Angel Oak Mortgage REIT, Inc. (AOMR) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents mixed signals. Positive factors include 20% growth in net interest income and a well-positioned balance sheet. However, the decrease in book value per share and an increase in delinquency rates raise concerns. The Q&A reveals management's uncertainty in some areas, such as legacy securitizations, which may cause investor unease. Overall, the financial performance and strategic plans are stable, but not overly optimistic, leading to a neutral stock price prediction.
Key Financial Performance
GAAP Net Loss $7.4 million or a loss of $0.30 per common diluted share in Q1 2026, compared to GAAP net income of $20.5 million or $0.87 per diluted common share in Q1 2025. The loss was driven by unrealized valuation changes on loan portfolios due to macroeconomic market volatility.
Distributable Earnings $4.6 million in Q1 2026, compared to $4.1 million in Q1 2025. The increase was primarily driven by the removal of unrealized fair value movements.
Interest Income $40.7 million in Q1 2026, compared to $32.9 million in Q1 2025, showcasing a 24% growth. This was supported by targeted asset purchases and consistent securitization market access.
Net Interest Income $12.1 million in Q1 2026, compared to $10.1 million in Q1 2025, reflecting a 20% growth. Growth was driven by targeted asset purchases and growing net interest margin.
Operating Expenses $5.2 million in Q1 2026, with $3.4 million excluding noncash stock compensation expenses and securitization costs. The increase compared to Q1 2025 was due to higher professional service fees and loan diligence fees.
Loan Purchases $246.2 million in Q1 2026, reflecting conservative credit profiles, moderate loan-to-value ratios, and attractive risk-adjusted market coupons.
GAAP Book Value Per Share $10.31 at the end of Q1 2026, a 4% decrease compared to the end of 2025. The decrease was due to market-driven valuation changes and dividend payments.
Economic Book Value Per Share $12.28 at the end of Q1 2026, a 3.3% decrease compared to the end of 2025. The decrease was attributed to market-driven valuation changes and dividend payments.
Cash $42 million at the end of Q1 2026, reflecting a well-positioned balance sheet.
90+ Day Delinquency Rate Approximately 2.7% in Q1 2026, materially flat compared to Q1 2025 but increased by 50 basis points from Q4 2025. The increase was attributed to macroeconomic conditions.
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Operating Highlights
AOMT 2026-2 Securitization: Completed in March 2026 with a $272 million unpaid principal balance, weighted average coupon of 7.1%, and AAA-rated senior bonds priced at a 113 basis point spread over the treasury yield curve.
Non-QM Lending Solutions: Continued demand for non-QM lending solutions, with $246.2 million in loan purchases during Q1 2026, reflecting conservative credit profiles and attractive risk-adjusted returns.
Net Interest Income Growth: Achieved 24% growth in interest income and 20% growth in net interest income compared to Q1 2025, supported by targeted asset purchases and consistent securitization market access.
Operating Expense Management: Operating expenses for Q1 2026 were $5.2 million, with $3.4 million excluding noncash stock compensation and securitization costs, reflecting efficient expense management.
Securitization Strategy: Maintained a disciplined and methodical securitization strategy, completing four securitizations per year, with a focus on sound structures and conservative leverage.
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Risk or Challenges
Geopolitical Tensions: Renewed conflict in the Middle East and geopolitical tensions have created market volatility, impacting investor sentiment and valuation of portfolios.
Macroeconomic Volatility: Global economic uncertainties, including inflation and rate volatility, have led to unfavorable valuation impacts and unrealized losses in loan portfolios.
Interest Rate Risks: Rate increases and spread widening have negatively affected book value and portfolio valuations, creating challenges in maintaining consistent returns.
Credit Performance: An increase in 90+ day delinquency rates compared to the prior quarter, though still relatively low, indicates potential credit risks in the portfolio.
Market Access and Liquidity: Volatility in securitization markets and reliance on favorable market conditions for securitizations pose risks to liquidity and operational flexibility.
Operational Costs: Increased professional service fees and loan diligence fees have raised operating expenses, potentially impacting profitability.
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Guidance & Outlook
Non-QM Lending Solutions: The company anticipates a durable need for non-QM lending solutions and plans to maintain a cautious but active posture in this market.
Securitization Strategy: The company expects to continue its trend of executing four securitizations per year, approximately one per quarter, leveraging favorable market conditions when possible.
Operating Expense Levels: The company plans to maintain similar operating expense levels going forward, focusing on efficiency.
Loan Purchases: The company intends to continue purchasing loans with conservative credit profiles, moderate loan-to-value ratios, and attractive risk-adjusted returns.
Prepayment Speeds: The company expects prepayment speeds to increase as interest rates decrease, though significant impacts on portfolio returns are unlikely unless mortgage rates fall meaningfully.
Dividend Declaration: The company declared a $0.32 per share common dividend payable on May 29, 2026, to shareholders of record as of May 22, 2026.
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Shareholder Return Plan
Dividend Declaration: 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.
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Key Q&A
Q: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?
A:We are building our current HELOC pipeline right now. After the securitization '26-2, we bought some HELOCs as well. We have enough to co-mingle with other Angel Oak entities and are looking forward to another HELOC securitization in the coming months. The pacing is still about correct.
