Angel Oak Mortgage REIT, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s discussion and analysis of financial condition and results of operations is intended to help the reader understand the results of operations and financial condition of Angel Oak Mortgage REIT, Inc. The following should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto. References herein to our “Company,” “we,” “us,” or “our” refer to Angel Oak Mortgage REIT, Inc. and its subsidiaries including Angel Oak Mortgage Operating Partnership, LP (the “Operating Partnership”), through which we hold substantially all of our assets and conduct our operations. Unless otherwise indicated, the term “Angel Oak” refers collectively to Angel Oak Capital Advisors, LLC (“Angel Oak Capital”) and its affiliates, including Falcons I, LLC, our external manager (our “Manager”), Angel Oak Companies, LP (“Angel Oak Companies”), and the proprietary mortgage lending platform of affiliates Angel Oak Mortgage Solutions LLC (together with other non-operational affiliated originators, “Angel Oak Mortgage Lending”). Cautionary Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve numerous risks and uncertainties. Our actual results may differ from our beliefs, expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Forward-looking statements are not historical in nature and can be identified by words such as “anticipate,” “estimate,” “will,” “should,” “expect,” “believe,” “intend,” “seek,” “plan” and similar expressions or their negative forms, or by references to strategy, plans, or intentions. These forward-looking statements are subject to risks and uncertainties, including, among other things, those described under Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024 (the “Annual Report on Form 10-K”). Other risks, uncertainties, and factors that could cause actual results to differ materially from those projected may be described from time to time in other reports we file with the Securities and Exchange Commission (the “SEC”). We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. 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, including as a result of the current U.S. government shutdown, 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; • changes in our industry, inflation, interest rates, business strategies, target assets, the debt or equity markets, the general economy (or in specific regions) or the residential real estate finance and real estate markets specifically; • general volatility of the markets in which we invest; • changes in the availability of attractive loans and other investment opportunities, including non-QM loans sourced from Angel Oak Mortgage Lending; • the ability of our Manager to locate suitable investments for us, manage our portfolio, and implement our strategy; • our ability to profitably execute securitization transactions; • our ability to obtain and maintain financing arrangements on favorable terms, or at all; • the adequacy of collateral securing our investments and a decline in the fair value of our investments; • the timing of cash flows, if any, from our investments; • the operating performance, liquidity, and financial condition of borrowers; • increased rates of default and/or decreased recovery rates on our investments; • changes in prepayment rates on our investments; • the departure of any of the members of senior management of the Company, our Manager, or Angel Oak; • the availability of qualified personnel; • conflicts with Angel Oak, including our Manager and its personnel, including our officers, and entities managed by Angel Oak; 28 • 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; • impact of and changes in governmental regulations, tax laws and rates, accounting principles and policies and similar matters; • the level of governmental involvement in the U.S. mortgage market; • future changes with respect to the Federal National Mortgage Association (“Fannie Mae”) or Federal Home Loan Mortgage Corporation (“Freddie Mac” and together with Fannie Mae, the “GSEs”) in the mortgage market and related events, including the lack of certainty as to the future roles of these entities and the U.S. Government in the mortgage market and changes to legislation and regulations affecting these entities; • effects of hedging instruments on our target assets and our returns, and the degree to which our hedging strategies may or may not protect us from interest rate volatility; • our ability to make distributions to our stockholders in the future at the level contemplated by our stockholders or the market generally, or at all; • our ability to continue to qualify as a real estate investment trust (a “REIT”) for U.S. federal income tax purposes; and • our ability to maintain our exclusion from regulation as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this report and in the Annual Report on Form 10-K. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our management’s views only as of the date such statements are made. The risks summarized under Item 1A. “Risk Factors” in the Annual Report on Form 10-K could cause actual results and performance to differ materially from those set forth in or implied by our forward-looking statements. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Important Information Regarding Our Disclosure to Investors We may use our website (www.angeloakreit.com) to communicate with our investors and disclose company information. The information disclosed through our website may be considered material, so investors should monitor our website in addition to press releases, SEC filings and public conference calls and webcasts. The contents of our website referenced herein are not incorporated by reference into this report. General Angel Oak Mortgage REIT, Inc. is a real estate finance company focused on acquiring and investing in first lien non-QM loans and other mortgage-related assets in the U.S. mortgage market. Our strategy is to make credit-sensitive investments primarily in newly originated non-QM loans that are primarily made to higher quality borrowers and sourced from Angel Oak’s proprietary mortgage lending platform, Angel Oak Mortgage Lending, which currently operates primarily through a wholesale channel and has a national origination footprint, and other originators. We also may invest in other residential mortgage loans, RMBS, and other mortgage-related assets, which, collectively with non-QM loans, we refer to as our target assets. Further, we also may identify and acquire our target assets through the secondary market when market conditions and asset prices are conducive to making attractive purchases. Our objective is to generate attractive risk-adjusted returns for our stockholders, through cash distributions and capital appreciation, across interest rate and credit cycles. We are externally managed and advised by our Manager, Falcons I, LLC, a registered investment adviser under the Investment Advisers Act of 1940 and an affiliate of Angel Oak Capital, a leading alternative credit manager with market leadership in mortgage credit that includes asset management, lending and capital markets. Angel Oak Mortgage Lending, an affiliated Angel Oak mortgage origination platform, is a market leader in non‑QM loan production. Through our relationship with our Manager, we benefit from Angel Oak’s vertically integrated platform and in‑house expertise, providing us with the resources that we believe are necessary to generate attractive risk‑adjusted returns for our stockholders. Angel Oak Mortgage Lending provides us with proprietary access to non‑QM loans, as well as transparency over the underwriting process and the ability to acquire loans with our desired credit and return profile. We believe our ability to identify and acquire target assets through the secondary market is bolstered by Angel Oak’s experience in the mortgage industry and expertise in structured credit investments. In addition, we believe 29 we have significant competitive advantages due to Angel Oak’s analytical investment tools, extensive relationships in the financial community, financing and capital structuring skills, investment surveillance capabilities, and operational expertise. On October 1, 2025, the Company, the Operating Partnership, and our Manager entered into a new management agreement (the “New Management Agreement”) to supersede and replace in its entirety the Amended and Restated Management Agreement, dated as of May 1, 2024 (the “Management Agreement”). The New Management Agreement was entered into immediately following the closing on October 1, 2025 of the strategic transaction between Angel Oak Companies, an affiliate of the Manager, and Brookfield Asset Management Ltd. (“Brookfield”). The New Management Agreement is substantially and economically similar to the Management Agreement, with a revision to the reimbursement for the Company’s Chief Executive Officer, Sreeni Prabhu, and clarification of the considerations for which the Company may decline to renew the New Management Agreement on an annual basis. We have elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2019. Commencing with our taxable year ended December 31, 2019, we believe that we have been organized and operated, and we intend to continue to operate in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). Our qualification as a REIT, and maintenance of such qualification, depends on our ability to meet, on a continuing basis, various complex requirements under the Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels, and the concentration of ownership of our stock. We also intend to operate our business in a manner that will allow us to maintain our exclusion from regulation as an investment company under the Investment Company Act. Our common stock commenced trading on the New York Stock Exchange on June 17, 2021. We expect to derive our returns primarily from the difference between the interest we earn on loans we invest in and our cost of capital, as well as the returns from bonds, including risk retention securities, that are retained after securitizing the underlying loan collateral. Trends and Recent Developments Overall macroeconomic environment and its effect on us In the third quarter of 2025, the macroeconomic environment was characterized by general resilience despite competing headwinds and tailwinds surrounding inflation, consumer spending, gross domestic product, and continued geopolitical tension. Many of the themes driving uncertainty from earlier in the year persisted in the third quarter of 2025, yet equity markets again finished with quarter over quarter growth compared to the end of the second quarter of 2025. Inflation ticked up from 2.7% to 3.0% from June 2025 to September 2025. Combined with a weakening labor market, the Federal Reserve Bank (“Fed”) elected to cut the federal funds rate at their September meeting by 25 basis points to 4.00% - 4.25%, representing the first cut since December 2024. This was followed by an additional 25 basis point cut in the Fed’s October meeting, bringing the current federal funds rate to 3.75% - 4.00%. The dovish approach was a welcome development for prospective homebuyers, as mortgage rates decreased in line with Fed rate expectations. Current projections are for two more interest rate cuts in 2025, though the recent government shutdown has cast uncertainty on the future rate path. Securitization markets, in particular, demonstrated resilience with robust activity and a continued tightening of execution spreads. As expected, Treasury yields decreased across two, five, and ten-year terms in the third quarter of 2025. The two-year Treasury yield decreased by approximately 11 basis points since the end of the second quarter of 2025 to 3.62% at the end of the third quarter of 2025, the five-year Treasury yield decreased by approximately 6 basis points since the end of second quarter of 2025 to 3.75% at the end of the third quarter of 2025, and the ten-year Treasury yield decreased by approximately 8 basis points since the end of second quarter of 2025 to 4.15% at the end of the third quarter of 2025. 