indicated on the call. We think that now with what those proceeds being invested in securitization going off.
Speaker Change: New loans coming on as well and then we also plan to do a securitization late this year or early next.
Speaker Change: As well you will.
Speaker Change: You should see that net interest margin widened out more similar to what we saw in Q2.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: The next question comes from Matthew.
Speaker Change: Jones trading please go ahead.
Matthew: Hey, good morning, guys. Thanks for taking the question how.
Speaker Change: How should we expect the pace of Securitizations, you know should we look at it as kind of a one per quarter with a $200 million.
Speaker Change: I guess run rate so to say so to speak on investments.
Speaker Change: Yes.
Speaker Change: I think as we've mentioned a few other calls I think we kind of target one securitization a quarter.
Speaker Change: Obviously last quarter, we took a pause in Q3, but now we're expecting to in Q4, so that's probably a good.
Speaker Change: Proxy for what we would do and we get up to somewhere around 300 million for a securitization.
Speaker Change: Gotcha, Yeah that's helpful.
Speaker Change: And then how is the execution been there and how is that on the October one and then can you guys also speak about what you guys are retained from the Securitizations.
Speaker Change: Yes, no I think the execution, we had on the October securitization was very good.
Speaker Change: We sold about 95% of the capital structure.
Speaker Change: Retained at about just under five 5% cost of funds dropped out as we can.
Speaker Change: The 110 basis points funding cost.
Speaker Change: And that in that particular deal we retained the io positions excess servicing strip the excess interest bond the unrated bond and there. We also sold off a piece and retain a piece of the single B rated bonds.
Speaker Change: This is the screen here from execution side execution continues to be strong and Thats again so.
Speaker Change: Non QM securitization market. So we've done as they as the Angels entity.
Speaker Change: Those 12, Securitizations this year, including Vornado and monitor so we see continued appetite for AAA spreads anywhere from last couple of weeks bond spreads widen out a little bit, but then somewhere in the mid <unk> to mid <unk>.
Speaker Change: And they have been consistent and I just think that the.
Speaker Change: Any stability will continue to tighten spreads here.
Speaker Change: Yeah. That's that's very helpful. There and then one last one for me how are you expecting your asset yields going forward you know I think it was 7.8 on the last securitization.
Speaker Change: That's sustainable for the next couple of quarters.
Speaker Change: You know I I'm, assuming it's kind of all right ball and how it plays around that but do you have any insight there.
Speaker Change: Right Yeah no the.
Speaker Change: The weighted average coupon of the asset so obviously slowed around a bit as rates come in now with the rate volatility you've had mortgages kind of dip right. After.
Speaker Change: The fed rate cut, but now we're essentially back up to the high Sevens.
Speaker Change: On our locks coming in today.
Speaker Change: Keeping the good spread to an agency product, but I would expect over the next year.
Speaker Change: Come down and.
Speaker Change: And in concert with that of course, we should get a little better lower funding costs on the securitization and then our warehouse financing will also.
Speaker Change:
Speaker Change: Come in as well as its tide floating component there is tied to sofa.
Speaker Change: It comes down obviously with kind of a rate cut.
Speaker Change: So we still expect on a levered securitize space and just like a 15% to 20% Roe.
Speaker Change: Awesome, that's great. Thank you guys for taking the questions and congrats on the quarter.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Eric Hagen with <unk>.
Speaker Change: Please go ahead.
Eric Hagen: Hey, Good morning, Hope you guys are well.
Eric Hagen: How are we looking at the opportunity to buy back stock at these levels.
Speaker Change: What other liquidity sources that you might draw upon to make that happen.
Speaker Change: How high would you take your leverage if there was an opportunity to maybe get more aggressive with the buyback at these levels.
Speaker Change: Yes.
Speaker Change: We're always talking about right.
Speaker Change: The stock price has traded down I think you know.
Speaker Change: Two months ago.
Speaker Change: Question wouldn't come up here, Eric I guess, because we would have been 11 $12 a share I think we're dealing with we've got some stock overhang is our largest investors move some shares away from $10 I think the volatility around the election has has decreased.
Speaker Change: Also created some overhanging the broader REIT market, which we got hit a little extra hard on.
Speaker Change: But I would I believe that over the next quarters or so that youll see the stock price start to appreciate again.
Speaker Change: So a buyback for US right now is really on the table.
Speaker Change: But it is something we monitor.
Speaker Change: Almost on a day to day basis and try to make the decision.
Speaker Change: Apparent that if we're trading still at a 14% dividend.
Speaker Change: Throughout the quarter, then we would we might consider doing something but again nothing from the pipe right now.
Speaker Change: Got you guys. Thank you.
