Angel Oak Mortgage REIT (NYSE:AOMR) held its first-quarter earnings conference call on Tuesday. Below is the complete transcript from the call.

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Summary

Angel Oak Mortgage REIT Inc reported a GAAP net loss of $7.4 million for Q1 2026, largely due to unrealized valuation changes linked to macroeconomic volatility.

The company completed the AOMT 20262 securitization, emphasizing its methodical, repeatable approach to securitizations, and plans to conduct about four securitizations annually.

Despite a decrease in book value, the company maintained strong operating earnings and a stable credit performance with a 90+ day delinquency rate at approximately 2.7%.

Interest income grew by 24% year-over-year, supported by targeted asset purchases and consistent securitization market access.

Management highlighted a focus on disciplined credit selection, maintaining liquidity, and aiming for continued earnings growth despite market volatility.

Full Transcript

OPERATOR

We doing and welcome to Angel Oak Morgan Street 1st Quarter 2026 Earnings Conference Call. At this time all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, Please press star 0 for operator assistance. Please note that this event is being recorded. I would now like to turn the conference over to Mr. Casey Culler. Please go ahead. Good morning.

Casey Culler

Thank you for joining us today for Angel Oak Mortgage REIT Inc's first quarter 2026 earnings conference call. This morning we filed our press release detailing these results which is available in the Investors section on our website at www.angeloakreit.com. as a reminder, remarks made on today's conference call may include forward looking statements. Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. We do not undertake any obligation to update our forward looking statements in light of new information or future events. For a more detailed discussion of the factors that may affect the Company's results, please refer to our earnings release for this quarter and to our most recent SEC filings.. During this call we will be discussing certain non-GAAP financial measures. More information about these non-GAAP financial measures and reconciliations to the most directly comparable GAAP financial measures are contained in our earnings release and SEC filings.. This morning's conference call is hosted by Angel Oak Mortgage REIT's Chief Executive Officer Srini Prabhu and Chief Financial Officer Brandon Filson. Management will make some prepared comments after which we will open up the call to your questions. Additionally, we recommend reviewing our earnings supplement posted on our website. Now I will turn the call over to Srini.

Srini Prabhu (Chief Executive Officer)

Thank you Casey and thank you all for joining us today. First quarter unfolded in a global environment that was largely supportive, though 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 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 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 (Chief Financial Officer)

Thank you Srini. 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 Srini 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 four securitizations per year or roughly one per quarter, while spread widening and rate increases associated with global tension drove a decrease to 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. Toward 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 for 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 non cash 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 will 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 were able to take advantage of favorable market conditions with our AOMT 2026-2. 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%, 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 non recourse 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 that had previously discussed Market driven valuation decrease within a 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 1.3 times. 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 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 commingled securitization entities which are included in other assets on our balance sheet. We finished the quarter with an undrawn loan financing capacity of approximately $1.1 billion with four high quality lending partners. Credit performance continue to be solid with portfolio-wide 90 plus 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 2025. 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 not QM platforms across a 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. Three month prepaid 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 prepaid speeds to increase, its rates decrease and homeowners are incentivized to refinance. With that said, we model our returns based on historical prepaid speeds of approximately 20% to 30%. While prepaid 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 32-cent 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.

Srini Prabhu (Chief Executive Officer)

Thank you, Brandon. the proven, well established Angel Oak origination, purchase and securitization platform provides us with confidence to perform well in 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 Ladies and gentlemen, we will now begin the question and answer session. If you have a question please press star followed by the number one. On your touchtone phone you will hear a prompt that her hand has been raised. If you would like to be draw from the polling process please press tor d the number 2. If you are using a speaker phone please make sure to lift your handset before pressing any keys. Your first question comes from the line of Marie Celebal from ubs. Please go ahead.

Marie Celebal (Equity Analyst)

Good morning, thanks for taking my question. 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? forward to another HELOC securitization here in the coming months. But I think that pacing is still about correct. Okay, great. Thanks for all the color.

OPERATOR

The next question comes from the line of Matthew Earner from Jones Trading. Please go ahead.

Matthew Earner

Hey, good morning guys. Thanks for taking the question. In prior quarters you've talked a little bit about calling legacy securitization. It's kind of the 21s, 22s, you know, as of last quarter you guys kind of intended to call two of those throughout the year. Is that still the plan? And then you know, what, what are you guys seeing there in terms of you know, re securitization that you could achieve? Decision to effectively be accretive to call the deals. Got it. That's helpful. Thank you guys.

OPERATOR

Your next question comes from the line of Timothy d' Agostino from BRLE securities. Please go ahead.

Timothy d'Agostino

Yeah, hi, good morning. Thanks for taking the questions regarding operating expenses. It seemed like this quarter it was elevated a little bit at about 1.7 million. And was wondering if there's anything in particular in that line item that increased it. Thank you. Okay, great. And then I just want to touch on securitization costs as well. You know, if you do one securitization a quarter for the non QM space, is the pricing on that generally going to be around one and a half 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 a HELOC securitization? Just trying to understand that that expense line item better as well. Thank you. Okay, thank you so much,

OPERATOR

Ladies and gentlemen. As a reminder, if you would like to ask a question, please press star followed by the number one on your touchtone phone. And if you're using a speakerphone, please make sure to lift your handset before pressing. Any case, your next question comes from the line of Doug Harter from btig. Please go ahead.

Brendan Greeney

Hi, thanks for taking my question. This is Brendan Greeney on for Doug. How did whole loan pricing of non QM loans hold up in March versus securitization spreads? Okay, thank you. And where are spreads today on AAAs and securitization? Okay, thank you very much.

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 (Chief Financial Officer)

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.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.