[PART I. FINANCIAL INFORMATION](index=2&type=section&id=Part%20I%20-%20FINANCIAL%20INFORMATION) This section covers the Company's unaudited financial statements and management's discussion and analysis [ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including core statements and detailed notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Presents the Company's financial position, detailing assets, liabilities, and equity at specific points in time Key Balance Sheet Figures (in thousands): | Metric | March 31, 2025 | December 31, 2024 | Change | | :----------------------------------------- | :------------- | :---------------- | :----- | | Total assets | $2,676,535 | $2,269,769 | +$406,766 | | Residential mortgage loans - at fair value | $439,460 | $183,064 | +$256,396 | | RMBS - at fair value | $398,272 | $300,243 | +$98,029 | | Total liabilities | $2,425,055 | $2,030,802 | +$394,253 | | Notes payable | $360,470 | $129,459 | +$231,011 | | Due to broker | $302,619 | $201,994 | +$100,625 | | Total stockholders' equity | $251,480 | $238,967 | +$12,513 | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) Details the Company's revenues, expenses, and net income or loss over specific reporting periods Key Operations Figures (Three Months Ended, in thousands): | Metric | March 31, 2025 | March 31, 2024 | Change | | :---------------------------------------------------------------- | :------------- | :------------- | :----- | | Interest income | $32,867 | $25,212 | +$7,655 | | Interest expense | $22,780 | $16,633 | +$6,147 | | NET INTEREST INCOME | $10,087 | $8,579 | +$1,508 | | TOTAL REALIZED AND UNREALIZED GAINS (LOSSES), NET | $13,443 | $9,262 | +$4,181 | | Total operating expenses | $2,999 | $4,680 | $(1,681) | | INCOME (LOSS) BEFORE INCOME TAXES | $20,531 | $13,161 | +$7,370 | | NET INCOME (LOSS) ALLOCABLE TO COMMON STOCKHOLDERS | $20,531 | $12,874 | +$7,657 | | Basic earnings (loss) per common share | $0.88 | $0.52 | +$0.36 | | Diluted earnings (loss) per common share | $0.87 | $0.51 | +$0.36 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Outlines the changes in the Company's equity accounts, including net income, dividends, and stock transactions Changes in Stockholders' Equity (Three Months Ended, in thousands): | Metric | March 31, 2025 | December 31, 2024 | | :------------------------------------ | :------------- | :---------------- | | Stockholders' equity as of period start | $238,967 | $256,106 | | Dividends paid on common stock | $(7,520) | $(7,989) | | Stock compensation | $237 | $630 | | Unrealized gain (loss) on RMBS and CMBS | $(695) | $1,703 | | Net income | $20,531 | $12,874 | | Stockholders' equity as of period end | $251,480 | $263,324 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash inflows and outflows from operating, investing, and financing activities for the reporting period Cash Flow Summary (Three Months Ended, in thousands): | Activity | March 31, 2025 | March 31, 2024 | | :-------------------------------------- | :------------- | :------------- | | Net cash provided by (used in) operating activities | $(201,748) | $40,222 | | Net cash provided by (used in) investing activities | $(75,867) | $(4,819) | | Net cash provided by (used in) financing activities | $278,192 | $(37,679) | | CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | $577 | $(2,276) | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period | $43,470 | $42,220 | [Notes to the Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and additional information supporting the condensed consolidated financial statements [Note 1. Organization and Basis of Presentation](index=8&type=section&id=Note%201.%20Organization%20and%20Basis%20of%20Presentation) Describes the Company's business, its focus on non-QM loans, and its election to be taxed as a REIT - The Company is a real estate finance company focused on acquiring and investing in first lien non-qualified residential mortgage ("non-QM") loans and other mortgage-related assets in the U.S. mortgage market[23](index=23&type=chunk) - The Company is externally managed and advised by Falcons I, LLC (the "Manager"), an affiliate of Angel Oak Capital Advisors, LLC, and has elected to be taxed as a real estate investment trust (REIT) since December 31, 2019[27](index=27&type=chunk) [Note 2. Variable Interest Entities](index=9&type=section&id=Note%202.%20Variable%20Interest%20Entities) Explains the Company's use of VIEs for securitization and consolidation of primary beneficiaries - The Company utilizes variable interest entities (VIEs) for securitizing whole mortgage loans to obtain long-term non-recourse financing, consolidating those where it is the primary beneficiary[36](index=36&type=chunk)[37](index=37&type=chunk) Consolidated VIEs (in thousands): | Metric | March 31, 2025 | December 31, 2024 | | :------------------------------------------------------------------------------------------------ | :------------- | :---------------- | | Residential mortgage loans in securitization trusts, at fair value | $1,672,189 | $1,696,995 | | Non-recourse securitization obligation, collateralized by residential mortgage loans in securitization trusts at fair value | $1,556,075 | $1,593,612 | [Note 3. Residential Mortgage Loans](index=11&type=section&id=Note%203.%20Residential%20Mortgage%20Loans) Details the Company's residential mortgage loan portfolio, including fair value and delinquency rates Residential Mortgage Loan Portfolio (in thousands): | Metric | March 31, 2025 | December 31, 2024 | | :------------------------------------ | :------------- | :---------------- | | Fair value | $439,460 | $183,064 | | Weighted average interest rate | 7.55 % | 7.39 % | | Number of mortgage loans 90+ days past due | 3 | — | | Recorded investment in mortgage loans 90+ days past due | $2,436 | $— | [Note 4. Investment Securities](index=12&type=section&id=Note%204.%20Investment%20Securities) Describes the Company's investment securities, including RMBS, Agency RMBS, and U.S. Treasury securities - Investment securities include non-agency RMBS (AOMT RMBS), Whole Pool Agency RMBS, and U.S. Treasury securities[51](index=51&type=chunk) Investment Securities at Fair Value (in thousands): | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------- | :------------- | :---------------- | | Total RMBS | $398,272 | $300,243 | | AOMT RMBS | $97,210 | $98,791 | | Whole Pool Agency RMBS | $301,062 | $201,452 | | U.S. Treasury securities | $74,959 | $— | [Note 5. Financing](index=14&type=section&id=Note%205.%20Financing) Outlines the Company's financing arrangements, including lines of credit, notes payable, and senior unsecured notes - The Company finances residential and commercial whole loans using lines of credit (notes payable) and has issued Senior Unsecured Notes[55](index=55&type=chunk)[59](index=59&type=chunk) Financing Details (in thousands): | Metric | March 31, 2025 | December 31, 2024 | | :------------------------------------ | :------------- | :---------------- | | Total Notes Payable (Drawn Amount) | $360,470 | $129,459 | | Total Borrowing Capacity | $1,050,000 | N/A | | Available Financing | $689,530 | N/A | | Senior Unsecured Notes (Outstanding Principal) | $50,000 | $50,000 | | Senior Unsecured Notes Interest Rate | 9.500% | 9.500% | | Senior Unsecured Notes Maturity | July 30, 2029 | July 30, 2029 | - The financing facility with Multinational Bank 1 was extended through September 25, 2025, with the interest rate pricing spread reduced to a range from **1.65% to 2.10%**[57](index=57&type=chunk)[62](index=62&type=chunk) [Note 6. Due to Broker](index=17&type=section&id=Note%206.