AOMR Q1 2026 Earnings Transcript

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DATE

May 5, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Sreeniwas Prabhu
• Chief Financial Officer — Brandon Filson

TAKEAWAYS

• GAAP net loss -- $7.4 million, or $0.30 per diluted common share, driven by unrealized losses on loan portfolios tied to macroeconomic market volatility.
• Distributable earnings -- $4.6 million, adjusting for unrealized fair value movements.
• Net interest income -- $12.1 million, marking 20% growth year over year and 11% sequential growth from the fourth quarter of fiscal 2025.
• Interest income -- $40.7 million, a 24% year-over-year increase and a 4% sequential increase from the fourth quarter of fiscal 2025.
• Operating expenses -- $5.2 million total; excluding non-cash stock compensation expenses and securitization costs, operating expenses were $3.4 million, attributed to higher professional service and loan diligence fees.
• Loan purchases -- $246.2 million, with weighted average coupon 7.3%, weighted average CLTV 67%, and weighted average credit score 759, indicating continued focus on conservative credit quality.
• Securitization activity -- Executed the AOMT 2026-2 securitization at $272 million unpaid principal balance, sole contributor, with a weighted average coupon of 7.1%, weighted average credit score 757, and CLTV 70.7%.
• Securitization pricing -- AAA rated senior bonds priced at a 113 basis point spread over the treasury yield curve.
• Book value -- GAAP book value per share $10.31 (down 4% from end of fiscal 2025); economic book value per share $12.28 (down 3.3% from end of fiscal 2025); declines attributed to market-driven valuation adjustments and dividend payments.
• Portfolio balance -- $245.5 million in unsecuritized residential whole loans, $192.2 million warehouse debt, $2.2 billion residential mortgage loans in securitization trust, $238.3 million in RMBS ($25.7 million in co-mingled securitization entities included in other assets).
• Liquidity -- $42 million in cash with $1.1 billion undrawn loan financing capacity across four lending partners.
• Leverage -- Recourse debt-to-equity ratio at 1.3x.
• Credit performance -- 90+ day delinquency at 2.7%, flat year over year but up 50 basis points versus the fourth quarter of fiscal 2025.
• Prepayment speed -- 3-month prepay speeds on non-QM RMBS and securitized loans at 12%, up from 11.2% in the fourth quarter of fiscal 2025.
• Dividend -- $0.32 per share declared for common shareholders of record as of May 22, 2026, payable May 29, 2026.

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RISKS

• Brandon Filson stated that the "Loss was driven by unrealized valuation changes on our securitized and unsecuritized loan portfolios, largely tied to macroeconomic market volatility," resulting in a GAAP net loss for the quarter.
• Book value per share declined 4% GAAP and 3.3% economic, as spread widening and rate increases "drove a decrease in book value of our portfolio."
• Credit performance risk noted as 90+ day delinquency rate increased by approximately 50 basis points sequentially from the fourth quarter of fiscal 2025.
• Filson commented, "the whole loan pricing decreased quite a bit. That's really where most of that valuation decrease we have and the losses we had on the unrealized during the quarter. We lost about 1 point off of our whole loan pricing in Q1."

SUMMARY

Angel Oak Mortgage (NYSE:AOMR) reported a GAAP net loss, contrasting with prior year profitability, due to valuation declines in both securitized and unsecuritized loan portfolios driven mostly by market volatility and spread widening. Despite the headline loss, the company generated distributable earnings and demonstrated sequential and annual growth in both net interest and interest income, attributed to targeted asset purchases and disciplined operating practices. Securitization activity remained consistent, with management emphasizing selective execution and favorable AAA bond pricing, while liquidity and financing capacity were underscored as strategic positives. Delinquency rates rose modestly over the prior quarter but held steady year over year, with management highlighting continued credit selectivity and proactive risk management.

• Sreeniwas Prabhu emphasized, "the need for non-QM lending solutions remains durable," maintaining a cautious but active investment posture.
• Brandon Filson stated securitization expense was typically "somewhere around 50 basis points" of deal size and could be lower or higher depending on the size of the deal, with expense sensitivities particularly for HELOC deals based on participation.
• Filson also said return on equity for newly executed securitizations would be in the "lower teens to high 12s" due to recent increases in treasury yields and spreads, which is below the company's long-term preference of 15%-20%.
• HELOC securitization activity is expected to proceed, with pacing described as "about correct" and pipeline building since the AOMT 2026-2 deal according to Filson.
• Current AAA securitization spreads were cited as "about $135 million to $145 million" (basis points) depending on timing and collateral, up from the 113 basis points achieved on the AOMT 2026-2 execution.

