What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-15 compared with 2021-08-13 · 193 added, 147 removed, 458 unchanged (43% of the section changed)

3 unchanged sentences

(in thousands, except for share data)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Residential mortgage loans - at fair value $ 723,139 $ 142,030

Residential mortgage loans in securitization trust - at fair value 319,812 —

Commercial mortgage loans - at fair value 7,936 7,466

9 unchanged sentences

Notes payable $ 550,752 $ 81,905

Non-recourse securitization obligation, collateralized by residential mortgage loans 290,529 —

Securities sold under agreements to repurchase 489,287 178,291

3 unchanged sentences

Interest payable 608 100

Management fee payable to affiliate 1,845 —

Total liabilities $ 1,334,540 $ 261,347

1 unchanged sentence

STOCKHOLDERS’ EQUITY

Series A preferred stock, $ 0.01 par value, 12 % cumulative, non-voting, 125 shares issued and outstanding as of June 30, 2021 and December 31, 2020

Series A preferred stock, $ 0.01 par value, 12 % cumulative, non-voting, 125 shares issued and outstanding as of September 30, 2021 and December 31, 2020

Common stock, $ 0.01 par value.

As of June 30, 2021:

As of September 30, 2021:

350,000,000 shares authorized, 25,405,544 shares issued and outstanding.

10 unchanged sentences

(in thousands, except for share and per share data)

Three Months Ended Six Months Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

INTEREST INCOME, NET

25 unchanged sentences

(in thousands)

For the Three Months Ended June 30, 2020

For the Three Months Ended September 30, 2020

Preferred Stock Common Stock at Par Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Deficit Total Equity

Stockholders’ equity as of March 31, 2020 $ 101 $ 157 $ 281,979 $ ( 5,727 ) $ ( 33,157 ) $ 243,353

Stockholders’ equity as of June 30, 2020 $ 101 $ — $ 302,779 $ ( 6,671 ) $ ( 8,635 ) $ 287,574

Distributions to common stockholder — — ( 75,000 ) — — ( 75,000 )

Dividends declared - preferred — — — — ( 4 ) ( 4 )

Unrealized loss on RMBS and CMBS — — — ( 944 ) — ( 944 )

Equity contribution from (distribution to) common stockholder — — 20,643 — ( 1,700 ) 18,943

Unrealized gain on RMBS and Treasury Bills — — — 5,171 — 5,171

Additional equity contribution from common stockholder — — 26 — — 26

Net income — — — — 4,242 4,242

Stockholders’ equity as of June 30, 2020

Stockholders’ equity as of September 30, 2020

$ 101 $ — $ 227,805 $ ( 1,500 ) $ ( 4,397 ) $ 222,009

For the Three Months Ended June 30, 2021

Preferred Stock Common Stock at Par Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Equity

Stockholders’ equity as of March 31, 2021 $ 101 $ 157 $ 302,750 $ ( 509 ) $ 12,084 $ 314,583

Private placement concurrent with IPO — 21 39,979 — — 40,000

Common stock issued in IPO — 72 136,728 — — 136,800

For the Three Months Ended September 30, 2021

Preferred Stock Common Stock at Par Additional Paid-in Capital Accumulated Other Comprehensive Income Retained Earnings Total Equity

Stockholders’ equity as of June 30, 2021 $ 101 $ 255 $ 479,542 $ 2,576 $ 14,307 $ 496,781

Shares repurchased — ( 1 ) ( 1,652 ) — — ( 1,653 )

Non-cash equity compensation — — 833 — — 833

1 unchanged sentence

Unrealized gain on RMBS and CMBS — — — 1,818 — 1,818

Dividends paid on common stock — — — — ( 3,056 ) ( 3,056 )

Net income — — — — 6,344 6,344

Stockholders’ equity as of June 30, 2021

Stockholders’ equity as of September 30, 2021

$ 101 $ 254 $ 478,723 $ 4,394 $ 17,590 $ 501,062

3 unchanged sentences

(in thousands)

For the Six Months Ended June 30, 2020

For the Nine Months Ended September 30, 2020

Preferred Stock Common Stock at Par Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings (Deficit) Total Equity

3 unchanged sentences

Unrealized loss on RMBS and Treasury Bills — — — ( 5,054 ) — ( 5,054 )

Additional equity contribution from (distribution to) common stockholder — — 215,151 — ( 1,700 ) 213,451

Additional equity contribution from common stockholder — — 215,177 — — 215,177

Distributions to commons stockholder — — ( 75,000 ) — ( 1,700 ) ( 76,700 )

Net loss — — — — ( 6,266 ) ( 6,266 )

Stockholders’ equity as of June 30, 2020

Stockholders’ equity as of September 30, 2020

$ 101 $ — $ 227,805 $ ( 1,500 ) $ ( 4,397 ) $ 222,009

For the Six Months Ended June 30, 2021

For the Nine Months Ended September 30, 2021

Preferred Stock Common Stock at Par Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Equity

4 unchanged sentences

Common stock issued in IPO — 72 136,728 — — 136,800

Shares repurchased — ( 1 ) ( 1,652 ) — — ( 1,653 )

Non-cash equity compensation — 5 918 — — 923

1 unchanged sentence

Unrealized gain on RMBS and CMBS — — — 5,433 — 5,433

Dividends paid on common stock — — — — ( 3,056 ) ( 3,056 )

