Angel Oak Mortgage REIT's Q3 2025: Contradictions Emerge on Securitization Strategy, Non-QM Loans, and Growth Plans

Date of Call: November 6, 2025

Financials Results

• EPS: $0.46 per diluted common share (GAAP net income $11.4M)

Guidance:

• Net interest income expected to continue growing driven by accretive loans purchased this year and Q4 securitization.
• GAAP book value modestly higher since quarter end; book value expected to grow moderately alongside recent rate rally.
• Continue programmatic securitization and resecuritization (including planned HELOC securitization) to release capital and diversify funding.
• Maintain similar operating expense levels and continue cost-efficiency initiatives.
• Declared common dividend of $0.32 per share payable Nov 26, 2025.

Business Commentary:

• Financial Performance and Securitization:
• Angel Oak Mortgage REIT reported a 13% growth in net interest income compared to Q3 2024 and a 2% increase compared to Q2 2025.

• This growth was driven by strategic capital reallocation into high-yielding assets, improved loan financing costs, and successful securitization activities.

  

• Portfolio Growth and Credit Quality:

• The company's net interest income is expected to continue growing, supported by earnings from accretive loans purchased throughout the year and securitization activity in Q4.

• This is attributed to disciplined capital deployment into high-quality, income-accretive opportunities and a focus on maintaining vigilance on credit quality.

• Securitization Market and Cost Optimization:

• Securitization spreads continue to tighten, contributing to the company's efficient securitization execution and supporting valuation and earnings growth.

• The company has optimized costs through rationalization and savings initiatives, with year-to-date operating expenses excluding securitization costs and stock compensation expenses being 19% lower than in 2024.

• Capital Allocation and Strategic Positioning:

• The company effectively utilized a senior unsecured debt issuance in Q2, achieving a full return on investment within one quarter.
• This reflects the company's strategic positioning and ability to capitalize on market conditions, enabling continued growth and margin improvement.

Sentiment Analysis:

Overall Tone: Positive

• "13% growth in net interest income compared to third quarter of 2024"; "GAAP book value per share increased by over 2% compared to the second quarter"; management: "securitization market remains active" and highlighted capital redeployments (called deals releasing $19M and AOMT 2025-10 releasing $22M) supporting earnings and portfolio growth.

Q&A:

• Question from Matthew Erdner (JonesTrading Institutional Services, LLC): 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 the securitizations? And then expectation going forward as to what other calls would do to that cost of funds.
  Response: Calling AOMT 2019-2 and 2019-4 released $19M cash to redeploy into whole loans that should raise returns (from ~6% retained yields to ~14% with leverage); management will evaluate other delevering deals (e.g., 19-6, 2020-3) over the next year.

• Question from Matthew Erdner (JonesTrading Institutional Services, LLC): You mentioned competition earlier on the call. 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?
  Response: Affiliation with Angel Oak Mortgage Solutions, long-standing non-QM program, consistent rate sheets and reliable execution give them sourcing advantages and steady relationships versus newer entrants.

• Question from Douglas Harter (UBS Investment Bank): 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.
  Response: They have a sizable runway—proceeds from senior unsecured issuance, $19M from calls and $22M+ from AOMT 2025-10—enabling continued purchases in the ~$200–300M per quarter range and planned HELOC securitization to release additional capital.

• Question from Douglas Harter (UBS Investment Bank): Could you give a little more detail on how we might think about the drivers of change going forward on GAAP book value versus economic book value?
  Response: Divergence is driven by GAAP holding sold bonds at amortized cost while economic BV fair-values nonrecourse securitization liabilities; as rates decline sold-bond fair values rise, reducing economic BV even while GAAP BV benefits from portfolio valuation gains.

• Question from Timothy D'Agostino (B. Riley Securities, Inc.): Regarding the size of securitizations, could we see future securitizations get back to that $300 million level or are you comfortable with the size you're doing now?
  Response: They intentionally pursue programmatic, consistent securitizations at smaller sizes to stay active in the market, tighten spreads and reduce risk rather than waiting for larger $300–$400M deals.

• Question from Timothy D'Agostino (B. Riley Securities, Inc.): Could we see you investing more in HELOCs going forward? Or will you continue to focus majority on non-QM?
  Response: Primary focus remains on non-QM; HELOCs are 'non-QM adjacent' with higher yields (~11%) and they expect to keep HELOC exposure around ~$75M–$150M and securitize them opportunistically.

