What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-04 compared with 2026-05-05 · 253 added, 154 removed, 630 unchanged (39% of the section changed)

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Factors that could have a material adverse effect on future results and performance relative to those set forth in or implied by the related forward-looking statements, as well as on our business, financial condition, liquidity, results of operations and prospects, include, but are not limited to:

• the effects of adverse conditions or developments in the financial markets and the economy upon our ability to acquire target assets such as non-qualified residential mortgage (“non-QM”) loans, including those sourced from Angel Oak’s proprietary mortgage lending platform, Angel Oak Mortgage Lending;

• the effects of adverse conditions or developments in the financial markets and the economy upon our ability to acquire target assets such as non-qualified residential mortgage (“non-QM”) loans, particularly those sourced from Angel Oak’s proprietary mortgage lending platform, Angel Oak Mortgage Lending;

• the level and volatility of prevailing interest rates and credit spreads;

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• conflicts with Angel Oak, including our Manager and its personnel, including our officers, and entities managed by Angel Oak;

• events, contemplated or otherwise, such as acts of God, including hurricanes, wildfires, earthquakes, and other natural disasters, including those resulting from global climate change, pandemics, acts of war or terrorism, the initiation or escalation of military conflicts, and others that may cause unanticipated and uninsured performance declines, disruptions in markets, volatility in prevailing interest rates, and/or losses to us or the owners and operators of the real estate securing our investments;

• events, contemplated or otherwise, such as acts of God, including hurricanes, wildfires, earthquakes, and other natural disasters, including those resulting from global climate change, pandemics, acts of war or terrorism, the initiation or escalation of military conflicts, and others that may cause unanticipated and uninsured performance declines, disruptions in markets, and/or losses to us or the owners and operators of the real estate securing our investments;

• the occurrence of certain geo-political events (including global trade disputes related to tariffs) that affect the normal and peaceful course of international relations;

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Overall macroeconomic environment and its effect on us

During the first quarter of 2026, the U.S.

Federal Reserve Bank (the “Fed”) maintained a generally neutral policy stance following the easing cycle of late 2025.

Monetary policy in the quarter reflected continued confidence in moderating inflationary pressures and a gradually cooling, yet resilient, U.S.

While broader macroeconomic conditions were more constructive than in the prior year, uncertainty and volatility persisted throughout the quarter, driven by incoming inflation and employment data as well as shifting market expectations regarding the timing of any future policy actions.

Additionally, the conflict in Iran added to the rate volatility late in the first quarter of 2026.

As such, the Fed left the federal funds rate unchanged at 3.50% - 3.75% as of the end of the first quarter of 2026.

Overall, the interest rate environment during the first quarter of 2026 remained supportive for prospective homebuyers relative to recent years.

In parallel, securitization markets continued to demonstrate healthy activity, supported by constructive execution spreads and steady investor demand.

Current expectations remain for a relatively stable interest rate environment through the balance of 2026, assuming continued progress on inflation and sustained, albeit moderating, economic growth.

Treasury yields during the first quarter of 2026 reflected this stable but still data‑dependent environment.

Short‑ and intermediate‑term Treasury yields experienced modest fluctuations over the course of the quarter, while longer‑term yields remained range‑bound, reflecting balanced market views on inflation, growth, and future monetary policy.

Intra‑quarter yield movements were largely driven by updated macroeconomic data releases and evolving market commentary from the Fed.

Residential mortgage rates moved broadly in line with Treasury yields during the first quarter of 2026, remaining below levels observed throughout much of 2024 and early 2025.

Mortgage market activity showed continued signs of improvement, with borrower engagement supported by greater rate stability and improved affordability relative to the prior year.

During the second quarter of 2026, the U.S.

Federal Reserve Bank (the “Fed”) maintained its target range for the federal funds rate at 3.50% - 3.75%, extending the neutral-to-restrictive policy stance that followed the easing cycle of late 2025.

Monetary policy during the quarter remained highly data-dependent, as the Fed balanced solid economic activity and a relatively stable labor market against inflation that remained above its long-term objective.

Market expectations shifted more hawkish over the course of the quarter, particularly following the June Federal Open Market Committee meeting, as updated projections reduced expectations for near-term rate cuts and increased attention on the potential for rates to remain higher for longer.

Geopolitical uncertainty, including the conflict in Iran and related volatility in energy markets, continued to contribute to interest rate volatility during the quarter.

Overall, while the interest rate environment remained more constructive for prospective homebuyers than the elevated levels observed in prior years, the second quarter was characterized by renewed uncertainty around the path of monetary policy and inflation.

In parallel, securitization markets remained active, supported by continued investor demand, although execution levels were influenced by broader rate volatility and modest spread movements.

Current expectations remain for a relatively stable, but more cautious, interest rate environment through the balance of 2026, assuming inflation moderates and economic growth remains resilient.

Treasury yields during the second quarter of 2026 reflected a more volatile and increasingly hawkish policy outlook.

Short- and intermediate-term Treasury yields generally moved higher as markets repriced the likelihood of future Fed easing and incorporated the possibility that policy rates could remain elevated for a longer period.

Longer-term yields also fluctuated during the quarter, influenced by inflation expectations, energy-market developments, Treasury supply, and changing views on economic growth.

The yield curve flattened at points during the quarter as front-end yields responded more directly to Fed communications, while longer maturities remained sensitive to shifting inflation risk premiums and geopolitical developments.

Residential mortgage rates moved broadly in line with Treasury yields during the second quarter of 2026, with periods of volatility limiting the pace of improvement in affordability.

Mortgage market activity continued to show signs of stabilization, supported by greater

borrower engagement relative to the prior year, although rate sensitivity remained an important factor for loan demand and prepayment expectations.

Residential mortgage rates, along with securitization spreads, remain key benchmarks for the valuation of our portfolio;

though the generally lower rate environment was a positive contributor to asset pricing, macroeconomic volatility drove spreads wider, leading to an overall decrease in asset pricing during the quarter.

Continued purchases of newly originated loans, together with ongoing securitizations of recently originated collateral, supported earnings

growth across our residential whole loan and loans held within securitization trusts portfolios.

We expect continued acquisition of newly originated loans throughout 2026, which should further support portfolio performance and securitization execution in a constructive capital markets environment.

as such, volatility and spread movements throughout the quarter created generally negative valuation impacts.

Continued purchases of newly originated loans supported interest income growth in the second quarter, and we expect to continue to acquire newly originated loans throughout 2026, which should further support portfolio performance and securitization execution.

Our investment performance

Net Interest Margin (“NIM”).

We generated $7.8 million greater interest income for the quarter ended March 31, 2026 compared to the comparable period for 2025, driven by increases in the amount of our target assets.

Interest expense increased by $5.8 million for the quarter ended March 31, 2026 compared to the comparable period for 2025, due to new asset purchases and securitizations, collateralized by residential mortgage loans in securitization trusts as well as our 9.750% Senior Notes due 2030 (“2030 Notes”) issued in May 2025.

Overall, the increase in our interest income outpaced the increase in interest expense and drove a 20%, or $2.0 million, increase in net interest income for the quarter ended March 31, 2026 compared to the comparable period for 2025.

Net realized loss .