Net income — — — — 18,056 18,056

Stockholders’ equity as of June 30, 2021

Stockholders’ equity as of September 30, 2021

$ 101 $ 254 $ 478,723 $ 4,394 $ 17,590 $ 501,062

3 unchanged sentences

(in thousands)

Six Months Ended June 30, 2021 Six Months Ended June 30, 2020

Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020

CASH FLOWS FROM OPERATING ACTIVITIES

3 unchanged sentences

Net unrealized (gain) loss on derivative contracts and mortgage loans ( 16,151 ) 4,369

Accretion of securities — ( 66 )

Amortization of debt issuance costs 57 13

Net amortization of premiums and discounts on mortgage loans 94 171

Accretion of and amortization 438 263

Non-cash equity compensation 923 —

4 unchanged sentences

Principal payments on residential mortgage loans 63,199 14,104

Margin received from (posted on) interest rate futures contracts 471 ( 14,098 )

Margin posted on interest rate futures contracts and TBAs ( 9,297 ) ( 14,186 )

Principal and interest receivable ( 7,255 ) 330

5 unchanged sentences

Interest payable 509 ( 301 )

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ( 382,091 ) 74,967

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES ( 883,722 ) 118,123

CASH FLOWS FROM INVESTING ACTIVITIES

3 unchanged sentences

Principal payments on RMBS 7,238 5,878

Purchases of commercial mortgage loans from affiliate — ( 26,446 )

Purchases of commercial mortgage loans ( 1,500 ) ( 26,446 )

Principal payments on commercial mortgage loans 1,401 378

NET CASH USED IN INVESTING ACTIVITIES ( 705,897 ) ( 495,881 )

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES ( 408,479 ) 17,675

CASH FLOWS FROM FINANCING ACTIVITIES

Dividends paid to common stockholders ( 3,056 ) —

Stock repurchase ( 1,653 ) —

Contributions from prior common stockholder 56,262 215,177

2 unchanged sentences

Proceeds from IPO 136,800 —

Cash paid for debt issuance costs ( 77 ) ( 143 )

Net proceeds from securities sold under agreements to repurchase 608,885 363,284

Other ( 16,050 ) ( 153 )

Proceeds from securitization 306,352 —

Net proceeds from (payments on) securities sold under agreements to repurchase 310,996 ( 173,550 )

Net proceeds from (payments on) notes payable 468,847 ( 102,890 )

NET CASH PROVIDED BY FINANCING ACTIVITIES 1,075,043 487,787

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,298,498 ( 138,116 )

CHANGE IN CASH AND RESTRICTED CASH 6,297 ( 2,318 )

4 unchanged sentences

Cash paid during the period for interest $ 2,170 $ 7,755

(1) Cash, cash equivalents, and restricted cash as of June 30, 2021 included cash and cash equivalents of $ 28.9 million and restricted cash of $ 4.1 million, and at December 31, 2020 included cash and cash equivalents of $ 43.6 million and restricted cash of $ 2.4 million.

(1) Cash, cash equivalents, and restricted cash as of September 30, 2021 included cash and cash equivalents of $ 49.2 million and restricted cash of $ 3.1 million, and at December 31, 2020 included cash and cash equivalents of $ 43.6 million and restricted cash of $ 2.4 million.

The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of this statement.

2 unchanged sentences

Organization and Basis of Presentation

Angel Oak Mortgage, Inc., together with its subsidiaries (“the Company”), is a real estate finance company focused on acquiring and investing in first lien non-qualified residential mortgage (“non-QM”) loans and other mortgage‑related assets in the U.S.

Angel Oak Mortgage, Inc.

(together with its subsidiaries the “Company”), is a real estate finance company focused on acquiring and investing in first lien non-qualified residential mortgage (“non-QM”) loans and other mortgage‑related assets in the U.S.

mortgage market.

The Company’s strategy is to make investments in first lien non‑QM loans that are primarily made to higher‑quality non‑QM loan borrowers and primarily sourced from the proprietary mortgage lending platform of affiliates Angel Oak Mortgage Solutions and Angel Oak Home Loans (together, “Angel Oak Lending”), which operates through wholesale and retail channels and has a national origination footprint.

The Company’s strategy is to make investments in first lien non‑QM loans that are primarily made to higher‑quality non‑QM loan borrowers and primarily sourced from the proprietary mortgage lending platform of affiliates, Angel Oak Mortgage Solutions LLC and Angel Oak Home Loans LLC (together, “Angel Oak Lending”), which operates through wholesale and retail channels and has a national origination footprint.

The Company may also invest in other residential mortgage loans, residential mortgage‑backed securities (“RMBS”), and other mortgage‑related assets.

31 unchanged sentences

The Company’s estimates are inherently subjective in nature and actual results could differ from the Company’s estimates and the differences could be material.

Significant Accounting Policies Recently Adopted

The Company uses securitization trusts considered to be variable interest entities (“VIEs”) in its securitization transactions.

VIEs are defined as entities in which equity investors (i) do not have the characteristics of a controlling financial interest, or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.

The entity that consolidates a VIE is known as its primary beneficiary and is generally the entity with (i) the power to direct the activities that most significantly impact the VIE’s economic performance, and (ii) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE.

