Angel Oak Mortgage REIT Q4 2025 Earnings Call Transcript

Quartr
Provided by Quartr
February 25, 2026

Key Takeaways

  • Positive Sentiment: Angel Oak reported meaningful earnings and net interest income growth — interest income $143.7M (+30% YoY) and GAAP net income of $44.0M for 2025 (+53% YoY), with Q4 GAAP net income of $11.3M versus a loss a year ago.
  • Positive Sentiment: Management executed an active funding and securitization program — completed 4 securitizations (securitized $704M UPB), called two legacy deals, closed its first HELOC securitization, added a new warehouse facility, and cites ~$1B undrawn financing capacity to redeploy capital.
  • Positive Sentiment: Credit and portfolio quality remain strong — total 90+ day delinquencies fell to 2.18%, purchased loans carried a weighted average credit score of 756 and conservative LTVs, and management expects lower loss outcomes versus peers.
  • Negative Sentiment: Distributable earnings lag GAAP due to removed unrealized gains on securitized loans (Q4 distributable earnings $7.3M vs GAAP $11.3M; full-year distributable $14.6M vs GAAP $44.0M), and modestly lower economic book value and rising prepayment speeds could pressure future distributable cash flow.
AI Generated. May Contain Errors.
Earnings Conference Call
Angel Oak Mortgage REIT Q4 2025
00:00 / 00:00

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Operator

Good day, welcome to the Angel Oak Mortgage REIT Fourth Quarter 2025 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Mr. KC Kelleher Please go ahead.

KC Kelleher
KC Kelleher
Head of Corporate Finance and Investor Relations at Angel Oak Mortgage REIT

Good morning and thank you for joining us today for Angel Oak Mortgage REIT's fourth quarter and full year 2025 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.

KC Kelleher
KC Kelleher
Head of Corporate Finance and Investor Relations at Angel Oak Mortgage REIT

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, Sreeniwas Prabhu, and Chief Financial Officer, Brandon Filson. Management will make some prepared comments, after which we will open up the call to your questions. We recommend reviewing our earnings supplement posted on our website, www.angeloakreit.com. Now, I'll turn the call over to Srini.

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

Thank you, K.C. Thank you all for joining us today. Our fourth quarter and full year results were encouraging, serving as a testament to the strength of our earnings engine and our dedication to our process. We delivered our second consecutive year of double-digit net interest income % growth, alongside our third consecutive year of operating expense reduction, emphasizing the stability of our platform and the strength of our operations. We executed our proven strategy, demonstrating its value in an evolving and a constructive market environment as we navigate a shifting rate backdrop. GAAP book value per share increased year-over-year due to improving valuations in our legacy securitizations as rates moved lower, as well as higher net interest income, supported by our deployment of capital into high-yielding investments.

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

Credit performance remains strong, both in aggregate and relative to the overall market. We believe our portfolio remains well positioned to perform comparably well over a range of macroeconomic outcomes. We continue to see the benefits of our deliberate early decision to step up in credit quality and focus our balance sheet on assets that we believe are resilient across a range of economic outcomes. The broader interest rate environment in 2025 was characterized in general by decreasing rates across the curve and over the course of the year, amid shifting of the expectations around the pace and the path of short-term rates. While uncertainty remains, we are optimistic that short-term rates will continue to decline. We will see further steepening in the yield curve. Securitization markets were healthy throughout 2025, with tightening spreads and healthy investor demand supporting attractive term financing for our investment portfolio.

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

We participated in 4 securitizations and called two of our legacy deals from 2019, enabling us to redeploy the delevered capital into higher-yielding assets. Notably, we also completed our first HELOC securitization. We believe HELOCs are an attractive and growing asset class, and we expect to continue to invest in them, though we remain focused on our core strategy of acquiring and securitizing high-quality non-QM loans. We had a new warehouse credit facility in 2025, diversifying our lender base and continued to optimize our funding mix to support high-quality loan purchases. Additionally, we completed our second issuance of senior unsecured notes, the capital from which was quickly deployed into accretive target asset purchases that generated incremental earnings within a quarter of the debt issuance.

