Earnings call transcript: Angel Oak Mortgage Q2 2025 misses EPS estimates

Angel Oak Mortgage Inc. (AOMR) reported its Q2 2025 earnings, revealing a significant miss on earnings per share (EPS) expectations, while revenue slightly surpassed forecasts. The company reported an EPS of $0.03, falling short of the expected $0.29, an 89.66% surprise to the downside. Revenue came in at $10.42 million, exceeding projections of $10.04 million by 3.78%. Following the earnings announcement, Angel Oak Mortgage’s stock dropped 5.83% in pre-market trading, reflecting investor concerns over the EPS miss. According to InvestingPro data, the company maintains a notable dividend yield of ~13.6% and trades at an attractive P/E ratio of 5.8x, suggesting potential value for income-focused investors.

Key Takeaways

• Angel Oak Mortgage’s EPS fell significantly below analyst expectations.
• Revenue exceeded forecasts by a small margin, showing resilience in sales.
• Stock price declined by 5.83% in pre-market trading, indicating negative investor sentiment.
• The company completed two securitizations in Q2, contributing to future growth prospects.
• Plans for a September securitization and potential capital raising were announced.

Company Performance

Angel Oak Mortgage reported a mixed performance for Q2 2025. While the company managed to grow its net interest income by 5% year-over-year to $9.9 million, the significant miss on EPS overshadowed its revenue beat. The company’s focus on expanding into Home Equity Line of Credit (HELOC) products and completing two securitizations during the quarter highlights its strategic initiatives to drive future growth. InvestingPro analysis indicates the company maintains strong liquidity with a current ratio of 2.64, though revenue has declined 14.14% over the last twelve months. Get access to 7 more exclusive InvestingPro Tips and comprehensive financial analysis with an InvestingPro subscription.

Financial Highlights

• Revenue: $10.42 million, exceeding forecasts by 3.78%.
• Earnings per share: $0.03, missing expectations by 89.66%.
• Net interest income: $9.9 million, up 5% year-over-year.
• GAAP net income: $767,000, or $0.03 per diluted share.
• Distributable earnings: $2.6 million, or $0.11 per diluted share.

Earnings vs. Forecast

Angel Oak Mortgage’s EPS of $0.03 was a stark miss from the forecasted $0.29, representing an 89.66% negative surprise. This significant deviation from expectations may raise concerns about the company’s ability to manage costs or adapt to changing market conditions. The revenue, however, came in at $10.42 million, slightly above the forecast of $10.04 million, which shows some strength in the company’s core operations.

Market Reaction

The company’s stock price fell by 5.83% in pre-market trading, reflecting investor disappointment with the EPS miss. The stock’s movement is significant, given its 52-week range, with a high of $12.61 and a low of $7.36. The decline suggests that investors are cautious about the company’s near-term profitability despite the revenue beat. Based on InvestingPro’s Fair Value analysis, AOMR appears slightly overvalued at current levels. Analyst price targets range from $10.50 to $13.50, suggesting potential upside despite recent volatility. Discover detailed valuation metrics and 1,400+ comprehensive Pro Research Reports available on InvestingPro.

Outlook & Guidance

Looking ahead, Angel Oak Mortgage plans to execute another securitization in September 2025 and explore capital raising through preferred equity markets. The company expects to maintain current operating expense levels and anticipates continued portfolio growth and net interest margin improvement. These initiatives aim to strengthen the company’s financial position and support long-term growth.

Executive Commentary

CEO Srini Prabhu expressed optimism about the company’s future, stating, "We look forward to continuing to build long-term value for our shareholders." CFO Brandon Filson highlighted the strength of the securitization market, noting, "The securitization market continues to get tighter and stronger in the non-QM space."

Risks and Challenges

• Potential for continued EPS volatility if cost management issues persist.
• Market conditions affecting securitization and loan origination could impact future earnings.
• Macroeconomic factors, such as interest rate changes, may influence mortgage rates and demand.
• Competition in the non-QM loan market could pressure margins.
• Execution risks related to planned capital raising and securitizations.