For VIEs that do not have substantial on-going activities, the power to direct the activities that most significantly impact the VIE’s economic performance may be determined by an entity’s involvement with the design and structure of the VIE.

The trusts are structured as entities that receive principal and interest on the underlying collateral and distribute those payments to the security holders.

The assets held by the securitization entities are restricted in that they can only be used to fulfill the obligations of the securitization entity.

The Company’s risks associated with its involvement with these VIEs are limited to its risks and rights as a holder of the security it has retained as well as certain risks associated which may occur when the Company acts as either the sponsor and/or depositor of and the seller, directly or indirectly to, the securitization entities.

Determining the primary beneficiary of a VIE requires judgment.

The Company determined that for the securitizations it consolidates, its ownership provides the Company with the obligation to absorb losses or the right to receive benefits from the VIE that could be significant to the VIE.

In addition, the Company has the power to direct the activities of the VIEs that most significantly impact the VIEs’ economic performance, or power, such as rights to replace the servicer without cause or the Company was determined to have power in connection with its involvement with the structure and design of the VIE.

The Company’s interest in the assets held by consolidated securitization vehicles, which are consolidated on the Company’s Consolidated Balance Sheets, is restricted by the structural provisions of these trusts, and a recovery of the Company’s investment in the vehicles will be limited by each entity’s distribution provisions.

The liabilities of the securitization vehicles, which are also consolidated on the Company’s Consolidated Balance Sheets, are non-recourse to the Company, and can only be satisfied using proceeds from each securitization vehicle’s respective asset pool.

The assets of securitization entities are comprised of residential mortgage-backed securities (or RMBS), or residential mortgage loans.

See Note 2 for further discussion of the characteristics of the securities and loans in the Company’s portfolio relating to asset pools arising from securitization transactions.

Recent Accounting Standards - Recently Issued

5 unchanged sentences

The Company does not believe that this ASU will have a material impact upon its consolidated financial statements.

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

Variable Interest Entities

The Company has co‑sponsored and participated in the formation of various entities that are considered to be variable interest entities (“VIEs”).

These VIEs were formed to facilitate securitization issuances that are comprised of secured residential whole loans or small balance commercial loans contributed to securitization trusts.

The Company’s determination of whether it is the primary beneficiary of the VIE is based on whether the Company is exposed to the majority of the risks and rewards of the entity, and whether it has the ability to direct the activities of the VIE that most significantly impact the VIE’s performance.

The Company determined that it is not the primary beneficiary of these entities.

The Company thus has not consolidated the operating results or statements of financial position of any of these entities, as it is not considered the primary beneficiary.

The Company performs ongoing reassessments of all VIEs in which the Company has participated since its inception as to whether changes in the facts and circumstances regarding the Company’s involvement with a VIE would cause the Company’s consolidation conclusion to change, and the Company’s assessment of the VIEs in which the Company participated in prior periods (since the Company’s inception) remains unchanged.

The Company did not participate in any securitization transactions during the three and six month periods ended June 30, 2021.

Collectively, the securities resulting from securitization are referred to as “AOMT Securities.” The securities received in previous securitization transactions are included in “RMBS” and “CMBS” on the condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020, and details on the accounting treatment and fair value methodology of the securities can be found in Note 9, Fair Value Measurements .

See Note 5, Investment Securities , for the fair value of AOMT Securities held by the Company as of June 30, 2021 and December 31, 2020 that were retained by the Company as a result of securitization transactions in 2020 and 2019.

Since its inception, the Company has utilized VIEs for the purpose of securitizing whole mortgage loans to obtain long-term non-recourse financing.

The Company evaluates its interest in each VIE to determine if it is the primary beneficiary.

VIEs for Which the Company is the Primary Beneficiary

In the third quarter of 2021, the Company entered into a securitization transaction where it was determined that the Company was the primary beneficiary.

The Company was the sole entity to contribute residential whole mortgage loans to the securitization vehicle, AOMT 2021-4.

During the three and nine months ended September 30, 2021, in the AOMT 2021-4 transaction, the Company securitized and consolidated approximately $ 316.6 million unpaid principal balance of seasoned residential non-QM mortgage loans.

The retained beneficial interest in VIE for which the Company is the primary beneficiary (currently solely comprised of AOMT 2021-4) is the subordinated tranches of the securitization and further interests in additional tranches.

The table below sets forth the fair values of the assets and liabilities recorded in the condensed consolidated balance sheet related to this consolidated VIE as of September 30, 2021:

(in thousands)

Residential mortgage loans in securitization trust - at fair value $ 319,812

Accrued interest receivable 986

Other assets —

Non-recourse securitization obligation, collateralized by residential mortgage loans $ 290,529

Accrued interest payable —

Other liabilities —

Income and expense amounts related to the consolidated VIE recorded in the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2021 is set forth as follows:

(in thousands)

Interest income, assets of AOMT 2021-4 $ 2,620

Interest expense, non-recourse liabilities of AOMT 2021-4 ( 394 )

Net interest income, AOMT 2021-4 $ 2,226

Servicing fees $ 34

VIEs for Which the Company is Not the Primary Beneficiary

In 2019 and 2020, the Company both co‑sponsored and participated in the formation of various entities that were considered to be VIEs, which were formed to facilitate securitization issuances that were comprised of secured residential whole loans or small balance commercial loans contributed to securitization trusts.

