Q1 2026 Angel Oak Mortgage REIT Inc Earnings Call

May 5, 2026

Speaker #1: We're doing a welcome to Angel Oak Mortgage REIT, first quarter 2026 earnings conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session.

Operator: Good day, welcome to Angel Oak Mortgage REIT Q1 2026 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star 0 for operator assistance. Please note that this event is being recorded. I would now like to turn the conference over to Mr. KC Kelleher. Please go ahead.

Operator: Good day and welcome to Angel Oak Mortgage REIT Q1 2026 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for operator assistance. Please note that this event is being recorded. I would now like to turn the conference over to Mr. KC Kelleher. Please go ahead.

Speaker #1: If at any time during this call you require me to assistance, please place 40 for operator assistance. Please note that this event is being recorded.

Speaker #1: I would now like to turn the conference over to Mr. KC Kelleher, please go ahead.

Speaker #2: Good morning. Thank you for joining us today for Angel Oak Mortgage REIT's first quarter 2026 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.angeloireit.com.

KC Kelleher: Good morning. Thank you for joining us today for Angel Oak Mortgage REIT's Q1 2026 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: During this call, we will be discussing certain non-GAAP financial measures. 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.

KC Kelleher: 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, Sreeni 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. Now, I will turn the call over to Sreeni.

Speaker #2: 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.

Speaker #2: Additionally, we recommend reviewing our earnings supplement posted on our website. Now, I will turn the call over to Sreeni.

Speaker #3: Thank you, KC, and thank you all for joining us today. First quarter unfolded in a global environment that was largely supportive of uneven economic growth and geopolitical tensions including renewed conflict in the Middle East, weighed on investors, towards the end of the quarter.

Sreeni Prabhu: Thank you, KC, and thank you all for joining us today. Q1 unfolded in a global environment that was largely supportive, though uneven economic growth and geopolitical tensions, including renewed conflict in the Middle East, weighed on investors towards the end of the quarter. Inflation showed gradual improvement while labor markets cooled modestly and the Federal Reserve maintained a measured data-driven approach to policy decisions. Uncertainty weighed on risk sentiment at times but also reinforced the values of discipline, liquidity, and steady execution. Within this setting, our platform performed well, supported by our focus on credit quality, funding discipline, and repeatable processes. Despite broader macro pressures, securitization markets remained open through the quarter. Investor demand continued to favor high-quality collateral and experienced issues even as spreads reflected global headlines, rate volatility, and period of reduced risk appetite.

Speaker #3: Inflation showed gradual improvement while labor markets cooled modestly, and the Federal Reserve maintained a measured data-driven approach to policy decisions. Uncertainty weighed on risk sentiment at times, but also reinforced the values of discipline, liquidity, and steady execution.

Speaker #3: Within this setting, our platform performed well supported by our focus on credit quality, funding discipline, and repeatable processes. Despite broader macro pressures, securitization markets remained open through the quarter.

Speaker #3: Investor demand continued to favor high-quality collateral and experienced issues even as spreads reflected global headlines, rate volatility, and period of reduced risk appetite. We were pleased to complete the AOMT 2026-2 securitization shortly before the onset of the conflict in the Middle East.

Sreeni Prabhu: We were pleased to complete the AOMT 2026-2 securitization shortly before the onset of the conflict in the Middle East, taking advantage of favorable market conditions and underscoring the benefits of a methodical, repeatable securitization approach. We remain selective in our use of these markets, staying focused on sound structures, conservative leverage, and economics that meet our return thresholds. Our Q1 results reflected our established operating growth trend with another consecutive quarter of net interest income expansion and prudent expense management. The positive earnings trend helped offset unfavorable valuation impacts during the quarter, which were driven by rates and spreads increasing and becoming more volatile. Looking forward, the need for non-QM lending solutions remains durable, and we see value in maintaining a cautious but active posture.

Speaker #3: Taking advantage of favorable market conditions, and underscoring the benefits of our methodical, repeatable securitization approach, we remained selective in our use of these markets staying focused on sound structures conservative leverage and economics that meet our return thresholds.

Speaker #3: Our first quarter results reflected our established operating growth trend, with another consecutive quarter of net interest income expansion and prudent expense management. The positive earnings trend helped offset unfavorable valuation impacts during the quarter.