Contradiction Point 1

Securitization Strategy and Size

It involves the company's strategy and approach to securitizations, which is pivotal for capital management and growth.

Securitization size averaged over $300 million in 2024 but currently hovers around $280 million in 2025. Do you expect future securitization volumes to return to that level, or are you comfortable with the current size? - Timothy D'Agostino (B. Riley Securities, Inc., Research Division)

2025Q3: Angel Oak Mortgage REIT is focusing on consistently issuing securitizations rather than waiting for a specific size. - Brandon Filson(CFO)

Could you clarify the pathways for portfolio growth through unsecured issuance and portfolio recycling, and your view on balance sheet expansion potential? - Douglas Michael Harter (UBS Investment Bank, Research Division)

2025Q2: We're focusing on consistently issuing securitizations rather than waiting for a specific size. - Brandon Robert Filson(CFO)

Contradiction Point 2

Focus on Traditional Non-QM Loans

It reflects the company's strategic focus on loan types, which impacts portfolio composition and risk profile.

What are your plans moving forward for calling the old securitizations? How much incremental cost of funds did you gain from calling the securitizations, and what are your expectations for future calls' impact on cost of funds? - Matthew Erdner (JonesTrading Institutional Services, LLC, Research Division)

2025Q3: Angel Oak Mortgage REIT primarily focuses on non-QM but sees HELOCs as non-QM adjacent. - Brandon Filson(CFO)

How can you purchase loans at 7% coupon rates when your portfolio's weighted average coupon is 8.5%? - Randy Binner (B. Riley Securities, Inc., Research Division)

2025Q2: We're focusing on buying traditional non-QM loans to prepare for a securitization in the next couple of months. - Brandon Robert Filson(CFO)

Contradiction Point 3

Securitization Market and Spreads

It involves the description of the securitization market and spreads, which are crucial for financial performance and investor expectations.

What are your future plans for calling old securitizations? What was the incremental impact on cost of funds from calling the securitizations, and what are expectations for future calls' impact on cost of funds? - Matthew Erdner(JonesTrading Institutional Services, LLC, Research Division)

2025Q3: Similar opportunities are being considered for other securitizations like 19-6 and 2020-3 as they delever and may offer further margin improvements. - Brandon Filson(CFO)

Did market volatility in early April impact your decision to pursue a single large deal instead of multiple smaller ones? How are daily market fluctuations affecting your operations? - Randy Binner(B. Riley FBR)

2025Q1: Market volatility did impact securitization spreads, widening from 130/135 to 180 over treasuries. - Sreeni Prabhu(CEO)

Contradiction Point 4

Portfolio Growth and Loan Purchases

It involves the company's strategy for portfolio growth and loan purchases, which directly impacts business operations and financial performance.

Given the resecuritization opportunities and potential to add leverage, what is your outlook for growth in the investment portfolio? - Douglas Harter(UBS Investment Bank, Research Division)

2025Q3: Angel Oak Mortgage REIT has a strong pipeline for growth, with consistent loan purchasing of $200 million to $300 million per quarter. - Brandon Filson(CFO)

Can you provide an update on post-securitization loan purchases and any market changes observed? Have credit expansion efforts led to higher acquisition costs? - Matthew Erdner(Jones Trading)

2025Q1: A $24 million capital infusion from the securitization permits $100-$150 million in loan purchases. - Brandon Filson(CFO)

Contradiction Point 5

Securitization Opportunities and Incremental Yield

It directly impacts financial strategies and potential returns on investments, influencing investor expectations.

What are your plans for the old securitizations going forward? What was the incremental impact on funding costs from calling the securitizations? - Matthew Erdner(JonesTrading Institutional Services, LLC, Research Division)

2025Q3: The $19 million in cash from calling the 19-2 and 19-4 securitizations has been immediately reinvested into whole loans, which should increase returns from 6% to 14% unlevered and 15% to 20% levered. - Brandon Filson(CFO)

What incremental yield can re-securitization generate? - Matthew Erdner(Jones Trading)

2024Q4: Incremental yield from re-securitization depends on the specifics of the securitization. Leveraging opportunities can provide 12%-15% yield on whole loans and 15% on securitized securitizations. - Brandon Filson(CFO)