%20Due%20to%20Broker) Explains the 'Due to broker' balance, primarily related to quarter-end Whole Pool Agency RMBS purchases Due to Broker (in thousands): | Metric | March 31, 2025 | December 31, 2024 | | :----------- | :------------- | :---------------- | | Due to broker | $302,619 | $201,994 | - The increase in 'Due to broker' relates to the purchase of Whole Pool Agency RMBS at quarter-end, with settlement occurring in the subsequent month[67](index=67&type=chunk) [Note 7. Securities Sold Under Agreements to Repurchase](index=17&type=section&id=Note%207.%20Securities%20Sold%20Under%20Agreements%20to%20Repurchase) Details the Company's repurchase agreements, including outstanding amounts and weighted average rates Repurchase Agreements (in thousands): | Metric | March 31, 2025 | December 31, 2024 | | :------------------------------------ | :------------- | :---------------- | | Amount Outstanding | $148,467 | $50,555 | | Weighted Average Interest Rate | 5.15 % | 5.76 % | | Weighted Average Remaining Maturity (Days) | 10 | 19 | [Note 8. Derivative Financial Instruments](index=17&type=section&id=Note%208.%20Derivative%20Financial%20Instruments) Describes the Company's use of interest rate futures and TBAs for hedging interest rate and prepayment risk - The Company uses interest rate futures and To-Be-Announced ("TBA") securities as economic hedges to manage interest rate and prepayment risk[71](index=71&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) Derivative Gains and Losses (Three Months Ended March 31, 2025, in thousands): | Instrument | Net Realized Gains (Losses) | Net Change in Unrealized Appreciation (Depreciation) | | :------------------ | :-------------------------- | :------------------------------------------------- | | Interest rate futures | $(1,473) | $(1,935) | | TBAs | $1,163 | $893 | [Note 9. Fair Value Measurements](index=19&type=section&id=Note%209.%20Fair%20Value%20Measurements) Explains the Company's fair value hierarchy for financial instruments, including Level 3 inputs and assumptions - The Company uses a fair value hierarchy (Level 1, 2, 3) for financial instruments, with Level 3 inputs involving significant unobservable assumptions such as prepayment rates, default rates, and loss severity[79](index=79&type=chunk)[87](index=87&type=chunk) Financial Assets and Liabilities at Fair Value (March 31, 2025, in thousands): | Category | Level 1 | Level 2 | Level 3 | Total | | :---------------------------------------------------------------- | :------ | :-------- | :------ | :------ | | Total assets, at fair value | $76,380 | $2,494,796 | $26,090 | $2,597,266 | | Residential mortgage loans (Level 3) | — | $437,228 | $2,232 | $439,460 | | Residential mortgage loans in securitization trusts (Level 3) | — | $1,648,331 | $23,858 | $1,672,189 | | Total liabilities, at fair value | $948 | $1,178,727 | $— | $1,179,675 | - The fair value of non-recourse securitization obligations held at amortized cost was approximately **$95.3 million less** than their amortized cost basis as of March 31, 2025[92](index=92&type=chunk) [Note 10. Related Party Transactions](index=24&type=section&id=Note%2010.%20Related%20Party%20Transactions) Details transactions with affiliates, including loan purchases, management fees, and operating expenses - The Company purchases residential mortgage loans from affiliates and participates in securitization transactions with other Angel Oak Capital affiliates[103](index=103&type=chunk)[105](index=105&type=chunk) Related Party Transactions (in thousands): | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Amount of Loans Purchased from Affiliates | $76,697 | N/A | | Management fee incurred with affiliate | $1,145 | $1,313 | | Operating expenses incurred with affiliate | $416 | $515 | - The management fee and operating expenses incurred with affiliates decreased due to a decrease in average Equity and resource alignment initiatives, respectively[160](index=160&type=chunk)[163](index=163&type=chunk) [Note 11. Commitments and Contingencies](index=26&type=section&id=Note%2011.%20Commitments%20and%20Contingencies) Summarizes the Company's purchase commitments and confirms no material legal claims as of March 31, 2025 Total Purchase Commitments (in thousands): | Date | Amount | | :---------------- | :------- | | March 31, 2025 | $108,600 | | December 31, 2024 | $152,600 | - The Company was not aware of any legal claims that could materially impact its financial condition as of March 31, 2025[110](index=110&type=chunk) [Note 12. Accumulated Other Comprehensive Income/(Loss)](index=26&type=section&id=Note%2012.%20Accumulated%20Other%20Comprehensive%20Income/(Loss)) Presents the changes in accumulated other comprehensive income or loss, including unrealized gains/losses Accumulated Other Comprehensive Income/(Loss) (in thousands): | Metric | March 31, 2025 | March 31, 2024 | | :------------------------------------ | :------------- | :------------- | | AOCI balance, beginning of period | $(3,475) | $(4,975) | | Net unrealized gain/(loss) on AFS securities | $(695) | $1,703 | | AOCI balance, end of period | $(4,170) | $(3,272) | [Note 13. Other Assets](index=27&type=section&id=Note%2013.%20Other%20Assets) Details other assets, including investments in majority-owned affiliates, commercial mortgage loans, and CMBS Other Assets (in thousands): | Category | March 31, 2025 | December 31, 2024 | | :------------------------------------ | :------------- | :---------------- | | Investments in Majority-Owned Affiliates | $20,828 | $20,680 | | Commercial Mortgage Loans | $5,207 | $5,214 | | CMBS | $5,757 | $5,593 | | Total other assets | $36,941 | $36,918 | - Investments in Majority-Owned Affiliates (MOAs) are accounted for as equity method investments and held at amortized cost, representing risk retention bonds from securitization trusts[115](index=115&type=chunk) [Note 14. Equity and Earnings per Share ("EPS")](index=28&type=section&id=Note%2014.%20Equity%20and%20Earnings%20per%20Share%20(%22EPS%22)) Provides details on the Company's equity and earnings per share calculations for common stockholders Earnings Per Share (Three Months Ended): | Metric | March 31, 2025 | March 31, 2024 | | :------------------------------------ | :------------- | :------------- | | Net income (loss) to common stockholders - basic | $20,498k | $12,814k | | Basic earnings (loss) per common share | $0.88 | $0.52 | | Diluted earnings (loss) per common share | $0.87 | $0.51 | [Note 15. Subsequent Events](index=28&type=section&id=Note%2015.