Speaker #3: Which were driven by rates and spreads increasing and becoming more volatile. Looking forward, the need for non-QM lending solutions remains durable and we see value in maintaining a cautious but active posture.

Speaker #3: Our priorities remain consistent growing earnings executing reliably in capital markets and positioning the portfolio to perform across wide range of economic outcomes. With that, I'll turn it over to Brandon who will walk us through our first quarter financial performance in greater detail.

Sreeni Prabhu: Our priorities remain consistent, growing earnings, executing reliably in capital markets, and positioning the portfolio to perform across wide range of economic outcomes. With that, I'll turn it over to Brandon, who will walk us through our Q1 financial performance in greater detail.

Speaker #2: Thank you, Sreeni. First quarter results from an interest income and expense perspective were in line with expectations and reflected contributions from assets added in the quarter and in prior periods along with a continued focus on cost control.

Brandon Filson: Thank you, Sreeni. Q1 results from an interest income and expense perspective were in line with expectations and reflected contributions from assets added in the quarter and in prior periods, along with a continued focus on cost control. To that end, as Sreeni mentioned, we continued our earnings growth trajectory established in 2025 with another consecutive quarter of net interest income growth. Interest rates were generally stable throughout the quarter, supporting consistent mortgage market activity and enabling continued purchases of accretive non-QM loans. Execution of the AOMT 2026-2 securitization in early March, which I will detail shortly, was strong and well-timed. We expect to continue our trend of 4 securitizations per year or roughly 1 per quarter.

Speaker #2: To that end, as Sreeni mentioned, we continued our earnings growth trajectory established in 2025 with another consecutive quarter of net interest income growth. Interest rates were generally stable throughout the quarter supporting consistent mortgage market activity and enabling continued purchases of accretive non-QM loans.

Speaker #2: Execution of the AOMT 2026-2 securitization in early March which I will detail shortly was strong and well-timed and we expect to continue our trend of four securitizations per year of roughly one per quarter.

Speaker #2: While spread widening and rate increases associated with global tension drove a decrease to book value of our portfolio, underlying fundamentals remain supportive, and strong operating earnings mitigated the impact of valuation decreases, which we believe are temporary due to the ongoing conflict in Iran.

Brandon Filson: While spread widening and rate increases associated with global tension drove a decrease to book value of our portfolio. Underlying fundamentals remain supportive, and strong operating earnings mitigated the impact of valuation decreases, which we believe are temporary due to the ongoing conflict in Iran. In Q1, we had a GAAP net loss of $7.4 million or a loss of $0.30 per common diluted share. Loss was driven by unrealized valuation changes on our securitized and unsecuritized loan portfolios, largely tied to macroeconomic market volatility toward the end of Q1, which offset positive operating growth. Comparatively, in Q1 of 2025, we had GAAP net income of $20.5 million or $0.87 per diluted common share. That income was attributable to unrealized valuation gains of our securitized and unsecuritized loan portfolios, as well as operating income.

Speaker #2: In the first quarter we had a GAAP net loss of 7.4 million dollars or a loss of 30 cents per common deleted share. Loss was driven by unrealized valuation changes on our securitized and unsecuritized loan portfolios largely tied to macroeconomic market volatility toward the end of the quarter.

Speaker #2: Which offset positive operating growth. Comparatively, the first quarter of 2025 we had GAAP net income of 20.5 million dollars or 87 cents per diluted common share.

Speaker #2: That income was attributable to unrealized valuation gains of our securitized and unsecuritized loan portfolios as well as operating income. Distributable earnings for the quarter were 4.6 million dollars.

Brandon Filson: Distributable earnings for the quarter were $4.6 million. Differences versus GAAP results were primarily driven by the removal of the unrealized fair value movements just described. Our securitized loan portfolio and residential loan portfolio combined for $13.1 million of unrealized losses, which were offset by $1.6 million of net unrealized gains in our trading securities and hedge portfolios. In Q1 2025, distributable earnings were $4.1 million. Interest income for the quarter was $40.7 million, and net interest income was $12.1 million. This compares to interest income of $32.9 million and net interest income of $10.1 million in Q1 2025, showcasing 24% and 20% growth, respectively.