Our net realized loss for the quarter ended March 31, 2026 was primarily due to realized losses associated with the unamortized premium of loans that paid off underlying our residential loans in securitization trust and RMBS portfolio as well as realized losses associated with hedging activity.

We generated $6.3 million greater interest income for the quarter ended June 30, 2026 compared to the comparable period for 2025, driven by increases in the amount of our target assets.

Interest expense increased by $5.5 million for the quarter ended June 30, 2026 compared to the comparable period for 2025, due to new asset purchases and securitizations, collateralized by residential mortgage loans in securitization trusts as well as our 9.750% Senior Notes due 2030 (“2030 Notes”) issued in May 2025.

Overall, the increase in our interest income outpaced the increase in interest expense and drove a 8%, or $0.8 million, increase in net interest income for the quarter ended June 30, 2026 compared to the comparable period for 2025.

Net realized gain .

Our net realized gain for the quarter ended June 30, 2026 was primarily due to realized gains associated with our hedging activity, offset by realized losses associated with the unamortized premium of loans that paid off underlying our residential loans in securitization trust and RMBS portfolios.

Net unrealized loss .

Our net unrealized loss for the quarter ended March 31, 2026 was primarily due to a decrease in the valuation of our loans in securitization trust, net of non-recourse securitization obligation and residential whole loans portfolios.

Our net unrealized loss for the quarter ended June 30, 2026 was primarily due to a decrease in the valuation of our loans in securitization trust, net of non-recourse securitization obligation and residential whole loans portfolios, as well as unrealized losses associated with our hedging activity as of the end of the quarter ended June 30, 2026.

Whole loans and securitization activity

During the quarter ended March 31, 2026, we purchased $246.2 million of newly-originated, current market coupon non-QM residential mortgage loans, with a weighted average coupon of 7.34%, weighted average combined loan-to-value ratio (“CLTV”) of 67.1% and weighted average credit score of 759.

During the quarter ended June 30, 2026, we purchased $204 million of newly-originated, current market coupon non-QM residential mortgage loans and home equity lines of credit (“HELOCs”), with a weighted average coupon of 7.34%, weighted average combined loan-to-value ratio (“CLTV”) of 70.5% and weighted average credit score of 759.

In March 2026, we issued AOMT 2026-2, a $272.3 million scheduled unpaid principal balance securitization backed by a pool of residential mortgage loans.

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We used the proceeds to repay outstanding debt of approximately $234.1 million, and the $23.9 million of cash released was used for new loan purchases and operational purposes.

Subsequent to the quarter ended June 30, 2026, in July 2026, we issued AOMT 2026-3, a $279.6 million scheduled unpaid principal balance securitization backed by a pool of residential mortgage loans.

We issued AOMT 2026-3 as the sole contributor in the securitization.

We used the proceeds to repay outstanding debt of approximately $247.4 million, and the $22.3 million of cash released was used for new loan purchases and operational purposes.

Additionally, subsequent to the quarter ended June 30, 2026, in August 2026, we and other Angel Oak affiliates participated in AOMT 2026-HB1, an approximately $221.4 million scheduled unpaid principal balance securitization backed by a pool of residential mortgage loans secured by second lien HELOCs on one‑to‑four family residential properties.

We contributed HELOCs with a scheduled unpaid principal balance of $71.2 million to the deal.

Whole loan financing facilities activity

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See “Liquidity and Capital Resources” below for a full description of our financing arrangements.

Our total borrowing capacity was $1.3 billion as of March 31, 2026 Highlights of whole loan financing facilities activity over the first quarter of 2026 are as follows:

• During the quarter ended March 31, 2026, we maintained the same whole loan financing facility lender base as of December 31, 2025.

• On April 22, 2026, the Company and one of its subsidiaries, amended the Pricing Side Letter for its loan financing facility with Global Investment Bank 2.

The amendment updates the seller underwriting guidelines to include home equity revolving lines of credit.

The termination date of the loan financing facility was extended to April 21, 2028.

In addition, the interest rate pricing spread was updated to a range from 1.50% to 2.60%;

Our total borrowing capacity was $1.3 billion as of June 30, 2026.

Highlights of whole loan financing facilities activity over the second quarter of 2026 are as follows:

• During the quarter ended June 30, 2026, we maintained the same whole loan financing facility lender base as of December 31, 2025.

• During the quarter ended June 30, 2026, we renewed our loan financing facility with Multinational Bank 1 in accordance with the terms of the agreement, which contemplates rolling three-month renewals.

This financing facility was extended through September 25, 2026.

In addition, the interest rate pricing spread was reduced to a range from 1.30% to 2.10%;

prior to this extension, the interest rate pricing spread was a range from 1.65% to 2.10%.

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federal income tax at the regular corporate rate to the extent that we annually distribute less than 100% of such taxable income.

in an amount equal to our REIT taxable income, if and to the extent authorized by our Board of Directors.

Given these requirements and our belief that dividends are generally one of the principal reasons that stockholders invest in our common stock, generally we intend to attempt to pay dividends to our stockholders in an amount equal to our REIT taxable income, if and to the extent authorized by our Board of Directors.

Distributable Earnings is one of a number of factors considered by our Board of Directors in declaring dividends and, while not a direct measure of REIT taxable income, over time, the measure can be considered a useful indicator of our dividends.

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For information on the fees that are payable to our Manager under the Management Agreement, see “Note 10 – Related Party Transactions” in our unaudited condensed consolidated financial statements included in this report.

Distributable Earnings were approximately a gain of $4.6 million and a gain of $4.1 million for the three months ended March 31, 2026 and 2025, respectively.

The primary drivers of this quarter’s Distributable Earnings as compared to GAAP net income are the adjustments to remove unrealized losses associated with our residential loans and residential loans in securitization trusts and non-recourse securitization obligation portfolios.

The table below sets forth a reconciliation of net income (loss) allocable to common stockholders, calculated in accordance with GAAP, to Distributable Earnings for the three months ended March 31, 2026 and 2025:

Three Months Ended

March 31, 2026 March 31, 2025

Distributable Earnings were a gain of $9.0 million and a gain of $2.6 million for the three months ended June 30, 2026 and 2025, respectively.

The primary drivers of the difference of Distributable Earnings as compared to GAAP net income in the quarter ended June 30, 2026 were adjustments to remove unrealized losses on residential loans, residential loans in securitization trusts and non-recourse securitization obligation, and derivatives portfolios.

For the quarter ended June 30, 2025, the primary driver of the difference between Distributable Earnings and GAAP net income was the adjustment to remove losses on our residential loans portfolio.

For the six months ended June 30, 2026 and June 30, 2025, the primary drivers of the difference between Distributable Earnings and GAAP net income were adjustments to remove unrealized losses on residential loans and residential loans in securitization trusts and non-recourse securitization obligation, and adjustments to remove unrealized gains on residential loans in securitization trusts and non-recourse securitization obligation, respectively.