Speaker Change: I actually want to ask about loan delinquencies I mean, they remain very low but what is the structure of any loan modification activity. That's taking place right now and if we did see delinquencies pick up a little bit more and rates were to stay high.
Speaker Change: How do you feel like the loan market activity with <unk>.
Speaker Change: Potentially change.
Speaker Change: Yes, there's not a lot I mean.
Speaker Change: Delinquency is just because of the home price appreciation.
Speaker Change: Activity a lot of these end up probably refinancing just because of the home price appreciation versus modification. So my integration activity is much lower just because of the delinquencies would we have to look for India.
Speaker Change: We're publishing a paper at some point on the delinquencies that were seeing and originations in 2023.
Speaker Change: And honestly, they're lower than the market, but we are looking to it but we will have a lot more information on that to do.
Speaker Change: Same to you over the next.
Speaker Change: A couple of weeks.
Speaker Change: Alright interesting looking forward to that thank you guys.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: We have the next question is from Matthew Howlett with.
Speaker Change: B Riley. Please go ahead.
Matthew Howlett: Oh, Hi, Brendan Hi training, Thanks for taking my question.
Speaker Change: Brendan.
Speaker Change: The.
Speaker Change: Loss adjusted Levered yields on 2014 was 15% to 20%.
Speaker Change: That's right.
Speaker Change: So I guess just a big picture question when I look at those type of returns today.
Speaker Change: And the thing that stays consistent.
Speaker Change: And with with your expense ratio you could be doing it in a.
Speaker Change: Or are we in the very low teens, which gets me to something in earnings power well above your current dividend rate I don't want to hold you to raising the dividend, but you mentioned, calling some legacy deals, which I'm assuming are earning lower than that what's the just talk about recycling. Some of these legacy securitization into this new production and where do you think the ROE of the company could go.
Speaker Change: <unk>.
Speaker Change: Yeah No I appreciate the question and I think Youre right, we do have a.
Speaker Change: Bit of an ability to.
Speaker Change: Exceed <unk>.
Speaker Change: Maybe maybe not as much out of $9 share price and a 14% yield net.
Speaker Change: We've got a lot of Securitizations, we have some securitizations from 'twenty to that.
Speaker Change: Don't make us a whole lot of money you don't have that 15% to 20% Roe.
Speaker Change: Profile like I said, when we buy loans.
Speaker Change: Nominate as pricing the loan pricing and credit to target that return obviously in some scenarios like in 2021. The reality there was much higher than modeled and then in 2022 that reversed and it was much lower.
Speaker Change: Those deals from 'twenty two.
Speaker Change: We'll start to become callable in 'twenty five.
Speaker Change: Those are you going to be your very low coupon for five 5% coupon deals.
Speaker Change: We could get into the money from our call perspective, or even if theyre not 100% in the money in terms of completely being a 15% to 20 Roe.
Speaker Change: You could take a single digit IRR and maybe get to a low double digit IRR with the funding cost change we also have.
Speaker Change: Some securitization back from 2019.
Speaker Change: We can kind of package up re securitize and even though those those funding costs are somewhat similar to today actually a little bit inside of <unk> funding as those deals have also de levered a lot. So we can use that as a tool in our toolbox to juice up the returns and like I mentioned.
Speaker Change: A few times.
Speaker Change: We expect our net interest margin to expand in the next quarter.
Speaker Change: Again, much like Q2 so.
Speaker Change: So we should get to an effective dividend coverage ratio I think at that time.
Speaker Change: And then we still have capital and runway.
Speaker Change: To grow into Q1, as well and through 2025, where you start looking at it yes.
Speaker Change: We keep expanding net interest income operating expenses stay low.
Speaker Change: There will be a discussion about.
Speaker Change: What to do with the dividend at that time.
Speaker Change: Yes look I'm asking these are incredible returns. That's my next question you guys had been raising coupon successfully with these type of returns on loved it.
Speaker Change: It sounds like they are the highest they've been securitization economics are the highest they've been in.
Speaker Change: Quite some time.
Speaker Change: Are you running I mean I know.
Speaker Change: The cycle has shaken out a lot of competitors.
Speaker Change: And you guys are a leader in the sort of the.
Speaker Change: The Alaska standing I mean are you running the antibody with these type of depreciation retrench or you're going to see new people trying to come in.
Speaker Change: And could that pressure.
Speaker Change: Term change or coupons, just want to hear your thoughts.
Speaker Change: Winter securitization economics stand today versus where you've seen the last one for each of them assuming they haven't been this good since you went public.
Speaker Change: Yeah.
Speaker Change: This is Jamie. This is this is as good as it gets relative to 2021 2020. One was also a great year.
Speaker Change: From a competitive perspective, I mean, there are.
