AOMR

• Portfolio Strategy and Discipline

  • Management maintains a balanced, value-driven approach amid unclear macroeconomic conditions, focusing on disciplined capital deployment, balance sheet flexibility, and strengthening long-term portfolio return durability
  • Originations and purchases follow strict credit and return criteria; the firm prioritizes strategic balance sheet strengthening over volume-driven securitization targets
  • Management aims to maintain a conservative leverage profile and retain ample liquidity and financing capacity to navigate market volatility

• Strategic Actions Completed in Q2 2026

  • Monetized delevered legacy retained bonds from the AOMT 2020-3 securitization, reinvesting proceeds into newly originated higher-yield loans
  • Repurchased $15 million of common equity from a pre-IPO investor at accretive return levels
  • Negotiated a 35 basis point interest spread reduction on the firm's largest warehouse financing facility, expected to deliver ongoing cost savings

• Post-Quarter Operational Updates

  • Completed two securitizations after quarter end: AOMT 2026-3, a $280 million unpaid principal balance non-QM securitization where AOMR was the sole contributor, and AOMT 2026-HP1, a $221 million commingled HELOC securitization to which AOMR contributed $71 million of assets
  • Following these securitizations, the recourse debt-to-equity ratio fell to ~1.0x from 2.3x at quarter end, strengthening the balance sheet

• Credit Performance

  • Portfolio credit performance remains solid, with differentiated underwriting that management expects to deliver lower full-cycle losses compared to peer non-QM platforms

• Securitization: Management maintains its target of roughly one non-QM securitization per quarter (four total per year). A second HELOC securitization in 2026 is considered fairly likely, and there is a decent chance of a second non-QM securitization closing in Q3 2026 (if it does not close in September, it will move to October)
• Prepayment speeds: Management expects prepayment speeds to continue increasing as mortgage rates fall, but notes that a material impact on portfolio returns would require a meaningful decline in rates; base return modeling uses historical average prepayment speeds of 20-30%
• Operating expenses: Management expects to maintain current operating expense levels and continue optimizing expense efficiency
• Returns: Expected returns remain 13-14% during the warehouse holding period and 15-20% following securitization, consistent with prior guidance, with minor variation based on execution and transaction specifics
• Dividend: The company declared a $0.32 per share common dividend, payable August 28, 2026 to shareholders of record August 21, 2026

Angel Oak Mortgage REIT operates two core residential mortgage asset segments: non-QM loans and HELOCs. As of Q2 2026 end: Total residential mortgage loans (including securitization trusts) stood at $2.1 billion, unsecuritized residential whole loans had a fair value of $439 million, and total RMBS holdings were $334 million. Non-QM loans make up 85% to 90% of the total portfolio, while HELOCs are targeted for a 10% to 15% allocation. Investor cash flow non-QM loans represent roughly 50% of the firm's non-QM collateral, matching market share. In Q2 2026, total interest income was $41.4 million (up 18% year-over-year), total net interest income was $10.7 million (up 8% year-over-year). GAAP net income was $3.4 million ($0.14 per diluted share), compared to $0.8 million ($0.03 per diluted share) in Q2 2025. Distributable earnings were $9 million, up from $2.6 million in Q2 2025. Operating expenses were $3.6 million ($3.2 million excluding non-cash stock compensation), with a small year-over-year increase driven by higher loan diligence fees for larger asset purchases. As of Q2 end, portfolio-wide 90+ day delinquencies were 2.8%, up 9 basis points from Q1 2026. Three-month prepayment speeds for non-QM RMBS securitized loans were 13.6%, up from 12.5% in Q1 2026. GAAP book value per share was $10.13, down 1.7% from Q1 2026, while economic book value per share was $12.24, down 0.3% quarter-over-quarter.

• Macroeconomic uncertainty, including unclear inflation trends, Federal Reserve policy path, and broader global and geopolitical volatility, drives market valuation volatility and impacts housing affordability and origination activity
• As mortgage rates fall, higher-than-expected prepayment speeds could negatively impact portfolio returns
• Competitive pressure in the non-QM market has increased, with additional capital from insurance companies entering the space, and some competitors have loosened underwriting standards on certain programs that AOMR chooses not to participate in
• Consumer credit has weakened amid peak housing prices, with consumers seeing limited benefit from equity market gains, requiring tighter credit discipline especially for HELOC products
• Unrealized mark-to-market valuation declines in the securitized loan and derivative portfolios created quarterly volatility in GAAP net income and book value

Q: What is the size of the HELOC opportunity for AOMR, and what is the target allocation relative to non-QM loans? / A: Management views HELOCs as a selective, targeted opportunity, with a target allocation of 10-15% of the overall portfolio. Non-QM loans will remain the dominant asset class for the firm, and HELOC originations and purchases will only be done within the firm's existing credit box requirements.

Q: What are the expected returns for loans during the warehouse period versus after securitization, and why has quarterly warehouse cost volatility been observed? / A: Current expected returns are 13-14% during the warehouse period and 15-20% after securitization, with minor variation based on execution. Quarterly warehouse cost volatility is driven by changes in leverage throughout the quarter: Q2 2026 had higher leverage as no securitization closed during the quarter, while Q3 will see lower leverage after the two post-quarter securitizations, so volatility will moderate in Q3.

Q: What drove spread compression in the recent AOMT 2026-3 securitization, and what are management's observations on broad consumer credit trends and industry underwriting standards? / A: Spread tightening reflected healthy securitization market conditions with strong buyer demand for non-QM RMBS, and the deal's collateral had a slightly lower coupon than newly originated loans. Industry-wide underwriting remains broadly disciplined, but some competitors have started loosened standards on niche programs that AOMR avoids. Consumer credit is weaker amid peak housing prices, so AOMR maintains strict 40-65% CLTV requirements for HELOCs and avoids higher-risk borrower segments.

Q: Is there enough pipeline to support a second non-QM securitization in Q3 2026, and is there still sufficient demand for non-QM loans? / A: There is a decent chance a second non-QM securitization will close in Q3, and will roll to October if it does not make the September window, depending on market conditions. A second HELOC securitization in 2026 is also quite likely. Non-QM market demand remains strong, with the market continuing to grow and ample buyer appetite from a range of market participants supporting ongoing activity.