The table below sets forth a reconciliation of net income (loss) allocable to common stockholders, calculated in accordance with GAAP, to Distributable Earnings for the three and six months ended June 30, 2026 and 2025:

Three Months Ended Six Months Ended

June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025

(in thousands)

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Net unrealized (gains) losses on residential loans 1,624 2,191 5,604 (850)

Non-cash equity compensation expense 423 237

Net unrealized (gains) losses on commercial loans (149) — (149) —

Stock compensation expense 423 296 847 533

Distributable Earnings $ 8,993 $ 2,639 $ 13,630 $ 6,782

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Our methodology for calculating Distributable Earnings Return on Average Equity may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and as a result, our Distributable Earnings Return on Average Equity may not be comparable to similar measures presented by other REITs.

Set forth below is our computation of Distributable Earnings Return on Average Equity for the three months ended March 31, 2026 and 2025:

Three Months Ended

March 31, 2026 March 31, 2025

Set forth below is our computation of Distributable Earnings Return on Average Equity for the three and six months ended June 30, 2026 and 2025:

Three Months Ended Six Months Ended

June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025

($ in thousands)

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Book Value per Share of Common Stock

The following table sets forth the calculation of our book value per share of common stock as of March 31, 2026 and December 31, 2025:

March 31, 2026 December 31, 2025

The following table sets forth the calculation of our book value per share of common stock as of June 30, 2026 and December 31, 2025:

June 30, 2026 December 31, 2025

(in thousands except for share and per share data)

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Economic book value does not represent and should not be considered as a substitute for book value per share of common stock or stockholders’ equity, as determined in accordance with GAAP, and our calculation of this measure may not be comparable to similarly titled measures reported by other companies.

The following table sets forth a reconciliation from GAAP total stockholders’ equity and book value per share of common stock to economic book value and economic book value per share of common stock as of March 31, 2026 and December 31, 2025:

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

(in thousands except for share and per share data)

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Results of Operations

Three Months Ended March 31, 2026 and 2025

The following table sets forth a summary of our results of operations for the three months ended March 31, 2026 and 2025:

Three Months Ended June 30, 2026 and 2025

The following table sets forth a summary of our results of operations for the three months ended June 30, 2026 and 2025:

Three Months Ended

March 31, 2026 March 31, 2025

June 30, 2026 June 30, 2025

(in thousands)

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Net realized gain (loss) on mortgage loans, derivative contracts, RMBS, and CMBS $ 1,477 $ (2,499)

Net unrealized gain (loss) on mortgage loans, portion of debt at fair value option, derivative contracts, and trading securities (11,592) 16,625

Net unrealized gain (loss) on trading securities, mortgage loans, portion of debt at fair value option, and derivative contracts

(5,217) (1,576)

TOTAL REALIZED AND UNREALIZED GAINS (LOSSES), NET $ (3,740) $ (4,075)

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Net Interest Income

The following table sets forth the components of net interest income for the three months ended March 31, 2026 and 2025:

The following table sets forth the components of net interest income for the three months ended June 30, 2026 and 2025:

Three Months Ended

March 31, 2026 March 31, 2025

June 30, 2026 June 30, 2025

(in thousands)

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Notes payable 3,578 272,906 2,274 176,214

Non-recourse securitization obligation, collateralized by residential mortgage loans in securitization trusts 22,541 1,933,249 16,843 1,574,110

Non-recourse securitization obligation, collateralized by residential mortgage loans 23,695 2,019,555 19,854 1,730,521

Repurchase facilities 835 66,135 1,154 69,522

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Net interest income $ 10,742 $ 9,940

We generated $7.8 million greater interest income for the quarter ended March 31, 2026 compared to the comparable period for 2025, driven by increases in the amount of our target assets.

Overall, this increase in interest expense was mitigated by lower average borrowing costs.

We generated $6.3 million greater interest income for the quarter ended June 30, 2026 compared to the comparable period for 2025, driven by increases in the amount of our target assets.

Overall, the increase in our interest income outpaced the increase in interest expense and drove an 8%, or $0.8 million, increase in net interest income for the quarter ended June 30, 2026 compared to the comparable period for 2025.

Total Realized and Unrealized Gains (Losses)

The components of total realized and unrealized gains (losses), net for the three months ended March 31, 2026 and 2025 are set forth as follows:

The components of total realized and unrealized gains (losses), net for the three months ended June 30, 2026 and 2025 are set forth as follows:

Three Months Ended

March 31, 2026 March 31, 2025

June 30, 2026 June 30, 2025

(in thousands)

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Realized and unrealized gain (loss) on residential mortgage loans (2,066) (1,182)

Realized and unrealized gain (loss) on commercial mortgage loans 149 —

Realized and unrealized gain (loss) on U.S.

Treasury securities

Unrealized appreciation (depreciation) on interest rate futures (1,874) (199)

Realized gain/(loss) on AOMT MOA (248) (105)

Realized gain/(loss) on AOMT Majority Owned Affiliates (“MOA”) (655) (194)

Total realized and unrealized gains (losses), net $ (3,740) $ (4,075)

For the three months ended March 31, 2026 and 2025, total realized and unrealized gains and (losses), net resulted in a net loss of ($14.3) million and a gain of $13.4 million, respectively.

During the three months ended March 31, 2026, the ($11.2) million of realized and unrealized loss on securitization, net of unrealized gain (loss) on non-recourse securitization obligation and the ($4.0) million of realized and unrealized loss on our residential mortgage loan portfolio were the primary driver of the overall loss.

These losses are substantially comprised of unrealized losses associated with valuation decreases in our securitization, net of unrealized gain (loss) on non-recourse securitization obligation and our residential mortgage loan portfolios, as well as realized losses associated with the loss of unamortized premiums in these portfolios.

During the three months ended March 31, 2025, realized and unrealized gains on securitization, net of unrealized gain (loss) on non-recourse securitization obligation was the key drivers of the overall gain.

For the three months ended June 30, 2026 and 2025, total realized and unrealized gains and (losses), net resulted in net losses of $(3.7) million and $(4.1) million, respectively.

During the three months ended June 30, 2026, the $(4.1) million of realized and unrealized loss on securitization, net of unrealized gain (loss) on non-recourse securitization obligation was the primary driver of the overall loss.

This loss is substantially comprised of unrealized loss due to valuation decreases and realized loss associated with the loss of unamortized premiums in the aforementioned portfolio.

This was partially offset by a realized gain on RMBS of $0.5 million, which was primarily driven by the sale of retained bonds from the AOMT 2020-3 securitization.

During the three months ended June 30, 2025, the $(1.1) million of realized and unrealized loss on securitization, net of unrealized gain (loss) on non-recourse securitization obligation, the $(1.1) million of realized loss on interest rate futures, and the $(1.2) million of realized and unrealized losses on residential mortgage loans were the key drivers of the overall loss.

Operating Expenses

For the three months ended March 31, 2026 and 2025, our operating expenses were $1.7 million and $1.2 million, respectively.

For the three months ended June 30, 2026 and 2025, our operating expenses were $1.6 million and $1.3 million, respectively.

Our operating expenses increased compared to the comparative period due to increases in audit and loan diligence fees associated with a larger overall balance in our target portfolio.

Operating Expenses Incurred with Affiliate

For the three months ended March 31, 2026 and 2025, our operating expenses incurred with affiliate were $0.6 million and $0.4 million, respectively.

These expenses, which are substantially comprised of payroll reimbursements to our Manager, increased in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 due to standard annual compensation increases.