INDUSTRY GLOSSARY

• Non-QM: Non-qualified mortgage; loans that do not meet the Consumer Financial Protection Bureau's standard underwriting requirements but are underwritten to risk-adjusted, customized criteria.
• RMBS: Residential Mortgage-Backed Securities; securities backed by pools of residential mortgages.
• CLTV: Combined Loan-to-Value; a measure of mortgage debt compared to the appraised property value, including subordinate liens.
• CPR: Conditional Prepayment Rate; the rate at which borrowers are expected to prepay loans in a mortgage pool, annualized.
• HELOC: Home Equity Line of Credit; a revolving credit line secured by the equity in a borrower's home.

Full Conference Call Transcript

Sreeniwas Prabhu: Thank you, KC, and thank you all for joining us today. First quarter unfolded in a global environment that was largely supportive to uneven economic growth and geopolitical tensions, including renewed conflict in the Middle East weighed on investors towards the end of the quarter. Inflation showed gradual improvement, while labor markets cooled modestly, and the Federal Reserve maintained a measured data-driven approach to policy decisions. Uncertainty weighed on risk sentiment at times, but also reinforced the values of discipline, liquidity and steady execution. Within this setting, our platform performed well, supported by our focus on credit quality, funding discipline and repeatable processes. Despite broader macro pressures, securitization markets remained open through the quarter.

Investor demand continued to favor high-quality collateral and experienced issues even as spreads reflected global headlines, rate volatility and a period of reduced risk appetite. We were pleased to complete the AOMT 2026-2 securitization shortly before the onset of the conflict in the Middle East, taking advantage of favorable market conditions and underscoring the benefits of our methodical, repeatable securitization approach. We remain selective in our use of these markets, staying focused on sound structures, conservative leverage and economics that meet our return thresholds. Our first quarter results reflected our established operating growth trend with another consecutive quarter of net interest income expansion and prudent expense management.

The positive earnings trend helped offset unfavorable valuation impacts during the quarter, which were driven by rates and spreads increasing and becoming more volatile. Looking forward, the need for non-QM lending solutions remains durable, and we see value in maintaining a cautious but active posture. Our priorities remain consistent, growing earnings, executing reliably in capital markets and positioning the portfolio to perform across a wide range of economic outcomes. With that, I'll turn it over to Brandon, who will walk us through our first quarter financial performance in greater detail.

Brandon Filson: Thank you, Sreeni. First quarter results from an interest income and expense perspective were in line with expectations and reflected contributions from assets added in the quarter and in prior periods, along with a continued focus on cost control. To that end, as Sreeni mentioned, we continued our earnings growth trajectory established in 2025 with another consecutive quarter of net interest income growth. Interest rates were generally stable throughout the quarter, supporting consistent mortgage market activity and enabling continued purchases of accretive non-QM loans. Execution of the AOMT 2026-2 securitization in early March, which I will detail shortly, was strong and well timed, and we expect to continue our trend of 4 securitizations per year or roughly 1 per quarter.

While spread widening and rate increases associated with global pension drove a decrease in book value of our portfolio, underlying fundamentals remain supportive and strong operating earnings mitigated the impact of valuation decreases, which we believe are temporary due to the ongoing conflict in Iran. In the first quarter, we had a GAAP net loss of $7.4 million or a loss of $0.30 per common diluted share. Loss was driven by unrealized valuation changes on our securitized and unsecuritized loan portfolios, largely tied to macroeconomic market volatility towards the end of the quarter, which offset positive operating growth. Comparatively, in the first quarter of 2025, we had GAAP net income of $20.5 million or $0.87 per diluted common share.

That income was attributable to unrealized valuation gains of our securitized and unsecuritized loan portfolios as well as operating income. Distributable earnings for the quarter were $4.6 million. Differences versus GAAP results were primarily driven by the removal of the unrealized fair value movements just described. Our securitized loan portfolio and residential loan portfolio combined for $13.1 million of unrealized losses, which were offset by $1.6 million of net unrealized gains in our trading securities and hedge portfolios. In the first quarter of 2025, distributable earnings were $4.1 million. Interest income for the quarter was $40.7 million and net interest income was $12.1 million.

This compares to interest income of $32.9 million and net interest income of $10.1 million in Q1 2025, showcasing 24% and 20% growth, respectively. Compared to the fourth quarter of 2025, interest income and net interest income grew by 4% and 11%, respectively. Performance has been supported by targeted asset purchases, growing net interest margin and consistent securitization market access during all of 2025 and specifically Q4 '25 and Q1 '26. Operating expenses for the quarter were $5.2 million. Excluding noncash stock compensation expenses and securitization costs, first quarter operating expenses were $3.4 million.

The increase compared to a year ago and prior quarter is due to increases in professional service fees and loan diligence fees associated with a larger overall balance and consistent purchases of target assets. Going forward, we expect to maintain similar operating expense levels, and we'll continue to be as efficient as possible with our expense structure. Loan purchases during the quarter totaled $246.2 million and continue to reflect conservative credit profiles, moderate loan-to-value ratios and current market coupons that we believe remain attractive on a risk-adjusted basis. The weighted average coupon of loans purchased during the quarter was 7.3%, the weighted average CLTV was 67% and the weighted average credit score was 759.