Q&A

During the earnings call, analysts inquired about the company’s strategies for capital growth and market opportunities in HELOCs. Executives confirmed a strong market position and growth potential, while also analyzing the potential impact of future Federal Reserve rate cuts on their operations.

Full transcript - Angel Oak Mortgage Inc (AOMR) Q2 2025:

Conference Operator: Good day, and welcome to the Angel Oak Mortgage Right Second Quarter twenty twenty five 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 questions. To ask a question, you may press star, then one on your telephone keypad.

To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to Mr. K. C.

Kelleher. Please go ahead.

K.C. Kelleher, Investor Relations, Angel Oak Mortgage REIT: Good morning and thank you for joining us today for Angel Oak Mortgage REIT’s second quarter twenty twenty five earnings conference call. This morning, we filed our press release detailing these results, which is available in the Investors section on our website at ww.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 Angelo Mortgage REIT’s Chief Executive Officer, Srini 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 Srini.

Srini Prabhu, Chief Executive Officer, Angel Oak Mortgage REIT: Thank you, Casey, and thank you all for joining us today. The 2025 was highlighted by our securitization and capital markets activity as we continue to execute towards our earnings growth goals. We completed two securitizations during the quarter and issued $42,500,000 of unsecured debt. The capital released and raised by these transactions was deployed into high quality loans that are expected to drive incremental earnings. Similar to senior unsecured notes we issued in 2024, we expect the new issuance to be accretive to earnings within the next quarter as the earnings from newly purchased assets make their way into the portfolio.

This is strategic playbook we have used successfully in the past, and it continues to be vital growth catalyst for us and the performance of our investment portfolio. Results for the quarter were in line with expectations with 5% growth in net interest income compared to Q2 twenty twenty four and a slight contraction compared to the first quarter due to the added expense of the new senior unsecured notes. Despite the decrease versus the last quarter, we have generated strong expansion in year to date net interest income compared to the 2024, which Brandon will detail further. Book value declined slightly compared to the first quarter on per share basis, driven by net decrease in valuations and the payment of our dividend. Cash flow and dividend coverage remains relatively stable and are expected to resume their respective growth trends demonstrated over the last two years, driven by earnings from assets purchased during and after the quarter.

On credit, notably, ninety plus day delinquency rates decreased at the portfolio wide level compared to the past two quarters, driven by a reduction in delinquency rates for loans securitized in the past two years. The AOMT shelf has begun to distinguish itself along its peers with regards to delinquency performance, which is a direct reflection of our expertise as credit managers. Despite continued uncertainty surrounding international trade and tariff activity, our mortgage rates have been relatively stable, and we continue to purchase loans in the mid to high 7% range. Securitization markets have remained active and accretive amid uncertainty, with both traditional and new participants being active in the market. We have ample opportunities to recycle capital and continue growing our target asset portfolio.

Our capital deployment strategy will remain adaptive and flexible, aligning with evolving market dynamics in order to maximize expected returns for our shareholders. Moving forward, our focus remains on executing our business strategy and delivering positive outcomes for our shareholders, while positioning our balance sheet to be an active buyer of high quality non QM loans. With that, I’ll turn it over to Brandon, who will walk us through our second quarter financial performance in greater detail.

Brandon Filson, Chief Financial Officer, Angel Oak Mortgage REIT: Thank you, Srini. Second quarter operating results were in line with expectations with 5% net interest income growth versus the 2024 and a slight contraction compared to the 2025, owing to the increased interest expense associated with May’s senior unsecured notes issuance. Year to date, net interest income increased 11% compared to 2024. Operating expenses, excluding securitization costs and compensation expense, were $500,000 or 15% lower than in the 2024 and relatively flat compared to the 2025. Year to date, operating expenses excluding securitization costs and stock compensation were 22% lower than in 2024.