30 year fixed residential conforming mortgage rates decreased by 47 basis points over the course of the third quarter of 2025 to 6.30% as of the end of the third quarter of 2025 from 6.77% as of the end of the second quarter of 2025. These rates, alongside federal funds rate and Treasury yields, are key benchmarks for the valuation of our portfolio, and a decrease is generally expected to drive a corresponding positive impact to our newly originated asset pricing, consistent with what we observed in the third quarter of 2025. We observed an approximately 63 basis point increase through the end of the third quarter of 2025 versus the second quarter of 2025 in the weighted average price of our residential whole loans portfolio, inclusive of home equity lines of credit (“HELOCs”). This increase in valuation was accompanied by a 78 basis point increase in the third quarter in the weighted average price of our loans in securitization trusts portfolio versus the prior quarter. We expect to continue to purchase newly originated loans and HELOCs, which should continue to support overall portfolio valuations and securitization execution going forward. 30 Our investment performance Net Interest Margin (“NIM”). We generated a 12.9% increase in net interest income in the third quarter of 2025 as compared to the third quarter of 2024, supported by the continued acquisition of accretive assets and reductions in financing facility pricing. Compared to the third quarter of 2024, interest income grew by $9.2 million and interest expense grew by $8.1 million, resulting in net interest income growth of $1.2 million in the third quarter of 2025. Interest income grew due to the continued acquisition and securitization of current market non-QM loans. Compared to the second quarter of 2025, net interest income grew by 2.4%, demonstrating that earnings from assets purchased with the proceeds of our May 2025 offering of $42.5 million in aggregate principal amount of our 9.750% Senior Notes due 2030 (the “2030 Notes”) outpaced the incremental interest expense and produced a positive return. Net realized loss . Our net realized loss for the quarter ended September 30, 2025 was primarily due to realized losses associated with hedging activity, as well as a realized loss associated with the retained RMBS from our AOMT 2019-2 and AOMT 2019-4 securitizations, which were called and re-securitized into AOMT 2025-R1 in the third quarter. Note that the previous unrealized loss on these RMBS was greater than the realized loss, indicating an incrementally positive impact to book value. Net unrealized gain . Our net unrealized gain for the quarter ended September 30, 2025 was primarily due to increases in valuations of our residential mortgage loans and residential mortgage loans in securitization trusts during the quarter. Whole loans and securitization activity During the quarter ended September 30, 2025, we purchased $237.6 million of newly-originated, current market coupon non-QM residential mortgage loans, second lien mortgage loans (residential mortgage loans that are subordinate to the primary or first lien mortgage loans on a residential property, or “Closed-End Seconds”), and HELOCs, with a weighted average coupon of 7.74%, weighted average combined loan-to-value ratio (“CLTV”) of 69.4% and weighted average non-zero credit score of 759. In September 2025, the Company in conjunction with the Company’s affiliates exercised their call rights on the AOMT 2019-2 and AOMT 2019-4 securitizations and subsequently re-securitized the underlying loans in AOMT 2025-R1. This transaction resulted in $19.4 million of cash, which was used for new loan purchases and other accretive uses, and $7.3 million of non-performing loans that are classified as held for sale and recorded in other assets. Subsequent to the end of the third quarter, in October 2025, we issued AOMT 2025-10, an approximately $274.3 million scheduled unpaid principal balance securitization backed by a pool of residential mortgage loans. We issued AOMT 2025-10 as the sole contributor in the securitization. We used the proceeds to repay outstanding debt of approximately $237.4 million, and the $22.1 million of cash released is planned to be used for new loan purchases and operational purposes. Whole loan financing facilities activity We continuously evaluate our lender base and may enter into new agreements and / or exit agreements as we deem prudent, in accordance with our core financial strategy of purchasing whole loans and financing them until securitized. See “Liquidity and Capital Resources” below for a full description of our financing arrangements. Our total borrowing capacity was $1.1 billion as of September 30, 2025; Highlights of whole loan financing facilities activity over the third quarter of 2025 are as follows: • During the quarter ended September 30, 2025, we maintained the same whole loan financing facility lender base as of December 31, 2024. • During the quarter ended September 30, 2025, we renewed our loan financing facility with Multinational Bank 1 in accordance with the mechanism for six-month renewal periods. • Subsequent to the quarter ended September 30, 2025, on October 6, 2025, the Company and one of its subsidiaries entered into a $200.0 million repurchase facility with a global investment bank (“Global Investment Bank 4”) through the execution of a Master Repurchase Agreement and Securities Contract (the “Master Repurchase Agreement”). The amount expected to be advanced by Global Investment Bank 4 is generally in line with other similar agreements that the Company has entered into. Additionally, the rates, terms, events of default, and remedies for such events of default contained within the Master Repurchase Agreement are generally in line with other similar agreements that the Company has entered into. 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; (2) a maximum ratio of indebtedness to tangible net worth; and (3) minimum liquidity. The Master Repurchase Agreement expires on October 6, 2027, unless terminated earlier pursuant to the terms of the Master Repurchase Agreement. 31 Key Financial Metrics As a real estate finance company, we believe the key financial measures and indicators for our business are Distributable Earnings, Distributable Earnings Return on Average Equity, Book Value per Share of Common Stock, and Economic Book Value per Share of Common Stock. Distributable Earnings Distributable Earnings is a non‑GAAP measure and is defined as net income (loss) allocable to common stockholders as calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”), excluding (1) unrealized gains and losses on our aggregate portfolio, (2) impairment losses, (3) extinguishment of debt, (4) non-cash equity compensation expense, (5) the incentive fee earned by our Manager, (6) realized gains or losses on swap terminations and (7) certain other nonrecurring gains or losses. We believe that the presentation of Distributable Earnings provides investors with a useful measure to facilitate comparisons of financial performance among our REIT peers, but has important limitations. We believe Distributable Earnings as described above helps evaluate our financial performance without the impact of certain transactions but is of limited usefulness as an analytical tool. As a REIT, we are generally required to distribute at least 90% of our annual REIT taxable income and to pay U.S. federal income tax at the regular corporate rate to the extent that we annually distribute less than 100% of such taxable income. 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. Distributable Earnings should not be viewed in isolation and is not a substitute for net income computed in accordance with GAAP. Our methodology for calculating Distributable Earnings 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 may not be comparable to similar measures presented by other REITs. We also use Distributable Earnings to determine the incentive fee, if any, payable to our Manager pursuant to the Management Agreement. 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 a gain of $0.5 million and a loss of $3.4 million for the three months ended September 30, 2025 and 2024, respectively. The primary drivers of the difference of Distributable Earnings as compared to GAAP net income for both of the quarters ended September 30, 2025 and September 30, 2024 were adjustments to remove unrealized gains on residential loans and on residential loans in securitization trusts and non-recourse securitization obligation. Distributable Earnings were a gain of $7.3 million and a loss of $2.8 million for the nine months ended September 30, 2025 and 2024, respectively. For the nine months ended September 30, 2025 and September 30, 2024, the primary drivers of the difference between Distributable Earnings and GAAP net income for both periods were adjustments to remove unrealized gains on residential loans in securitization trusts and non-recourse securitization obligation and unrealized gains on residential loans. 32 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 nine months ended September 30, 2025 and 2024: Three Months Ended Nine Months Ended September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 (in thousands) Net income (loss) allocable to common stockholders $ 11,410 $ 31,204 $ 32,708 $ 43,806 Adjustments: Net unrealized (gains) losses on trading securities 2,005 (984) (1,861) 829 Net unrealized (gains) losses on derivatives (4,990) 51 881 (2,985) Net unrealized (gains) losses on residential loans in securitization trusts and non-recourse securitization obligation (3,995) (26,304) (20,199) (28,871) Net unrealized (gains) losses on residential loans (4,299) (7,935) (5,149) (17,438) Net unrealized (gains) losses on commercial loans — — $ — (49) Stock compensation expense 398 604 930 1,864 Distributable Earnings $ 529 $ (3,364) $ 7,310 $ (2,844) Distributable Earnings Return on Average Equity Distributable Earnings Return on Average Equity is a non-GAAP measure and is defined as annual or annualized Distributable Earnings divided by average total stockholders’ equity. We believe that the presentation of Distributable Earnings Return on Average Equity provides investors with a useful measure to facilitate comparisons of financial performance among our REIT peers, but has important limitations. Additionally, we believe Distributable Earnings Return on Average Equity provides investors with additional detail on the Distributable Earnings generated by our invested equity capital. We believe Distributable Earnings Return on Average Equity as described above helps evaluate our financial performance without the impact of certain transactions but is of limited usefulness as an analytical tool. Therefore, Distributable Earnings Return on Average Equity should not be viewed in isolation and is not a substitute for net income computed in accordance with GAAP. 