%20Subsequent%20Events) Highlights significant events occurring after the reporting period, such as securitizations and dividend declarations - On April 11, 2025, the Company securitized residential mortgage loans with an unpaid principal balance of **$284.3 million** in the issuance of AOMT 2025-4[121](index=121&type=chunk) - On May 5, 2025, the Company declared a dividend of **$0.32 per share** of common stock, payable on May 30, 2025[121](index=121&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the Company's financial condition, operations, and liquidity, highlighting macroeconomic trends and portfolio performance [General](index=31&type=section&id=General) Provides an overview of the Company's business model, focus on non-QM loans, and the upcoming strategic transaction - Angel Oak Mortgage REIT, Inc. focuses on acquiring and investing in first lien non-qualified residential mortgage (non-QM) loans, primarily sourced from its affiliated mortgage lending platform[128](index=128&type=chunk) - The Company benefits from Angel Oak's vertically integrated platform, providing proprietary access to non-QM loans, underwriting transparency, and expertise in structured credit investments[130](index=130&type=chunk)[132](index=132&type=chunk) - A strategic transaction is expected to close in Q2 or Q3 2025, where Brookfield Asset Management Ltd. will acquire approximately **51% beneficial ownership** of Angel Oak Companies and indirectly the Manager, with no material changes anticipated for the Company's investment objectives or management[133](index=133&type=chunk) [Trends and Recent Developments](index=33&type=section&id=Trends%20and%20Recent%20Developments) Discusses macroeconomic trends, interest rate movements, and their impact on asset pricing and loan purchases in Q1 2025 - The first quarter of 2025 presented a constructive macroeconomic environment with stable interest rates and decreasing expected rate and inflation paths, although new tariffs introduced uncertainty[136](index=136&type=chunk) - Treasury yields decreased across two, five, and ten-year terms (e.g., two-year yield decreased by approximately **36 basis points to 3.95%**)[137](index=137&type=chunk) - 30-year fixed residential conforming mortgage rates decreased by **20 basis points to 6.65%** by the end of Q1 2025, positively impacting asset pricing[138](index=138&type=chunk) - The Company observed a **77 basis point increase** in the weighted average price of its residential whole loans portfolio and a **94 basis point increase** in the weighted average price of its loans in securitization trusts portfolio[138](index=138&type=chunk) - During Q1 2025, the Company purchased **$259.0 million** of newly-originated non-QM residential mortgage loans with a weighted average coupon of **7.67%**, LTV of **70.0%**, and credit score of **751**[141](index=141&type=chunk) [Key Financial Metrics](index=34&type=section&id=Key%20Financial%20Metrics) Presents non-GAAP measures like Distributable Earnings and Book Value per Share to assess financial performance - The Company uses non-GAAP measures such as Distributable Earnings, Distributable Earnings Return on Average Equity, Book Value per Share, and Economic Book Value per Share to assess financial performance[144](index=144&type=chunk)[145](index=145&type=chunk)[150](index=150&type=chunk)[153](index=153&type=chunk) Distributable Earnings & Return on Equity (in thousands, except %): | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Distributable Earnings | $4,144 | $2,820 | | Annualized Distributable Earnings | $16,576 | $11,280 | | Distributable Earnings Return on Average Equity | 6.6 % | 4.3 % | Book Value & Economic Book Value per Share: | Metric | March 31, 2025 | December 31, 2024 | | :------------------------------------ | :------------- | :---------------- | | Book value per share of common stock | $10.70 | $10.17 | | Economic book value per share of common stock | $13.41 | $13.10 | [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Summarizes the Company's net interest income, total gains/losses, operating expenses, and net income for the period Summary of Results of Operations (Three Months Ended, in thousands): | Metric | March 31, 2025 | March 31, 2024 | Change | | :---------------------------------------------------------------- | :------------- | :------------- | :----- | | Net Interest Income | $10,087 | $8,579 | +$1,508 | | Total Realized and Unrealized Gains (Losses), Net | $13,443 | $9,262 | +$4,181 | | Total Operating Expenses | $2,999 | $4,680 | $(1,681) | | Net Income (Loss) Allocable to Common Stockholders | $20,531 | $12,874 | +$7,657 | | Total Comprehensive Income (Loss) | $19,836 | $14,577 | +$5,259 | - Net interest income increased by **17.6% year-over-year**, driven by a **$7.7 million increase** in interest income (due to higher asset amounts and yields) which outpaced a **$6.2 million increase** in interest expense (due to higher borrowings, mitigated by lower average borrowing costs)[156](index=156&type=chunk) - Total realized and unrealized gains, net, were primarily driven by gains on securitization, net of unrealized gain (loss) on non-recourse securitization obligation[158](index=158&type=chunk) - Total operating expenses decreased due to cost savings actions, vendor contract negotiations, and lower servicing fees[159](index=159&type=chunk) [Our Portfolio](index=40&type=section&id=Our%20Portfolio) Provides a detailed overview of the Company's investment portfolio, including residential mortgage loans and RMBS Portfolio Overview (March 31, 2025, in thousands): | Category | Fair Value | Collateralized Debt | Allocated Capital | % of Total Capital | | :------------------------------------ | :--------- | :------------------ | :---------------- | :----------------- | | Residential mortgage loans | $439,460 | $360,470 | $78,990 | 31.4 % | | Residential mortgage loans in securitization trust | $1,672,189 | $1,556,075 | $116,114 | 46.2 % | | RMBS | $398,272 | $73,903 | $324,369 | 129.0 % | | U.S. Treasury securities | $74,959 | $74,564 | $395 | 0.2 % | | Investments in Majority-Owned Affiliates | $20,828 | $— | $20,828 | 8.3 % | | Total investment portfolio | $2,605,708 | $2,065,012 | $540,696 | 215.0 % | Residential Mortgage Loans Characteristics (March 31, 2025): | Metric | Portfolio Weighted Average | | :------------------------------------ | :------------------------- | | Interest rate | 7.55% | | FICO score at loan origination | 750 | | LTV at loan origination | 71.2% | | Percentage of loans 90+ days delinquent (based on UPB) | 0.6% | Residential Mortgage Loans in Securitization Trusts Characteristics (March 31, 2025): | Metric | Value | | :------------------------------------ | :------ | | UPB | $1,738,099k | | Weighted average loan coupon | 5.55% | | Weighted average credit score at loan origination and deal date | 743 | | Percentage of loans 90+ days delinquent (based on UPB) | 1.7% | - The geographic distribution of residential mortgage loans shows concentrations in California (**25.9%**), Florida (**15.9%**), and Texas (**7.9%**) as of March 31, 2025[174](index=174&type=chunk) [Liquidity and Capital Resources](index=58&type=section&id=Liquidity%20and%20Capital%20Resources) Details the Company's liquidity sources, financing lines, repurchase facilities, and cash flow activities - The Company's liquidity sources include principal and interest payments, unused borrowing capacity under loan financing lines and repurchase facilities, securitizations, and its ATM Program[201](index=201&type=chunk) Financing Lines and Capacity (March 31, 2025, in thousands): | Metric | Value | | :------------------------------------ | :---------- | | Total Borrowing Capacity | $1,050,000 | | Total Drawn Amount (Notes