Speaker #2: Differences versus GAAP results were primarily driven by the removal of the unrealized fair value movements just described. Our securitized loan portfolio and residential loan portfolio combined for a 13.1 million dollars for unrealized losses which were offset by 1.6 million dollars of net unrealized gains in our trading securities and hedge portfolios.

Speaker #2: In the first quarter of 2025 distributable earnings were 4.1 million dollars. Interest income for the quarter was 40.7 million and net interest income was 12.1 million dollars.

Speaker #2: This compares to interest income of 32.9 million and net interest income of 10.1 million dollars in Q1 2025. Showcasing 24% and 20% growth respectively.

Speaker #2: Compared to the fourth quarter of 2025 interest income and net interest income grew by 4% and 11% respectively. Performance has been supported by targeted asset purchases growing net interest margin and consistent securitization market access during all of 2025 and specifically Q4 25 and Q1 26.

Brandon Filson: Compared to Q4 2025, interest income and net interest income grew by 4% and 11%, respectively. Performance has been supported by targeted asset purchases, growing net interest margin, and consistent securitization market access during all of 2025 and specifically Q4 2025 and Q1 2026. Operating expenses for the quarter were $5.2 million. Excluding non-cash stock compensation expenses and securitization costs, Q1 operating expenses were $3.4 million. The increase compared to a year ago and prior quarter is due to increases in professional service fees and loan diligence fees associated with a larger overall balance and consistent purchases of target assets. Going forward, we expect to maintain similar operating expense levels and will continue to be as efficient as possible with our expense structure.

Speaker #2: Operating expenses for the quarter were 5.2 million dollars excluding non-cash stock compensation expenses and securitization costs first quarter operating expenses were 3.4 million dollars.

Speaker #2: The increase compared to a year ago and prior quarter is due to increases in professional services fees and loan diligence fees associated with a larger overall balance and consistent purchases of target assets.

Speaker #2: Going forward we expect to maintain similar operating expense levels and will continue to be as efficient as possible with our expense structure. Loan purchases during the quarter totaled 246.2 million dollars and continued to reflect conservative credit profiles moderate loan value ratios and current market coupons that we believe remain attractive on a risk-adjusted basis.

Brandon Filson: Loan purchases during the quarter totaled $246.2 million and continue to reflect conservative credit profiles, moderate loans-to-value ratios, and current market coupons that we believe remain attractive on a risk-adjusted basis. The weighted average coupon of loans purchased during the quarter was 7.3%, the weighted average CLTV was 67%, and the weighted average credit score was 759. Our credit underwriting metrics have continued to improve over time as we target our desired credit and return profile. As of the end of the quarter, our loans and securitization trust portfolio carried a weighted average coupon of 6.1% with a weighted average funding cost of approximately 4.5%. We intend to continue to access securitization markets through our disciplined, methodical securitization strategy.

Speaker #2: The weighted average coupon of loans purchased during the quarter was 7.3%. The weighted average CLTV was 67% and the weighted average credit score was 759.

Speaker #2: Our credit underwriting metrics have continued to improve over time as we target our desired credit and return profile. As of the end of the quarter our loans and securitization trust portfolio carried a weighted average coupon of 6.1% with a weighted average funding cost of approximately 4.5%.

Speaker #2: We intend to continue to access securitization markets through our disciplined methodical securitization strategy. As mentioned we were able to take advantage of favorable market conditions with our AOMT 2026-2 securitization in March just before the onset of the renewed conflict in the Middle East.

Brandon Filson: As mentioned, we were able to take advantage of favorable market conditions with our AOMT 2026-2 securitization in March, just before the onset of the renewed conflict in the Middle East. We were the sole contributor to AOMT 2026-2, which had a $272 million unpaid principal balance and a weighted average coupon of 7.1%, a weighted average non-zero credit score of 757, and a weighted average CLTV of 70.7%. The AAA-rated senior bonds priced favorably at a 113 basis point spread over the Treasury yield curve. As of quarter end, GAAP book value per share was $10.31. economic book value, which fair values all non-recourse securitization obligations, was $12.28.

Speaker #2: We were the sole contributor to AOMT 2026-2 which had a 272 million dollar unpaid principal balance and a weighted average coupon of 7.1%. The weighted average non-zero credit score of 757 and a weighted average CLTV of 70.7%.