These securities were issued as a result of the unconsolidated securitizations where the Company retained bonds from the issuances of AOMT 2019-2, AOMT 2019-4, AOMT 2019-6, AOMT 2020-3, and AOMT 2020-SBC1.

The Company determined that it was not then and is not now the primary beneficiary of any of these entities, and thus has not consolidated the operating results or statements of financial position of any of these entities.

The securities received in the aforementioned 2019 and 2020 securitization transactions are included in “RMBS - at fair value” and “CMBS - at fair value” on the condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020, and details on the accounting treatment and fair value methodology of the securities can be found in Note 9, Fair Value Measurements .

See Note 5, Investment Securities , for the fair value of AOMT securities held by the Company as of September 30, 2021 and December 31, 2020 that were retained by the Company as a result of the securitization transactions in 2020 and 2019.

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

Residential Mortgage Loans

Residential mortgage loans are measured at fair value.

The following table sets forth the cost, fair value, weighted average interest rate, and weighted average remaining maturity of the Company’s residential mortgage loan portfolio as of June 30, 2021 and December 31, 2020:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

($ in thousands)

6 unchanged sentences

Weighted average remaining maturity (years) 29.7 29.8

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

The following table sets forth data regarding the number of consumer mortgage loans secured by residential real property 90 or more days past due and also those in formal foreclosure proceedings, and the recorded investment and unpaid principal balance of such loans as of June 30, 2021 and December 31, 2020:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

($ in thousands)

5 unchanged sentences

Unpaid principal balance of loans in foreclosure $ 3,767 $ 2,636

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

Commercial Mortgage Loans

Commercial mortgage loans are measured at fair value.

The following table sets forth the cost, fair value, weighted average interest rate, and weighted average remaining maturity of the Company’s commercial mortgage loan portfolio as of June 30, 2021 and December 31, 2020:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

($ in thousands)

6 unchanged sentences

Weighted average remaining maturity (years) 10.6 14.3

There was one commercial mortgage loan more than 90 days overdue as of June 30, 2021, and there was one commercial mortgage loan more than 90 days overdue, which was also in foreclosure as further described below, as of December 31, 2020.

As of June 30, 2021, both the unpaid principal balance and the recorded investment were $ 0.6 million, respectively, in the loan that was more than 90 days overdue.

There were no commercial mortgage loans in foreclosure as of June 30, 2021, and there was one commercial mortgage loan in foreclosure as of December 31, 2020.

There was one commercial mortgage loan more than 90 days overdue as of September 30, 2021, and there was one commercial mortgage loan more than 90 days overdue, which was also in foreclosure as further described below, as of December 31, 2020.

As of September 30, 2021, the unpaid principal balance was $ 0.6 million and the recorded investment was $ 0.6 million in the loan that was more than 90 days overdue.

There were no commercial mortgage loans in foreclosure as of September 30, 2021, and there was one commercial mortgage loan in foreclosure as of December 31, 2020.

In the second quarter of 2021, the loan that had been in foreclosure on December 31, 2020 was cured, with all prior principal and interest due paid to a current status.

1 unchanged sentence

Investment Securities

As of June 30, 2021 investment securities were comprised of non‑agency RMBS and Freddie Mac and Fannie Mae “whole pool agency RMBS” (together, “RMBS”), commercial mortgage backed securities (“CMBS”), and U.S.

As of September 30, 2021 investment securities were comprised of non‑agency RMBS and Freddie Mac and Fannie Mae “whole pool agency RMBS” (together, “RMBS”), commercial mortgage backed securities (“CMBS”), and U.S.

Treasury securities as presented in the condensed consolidated balance sheet.

1 unchanged sentence

Treasury securities in the condensed consolidated balance sheet.

Treasury securities held by the Company as of June 30, 2021 and December 31, 2020 matured on July 22, 2021 and January 19, 2021, respectively.

Treasury securities held by the Company as of September 30, 2021 and December 31, 2020 matured on October 21, 2021 and January 19, 2021, respectively.

The Company recognized a nominal amount of accretion on U.S.

Treasury securities for the three and six months ended June 30, 2021 and 2020, respectively.

Treasury securities for the three and nine months ended September 30, 2021 and 2020, respectively.

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

The following table sets forth a summary of RMBS and CMBS at cost as of June 30, 2021 and December 31, 2020:

June 30, 2021 December 31, 2020

The following table sets forth a summary of RMBS and CMBS at cost as of September 30, 2021 and December 31, 2020:

September 30, 2021 December 31, 2020

(in thousands)

1 unchanged sentence

CMBS $ 11,221 $ 8,857

The following table sets forth certain information about the Company’s investments in RMBS and CMBS as of June 30, 2021 and December 31, 2020:

The following table sets forth certain information about the Company’s investments in RMBS and CMBS as of September 30, 2021 and December 31, 2020:

Real Estate Securities at Fair Value Securities Sold Under Agreement to Repurchase Allocated Capital

June 30, 2021:

September 30, 2021:

(in thousands)

17 unchanged sentences

Total AOMT CMBS $ 11,349 $ — $ 11,349

(1) AOMT RMBS held as of June 30, 2021 included both retained tranches of securitizations in which the Company participated within the purview of Angel Oak Mortgage Trust I (“AOMT”) and additional AOMT Securities purchased in secondary market transactions.