Payable) | $360,470 | | Available Financing | $689,530 | Short-Term Repurchase Facilities (March 31, 2025, in thousands): | Metric | Value | | :------------------------------------ | :---------- | | Amount Outstanding | $148,467 | | Weighted Average Interest Rate | 5.15 % | | Weighted Average Remaining Maturity (Days) | 10 | - Subsequent to quarter-end, in April 2025, the Company issued AOMT 2025-4, a **$284.3 million** securitization, using proceeds to repay **$242.4 million** of debt and retaining **$24.7 million** cash for new loan purchases and operations[234](index=234&type=chunk) - Cash and cash equivalents were **$38.7 million** and restricted cash was **$4.8 million** as of March 31, 2025, deemed sufficient to meet liquidity covenants and potential margin calls[8](index=8&type=chunk)[250](index=250&type=chunk)[251](index=251&type=chunk) - Cash flows from operating activities shifted from a **$40.2 million provision** in Q1 2024 to a **$(201.7) million use** in Q1 2025, primarily due to the volume of residential mortgage loans purchased[253](index=253&type=chunk) [Critical Accounting Policies and Estimates](index=66&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) States that critical accounting policies and estimates remain unchanged, anticipating GAAP earnings volatility - The Company's critical accounting policies and estimates, which involve significant judgment and assumptions, have not materially changed since December 31, 2024[257](index=257&type=chunk) - Management anticipates quarter-to-quarter GAAP earnings volatility due to changes in the fair values of consolidated assets and liabilities, and technical accounting issues and estimates[258](index=258&type=chunk) [Recent Accounting Pronouncements](index=66&type=section&id=Recent%20Accounting%20Pronouncements) Confirms no significant impact from recent Accounting Standards Updates on the Company's financial statements - There were no recent Accounting Standards Updates (ASUs) expected to have a significant impact on the Company's condensed consolidated financial statements[33](index=33&type=chunk)[259](index=259&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=67&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the Company is not required to provide quantitative and qualitative disclosures about market risk - The Company is not required to provide quantitative and qualitative disclosures about market risk as it qualifies as a smaller reporting company[260](index=260&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=67&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting - The Company's disclosure controls and procedures were evaluated and deemed effective as of March 31, 2025[261](index=261&type=chunk) - There have been no material changes in the Company's internal control over financial reporting during the fiscal quarter[262](index=262&type=chunk) [PART II. OTHER INFORMATION](index=68&type=section&id=Part%20II.%20Other%20Information) This section contains other required information, including legal proceedings, risk factors, equity sales, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=68&type=section&id=Item%201.%20Legal%20Proceedings) The Company reported no legal proceedings during the quarter - No legal proceedings were reported by the Company[264](index=264&type=chunk) [ITEM 1A. RISK FACTORS](index=68&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the Company's principal risk factors from those previously disclosed - No material changes to the Company's principal risk factors have occurred since the Annual Report on Form 10-K[265](index=265&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=68&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company did not engage in any unregistered sales or issuer purchases of equity securities during the quarter - There were no issuer purchases of equity securities during the quarter ended March 31, 2025[266](index=266&type=chunk) - There were no unregistered sales of equity securities during the quarter ended March 31, 2025[267](index=267&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=68&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities during the quarter - No defaults upon senior securities were reported[268](index=268&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=68&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company's operations - Mine Safety Disclosures are not applicable to the Company[269](index=269&type=chunk) [ITEM 5. OTHER INFORMATION](index=68&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - None of the Company's directors or officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2025[270](index=270&type=chunk) [ITEM 6. EXHIBITS](index=69&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including governance documents and certifications - Exhibits include Articles of Amendment, Bylaws, CEO and CFO certifications (pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act), and Interactive Data Files (XBRL documents)[271](index=271&type=chunk) [Signatures](index=70&type=section&id=Signatures) The Quarterly Report on Form 10-Q was signed on May 6, 2025, by the CEO and CFO - The report was signed by Sreeniwas Prabhu (Chief Executive Officer and President) and Brandon R. Filson (Chief Financial Officer and Treasurer) on May 6, 2025[275](index=275&type=chunk)

Core Viewpoint - Angel Oak Mortgage (AOMR) reported quarterly earnings of $0.17 per share, missing the Zacks Consensus Estimate of $0.27 per share, but showing an increase from $0.11 per share a year ago, resulting in an earnings surprise of -37.04% [1] Group 1: Earnings and Revenue Performance - The company posted revenues of $32.87 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 0.34%, compared to $25.21 million in the same quarter last year [2] - Over the last four quarters, the company has exceeded consensus revenue estimates three times [2] - The current consensus EPS estimate for the upcoming quarter is $0.29 on revenues of $34.18 million, and for the current fiscal year, it is $1.18 on revenues of $139.54 million [7] Group 2: Stock Performance and Market Comparison - Angel Oak shares have increased by approximately 2.9% since the beginning of the year, contrasting with the S&P 500's decline of -3.3% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating it is expected to perform in line with the market in the near future [6] Group 3: Industry Outlook - The REIT and Equity Trust industry, to which Angel Oak belongs, is currently ranked in the bottom 45% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact investor sentiment [5]