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

These actions position us to sustain and further enhance our net interest income increases as we move forward while maintaining a prudent approach to leverage and liquidity. Looking ahead, our addressable market remains significant and continues to grow, driven by a structural demand for non-QM solutions and ongoing need for specialized mortgage credit. Within this market, Angel Oak has established itself as a leading non-QM platform with differentiated sourcing, underwriting, and financing capabilities. Our consistent securitization execution, combined with strong collateral performance and a growing track record of the AOMT shelf, positions us to capture attractive risk-adjusted opportunities. We'll continue to manage recourse leverage prudently, emphasize net interest margin and earnings growth, and focus on the segments of the market where we see the most compelling long-term risk reward.

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

We believe our results and momentum prove that AOMR is well-positioned to operate through a range of economic environments, to continue strong performance within existing rate landscape, and to deliver risk-adjusted returns and long-term value for our shareholders across cycles. With that, I'll turn it over to Brandon, who will walk us through our fourth quarter and full year 2025 financial performance in greater detail.

Brandon Filson
Brandon Filson
CFO and Treasurer at Angel Oak Mortgage REIT

Thank you, Sreeniwas. Fourth quarter results tracked in line with our expectation, and as Sreeniwas mentioned, capped a second consecutive year of expanding net interest income alongside continued operating expense reduction. Interest income increased 30%, and net interest income increased over 11% year-over-year versus 2024, from $110.4 million to $143.7 million, and from $36.9 million to $41.1 million, respectively. This growth was supported by a 15.4% reduction versus 2024 of operating expenses, including securitization cost and stock compensation, as we continued to push hard on cost rationalization and key expense savings initiatives. Valuations were supportive during 2025 and in the fourth quarter, driving increases in valuations across the portfolio.

Brandon Filson
Brandon Filson
CFO and Treasurer at Angel Oak Mortgage REIT

As of today, we expect that our book value moderately increased compared to the end of 2025 as the rate curve continues to steepen. For the fourth quarter of 2025, we had GAAP net income of $11.3 million, or $0.45 per diluted common share, compared to a GAAP net loss of $15.1 million, or $0.65 per common share in the fourth quarter of 2024. For the full year, we had GAAP net income of $44 million, or $1.80 per fully diluted common share, representing a 53% growth versus $28.8 million or $1.17 per diluted common share for the full year of 2024. Distributable earnings in Q4 2025 were $7.3 million.

Brandon Filson
Brandon Filson
CFO and Treasurer at Angel Oak Mortgage REIT

The primary driver of the difference between this and our GAAP net income of $11.3 million and distributable earnings was a removal of $8.4 million of net unrealized gains from our securitized loan portfolio, offset by $4 million of unrealized losses from our residential loans and hedge portfolios. For the full year, distributable earnings were $14.6 million. Primary driver of the difference between this and our $44 million of GAAP net income is a removal of $28.6 million of unrealized net gains on our securitized loan portfolio. Interest income for the fourth quarter was $39 million, and net interest income was $10.9 million, marking a 22% improvement in interest income and a 10% improvement in net interest income compared to the fourth quarter of 2024.

Brandon Filson
Brandon Filson
CFO and Treasurer at Angel Oak Mortgage REIT

Compared sequentially to the third quarter of 2025, interest income increased by 6.5%, and net interest income increased by 7%. For the full year, interest income was $143.7 million, and net interest income was $41.1 million, which translates to increases of 30% and 11%, respectively, compared to the prior year. This increase in net income was driven primarily by the steady purchases of securitizations of newly originated loans, higher weighted average coupons on our overall investment portfolio, and decreases in funding costs as a percentage of borrowings associated with our residential whole loan portfolio, as well as the consistent securitization market. We expect our net interest income to continue its growth trend, with earnings generated from accreted loans purchased throughout the year and ongoing securitization activity.

Brandon Filson
Brandon Filson
CFO and Treasurer at Angel Oak Mortgage REIT

Our $861.8 million of loan purchases in the year carried a weighted average coupon of 7.79%, with a weighted average combined loan-to-value ratio of 65.4% and a weighted average credit score of 756. Our total residential whole loan portfolio had a weighted average coupon of 7.38% as of the end of the quarter. The non-QM portion of our whole loan portfolio carried a weighted average coupon of 7.09%, and HELOCs and closed-end seconds carried a 9.75% weighted average coupon. As of the end of the quarter, loans and securitization trust portfolio carried a weighted average coupon rate of 5.97%, with a weighted average funding cost of approximately 4%.

