AOMR 10-K & 10-Q changes, risk factors and insider trading

•Legislative or other actions affecting REITs could materially and adversely affect us.us and our stockholders.

We are subject to conflicts of interest arising out of our relationship with Angel Oak, including our Manager. Currently, all of our officers, including our dedicated Chief Financial Officer and Treasurer and our partially dedicated Chief Executive Officer and President, and one of our directors also serve as employees of Angel Oak including our Manager. As a result, our Manager, our officers and this director may have conflicts between their duties to us and their duties to, and interests in, Angel Oak, including our Manager. For example, Mr. Michael Fierman, the Chairman of our Board of Directors, also serves as a Managing Partner and Co-Chief Executive Officer of Angel Oak Companies, and Sreeniwas Prabhu, our Chief Executive Officer and President, also serves as Managing Partner, Co-Chief Executive Officer, and Group Chief Investment Officer at Angel Oak Capital.

•Loans Originated by Angel Oak Mortgage Lending. Our strategy is to make credit-sensitive investments primarily in newly-originated first lien non-QM loans and other mortgage assets that are substantially sourced from Angel Oak’sOak proprietaryMortgage mortgageLending lendingand platform,other originators through our relationship with Angel Oak Mortgage Lending.Capital. Since our commencement of operations in September 2018 through December 31, 2024,2025, a substantial portion of the target assets in our portfolio have been acquired from Angel Oak Mortgage Lending, and we expect that, in the future, a substantial portion of our portfolio will continue to consist of target assets acquired from Angel Oak Mortgage Lending. As our Manager directs our investment activities, there are conflicts of interest related to the fact that Angel Oak Mortgage Lending consists of affiliates of our Manager, including the following:

◦In addition, although our strategy is to make credit-sensitive investments primarily in newly-originated first lien non-QM loans and other mortgage assets that are substantially sourced from Angel Oak Mortgage Lending,Lending and other originators through our relationship with Angel Oak Capital, this strategy may need to adapt to changing market conditions or other factors. If investment in non-QM loans falls out of favor or otherwise becomes unattractive because of perceived risks, unfavorable pricing or otherwise, our Manager will have a conflict of interest in determining whether our strategy should continue to focus on the acquisition of non-QM loans, particularly if the origination of such loans continues to be a focus of Angel Oak Mortgage Lending. The continued pursuit of our strategy under these circumstances may result in losses. The significant majority of the loans that Angel Oak Mortgage Lending currently originates are non-QM loans. Similarly, failure to adjust our strategy may cause us to forego other attractive investment opportunities outside investments in non-QM loans. Our Manager has a conflict in determining whether to adjust our strategy and to pursue investments in other types of target assets that may be more attractive even if Angel Oak Mortgage Lending continues to originate non-QM loans.

•Service Providers. Our Manager may engage affiliated service providers,providers that act as the servicer for the loans in our portfolio. Such relationships may influence our Manager in deciding whether to select such service providers. Our Manager’s affiliates may receive benefits, including compensation, for these activities. Additionally, affiliated service providers will not have the same independence with respect to the performance of their duties to us as an unaffiliated service provider. The use of affiliated service providers may impair our ability to obtain the most favorable terms with respect to such services and transactions, which could materially and adversely affect us.

Our operating results are dependent upon our Manager’s ability to source a large volume of non-QM loans and other target assets for acquisition by us from Angel Oak Mortgage Lending and other unaffiliated originators. Although we are a party to mortgage loan purchase agreements with Angel Oak Mortgage Lending, and such agreements provide the framework pursuant to which we have agreed to purchase from Angel Oak Mortgage Lending certain target assets, Angel Oak Mortgage Lending has no obligation to sell non-QM loans or other target assets to us and we may be unable to locate other originators that are able or willing to originate non-QM loans and other target assets that meet our standards. If Angel Oak Mortgage Lending is unable to originate non-QM loans due to business, competitive, regulatory or other reasons, or for any other reason is unable or unwilling to provide non-QM loans and other target assets for sale to us in sufficient quantity, we may not be able to source acquisitions of non-QM loans and other target assets from other originators, banks and other sellers, on favorable terms and conditions or at all. In this regard, mortgage originators are subject to significant regulation and oversight and failure by Angel Oak Mortgage Lending to comply with its obligations under law may result in an inability to originate non-QM loans or other target assets in certain jurisdictions or at all. Similarly, if Angel Oak Mortgage Lending otherwise separates from its affiliation with our Manager, it may determine to sell the non-QM loans or other target assets that it originates to other parties. Angel Oak Mortgage Lending has and may in the future enter into commitments with third parties to sell them non-QM loans or other assets, which could reduce the quantity of loans that would otherwise be available for purchase by us. If we cannot source an adequate volume of attractive non-QM loans and other target assets from Angel Oak Mortgage Lending on desirable terms, we may not be able to acquire a sufficient amount of attractive non-QM loans or other target assets to make our strategy profitable, and we may be materially and adversely affected.

The Management Agreement that we and our operating partnership entered into with our Manager was negotiated between related parties, and its terms, including fees payable, may not be as favorable to us as if it had been negotiated with an unaffiliated third party. Various potential and actual conflicts of interest may arise from the activities of Angel Oak by virtue of the fact that our Manager is controlled by Angel Oak.

Our business is materially affected by conditions in the residential mortgage market, the residential real estate market, the financial markets, and the economy, including increasing inflation, energy costs, unemployment, geopolitical issues, tariff policies, pandemics, endemics, concerns over the creditworthiness of governments worldwide and the stability of the global banking system. In particular, the residential mortgage market in the United States has experienced, in the past, a variety of difficulties and challenging economic conditions, including defaults, credit losses, and liquidity concerns. Certain commercial banks, investment banks, insurance companies, and mortgage-related investment vehicles (including publicly traded mortgage REITs) have incurred extensive losses from exposure to the residential mortgage market as a result of these difficulties and conditions. Continuing concerns over these factors have contributed to increased volatility and unclear expectations for the economy and markets going forward and continue to impact investor perception of the risks associated with the residential real estate market, residential mortgage loans and various other target assets in which we may invest. As a result, values for residential mortgage loans, including non-QM loans, and various other target assets in which we invest have also experienced, and may continue to experience, significant volatility. Any deterioration of the residential mortgage market and investor perception of the risks associated with residential mortgage loans, including non-QM loans, and various other of our target assets could have a material adverse effect on us.

Non-QM loans have flexibility in underwriting guidelines and are subject to credit risk. The underwriting guidelines for non-QM loans may be permissive as to the borrower’s DTI, credit history, and/or income documentation. Loans that are underwritten pursuant to less stringent underwriting guidelines could experience substantially higher rates of delinquencies, defaults and foreclosures than those experienced by loans underwritten to more stringent underwriting guidelines. If our non-QM loans are underwritten to more flexible guidelines which have increased risk and may cause higher delinquency, default, or foreclosure rates given economic stress, the performance of our investments in our non-QM loan portfolio could be correspondingly adversely affected, which could materially and adversely affect us.