Speaker #2: The AAA rated senior bonds price favorably at 113 basis points spread over the Treasury yield curve. As of quarter end GAAP book value per share was $10.31.

Speaker #2: Economic book value which fair values all non-recourse securitization obligations was $12.28. Compared to the end of 2025 GAAP book value per share decreased 4% and economic book value decreased 3.3%.

Brandon Filson: Compared to the end of 2025, GAAP book value per share decreased 4% and economic book value decreased 3.3%. Changes in book value to the quarter were reflective of operating income, offset by our quarterly dividend payment and the previously discussed market-driven valuation decrease within the portfolio. While the market continues to display volatility tied to geopolitical tension, we estimate that, as of today, book value has increased slightly since the end of Q1 due to continued accretive asset purchases and incremental earnings generation. Balance sheet remained well-positioned with cash of $42 million and recourse debt to equity of 1.3 times. We aim to maintain liquidity and available financing capacity to provide flexibility to respond to changing market conditions.

Speaker #2: Changes in book value to the quarter were reflective of operating income offset by our quarterly dividend payment and the previously discussed market-driven valuation decrease within the portfolio.

Speaker #2: While the market continues to display volatility tied to geopolitical tension we estimate that as of today book value has increased slightly since the end of the first quarter due to continued accretive asset purchases and incremental earnings generation.

Speaker #2: Balance sheet remained well positioned with cash of 42 million dollars and recourse debt to equity of 1.3 times. We aim to maintain liquidity and available financing capacity to provide flexibility to respond to changing market conditions.

Speaker #2: We ended the quarter with unsecuritized residential whole loans at a fair value of 245.5 million dollars financed with 192.2 million dollars of warehouse debt.

Brandon Filson: We ended the quarter with unsecuritized residential whole loans at a fair value of $245.5 million, financed with $192.2 million of warehouse debt, $2.2 billion of residential mortgage loans and securitization trusts, and $238.3 million of RMBS, including $25.7 million of investments in co-mingled securitization entities, which are included in other assets on our balance sheet. We finished the quarter with an undrawn loan financing capacity of approximately $1.1 billion with four high-quality lending partners. Credit performance continued to be solid with portfolio-wide 90-plus day delinquency at approximately 2.7%, which is inclusive of our residential loan, securitized loan, and RMBS portfolios.

Speaker #2: 2.2 billion dollars of residential mortgage loans and securitization trust and 238.3 million dollars of RMBS. Including 25.7 million dollars of investments in commingled securitization entities which are included in other assets on our balance sheet.

Speaker #2: We finished the quarter with an undrawn loan financing capacity of approximately 1.1 billion dollars with four high-quality lending partners. Credit performance continued to be solid with portfolio-wide 90 plus day delinquency at approximately 2.7% which is inclusive of our residential loan, securitized loan, and RMBS portfolios.

Speaker #2: This is materially flat compared to Q1 of 2025 and represents an increase of approximately 50 basis points from Q4 25. Despite the increase compared to the prior quarter performance across the Angel Oak shelf remains strong and we believe that the performance of our collateral relative to the non-QM securitization market is a key differentiator of our platform.

Brandon Filson: This is materially flat compared to Q1 2025 and represents an increase of approximately 50 basis points from Q4 2025. Despite the increase compared to the prior quarter, performance across the Angel Oak remains strong, and we believe that the performance of our collateral relative to the non-QM securitization market is a key differentiator of our platform. We expect our differentiated credit performance to translate into lower losses than comparable non-QM platforms across the full credit cycle. This view is supported by our proactive migration of credit spectrum, conservative LTVs, and disciplined underwriting approach, which we believe position the portfolio to perform consistently even in more challenging environments. 3-month prepaid speeds on our non-QM RMBS and securitized loan portfolios were 12% as of the end of the quarter, compared to 11.2% in Q4 2025.

Speaker #2: We expect our differentiated credit performance to translate into lower losses than comparable non-QM platforms across a full credit cycle. This view is supported by our proactive migration of credit spectrum conservative LTVs and disciplined underwriting approach which we believe position the portfolio to perform consistently even in more challenging environments.