[First Quarter 2025 Financial Results](index=1&type=section&id=First%20Quarter%202025%20Financial%20Results) [First Quarter 2025 Highlights](index=1&type=section&id=First%20Quarter%202025%20Highlights) Angel Oak Mortgage REIT (AOMR) reported strong Q1 2025 results, highlighted by a GAAP net income of $20.5 million ($0.87 per diluted share) and a 17.6% year-over-year increase in net interest income to $10.1 million. The company saw growth in both GAAP book value to $10.70 per share and economic book value to $13.41 per share, driven by the acquisition of nearly $260 million in high-quality non-QM loans and sustained operational efficiency Q1 2025 Key Financial Metrics | Metric | Q1 2025 Value | Change vs. Q4 2024 | Change vs. Q1 2024 | | :--- | :--- | :--- | :--- | | GAAP Net Income | $20.5 million | - | - | | Diluted EPS | $0.87 | - | - | | Net Interest Income | $10.1 million | +2.3% | +17.6% | | GAAP Book Value/Share | $10.70 | +5.2% | - | | Economic Book Value/Share | $13.41 | +2.4% | - | | Distributable Earnings | $4.1 million ($0.17/share) | - | - | | Declared Dividend/Share | $0.32 | - | - | - The CEO attributed earnings growth to the acquisition of nearly **$260 million** in high-quality non-QM loans and maintained operating expense savings. The company plans to continue expanding earnings through further loan purchases, funded by a post-quarter end securitization[3](index=3&type=chunk) [Operational and Financial Details](index=1&type=section&id=Operational%20and%20Financial%20Details) During Q1 2025, the company purchased $259.0 million in non-QM loans, increasing the portfolio's weighted average coupon. Post-quarter, AOMR executed a $284.3 million securitization, which significantly reduced its recourse debt to equity ratio from 2.3x to approximately 1.3x and freed up $24.7 million in cash. As of quarter-end, the company had $690 million in available borrowing capacity for new loan acquisitions [Portfolio and Investment Activity](index=1&type=section&id=Portfolio%20and%20Investment%20Activity) The company acquired **$259.0 million** in non-QM loans in Q1 2025, increasing the portfolio's weighted average coupon to **7.55%** - In Q1 2025, the company purchased **$259.0 million** of newly-originated non-QM residential mortgage loans[7](index=7&type=chunk) Q1 2025 Loan Purchase Characteristics | Metric | Value | | :--- | :--- | | Weighted Average Coupon | 7.67% | | Weighted Average LTV | 70.0% | | Weighted Average Credit Score | 751 | - The weighted average coupon of the residential whole loan portfolio increased by **44 basis points** year-over-year to **7.55%** as of March 31, 2025[7](index=7&type=chunk) [Capital Markets Activity](index=1&type=section&id=Capital%20Markets%20Activity) Post-quarter, AOMR completed a **$284.3 million** securitization, reducing recourse debt and freeing up cash for new loan acquisitions - In April 2025, after the quarter ended, the company executed the AOMT 2025-4 securitization, contributing loans with an unpaid principal balance of approximately **$284.3 million**[7](index=7&type=chunk) - This securitization reduced the company's debt by approximately **$242.4 million** and released **$24.7 million** in cash for new loan purchases and other operational purposes[7](index=7&type=chunk) - As of March 31, 2025, the company had three loan financing lines with an aggregate capacity of up to **$1.1 billion**, of which approximately **$690 million** was available for new loan purchases[8](index=8&type=chunk) [Balance Sheet](index=2&type=section&id=Balance%20Sheet) Target assets reached **$2.5 billion** as of March 31, 2025, with the recourse debt to equity ratio significantly reduced post-securitization - Target assets totaled **$2.5 billion** as of March 31, 2025[13](index=13&type=chunk) - The company's recourse debt to equity ratio was approximately **2.3x** at quarter-end. Subsequent to quarter-end, this ratio was reduced to approximately **1.3x** following the AOMT 2025-4 securitization[13](index=13&type=chunk) [Dividend](index=2&type=section&id=Dividend) The company declared a **$0.32 per share** common stock dividend payable on May 30, 2025 - On May 5, 2025, the company declared a dividend of **$0.32 per share** of common stock, payable on May 30, 2025, to stockholders of record as of May 22, 2025[9](index=9&type=chunk) [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) For the three months ended March 31, 2025, the company reported a net income of $20.5 million, a significant increase from $12.9 million in the same period of 2024. This improvement was primarily driven by a 17.6% rise in net interest income to $10.1 million and a substantial reduction in total operating expenses from $4.7 million to $3.0 million year-over-year Q1 2025 vs Q1 2024 Statement of Operations (in thousands) | Line Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | **NET INTEREST INCOME** | **$10,087** | **$8,579** | | TOTAL REALIZED AND UNREALIZED GAINS, NET | $13,443 | $9,262 | | Total operating expenses | $2,999 | $4,680 | | **INCOME BEFORE INCOME TAXES** | **$20,531** | **$13,161** | | **NET INCOME ALLOCABLE TO COMMON STOCKHOLDERS** | **$20,531** | **$12,874** | | Diluted earnings per common share | $0.87 | $0.51 | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets increased to $2.68 billion from $2.27 billion at the end of 2024, largely due to a significant rise in residential mortgage loans held at fair value. Total liabilities also grew to $2.43 billion from $2.03 billion, while total stockholders' equity increased to $251.5 million from $239.0 million over the same period Balance Sheet Highlights (in thousands) | Line Item | As of March 31, 2025 | As of December 31, 2024 | | :--- | :--- | :--- | | Residential mortgage loans - at fair value | $439,460 | $183,064 | | Cash and cash equivalents | $38,696 | $40,762 | | **Total assets** | **$2,676,535** | **$2,269,769** | | Notes payable | $360,470 | $129,459 | | Non-recourse securitization obligation | $1,556,075 | $1,593,612 | | **Total liabilities** | **$2,425,055** | **$2,030,802** | | **Total stockholders' equity** | **$251,480** | **$238,967** | [Non-GAAP Financial Measures](index=2&type=section&id=Non-GAAP%20Financial%20Measures) [Definitions of Non-GAAP Metrics](index=2&type=section&id=Definitions%20of%20Non-GAAP%20Metrics) The company provides three non-GAAP metrics to supplement its GAAP results. 'Distributable Earnings' adjusts net income for non-cash items like unrealized gains/losses to show a measure of financial performance comparable to REIT peers. 'Distributable Earnings Return on Average Equity' measures the return generated by invested equity capital. 'Economic Book Value' adjusts stockholders' equity to reflect the fair value of all assets and liabilities, offering a supplemental view of the company's financial position - Distributable Earnings is a non-GAAP measure that excludes items such as unrealized gains and losses, impairment losses, and non-cash equity compensation from GAAP net income[12](index=12&type=chunk) - Economic Book Value is a non-GAAP measure that adjusts GAAP stockholders' equity by marking the company's non-recourse financing obligations to fair value, providing a supplemental measure of financial position[16](index=16&type=chunk) [Reconciliation of Net Income to Distributable Earnings](index=6&type=section&id=Reconciliation%20of%20Net%20Income%20(Loss)%20to%20Distributable%20Earnings) For Q1 2025, GAAP Net Income of $20.5 million was reconciled to Distributable Earnings of $4.1 million, primarily by excluding $16.6 million in net unrealized gains. This resulted in a Distributable Earnings Return on Average Equity of 6.6%, a notable increase from 4.3% in Q1 2024, when Distributable Earnings were $2.8 million Reconciliation to Distributable Earnings (in thousands) | Line Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net income (loss) allocable to common stockholders | $20,531 | $12,874 | | Net unrealized (gains) losses (Total Adjustments) | $(16,624) | $(10,614) | | Stock