Our strategy is to acquiremake credit-sensitive investments primarily in newly-originated first lien non-QM loans and other mortgage assets that are primarily made to non-QM loanhigher-quality borrowers and substantially sourced from Angel Oak Mortgage Lending and other originators through our relationship with Angel Oak Capital. Accordingly, a substantial portion of our portfolio may consist of non-QM loans and other assets acquired from Angel Oak Mortgage Lending. If Angel Oak Mortgage Lending is unable to originate loans in one or more jurisdictions as a result of regulatory issues or otherwise, it may result in fewer investment opportunities for us or in opportunities that are less geographically diversified. Further, any such regulatory issues for Angel Oak Mortgage Lending could result in damage to the reputation of Angel Oak in the market and impact Angel Oak Mortgage Lending’s ability to continue to source a significant volume of non-QM loan originations. If Angel Oak Mortgage Lending is unable to originate the volume of loans anticipated, we may also be unable to identify other sources of non-QM loans for acquisition to satisfy our strategy and we may need to alter such strategy to seek other investments.

Our investment guidelines do not require us to observe specific diversification criteria. Currently, we are focused on acquiring and investing in first lien non-QM loans in the U.S. mortgage market. As of December 31, 2024,2025, substantially all of the loans underlying our portfolio of RMBS and residential loans held in securitization trusts consisted of non-QM loans. In addition, as of December 31, 2024,2025, more than 5% of the unpaid principal balance of the loans underlying our portfolio of RMBS from the AOMT securitizations in which we participated and/or were the primary beneficiary were secured by properties located in each of California, Florida, Texas, and Georgia.Texas. As a result, our portfolio is concentrated, and may continue to be concentrated, by asset type and geographic region, increasing our risk of loss if there are adverse developments or greater risks affecting the particular concentration. Accordingly, downturns relating generally to non-QM loans may result in defaults on a number of our non-QM loans within a short time period, and adverse conditions in the areas where the properties securing or otherwise underlying our investments are concentrated (including unemployment rates, changing demographics and other factors) and local real estate conditions (such as oversupply or reduced demand) may have an adverse effect on the value of our investments, any of which may materially and adversely affect us.

The occurrence of a natural disaster (such as an earthquake, tornado, hurricane, flood, landslide, or wildfire), or the effects of climate change (including flooding, drought, and severe weather), may cause decreases in the value of real estate (including sudden or abrupt changes) and would likely reduce the value of the properties underlying our portfolio of RMBS, residential mortgage loans held in securitization trusts and residential mortgage loans that we own directly. For example, in recent years, hurricanes have caused widespread flooding in Florida and Texas and wildfires and mudslides in California have destroyed or damaged thousands of homes,California, including during the wildfires experienced in southern California in January 2025.2025, have destroyed or damaged thousands of homes. Since certain natural disasters may not typically be covered by the standard insurance policies maintained by borrowers, or borrowers may not be able to purchase insurance against certain hazards at all, the borrowers themselves may have to pay for repairs due to the disasters. Borrowers may not repair their property or may stopbecome payingunable or unwilling to pay their mortgage loans under those circumstances, especially if the property is damaged. This would likely cause foreclosures to increase and lead to higher credit losses on our loans or other investments or on the pool of mortgage loans underlying securities we own.

Our strategy is to make credit-sensitive investments primarily in newly-originated first lien non-QM loans, which include investment property loans.loans, and other mortgage assets. We also may invest in other target assets. Further, we may identify and acquire our target assets through the secondary market when market conditions and asset prices are conducive to making attractive purchases. Such acquisitions and investments will subject us to risks which include, among others:

We may invest in distressed residential mortgage loans and commercial mortgage loans where the borrower has failed to make timely payments of principal and/or interest or where the loan was performing but subsequently could or did become non-performing. There are no limits on the percentage of non-performing loans we may hold. Further, the borrowers on non-performing residential mortgage loans may be in economic distress and/or may have become unemployed, bankrupt, or otherwise unable or unwilling to make payments when due. Borrowers of non-performing commercial mortgage loans may be in economic distress due to changes in the general economic climate or local conditions (such as an oversupply of space or a reduction in demand for space), competition based on rental rates, attractiveness and location of the properties, changes in the financial condition of tenants, and changes in operating costs. Distressed assets may entail characteristics that make disposition or liquidation more challenging, including, among other things, severe document deficiencies or underlying real estate located in states with extended foreclosure timelines. Additionally, many of these loans may have LTVsCLTVs in excess of 100%, meaning the amount owed on the loan exceeds the value of the underlying real estate. Any loss we may incur on such investments may be significant and could materially and adversely affect us.

Additionally, our strategy is to make credit-sensitive investments primarily in newly-originated first lien non-QM loans and other mortgage assets that are substantially sourced from Angel Oak Mortgage Lending.Lending and other originators through our relationship with Angel Oak Capital. Angel Oak Mortgage Lending consists of affiliates of our Manager and, accordingly, our Manager may not conduct as thorough of a review of the loans acquired from Angel Oak Mortgage Lending in comparison to the review our Manager would conduct for loans acquired from unaffiliated third parties. If our Manager conducts more limited due diligence on the loans acquired from Angel Oak Mortgage Lending, such due diligence may not reveal all of the risks associated with such loans, which could materially and adversely affect us.

Our profitability depends, in large part, on our ability to acquire our target assets at favorable prices. Although our strategy is to make credit-sensitive investments primarily in newly-originated first lien non-QM loans and other mortgage assets that are substantially sourced from Angel Oak Mortgage Lending,Lending and other originators through our relationship with Angel Oak Capital, Angel Oak Mortgage Lending has no obligation to sell non-QM loans and other target assets to us and, as a result, we may need to acquire non-QM loans and other target assets from unaffiliated third parties, including through the secondary market when market conditions and asset prices are conducive to making attractive purchases. In acquiring non-QM loans and other target assets from unaffiliated third parties, we compete with other mortgage REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, financial institutions, governmental bodies and other entities. Additionally, we may also compete with the U.S. Federal Reserve and the U.S. Treasury to the extent they purchase assets meeting our objectives pursuant to various purchase programs. Many of our competitors are larger than us, have greater access to capital and other resources and may have other advantages over us. Our competitors may include other entities managed by Angel Oak, including with respect to loans originated by Angel Oak Mortgage Lending.

To the extent benchmark interest rates rise, one of the immediate potential impacts on our assets would be a reduction in the overall value of our assets and the overall value of the pipeline of mortgage loans that our Manager identifies, including from Angel Oak Mortgage Lending. Rising benchmark interest rates also generally have a negative impact on the overall cost of borrowings we may use to finance our acquisitions and holdings of assets, including as a result of the requirement to post additional margin (or collateral) to lenders to offset any associated decline in value of the assets we finance with the use of leverage. Rising benchmark interest rates may also cause sources of leverage that we may use to finance our investments to be unavailable or more limited in their availability in the future. Conversely, decreasing benchmark interest rates would have the potential to accelerate prepayment speeds as borrowers pay off higher rate mortgage loans and refinance into lower available rates, which may have a negative impact to our earnings associated with these assets.assets and we may only be able to reinvest the proceeds of prepayments received in assets with lower yields. These and other developments could materially and adversely affect us.