Speaker #2: Three-month prepaid speeds on our non-QM RMBS and securitized loan portfolios were 12% as of the end of the quarter compared to 11.2% in the fourth quarter of 2025.

Speaker #2: As we have mentioned in previous quarters we expect prepaid speeds to increase its rates decrease and homeowners are incentivized to refinance. With that said we model our returns based on historical prepaid speeds of approximately 20 to 30% while prepaid speeds are likely to tick upward if newly originated coupon rates continue to decrease the majority of our portfolio still has coupon rates that are 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.

Brandon Filson: As we have mentioned in previous quarters, we expect prepaid speeds to increase as rates decrease and homeowners are incentivized to refinance. With that said, we model our returns based on historical prepaid and speeds of approximately 20% to 30%. While prepaid speeds are likely to tick upward if newly originated coupon rates continue to decrease, the majority of our portfolio still has coupon rates that are below newly originated coupon rates. We expect that mortgage rates would need to fall meaningfully in order to produce a significant impact to the returns on our portfolio. Lastly, the company declared a $0.32 per share common dividend payable on 29 May 2026 to common shareholders of record as of 22 May 2026. For additional details on our financial results and portfolio composition, please refer to the earnings supplement available on our website.

Speaker #2: Lastly the company declared a 32 cent per share common dividend payable on May 29th 2026 to common shareholders of record as of May 22nd 2026.

Speaker #2: For additional details on our financial results and portfolio composition please refer to the earnings supplement available on our website. Training Thank you Brandon. The proven well-established Angel Oak origination purchase and securitization platform provides us with confidence to perform well in a variety of macro environments.

Sreeni Prabhu: Thank you, Brandon. The proven, well-established Angel Oak origination purchase and securitization platform provides us with confidence to perform well in a variety of macro environments. The fundamental backdrop of our business is positive. While risk remains, we will continue to focus on what we can control. Expansion of earnings, consistent securitization market activity, and disciplined credit selection and management. With that, we will open the call for your questions. Operator.

Speaker #2: The fundamental backdrop of our business is positive and while risk remains we will continue to focus on what we can control. Expansion of earnings consistent securitization market activity and disciplined credit selection and management.

Speaker #2: With that, we will open the call for your questions. Operator? Ladies and gentlemen, we will now begin the question-and-answer session. If you have a question, please press 4 followed by the number 1 on your touch-tone phone.

Operator: Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press star followed by 1 on your touch-tone phone. You will hear a prompt that your hand has been raised. If you would like to withdraw from the polling process, please press star then 2. If you are using a speakerphone, please make sure to lift your handset before pressing any keys. Your first question comes from the line of Marisa Lobel from UBS. Please go ahead.

Speaker #2: You will hear a prompt that your hand has been raised. If you would like to be dropped from the polling process please press start in the number 2.

Speaker #2: If you are using a speakerphone please make sure to lift your handset before pressing any keys. Your first question comes from the line of Marie Salobo from UBS.

Speaker #2: Please go ahead. Good morning. Thanks for taking my question. On HELOX you participated in one securitization in 2025 and you guided to about 2 a year.

Marisa Lobel: Good morning. Thanks for taking my question. On HELOCs, you participated in 1 securitization in 2025, and you guided to about 2 a year. How is the HELOC pipeline building relative to non-QM?

Marissa Lobo: Good morning. Thanks for taking my question. On HELOCs, you participated in 1 securitization in 2025, and you guided to about 2 a year. How is the HELOC pipeline building relative to non-QM?

Speaker #2: So how is the HELOC pipeline building relative to non-QM? Yeah we hey Marissa thanks. We are building our current HELOC pipeline right now. After the securitization 26-2 we went bought some HELOCs as well.

Brandon Filson: Hey, Marisa. Thanks. We are building our current HELOC pipeline right now. After the securitization 26-2, we went and bought some HELOCs as well. We kind of have enough to commingle with some other Angel Oak entities. We're looking forward to another HELOC securitization in the coming months. I think that pacing is still about correct.

Speaker #2: We kind of have enough to commingle with some other Angel Oak entities. So we're looking forward to another HELOC securitization in the coming months.