Brandon Filson
Brandon Filson
CFO and Treasurer at Angel Oak Mortgage REIT

As mentioned, the securitization market remains active, and we intend to continue leveraging the current strength through our disciplined, methodical securitization strategy. We executed 4 securitizations over the course of the year, in addition to calling 2 of our legacy deals from 2019, keeping in line with our stated goal of 4 securitizations per year. In total, we securitized $704 million in unpaid principal balance across these 4 securitizations. In the fourth quarter, we completed AOMT 2025-10 as the sole contributor, contributing a balance of $274.3 million in loans. Additionally, we participated in AOMT 2025-HB2, AOMR's HELOC securitization, which was a $281.4 million securitization, of which we contributed $58.6 million of HELOCs alongside other Angel Oak strategies.

Brandon Filson
Brandon Filson
CFO and Treasurer at Angel Oak Mortgage REIT

Operating expenses for the fourth quarter were $5.2 million. Excluding non-cash stock compensation and securitization cost, fourth quarter operating expenses were $3 million. For the full year, operating expenses were $16.4 million, representing a decrease of 15.5% compared to 2024. Excluding non-cash stock compensation expenses and securitization costs, operating expenses for the full year were $11.5 million, representing a decrease of 15.4% compared to 2024. Going forward, we expect to maintain similar operating expense levels and will continue to be as efficient as possible with our expense structure. Looking at our balance sheet, as of the end of the quarter, we had over $41 million of cash, and our recourse debt to equity ratio is 1.4 times.

Brandon Filson
Brandon Filson
CFO and Treasurer at Angel Oak Mortgage REIT

We expect to continue to prudently manage our recourse debt to equity ratio going forward. GAAP book value per share increased 1.3% to $10.74 as of December 31, 2025, from $10.60 as of September 30, 2025. Economic book value, which fair values all non-recourse securitization obligations, was $12.70 per share as of December 31, 2025, down 0.2% from $12.72 per share as of September 30, 2025. The growth in GAAP book value was driven by improving valuations in our legacy securitizations and higher operating income, while economic book value decreased slightly, as expected, with the normalization in those legacy valuations.

Brandon Filson
Brandon Filson
CFO and Treasurer at Angel Oak Mortgage REIT

We ended the quarter with an unsecuritized residential whole loans, a fair value of $294.1 million, financed with $218.8 million of warehouse debt, $2.1 billion of residential mortgage loans and securitization trust, and $305.5 million of RMBS, including $25.5 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 billion.

Brandon Filson
Brandon Filson
CFO and Treasurer at Angel Oak Mortgage REIT

Now, looking at credit, we ended the quarter with a total portfolio weighted average percentage of loans, 90-plus days delinquent at 2.18%, inclusive of our residential loan, securitized loan, and RMBS portfolio, a decrease of 2 basis points from the third quarter of 2025, and a decrease of 25 basis points compared to year-end 2024. Performance across the Angel Oak shelf has remained strong. We believe the continued outperformance of our collateral relative to broader market further differentiates our platforms. This not only serves as a competitive advantage in terms of financing stability, but also strengthens confidence in our earnings profile. Our shelf's performance divergence, combined with consistent deal execution, reinforces our view that we are well-positioned as a leader in the non-QM market and that our securitization program remains a reliable and repeatable tool for earnings growth.

Brandon Filson
Brandon Filson
CFO and Treasurer at Angel Oak Mortgage REIT

We expect our differentiated credit performance to translate it to lower losses than comparable non-QM platforms across a full credit cycle. This view is supported by a proactive migration up the credit spectrum, conservative LTVs, and disciplined underwriting approach, which we believe position the portfolio to perform consistently, even in more challenging environments. Three-month prepayment speeds for our RMBS securitized loan portfolio were 11.2% to end the quarter, reflecting an increase from 9.4% in the third quarter of 2025. As we have mentioned in previous quarters, prepay speeds are expected to increase as rates decrease and homeowners are incentivized to refinance. With that said, as a reminder, we model our returns based on historical average prepayment speeds of 20%-30%. Prepayment speeds are likely to tick upwards if newly originated coupon rates continue to decrease.

Brandon Filson
Brandon Filson
CFO and Treasurer at Angel Oak Mortgage REIT

However, the majority of our portfolio still has coupon rates that are well 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. Finally, the company declared a $0.32 per share common dividend, which will be paid on February 27, 2026, to common shareholders of record as of February 20, 2026. For additional color on our financial results, please review the earnings supplement available on our website. I will now turn it back to Sreeniwas for closing remarks.