Computer malware, viruses, and computer hacking and phishing attacks have become more prevalent in the financial services industry and may occur on our systems in the future. We rely heavily on our financial, accounting, and other data processing systems. Financial services institutions have reported breaches of their systems, some of which have been significant. Even with all reasonable security efforts, not every breach can be prevented or even detected. It is possible that we have experienced an undetected breach, and it is likely that other financial institutions have experienced more breaches than have been detected and reported. There is no assurance that we, or the third parties that facilitate our business activities, have not or will not experience a breach. It is difficult to determine what, if any, negative impact may directly result from any specific interruption or cyber-attacks or security breaches of our networks or systems (or the networks or systems of third parties that facilitate our business activities) or any failure to maintain performance, reliability and security of our technical infrastructure, but such computer malware, viruses, and computer hacking and phishing attacks may have a material adverse effect on us.

As of December 31, 2024,2025, we had approximately $230.1$365.3 million of debt outstanding at par, including (1) approximately $129.5$218.8 million outstanding under various uncommitted loan financing lines with a combination of multinational and global money center banks, which permitted borrowings in an aggregate amount of up to $1.1$1.3 billion as of December 31, 20242025; (2) approximately $50.6$54.0 million outstanding under short-term repurchase facilities; and (3) $50.0 million in aggregate principal amount of our 9.500% Senior Notes due 2029 (our “2029 senior unsecured notes”); and (4) $42.5 million in aggregate principal amount of our 9.750% Senior Notes due 2030 (our “2030 senior notes” and, together with our 2029 senior notes, our “Senior Unsecured Notes”) . Our charter, bylaws and investment guidelines contain no limitation on the amount of debt we may incur, and our Manager has the discretion, without the need for further approval by our Board of Directors, to change both our overall leverage and the leverage used for individual asset classes.

We depend upon the availability of adequate capital and financing sources to fund our operations. Our lenders include or are expected to include global money center and large regional banks, with exposures both to global financial markets and to more localized conditions. Whether because of a global or local financial crisis or other circumstances, if one or more of our lenders experiences severe financial difficulties, they or other lenders could become unwilling or unable to provide us with financing, or could increase the costs of that financing, or could become insolvent. Additionally,We inhave Julyalso 2024,accessed wethe raisedpublic $50.0debt millioncapital inmarkets aggregatethrough principalthe amountissuance of seniorour unsecuredSenior notesUnsecured in an SEC-registered offering.Notes. Our access to the debt capital markets in the future will depend upon a number of factors, including general market conditions, the market’s view of the quality of our assets, our growth potential, and our current and potential future earnings, and there can be no assurance that we will be able to access the debt capital markets in the future on attractive terms or at all. Moreover, we are currently party to short-term borrowings (in the form of loan financing lines and repurchase facilities) and there can be no assurance that we will be able to replace these borrowings, or “roll” them, as they mature on a continuous basis and it may be more difficult for us to obtain debt financing on favorable terms or at all. In addition, if regulatory capital requirements imposed on our lenders change, they may be required to limit, or increase the cost of, financing they provide to us. In general, this could potentially increase our financing costs and reduce our liquidity or require us to sell assets at an inopportune time or price. Consequently, depending on market conditions at the relevant time, we may have to rely on additional equity issuances to meet our capital and financing needs, which may be dilutive to our stockholders, or we may have to rely on less efficient forms of debt financing that consume a larger portion of our cash flow from operations, thereby reducing funds available for our operations, future business opportunities, cash distributions to our stockholders, and other purposes. We cannot assure you that we will have access to such equity or debt capital on favorable terms (including, without limitation, cost and term) at the desired times, or at all, which may cause us to curtail our asset acquisition activities and/or dispose of assets, which could materially and adversely affect us.

To the extent that any hedging strategy involves the use of OTC derivatives transactions, such a strategy would be affected by various regulations adopted pursuant to the Dodd-Frank Act. OTC derivative dealers are required to register with the U.S. Commodity Futures Trading Commission (the “CFTC”) and/or the SEC. Registered swap and security-based swap dealers are subject to minimum capital and margin requirements and business conduct standards, disclosure requirements, reporting and recordkeeping requirements, transparency requirements, position limits, limitations on conflicts of interest, and other regulatory burdens. These requirements further increase the overall costs for OTC derivative dealers, which may be passed along to market participants as market changes continue to be implemented.participants.

Although the Dodd-Frank Act requires many OTC derivative transactions to be submitted for clearing by a regulated clearinghouse, rather than entered into on a principal-to-principal basis, not all of our derivative transactions will be subject to the clearing requirements. The “bid-ask” spreads may be unusually wide with respect to transactions entered into on a principal-to-principal basis, as opposed to cleared basis. The risk of counterparty nonperformance can be significant in the case of these OTC instruments, and although generally we will seek to reserve the right to terminate our hedging positions, it may not always be possible to dispose of or close out a hedging position without the consent of the hedging counterparty and we may not be able to enter into an offsetting contract in order to cover our risk. A liquid secondary market may not exist for hedging instruments to be purchased or sold, and we may be required to maintain a position until exercise or expiration, which could result in significant losses. While the Dodd-Frank Act is intended to bring more stability and lower counterparty risk to the derivatives market by requiring central clearing of certain standardized derivatives trades, not all of our trades are or will be subject to a clearing requirement because the trades predate the effective dates of relevant clearing mandates, they are bespoke, or they are within a class that is not currently subject to mandatory clearing. Furthermore, it is yet to be seen whether the Dodd-Frank Act has been effective in reducing counterparty risk or if such risk may actually increase as a result of market uncertainty, mutuality of loss to clearinghouse members, or other reasons.

Certain provisions of the Maryland General Corporation Law (the “MGCL”) may have the effect of deterring a third party from making a proposal to acquire us or of inhibiting a change in control under circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-prevailing market price of our common stock. Under the MGCL, certain “business combinations” (including a merger, consolidation, statutory share exchange or, in certain circumstances specified under the statute, an asset transfer or issuance or reclassification of equity securities) between a Maryland corporation and any interested stockholder (as defined in the statute) or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. Thereafter, any such business combination must be recommended by the board of directors of such corporation and approved by the affirmative vote of at least (1) 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation and (2) two-thirds of the votes entitled to be cast by holders of shares of voting stock of the corporation other than shares held by the interested stockholder with whom (or with whose affiliate) the business combination is to be effected or held by an affiliate or associate of the interested stockholder. These two supermajority votes are not required if, among other conditions, the corporation’s common stockholders receive a minimum price (as defined in the MGCL) for their shares and the consideration is received in cash or in the same form as previously paid by the interested stockholder for its shares. These provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by a corporation's board of directors prior to the time that the interested stockholder becomes an interested stockholder. Pursuant to the statute, our Board of Directors has adopted a resolution exempting any business combination between us and any other person or group of persons from the provisions of this statute. There is no assurance that our Board of Directors will not amend or revoke this exemption in the future.

The “unsolicited takeover” provisions of the MGCL permit our Board of Directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement takeover defenses if we have a class of equity securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and at least three independent directors. These provisions may have the effect of inhibiting a third party from making an acquisition proposal for us or of delaying, deferring or preventing a change in control of us under the circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-current market price. Our charter contains a provision whereby we have elected to be subject to a provision of Title 3, Subtitle 8 of the MGCL relating to the filling of vacancies on our Board of Directors.