Speaker #2: But I think that pacing is still about correct. Okay great thank you. And then just looking at the loans and securitization trust notice the 2024 vintage is picking up in speeds about 23 up a bit from last quarter delinquency a little bit up.

Marisa Lobel: Okay, great. Thank you. Just looking at the loans and securitization trust, noticed the 2024 vintage is 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?

Marissa Lobo: Okay, great. Thank you. Just looking at the loans and securitization trust, noticed the 2024 vintage is 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?

Speaker #2: So how should we think about that and how is that impacting the valuation of the retained tranches on those deals? I think the yeah that's I think the speed increase is a little bit expected as rates started to come down.

Brandon Filson: I think the speed increase is a little bit expected as rates started to come down. The 24 deals had a lot of loans that were generated with much higher coupons. You know, the increase isn't necessarily, you know, a surprise to us. We expect and model the 25% to 30% CPR kind of over the life of the securitizations in, like, a normal kind of rate environment. You know, the, you know, return profile seems about the same during that period from certainly what we model. The delinquencies are, you know, something we're monitoring, but nothing that's sticking out to us.

Speaker #2: So, the '24 deals had a lot of loans that were generated with much higher coupons. So, you know, the increase isn't necessarily a surprise to us.

Speaker #2: We expect and model a 25 to 30 CPR kind of over the life of the securitizations and like a normal kind of rate environment.

Speaker #2: You know the you know return profile seems about the same during that period from what certainly what we modeled the delinquencies are you know something we're monitoring but nothing that's that's sticking out to us.

Speaker #2: And you know if you remember some of the retained tranches we have we have a little bit of a hedging effect on our retained positions because the you know we have the interest-only bond and then we have the junior unrated equity piece.

Brandon Filson: You know, if you remember, some of the retained tranches we have, we have a little bit of a hedging effect on our retained positions because, you know, we have the interest-only bond, and then we have the junior unrated equity piece. As speeds increase, obviously the valuations or the anticipated returns of the IO would start to decrease. The B3 or unrated bond and the bonds directly above it increases as it's expected they'll get paid off sooner.

Speaker #2: And as speeds increase obviously the valuations or the anticipated returns of the IO would start to decrease but that B3 or unrated bond and the bonds directly above it start to the valuation increases as it's expected they'll get paid off sooner.

Speaker #2: Okay great. Thanks for all the caller. Your next question comes from the line of Matthew Erner from Jones Trading. Please go ahead. Hey good morning guys.

Marisa Lobel: Okay, great. Thanks for all the color.

Marissa Lobo: Okay, great. Thanks for all the color.

Operator: The next question comes from the line of Matthew Erdner from JonesTrading. Please go ahead.

Matthew Erdner: Hey, good morning, guys. Thanks for taking the question. In prior quarters, you've talked a little bit about calling legacy securitizations, kind of the 2021s, 2022s. You know, as of last quarter, you guys kind of intended to call 2 of those throughout the year. Is that still the plan? You know, what are you guys seeing there in terms of, you know, re-securitization that you could achieve?

Speaker #2: Thanks for taking the question. In prior quarters you've talked a little bit about calling legacy securitizations kind of the 21s 22s you know as of last quarter you guys kind of intended to call two of those throughout the year.

Speaker #2: Is that still the plan? And then, you know, what are you guys seeing there in terms of, you know, resecuritization that you could achieve?

Speaker #2: Yeah you know that's something we're literally monitoring every day. As you probably have visibility to that decision-based is a lot on what the funding cost of the deal you're calling what how they are levered what's what's left in the stack.

Brandon Filson: You know, that's something we're literally monitoring every day. As you probably have the visibility to that decision bases a lot on what the funding cost of the deal you're calling, how they are levered, what's left in the stack, and, you know, current funding cost. Which, you know, over, you know, if we're talking in the middle or late of February, that answer was a little different than it is today. It's something we're monitoring. What we probably have to see is a little, you know, cessation or dramatic reduction in some of the volatility in the rate markets for that go, no-go decision to effectively be accretive to call the deals.

Speaker #2: And you know current funding cost which you know over you know if we're talking in the middle or late of February that answer would be a little different than it is today and but it's something we're monitoring.

Speaker #2: So what we'd probably have to see is a little you know cessation or dramatic reduction in some of the volatility in the rate markets.