Our credit underwriting metrics have continued to improve over time as we target our desired credit and return profile. As of the end of the quarter, our loans and securitization trust portfolio carried a weighted average coupon of 6.1% with a weighted average funding cost of approximately 4.5%. We intend to continue to access securitization markets through our disciplined, methodical securitization strategy. As mentioned, we are able to take advantage of favorable market conditions with our AOMT 2026-2 securitization in March just before the onset of the renewed conflict in the Middle East.

We were the sole contributor to AOMT 2026-2, which had a $272 million unpaid principal balance and a weighted average coupon of 7.1%, a weighted average non-zero credit score of 757 and a weighted average CLTV of 70.7%. The AAA rated senior bonds priced favorably at 113 basis point spread over the treasury yield curve. As of quarter end, GAAP book value per share was $10.31. Economic book value, which fair values all nonrecourse securitization obligations was $12.28. Compared to the end of 2025, GAAP book value per share decreased 4% and economic book value decreased 3.3%.

Changes in book value during the quarter were reflective of operating income, offset by our quarterly dividend payment and the previously discussed market-driven valuation decrease within the portfolio. While the market continues to display volatility tied to geopolitical tension, we estimate that as of today, book value has increased slightly since the end of the first quarter due to continued accretive asset purchases and incremental earnings generation. Balance sheet remained well positioned with cash of $42 million and recourse debt to equity of 1.3x. We aim to maintain liquidity and available financing capacity to provide flexibility to respond to changing market conditions.

We ended the quarter with unsecuritized residential whole loans at a fair value of $245.5 million financed with $192.2 million of warehouse debt, $2.2 billion of residential mortgage loans and securitization trust and $238.3 million of RMBS, including $25.7 million of investments in co-mingled securitization entities, which are included in other assets on our balance sheet. We finished the quarter with undrawn loan financing capacity of approximately $1.1 billion with 4 high-quality lending partners. Credit performance continued to be solid with portfolio-wide 90+ day delinquency at approximately 2.7%, which is inclusive of our residential loan, securitized loan and RMBS portfolios.

This is materially flat compared to Q1 of 2025 and represents an increase of approximately 50 basis points from Q4 '25. Despite the increase compared to the prior quarter, performance across the Angel Oak shelf remains strong, and we believe that the performance of our collateral relative to the non-QM securitization market is a key differentiator of our platform. We expect our differentiated credit performance to translate into lower losses than comparable non-QM platforms across the full credit cycle. This view is supported by our proactive migration of credit spectrum, conservative LTVs and disciplined underwriting approach, which we believe position the portfolio to perform consistently even in more challenging environments.

3-month prepay speeds on our non-QM RMBS and securitized loan portfolios were 12% as of the end of the quarter compared to 11.2% in the fourth quarter of 2025. As we have mentioned in previous quarters, we expect prepay speeds to increase as rates decrease and homeowners are incentivized to refinance. With that said, we model our returns based on historical prepayment speeds of approximately 20% to 30%.

While prepay speeds are likely to tick upward if newly originated coupon rates continue to decrease, the majority of our portfolio still has coupon rates that are below newly originated coupon rates, and we expect that mortgage rates would need to fall meaningfully in order to produce a significant impact to the returns on our portfolio. Lastly, the company declared a $0.32 per share common dividend payable on May 29, 2026, to common shareholders of record as of May 22, 2026. For additional details on our financial results and portfolio composition, please refer to the earnings supplement available on our website. Sreeni?

Sreeniwas Prabhu: Thank you, Brandon. The proven well-established Angel origination, purchase and securitization platform provides us with confidence to perform well in a variety of macro environments. The fundamental backdrop of our business is positive. And while risk remains, we will continue to focus on what we can control, expansion of earnings, consistent securitization market activity and disciplined credit selection and management. With that, we will open the call for your questions. Operator?

Operator: [Operator Instructions] Your first question comes from the line of Marissa Lobo from UBS.

Ameeta Lobo Nelson: On HELOCs, you participated in one securitization in 2025 and you guided to about two a year. So how is the HELOC pipeline building relative to non-QM?

Brandon Filson: We are building our current HELOC pipeline right now. After the securitization '26-2, we went bought some HELOCs as well. We kind of have enough to co-mingle with some other Angel Oak entities. So we're looking forward to another HELOC securitization in the coming months. But I think that the pacing is still about correct.

Ameeta Lobo Nelson: Okay. Great. And then just looking at the loans and securitization trust, noticed the 2024 vintages picking up in speeds about '23, up a bit from last quarter. Delinquency a little bit up. So how should we think about that? And how is that impacting the valuation of the retained tranches on those deals?