(1) AOMT RMBS held as of September 30, 2021 included both retained tranches of securitizations in which the Company participated within the purview of Angel Oak Mortgage Trust I (“AOMT”) and additional AOMT securities purchased in secondary market transactions.

Angel Oak Mortgage, Inc.

19 unchanged sentences

The following table sets forth certain information about the Company’s investments in U.S.

Treasury Bills as of June 30, 2021 and December 31, 2020:

Treasury Bills as of September 30, 2021 and December 31, 2020:

Date Face Value Unamortized Discount, net Amortized Cost (1)

1 unchanged sentence

($ in thousands)

June 30, 2021 $ 275,000 $ — $ 275,000 $ ( 8 ) $ 274,992 5.00 basis points

September 30, 2021 $ 80,000 $ — $ 80,000 $ — $ 80,000 2.00 basis points

December 31, 2020 $ 150,000 $ ( 3 ) $ 149,997 $ ( 2 ) $ 149,995 6.25 basis points

(1) Cost and amortized cost of U.S.

Treasury Bills is substantially equal, due to the purchase of these securities close to quarter-end.

Treasury Bills is substantially equal, due to the short length of time until maturity on these financial instruments.

Notes Payable

5 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

The following table sets forth the details of all the lines of credit available to the Company and drawn amounts for whole loan purchases as of June 30, 2021 and December 31, 2020:

Line of Credit Facility Limit Base Interest Rate Interest Rate Spread June 30, 2021 December 31, 2020

The following table sets forth the details of all the lines of credit available to the Company and drawn amounts for whole loan purchases as of September 30, 2021 and December 31, 2020:

Line of Credit Facility Limit Base Interest Rate Interest Rate Spread September 30, 2021 December 31, 2020

($ in thousands)

Barclays Bank PLC (1)

$ 400,000 1 month or 3 month LIBOR 1.70 % - 3.50 %

$ 104,644 N/A

Nomura Corporate Funding Americas, LLC (2)

1 unchanged sentence

$ 101,210 $ 8,011

Banc of California, National Association (2)

$ 50,000 1 month LIBOR 2.50 % - 3.13 %

$ 45,259 $ 38,989

Deutsche Bank, AG (3)

3 unchanged sentences

$ 200,000 3 month LIBOR 2.25 % $ 194,959 N/A

Banc of California, National Association (5)

$ 50,000 1 month LIBOR 2.50 % - 3.13 %

$ 38,498 $ 38,989

(1) On June 21, 2021, this facility was amended to extend the expiration date from December 3, 2021 to August 5, 2022, add the one-month LIBOR as a base interest rate for certain loans, and change the interest rate spread to 1.70 % (from 1.75 %) to 3.50 %.

(2) This agreement expires on March 16, 2022.

(3) On June 21, 2021, this facility was amended to increase the facility limit from $ 150.0 million to $ 250.0 million, and replace the previous sole shareholder as guarantor with the Company and its subsidiaries.

This agreement expires on February 11, 2022.

Veritex Community Bank (6)

$ 50,000 1 month LIBOR 2.30 % $ 36,889 N/A

Total $ 1,250,000 $ 550,752 $ 81,905

(1) On September 20, 2021, the Company entered into a $ 400.0 million repurchase facility with Barclays Bank PLC which expires on September 20, 2022.

(2) On August 6, 2021, this facility was amended to extend the expiration date from December 3, 2021 to August 5, 2022, add the one-month LIBOR as a base interest rate for certain loans, and change the interest rate spread to 1.70 % (from 1.75 %) to 3.50 %.

(3) On June 21, 2021, this facility was amended to increase the facility limit from $ 150.0 million to $ 250.0 million.

This facility expires on February 11, 2022.

(4) The master repurchase agreement with Goldman Sachs Bank USA, was entered into on March 5, 2021, and expires on March 5, 2022.

(5) This agreement expires on March 16, 2022.

(6) On August 16, 2021, the Company entered into a financing facility with Veritex Community Bank, which expires on August 16, 2023.

Securities Sold Under Agreements to Repurchase

1 unchanged sentence

Margin (if required) for securities sold under agreements to repurchase represents margin collateral amounts held to ensure that the Company has sufficient coverage for securities sold under agreements to repurchase in case of adverse price changes.

Restricted cash was substantially comprised of margin collateral for securities sold under agreements to repurchase as of each of June 30, 2021 and December 31, 2020, respectively.

The following table summarizes certain characteristics of the Company’s repurchase agreements as of June 30, 2021 and December 31, 2020:

June 30, 2021

Restricted cash was substantially comprised of margin collateral for securities sold under agreements to repurchase as of each of September 30, 2021 and December 31, 2020, respectively.

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

The following table summarizes certain characteristics of the Company’s repurchase agreements as of September 30, 2021 and December 31, 2020:

September 30, 2021

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

($ in thousands)

Treasury Bills $ 274,308 0.09 % 22

RMBS 489,287 0.11 % 14

8 unchanged sentences

A reduction in the value of pledged assets would require the Company to provide additional collateral or fund margin calls.

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

Derivative Financial Instruments

1 unchanged sentence

The derivatives in which the Company invests, and the market risk that the economic hedge is intended to mitigate are further discussed below.

Derivative instruments as of June 30, 2021 included both “To be Announced” forward-settling of mortgage-backed securities trades (“TBAs”) and interest rate futures contracts, while the derivative investments as of December 31, 2020 were solely comprised of interest rate futures contracts.

