Angel Oak Mortgage REIT, Inc. (AOMR) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reflects strong financial performance with significant increases in net income and reduced operating expenses. The company demonstrates effective capital recycling and has a positive outlook on HELOC and non-QM loan markets. Despite a slight dip in economic book value, the overall sentiment is positive with robust ROEs and low delinquency rates. The Q&A confirms confidence in continued growth and market stability, although there is some caution regarding private credit impacts. The absence of a market cap suggests a moderate reaction, likely within the 2% to 8% range.
Key Financial Performance
Interest Income Increased 30% year-over-year from $110.4 million in 2024 to $143.7 million in 2025. This growth was driven by steady purchases of securitizations of newly originated loans, higher weighted average coupons on the investment portfolio, and decreases in funding costs.
Net Interest Income Increased 11% year-over-year from $36.9 million in 2024 to $41.1 million in 2025. The increase was supported by higher weighted average coupons and cost rationalization efforts.
Operating Expenses Decreased 15.4% year-over-year from $13.6 million in 2024 to $11.5 million in 2025 (excluding noncash stock compensation and securitization costs). This reduction was due to cost rationalization and expense-saving initiatives.
GAAP Net Income Increased 53% year-over-year from $28.8 million in 2024 to $44 million in 2025. The growth was attributed to higher net interest income and improved valuations in the securitized loan portfolio.
GAAP Book Value per Share Increased 1.3% quarter-over-quarter to $10.74 as of December 31, 2025, from $10.60 as of September 30, 2025. The increase was driven by improving valuations in legacy securitizations and higher operating income.
Economic Book Value per Share Decreased slightly by 0.2% quarter-over-quarter to $12.70 as of December 31, 2025, from $12.72 as of September 30, 2025. The decrease was due to normalization in legacy valuations.
Loan Purchases Totaled $861.8 million in 2025, with a weighted average coupon of 7.79%, a weighted average combined loan-to-value ratio of 65.4%, and a weighted average credit score of 756.
Securitizations Executed 4 securitizations in 2025, totaling $704 million in unpaid principal balance. This included the first HELOC securitization and calling 2 legacy deals from 2019.
Portfolio Delinquency Rate Decreased to 2.18% as of the end of 2025, down 25 basis points year-over-year. This reflects strong credit performance and disciplined underwriting.
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Operating Highlights
HELOC securitization: Completed the first HELOC securitization, marking an entry into a growing asset class while maintaining focus on high-quality non-QM loans.
Non-QM market leadership: Established as a leading non-QM platform with differentiated sourcing, underwriting, and financing capabilities.
Net interest income growth: Achieved 11% year-over-year growth in net interest income, supported by high-yielding investments and securitization activities.
Operating expense reduction: Reduced operating expenses by 15.4% year-over-year, excluding securitization costs and stock compensation.
Securitization activity: Executed 4 securitizations and called 2 legacy deals, redeploying capital into higher-yielding assets.
Credit quality focus: Deliberately shifted to higher credit quality assets to ensure resilience across economic outcomes.
Funding diversification: Added a new warehouse credit facility and issued senior unsecured notes to optimize funding mix and support loan purchases.
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Risk or Challenges
Interest Rate Uncertainty: The broader interest rate environment in 2025 was characterized by decreasing rates, but uncertainty remains around the pace and path of short-term rates, which could impact financial performance and strategic planning.
Economic Environment: The company acknowledges the need to navigate a range of macroeconomic outcomes, which could pose challenges to portfolio performance and overall operations.
Prepayment Speeds: Prepayment speeds are expected to increase as rates decrease, potentially impacting returns on the portfolio. Mortgage rates would need to fall significantly to produce a meaningful impact, but this remains a risk.
Credit Performance: While credit performance remains strong, there is a risk of potential losses in more challenging economic environments, despite proactive credit spectrum migration and disciplined underwriting.
Funding Costs: Decreases in funding costs have supported growth, but any adverse changes in funding conditions could negatively impact net interest income and overall financial performance.
Securitization Market Dependence: The company relies heavily on securitization markets for financing. Any disruptions or unfavorable conditions in these markets could impact the ability to execute securitizations and maintain earnings growth.
Operational Efficiency: The company has reduced operating expenses, but maintaining similar levels of efficiency in the future could be challenging, especially if unexpected costs arise.
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Guidance & Outlook
Interest Rate Environment: Optimistic that short-term rates will continue to decline, leading to further steepening in the yield curve.
HELOC Investments: HELOCs are considered an attractive and growing asset class, with plans to continue investing in them while focusing on high-quality non-QM loans.
Net Interest Income: Expected to continue its growth trend, supported by accretive loans purchased throughout the year and ongoing securitization activity.
Operating Expenses: Expected to maintain similar levels while continuing to optimize expense structure.
Securitization Strategy: Plans to continue leveraging the active securitization market with a disciplined and methodical approach, targeting four securitizations per year.
Credit Performance: Differentiated credit performance expected to translate into lower losses compared to other non-QM platforms across a full credit cycle.
Prepayment Speeds: Prepayment speeds are expected to increase as rates decrease, but significant impact on portfolio returns is unlikely unless mortgage rates fall meaningfully.
Dividend: Declared a $0.32 per share common dividend, to be paid on February 27, 2026.
