Angel Oak Mortgage REIT NYSE: AOMR reported a third-quarter GAAP net loss as rising interest rates and wider mortgage-credit spreads reduced the value of its securitization portfolio, although management said underlying loan credit performance remained stable.
The company posted a GAAP net loss of $16.7 million, or $0.72 per diluted common share, compared with net income of $11.4 million, or $0.46 per diluted common share, in the third quarter of 2025. Chief Financial Officer Brandon Filson said the loss was primarily driven by a $24.4 million net realized and unrealized loss tied to the company’s securitization portfolio.
Filson said higher short-term yields and an upward shift in the yield curve created non-cash mark-to-market pressure on asset valuations. Management emphasized that the valuation changes did not signal weakening credit quality among the loans held in the portfolio.
Book Value Declines as Rates and Spreads Rise
GAAP book value per share fell 11.5% during the quarter to $8.97 from $10.13 at the end of the second quarter. Economic book value per share, which marks non-recourse securitization obligations to fair value, declined 6.5% to $11.45 from $12.24.
During the question-and-answer session, Filson said the book-value decline reflected a nearly equal combination of higher base rates and wider non-QM credit spreads. He noted that the company’s AOMT 2026-3 securitization priced AAA-rated bonds at a 130-basis-point spread over the Treasury curve earlier in the quarter, while the subsequent AOMT 2026-6 transaction priced AAA bonds at 160 basis points over the curve.
Filson said book value had recovered by roughly “a couple points” so far in the fourth quarter as market conditions became more favorable.
He also said the company hedges the base-rate component of securitization execution but does not hedge credit spreads, its securitized book value or retained bond positions after securitization. According to Filson, movements in retained interests were largely mark-to-market changes rather than revisions to expected cash flows, absent an unexpected credit problem.
Distributable Earnings Rise Despite GAAP Loss
Distributable Earnings were $6.4 million, or $0.28 per diluted common share, up from $0.5 million, or $0.02 per diluted common share, in the prior-year period. The measure excluded unrealized losses on residential loans, loans held in securitization trusts, non-recourse securitization obligations and derivatives.
The company completed two securitizations during the quarter, with $1.8 million of related costs included in Distributable Earnings.
Interest income increased 16% year over year to $42.5 million from $36.7 million, driven by growth in target assets. Net interest income was unchanged at $10.2 million. Operating expenses totaled $2.1 million, rising modestly because of higher loan-diligence fees and valuation costs associated with the larger target asset portfolio.
Securitization Activity Continues
Chief Executive Officer Sreeni Prabhu said the company completed two securitizations early in the quarter, before the more pronounced increase in rates during August and September, and completed another transaction in October to reduce further interest-rate exposure.
- AOMT 2026-3 had a $280 million unpaid principal balance. Angel Oak Mortgage REIT was the sole contributor to the transaction.
- AOMT 2026-HB1 was a $221 million co-mingled HELOC securitization, to which the company contributed $71 million of loans.
- AOMT 2026-6 closed in late October with a $250 million unpaid principal balance.
Filson said securitization markets have remained constructive despite market uncertainty and that the company continues to expect to complete approximately one securitization per quarter, or four annually. The company also renewed and extended several financing facilities at lower spreads, though elevated underlying base rates offset much of the near-term savings.
At quarter-end, Angel Oak Mortgage REIT had $49 million in cash, a recourse debt-to-equity ratio of 2 times and roughly $1 billion of undrawn loan-financing capacity across four lending partners. The company held $294 million in unsecuritized residential home loans at fair value, financed by $255 million of warehouse debt, as well as $2.3 billion of residential loans in securitization trusts and $203 million of RMBS.
Loan Purchases and Credit Metrics
Loan purchases totaled $233.1 million during the quarter. The loans purchased carried a weighted average coupon of 7.21%, weighted average combined loan-to-value ratio of 71.8%, and weighted average credit score of 758. Current mortgage locks averaged about a 7.9% coupon.
Filson said newly originated loans are taking 30 to 60 days to move through the process, meaning current returns have lagged the company’s historical 15% to 20% target range following the rate increase. However, he said new locks near 8% could allow returns to recover toward that range if rates remain near current levels.
Credit performance remained stable, with portfolio-wide loans delinquent by 90 days or more at approximately 2.1%, unchanged from the end of the second quarter. Three-month prepayment speeds on securitized non-QM RMBS loans slowed to 11.2% from 15.2% in the previous quarter.
Prabhu said weaker underwriting from competitors was beginning to appear in “small waves” through whole-loan sales at modest discounts to market. He said continued wider spreads could eventually slow weaker programs if they lose access to capital-markets exits.
The company declared a common dividend of $0.32 per share, payable Nov. 30, 2026, to shareholders of record as of Nov. 23, 2026.
About Angel Oak Mortgage REIT (NYSE:AOMR)
Angel Oak Mortgage REIT, Inc is a real estate investment trust focused on investing in residential mortgage assets. The company primarily targets non-qualified mortgage loans, or non-QM loans, which are residential mortgages made to creditworthy borrowers whose financial profiles may not fit traditional agency underwriting standards.
Its investment portfolio may also include residential mortgage-backed securities and other mortgage-related assets. Angel Oak Mortgage REIT seeks to generate income through interest payments and other returns from these investments, with an emphasis on loans secured by residential properties in the United States.
Angel Oak Mortgage REIT is externally managed by Angel Oak Capital Advisors, an investment management firm specializing in mortgage credit and related strategies.
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