compensation | $237 | $630 | | **Distributable Earnings** | **$4,144** | **$2,820** | | **Distributable Earnings Return on Average Equity** | **6.6%** | **4.3%** | [Reconciliation of Stockholders' Equity to Economic Book Value](index=7&type=section&id=Reconciliation%20of%20Stockholders'%20Equity%20to%20Economic%20Book%20Value) As of March 31, 2025, the company's GAAP book value per share was $10.70. After a positive fair value adjustment of $63.6 million for securitized debt, the Economic Book Value per share was calculated at $13.41. This represents a sequential increase from $13.10 at the end of Q4 2024 Book Value Reconciliation (per share) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Book value per share of common stock (GAAP) | $10.70 | $10.17 | | Economic book value per share of common stock (Non-GAAP) | $13.41 | $13.10 | [Other Information](index=2&type=section&id=Other%20Information) [Conference Call and Webcast Information](index=2&type=section&id=Conference%20Call%20and%20Webcast%20Information) The company scheduled a live conference call and webcast for May 5, 2025, at 8:30 a.m. Eastern time to discuss its Q1 2025 financial results. Access details for both the live event and a playback option available through May 19, 2025, were provided - A conference call and webcast to discuss results was held on May 5, 2025, at **8:30 a.m. Eastern time**[10](index=10&type=chunk) - Playback of the conference call is available through **May 19, 2025**, using passcode **10198623**[11](index=11&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section serves as a legal disclaimer, cautioning that the press release contains forward-looking statements based on current assumptions and expectations. It warns that actual results could differ materially from these statements due to various risks and uncertainties and advises against placing undue reliance on them - The press release contains forward-looking statements subject to risks and uncertainties, and actual results could differ materially. The company does not undertake any obligation to update these statements[17](index=17&type=chunk) [About Angel Oak Mortgage REIT, Inc.](index=3&type=section&id=About%20Angel%20Oak%20Mortgage%20REIT,%20Inc.) Angel Oak Mortgage REIT, Inc. is a real estate finance company that invests in first lien non-QM loans and other U.S. mortgage-related assets. Its objective is to deliver attractive risk-adjusted returns to stockholders. The company is externally managed by an affiliate of Angel Oak Capital Advisors, LLC, a prominent alternative credit manager - The company is a real estate finance company focused on acquiring and investing in first lien non-QM loans and other mortgage-related assets in the U.S. mortgage market[18](index=18&type=chunk)

Core Insights - Albert Anthony is a Croatian-American media personality active on investor platforms, focusing on markets and stocks, with a growing follower base of over 1,000 since 2023 [1] - He is set to launch a new book titled "Financial Markets: Growing A Dividend Income Portfolio" in 2025, coinciding with an ongoing article series on the same topic [1] - Albert Anthony has a background in management and information systems, having worked in a top-10 financial firm's IT department [1] Company Overview - Albert Anthony & Co. is a sole proprietorship registered in Austin, Texas, focusing on general market commentary based on publicly available data [1] - The company does not provide personalized financial advice or sell financial products, and it is not a registered financial advisor [1] Investment Focus - Albert Anthony has launched the Future Investor Fund, which aims to build a dividend portfolio [1] - The company emphasizes the importance of due diligence for investors, indicating that all investments carry risk [1]

Asset Management and Investment Strategy - As of December 31, 2024, the company's portfolio of target assets was approximately $2.2 billion, predominantly consisting of residential mortgage loans, securitization trusts, and RMBS[67]. - The investment strategy focuses on credit-sensitive investments in newly-originated first lien non-QM loans, primarily sourced from Angel Oak Mortgage Lending[61]. - The company aims to generate attractive risk-adjusted returns through cash distributions and capital appreciation across interest rate and credit cycles[61]. - The investment guidelines allow for flexibility in strategy and target assets, adapting to changing market conditions[65]. - The company is focusing on acquiring and investing in first lien non-QM loans in the U.S. mortgage market, with a significant concentration in California, Florida, Texas, and Georgia, where more than 5% of the unpaid principal balance of loans is secured by properties in these states[109]. - As of December 31, 2024, substantially all loans in the company's portfolio of RMBS and residential loans held in securitization trusts consisted of non-QM loans, indicating a concentrated investment strategy[109]. Financing and Debt - The company utilizes various financing lines and expects to secure long-term securitization funding for substantially all of its non-QM loans[69]. - The company has significant debt with no limitations on the amount it may incur, increasing the risk of loss[80]. - The company’s access to financing may be limited, potentially affecting its operations and financial health[80]. - As of December 31, 2024, the company had approximately $230.1 million of debt outstanding, including $129.5 million under uncommitted loan financing lines with a borrowing capacity of up to $1.1 billion[221]. - The company’s substantial indebtedness could limit its ability to obtain additional financing on acceptable terms, affecting its liquidity and operational flexibility[222]. - Current market conditions may hinder the company's access to debt capital markets, affecting its ability to refinance short-term borrowings[225]. Management and Operational Risks - The company is externally managed by Falcons I, LLC, which provides access to proprietary non-QM loans and underwriting transparency[59]. - The company has no employees; all executive officers are provided through its Manager or affiliates[74]. - The company is highly dependent on its Manager and key personnel from Angel Oak, with no assurance of suitable replacements if the Management Agreement is terminated[79]. - The management fee structure may not align incentives properly, potentially leading to riskier investments that do not optimize returns for stockholders[90]. - The effectiveness of third-party servicers is critical; failures in servicing could lead to higher default rates and negatively impact investment values[185]. Market and Economic Risks - The company is subject to competition from various institutional investors, which may affect its ability to generate satisfactory returns[72]. - The company may face challenges in sourcing non-QM loans due to competition and economic factors, which could limit investment opportunities[100]. - The company anticipates that rising interest rates could adversely affect asset values, increase interest expenses, and lead to a decrease in the volume of target assets available for acquisition[120]. - Changes in fair values of assets and liabilities can significantly impact the