Speaker Change: More competitors, but again at the end of the day. This business is about consistency.
Speaker Change: And if you build a business.
Speaker Change: And Angel of mortgage solutions, which is our mortgage company, which is more of a service driven.
Speaker Change: And what we are targeting over there is clients are there and maybe a sourcing loans.
Speaker Change: We tend to be in a less competitive environment just because of it.
Speaker Change: Name recognition, so service becomes more important than price price is important but we're not we're not competing on price every day and so that's the model that behalf.
Speaker Change: Because we are everyday in the marketplace buying loans and there's only really a few guys that are doing that so yeah. There's a lot of guys wanting to do it there are a lot of guidance has come in and out.
Speaker Change: But the consistency is what drives us to get more than our fair share in the market.
Speaker Change: At a reasonable price.
Speaker Change: Yes that was my last part is going to commend you on the credit it seems like you are.
Speaker Change: Credit portfolios.
Speaker Change: You're sort of holding.
Speaker Change: <unk> steady, whereas we've seen other shelf non QM sort of.
Speaker Change: Increase I mean any changes in your radar at this point in time, we're just sticking with.
Speaker Change: Youre, noting here.
Speaker Change: Yes.
Speaker Change: We of.
Speaker Change: Constantly re underwriting Matt and.
Speaker Change: We brought in a senior.
Speaker Change: Lauren.
Speaker Change: Credit Guy from the mortgage company into asset management.
Speaker Change: And at some point, we will also introduce them to the analyst community and what you're really doing is re underwriting again, all sorts of loans that'd be run rating what we.
Speaker Change: We are seeing what type of credits, we want to slow down what type of credits that we want to do.
Speaker Change: More.
Speaker Change: As I've said previously a few minutes ago, we are seeing obviously delinquencies that are trending much lower than it than our peers.
Speaker Change: You're also seeing some delinquencies coming out of 2023 originations.
Speaker Change: A lot of guys new entrants got aggressive so we're doing a little bit of a write up on that so.
Speaker Change: We will send it out to all of you guys. Once we get a little bit more deep into it but our goal is to continue to manage credit.
Speaker Change: I mean, right now nobody thinks about any sort of lending but end of the day.
Speaker Change: Had a long cycle in non QM and at some point.
Speaker Change: Credit will be something that we'll have I'll have to discuss but we're not there today, but we are seeing trends.
Speaker Change: I appreciate it look forward to the earnings growth next year. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Again, ladies and gentlemen, if you will have a question. Please press star then one.
Speaker Change: We have the next question from Chris Kotowski with Oppenheimer. Please go ahead.
Chris Kotowski: Good morning, and thanks for taking the question I just wanted to follow up on the impact of the.
Chris Kotowski: Securitization you did in October you said it was up by 110 basis points.
Chris Kotowski: Savings on the interest so should we expect that to be like 750 800000 of incremental net interest income on a quarterly basis is that the way to look at it.
Speaker Change: That will some of that savings on a cost basis lever is going to be taken up by the additional leverage.
Chris Kotowski: That it took in.
Chris Kotowski: Looking at places like say, that's effectively 95% levered versus in their warehouse space. It was 80% levered.
Chris Kotowski: It's going to be a lateral move from that directly but really what that affords again as the additional capital that's freed up $40 million in cash, which we'll use to be one full.
Chris Kotowski: New securitization and we've already deployed that cash into.
Speaker Change: Whole loans, initially unlevered, which would have run.
Speaker Change: One way of approximately $1 billion a year.
Speaker Change: In terms of.
Speaker Change: Net interest margin.
Speaker Change: So I mean, I understand the capital efficiency of it and.
Speaker Change: Wanted to do it but I was just trying to think of in isolation of the impact of that one securitization.
Speaker Change: It sounds to me it should be like $3 5 million, a year or something like that it am I thinking about that correctly.
Speaker Change: Well again, no because the because of the additional leverage in the securitization.
Speaker Change: If that was the only thing we did the operating results will be effectively flat.
Speaker Change: Compared to.
Speaker Change: Where we were before.
Speaker Change: Increase the leverage.
Speaker Change: So the delta once we effectively have more debt.
Speaker Change: At a lower cost.
Speaker Change: Okay Alright. Thank you that's it for me.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, this concludes our question and answer session.
Speaker Change: I would like to turn the conference back over to the CEO, Mr. Sweeney for closing comments.
Mr. Sweeney: Thank you everyone for your time and interest in Angel of mortgage REIT.
Mr. Sweeney: We look forward to connecting with you again in the next part in the meantime, if you have any questions.
Mr. Sweeney: Please feel free to reach out to us have a great day.
Speaker Change: Thank you.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Mr. Sweeney: Okay.
Mr. Sweeney: Yes.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].