Q: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. How should we think about that? And how is that impacting the valuation of the retained tranches on those deals?
A:The speed increase is expected as rates started to come down. The '24 deals had loans with higher coupons, so the increase isn't surprising. We model 25 to 30 CPR over the life of the securitizations. Delinquencies are being monitored but nothing stands out. Retained tranches have a hedging effect; as speeds increase, IO bond valuations decrease, but B3 or unrated bond valuations increase as they are expected to be paid off sooner.
Q:In prior quarters, you've talked about calling legacy securitizations, kind of the '21s, '22s. As of last quarter, you intended to call two of those throughout the year. Is that still the plan? And what are you seeing in terms of resecuritization that you could achieve?
A:We are monitoring this daily. The decision depends on funding costs, leverage, and rate market volatility. A reduction in rate market volatility is needed for the decision to call the deals to be accretive.
Q:What kind of ROEs are you seeing in the market? I think it was mid-teens last quarter, trending a little bit lower. Is that still the expectation and then low 20s on HELOCs?
A:Our long-term expectation is mid-teens to low 20s. Currently, with increased treasuries and spreads, ROEs are lower, around lower teens to high 12s. We hope to return to the 15% to 20% range when securitization resumes.
Q:Regarding operating expenses, it seems like this quarter, it was elevated a little bit at about $1.7 million. Is there anything in particular in that line item that increased it?
A:The increase is mainly due to professional service fees and loan diligence fees. Professional service fees are related to the ATM program, where costs were expensed instead of being put through a contra equity account.
Q: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 how does the cost for non-QM securitization differ from HELOC securitization?
A:Securitization expenses include fixed and variable costs. Costs are sensitive to deal size, especially for HELOC securitization, where costs are pro rata. Typically, costs are around 50 basis points of the securitized amount, which could vary slightly depending on deal size.
Q:How did whole loan pricing of non-QM loans hold up in March versus securitization spreads?
A:Whole loan pricing decreased significantly, losing about 1 point in Q1. This reflects current spreads and treasury base rates.
Q:Where are spreads today on AAAs and securitization?
A:Spreads are approximately $135 million to $145 million, depending on timing and collateral specifics.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding the decision to call legacy securitizations ('21s, '22s). They stated it depends on funding costs, leverage, and rate market volatility, but did not provide specific details or a clear timeline for the decision.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AAA bond
AOMT balance
AOMT securitization
Balance sheet
CLTV AAA
CLTV credit
Changes book
Chief Head
Credit portfolio
Differences
Investor
Middle East
Mortgage REIT
advantage market
approach
asset purchase
conflict Middle
credit profile
credit score
discipline
end book
fee
lending
liquidity
market condition
market volatility
onset conflict
period
platform credit
portfolio market
prepay speed
rate mortgage
securitization onset
share book
structure
tension
valuation decrease
value share
AOMR Transcript
Angel Oak Mortgage REIT, Inc. (AOMR) Q1 2026 Earnings Call Transcript
Unknown5-5
The earnings call presents mixed signals. Positive factors include 20% growth in net interest income and a well-positioned balance sheet. However, the decrease in book value per share and an increase in delinquency rates raise concerns. The Q&A reveals management's uncertainty in some areas, such as legacy securitizations, which may cause investor unease. Overall, the financial performance and strategic plans are stable, but not overly optimistic, leading to a neutral stock price prediction.
Angel Oak Mortgage REIT, Inc. (AOMR) Q4 2025 Earnings Call Transcript
Positive2-25
The earnings call reflects strong financial performance with significant increases in net income and reduced operating expenses. The company demonstrates effective capital recycling and has a positive outlook on HELOC and non-QM loan markets. Despite a slight dip in economic book value, the overall sentiment is positive with robust ROEs and low delinquency rates. The Q&A confirms confidence in continued growth and market stability, although there is some caution regarding private credit impacts. The absence of a market cap suggests a moderate reaction, likely within the 2% to 8% range.
Angel Oak Mortgage REIT, Inc. (AOMR) Q3 2025 Earnings Call Transcript
Positive11-6
The company demonstrated strong financial performance with growth in net interest income, GAAP book value, and interest income. Operating expenses decreased significantly, and credit performance improved. The Q&A session revealed a strategic focus on high-yielding assets and a robust securitization strategy, with analysts showing positive sentiment. The company's strategic plan aligns with market dynamics, and the overall sentiment is positive, suggesting a potential stock price increase of 2% to 8% over the next two weeks.
Angel Oak Mortgage REIT, Inc. (AOMR) Q2 2025 Earnings Call Transcript
Positive8-5
The earnings call summary shows strong financial performance with a significant increase in net interest and distributable earnings. Despite a slight decline in book value, the company has strategic plans for growth, including a new partnership and securitization activities. The Q&A section revealed positive sentiment from analysts, with management addressing growth and capital recycling. The strategic partnership announcement and dividend declaration further bolster a positive outlook, suggesting a stock price increase of 2% to 8% over the next two weeks.
AOMR Slides
AOMR Report
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