For the three months ended June 30, 2026 and 2025, our operating expenses incurred with affiliate were $0.6 million and $0.5 million, respectively.

These expenses, which are substantially comprised of payroll reimbursements to our Manager, increased in the three months ended June 30, 2026 compared to the same period of 2025 due to standard annual compensation increases.

Stock Compensation

For the three months ended March 31, 2026 and 2025, our stock compensation expense was $0.4 million and $0.2 million, respectively.

Our stock compensation expense increased for the three months ended March 31, 2026 due to the issuance of new performance based stock awards in 2025.

For the three months ended June 30, 2026 and 2025, our stock compensation expense was $0.4 million and $0.3 million, respectively.

Our stock compensation expense increased for the three months ended June 30, 2026 due to the issuance of new performance-based stock awards after the three months ended June 30, 2025.

Securitization Costs

For the three months ended March 31, 2026 and 2025, we incurred $1.4 million of securitization costs and no securitization costs, respectively.

The securitization costs in the three months ended March 31, 2026 are associated with the AOMT 2026-2 securitization in March 2026, and there was no securitization activity in the three months ended March 31, 2025.

For the three months ended June 30, 2026, we incurred no securitization costs.

In the three months ended June 30, 2025, we incurred $1.9 million of securitization costs.

We did not have any securitizations in the three months ended June 30, 2026.

The expense in the three months ended June 30, 2025 is due to expenses associated with the AOMT 2025-4 and AOMT 2025-6 securitizations.

Management Fee Incurred with Affiliate

For the three months ended March 31, 2026 and 2025, our management fee incurred with affiliate was $1.1 million and $1.1 million, respectively.

These expenses, which were flat for the three months ended March 31, 2026 versus the comparative period, are driven by our average Equity (as defined in the Management Agreement).

For the three months ended June 30, 2026 and 2025, our management fee incurred with affiliate was $1.1 million and $1.1 million, respectively.

These expenses, which were flat for the three months ended June 30, 2026 versus the comparative period, are driven by our average Equity (as defined in the Management Agreement).

Six Months Ended June 30, 2026 and 2025

The following table sets forth a summary of our results of operations for the six months ended June 30, 2026 and 2025:

Six Months Ended

June 30, 2026 June 30, 2025

(in thousands)

INTEREST INCOME, NET

Interest income $ 82,092 $ 67,961

Interest expense 59,240 47,934

NET INTEREST INCOME $ 22,852 $ 20,027

REALIZED AND UNREALIZED GAINS (LOSSES), NET

Net realized gain (loss) on mortgage loans, derivative contracts, RMBS, and CMBS $ (1,244) $ (5,681)

Net unrealized gain (loss) on trading securities, mortgage loans, portion of debt at fair value option, and derivative contracts (16,808) 15,049

TOTAL REALIZED AND UNREALIZED GAINS (LOSSES), NET $ (18,052) $ 9,368

Operating expenses $ 3,225 $ 2,536

Operating expenses incurred with affiliate 1,120 869

Stock compensation 847 533

Securitization costs 1,402 1,866

Management fee incurred with affiliate 2,231 2,293

Total operating expenses $ 8,825 $ 8,097

INCOME (LOSS) BEFORE INCOME TAXES $ (4,025) $ 21,298

Income tax expense (benefit) — —

NET INCOME (LOSS) ALLOCABLE TO COMMON STOCKHOLDERS $ (4,025) $ 21,298

Other comprehensive income (loss) 1,094 (1,186)

TOTAL COMPREHENSIVE INCOME (LOSS) $ (2,931) $ 20,112

Net Interest Income

The following table sets forth the components of net interest income for the six months ended June 30, 2026 and 2025:

Six Months Ended

June 30, 2026 June 30, 2025

(in thousands)

Interest income Interest income / expense Average balance Interest income / expense Average balance

Residential mortgage loans $ 11,360 $ 348,934 $ 8,550 $ 245,619

Residential mortgage loans in securitization trusts 62,045 2,129,839 50,199 1,787,012

Commercial mortgage loans 180 4,757 222 5,207

RMBS and Majority Owned Affiliate

7,323 120,943 7,330 147,356

CMBS 449 4,880 524 5,597

Treasury securities — — 61 3,333

Other interest income 735 38,230 1,075 47,167

Total interest income $ 82,092 $ 67,961

Interest expense

Notes payable $ 6,402 277,420 $ 6,034 186,700

Non-recourse securitization obligation, collateralized by residential mortgage loans 46,235 1,961,652 36,697 1,666,064

Repurchase facilities 1,568 61,797 2,018 62,591

Senior Unsecured Notes 5,035 89,251 3,185 59,462

Total interest expense $ 59,240 $ 47,934

Net interest income $ 22,852 $ 20,027

We generated $14.1 million greater interest income in the six months ended June 30, 2026 as compared to the same period in 2025, primarily driven by increases in the amount of our target assets.

Interest expense increased by $11.3 million in the six months ended June 30, 2026 as compared to the same period in 2025, due to new asset purchases and securitizations, collateralized by residential mortgage loans in securitization trusts as well as our 2030 Notes issued in May 2025.

Overall, the increase in our interest income outpaced the increase in interest expense and drove a 14%, or $2.8 million, increase in net interest income for the six months ended June 30, 2026 compared to the comparable period for 2025.

Total Realized and Unrealized Gains (Losses)

The components of total realized and unrealized gains (losses), net for the six months ended June 30, 2026 and 2025 are set forth as follows:

Six Months Ended

June 30, 2026 June 30, 2025

(in thousands)

Realized and unrealized gain (loss) on securitization, net of unrealized gain (loss) on non-recourse securitization obligation

$ (15,366) $ 13,419

Realized gain (loss) on RMBS

Unrealized gain (loss) on Whole Pool Agency RMBS (913) 5,640

Realized gain (loss) on CMBS (64) (264)

Realized gain (loss) on interest rate futures 4,246 (2,536)

Realized and unrealized gain (loss) on TBAs 1,046 (5,590)

Realized and unrealized gain (loss) on residential mortgage loans

(6,108) 1,754

Realized and unrealized gain (loss) on commercial mortgage loans

Unrealized appreciation (depreciation) on interest rate futures

(420) (2,134)

Realized gain/(loss) on AOMT MOA (904) (299)

Total realized and unrealized gains (losses), net $ (18,052) $ 9,368

For the six months ended June 30, 2026 and 2025, total realized and unrealized gains (losses), net resulted in a net loss of $(18.1) million and a net gain of $9.4 million, respectively.

During the six months ended June 30, 2026, the $(15.4) million of realized and unrealized loss on securitization, net of non-recourse securitization obligation and the $(6.1) million of realized and unrealized loss on our residential mortgage loan portfolio were the primary drivers of the net loss, partially offset by $4.2 million of realized gain on interest rate futures.

These losses are substantially associated with valuation decreases in the aforementioned portfolios, as well as realized losses associated with the loss of unamortized premiums in these portfolios;

the offsetting gain in interest rate futures is the result of our hedging portfolio mitigating the impact of valuation changes to our residential mortgage loan portfolio.

