Angel Oak Mortgage REIT (NYSE:AOMR) executives struck an upbeat tone on the company’s fourth-quarter and full-year 2025 earnings call, pointing to higher net interest income, lower operating expenses, and improving valuation marks tied to legacy securitizations as interest rates moved lower during the year.
Management highlights: net interest income growth and improving valuations
Chief Executive Officer Sreeniwas Prabhu said 2025 results reflected “the strength of our earnings engine” and continued execution of the company’s strategy in what he described as an evolving but constructive market backdrop. Prabhu said the company posted a second consecutive year of double-digit net interest income percentage growth and a third consecutive year of operating expense reductions.
Financial results: GAAP profitability improved year over year
Chief Financial Officer Brandon Filson said fourth-quarter performance was in line with expectations and concluded a second consecutive year of expanding net interest income alongside operating expense reductions.
- Fourth quarter GAAP net income: $11.3 million, or $0.45 per diluted common share, compared with a GAAP net loss of $15.1 million, or $0.65 per share, in the fourth quarter of 2024.
- Full-year GAAP net income: $44.0 million, or $1.80 per fully diluted common share, up 53% from $28.8 million, or $1.17 per share, in 2024.
- Fourth quarter distributable earnings: $7.3 million.
- Full-year distributable earnings: $14.6 million.
Filson explained that distributable earnings differed from GAAP results primarily due to the removal of unrealized gains and losses. In the fourth quarter, the difference was driven by removing $8.4 million of net unrealized gains from the securitized loan portfolio, partially offset by $4.0 million of unrealized losses from the residential loans and hedge portfolios. For the full year, the primary driver was removing $28.6 million of unrealized net gains on the securitized loan portfolio.
For 2025, Filson said interest income rose 30% year over year to $143.7 million, while net interest income increased more than 11% to $41.1 million. In the fourth quarter, interest income was $39.0 million and net interest income was $10.9 million, representing year-over-year gains of 22% and 10%, respectively, and sequential increases of 6.5% and 7% from the third quarter.
Cost reductions and balance sheet metrics
Filson said operating expenses declined 15.5% in 2025 to $16.4 million. Excluding non-cash stock compensation and securitization costs, operating expenses were $11.5 million, down 15.4% year over year. Fourth-quarter operating expenses were $5.2 million, or $3.0 million excluding non-cash stock compensation and securitization costs. Filson said the company expects to maintain similar operating expense levels going forward while remaining focused on efficiency.
On the balance sheet, Filson said the company ended the quarter with over $41 million of cash and a recourse debt-to-equity ratio of 1.4 times. He said the company intends to continue managing recourse leverage prudently.
GAAP book value per share increased 1.3% sequentially to $10.74 as of Dec. 31, 2025, from $10.60 as of Sept. 30, 2025. Economic book value—defined by the company as fair valuing all non-recourse securitization obligations—was $12.70 per share at year-end, down slightly from $12.72 per share the prior quarter. Filson said the GAAP book value increase was driven by improving valuations in legacy securitizations and higher operating income, while the small decline in economic book value reflected an expected normalization in legacy valuations.
Loan purchases, securitizations, and HELOC expansion
Filson said the company purchased $861.8 million of loans during 2025. Those purchases carried a weighted average coupon of 7.79%, with a weighted average combined loan-to-value ratio of 65.4% and a weighted average credit score of 756. As of quarter end, the total residential whole loan portfolio carried a weighted average coupon of 7.38%. Within that, the non-QM portion carried a 7.09% weighted average coupon, while HELOCs and closed-end seconds carried a 9.75% weighted average coupon.
Management emphasized continued activity in securitization markets. Filson said the company completed four securitizations during 2025, consistent with its stated annual goal, and also called two legacy deals from 2019 to redeploy delevered capital into higher-yielding assets. In total, the company securitized $704 million in unpaid principal balance across the four transactions. In the fourth quarter, the company completed AOMT 2025-10 as the sole contributor, contributing $274.3 million of loans. It also participated in AOMT 2025-HB2, a $281.4 million HELOC securitization, contributing $58.6 million of HELOCs alongside other Angel Oak strategies.
In the Q&A, Prabhu said HELOCs offered “more relative value” and higher returns, but emphasized the company’s longer-term focus on non-QM and a cautious approach to scaling HELOC underwriting. He said non-QM securitizations were still generating returns in the mid- to high-teens, while HELOC securitizations could be “5, 6, 7 points higher,” citing low-20s return-on-equity perspectives on a fully securitized basis. Management also indicated AOMR may participate in roughly one to two HELOC securitizations per year, noting HELOC purchases began in the back half of 2025.
Credit trends, prepayments, and dividend
Filson said the weighted average percentage of loans 90-plus days delinquent across the total portfolio was 2.18% at quarter end, down 2 basis points from the third quarter of 2025 and down 25 basis points from year-end 2024. He also said performance across the Angel Oak shelf remained strong and that management expects its credit approach to translate into lower losses than comparable non-QM platforms over a full credit cycle.
Three-month prepayment speeds for the RMBS securitized loan portfolio were 11.2% at quarter end, up from 9.4% in the third quarter. Filson said the company expects prepayments to rise as rates decline, but noted it models returns using historical average prepayment speeds of 20% to 30% and said mortgage rates would need to fall meaningfully to have a significant impact because much of the portfolio’s coupon rates remain well below newly originated rates.
The company declared a $0.32 per share common dividend payable Feb. 27, 2026, to shareholders of record as of Feb. 20, 2026.
Looking ahead, Prabhu said the company was optimistic about performance in a steepening yield environment and reiterated a focus on “diligent credit selection, consistent securitization execution, and value-driven decision making.” Filson added that management expects net interest income to continue growing as earnings from purchased loans accrete and securitization activity continues. In response to a question on current book value, management said it believed book value had modestly increased from Dec. 31, 2025 as the curve steepened.
About Angel Oak Mortgage REIT (NYSE:AOMR)
Angel Oak Mortgage REIT, Inc (NYSE: AOMR) is a real estate investment trust that specializes in a diversified portfolio of residential mortgage assets. The company primarily invests in non-agency residential mortgage-backed securities (RMBS), residential whole loans and credit risk transfer securities issued by government-sponsored enterprises. By focusing on these structured credit instruments, Angel Oak Mortgage REIT seeks to generate attractive risk-adjusted returns through a combination of net interest income and potential capital appreciation.
The firm employs leverage through repurchase financing facilities and actively manages duration and credit exposure to adapt to changing market conditions.
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