Valuations were a slight headwind during the second quarter as increases in valuations for our loans and trust portfolio were offset by increases in the valuation of our non recourse securitization obligation. As of today, we expect that our book value is approximately flat compared to the end of the second quarter. For the 2025, we had GAAP net income of $767,000 or $03 per diluted common share. Distributable earnings for the second quarter were $2,600,000 or $0.11 per diluted common share. The main driver of the difference between GAAP net income and distributable earnings is the realization of unrealized gains on residential loans that were securitized during the second quarter.

For the second quarter, we had $1,600,000 of unrealized loss on our securitized and residential loan portfolios. Interest income for the second quarter was $35,100,000 and net interest income was $9,900,000 marking a 35% improvement in net interest income and a 5% improvement in net interest income compared to the 2024. Compared to the 2025, interest income increased by 6.8% and net interest income decreased by 1%. For the first six months of the year, interest income was $68,000,000 and net interest income was $20,000,000 which translates to an improvement of 3311% respectively, compared to the 2024. Our $147,000,000 of loan purchases in the quarter, inclusive of HELOCs and closed in second mortgages, carried a weighted average coupon of 8.68 and a weighted average combined loan to value ratio of 68.4% and a weighted average FICO score of seven fifty seven.

The weighted average coupon of our residential whole loan portfolio as of the end of the quarter was 8.37%, representing an expansion of 82 basis points versus the end of the first quarter and 66 basis points versus the same period 2024. As of today, our current weighted average coupon is approximately 8.4%. Current loan production in LOXA had stable rates for the past several quarters. We completed two securitizations in the second quarter, where they’re sole contributor to AOMT twenty twenty five-four, contributing 284,300,000.0 with loans. The deal paid down $242,400,000 of warehouse debt and released $24,700,000 of cash, which was used to purchase new loans and reduce outstanding repurchase debt on our retained bond portfolio to reduce financing risk.

Additionally, we participated in AOMT twenty twenty five-six alongside other Angeloid entities, contributing $87,200,000 of the total $349,700,000 scheduled unpaid principal balance. AONT twenty twenty five-six paid down outstanding debt of approximately $73,100,000 and retained bonds with a value of $8,100,000 in addition to releasing $9,200,000 of cash, which was also used to purchase new loans. 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 4.1%. As Srini mentioned, the securitization market remains active, and we intend to continue leveraging it through our disciplined, methodical securitization strategy. Operating expenses for the second quarter were $5,100,000 Excluding non cash stock compensation expenses and securitization costs, second quarter operating expenses were $2,900,000 This represents a 15% decrease compared to the same metric in the 2024.

For the first six months of the year, operating expenses were $8,100,000 Excluding non cash stock compensation expenses and securitization costs, operating expenses for the first six months of the year were $5,700,000 representing a decrease of 22% compared to the 2024. Going forward, we expect to maintain similar operating expense levels. Looking at our balance sheet, as of the end of the quarter, we had $40,500,000 in cash and our recourse debt to equity ratio was 1.1 times. GAAP book value per share decreased 3.1% to $10.37 as of 06/30/2025 from $10.7 as of 03/31/2025. Economic book value, which fair values all non recourse securitization obligations, was $12.97 per share as of 06/30/2025, down 3.3% from $13.41 per share as of 03/31/2025.

The decrease in book value was driven primarily by the aforementioned unrealized losses on our unsecured portfolio and our Q2 dividend payment, offset by operating earnings generated by our portfolio. We ended the quarter with unsecuritized residential whole loans at a fair value of $200,700,000 financed with $118,600,000 of warehouse debt, dollars 1,900,000,000.0 of residential mortgage loans and securitization trusts, and $383,000,000 of RMBS, including $21,000,000 of investments in commingled securitization entities, which are included in other assets on our balance sheet. We finished the quarter with undrawn loan financing capacity of $931,000,000 Now looking at credit, we ended the quarter with a total portfolio weighted average percentage of loans ninety plus days delinquent at 2.35%, inclusive of our residential loan, securitized loan, and RMBS portfolio, representing a decrease of 44 basis points from the 2025. This decrease was observed notably in the loans underlying our twenty twenty three-twenty twenty four seconduritizations, which had been the primary drivers of increases in the ninety plus days delinquent in prior quarters. As expected, it appears performance in these securitizations have begun to normalize.

