Despite ongoing growth in net interest income, economic concerns surrounding the Iran War contributed to a first-quarter loss for Angel Oak Cos.' publicly traded real estate investment trust, company leaders said. 

The lender, which specializes in buying and selling non-qualified mortgages in secondary markets, posted a GAAP loss of $7.4 million in the first quarter, as changes in the fair value of portfolio assets weighed on the bottom line.

The latest loss represents a reversal from the $11.3 million in net income reported in the fourth quarter. One year earlier, Angel Oak Mortgage REIT posted $20.5 million in profits to start 2025, benefiting from positive fair value adjustments at that time. 

Although recent developments pushed the company into the red, growth in net interest income for three straight quarters led leaders to look favorably on its performance and outlook. 

"Uncertainty weighed on risk sentiment at times but also reinforced the values of discipline, liquidity and steady execution," said Sreeni Prabhu, the Atlanta-based company's CEO, during an earnings call. 

"Looking forward, the need for non-QM lending solutions remains durable," Prabhu added. 

Net interest income totaled $12.1 million compared to $10.9 million in the previous quarter. On a year-over-year basis, the number improved from $10.1 million.   

"Operating earnings mitigated the impact of valuation decreases, which we believe are temporary due to the ongoing conflict in Iran," Chief Financial Officer Brandon Filson said about the first-quarter results. 

Fair-value pricing hit whole-loan pricing particularly hard, leading to a loss of approximately one percentage point during the quarter, according to Filson. "That's really just a reflection of where the current spreads are and the current Treasury base rates," he said.

Angel Oak activity by the numbers

In March, the REIT issued one securitization, maintaining its forecasted pace of four per year. AOMT 2026-2 included loans with an unpaid principal balance totaling $272.3 million, resulting in a lowering of debt and in a $23.9 million cash release to help fund new purchases.   

During the quarter, Angel Oak also acquired $246.2 million of newly originated non-QM mortgages reflecting moderate loan-to-value ratios, "conservative" credit profiles and favorable coupon rates, Filson said. 

Securitizations of home equity lines of credit also remain in the company's plans after its first came to market last spring, leaders said. The REIT anticipates future HELOC issuances at a pace of two per year, after a purchase of liens during the most recent quarter.   

"We have enough to co-mingle with other Angel Oak entities," Filson said. "We're looking forward to another HELOC securitization in the coming months." 

At the end of March, Angel Oak had access to four financing lines, which permit borrowing of up to $1.3 billion, with $192 million already drawn. 

The three-month prepayment speed on Angel Oak's non-QM securities increased to 12% at the end of the first quarter, up from 11.2% three months earlier. While any future mortgage rate decreases would likely accelerate prepayments, the current pace still comes in well below speeds of 20% to 30%, which Angel Oak uses in its modeling. 

"We expect that mortgage rates would need to fall meaningfully in order to produce a significant impact to return to our portfolio," Filson said. 

Following the earnings call, shares of the company (AOMR) opened trading at $8.88 on the New York Stock Exchange, with profits falling short of some analysts' estimates. The stock value finished at $9.03 at closing bell Monday.