Derivative instruments as of September 30, 2021 included both “To be Announced” forward-settling of mortgage-backed securities trades (“TBAs”) and interest rate futures contracts, while the derivative investments as of December 31, 2020 were solely comprised of interest rate futures contracts.

The Company uses interest rate futures as economic hedges to hedge a portion of its interest rate risk exposure.

6 unchanged sentences

All realized and unrealized gains and losses on derivative contracts are recognized in earnings, in “net realized loss on derivative contracts, RMBS, CMBS, and mortgage loans” for realized losses, and “net unrealized gain (loss) on derivative contracts and mortgage loans” for unrealized gains and losses.

Unrealized appreciation on futures contracts and unrealized appreciation on TBAs is included in “other assets” on the condensed consolidated balance sheets when an unrealized appreciation position exists.

The Company considers the notional amounts, categorized by primary underlying risk, to be representative of the volume of its derivative activities.

The following table sets forth the derivative instruments presented on the condensed consolidated balance sheets and notional amounts as of June 30, 2021 and December 31, 2020:

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

The following table sets forth the derivative instruments presented on the condensed consolidated balance sheets and notional amounts as of September 30, 2021 and December 31, 2020:

Notional Amounts

1 unchanged sentence

($ in thousands)

June 30, 2021 Futures contracts 7,349 $ 2,224 $ — $ — $ 734,900

June 30, 2021 TBAs N/A $ — $ ( 185 ) $ — $ 676,705

September 30, 2021 Futures contracts 8,209 $ 2,421 $ — $ — $ 820,900

September 30, 2021 TBAs N/A $ 1,120 $ — $ — $ 697,523

December 31, 2020 Futures contracts 1,295 $ — $ ( 198 ) $ — $ 129,500

The losses arising from these derivative instruments in the condensed consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2021 and June 30, 2020 are set forth as follows:

Derivatives Not Designated as Hedging Instruments Net Realized Losses on Derivative Instruments Net Change in Unrealized Appreciation (Depreciation) on Derivative Instruments

The gains and losses arising from these derivative instruments in the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2021 and September 30, 2020 are set forth as follows:

Derivatives Not Designated as Hedging Instruments Net Realized Gains (Losses) on Derivative Instruments Net Change in Unrealized Appreciation (Depreciation) on Derivative Instruments

(in thousands)

Three Months Ended June 30, 2021 Futures contracts $ ( 2,546 ) $ 746

Three Months Ended June 30, 2021 TBAs $ ( 2,070 ) $ ( 118 )

Six Months Ended June 30, 2021 Futures contracts $ ( 2,443 ) $ 2,481

Six Months Ended June 30, 2021 TBAs $ ( 471 ) $ ( 185 )

Three Months Ended September 30, 2021 Futures contracts $ 39 $ 1,666

Three Months Ended September 30, 2021 TBAs $ ( 5,378 ) $ 1,305

Nine Months Ended September 30, 2021 Futures contracts $ ( 431 ) $ 2,678

Nine Months Ended September 30, 2021 TBAs $ ( 7,822 ) $ 1,120

Derivatives Not Designated as Hedging Instruments Net Realized Losses on Derivative Instruments Net Change in Unrealized Depreciation on Derivative Instruments

(in thousands)

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Futures contracts $ ( 88 ) $ 101

Six Months Ended June 30, 2020 Futures contracts $ ( 14,039 ) $ ( 117 )

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

Nine Months Ended September 30, 2020 Futures contracts $ ( 14,127 ) $ ( 75 )

Fair Value Measurements

7 unchanged sentences

Our assessment of the significance of a particular input requires judgment and considers factors specific to the asset or liability being measured.

As of June 30, 2021, our valuation policy and processes had not changed from those described in our consolidate financial statements for the year ended December 31, 2020 included in the Prospectus.

Included in Note 10 to the Consolidated Financial Statements for the year ended December 31, 2020 included in the Prospectus is a more detailed description of our financial instruments measured at fair value and their significant inputs, as well as the general classification of such instruments pursuant to the Level 1, Level 2, and Level 3 valuation hierarchy.

The following table sets forth information about the Company’s financial assets and liabilities measured at fair value as of June 30, 2021:

As of September 30, 2021, our valuation policy and processes had not changed from those described in our consolidated financial statements for the year ended December 31, 2020 included in the Prospectus.

Included in Note 10 to the Consolidated Financial Statements for the year ended December 31, 2020 is a more detailed description of our financial instruments measured at fair value and their significant inputs, as well as the general classification of such instruments pursuant to the Level 1, Level 2, and Level 3 valuation hierarchy.

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

The following table sets forth information about the Company’s financial assets measured at fair value as of September 30, 2021 (1) :

Level 1 Level 2 Level 3 Total

1 unchanged sentence

Residential mortgage loans $ — $ 715,691 $ 7,448 $ 723,139

Residential mortgage loans in securitization trust — 318,965 847 319,812

Commercial mortgage loans — 7,429 507 7,936

8 unchanged sentences

2,421 — — 2,421

Total assets $ 871,113 $ 667,883 $ 9,324 $ 1,548,320

Liabilities, at fair value

Unrealized depreciation on TBAs (3)

Unrealized appreciation on TBAs (4)

1,120 — — 1,120

Total liabilities $ ( 186 ) $ — $ — $ ( 186 )

(1) Non‑Agency RMBS held as of June 30, 2021 included both retained tranches of securitizations in which the Company participated, additional AOMT Securities purchased in secondary market transactions, and other RMBS purchased in secondary market transactions.