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

Thank you, Brandon. We are optimistic about the future performance of the AOMR and are excited to demonstrate the strength of our model in a steepening yield environment. The team has worked tirelessly to establish what we believe is the best non-QM loan origination, purchase, and securitization platform, which provides us the confidence for the future. We'll maintain our focus on diligent credit selection, consistent securitization execution, and value-driven decision making, and we look forward to continuing to build long-term value for our shareholders in the coming quarters and years. With that, we'll open up the call to your questions. Operator?

Operator

Thank you very much. We will now begin with the question-and-answer session. To ask a question, you may press * then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press * then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Matthew Erdner with JonesTrading. Please go ahead.

Matthew Erdner
Director at JonesTrading Institutional Services

Hey, good morning, guys. Thanks for taking the question. You know, where are you guys seeing the best kind of risk-reward opportunities right now? You've mentioned, you know, kind of that whole loan portfolio purchases or I guess what you currently have is at 709 basis points call, and then the HELOCs are about, give or take, 250 points higher. You know, where are you guys favoring your capital allocation right now for purchases?

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

Hey, thanks, Matt. This is Sreeniwas. I think we have a healthy mix of, obviously, there's more relative value in terms of buying HELOCs, for sure, because the IRRs are better, but obviously, the long term, it's more focused on non-QM. They both provide healthy returns for us, and I think you should see us continue to keep that mix. You know, HELOCs can, you know, the more you scale, you know, you want to be very careful of the credit you're underwriting. We're extremely careful about what we underwrite in HELOCs, versus just growing the volumes and securitizing it. The cleaner credit, obviously, has always been non-QM for us. We like the returns we get over there, and then we just are using, selectively using, HELOCs for that. A little bit more alpha.

Matthew Erdner
Director at JonesTrading Institutional Services

Got it. That's helpful. You know, where are you seeing the ROEs on each of those types of securitizations today?

Brandon Filson
Brandon Filson
CFO and Treasurer at Angel Oak Mortgage REIT

On the, you know, from the non-QM securitization front, we're still in that, you know, mid- to high-teens level. You know, it kind of, it's been bouncing around a little bit, with rates coming down on the mortgages, but then spreads and the base rates on the securitizations have come in. We're still in that mid-teen level. The HELOCs are going to be, you know, 5, 6, 7 points higher than that, on a fully securitized basis. You know, low 20, ROE perspectives.

Matthew Erdner
Director at JonesTrading Institutional Services

Got it. That's helpful. Last one from me: Did you guys provide a book value update quarter to date?

Brandon Filson
Brandon Filson
CFO and Treasurer at Angel Oak Mortgage REIT

Yeah. Our book value today, we think, is modestly increased from where we were at December 31.

Matthew Erdner
Director at JonesTrading Institutional Services

Got it. Thank you, guys.

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

Thank you.

Operator

Thank you. Your next question comes from Doug Harter with UBS. Please go ahead.

Doug Harter
Doug Harter
Director and Senior Equity Research Analyst at UBS

Thanks. Good morning. Can you talk about your ability to continue to recycle, capital, either through calling deals, or just, you know, optimizing financing? You know, how much more capacity you have to grow with the existing capital base?

Brandon Filson
Brandon Filson
CFO and Treasurer at Angel Oak Mortgage REIT

We have a pretty good amount of power that we can still recycle and use. I mean, we've got lots of unlevered loans in our book right now that we could choose to lever to continue to buy new loans. A lot of our recourse debt to equity ratio leverage is very low. You know, our actual total amount borrowed on repo facilities is lower than it has been over the course of time, even though our RMBS, you know, portfolio has grown dramatically through securitizations. As we do these securitizations, obviously, we usually are releasing $20 million-$30 million in cash off of each one. We have a kind of enough capacity for sure to take us through, you know, a similar buying clip into 2026.

Doug Harter
Doug Harter
Director and Senior Equity Research Analyst at UBS

I appreciate that. Thank you.

Operator

Thank you. The next question comes from Timothy D'Agostino with B. Riley Securities. Please go ahead.

Timothy D'Agostino
Timothy D'Agostino
Research Analyst at B. Riley Securities

Yeah, hi. Thank you. Good morning. Thanks for taking the question. I guess my question is a little bit more general. Just like to get your sense on kind of how the market feels and the activity level, whether that be in non-QM, HELOC, or as well as securitization market, and how it feels different at the start of 2026 compared to 2025. Thank you.

