Earnings call transcript: Angel Oak Mortgage beats Q3 2025 EPS forecast

Angel Oak Mortgage Inc. (AOMR) reported its third-quarter earnings for 2025, surpassing analyst expectations with an EPS of $0.46, significantly higher than the forecasted $0.30. This 53.33% surprise is a notable achievement, reflecting robust financial performance. The stock, however, showed a slight decline of 0.22% in the premarket session, closing at $9.15, which remains within its 52-week range.

Key Takeaways

• Angel Oak Mortgage reported a 53.33% EPS surprise in Q3 2025.
• Despite strong earnings, the stock price decreased slightly by 0.22%.
• The company achieved a 34% increase in interest income compared to Q3 2024.
• Operating expenses decreased by 13% year-over-year.
• The securitization market remains active, supporting future growth.

Company Performance

Angel Oak Mortgage showcased a strong performance in Q3 2025, driven by a significant increase in interest income and effective cost management. The company’s net interest income grew by 13% compared to the same period last year, while operating expenses were reduced by 13%. In a competitive non-QM lending space, Angel Oak Mortgage has maintained a differentiated platform, outperforming peers in securitization and delinquency rates.

Financial Highlights

• Revenue: Not specified in the call but highlighted strong interest income growth.
• Earnings per share: $0.46, a 53.33% surprise over the forecast.
• GAAP net income: $11.4 million.
• Net interest income: $36.7 million, a 34% increase year-over-year.
• GAAP book value per share: Increased by 2.2% to $10.60.

Earnings vs. Forecast

Angel Oak Mortgage’s Q3 2025 EPS of $0.46 exceeded the forecast of $0.30, marking a 53.33% surprise. This performance reflects the company’s ability to navigate a competitive market environment and capitalize on opportunities within the securitization market.

Market Reaction

Despite the positive earnings surprise, Angel Oak Mortgage’s stock experienced a minor decline of 0.22% in premarket trading, closing at $9.15. This movement is within the company’s 52-week range of $7.36 to $10.88, indicating a cautious market sentiment amidst broader market trends.

Outlook & Guidance

Looking forward, Angel Oak Mortgage expects continued growth in net interest income and plans to maintain a consistent loan purchase volume of $200–$300 million quarterly. The company is also considering a potential HELOC securitization in the coming quarter and evaluating calls on older securitizations, signaling a proactive approach to market opportunities.

Executive Commentary

"This is a business for us, not a trade," emphasized Sreeni Prabhu, CEO, highlighting the company’s long-term strategic focus. CFO Brandon Filson added, "We’ve been buying $200-$300 million a quarter," underscoring the company’s consistent market presence and commitment to growth.

Risks and Challenges

• Increasing competition in the non-QM lending space could pressure margins.
• Market volatility and interest rate fluctuations may impact refinancing activity.
• Maintaining low delinquency rates in a dynamic market environment is crucial.
• Potential regulatory changes in the mortgage industry could affect operations.

Q&A

During the earnings call, analysts inquired about the company’s strategic securitization approach and the differences in book value calculations. Executives confirmed their focus on non-QM lending while exploring some investments in HELOCs, providing clarity on future growth strategies.

Full transcript - Angel Oak Mortgage Inc (AOMR) Q3 2025:

Conference Operator: Good day and welcome to the Angel Oak Mortgage REIT third quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask a question. To ask a question, you may press star, then one on your telephone keypad. To withdraw a question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. KC Kelleher. Please go ahead.

Brandon Filson, Chief Financial Officer, Angel Oak Mortgage REIT: Good morning, and thank you for joining us today for Angel Oak Mortgage REIT’s third quarter 2025 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.angeloakreit.com. As a reminder, remarks made on today’s conference call may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. We do not undertake any obligation to update our forward-looking statements in light of new information or future events. For a more detailed discussion of the factors that may affect the company’s results, please refer to our earnings release for this quarter and to our most recent SEC filings. 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. This morning’s conference call is hosted by Angel Oak Mortgage REIT’s Chief Executive Officer, Sreeni Prabhu, and Chief Financial Officer, Brandon Filson. Management will make some prepared comments, after which we will open up the call to your questions. Additionally, we recommend reviewing our earnings supplement posted on our website, www.angeloakreit.com. Now, I will turn the call over to Sreeni.