All AOMT CMBS held as of June 30, 2021 was comprised of retained tranches of AOMT securitizations.

(2) “Unrealized appreciation on futures contracts” is comprised of unrealized appreciation on interest rate futures contracts, and is included in “other assets” on the condensed consolidated balance sheet.

(3) “Unrealized depreciation on TBAs” is comprised of unrealized depreciation on TBAs and is included in “accrued expenses”

on the condensed consolidated balance sheet.

Total assets at fair value $ 83,541 $ 1,675,104 $ 8,802 $ 1,767,447

(1) As of September 30, 2021, there were no financial liabilities measured at fair value.

(2) Non‑Agency RMBS held as of September 30, 2021 included both retained tranches of securitizations in which the Company participated, additional AOMT securities purchased in secondary market transactions, and other RMBS purchased in secondary market transactions.

All AOMT CMBS held as of September 30, 2021 were comprised of retained tranches of AOMT securitizations.

(3) “Unrealized appreciation on futures contracts” is included in “other assets” on the condensed consolidated balance sheet.

(4) “Unrealized appreciation on TBAs” is included in “other assets” on the condensed consolidated balance sheet.

Transfers from Level 2 to Level 3 were comprised of residential loans more than 90 days overdue (including those in foreclosure) and commercial mortgage loans in special servicing or otherwise considered “non‑performing” by the Company’s third‑party valuation providers.

2 unchanged sentences

All unrealized gains and losses arising from valuation changes in residential and commercial mortgage loans are recognized in net income for the periods presented.

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

We use third‑party valuation firms who utilize proprietary methodologies to value our residential and commercial loans.

2 unchanged sentences

Accordingly, a significant increase or decrease in any of these inputs in isolation may result in a significantly lower or higher fair value measurement.

The following table sets forth information regarding the Company’s significant Level 3 inputs as of June 30, 2021:

The following table sets forth information regarding the Company’s significant Level 3 inputs as of September 30, 2021:

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

Asset Fair Value Unobservable Input Range Average

3 unchanged sentences

Expected remaining life 0.70 - 2.73 years

Residential mortgage loans in securitization trust, at fair value $ 847 Prepayment rate (annual CPR) 15.61 % - 21.67 %

Default rate 22.83 % - 23.75 %

Loss severity 10.00 % 10.00 %

Expected remaining life 1.20 - 1.73 years

Commercial mortgage loans, at fair value $ 507 Loss severity ( 25.00 )% ( 25.00 )%

12 unchanged sentences

Treasury Bills 149,995 — — 149,995

Total assets $ 149,995 $ 294,488 $ 13,740 $ 458,223

Total assets at fair value $ 149,995 $ 294,488 $ 13,740 $ 458,223

Liabilities, at fair value

Unrealized depreciation on futures contracts $ 198 $ — $ — $ 198

Total liabilities $ 198 $ — $ — $ 198

Total liabilities at fair value $ 198 $ — $ — $ 198

(1) Non‑Agency RMBS held as of December 31, 2020 included both retained tranches of AOMT securitizations in which the Company participated, additional AOMT securities purchased in secondary market transactions, and other RMBS purchased in secondary market transactions.

29 unchanged sentences

The following table sets forth certain financial information pertaining to whole loans purchased from affiliates during the year-to-date or year, respectively, and held as of year-to-date / year end:

As of and for the Year-to-Date/Year Ended:

Amount of Loans Purchased from Affiliates during the Year-to-Date/Year Number of Loans Purchased from Affiliates during the Year-to-Date/Year Number of Loans Purchased from Affiliates Held as of Year-to-Date/Year End:

Period-End/Year-End Amount of Loans Purchased from Affiliates for the period/as of Number of Loans Purchased from Affiliates for the period/as of Number of Loans Purchased from Affiliates Held as of

($ in thousands)

June 30, 2021 $ 335,233 703 928

September 30, 2021 $ 751,416 1,641 1,802

December 31, 2020 $ 423,172 950 273

11 unchanged sentences

($ in thousands)

June 30, 2021 $ — — 7

September 30, 2021 $ — — 7

December 31, 2020 $ 26,334 30 12

19 unchanged sentences

The Company, from time to time, may be party to litigation relating to claims arising in the normal course of business.

As of June 30, 2021, the Company was not aware of any legal claims that could materially impact its financial condition.

As of June 30, 2021, the Company had no unfunded commitments.

As of September 30, 2021, the Company was not aware of any legal claims that could materially impact its financial condition.

As of September 30, 2021, the Company had no unfunded commitments.

Equity and Earnings per Share (“EPS”)

In the calculations of basic and diluted earnings per common share for the three and six months ended June 30, 2021, we included participating securities, which are certain equity awards that have non-forfeitable dividend participation rights, as we determined that the two-class method was more dilutive than the alternative treasury stock method for these shares.

In the calculations of basic and diluted earnings per common share for the three and nine months ended September 30, 2021, the Company included participating securities, which are certain equity awards that have non-forfeitable dividend participation rights, as it was determined that the two-class method was more dilutive than the alternative treasury stock method for these shares.