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

Yeah, that's a good question. You know, we have just, the 25 was a solid year across the board in mortgage market. You know whether you take any part of resi market was doing well. That continued into 2026. We had seen, you know, take the last two weeks of volatility out, we had seen spreads tightening in the securitization market. I think we printed a deal close to 100 basis points. It was like 105, 110 basis points. They have widened out since as the volatility has gotten into the entire market. The mortgage market itself seems to be solid. The non-QM market continues to grow.

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

I think we're going to have more issuance this year than last year. There are more players coming in, so it's getting competitive for sure. You know, what we try to tell people is, whether it's our private funds or AOMR, what we try to tell people is we originate what we can originate. We're not looking for scale per se, we're looking for quality and the relationships we have with those brokers. We've been in the market for so many years, you know, we're able to. We don't have to compete on price. Right now, the market is competing extremely on price, because there are more entrants. People want to get bigger in this space. That's, that's the, so the growth is good. It is competing, it is coming with competitive pressures.

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

There are going to be balance sheets which will have lower IRRs for sure, because scale pretty much brings lower IRR if you try to originate more loans. That's the backdrop we have. The non-QM market by itself just continues to grow as there's more and more people looking for, and they really don't fit the guidelines. As more and more people get self-employed, entrepreneurs, you know, non-permanent employees, they need non-QM loans. How do I see this unfolding in 2026? You know, we feel that there will be pockets of volatility. You know, 2025 was, except April, was just a phenomenal place. You cannot expect that. That's one of the reasons why we hit the securitization market as fast as we can. Rates are continuing to drop.

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

You've seen the mortgage rates have dropped. You know, we think that generally the market's gonna be solid with some pockets of volatility.

Timothy D'Agostino
Timothy D'Agostino
Research Analyst at B. Riley Securities

Okay, great. Thanks so much. Then just a quick follow-up. Regarding HELOC securitizations, I believe, and correct me if I'm wrong, Earl in the call, said you're contributing to the second one. I guess, you know, in terms of HELOC securitizations per year, would you say the pace is probably one to two, or just any kind of color there? Thanks.

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

Yeah, I mean, when we said 2 securitization last year, that was to our entire franchise. You probably will see more from our entire franchise. I would speculate the AOMR will be involved in 1 to 2 of them. Is that fair, Ben?

Brandon Filson
Brandon Filson
CFO and Treasurer at Angel Oak Mortgage REIT

Yeah.

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

Yeah.

Brandon Filson
Brandon Filson
CFO and Treasurer at Angel Oak Mortgage REIT

I think that's probably right. I would cheat up to.

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

Two, yeah.

Brandon Filson
Brandon Filson
CFO and Treasurer at Angel Oak Mortgage REIT

... for that, 'cause we just started buying HELOCs in back half of 2025. We contributed to 2025-HB2 in December. If you kind of follow that same pace, that puts us on the course of about two participations a year in the HELOC space.

Timothy D'Agostino
Timothy D'Agostino
Research Analyst at B. Riley Securities

Okay, great. Thank you so much for taking the questions today.

Operator

Thank you. Again, if you have a question, please press * and then 1. Our next question comes from Eric Hagen with BTIG. Please go ahead.

Eric Hagen
Eric Hagen
Managing Director and Mortgage and Specialty Finance Analyst at BTIG

Hey, thanks. Good morning. How are you guys thinking about this attention across the market right now on private credit, right, the impact on other asset managers, and then the knock-on effects that it could have on the resi and commercial mortgage markets? I mean, do you think this raises attention on the underwriting, or could it kind of, like, affect the demand that we typically see from asset managers to buy whole loans and securitized products?

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

Yeah, I mean, you know, we so, the way to answer this question, Eric, is, you know, we see this across what we at Angel Oak Companies see, right? We have ETFs, mutual funds, private credit in the mortgage space. We are traveling to raise money, traditional money, and obviously we have AOMR as a public REIT. We see it across the board, what investors are thinking. The way I would say it is that when a lot of money that went into so-called private credit went into corporate credit, right? It was institutional probably three, four years ago, and then retail followed last couple of years. That's where all the money went. Let's discount the fact that whether private credit underwriting is good or bad, but that's where a lot of money went.

