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AO

Angel Oak Mortgage REIT, Inc. (AOMR)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 delivered GAAP net income of $20.5M ($0.87 diluted EPS), net interest income of $10.1M (+17.6% YoY, +2.3% QoQ), and Distributable Earnings (DE) of $4.1M ($0.17/share); GAAP and economic book value rose to $10.70 and $13.41 per share, respectively .
  • EPS vs consensus: Primary EPS came in at $0.17 vs $0.30 consensus (miss); “Revenue” vs consensus: $23.53M vs $10.66M (beat). Management emphasized NII as the core operating metric rather than “revenue” reported by third-party data providers. Values retrieved from S&P Global.*
  • Portfolio execution remained disciplined: $259M of non-QM loan purchases in Q1 (7.67% WA coupon, 70% WA LTV, 751 WA FICO), followed by AOMT 2025-4 ($284.3M) post-quarter that reduced warehouse debt by $242.4M and released $24.7M cash; recourse D/E fell to ~1.3x subsequent to quarter end .
  • Macro backdrop: mortgage rates stable in the mid-to-high 7% range; tariff-related volatility widened spreads near quarter-end, but securitization markets remained open; management expects continued earnings growth and maintained operating expense savings .
  • Near-term catalysts: active securitization pipeline, tightening warehouse spreads, and a 9.75% senior notes due 2030 offering priced May 14 to fund accretive loan purchases and corporate purposes .

What Went Well and What Went Wrong

What Went Well

  • Net interest income expanded to $10.1M (+17.6% YoY, +2.3% QoQ), with management citing “continued net interest margin growth driven by accretive newly originated loan purchases [and] maintained operating expense savings” .
  • Book value accretion: GAAP BV/share rose 5.2% QoQ to $10.70; economic BV/share rose 2.4% QoQ to $13.41, supported by $18.7M of unrealized gains on securitized and residential loan portfolios .
  • Capital discipline and deleveraging: post-quarter securitization freed $24.7M cash and lowered recourse D/E to ~1.3x; warehouse spreads are tightening (down to 165–190 bps over, no SOFR add-on at some lines), improving returns tailwinds .

What Went Wrong

  • EPS miss versus consensus: Primary EPS $0.17 versus $0.30 expected as DE excluded unrealized gains that lifted GAAP results; CFO: “the driver of the difference…is a removal of unrealized gains” (Q1 unrealized gains: $18.7M) . Values retrieved from S&P Global.*
  • Credit normalization continued: 90+ day delinquencies rose to 2.79% portfolio-wide (+35 bps YoY), consistent with a return to historical norms, though management expects relative outperformance versus peers .
  • Spread volatility around tariff headlines temporarily widened AAA spreads to ~180 bps, trimming expected securitization yields to ~13–17% versus the typical 15–20% range .

Financial Results

EPS and Distributable Earnings per Share

MetricQ3 2024Q4 2024Q1 2025
GAAP Diluted EPS ($)$1.29 $(0.65) $0.87
Distributable Earnings per Diluted Share ($)$(0.14) $0.42 $0.17
Primary EPS Consensus Mean ($)*0.201820.260630.29581

Values retrieved from S&P Global.*

Interest Income and Net Interest Income (core operating metrics)

MetricQ3 2024Q4 2024Q1 2025
Interest Income ($USD)$27.44M $31.87M $32.87M
Net Interest Income ($USD)$9.02M $9.86M $10.09M
Revenue Consensus Mean ($USD)*$9.41M$9.90M$10.66M
Revenue Actual ($USD, S&P)*$37.86M$(9.59)M$23.53M

Values retrieved from S&P Global.*

Book Value and ROAE

MetricQ3 2024Q4 2024Q1 2025
GAAP Book Value per Share ($)$11.28 $10.17 $10.70
Economic Book Value per Share ($)$14.02 $13.10 $13.41
DE ROAE (%)(5.2)% 15.7% 6.6%