Sreeni Prabhu, Chief Executive Officer, Angel Oak Mortgage REIT: Thank you, KC, and thank you all for joining us today. Our third-quarter performance reflected another period of disciplined execution and strategic progress for AOMR. We continue to execute both operationally and strategically in a constructive market environment. We capitalized on a couple of strategic opportunities to reallocate capital into high-yielding assets, improve our loan financing funding costs, and diversify our lender base. As always, our team continued to focus on deploying capital into high-quality income-accretive opportunities, supporting both portfolio growth and underlying earnings quality while maintaining vigilance on credits. Our results this quarter were in line with our expectations. This was highlighted by our 13% growth in net interest income compared to the third quarter of 2024 and a 2% increase compared to the second quarter of the year.

GAAP book value per share increased by over 2% compared to the second quarter, driven by increases in valuations across our portfolio. Cash flow dividend coverage increased and is expected to continue its growth trend as demonstrated over the last two years. This is driven by earnings from assets purchased during and post-quarter end, as well as the resecuritization of some pre-IPO deals, which will rotate capital into high-yield uses. Credit continues to perform well, both in aggregate and relative to our peers, and our earnings generation engine continues to strengthen. As I mentioned, we executed on several key initiatives during the quarter. First, we successfully called and retired two legacy vintage deals, which is something we have been opportunistically monitoring for the last several quarters. Retiring these deals allowed us to release and reinvest capital into new attractive opportunities and further optimize the yield on our investment portfolio. Second.

We added a new warehouse credit facility and extended another facility at attractive funding rates, which, combined with decreases in SOFR, are expected to improve margins while also diversifying our lender base. These actions, along with our continued focus on efficient capital recycling and securitization, emphasize the reliability and the repeatability of our strategy. We are encouraged by the strength and stability in the securitization market, as well as the constructive environment for portfolio growth. Securitization spreads continue to tighten, and the market continues to function efficiently, with new and traditional participants active in the marketplace. The market backdrop has become more positive as the year has progressed, and the interest rate trajectory and efficient securitization execution have supported valuation and earnings growth for AOMR. While the competition in the space has increased, we see this as an indication of solid demand in an area where we have demonstrated expertise.

Further, our differentiated platform and dynamic approach to capital deployment and portfolio management positions us to capitalize on opportunities. As we look ahead, we remain committed to continued execution of our strategies, delivering strong results for shareholders, and building on our solid historical track record. With that, I’ll turn it over to Brandon, who will walk us through our third-quarter financial performance in greater detail.

Brandon Filson, Chief Financial Officer, Angel Oak Mortgage REIT: Thank you, Sreeni. Third-quarter operating results were in line with our expectations, with 13% net interest income growth versus the third quarter of 2024. Expansion versus the second quarter of this year, demonstrating a positive return on May’s senior unsecured debt issuance within one quarter. Year-to-date net interest income increased 11% compared to 2024. Operating expenses, excluding securitization cost and stock compensation expense, were 13% lower than in the third quarter of 2024 and 5% lower than the second quarter of 2025. Year-to-date operating expenses, excluding securitization cost and stock compensation, were 19% lower than in 2024, as we continue to push hard on cost rationalization and key expense-saving initiatives. Valuations were a tailwind during the third quarter, as we observed increases in valuations across the portfolio.

As of today, we expect that our book value has grown moderately compared to the end of the third quarter, alongside the recent rate rally. For the third quarter of 2025, we had GAAP net income of $11.4 million, or $0.46 per diluted common share. Distributable earnings for the second quarter were $529,000. The primary driver of the difference between GAAP net income and distributable earnings were the impacts of $4.3 million of unrealized gains on our residential loan portfolios and $5 million of unrealized gains on hedge contracts. Interest income for the third quarter was $36.7 million, and net interest income was $10.2 million, marking a 34% improvement in interest income and a 13% improvement in net interest income compared to the third quarter of 2024. Compared sequentially to the second quarter of 2025, interest income increased by 4% and net interest income increased by 2%.