The AOMT securitization shelf has started to demonstrate outperformance relative to other non QM shelves in terms of delinquencies. We expect that through a credit cycle, this outperformance will lead to fewer defaults and lower losses than other non QM securitization platforms. This expectation is born out of our intentional effort to move up in credit for loan origination and purchases over the past couple of years and continues to provide us with the confidence we will deliver amid potential periods of volatility. Additionally, we expect our portfolio wide LTV diligent underwriting standards and inherent credit selection to mitigate losses throughout the cycle if credit becomes an issue. Three month prepayment speeds for our RMBS and securitized loan portfolios were 11.1% in the quarter, reflecting an increase compared to the 2025.

The increase stems primarily from an acceleration in speed on securitizations within the past two years, as the loans underlying our older securitizations are still significantly below current mortgage rates. While speeds have accelerated, they’re still well below historical and assumed rates of 20% to 30%, which is what we model our returns on. Finally, the company has declared a $0.32 per share common dividend, which will be paid on 08/29/2025, to common shareholders of record as of 08/22/2025. For additional color on our financial results, please review the earnings supplement available on our website. I will now turn it back to Srini for closing remarks.

Srini Prabhu, Chief Executive Officer, Angel Oak Mortgage REIT: Thank you, Brandon. I do like to thank the entire Engleb team for their hard work towards building what we believe is the best non QM loan origination, purchase, and securitization platform by focusing on diligent credit selection, consistent securitization execution, and value driven decision making. 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?

Conference Operator: We will now begin the question and answer session. The first question will come from Doug Harter with UBS. Please go ahead.

Doug Harter, Analyst, UBS: Thanks and good morning. I was hoping you could talk a little bit about your pathway for continuing to grow the portfolio, whether that’s through additional unsecured issuance, continued recycling of the portfolio? Just help us understand how you see the capacity for further balance sheet growth from here.

Brandon Filson, Chief Financial Officer, Angel Oak Mortgage REIT: Yes. No. Hey, Doug. I think this past week, right, we’ve seen a little bit of life in the preferred equity markets with Annaly coming out their deal that priced inside of 9%. I mean, certainly we be a little bit higher pricing than that.

But that’s something we’re looking at as far as immediate growth trajectory and different piece of the capital structure we haven’t utilized yet. I believe that at least as our current common equity base, we’re probably more or less, let’s call it, tapped out on senior unsecured notes issuance. So there’s potential if the stock starts trading well, we could do a little ATM issuance, but nothing really that material for us. So really, we’d be looking at new capital in the preferred markets, especially if we think it’s open now that the Annaly, like said, has hit the market there. Really, it’s recycling.

We have some additional leverage we can apply from the $42,000,000 that we’re continuing to apply over time. If you look at our unsecured portfolio right now, it’s like 50% leverage. We have additional leverage we can apply there to keep buying loans and keep our cash balance about the same. So we have several more securitizations in the pipeline that should free up capital that we’ll be able to continue purchasing loans and really much like we did last fall, you should see or we’re expecting next quarter to really grow the net interest margin again, to continue to improve dividend coverage from a cash flow basis.

Doug Harter, Analyst, UBS: Thanks. And in the past, you’ve talked about potentially relevering, I guess, calling and reissuing some of the older securitizations as a way to free up capital. Can you just talk about kind of how the economics look on that today?

Brandon Filson, Chief Financial Officer, Angel Oak Mortgage REIT: Yes. I mean, that’s still something that’s in flight. And really what we’ll be talking there is some of our pre IPO securitization. So we have three securitizations with like a 2019 vintage, one securitization and a 2020 vintage. From like a true funding cost perspective and the funding cost today look very similar to what they did in 2019.