DueTo assist us to comply with the limitations on the concentration of ownership of REIT stock imposed by the Code, and subject to certain exceptions, our charter provides that no person may beneficially or constructively own (1) shares of common stock in excess of 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding shares of our common stock or (2) shares of stock in excess of 9.8% in value of the outstanding shares of our stock. These and other restrictions on ownership and transfer of our shares contained in our charter may discourage a change in control of our company and may deter individuals or entities from making tender offers for shares of our common stock on terms that might be financially attractive to our stockholders or which may cause a change in our management. In addition to deterring potential transactions that may be favorable to our stockholders, these provisions may also decrease their ability to sell shares of our common stock.

DueTo assist us to comply with the limitations on the concentration of ownership of REIT stock imposed by the Code, and subject to certain exceptions, our charter provides that no person may beneficially or constructively own (1) shares of common stock in excess of 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding shares of our common stock or (2) shares of stock in excess of 9.8% in value of the outstanding shares of our stock. Our charter also contains certain other limitations on the ownership and transfer of our stock.

Under the terms of the partnership agreement of our operating partnership, if there is a conflict between the interests of our stockholders and any limited partners, the general partner will endeavor in good faith to resolve the conflict in a manner not adverse to either our stockholders or any limited partners; provided thatthat, at such times as we own a controlling economic interest in our operating partnership, any conflict that cannot be resolved in a manner not adverse to either our stockholders or any limited partners shall be resolved in favor of our stockholders.

Legislative or other actions affecting REITs could materially and adversely affect us.us and our stockholders.

The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service (“IRS”) and the U.S. Treasury Department. Changes to the U.S. federal income tax laws, with or without retroactive application, could materially and adversely affect us.us and our stockholders. We cannot predict how changes in the tax laws might affect us or our stockholders. New legislation, regulations promulgated by the U.S. Treasury Department (the “U.S. Treasury regulations”), administrative interpretations, or court decisions could significantly and negatively affect our ability to qualify as a REITREIT, the U.S. federal income tax consequences of such qualification or the U.S. federal income tax consequences of suchour qualification.stockholders.

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. As long as we meet the requirements under the Code for qualification and taxation as a REIT each year, we can deduct dividends paid to our stockholders when calculating our REIT taxable income. For us to qualify as a REIT, we must meet detailed technical requirements, including income, assetasset, distribution and stock ownership tests, under several Code provisions that have not been extensively interpreted by judges or administrative officers. In addition, we do not control the determination of all factual matters and circumstances that affect our ability to qualify as a REIT. New legislation, U.S. Treasury regulations, administrative interpretations or court decisions might significantly change the U.S. federal income tax laws with respect to our qualification as a REIT or the U.S. federal income tax consequences of such qualification. We believe that we have been organized and operate in conformity with the requirements for qualification as a REIT under the Code. All of our investments are held indirectly through our operating partnership. We control our operating partnership and intend to operate it in a manner consistent with the requirements for qualification as a REIT. However, we cannot guarantee that we will qualify as a REIT in any given year because:

In addition, we may be required to acquire and hold FannieAgency Mae multi-familyissued securities, U.S. Treasury securities or other similar assets directly, using significant leverage to do so, in order for us to satisfy the requirement that securities of one or more TRSs represent not more than 25% (20% for periods prior to 2026) of the value of our gross assets on each testing date, even though we might not have acquired or held such FannieAgency Mae multi-familyissued securities, U.S. Treasury securities or other similar assets in the absence of that 25% (20% for periods prior to 2026) value test. Additionally, the need to satisfy such 25% (20% for periods prior to 2026) value test may require dividends to be distributed by one or more TRSs to us at times when it may not be beneficial to do so. We may, in turn, distribute all or a portion of such dividends to our stockholders at times when we might not otherwise wish to declare and pay such dividends. These dividends when received by non-corporate U.S. stockholders generally will be eligible for taxation at preferential qualified dividend income tax rates rather than at ordinary income rates. TRS distributions classified as dividends, however, will generally constitute qualifying income for purposes of the 95% gross income test but not qualifying income for purposes of the 75% gross income test. It is possible that we may wish to distribute a dividend from a TRS to ourselves in order to reduce the value of TRS securities below 25% (20% for periods prior to 2026) of our assets, but be unable to do so without violating the requirement that 75% of our gross income in the taxable year be derived from real estate assets and certain other sources. Although there are other measures we can take in such circumstances in order to remain in compliance with REIT requirements, there can be no assurance that we will be able to comply with both of these tests in all market conditions.

The Code provides for a 20% maximum U.S. federal income tax rate for dividends paid by regular United States corporations to eligible domestic shareholders that are individuals, trusts or estates. Dividends paid by REITs are generally not eligible for these reduced rates. H.R.However, 1,such commonlynon-corporate known as the 2017 Tax Cuts and Job Act (the “Tax Act”), which was enacted on December 22, 2017, generallystockholders may allow domestic shareholders to deduct from their taxable income one-fifth of the REIT ordinary dividends payable to them that are not treated as capital gains dividends or as qualified dividend income (“Qualified REIT Dividends”) for taxablethe yearspurposes beginningof afterdetermining Decembertheir 31,U.S. 2017federal andincome before January 1, 2026.tax. To qualify for this deduction, the shareholderstockholder receiving sucha dividendQualified REIT Dividend must hold the dividend-paying REIT shares for at least 46 days (taking into account certain special holding period rules) of the 91-day period beginning 45 days before the shares become ex-dividend,ex-dividend and cannot be under an obligation to make related payments with respect to a position in substantially similar or related property. However, even if a domestic shareholder qualifies for this deduction, the effective rate for such REIT dividends still remains higher than rates for regular corporate dividends paid to high-taxed individuals. The more favorable rates applicable to regular corporate dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive as a federal income tax matter than investments in the stocks of non-REIT corporations that pay dividends, which could materially and adversely affect the value of the stock of REITs, including our shares of common stock.

Due to each of these potential differences between income recognition or expense deduction and related cash receipts or disbursements, there is a significant risk that we may have substantial taxable income in excess of cash available for distribution. In that event, wein may need to borrow funds or take other actionsorder to satisfy the REITdistribution requirement and to avoid U.S. federal corporate income tax and the 4% nondeductible excise tax in that year, we may be required to: (1) sell assets in adverse market conditions; (2) borrow on unfavorable terms; (3) distribute amounts that would otherwise be invested in our target assets consistent with our strategy, capital expenditures or repayment of debt; or (4) make a taxable distribution requirementsof forshares theof taxableour yearcommon stock as part of a distribution in which thisstockholders “phantommay income”elect isto recognized.receive shares or (subject to a limit measured as a percentage of the total distribution) cash.

As with other REITs, but unlike corporations generally, our ability to finance our growth must largely be funded by external sources of capital because we generally have to distribute to our stockholders 90% of our REIT taxable income annually in order to qualify as a REIT and 100% of REIT taxable income in order to avoid U.S. federal corporate income tax and a 4% nondeductible excise tax. Our access to external capital depends upon a number of factors, including general market conditions, the market’s perception of our growth potential, our current and potential future earnings, cash distributions, and the market price of our common stock.

