How does AOMR's non-QM collateral compare to the market's 50% investor loans, and is DSCR exposure growing?

AOMR's composition on investor cash flow loans is around 50%, which has been a good source of growth. They predominantly focus on this space and bank statement underwriting for small business owners. “I think our composition on investor cash flow loans is around that same amount. It's been a good source for growth for us over the past several years, but we still predominantly play in that space and the bank statement borrowing underwriting programs to like small business owners.”

Can you elaborate on the returns seen during the warehouse period versus upon securitization, especially after the 35 basis point warehouse financing improvement?

Returns are estimated at 13% to 14% during the warehouse phase and 15% to 20% upon securitization, depending on execution. “But typically, right now, I think we're seeing about 13% to 14% return in the warehouse phase. And then in securitization, it's that 15% to 20% we often quote depending exactly on where securitizations execute.”

Given spread compression on the AOMT 2026-3 deal (lower WAC, higher AAA spreads), are high teens returns still expected, and what drove the tighter net spread?

Management still expects 15% to 20% returns. The specific deal had a lower coupon portfolio, but current purchases have higher coupons (mid-7s). The securitization market is healthy with tight spreads despite rate volatility. “I think that we're still expecting the 15% to 20%. Of course, that can bounce around from time to time. This last one was your portfolio composition was a little lower coupon than what we're currently buying. But now in response to the higher rates, our average mortgage coupons have gone up by 35, 40 basis points on average. And today, we're buying loans closer back to that mid-7s level from a non-QM perspective.”

AOMR

Angel Oak Mortgage REIT (AOMR) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Real Estate· Aug 4, 2026

Source: earnings call transcript

Executive summary

Angel Oak Mortgage REIT Q2 FY26 — Strategic Actions Strengthen Portfolio Amidst Market Volatility

Angel Oak Mortgage REIT navigated a volatile Q2 FY26 with strategic actions to fortify its portfolio, including bond monetization, share repurchases, and reduced financing costs. Despite unrealized mark-to-market losses and a slight increase in delinquencies, the company maintained solid net interest income growth and stable book value, emphasizing disciplined capital deployment and strategic securitization to build long-term shareholder value.

Highlights

Net interest income grew 8% year-over-year to $10.7 million in Q2 2026.
GAAP net income increased to $3.4 million ($0.14 per diluted share) in Q2 2026 from $0.8 million ($0.03 per diluted share) in Q2 2025.
Repurchased $15 million of common equity from a pre-IPO investor at accretive return levels.
Reduced interest rate spread on largest warehouse financing facility by 35 basis points.
Recourse debt-to-equity ratio decreased to approximately 1x post-quarter-end securitizations from 2.3x at quarter-end.

Concerns

Unrealized mark-to-market valuation decreases in unsecured securitized loan portfolio partially offset strong operating foundation.
GAAP book value per share decreased 1.7% to $10.13 from Q1 2026.
Economic book value decreased 0.3% to $12.24 from Q1 2026.
Portfolio-wide 90-day plus delinquencies increased by 9 basis points to approximately 2.8% from Q1 2026.

Guidance & targets

Category	Target	Timeline	Confidence
Securitization pace	Roughly one securitization per quarter medium materiality	Ongoing	Medium
Operating expense levels	Maintain similar operating expense levels low materiality	Ongoing	Medium
Securitization pace	Roughly 1 securitization per quarter or 4 per year medium materiality	Annual	Medium
Non-QM securitization pace	4 per year on average medium materiality	Annual	Medium
HELOC securitization	Second HELOC securitization likely low materiality	FY26	Medium
Non-QM securitization	Decent chance of second non-QM securitization low materiality	Q3 · FY26	Low

Deals & partnerships

Pre-IPO investor Common stock repurchase $15M

Repurchased $15 million of common equity from a pre-IPO investor at accretive return levels.

Largest warehouse financing provider Interest rate spread reduction 35 bps

Successfully negotiated a 35 basis point spread reduction on its largest warehouse financing facility.

N/A Monetization of delevered legacy retained bonds

Sold retained bonds from the AOMT 2020-3 securitization.

N/A (AOMR sole contributor) Non-QM Securitization $280M UPB

Executed AOMT 2026-3, to which AOMR was the sole contributor, with $280 million of unpaid principal balance.

N/A (AOMR contributor) HELOC Securitization $221M commingled HELOC securitization

Recently priced AOMT 2026-HB1, a $221 million commingled HELOC securitization, to which AOMR contributed $71 million of loans.