Balance Sheet Composition (selected)

Asset/LiabilityDec 31, 2024Mar 31, 2025
Residential Mortgage Whole Loans (FV)$183.1M $439.5M
Loans in Securitization Trusts (FV)$1.697B $1.672B
RMBS (FV)$300.2M $398.3M
U.S. Treasuries (FV)— $75.0M
Cash & Equivalents$40.8M $38.7M
Notes Payable (recourse)$129.5M $360.5M
Non-Recourse Securitization Obligation$1.594B $1.556B
Recourse Debt-to-Equity (period-end)~1.0x ~2.3x (then ~1.3x post-Q1)

KPIs

KPIQ1 2025Prior/Context
Non-QM Loan Purchases$259.0M (7.67% WA coupon; 70.0% WA LTV; 751 WA FICO) Q3 2024 purchases: $264.8M (7.74% WA coupon; 70.0% WA LTV; 754 WA FICO)
Whole Loans WA Coupon7.55% +44 bps vs Q1 2024
Loans & Securitization Trust Portfolio WA Coupon5.6% end-Q1; ~5.8% post AOMT 2025-4 —
AOMT 2025-4 (post-Q1)$284.3M loans; 7.50% WA coupon; 70.9% WA LTV; 752 WA FICO; freed $24.7M cash; paid down $242.4M warehouse debt
90+ Day Delinquencies (Portfolio)2.79% (+35 bps YoY) Expected normalization
CPR (RMBS & Securitized Loans)6.6% (3-month) Below historical 25–30 CPR
Dividend$0.32 per share declared (paid May 30) $0.32 in prior quarter (paid Feb 28)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Operating Expenses (ex stock comp, securitization)Near-termN/A“Expect to maintain similar operating expense levels” (~$2.8M ex-noncash/SE) Introduced/maintained
Recourse Debt-to-EquityOngoing“Expected to remain below 2.5x going forward” ~2.3x at Q1 end; ~1.3x post AOMT 2025-4 Maintained (improved post-quarter)
Securitization YieldAOMT 2025-4Typical 15–20%~13–17% due to wider AAA spreads (printed ~180 bps over) Lowered
Loan Purchase PaceNext 1–2 quartersN/A~$100–$150M anticipated using freed capital Introduced
Book Value TrajectoryPost-Q1N/A“Approximately flat” vs Q1-end amid lower base rates offset by slight spread widening Introduced
DividendQ1/Q2 timing$0.32 (paid Feb 28) $0.32 (paid May 30) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Securitization cadence & yieldsAOMT 2024-10 executed post-Q3; positive NII impact Two Q4 deals (AOMT 2024-10, 2024-13) drove NII; methodical cadence AOMT 2025-4 post-Q1; yields trimmed to 13–17% amid wider AAA spreads; market liquidity intact Consistent execution; yields sensitive to spreads
Macro & tariffsRate cut supportive; constructive macro emerging Entered 2025 expecting NII growth Tariff uncertainty widened spreads; mortgage rates mid-high 7% stable; markets resilient Macro supportive but volatile spreads
Credit & prepaymentsStrength in platform; BV accretion Accretive notes issuance; portfolio expansion 90+ delinquency 2.79% (normalize); CPR 6.6%; vigilance on DSCR (Airbnb risk) Gradual normalization; vigilant underwriting
Funding costs/warehouseNoted rate cut benefits Expect recourse D/E <2.5x Warehouse spreads tightening to 165–190 over, removing SOFR add-ons; returns tailwind Improving
Capital raises9.50% notes due 2029 issued in 2024 Accretive within a quarter Flexibility on capital raises; priced 9.75% notes due 2030 in May 2025 Opportunistic capital markets access
Strategic relationships——Brookfield partnership announced for Angel Oak platform; no day-to-day changes for AOMR Potential platform benefits