In order to qualify and maintain our qualification as a REIT for U.S. federal income tax purposes, we must on a continuing basis satisfy various tests on an annual and quarterly basis regarding the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders, and the ownership of our stock. To meet these tests, we may be required to forgo investments we might otherwise make. We may be required to make distributions to our stockholders at disadvantageous times or when we do not have funds readily available for distribution and may be unable to pursue investments that would be otherwise advantageous to us in order to satisfy the source of income or asset diversification requirements for qualifying as a REIT. Thus, compliance with the REIT requirements may hinder our investment performance and materially and adversely affect us.

In order to qualify and maintain our qualification as a REIT for U.S. federal income tax purposes, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities, and designated real estate assets, including certain mortgage loans and stock in other REITs. Subject to certain exceptions, our ownership of securities, other than government securities and securities that constitute real estate assets, generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets, other than government securities and securities that constitute real estate assets, can consist of the securities of any one issuer, and no more than 25% (20% for periods prior to 2026) of the value of our total securities can be represented by securities of one or more TRSs. We generally do not intend, and as the sole owner of the general partner of our operating partnership, do not intend to permit our operating partnership, to take actions we believe would cause us to fail to satisfy the asset tests described above. However, if we fail to comply with these requirements at the end of any calendar quarter after the first calendar quarter for which we qualified as a REIT, we must generally correct such failure within 30 days after the end of such calendar quarter to prevent us from losing our REIT qualification. As a result, we may be required to liquidate otherwise profitable assets prematurely, which could reduce the return on our assets, which could materially and adversely affect us.

We may distribute taxable dividends that are payable in cash and shares of our common stock at the election of each stockholder. TaxableU.S. stockholders receiving such distributions will be required to include the full amount of the distribution asin ordinarytheir taxable income to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, stockholdersa U.S. stockholder may be required to pay U.S. federal income taxes with respect to such dividends in excess of the cash dividends received.received, and the U.S. stockholder may be forced to use funds from other sources to pay its tax liability. If a U.S. stockholder sells shares of our common stock that it receives as a dividend in order to pay this tax, the sale proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of shares of our common stock at the time of the sale. Furthermore, with respect to certain non-U.S. stockholders, we may be required to withhold U.S. federal income tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock. In addition, if a significant number of our stockholders determine to sell shares of our common stock in order to pay taxes owed on dividends, it may put downward pressure on the trading price of shares of our common stock.

InWe Julyhave 2024,accessed wethe raisedpublic $50.0debt millioncapital inmarkets aggregatethrough principalthe amount of senior unsecured notes in an SEC-registered offering and such notes rank senior to sharesissuance of our commonSenior stockUnsecured upon our bankruptcy or liquidation.Notes. Additionally, in the future, we may attempt to increase our capital resources by making additional offerings of debt securities (or causing our operating partnership to issue debt securities) or additional offerings of equity securities. Upon bankruptcy or liquidation, holders of our debt securities, our preferred stock, if issued, and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of shares of our common stock. Any preferred stock, if issued, could have a preference on liquidating distributions or a preference on dividend payments or both that could limit our ability to pay a dividend or other distribution to the holders of shares of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of shares of our common stock bear the risk of our future offerings reducing the market price of shares of our common stock and diluting their stock holdings in us.

Angel Oak Mortgage REIT, Inc. is a real estate finance company focused on acquiring and investing in first and second 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 first lien non-QM loans and other mortgage assets that are primarily made to higher-quality non-QM loan borrowers and substantially sourced from Angel Oak’sthe proprietary mortgage lending platform,platform of our affiliate, Angel Oak Mortgage Lending,Lending whichand currentlyother operates primarilyoriginators through aour wholesalerelationship channelwith andAngel hasOak a national origination footprint.Capital. We may 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,lending and capital markets. Angel Oak Mortgage Lending, an affiliated Angel Oak mortgage origination platform, is a market leader in non‑QM loan production and, as of December 31, 2024, had originated over $20.0 billion in total non‑QM loan volume since its inception in 2011.production.

The two-year Treasury yield capped off 2024 flat compared to the end of 2023ended at 4.25%. The five-year Treasury yield, however, increased by approximately 54 basis points, from 3.85%3.48% as of the end of 20232025, demonstrating a decrease of 77 basis points compared to 4.25% as of the end of 2024. The five-year Treasury yield also decreased, ending at 3.73% as of the end of 2025, marking a decrease of 66 basis points compared to 4.39% as of the end of 2024. TheSimilarly the ten-year Treasury yield increaseddecreased byas approximatelywell, 70ending 2025 at 4.17%, a decrease of 41 basis points,points from 3.88% as of the end of 2023compared to 4.58% as of the end of 2024. Notably, the five and ten-year Treasury yields are no longer inverted, ending 14 and 33 basis points, respectively, higher than the two-year Treasury yield as of the end of 2024 after finishing 2023 40 and 37 basis points, respectively, below the two year Treasury yield as of the end of 2023. Over the course of 2024,2025, the two-year Treasury saw yields ranging from a high of 5.05%4.39% and a low of 3.55%,3.43%, the five-year Treasury observed yields ranging from a high of 4.73%4.61% and a low of 3.41%,3.55%, and the ten-year saw yields ranging from a high of 4.71%4.79% and a low of 3.62%.3.95%. Notably,The allTreasury yield curve steepened throughout the course of the year as well, with the spread between the two year and ten year Treasury yield increasing from 32 basis points as of the end of 2024 to 69 basis points as of the end of 2025. All tenors of the Treasury yield saw their annual high rate in January 2025 and their annual low rate in SeptemberOctober 20242025 before increasing againslightly to end the year.

Residential mortgage rates haveresponded provenalongside tothe be stickydecreases in light ofthe federal funds rate cuts,rate, with the average conforming 30-year mortgage rate increasingdecreasing by 2470 basis points to 6.15% as of the end of 2025 compared to 6.85% as of the end of 20242024. comparedMortgage toapplications 6.61%rose asin of2025, theparticularly end of 2023. However, the path throughout the course of the year was not a steady increase, as rates fell alongside the September rate cut to an average of 6.08% as of the end of September 2024 before increasing by 77 basis points bytoward the end of the year.year, Thesereflecting improved conditions compared to 2024. Residential mortgage rates are key benchmarks for the valuation of our portfolio, and the decreasing rates drove corresponding positive impacts to our asset pricing. Continued purchases of newly originated loans and securitizations of recently originated loans contributed to an increase in the valuations of our residential whole loans and loans in securitization trusts portfolios over the course of 2024,2025, along with ana overall tightening inhealthy securitization spreads.market. We expect to continue to purchase newly originated loans, which should continue to support overall portfolio valuations and securitization execution going forward.

Net Interest Margin (“NIM”). We generated $8.0$4.2 million greater net interest income for the year ended December 31, 20242025 as compared to the prior year, driven primarily by steady purchases and securitizations of newly originated loans, higher weighted average coupons on our overall investment portfolio, new loan purchases, and decreases in funding costs inas notesa payablepercentage of borrowings associated with our residential whole loans portfolio. Our interest income for the year ended December 31, 20242025 was $110.4$143.7 million compared to $96.0$110.4 million in the prior year, and our interest expense for the year ended December 31, 20242025 was $73.5$102.6 million compared to $67.1$73.5 million in the prior year. Our net interest income for the year ended December 31, 20242025 increased by 28%11% versus the prior year.

