AOMR Posts Q3 2026 Loss as Valuation Declines Weigh on Book Value

Angel Oak Mortgage REIT, Inc. reported a third-quarter 2026 GAAP net loss of $16.7 million as unrealized valuation declines outweighed higher interest income, pushing both GAAP and economic book value lower. Interest income increased 16% from a year earlier, but net interest income rose only 0.6% as funding costs also increased.

The mortgage REIT, which trades under the ticker AOMR, recorded a diluted GAAP loss of $0.72 per common share, compared with net income allocable to common stockholders of $11.4 million in the year-earlier quarter. The latest result included $22.6 million of net unrealized losses on trading securities, mortgage loans, debt measured under the fair-value option and derivatives.

AOMR attributed the quarterly net loss primarily to lower valuations for residential mortgage loans held in securitization trusts and for residential mortgage loans owned directly. Distributable earnings, a non-GAAP measure that excludes unrealized gains and losses and certain other items, were $6.4 million, or $0.28 per common share, up from $529,000 in the third quarter of 2025.

The company declared a dividend of $0.32 per common share, payable on November 30, 2026, to shareholders of record as of November 23.

Higher interest income offset by rising funding costs

Third-quarter interest income rose to $42.5 million from $36.7 million a year earlier, led by residential mortgage loans in securitization trusts. Income from that category increased to $34.9 million from $26.5 million as its average balance rose to $2.28 billion from $1.88 billion.

Interest expense increased to $32.2 million from $26.5 million, largely reflecting higher costs on non-recourse securitization obligations. As a result, net interest income was $10.24 million, compared with $10.18 million a year earlier. For the first nine months of 2026, net interest income increased 9.6% to $33.1 million.

Operating expenses totaled $6.0 million in the quarter, up from $3.2 million in the prior-year period. The latest total included $1.8 million of securitization costs.

Book value falls on valuation headwinds

GAAP book value ended the quarter at $8.97 per common share, down 11.5% from $10.13 at June 30 and 15.4% from $10.60 a year earlier. Excluding the quarterly dividend, the sequential decline was 8.4%.

Economic book value, a non-GAAP measure that adjusts portions of non-recourse financing obligations held at amortized cost to fair value, fell 6.5% sequentially to $11.45 per share. It was down 10% from $12.72 a year earlier. Excluding dividends, economic book value declined 3.8% from the second quarter but increased 0.1% from a year earlier.

Loan purchases and securitizations reshape the portfolio

AOMR purchased $233 million of loans during the quarter. Those loans had a weighted-average coupon of 7.29%, a weighted-average combined loan-to-value ratio of 69.8% and a weighted-average non-zero credit score of 758.

Target assets totaled $2.82 billion at quarter-end, down $89 million sequentially. A $230 million decrease in residential whole loans and residential mortgage-backed securities and investments in a majority-owned affiliate was partly offset by a $141 million increase in residential loans held in securitization trusts. The company said securitization activity transferred assets among those portfolio categories, while loan paydowns offset purchases.

During the quarter, AOMR was the sole participant in the $279.6 million AOMT 2026-3 securitization and contributed loans with a scheduled unpaid principal balance of the same amount. It also contributed $71.2 million of home equity lines of credit to the $221.4 million AOMT 2026-HB1 transaction.

After quarter-end, AOMR completed the AOMT 2026-6 securitization in October. The company was the sole participant and contributed approximately $250.1 million of loans carrying a 7.25% weighted-average coupon. Securities with a face value of $234.3 million were sold, and the AAA-rated bonds priced at a spread of 130 basis points over the Treasury yield curve.

The company’s recourse debt-to-equity ratio was approximately 2.0 times at September 30. AOMR said the ratio subsequently declined to about 1.2 times following the AOMT 2026-6 transaction and expects it to remain below 2.5 times going forward.

Delinquencies edge higher

The weighted-average rate of loans at least 90 days delinquent across residential whole loans, loans in securitization trusts and RMBS was 3.0% at the end of the third quarter, up from 2.77% at June 30. Directly held residential loans had a 0.4% 90-day-plus delinquency rate, while the combined RMBS and residential-loan securitization-trust portfolio reported a 3.30% rate.

AOMR’s stated strategy is to target approximately one securitization per quarter, using term financing and portfolio cash flows to support additional purchases of predominantly non-qualified mortgage loans. The company said its results remain exposed to interest-rate and credit-spread volatility, changes in loan availability and prepayment rates, borrower defaults, asset valuations, financing conditions and its ability to execute securitizations profitably.