In the six months ended June 30, 2025, the $13.4 million of realized and unrealized gain on securitization, net of non-recourse securitization obligation and the $1.8 million of realized and unrealized gain on our residential mortgage loan portfolio were the primary drivers of the net gain, partially offset by $(2.1) million of realized loss on interest rate futures.

Operating Expenses

For the six months ended June 30, 2026 and 2025, our operating expenses were $3.2 million and $2.5 million, respectively.

Our operating expenses increased during the six months ended June 30, 2026 as compared to the comparative period due to increases in audit and loan diligence fees associated with a larger overall balance in our target portfolio.

Operating Expenses Incurred with Affiliate

For the six months ended June 30, 2026 and 2025, our operating expenses incurred with affiliate were $1.1 million and $0.9 million, respectively.

These expenses, which are substantially comprised of payroll reimbursements to our Manager, increased versus the comparative period due to standard annual compensation increases.

Stock Compensation

For the six months ended June 30, 2026 and 2025 our stock compensation expense was $0.8 million and $0.5 million, respectively.

Stock compensation expense increased for the six months ended June 30, 2026 due to the issuance of new performance based stock awards after the six months ended June 30, 2025.

Securitization Costs

Securitization costs of $1.4 million were incurred for the six months ended June 30, 2026 in connection with the AOMT 2026-2 securitization in March 2026.

The $1.9 million of securitization costs in the comparable period in 2025 were incurred in connection with the AOMT 2025-4 and AOMT 2025-6 securitizations.

Management Fee Incurred with Affiliate

For the six months ended June 30, 2026 and 2025, our management fee incurred with affiliate was $2.2 million and $2.3 million, respectively.

These expenses, which decreased slightly in the six months ended June 30, 2026 versus the comparative period, are driven by our average Equity (as defined in the Management Agreement).

Our Portfolio

As of March 31, 2026, our portfolio consisted of approximately $2.7 billion of residential mortgage loans, RMBS, and other target assets.

As of June 30, 2026, our portfolio consisted of approximately $2.9 billion of residential mortgage loans, RMBS, and other target assets.

Certain of these portfolio assets are located in states such as Florida and California where natural disasters such as hurricanes, wildfires and earthquakes may occasionally occur.

We require all of our collateral to be adequately insured.

The graphs in the subsequent detail of residential mortgage loans, residential mortgage loans held in securitization trusts, and residential mortgage loans underlying RMBS issuances show the percentage of residential mortgage loans held in each state where there is a concentration of loans.

The following table sets forth additional information regarding our portfolio, including the manner in which our equity capital was allocated among investment types, as of March 31, 2026:

The following table sets forth additional information regarding our portfolio, including the manner in which our equity capital was allocated among investment types, as of June 30, 2026:

Fair Value Collateralized Debt Allocated Capital % of Total Capital

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RMBS $ 308,086 $ 70,540 $ 237,546 101.1 %

Total investment securities $ 308,086 $ 70,540 $ 237,546 101.1 %

Investments in Majority-Owned Affiliates (1)

$ 25,351 $ — $ 25,351 10.8 %

Total investment securities $ 238,263 $ 57,000 $ 181,263 70.6 %

Total investment portfolio $ 2,904,946 $ 2,403,902 $ 501,044 213.3 %

4 unchanged sentences

Total $ 2,638,767 $ 2,403,902 $ 234,865 100.0 %

(1) Our Investment in Majority-Owned Affiliates is held at its amortized cost basis.

(1) "Investments in Majority-Owned Affiliates” is held at amortized cost.

(2) Other assets and liabilities presented is calculated as a net liability substantially comprised of $255.9 million due to broker for our quarter-end purchase of certain Freddie Mac and Fannie Mae-issued Whole Pool Agency RMBS, and excluding the portion of “other assets” which includes our investment in Majority-Owned Affiliates, which is considered a target asset.

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Residential Mortgage Loans

The following table sets forth additional information on the residential mortgage loans in our portfolio as of March 31, 2026:

The following table sets forth additional information on the residential mortgage loans in our portfolio as of June 30, 2026:

Portfolio Range Portfolio Weighted Average

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Maturity date 9/1/2026 - 6/4/2066

February, 2055

FICO score at loan origination 628 - 850

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Percentage of loans 90+ days delinquent (based on UPB) N/A 0.4%

The following charts illustrate the distribution of the credit scores and interest rates by the number of loans in our residential mortgage loan portfolio as of March 31, 2026:

The following charts illustrate the distribution of the credit scores and interest rates by the number of loans in our residential mortgage loan portfolio as of June 30, 2026:

The following charts illustrate the distribution of the credit scores and interest rates by the number of loans in our residential mortgage loan portfolio as of December 31, 2025:

The following charts illustrate additional characteristics of our residential mortgage loans in our portfolio that we owned directly as of March 31, 2026, based on the product profile, borrower profile, and geographic location (percentages are based on the aggregate unpaid principal balance of such loans):

Characteristics of Our Residential Mortgage Loans as of March 31, 2026:

No state in “Other” represents more than a 3% concentration of the residential mortgage loans in our portfolio that we owned directly as of March 31, 2026.

The following charts illustrate additional characteristics of our residential mortgage loans in our portfolio that we owned directly as of June 30, 2026, based on the product profile, borrower profile, and geographic location (percentages are based on the aggregate unpaid principal balance of such loans):

Characteristics of Our Residential Mortgage Loans as of June 30, 2026:

No state in “Other” represents more than a 3% concentration of the residential mortgage loans in our portfolio that we owned directly as of June 30, 2026.

Numbers presented may add to more than 100% due to rounding.

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Residential Mortgage Loans Held in Securitization Trusts

The following table sets forth the information regarding the underlying collateral of our residential mortgage loans held in securitization trusts as of March 31, 2026:

The following table sets forth the information regarding the underlying collateral of our residential mortgage loans held in securitization trusts as of June 30, 2026:

($ in thousands)

UPB $2,174,450

Fair Value $2,249,614

Number of loans 5,242

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(1) CPR is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year.

The following chart illustrates the geographic distribution of the underlying collateral of our residential mortgage loans held in securitization trusts as of March 31, 2026 (percentages based on the aggregate unpaid principal balance of such loans):

No state in “Other” represents more than a 3% concentration of the underlying collateral of our residential mortgage loans held in securitization trusts as of March 31, 2026.

The following chart illustrates the geographic distribution of the underlying collateral of our residential mortgage loans held in securitization trusts as of June 30, 2026 (percentages are based on the aggregate unpaid principal balance of such loans):

No state in “Other” represents more than a 3% concentration of the underlying collateral of our residential mortgage loans held in securitization trusts as of June 30, 2026.

Numbers presented may add to more than 100% due to rounding.

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Risk retention securities represent at least 5% of a horizontal or vertical slice of the bonds issued as part of the transaction.