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

That's what happens when new money comes into a space and then gets worried. You know, you see the momentum shift. In terms of other types of private credit, whether it's asset-backed or mortgage credit, generally, I would say institutions are underinvested, and retail definitely is underinvested. They may invest through ETFs and mutual funds buying bonds, but in terms of private credit in the mortgage space, they're underallocated. Retail is definitely underallocated. From that perspective, I don't like you when you see this, commercial is a little different because, you know, there are true delinquencies and defaults happening in commercial real estate sector that you have to dissect the good, the bad, the ugly. Very different. In terms of asset-backed and resi, I would say that.

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

That's why you're not seeing any of the private credit side. You're not seeing any ABS or mortgage funds in the crosshairs right now. Can it bleed into mortgage sector? Yeah, it could. Like I said, is, you know, in terms of unwinding or what has happened to a couple of funds in the private credit space, you know, I don't, we haven't seen that in the mortgage or ABS space.

Eric Hagen
Eric Hagen
Managing Director and Mortgage and Specialty Finance Analyst at BTIG

Okay, that's really helpful commentary. Good perspective there. I mean, how sensitive do you guys think the origination volume in the primary market for non-QM could be if there is a backup in spreads in the secondary market, right? Like, which one is responding to the other? I mean, do you think that spreads can stay this stable if we do get a steeper yield curve and if we do get higher, longer-term interest rates?

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

Eric, do you mind repeating that question? We're having some issues on our side. We missed some of that question. If you don't mind, please.

Eric Hagen
Eric Hagen
Managing Director and Mortgage and Specialty Finance Analyst at BTIG

Oh, yeah. Sorry, it's probably on my end.

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

Yeah.

Eric Hagen
Eric Hagen
Managing Director and Mortgage and Specialty Finance Analyst at BTIG

I'm asking about how sensitive you think the origination volume in the primary market could be if there's a backup in spreads in the secondary market, like which ones are kind of responding to the other. Do you feel like spreads in, for non-QM can stay as stable as they've been if we get a steeper yield curve?

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

Yeah. Yeah. To answer your first point, I mean, you know, we've gone through a high-rate environment, right? The high, if you just go back to 2023, you know, we saw high spread in the secondary, we had to combine that with high rates. As long as rates, I mean, the way to think about it is, you know, mortgage volumes, when you're in a range-bound environment, plus or minus 50 basis points, I believe volumes will continue to grow as people need more and more of these loans. It wouldn't affect that much. You know, it's driven by IRRs, obviously, right? We got to make IRRs for AOMR, we got to make IRRs for private funds. Our volumes won't be affected as much by that.

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

A steeper yield curve, which brings 10-year rates much higher, two things could happen. One is you could see the origination move towards a hybrid, more of a, fixed to floating kind of mortgages that will be out there. You've seen that happen a little bit more in the prime jumbo space. I know you talked to other REITs about it, that, more origination. We haven't seen that in our space yet. The curve isn't steep enough to do that. You could see that trend. Your third question about the stability of spreads, you know, we're not expecting spreads. You know, just for example, last two weeks, spreads have widened out again.

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

As long as the spreads are in the range bound, 25 to 30 to 40 basis points, you know, securitization markets will be healthy and origination activity will be healthy, I believe.

Eric Hagen
Eric Hagen
Managing Director and Mortgage and Specialty Finance Analyst at BTIG

Great commentary. Appreciate you guys very much. Thank you.

Sreeniwas Prabhu
Sreeniwas Prabhu
CEO and President at Angel Oak Mortgage REIT

Thank you. Thank you.

Operator

Thank you. This concludes our question and answer session. I would like to turn the conference back over to Mr. Brandon Filson for any closing remarks.

Brandon Filson
Brandon Filson
CFO and Treasurer at Angel Oak Mortgage REIT

Thank you, everyone, for your time and interest in Angel Oak Mortgage REIT. We look forward to connecting with you again next quarter. In the meantime, if you have any questions, please feel free to reach out to us, and have a great day.

Operator

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Executives
    • Brandon Filson
      Brandon Filson
      CFO and Treasurer
    • KC Kelleher
      KC Kelleher
      Head of Corporate Finance and Investor Relations
    • Sreeniwas Prabhu
      Sreeniwas Prabhu
      CEO and President
Analysts
    • Doug Harter
      Director and Senior Equity Research Analyst at UBS
    • Eric Hagen
      Managing Director and Mortgage and Specialty Finance Analyst at BTIG
    • Matthew Erdner
      Director at JonesTrading Institutional Services
    • Timothy D'Agostino
      Research Analyst at B. Riley Securities
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