Net realized loss. Our net realized loss of $10.9 million for the year ended December 31, 2025 was driven by the loss of unamortized premiums associated with an increased rate of loans in our loans held in securitization trusts portfolio that were prepaid during the year, as well as realized losses on forward contracts used to hedge valuation risk in our residential loan portfolio. When valuations of our residential loan portfolio increase, we will typically observe a corresponding negative impact in forward contracts. Our net realized loss of $9.2 million for the year ended December 31, 2024 was primarily driven by our participation in co-mingled securitizations with other Angel Oak entities (AOMT 2024-3 and AOMT 2024-6). Because these securitizations did not result in the consolidation of VIE entities, we recognized a loss on the sale of these loans; however, the realized losses were less than the previous period’s unrealized losses for these loans, which drove overall positive GAAP net income for these securitizations.

We participated in fivefour securitization transactions and one re-securitization in 2024,2025, contributing a total of $855$704 million of scheduled unpaid principal balance of residential mortgage loans to the securitizations. In MarchApril 2024,2025, we issued AOMT 2025-4, a $284.3 million unpaid principal balance securitization backed by a pool of residential mortgage loans, to which we contributed the entire balance as the sole participant. In May 2025, we participated in AOMT 2024-3,2025-6, a $439.6$349.7 million scheduled unpaid principal balance securitization backed by a pool of residential mortgage loans, to which we contributed loans with a scheduledan unpaid principal balance of approximately $48.7$87.2 million. In AprilSeptember 2024,2025, the Company in conjunction with the Company’s affiliates exercised the combined call rights on the AOMT 2019-2 and AOMT 2019-4 securitizations in which we participated, along with others in which we did not participate, and subsequently re-securitized the underlying loans in AOMT 2025-R1. We no longer hold any economic interest in these loans or the re-securitization. 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 were classified as held for sale and recorded in other assets. In October 2025, we issued AOMT 2024-4, securitizing2025-10, a total of $299.8$274.3 million of scheduled unpaid principal balance of non-QM mortgage loans. In June 2024, we participated in AOMT 2024-6, an approximately $479.6 million scheduled unpaid principal balance securitization backed by a pool of residential mortgage loans, to which we contributed loansthe with a scheduled unpaid principalentire balance ofas approximatelythe $22.9sole million.participant. In October 2024, we issued AOMT 2024-10, securitizing a total of $316.8 million of scheduled unpaid principal balance of non-QM mortgage loans. Lastly, in December 2024,2025, we participated in AOMT 2024-13,2025-HB2, a $288.9$281.4 million scheduled unpaid scheduled principal balance securitization backed by aHELOCs poolon ofone‑to‑four family residential mortgage loans,properties, to which we contributed loans with a scheduledan unpaid principal balance of approximately $167.2$58.6 million.

AOMT 2024-3, AOMT 2024-6,2025-6 and AOMT 2024-132025-HB2 were securitization transactions entered into with other Angel Oak affiliates, for which we are not considered to be a "“primary beneficiary" ”of the applicable securitization vehicle. Therefore, the bonds retained from these securitizations, as well as from our securitizations prior to 2021, are held on our consolidated balance sheets as RMBS as of December 31, 20242025 and December 31, 2023.2024. The risk retention portion of the bonds retained from these securitizations is presented in other assets on our consolidated balance sheets as of the applicable dates. We may decide to enter into similar securitization transactions in the future.

•In the fourth quarter of 2024,2025, the Company amended its loan financing facility with Global Investment Bank 22. to reduce theThe interest rate pricing spread was updated from a range of 2.10%1.75% -to 3.35% to a range of 1.75%1.65% to 3.35%,2.40%, based on collateral type, loan status, dwell time,time and other factors. This resulted in an effective decrease in interest rate pricing spread of approximately 25 basis points.

Distributable Earnings were approximately $7.0$14.6 million and $(28.1)$7.0 million for the years ended December 31, 20242025 and 2023,December 31, 2024, respectively. The table below sets forth a reconciliation of net income allocable to common stockholders, calculated in accordance with GAAP, to Distributable Earnings for the years ended December 31, 20242025 and 2023December 31, 2024:

Distributable Earnings Return on Average Equity is a non-GAAP measure and is defined as annual or annualized Distributable Earnings divided by average total common 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 years ended December 31, 20242025 and 2023December 31, 2024:

The following table sets forth a summary of our results of operations for the years ended December 31, 20242025 and 2023December 31, 2024:

The following table sets forth the components of net interest income for the years ended December 31, 20242025 and 2023December 31, 2024:

Net interest income for the years ended December 31, 20242025 and 2023December 31, 2024 was $36.9$41.1 million and $28.9$36.9 million, respectively. Net interest income increased by approximately $8.0$4.2 million for the year ended December 31, 20242025 as compared to 2023,December 31, 2024, primarily due to anew higherasset residentialpurchases mortgageand loans in securitization trusts balance,securitizations, as well as a higher interest rate associated with those and other target assets. Interest expense increased for the year ended December 31, 20242025 as compared to 2023December 31, 2024 due to a higher average balance in our non-recourse securitization obligation, collateralized by residential mortgage loans in securitization trusts as well as our 2030 senior unsecured notes issued in JulyMay 2024.2025. Overall, the increase in interest income offset the increase in interest expense and drove the $8.0$4.2 million increase to net interest income.

The components of total realized and unrealized gains (losses), net for the years ended December 31, 20242025 and 2023December 31, 2024 are set forth as follows:

For the years ended December 31, 20242025 and 2023,December 31, 2024, our operating expenses were $6.0$5.0 million and $7.5$6.8 million, respectively. Our operating expenses decreased compared to the comparative period due to continued cost savings actions such as in-sourcing of key accounting functions,functions and vendor contract negotiations, and a decrease in servicing fees associated with servicing our whole loans portfolios.negotiations.

For the years ended December 31, 20242025 and 2023,December 31, 2024, our operating expenses incurred with affiliate were $1.8$1.9 million and $2.1$1.8 million, respectively. These expenses, which are substantially comprised of payroll reimbursements to our Manager, decreasedincreased slightly versus the comparative period due to astandard rationalizationannual ofcompensation resources.increases.

For the year ended December 31, 20242025 and 2023,December 31, 2024, our securitization expenses were $3.8$3.6 million and $2.5$3.8 million, respectively. The increasedecrease in expense is duedriven toprimarily by a largerdecrease in total securitization volume infor the year ended December 31, 20242025 as compared toversus the priorcomparable year.period in 2024. Expenses incurred during the year ended December 31, 20242025 are related to the AOMT 2025-4, AOMT 2025-6, AOMT 2025-R1, AOMT 2025-10, and AOMT 2025-HB2 securitizations. The securitization costs incurred for the comparable period in 2024 were associated with the AOMT 2024-3, AOMT 2024-4, AOMT 2024-6, AOMT 2024-10, and AOMT 2024-13 securitizations. The securitization costs incurred for the comparable period in 2023 were associated with the AOMT 2023-1, AOMT 2023-4, AOMT 2023-5, and AOMT 2023-7 securitizations.

For the years ended December 31, 20242025 and 2023,December 31, 2024, our management fee incurred with affiliate was $5.0$4.6 million and $5.8$5.0 million, respectively. The decrease is due to the decline in our average Equity (as defined in the Management Agreement) for the year ended December 31, 20242025 as compared to the same period in 2023. The calculation of Equity for the purposes of the Management Agreement includes the addition of Distributable Earnings, which is the primary departure from the calculation of equity in accordance with GAAP, which has caused Equity (as defined in the Management Agreement) to decrease.2024.