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Shareholder Return Plan
Dividend Declaration: The company declared a $0.32 per share common dividend, which will be paid on February 27, 2026, to common shareholders of record as of February 20, 2026.
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Key Q&A
Q:Where are you guys seeing the best kind of risk/reward opportunities right now?
A:The company sees more relative value in buying HELOCs due to better IRRs, but they are also focused on non-QM loans for long-term returns. They maintain a mix of both, being cautious with credit underwriting for HELOCs while favoring the cleaner credit of non-QM loans.
Q:Where are you seeing the ROEs on each of those types of securitizations today?
A:Non-QM securitizations are yielding mid- to high-teens ROEs, while HELOCs are 5-7 points higher, resulting in low 20s ROEs on a fully securitized basis.
Q:Did you guys provide a book value update quarter-to-date?
A:The book value has modestly increased from December 31.
Q:Can you talk about your ability to continue to recycle capital either through calling deals or just optimizing financing? How much more capacity you have to grow with the existing capital base?
A:The company has significant capacity to recycle and use capital. They have unlevered loans that can be leveraged, low recourse debt-to-equity ratio, and cash released from securitizations. This capacity is expected to support growth through 2026.
Q:How does the market feel and the activity level in non-QM, HELOC, and securitization markets differ at the start of '26 compared to '25?
A:The mortgage market remains solid, with the non-QM market growing and becoming more competitive. Spreads in the securitization market have tightened but recently widened due to volatility. The company focuses on quality over scale, maintaining relationships with brokers and avoiding price competition.
Q:Regarding HELOC securitizations, what is the expected pace per year?
A:The company expects to participate in 1-2 HELOC securitizations per year, based on their recent activity and pace.
Q:How are you thinking about the attention on private credit and its impact on other asset managers and the resi and commercial mortgage markets?
A:Private credit has seen significant investment, particularly in corporate credit. Institutions and retail investors are underallocated in mortgage-related private credit. While commercial real estate faces delinquencies and defaults, the asset-backed and residential mortgage sectors remain stable. The company has not observed significant impact from private credit issues on these sectors.
Q:How sensitive is the origination volume in the primary market for non-QM to changes in spreads in the secondary market?
A:Origination volumes are not highly sensitive to spread changes as long as rates remain range-bound. A steeper yield curve could shift origination towards hybrid mortgages. Spreads need to stay within 25-40 basis points for healthy securitization and origination activity.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the potential long-term impact of private credit issues on the mortgage sector, providing general observations instead of specific data or detailed analysis.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AOMR HELOC
AOMR environment
AOMT HB
AOMT contributor
Chief Head
Closed End
Conference event
End Seconds
Full Conference
HB AOMR
HELOC securitization
HELOCs Closed
HELOCs asset
Mortgage REIT
approach
coupon end
course
decrease basis
environment rate
expense reduction
income removal
investment portfolio
legacy deal
legacy securitizations
market platform
noncash stock
outcome
quality loan
rate curve
removal gain
securitization HELOCs
share valuation
stability
strength
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valuation legacy
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AOMR Transcript
Angel Oak Mortgage REIT, Inc. (AOMR) Q4 2025 Earnings Call Transcript
Positive2-25
The earnings call reflects strong financial performance with significant increases in net income and reduced operating expenses. The company demonstrates effective capital recycling and has a positive outlook on HELOC and non-QM loan markets. Despite a slight dip in economic book value, the overall sentiment is positive with robust ROEs and low delinquency rates. The Q&A confirms confidence in continued growth and market stability, although there is some caution regarding private credit impacts. The absence of a market cap suggests a moderate reaction, likely within the 2% to 8% range.
Angel Oak Mortgage REIT, Inc. (AOMR) Q3 2025 Earnings Call Transcript
Positive11-6
The company demonstrated strong financial performance with growth in net interest income, GAAP book value, and interest income. Operating expenses decreased significantly, and credit performance improved. The Q&A session revealed a strategic focus on high-yielding assets and a robust securitization strategy, with analysts showing positive sentiment. The company's strategic plan aligns with market dynamics, and the overall sentiment is positive, suggesting a potential stock price increase of 2% to 8% over the next two weeks.
Angel Oak Mortgage REIT, Inc. (AOMR) Q2 2025 Earnings Call Transcript
Positive8-5
The earnings call summary shows strong financial performance with a significant increase in net interest and distributable earnings. Despite a slight decline in book value, the company has strategic plans for growth, including a new partnership and securitization activities. The Q&A section revealed positive sentiment from analysts, with management addressing growth and capital recycling. The strategic partnership announcement and dividend declaration further bolster a positive outlook, suggesting a stock price increase of 2% to 8% over the next two weeks.
Angel Oak Mortgage REIT, Inc. (AOMR) Q1 2025 Earnings Call Transcript
Positive5-5
The earnings call reveals strong financial performance with significant increases in net interest income, operating expense savings, and book value. The company successfully executed securitizations, enhancing capital flexibility. Despite some concerns about market volatility and management's unclear responses on certain issues, the overall outlook remains positive with optimistic guidance and a stable dividend. The positive impact of securitization and loan purchase plans further supports a positive sentiment, likely resulting in a stock price increase of 2% to 8% over the next two weeks.
AOMR Slides
AOMR Report
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