Angel Oak Mortgage REIT (NYSE:AOMR) reported second-quarter 2026 GAAP net income of $3.4 million, or $0.14 per diluted common share, compared with $800,000, or $0.03 per diluted common share, in the prior-year period. The mortgage REIT said higher net interest income and controlled operating expenses supported results, while unrealized mark-to-market losses reduced GAAP earnings.
Distributable earnings totaled $9 million for the quarter, up from $2.6 million in the second quarter of 2025. Chief Financial Officer and Treasurer Brandon Filson said unrealized losses of $3.6 million in the company’s securitized loan and residential loan portfolios, along with $2.4 million of unrealized losses in derivatives, accounted for the difference between GAAP net income and distributable earnings.
Portfolio Actions and Financing
Management highlighted several actions taken during the quarter to improve the portfolio’s return profile and financing structure. The company sold retained bonds from its AOMT 2020-3 securitization and reinvested the proceeds into newly originated loans with higher modeled yields. It also repurchased $15 million of common equity from a pre-IPO investor and negotiated a 35-basis-point reduction in the spread on its largest warehouse financing facility.
“We expect to realize the positive impacts of these actions in the coming quarters and years,” Filson said.
Loan purchases totaled $204 million during the quarter. The purchased loans had a weighted average coupon of 7.34%, a weighted average combined loan-to-value ratio of 70.5%, and a weighted average credit score of 759. At quarter-end, the company’s loans and securitization trust portfolio had a weighted average coupon of 6.04% and an approximate weighted average funding cost of 4.5%.
Chief Executive Officer and President Sreeni Prabhu said the company remains selective in deploying capital and intends to maintain a conservative leverage approach. He said securitization is being used as a strategic funding tool rather than as a volume-driven objective.
- Cash at quarter-end was $48.6 million.
- Recourse debt-to-equity was 2.3 times at quarter-end, declining to about 1.0 times following two post-quarter-end securitizations.
- Undrawn loan financing capacity totaled approximately $900 million across four lending partners.
- Unsecuritized residential whole loans had a fair value of $439 million and were financed with $365 million of warehouse debt.
Securitization Activity Continues After Quarter-End
Although Angel Oak did not complete a securitization during the second quarter, it executed two transactions after the period ended. The AOMT 2026-3 transaction included $280 million of unpaid principal balance, with Angel Oak as the sole contributor. The underlying collateral had a weighted average coupon of 6.9%, a weighted average non-zero credit score of 757, and a weighted average CLTV of 69%. The AAA-rated senior bonds priced at a spread of 130 basis points over the Treasury yield curve.
The company also recently priced AOMT 2026-HB1, a $221 million commingled HELOC securitization to which Angel Oak contributed $71 million of loans. The loans in that transaction had a weighted average coupon of 9.79%, a weighted average non-zero credit score of 744, and a weighted average CLTV of 64.8%.
Management continues to expect roughly one securitization per quarter, or about four annually, in the non-QM market. During the question-and-answer session, Filson said a second non-QM securitization in the third quarter was possible depending on market conditions and pipeline timing. He added that a second HELOC securitization this year is “pretty likely.”
Filson said warehouse-period returns are currently about 13% to 14%, while securitized returns are generally in the 15% to 20% range, depending on execution conditions. He said spreads in the non-QM securitization market have remained relatively tight, with substantial buyer activity despite volatility in interest rates.
Credit Performance and HELOC Allocation
Portfolio-wide 90-day-plus delinquencies were approximately 2.8% at quarter-end, up about nine basis points from the first quarter. The measure includes the company’s residential loan, securitized loan and RMBS portfolios. Filson said management believes Angel Oak’s conservative loan-to-value ratios, credit migration strategy and underwriting approach should support lower losses than comparable non-QM platforms over a full credit cycle.
Three-month prepayment speeds in the company’s non-QM RMBS securitized loan portfolios increased to 13.6% from 12.5% in the first quarter. Management expects prepayments to rise if rates decline, though Filson said the company models returns using historical average prepayment speeds of 20% to 30% and expects mortgage rates would need to fall meaningfully to materially affect portfolio returns.
Prabhu said the company views HELOCs as an opportunity but expects the product to remain a limited portion of the portfolio. “We think of it as a 10%-15% allocation of our overall allocation,” he said, adding that Angel Oak will remain predominantly focused on non-QM first-lien loans.
Management also said investor cash-flow loans represent about half of its non-QM composition, alongside bank-statement lending to small-business owners. Prabhu said non-QM underwriting remains generally prudent across the industry, though the company is seeing weaker competitive underwriting in certain programs it does not offer.
Book Value and Dividend
GAAP book value per share ended the quarter at $10.13, down 1.7% from the end of the first quarter. Economic book value per share was $12.24, down 0.3%. Filson attributed the changes to operating income offset by the quarterly dividend and market-driven unrealized valuation changes. He said management estimated book value had remained relatively flat since the end of the second quarter.
The company declared a quarterly common dividend of $0.32 per share, payable Aug. 28 to shareholders of record as of Aug. 21.
About Angel Oak Mortgage REIT (NYSE:AOMR)
Angel Oak Mortgage REIT, Inc (NYSE: AOMR) is a real estate investment trust that specializes in a diversified portfolio of residential mortgage assets. The company primarily invests in non-agency residential mortgage-backed securities (RMBS), residential whole loans and credit risk transfer securities issued by government-sponsored enterprises. By focusing on these structured credit instruments, Angel Oak Mortgage REIT seeks to generate attractive risk-adjusted returns through a combination of net interest income and potential capital appreciation.
The firm employs leverage through repurchase financing facilities and actively manages duration and credit exposure to adapt to changing market conditions.