So really it’s just a releveraging exercise there. And, you know, that’s something that we’re looking at. And, you know, so far the go, no go decision has trended a little bit on the no go decision just based on the for spending incremental dollars on that. It’s not quite as accretive as new loan purchases, especially as we started to buy some HELOCs which have a much higher coupon. And the current issue securitization market continues to get tighter and stronger in the non QM space.

Doug Harter, Analyst, UBS: Great. Appreciate the answers. Thank you.

Conference Operator: The next question is from Randy Binner with B Riley. Please go ahead.

Randy Binner, Analyst, B Riley: Hey thanks. Good morning. So just in the commentary on book value, did you give an indication of where book value is quarter to date?

Brandon Filson, Chief Financial Officer, Angel Oak Mortgage REIT: We believe I apologize if I missed Yeah, no worries. I mean, I think there’s been a lot of movement in the last couple of days. It’s flat to slightly up right now.

Randy Binner, Analyst, B Riley: Okay. That’s helpful. And then on yeah, I guess I’m just interested. So I think you said you’re buying kind of at a mid 7% coupon and the average weighted coupon on the book is like 8.5%. So is there can you say can we just talk about that a little bit more like where kind of how do you see where you’re able to purchase developing kind of over the next month or the remainder of the year?

How if the Fed cuts rates, how that would impact kind of where kind of what coupon you’re purchasing?

Brandon Filson, Chief Financial Officer, Angel Oak Mortgage REIT: Yes. So when we say our mortgage rates are 7.5% or call it mid-7s, that’s for our traditional non QM product. Right now, our portfolio is in the low to mid-8s because we purchased post the 42,000,000 debt issuance, about $75,000,000 worth of home equity line of credits, which is really a newer product for us. We had a couple in the portfolio at the end of Q1. We purchased a couple of pools.

Those are similar credit profiles, mid-seven 100 FICOs, combined LTVs, even in the 60s. But coupons of averaging nearly 11%, sometimes a little bit higher than that. So that’s driven that increase. We ’d expect where we are, again, we want to be, those will be in a separate type of securitization structure when we do that. They’ll be coming with other Angelic entities.

So we like the product, But now we’ve kind of slowed down the purchases of that product to get enough of your traditional non QM loans back in the balance sheet to do a securitization here in the next couple of months.

Randy Binner, Analyst, B Riley: Okay. And then that was the related question. So it sounds like you’re planning hopefully to get one in before the end of the third quarter securitization.

Brandon Filson, Chief Financial Officer, Angel Oak Mortgage REIT: That yeah, that’s the plan.

Eric Hagen, Analyst, BTIG: Got it.

Brandon Filson, Chief Financial Officer, Angel Oak Mortgage REIT: All right. Thank you.

Conference Operator: The next question is from Matthew Erdner with Jones Trading. Please go ahead.

Matthew Erdner, Analyst, Jones Trading: Hey, good morning, guys. Thanks for taking the question. I’m going to follow-up a little on that last one, just kind of on the HELOCs and second liens. Where are you guys seeing the most opportunity right now in the acquisition market when you’re out there buying loans? And then just kind of following up on the securitization question, should we kind of expect that towards the end of the quarter?

Brandon Filson, Chief Financial Officer, Angel Oak Mortgage REIT: Side, I would think that, yeah, we’re probably looking targeting sometime September for the deal. Again, it depends a little bit on where exactly we are with some of our loan pipeline. We have 100 of committed loan purchases, but some of those take a little time to get closed from a locked position to a loan position. If those close a little quicker, we can push out a little earlier. Otherwise, we have to wait to that critical mass, right, as our securitizations are high 200,000,000 low $300,000,000 range right now.