For the first nine months of the year, interest income was $104.6 million, and net interest income was $30.2 million, which translates to increases of 33% and 12%, respectively, compared to the first nine months of 2024. As we previously noted, we expect our net interest income to continue its growth trend with earnings generated from accretive loans purchased throughout the year and our securitization activity in Q4. Our $238 million of loan purchases in the quarter carried a weighted average coupon of 7.74%, with a weighted average combined loan-to-value ratio of 69.4% and a weighted average FICO score of 759. Our total residential whole loan portfolio had a weighted average coupon of 7.98% as of the end of the quarter. The non-QM portion of our whole loan portfolio carried a weighted average coupon of 7.37%, and HELOCs carried an 11.03% weighted average coupon.

As of today, our current weighted average coupon is approximately 8.7%. Reflecting the 2025-10 securitization, which closed in October. As of the end of the quarter, our loans and securitization trust portfolio carried a weighted average coupon rate of 5.8%, with a weighted average funding cost of approximately 4.2%. As Sreeni mentioned, the securitization market remains active, and we intend to continue leveraging this strength through our disciplined, methodical securitization strategy. As mentioned earlier, we called and retired our retained bonds from AOMT 2019-2 and AOMT 2019-4 securitizations in the third quarter. These deals had become deliberate over time, and the call released $19 million of capital to be reinvested into higher-yielding new loan purchases and other earnings-accretive uses. Additionally, in October, we executed the AOMT 2025-10 securitization.

This securitization was a $274 million deal that enabled us to pay down $237 million of warehouse financing and release $22 million of cash for redeployment. The execution of this deal was strong, with the senior bonds issued at a spread of 125 basis points over Treasuries. Operating expenses for the third quarter were $3.2 million. Excluding non-cash stock compensation expenses and securitization cost, third-quarter operating expenses were $2.8 million. This represents a 13% decrease compared to the same metric in the third quarter of 2024. For the first nine months of the year, operating expenses were $11.3 million. Excluding non-cash stock compensation expenses and securitization cost, operating expenses for the first nine months of the year were $8.5 million, representing a decrease of 19% compared to the first nine months of 2024.

Going forward, we expect to maintain similar operating expense levels and will continue to be as efficient as possible with our expense structure. Looking at our balance sheet, as of the end of the quarter, we have $51.6 million of cash, and our recourse debt-to-equity ratio was 1.9 times. As of today’s date, and factoring in the October securitization, we estimate our recourse debt-to-equity ratio to be approximately one time. GAAP book value per share increased 2.2% to $10.60 per share as of September 30, 2025, from $10.37 as of June 30, 2025. Economic book value, which fair values all non-recourse securitization obligations, was $12.72 per share as of September 30, 2025, down 1.9% from $12.97 per share as of June 30, 2025. The increase in GAAP book value was driven primarily by the aforementioned valuation increases across our portfolio.

Valuations of the sold bonds from our 2021-4 and 2021-7 securitizations are included as a liability in our economic book value calculation, and the markup of these bonds drove the directional difference between GAAP and economic book value. We ended the quarter with unsecuritized residential whole loans at fair value of $425.8 million, financed with $342.6 million of warehouse debt, $1.9 billion of residential mortgage loans and securitization trust, and $256.2 million of RMBS, including $21.2 million of investments in commingled securitization entities, which are included in other assets on our balance sheet. We finished the quarter with an undrawn loan financing capacity of approximately $707.4 million.

Now, looking at credit, we ended the quarter with a total portfolio weighted average percentage of loans 90-plus days delinquent at 2.2%, inclusive of our residential loan, securitized loan, and RMBS portfolios, which represents a decrease of 15 basis points from the second quarter of 2025. The AOMT securitization shelf continues to demonstrate outperformance relative to other non-QM shelves in terms of delinquency. We expect that throughout the credit cycle, this outperformance will lead to fewer defaults and lower credit losses than comparable non-QM securitization platforms. The expectation is born out of our intentional effort to move up in credit for our loan originations and purchases over the past couple of years, which continues to provide us with the confidence that we will deliver consistently amid periods of potential volatility.

Additionally, we expect our portfolio-wide low LTV, diligent underwriting standards, and inherent credit selection to mitigate losses throughout a cycle if credit becomes an issue. Three-month prepay speeds for our RMBS and securitized loan portfolios were 9.4% to end the quarter, reflecting a marginal decrease compared to the second quarter of 2025. As a reminder, we model our returns on historical average prepayment speeds of 20%-30%. We continued to expect that mortgage rates would need to fall meaningfully in order to drive a significant uptick in refinances and prepayment speeds in our portfolio. Finally, the company declared a $0.32 per share common dividend, which will be paid on November 26, 2025, to common shareholders of record as of November 18, 2025. For additional color on our financial results, please review the earnings supplement available on our website.