Certain information regarding the mortgage loans underlying our portfolio of RMBS issued in such securitization transactions is set forth below as of March 31, 2026, unless otherwise stated:

March 31, 2026 AOMT 2019 Securitizations AOMT 2020 Securitizations AOMT 2023 Securitizations AOMT 2024 Securitizations AOMT 2025 Securitizations

Certain information regarding the mortgage loans underlying our portfolio of RMBS issued in such securitization transactions is set forth below as of June 30, 2026, unless otherwise stated:

June 30, 2026 AOMT 2019 Securitizations AOMT 2023 Securitizations AOMT 2024 Securitizations AOMT 2025 Securitizations

($ in thousands)

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Weighted Average 90+ Delinquency (as a % of Original Balance) 0.8 % 3.9 % 2.4 % 1.3 %

Weighted Average CLTV of 90+ Delinquent Loans (FHFA HPI Estimate) (2)

48.3% 74.1% 64.0% 67.4% 52.1%

Weighted Average CLTV of 90+ Delinquent Loans (Federal Housing Finance Agency Home Price Index Estimates (“FHFA HPI Estimate”)) 48.3 % 64.0 % 67.4 % 52.2 %

Fair value of first loss piece (2)

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12.72 % 9.04 % 10.92 % 4.67 %

During the three months ended June 30, 2026, the Company sold its investment in AOMT 2020-3 non-agency RMBS.

As such, there are no remaining RMBS from AOMT 2020 securitizations.

(1) CPR is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year.

(2) AOMT 2020-3 does not have combined loan-to-value ratio (“CLTV”) or Federal Housing Finance Agency Home Price Index Estimates (“FHFA HPI Estimates”);

accordingly, original CLTV is used.

(3) Represents the fair value of the securities we hold in the first loss tranche in each securitization.

(4) The fair value of the first loss pieces presented for the 2023 - 2025 securitizations is the total at risk for the Majority-Owned Affiliates.

(2) Represents the fair value of the securities we hold in the first loss tranche in each securitization including the total at risk for the Majority-Owned Affiliates.

(3) Represents the average size of the subordinate securities we own as investments in each securitization relative to the average current size of the securitization.

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(3) Represents the fair value of the securities we hold in the first loss tranche in each securitization.

(4) The fair value of the first loss pieces presented for the 2023 - 2025 securitizations is the total at risk for the Majority-Owned Affiliates.

(4) The fair value of the first loss pieces presented is the total at risk for the Majority-Owned Affiliates.

(5) Represents the average size of the subordinate securities we own as investments in each securitization relative to the average current size of the securitization.

The following table provides certain information with respect to our RMBS portfolio both received in AOMT securitization transactions and acquired from other third parties as of March 31, 2026:

The following table provides certain information with respect to our RMBS portfolio both received in AOMT securitization transactions and acquired from other third parties as of June 30, 2026:

RMBS Repurchase Debt (1,3)

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(1) Repurchase debt includes borrowings against retained bonds received from on-balance sheet securitizations (i.e., consolidated VIEs).

(2) The whole pool RMBS presented as of March 31, 2026 were purchased from a broker to whom the Company owed approximately $129.4 million, payable upon the settlement date of the trade.

(2) The whole pool RMBS presented as of June 30, 2026 were purchased from a broker to whom the Company owed approximately $255.9 million, payable upon the settlement date of the trade.

See Note 6 — Due to Broker in our unaudited condensed consolidated financial statements included in this report.

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— — — 34,694 — 34,694 (34,694) — (34,694)

$ 82,140 $ 197,865 $ 280,005 $ 54,041 $ — $ 54,041 $ 28,099 $ 197,865 $ 225,964

Subtotal $ 82,140 $ 197,865 $ 280,005 $ 54,041 $ — $ 54,041 $ 28,099 $ 197,865 $ 225,964

Investment in Majority Owned Affiliates 25,474 — 25,474 — — — 25,474 — 25,474

25,474 — 25,474 — — — 25,474 — 25,474

$ 107,614 $ 197,865 $ 305,479 $ 54,041 $ — $ 54,041 $ 53,573 $ 197,865 $ 251,438

Total $ 107,614 $ 197,865 $ 305,479 $ 54,041 $ — $ 54,041 $ 53,573 $ 197,865 $ 251,438

(1) Repurchase debt includes borrowings against retained bonds received from on-balance sheet securitizations (i.e., consolidated VIEs).

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These bonds, with a fair value of $198.9 million, are not reflected in the consolidated balance sheets, as the Company reflects the assets of the VIE (residential mortgage loans in securitization trusts - at fair value) on its condensed consolidated balance sheets.

The following table sets forth information with respect to our RMBS ending balances, at fair value, for the period ended March 31, 2026:

The following table sets forth information with respect to our RMBS ending balances, at fair value, as of June 30, 2026:

Mezzanine Subordinate Interest Only Whole Pool Total

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Acquisitions:

Retained bonds received in securitizations — — — — —

Third party securities — — — 255,867 255,867

Effect of principal payments / called deals — (198,191) (198,191)

Effect of principal payments / called deals / sales — (27,313) (3,700) (129,359) (160,372)

IO and excess servicing prepayments — — (183) 638 455

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Third party securities — — — 908,857 908,857

Effect of principal payments / called deals 155 (25,251) (3,347) (915,610) (944,053)

Effect of principal payments / called deals / sales 155 (25,251) (3,347) (915,610) (944,053)

IO and excess servicing prepayments — — (1,640) — (1,640)

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Ending fair value $ 13,252 $ 59,587 $ 9,301 $ 197,865 $ 280,005

The following chart illustrates the geographic diversification of the loans underlying our portfolio of RMBS issued in AOMT securitization transactions as of March 31, 2026 (percentages are based on the aggregate unpaid principal balance of such loans):

The following chart illustrates the geographic diversification of the loans underlying our portfolio of RMBS issued in AOMT securitization transactions as of June 30, 2026 (percentages are based on the aggregate unpaid principal balance of such loans):

Geographic Diversification of Loans Underlying Our Portfolio

of RMBS Issued in AOMT Securitization Transactions

(as of March 31, 2026)

No state in “Other” represents more than a 4% concentration of the loans underlying our portfolio of RMBS issued in AOMT securitization transactions as of March 31, 2026.

(as of June 30, 2026)

No state in “Other” represents more than a 3% concentration of the loans underlying our portfolio of RMBS issued in AOMT

securitization transactions as of June 30, 2026.

Numbers presented may add to more than 100% due to rounding.

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Description of Existing Financing Arrangements

As of March 31, 2026, we were a party to four warehouse loan financing lines, which permitted borrowings in an aggregate amount of up to $1.3 billion.

Borrowings under uncommitted loan financing lines may be used to purchase whole loans for eventual securitization or loans purchased for long‑term investment purposes.

As of June 30, 2026, we were a party to four warehouse loan financing lines, which permitted borrowings in an aggregate amount of up to $1.3 billion.

During the quarter ended June 30, 2026, we renewed our loan financing facility with Multinational Bank 1 in accordance with the terms of the agreement, which contemplates rolling three-month renewals.

Borrowings under warehouse loan financing lines (in general, each a “loan financing facility”) may be used to purchase whole loans for securitization or loans purchased for long‑term investment purposes.

Our financing facilities are generally subject to limits on borrowings related to specific asset pools (“advance rates”) and other restrictive covenants, as is usual and customary.

As of March 31, 2026, the advance rates (when required) of our four active lenders ranged from 60% to 92%, depending on the asset type and loan delinquency status.