Dividends and undistributed earnings allocated to participating securities under the basic and diluted earnings per share calculations require specific shares to be included that may differ in certain circumstances.

For each of the three months and six months ended June 30, 2021, no outstanding equity awards were antidilutive.

For each of the three months and nine months ended September 30, 2021, no outstanding equity awards were antidilutive.

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

The following table sets forth the calculation of basic and diluted earnings per share for the three and six months ended June 30, 2021:

The following table sets forth the calculation of basic and diluted earnings per share for the three and nine months ended September 30, 2021:

Three Months Ended

June 30, 2021 Six Months Ended

June 30, 2021

September 30, 2021 Nine Months Ended

September 30, 2021

(in thousands, except share data)

8 unchanged sentences

Diluted earnings per common share $ 0.25 $ 0.93

Basic and Diluted EPS for the three and six months ended June 30, 2020, and Effect of Stock Split and Stock Dividend in Conjunction with the IPO

For the three and six months ended June 30, 2020, basic and diluted earnings per share were equivalent as there were no potentially dilutive securities outstanding.

For the three and six months ended June 30, 2020, 1,000 shares of common stock were outstanding (both outstanding and weighted average outstanding), all of which were held by Angel Oak Mortgage Fund, LP, the Company’s sole common stockholder prior to the IPO.

Effect of Stock Split and Stock Dividend in Conjunction with the IPO during the nine months ended September 30, 2021

In conjunction with the IPO, the Company declared a stock split that resulted in 15,723,050 being owned by that sole common stockholder, who then distributed its stock in the Company to its investors.

As a result of the stock split, 15,724,050 shares of common stock were outstanding as of June 21, 2021 (both outstanding and weighted average outstanding), and the related share data and earnings per share calculations include the share amounts that have been retroactively restated accordingly for the calculations of earnings per share during that time period for the nine months ended September 30, 2021.

Basic and Diluted EPS for the three and nine months ended September 30, 2020

For the three and nine months ended September 30, 2020, basic and diluted earnings per share were equivalent as there were no potentially dilutive securities outstanding.

For the three and nine months ended September 30, 2020, 1,000 shares of common stock were outstanding (both outstanding and weighted average outstanding), all of which were held by Angel Oak Mortgage Fund, LP, the Company’s sole common stockholder prior to the IPO.

These shares have been retroactively restated accordingly as described above for the calculations of earnings per share for the three and nine months ended September 30, 2020.

Equity Compensation Plans

On June 22, 2021, we established our sole equity compensation plan, the 2021 Equity Incentive Plan (the “Plan”), with 2,125,000 shares initially available for grant.

As of June 30, 2021, 1,651,316 shares of common stock were available for grant under the Plan, as on June 21, 2021, we granted 473,684 shares in restricted stock awards, for which the sole restriction to be satisfied is vesting over a period over one to three years .

There were no forfeitures during the three and six months ended June 30, 2021.

Compensation expense for each of the three and six months ended June 30, 2021 related to these awards was de minimis, due to only 10 days of expense incurred.

As of September 30, 2021, 1,651,316 shares of common stock were available for grant under the Plan, as on June 21, 2021, we granted 473,684 shares in restricted stock awards, for which the sole restriction to be satisfied is vesting over a period over one to three years .

There were no forfeitures during the three and nine months ended September 30, 2021.

Compensation expense for the three and nine months ended September 30, 2021 related to these awards was $ 0.8 million and $ 0.9 million, respectively.

The Company recognizes compensation expense using the straight-line method.

The unamortized compensation expense of the restricted stock awards issued under the Plan totaled approximately $ 8.9 million as of June 30, 2021.

As of December 30, 2020, and prior to the establishment of the Plan, there were no equity compensation plans in existence, and therefore, no such compensation costs were incurred during the three and six months ended June 30, 2020.

The unamortized compensation expense of the restricted stock awards issued under the Plan totaled approximately $ 8.1 million as of September 30, 2021.

Subsequent Events

Stock Repurchases

In May 2021, our Board of Directors approved an authorization for the repurchase of our common stock under a plan complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (“the 10b5-1 Plan”).

This authorization has no expiration date.

This repurchase authorization does not obligate us to acquire any specific number of shares or securities.

Under this authorization, shares or securities may be repurchased in open market transactions under the 10b5-1 Plan, which expires in July 2022.

During the three and six months ended June 30, 2021, we did no t repurchase any shares.

As of August 13, 2021, we had repurchased 22,673 shares of our common stock under this Plan.

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

Notes Payable

On August 6, 2021, the Company and one of its subsidiaries entered into an amendment to its facility with Nomura Corporate Funding Americas, LLC to, among other matters:

(a) extend the expiration date from December 3, 2021 to August 5, 2022;

(b) add one-month LIBOR as a base interest rate for certain loans;

and (c) change the interest rate spread to 1.70 % to 3.50 %.

Dividend Declared

On August 12, 2021, the Company declared a dividend of 12 cents per share of common stock, to be paid on August 31, 2021 to common stockholders of record as of August 23, 2021.

On November 8, 2021, the Company declared a dividend of 36 cents per share of common stock, to be paid on November 30, 2021 to common stockholders of record as of November 22, 2021.

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

What changed 10-Q

Item 1. Financial Statements