Angel Oak Mortgage's Q1 2025: Unpacking Key Contradictions in Securitization and Mortgage Strategy

Securitization strategy and loan purchases, mortgage rates and prepayment speeds, securitization frequency and size, mortgage rate increases and prepayment speeds, and securitization impact on net interest margin are the key contradictions discussed in Angel Oak Mortgage's latest 2025Q1 earnings call.



Net Interest Income Growth:
- Angel Oak Mortgage REIT reported 18% net interest income growth for the first quarter of 2025 compared to the first quarter of 2024, marking its third consecutive quarter of net interest income growth.
- The growth is attributed to accretive newly originated loan purchases, maintained operating expense savings, and valuation tailwinds that buoyed book value growth.

Securitization and Capital Deployment:
- The company completed the AOMT 2025-4 securitization, providing capital to purchase new loans and reduce repurchased debt associated with their retained bond portfolio.
- This strategy is designed to drive incremental net interest income in the coming quarters, aligning with the company's adaptive and flexible capital deployment strategy.

Credit Performance and Interest Rate Dynamics:
- The weighted average coupon of their residential whole loan portfolio increased by 44 basis points since the first quarter of 2024, with current loan production remaining in the mid to high 7% range.
- Despite international trade uncertainties impacting interest rate spreads, the company's disciplined and value-driven operating model enables it to withstand volatility while maintaining strong credit performance.

Operating Expense Savings:
- Operating expenses, excluding securitization costs and stock compensation expenses, were $2.8 million in the first quarter of 2025, representing a 29% decrease compared to the same period in 2024 and a 10% decrease from the fourth quarter of 2024.
- This was achieved through strategic cost management and operational efficiency, contributing to overall financial performance and profitability.

Dividend and Shareholder Returns:
- The company declared a $0.32 per share common dividend, showcasing its commitment to delivering positive outcomes for shareholders amid market volatility.
- The dividend payout aligns with the company's focus on maximizing shareholder returns by leveraging its securitization platform and adaptive capital deployment strategy.