As of June 30, 2026, the advance rates (when required) of our four active lenders ranged from 60% to 92%, depending on the asset type and loan delinquency status.

Our most restrictive covenants (when covenants are required by any of our four active lenders) included:

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and (3) the maximum ratio of our and our subsidiaries’ total indebtedness to tangible net worth must not be greater than 5:1.

Our minimum liquidity requirement as of March 31, 2026 was $10.0 million.

We were in compliance with all covenants as of March 31, 2026.

Our minimum liquidity requirement as of June 30, 2026 was $10.0 million.

We were in compliance with all covenants as of June 30, 2026.

A description of each loan financing line is set forth as follows:

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Pursuant to the terms of the master repurchase agreement, the agreement may be renewed every three months for a maximum six-month term.

As of March 31, 2026, the termination date of the master repurchase agreement was June 25, 2026, unless terminated earlier pursuant to the terms of the master repurchase agreement.

As of June 30, 2026, the termination date of the master repurchase agreement was September 25, 2026, unless terminated earlier pursuant to the terms of the master repurchase agreement.

The amount expected to be paid by Multinational Bank 1 for each eligible mortgage loan is based on an advance rate as a percentage of either the outstanding principal balance of the mortgage loan or the market value of the mortgage loan, whichever is less.

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The interest rate is equal to the sum of (1) a spread of 1.60%, and (2) Term SOFR.

The Company is subject to various financial and other covenants, including those relating to (1) declines in tangible net worth;

The Company is subject to various financial and other covenants, including those relating to:

(1) declines in tangible net worth;

(2) a maximum ratio of indebtedness to tangible net worth;

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The Global Investment Bank 4 Master Repurchase Agreement expires on October 6, 2027, unless terminated earlier pursuant to the terms of the Global Investment Bank 4 Master Repurchase Agreement.

The following table sets forth the details of our financing lines as of each of March 31, 2026 and December 31, 2025:

The following table sets forth the details of our financing lines as of each of June 30, 2026 and December 31, 2025:

Spread Drawn Amount

Note Payable Base Interest Rate March 31, 2026 December 31, 2025

Note Payable Base Interest Rate June 30, 2026 December 31, 2025

(in thousands)

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Total $ 364,599 $ 218,757

(1) On December 26, 2025, this financing facility was extended through June 25, 2026 in accordance with the terms of the agreement, which contemplates rolling three-month renewals.

The interest rate pricing spread remained unchanged from the prior extension at a range from 1.65% to 2.10%.

(1) On June 25, 2026, this financing facility was extended through September 25, 2026 in accordance with the terms of the agreement, which contemplates rolling three-month renewals.

In addition, the interest rate pricing spread was reduced to a range from 1.30% to 2.10%;

prior to this extension, the interest rate pricing spread was a range from 1.65% to 2.10%.

(2) On April 22, 2026, the Company and one of its subsidiaries amended the Pricing Side Letter for its loan financing facility with Global Investment Bank 2.

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The termination date of the loan financing facility was extended to April 21, 2028.

In addition, the interest rate pricing spread

was updated to a range from 1.50% to 2.60%;

In addition, the interest rate pricing spread was updated to a range from 1.50% to 2.60%;

prior to this extension, the interest rate pricing spread was a range from 1.65% to 2.40%

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The Global Investment Bank 4 Master Repurchase Agreement expires on October 6, 2027, unless terminated earlier pursuant to the terms of the Global Investment Bank 4 Master Repurchase Agreement.

The following table sets forth the total unused borrowing capacity of each financing line as of March 31, 2026:

The following table sets forth the total unused borrowing capacity of each financing line as of June 30, 2026:

Note Payable Borrowing Capacity Balance Outstanding Available Financing

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Treasury securities, securities issued by AOMT, Angel Oak’s securitization platform, and other securities we may acquire in accordance with our investment guidelines.

The following table sets forth certain characteristics of our short-term repurchase facilities as of March 31, 2026 and December 31, 2025:

March 31, 2026

The following table sets forth certain characteristics of our short-term repurchase facilities as of June 30, 2026 and December 31, 2025:

June 30, 2026

Repurchase Agreements Amount Outstanding Weighted Average Interest Rate Weighted Average Remaining Maturity (Days)

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$ 54,041 5.44 % 16

(1) A portion of repurchase debt outstanding as of both March 31, 2026 and December 31, 2025 includes borrowings against retained bonds received from on-balance sheet securitizations (i.e., consolidated VIEs).

(1) A portion of repurchase debt outstanding as of both June 30, 2026 and December 31, 2025 includes borrowings against retained bonds received from on-balance sheet securitizations (i.e., consolidated VIEs).

The following table presents the amount of collateralized borrowings outstanding under repurchase facilities as of the end of each quarter, the average amount of collateralized borrowings outstanding under repurchase facilities during the quarter and the highest balance of any month end during the quarter:

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Q4 2024 50,555 53,412 51,843

Q1 2025 148,467 62,631 148,467

148,467 62,631 148,467

68,062 71,980 148,467

Q3 2025 54,041 64,557 68,062

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We are the sole member of the depositor and also own and hold the call rights on the XS tranche of bonds, which is the “controlling class” of the bonds.

We have consolidated the AOMT 2026-2 securitization on our consolidated balance sheet, maintaining the residential mortgage loans held in the securitization trust and the related financing obligation thereto on our consolidated balance sheets as of March 31, 2026.

In December 2025, we and other affiliated entities participated in a securitization transaction of a pool of residential mortgage loans secured by second lien HELOCs (an open or closed end home equity revolving line of credit, secured by a mortgage, deed of trust or other instrument creating a first or junior lien on a residential property, which lien secures the related line of credit) on one‑to‑four family residential properties.

2 unchanged sentences

We used the proceeds of the securitization transaction to repay outstanding debt of approximately $43.4 million and released cash of $12.4 million, which was used for new loan purchases and operational purposes.

We derecognized the mortgage loans sold in AOMT 2025-HB2 and recorded investments in RMBS and majority-owned affiliates (which is located within “other assets” on our consolidated balance sheet) as of March 31, 2026.

In October 2025, we were the sole participant in a securitization transaction of a pool of residential mortgage loans secured exclusively by first liens on one‑to‑four family residential properties.

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We are the sole member of the depositor and also own and hold the call rights on the XS tranche of bonds, which is the “controlling class” of the bonds.

We have consolidated the AOMT 2025-10 securitization on our consolidated balance sheet, maintaining the residential mortgage loans held in the securitization trust and the related financing obligation thereto on our consolidated balance sheets as of March 31, 2026.

In May 2025, we and other affiliated entities participated in a securitization transaction of a pool of residential mortgage loans secured primarily by first liens on one‑to‑four family residential properties.

2 unchanged sentences

We used the proceeds of the securitization transaction to repay outstanding debt of approximately $73.1 million and retained cash of $9.2 million, which was used for operational purposes.

We derecognized the mortgage loans sold in AOMT 2025-6 and recorded investments in RMBS and majority-owned affiliates (which is located within “other assets” on our consolidated balance sheet) as of March 31, 2026.

In April 2025, we were the sole participant in a securitization transaction of a pool of residential mortgage loans secured exclusively by first liens on one‑to‑four family residential properties.