Brandon Filson: I think the -- yes, I think the speed increase is a little bit expected as rates started to come down. So the '24 deals had a lot of loans that were generated with much higher coupons. So the increase isn't necessarily a surprise to us. We expect to model the 25 to 30 CPR kind of over the life of the securitizations and like a normal kind of rate environment. The return profile seems about the same during that period from certainly what we model. The delinquencies are something we're monitoring, but nothing that's sticking out to us.

And if you remember, some of the retained tranches we have, we have a little bit of a hedging effect on our retained positions because we have the interest-only bond and then we have the junior unrated equity piece. And as speeds increase, obviously, the valuations or anticipated returns of the IO would start to decrease, but the B3 or unrated bond and the bonds directly above it start to -- the valuation increases as it's expected, they'll get paid off soon.

Operator: Your next question comes from the line of Matthew Erdner from JonesTrading.

Matthew Erdner: In prior quarters, you've talked a little bit about calling legacy securitizations, kind of the '21s, '22s. As of last quarter, you guys kind of intended to call two of those throughout the year. Is that still the plan? And then what are you guys seeing there in terms of resecuritization that you could achieve?

Brandon Filson: Yes. That's something we're literally monitoring every day. As you probably have good visibility to that decision based a lot on what the funding cost of the deal you're calling, what -- how they are levered, what's left in the stack and current funding cost, which over -- if we're talking in the middle or late February, that answer is a little different than it is today, but it's something we're monitoring. So what we probably have to see is a little cessation or dramatic reduction in some of the volatility in the rate markets for that go/no-go decision to effectively be accretive to call the deals.

Matthew Erdner: Got it. Yes, that's helpful. And then as a follow-up to that, what kind of ROEs are you guys seeing in the market? I think it was mid-teens last quarter, trending a little bit lower. Is that still kind of the expectation and then low 20s on HELOCs?

Brandon Filson: Yes. I mean I think that's our long-term expectation. If we were to do a deal today with the increase in treasuries and increase in the spreads, we'll be looking maybe lower teens to high 12s. So it has taken a little bit off, but we're not necessarily in the market right now with the securitization. We hope that when things come back into play for us to securitize, we're back up to that 15% to 20% number.

Operator: Your next question comes from the line of Timothy D'Agostino from B. Riley Securities.

Timothy D'Agostino: Regarding operating expenses, it seems like this quarter, it was elevated a little bit at about $1.7 million. I was wondering if there's anything in particular in that line item that increased it.

Brandon Filson: Yes. Mainly, that's going to be professional service fees and loan diligence fees as we continue to buy loans. Our professional service fees in this instance are really related to our ATM program that we have out there that we didn't issue any shares on this quarter. So we had -- we expensed those costs versus putting it through like a contra equity account.

Timothy D'Agostino: Okay. Great. And then I just want to touch on the securitization costs as well. If you do one securitization a quarter for the non-QM space, is the pricing on that generally going to be around $1.5 million? Or would it be less? And then the price for a non-QM or the cost for non-QM securitization, how does that differ to HELOC securitization? Just trying to understand that expense line item better as well.

Brandon Filson: Yes. I mean securitization expense, there's a decent amount of fixed costs that go into that, and then there's obviously some variable costs. So it's kind of sensitive on how big the deal is, especially on the HELOC securitization, how much of the HELOC securitization we are participating in because we'll take our pro rata share of the deal cost. But really, you can kind of back into like a basis point percentage on securitization based on the amount that we securitized in the quarter, which typically is somewhere around 50 basis points. It could be a little less, could be a little more.

But certainly, if we got a larger deal out, it would be a little less than that and about as small as we've been doing lately, $300 million or so it's about 50 basis points.

Operator: [Operator Instructions] Your next question comes from the line of Doug Harter from BTIG.

Brendan Matthew Greaney: This is Brendan Greaney on for Doug. How did whole loan pricing of non-QM loans hold up in March versus securitization spreads?

Brandon Filson: Yes. I mean the whole loan pricing decreased quite a bit. That's really where most of that valuation decrease we have and the losses we had on the unrealized during the quarter. We lost about 1 point off of our whole loan pricing in Q1, and that's really just a reflection of where the current spreads are and the current treasury base rates.

Brendan Matthew Greaney: Okay. And where are spreads today on AAAs and securitization?

Brandon Filson: It'd probably be about $135 million to $145 million depending on the exact timing and exact collateral that was out there.

Operator: Thank you. There are no further questions at this time. I would like to turn the call back to Mr. Brandon Filson for closing comments. Sir, please go ahead.

Brandon Filson: I would like to thank everybody for your time and interest in Angel Oak Mortgage REIT. As always, if you have any further questions or comments, please feel free to give us a call and reach out. Otherwise, we look forward to connecting again with you next quarter.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.

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