During the year ended December 31, 2024,2025 and December 31, 2024 we recorded an income tax expense of approximately $0.5 million and $3.3 millionmillion, respectively based on our income taxes arising from income associated with assets held in our TRS. During the year ended December 31, 2023, we incurred an income tax expense of approximately $1.2 million based on our income taxes arising from income associated with assets held in our TRS.

(2) Other assets and liabilities presented is calculated as a net liability substantially comprised of $202.0$198.2 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.

(31) Our Investment in Majority-Owned Affiliates is held at its amortized cost basis (2) Other assets and liabilities presented is calculated as a net liability substantially comprised of $392$202 million due to broker for our quarter-end purchase of certain certain Freddie Mac and Fannie Mae-issued Whole Pool Agency RMBS, and excluding the portion of “other assets” which includes our investment in a Majority-Owned Affiliates, which is considered a target asset. Additionally, other assets includes $5.2 million of commercial loans and $6.6 million of CMBS.

The following tablecharts sets forth additional information onillustrate the residentialdistribution mortgageof the credit scores and interest rates by the number of loans in our residential mortgage loan portfolio as of December 31, 20232025:

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 not sum to 100% due to rounding.rounding

Certain information regarding the mortgage loans underlying our portfolio of RMBS issued in AOMT securitization transactions is set forth below as of December 31, 20242025 and 2023December 31, 2024 unless otherwise stated:

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

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

During the firstsecond quarter of 2026, the U.S. Federal Reserve Bank (the “Fed”) maintained aits generallytarget neutralrange for the federal funds rate at 3.50% - 3.75%, extending the neutral-to-restrictive policy stance followingthat followed the easing cycle of late 2025. Monetary policy induring the quarter reflectedremained continuedhighly confidencedata-dependent, inas moderatingthe inflationaryFed pressuresbalanced solid economic activity and a graduallyrelatively cooling,stable yetlabor resilient,market U.S.against economy.inflation Whilethat broaderremained macroeconomicabove conditionsits werelong-term objective. Market expectations shifted more constructivehawkish than inover the priorcourse year, uncertainty and volatility persisted throughoutof the quarter, drivenparticularly byfollowing incomingthe inflationJune Federal Open Market Committee meeting, as updated projections reduced expectations for near-term rate cuts and employmentincreased dataattention as well as shifting market expectations regardingon the timingpotential offor anyrates futureto policyremain actions.higher Additionally,for longer. Geopolitical uncertainty, including the conflict in Iran addedand related volatility in energy markets, continued to thecontribute to interest rate volatility late induring the first quarter of 2026. As such, the Fed left the federal funds rate unchanged at 3.50% - 3.75% as of the end of the first quarter of 2026.quarter. Overall, while the interest rate environment during the first quarter of 2026 remained supportivemore constructive for prospective homebuyers relativethan tothe recentelevated years.levels observed in prior years, the second quarter was characterized by renewed uncertainty around the path of monetary policy and inflation. In parallel, securitization markets continuedremained to demonstrate healthy activity,active, supported by constructivecontinued investor demand, although execution spreadslevels were influenced by broader rate volatility and steadymodest investorspread demand.movements. Current expectations remain for a relatively stablestable, but more cautious, interest rate environment through the balance of 2026, assuming continuedinflation progress on inflationmoderates and sustained, albeit moderating, economic growth.growth remains resilient.

Residential mortgage rates moved broadly in line with Treasury yields during the firstsecond quarter of 2026, remainingwith below levels observed throughout muchperiods of 2024volatility andlimiting earlythe 2025.pace of improvement in affordability. Mortgage market activity showedcontinued continuedto show signs of improvement, with borrower engagementstabilization, supported by greater rateborrower stability and improved affordabilityengagement relative to the prior year.year, although rate sensitivity remained an important factor for loan demand and prepayment expectations. Residential mortgage rates, along with securitization spreads, remain key benchmarks for the valuation of our portfolio; thoughas such, volatility and spread movements throughout the quarter created generally lowernegative ratevaluation environment was a positive contributor to asset pricing, macroeconomic volatility drove spreads wider, leading to an overall decrease in asset pricing during the quarter.impacts. Continued purchases of newly originated loans, together with ongoing securitizations of recently originated collateral,loans supported earningsinterest income growth acrossin ourthe residentialsecond whole loanquarter, and loans held within securitization trusts portfolios. Wewe expect continuedto acquisitioncontinue ofto acquire newly originated loans throughout 2026, which should further support portfolio performance and securitization execution in a constructive capital markets environment.execution.

Net Interest Margin (“NIM”). We generated $7.8$6.3 million greater interest income for the quarter ended MarchJune 31,30, 2026 compared to the comparable period for 2025, driven by increases in the amount of our target assets. Interest expense increased by $5.8$5.5 million for the quarter ended MarchJune 31,30, 2026 compared to the comparable period for 2025, due to new asset purchases and securitizations, collateralized by residential mortgage loans in securitization trusts as well as our 9.750% Senior Notes due 2030 (“2030 Notes”) issued in May 2025. Overall, the increase in our interest income outpaced the increase in interest expense and drove a 20%,8%, or $2.0$0.8 million, increase in net interest income for the quarter ended MarchJune 31,30, 2026 compared to the comparable period for 2025.

Net realized loss.gain. Our net realized lossgain for the quarter ended MarchJune 31,30, 2026 was primarily due to realized gains associated with our hedging activity, offset by realized losses associated with the unamortized premium of loans that paid off underlying our residential loans in securitization trust and RMBS portfolio as well as realized losses associated with hedging activity.portfolios.

Net unrealized loss. Our net unrealized loss for the quarter ended MarchJune 31,30, 2026 was primarily due to a decrease in the valuation of our loans in securitization trust, net of non-recourse securitization obligation and residential whole loans portfolios.portfolios, as well as unrealized losses associated with our hedging activity as of the end of the quarter ended June 30, 2026.

During the quarter ended MarchJune 31,30, 2026, we purchased $246.2$204 million of newly-originated, current market coupon non-QM residential mortgage loans,loans and home equity lines of credit (“HELOCs”), with a weighted average coupon of 7.34%, weighted average combined loan-to-value ratio (“CLTV”) of 67.1%70.5% and weighted average credit score of 759.

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,below for a full description of our financing arrangements. Our total borrowing capacity was $1.3 billion as of MarchJune 31,30, 20262026. Highlights of whole loan financing facilities activity over the firstsecond quarter of 2026 are as follows:

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

•OnDuring Aprilthe 22,quarter ended June 30, 2026, thewe Companyrenewed and one of its subsidiaries, amended the Pricing Side Letter for itsour loan financing facility with Global InvestmentMultinational Bank 2.1 Thein amendmentaccordance updateswith the seller underwriting guidelines to include home equity revolving lines of credit. The termination dateterms of the loanagreement, which contemplates rolling three-month renewals. This financing facility was extended tothrough AprilSeptember 21,25, 2028.2026. In addition, the interest rate pricing spread was updatedreduced to a range from 1.50%1.30% to 2.60%2.10%; prior to this extension, the interest rate pricing spread was a range from 1.65% to 2.40%2.10%.