Risks & headwinds

Macroeconomic uncertainty and market volatility Q2 FY26 and ongoing

unrealized mark-to-market valuation decreases in our unsecured securitized loan portfolio

Mitigation:balanced approach of strategic value-driven decision-making and operating excellence; staying disciplined in capital deployment, preserving flexibility; maintaining liquidity and available financing capacity

Increased 90-day+ delinquencies Q2 FY26

2.8%, an increase of approximately 9 basis points from Q1 2026

Mitigation:proactive migration of the credit spectrum, conservative LTVs and disciplined underwriting approach

Housing affordability and rising rates impacting origination Ongoing

market obviously is difficult from the origination side, right, because housing affordability slows down, obviously, as rates keep going up

Mitigation:continue to originate and purchase selectively; disciplined underwriting approach

Competitive pressures in non-QM market Ongoing

extremely competitive because you have a whole addition of insurance companies that are stepping in at these higher rates

Mitigation:be disciplined; avoid certain programs that we generally don't do

General consumer credit weakness (outside AOMR's direct portfolio) Ongoing

The general consumer credit that I say consumer ex housing generally is the one that also probably has not gotten any benefit of the equity markets. I think that consumer continues to be weaker.

Mitigation:AOMR does not play in this space directly, but is cautious in related funds (mutual funds, ETFs)

What to watch in Q3 FY26

Non-QM Securitization Pace

Q3 FY26

Current 2 securitizations (AOMT 2026-3, AOMT 2026-HB1) executed post Q2 FY26

Target Second non-QM securitization in Q3 FY26

Why it matters

Indicates continued access to funding markets and ability to rotate warehouse inventory, supporting earnings power.

and there's a decent chance with the pipeline coming that we'll see a second non-QM within Q3.

Find out whether AOMR delivers this. Inve re-checks your case every morning.

Q&A highlights

What is the target allocation for HELOCs relative to first lien non-QM, and how large is the opportunity?

Management sees the HELOC opportunity as a 10% to 15% allocation of the overall portfolio, with non-QM remaining predominant, based on size, scale, and credit box.

“So we think of it as a 10% to 15% allocation of our overall allocation. So we'll still be predominantly non-QM and then selectively we'll look into HELOCs based on our credit boxes.”

asked by Marissa Lobo · answered by Sreeniwas Prabhu

2 min read 7 chapters

Detailed narrative

Strategic Portfolio Actions

AOMR undertook several strategic initiatives in Q2 2026 to enhance portfolio strength and return profile. These included monetizing delevered legacy retained bonds from the AOMT 2020-3 securitization, repurchasing $15 million of common equity from a pre-IPO investor, and negotiating a 35 basis point spread reduction on its largest warehouse financing facility.

These opportunistic and prudent actions are designed to fortify the strength and return profile of the portfolio over the short and long term.

Securitization Strategy and Market Conditions

The company maintained a disciplined approach to securitization, executing AOMT 2026-3 ($280 million UPB) and AOMT 2026-HB1 ($221 million commingled HELOC securitization, with AOMR contributing $71 million) post-quarter-end. Management aims for approximately one securitization per quarter, focusing on balance sheet durability, reduced financing uncertainty, and long-term earnings power rather than volume-driven objectives. The securitization market remains constructive with tight spreads despite rate volatility.

Loan Origination and Credit Profile

AOMR continues to source loans fitting its credit and return criteria, with Q2 purchases totaling $204 million. These loans exhibit conservative credit profiles, moderate loan-to-value ratios (weighted average CLTV of 70.5%), and strong credit scores (weighted average 759). The weighted average coupon of purchased loans was 7.34%.

The company's non-QM collateral composition includes approximately 50% investor cash flow loans, and for HELOCs, they target underwriting to a 65% combined loan-to-value.

Financial Performance Highlights

GAAP net income for Q2 2026 was $3.4 million ($0.14 per diluted share), a significant increase from $0.8 million ($0.03 per diluted share) in Q2 2025. Net interest income grew 8% year-over-year to $10.7 million. Distributable earnings were $9 million, compared to $2.6 million in Q2 2025.

Interest income and net interest income grew by 21% and 14% respectively for the first six months of 2026 versus the prior year period.

Balance Sheet and Liquidity

As of quarter-end, GAAP book value per share was $10.13, and economic book value was $12.24. The recourse debt-to-equity ratio was 2.3x at quarter-end, decreasing to approximately 1x after subsequent securitizations. The company held $48.6 million in cash and $900 million in undrawn loan financing capacity with four high-quality lending partners, maintaining flexibility to respond to changing market conditions.

Credit Performance and Delinquencies

Portfolio-wide 90-day plus delinquencies stood at approximately 2.8%, a 9 basis point increase from Q1 2026. Despite this, management believes its proactive migration of the credit spectrum, conservative LTVs, and disciplined underwriting position the portfolio for strong performance. They expect their differentiated credit performance to translate into lower losses compared to other non-QM platforms across the full credit cycle.

Prepayment Speeds and Returns

3-month prepay speeds for non-QM RMBS securitized loan portfolios increased to 13.6% from 12.5% in Q1 2026. While expecting speeds to tick upward if rates decrease, the company models returns based on historical average prepayment speeds of 20% to 30%. Returns are modeled at 13% to 14% during the warehouse phase and 15% to 20% upon securitization.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.