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 and nine months ended September 30, 2025 and 2024: Three Months Ended Nine Months Ended September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 ($ in thousands) Annualized Distributable Earnings $ 2,116 $ (13,460) $ 9,747 $ (3,793) Average total stockholders’ equity $ 255,276 $ 260,452 $ 250,250 $ 260,083 Distributable Earnings Return on Average Equity 0.8% (5.2)% 3.9% (1.5)% 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 September 30, 2025 and December 31, 2024: 33 September 30, 2025 December 31, 2024 (in thousands except for share and per share data) Total stockholders’ equity $ 264,165 $ 238,967 Number of shares of common stock outstanding at period end 24,914,035 23,500,175 Book value per share of common stock $ 10.60 $ 10.17 Economic Book Value per Share of Common Stock “Economic book value” is a non-GAAP financial measure of our financial position. To calculate our economic book value, the portions of our non-recourse financing obligation held at amortized cost are adjusted to fair value. These adjustments are also reflected in the table below in our end of period total stockholders’ equity. Management considers economic book value to provide investors with a useful supplemental measure to evaluate our financial position as it reflects the impact of fair value changes for our legally held retained bonds, irrespective of the accounting model applied for GAAP reporting purposes. 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 September 30, 2025 and December 31, 2024: September 30, 2025 December 31, 2024 (in thousands except for share and per share data) GAAP total stockholders’ equity $ 264,165 $ 238,967 Adjustments: Fair value adjustment for securitized debt held at amortized cost 52,770 68,784 Stockholders’ equity including economic book value adjustments $ 316,935 $ 307,751 Number of shares of common stock outstanding at period end 24,914,035 23,500,175 Book value per share of common stock $ 10.60 $ 10.17 Economic book value per share of common stock $ 12.72 $ 13.10 34 Results of Operations Three Months Ended September 30, 2025 and 2024 The following table sets forth a summary of our results of operations for the three months ended September 30, 2025 and 2024: Three Months Ended September 30, 2025 September 30, 2024 (in thousands) INTEREST INCOME, NET Interest income $ 36,659 $ 27,444 Interest expense 26,479 18,424 NET INTEREST INCOME $ 10,180 $ 9,020 REALIZED AND UNREALIZED GAINS (LOSSES), NET Net realized gain (loss) on mortgage loans, derivative contracts, RMBS, and CMBS $ (6,557) $ (6,335) Net unrealized gain (loss) on trading securities, mortgage loans, portion of debt at fair value option, and derivative contracts 11,280 35,172 TOTAL REALIZED AND UNREALIZED GAINS (LOSSES), NET $ 4,723 $ 28,837 EXPENSES Operating expenses $ 1,117 $ 1,541 Operating expenses incurred with affiliate 510 472 Stock compensation 398 604 Management fee incurred with affiliate 1,161 1,204 Total operating expenses $ 3,186 $ 3,821 INCOME (LOSS) BEFORE INCOME TAXES $ 11,717 $ 34,036 Income tax expense (benefit) 307 2,832 NET INCOME (LOSS) ALLOCABLE TO COMMON STOCKHOLDERS $ 11,410 $ 31,204 Other comprehensive income (loss) 3,665 2,706 TOTAL COMPREHENSIVE INCOME (LOSS) $ 15,075 $ 33,910 35 Net Interest Income The following table sets forth the components of net interest income for the three months ended September 30, 2025 and 2024: Three Months Ended September 30, 2025 September 30, 2024 (in thousands) Interest income Interest income / expense Average balance Interest income / expense Average balance Residential mortgage loans $ 5,693 $ 318,069 $ 4,659 $ 263,095 Residential mortgage loans in securitization trusts 26,501 1,882,129 18,580 1,454,736 Commercial mortgage loans 104 5,199 81 5,246 RMBS and Majority-Owned Affiliate 3,692 139,447 3,251 117,965 CMBS 237 5,120 417 6,239 U.S. Treasury securities — — 65 6,000 Other interest income 432 43,026 391 40,919 Total interest income $ 36,659 $ 27,444 Interest expense Notes payable 3,619 235,898 2,830 176,159 Non-recourse securitization obligation, collateralized by residential mortgage loans 19,564 1,746,766 13,731 1,362,039 Repurchase facilities 851 64,557 900 57,842 Senior Unsecured Notes 2,445 88,705 963 40,538 Total interest expense $ 26,479 $ 18,424 Net interest income $ 10,180 $ 9,020 We generated $9.2 million greater interest income for the quarter ended September 30, 2025 than in the comparable period for 2024, driven by increases in both the amount and yields of our target assets. Interest expense increased by $8.1 million for the quarter ended September 30, 2025 compared to the comparable period for 2024, driven by increases in our total borrowings and our 2030 Notes issuance. Overall, the increase in our interest income outpaced the increase in interest expense and drove a 12.9%, or $1.2 million, increase in net interest income for the quarter ended September 30, 2025 than in the comparable period of 2024. Total Realized and Unrealized Gains (Losses) The components of total realized and unrealized gains (losses), net for the three months ended September 30, 2025 and 2024 are set forth as follows: Three Months Ended September 30, 2025 September 30, 2024 (in thousands) Realized and unrealized gain (loss) on securitization, net of unrealized gain (loss) on non-recourse securitization obligation $ 2,729 $ 25,228 Realized gain (loss) on RMBS (1,487) (565) Unrealized gain (loss) on Whole Pool Agency RMBS (1,972) (2,138) Realized gain (loss) on CMBS (289) (67) Realized gain (loss) on interest rate futures (3,100) (4,461) Realized and unrealized gain (loss) on TBAs 1,829 1,880 Realized and unrealized gain (loss) on residential mortgage loans 4,060 7,789 Realized and unrealized gain (loss) on U.S. Treasury securities — (13) Unrealized appreciation (depreciation) on interest rate futures 3,091 1,184 Realized gain/(loss) on AOMT Majority Owned Affiliates (“MOA”) (138) — Total realized and unrealized gains (losses), net $ 4,723 $ 28,837 36 For the three months ended September 30, 2025 and 2024, total realized and unrealized gains and (losses), net resulted in net gains of $4.7 million and $28.8 million, respectively. During the three months ended September 30, 2025, realized and unrealized gains on residential mortgage loans, and realized and unrealized gain (loss) on securitization, net of unrealized gain (loss) on non-recourse securitization obligation were the primary drivers of the overall gain to our portfolio. During the three months ended September 30, 2024, realized gains losses on securitization, net of unrealized gain (loss) on non-recourse securitization obligation was the key drivers of the overall gain. Expenses Operating Expenses For the three months ended September 30, 2025 and 2024, our operating expenses were $1.1 million and $1.5 million, respectively. Our operating expenses decreased compared to the comparative period due to a decrease in expenses associated with the acquisition of whole loans in our whole loans portfolio. Operating Expenses Incurred with Affiliate For the three months ended September 30, 2025 and 2024, our operating expenses incurred with affiliate were $0.5 million and $0.5 million, respectively. These expenses, which are substantially comprised of payroll reimbursements to our Manager, were consistent with the three months ended September 30, 2025 compared to the same period of 2024. Stock Compensation For the three months ended September 30, 2025 and 2024, our stock compensation expense was $0.4 million and $0.6 million, respectively. Our stock compensation expense decreased for the three months ended September 30, 2025 due primarily to the vesting of stock awards granted at our IPO. Management Fee Incurred with Affiliate For the three months ended September 30, 2025 and 2024, our management fee incurred with affiliate was $1.2 million and $1.2 million, respectively. Minor movements are attributable to changes in our average Equity (as defined in the Management Agreement) for the three months ended September 30, 2025 as compared to the same period in 2024. The calculation of Equity for the purposes of the Management Agreement includes the addition or subtraction of Distributable Earnings, which is the primary departure from the calculation of equity in accordance with GAAP. 37 Nine Months Ended September 30, 2025 and 2024 The following table sets forth a summary of our results of operations for the nine months ended September 30, 2025 and 2024: Nine Months Ended September 30, 2025 September 30, 2024 (in thousands) INTEREST INCOME, NET Interest income $ 104,620 $ 78,558 Interest expense 74,414 51,495 NET INTEREST INCOME $ 30,206 $ 27,063 REALIZED AND UNREALIZED GAINS (LOSSES), NET Net realized gain (loss) on mortgage loans, derivative contracts, RMBS, and CMBS $ (12,238) $ (14,527) Net unrealized gain (loss) on trading securities, mortgage loans, portion of debt at fair value option, and derivative contracts 26,329 48,514 TOTAL REALIZED AND UNREALIZED GAINS (LOSSES), NET $ 14,091 $ 33,987 EXPENSES Operating expenses $ 3,653 $ 5,282 Operating expenses incurred with affiliate 1,379 1,444 Stock compensation 930 1,864 Securitization costs 1,866 1,583 Management fee incurred with affiliate 3,454 3,810 Total operating expenses $ 11,282 $ 13,983 INCOME (LOSS) BEFORE INCOME TAXES $ 33,015 $ 47,067 Income tax expense (benefit) 307 3,261 NET INCOME (LOSS) ALLOCABLE TO COMMON STOCKHOLDERS $ 32,708 $ 43,806 Other comprehensive income (loss) 2,479 4,534 TOTAL COMPREHENSIVE INCOME (LOSS) $ 35,187 $ 48,340 38 Net Interest Income The following table sets forth the components of net interest income for the nine months ended September 30, 2025 and 2024: Nine Months Ended September 30, 2025 September 30, 2024 (in thousands) Interest income Interest income / expense Average balance Interest income / expense Average balance Residential mortgage loans $ 14,243 $ 279,094 $ 13,925 $ 284,211 Residential mortgage loans in securitization trusts 76,700 1,813,488 51,851 1,357,840 Commercial mortgage loans 327 5,204 258 5,231 RMBS and Majority Owned Affiliate 11,022 144,120 9,613 148,677 CMBS 761 5,436 1,097 6,428 U.S. Treasury securities 61 2,222 548 14,528 Other interest income 1,506 46,177 1,266 39,239 Total interest income $ 104,620 $ 78,558 Interest expense Notes payable $ 9,655 213,187 $ 9,928 199,644 Non-recourse securitization obligation, collateralized by residential mortgage loans 56,261 1,688,158 37,624 1,285,118 Repurchase facilities 2,869 62,830 2,980 64,431 Senior Unsecured Notes 5,629 68,245 963 35,681 Total interest expense $ 74,414 $ 51,495 Net interest income $ 30,206 $ 27,063 Net interest income for the nine months ended September 30, 2025 and 2024 was $30.2 million and $27.1 million, respectively. Net interest income increased in the nine months ended September 30, 2025 as compared to the same period in 2024, primarily due to higher interest income generated by increase balances in our residential mortgage loans in securitization trusts portfolio. Similarly, the increase in interest expense was also driven by the increased balance of our non-recourse securitization obligation, collateralized by residential mortgage loans portfolio during the nine months ended September 30, 2025. The net interest income associated with our residential mortgage loans in securitization trusts portfolio and non-recourse securitization obligation, collateralized by residential mortgage loans portfolio was $20.4 million in the nine months ended September 30, 2025 as compared to $14.2 million in the comparable period of 2024. 39 Total Realized and Unrealized Gains (Losses) The components of total realized and unrealized gains (losses), net for the nine months ended September 30, 2025 and 2024 are set forth as follows: Nine Months Ended September 30, 2025 September 30, 2024 (in thousands) Realized and unrealized gain (loss) on securitization, net of unrealized gain (loss) on non-recourse securitization obligation $ 16,149 $ 25,607 Realized gain (loss) on RMBS (2,109) (2,469) Realized and unrealized gain (loss) on Whole Pool Agency RMBS 3,668 (6,355) Realized gain (loss) on CMBS (553) (186) Realized gain (loss) on interest rate futures (5,636) (622) Realized and unrealized gain (loss) on TBAs (3,761) 5,992 Realized and unrealized gain (loss) on residential mortgage loans 5,813 9,839 Realized and unrealized gain (loss) on commercial mortgage loans — 48 Realized and unrealized gain (loss) on U.S. Treasury securities — (99) Unrealized appreciation (depreciation) on interest rate futures 957 2,232 Realized gain/(loss) on AOMT MOA (437) — Total realized and unrealized gains (losses), net $ 14,091 $ 33,987 For the nine months ended September 30, 2025 and 2024, total realized and unrealized gains (losses), net resulted in a net gains of $14.1 million and $34.0 million, respectively. During the nine months ended September 30, 2025, realized and unrealized gains on securitization, net of unrealized gain (loss) on non-recourse securitization obligation, partially offset by realized losses on RMBS, were the primary drivers of the net gain. In the nine months ended September 30, 2024, the net realized and unrealized gain was primarily due to gains on securitization, net of unrealized gain (loss) on non-recourse securitization obligation, and realized and unrealized gains on residential mortgage loans. 40 Expenses Operating Expenses For the nine months ended September 30, 2025 and 2024, our operating expenses were $3.7 million and $5.3 million, respectively. Our operating expenses decreased during the nine months ended September 30, 2025 as compared to the comparative period due to continued cost savings actions such as in-sourcing of key accounting functions, vendor contract negotiations, and a decrease in servicing fees associated with servicing our whole loan portfolio. Operating Expenses Incurred with Affiliate For the nine months ended September 30, 2025 and 2024, our operating expenses incurred with affiliate were $1.4 million and $1.4 million, respectively. These expenses, which are substantially comprised of payroll reimbursements to our Manager, decreased slightly versus the comparative period due to achieved resource efficiencies. Stock Compensation For the nine months ended September 30, 2025 and 2024 our stock compensation expense was $0.9 million and $1.9 million, respectively. Stock compensation expense decreased for the nine months ended September 30, 2025 due primarily to the vesting of stock awards granted at our IPO. Securitization Costs Securitization costs of $1.9 million were incurred for the nine months ended September 30, 2025 in connection with the AOMT 2025-4 and AOMT 2025-6 securitizations. There were $1.6 million of securitization costs incurred for the comparable period in 2024, representing costs incurred in connection with the AOMT 2024-3, AOMT 2024-4, and AOMT 2024-6 securitizations. Management Fee Incurred with Affiliate For the nine months ended September 30, 2025 and 2024, our management fee incurred with affiliate was $3.5 million and $3.8 million, respectively. The decrease is due to the decrease in our average Equity as defined in the Management Agreement for the nine months ended September 30, 2025 as compared to the same period in 2024. The calculation of Equity for the purposes of the Management Agreement includes the addition or subtraction of Distributable Earnings, which is the primary departure from the calculation of equity in accordance with GAAP. 41 Our Portfolio As of September 30, 2025, our portfolio consisted of approximately $2.5 billion of residential mortgage loans, RMBS, and other target assets. Certain of these portfolio assets are located in states such as Florida and California where natural disasters such as hurricanes, wildfires and earthquakes may occasionally occur. We require all of our collateral to be adequately insured. The graphs in the subsequent detail of residential mortgage loans, residential mortgage loans held in securitization trusts, and residential mortgage loans underlying RMBS issuances show the percentage of residential mortgage loans held in each state where there is a concentration of loans. The following table sets forth additional information regarding our portfolio, including the manner in which our equity capital was allocated among investment types, as of September 30, 2025: Fair Value Collateralized Debt Allocated Capital % of Total Capital Portfolio: ($ in thousands) Residential mortgage loans $ 425,775 $ 342,608 $ 83,167 31.5 % Residential mortgage loans in securitization trust 1,862,330 1,726,657 135,673 51.4 % Total whole loan portfolio $ 2,288,105 $ 2,069,265 $ 218,840 82.9 % Investment securities RMBS $ 235,024 $ 54,041 $ 180,983 68.5 % Total investment securities $ 235,024 $ 54,041 $ 180,983 68.5 % Investments in Majority-Owned Affiliates (1) $ 21,164 $ — $ 21,164 8.0 % Total investment portfolio $ 2,544,293 $ 2,123,306 $ 420,987 159.4 % Target assets (2) $ 2,544,293 $ 2,123,306 $ 420,987 159.4 % Cash $ 51,598 $ — $ 51,598 19.5 % Other assets and liabilities (3) (208,420) — (208,420) (78.9) % Total $ 2,387,471 $ 2,123,306 $ 264,165 100.0 % (1) "Investments in Majority-Owned Affiliates” is held at amortized cost. (2) “Target assets” as defined by us excludes U.S. Treasury securities and includes investments in Majority-Owned Affiliates. (3) Other assets and liabilities presented is calculated as a net liability substantially comprised of $153.8 million due to broker for our quarter-end purchase of certain Freddie Mac and Fannie Mae-issued whole pool agency residential mortgage-backed securities (“Whole Pool Agency RMBS”), and excluding the portion of “other assets” which includes our investment in a Majority-Owned Affiliate, which is considered a target asset. 42 As of December 31, 2024, our portfolio consisted of approximately $2.2 billion of residential mortgage loans, RMBS, and other target assets. The following table sets forth additional information regarding our portfolio including the manner in which our equity capital was allocated among investment types, as of December 31, 2024: Fair Value Collateralized Debt Allocated Capital % of Total Capital Portfolio: ($ in thousands) Residential mortgage loans $ 183,064 $ 129,459 $ 53,605 21.0 % Residential mortgage loans in securitization trust 1,696,995 1,593,612 103,383 40.5 % Total whole loan portfolio $ 1,880,059 $ 1,723,071 $ 156,988 61.5 % Investment securities RMBS $ 300,243 $ 50,555 $ 249,688 97.8 % Investment in Majority-Owned Affiliates (1) 20,680 — 20,680 8.1 % Total investment securities $ 320,923 $ 50,555 $ 270,368 105.9 % Total investment portfolio $ 2,200,982 $ 1,773,626 $ 427,356 167.4 % Target assets (2) $ 2,200,982 $ 1,773,626 $ 427,356 167.4 % Cash $ 40,762 $ — $ 40,762 15.9 % Other assets and liabilities (3) (212,801) — (212,801) (83.3) % Total $ 2,028,943 $ 1,773,626 $ 255,317 100.0 % (1) "Investment in Majority-Owned Affiliate” is held at its amortized cost basis. (2) “Target assets” as defined by us excludes U.S. Treasury securities, and includes our investment in Majority-Owned Affiliates. (3) Other assets and liabilities presented is calculated as a net liability substantially comprised of $202.0 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. Additionally, other assets includes $5.2 million of commercial loans and $5.6 million of CMBS. Residential Mortgage Loans The following table sets forth additional information on the residential mortgage loans in our portfolio as of September 30, 2025: Portfolio Range Portfolio Weighted Average ($ in thousands) Unpaid principal balance (“UPB”) $2 - $2,991 $355 Interest rate 1.00% - 15.54% 7.98% Maturity date 8/8/2039 - 7/24/2065 March 2055 FICO score at loan origination 628 - 850 757 Combined loan-to-value ratio (“CLTV”) at loan origination 2.8% - 90.0% 69.1% DTI at loan origination 1.7% - 50.0% 33.2% Percentage of first lien loans N/A 83.3% Percentage of loans 90+ days delinquent (based on UPB) N/A 0.3% 43 The following table sets forth additional information on the residential mortgage loans in our portfolio as of December 31, 2024: Portfolio Range Portfolio Weighted Average ($ in thousands) Unpaid principal balance (“UPB”) $75 - $2,995 $537 Interest rate 3.87%-11.88% 7.4% Maturity date 8/8/2039 - 9/26/2064 November 2054 FICO score at loan origination 628-822 752 CLTV at loan origination 31.9%-90.0% 71.7% DTI at loan origination 1.94%-50.0% 31.2% Percentage of first lien loans N/A 96.7% Percentage of loans 90+ days delinquent (based on UPB) N/A —% 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 September 30, 2025: 44 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, 2024: 45 The following charts illustrate additional characteristics of our residential mortgage loans in our portfolio that we owned directly as of September 30, 2025, 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 September 30, 2025: Note: No state in “Other” represents more than a 3% concentration of the residential mortgage loans in our portfolio that we owned directly as of September 30, 2025. Numbers presented may add to more than 100% due to rounding. 46 The following charts illustrate additional characteristics of the residential mortgage loans in our portfolio that we owned directly as of December 31, 2024, 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 December 31, 2024: Note: No state in “Other” represents more than a 3% concentration of the residential mortgage loans in our portfolio that we owned directly as of December 31, 2024. Numbers presented may add to more than 100% due to rounding. 47 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 September 30, 2025: ($ in thousands) UPB $1,893,465 Fair Value $1,862,330 Number of loans 4,467 Weighted average loan coupon 5.78% Average loan amount $426 Weighted average LTV at loan origination and deal date 66.8% Weighted average credit score at loan origination and deal date 745 Current 3-month constant prepayment rate (“CPR”) (1) 9.6% Percentage of loans 90+ days delinquent (based on UPB) 1.7% (1) CPR is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year. The following chart illustrates the geographic distribution of the underlying collateral of our residential mortgage loans held in securitization trusts as of September 30, 2025 (percentages are based on the aggregate unpaid principal balance of such loans): Note: No state in “Other” represents more than a 3% concentration of the underlying collateral of our residential mortgage loans held in securitization trusts as of September 30, 2025. Numbers presented may add to more than 100% due to rounding. 48 The following table sets forth the information regarding the underlying collateral of our residential mortgage loans held in securitization trusts as of December 31, 2024: ($ in thousands) UPB $1,781,311 Fair Value $1,696,995 Number of loans 4,183 Weighted average loan coupon 5.56% Average loan amount $427 Weighted average LTV at loan origination and deal date 67.0% Weighted average credit score at loan origination and deal date 743 Current 3-month CPR 7.4% Percentage of loans 90+ days delinquent (based on UPB) 2.0% The following chart illustrates the geographic distribution of the underlying collateral of our residential mortgage loans held in securitization trusts as of December 31, 2024 (percentages based on the aggregate unpaid principal balance of such loans): Note: No state in “Other” represents more than a 3% concentration of the underlying collateral of our residential mortgage loans held in securitization trusts as of December 31, 2024. Numbers presented may add to more than 100% due to rounding. 49 RMBS We have participated in numerous securitization transactions pursuant to which we contributed to a securitization trust under the purview of AOMT I, LLC, non‑QM loans that we had accumulated and held on our balance sheet. These loans were purchased from affiliated and unaffiliated entities. In return, we received bonds from these securitization trusts, and cash. At times, we were allocated certain risk retention securities as part of these transactions. Risk retention securities represent at least 5% of a horizontal or vertical slice of the bonds issued as part of the transaction. Certain information regarding the mortgage loans underlying our portfolio of RMBS issued in such securitization transactions is set forth below as of September 30, 2025, unless otherwise stated: 2019 Securitizations 2020 Securitizations 2023 Securitizations 2024 Securitizations 2025 Securitizations ($ in thousands) UPB of loans $110,970 $137,115 $1,010,067 $1,060,809 $336,657 Number of loans 401 438 1,990 2,479 713 Weighted average loan coupon 6.44 % 5.81 % 5.19 % 5.75 % 7.66 % Average loan amount $277 $313 $508 $428 $472 Weighted average LTV at loan origination and deal date 66.4 % 74.1 % 67.3 % 67.7 % 72.0 % Weighted average credit score at loan origination and deal date 719 719 732 737 751 Current 3-month CPR (1) 10.1 % 11.0 % 7.3 % 9.9 % 11.8 % 90+ day delinquency (as a % of UPB) 4.8 % 2.6 % 4.0 % 2.3 % 0.2 % Weighted Average 90+ Delinquency (as a % of Original Balance) 1.1 % 0.9 % 3.4 % 2.2 % 0.2 % Weighted Average LTV of 90+ Delinquent Loans (FHFA HPI Estimate) (2) 48.0 % 74.1 % 65.8 % 67.1 % 40.4 % Fair value of first loss piece (3) $2,134 $23,931 $11,434 $18,711 $7,219 Investment thickness (4) 11.5 % 22.6 % 8.4 % 9.9 % 5.2 % (1) CPR is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year. (2) AOMT 2020-3 does not have LTV or Federal Housing Finance Agency Home Price Index Estimates (“FHFA HPI Estimates”); accordingly, original LTV is used. (3) Represents the fair value of the securities we hold in the first loss tranche in each securitization including the total at risk for the Majority-Owned Affiliates. (4) Represents the average size of the subordinate securities we own as investments in each securitization relative to the average current size of the securitization. 50 Certain information regarding the mortgage loans underlying our portfolio of RMBS issued in AOMT securitization transactions is set forth below as of December 31, 2024, unless otherwise stated: 2019 Securitizations 2020 Securitizations 2023 Securitizations 2024 Securitizations ($ in thousands) UPB of loans $286,875 $148,016 $1,093,694 $1,153,975 Number of loans 1053 466 2122 2629 Weighted average loan coupon 7.19 % 5.83 % 5.23 % 5.79 % Average loan amount $272 $318 $515 $439 Weighted average LTV at loan origination and deal date 68.7 % 74.1 % 68.4 % 68.5 % Weighted average credit score at loan origination and deal date 708 719 732 737 Current 3-month CPR (1) 10.1 % 13.2 % 7.4 % 9.1 % 90+ day delinquency (as a % of UPB) 8.3 % 4.0 % 2.6 % 1.6 % Weighted Average 90+ Delinquency (as a % of Original Balance) 1.3 % 1.3 % 2.5 % 2.1 % Weighted Average LTV of 90+ Delinquent Loans (FHFA HPI Estimate) (2) 47.2 % 74.1 % 67.0 % 70.2 % Fair value of first loss piece (3, 4) $19,226 $23,405 $10,995 $18,650 Investment thickness (5) 21.92 % 20.96 % 7.77 % 9.59 % (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 LTV or Federal Housing Finance Agency Home Price Index Estimates (“FHFA HPI Estimates”); accordingly, original LTV 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 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. 51 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 September 30, 2025: RMBS Repurchase Debt (1,3) Allocated Capital AOMT Third Party RMBS Total AOMT Third Party RMBS Total AOMT Third Party RMBS Total (in thousands) Mezzanine $ 13,245 $ — $ 13,245 $ 2,394 $ — $ 2,394 $ 10,851 $ — $ 10,851 Subordinate 56,381 — 56,381 12,354 — 12,354 44,027 — 44,027 Interest only / excess 10,260 — 10,260 — — — 10,260 — 10,260 Whole pool (2) — 155,138 155,138 — — — — 155,138 155,138 Retained RMBS in VIEs (3) — — — 39,293 — 39,293 (39,293) — (39,293) Subtotal $ 79,886 $ 155,138 $ 235,024 $ 54,041 $ — $ 54,041 $ 25,845 $ 155,138 $ 180,983 Investment in Majority Owned Affiliates $ 21,164 $ — $ 21,164 $ — $ — $ — $ 21,164 $ — $ 21,164 Total $ 101,050 $ 155,138 $ 256,188 $ 54,041 $ — $ 54,041 $ 47,009 $ 155,138 $ 202,147 (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 September 30, 2025 were purchased from a broker to whom the Company owed approximately $153.8 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. (3) A portion of repurchase debt includes borrowings against retained bonds received from on-balance sheet securitizations (i.e., consolidated VIEs). These bonds, with a fair value of $178.3 million, are not reflected in the condensed 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. 52 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 December 31, 2024: RMBS Repurchase Debt (1,3) Allocated Capital AOMT Third Party RMBS Total AOMT Third Party RMBS Total AOMT Third Party RMBS Total (in thousands) Mezzanine $ 12,735 $ — $ 12,735 $ 5,440 $ — $ 5,440 $ 7,295 $ — $ 7,295 Subordinate 73,548 — 73,548 19,829 — 19,829 53,719 — $ 53,719 Interest only / excess 12,508 — 12,508 — — — 12,508 — $ 12,508 Whole pool (2) — 201,452 201,452 — — — — 201,452 $ 201,452 Retained RMBS in VIEs (3) — — — 25,286 — 25,286 (25,286) — $ (25,286) Subtotal $ 98,791 $ 201,452 $ 300,243 $ 50,555 $ — $ 50,555 $ 48,236 $ 201,452 $ 249,688 Investment in Majority Owned Affiliates $ 20,680 $ — $ 20,680 $ — $ — $ — $ 20,680 $ — $ 20,680 Total $ 119,471 $ 201,452 $ 320,923 $ 50,555 $ — $ 50,555 $ 68,916 $ 201,452 $ 270,368 (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 December 31, 2024 were purchased from a broker to whom the Company owed approximately $202 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. (3) A portion of repurchase debt includes borrowings against retained bonds received from on-balance sheet securitizations (i.e., consolidated VIEs). These bonds, with a fair value of $163.9 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. 53 The following table sets forth information with respect to our RMBS ending balances, at fair value, for the quarter ended September 30, 2025: Mezzanine Subordinate Interest Only Whole Pool Total (in thousands) Beginning fair value as of June 30, 2025 $ 12,831 $ 80,510 $ 10,992 $ 257,552 $ 361,885 Acquisitions: Third party securities — — — 153,819 $ 153,819 Effect of principal payments / called deals — (24,378) (3,347) (254,228) $ (281,953) IO and excess servicing prepayments — — (233) — $ (233) Changes in fair value, net 415 250 2,846 (2,005) $ 1,506 Ending fair value as of September 30, 2025 $ 13,246 $ 56,382 $ 10,258 $ 155,138 $ 235,024 The following table sets forth information with respect to our RMBS ending balances, at fair value, for the year ended December 31, 2024: Mezzanine Subordinate Interest Only Whole Pool Total (in thousands) Beginning fair value as of December 31, 2023 $ 10,972 $ 55,665 $ 13,059 $ 392,362 $ 472,058 Acquisitions: Retained bonds received in securitizations 2,420 14,757 1,838 — 19,015 Third party securities — — — 938,430 938,430 Effect of principal payments / called deals (1,080) — — (1,125,653) (1,126,733) IO and excess servicing prepayments — — (1,974) — (1,974) Changes in fair value, net 423 3,127 (415) (3,688) (553) Ending fair value as of December 31, 2024 $ 12,735 $ 73,549 $ 12,508 $ 201,451 $ 300,243 54 The following chart illustrates the geographic diversification of the loans underlying our portfolio of RMBS issued in AOMT securitization transactions as of September 30, 2025 (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 September 30, 2025) Note: 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 September 30, 2025. Numbers presented may add to more than 100% due to rounding. The following chart illustrates the geographic diversification of the loans underlying our portfolio of RMBS issued in AOMT securitization transactions as of December 31, 2024 (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 December 31, 2024) Note: 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 December 31, 2024. Numbers presented may add to more than 100% due to rounding. 55 Liquidity and Capital Resources Overview Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund our investments and operating costs, make distributions to our stockholders, and satisfy other general business needs. Our financing sources currently include payments of principal and interest we receive on our investment portfolio, unused borrowing capacity under our in‑place loan financing lines and repurchase facilities, securitizations of our whole loans, and our ATM Program (as defined below). Additionally, on July 25, 2024, we closed an underwritten public offering and sale of, and issued, $50 million in aggregate principal amount of our 9.500% Senior Notes due July 2029 (the “2029 Notes” and, together with the 2030 Notes, the “Senior Unsecured Notes”). We have deployed the majority of the net proceeds from the offering of our 2029 Notes for general corporate purposes, which included the acquisition of non-QM loans and other target assets substantially sourced from our affiliated proprietary mortgage lending platform and other target assets through the secondary market in a manner consistent with our strategy and investment guidelines. Additionally, we used the net proceeds from the offering of our 2029 Notes to repurchase 1,707,922 shares of our common stock owned by Xylem Finance LLC, an affiliate of Davidson Kempner Capital Management LP, for an aggregate repurchase price of approximately $20.0 million. Furthermore, in May 2025, we closed an underwritten public offering and sale of, and issued, $42.5 million in aggregate principal amount of our 2030 Notes. We used the majority of the net proceeds from the offering of our 2030 Notes for general corporate purposes, which included the acquisition of non-QM loans and other target assets in a manner consistent with our strategy and investment guidelines. Our financing sources historically have included the foregoing, as well as capital contributions from our investors prior to our IPO, and the proceeds from our IPO and concurrent private placement (which capital has all been deployed). Going forward, we may also utilize other types of borrowings, including bank credit facilities and warehouse lines of credit, among others. We may also seek to raise additional capital through public or private offerings of equity, equity-related, or debt securities, depending upon market conditions. The use of any particular source of capital and funds will depend on market conditions, availability of these sources, and the investment opportunities available to us. We have used and expect to continue to use loan financing lines to finance the acquisition and accumulation of mortgage loans or other mortgage‑related assets pending their eventual securitization. Upon accumulating an appropriate amount of assets, we have financed and expect to continue to finance a substantial portion of our mortgage loans utilizing fixed-rate term securitization funding that provides long‑term financing for our mortgage loans and locks in our cost of funding, regardless of future interest rate movements. Securitization transactions may either take the form of the issuance of securitized bonds or the sale of “real estate mortgage investment conduit” securities backed by mortgage loans or other assets, with the securitization proceeds being used in part to repay pre-existing loan financing lines and repurchase facilities. We have sponsored and participated in securitization transactions with other entities that are managed by Angel Oak, and may continue to do so in the future, along with sponsoring sole securitization transactions in which we are the sole participant and contributor. We believe these identified sources of financing will be adequate for purposes of meeting our short‑term (within one year) and our longer‑term liquidity needs. We cannot predict with certainty the specific transactions we will undertake to generate sufficient liquidity to meet our obligations as they come due. We will adjust our plans as appropriate in response to changes in our expectations and any potential changes in market conditions. Description of Existing Financing Arrangements As of September 30, 2025, we were a party to three warehouse loan financing lines, which permitted borrowings in an aggregate amount of up to $1.1 billion. Subsequent to the quarter ended September 30, 2025, on October 6, 2025, the Company and one of its subsidiaries entered into a $200.0 million repurchase facility with Global Investment Bank 4 through the execution of the Master Repurchase Agreement. The amount expected to be advanced by Global Investment Bank 4 is generally in line with other similar agreements that the Company has entered into. Additionally, the rates, terms, events of default, and remedies for such events of default contained within the Master Repurchase Agreement are generally in line with other similar agreements that the Company has entered into. 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; (2) a maximum ratio of indebtedness to tangible net worth; and (3) minimum liquidity. The Master Repurchase Agreement expires on October 6, 2027, unless terminated earlier pursuant to the terms of the Master Repurchase Agreement. Subsequent to the quarter ended September 30, 2025, on October 10, 2025, the Company amended the Pricing Side Letter of its loan financing facility with Global Investment Bank 2. The interest rate pricing spread was updated from a range of 1.75% to 3.35% to a range of 1.65% to 2.40% , based on collateral type, loan status, dwell time and other factors. 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 September 30, 2025, the advance rates (when required) of our three 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 three active lenders) included (1) our minimum tangible net worth must not (i) decline 20% or more in the previous 30 days, 25% or more in the previous 90 days, or 35% or more in the previous year, or (ii) fall below $200.0 million of tangible net worth as of September 30, 2022 plus 50% of any capital contribution made or raised after September 30, 2022; (2) our minimum liquidity must not fall 56 below the greatest of (i) the product of 5% and the aggregate repurchase price for a specific loan financing facility as of such date of determination, (ii) $10.0 million and (iii) any other amount of liquidity that we have covenanted to maintain in any other note, indenture, loan agreement, guaranty, swap agreement or any other contract, agreement or transaction (including, without limitation, any repurchase agreement, loan and security agreement, or similar credit facility or agreement for borrowed funds); 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 September 30, 2025 was $10.0 million. A description of each loan financing facility in place during the quarter ended September 30, 2025 is set forth as follows: Multinational Bank 1 Loan Financing Facility. On April 13, 2022, we and two of our subsidiaries entered into a master repurchase agreement with a multinational bank (“Multinational Bank 1”). Our subsidiaries are each considered a “Seller” under this agreement. From time to time and pursuant to the agreement, either of our subsidiaries may sell to Multinational Bank 1, and later repurchase, up to $600.0 million aggregate borrowings on mortgage loans. 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 September 30, 2025, the termination date of the master repurchase agreement was March 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. Pursuant to the agreement, Multinational Bank 1 retains the right to determine the market value of the mortgage loans in its sole commercially reasonable discretion. The loan financing line is marked‑to‑market. Additionally, Multinational Bank 1 is under no obligation to purchase the eligible mortgage loans we offer to sell to them. The interest rate on any outstanding balance under the master repurchase agreement that the applicable subsidiary is required to pay Multinational Bank 1 is generally in line with other similar agreements that the Company or one or more of its subsidiaries has entered into, where the interest rate is equal to the sum of (1) a pricing spread from 1.65% - 2.10% and (2) the average SOFR for each U.S. Government Securities Business Day (as defined in the master repurchase agreement) until two U.S. Government Securities Business Days prior to the date the applicable loan is repurchased by the applicable subsidiary. The obligations of the subsidiaries under the master repurchase agreement are guaranteed by the Company pursuant to a guaranty executed contemporaneously with the master repurchase agreement. In addition, and similar to other repurchase agreements that the Company has entered into, the Company is subject to various financial and other covenants, including those relating to (1) maintenance of a minimum tangible net worth; (2) a maximum ratio of indebtedness to tangible net worth; and (3) minimum liquidity. The agreement contains margin call provisions that provide Multinational Bank 1 with certain rights in the event of a decline in the market value of the purchased mortgage loans. Under these provisions, Multinational Bank 1 may require us or our subsidiaries to transfer cash sufficient to eliminate any margin deficit resulting from such a decline. In addition, the agreement contains events of default (subject to certain materiality thresholds and grace periods), including payment defaults, breaches of covenants and/or certain representations and warranties, cross‑defaults, bankruptcy or insolvency proceedings and other events of default customary for this type of transaction. The remedies for such events of default are also customary for this type of transaction and include the acceleration of the principal amount outstanding under the agreement and Multinational Bank 1’s right to liquidate the mortgage loans then subject to the agreement. We and our subsidiaries are also required to pay certain customary fees to Multinational Bank 1 and to reimburse Multinational Bank 1 for certain costs and expenses incurred in connection with its structuring, management, and ongoing administration of the master repurchase agreement. Global Investment Bank 2 Loan Financing Facility. On March 28, 2024, two of our subsidiaries entered into a master repurchase agreement with a global investment bank (“Global Investment Bank 2”), replacing the existing master repurchase agreement with Global Investment Bank 2 entered into on February 13, 2020. The Company is guarantor under the current facility, one of the subsidiaries is seller and Global Investment Bank 2 is buyer. Pursuant to the agreement, one of our subsidiaries may sell to Global Investment Bank 2, and later repurchase, up to $250.0 million aggregate borrowings on mortgage loans. The agreement is set to terminate on March 27, 2026, unless terminated earlier pursuant to the terms of the agreement. The principal amount paid by Global Investment Bank 2 for each mortgage loan is based on a percentage of the market value, cost‑basis value, or unpaid principal balance of the mortgage loan (depending on the type of loan and certain other factors and subject to certain other adjustments). Pursuant to the agreement, Global Investment Bank 2 retains the right to determine the market value of the mortgage loan collateral in its sole good faith discretion. Additionally, Global Investment Bank 2 is under no obligation to purchase the eligible mortgage loans we offer to sell to them. Upon our or our subsidiary’s repurchase of the mortgage loan, our subsidiaries are required to repay Global Investment Bank 2 the principal amount related to such mortgage loan plus accrued and unpaid interest at a rate based on the sum of (1) (A) the greater of (i) 0.00% and (ii) Term SOFR (which is defined as the forward-looking term rate based on the Secured 57 Overnight Financing Rate for a corresponding tenor of one month) and (B) a pricing spread generally ranging from 1.75% to 3.35%. On October 10, 2025, the facility was amended to, among other changes, reduced the interest rate pricing spread to a range from 1.65% and 2.40%. The agreement requires us to maintain various financial and other covenants, which include requirements surrounding: (1) adjusted tangible net worth; (2) liquidity; and (3) our indebtedness to our adjusted tangible net worth. The agreement contains margin call provisions that provide Global Investment Bank 2 with certain rights in the event of a decline in the market value or cost‑basis value of the purchased mortgage loans. Under these provisions, Global Investment Bank 2 may require us or our subsidiary to transfer cash sufficient to eliminate any margin deficit resulting from such a decline. In addition, the agreement contains events of default (subject to certain materiality thresholds and grace periods), including payment defaults, breaches of covenants and/or certain representations and warranties, cross‑defaults, bankruptcy or insolvency proceedings and other events of default customary for this type of transaction. The remedies for such events of default are also customary for this type of transaction and include the acceleration of the principal amount outstanding under the agreement and Global Investment Bank 2’s right to liquidate the mortgage loans then subject to the agreement. We and our subsidiary are also required to pay certain customary fees to Global Investment Bank 2 and to reimburse Global Investment Bank 2 for certain costs and expenses incurred in connection with its structuring, management and ongoing administration of the agreement. Global Investment Bank 3 Loan Financing Facility. On October 24, 2018, two of our subsidiaries entered into a master repurchase agreement with a global investment bank (“Global Investment Bank 3”) for which we serve as guarantor of our subsidiaries’ obligations. Our subsidiaries, are each considered a “Seller” under this agreement. Pursuant to the initial agreement, our subsidiaries could sell to Global Investment Bank 3, and later repurchase, up to $200.0 million aggregate borrowings on mortgage loans. On November 7, 2023, the facility was amended to set the base interest rate spread to 1.80% plus a 0.20% index spread adjustment for the first six (6) months of seasoning on this financing facility with an additional 0.25% increase following the first six (6) months. On September 26, 2025, the facility’s termination date was extended to September 26, 2026. In addition, the interest rate pricing spread was reduced to a range from 1.75% to 4.75%; prior to this extension, the interest rate pricing spread was a range from 1.90% to 4.75%. The loan financing line is marked‑to‑market at fair value, where Global Investment Bank 3 retains the right to determine the market value of the mortgage loan collateral in its sole good faith discretion and in a commercially reasonable manner and is under no obligation to purchase the eligible mortgage loans we offer to sell to them. Further, the principal amount paid by Global Investment Bank 3 for each eligible mortgage loan is based on a percentage of the outstanding principal balance of the mortgage loan or the market value of the mortgage loan, whichever is less. The agreement contains margin call provisions that provide Global Investment Bank 3 with certain rights in the event of a decline in the market value of the purchased mortgage loans. Under those provisions, Global Investment Bank 3 could require us or our subsidiaries to transfer cash sufficient to eliminate any margin deficit resulting from such a decline. The agreement requires us to maintain various financial and other customary covenants. The agreement also sets forth events of default (subject to certain materiality thresholds and grace periods), including payment defaults, breaches of covenants and/or certain representations and warranties, cross‑defaults, bankruptcy or insolvency proceedings and other events of default customary for this type of transaction. The remedies for such events of default are also customary for this type of transaction and include the acceleration of the principal amount outstanding under the agreement and Global Investment Bank 3’s right to liquidate the mortgage loans then subject to the agreement. We and our subsidiaries are also required to pay certain customary fees to Global Investment Bank 3 and to reimburse Global Investment Bank 3 for certain costs and expenses incurred in connection with its structuring, management, and ongoing administration of the agreement. 58 The following table sets forth the details of our financing lines as of each of September 30, 2025 and December 31, 2024: Interest Rate Pricing Spread Drawn Amount Note Payable Base Interest Rate September 30, 2025 December 31, 2024 (in thousands) Multinational Bank 1 (1) Average Daily SOFR 1.65% - 2.10% $ 252,100 $ 100,711 Global Investment Bank 2 (2) 1 month Term SOFR 1.75% - 3.35% 143 15,111 Global Investment Bank 3 (3) Compound SOFR 1.75% - 4.75% 90,365 13,637 Total $ 342,608 $ 129,459 (1) On September 25, 2025, this financing facility was extended through March 25, 2026 in accordance with the terms of the agreement, which contemplates six-month renewals. The interest rate pricing spread remained unchanged from the prior extension at a range from 1.65% to 2.10%. (2) On March 28, 2024, the Company and two of its subsidiaries terminated the existing facility with Global Investment Bank 2 and the Company and two different subsidiaries entered into a new facility with Global Investment Bank 2 wherein the Company is guarantor, one of the subsidiaries is seller and Global Investment Bank 2 is buyer. This updated facility is extended through March 27, 2026. On October 10, 2025, the facility was amended to reduce the interest rate pricing spread to a range of 1.65% to 2.40%; prior to this amendment, the interest rate pricing spread was a range of 1.75% to 3.35%. (3) On September 26, 2025, the facility’s termination date was extended to September 26, 2026. In addition, the interest rate pricing spread was reduced to a range from 1.75% to 4.75%; prior to this extension, the interest rate pricing spread was a range from 1.90% to 4.75%. The following table sets forth the total unused borrowing capacity of each financing line as of September 30, 2025: Note Payable Borrowing Capacity Balance Outstanding Available Financing (in thousands) Multinational Bank 1 $ 600,000 $ 252,100 $ 347,900 Global Investment Bank 2 250,000 143 249,857 Global Investment Bank 3 200,000 90,365 109,635 Total $ 1,050,000 $ 342,608 $ 707,392 Although available financing is uncommitted for each of these lines of credit, the Company’s unused borrowing capacity is available if it has eligible collateral to pledge and meets other borrowing conditions as set forth in the applicable agreements. 59 Short‑Term Repurchase Facilities. In addition to our existing loan financing lines, we employ short‑term repurchase facilities to borrow against U.S. 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 September 30, 2025 and December 31, 2024: September 30, 2025 Repurchase Agreements Amount Outstanding Weighted Average Interest Rate Weighted Average Remaining Maturity (Days) (in thousands) AOMT RMBS (1) $ 54,041 5.92 % 16 December 31, 2024 Repurchase Agreements Amount Outstanding Weighted Average Interest Rate Weighted Average Remaining Maturity (Days) (in thousands) AOMT RMBS (1) $ 50,555 5.76 % 19 (1) A portion of repurchase debt outstanding as of both September 30, 2025 and December 31, 2024 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: Quarter End Quarter End Balance Average Balance in Quarter Highest Month-End Balance in Quarter (in thousands) Q3 2023 188,101 87,279 188,101 Q4 2023 193,656 62,536 193,656 Q1 2024 193,493 69,254 193,493 Q2 2024 201,051 66,804 201,051 Q3 2024 102,876 57,842 102,876 Q4 2024 50,555 53,412 51,843 Q1 2025 148,467 62,631 148,467 Q2 2025 68,062 71,980 148,467 Q3 2025 54,041 64,557 68,062 We utilize short‑term repurchase facilities on our RMBS portfolio and to finance assets for REIT asset test purposes. Over time, the need to purchase securities for REIT asset test purposes will be reduced as we obtain and participate in additional securitizations and acquire assets directly for investment purposes. We will continue to use repurchase facilities on our RMBS portfolio to add additional leverage which increases the yield on those assets. Our use of repurchase facilities is generally highest at the end of any particular quarter, as shown in the table above, where the quarter-end balance and the highest month-end balance in each quarter are generally equivalent. Securitization Transactions Subsequent to the end of the third quarter, in October 2025, we issued AOMT 2025-10, an approximately $274.3 million scheduled unpaid principal balance securitization backed by a pool of residential mortgage loans. We issued AOMT 2025-10 as the sole contributor in the securitization. We used the proceeds to repay outstanding debt of approximately $237.4 million, and the $22.1 million of cash released is planned to be used for new loan purchases and operational purposes. 60 In May 2025, we and other affiliated entities participated in a securitization transaction of a pool of residential mortgage loans, approximately 17% of which were mortgage loans originated by our affiliated mortgage origination companies, secured primarily by first liens on one‑to‑four family residential properties. In the transaction, AOMT 2025-6 issued approximately $349.7 million in face value of bonds. Our proportionate share of 24.94% of the retained bonds and investments in MOAs was approximately $8.1 million, including a retained premium on issuance of approximately $2.7 million. 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. In April 2025, we were the sole contributor in a securitization transaction of a pool of residential mortgage loans, secured exclusively by first liens on one‑to‑four family residential properties. In the transaction, AOMT 2025-4 issued approximately $284.3 million in face value of bonds. We used the proceeds of the securitization transaction to repay outstanding debt of approximately $242.4 million and retained cash of $24.7 million, which was used for new loan purchases and operational purposes. In December 2024, we and other affiliated entities participated in a securitization transaction of a pool of residential mortgage loans, approximately 36% of which were mortgage loans originated by our affiliated mortgage origination companies, secured primarily by first liens on one‑to‑four family residential properties. In the transaction, AOMT 2024-13 issued approximately $288.9 million in face value of bonds. Our proportionate share of 57.92% of the retained bonds and investments in MOAs was approximately $15.1 million, including a retained premium on issuance of approximately $4.4 million. We used the proceeds of the securitization transaction to repay outstanding debt of approximately $141.5 million and retained cash of $15.6 million, which was used for operational purposes. We derecognized the mortgage loans sold in AOMT 2024-13 and recorded investments in RMBS and majority-owned affiliates (which is located within “other assets” on our consolidated balance sheet) as of September 30, 2025. In October 2024, we were the sole contributor in a securitization transaction of a pool of residential mortgage loans, approximately 42% of which were mortgage loans originated by our affiliated mortgage origination companies, secured exclusively by first liens on one‑to‑four family residential properties. In the transaction, AOMT 2024-10 issued approximately $316.8 million in face value of bonds. We used the proceeds of the securitization transaction to repay outstanding debt of approximately $260.4 million and retained cash of $39.4 million, which was used for new loan purchases and operational purposes. 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 2024-10 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 September 30, 2025. In June 2024, we and other affiliated entities participated in a securitization transaction of a pool of residential mortgage loans, approximately 62% of which were mortgage loans originated by our affiliated mortgage origination companies, secured primarily by first liens on one‑to‑four family residential properties. In the transaction, AOMT 2024-6 issued approximately $479.6 million in face value of bonds. Our proportionate share of 4.51% of the retained bonds and investments in MOAs was approximately $2.7 million, including a retained discount on issuance of approximately $0.8 million. We used the proceeds of the securitization transaction to repay outstanding debt of approximately $15.8 million and retained cash of $1.8 million, which was used for operational purposes. We derecognized the mortgage loans sold in AOMT 2024-6 and recorded investments in RMBS and majority-owned affiliates (which is located within “other assets” on our consolidated balance sheet) as of September 30, 2025. In April 2024, we were the sole contributor in a securitization transaction of a pool of residential mortgage loans, approximately 79% of which were mortgage loans originated by our affiliated mortgage origination companies, secured exclusively by first liens on one‑to‑four family residential properties. In the transaction, AOMT 2024-4 issued approximately $299.8 million in face value of bonds. We used the proceeds of the securitization transaction to repay outstanding debt of approximately $235.9 million and retained cash of $39.1 million, which was used for new loan purchases and operational purposes. 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 2024-4 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 September 30, 2025. In March 2024, we and other affiliated entities participated in a securitization transaction of a pool of residential mortgage loans, approximately 60% of which were mortgage loans originated by our affiliated mortgage origination companies, secured primarily by first liens on one‑to‑four family residential properties. In the transaction, AOMT 2024-3 issued approximately $439.6 million in face value of bonds. Our proportionate share of 10.98% of the retained bonds and investments in MOAs was approximately $5.3 million, including a retained discount on issuance of approximately $1.6 million. We used the proceeds of the securitization transaction to repay outstanding debt of approximately $35.9 million and retained cash of $4.6 million, which was used for operational purposes. We derecognized the mortgage loans sold in AOMT 2024-3 and recorded investments in RMBS and majority-owned affiliates (which is located within “other assets” on our consolidated balance sheet) as of September 30, 2025. 61 Notes Offerings The Company’s Senior Unsecured Notes consist of $42.5 million principal amount of our 2030 Notes and $50.0 million principal amount of our 2029 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 $47.5 million. The below table provides a summary of the Senior Unsecured Notes as of September 30, 2025 ($ in thousands). Senior Unsecured Notes (1) Principal Amount Carrying Value Maturity Date (2) Redemption Date (3) Rate (4) June 2030 Senior Unsecured Notes $ 42,500 $ 40,681 June 2030 June 2027 9.750 % July 2029 Senior Unsecured Notes $ 50,000 $ 48,114 July 2029 July 2026 9.500 % (1) The Senior Unsecured Notes are fully and unconditionally guaranteed on a senior unsecured basis by the Operating Partnership, including the due and punctual payment of principal, premium, if any, and interest on the Senior Unsecured Notes, whether at stated maturity, upon acceleration, call for redemption or otherwise. (2) The Company has the option to redeem the Senior Unsecured Notes earlier than the maturity date. (3) The Company may redeem the Senior Unsecured Notes in whole or in part at any time on or after the optional redemption date, at a redemption price equal to 100% of the outstanding principal amount of the Senior Unsecured Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date. Upon the occurrence of certain events relating to a change of control of the Company, the Company must make an offer to repurchase all outstanding Senior Unsecured Notes at a price in cash equal to 101% of the principal amount of the Senior Unsecured Notes, plus accrued and unpaid interest to, but excluding, the repurchase date. (4) The 2030 Notes bear interest at a rate equal to 9.750% per year, payable in cash quarterly in arrears on March 1, June 1, September 1, and December 1 of each year, beginning on September 1, 2025. 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 and nine months ended September 30, 2025 and September 30, 2024. Three Months Ended Nine Months Ended September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Coupon interest expense $ 2,223,437 $ 884,028 $ 5,070,365 $ 884,028 Amortization expense 221,407 109,371 559,112 109,371 Total interest expense $ 2,444,844 $ 993,399 $ 5,629,477 $ 993,399 At September 30, 2025 and September 30, 2024, the accrued interest payable on the Senior Unsecured Notes was $1.2 million and $0.9 million, respectively. At September 30, 2025 and September 30, 2024, the unamortized deferred debt issuance cost was $1.3 million and $0.9 million, respectively. The unamortized debt issuance costs will be amortized until maturity. 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 million, through an “at the market” equity offering program (the “ATM Program”). During the three and nine-months ended September 30, 2025, the Company issued and sold 1,061,578 and 1,277,200 shares, respectively, of its common stock through the ATM Program resulting in proceeds of $10.1 million and $12.3 million, respectively, net of commissions and fees. These shares of common stock were issued in SEC registered transactions off the Company’s shelf registration statement. As of September 30, 2025, the Company had approximately $60.2 million of gross proceeds available for issuance under the ATM Program and Sales Agreement. Leverage and Hedging Strategies We finance our assets with what we believe to be a prudent amount of leverage, which will vary from time to time based upon the particular characteristics of our portfolio, availability of financing, and market conditions. Subject to maintaining our qualification as a REIT and maintaining our exclusion from regulation as an investment company under the Investment Company Act, we expect to utilize various derivative instruments and other hedging instruments to mitigate interest rate risk, credit risk and other risks. For example, we may enter into hedging transactions with respect to interest rate exposure on one or more of our 62 assets or liabilities. Any such hedging transactions could take a variety of forms, including the use of derivative instruments such as interest rate swap contracts, index swap contracts, interest rate cap or floor contracts, futures or forward contracts, and options. Cash Availability Cash and cash equivalents Our cash balance as of September 30, 2025 was sufficient to meet our liquidity covenants under our financing facilities and the 2029 Notes and 2030 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 September 30, 2025 or December 31,2024. We may also participate in upcoming securitizations either solely or with other Angel Oak entities. We also have the ability to leverage currently unleveraged securities or whole loan assets, if we deem those actions advisable. Restricted Cash Restricted cash of approximately $1.8 million as of September 30, 2025 was comprised of: $0.6 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. Restricted cash of approximately $2.1 million as of December 31, 2024 was comprised of: $0.8 million in interest rate futures margin collateral; 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 December 31, 2024. Cash Flows Nine Months Ended September 30, 2025 September 30, 2024 (in thousands) Cash flows provided by (used in) operating activities $ (354,454) $ (196,380) Cash flows provided by (used in) investing activities 20,885 86,040 Cash flows provided by financing activities 344,107 110,575 Net increase in cash and restricted cash $ 10,538 $ 235 The cash used in operating activities of $354.5 million for the nine months ended September 30, 2025 as compared to the cash used in operating activities of $196.4 million for the nine months ended September 30, 2024 was primarily due to the volume of residential mortgage loans purchased during the first nine months of 2024, as compared to the first nine months of 2025. Cash flows provided by investing activities of $20.9 million for the nine months ended September 30, 2025 as compared to cash flows provided by investing activities of $86.0 million for the nine months ended September 30, 2024 were primarily due to the timing of purchases and maturities of U.S. Treasury securities in the comparative period of 2024. Financing cash flows provided $344.1 million for the nine months ended September 30, 2025 as compared to $110.6 million in the nine months ended September 30, 2024 were primarily due to the activity within net borrowings under repurchase agreements and notes payable for the comparative periods. Cash Flows - Residential and Commercial Loan Classification Residential loan activity is recognized in the statement of cash flows as an operating activity, as our residential mortgage loans are generally held for a short period of time with the intent to securitize these loans. Commercial mortgage loan activity is recognized in the statement of cash flows as an investing activity, as our commercial mortgage loan portfolio is generally deemed to be held for investing purposes. Critical Accounting Policies and Estimates The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. A discussion of critical accounting policies and estimates is included in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” section in the Annual Report on Form 10-K. Our critical accounting policies and estimates have not materially 63 changed since December 31, 2024. Management discusses the ongoing development and selection of these critical accounting policies and estimates with the Audit Committee of our Board of Directors. We expect quarter-to-quarter GAAP earnings volatility from our business activities. This volatility can occur for a variety of reasons, particularly changes in the fair values of consolidated assets and liabilities. In addition, the amount or timing of our reported earnings may be impacted by technical accounting issues and estimates. Recent Accounting Pronouncements Refer to the notes to our condensed consolidated financial statements included in this report for a discussion of recent accounting pronouncements and any expected impact on the Company. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to provide this information. 64