company's earnings and book value, with volatility driven by interest rates and market conditions[122][123]. - Natural disasters and climate change pose risks to the value of real estate investments, potentially leading to increased foreclosures and credit losses[111]. Regulatory and Compliance Risks - The company has elected to be taxed as a REIT since December 31, 2019, and intends to maintain compliance with REIT requirements[58]. - The company is subject to U.S. Risk Retention Rules, requiring it to retain a 5% interest in securitizations, which may contribute to asset illiquidity[175]. - The company intends to maintain its exclusion from regulation as an investment company under the Investment Company Act, which imposes significant limitations on its operations and investment strategies[214]. - The company may incur significant costs to comply with new or existing regulatory requirements, which could materially affect its operations[211]. - Legislative actions aimed at preventing foreclosures may reduce the value of mortgage loans and affect the company's returns[186]. Investment Performance and Risks - Non-QM loans may experience higher rates of delinquencies and defaults due to less stringent underwriting guidelines, impacting the company's portfolio performance[102]. - The performance of RMBS investments is influenced by principal payment rates and the timing of those payments, which can be affected by various economic factors[133]. - Investments in distressed or non-performing residential and commercial mortgage loans could increase the company's risk of loss, especially if LTVs exceed 100%[164]. - The company may invest in CRT securities that transfer a portion of the risk associated with credit losses within pools of conventional residential mortgage loans to investors[151]. - The company may face litigation risks related to inaccuracies in disclosure documentation for securitization transactions, which could lead to financial liabilities[239]. Technology and Cybersecurity Risks - The company is highly dependent on information systems, and any failure or cyber-attack could significantly disrupt business operations, potentially leading to material adverse effects[206]. - Cybersecurity breaches pose a significant risk, potentially leading to reputational damage and material costs associated with data breaches[200]. - The financial services industry is experiencing rapid technological changes, and the company's future success will depend on its ability to effectively implement new technology-driven products and services[205]. General Economic Conditions - Future pandemics or public health crises could significantly impact the economy and the company's financial performance[180]. - Changes in the conservatorship of Fannie Mae and Freddie Mac could significantly impact the company's operations and the residential mortgage market[196]. - Fluctuations in benchmark interest rates by the U.S. Federal Reserve could adversely affect the value of the company's investments and overall financial performance[197].

Financial Data and Key Metrics Changes - The company reported a GAAP net loss of $15 million or $0.65 per common share for Q4 2024, while for the full year, GAAP net income was $28.8 million or $1.17 per diluted common share [17][19] - Distributable earnings for Q4 were $9.9 million or $0.42 per diluted common share, with full-year distributable earnings at $7 million [18][20] - Interest income for Q4 was $31.9 million, marking a 30% improvement compared to Q4 2023, and net interest income was $9.9 million, a 20% improvement [19][20] - GAAP book value per share decreased by 9.8% to $10.17 as of December 31, 2024, down from $11.28 as of September 30, 2024 [25] Business Line Data and Key Metrics Changes - The company completed five securitizations in 2024, exceeding the target of one per quarter, with a total of $855 million in scheduled unpaid principal balance [22][23] - The weighted average coupon of the residential whole loan portfolio increased by 61 basis points to 7.39% by year-end 2024 [21] Market Data and Key Metrics Changes - The total portfolio weighted average percentage of loans 90 days plus delinquent increased to 2.4% from 1.85% at the end of Q3 2024 [27] - The company noted that the securitization market remains active and receptive with tight spreads, indicating a favorable environment for capital recycling [12][23] Company Strategy and Development Direction - The company focuses on long-term earnings accretion, disciplined decision-making, and risk management to create shareholder value [7][8] - The capital deployment strategy is adaptive and flexible, aligning with evolving market dynamics to maximize returns [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term backdrop of the business, despite experiencing a decline in book value due to interest rate volatility [8][11] - The company expects interest income to continue growing through effective portfolio management and securitization execution [21] Other Important Information - The company declared a $0.32 per share common dividend, paid on February 28, 2025 [32] - The company has a small exposure to the California mortgage market, with minimal impact from recent wildfires [30][31] Q&A Session Summary Question: How insulated are the '21 to '23 vintages regarding prepayments? - Management indicated that significant declines in rates would be needed to trigger prepayments, estimating a drop of 150 to 200 basis points [37] Question: Can you discuss the outlook for net interest income (NII) in the next quarter? - Management confirmed a strong pipeline and expected continued growth in NII throughout 2025 [50][51] Question: What are the expectations for delinquencies moving forward? - Management anticipates a return to normalized levels of 2% to 3% for 90-day delinquencies, indicating a healthy credit environment [64] Question: What is the company's stance on repurchasing stock? - Management expressed a preference for building equity over stock buybacks, citing higher returns on incremental capital compared to the current dividend yield [59][60]

Group 1: Earnings Performance - Angel Oak Mortgage (AOMR) reported quarterly earnings of $0.42 per share, exceeding the Zacks Consensus Estimate of $0.25 per share, compared to a loss of $0.26 per share a year ago, representing an earnings surprise of 68% [1] - The company posted revenues of $31.87 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 6.22%, and showing an increase from year-ago revenues of $24.55 million [2] Group 2: Stock Performance and Outlook - Angel Oak shares have increased by approximately 3% since the beginning of the year, while the S&P 500 has declined by 0.5% [3] - The current consensus EPS estimate for the upcoming quarter is $0.30 on revenues of $30.95 million, and for the current fiscal year, it is $1.32 on revenues of $140.49 million [7] Group 3: Industry Context - The Financial - Mortgage & Related Services industry, to which Angel Oak belongs, is currently ranked in the bottom 32% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Another company in the same industry, Finance of America Companies Inc. (FOA), is expected to report quarterly earnings of $0.45 per share, reflecting a year-over-year change of +150%, with revenues anticipated to be $79 million, down 71.4% from the previous year [9][10]