Distributable Earnings were approximately a gain of $4.6$9.0 million and a gain of $4.1$2.6 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The primary drivers of thisthe quarter’sdifference of Distributable Earnings as compared to GAAP net income arein the quarter ended June 30, 2026 were adjustments to remove unrealized losses associatedon withresidential loans, residential loans in securitization trusts and non-recourse securitization obligation, and derivatives portfolios. For the quarter ended June 30, 2025, the primary driver of the difference between Distributable Earnings and GAAP net income was the adjustment to remove losses on our residential loans portfolio. For the six months ended June 30, 2026 and June 30, 2025, the primary drivers of the difference between Distributable Earnings and GAAP net income were adjustments to remove unrealized losses on residential loans and residential loans in securitization trusts and non-recourse securitization obligationobligation, portfolios.and adjustments to remove unrealized gains on residential loans in securitization trusts and non-recourse securitization obligation, respectively.

The table below sets forth a reconciliation of net income (loss) allocable to common stockholders, calculated in accordance with GAAP, to Distributable Earnings for the three and six months ended MarchJune 31,30, 2026 and 2025:

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 six months ended MarchJune 31,30, 2026 and 2025:

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

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 MarchJune 31,30, 2026 and December 31, 2025:

Three Months Ended MarchJune 31,30, 2026 and 2025

The following table sets forth a summary of our results of operations for the three months ended MarchJune 31,30, 2026 and 2025:

The following table sets forth the components of net interest income for the three months ended MarchJune 31,30, 2026 and 2025:

We generated $7.8$6.3 million greater interest income for the quarter ended MarchJune 31,30, 2026 compared to the comparable period for 2025, driven by increases in the amount of our target assets. Interest expense increased by $5.8$5.5 million for the quarter ended MarchJune 31,30, 2026 compared to the comparable period for 2025, due to new asset purchases and securitizations, collateralized by residential mortgage loans in securitization trusts as well as our 2030 Notes issued in May 2025. Overall, this increase in interest expense was mitigated by lower average borrowing costs. Overall, the increase in our interest income outpaced the increase in interest expense and drove aan 20%,8%, or $2.0$0.8 million, increase in net interest income for the quarter ended MarchJune 31,30, 2026 compared to the comparable period for 2025.

The components of total realized and unrealized gains (losses), net for the three months ended MarchJune 31,30, 2026 and 2025 are set forth as follows:

For the three months ended MarchJune 31,30, 2026 and 2025, total realized and unrealized gains and (losses), net resulted in a net losslosses of $($14.33.7) million and a gain of $13.4$(4.1) million, respectively. During the three months ended MarchJune 31,30, 2026, the $($11.24.1) million of realized and unrealized loss on securitization, net of unrealized gain (loss) on non-recourse securitization obligation and the ($4.0) million of realized and unrealized loss on our residential mortgage loan portfolio werewas the primary driver of the overall loss. TheseThis lossesloss areis substantially comprised of unrealized lossesloss associateddue withto valuation decreases in our securitization, net of unrealized gain (loss) on non-recourse securitization obligation and our residential mortgage loan portfolios, as well as realized lossesloss associated with the loss of unamortized premiums in thesethe portfolios.aforementioned portfolio. This was partially offset by a realized gain on RMBS of $0.5 million, which was primarily driven by the sale of retained bonds from the AOMT 2020-3 securitization. During the three months ended MarchJune 31,30, 2025, the $(1.1) million of realized and unrealized gainsloss on securitization, net of unrealized gain (loss) on non-recourse securitization obligationobligation, wasthe $(1.1) million of realized loss on interest rate futures, and the $(1.2) million of realized and unrealized losses on residential mortgage loans were the key drivers of the overall gain.loss.

For the three months ended MarchJune 31,30, 2026 and 2025, our operating expenses were $1.7$1.6 million and $1.2$1.3 million, respectively. Our operating expenses increased compared to the comparative period due to increases in audit and loan diligence fees associated with a larger overall balance in our target portfolio.

For the three months ended MarchJune 31,30, 2026 and 2025, our operating expenses incurred with affiliate were $0.6 million and $0.4$0.5 million, respectively. These expenses, which are substantially comprised of payroll reimbursements to our Manager, increased in the three months ended MarchJune 31,30, 2026 compared to the threesame monthsperiod ended March 31,of 2025 due to standard annual compensation increases.

For the three months ended MarchJune 31,30, 2026 and 2025, our stock compensation expense was $0.4 million and $0.2$0.3 million, respectively. Our stock compensation expense increased for the three months ended MarchJune 31,30, 2026 due to the issuance of new performance basedperformance-based stock awards inafter the three months ended June 30, 2025.

For the three months ended MarchJune 31,30, 20262026, andwe incurred no securitization costs. In the three months ended June 30, 2025, we incurred $1.4$1.9 million of securitization costscosts. andWe nodid securitizationnot costs,have respectively.any The securitization costssecuritizations in the three months ended MarchJune 31,30, 20262026. areThe associated with the AOMT 2026-2 securitization in March 2026, and there was no securitization activityexpense in the three months ended MarchJune 31,30, 2025.2025 is due to expenses associated with the AOMT 2025-4 and AOMT 2025-6 securitizations.

For the three months ended MarchJune 31,30, 2026 and 2025, our management fee incurred with affiliate was $1.1 million and $1.1 million, respectively. These expenses, which were flat for the three months ended MarchJune 31,30, 2026 versus the comparative period, are driven by our average Equity (as defined in the Management Agreement).

As of MarchJune 31,30, 2026, our portfolio consisted of approximately $2.7$2.9 billion of residential mortgage loans, RMBS, and other target assets. Certain of these portfolio assets are located in states such as Florida and California where natural disasters such as hurricanes, wildfires and earthquakes may occasionally occur. We require all of our collateral to be adequately insured. The graphs in the subsequent detail of residential mortgage loans, residential mortgage loans held in securitization trusts, and residential mortgage loans underlying RMBS issuances show the percentage of residential mortgage loans held in each state where there is a concentration of loans.

The following table sets forth additional information regarding our portfolio, including the manner in which our equity capital was allocated among investment types, as of MarchJune 31,30, 2026:

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

The following table sets forth additional information on the residential mortgage loans in our portfolio as of MarchJune 31,30, 2026:

The following charts illustrate the distribution of the credit scores and interest rates by the number of loans in our residential mortgage loan portfolio as of MarchJune 31,30, 2026:

The following charts illustrate additional characteristics of our residential mortgage loans in our portfolio that we owned directly as of MarchJune 31,30, 2026, based on the product profile, borrower profile, and geographic location (percentages are based on the aggregate unpaid principal balance of such loans):

Characteristics of Our Residential Mortgage Loans as of MarchJune 31,30, 2026:

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 MarchJune 31,30, 2026. Numbers presented may add to more than 100% due to rounding.

The following table sets forth the information regarding the underlying collateral of our residential mortgage loans held in securitization trusts as of MarchJune 31,30, 2026:

The following chart illustrates the geographic distribution of the underlying collateral of our residential mortgage loans held in securitization trusts as of MarchJune 31,30, 2026 (percentages are based on the aggregate unpaid principal balance of such loans):