2 unchanged sentences

We are the sole member of the depositor and also own and hold the call rights on the XS tranche of bonds, which is the “controlling class” of the bonds.

We have consolidated the AOMT 2025-4 securitization on our consolidated balance sheet, maintaining the residential mortgage loans held in the securitization trust and the related financing obligation thereto on our consolidated balance sheets as of March 31, 2026.

Notes Offering

Notes Offerings

The Company’s Senior Unsecured Notes consist of $42.5 million principal amount of its 2030 Notes and $50.0 million principal amount of its 9.500% Senior Notes due July 2029 (the “2029 Notes” and, together with the 2030 Notes, the “Senior Unsecured Notes”).

The 2030 Notes were issued in May 2025 in a public offering for net proceeds of approximately $40.6 million and the 2029 Notes were issued in July 2024 in a public offering for net proceeds of approximately $47.5 million.

The below table provides a summary of the Senior Unsecured Notes as of March 31, 2026 ($ in thousands).

The below table provides a summary of the Senior Unsecured Notes as of June 30, 2026 ($ in thousands).

Carrying Value

Senior Unsecured Notes (1)

Principal Amount March 31, 2026 December 31, 2025 Maturity Date (2)

Principal Amount June 30, 2026 December 31, 2025 Maturity Date (2)

Redemption Date (3)

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The 2029 Notes bear interest at a rate equal to 9.500% per year, payable in cash quarterly in arrears on January 30, April 30, July 30 and October 30 of each year.

The below table details the total interest expense incurred on the Senior Unsecured Notes during the three months ended March 31, 2026 and March 31, 2025.

March 31, 2026 March 31, 2025

The below table details the total interest expense incurred on the Senior Unsecured Notes during the three and six months ended June 30, 2026 and June 30, 2025 ($ in thousands).

Three Months Ended Six Months Ended

June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025

Coupon interest expense $ 2,226 $ 1,659 $ 4,456 $ 2,847

1 unchanged sentence

Total interest expense $ 2,502 $ 1,872 $ 4,954 $ 3,185

At March 31, 2026 and December 31, 2025, the accrued interest payable on the Senior Unsecured Notes was $1.2 million and $2.2 million, respectively.

At March 31, 2026 and December 31, 2025, the unamortized deferred debt issuance cost was $1.2 million and $1.2 million, respectively.

At June 30, 2026 and December 31, 2025, the accrued interest payable on the Senior Unsecured Notes was $1.2 million and $2.2 million, respectively.

At June 30, 2026 and December 31, 2025, the unamortized deferred debt issuance cost was $1.1 million and $1.2 million, respectively.

The unamortized debt issuance costs will be amortized until maturity.

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and the Operating Partnership are not materially different than the corresponding amounts in Angel Oak Mortgage REIT, Inc.’s consolidated financial statements, and management believes such summarized financial information would be repetitive and would not provide incremental value to investors.

On August 8, 2024, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) to sell shares of the Company’s common stock from time to time having an aggregate gross sales price of up to $75.0 million, of which $60.2 million remains available as of March 31, 2026, through an “at the market” equity offering program (the “ATM Program”).

On August 8, 2024, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) to sell shares of the Company’s common stock from time to time having an aggregate gross sales price of up to $75.0 million, of which $60.2 million remains available as of June 30, 2026, through an “at the market” equity offering program (the “ATM Program”).

During the year ended December 31, 2025, the Company issued and sold 1,277,812 shares of its common stock through its ATM Program resulting in proceeds of $12.3 million, net of commissions and fees.

These shares of common stock were issued in SEC - registered transactions off the Company’s shelf registration statement.

The Company did not issue any shares under the ATM Program during the quarter ended March 31, 2026.

The Company did not issue any shares under the ATM Program during the three and six months ended June 30, 2026.

Leverage and Hedging Strategies

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Cash and cash equivalents

Our cash balance as of March 31, 2026 was sufficient to meet our liquidity covenants under our financing facilities and the Senior Unsecured Notes.

Our cash balance as of June 30, 2026 was sufficient to meet our liquidity covenants under our financing facilities and the Senior Unsecured Notes.

We believe that we maintain sufficient cash to continue to meet margin calls on our financing facilities, should such margin calls occur.

There was no margin collateral required as of March 31, 2026 or December 31, 2025.

There was no margin collateral required as of June 30, 2026 or December 31, 2025.

We may also participate in upcoming securitizations either solely or with other Angel Oak entities.

1 unchanged sentence

Restricted Cash

Restricted cash of approximately $1.7 million as of March 31, 2026 was comprised of:

Restricted cash of approximately $3.4 million as of June 30, 2026 was comprised of:

$2.2 million in interest rate futures margin collateral for the interest rate futures under our sole control;

and margin collateral for securities sold under agreements to repurchase of $1.2 million.

Our counterparties did not require any margin collateral for TBAs as of June 30, 2026.

Restricted cash of approximately $3.7 million as of December 31, 2025 was comprised of:

2 unchanged sentences

Our counterparties did not require any margin collateral for TBAs as of December 31, 2025.

Three Months Ended

March 31, 2026 March 31, 2025

Six Months Ended

June 30, 2026 June 30, 2025

(in thousands)

1 unchanged sentence

Cash flows provided by (used in) investing activities 30,209 (5,769)

Cash flows provided by (used in)financing activities $ 141,672 $ 278,192

Net increase (decrease) in cash and restricted cash $ (1,640) $ 577

The cash used in operating activities of $143.7 million for the three months ended March 31, 2026 as compared to the cash used in operating activities of $201.7 million for the three months ended March 31, 2025 was primarily due to the volume of residential mortgage loans purchased during the first three months of 2026, as compared to the first three months of 2025.

Cash provided by investing activities of $0.4 million for the three months ended March 31, 2026 as compared to cash used by investing activities of $75.9 million for the three months ended March 31, 2025 were primarily due to the timing of purchases and maturities of U.S.

Treasury securities in the comparative period of 2025.

Financing cash flows provided $141.7 million for the three months ended March 31, 2026 as compared to $278.2 million provided by financing activities for the three months ended March 31, 2025 were primarily due to the activity within net borrowings under repurchase agreements and notes payable during the first three months of 2026.

Cash flows provided by financing activities 202,204 188,346

Net increase in cash and restricted cash $ 6,770 $ 1,474

The cash used in operating activities of $225.6 million for the six months ended June 30, 2026 as compared to cash used in operating activities of $181.1 million for the six months ended June 30, 2025 was primarily due to the volume of residential mortgage loans purchased from affiliates and non affiliates during the first six months of 2025, as compared to the first six months of 2026.

Investing cash flows provided $30.2 million for the six months ended June 30, 2026 as compared to cash used in investing activities of $5.8 million for the six months ended June 30, 2025, which were primarily due to the sale of investments in RMBS, available for sale during the first six months of 2026.

Financing cash flows provided $202.2 million for the six months ended June 30, 2026 as compared to $188.3 million used in the six months ended June 30, 2025, which were primarily due to the activity within net borrowings under notes payable offset by the repurchase of common stock and principal payments on non-recourse securitization obligation.

Cash Flows - Residential and Commercial Loan Classification

15 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis