Angel Oak Mortgage REIT, Inc. (AOMR)

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 contains 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, 2025 (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 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;

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•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 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 non-QM loans and other mortgage assets that are primarily made to higher-quality borrowers and sourced from the proprietary mortgage lending platform of our affiliate, Angel Oak Mortgage Lending and other originators through our relationship with Angel Oak Capital. We may also 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. 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

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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, Angel Oak Companies, an affiliate of our Manager, and Brookfield Asset Management Ltd. (“Brookfield”), closed on a strategic transaction resulting in the beneficial owners of Angel Oak Companies selling approximately 51% of the outstanding beneficial ownership of Angel Oak Companies, and indirectly our Manager, to Brookfield (the “Strategic Transaction”). Angel Oak Companies has advised the Company that the Strategic Transaction is not expected to result in any material change in the day-to-day management of the Company, and will not result in any material changes to the Company’s investment objectives and strategies. As part of the Strategic Transaction, Brookfield has the right to acquire additional beneficial ownership in Angel Oak Companies beginning in 2027, which over time could result in Brookfield taking control of the board of directors of Angel Oak Companies.

On October 1, 2025, immediately following the closing of the Strategic Transaction between Angel Oak Companies and Brookfield, the Company, the Operating Partnership, and our Manager, entered into a new management agreement (the “Management Agreement”) to supersede and replace in its entirety the Amended and Restated Management Agreement, dated as of May 1, 2024, previously in effect (the “Prior Management Agreement”). The Management Agreement is substantially and economically similar to the Prior Management Agreement. The Management Agreement reflects two substantive changes from the Prior Management Agreement. The Prior Management Agreement required the Company to reimburse our Manager for a share of the wages, salaries and benefits incurred by our Manager with respect to the Company’s Chief Executive Officer and President, based upon the percentage of such person’s working time relating to the Company. Under the Management Agreement, this provision was modified to provide that, for so long as Sreeni Prabhu serves as the Company’s Chief Executive Officer and President, our Manager will not b

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our historical consolidated financial statements and the notes thereto appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis, including information with respect to our business strategies, our expectations regarding the future performance of our business, and the other non-historical statements contained herein, are forward-looking statements. Our actual results may differ materially from those anticipated in any forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and “Special Note Regarding Forward-Looking Statements” elsewhere in this Annual Report on Form 10-K.

General

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 non-QM loans and other mortgage assets that are primarily made to higher-quality borrowers and sourced from the proprietary mortgage lending platform of our affiliate, Angel Oak Mortgage Lending and other originators through our relationship with Angel Oak Capital. We may also 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. Our objective is to generate attractive risk-adjusted returns for our stockholders, through cash distributions and capital appreciation, across interest rate and credit cycles.

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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 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, immediately following the closing of the Strategic Transaction between Angel Oak Companies and Brookfield, the Company, our operating partnership, and our Manager, entered into a new Management Agreement to supersede and replace in its entirety the Prior Management Agreement previously in effect. The Management Agreement is substantially and economically similar to the Prior Management Agreement. The Management Agreement reflects two substantive changes from the Prior Management Agreement. The Prior Management Agreement required the Company to reimburse our Manager for a share of the wages, salaries and benefits incurred by our Manager with respect to the Company’s Chief Executive Officer and President, based upon the percentage of such person’s working time relating to the Company. Under the Management Agreement, this provision was modified to provide that, for so long as Sreeni Prabhu serves as the Company’s Chief Executive Officer and President, our Manager will not be entitled to be reimbursed for the costs of his wages, salaries and benefits unless Mr. Prabhu devotes 100% of his working time on matters related to the Company and its subsidiaries (which is not currently the case), and any such reimbursement is approved in advance by at least two-thirds of the independent directors. In addition, under the Management Agreement, with respect to the Company’s annual right to decline to renew the Management Agreement without cause upon the affirmative vote of at least two-thirds of the independent directors based upon a determination that the compensation payable to our Manager is not fair, it was clarified that any such determination will take into account amounts sought for expense reimbursement.

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 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 2025, the U.S. Federal Reserve Bank (the “Fed”) held the federal funds rate stable through most of the year, and began easing policy in September with its first federal funds rate cut of the year, signaling confidence in an easing of inflationary pressures. Ultimately, three 25 basis point cuts between September and December 2025 culminated in a federal funds rate of 3.50% to 3.75% as of the end of 2025 as compared to 4.25% to 4.50% as of the end of 2024. 2025 was a more constructive general environment compared to 2024; however, while dampened compared to 2024, uncertainty and volatility persisted in 2025 with regard to key inflation and employment data. Overall, the dovish approach was constructive for prospective homebuyers, as mortgage rates decreased in line with the federal funds rate. Additionally, securitization markets demonstrated an improved environment with robust activity and a continued tightening of execution spreads. Expectations are for a steady interest rate environment in 2026 with further inflation moderation and cooling, though positive, economic growth.

The two-year Treasury yield ended at 3.48% as of the end of 2025, 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. Similarly the ten-year Treasury yield decreased as well, ending 2025 at 4.17%, a decrease of 41 basis points compared to 4.58% as of the end of 2024. Over the course of 2025, the two-year Treasury saw yields ranging from a high of 4.39% and a low of 3.43%, the five-year Treasury observed yields ranging from a high of 4.61% and a low of 3.55%, and the ten-year saw yields ranging from a high of 4.79% and a low of 3.95%. The Treasury 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 October 2025 before increasing slightly to end the year.

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Residential mortgage rates responded alongside the decreases in the federal funds rate, with the average conforming 30-year mortgage rate decreasing by 70 basis points to 6.15% as of the end of 2025 compared to 6.85% as of the end of 2024. Mortgage applications rose in 2025, particularly toward the end of the year, reflecting 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 2025, along with a healthy securitization market. We expect to continue to purchase newly originated loans, which should continue to support overall portfolio valuations and securitization execution going forward.

Our investment performance

Net Interest Margin (“NIM”). We generated $4.2 million greater net interest income for the year ended December 31, 2025 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, and decreases in funding costs as a percentage of borrowings associated with our residential whole loans portfolio. Our interest income for the year ended December 31, 2025 was $143.7 million compared to $110.4 million in the prior year, and our interest expense for the year ended December 31, 2025 was $102.6 million compared to $73.5 million in the prior year. Our net interest income for the year ended December 31, 2025 increased by 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.

Net unrealized gain. Our net unrealized gain of $30.8 million for the year ended December 31, 2025 was primarily attributable to $28.6 million of unrealized gains in our residential loans in securitizations trusts and non-recourse securitization obligation portfolio, as well as $3.3 million of unrealized gains in our residential loan portfolio. Gains were driven by a decreasing interest rate environment that led to rebounds in the valuations of lower-coupon securitizations as well as higher marks on new loan purchases and more recent, higher-coupon securitizations.

Whole loans and securitization activity

During the year ended December 31, 2025, we purchased $861.8 million

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