I will now turn it back to Sreeni for closing remarks.

Conference Operator: Thank you, Brandon. I would like to thank the entire Angel Oak team for their hard work towards building what we believe is the best non-QM loan origination, purchase, and securitization platform. We look forward to continuing to build long-term value for our shareholders in the coming quarters and years. With that, we’ll open up the call to your questions, Operator.

Sreeni Prabhu, Chief Executive Officer, Angel Oak Mortgage REIT: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchstone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Matthew Erdner with Jones Trading. Please go ahead.

Hey, good morning, guys. Thanks for taking the question. I’d like to touch on kind of the calling of the old securitizations there. One, get your thoughts going forward, and two, how much incrementally were you guys able to pick up on the margin there in terms of cost of funds kind of coming in as a result of calling those securitizations? Then expectation going forward as to what other calls would do to that cost of funds. Thanks.

Brandon Filson, Chief Financial Officer, Angel Oak Mortgage REIT: Yeah. Hey, thanks, Matt. Yeah, 2019-2, 2019-4, those were our very first securitizations that we did even before this vehicle was a public REIT. They were very deliberate, to the point, I mean, that the factors were down to very low levels where effectively our retained interest was earning. The weighted average coupon of the deals are in some cases even a bit less. So 6%-7% kind of retained yields on those bond positions. The $19 million in cash would be then immediately reinvested into whole loans. That would at least earn that unleveraged yield today with leverage 12%-14%, and then once we securitize, 15%-20% kind of return. You can think of 8% of our capital over the next couple of quarters going from earning a 6% to a 14% at a base case level.

As we look at other deals, I mean, we do have 1996 securitization and 2020-3 securitization out there that we’re evaluating what to do with them as they deliberate. It all depends on what the execution price and where we are in terms of the cycle, but I’d expect us to be looking hard at that over the next year.

Yeah, got it. That’s helpful there. You guys mentioned competition earlier on the call. I’d like to touch on this given the amount of people that have entered the space or are starting to come in. How are you guys able to go out there and kind of source the loans that you find attractive, opportunistic, and whatnot, and kind of beat out that competition, so to speak?

Yeah, I think we, with our affiliation with Angel Oak Mortgage Solutions and the Angel Oak platform in general, we’ve had a very consistent non-QM program over the past many years. Our rate sheets are similar. We’re always buying. We’re assured of closing deals. When we go out, we think we are able to pull in good demand versus maybe the new guys entering the space that may not be there tomorrow, that may change their mind, and they’re just coming in and out based on a trade item. Again, we’ve said many times this is a business for us, not a trade. We have great relationships, again, with our affiliated originators and other third-party originators where they will show us the loans that we want with the rates we want and the prices we want because they know that we’ll be able to execute and.

Close those loans.

Got it. That’s helpful. Thank you, guys.

Sreeni Prabhu, Chief Executive Officer, Angel Oak Mortgage REIT: The next question comes from Doug Harter with UBS. Please go ahead.

Thanks. Hoping you could touch on your outlook for growth in the investment portfolio, I guess, given a combination of the resecuritization opportunities plus maybe adding some more leverage to the balance sheet.

Brandon Filson, Chief Financial Officer, Angel Oak Mortgage REIT: Yeah. No, I think we have. We did our senior unsecured notes offering, second one, this last summer. Those proceeds have effectively been deployed. Maybe not fully. I mean, it takes several cycles of securitization to get 100% deployed in terms of capital. We released the securitization from the 2019-2, 2019-4 deals. You’ll also see in the filings and whatnot that we also took back an interest in a vehicle that holds some of the non-performing loans from those deals. It’d be about $7 million. Those proceeds should also be coming in today, literally. Then 2025-10 released over $20 million in capital. We have kind of a very good runway for growth in terms of what we’re looking at in terms of purchasing volume. We like to be consistent in the space. We’ve been buying $200-$300 million a quarter, really, over the past year of loans.

We’re also looking at, we have about $75 million worth of HELOCs in our portfolio. We’re looking at doing a securitization in that regard here in the coming quarter that should release additional capital and continuing to grow. As you mentioned, we’re going to be looking at the 1996 and then the 2020-3 securitizations to resecuritize and call if and when that time and opportunity comes up. Yeah, 1996. Sorry if I said 1992.

Great. Appreciate that. I know in the prepared remarks, you did walk through some of the difference between GAAP and economic book value in the quarter, but if you could just kind of give a little more detail and just how we might think about the drivers of change as we go forward on those metrics.

Yeah. So the genesis of economic book value was the 2114 and 2116 securitizations that we did immediately post-IPO. Those were the deals that were in the Goldilocks phase of the market when interest rates were zero and the securitization market was incredibly accretive. They had one of them, 2114, the coupon on the senior bond was just over 1%. So literally very little funding cost. We made the election at that time, if you recall, to hold those liabilities for those sold bonds at amortized cost. Meaning that as obviously rates sold off over the next couple of years, they stayed at par when in reality the fair value of those bonds or the fair value of the liability would have been significantly below par. As we’re in this cycle now where real rates are starting to decline, securitization markets getting better, things are getting tighter.

There’s a lot of demand for these products, and again, real rates are declining. Those bonds are starting to mark back up, which doesn’t happen under GAAP book values. That’s why you see the divergence or the decrease in economic book value quarter versus the increase in GAAP book value, because from a GAAP book value perspective, if you think about those two securitizations, we effectively have an unhedged asset with several hundred million dollars in loans in it. From an economic book value, then we effectively hedge that back down as that liability is starting to increase in value. That liability value is based on the value of those sold bonds.

Great. Appreciate that. Thank you.

Sreeni Prabhu, Chief Executive Officer, Angel Oak Mortgage REIT: Thank you. If you have a question, please press star, then 1. The next question comes from Timothy D’Agostino with B. Riley Securities. Please go ahead.

Good morning. Thanks for taking the question. Just one for me. Regarding the size of securitizations. Just flipping back through prior quarters, it seemed like in 2024, securitizations were slightly above $300 million. So far in 2025, they’ve kind of hovered around $280 million. Was just kind of wondering if we could see future securitizations kind of get back to that $300 million level or if you guys are comfortable with kind of the size you’re doing now. Thanks.

Brandon Filson, Chief Financial Officer, Angel Oak Mortgage REIT: Yeah. We’ve made the conscious decision to be hitting the securitization market very programmatically and consistently, right, and not waiting in this rate environment to get to a $300-$400 million level. That was something we did used to do. Now we found it better, especially with all the supply coming on the market, to be a very consistent issuer. That’s why this year we’re already up to 10-11 real non-QM securitizations. We’ve done the resecuritization. Earlier in the year, we had our first HELOC securitization. I say we here as AOMT or Angel Oak itself. We’re consistently in the market, and we find that has helped tighten up our spreads and keep our risk low on our balance sheets as we move to term out that funding cost.

Okay. Great. And just a quick follow-up. Could we see you investing more in HELOCs going forward, or are you going to continue to just majority focus on non-QM things?

We’re majority focused on non-QM, and we consider our HELOCs kind of non-QM adjacent. A lot of times they look a lot and they feel a lot like a non-QM loan from what we’re doing. They’re just, especially in today’s environment. They’re very attractive in terms of their yield profile. You can see from some of the disclosures, the weighted average coupon on those are just north of 11%. Currently versus new originated non-QM loans. 7.25% to 7.5%. The funding cost is similar between the two, so you can get a lot of extra margin on those. I would imagine that over the coming quarters, we’ll keep it kind of where we are today, which is 70-150 million dollars worth of HELOCs in the portfolio, and then we’ll securitize them off.

Okay. Great. Thank you so much.

Sreeni Prabhu, Chief Executive Officer, Angel Oak Mortgage REIT: Thank you. This concludes our question and answer session. I would like to turn the conference back over to Brandon Filson for any closing remarks.

Brandon Filson, Chief Financial Officer, Angel Oak Mortgage REIT: All right. Thank you, everyone, for your time and interest in Angel Oak Mortgage REIT. We look forward to connecting with you again for year-end. In the meantime, if you have any questions, feel free to reach out to us and have a great day.

Sreeni Prabhu, Chief Executive Officer, Angel Oak Mortgage REIT: Thank you. The conference has now concluded. You may now disconnect your lines. Thank you.

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