Speaker #2: For that go no-go decision to effectively be accretive to call the deals. Got it. Yeah that's helpful. And then as a follow-up to that you know what kind of ROEs are you guys seeing in the market?

Matthew Erdner: Got it. Yeah, that's helpful. As a follow-up to that, you know, what kind of ROEs are you guys seeing in the market? I think it was mid-teens last quarter trending a little bit lower. Is that still kind of the expectation and then low twenties on HELOCs?

Speaker #2: I think it was mid-teens last quarter trending a little bit lower. Is that still kind of the expectation and then low 20s on HELOCs?

Speaker #2: Yeah I mean I think that's our long-term expectation. We if we were to do a deal today with the you know increase in treasuries and increase in the spreads you know we'd be looking you know low maybe lower teens to to high 12s.

Brandon Filson: Yeah, I mean, I think that's our long-term expectation. If we were to do a deal today with the, you know, increase in treasuries and increase in the spreads, you know, we'd be looking, you know, maybe lower teens to high 12s. It has taken a little bit off, but we're not necessarily in the market right now with the securitization. We hope that when things come back into play for us to securitize, we're back up to that 15 to 20 number.

Speaker #2: So it has taken a little bit off but we're not necessarily in the market right now with a securitization. We hope that when when things come back into play for us to securitize we're back up to that 15 to 20 lever.

Speaker #2: Got it. That's helpful. Thank you guys. Your next question comes from the line of Timothy Diegostino from BRLE Securities. Please go ahead. Yeah hi good morning.

Matthew Erdner: Got it. That's helpful. Thank you, guys.

Operator: Your next question comes from the line of Timothy DiGrazia from B. Riley Securities. Please go ahead.

Timothy DiGrazia: Yeah. Hi, good morning. Thanks for taking the questions. Regarding operating expenses, it seemed like this quarter it was elevated a little bit at about $1.7 million. Was wondering if there's anything in particular in that line item that increased it. Thank you.

Timothy D'Agostino: Yeah. Hi, good morning. Thanks for taking the questions. Regarding operating expenses, it seemed like this quarter it was elevated a little bit at about $1.7 million. Was wondering if there's anything in particular in that line item that increased it. Thank you.

Speaker #2: Thanks for taking the questions. Regarding operating expenses, it seemed like this quarter it was elevated a little bit at about $1.7 million. I was wondering if there's anything in particular in that line item that increased it.

Speaker #2: Thank you. Yeah mainly that's going to be professional service fees. And loan diligence fees as we continue to buy loans. And professional service fees and this instance are really related to our ATM program that we have out there that we didn't issue any shares on this quarter.

Brandon Filson: Yeah, mainly, that's gonna be professional service fees and loan diligence fees as we continue to buy loans. Professional service fees in this instance are really related to our ATM program that we had out there that we didn't issue any shares on this quarter. We had, you know, we expensed those costs versus putting it through like a contra equity account.

Speaker #2: So we had you know we we expense those costs versus putting it through like a contract equity account. Okay great. And then I just wanted to touch on securitization costs as well.

Timothy DiGrazia: Okay, great. I just want to touch on securitization costs as well. You know, if you do one securitization a quarter for the non-QM space, the pricing on that generally gonna be around $1.5 million or would it be less? The price for a non-QM or the cost for QM securitization, how does that differ to a HELOC securitization? Just trying to understand that expense line item better as well. Thank you.

Timothy D'Agostino: Okay, great. I just want to touch on securitization costs as well. You know, if you do one securitization a quarter for the non-QM space, the pricing on that generally gonna be around $1.5 million or would it be less? The price for a non-QM or the cost for QM securitization, how does that differ to a HELOC securitization? Just trying to understand that expense line item better as well. Thank you.

Speaker #2: You know, 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?

Speaker #2: And then the price for a non-QM or the cost for non-QM securitization how does that differ to a HELOC securitization? Just trying to understand that that that expense line item better as well.

Speaker #2: Thank you. Yeah I mean securitization expense there's a there's a decent amount of fixed costs that go into that and then there's obviously some variable costs.