Financial Performance - Q4 2024 net interest income was $9.9 million, a 20% increase from Q4 2023's $8.2 million[4] - FY 2024 net interest income reached $36.9 million, reflecting a 28% increase compared to FY 2023's $28.9 million[4] - Q4 2024 GAAP net loss was $(15.1) million, or $(0.65) per diluted share[4] - FY 2024 GAAP net income was $28.8 million, or $1.17 per diluted share[4] - Net income allocable to common stockholders for the three months ended December 31, 2024, was a loss of $15,055,000 compared to a profit of $28,599,000 for the same period in 2023[24] - Distributable Earnings for the three months ended December 31, 2024, were $9,874,000, a significant recovery from a loss of $6,527,000 in the same period of 2023[24] - Annualized Distributable Earnings for the twelve months ended December 31, 2024, were $39,500,000, compared to a loss of $26,107,000 for the previous year[24] - Distributable Earnings Return on Average Equity improved to 15.7% for the three months ended December 31, 2024, compared to a negative 10.7% for the same period in 2023[24] Asset and Liability Management - Total assets decreased to $2,269,769,000 as of December 31, 2024, from $2,308,011,000 as of December 31, 2023, representing a decline of approximately 1.66%[22] - Total liabilities decreased to $2,030,802,000 as of December 31, 2024, from $2,051,905,000 as of December 31, 2023, a reduction of approximately 1.03%[22] - Common stock outstanding decreased from 24,965,274 shares as of December 31, 2023, to 23,500,175 shares as of December 31, 2024[26] - Book value per share of common stock decreased to $10.17 as of December 31, 2024, from $10.26 as of December 31, 2023[26] - Economic book value per share of common stock increased to $13.10 as of December 31, 2024, from $13.54 as of December 31, 2023[26] - Average total stockholders' equity for the twelve months ended December 31, 2024, was $255,860,000, compared to $240,524,000 for the previous year, reflecting an increase of approximately 6.4%[24] Securitization and Loan Activity - The Company participated in five securitization transactions in 2024, contributing a total of $855 million in scheduled unpaid principal balance of loans[5] - The Company purchased $683.7 million of newly-originated, market coupon non-QM residential mortgage loans in 2024[5] Debt Management - As of December 31, 2024, the Company's recourse debt to equity ratio was approximately 1.0x, expected to remain below 2.5x going forward[12] Dividend Declaration - The Company declared a dividend of $0.32 per share of common stock, paid on February 28, 2025[4] Loan Portfolio Metrics - As of December 31, 2024, the weighted average coupon of the residential whole loans portfolio was 7.39%, a 61 basis point increase from December 31, 2023[6]

Company Overview - Binary Tree Analytics (BTA) has a background in investment banking cash and derivatives trading, focusing on providing transparency and analytics for capital markets instruments and trades [1] - BTA specializes in Closed-End Funds (CEFs), Exchange-Traded Funds (ETFs), and Special Situations, aiming to deliver high annualized returns with a low volatility profile [1] - The company has over 20 years of investment experience, having obtained a Finance major from a top university [1]

Financial Data and Key Metrics Changes - GAAP net income for Q3 2024 was $31.2 million, or $1.29 per diluted common share, while distributed earnings resulted in a loss of $3.4 million, or $0.14 per common share due to unrealized gains exclusion and realized losses on hedges [20][21] - Interest income increased to $27.4 million, a 6% increase from the prior quarter and a 15% increase compared to Q3 2023, driven by rapid capital deployment [21] - Net interest income was $9 million, showing a slight decrease from the prior quarter but a 22% improvement over Q3 2023 [23][29] - GAAP book value increased by 10.3% and economic book value increased by 6.5% compared to Q2 2024, reflecting significant valuation gains across the portfolio [29][30] Business Line Data and Key Metrics Changes - The company purchased $264.8 million of loans in Q3 2024, with a weighted average coupon of approximately 7.74% and a weighted average loan-to-value (LTV) of 70.0% [25] - The residential whole loan portfolio had a weighted average coupon of 7.73%, nearly a 200 basis point increase from Q3 2023 [25] - As of the end of Q3, the unsecuritized loan balance was just over $200 million, expected to grow for future securitization [26] Market Data and Key Metrics Changes - The company noted a constructive macroeconomic cycle for the mortgage REIT sector, with historical trends indicating potential for significant growth and heightened capital markets activity [14] - Delinquencies remained low, with the total portfolio weighted average percentage of loans 90 days delinquent at 1.95%, stable over the past six quarters [35] Company Strategy and Development Direction - The company is focused on a disciplined operational strategy aimed at delivering consistent and attractive investor returns, prioritizing sustainable earnings generation [10][13] - There is a commitment to high-quality loan acquisitions and disciplined capital management, with plans for future securitizations to enhance the balance sheet [34][41] - The management believes in capitalizing on new opportunities in the non-QM space, which is gaining positive momentum [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, anticipating meaningful net interest income growth due to recent Fed rate cuts and successful capital deployment [12][41] - The company expects to maintain its dividend level, supported by ongoing investments and anticipated net interest margin expansion [44][68] Other Important Information - The company declared a $0.32 per share common dividend, payable on November 27, 2024 [40] - The recent securitization (AOMT 2024-10) contributed to a reduction in funding costs by over 110 basis points, enhancing capital efficiency [32][80] Q&A Session Summary Question: Expectations for new investment volume in the next few quarters - Management expects mid $200 million in origination and purchases for the next few quarters [43] Question: Clarification on book value comments - Approximately half of the book value increase has been given back as of today [44] Question: Pace of securitizations - The company targets one securitization per quarter, expecting two in Q4 2024 [46] Question: Execution of recent securitization - The October securitization was executed well, with a significant portion of the capital structure sold and retained positions [48][49] Question: Opportunity for stock buybacks - Currently, stock buybacks are not on the table, but management monitors the situation closely [56][58] Question: Loan delinquencies and modification activity - Modification activity is low due to home price appreciation, with delinquencies remaining stable [59] Question: Recycling legacy securitizations - Management discussed the potential to recycle legacy securitizations into new production to enhance returns [66][68] Question: Securitization economics and competition - The current securitization economics are favorable, with a focus on consistency and service over price competition [71][73]