And as far as incremental purchase volume, I think origination volume has been relatively strong. Rates have been very stable in that market, even if you get a little volatility. I think that’s probably a little bit of a reflection of the fact that our securitization market continues to be very strong. We’re pricing deals now kind of low in a 140 range of AAA level, which is kind of pricing on top of agency bonds. Very tight spreads.

So that market is strong and taking out some of the volatility we’ve seen over the past, even with rates rising or rates declining. If the Fed starts cutting rates, The portfolio is I don’t expect a huge move in prepayment speeds as we have a lot of current market coupon deals. But if the Fed starts cutting a little bit and rates go from 7.5 to 7.8 or 7.25 is probably not going to move that much. And then so much of our portfolio is also still significantly underwater or out of the money from a refinance decision at the 5% coupon range. Obviously, there’ll be incremental speed pickup, but nothing to increase even at least is what we’re expecting back to historical levels in non QM of like a 25 to 30 CPR.

Today we’re seeing new deals in the 20s, low 20s, some of the older ones still down in the low 10s. Really the change there on rates declining, it’s going to be a book value change. As we see rates come in, real rates come in, Fed rates cut, you’ll see our financing costs decrease a little bit on the warehouse side. And then book value start to increase as well, especially again back on those 5% loans that we were originating in ’twenty one, ’twenty two.

Matthew Erdner, Analyst, Jones Trading: That’s very helpful. Thank you for the color.

Conference Operator: The next question is from Eric Hagen from BTIG. Please go ahead.

Eric Hagen, Analyst, BTIG: Hi, thanks. Good morning. We’ve seen some more of the mortgage REITs allocate more capital to their origination platforms. I mean, do you guys see that maybe changing the competitive dynamic in the market at all? And just any general perspectives on what that capital allocation kind of means for our market?

Srini Prabhu, Chief Executive Officer, Angel Oak Mortgage REIT: Yeah, I mean, we are seeing a lot of mortgage REITs actually invest in the non QM side, when the other sectors of the mortgage market don’t seem to be giving that kind of returns. To be perfectly honest with you, we haven’t seen, from our mortgage company side, I mean, the market is getting bigger, the overall size of the market is getting bigger just because there’s more education out there. So that’s necessarily not a bad thing. So I would not say that it’s eating into other originations. The overall pot is growing, which is exciting for the overall market.

From our origination, from, you know, we had we had a team over to our offices. The mortgage company team had offices yesterday, and our pipelines are growing. So so that’s healthy for the market. We are not seeing that much creep in credit standards from even other guys. So that’s also a good thing, right?

Because that’s a worrisome trend. You’ve seen that the delinquencies of some of the other originators have gone up. But generally, would say that even the new guys coming in or guys investing in origination companies, the credit seems to be still on a good path. So yes, we are seeing more people enter, but it hasn’t pushed on the fact that it’s eating into our origination, or I don’t think it’s eating into other originations.

Eric Hagen, Analyst, BTIG: Got it. That’s really helpful. Historically, you guys have been a fixed rate lender. But do you guys think we’ll eventually see more demand for hybrid ARMs to refi these high coupon borrowers if the long end of the yield curve stays high. But the Fed cuts rates, I mean, and from your perspective, you guys able to supply that kind of credit?

Just your perspective on Yeah. Doing

Srini Prabhu, Chief Executive Officer, Angel Oak Mortgage REIT: know, it’s funny. We haven’t seen hybrids in a long, long time. But we’ve talked about it, to be honest with you, the curve will have to steepen a lot. But I don’t know, that’s a good question. I think all of us will have to get to that point.

And I do think those conversations will happen if the longer rates stay higher and you start seeing the front end, because that environment hasn’t happened in a long time. But as of today, it’s not efficient, and we really haven’t discussed it in great detail.

Eric Hagen, Analyst, BTIG: Got you. Thank you guys very much.

Srini Prabhu, Chief Executive Officer, Angel Oak Mortgage REIT: Thank you. This

Conference Operator: concludes our question and answer session. I would like to turn the conference back over to Brandon Filson for closing remarks.

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

Conference Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.