Brandon Filson: Yeah, I mean, securitization expense, there's a decent amount of fixed costs that go into that, and then there's obviously some variable costs. It's kind of sensitive on how big the deal is, and especially on, like, HELOC securitization, how much of the HELOC securitization we are participating in because we'll take our pro rata share of the deal cost. But really, you can kind of back into like a basis point percentage on securitization based on the amount that we securitized in the quarter, which typically, you know, is somewhere around 50 basis points. It could be a little less, could be a little more, but certainly if we got a larger deal out, it'd be a little less than that.

Speaker #2: So it's kind of sensitive on how big the deal is. And especially on like HELOC securitization how much of the HELOC securitization we are participating in because we we'll take our pro rata share of the deal cost.

Speaker #2: But really it's you can kind of back into like a basis point percentage on a securitization based on the amount that we securitize in the quarter.

Speaker #2: Which which typically you know is is somewhere around 50 basis points. Could be a little less could be a little more but certainly if we got a larger deal out it'd be a little less than that.

Speaker #2: And you know about as small as we we've been doing lately 300 million or so it's about 50 basis points. Okay thank you so much.

Brandon Filson: Then, you know, about as small as we've been doing lately, $300 million or so, it's about 50 basis points.

Timothy DiGrazia: Okay. Thank you so much.

Timothy D'Agostino: Okay. Thank you so much.

Speaker #2: Ladies and gentlemen, this is a reminder: if you would like to ask a question, please press * and then the number 1 on your touch-tone phone.

Operator: Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star followed by the number 1 on your touchtone phone. If you're using a speakerphone, please make sure to lift your handset before pressing any keys. Your next question comes from the line of Doug Harter from BTIG. Please go ahead.

Speaker #2: And if you're using a speakerphone please make sure to lift your handset before pressing any case. Your next question comes from the line of Doug Harter from BTIG.

Speaker #2: Please go ahead. Hi thanks for taking my question. This is Brendan Greeney on for Doug. How did whole loan pricing of non-QM loans hold up in March for securitization spreads?

Brendan Greeny: Hi. Thanks for taking my question. This is Brendan Greeny on for Doug. How did whole loan pricing of non-QM loans hold up in March for securitization spreads?

Brendan Greaney: Hi. Thanks for taking my question. This is Brendan Greeny on for Doug. How did whole loan pricing of non-QM loans hold up in March for securitization spreads?

Speaker #2: Yeah that I mean the whole loan pricing you know decreased quite a bit. That's really where most of that valuation decrease we have and the losses we had on the unrealized.

Brandon Filson: Yeah, I mean, the whole loan pricing, you know, decreased quite a bit. That's really where most of that valuation decrease we have and the losses we had on the unrealized during the quarter. You know, we lost about a point off of our whole loan pricing in Q1, and that's really just a reflection of where the current spreads are and the current, like, treasury base rates.

Speaker #2: During the quarter you know we we lost about a point off of our whole loan pricing in Q1 and that's really just a a reflection of where the current spreads are and the the current like treasury base rates.

Speaker #2: Okay thank you. And where are spreads today on AAAs and securitization? It'd probably be about 135 to 145 depending on the exact timing and exact collateral that was out there.

Brendan Greeny: Okay, thank you. Where are spreads today on AAA in securitization?

Brendan Greaney: Okay, thank you. Where are spreads today on AAA in securitization?

Brandon Filson: It'd probably be about $135 to 145, depending on the exact timing and exact collateral that was out there.

Speaker #2: Okay thank you very much. Thank you. There are no further questions at this time. I would like to turn the call back to Mr. Brandon Filson for closing comments.

Brendan Greeny: Okay. Thank you very much.

Brendan Greaney: Okay. Thank you very much.

Operator: Thank you. There are no further questions at this time. I would like to turn the call back to Mr. Brandon Filson for closing comments. Sir, please go ahead.

Speaker #2: Sir please go ahead. I would like to thank everybody for your time and interest in Angel Oak Mortgage REIT. As always if you have any further questions or or comments please feel free to give us a call and reach out.

Brandon Filson: I would like to thank everybody for your time and interest in Angel Oak Mortgage REIT. As always, if you have any further questions or comments, please feel free to give us a call and reach out. Otherwise, we look forward to connecting again with you next quarter.

Speaker #2: Otherwise, we look forward to connecting again with you next quarter. Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.