Management Commentary

  • CEO: “Our performance…was highlighted by continued net interest margin growth driven by accretive newly originated loan purchases, maintained operating expense savings and valuation tailwinds that buoyed book value growth…” .
  • CFO: “For the first quarter…GAAP net income of $20.5M or $0.87…DE…$4.1M or $0.17…The driver of the difference…is a removal of unrealized gains…” .
  • CEO on macro and securitization: “Despite uncertainty surrounding international trade and tariff activity…securitization markets have been resilient…we will remain committed to growing long-term shareholder value through disciplined risk management, securitization execution, and strategic capital deployment” .
  • CFO on warehouse funding costs: “Facilities…were at 210 over…now…no SOFR adjustment and 190…175…and one…at 165…provides…tailwind on returns” .
  • CEO on platform strategy: “We…do not expect any material changes to the day-to-day management of AOMR [from Brookfield partnership]” .

Q&A Highlights

  • Securitization execution through volatility: AAA spreads widened to ~180 bps, trimming expected yields to ~13–17% but still accretive and liquidity remained available; spreads have since tightened to 160s/150s .
  • Prepayment sensitivity: older 5–6% coupon deals would need ~200 bps mortgage rate decline to see speeds pick up meaningfully; current 7.5%+ coupon vintages need ~100 bps; current portfolio-wide CPR ~10 with historical non-QM ~25–30 CPR .
  • DSCR vs bank statement loans: DSCR offers stronger returns via prepayment penalties but requires tighter scrutiny (e.g., Airbnb exposure); no change in mix planned, but higher credit standards maintained .
  • Resecuritization approach: preference for immediate call-and-resecuritize (same day) to avoid variable-rate carry and market risk; warehouse spreads tightening to 165–190 over enhances returns .

Estimates Context

  • EPS: Primary EPS consensus was $0.296 vs actual $0.17 — miss. Management attributed the DE/GAAP divergence to exclusion of unrealized gains ($18.7M in Q1), which boosted GAAP EPS but not DE; consensus likely overestimated DE conversion of valuation tailwinds . Values retrieved from S&P Global.*
  • “Revenue”: Consensus $10.66M vs S&P “actual” $23.53M — beat. The company emphasizes net interest income (NII) as a more meaningful operating metric; NII was $10.09M (+18% YoY). Values retrieved from S&P Global.*
  • Prior quarters: Q4 EPS beat ($0.42 vs $0.261); Q3 EPS miss (–$0.14 vs $0.202). Values retrieved from S&P Global.*
  • Revisions likely: Expect upward adjustments to forward NII given post-quarter securitization and tighter warehouse spreads, but EPS forecasts should reflect continued exclusion of unrealized gains in DE, moderating “headline” EPS vs GAAP .

Key Takeaways for Investors

  • Core earnings power is expanding: NII growth (+18% YoY; +2% QoQ) and tighter warehouse spreads support forward returns even amid spread volatility .
  • Deleveraging and capital recycling are working: post-quarter securitization reduced recourse D/E to ~1.3x and freed $24.7M cash to fund $100–$150M of incremental purchases, reinforcing accretive growth .
  • Expect DE/GAAP EPS divergence to persist: valuation gains lift GAAP, while DE excludes them; traders should anchor on NII and cash coverage rather than third-party “revenue” classifications .
  • Credit normalization manageable: 90+ day delinquency at 2.79% remains controlled; underwriting and low LTVs provide downside protection as non-QM credit normalizes .
  • Securitization markets open but sensitive: yields hinge on spread conditions; management executes through volatility and adapts cadence accordingly — spread tightening is a tailwind for the next print .
  • Dividend stable at $0.32; book value accretive QoQ — signs of improving fundamentals and potential multiple support if NII trajectory continues .
  • Medium-term thesis: scale NII via disciplined loan purchases and methodical securitizations, maintain lean OpEx, and benefit from improving funding costs; watch tariffs/spreads and credit normalization trajectory for near-term trading setup .

Footnote: Values retrieved from S&P Global.*